As filed with the Securities and Exchange Commission on ^ January 15, 1998
Registration No. 333-42501
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LAKEVIEW FINANCIAL CORP.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 6036 22-3334052
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
1117 Main Street
Paterson, New Jersey 07503
(201) 890-1234
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
Kevin J. Coogan, President and Chief Executive Officer
Lakeview Financial Corp.
989 McBride Avenue
West Paterson, New Jersey 07424
(201) 890-1234
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
Samuel J. Malizia, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square
1301 K Street, N.W.
Suite 700, East
Washington, DC 20005
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effectiveness of the
Registration Statement.
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. |_|
----------------------------------
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Securities Amount to Offering Price Aggregate Offering Amount of
to be Registered be Registered Per Share Price (1) Registration Fee
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Common Stock,
par value $1.00 per share......... ^ 520,000 $27.13 $9,564,102 $2,821.41
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
for the filing of the Form S-4 pursuant to Rule 457(f)(1) and (3) under
the Securities Act based on the average of the high and low prices
reported by NASDAQ for Westwood Financial Corporation common stock as
of December 16, 1997, a date within five business days prior to the
filing of this Registration Statement and reduced by 49.9% of cash to
be paid by Lakeview Financial Corp. As of December 16, 1997, Westwood
Financial Corporation had 645,295 shares of common stock outstanding
and 58,355 options to purchase common stock outstanding. Shareholders
of Westwood Financial Corporation will be entitled to elect their
preference with respect to each share of Westwood Financial Corporation
common stock held by them, subject to pro-rata allocation, such that an
aggregate of 49.9% will be converted into cash and 50.1% will be
converted into stock.
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 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>
Westwood Financial Corporation
700-88 Broadway
Westwood, New Jersey 07675
^ January 23, 1998
To the Shareholders of
Westwood Financial Corporation
You are cordially invited to attend the Special Meeting of
Shareholders (the "Special Meeting") of Westwood Financial Corporation ("WFC"),
the holding company for Westwood Savings Bank ("WSB"), which will be held on ^
Tuesday, February 24, 1998, at ____:____ ____.m., local time at the ___________,
___________, New Jersey.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Reorganization, dated September 10,
1997 (the "Reorganization Agreement") by and between WFC, WSB, and Lakeview
Financial Corp. ("LFC"), a New Jersey corporation and the holding company for
Lakeview Savings Bank, a New Jersey stock savings bank ("LSB") and LSB. Pursuant
to the Reorganization Agreement, WFC will be merged with and into LFC, and as
soon as practicable thereafter, WSB will be merged with and into LSB (together,
the "Merger"). According to the terms of the Reorganization Agreement,
shareholders of WFC may elect, subject to certain election and allocation
procedures, to exchange their shares of WFC common stock for $29.25, payable in
the aggregate form of 50% cash and 50% LFC common stock. ^An election form and
letter of transmittal ^is being delivered to you under separate cover. You will
have the right to elect payment in the form of cash or stock, subject to
proration to assure aggregate consideration of approximately 50% LFC common
stock. The allocation of cash and shares of LFC common stock that you receive
will depend on the stated preferences of the WFC shareholders on the election
forms and the proration procedures to be applied. You should note that the
federal income tax consequences of the Merger will depend on whether you receive
cash, stock or a combination of cash and stock in exchange for your shares of
WFC common stock.
^ FinPro, Inc., an investment banking firm, has issued its opinion to
your board of directors regarding the fairness from a financial point of view,
of the consideration to be received by the shareholders of WFC pursuant to the
Reorganization Agreement as of the date of such opinion. A copy of the opinion
is attached as Appendix II to the Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED MERGER
AND RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES "FOR" APPROVAL OF THE MERGER.
THE AFFIRMATIVE VOTE OF A MAJORITY OF WFC'S OUTSTANDING SHARES ENTITLED TO VOTE
IS NECESSARY TO APPROVE THE MERGER. ACCORDINGLY, FAILURE TO VOTE, EITHER BY
RETURNING YOUR PROXY CARD OR VOTING IN PERSON AT THE SPECIAL MEETING WILL HAVE
THE EFFECT OF A VOTE AGAINST THE MERGER.
^ The accompanying Notice of Special Meeting of Shareholders and the
Proxy Statement/Prospectus ^ describe the matters to be acted upon at the
Special Meeting, ^ including matters incidental to the conduct of the Special
Meeting. Shareholders are urged to review carefully the attached Proxy
Statement/Prospectus, including the Appendices, which together describe the
Merger and its terms and conditions in detail.
Sincerely,
William J. Woods
President and Chief Executive Officer
<PAGE>
Westwood Financial Corporation
700-88 Broadway
Westwood, New Jersey 07675
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ^ February 24, 1998
To the Holders of Common Stock of Westwood Financial Corporation:
NOTICE IS HEREBY GIVEN that the Special Meeting of ^ Shareholders (the "Special
Meeting") of Westwood Financial Corporation ("WFC") will be held on ^ Tuesday,
February 24, 1998, at ____:____ ____.m., local time at the ________________,
________________, New Jersey. The Special Meeting is for the purpose of
considering and voting upon the following matters, all of which are set forth
more completely in the accompanying Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve an Agreement and Plan of
Reorganization, dated September 10, 1997 (the "Reorganization Agreement")
by and between WFC, ^ Westwood Savings Bank ("WSB"), and Lakeview Financial
Corp. ("LFC"), a New Jersey corporation and the holding company for
Lakeview Savings Bank, a New Jersey stock savings bank ("LSB") and LSB.
Pursuant to the Reorganization Agreement, WFC will be merged with and into
LFC, and as soon as practicable thereafter, WSB will be merged with and
into LSB (together, the "Merger"). According to the terms of the
Reorganization Agreement, shareholders of WFC may elect, subject to certain
election and allocation procedures, to exchange their shares of WFC common
stock for $29.25, payable in the aggregate form of 50% cash and 50% LFC
common stock.
^ To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on the record
date, ^ January 20, 1998, are entitled to notice of and to vote at the Special
Meeting and any adjournments thereof. The affirmative vote of not less than a
majority of outstanding WFC common stock entitled to vote is necessary to
approve the ^ merger proposal. Accordingly, failure to vote either by failing to
return your proxy or failing to vote in person at the Special Meeting will have
the same effect as a vote against the ^ merger proposal. We urge you to execute
and return the enclosed proxy as soon as possible to ensure that your shares
will be represented at the Special Meeting. Your proxy may be revoked in the
manner described in the accompanying Proxy Statement/Prospectus at any time
before it has been voted at the Special Meeting.
By Order of the Board of Directors
Joanne Miller
Secretary
Westwood, New Jersey
^ January 23, 1998
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ^ THE ^
PROPOSAL STATED ABOVE. PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOU
MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING.
PLEASE DO NOT SEND IN CERTIFICATES FOR YOUR SHARES OF WFC COMMON STOCK
WITH YOUR PROXY CARD; PLEASE CAREFULLY READ AND FOLLOW THE INSTRUCTIONS SET
FORTH IN THE ELECTION FORM AND LETTER OF TRANSMITTAL REGARDING THE MAKING OF
YOUR ELECTION AND THE SURRENDER OF YOUR WFC STOCK CERTIFICATES.
<PAGE>
Proxy Statement/Prospectus
Proxy Statement
of
Westwood Financial Corporation
For a Special Meeting of Shareholders
To Be Held on ^ February 24, 1998
LAKEVIEW FINANCIAL CORP.
Prospectus
Up to ^ 520,000 Shares of Common Stock, $1.00 Par Value Per Share
This combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") is being furnished to the holders of common stock, $0.10
par value per share ("WFC Common Stock") of Westwood Financial Corporation, a
New Jersey corporation ("WFC"), in connection with the solicitation of proxies
by the Board of Directors of WFC for use at the Special Meeting of Shareholders
of WFC to be held on ^ Tuesday, February 24, 1998 at ____:____ ____.m., local
time, at the ________, ________, New Jersey or at any adjournments or
postponements thereof (the "Special Meeting"). This Proxy Statement/Prospectus
and accompanying form of proxy ("Proxy") are first being mailed to shareholders
of WFC as of ^ January 20, 1998 (the "Record Date") on or about ^ January 23,
1998.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Reorganization, dated September 10,
1997 (the "Reorganization Agreement") by and between WFC, Westwood Savings
Bank ("WSB") and Lakeview Financial Corp. ("LFC"), a New Jersey corporation and
the holding company for Lakeview Savings Bank, a New Jersey stock savings bank
("LSB") and LSB. Pursuant to the Reorganization Agreement, WFC will be merged
with and into LFC, and as soon as practicable thereafter, WSB will be merged
with and into LSB (together, the "Merger"). According to the terms of the
Reorganization Agreement, shareholders of WFC may elect, subject to certain
election and allocation procedures, to exchange their shares of WFC common stock
for $29.25, payable in the aggregate form of 50% cash and 50% LFC common stock.
You will have the right to elect payment in the form of cash or stock, subject
to proration to assure aggregate consideration of approximately 50% LFC common
stock. The Merger must qualify as a tax-free reorganization. Thus, no guarantee
can be given that an election by any given shareholder will be honored, or that
WFC shareholders will receive their elected form of consideration. For a more
detailed description of the terms of the Merger, see "Proposal I--The Merger."
This Proxy Statement also constitutes a prospectus of LFC with respect
to up to ^ 520,000 shares of LFC common stock, $1.00 par value per share ("LFC
Common Stock"), that will be issued in connection with the Merger and the
exercise of certain options granted under the WFC 1993 and 1997 Stock Option
Plans (the "Plans").
THE SHARES OF WFC COMMON STOCK TO BE ISSUED PURSUANT TO THE
REORGANIZATION AGREEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF LFC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS ________________, 1998.
<PAGE>
This Proxy Statement/Prospectus does not cover any resale of the
securities to be received by shareholders of WFC upon consummation of the
proposed transaction, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale.
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus or
incorporated by reference herein in connection with the solicitation of proxies
or the offering of securities made hereby and, if given or made, such
information or representations must not be relied upon as having been authorized
by LFC or WFC. This Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any securities, or the solicitation
of a proxy, in any jurisdiction to or from any person to whom it is not lawful
to make any such offer or solicitation in such jurisdiction. Neither the
delivery of this Proxy Statement/Prospectus nor any distribution of securities
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of LFC or WFC since the date of this Proxy
Statement/Prospectus or that the information set forth herein or in the
documents or reports incorporated herein by reference since the date of this
Proxy Statement/Prospectus; however, if any material change occurs in such
affairs or information during the period that this Proxy Statement is required
to be delivered, this Proxy Statement/Prospectus will be amended and
supplemented accordingly. All information contained in this Proxy
Statement/Prospectus relating to WFC and its subsidiary has been supplied by WFC
and all information contained in this Proxy Statement/Prospectus relating to LFC
and its subsidiaries has been supplied by LFC.
AVAILABLE INFORMATION
LFC and WFC are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, information statements and other
information, when filed, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional offices in New York (7
World Trade Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission and the address of such site is http://www.sec.gov. In
addition, the common stock of both LFC and WFC is listed on the Nasdaq Stock
Market and reports, proxy statements and other information concerning LFC and
WFC can be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
From February 23, 1993 to June 6, 1996, WSB was subject to the
informational requirements of the Exchange Act pursuant to Section 12(i) of the
Exchange Act. Such reports, proxy statements, and other information were filed
with the Federal Deposit Insurance Corporation (the "FDIC") and can be inspected
and copied at the public reference facilities maintained by the FDIC. Copies of
such materials can be obtained, at prescribed rates, from the Registration,
Disclosure and Securities Operations Unit, 550 17th Street, N.W., Room F640,
Washington, D.C. 20429, or by calling the FDIC at (202) 899- 8911 or (202)
898-8913 or faxing the FDIC at (202) 898-3909.
LFC has filed with the Commission a registration statement on Form S-4
under the Securities Act of 1933, as amended ("Securities Act"), in respect to
the LFC Common Stock to be issued in the Merger ("Registration Statement"). As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. For such information, reference is made
to the Registration Statement and the exhibits filed as a part thereof or
incorporated by reference therein.
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents or portions of documents filed by LFC (File No.
0-25106) and WFC (File No. 0-28200) with the Commission are hereby incorporated
by reference into and made a part of this Proxy Statement/Prospectus.
1. LFC's Annual Report on Form 10-K for the fiscal year ended July 31,
1997.
2. LFC's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1997.
3. LFC's Current Report on Form 8-K filed September 10, 1997.
4. WFC's Annual Report on Form 10-KSB for the fiscal year ended March 31,
1997.
5. WFC's Quarterly Reports on Form 10-QSB for the quarters ended June 30,
1997 and September 30, 1997.
6. WFC's Current Report on Form 8-K filed September 10, 1997.
All documents filed by LFC and WFC pursuant to Section 13(a), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the WFC Special Meeting shall be deemed to be incorporated
by reference into this Proxy Statement/Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that is also incorporated or deemed
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE LFC DOCUMENTS ARE
AVAILABLE (WITHOUT CHARGE) UPON WRITTEN REQUEST TO SANDRA L. COULTHART, LAKEVIEW
FINANCIAL CORP., 1117 MAIN STREET, PATERSON, NEW JERSEY 07424. THE WFC DOCUMENTS
ARE AVAILABLE (WITHOUT CHARGE) UPON WRITTEN REQUEST TO JOANNE MILLER, WESTWOOD
FINANCIAL CORPORATION, 700-88 BROADWAY, WESTWOOD, NEW JERSEY, 07675. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST MUST BE RECEIVED BY ^
FEBRUARY 17, 1998.
ACCOMPANYING DOCUMENTS
This Proxy Statement/Prospectus includes a copy of WFC's Annual Report
to Shareholders for the fiscal year ended March 31, 1997 and Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997. See Appendices III and IV.
<PAGE>
TABLE OF CONTENTS
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SUMMARY............................................................................................................
The Companies.............................................................................................
Westwood Special Meeting..................................................................................
Time, Date, Place and Purpose.............................................................................
Record Date; Vote Required................................................................................
Stock Held By WFC Affiliates..............................................................................
The Merger................................................................................................
^ Comparative Market and Stock Price Information..........................................................
Comparative Per Share Information.........................................................................
Selected Historical Consolidated Financial Information....................................................
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS........................................................................
INTRODUCTION.......................................................................................................
WFC SPECIAL MEETING................................................................................................
Record Date; Vote Required................................................................................
Proxies; Revocation; Solicitation.........................................................................
PROPOSAL I -- THE MERGER...........................................................................................
Closing and Effective Time................................................................................
The Merger................................................................................................
Effect of the Merger......................................................................................
Merger Consideration......................................................................................
Recommendation of the Board of Directors..................................................................
Background of the Merger..................................................................................
Reasons for the Merger....................................................................................
Opinion of WFC's Financial Advisor........................................................................
Conditions to the Merger..................................................................................
Termination...............................................................................................
Termination Fee...........................................................................................
Business Pending Consummation.............................................................................
^ WFC Stock Option Plans..................................................................................
Federal Income Tax Consequences...........................................................................
No Dissenters' Rights.....................................................................................
Accounting Treatment......................................................................................
Interests of Certain Persons in the Merger................................................................
Resales by Affiliates.....................................................................................
Regulatory Approvals......................................................................................
EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS.......................................................................
General...................................................................................................
Board of Directors........................................................................................
Meetings of Shareholders; Cumulative Voting; Proxies......................................................
Nominations to the Board of Directors, Shareholder Proposals, and Conduct of Meetings.....................
Authorized Shares.........................................................................................
Limitations on Voting.....................................................................................
Indemnification; Limitation of Liability..................................................................
LFC................................................................................................................
DESCRIPTION OF LFC CAPITAL STOCK...................................................................................
WFC................................................................................................................
EXPERTS............................................................................................................
LEGAL MATTERS......................................................................................................
OTHER MATTERS......................................................................................................
AGREEMENT AND PLAN OF REORGANIZATION
DATED SEPTEMBER 10, 1997.............................................................................APPENDIX I
FAIRNESS OPINION OF FINPRO, INC........................................................................APPENDIX II
WFC's ANNUAL REPORT TO SHAREHOLDERS
FOR THE FISCAL YEAR ENDED MARCH 31, 1997.............................................................APPENDIX III
WFC's QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997..............................................................APPENDIX IV
</TABLE>
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SUMMARY
The following is a brief summary of the matters to be considered at the
Special Meeting. This summary is not intended to be complete and is qualified in
its entirety by reference to, and should be read in conjunction with, the
detailed information, including the Appendices hereto, contained or incorporated
by reference herein. A copy of the Reorganization Agreement is attached as
Appendix I to this Proxy Statement/Prospectus. Shareholders are urged to read
carefully the entire Proxy Statement/Prospectus. As used in this Proxy
Statement/Prospectus, the terms "LFC," and "WFC" refer to such corporations,
respectively, and where the context requires such corporations and their
subsidiaries on a consolidated basis.
The Companies
LFC
LFC, ^ headquartered in Paterson, New Jersey and incorporated under the
laws of the state of New Jersey, is a savings and loan holding company ^.
Through its wholly-owned stock savings bank subsidiary, ^ LSB, LFC has eight
banking offices located in Bergen and Passaic Counties, New Jersey. LFC's
primary business consist of attracting deposits from the general public and
originating loans that are secured by residential properties, as well as
originating multi-family, commercial real estate, home equity, second mortgage
and home improvement loans. In addition, LFC owns two active nonbank
subsidiaries that are engaged primarily in mortgage brokerage services and
consumer finance services, respectively. LFC's principal office is located at
1117 Main Street, Paterson, New Jersey. See "Incorporation of Certain
Information by Reference" for additional information about LFC. ^
^ WFC
WFC, headquartered in Westwood, New Jersey^ and incorporated under the
laws of the state of New Jersey, is a bank holding company. Through its
wholly-owned stock, savings bank subsidiary, WSB, ^ WFC has two banking offices
in Westwood and Haworth, New Jersey. ^ WFC's primary business consist of
attracting deposits from the general public and originating loans that are
secured by residential properties as well as originating commercial real estate
and consumer loans. WFC's principal office is located at 700-88 Broadway,
Westwood, New Jersey. See "Incorporation of Certain Information by Reference"
and "Accompanying Documents" for additional information about WFC.
Westwood Special Meeting
Time, Date, Place and Purpose
The Special Meeting will be held on ^ Tuesday, February 24, 1998 at ^
____:____ ____.m. local time, at the ^ ____________, ___________, New Jersey,
to consider and vote upon ^ a proposal to approve the Reorganization Agreement
and the transactions contemplated thereby^. A copy of the Reorganization
Agreement (without exhibits) is attached hereto as Appendix I.
Record Date; Vote Required
The record date ("Record Date") for determining WFC shareholders
entitled to notice of and to vote at the Special Meeting is ^ January 20, 1998.
The presence, in person or by proxy, of holders of shares entitled to cast at
least a majority of the votes at the Special Meeting is necessary to constitute
a quorum at the Special Meeting. Assuming a quorum is present, an affirmative
vote of at least a majority
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(i)
<PAGE>
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of the votes cast and entitled to vote at the Special Meeting is necessary to
approve the Reorganization Agreement. In the event a quorum is not present or
there are insufficient votes to approve any proposal, the Special Meeting may be
adjourned from time to time by a majority of those present in person or by proxy
in order to permit, as appropriate, further solicitation of proxies by the WFC
Board.
Stock Held By WFC Affiliates
The directors and executive officers of WFC and their affiliates
beneficially owned, as of the Record Date, ^ 133,296 shares of "WFC Common
Stock", including 51,692 shares subject to unexercised options held by such
persons which cannot be voted at the Special Meeting if not exercised,
representing 19% of the issued and outstanding shares of WFC Common Stock. The
directors and executive officers of WFC have all indicated that they will vote
their shares of WFC Common Stock in favor of the proposal to approve the
Reorganization Agreement.
LFC beneficially owns ^ 28,415 shares of WFC Common Stock, which
represents 4% of the issued and outstanding WFC Common Stock. LFC intends to
vote its shares in favor of the proposal to approve the Reorganization
Agreement.
The Merger
Effective Time
The merger of WFC with and into LFC (the "Holding Company Merger") will
become effective at the hour and on the date ("Effective Time") specified in the
Articles of Merger to be filed pursuant to the New Jersey Business Corporation
Act with the Secretary of State of the State of New Jersey immediately following
the closing of the Holding Company Merger. If the Holding Company Merger is
approved by WFC shareholders, subject to the satisfaction or waiver of certain
other conditions set forth in the Reorganization Agreement, it is currently
contemplated that the Effective Time will occur during the first calendar
quarter of 1998. At the Effective Time, WFC will be merged with and into LFC.
See "Proposal I -- The Merger-Closing and Effective Time."
Merger Consideration
The Reorganization Agreement provides that, subject to the election and
allocation procedures provided for therein, each issued and outstanding share of
WFC Common Stock will be converted into the right to receive, at the election of
each holder thereof, either (a) cash equal to $29.25 (the "Cash Merger
Consideration"), or (b) a number of shares of LFC Common Stock equal to $29.25
divided by the Final Market Price. The Final Market Price will be the average
closing price per share of the "last" real time trades (i.e., closing price) of
the LFC Common Stock as reported on the Nasdaq National Market for each of the
15 Nasdaq National Market general market trading days preceding one week prior
to the Closing Date on which the Nasdaq National Market was open for business.
Fractional shares of LFC Common Stock will not be issued in the Merger.
WFC shareholders otherwise entitled to a fractional share will be paid the value
of such fraction in cash determined as described herein under "Proposal I -- The
Merger-Effect of the Merger."
On ^ January 13, 1998, the most recent date for which it was
practicable to obtain market price data prior to the printing of this Proxy
Statement/Prospectus, the closing sales price per share of LFC Common Stock was
^ $25.25.
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(ii)
<PAGE>
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Because the Merger must qualify as a tax-free reorganization, no
guarantee can be given that an election by any given shareholder will be
honored. Rather, the election by each holder will be subject to the proration
and allocation procedures described herein and in the Reorganization Agreement.
Thus, holders may not receive their chosen form of consideration. See "Proposal
I -- The Merger-Election and Allocation Procedures."
Election by WFC Shareholders
Each shareholder of WFC will have the opportunity to submit an election
form and letter of transmittal ("Election Form") specifying the kind of
consideration sought to be received in exchange for his or her shares of WFC
Common Stock. The Election Form will be mailed (the "Mailing Date") under
separate cover to each holder of record of WFC Common Stock as of the Record
Date. An Election Form and a copy of this Proxy Statement/Prospectus also will
be mailed to persons who become shareholders of record of WFC after the Record
Date up to one business day prior to the Election Deadline (as defined below).
Election Forms also will be available at WFC's main office, LFC's main office
and from the Exchange Agent at all times through the Election Deadline.
The Election Form will permit WFC shareholders (i) to indicate that
they elect to receive in exchange for their WFC shares (a) LFC Common Stock
("Stock Election Shares"), (b) cash ("Cash Election Shares"), or (c) a
combination thereof, or (ii) to make no election ("Non-Electing Shares"). The
Non-Electing Shares will be converted into LFC Common Stock, cash or a
combination thereof as necessary to ensure that (i) the aggregate amount of
consideration payable in cash is equal to 49.9% of the aggregate value of all of
the consideration issued or paid in connection with the Merger, and the total
number of shares of LFC Common Stock to be issued in connection with the Merger
shall be that number of whole shares of LFC Common Stock that is equal to 50.1%
of the aggregate value of all of the consideration issued or paid in connection
with the Merger, and (ii) the Merger will qualify as a tax-free reorganization.
The Election Form together with stock certificates representing all shares of
WFC Common Stock covered thereby (or customary affidavits and indemnification
regarding the loss or destruction of such certificates or the guaranteed
delivery of such certificates), must be returned to Registrar and Transfer
Company, as exchange agent (the "Exchange Agent"), no later than ^ the close of
business on February 24, 1998 (the "Election Deadline"). Shares of WFC Common
Stock for which a properly completed Election Form has not been received by the
Exchange Agent by the Election Deadline will be deemed Non-Electing Shares.
Accordingly, persons who become shareholders of WFC after the Election Deadline
will be deemed to hold Non-Electing Shares, because they could not have made an
effective election with respect to such shares. See "Proposal I -- The
Merger-Election and Allocation Procedures."
Because the Merger must qualify as a tax-free reorganization, the
extent to which individual elections will be accommodated will depend upon the
respective number of WFC shareholders who elect cash and stock and who fail to
make an election. Accordingly, a WFC shareholder who elects to receive cash may
instead receive a combination of cash and shares of LFC Common Stock, a WFC
shareholder who elects to receive shares of LFC Common Stock (plus cash in lieu
of fractional shares) may instead receive a combination of cash and shares of
LFC Common Stock, and a WFC shareholder who elects to receive a combination of
cash and shares of LFC Common Stock may instead receive a different combination
of cash and shares of LFC Common Stock.
Because the tax consequences of receiving cash or LFC Common Stock will
differ, shareholders of WFC are urged to read carefully the information under
the caption "Proposal I -- The Merger-Federal Income Tax Consequences" and
consult their own tax advisor to determine the particular tax consequences to
them of the Merger.
- --------------------------------------------------------------------------------
(iii)
<PAGE>
- --------------------------------------------------------------------------------
Allocation Procedures
The aggregate amount of consideration to be received by WFC
shareholders in exchange for their shares of WFC Common Stock shall consist of
cash or LFC Common Stock, in such proportion as follows: (i) the aggregate
amount of consideration payable in cash ("Cash Amount") shall be 49.9% of the
aggregate value of all of the consideration issued or paid in connection with
the Merger; and (ii) the total number of shares of LFC Common Stock to be issued
in connection with the Merger ("Stock Amount") shall be that number of whole
shares of LFC Common Stock that has an aggregate value of 50.1% of the aggregate
value of all of the consideration issued or paid in connection with the Merger.
The Reorganization Agreement provides that the value of the aggregate number of
shares of LFC Common Stock to be issued in the Merger shall not exceed 50.1% of
the aggregate value of all of the consideration to be paid in connection with
the Merger. However, in order for Malizia, Spidi, Sloane & Fisch, P.C. to render
its opinion that the Merger qualifies as a tax-free reorganization, the value of
the aggregate number of shares of LFC Common Stock to be issued in the Merger
must be at least 50.1% of the aggregate value of all of the consideration to be
paid in connection with the Merger. To the greatest extent possible, LFC will
allocate cash and stock in accordance with each WFC shareholder's election.
However, if either the cash portion or the stock portion is oversubscribed, or
if the initial allocation based on WFC shareholder elections would threaten
satisfaction of the conditions to the consummation of the Merger, WFC
shareholder elections will be adjusted in accordance with the election and
allocation procedures, as described herein. See "Proposal I -- The
Merger-Election and Allocation Procedures."
Exchange of Certificates; Delivery of LFC Common Stock and Cash
No holder of certificates formerly representing shares of WFC Common
Stock will be entitled to receive either cash or shares of LFC Common Stock
until the certificates are properly surrendered to the Exchange Agent and no
interest will accrue in respect thereof. Each share of LFC Common Stock for
which shares of WFC Common Stock are exchanged in the Merger will be deemed to
have been issued on the Effective Date. Accordingly, WFC shareholders who
receive LFC Common Stock in the Merger will be entitled to vote their shares and
to receive any dividends or other distributions, without interest, that may be
payable to holders of record of LFC Common Stock after the Effective Date,
except that no such dividend will be remitted until the certificate representing
WFC Common Stock have been properly surrendered to the Exchange Agent. Within
five business days after the allocation described above under "--Allocation
Procedures," the Exchange Agent will distribute LFC Common Stock and cash with
respect to shares of WFC Common Stock which have been properly surrendered to
the Common Stock for LFC. Instead, each holder of shares of WFC Common Stock who
would otherwise be entitled to a fractional share of LFC Common Stock will
receive in lieu thereof a check in an amount equal to the value of such
fractional share based upon the Final Market Price.
Opinion of WFC's Financial Advisor
WFC engaged FinPro, Inc. ("FinPro") to render financial advisory and
investment banking services in connection with WFC management's decision to
explore various methods to enhance WFC shareholder value. Pursuant to such
engagement, FinPro has evaluated the fairness of the consideration to be
received by WFC's shareholders. FinPro has delivered to WFC an opinion dated
September 9, 1997 and updated as of January 15, 1998, stating that, as of such
date, based on the review and assumptions and subject to the limitations
described therein, the ^ merger consideration was fair, from a financial point
of view, to WFC's shareholders. A copy of FinPro's opinion is attached as
Appendix
- --------------------------------------------------------------------------------
(iv)
<PAGE>
- --------------------------------------------------------------------------------
II to this Proxy Statement/Prospectus and should be read in its entirety. See
"Proposal I -- The Merger- Opinion of WFC's Financial Advisor."
Federal Income Tax Consequences
The Merger is intended to be a reorganization within the meaning of
Section 368 of the Code; accordingly, a gain or loss generally will not be
recognized by WFC shareholders who receive solely LFC Common Stock in exchange
for their WFC Common Stock. Receipt of cash in the Merger will be a taxable
event. The Reorganization Agreement provides that consummation of the Merger is
conditioned upon receipt by LFC and WFC of an opinion of Malizia, Spidi, Sloane
& Fisch, P.C., legal counsel to LFC, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code. For a
further discussion of the federal income tax consequences of the Merger, see
"Proposal I-- The Merger-Federal Income Tax Consequences".
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH HOLDER
OF WFC COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS).
Accounting Treatment
It is anticipated that the Merger, when consummated, will be accounted
for as a purchase. See "Proposal I -- The Merger-Accounting Treatment".
Conditions of the Merger
Consummation of the Merger is subject, among other things, to the
approval of the Reorganization Agreement by the requisite vote of WFC
shareholders and the receipt of all requisite regulatory approvals and
satisfaction of other conditions contained in the Reorganization Agreement. See
"Proposal I -- The Merger-Conditions to the Merger."
Comparison of Shareholders' Rights
Because LFC and WFC are both New Jersey corporations, any differences
in the rights of holders of their respective common stock are due to differences
in the certificates of incorporation and by-laws of the two corporations. At the
Effective Time, holders of WFC Common Stock who become shareholders of LFC will
have their rights as shareholders of LFC determined by LFC's Certificate of
Incorporation and By-laws. See "Effect of the Merger on Shareholders' Rights."
Dissenters' Rights
Under the New Jersey Business Corporation Act, there are no dissenters'
rights of appraisal available to holders of WFC Common Stock in connection with
the Merger. See "Proposal I -- The Merger-No Dissenters Rights."
- --------------------------------------------------------------------------------
(v)
<PAGE>
- --------------------------------------------------------------------------------
Interests of Certain Persons in the Merger
Certain members of WFC's management and Board of Directors have
interests in the Merger in addition to their interests as WFC shareholders.
These include provisions in the Reorganization Agreement relating to continued
employment, indemnification, severance payments, stock options and restricted
stock payments. See "Proposal I -- The Merger-Interests of Certain Persons in
the Merger."
Comparative Market and Stock Price Information
LFC Common Stock is quoted on the Nasdaq National Market under the
symbol "LVSB". WFC Common Stock is quoted on the Nasdaq SmallCap Market under
the symbol "WWFC". The table below sets forth, for the fiscal ^ quarter
indicated, the high and low sales prices for LFC Common Stock and WFC Common
Stock and the dividends per share declared on LFC Common Stock and WFC Common
Stock in each quarter. No assurance can be given as to the market price of LFC
Common Stock or WFC Common Stock at, or in the case of LFC Common Stock, after,
the Effective Date.
<TABLE>
<CAPTION>
LFC^(1) WFC
---------------------------------------- ----------------------------------------
Sales Price Cash Sales Price Cash
-------------------- Dividends ----------- Dividends
High Low Paid High Low Paid
---- --- ---- ---- --- ----
1996
- ----
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended October 31.............. $ 7.91 $ 7.18 $.03125 N/A N/A N/A
Quarter Ended January 31.............. 8.13 7.28 .03125 N/A N/A N/A
Quarter Ended April 30................ 9.04 7.84 .03125 N/A N/A N/A
Quarter Ended July 31................. 9.55 8.07 .03125 $11.00 $10.25 $.05
1997
- ----
Quarter Ended October 31.............. 12.44 9.21 .03125 13.75 10.50 .05
Quarter Ended January 31.............. 15.69 11.25 .03125 17.13 13.25 .05
Quarter Ended April 30................ 17.13 13.75 .03125 20.38 16.25 .05
Quarter Ended July 31................. 17.32 13.63 .03125 ^ 21.75 17.00 .05
1998
- ----
Quarter Ended October 31.............. 26.75 16.13 .03125 28.00 20.00 .10
Quarter Ended January 31
(through ^ January 13).............. 26.00 24.13 ^ 28.25 ^ 27.63 .05
</TABLE>
^(1) Per share data and historical stock prices have been adjusted for a
two-for-one stock split on October 15, 1997 and a 10% stock dividend on
November 13, 1996.
N/A - WFC's conversion and reorganization from the mutual holding company to the
stock holding company form of reorganization was completed on June 6, 1996.
Prior to that time, WSB's common stock was not listed on the Nasdaq ^ Stock
Market or any national exchange.
- --------------------------------------------------------------------------------
(vi)
<PAGE>
- --------------------------------------------------------------------------------
On September 9, 1997, the last trading day before the public
announcement of the Reorganization Agreement, the reported closing sale prices
of LFC Common Stock and WFC Common Stock were $17.75 and $21.25, respectively.
On ^ January 13, 1998, the most recent date for which it was practicable to
obtain market price data prior to the printing of this Proxy
Statement/Prospectus, the reported closing sale prices per share of LFC Common
Stock and WFC Common Stock were ^ $25.25 and ^ $27.63, respectively. The per
share stock distribution will be determined based on a formula set forth in the
Reorganization Agreement that takes into consideration the average closing price
per share of the "last" real time trades (i.e. closing price of LFC common stock
as reported on the Nasdaq National Market for each of the fifteen Nasdaq
National Market general market trading days preceding the week prior to the
Closing Date on which the Nasdaq National Market was open for business (the
"Pricing Period").
No assurance can be given as to what LFC average stock price will be
during the actual Pricing Period or as to what the market price of the shares of
LFC Common Stock will be at the time the Merger is consummated. WFC shareholders
are encouraged to obtain current market quotations for LFC Common Stock and WFC
Common Stock. No assurance can be given as to the market price of LFC Common
Stock or WFC Common Stock at, or in the case of LFC Common Stock, after, the
Effective Date.
- --------------------------------------------------------------------------------
(vii)
<PAGE>
- --------------------------------------------------------------------------------
Comparative Per Share Information
The following table sets forth unaudited comparative per share data of
LFC on both a historical and pro forma combined basis and per share data of WFC
on both a historical and pro forma equivalent combined basis. These tables
should be read in conjunction with the consolidated financial statements and
notes thereto of LFC contained in the LFC 1997 Annual Report and the LFC Form
10-Q for the three months ended October 31, 1997, the consolidated financial
statements and notes thereto of WFC contained in the WFC 1997 Annual Report
accompanying this Proxy Statement/Prospectus, and the pro forma combined
financial statements and notes thereto appearing elsewhere in this Proxy
Statement/Prospectus. See "Incorporation of Certain Information By Reference"
and "Pro Forma Consolidated Financial Information." Pro forma combined and pro
forma equivalent per share data have been prepared giving effect to the Merger
under the purchase method of accounting. The following information is not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations of future periods or future combined financial position.
As discussed under "Proposal I - The Merger--Merger Consideration," the
conversion ratio is subject to adjustment as a result of changes in the market
price of shares of LFC Common Stock.
<TABLE>
<CAPTION>
At or For the At or For the
Three Months Ended Year Ended
October 31, 1997 July 31, 1997
---------------- -------------
<S> <C> <C>
Book Value Per Share
Historical:
LFC...................................................... $13.29 $13.71
WFC...................................................... 15.95 15.76
Pro Forma:
LFC and WFC combined..................................... 14.27 14.42
WFC equivalent(1)........................................ ^ 16.53 16.70
Cash Dividends Per Share
Historical:
LFC...................................................... $.03125 $.1250
WFC...................................................... .05000 .2000
Pro Forma:
LFC and WFC combined(2).................................. .03125 ^.12500
WFC equivalent(1)........................................ ^.03620 .14480
Net Income Per Share
Historical:
LFC...................................................... $.26 $1.20
WFC...................................................... .19 .78
Pro Forma:
LFC and WFC combined..................................... .20 .96
WFC equivalent(1)........................................ ^.23 1.11
</TABLE>
(footnotes on following page)
- --------------------------------------------------------------------------------
(viii)
<PAGE>
- --------------------------------------------------------------------------------
- ------------------
(1) The pro forma equivalent per share data for WFC has been computed by
multiplying the pro forma combined amount (giving effect to the Merger)
by the ratio of ^ 1.1584 based on the consideration of $29.25 divided
by ^ $25.25, the last sales price of a share of LFC ^ common stock on
January 13, 1998.
(2) Based on historical dividends of LFC.
Selected Historical Consolidated Financial Information
The following tables set forth, for the periods indicated, certain
selected historical financial information for LFC and WFC. This information
should be read in conjunction with the consolidated financial statements of LFC
and WFC, and the related notes thereto, included in documents incorporated
herein by reference. See "Incorporation of Certain Information by Reference."
The historical balance sheet and income statement information included
in the selected financial information for LFC for the five years ended July 31,
1997, and for WFC for the five years ended March 31, 1997, are derived from
audited financial statements as of, and for, such years. The historical balance
sheet and income statement information for LFC for the three months ended
October 31, 1997 and 1996 and WFC for the six months ended September 30, 1997
and 1996 are derived from unaudited financial statements as of, and for, such
period. These unaudited financial statements include all adjustments which are,
in the opinion of LFC management and WFC management, necessary for a fair
statement of the results of these periods and are of a normal recurring nature.
- --------------------------------------------------------------------------------
(ix)
<PAGE>
- --------------------------------------------------------------------------------
Selected Historical Financial Information of LFC
<TABLE>
<CAPTION>
At or For the
Three Months Ended
October 31, At or For the Year Ended July 31,
----------------------- -----------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share data)
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......................... $ 8,971 $ 8,058 $ 32,842 $ 30,972 $ 28,430 $ 18,947 $15,179
Interest expense......................... 4,636 4,209 17,318 16,550 13,539 7,735 7,154
Net interest income...................... 4,335 3,849 15,524 14,423 14,891 11,212 8,025
Provision for loan losses................ 301 105 961 664 1,376 2,047 2,031
Investment securities gains (losses)..... (13) 764 4,788 2,769 2,107 866 679
Net income .............................. ^ 1,266 346 6,061 6,274 6,295 4,571 2,339
Net income ^ per share................... .26 .07 1.20 1.13 1.01 N/A N/A
Average common shares outstanding........ 4,822 5,142 5,071 5,560 6,261 N/A N/A
Balance Sheet Data:
Total assets............................. 517,975 472,698 505,882 457,860 419,212 413,725 207,462
Investment securities.................... 252,892 263,459 250,523 252,250 239,680 246,973 56,493
Loans.................................... 233,514 ^ 179,222 224,564 163,457 142,123 136,143 137,301
Total deposits........................... 369,056 360,989 370,787 354,247 343,489 344,915 164,130
Borrowings............................... 85,782 58,187 63,604 54,721 19,859 19,021 18,500
Shareholders' equity..................... 55,359 48,415 61,809 45,760 49,440 46,982 22,211
Book value per common share.............. 13.29 9.73 13.71 9.18 8.51 7.30 N/A
Selected Ratios:
Return on average assets(1).............. 1.00^% .30% 1.28% 1.42% 1.50% 1.16% 1.13%
Return on average equity(1).............. 8.63 2.98 11.27 13.18 13.06 13.21 11.11
Average interest rate spread............. 3.06 3.24 3.15 3.21 3.58 4.07 3.89
Average net interest margin.............. 3.61 3.57 3.51 3.51 3.86 4.31 4.13
Allowance for loan losses to total loans. 1.51 1.76 1.52 1.88 1.78 1.26 1.92
Allowance for loan losses
to nonperforming assets................ ^ 59.9 ^ 55.2 59.4 67.1 32.4 ^ 15.0 ^ 17.2
</TABLE>
(1) Annualized for the three months ended October 31, 1997 and 1996.
- --------------------------------------------------------------------------------
(x)
<PAGE>
- --------------------------------------------------------------------------------
Selected Historical Financial Information of WFC
<TABLE>
<CAPTION>
At or For the
Six Months Ended
September 30, At or For the Year Ended March 31
------------- ----------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income.......................... $ 3,777 $ 3,061 $ 6,648 $ 5,566 $ 4,535 $ 3,700 $ 3,647
Interest expense......................... 2,235 1,716 3,775 3,314 2,229 1,671 1,876
Net interest income..................... 1,542 1,345 2,873 2,252 2,236 2,029 1,771
Provision for loan losses................ 17 40 52 35 39 14 12
Investment securities gains (losses)..... - (17) (98) - - - -
Net income ............................. ^ 357 19 435 552 550 698 592
Net income ^ per share................... .55 .03 .73 1.45 1.45 .49 N/A
Cash dividends declared per share........ .15 .05 .20 .20 .40 .10 N/A
Average common shares outstanding........ 645 549 645 380 380 N/M N/A
Balance Sheet Data:
Total assets............................. 110,425 93,648 107,981 86,564 75,497 53,807 49,026
Investment securities.................... 60,512 46,680 58,633 43,445 35,039 21,489 18,547
Loans.................................... 40,067 38,486 40,371 34,504 32,205 28,246 27,640
Total deposits........................... 89,745 83,425 87,857 80,356 69,822 48,639 45,534
Long-term debt........................... 10,000 - - - - - -
Shareholders' equity..................... 10,290 9,546 9,950 6,126 5,543 5,084 3,381
Book value per common share.............. 15.95 14.76 15.42 N-M N-M N-M N/A
Selected Ratios:
Return on average assets(1).............. .7% .04% .5% .7% .8% 1.3% 1 .3%
Return on average equity(1).............. 7.0 .4 4.8 9.4 10.1 17.0 19.2
Average interest rate spread............ 2.5 2.8 2.7 2.7 3.1 3.6 3.5
Average net interest margin............. 2.8 3.1 3.0 2.9 3.3 3.9 3.8
Allowance for loan losses to total loans .04 .1 .5 .5 .4 .3 .3
Allowance for loan losses
to nonperforming assets................ - - - - - - -
</TABLE>
(1) Annualized for the six months ended September 30, 1997 and 1996.
N-M - Not meaningful as a result of the conversion and reorganization
completed June 6, 1996.
- --------------------------------------------------------------------------------
(xi)
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements
give effect to the Merger as if it had been consummated on October 31, 1997 for
^ balance sheet purposes, and August 1, 1997 or August 1, 1996 for statement of
income purposes, as the case may be. Pro forma adjustments are based on the
purchase method of accounting and a preliminary allocation of the purchase price
based on the estimated fair value of the net assets acquired as of October 31,
1997. The actual purchase accounting adjustments and goodwill will be based on
the facts and circumstances on the date the transaction closes. The transaction
is structured such that LFC will pay 50.1% in LFC Common Stock and 49.9% cash
for the estimated fair market value of net assets acquired of WFC. The actual
allocation of the purchase price between stock and cash, as outlined in
"Proposal I - The Merger," may have an impact on the pro forma consolidated
results of operations and earnings per share reported herein, although such
impact is not expected to be material. Accordingly, the pro forma combined
consolidated financial statements are intended for informational purposes and is
not necessarily indicative of the future financial position or future results of
operations of the combined company or of the financial position or the results
of operations of the combined company that would have actually occurred had the
Merger been in effect as of the date or for the periods presented. See "Proposal
I - The Merger" for a discussion of the determination of the aggregate value of
all consideration paid in connection with the Merger.
The following unaudited pro forma consolidated financial statements
assume the following with respect to the allocation of the purchase price and
determination of goodwill:
Purchase price:
Stock portion (416,613 shares of LFC Common Stock
issued at a value of $24.75 per share)............... $10,311,170
Cash portion ($7 million borrowed from a
third party financial institution)................... 10,270,008
Estimated direct costs................................. 335,000
-----------
20,916,178
Estimated fair market value of assets acquired:
WFC book value at September 30, 1997................... 10,290,000
Estimated mark-to-market adjustments, net.............. 529,855
-----------
Estimated fair market value of net assets acquired..... 10,819,855
----------
Estimated goodwill..................................... $10,096,323
==========
The following information should be read in conjunction with the
consolidated financial statements of LFC and WFC, and the related notes thereto,
included herein or in documents incorporated herein by reference. As a result of
the different fiscal year-ends between LFC and WFC, the historical statements of
income of WFC included in the pro forma consolidated financial statements of
income have been updated to conform with the reporting requirements of Article
11 of Regulation ^ S-X. Accordingly, for the year ended July 31, 1997 the
results of operations of WFC include the twelve months ended June 30, 1997 by
combining the last three quarters of WFC's 1997 fiscal year-end ^ with the first
quarter of WFC's 1998 fiscal year end. Furthermore, the results of operations
for second fiscal quarter of WFC's 1998 fiscal year-end have been separated from
that period's six month results of operations in order to make WFC's results
comparable to the reporting periods included in LFC's results of operations for
the three months ended October 31, 1997.
(xii)
<PAGE>
PRO FORMA CONSOLIDATED ^ BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Historical
-------------------------------------
October 31, 1997 September 30, 1997 Pro Forma Pro Forma
LFC WFC Adjustments Consolidated
--------------- ------------------ --------------- -------------
<S> <C> <C> <C> <C>
Assets
- ------
Cash on hand and in banks $ 6,482,274 $ 6,302,000 $(3,270,008)(2) $ 9,514,266
Investment securities held to maturity 45,816,417 42,399,000 (727,000)(5) 87,488,417
Investment securities available for sale 109,118,930 2,000 109,120,930
Mortgage-backed securities held to maturity 97,956,618 18,111,000 116,067,618
Loans receivable, net 233,514,164 40,067,000 (200,000)(5) 273,381,164
Real estate owned, net 1,761,637 0 1,761,637
FHLB of New York stock, at cost 3,800,000 576,000 4,376,000
Accrued interest receivable 3,959,441 1,115,000 5,074,441
Office properties and equipment, net 3,976,046 711,000 4,687,046
Excess of cost over fair value of net assets acquired 8,526,064 1,085,000 10,096,323 (1) 19,497,047
(210,340)(6)
Other assets 3,063,245 57,000 35,700 (7) 3,155,945
----------- ------------- ----------- -----------
Total assets $517,974,836 $110,425,000 $ 5,724,675 $634,124,511
=========== =========== =========== ===========
Liabilities
- -----------
Deposits $369,056,018 $ 89,745,000 ($2,000,000)(5) $456,801,018
Borrowings 83,450,000 10,000,000 7,000,000(2) 100,450,000
Borrowings - (ESOP) obligation 2,332,375 0 2,332,375
Advance payments by borrowers for taxes
and insurance 267,978 0 267,978
Other liabilities 7,508,997 390,000 878,145 (5) 8,882,142
105,000 (7)
Total liabilities 462,615,368 100,135,000 5,983,145 568,733,513
Stockholders' Equity
- --------------------
Common Stock $ 6,441,504 $ 65,000 $ (65,000)(4) $ 6,858,117
416,613 (3)
Additional paid-in capital 33,277,112 3,212,000 (3,212,000)(4) 43,171,669
9,894,557 (3)
Retained income 29,743,857 7,013,000 (7,013,000)(4) 29,464,217
(69,300)(7)
(210,340)(6)
Unrealized gain on securities available for sale,
net of tax 14,290,563 0 0 14,290,563
Treasury stock at cost (25,010,210) 0 0 (25,010,210)
Unallocated ESOP shares (2,325,710) 0 0 (2,325,710)
Unallocated MSBP shares (1,057,648) 0 0 (1,057,648)
----------- -------------- ------------ ----------
Total stockholders' equity 55,359,468 10,290,000 (258,470) 65,390,998
----------- ----------- ---------- -----------
Total liabilities and stockholders' equity $517,974,836 $110,425,000 $5,724,675 $634,124,511
=========== =========== ========= ===========
</TABLE>
(footnotes on following page)
(xiii)
<PAGE>
1. Excess of cost over fair value of net assets acquired resulting from
the Merger, after application of purchase accounting adjustments, is
assumed to approximate $10.1 million.
2. Amount to fund the cash portion of the transaction assumed to be $10.3
million, represented by $7.0 million in borrowings and $3.3 million in
cash on hand and in banks.
3. 416,613 shares of ^ $1.00 par value LFC Common Stock are assumed to
have been issued at a value of $24.75 per share or $10.3 million in
total. The per share amount represents the market value of LFC Common
Stock at October 31, 1997.
4. Adjustments necessary to eliminate WFC equity accounts.
5. All other pro forma adjustments to assets and liabilities represent
estimated mark-to-market adjustments and other accrued liabilities
associated with the Merger as of October 31, 1997. Mark-to-market
adjustments are based on third party securities prices, appraisals, or
in circumstances where such could not be obtained, management's best
estimate of the value of the asset or liability.
6. Amount reflects the amortization of goodwill to give effect of the
transaction as if it had occurred at the beginning of the ^ period.
Goodwill is being amortized over 12 years.
7. Amount reflects the interest expense that would have been recorded on
the borrowings at an assumed rate of 6%, net of tax, as if the
transaction had occurred at the beginning of the year.
(xiv)
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------------------------
Year Ended Year Ended
July 31, 1997 June 30, 1997 Pro Forma Pro Forma
LFC WFC Adjustments Consolidated
----------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income
- ---------------
Loans receivable $16,841,183 $3,083,000 $19,924,183
Mortgage-backed securities 7,319,449 1,267,000 8,586,449
Investment securities, held to maturity and
Federal Funds 3,425,496 2,671,000 $ 145,400 (3) 6,241,896
Investment securities available for sale 5,255,997 0 5,255,997
----------- ----------- -------- -----------
Total interest income 32,842,125 7,021,000 145,400 40,008,525
---------- ----------- -------- -----------
Interest Expense
- ----------------
Interest on deposits 13,987,512 3,669,000 400,000 (3) 18,056,512
Interest on borrowings 3,330,542 364,000 420,000 (2) 4,114,542
----------- ----------- -------- -----------
Total interest expense 17,318,054 4,033,000 820,000 22,171,054
---------- --------- -------- -----------
Net interest income 15,524,071 2,988,000 (674,600) 17,837,471
Provision for losses on loans 961,217 25,000 986,217
---------- ----------- --------- -----------
Net interest income after provision for losses 14,562,854 2,963,000 (674,600) 16,851,254
---------- --------- --------- -----------
on loans
Other income:
Loan fees and service charges 1,192,971 156,000 1,348,971
Net realized gain (loss) on sales of
investment securities available for
sale and trading securities 4,787,866 (98,000) 4,689,866
Other operating income 2,120,763 6,000 2,126,763
---------- ----------- ----------
Total other income 8,101,600 64,000 8,165,600
---------- ----------- ----------
Other Expenses:
Compensation and employee benefits 5,707,554 685,000 6,392,554
Office occupancy and equipment expense 932,128 107,000 1,039,128
Net loss on real estate owned activities 206,369 0 206,369
Other operating activities 2,769,553 790,215 3,559,768
SAIF recapitalization assessment 2,218,674 454,000 2,672,674
Amortization of the excess of cost over fair
value of net assets acquired 1,320,288 105,785 829,985 (1) 2,256,058
---------- ----------- -------- ----------
Total other expenses 13,154,566 2,142,000 829,985 16,126,551
Income before Federal and state income tax 9,509,888 885,000 (1,504,585) 8,890,303
Federal and state income tax expense
(benefit) 3,448,877 382,000 (142,800)(2) 3,601,513
(86,564)(3)
Net income $6,061,011 $ 503,000 $(1,275,221) $5,288,790
========= ========= ========== =========
Weighted average shares outstanding 5,071,444 645,268 (228,655) 5,488,057
Earnings per common share $1.20 $0.78 $0.96
</TABLE>
(footnotes on following pages)
(xv)
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Historical
--------------------------------------------
Three Months Ended Three Months Ended
October 31, 1997 September 30, 1997 Pro Forma Pro Forma
LFC WFC Adjustments Consolidated
------------------ ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Interest Income
- ---------------
Loans receivable $5,183,596 $ 774,000 $ 5,957,596
Mortgage-backed securities 1,635,489 328,000 1,963,489
Investment securities, held to maturity
and Federal Funds 937,332 793,000 $ 36,350 (3) 1,766,682
Investment securities available for sale 1,214,099 0 1,214,099
---------- ----------- ------------ ----------
Total interest income 8,970,516 1,895,000 36,350 10,901,866
Interest Expense
- ----------------
Interest on deposits 3,568,271 983,000 100,000 (3) 4,651,271
Interest on borrowings 1,068,140 150,000 105,000 (2) 1,323,140
---------- ---------- ------------ ---------
Total interest expense 4,636,411 1,133,000 205,000 5,974,411
Net interest income 4,334,105 762,000 (168,650) 4,927,455
Provision for losses on loans 300,518 9,000 309,518
---------- ---------- ----------- ----------
Net interest income after provision
for losses on loans 4,033,587 753,000 (168,650) 4,617,937
Other income:
Loan fees and service charges 323,604 58,000 381,604
Net realized gain (loss) on sales of
investment securities available for
sale and trading securities (13,056) 0 (13,056)
Other operating income 434,717 6,000 440,717
---------- ---------- ----------
Total other income 745,265 64,000 809,265
Other Expenses:
Compensation and employee benefits 1,507,226 244,000 1,751,226
Office occupancy and equipment expense 230,504 76,000 306,504
Net loss on real estate owned activities 41,487 0 41,487
Other operating activities 713,648 236,000 949,648
Amortization of the excess of cost over
fair value of net assets acquired 330,072 23,000 210,340 (1) 563,412
---------- ---------- ----------- ----------
Total other expenses 2,822,937 579,000 210,340 3,612,277
Income before Federal and state income
tax 1,955,915 238,000 (378,990) 1,814,925
Federal and state income tax expense
(benefit) 689,600 118,000 (35,700) (2) 750,259
(21,641) (3)
Net income $1,266,315 $ 120,000 $ (321,649) $1,064,666
========= ========= ========== =========
Weighted average shares outstanding 4,822,350 645,268 (228,655) 5,238,963
Earnings per common share $0.26 $0.19 $0.20
</TABLE>
(footnotes on following page)
(xvi)
<PAGE>
1. Excess of cost over fair value of net assets acquired is assumed to
approximate $10.1 million and is amortized over 12 years.
2. Borrowings drawn by LFC to fund the transaction are assumed have an annual
rate of 6%.
3. All other pro forma adjustments represent the amortization of estimated
mark-to-market adjustments amortized over five years and the related income
tax effect of such adjustments at an assumed tax rate of 34%. The pro forma
adjustments give no effect to cost savings or revenue enhancements that may
be realized as a result of the Merger.
(xvii)
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to WFC Shareholders
in connection with the solicitation of proxies by the WFC Board for use at the
WFC Special Meeting to be held on ^Tuesday, February 24, 1998, at the
_____________, ______________, New Jersey, at ____:____ ____.m. local time or at
any adjournments thereof. The purpose of the Special Meeting is to consider and
vote upon a proposal to approve the Reorganization Agreement and the
transactions contemplated thereby, as more fully set forth in the Notice of
Special Meeting accompanying this Proxy Statement/Prospectus.
The Board of Directors of WFC unanimously approved the Reorganization
Agreement and recommends that WFC Shareholders vote FOR its approval.
WFC SPECIAL MEETING
Record Date; Vote Required
The securities to be voted at the WFC Special Meeting consist of shares
of WFC Common Stock, with each share entitling its owner to one vote on the
proposal brought before the WFC Special Meeting. WFC had no other class of
securities entitled to vote on the Reorganization Agreement outstanding at the
close of business on the WFC Record Date. There were ^ 335 holders of record of
WFC Common Stock and ^ 645,296 shares of WFC Common Stock outstanding and
eligible to be voted at the WFC Special Meeting as of the Record Date.
The presence at the WFC Special Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of WFC Common will constitute a
quorum for the transaction of business. Under the New Jersey Corporation Act and
WFC's Certificate of Incorporation, the approval of the Reorganization Agreement
requires the affirmative vote of a majority of the votes cast by the holders of
shares entitled to vote. The approval of the Reorganization Agreement by WFC
Shareholders is a condition to the consummation of the Merger. Unless otherwise
required by law, all other matters shall be determined by a majority of votes
cast affirmatively or negatively without regard to (a) broker non- votes or (b)
proxies marked "ABSTAIN" as to that matter. See Proposal I -- "The
Merger-Conditions to the Merger.
For purposes of determining the number of votes cast with respect to a
matter, only those votes cast "for" and "against" a proposal are counted. There
will be no "broker non-votes" (i.e., shares held by brokers or nominees as to
which instructions have not been received from the beneficial owners or the
persons entitled to vote such shares and the broker or nominee does not have
discretionary voting power under the applicable ^ Nasdaq rules). Consequently,
broker ^ non-votes will have no impact on the votes counted as "for" or
"against" for purposes of determining the number of votes cast ^ but will be
treated as present for quorum purposes. Abstentions will be treated as shares
that are present for purposes of determining the presence of a quorum but will
not be counted "for" or "against" the proposal.
1
<PAGE>
Proxies; Revocation; Solicitation
If the form of WFC proxy is properly executed and returned to WFC in
time to be voted at the WFC Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. WFC proxies that
are executed, but as to which no instructions have been marked, will be voted
FOR the approval of the Reorganization Agreement. Should any other matter
properly come before the WFC Special Meeting, the persons named as proxies in
the WFC proxy, acting by a majority of those proxies present, will have
discretionary authority to vote on such matters in accordance with their
judgment. However, no proxy which is voted "against" the proposal to approve and
adopt the Reorganization Agreement will be voted in favor of any such
adjournment or postponement. As of the time of the preparation of this Proxy
Statement/Prospectus, the WFC Board does not know of any matter, other than
those matters referred to in the WFC Notice of Special Meeting of Shareholders,
to be presented for action at the WFC Special Meeting.
The cost of soliciting proxies will be borne by WFC. In addition to use
of the mails, proxies may be solicited personally or by telephone, telecopier or
telegraph by officers, directors or employees of WFC, who will not be specially
compensated for such solicitation activities. Arrangements will also be made by
WFC to reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses incurred in forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
A proxy may be revoked by the person giving the proxy at any time prior
to the close of voting. Prior to the WFC Special Meeting a proxy may be revoked
by filing with the Secretary of WFC at Westwood Financial Corporation, 700-88
Broadway, Westwood, New Jersey 07675, a written revocation or a duly executed
proxy bearing a later date. During the WFC Special Meeting a proxy may be
revoked by filing a written revocation or a duly executed proxy bearing a later
date with the secretary of the WFC Special Meeting prior to the close of voting
or by attending the WFC Special Meeting and voting in person. Any shareholder of
record may attend the WFC Special Meeting and vote in person, whether or not a
proxy has previously been given.
If a person holding WFC Common in street name wishes to vote such WFC
Common at the WFC Special Meeting, the person must obtain from the nominee
holding the WFC Common in street name a properly executed "legal proxy"
identifying the individual as a WFC Shareholder, authorizing the WFC Shareholder
to act on behalf of the nominee at the Special Meeting and identifying the
number of shares with respect to which the authorization is granted.
PROPOSAL I -- THE MERGER
The following information concerning the Merger, insofar as it relates
to matters contained in the Reorganization Agreement, is qualified in its
entirety by reference to the full text of the Reorganization Agreement which is
attached as Appendix I to this Proxy Statement/Prospectus and is incorporated by
reference.
2
<PAGE>
Closing and Effective Time
The Reorganization Agreement provides that the closing of the Merger
(the "Closing") will be held on the second business day after satisfaction of
the conditions or waiver of the Holding Company Merger, unless another date,
time or place is agreed to in writing by the parties hereto, provided, however,
that the Closing Date will not occur prior to January 1, 1998.
The Holding Company Merger shall become effective on the date and at
the time of filing of the Articles of Merger with the Secretary of State of the
State of New Jersey or at such later date and/or time as may be agreed upon by
the Parties and set forth in the Articles of Merger so filed.
The Merger
The Reorganization Agreement provides that LFC will acquire WFC through
a merger of WFC into LFC with LFC being the surviving entity. Upon consummation
of the Merger, all shares of WFC Common Stock will no longer be outstanding and
will automatically be canceled and retired and will cease to exist, and each
holder of a certificate representing any shares of WFC Common Stock will cease
to have any rights with respect thereto, except the right to receive cash and/or
shares of LFC Common Stock to be paid or issued upon the surrender of such
certificate, without interest, as described below. LFC also plans to merge WSB
into LVSB on, or as soon as practicable after, the Effective Date (the "Bank
Merger"), and LFC and WFC have agreed to take all action necessary and
appropriate to effectuate the Bank Merger.
Effect of The Merger
On the Effective Date, as defined below, WFC will merge with and into
LFC. The WFC Common Stock will be exchanged for shares of LFC Common Stock or
cash as described under "-- Merger Consideration." Each share of LFC Common
Stock outstanding immediately prior to the Effective Date will remain
outstanding and unchanged as a result of the Merger.
No fractional shares of LFC Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, LFC will make a cash
payment equal to the fractional interest which a WFC shareholder would otherwise
receive multiplied by the Final Market Price (described below).
Merger Consideration
Conversion of Stock. At the Effective Time of the Merger, each share of
WFC Common Stock then issued and outstanding (other than shares held directly or
indirectly by LFC, excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
represent the right to receive the cash and/or shares of stock of LFC
constituting the Per Share Merger Consideration (as defined below). As of the
Effective Time of the Merger, each share of the WFC Common Stock held directly
or indirectly by LFC, excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, shall be canceled, retired and
cease to exist, and no exchange or payment shall be made with respect thereto.
3
<PAGE>
As used herein, the term "Per Share Merger Consideration" shall mean
either the amount of cash set forth in clause (i) below (the "Cash Merger
Consideration") or that number of shares of LFC Common Stock as set forth in
clause (ii) below (the "Stock Merger Consideration"), at the election of the
holder of each share of WFC Common Stock, subject however to proration as set
forth below.
(i) If Cash Merger Consideration is to be paid with respect to a
share of WFC Common Stock, the Per Share Merger Consideration
with respect to such share of WFC Common Stock shall be in the
amount of $29.25.
(ii) If Stock Merger Consideration is to be paid with respect to a
share of WFC Common Stock, the Per Share Merger Consideration
with respect to such share of WFC Common Stock shall be that
number of shares of LFC Stock (the "Conversion Number") equal
to $29.25 divided by the Final Market Price as defined below.
The "Final Market Price" shall be the average closing price per share
of the "last" real time trades (i.e., closing price) of the LFC Common Stock as
reported on the Nasdaq National Market for each of the 15 Nasdaq National Market
general market trading days preceding one week prior to the Closing Date on
which the Nasdaq National Market was open for business (the "Pricing Period").
In the event the LFC Common Stock does not trade on one or more of the trading
days during the Pricing Period (a "No Trade Date"), any such No Trade Date shall
be disregarded in computing the average closing price per share of LFC Common
Stock and the average shall be based upon the "last" real time trades and number
of days on which the LFC Common Stock actually traded during the Pricing Period.
No such holder will be entitled to dividends, voting rights or any
other rights of a stockholder of LFC or WFC in respect of any such fractional
share.
The calculations of the respective amounts of cash and LFC Common Stock
payable and issuable pursuant to the terms of this Reorganization Agreement
shall be jointly prepared and agreed to by LFC and WFC and set forth in
reasonable detail in a schedule that shall be delivered to Registrar and
Transfer Company (the "Exchange Agent") prior to the Closing Date.
Election and Allocation Procedures. Subject to and in accordance with
the allocation and election procedures set forth herein, each record holder of a
share of WFC Common Stock (the "WFC Shareholders") shall, prior to the Election
Deadline (as hereinafter defined) specify (i) the number of whole shares of WFC
Common Stock held by such Shareholder as to which such Shareholder shall desire
to receive the Cash Merger Consideration, and (ii) the number of whole shares of
WFC Common Stock held by such Shareholder as to which such Shareholder shall
desire to receive the Stock Merger Consideration.
At the Effective Time of the Merger, each unexercised WFC Stock Option
shall be deemed canceled and as consideration therefor, at the election of each
holder of a WFC Stock Option (the "Option Holders," and together with the
Shareholders the "Holders") shall be converted into the right to receive either
(i) solely a cash payment amount (the "Cash Out") equal to the excess of (A)
$29.25 over the exercise price per share of WFC Common Stock covered by the WFC
Stock Option, multiplied by (B) the total number of shares of WFC Common Stock
covered by the WFC Stock Option or (ii) solely a number of shares of LFC Common
Stock (the "Stock Exchange") equal to the excess of (A) $29.25 over the exercise
price per share of WFC Common Stock covered by the WFC Stock Option, multiplied
by
4
<PAGE>
(B) the total number of shares of WFC Common Stock covered by the WFC Stock
Option and divided by (C) the Final Market Price.
An election as described in clause (i) above is herein referred to as a
"Cash Election," and shares of WFC Common Stock as to which a Cash Election has
been made are herein referred to as "Cash Election Shares." An election as
described in clause (ii) above is herein referred to as a "Stock Election," and
shares as to which a Stock Election has been made are herein referred to as
"Stock Election Shares." A failure to indicate a preference in accordance
herewith is herein referred to as a "Non-Election," and shares as to which there
is a Non-Election are herein referred to as "Non-Electing Shares."
Notwithstanding anything herein to the contrary, not less than 50.1% of
the WFC Common Stock shall be exchanged for Lakeview Common Stock. Payment of
cash pursuant to the Cash Merger Consideration and the Cash Out, and issuance of
LFC Common Stock pursuant to the Stock Merger Consideration and the Stock
Exchange, shall be allocated to Holders such that the number of shares of WFC
Common Stock (outstanding or subject to WFC Stock Options) as to which cash is
paid shall equal 49.9% of the aggregate number of shares of WFC Common Stock
outstanding plus those subject to WFC Stock Options (the "Aggregate Shares"),
and the number of shares of WFC Common Stock (outstanding or subject to WFC
Stock Options) as to which WFC Stock are issued shall equal 50.1% of the
Aggregate Shares, as follows:
(1) If the number of Cash Election Shares is in excess of 49.9% of the
Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be
Stock Election Shares, (ii) Cash Election Shares of Option Holders
shall be treated as Cash Election Shares without adjustment, and
(iii)(A) Cash Election Shares of each Shareholder shall be reduced pro
rata by multiplying the number of Cash Election Shares of such
Shareholder by a fraction, the numerator of which is the number of
shares of WFC Common Stock equal to 49.9% of the Aggregate Shares
minus the aggregate number of Cash Election Shares of Option Holders
and the denominator of which is the aggregate number of Cash Election
Shares of all Shareholders, and (B) the shares of such Shareholder
representing the difference between such Shareholder's initial Cash
Election and such Shareholder's reduced Cash Election pursuant to
clause (A) shall be converted into and be deemed to be Stock Election
Shares.
(2) If the number of Stock Election Shares is in excess of 50.1% of the
Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be
Cash Election Shares, ^ (ii) Stock Election Shares of Option Holders
shall be treated as Stock Election Shares without adjustment, and
(iii)(A) Stock Election Shares of each Holder shall be reduced pro
rata by multiplying the number of Stock Election Shares of such Holder
by a fraction, the numerator of which is the number of shares of WFC
Common Stock equal to 50.1% of the Aggregate Shares and the
denominator of which is the aggregate number of Stock Election Shares
of all Holders, and (B) the shares of such Holder representing the
difference between such Holder's initial Stock Election and such
Holder's reduced Stock Election pursuant to clause (A) shall be
converted into to and be deemed to be Cash Election Shares.
(3) If the number of Cash Election Shares is less than or equal to 49.9%
of the Aggregate Shares and the number of Stock Election Shares is
less than or equal to 50.1% of the Aggregate Shares, then (i) there
shall be no adjustment to the elections made by electing
5
<PAGE>
Holders, and (ii) Non-Electing Shares of each Holder shall be treated
as Stock Elections Shares and/or as Cash Election Shares in proportion
to the respective amounts by which the Cash Election Shares and the
Stock Election Shares are less than the 49.9% and 50.1% limits,
respectively.
After taking into account the foregoing adjustment provisions, each
Cash Election Share (including those deemed to be Cash Election Shares) shall
receive in the Merger the Cash Merger Consideration or the Cash Out, as
applicable, and each Stock Election Share (including those deemed to be Stock
Election Shares) shall receive in the Merger the Stock Merger Consideration (and
cash in lieu of fractional shares).
Notwithstanding any other provision of the Reorganization Agreement, if
the application of the proration provisions would result in receiving a number
of shares of LFC Common Stock that would prevent the Per Share Merger
Consideration from consisting in the aggregate of 49.9% Cash Merger
Consideration and 50.1% Stock Merger Consideration or otherwise prevent the
satisfaction of any of the conditions set forth in the Reorganization Agreement,
the number of shares otherwise allocable shall be adjusted in an equitable
manner as shall be necessary to enable the satisfaction of all conditions.
Election Procedures. ^ Elections ^ may be made by Shareholders of WFC
(the "Holders" or "Holder") by mailing to the Exchange Agent a completed
Election Form. To be effective, an Election Form must be properly completed,
signed and submitted to the Exchange Agent and must be accompanied by
certificates representing the shares of WFC Common Stock or the WFC Stock Option
as to which the election is being made (or by an appropriate guaranty of
delivery by a commercial bank or trust company in the United States or a member
of a registered national security exchange or the National Association of
Security Dealers, Inc.), or by evidence that such certificates have been lost,
stolen or destroyed accompanied by such security or indemnity as shall be
reasonably requested by LFC. A properly completed Election Form and accompanying
share certificates or WFC Stock Options, as the case may be, must be received by
the Exchange Agent by the close of business on ^ February 24, 1998, for an
election to be effective. An election may be changed or revoked but only by
written notice received by the Exchange Agent prior to the Election Deadline
including, in the case of a change, a properly completed revised Election Form.
LFC will have the discretion, which it may delegate in whole or in part
to the Exchange Agent, to determine whether the Election Forms have been
properly completed, signed and submitted or changed or revoked and to disregard
immaterial defects in Election Forms. The decision of LFC (or the Exchange
Agent) in such matters shall be conclusive and binding. Neither LFC nor the
Exchange Agent will be under any obligation to notify any person of any defect
in an Election Form submitted to the Exchange Agent.
For the purposes hereof, a Holder who does not submit an effective
Election Form to the Exchange Agent prior to the Election Deadline shall be
deemed to have made a Non-Election.
To make an effective election, a WFC Holder will be required to return
a properly completed Election Form sufficiently in advance of the Election
Deadline so that it is actually received by the Exchange Agent at or prior to
the Election Deadline. An Election Form will not be considered properly
completed if it is not accompanied by certificates representing all shares of
WFC Common Stock covered thereby (or customary affidavits and indemnification
regarding the
6
<PAGE>
loss or destruction of such certificates or the guaranteed delivery of such
certificates). The Election Deadline is the close of business of the Exchange
Agent on February 24, 1998.
In the event that the Reorganization Agreement is terminated pursuant
to the provisions hereof and any shares or WFC Stock Options have been
transmitted to the Exchange Agent pursuant to the provisions hereof, LFC and WFC
shall cause the Exchange Agent to promptly return such shares to the person
submitting the same.
Mechanics of Payment of Consideration. The conversion of shares of
WFC's Common Stock into the right to receive the Cash Merger Consideration or
the Stock Merger Consideration will occur at the Effective Time of the Merger.
As soon as practicable as of or after the Effective Time of the Merger,
the Exchange Agent will send a letter of transmittal to each Holder of WFC
Common Stock or WFC Stock Options (other than the Holder who has properly
submitted the Election Form and certificates of WFC Common Stock or WFC Stock
Options (the "share certificates") to the Exchange Agent). The letter of
transmittal will contain instructions with respect to the surrender of the
Holder's share certificates in order for the Holder to receive the consideration
to be paid in the Merger.
EXCEPT FOR THE SHARE CERTIFICATES SURRENDERED WITH AN ELECTION FORM AS
DESCRIBED ABOVE UNDER "-- ELECTION PROCEDURE," THE HOLDER SHOULD NOT FORWARD
SHARE CERTIFICATES TO THE EXCHANGE AGENT UNTIL HE HAS RECEIVED THE LETTER OF
TRANSMITTAL.
After the Effective Time of the Merger and until properly surrendered
to the Exchange Agent, each outstanding share certificates shall be deemed for
all corporate purposes to represent and evidence only the right to receive the
consideration into which the Holder's share certificates were converted and
aggregated at the Effective Time of the Merger. Unless and until the outstanding
share certificates shall have been properly surrendered as provided above, the
consideration issued or payable to the Holder of the canceled share certificates
as of any time after the Effective Date of the Merger shall not be paid to the
Holder of the share certificates until the share certificates shall have been
surrendered in the manner required. Each Holder will be responsible for all
federal, state and local taxes which may be incurred by him on account of his
receipt of the consideration to be paid in the Merger.
The Holder of any share certificates which shall have been lost or
destroyed may nevertheless, subject to the provisions of the Reorganization
Agreement, receive the consideration to which the Holder is entitled, provided
that the Holder shall deliver to LFC and to the Exchange Agent: (i) a sworn
statement certifying the loss or destruction and specifying the circumstances
thereof and (ii) a lost instrument bond in form satisfactory to LFC and the
Exchange Agent which has been duly executed by a corporate surety satisfactory
to LFC and the Exchange Agent, indemnifying LFC and the Exchange Agent (and
their respective successors) to their satisfaction against any loss or expense
which any of them may incur as a result of the lost or destroyed share
certificates being thereafter presented. Any costs or expenses which may arise
from such replacement procedure, including the premium on the lost instrument
bond, shall be paid by the Holder.
7
<PAGE>
Recommendation of the Board of Directors
The Reorganization Agreement has been approved by the WFC Board and it
believes that the Merger is in the best interests of WFC shareholders. The WFC
Board unanimously recommends that the shareholders vote FOR the proposal to
approve the Reorganization Agreement.
Background of the Merger
In 1993 WSB converted from a mutual savings bank to a stock savings
bank, as part of a reorganization to the mutual holding company ("MHC"), form of
organization. As part of the MHC reorganization, approximately 42% of WSB's
stock was owned by the public and 58% by the mutual holding company. In June
1996, the mutual holding company reorganized to a full stock company and WFC
conducted an initial public offering of common stock, whereby the approximately
42% of the stock of WSB held by the public was exchanged for the stock of WFC
and the remaining 58% of the stock held by the mutual holding company was
offered to the public. Since the public offering, the Board of Directors and
management of WFC have recognized that the increased competition from commercial
banks and other financial institutions has changed fundamentally the environment
in which traditional thrifts have operated and threatens the market share held
by thrifts for their traditional services. Competition with these commercial
banks, with other financial institutions and with other providers of financial
services, such as credit unions, is strong, making it extremely difficult for
WFC, despite its diversification efforts and accomplishments, to meaningfully
expand into the commercial banking business or make significant market share
gains in any one market area.
The Board of Directors and management of WFC have assessed the
foregoing and other developments and their significance to WFC and its
shareholders. At the same time, the Board of Directors has been cognizant of
changes in WFC's operating environment, including rising interest rates and
shrinking interest margins, causing the Board of Directors and management to
project slower growth in earnings and a decline in the estimated fair value of
financial assets compared to their carrying values over the next few years.
In light of these occurrences and conditions, the Board of Directors,
in April, 1997, decided to undertake a comprehensive study of WFC's future and
the strategic options available to WFC. The Board of Directors employed FinPro
to provide business and financial advice regarding the strategic future of WFC.
With the assistance of FinPro, the Board of Directors reviewed the economic and
competitive conditions in the market areas of WFC, changes in the residential
mortgage industry, the trend of consolidation among federally-insured depository
institutions, the potential effects of the Interstate Banking Act and the advent
of interstate banking, and the effects that rising interest rates and cyclical
trends could have on bank and thrift stock prices in coming years. The Board of
Directors also analyzed the history and market performance of WFC since it
converted to a stock institution in 1996 and of WSB since its MHC form of
organization.
The Board of Directors considered several options for the future of
WFC, including: (i) remaining independent and seeking to generate growth and
added profits by expanding and diversifying WFC's financial services and product
offerings, (ii) expanding through establishment of new branches, (iii) expanding
by acquiring smaller savings institutions, commercial banks or branches, (iv)
merging with an institution of nearly equal size, and (v) being acquired by a
larger bank or thrift holding company. The Board reviewed each option and
concluded, in light of current business conditions, WFC's particular
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circumstances and prospects, and the risks and expenses of expanding its
products, services, and/or branch network on an independent basis, that the best
interests of WFC and its shareholders should be served by exploring closely the
possibility of combining with another institution in a sale transaction in the
near term.
Accordingly, in July 1997 the Board of Directors decided to survey the
most likely obtainable terms and conditions on which WFC could combine with a
larger in-state or out-of-state bank or thrift holding company. Working with
FinPro, WFC reviewed the expected terms of a business combination and developed
a list of desirable and likely acquirors. FinPro, on behalf of WFC, communicated
directly with ^ targeted financial institutions it considered to be the most
likely potential acquirors of WFC to invite expressions of interest in pursuing
acquisition proposals. ^ LFC and one other company acting pursuant to written
confidentiality agreements and with the aid of certain information provided by
FinPro and WFC, expressed indications of value, with LFC ultimately submitting a
proposal in response to FinPro's communications. The Board of Directors of WFC
determined, with the assistance of FinPro, that LFC's indication of value
represented the highest value to, and the best strategic alternative for WFC and
its shareholders. With the advice of FinPro, WFC proceeded to enter into further
discussions with LFC. ^ In late July, several lengthy meetings of certain
members of the senior management of LFC and WFC were held to discuss and develop
the basis for a potential acquisition of WFC by LFC. Between meetings, and
subject to a confidentiality agreement between the parties, an appreciable
exchange of information occurred. Representatives of LFC conducted due diligence
of WFC and representatives of WFC, RD Hunter & Company, LLP and FinPro conducted
due diligence of LFC on behalf of WFC. ^
Throughout the foregoing process, management advised and informed the
Board of Directors of WFC of developments and was directed by the Board to
pursue discussions. ^ On August ^ 8, 1997, the Board of Directors ^ met to
review the LFC proposal and FinPro presented a preliminary analysis of the
proposal. On August 15, 1997, the Board of Directors met again to review the
proposal and met with FinPro and WFC's attorneys to discuss and review the final
proposal, including the form of agreement which had previously been distributed
to the Board of Directors for its review. FinPro presented a detailed analysis
of the proposal to the Board of Directors and concluded that in FinPro's opinion
LFC's proposal was fair to WFC's shareholders from a financial point of view. ^
On August 21, 1997 the Board of Directors of WFC met with senior management of
WFC. Management reviewed with the Board of Directors the alternative strategies
for the future operation of WFC including the potential of a merger with LFC. On
this same date, the full Board of Directors of WFC met with senior management
and FinPro representatives in attendance. Management repeated the review of
alternative strategies for the future operation of WFC previously discussed with
the Executive Committee. FinPro addressed the Board on these strategies and
reviewed with the Board the tentative proposal of LFC. FinPro also briefed the
Board on the general climate of the merger/acquisitions market place and
reported on all contacts with other financial institutions by FinPro acting in
WFC's behalf. The Board directed senior management to continue negotiations with
LFC, including the conduct of due diligence by both parties. In early ^
September 1997, senior management of both institutions, with the assistance of
FinPro and outside counsel, negotiated a form of a definitive reorganization
agreement. Draft copies of the proposed agreement were distributed to the Board
of Directors of WFC for their review.
On the basis of the independent judgment of the members of the WFC
Board and the advice of FinPro, that the LFC proposal was fair to WFC's
shareholders from a financial point of view, the Board of Directors concluded
that LFC's offer was in the best interests of WFC and its shareholders.
Accordingly, for all of the reasons herein, on September 10, 1997, WFC's Board
of Directors accepted LFC's offer and authorized execution of the Reorganization
Agreement.
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Reasons for the Merger
In reaching its conclusion to approve the Merger, the WFC Board
considered a number of factors. The WFC Board did not assign any relative or
specific weights to the factors considered. Among other things, The WFC Board
considered: (i) the Merger consideration in relation to earnings, book value,
and assets of WFC; (ii) information concerning the financial condition, results
of operations and prospects of WFC, including the return on assets and return on
equity of WFC; (iii) the financial terms of other recent business combinations
in the banking industry; and (iv) the opinion of FinPro as to the fairness of
the consideration to be received by WFC shareholders from a financial point of
view.
The WFC Board believes that the terms of the Reorganization Agreement,
which are the product of arms-length negotiations between LFC and WFC, are in
the best interest of WFC and its shareholders. In the course of reaching its
determination, the WFC Board consulted with legal counsel with respect to its
legal duties, the terms of the Reorganization Agreement and the issues related
thereto; with its financial advisor with respect to the financial aspects and
fairness of the transaction; and with senior management regarding, among other
things, operational matters.
In reaching its determination to approve the Reorganization Agreement,
the WFC Board considered all factors it deemed material, which are the
following:
(a) The WFC Board analyzed information with respect to the financial
condition, results of operations, businesses and prospects of WFC and LFC. In
this regard, the WFC Board analyzed the options of selling WFC or continuing on
a stand-alone basis. The range of values on a sale basis were determined to
generally exceed the present value of WFC shares on a stand-alone basis under
business strategies which could be reasonably implemented by WFC.
(b) The WFC Board considered the written opinion of FinPro that, as of
September 9, 1997, the Merger Consideration was fair to WFC shareholders from a
financial point of view. See "--Opinion of WFC's Financial Advisor."
(c) The WFC Board considered the current operating environment,
including, but not limited to, the continued merger and increasing competition
in the banking and financial services industries, the prospect for further
changes in these industries, and the importance of being able to capitalize on
developing opportunities in these industries. This information has been
periodically reviewed by the WFC Board at its regular board meetings and was
also discussed between the WFC Board and WFC's various advisors.
(d) The WFC Board considered the other terms of the Reorganization
Agreement and exhibits, including the tax-free nature of the transaction for
those shareholders who receive LFC Common Stock.
(e) The WFC Board considered the detailed financial analyses and other
information with respect to WFC and LFC discussed by FinPro, as well as the WFC
Board's own knowledge of WFC, LFC and their respective businesses. In this
regard, the latest publicly-available financial and other information for WFC
and LFC were analyzed, including a comparison to publicly-available financial
and other information for other similar institutions.
(f) The WFC Board considered the value of WFC Common Stock if WFC
continued as a stand-alone entity compared to the effect of WFC combining with
LFC in light of the factors summarized
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<PAGE>
above and the current economic and financial environment, including, but not
limited to, other possible strategic alternatives, the results of the contacts
and discussions between WFC and its financial advisor and various third parties
and the belief of the WFC Board and management that the Merger offered the best
transaction available to WFC and its shareholders.
(g) The WFC Board considered the likelihood of the Merger being
approved by the appropriate regulatory authorities, including factors such as
market share analysis, LFC's Community Reinvestment Act rating at that time and
the estimated pro forma financial impact of the Merger on LFC.
The foregoing discussion of the information and factors considered by
the WFC Board is not intended to be exhaustive, but constitutes the material
factors considered by the WFC Board. In reaching its determination to approve
and recommend the Reorganization Agreement, the WFC Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have weighted factors differently. After deliberating with respect to the
Merger and the other transactions contemplated by the Reorganization Agreement,
considering, among other things, the matters discussed above and the opinion of
FinPro referred to above, the WFC Board approved and adopted the Reorganization
Agreement and the transactions contemplated thereby as being in the best
interests of WFC and its shareholders.
Opinion of WFC's Financial Advisor
On August 20, 1997 WSB retained FinPro, Inc., a financial consulting
firm, on the basis of its experience, to render a written fairness opinion to
the Board of Directors and shareholders of WFC. FinPro, Inc. has been in the
business of consulting for the banking industry for eight years, including the
appraisal and valuation of banking institutions and their securities in
connection with mergers, acquisitions and other securities transactions. FinPro
has knowledge of and experience with the New Jersey banking and thrift market
and financial organizations operating in that market. FinPro reviewed the
negotiated terms of the Reorganization Agreement including governance matters.
Except as described herein, FinPro is not affiliated in any way with WFC or LFC
or their respective affiliates.
On ^ September 10, 1997, FinPro delivered its written opinion that the
terms of the Merger as provided in the Reorganization Agreement are fair and
equitable, from a financial perspective, to WFC and its shareholders. ^ This
opinion was based upon conditions as they existed on July 31, 1997. ^ This
opinion was reconfirmed in writing as of January 15, 1998. A copy of the updated
opinion is attached as Appendix II to this Proxy Statement/Prospectus and should
be read in its entirety by WFC shareholders. FinPro's written opinion does not
constitute an endorsement of the Merger or a recommendation to any shareholder
as to how such shareholder should vote at the ^ Special Meeting.
In rendering its opinion, FinPro reviewed certain publicly available
information concerning WFC and LFC, including each party's audited financial
statements and annual reports. FinPro considered many factors in making its
evaluation. In arriving at its ^ opinion regarding the fairness of the
transaction, FinPro reviewed: (i) the Reorganization Agreement; (ii) the most
recent external auditor's reports to the Boards of Directors of each
organization; (iii) the June 30, 1997 Report of Condition and Income for each
organization; (iv) the Rate Sensitivity Analysis reports for each organization;
(v) each organization's listing of marketable securities showing rate, maturity,
and market value as compared to book value; (vi) each organization's internal
loan classification list; (vii) a listing of other real estate owned for each
organization; (viii) the budget and long range operating plan of each
organization; (ix) the Minutes of the Board of Directors meeting for WFC; (x)
the most recent Board report for WFC; (xi) the listing and
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<PAGE>
description of significant real properties for each organization; and (xii) the
directors and officers liability and blanket bond insurance policies for each
organization. FinPro conducted an on-site review of each organization's
historical performance and current financial condition and performed a market
area analysis.
In addition, FinPro discussed with the management of WFC and LFC the
relative operating performance and future prospects of each organization,
primarily with respect to the current level of their earnings and future
expected operating results, giving weight to FinPro's assessment of the future
of the banking industry and each organization's performance within the industry.
FinPro compared the results of operation of WFC and LFC with the results of
operation of all New Jersey ^ savings banks as of March 31, 1997.
<TABLE>
<CAPTION>
New Jersey ^
WFC LFC Savings Banks
--- --- -------------
<S> <C> <C> <C>
Return on Average Assets .47% 1.02% .97%
Return On Average Equity 5.8 10.7 9.9
Net Interest Margin/Average Assets 3.04 3.68 3.02
Noninterest Income/Average Earning Assets .15 .29 .14
Total Overhead Expense/Average Earning Assets 1.56 1.92 1.32
Nonearning Assets/Total Assets 3 7 3
Total Loans/Earning Assets 39 48 46
Loan Loss Reserves/Total Equity 3 9 3
Efficiency Ratio 49.0 48.5 40.7
Tier 1 Capital/Assets 6.8 7.3 9.5
Tier I & II Capital/Risk Based Assets 19.1 14.8 27.0
</TABLE>
Many variables affect the value of savings banks and thrifts , not the
least of which is the uncertainty of future events, so that the relative
importance of the valuation ^ variables differs in ^ various situations, with
the result that appraisal theorists argue about which variable are the most
appropriate ones on which to focus. However, most appraisers agree that the
primary financial variables to be considered are earnings, equity, dividends or
dividend-paying capacity, asset quality and cash flow. In addition, in most
instances, if not all, value is further tempered by non-financial factors such
as marketability, voting rights or block size, history of past sales of the
banking company's stock, nature and relationship of the other shareholdings in
the bank, and special ownership or management considerations.
FinPro analyzed the total purchase price on a cash equivalent fair
market value basis using the standard evaluation techniques (as discussed below)
including net asset value, comparable sales multiples, net present value, return
on investment and the price equity index based on certain assumptions of
projected growth, earnings and dividends and a range of discount rates from 10%
to 12%
Net Asset Value. Net asset value is the value of the net equity of a
bank, including every kind of property and value. This approach normally assumes
liquidation on the date of appraisal with the recognition of securities gains or
losses, real estate appreciation or depreciation, adjustments to the loan
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loss reserve, premium or discount to the loan portfolio, premium or discount for
deposits, premium or discount for borrowings, and changes in the net value of
other assets and/or liabilities. As such, it is not the best approach to use
when valuing a going concern, because it is based on historical costs and
varying accounting methods. Even if the assets and liabilities are adjusted to
reflect prevailing prices and yields (which is often of limited accuracy because
readily available data is often lacking), it still results in a liquidation
value for the concern. Furthermore, since this method does not take into account
the values attributable to the going concern such as the interrelationship among
the company's assets and liabilities, customer relations, market presence, image
and reputation, and staff expertise and depth, little weight is given by FinPro
to the net asset value method of valuation.
Market Value. Market value is generally defined as the price,
established on an "arms-length" basis, at which knowledgeable, unrelated buyers
and sellers would agree. The market value is frequently used to determine the
price of a minority block of stock when both the quantity and the quality of the
"comparable" data are deemed sufficient. However, the relative thinness of the
specific market for the stock of the banking company being appraised may result
in the need to review alternative markets for comparative pricing purposes. The
"hypothetical" market value for a small bank with a thin market for its stock is
normally determined by comparison to the average price to earnings, price to
equity and dividend yield of local or regional publicly-traded bank issues,
adjusting for significant differences in financial performance criteria and for
any lack of marketability or liquidity. The market value in connection with the
evaluation of control of a bank is determined by the previous sales of banks in
the state or region. In valuing a business enterprise, when sufficient
comparable trade data is available, the market value deserves greater weight
than the net asset value and similar emphasis as the investment value as
discussed below.
FinPro maintains substantial files concerning the prices paid for
banking institutions nationwide. The database includes transactions involving
New Jersey thrift organizations and thrift organizations in the Eastern region
of the United States, and national thrift organizations over the last five
years. The database provides comparable pricing and financial performance data
for banking organizations sold or acquired. Organized by different peer groups,
the data present averages of financial performance and purchase price levels,
thereby facilitating a valid comparative purchase price analysis. In analyzing
the transaction value of WFC, FinPro has considered the market approach and has
evaluated price to equity and price to earnings multiples of all New Jersey
banking organizations and Regional banking organizations with assets less than
$150 million.
Comparable Sales Multiples. FinPro calculated an "Adjusted Book Value"
of $28.81 per share, based on WFC's fully diluted June 30, 1997 equity and the
average price to book multiple of 199.37% for New Jersey savings organizations
sold between January 1, 1997 and August 8, 1997. FinPro calculated an "Adjusted
Book Value" of $23.43 per share, based on WFC's fully diluted June 30, 1997
equity and the average price to book multiple of 162.17% for New Jersey savings
organizations sold between January 1, 1996 and December 31, 1996.
FinPro calculated an "Adjusted Earnings Value" of $20.78 per share,
based on WFC's fully diluted unadjusted last twelve months earnings ending June
30, 1997 and the average price to earnings multiple of 16.76 for New Jersey
savings organizations sold between January 1, 1997 and August 8, 1997. FinPro
calculated an "Adjusted Earnings Value" of $26.77 per share, based on WFC's
fully diluted unadjusted last twelve months earnings ending June 30, 1997 and
the average price to earnings multiple of 21.59 for New Jersey savings
organizations sold between January 1, 1996 and December 31, 1996.
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<PAGE>
FinPro calculated an "Adjusted Book Value" of $24.44 per share, based
on WFC's fully diluted June 30, 1997 equity and the average price to book
multiple of 169.14% for New Jersey, New York, Pennsylvania, and Delaware savings
organizations less than $150 million in assets sold between January 1, 1997 and
August 8, 1997. FinPro calculated an "Adjusted Book Value" of $18.27 per share,
based on WFC's fully diluted June 30, 1997 equity and the average price to book
multiple of 126.42% for New Jersey, New York, Pennsylvania, and Delaware savings
organizations less than $150 million in assets sold between January 1, 1996 and
December 31, 1996.
FinPro calculated an "Adjusted Earnings Value" of $16.28 per share,
based on WFC's fully diluted last twelve months earnings ending June 30, 1997
and the average price to earnings multiple of 13.13 for New Jersey, New York,
Pennsylvania, and Delaware banking organizations less than $150 million in
assets sold between January 1, 1997 and August 8, 1997. FinPro calculated an
"Adjusted Earnings Value" of $32.15 per share, based on WFC's fully diluted last
twelve months earnings ending June 30, 1997 and the average price to earnings
multiple of 25.93 for New Jersey, New York, Pennsylvania, and Delaware banking
organizations less than $150 million in assets sold between January 1, 1996 and
December 31, 1996.
The financial performance characteristics of the regional banking
organizations vary, sometimes substantially, from those of WFC. When the
variance is significant for relevant performance factors, adjustments to the
price multiples are appropriate when comparing them to the transaction value.
Investment Value. The investment value is sometimes referred to as the
income value or earnings value. One investment value method frequently used
estimates the present value of an enterprise's future earnings or cash flow.
Another popular investment value method is to determine the level of current
annual benefits (earnings, cash flow, dividends, etc.), and then capitalize one
or more of the benefit types using an appropriate capitalization rate such as an
earnings or dividend yield. Yet another method of calculating investment value
is a cash flow analysis of the ability of a banking company to service
acquisition debt obligations (at a certain price level) while providing
sufficient earnings for reasonable dividends and capital adequacy requirements.
In connection with the cash flow analysis, the return on investment that would
accrue to a prospective buyer at the transaction value is calculated. The
investment value methods which were analyzed in connection with this transaction
were the net present value analysis, and the return on investment analysis,
which are discussed below.
Net Present Value Analysis. The investment of earnings value of any
banking organization's stock is an estimate of present value of the future
benefits, usually earnings, cash flow or dividends, which will accrue to the
stock. An earnings value is calculated using an annual future earnings stream
over a period of time of no less than ten years and the residual value of the
earnings stream after ten years, assuming no earnings growth, and an appropriate
capitalization rate (the net present value discount rate). FinPro's computations
were based on an analysis of the banking industry, the economic and competitive
situations in WFC's market area, its current financial condition and historical
levels of growth and earnings. Using a net present value discount rate of 11%,
an acceptable discount rate considering the risk-return relationship most
investors would demand for an investment of this as of the valuation date, the
"Net Present Value of Future Earnings," equaled $26.41 per share.
Return on Investment Analysis. Return on investment (ROI) analysis ^
analyzes the ten year ROI of an equity investment equal to WFC's book value at
July 31, 1997, (i) assuming a constant return on equity of 9.37%, with a
liquidation at book value in the year 2007, as opposed to a sale at ten times
projected earnings for the year 2007; and (ii) assuming a gradual reduction in
return on equity from
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<PAGE>
9.37% to 6.87%, with a liquidation at book value in the year 2007, as opposed to
a sale at ten times projected earnings for the year 2007. This ROI analysis
provides a benchmark for assessing the validity of the fair market value of a
majority block of stock. The ROI analysis is one approach to valuing a going
concern, and is directly impacted by the earning stream, dividend payout levels
and levels of debt, if any. Other financial and non-financial factors indirectly
affect the ROI; however, these factors more directly influence the level of ROI
an investor would demand from an investment in a majority block of stock of a
specific bank at a certain point in time. The ROI, assuming a constant return on
equity of 9.37% with liquidation at book value in 2007, is 7.83%, and sale at
twenty times projected earnings in 2007, is 13.78%. The ROI, assuming a gradual
reduction in return on equity with liquidation at book value in 2007, is 6.99%,
and sale at twenty times projected earnings in 2007, is 10.29%.
Price Equity Index Analysis. Furthermore, a price level indicator, the
equity index, may be used to confirm the validity of the transaction value. The
equity index adjusts the price to equity multiple in order to facilitate a truer
price level comparison with comparable banking organizations, regardless of
differing levels of equity capital. The equity index is derived by multiplying
the price to equity multiple by the equity-to-assets ratio. The following table
sets forth the average price equity indexes for all New Jersey transactions, for
transactions in New Jersey, New York, Pennsylvania, and Delaware for
organizations less than $150 million, and for WFC for the years 1997, 1996,
1995, and 1994.
Year New Jersey Region WFC
---- ---------- ------ ---
Average Price Equity Index 1997 14.86% 15.81% 17.48%
Average Price Equity Index 1996 12.66 19.43 N/A
Average Price Equity Index 1995 20.02 11.22 N/A
Average Price Equity Index 1994 11.44 12.25 N/A
Finally, another test of appropriateness for the transaction value of a
majority block of stock is the net present value-to-transaction value ratio.
Theoretically, an earnings stream may be valued through the use of a net present
value analysis. In FinPro's experience with majority block community bank stock
valuations, it has determined that a relationship does exist between the net
present value of an "average" community banking organization and the transaction
value of a majority block of the banking organization's stock. The net present
value-to-transaction value ratio equals 90.28% for WFC, which falls within
FinPro's expected range. There are many other factors to consider, when valuing
a going concern, which do not directly impact the earnings stream and the net
present value but which do exert a degree of influence over the fair market
value of a going concern. These factors include, but are not limited to, the
general condition of the industry, the economic and competitive situations in
the market area and the expertise of the management of the organization being
valued.
When the net asset value, market value and investment value methods are
subjectively weighted, using the appraiser's experience and judgment, it is
FinPro's opinion that the proposed transaction is fair.
FinPro considered this transaction as a merger rather than a purchase
of assets. Consideration was given to the levels of earnings per share, equity
per share and dividends per share appreciation or dilution percentages between
the merger partners over the next three to five years after consummation. A
merger is usually completed with the hopes of realizing economics of scale and
earnings enhancement opportunities, thereby providing a benefit to WFC
shareholders that otherwise might not be attainable.
15
<PAGE>
To justify the fairness of the transaction for WFC shareholders, it is important
to project, based upon realistic projections of future performance, a positive
impact for WFC shareholders. FinPro projected that WFC shareholders will have a
higher level of earnings per share, equity per share and dividends per share
after the Merger with LFC than they would on a stand-alone basis. The primary
focus has been on short-term and long-term earnings per share, equity per share
and dividends per share appreciation potential for WFC shareholders.
Neither WFC nor LFC imposed any limitations upon the scope of the
investigation to be performed by FinPro in formulating its Opinion. In rendering
its Opinion, FinPro did not independently verify the asset quality and financial
condition of WFC or LFC, but instead relied upon the data provided by or on
behalf of WFC and LFC to be true and accurate in all material respects.
For its services as independent financial analyst of the Merger,
including the rendering of its Opinion referred to above, WFC has paid FinPro
aggregate fees of approximately $140,000. WFC also agreed to reimburse FinPro
for reasonable out-of-pocket expenses. In addition, over the last two years,
FinPro has provided consulting services to both WFC and LFC and received fees
for these services of approximately $47,000 and $30,000, respectively.
Conditions to the Merger
The obligation of each party to consummate the Merger is subject to
satisfaction or waiver of certain conditions, including (i) approval of the
Reorganization Agreement and the transactions contemplated thereby by the
requisite vote of the holders of WFC Common Stock; (ii) the receipt of all
consents, approvals and authorizations of all necessary federal and state
government authorities and expiration of all required waiting periods, necessary
for the consummation of the Merger (see "--Regulatory Approvals"); (iii) the
effectiveness of the registration statement covering the shares of LFC Common
Stock to be issued to WFC shareholders, and the qualification of the issuance of
LFC Common Stock in every state where such qualification is required under
applicable state securities laws; (iv) the absence of any litigation that would
restrain or prohibit the consummation of the Merger; and (v) receipt by the
parties of an opinion of Malizia, Spidi, Sloane & Fisch, P.C. to the effect that
the exchange of WFC Common Stock for LFC Common Stock is a tax-free
reorganization within the meaning of Section 368 of the Code. See "-- Certain
Federal Income Tax Consequences".
The obligation of LFC to consummate the Merger is also conditioned on,
among other things, (i) the continued accuracy in all material respects of the
representations and warranties of WFC contained in the Reorganization Agreement;
and (ii) the performance by WFC, in all material respects, of all its
obligations under the Reorganization Agreement.
The obligation of WFC to consummate the Merger is also conditioned on,
among other things, (i) the continued accuracy in all material respects of the
representations and warranties of LFC contained in the Reorganization Agreement;
and (ii) the performance by LFC, in all material respects, of all its
obligations under the Reorganization Agreement; ^(iii) the receipt ^ of an
opinion by FinPro, Inc. regarding the fairness from a financial point of view of
the consideration to be received by the WFC shareholders in the Merger.
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<PAGE>
Termination
The Reorganization Agreement may be terminated at any time prior to the
closing: (i) by mutual consent in writing of the parties; (ii) by LFC or WFC in
the event the closing shall not have occurred by June 30, 1998, unless the
failure of the closing to occur shall be due to the failure of the party seeking
to terminate the Reorganization Agreement to perform its obligations hereunder
in a timely manner; (iii) by either LFC or WFC upon written notice to the other
party, upon (i) denial of any governmental approval necessary for the
consummation of the Merger (or should such approval be conditioned upon a
substantial deviation from the transactions contemplated); provided, however,
that either LFC or WFC may, upon written notice to the other, extend the term of
^ the Reorganization Agreement for only one or more sixty (60) day periods to
prosecute diligently and overturn such denial, provided that such denial has
been appealed within twenty (20) business days of the receipt thereof or (ii)
upon the failure to obtain the approval of the WFC shareholders at the WFC
shareholders meeting; (iv) by LFC or WFC in the event that there shall have been
a material breach of any obligations or covenant of the other party hereunder
and such breach shall not have been remedied within sixty (60) days after
receipt by the breaching party of written notice from the other party specifying
the nature of such breach and requesting that it be remedied; (v) by LFC or WFC
should WFC or any WFC subsidiary enter into any letter of intent or agreement
with a view of being acquired by or effecting a business combination with any
other person; or any agreement to merge, to consolidate, to combine or to sell a
material portion of its assets or to be acquired in any other manner by any
other person or to acquire a material amount of assets or a material equity
position in any other person, whether financial or otherwise; (vi) by LFC should
either WFC or WSB enter into any formal agreement, letter of understanding,
memorandum or other similar arrangement with any bank regulatory authority
establishing a formal capital plan requiring WFC or WSB to raise additional
capital or to sell a substantial portion of its assets.
Termination Fee
Pursuant to the Reorganization Agreement, WFC has agreed to pay LFC a
fee of $900,000 following the occurrence of a "Purchase Event." The term
"Purchase Event" means any of the following events, or WFC agreeing to enter
into an agreement relating to any of the following events, occurring before the
Effective Date or within 12 months of the date of termination of the
Reorganization Agreement: (i) the acquisition by any person, other than LFC, of
beneficial ownership of 25% or more of WFC Common Stock; (ii) a merger,
consolidation, share exchange, business combination or any similar transaction
involving WFC or WSB; (iii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 50% or more of the assets of WFC or WSB, in
single transaction or series of transactions; or (iv) the WFC Board does not
recommend approval of the Merger to the WFC shareholders. The fee will not be
paid to LFC if the Reorganization Agreement is terminated (i) by mutual consent
of WFC and LFC; (ii) by LFC or WFC if the closing of this transaction does not
occur by June 30, 1998, (iii) by either LFC or WFC upon written notice to the
other party, upon denial of any government approval; (iv) in the event
terminated by WFC due to a material breach by LFC, or (v) prior to the
occurrence of a Purchase Event.
Business Pending Consummation
WFC has agreed in the Reorganization Agreement not to take certain
actions relating to the operation of WFC pending consummation of the Merger
without the prior written consent of LFC except as otherwise permitted in the
Reorganization Agreement. See the Reorganization Agreement attached hereto as
Appendix I.
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WFC Stock Option Plans
Pursuant to WFC's stock option plans, options to acquire an aggregate
of 58,335 shares of WFC Common Stock have been granted to officers, directors
and employees of WFC and WSB. Pursuant to the Reorganization Agreement, on the
Effective Date of the Merger, each option granted under WFC Stock Option Plan
which is outstanding and unexercised will be converted, at the election of the
holder, into the right to receive either (i) cash equal to the excess of $29.25
over the exercise price per share of WFC Common Stock or (ii) a number of shares
of LFC Common Stock equal to the excess of $29.25 over the exercise price per
share of WFC Common Stock, multiplied by the total number of shares of WFC
Common Stock covered by the WFC stock option and divided by the Final Market
Price.
Federal Income Tax Consequences
The following is a summary description of the material federal income
tax consequences of the Merger. This summary is not a complete description of
all of the consequences of the Merger and, in particular, may not address
federal income tax consequences which may be applicable to particular categories
of taxpayers, such as broker-dealers, or to any shareholder who acquired his or
her WFC Common Stock through the exercise of an employee stock option including
a plan under Section 422 of the Code, or otherwise as compensation. This
discussion does not address the effect of any applicable foreign, state, local
or other tax laws. SHAREHOLDERS OF WFC ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY OF AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
Tax Treatment to LFC, WFC, and WSB. No gain or loss will be recognized
by LFC, WFC and WSB solely as a result of the Merger.
Receipt of LFC Common Stock for WFC Common Stock. No gain or loss will
be recognized by a holder who receives solely shares of LFC Common Stock (except
for cash received in lieu of fractional shares, as discussed below) in exchange
for all of his or her shares of WFC Common Stock. The tax basis of the shares of
LFC Common Stock received by a holder in such exchange will be equal (except for
the basis attributable to any fractional shares of LFC Common Stock, as
discussed below) to the basis of the WFC Common Stock surrendered in exchange
therefor. The holding period of the LFC Common Stock received will include the
holding period of shares of WFC Common Stock surrendered in exchange therefor,
provided that such shares were held as capital assets on the Effective Date of
the Merger.
Receipt of LFC Common Stock and Cash in Exchange for WFC Common Stock.
A holder who receives a combination of LFC Common Stock and cash in exchange for
his or her WFC Common Stock will not be permitted to recognize any loss for
federal income tax purposes. Such a holder will recognize gain, if any, equal to
the lesser of (i) the amount of cash received, or (ii) the amount of gain
"realized" in the transaction. The amount of gain a holder "realizes" will equal
the amount by which (i) the cash plus the fair market value on the Effective
Date of the Merger of the LFC Common Stock received exceeds (ii) the holders'
basis in the WFC Common Stock to be surrendered in the exchange therefor. Any
recognized gain could be taxed as a capital gain or a dividend, as described
below. The aggregate tax basis of the shares of LFC Common Stock received by
such holder will be the same as the aggregate basis of the shares of WFC Common
Stock surrendered in exchange therefor, adjusted as provided in Section 358(a)
of the Code for the cash received in exchange for such shares of WFC
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Common Stock. The holding period for shares of LFC Common Stock received in the
Merger will be the same as the holding period for WFC Common Stock surrendered
in exchange therefor, provided that such shares were held as capital assets of
the holder on the Effective Date of the Merger.
A holder's federal income tax consequences also will depend on whether
his or her shares of WFC Common Stock were purchased at different times at
different prices. If they were, the holder could realize gain with respect to
some of the shares of WFC Common Stock and loss with respect to other shares.
Such holder would have to recognize such gain to the extent such holder receives
cash with respect to those shares in which the holder's adjusted tax basis is
less than the amount of cash plus the fair market value on the Effective Date of
the Merger of the LFC Common Stock received, but could not recognize loss with
respect to those shares in which the holder's adjusted tax basis is greater than
the amount of cash plus the fair market value on the Effective Date of the
Merger of the LFC Common Stock received. Any disallowed loss would be included
in the adjusted basis of the LFC Common Stock. Such a holder is urged to consult
his or her own tax advisor regarding the tax consequences of the Merger on that
holder.
Possible Dividend Treatment. In certain circumstances, a holder who
receives cash or a combination of cash and LFC Common Stock in the Merger may
receive ordinary dividend, rather than capital gain, treatment on all or a
portion of the gain recognized by that holder. The determination of whether a
cash payment has the effect of a dividend distribution is made by treating a WFC
shareholder as if such holder had received solely LFC Common Stock in the
Merger, and LFC immediately thereafter redeemed a number of shares of LFC Common
Stock equal in value to the cash consideration received. This hypothetical
redemption is then tested under the provisions and limitations of Section 302 of
the Code to determine whether the holder's change in ownership in LFC results in
a dividend distribution. For purposes of this hypothetical Section 302
redemption analysis, shares of LFC Common Stock held by certain members of the
holder's family or certain entities in which the holder has an ownership or
beneficial interest and certain stock options may be aggregated with the
holder's shares of LFC Common Stock. The amount of the cash payment that may be
treated as a dividend is limited to the holder's ratable share of the
accumulated earnings and profits of WFC (or possibly of the total earnings and
profits of WFC and LFC) on the Effective Date of the Merger. Any gain that is
not treated as a dividend will be taxed as a capital gain, provided that the
holder's shares were held as capital assets on the Effective Date of the Merger.
Because the determination of whether a cash payment will be treated as having
the effect of a dividend will depend in part upon the facts and circumstances of
each holder, holders are advised to consult their own tax advisors regarding the
tax treatment of cash received in the Merger.
Receipt of Cash in Exchange for WFC Common Stock. A holder who receives
solely cash in exchange for all of his or her shares of WFC Common Stock, and
owns no LFC Common Stock actually or constructively, will recognize gain or loss
for federal income tax purposes equal to the difference between the cash
received and such holder's tax basis in the WFC Common Stock surrendered in
exchange therefor. Such gain or loss will be a capital gain or loss, provided
that such shares were held as capital assets of the holder on the Effective Date
of the Merger. Such gain or loss will be long-term capital gain or loss if the
holder's holding period is more than eighteen months on the Effective Date of
the Merger. The Code contains limitations on the extent to which a holder may
deduct capital losses from ordinary income. It is not clear whether the above
treatment would apply to a holder who receives solely cash for his or her shares
but who owns constructively shares of LFC Common Stock, or owns constructively
shares of WFC Common Stock which are not exchanged solely for cash, or whether
instead the treatment referred to above under "--Certain Federal Income Tax
Consequences -- Possible
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Dividend Treatment" would apply. A holder in this situation is advised to
consult his or her own tax advisor regarding the tax consequences to the holder.
Cash in Lieu of Fractional Shares. A holder who holds WFC Common Stock
as a capital asset and who receives in the Merger, in exchange for such stock,
solely LFC Common Stock and cash in lieu of a fractional share interest in LFC
Common Stock will be treated as having received such fraction of a shares of LFC
Common Stock and then as having received cash in redemption by LFC of the
fractional share interest. ^
Backup Withholding; Information Reporting. The cash payments due a
holder upon the exchange of such WFC Common Stock pursuant to the Merger (other
than certain exempt persons or entities) will be subject to "backup withholding"
for federal income tax purposes unless certain requirements are met. LFC or a
third party paying agent, as the case may be, must withhold 31% of the cash
payments to a holder, unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(ii) provides LFC or a third party paying agent, as the case may be, with his or
her taxpayer identification number and completes a form in which he or she
certifies that he or she has not been notified by the IRS that he or she is
subject to backup withholding as a result of a failure to report interest and
dividends. The taxpayer identification number of an individual is his or her
Social Security number. Any amount paid as backup withholding will be credited
against the holder's federal income tax liability. Holders who receive LFC
Common Stock also must comply with the information reporting requirements of the
Treasury regulations under Section 368 of the Code. Appropriate documentation
for the foregoing purposes will be provided to holders with the Election Forms
that will be sent to them by the Exchange Agent.
^ Pursuant to the terms of the Reorganization Agreement, LFC and WFC
shall receive an opinion from Malizia, Spidi, Sloane & Fisch, P.C. ^ to the
effect that the Merger will constitute a tax free reorganization within the
meaning of Section 368 of the Code and that no gain or loss will be recognized
by WFC shareholders who receive solely shares of LFC Common Stock in exchange
for their shares of WFC Common Stock. No ruling has been or will be sought from
the Internal Revenue Service as to the federal income tax consequences of the
Merger, and the opinions of Malizia, Spidi, Sloane & Fisch, P.C.
^ are not binding on the Internal Revenue Service or any court.
No Dissenters' Rights
Under applicable New Jersey law, no dissenters' rights of appraisal are
available to holders of WFC stock in connection with the Merger.
Accounting Treatment
Under generally accepted accounting principles, it is anticipated that
the Merger will be accounted for under the purchase method of accounting. The
assets and liabilities of WFC will be reflected in the consolidated financial
statements of LFC based upon their fair values as of the effective date of the
Merger. Results of operations of WFC will be reflected in the consolidated
financial statements of LFC for all periods subsequent to the effective date of
the Merger. Under the purchase method of accounting, the excess purchase price
paid over the fair market value of assets is amortized as an expense over the
period estimated to be benefitted.
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Interests of Certain Persons in the Merger
Certain members of WFC's management and its Board may be deemed to have
interests in the Merger in addition to their interests, if any, as stockholders
of WFC. These interests are described in more detail below.
Employment and Severance Agreements. Certain officers of WFC will
receive severance benefits. Total severance benefits will aggregate $293,000.
One of such officers will also entered into an employment agreement with LVSB
for three years, at such officer's current salary of $75,000. Chairman of the
Board of WFC and WSB, William J. Woods, will receive a consulting agreement for
a term of not less than three years at his current salary of $80,000 per year.
Such payments will continue to be paid to the spouse, survivor(s) or estate of
Mr. Woods in the event of death or disability.
Stock Options. Certain directors and officers of WFC have been granted
options under the Stock Option Plan to purchase, in the aggregate, 58,355 shares
of WFC Common Stock. As of the Effective Date of the Merger, such Option Plan
will terminate, and such options will be converted into shares of WFC Common
Stock or cash consideration of $29.25 less the exercise price, in accordance
with the Reorganization Agreement. Assuming the options are cashed out, William
J. Woods will receive approximately $255,000 and all other directors and
officers will receive payments aggregating $383,000.
Restricted Stock. Certain officers and directors of WFC have been
awarded shares of restricted stock under the Management Stock Bonus Plan (the
"MSBP"). As of the Effective Date of the Merger, the MSBP will terminate, all
unvested restricted stock awarded to officers and directors of the Company will
vest and be converted into shares of LFC Common Stock or cash in accordance with
the Reorganization Agreement. William J. Woods will receive either cash or stock
with a value of $103,000 in exchange for unvested shares of restricted stock.
Other officers and directors will receive cash or stock aggregating $151,000.
Continued Indemnification and Insurance Coverage. After the Merger is
consummated, LFC will continue to indemnify officers and directors of WFC and
WSB for prior acts in accordance with the provisions of LFC's Certificate of
Incorporation. LFC will also cover officers and directors of WFC and ^ WSB for
liability insurance for a three year period after the Merger is consummated.
Advisory Board. Pursuant to the Reorganization Agreement, LFC will
create an advisory board to assist and advise the LFC's Board of Directors with
respect to, the operations of WSB and the maintenance of building existing
relationships within the WSB's business community. The advisory board will
consist of William J. Woods and two directors of WFC and will meet on a
quarterly basis for at least three years. Mr. Woods will not receive
compensation for his services. One of the directors will receive annual board
fees of not less than $7,500.
Resales by Affiliates
The shares of LFC Common Stock issued to WFC shareholders upon
consummation of the Merger have been registered under the Securities Act, but
such registration does not cover resales by affiliates of WFC ("Affiliates").
LFC Common Stock received and beneficially owned by those WFC shareholders who
are deemed to be Affiliates may be resold without registration as provided for
by Rule 145 under the Securities Act, or as otherwise permitted. The term
"Affiliate" is defined to include any person who, directly or indirectly,
controls, or is controlled by, or is under common control with WFC
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at the time the Reorganization Agreement is submitted for approval by a vote of
the holders of WFC Common Stock. Generally, this definition includes executive
officers, directors and 10% or more shareholders of WFC. Each Affiliate who
desires to resell LFC Common Stock received in the Merger must sell such LFC
Common Stock either (i) pursuant to an effective registration statement under
the Securities Act, (ii) in accordance with the applicable provisions of Rule
145 under the Securities Act or (iii) in a transaction which, in the opinion of
counsel for such Affiliate or as described in a "no-action" or interpretive
letter from the staff of the Securities and Exchange Commission, in each case
reasonably satisfactory in form and substance to LFC, to the effect that such
resale is exempt from the registration requirements of the Securities Act.
Rule 145(d) requires that persons deemed to be Affiliates resell their
LFC Common Stock pursuant to certain of the requirements of Rule 144 under the
Securities Act if such LFC Common Stock is sold within the first year after the
receipt thereof. After one year, if such person is not an affiliate of LFC and
LFC is current in the filing of its periodic securities law reports, a former
Affiliate of WFC may freely resell the LFC Common Stock received in the Merger
without limitation. After two years from the issuance of the LFC Common Stock,
if such person is not an affiliate of LFC at the time of sale or for at least
three months prior to such sale, such person may freely resell such LFC Common
Stock, without limitation, regardless of the status of LFC's periodic securities
law reports.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior
receipt of all necessary regulatory approvals. Consummation of the Merger
requires approval of the Merger by the New Jersey Department of Banking and
Insurance ("NJDB"), and the FDIC under the Bank Merger Act (the "Bank Merger
Act"), and the approval of the Merger or waiver of the need for such approval by
the FRB. Approval by the NJDB or the FDIC does not constitute an endorsement of
the Merger or a determination by any such regulator that the terms of the Merger
are fair to the shareholders of WFC. While LFC and WFC anticipate receiving all
such approvals, there can be no assurance that they will be granted, or that
they will be granted on a timely basis or that they will be granted without
conditions unacceptable to LFC or WFC.
EFFECT OF THE MERGER ON SHAREHOLDERS' RIGHTS
General
Because WFC and LFC are both New Jersey business corporations, any
differences in rights of holders of their respective stocks are due to the
differences in the certificates of incorporation and by-laws of the two
companies. The following is a summary explanation of the material differences
between the rights of WFC shareholders and the rights of LFC shareholders. This
summary is qualified in its entirety by reference to the governing documents of
WFC and LFC referred to above.
Board of Directors
WFC. The number of directors of WFC will not be less than five nor more
than 21, as provided from time to time in or in accordance with the Bylaws of
WFC, provided that no decrease in the number of directors will have the effect
of shortening the term of any incumbent director, and provided further that no
action will be taken to decrease or increase the number of directors from time
to time unless at least two-thirds of the directors then in office concur in
said action. Vacancies in the board of directors
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of WFC, however caused, and newly created directorships are filled by a vote of
a majority of the directors then in office, whether or not a quorum, and any
director so chosen will hold office for a term expiring at the annual meeting of
shareholders' or by a sole remaining director.
Directors ^ are not be required to own any shares of WFC's common stock
and need not be residents of any particular state, country or other
jurisdiction.
The board of directors of WFC is divided into three classes of
directors which are designated Class I, Class II and Class III. The members of
each class are elected for a term of three years and until their successors are
elected and qualified. Such classes are as nearly equal in number as the then
total number of directors constituting the entire board of directors shall
permit, with the terms of office of all members of one class expiring each year.
A director whose term expires at any annual meeting will continue to serve until
such time as his successor is duly elected and qualified unless his position on
the board of directors is abolished by action taken to reduce the size of the
board of directors prior to said meeting.
Should the number of directors of WFC be reduced, the directorship(s)
eliminated will be allocated among classes as appropriate so that the number of
directors in each class is as specified in the immediately preceding paragraph.
The board of directors will designate, by the name of the incumbent(s), the
position(s) to be abolished. Notwithstanding the foregoing, no decrease in the
number of directors will have the effect of shortening the term of any incumbent
director. Should the number of directors of WFC be increased, the additional
directorships will be allocated among classes as appropriate so that the number
of directors in each class is as specified in the immediately preceding
paragraph.
Whenever the holders of any one or more series of preferred stock of
WFC shall have the right, voting separately as a class, to elect one or more
directors of WFC, the board of directors will consist of said directors so
elected in addition to the number of directors fixed as provided by WFC's
Certificate of Incorporation. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of WFC shall have the right, voting separately as a class, to
elect one or more directors of WFC, the terms of the director or directors
elected by such holders shall expire at the next succeeding annual meeting of
shareholders.
LFC. The number of directors of LFC will not be less than five nor more
than 11, as provided from time to time in or in accordance with the Bylaws of
LFC, provided that no decrease in the number of directors will have the effect
of shortening the term of any incumbent director, and provided further that no
action will be taken to decrease or increase the number of directors from time
to time unless at least two-thirds of the directors then in office concur in
said action. Vacancies in the board of directors of LFC, however caused, and
newly created directorships are filled by a vote of a majority of the directors
then in office, whether or not a quorum, and any director so chosen will hold
office for a term expiring at the annual meeting of shareholders.
Directors ^ are not be required to own any shares of LFC's common stock
and need not be residents of any particular state, country or other
jurisdiction.
The board of directors of LFC is divided into three classes of
directors which are designated Class I, Class II and Class III. The members of
each class are elected for a term of three years and until their successors are
elected and qualified. Such classes are as nearly equal in number as the then
total
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number of directors constituting the entire board of directors shall permit,
with the terms of office of all members of one class expiring each year. A
director whose term expires at any annual meeting will continue to serve until
such time as his successor is duly elected and qualified unless his position on
the board of directors is abolished by action taken to reduce the size of the
board of directors prior to said meeting.
Should the number of directors of LFC be reduced, the directorship(s)
eliminated will be allocated among classes as appropriate so that the number of
directors in each class is as specified in the immediately preceding paragraph.
The board of directors will designate, by the name of the incumbent(s), the
position(s) to be abolished. Notwithstanding the foregoing, no decrease in the
number of directors will have the effect of shortening the term of any incumbent
director. Should the number of directors of LFC be increased, the additional
directorships will be allocated among classes as appropriate so that the number
of directors in each class is as specified in the immediately preceding
paragraph.
Meetings of Shareholders; Cumulative Voting; Proxies
WFC. An action required to be taken or which may be taken at any annual
or special meeting of shareholders of WFC may be taken without a meeting if all
shareholders entitled to vote thereon consent to such action in writing. The
power of shareholders to take action by non-unanimous consent is specifically
denied. In the case of a merger, consolidation, acquisition of all capital
shares of WFC or sale of assets, such action may be taken without a meeting only
if all shareholders consent in writing, or if all shareholder entitled to vote
consent in writing and all other shareholders are provided the advance
notification required by Section 14A: 5-6(2)(b) of the New Jersey Business
Corporation Act.
Special meetings of the shareholders of WFC for any purpose or purposes
may be called at any time by the chairman of the board, a majority of the board
of directors of WFC, or by a committee of the board of directors which has been
duly designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the Bylaws of WFC,
include the power and authority to call such meetings.
Each shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for him by proxy, but no such proxy
will be voted or acted upon after 11 months from its date, unless the proxy
provides for a longer period. Without limiting the manner in which a shareholder
may authorize another person or persons to act for him as proxy, the following
constitutes a valid means by which a shareholder may grant such authority.
There is no cumulative voting by shareholders of any class or series in
the election of directors of WFC.
Meetings of shareholders may be held within or without the State of New
Jersey, as the Bylaws of WFC may provide.
LFC. An action required to be taken or which may be taken at any annual
or special meeting of shareholders of LFC may be taken without a meeting if all
shareholders entitled to vote thereon consent to such action in writing. The
power of shareholders to take action by non-unanimous consent is specifically
denied. In the case of a merger, consolidation, acquisition of all capital
shares of LFC or sale of assets, such action may be taken without a meeting only
if all shareholders consent in writing, or
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if all shareholder entitled to vote consent in writing and all other
shareholders are provided the advance notification required by Section 14A:
5-6(2)(b) of the New Jersey Business Corporation Act.
Special meetings of the shareholders of LFC for any purpose or purposes
may be called at any time by the chairman of the board, a majority of the board
of directors of LFC, or by a committee of the board of directors which has been
duly designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the Bylaws of LFC,
include the power and authority to call such meetings.
Each shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for him by proxy, but no such proxy
will be voted or acted upon after 11 months from its date, unless the proxy
provides for a longer period. Without limiting the manner in which a shareholder
may authorize another person or persons to act for him as proxy, the following
constitutes a valid means by which a shareholder may grant such authority.
There is no cumulative voting by shareholders of any class or series in
the election of directors of LFC.
Meetings of shareholders may be held within or without the State of New
Jersey, as the Bylaws of LFC may provide.
Nominations to the Board of Directors, Shareholder Proposals, and Conduct of
Meetings
WFC. Nominations of candidates for election as directors at any annual
meeting of shareholders may be made (a) by or at the direction of, a majority of
the board of directors or (b) by any shareholder entitled to vote at such annual
meeting. Only persons nominated in accordance with certain procedures described
in WFC's Bylaws (which are summarized below) will be eligible for election as
directors at an annual meeting. Ballots bearing the names of all the persons who
have been nominated for election as directors at an annual meeting will be
provided for use at the annual meeting.
Nominations, other than those made by or at the direction of the board
of directors, must be made pursuant to timely notice in writing to WFC's
Secretary. To be timely, a shareholder's notice shall be delivered to, or mailed
and received at, WFC's principal office not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of shareholders.
Proposals, other than those made by or at the direction of the board of
directors, must be made pursuant to timely notice in writing to WFC's Secretary.
For shareholder proposals to be included in WFC's proxy materials, the
shareholder must comply with all the timing and informational requirements of
Rule 14a-8 of the Exchange Act or any successor regulation. With respect to
shareholder proposals to be considered at the annual meeting of shareholders but
not included in WFC's proxy materials, the shareholder's notice must be
delivered to, or mailed and received at, the principal office of WFC not less
than 60 days prior to the anniversary date of the immediately preceding annual
meeting of shareholders of WFC.
The board of directors may reject any nomination by a shareholder or
shareholder proposal not timely made. If the board of directors, or a designated
committee thereof, determines that the information provided in a shareholder's
notice does not satisfy the informational requirements in any material respect,
the Secretary of WFC will notify such shareholder of the deficiency in the
notice. The
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shareholder will have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to
exceed five days from the date such deficiency notice is given to the
shareholder, as the board of directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the board of
directors or such committee reasonably determines that the additional
information provided by the shareholder, together with information previously
provided, does not satisfy the specified requirements in any material respect,
then the board of directors may reject such shareholder's nomination or
proposal. The Secretary of WFC will notify a shareholder in writing whether his
nomination or proposal has been made in accordance with the time and
informational requirements. Notwithstanding the procedures set forth in this
paragraph, if neither the board of directors nor such committee makes a
determination as to the validity of any nominations or proposals by a
shareholder, the presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the nomination or proposal was made in
accordance with the terms of WFC's Bylaws.
LFC. Nominations of candidates for election as directors at any annual
meeting of shareholders may be made (a) by or at the direction of, a majority of
the board of directors or (b) by any shareholder entitled to vote at such annual
meeting. Only persons nominated in accordance with certain procedures described
in LFC's Bylaws (which are summarized below) will be eligible for election as
directors at an annual meeting. Ballots bearing the names of all the persons who
have been nominated for election as directors at an annual meeting will be
provided for use at the annual meeting.
Nominations, other than those made by or at the direction of the board
of directors, must be made pursuant to timely notice in writing to LFC's
Secretary. To be timely, a shareholder's notice shall be delivered to, or mailed
and received at, LFC's principal office not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of shareholders.
Proposals, other than those made by or at the direction of the board of
directors, must be made pursuant to timely notice in writing to LFC's Secretary.
For shareholder proposals to be included in LFC's proxy materials, the
shareholder must comply with all the timing and informational requirements of
Rule 14a-8 of the Exchange Act or any successor regulation. With respect to
shareholder proposals to be considered at the annual meeting of shareholders but
not included in LFC's proxy materials, the shareholder's notice must be
delivered to, or mailed and received at, the principal office of LFC not less
than 60 days prior to the anniversary date of the immediately preceding annual
meeting of shareholders of LFC.
The board of directors may reject any nomination by a shareholder or
shareholder proposal not timely made. If the board of directors, or a designated
committee thereof, determines that the information provided in a shareholder's
notice does not satisfy the informational requirements in any material respect,
the Secretary of LFC will notify such shareholder of the deficiency in the
notice. The shareholder will have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
shareholder, as the board of directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the board of
directors or such committee reasonably determines that the additional
information provided by the shareholder, together with information previously
provided, does not satisfy the specified requirements in any material respect,
then the board of directors may reject such shareholder's nomination or
proposal. The Secretary of LFC will notify a shareholder in writing whether his
nomination or proposal has been made in accordance with the time and
informational requirements. Notwithstanding the procedures set forth in this
paragraph, if neither
26
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the board of directors nor such committee makes a determination as to the
validity of any nominations or proposals by a shareholder, the presiding officer
of the annual meeting shall determine and declare at the annual meeting whether
the nomination or proposal was made in accordance with the terms of LFC's
Bylaws.
Authorized Shares
WFC. The aggregate number of shares of all classes of capital stock
which WFC has authority to issue is 7,000,000 of which 5,000,000 are to be
shares of common stock, $0.10 par value per share, and of which 2,000,000 are to
be shares of serial preferred stock, $0.10 par value per share. The shares may
be issued by WFC without the approval of shareholders except as otherwise
provided in its Certificate of Incorporation or the rules of a national
securities exchange, if applicable. The consideration for the issuance of the
shares will be paid to or received by WFC in full before their issuance and will
not be less than the par value per share. The consideration for the issuance of
the shares will be cash, services rendered, personal property (tangible or
intangible), real property, leases of real property or any combination of the
foregoing. In the absence of actual fraud in the transaction, the judgment of
WFC's board of directors as to the value of such consideration will be
conclusive. Upon payment of such consideration such shares will be deemed to be
fully paid and nonassessable. In the case of a stock dividend, the part of the
surplus of WFC which is transferred to stated capital upon the issuance of
shares as a stock dividend will be deemed to be the consideration for their
issuance.
LFC. The aggregate number of shares of all classes of capital stock
which LFC has authority to issue is 10,000,000 shares of common stock, $1.00 par
value per share. The shares may be issued by LFC without the approval of
shareholders except as otherwise provided in its Certificate of Incorporation or
the rules of a national securities exchange, if applicable. The consideration
for the issuance of the shares will be paid to or received by LFC in full before
their issuance and will not be less than the par value per share. The
consideration for the issuance of the shares will be cash, services rendered,
personal property (tangible or intangible), real property, leases of real
property or any combination of the foregoing. In the absence of actual fraud in
the transaction, the judgment of LFC's board of directors as to the value of
such consideration will be conclusive. Upon payment of such consideration such
shares will be deemed to be fully paid and nonassessable. In the case of a stock
dividend, the part of the surplus of LFC which is transferred to stated capital
upon the issuance of shares as a stock dividend will be deemed to be the
consideration for their issuance.
Limitations on Voting
WFC. In no event may any record owner of any outstanding WFC Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of shareholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of WFC
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of the Limit. The number of votes which may be cast by
any record owner by virtue of the provisions hereof in respect of WFC Common
Stock beneficially owned by such person owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single record owner
of all WFC Common Stock owned by such person would be entitled to cast,
multiplied by a fraction, the numerator of which is the number of shares of such
class or series which are both beneficially owned by such person and owned of
record by such record owner and the denominator of which is the total number of
shares of WFC Common Stock beneficially owned by such person owning shares in
excess of the Limit.
27
<PAGE>
Further, for a period of five years from the completion of the
conversion of the Mutual Holding Company (i.e., June 6, 1996) to stock form, no
person may directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of any equity security of WFC. However,
this provision shall not be applicable if such acquisition has been approved by
WFC's Board of Directors.
LFC. In no event may any record owner of any outstanding LFC Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of shareholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of LFC
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of the Limit. The number of votes which may be cast by
any record owner by virtue of the provisions hereof in respect of LFC Common
Stock beneficially owned by such person owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single record owner
of all LFC Common Stock owned by such person would be entitled to cast,
multiplied by a fraction, the numerator of which is the number of shares of such
class or series which are both beneficially owned by such person and owned of
record by such record owner and the denominator of which is the total number of
shares of LFC Common Stock beneficially owned by such person owning shares in
excess of the Limit.
Indemnification; Limitation of Liability
WFC. WFC's Certificate of Incorporation provides, in accordance with
the NJBCA, that WFC 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, including actions by or in the right of WFC, whether civil,
criminal, administrative, arbitrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of WFC or of
any constituent corporation absorbed by WFC in a consolidation or merger, or is
or was serving at the request of WFC as a director, officer, employee or agent
of another Company, partnership, joint venture, sole proprietorship, trust or
other enterprise, against expenses (including attorneys' fees), judgements,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding to the full extent
permissible under NJBCA.
WFC may pay in advance any expenses (including attorneys' fees) which
may become subject to indemnification if the person receiving the payment
undertakes in writing to repay the same if it is ultimately determined that he
or she is not entitled to indemnification by WFC under New Jersey law. WFC may
purchase and maintain insurance on behalf of any person who is eligible for
indemnification, against any liability incurred by him or her in any such
position, or arising out of his or her status as such, whether or not WFC would
have power to indemnify him or her against such liability under the Certificate
of Incorporation and New Jersey law.
LFC. LFC's Certificate of Incorporation provides, in accordance with
the NJBCA, that LFC 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, including actions by or in the right of LFC, whether civil,
criminal, administrative, arbitrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of LFC or of
any constituent corporation absorbed by LFC in a consolidation or merger, or is
or was serving at the request of LFC as a director, officer, employee or agent
of another Company, partnership, joint venture, sole proprietorship, trust or
other enterprise, against expenses (including attorneys' fees), judgements,
fines and amounts paid in settlement actually
28
<PAGE>
and reasonably incurred by such person in connection with such action, suit or
proceeding to the full extent permissible under NJBCA.
LFC may pay in advance any expenses (including attorneys' fees) which
may become subject to indemnification if the person receiving the payment
undertakes in writing to repay the same if it is ultimately determined that he
or she is not entitled to indemnification by LFC under New Jersey law. LFC may
purchase and maintain insurance on behalf of any person who is eligible for
indemnification, against any liability incurred by him or her in any such
position, or arising out of his or her status as such, whether or not LFC would
have power to indemnify him or her against such liability under the Certificate
of Incorporation and New Jersey law.
LFC
Description of Business
LFC, ^ headquartered in Paterson, New Jersey and incorporated under the
laws of the state of New Jersey, is a savings and loan holding company ^.
Through its wholly-owned stock savings bank subsidiary, ^ LSB, LFC has eight
banking offices located in Bergen and Passaic Counties, New Jersey. ^ LFC's
primary business consist of attracting deposits from the general public and
originating loans that are secured by residential properties, as well as
originating multi-family, commercial real estate, home equity, second mortgage
and home improvement loans. In addition, LFC owns two active nonbank
subsidiaries that are engaged primarily in mortgage brokerage services and
consumer finance services, respectively. LFC's principal executive office is
located at 1117 Main Street, Paterson, New Jersey. See "Incorporation of Certain
Information by Reference" for additional information about LFC.
DESCRIPTION OF LFC CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which
the LFC has authority to issue is 10,000,000 shares of common stock, $1.00 par
value per share. The shares may be issued by the LFC from time to time as
approved by the board of directors of the LFC without the approval of the
stockholders except as otherwise provided in this Certificate or the rules of a
national securities exchange if applicable. The consideration for the issuance
of the shares shall be paid to or received by the LFC in full before their
issuance and shall not be less than the par value per share. The consideration
for the issuance of the shares may be paid in whole or in part, in cash, real
property, in tangible or intangible personal property, including stock of
another corporation, in labor or services actually performed for the corporation
or in its formation, or as otherwise permitted by New Jersey law. In the absence
of actual fraud in the transaction, the judgment of the board of directors or
the stockholders as the case may be as to the value of such consideration shall
be conclusive. Upon payment of such consideration such shares shall be deemed to
be fully paid and nonassessable. In the case of a stock dividend, the part of
the surplus of the LFC which is transferred to stated capital upon the issuance
of shares as a stock dividend shall be deemed to be the consideration for their
issuance.
The holders of the common stock shall exclusively possess all voting
power. Each holder of shares of common stock shall be entitled to one vote for
each share held by such holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of
29
<PAGE>
dividends, the full amount of dividends and sinking fund or retirement fund or
other retirement payments, if any, to which such holders are respectively
entitled in preference to the common stock, then dividends may be paid on the
common stock, and on any class or series of stock entitled to participate
therewith as to dividends, out of any assets legally available for the payment
of dividends, but only when as declared by the board of directors of LFC.
In the event of any liquidation, dissolution or winding up of LFC,
after there shall have been paid, or declared and set aside for payment, to the
holders of the outstanding shares of any class having preference over the common
stock in any such event, the full preferential amounts to which they are
respectively entitled, the holders of the common stock and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of LFC, including the payment of all fees, taxes
and other expenses incidental thereto, to receive the remaining assets of LFC
available for distribution, in cash or in kind.
Each share of common stock shall have the same relative rights,
preferences and limitations as, and shall be identical in all respects with, all
the other shares of common stock of LFC.
WFC
Description of Business
WFC, ^ headquartered in Westwood, New Jersey^ and incorporated under
the laws of the state of New Jersey, is a bank holding company. Through its
wholly-owned stock, savings bank subsidiary, ^ WSB, WFC has two banking offices
in Westwood and Haworth, New Jersey. ^ WFC's primary business consist of
attracting deposits from the general public and originating loans that are
secured by residential properties as well as originating commercial real estate
and consumer loans. WFC's principal executive office is located at 700-88
Broadway, Westwood, New Jersey. See "Incorporation of Certain Information by
Reference" and "Accompanying Documents" for additional information about WFC.
EXPERTS
The consolidated financial statements of LFC as of July 31, 1997 and
1996, and for each of the years in the three-year period ended July 31, 1997,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of WFC as of March 31, 1997 and
1996, and for each of the years in the two-year period ended March 31, 1997 have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of RD Hunter & Company LLP, independent certified
public accountants, incorporated by reference herein and upon the authority of
said firm as experts in accounting and auditing.
30
<PAGE>
LEGAL MATTERS
The validity of LFC Common Stock to be issued to WFC Shareholders
pursuant to the Merger and certain other legal matters in connection with the
Merger will be passed upon for LFC by Malizia, Spidi, Sloane & Fisch, P.C.,
Washington, D.C.
OTHER MATTERS
As of the date of this Proxy Statement, management of WFC know of no
other business that will come before the Special Meeting. Should any other
matters properly come before the Special Meeting, the proxy in the enclosed form
confers upon the person or persons designated to vote the shares discretionary
authority to vote the same with respect to any other matter in accordance with
the direction of the WFC Board.
31
<PAGE>
Appendix I
AGREEMENT AND PLAN OF REORGANIZATION
by and between
LAKEVIEW FINANCIAL CORP. AND
LAKEVIEW SAVINGS BANK
and
WESTWOOD FINANCIAL CORPORATION AND
WESTWOOD SAVINGS BANK
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Recitals...................................................................................... 1
--------
ARTICLE 1
TERMS OF THE REORGANIZATION
1.1 The Merger.................................................................................... 2
----------
(a) Effects of the Merger................................................................ 2
---------------------
(b) Transfer of Assets................................................................... 2
------------------
(c) Assumption of Liabilities............................................................ 2
-------------------------
1.2 Certificate of Incorporation, Bylaws, Directors, Officers and Name of the
Surviving Corporation.......................................................................... 2
(a) Certificate of Incorporation......................................................... 2
(b) Bylaws............................................................................... 2
(c) Directors and Officers............................................................... 3
(d) Name................................................................................. 3
1.3 Availability of Information................................................................... 3
1.4 Subsidiary Merger and Lakeview's Right to Revise the Structure
of the Transaction; Antidilution Provisions................................................... 3
1.5 WFC Stock Options............................................................................. 4
-----------------
1.6 Employment Agreements......................................................................... 4
---------------------
1.7 Employees..................................................................................... 4
---------
1.8 Earnest Money Deposit......................................................................... 4
---------------------
1.9 Anti-dilution Provisions........................................................................4
------------------------
ARTICLE 2
DESCRIPTION OF TRANSACTION
2.1 Terms of the Merger........................................................................... 5
-------------------
(a) Satisfaction of Conditions to Closing................................................ 5
-------------------------------------
(b) Effective Time of the Merger......................................................... 5
----------------------------
2.2 Conversion of Stock........................................................................... 5
-------------------
(a) Consideration......................................................................... 5
-------------
(b) Cash or Stock Merger Consideration.................................................... 5
----------------------------------
(c) Final Market Price.................................................................... 6
------------------
(d) Fractional Shares..................................................................... 6
-----------------
(e) Calculation Schedule.................................................................. 6
--------------------
2.3 Election and Allocation Procedures............................................................ 6
----------------------------------
2.4 Election Procedures............................................................................ 8
-------------------
2.5 Mechanics of Payment of Consideration ........................................................ 9
-------------------------------------
2.6 Time and Place of Closing..................................................................... 10
-------------------------
</TABLE>
i
<PAGE>
ARTICLE 3
REPRESENTATION AND WARRANTIES OF LAKEVIEW AND LAKEVIEW BANK
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3.1 Organization and Corporate Authority.......................................................... 11
------------------------------------
3.2 Authorization, Execution and Delivery; Reorganization Agreement Not in Breach................. 11
-----------------------------------------------------------------------------
3.3 No Legal Bar.................................................................................. 12
------------
3.4 Government Approvals.......................................................................... 12
--------------------
3.5 Capitalization................................................................................ 12
--------------
3.6 Lakeview Financial Statements................................................................. 12
-----------------------------
3.7 1934 Act and Nasdaq National Market........................................................... 13
-----------------------------------
3.8 The Lakeview Common Stock..................................................................... 13
-------------------------
3.9 Licenses, Franchises, and Permits............................................................. 13
---------------------------------
3.10 Absence of Certain Changes.................................................................... 13
--------------------------
3.11 Tax Matters................................................................................... 14
-----------
3.12 Litigation.................................................................................... 14
----------
3.13 Absence of Undisclosed Liabilities............................................................ 15
----------------------------------
3.14 Compliance with Laws.......................................................................... 15
--------------------
3.15 Material Contract Defaults.................................................................... 15
--------------------------
3.16 Disclosure.................................................................................... 15
----------
3.17 Certain Regulatory Matters.................................................................... 16
--------------------------
3.18 Delays.........................................................................................16
------
3.19 Corporate Approvals............................................................................16
-------------------
3.20 Charter Documents............................................................................. 16
-----------------
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WFC AND WESTWOOD BANK
4.1 Organization and Qualification of WFC and Subsidiaries........................................ 16
------------------------------------------------------
4.2 Authorization, Execution and Delivery; Reorganization Agreement Not in
Breach........................................................................................ 17
------
4.3 No Legal Bar.................................................................................. 18
------------
4.4 Government and Other Approvals................................................................ 18
------------------------------
4.5 Licenses, Franchises and Permits.............................................................. 18
--------------------------------
4.6 Charter Documents............................................................................. 18
-----------------
4.7 WFC Financial Statements...................................................................... 18
------------------------
4.8 Absence of Certain Changes.................................................................... 19
--------------------------
4.9 Deposits...................................................................................... 20
--------
4.10 Properties.................................................................................... 20
----------
4.11 Condition of Fixed Assets and Equipment....................................................... 20
---------------------------------------
4.12 Tax Matters................................................................................... 20
-----------
4.13 Litigation.................................................................................... 21
----------
4.14 Environmental Materials....................................................................... 21
-----------------------
4.15 Insurance..................................................................................... 22
---------
4.16 Books and Records............................................................................. 22
-----------------
4.17 Capitalization of WFC......................................................................... 22
---------------------
4.18 Sole Agreement................................................................................ 22
--------------
4.19 Disclosure.................................................................................... 23
----------
4.20 Absence of Undisclosed Liabilities............................................................ 23
----------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.21 Allowance for Possible Loan or REO Losses..................................................... 23
-----------------------------------------
4.22 Loan Portfolio................................................................................ 24
--------------
4.23 Compliance with Laws.......................................................................... 24
--------------------
4.24 Employee Benefit Plans........................................................................ 25
----------------------
4.25 Material Contracts............................................................................ 26
------------------
4.26 Material Contract Defaults.................................................................... 26
--------------------------
4.27 Reports....................................................................................... 26
-------
4.28 1934 Act and Nasdaq Small Cap Market.......................................................... 26
------------------------------------
4.29 Statements True and Correct................................................................... 27
---------------------------
4.30 Investment Securities......................................................................... 27
---------------------
4.31 Certain Regulatory Matters.................................................................... 27
--------------------------
4.32 Corporate Approval............................................................................ 28
------------------
4.33 Broker's and Finder's Fees.................................................................... 28
--------------------------
ARTICLE 5
COVENANTS OF LAKEVIEW
5.1 Regulatory and Other Approvals................................................................ 28
------------------------------
5.2 Approvals and Registrations................................................................... 29
---------------------------
5.3 Employee Benefits............................................................................. 29
-----------------
5.4 Notification.................................................................................. 30
------------
5.5 Tax Representations........................................................................... 30
-------------------
5.6 Directors and Officers Indemnification and Insurance Coverage................................. 30
-------------------------------------------------------------
5.7 Conduct of Lakeview and Lakeview Bank Prior to the Effective Time..............................30
-----------------------------------------------------------------
ARTICLE 6
COVENANTS OF WFC AND WESTWOOD BANK
6.1 Preparation of Registration Statement and Applications For Required Consents.................. 31
----------------------------------------------------------------------------
6.2 Conduct of Business -- Affirmative Covenants.................................................. 31
--------------------------------------------
6.3 Conduct of Business -- Negative Covenants..................................................... 33
-----------------------------------------
6.4 Conduct of Business -- Certain Actions........................................................ 35
--------------------------------------
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of WFC.......................................................... 36
------------------------------------
(a) Performance.......................................................................... 35
-----------
(b) No Material Adverse Change........................................................... 35
--------------------------
(c) Representations and Warranties....................................................... 35
------------------------------
(d) Documents............................................................................ 36
---------
(e) Consideration........................................................................ 37
-------------
(f) Opinion of Lakeview's Counsel........................................................ 37
-----------------------------
(g) Fairness Opinion..................................................................... 38
----------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
7.2 Conditions to the Obligations of Lakeview..................................................... 38
-----------------------------------------
(a) Performance.......................................................................... 38
-----------
(b) Representations and Warranties....................................................... 38
------------------------------
(c) Documents............................................................................ 39
---------
(d) Inspections Permitted................................................................ 39
---------------------
(e) No Material Adverse Change........................................................... 39
--------------------------
(f) Opinion of WFC's Counsel............................................................. 39
------------------------
(g) Other Business Combinations, Etc..................................................... 40
--------------------------------
(h) Regulatory Approvals................................................................. 40
--------------------
(i) WFC Stockholder Approval............................................................. 40
------------------------
(j) No Lakeview Stockholder Approval..................................................... 41
--------------------------------
7.3 Conditions to Obligations of All Parties...................................................... 41
----------------------------------------
(a) No Pending or Threatened Claims...................................................... 41
-------------------------------
(b) Governmental Approvals and Acquiescence Obtained..................................... 41
------------------------------------------------
(c) Approval of Stockholders............................................................. 41
------------------------
(d) Effectiveness of Registration Statement.............................................. 41
---------------------------------------
(e) Tax Opinion.......................................................................... 41
-----------
ARTICLE 8
TERMINATION
8.1 Termination................................................................................... 41
-----------
8.2 Effect of Termination......................................................................... 41
---------------------
8.3 Fees...........................................................................................42
----
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices....................................................................................... 43
-------
9.2 Governing Law................................................................................. 43
-------------
9.3 Counterparts.................................................................................. 44
------------
9.4 Publicity..................................................................................... 44
---------
9.5 Entire Agreement.............................................................................. 45
----------------
9.6 Severability.................................................................................. 45
------------
9.7 Modifications, Amendments and Waivers......................................................... 45
-------------------------------------
9.8 Interpretation................................................................................ 45
--------------
9.9 Payment of Expenses........................................................................... 46
-------------------
9.10 Attorneys' Fees............................................................................... 46
---------------
9.11 No Survival of Representations and Warranties................................................. 46
---------------------------------------------
9.12 No Waiver..................................................................................... 46
---------
9.13 Remedies Cumulative........................................................................... 46
-------------------
9.14 Confidentiality............................................................................... 46
---------------
Exhibit A - Plan of Merger (Westwood Financial Corporation and
Lakeview Financial Corp....................................................................... 49
Exhibit B - Merger Agreement (Lakeview Savings Bank and Westwood Savings Bank)............................ 61
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement"), dated as of September 10, 1997, is entered into by and between
Lakeview Financial Corp. ("Lakeview" or the "Surviving Corporation" as the
context may require), a corporation incorporated and existing under the laws of
the State of New Jersey, which is registered as a savings and loan holding
company and whose executive offices are located at 989 McBride Avenue, Paterson,
New Jersey 07424; Lakeview Savings Bank ("Lakeview Bank"), a state savings bank,
chartered and existing under the laws of New Jersey, which has its main office
at 989 McBride Avenue, Paterson, New Jersey 07424, and is a wholly-owned
subsidiary of Lakeview; Westwood Financial Corporation ("WFC"), a corporation
organized and existing under the laws of the State of New Jersey, which is a
registered bank holding company and whose principal offices are located at
700-88 Broadway, Westwood, New Jersey 07675; and Westwood Savings Bank
("Westwood Bank"), a state savings bank, chartered and existing under the laws
of New Jersey, which has its main office at 700-88 Broadway, Westwood, New
Jersey 07675 and is a wholly-owned subsidiary of WFC.
Lakeview, Lakeview Bank, WFC and Westwood Bank are sometimes referred to
herein as the "Parties."
RECITALS
A. WFC is the beneficial owner and holder of record of 1,000 shares of
the common stock, $2.00 par value per share, of Westwood Bank, which constitute
all of the shares of common stock of Westwood issued and outstanding (the
"Westwood Common Stock").
B. The Boards of Directors of WFC and Westwood Bank deem it desirable
and in the best interests of WFC and Westwood Bank and the shareholders of WFC
(the "WFC Shareholders") that WFC be merged (the "Merger") with and into
Lakeview (which would survive the merger as the Surviving Corporation, as
defined herein) on the terms and subject to the conditions set forth in this
Reorganization Agreement and in the manner provided in this Reorganization
Agreement and the Plan of Merger (the "Plan of Merger") attached hereto as
Exhibit A.
C. The Board of Directors of Lakeview deems it desirable and in the
best interests of Lakeview and the shareholders of Lakeview that WFC be merged
with and into Lakeview on the terms and subject to the conditions set forth in
this Reorganization Agreement and in the manner provided in this Reorganization
Agreement and the Plan of Merger.
D. The Parties to this Reorganization Agreement further deem it
desirable and in the best interests of the respective corporations and their
shareholders that Westwood Bank be merged with and into Lakeview Bank (the
"Subsidiary Merger") concurrently with or as soon as reasonably practicable
after the Merger pursuant to the Merger Agreement attached hereto as Exhibit B
(the "Subsidiary Merger Agreement").
E. Pursuant to this Reorganization Agreement, each share of Westwood
Common Stock outstanding at the Effective Time of the Merger will be converted
into either (i) cash in the amount of $29.25 (the "Cash Merger Consideration,"
as defined herein), or (ii) shares of Lakeview Common Stock having a Final
Market Price (as defined herein) equal to $29.25 (the "Stock Merger
Consideration as
<PAGE>
defined herein). Shareholders of Westwood Common Stock will be entitled to elect
their preference with respect to each share of Westwood Common Stock held by
them, subject to pro-rata allocation, such that an aggregate of 49.9% will be
converted into the Cash Merger Consideration, and 50.1% will be converted into
the Stock Merger Consideration.
F. It is agreed that the number of outstanding shares of Westwood
Common Stock (including shares issued under any restricted or management stock
bonus plan) outstanding, including 58,335 stock options, is 703,630, resulting
in total aggregate consideration of $20,581,178, at least half of which will be
paid in the form of Lakeview Common Stock.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1
TERMS OF THE REORGANIZATION
1.1 The Merger. Subject to the satisfaction (or lawful
waiver) of each of the condi- tions to the obligations of each of the Parties to
this Reorganization Agreement, at the Effective Time of the Merger (as defined
in Section 2.1(b) herein), WFC shall be merged with and into Lakeview, which
latter corporation shall survive the Merger and is referred to herein in such
capacity as the "Surviving Corporation." The Merger shall have the effects set
forth in the New Jersey Business Corporation Act ("NJBCA"), with respect to
mergers of corporate entities.
(a) Effects of the Merger. At the Effective Time of
the Merger, the separate existence of WFC shall cease, and WFC shall be merged
with and into Lakeview which, as the Surviving Corporation, shall thereupon and
thereafter possess all of the assets, rights, privileges, appointments, powers,
licenses, permits and franchises of the two merged corporations, whether of a
public or a private nature, and shall be subject to all of the liabilities,
restrictions, disabilities and duties of WFC. The Merger is intended to be
treated by the parties as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended, (the "Code").
(b) Transfer of Assets. At the Effective Time of
the Merger, all rights, assets, licenses, permits, franchises and interests of
WFC in and to every type of property, whether real, personal, or mixed, whether
tangible or intangible, and choses in action shall be deemed to be vested in
Lakeview as the Surviving Corporation by virtue of the Merger becoming effective
and without any deed or other instrument or act of transfer whatsoever.
(c) Assumption of Liabilities. At the Effective
Time of the Merger, the Surviving Corporation shall become and be liable for all
debts, liabilities, obligations and contracts of WFC whether the same shall be
matured or unmatured; whether accrued, absolute, contingent or otherwise; and
whether or not reflected or reserved against in the balance sheets, other
financial statements, books of account or records of WFC.
- 2 -
<PAGE>
1.2 Certificate of Incorporation, Bylaws, Directors, Officers
and Name of the Surviving Corporation.
(a) Certificate of Incorporation. At and after the
Effective Time of the Merger, the Certificate of Incorporation of Lakeview, as
in effect immediately prior to the Effective Time of the Merger, shall continue
to be the Certificate of Incorporation of Lakeview as the Surviving Corporation,
unless and until amended thereafter as provided by law and the terms of such
Certificate of Incorporation.
(b) Bylaws. At and after the Effective Time of the
Merger, the Bylaws of Lakeview, as in effect immediately prior to the Effective
Time of the Merger, shall continue to be the Bylaws of Lakeview as the Surviving
Corporation, unless and until amended or repealed as provided by law, the
Certificate of Incorporation of Lakeview and such Bylaws.
(c) Directors and Officers. The directors of
Lakeview in office immediately prior to the Effective Time of the Merger shall
continue to be the directors and officers of the Surviving Corporation, to hold
office as provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation, unless and until their successors shall have been elected
or appointed and shall have qualified or until they shall have been removed in
the manner provided in said Certificate of Incorporation and Bylaws.
(d) Advisory Board. The Surviving Corporation shall
appoint William J. Woods, Joanne Miller and John M. Caruso to an Advisory Board
of the Surviving Corporation for a period of at least three years. Mr. Caruso
will receive annual board fees of at not less than $7,500. Mr. Woods and Ms.
Miller will not receive fees for their services.
(e) Name. The name of the Surviving Corporation
following the Merger shall be: Lakeview Financial Corp.
1.3 Availability of Information. Promptly after the execution
by the Parties of this Reorganization Agreement, each Party shall provide to the
other Party, its officers, employees, agents, and representatives access, on
reasonable notice and during customary business hours, to the books, records,
properties and facilities of the Party and shall use its best efforts to cause
its officers, employees, agents and representatives to cooperate with any of the
reviewing Party's reasonable requests for information.
1.4 Subsidiary Merger and Lakeview's Right to Revise the
Structure of the Transaction. The Parties to this Reorganization Agreement shall
take all such action as shall be necessary or appropriate to effect the
Subsidiary Merger pursuant to the terms, subject to the conditions and with the
effects set forth in the Subsidiary Merger Agreement, at or as soon after the
Effective Time of the Merger as is reasonably practicable. With the consent of
WFC, which will not unreasonably be withheld, Lakeview shall have the right to
revise the structure of the corporate Reorganization contemplated by this
Reorganization Agreement in order to achieve tax benefits or for regulatory
reasons which Lakeview may deem advisable; Lakeview may exercise this right of
revision by giving written notice to WFC and Westwood Bank in the manner
provided in this Reorganization Agreement which notice shall be in the form of
an amendment to this Reorganization Agreement or in the form of an Amended and
Restated Agreement and Plan of Reorganization.
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1.5 WFC Stock Options. As of the date of this Reorganization
Agreement, there are 58,335 validly issued, outstanding and currently
exercisable options to purchase shares of WFC Common Stock (the "WFC Stock
Options"), and no other options, rights, warrants, scrip or similar rights to
purchase shares of WFC Common Stock are issued and outstanding. At the Effective
Time of the Merger, there will be no issued and outstanding WFC Stock Options.
1.6 Employment Agreements. It is acknowledged that WFC
currently has outstanding, valid and enforceable severance agreements
("Severance Agreements") with Colleen Krenizcky, Joanne Miller, George Niemczyk,
Robert L. Pierson, and Frances Lynne Kopp. Immediately prior to the closing of
the transaction, WFC will terminate the employment of Ms. Miller, President of
Westwood Bank, and pay the "Change of Control" lump sum payment provided for in
Section 3 of her Severance Agreement estimated in accordance with Schedule 1.6,
subject to final adjustment, as of the Closing Date. At the closing of the
acquisition, the Surviving Corporation will hire Ms. Miller for a period of at
least three years at a salary no less than her current salary. As to Colleen
Krenizcky, George E. Niemczyk, Robert L. Pierson and Frances Lynne Kopp ("Other
Management"), the Surviving Corporation shall have the option to either retain
such individuals as employees of the Surviving Corporation, or terminate their
employment subsequent to the close of the transaction, subject to the terms of
the Severance Agreements. In the event the Surviving Corporation offers
employment to any of the Other Management, such individual(s) shall have the
option to accept such employment or collect payment under the terms of their
Severance Agreement. Chairman of the Board, William J. Woods will receive a
consulting agreement for a term not less than three years at his current salary
of $80,000 per year. Such payments will continue to be paid to the spouse,
survivor(s) or estate of Mr. Woods in the event of death or disability.
1.7 Employees. Except as provided in Section 1.6 of this
Reorganization Agreement, the Surviving Corporation shall offer employment to
all employees of WFC and Westwood Bank as of the closing of the transaction at
their salary levels effective immediately prior to closing.
1.8 Earnest Money Deposit. Upon the signing of the
Reorganization Agreement, the Surviving Corporation will deposit $250,000 of
earnest money at Westwood Bank in an account paying interest at a rate equal to
that paid on accounts for similar amounts and terms. The earnest money deposit
will be returned upon termination of the Reorganization Agreement pursuant to
Section 8.1 hereof; provided that Westwood Bank shall retain the earnest money
deposit in the event that WFC terminates the Reorganization Agreement pursuant
to Section 8.1(d) hereof.
1.9 Anti-dilution Provisions. In the event Lakeview changes
the number of shares of Lakeview Common Stock issued and outstanding prior to
the Effective Time of the Merger as a result of a stock split, stock dividend,
recapitalization or similar transaction with respect to the outstanding Lakeview
Common stock and the record date therefor shall be after the first date of the
Pricing Period (as defined below) and prior to the Effective Time of the Merger,
the Per Share Stock Consideration (as defined below) shall be proportionately
adjusted.
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ARTICLE 2
DESCRIPTION OF TRANSACTION
2.1 Terms of the Merger.
(a) Satisfaction of Conditions to Closing. After the
transactions contemplated herein have been approved by the shareholders of WFC
and each other condition to the obligations of the Parties hereto, other than
those conditions which are to be satisfied by delivery of documents by any Party
to any other Party, has been satisfied or, if lawfully permitted, waived by the
Party or Parties entitled to the benefits thereof, a closing (the "Closing")
will be held on the date and at the time of day and place referred to in this
Reorganization Agreement. At the Closing the Parties shall use their respective
best efforts to deliver the certificates, letters and opinions which constitute
conditions to effecting the Merger and the Subsidiary Merger and each Party will
provide the other Parties with such proof or indication of satisfaction of the
conditions to the obligations of such other Parties to consummate the Merger as
such other Parties may reasonably require. If all conditions to the obligations
of each of the Parties shall have been satisfied or lawfully waived by the Party
entitled to the benefits thereof, the Parties shall, at the Closing, duly
execute Articles of Merger for filing with the Secretary of State of the State
of New Jersey and promptly thereafter WFC and Lakeview shall take all steps
necessary or desirable to consummate the Merger in accordance with all
applicable laws, rules and regulations and the Plan of Merger. The Parties shall
thereupon take such other and further actions as Lakeview shall direct or as may
be required by law or this Reorganization Agreement to consummate the
transactions contemplated herein.
(b) Effective Time of the Merger. Upon the
satisfaction of all conditions to Closing, the Merger shall become effective on
the date and at the time of filing of the Articles of Merger with the Secretary
of State of the State of New Jersey or at such later date and/or time as may be
agreed upon by the Parties and set forth in the Articles of Merger so filed (the
"Effective Time of the Merger").
2.2 Conversion of Stock.
(a) Consideration. At the Effective Time of the
Merger, each share of common stock of WFC, par value $0.10 per share (the "WFC
Common Stock") then issued and outstanding (other than shares held directly or
indirectly by Lakeview, excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
represent the right to receive the cash and/or shares of stock of Lakeview
constituting the Per Share Merger Consideration (as defined in paragraph (b)
below). As of the Effective Time of the Merger, each share of the WFC Common
Stock held directly or indirectly by Lakeview, excluding shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted, shall be
cancelled, retired and cease to exist, and no exchange or payment shall be made
with respect thereto.
(b) Cash or Stock Merger Consideration. As used
herein, the term "Per Share Merger Consideration" shall mean either the amount
of cash set forth in clause (i) below (the "Cash Merger Consideration") or that
number of shares of common stock of Lakeview, par value $2.00 per share
("Lakeview Common Stock") as set forth in clause (ii) below (the "Stock Merger
Consideration"), at the election of the holder of each share of WFC Common
Stock, subject however to proration as set forth below.
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(i) If Cash Merger Consideration is to
be paid with respect to a share of
WFC Common Stock, the Per Share
Merger Consideration with respect to
such share of WFC Common Stock shall
be in the amount of Twenty-nine
dollars and Twenty-five Cents
($29.25).
(ii) If Stock Merger Consideration is to
be paid with respect to a share of
WFC Common Stock, the Per Share
Merger Consideration with respect to
such share of WFC Common Stock shall
be that number of shares of Lakeview
Stock (the "Conversion Number")
equal to Twenty-nine Dollars and
Twenty-five Cents ($29.25) divided
by the Final Market Price as defined
below.
(c) Final Market Price. The "Final Market Price"
shall be the average closing price per share of the "last" real time trades
(i.e., closing price) of the Lakeview Common Stock as reported on the Nasdaq
National Market for each of the fifteen (15) Nasdaq National Market general
market trading days preceding one week prior to the Closing Date on which the
Nasdaq National Market was open for business (the "Pricing Period"). In the
event the Lakeview Common Stock does not trade on one or more of the trading
days during the Pricing Period (a "No Trade Date"), any such No Trade Date shall
be disregarded in computing the average closing price per share of Lakeview
Common Stock and the average shall be based upon the "last" real time trades and
number of days on which the Lakeview Common Stock actually traded during the
Pricing Period.
(d) Fractional Shares. Fractional shares of Lakeview
Common Stock shall not be issued and each holder of WFC Common Stock who would
otherwise be entitled to receive any such fractional shares (taking into account
all share amounts to which such holder is otherwise entitled hereunder) shall
receive cash (without interest) in lieu thereof in an amount equal to the
fraction of the share of Lakeview Common Stock to which such holder would
otherwise be entitled multiplied by the Final Market Price. No such holder will
be entitled to dividends, voting rights or any other rights of a stockholder of
Lakeview or WFC in respect of any such fractional share.
(e) Calculation Schedule. The calculations of the
respective amounts of cash and Lakeview Common Stock payable and issuable
pursuant to the terms of this Reorganization Agreement shall be jointly prepared
and agreed to by Lakeview and WFC and set forth in reasonable detail in a
schedule that shall be delivered to Registrar and Transfer Company (the
"Exchange Agent") prior to the Closing Date.
2.3 Election and Allocation Procedures.
(a) Subject to and in accordance with the allocation
and election procedures set forth herein, each record holder of a share of WFC
Common Stock (the "WFC Shareholders") shall, prior to the Election Deadline (as
hereinafter defined) specify (i) the number of whole shares of WFC Common Stock
held by such Shareholder as to which such Shareholder shall desire to receive
the Cash Merger Consideration, and (ii) the number of whole shares of WFC Common
Stock held by such Shareholder as to which such Shareholder shall desire to
receive the Stock Merger Consideration.
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(b) At the Effective Time of the Merger, each
unexercised WFC Stock Option shall be deemed cancelled and as consideration
therefor, at the election of each holder of a WFC Stock Option (the "Option
Holders," and together with the Shareholders the "Holders") shall be converted
into the right to receive either (i) solely a cash payment amount (the "Cash
Out") equal to the excess of (A) $29.25 over the exercise price per share of WFC
Common Stock covered by the WFC Stock Option, multiplied by (B) the total number
of shares of WFC Common Stock covered by the WFC Stock Option or (ii) solely a
number of shares of Lakeview Common Stock (the "Stock Exchange") equal to the
excess of (A) $29.25 over the exercise price per share of WFC Common Stock
covered by the WFC Stock Option, multiplied by (B) the total number of shares of
WFC Common Stock covered by the WFC Stock Option and divided by (C) the Final
Market Price.
(c) An election as described in clause (i) of
Paragraph (a) or Paragraph (b) of this Section is herein referred to as a "Cash
Election," and shares of WFC Common Stock as to which a Cash Election has been
made are herein referred to as "Cash Election Shares." An election as described
in clause (ii) of Paragraph (a) or Paragraph (b) is herein referred to as a
"Stock Election," and shares as to which a Stock Election has been made are
herein referred to as "Stock Election Shares." A failure to indicate a
preference in accordance herewith is herein referred to as a "Non-Election," and
shares as to which there is a Non-Election are herein referred to as
"Non-Electing Shares."
(d) Notwithstanding anything herein to the contrary,
not less than 50.1% of the outstanding WFC Common Stock shall be exchanged for
Lakeview Common Stock. Payment of cash pursuant to the Cash Merger Consideration
and the Cash Out, and issuance of Lakeview Common Stock pursuant to the Stock
Merger Consideration and the Stock Exchange, shall be allocated to Holders such
that the number of shares of WFC Common Stock (outstanding or subject to WFC
Stock Options) as to which cash is paid shall equal 49.9% of the aggregate
number of shares of WFC Common Stock outstanding plus those subject to WFC Stock
Options (the "Aggregate Shares"), and the number of shares of WFC Common Stock
(outstanding or subject to WFC Stock Options) as to which WFC Stock are issued
shall equal 50.1% of the Aggregate Shares, as follows:
(1) If the number of Cash Election
Shares is in excess of 49.9% of the
Aggregate Shares, then (i)
Non-Electing Shares shall be deemed
to be Stock Election Shares, (ii)
Cash Election Shares of Option
Holders shall be treated as Cash
Election Shares without adjustment,
and (iii)(A) Cash Election Shares of
each Shareholder shall be reduced
pro rata by multiplying the number
of Cash Election Shares of such
Shareholder by a fraction, the
numerator of which is the number of
shares of WFC Common Stock equal to
49.9% of the Aggregate Shares minus
the aggregate number of Cash
Election Shares of Option Holders
and the denominator of which is the
aggregate number of Cash Election
Shares of all Shareholders, and (B)
the shares of such Shareholder
representing the difference between
such Shareholder's initial Cash
Election and such Shareholder's
reduced Cash Election pursuant to
clause (A) shall be converted into
and be deemed to be Stock Election
Shares.
(2) If the number of Stock Election
Shares is in excess of 50.1% of the
Aggregate Shares, then (i)
Non-Electing Shares shall be
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deemed to be Cash Election Shares,
(ii) Stock Election Shares of Option
Holders shall be treated as Stock
Election Shares without adjustment,
and (iii)(A) Stock Election Shares
of each Holder shall be reduced pro
rata by multiplying the number of
Stock Election Shares of such Holder
by a fraction, the numerator of
which is the number of shares of WFC
Common Stock equal to 50.1% of the
Aggregate Shares and the denominator
of which is the aggregate number of
Stock Election Shares of all
Holders, and (B) the shares of such
Holder representing the difference
between such Holder's initial Stock
Election and such Holder's reduced
Stock Election pursuant to clause
(A) shall be converted into to and
be deemed to be Cash Election
Shares.
(3) If the number of Cash Election
Shares is less than or equal to
49.9% of the Aggregate Shares and
the number of Stock Election Shares
is less than or equal to 50.1% of
the Aggregate Shares, then (i) there
shall be no adjustment to the
elections made by electing Holders,
and (ii) Non-Electing Shares of each
Holder shall be treated as Stock
Elections Shares and/or as Cash
Election Shares in proportion to the
respective amounts by which the Cash
Election Shares and the Stock
Election Shares are less than the
49.9% and 50.1% limits,
respectively.
(e) After taking into account the foregoing
adjustment provisions, each Cash
Election Share (including those deemed to be Cash Election Shares) shall receive
in the Merger the Cash Merger Consideration pursuant to Section 2.2(b) or the
Cash Out pursuant to Section 2.3(b), as applicable, and each Stock Election
Share (including those deemed to be Stock Election Shares) shall receive in the
Merger the Stock Merger Consideration (and cash in lieu of fractional shares)
pursuant to Section 2.3(b) or the Stock Exchange pursuant to Section to 2.3(b),
as applicable.
(f) Satisfaction of Conditions to Closing.
Notwithstanding any other provision of this Agreement, if the application of the
provisions of this Section would result in Holders receiving a number of shares
of Lakeview Common Stock that would prevent the Per Share Merger Consideration
from consisting in the aggregate of 49.9% Cash Merger Consideration and 50.1%
Stock Merger Consideration or otherwise prevent the satisfaction of any of the
conditions set forth in Article 7 hereof, the number of shares otherwise
allocable to Holders pursuant to this section shall be adjusted in an equitable
manner as shall be necessary to enable the satisfaction of all conditions.
2.4 Election Procedures.
(a) WFC and Lakeview shall prepare a form for
purposes of making elections and containing instructions with respect thereto
(the "Election Form"). The Election Form shall be distributed to each Holder at
such time as WFC and Lakeview shall determine and shall specify the date by
which all such elections must be made (the "Election Deadline") which date shall
be the date of the meeting of WFC Shareholders to approve the Merger or such
other date determined by WFC and Lakeview.
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(b) Elections shall be made by Holders by mailing to
the Exchange Agent a completed Election Form. To be effective, an Election Form
must be properly completed, signed and submitted to the Exchange Agent
accompanied by certificates representing the shares of WFC Common Stock or by
the WFC Stock Option as to which the election is being made (or by an
appropriate guaranty of delivery by a commercial bank or trust company in the
United States or a member of a registered national security exchange or the
National Association of Security Dealers, Inc.), or by evidence that such
certificates have been lost, stolen or destroyed accompanied by such security or
indemnity as shall be reasonably requested by Lakeview. An Election Form and
accompanying share certificates or WFC Stock Options, as the case may be, must
be received by the Exchange Agent by the close of business on the Election
Deadline. An election may be changed or revoked but only by written notice
received by the Exchange Agent prior to the Election Deadline including, in the
case of a change, a properly completed revised Election Form.
(c) Lakeview will have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether the
Election Forms have been properly completed, signed and submitted or changed or
revoked and to disregard immaterial defects in Election Forms. The decision of
Lakeview (or the Exchange Agent) in such matters shall be conclusive and
binding. Neither Lakeview nor the Exchange Agent will be under any obligation to
notify any person of any defect in an Election Form submitted to the Exchange
Agent.
(d) For the purposes hereof, a Holder who does not
submit an effective Election Form to the Exchange Agent prior to the Election
Deadline shall be deemed to have made a Non-Election.
(e) In the event that this Agreement is terminated
pursuant to the provisions hereof and any shares or WFC Stock Options have been
transmitted to the Exchange Agent pursuant to the provisions hereof, Lakeview
and WFC shall cause the Exchange Agent to promptly return such shares to the
person submitting the same.
2.5 Mechanics of Payment of Consideration.
(a) Surrender of Certificates pursuant to Section
2.2(b) or the Stock Exchange pursuant to Section 2.3(b), as applicable. Within
five business days after the Effective Time of the Merger, the Exchange Agent
shall deliver to each of the WFC Record Holders who have not previously
submitted properly completed Election Forms, accompanied by all certificates (or
other appropriate documentation) in respect of all shares of WFC Common Stock
held of record by such WFC Record Holders, such materials and information deemed
necessary by the Exchange Agent to advise the WFC Record Holders of the
procedures required for proper surrender of their certificates evidencing and
representing shares of the WFC Common Stock in order for the WFC Record Holders
to receive the Consideration to which they are entitled as provided herein. Such
materials shall include, without limitation, a Letter of Transmittal, an
Instruction Sheet, and a return mailing envelope addressed to the Exchange Agent
(collectively the "Shareholder Materials"). All Shareholder Materials shall be
sent by United States mail to the WFC Record Holders at the addresses set forth
on a certified shareholder list to be delivered by WFC to Lakeview at the
Closing (the "Shareholder List"). Lakeview shall also make appropriate
provisions with the Exchange Agent to enable WFC Record Holders to obtain the
Shareholder Materials from, and to deliver the certificates formerly
representing shares of WFC Common Stock to, the Exchange Agent in person,
commencing on or not later than the second business day following the Closing
Date. Upon receipt of the appropriate Shareholder Materials, together with the
certificates
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formerly evidencing and representing all of the shares of WFC Common Stock which
were validly held of record by such holder, the Exchange Agent shall take prompt
action to process such certificates formerly evidencing and representing shares
of WFC Common Stock received by it (including the prompt return of any defective
submissions with instructions as to those actions which may be necessary to
remedy any defects) and to mail to the former WFC Record Holders in exchange for
the certificate(s) surrendered by them, the Consideration to be issued or paid
for each such WFC Record Holder's shares pursuant to the terms hereof. After the
Effective Time of the Merger and until properly surrendered to the Exchange
Agent, each outstanding certificate or certificates which formerly evidenced and
represented the shares of WFC Common Stock of a WFC Record Holder, subject to
the provisions of this Section, shall be deemed for all corporate purposes to
represent and evidence only the right to receive the Consideration into which
such WFC Record Holder's shares of WFC Common Stock were converted and
aggregated at the Effective Time of the Merger. Unless and until the outstanding
certificate or certificates, which immediately prior to the Effective Time of
the Merger evidenced and represented the WFC Record Holder's WFC Common Stock
shall have been properly surrendered as provided above, the Consideration issued
or payable to the WFC Record Holder(s) of the canceled shares as of any time
after the Effective Date of the Merger shall not be paid to the WFC Record
Holder(s) of such certificate(s) until such certificates shall have been
surrendered in the manner required. Each WFC Record Holder will be responsible
for all federal, state and local taxes which may be incurred by him on account
of his receipt of the Consideration to be paid in the Merger. The WFC Record
Holder(s) of any certificate(s) which shall have been lost or destroyed may
nevertheless, subject to the provisions of this Article, receive the
Consideration to which each such WFC Record Holder is entitled, provided that
each such WFC Record Holder shall deliver to Lakeview and to the Exchange Agent:
(i) a sworn statement certifying such loss or destruction and specifying the
circumstances thereof and (ii) a lost instrument bond in form satisfactory to
Lakeview and the Exchange Agent which has been duly executed by a corporate
surety satisfactory to Lakeview and the Exchange Agent, indemnifying the
Surviving Corporation, Lakeview, the Exchange Agent (and their respective
successors) to their satisfaction against any loss or expense which any of them
may incur as a result of such lost or destroyed certificates being thereafter
presented. Any costs or expenses which may arise from such replacement
procedure, including the premium on the lost instrument bond, shall be paid by
the WFC Record Holder.
(b) Stock Transfer Books. At the Effective Time of
the Merger, the stock transfer books of WFC shall be closed and no transfer of
shares of WFC Common Stock shall be made thereafter.
(c) Reservation, Registration and Listing of Shares
of Lakeview Common Stock. Lakeview shall reserve for issuance, register under
the Securities Laws and apply for listing for trading on the Nasdaq National
Market a sufficient number of shares of Lakeview Common Stock for the purpose of
issuing shares of Lakeview Common Stock to the WFC Record Holders in accordance
with the terms and conditions of this Article.
2.6 Time and Place of Closing. Unless this Reorganization
Agreement shall have been herein terminated and the transactions herein
contemplated shall have been abandoned pursuant to Section 8.01 and subject to
the satisfaction or waiver of the conditions set forth in Article 7, the closing
of the Merger (the "Closing") will take place at 10:00 a.m. on the second
business day after satisfaction of the conditions set forth in Section 7.03 (or
as soon as practicable thereafter following satisfaction or waiver of the
conditions set forth in Sections 7.01 and 7.02) (the "Closing Date"), at the
offices of Malizia, Spidi, Sloane & Fisch, P.C., 1301 K Street, N.W., Suite 700
East, Washington, D.C. 20005,
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unless another date, time or place is agreed to in writing by the parties
hereto; provided, however, that the Closing Date will not occur prior to January
1, 1998.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LAKEVIEW AND LAKEVIEW BANK
Except as otherwise disclosed in one or more schedules
(collectively the "Lakeview Schedule") dated as of the date hereof and delivered
concurrently with this Reorganization Agreement, both as of the date hereof and
as of the Effective Time of the Merger, each of Lakeview and Lakeview Bank
represents and warrants to WFC and Westwood Bank as follows:
3.1 Organization and Corporate Authority. Lakeview is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey and Lakeview Bank is duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Lakeview and
Lakeview Bank (i) have all requisite corporate power and authority to own,
operate and lease their material properties and carry on their businesses as is
currently being conducted; (ii) are in good standing and are duly qualified to
do business in each jurisdiction where the character of their properties owned
or held under lease or the nature of their business is such that failure to be
so qualified would have a material adverse effect on Lakeview and Lakeview Bank
taken as a whole; and (iii) have in effect all federal, state, local and foreign
governmental authorizations, permits and licenses necessary for them to own or
lease their properties and assets and to carry on their businesses as they are
currently being conducted. The Certificate of Incorporation and Bylaws of
Lakeview and the Certificate of Incorporation and Bylaws of Lakeview Bank, each
as amended to date, are in full force and effect.
3.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.
(a) Lakeview and Lakeview Bank have all requisite
corporate power and authority to execute and deliver this Reorganization
Agreement and the Plan of Merger and to consummate the transactions contemplated
hereby. The execution and delivery of this Reorganization Agreement and the Plan
of Merger and the consummation of the proposed transactions have been duly
authorized by at least a majority of the entire Boards of Directors of both
Lakeview and Lakeview Bank and no other corporate proceedings on the part of
Lakeview or Lakeview Bank are necessary to authorize the execution and delivery
of this Reorganization Agreement and the Plan of Merger and the consummation of
the transactions contemplated hereby and thereby. This Reorganization Agreement
and all other agreements and instruments herein contemplated to be executed by
Lakeview and Lakeview Bank have been (or upon execution will have been) duly
executed and delivered by Lakeview and Lakeview Bank and constitute (or upon
execution will constitute) legal, valid and enforceable obligations of Lakeview
and Lakeview Bank, subject, as to enforceability, to applicable bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to the
application of equitable principles and judicial discretion.
(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof will not result in a material violation or breach of any of
the terms or provisions of, or constitute a material default under (or an event
which, with the passage of time or the giving of notice or both, would
constitute such a material default under), or conflict with, or permit the
acceleration of any material obligation under, any material mortgage, lease,
covenant, agreement,
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indenture or other instrument to which Lakeview or Lakeview Bank is a party or
by which it or its property or any of its assets are bound, the Certificate of
Incorporation and Bylaws of Lakeview or the certificate of incorporation or
bylaws of Lakeview Bank, or any material judgment, decree, order, regulatory
letter of understanding or award of any court, governmental body or arbitrator
by which Lakeview or Lakeview Bank is bound; or any material permit, concession,
grant, franchise, license, law, statute, ordinance, rule or regulation
applicable to Lakeview or Lakeview Bank or their properties, or result in the
creation of any material lien, claim, security interest, encumbrance, charge,
restriction or right of any third party of any kind whatsoever upon the property
or assets of Lakeview or Lakeview Bank, except that the Government Approvals, as
defined below, shall be required in order for Lakeview or Lakeview Bank to
consummate the Merger.
3.3 No Legal Bar. Neither Lakeview nor Lakeview Bank is a
party to, subject to or bound by any material agreement, judgment, order,
regulatory letter of understanding, writ, prohibition, injunction or decree of
any court or other governmental authority or body of competent jurisdiction or
any law which would prevent the execution of this Reorganization Agreement or
the Plan of Merger by Lakeview and Lakeview Bank, the delivery thereof to WFC
and Westwood Bank or the consummation of the transactions contemplated hereby
and thereby and no action or proceeding is pending against Lakeview or Lakeview
Bank in which the validity of this Reorganization Agreement, any of the
transactions contemplated hereby or any action which has been taken by any of
the Parties in connection herewith or in connection with any of the transactions
contemplated hereby, is at issue.
3.4 Government Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
Lakeview in connection with the execution and delivery of this Reorganization
Agreement or the consummation of the transactions contemplated hereby by
Lakeview except for the prior approval of the Office of Thrift Supervision
("OTS") under the Home Owners' Loan Act of 1933, as amended and recodified
("HOLA"), the Federal Deposit Insurance Corporation ("FDIC"), the New Jersey
Department of Banking and Insurance ("NJDB"), and any other government approvals
that may be necessary (the "Government Approvals"). Neither Lakeview nor
Lakeview Bank is aware of any facts, circumstances or reasons why such
Government Approvals should not be forthcoming or which would prevent or hinder
such approvals from being obtained.
3.5 Capitalization. The authorized capital stock of Lakeview
consists of 10,000,000 shares of common stock having a par value of $2.00 per
share (the "Lakeview Common Stock"). As of July 31, 1997, 2,254,527 shares of
Lakeview Common Stock were validly issued and outstanding. As of the date
hereof, Lakeview is the holder, directly or indirectly, of all of the
outstanding capital stock of its subsidiaries including Lakeview Bank
(collectively, the "Lakeview Subsidiaries"), as reflected on Schedule 3.5,
except for director qualifying shares and shares of Lakeview Mortgage Depot,
Inc. as reflected on Schedule 3.5.
3.6 Lakeview Financial Statements. Lakeview has delivered or
will deliver to WFC copies of the consolidated statements of financial condition
of Lakeview as of July 31, for the fiscal years 1996 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the fiscal years 1995 through 1997, inclusive, as incorporated by
reference in Lakeview's Annual Report to Stockholders in each case accompanied
by the audit report of KPMG Peat Marwick LLP, independent public accountants
with respect to Lakeview, and the unaudited consolidated statements of financial
condition of Lakeview as of October 31, 1997 and the related unaudited
consolidated statements of operations, changes in stockholders' equity and cash
flows for the three month periods then
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ended as reported in Lakeview's quarterly report to shareholders. The
consolidated statements of financial condition of Lakeview referred to herein
(including the related notes, where applicable) fairly present the consolidated
financial condition of Lakeview as of the respective dates set forth therein,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows (including the related notes, where applicable) fairly
present the results of the consolidated operations, changes in stockholders'
equity and cash flows of Lakeview for the respective periods or as of the
respective dates set forth therein, in each case in conformity with generally
accepted accounting principles ("GAAP") consistently applied, it being
understood that Lakeview's interim financial statements are not audited, not
prepared with related notes and are subject to normal year-end adjustments.
3.7 1934 Act and Nasdaq National Market Filings.
(a) The Lakeview Common Stock is registered with the
SEC pursuant to the Securities Exchange Act of 1934, as amended, (the "1934
Act") and Lakeview has filed with the SEC all material forms and reports
required by law to be filed by Lakeview with the SEC, which forms and reports,
taken as a whole, are true and correct in all material respects, and do not
misstate a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(b) The Lakeview Common Stock is listed for trading
on the Nasdaq National Market (under the symbol "LVSB") pursuant to the listing
rules of the Nasdaq National Market and Lakeview has filed with the Nasdaq
National Market all material forms and reports required by law to be filed by
Lakeview with the Nasdaq National Market, which forms and reports, taken as a
whole, are true and correct in all material respects, and do not misstate a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
3.8 The Lakeview Common Stock. All shares of Lakeview Common
Stock to be issued by Lakeview and delivered to the holders of record of all
issued and outstanding shares of WFC Common Stock immediately prior to the
Effective Time of the Merger (the "WFC Record Holders") in exchange for all of
the WFC Common Stock will be duly authorized, validly issued, fully paid and
non-assessable, and none of such shares of Lakeview Common Stock will have been
issued in violation of any preemptive rights of any Lakeview shareholders.
3.9 Licenses, Franchises and Permits. Lakeview and all
Lakeview Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses.
All of such licenses, franchises, permits and authorizations are in full force
and effect. Neither Lakeview nor any Lakeview Subsidiary has received notice of
any proceeding for the suspension or revocation of any such license, franchise,
permit, or authorization and no such proceeding is pending or to the best
knowledge of Lakeview and the Lakeview Subsidiaries has been threatened by any
governmental authority.
3.10 Absence of Certain Changes. Except as disclosed in
Schedule 3.10 or as provided for or contemplated in this Reorganization
Agreement, since July 31, 1997 (the "Balance Sheet Date") there has not been any
material adverse change in the business, property, assets (including loan
portfolios), liabilities (whether absolute, accrued, contingent or otherwise),
operations, liquidity, income, financial condition or net worth of Lakeview on a
consolidated basis. Lakeview will make no special
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distribution to its shareholders (other than the payment of cash or stock
dividends in the ordinary course of business) that will result in a material
reduction in stockholders' equity.
3.11 Tax Matters. Except as described in Schedule 3.11 hereto:
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(a) All federal, state and local tax returns
required to be filed by or on behalf of Lakeview and each Lakeview Subsidiary
have been timely filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before the date of this
Reorganization Agreement, and all returns filed are, and the information
contained therein is, complete and accurate. All tax obligations reflected in
such returns have been paid. As of the date of this Reorganization Agreement,
there is no audit examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might reasonably be expected to
result in a determination materially adverse to Lakeview and Lakeview
Subsidiaries, taken as a whole, except as fully reserved for in the Lakeview
Financial Statements. All taxes, interest, additions, and penalties due with
respect to completed and settled examinations or concluded litigation have been
paid;
(b) Neither Lakeview nor any Lakeview Subsidiary has
executed an extension or waiver of any statute of limitations on the assessment
or collection of any tax due that is currently in effect;
(c) Adequate provision for any federal, state or
local taxes due or to become due for Lakeview and all Lakeview Subsidiaries for
all periods through and including July 31, 1997, has been made and is reflected
on the July 31, 1997 financial statements included in the Lakeview Financial
Statements, and have been and will continue to be made with respect to periods
ending after July 31, 1997;
(d) Deferred taxes of Lakeview and each Lakeview
Subsidiary have been and will be provided for in accordance with GAAP; and
(e) To the best knowledge of Lakeview, neither the
Internal Revenue Service nor any state, local or other taxing authority is now
asserting or threatening to assert against Lakeview or any Lakeview Subsidiary
any deficiency or claim for additional taxes, or interest thereon or penalties
in connection therewith. All material income, payroll, withholding, property,
excise, sales, use, franchise and transfer taxes, and all other taxes, charges,
fees, levies or other assessments, imposed upon Lakeview by the United States or
by any state, municipality, subdivision or instrumentality of the United States
or by any other taxing authority, including all interest, penalties or additions
attributable thereto, which are due and payable by Lakeview or any Lakeview
Subsidiary, either have been paid in full or have been properly accrued and
reflected in the Lakeview Financial Statements.
3.12 Litigation. Except as set forth in Schedule 3.12 hereto,
there is no action, suit or proceeding pending against Lakeview or any Lakeview
Subsidiary, or to the best knowledge of Lakeview, threatened against or
affecting Lakeview, any Lakeview Subsidiary or any of their assets, before any
court or arbitrator or any governmental body, agency or official that would, if
decided against Lakeview or the Lakeview Subsidiary, have a material adverse
impact on the business, properties, assets, liabilities or condition (financial
or other) of Lakeview and that are not reflected in the Lakeview Financial
Statements.
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3.13 Absence of Undisclosed Liabilities. Except as described
in Schedule 3.13 hereto, to their knowledge neither Lakeview nor any Lakeview
Subsidiary has any obligation or liability that is material to the financial
condition or operations of Lakeview or any Lakeview Subsidiary, or that, when
combined with all similar obligations or liabilities, would be material to the
financial condition or operations of Lakeview or any Lakeview Subsidiary (i)
except as disclosed in the Lakeview Financial Statements delivered to WFC prior
to the date of this Reorganization Agreement, (ii) except obligations or
liabilities incurred in the ordinary course of its business consistent with past
practices or (iii) except as contemplated under this Reorganization Agreement.
Except as disclosed in Schedule 3.13 hereto, since July 31, 1997, neither
Lakeview nor any Lakeview Subsidiary has incurred or paid any obligation or
liability which would be material to the financial condition or operations of
Lakeview or such Lakeview Subsidiary, except for obligations paid in connection
with transactions made by it in the ordinary course of its business consistent
with past practices and the laws and regulations applicable to Lakeview or any
Lakeview Subsidiary.
3.14 Compliance with Laws.
(a) Lakeview and each Lakeview Subsidiary is in
compliance with all laws, rules, regulations, reporting and licensing
requirements, and orders applicable to its business or employees conducting its
business (including, but not limited to, those relating to consumer disclosure
and currency transaction reporting) the breach or violation of which would
reasonably be expected to have a material adverse effect on the financial
condition or operations of Lakeview and the Lakeview Subsidiaries, taken as
whole, or which would reasonably be expected to subject Lakeview or any Lakeview
Subsidiary or any of its directors or officers to civil money penalties; and
(b) Neither Lakeview nor Lakeview Bank is a party to
any cease and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order to directive by, or is a recipient of any extraordinary
supervisory letter from, or has adopted any board resolutions at the request of,
federal or state governmental authorities (the "Regulatory Authorities") charged
with the supervision or regulation of the operations of any of them not has it
been advised by any such government authority that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, directive, written agreement, memorandum or understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking.
3.15 Material Contract Defaults. Neither Lakeview nor any
Lakeview Subsidiary is in default in any respect under any material contract,
agreement, commitment, arrangement, lease, insurance policy, or other instrument
to which it is a party or by which its respective assets, business, or
operations may be bound or affected or under which it or its respective assets,
business, or operations receives benefits, and which default would reasonably be
expected to have either individually or in the aggregate a material adverse
effect on Lakeview and the Lakeview Subsidiaries, taken as a whole, and there
has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default.
3.16 Disclosure. The information concerning, and the
representations or warranties made by, Lakeview and Lakeview Bank, as set forth
in this Reorganization Agreement, or in any document, statement, certificate or
other writing furnished or to be furnished by Lakeview or Lakeview Bank to WFC
and Westwood Bank pursuant hereto, do not and will not contain any untrue
statement of a material fact or omit and will not omit to state a material fact
required to be stated herein or therein
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which is necessary to make the statements and facts contained herein or therein,
in light of the circumstances under which they were or are made, not false or
misleading. Without limiting the foregoing, at the time the prospectus included
in the registration statement of Lakeview to be filed with the SEC as provided
herein is mailed to the holders of WFC Common Stock and at all times subsequent
to such mailing, up to and including the Effective Time of the Merger, such
registration statement (including any amendments and supplements thereto), with
respect to all information relating to Lakeview, Lakeview Bank and this
Reorganization Agreement as it relates to Lakeview (i) will comply in all
material respects with the applicable provisions of the Securities Act of 1933,
as amended (the "Securities Act") and the 1934 Act (collectively, the
"Securities Laws") and (ii) will not contain any statement which, at the time
and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact or omit to state any material fact
necessary in order to make the statements made therein not false or misleading
or required to be stated therein or necessary to correct any statement made in
an earlier communication with respect to such matters which have become false or
misleading. Copies of all documents heretofore or hereafter delivered or made
available to WFC and Westwood Bank by Lakeview and Lakeview Bank pursuant hereto
were or will be complete and accurate copies of such documents.
3.17 Certain Regulatory Matters.
(a) Lakeview Bank is a qualified thrift lender under
Section 10(m) of HOLA and is a member of the Federal Home Loan Bank of New York.
(b) Lakeview Bank has not paid any dividends to
Lakeview or any affiliate thereof that (i) caused the regulatory capital of
Lakeview Bank to be less than the amount then required by applicable law or (ii)
exceeded any other limitation on the payment of dividends imposed by law,
agreement or regulatory policy. Other than as required by applicable law, there
are no restrictions on the payment of dividends by Lakeview or Lakeview Bank.
3.18 Delays. Neither Lakeview nor Lakeview Bank is aware of
any matter that could cause a delay in receiving the approval required by this
Agreement.
3.19 Corporate Approval. At a duly constituted meeting of the
Board of Directors of Lakeview directors constituting at least a majority of the
Directors granted their prior approval to the Merger and, accordingly, the
provisions of Article XV of Lakeview's Certificate of Incorporation do not and
will not apply to this Reorganization Agreement or the consummation of any of
the transactions contemplated hereby or thereby.
3.20 Charter Documents. Included in Schedule 3.20 hereto are
true and correct copies of the Certificate of Incorporation and Bylaws of
Lakeview and Lakeview Bank.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WFC AND WESTWOOD BANK
Except as otherwise disclosed in one or more schedules (the "WFC
Schedule(s)") dated as of the date hereof and delivered concurrently with this
Reorganization Agreement, both as of the date hereof and as of the Effective
Time of the Merger, each of WFC and Westwood Bank represents and warrants to
Lakeview and Lakeview Bank as follows:
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4.1 Organization and Qualification of WFC and Subsidiaries.
WFC is a corporation duly organized, validly existing and in good standing under
the laws of the State of New Jersey and (i) has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is currently being conducted; (ii) is in good standing and is
duly qualified to do business in each jurisdiction where the character of its
properties owned or held under lease or the nature of its business is such that
a failure to be so qualified would have a material adverse effect on WFC and
Westwood Bank taken as a whole; and (iii) is registered as a bank holding
company with the Board of Governors of the Federal Reserve System ("Federal
Reserve System"). Westwood Bank is a state chartered stock savings bank, duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and engages only in activities (and holds properties only of the
types) permitted by the State of New Jersey and the rules and regulations
promulgated by the NJDB thereunder and the FDIC for insured depository
institutions. Westwood Bank's deposit accounts are insured by the Savings
Association Insurance Fund (the "SAIF") as administered by the FDIC to the
fullest extent permitted under applicable law.
4.2 Authorization, Execution and Delivery; Reorganization
Agreement Not in Breach.
(a) WFC and Westwood Bank have all requisite
corporate power and authority to execute and deliver this Reorganization
Agreement and the Plan of Merger and to consummate the transactions contemplated
hereby. The execution and delivery of this Reorganization Agreement and the Plan
of Merger and the consummation of the proposed transactions have been duly
authorized by at least a majority of the entire Boards of Directors of both WFC
and Westwood Bank and no other corporate proceedings on the part of WFC and
Westwood Bank are necessary to authorize the execution and delivery of this
Reorganization Agreement and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby. This Reorganization Agreement and
all other agreements and instruments herein contemplated to be executed by WFC
and Westwood Bank have been (or upon execution will have been) duly executed and
delivered by WFC and Westwood Bank and constitute (or upon execution will
constitute) legal, valid and enforceable obligations of WFC and Westwood Bank,
subject, as to enforceability, to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and to the application
of equitable principles and judicial discretion.
(b) The execution and delivery of this
Reorganization Agreement and the Plan of Merger, the consummation of the
transactions contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof will not result in a material violation or breach of any of
the terms or provisions of, or constitute a material default under (or an event
which, with the passage of time or the giving of notice, or both, would
constitute such a default under), or conflict with, or permit the acceleration
of, any material obligation under, any material mortgage, lease, covenant,
agreement, indenture or other instrument to which WFC or any WFC Subsidiary is a
party or by which WFC or any WFC Subsidiary is bound, the Certificate of
Incorporation and Bylaws of WFC or the Certificate of Incorporation and bylaws
of Westwood Bank; or any material judgment, decree, order, regulatory letter of
understanding or award of any court, governmental body, authority or arbitrator
by which WFC or any WFC Subsidiary is bound, or any material permit, concession,
grant, franchise, license, law, statute, ordinance, rule or regulation
applicable to WFC or any WFC Subsidiary or the properties of any of them; or
result in the creation of any material lien, claim, security interest,
encumbrance, charge, restriction or right of any third party of any kind
whatsoever upon the properties or assets of WFC or any WFC Subsidiary, except
the Government approvals shall be required for WFC and Westwood Bank to
consummate the Merger and Subsidiary Merger.
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4.3 No Legal Bar. Neither WFC nor Westwood Bank is a party to,
or subject to or bound by, any material agreement, judgment, order, letter of
understanding, writ, prohibition, injunction or decree of any court or other
governmental authority or body of competent jurisdiction, or any law which would
prevent the execution of this Reorganization Agreement or the Plan of Merger by
WFC or Westwood Bank, the delivery thereof to Lakeview and Lakeview Bank or the
consummation of the transactions contemplated hereby and thereby, and no action
or proceeding is pending against WFC or Westwood Bank in which the validity of
this Reorganization Agreement, any of the transactions contemplated hereby or
any action which has been taken by any of the Parties in connection herewith,
or, in connection with any of the transactions contemplated hereby, is at issue.
4.4 Government and Other Approvals. Except for the Government
Approvals described in Section 3.4, no consent, approval, order or authorization
of, or registration, declaration or filing with, any federal, state or local
governmental authority is required to be made or obtained by WFC or Westwood
Bank in connection with the execution and delivery of this Reorganization
Agreement or the consummation of the transactions contemplated by this
Reorganization Agreement nor is any consent or approval required from any
landlord, licensor or other non-governmental party which has granted rights to
WFC or Westwood Bank in order to avoid forfeiture or impairment of such rights.
Neither WFC nor Westwood Bank is aware of any facts, circumstances or reasons
why such Government Approvals should not be forthcoming or which would prevent
or hinder such approvals from being obtained.
4.5 Licenses, Franchises and Permits. WFC and all WFC
Subsidiaries hold all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses. Except as disclosed in
Schedule 4.5, the benefits of all of such licenses, franchises, permits and
authorizations are in full force and effect and may continue to be enjoyed by
WFC and Westwood Bank subsequent to the Closing of the transactions contemplated
herein without any consent or approval. Neither WFC nor any WFC Subsidiary has
received notice of any proceeding for the suspension or revocation of any such
license, franchise, permit, or authorization and no such proceeding is pending
or, to the best knowledge of WFC and the WFC Subsidiaries, has been threatened
by any governmental authority.
4.6 Charter Documents. Included in Schedule 4.6 hereto are
true and correct copies of the Certificate of Incorporation and Bylaws of WFC
and Westwood Bank.
4.7 WFC Financial Statements. WFC has delivered or will
deliver to Lakeview copies of the consolidated statements of financial condition
of WFC as of March 31, for the fiscal years 1996 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the fiscal years 1995 through 1997, inclusive, as incorporated by
reference in WFC's Annual Report to Stockholders in each case accompanied by the
audit report of RD Hunter LLP, independent public accountants with respect to
WFC (the "Audited Financial Statements"), and the unaudited consolidated
statements of financial condition of WFC as of September 30, 1997 and the
related unaudited consolidated statements of operations, changes in
stockholders' equity and cash flows for the six month periods then ended as
reported in WFC's quarterly report to shareholders. The consolidated statements
of financial condition of WFC referred to herein (including the related notes,
where applicable) fairly present the consolidated financial condition of WFC as
of the respective dates set forth therein, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows
(including the related notes, where applicable) fairly present the results of
the consolidated operations, changes in stockholders' equity and cash flows
(including the related notes, where applicable) fairly
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present the results of the consolidated operations, changes in stockholders'
equity and cash flows of WFC for the respective periods or as of the respective
dates set forth therein, in each case in conformity with GAAP consistently
applied, it being understood that WFC's interim financial statements are not
audited, not prepared with related notes and are subject to normal year-end
adjustments.
4.8 Absence of Certain Changes. Except as disclosed in
Schedule 4.8 or as provided for or contemplated in this Reorganization
Agreement, since June 30, 1997 (the "Balance Sheet Date") there has not been:
(a) any material transaction by WFC or Westwood Bank
not in the ordinary course of business and in conformity with past practice;
(b) any material adverse change in the business,
property, assets (including loan portfolios), liabilities (whether absolute,
accrued, contingent or otherwise), operations, liquidity, income, condition or
net worth of WFC and Westwood Bank taken as a whole;
(c) any damage, destruction or loss, whether or not
covered by insurance, which has had or may have a material adverse effect on any
of the properties or business prospects of WFC and Westwood Bank taken as a
whole or their future use and operation by WFC and Westwood Bank taken as a
whole;
(d) any acquisition or disposition by WFC or
Westwood Bank of any property or asset of WFC or Westwood Bank, whether real or
personal, having a fair market value, singularly or in the aggregate, in an
amount greater than One Hundred Thousand Dollars ($100,000) other than
acquisitions or dispositions made in the ordinary course of business;
(e) any mortgage, pledge or subjection to lien,
charge or encumbrance of any kind on any of the respective properties or assets
of WFC or Westwood Bank, except to secure extensions of credit in the ordinary
course of business and in conformity with past practice (pledges of and liens on
assets to secure Federal Home Loan Bank advances being deemed both in the
ordinary course of business and consistent with past practice);
(f) any amendment, modification or termination of
any contract or agreement in excess of $100,000, relating to WFC or Westwood
Bank, to which WFC or Westwood Bank is a party which would have a material
adverse effect upon the financial condition or operations of WFC and Westwood
Bank taken as a whole;
(g) any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, director, employee or
agent of WFC or Westwood Bank, or any bonus payment or similar arrangement made
to or with any of such officers, directors, employees or agents, other than
routine increases made in the ordinary course of business and consistent with
past practice not exceeding the lesser of five percent (5%) per annum or $5,000
for any of them individually;
(h) any incurring of, assumption of, or taking of,
by WFC or Westwood Bank, any property subject to, any liability in excess of
$100,000, except for liabilities incurred or assumed or property taken
subsequent to the Balance Sheet Date in the ordinary course of business and in
conformity with past practice; or
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(i) any material alteration in the manner of keeping
the books, accounts or Records of WFC or Westwood Bank, or in the accounting
policies or practices therein reflected, except as required by GAAP and
requirements of Regulatory Authorities.
4.9 Deposits. Except as set forth in Schedule 4.9, none of the
Westwood Bank deposits (consisting of certificate of deposit, savings accounts,
NOW accounts and checking account), is a brokered deposit.
4.10 Properties. Except as described in Schedule 4.10 hereto
or adequately reserved against in the Audited Financial Statements of WFC or
disposed of since the Balance Sheet Date, WFC and each WFC Subsidiary has good
and, as to real property, marketable title free and clear of all material liens,
encumbrances, charges, defaults, or equities of whatever character to all of the
material properties and assets, reflected in the Audited Financial Statements of
WFC as being owned by WFC or any WFC Subsidiary as of the dates thereof. All
buildings, and all fixtures, equipment, and other property and assets that are
material to the business of WFC and the WFC Subsidiaries on a consolidated
basis, held under leases or subleases by WFC or any WFC Subsidiary, are held
under valid instruments enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally, or by equitable principles).
4.11 Condition of Fixed Assets and Equipment. Except as
disclosed in Schedule 4.11 hereto, each item of WFC's or Westwood Bank's fixed
assets and equipment having a net book value in excess of Fifty Thousand Dollars
($50,000) included in the Fixed Assets is in good operating condition and
repair, normal wear and tear excepted.
4.12 Tax Matters. Except as described in Schedule 4.12 hereto:
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(a) All federal, state and local tax returns
required to be filed by or on behalf of WFC and Westwood Bank have been timely
filed or requests for extensions have been timely filed, granted and have not
expired for periods ended on or before the date of this Reorganization
Agreement, and all returns filed are, and the information contained therein is,
complete and accurate. All tax obligations reflected in such returns have been
paid. As of the date of this Reorganization Agreement, there is no audit
examination, deficiency, or refund litigation or matter in controversy with
respect to any taxes that might reasonably be expected to result in a
determination materially adverse to WFC and Westwood Bank taken as a whole
except as fully reserved for in the Audited Financial Statements of WFC. All
taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded litigation have been paid;
(b) Neither WFC nor Westwood Bank has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect;
(c) Adequate provision for any federal, state or
local taxes due or to become due for WFC and Westwood Bank for all periods
through and including March 31, 1997, has been made and is reflected on the
March 31, 1997 financial statements included in the Audited Financial Statements
of WFC, and have been and will continue to be made with respect to periods
ending after March 31, 1997;
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(d) Deferred taxes of WFC and Westwood Bank have
been and will be provided for in accordance with GAAP; and
(e) To the best knowledge of WFC and Westwood Bank,
neither the Internal Revenue Service nor any state, local or other taxing
authority is now asserting or threatening to assert against WFC or Westwood Bank
any deficiency or claim for additional taxes, or interest thereon or penalties
in connection therewith. All material income, payroll, withholding, property,
excise, sales, use, franchise and transfer taxes, and all other taxes, charges,
fees, levies or other assessments, imposed upon WFC by the United States or by
any state, municipality, subdivision or instrumentality of the United States or
by any other taxing authority, including all interest, penalties or additions
attributable thereto, which are due and payable by WFC or Westwood Bank, either
have been paid in full or have been properly accrued and reflected in the
Audited Financial Statements of WFC.
4.13 Litigation. Except as set forth in Schedule 4.13 hereto,
there is no action, suit or proceeding pending against WFC or Westwood Bank, or
to the best knowledge of WFC or Westwood Bank, threatened against or affecting
WFC, Westwood Bank or any of their assets, before any court or arbitrator or any
governmental body, agency or official that may, if decided against WFC or
Westwood Bank, have a material adverse effect on the business, properties,
assets, liabilities, or condition (financial or other) of WFC and Westwood Bank
taken as a whole and that are not reflected in the Audited Financial Statements
of WFC.
4.14 Environmental Materials. Except as set forth in Schedule
4.14 to the knowledge of WFC and Westwood Bank, the real property owned by WFC
associated with its two offices as well as other real property held as an asset
and real property held as real estate owned ("Real Properties") are in material
compliance with all Environmental Laws, as hereinafter defined, and there are no
conditions existing currently which would subject WFC to damages, penalties,
injunctive relief or cleanup costs under any Environmental Laws or assertions
thereof, or which require cleanup, removal, remedial action or other response
pursuant to Environmental Laws by WFC. Copies of all environmental studies,
reports, notices and the like known to exist with regard to the Real Properties
is contained at Schedule 4.14. WFC is not a party to any litigation or
administrative proceeding, nor has WFC (either in its own capacity or as trustee
or fiduciary), materially violated Environmental Laws nor, to its knowledge and
except as set forth in Schedule 4.14, is WFC (either in its own capacity or as
trustee or fiduciary) required to clean up, remove or take remedial or other
responsive action due to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials. To the knowledge of WFC, none
of the Real Properties are, nor is WFC, subject to any judgment, decree, order
or citation related to or arising out of any Environmental Laws. To the
knowledge of WFC, no material permits, licenses or approvals are required under
Environmental Laws relative to the Real Properties; and, except as disclosed in
Schedule 4.14, WFC has not stored, deposited, treated, recycled, used or
disposed of any materials (including, without limitation, asbestos) on, under or
at the Real Properties (or tanks or other facilities thereon containing such
materials), which materials if known to be present on the Real Properties or
present in soils or ground water, would require cleanup, removal or some other
remedial action under the Environmental Laws. The term "Environmental Laws"
shall mean all federal, state and local laws, including statutes, regulations,
ordinances, codes, rules and other governmental restrictions, standards and
requirements relating to the discharge of air pollutants, water pollutants or
process waste water or substances, as now or at any time hereafter in effect,
including, but not limited to, the Federal Solid Waste Disposal Act, the Federal
Hazardous Materials Transportation Act, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental Responsibility Cleanup and Liability Act of
1980, as amended
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("CERCLA"), regulations of the Environmental Protection Agency, regulations of
the Nuclear Regulatory Agency, regulations of the Occupational Safety and Health
Administration, and any so-called "Superfund" or "Superlien" Laws.
4.15 Insurance. WFC and Westwood Bank have paid all amounts
due and payable under any insurance policies and guaranties applicable to WFC
and Westwood Bank and WFC's or Westwood Bank's assets and operations; all such
insurance policies and guaranties are in full force and effect; and WFC and
Westwood Bank and all of WFC's and Westwood Bank's Realty and other material
properties are insured against fire, casualty, theft, loss, and such other
events against which it is customary to insure, all such insurance policies
being in amounts that are adequate and are consistent with past practices and
experience.
4.16 Books and Records. The minute books of WFC and Westwood
Bank contain, in all material respects, complete and accurate records of and
fairly reflect all actions taken at all meetings and accurately reflect all
other corporate action of the shareholders and the boards of directors and each
committee thereof. The books and records of WFC and Westwood Bank fairly and
accurately reflect the transactions to which WFC and Westwood Bank is or has
been a party or by which their properties are subject or bound, and such books
and records have been properly kept and maintained.
4.17 Capitalization of WFC. The authorized capital stock of
WFC consists of 5,000,000 shares of Common Stock having a par value of $.10 per
share, 2,000,000 shares of preferred stock, no par value per share, the "WFC
Preferred Stock" and no other class of equity security. As of the date of this
Reorganization Agreement, 645,295 shares of WFC Common Stock were issued and
outstanding and no shares of WFC Preferred Stock were issued and outstanding.
All of the outstanding WFC Common Stock is validly issued, fully-paid and
nonassessable and has not been issued in violation of any preemptive rights of
any WFC Shareholder. Except as described in Section 1.5 of this Reorganization
Agreement as of the date hereof, there are no outstanding securities or other
obligations which are convertible into WFC Common Stock or into any other equity
or debt security of WFC, and there are no outstanding options, warrants, rights,
scrip, rights to subscribe to, calls or other commitments of any nature which
would entitle the holder, upon exercise thereof, to be issued WFC Common Stock
or any other equity or debt security of WFC. Accordingly, immediately prior to
the Effective Time of the Merger, there will be not more than 703,630 shares of
WFC Common Stock issued and outstanding (645,295 shares currently outstanding
plus 58,335 unexercised options). WFC owns and is the beneficial record holder
of, and has good and freely transferable title to, all of the 1,000 shares of
Westwood Bank Common Stock issued and outstanding, and recorded on the books and
Records of Westwood Bank as being held in its name, free and clear of all liens,
charges or encumbrances, and such stock is not subject to any voting trusts,
agreements or similar arrangements or other claims which could affect the
ability of WFC to freely vote such stock in support of the transactions
contemplated herein.
4.18 Sole Agreement. With the exception of this Reorganization
Agreement, neither WFC, nor Westwood Bank, nor any Subsidiary of either has been
or is a party to: any letter of intent or agreement to merge, to consolidate, to
sell or purchase assets (other than in the normal course of its business) or to
any other agreement which contemplates the involvement of WFC or Westwood Bank
or any Subsidiary of either (or any of their assets) in any business combination
of any kind; or any agreement obligating WFC or Westwood Bank to issue or sell
or authorize the sale or transfer of WFC Common Stock or the capital stock of
Westwood Bank. There are no (nor will there be at the Effective Time of the
Merger any) shares of capital stock or other equity securities of WFC
outstanding, except for shares of WFC Common Stock presently issued and
outstanding (or issuable upon the exercise of
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outstanding stock options), and there are no (nor will there be at the Effective
Time of the Merger any) outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of WFC or Westwood Bank, or contracts, commitments, understandings, or
arrangements by which WFC or Westwood Bank is or may be bound to issue
additional shares of their capital stock or options, warrants, or rights to
purchase or acquire any additional shares of their capital stock. There are no
(nor will there be at the Effective Time of the Merger any) contracts,
commitments, understandings, or arrangements by which WFC or Westwood Bank is or
may be bound to transfer or issue to any third party any shares of the capital
stock of Westwood Bank, and there are no (nor will there be at the Effective
Time of the Merger any) contracts, agreements, understandings or commitments
relating to the right of WFC to vote or to dispose of any such shares.
4.19 Disclosure. The information concerning, and
representations and warranties made by, WFC and Westwood Bank set forth in this
Reorganization Agreement, or in the Schedule of WFC hereto, or in any document,
statement, certificate or other writing furnished or to be furnished by WFC or
Westwood Bank to Lakeview and Lakeview Bank, pursuant hereto, do not and will
not contain any untrue statement of a material fact or omit and will not omit to
state a material fact required to be stated herein or therein which is necessary
to make the statements and facts contained herein or therein, in light of the
circumstances in which they were or are made, not false or misleading. Without
limiting the foregoing, at the time the prospectus included in the registration
statement of Lakeview to be filed with the SEC as provided herein is mailed to
WFC Record Holders and at all times subsequent to such mailing, up to and
including the Effective Time of the Merger, such registration statement
(including any amendments and supplements thereto), with respect to all
information relating to WFC, Westwood Bank and this Reorganization Agreement as
it relates to WFC, (i) will comply in all material respects with the applicable
provisions of the Securities Laws and (ii) will not contain any statement which,
at the time and in light of the circumstances under which it is made, is false
or misleading with respect to any material fact or omit to state any material
fact necessary in order to make the statements made therein not false or
misleading, or required to be stated therein or necessary to correct any
statement made in an earlier communication with respect to such matters which
have become false or misleading. Copies of all documents heretofore or hereafter
delivered or made available to Lakeview by WFC or Westwood Bank pursuant hereto
were or will be complete and accurate copies of such documents.
4.20 Absence of Undisclosed Liabilities. Except as described
in Schedule 4.22 hereto, to their knowledge neither WFC nor Westwood Bank has
any obligation or liability that is material to the financial condition or
operations of WFC or Westwood Bank, or that, when combined with all similar
obligations or liabilities, would be material to the financial condition or
operations of WFC or Westwood Bank (i) except as disclosed in the Audited
Financial Statements of WFC delivered to Lakeview prior to the date of this
Reorganization Agreement, (ii) except obligations or liabilities incurred in the
ordinary course of its business consistent with past practices or (iii) except
as contemplated under this Reorganization Agreement. Since June 30, 1997,
neither WFC nor Westwood Bank has incurred or paid any obligation or liability
which would be material to the financial condition or operations of WFC or
Westwood Bank, except for obligations paid in connection with transactions made
by it in the ordinary course of its business consistent with past practices,
laws and regulations applicable to WFC or Westwood Bank.
4.21 Allowance for Possible Loan or REO Losses. The
allowance for possible loan losses shown on the Audited Financial Statements of
WFC is in the opinion of management of WFC adequate in all material respects to
provide for anticipated losses inherent in loans outstanding. Except
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as disclosed in Schedule 4.21 hereto, as of the date thereof, neither WFC nor
Westwood Bank has any loan which has been criticized, designated or classified
by management of WFC, or by regulatory examiners representing any Regulatory
Authority or by WFC's independent auditors as "Special Mention," "Substandard,"
"Doubtful", "Loss" or as a "Potential Problem Loan."
The allowance for possible losses in real estate owned,
if any, shown on the Audited Financial Statements of WFC in the opinion of
management is or will be adequate in all respects to provide for anticipated
losses inherent in REO owned or held by WFC or Westwood Bank and the net book
value of real estate owned on the Balance Sheet of the Audited Financial
Statements of WFC is the fair value of the real estate owned in accordance with
Statement of Position 92-3.
4.22 Loan Portfolio. To the best knowledge of WFC and Westwood
Bank, with respect to each mortgage loan owned by WFC or Westwood Bank in whole
or in part (each, a "Mortgage Loan"):
(a) Enforceability. The mortgage note and the
related mortgage are each legal, valid and binding obligations of the maker or
obligor thereof, enforceable against such maker or obligor in accordance with
their terms.
(b) No Modification. Neither WFC nor Westwood Bank
nor any prior holder of a Mortgage Loan has modified the related documents in
any material respect or satisfied, canceled or subordinated such mortgage or
mortgage note except as otherwise disclosed by documents in the applicable
mortgage file.
(c) Owner. WFC or Westwood Bank is the sole holder
of legal and beneficial title to each Mortgage Loan (or Westwood Bank's
applicable participation interest), as applicable and there has not been any
assignment or pledge of any Mortgage Loan (other than as security for Federal
Home Loan Bank advances).
(d) Collateral Documents. The mortgage note,
mortgage and any other collateral documents, copies of which are included in the
Mortgage Loan files, are true and correct copies of the documents they purport
to be and have not been superseded, amended, modified, canceled or otherwise
changed except as otherwise disclosed by documents in the applicable mortgage
file.
(e) Litigation. There is no litigation or proceeding
pending or threatened, relating to the mortgaged property which would have a
material adverse effect upon the related Mortgage Loan.
(f) Participation. With respect to each Mortgage
Loan held in the form of a participation, the participation documentation is
legal, valid, binding and enforceable and the interest in such Mortgage Loan of
WFC or Westwood Bank created by such participation would not be a part of the
insolvency estate of the Mortgage Loan originator or other third party upon the
insolvency thereof.
4.23 Compliance with Laws.
(a) WFC and Westwood Bank are in compliance with all
laws, rules, regulations, reporting and licensing requirements, and orders
applicable to its business or employees conducting its business (including, but
not limited to, those relating to consumer disclosure and currency
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transaction reporting) the breach or violation of which would or could
reasonably be expected to have a material adverse effect on the financial
condition or operations of WFC and Westwood Bank taken as a whole, or which
would or could reasonably be expected to subject WFC or Westwood Bank or any of
its directors or officers to civil money penalties; and
(b) Neither WFC nor Westwood Bank has received
notification or communication from any agency or department of federal, state,
or local government or any of the Regulatory Authorities, or the staff thereof
(i) asserting that WFC or Westwood Bank is not in compliance with any of the
statutes, rules, regulations, or ordinances which such governmental authority or
Regulatory Authority enforces, and which, as a result of such noncompliance,
would or could reasonably be expected to have a material adverse effect on WFC
and Westwood Bank taken as a whole, (ii) threatening to revoke any license,
franchise, permit, or governmental authorization which is material to the
financial condition or operations of WFC and the Westwood Bank, taken as a
whole, or (iii) requiring WFC or Westwood Bank to enter into a cease and desist
order, consent, agreement or memorandum of understanding.
4.24 Employee Benefit Plans. Schedule 4.24 to the WFC
Disclosure Schedule lists (i) each pension, profit sharing, stock bonus, thrift,
savings, employee stock ownership or other plan, program or arrangement, which
constitutes an "employee pension benefit plan" within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is maintained by WFC and/or Westwood Bank or to which WFC
and/or Westwood Bank contribute for the benefit of any current or former
employee, officer, director, consultant or agent; (ii) each plan, program or
arrangement for the provision of medical, surgical, or hospital care or
benefits, benefits in the event of sickness, accident, disability, death,
unemployment, severance, vacation, apprenticeship, day care, scholarship,
prepaid legal services or other benefits which constitute an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA, which is maintained
by WFC and/or Westwood Bank or to which WFC and/or Westwood Bank contribute for
the benefit of any current or former employee, officer, director, consultant or
agent; and (iii) every other retirement or deferred compensation plan, bonus or
incentive compensation plan or arrangement, stock option plan, stock purchase
plan, severance or vacation pay arrangement, or other fringe benefit plan,
program or arrangement through which WFC and/or Westwood Bank provide benefits
for or on behalf of any current or former employee, officer, director,
consultant or agent.
(b) All of the plans, programs and arrangements described in
Schedule 4.24 (hereinafter referred to as the "WFC Benefit Plans") that are
subject to ERISA are in material compliance with all applicable requirements of
ERISA and all other applicable federal and state laws, including the reporting
and disclosure requirements of Part I of Title I of ERISA. Each of the WFC
Benefit Plans that is intended to be a pension, profit sharing, stock bonus,
thrift, savings or employee stock ownership plan that is qualified under Section
401(a) of the Code satisfies the applicable requirements of such provision and
there exist no circumstances that would adversely affect the qualified status of
any such Plan under that section, except with respect to any required
retroactive amendment for which the remedial amendment period has not yet
expired. Except as set forth in Schedule 4.24, there is no pending or, to the
best knowledge of WFC, threatened litigation, governmental proceeding or
investigation against or relating to any WFC Benefit Plan and there is no
reasonable basis for any material proceedings, claims, actions or proceedings
against any such WFC Benefit Plan. No WFC Benefit Plan (or WFC Benefit Plan
fiduciary, in his capacity as such) has engaged in a non-exempt "Prohibited
Transaction" (as defined in Section 406 of ERISA and Section 4975(c) of the
Code) since the date on which said sections became applicable to such Plan.
There have been no acts or omissions by WFC that have given rise to any fines,
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penalties, taxes or related charges under Sections 502(c), 502(i) or 4071 of
ERISA or Chapter 43 of the Code, or that may give rise to any material fines,
penalties, taxes or related damages under such laws for which WFC may be liable.
All group health plans of WFC, including any plans of current and former
Affiliates of WFC that must be taken into account under Section 4980B of the
Code or Section 601 of ERISA or the requirements of any similar state law
regarding insurance continuation, have been operated in material compliance with
the group health plan continuation coverage requirements of Section 4980B of the
Code and Section 601 of ERISA to the extent such requirements are applicable.
All payments due from any WFC Benefit Plan (or from WFC with respect to any WFC
Benefit Plan) have been made, and all amounts properly accrued to date as
liabilities of WFC that have not yet been paid have been properly recorded on
the books of WFC.
4.25 Material Contracts. Except as described in Schedule 4.25
hereto, neither WFC nor Westwood Bank, nor any of their respective assets,
businesses, or operations, is as of the date of this Reorganization Agreement a
party to, or bound or affected by, or receives benefits under, any contract or
agreement or amendment thereto that require annual payments of over $50,000 per
year.
4.26 Material Contract Defaults. Neither WFC nor Westwood Bank
is in default in any respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a party
or by which its respective assets, business, or operations may be bound or
affected or under which it or its respective assets, business, or operations
receives benefits, and which default would reasonably be expected to have either
individually or in the aggregate a material adverse effect on WFC and Westwood
Bank taken as a whole, and there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute such a default.
4.27 Reports. Since June 6, 1996, WFC and Westwood Bank have
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with (i) the NJDB; (ii)
the FDIC, (iii) the SEC, including, but not limited to, Annual Reports on Form
10-KSB, Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and proxy
statements; and (iv) any other applicable federal or state securities or banking
authorities (except, in the case of federal or state securities authorities,
filings that are not material). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all of the
requirements of their respective forms and all of the statutes, rules, and
regulations enforced or promulgated by the Regulatory Authority with which they
were filed. All such reports were true and complete in all material respects and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.28 1934 Act and Nasdaq Small Cap Market
(a) The WFC Common Stock is registered with the SEC
pursuant to the 1934 Act and WFC has filed with the SEC all material forms and
reports required by law to be filed by WFC with the SEC, which forms and
reports, taken as a whole, are true and correct in all material respects, and do
not misstate a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
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(b) The outstanding shares of WFC Common Stock are
listed for trading on the Nasdaq Small Cap Market (under the symbol "WWFC")
pursuant to the listing rules of the Nasdaq and WFC has filed with the Nasdaq
all material forms and reports required by law to be filed by WFC, which forms
and reports, taken as a whole, are true and correct in all material respects,
and do not misstate a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
4.29 Statements True and Correct. None of the information
prepared by, or on behalf of, WFC or any WFC Subsidiary regarding WFC, Westwood
Bank or any other WFC Subsidiary included or to be included in the
Prospectus/Proxy Statement to be mailed to WFC's Shareholders in connection with
the WFC Shareholders' Meeting, and any other documents to be filed with the SEC,
or any other Regulatory Authority in connection with the transactions
contemplated herein, will, at the respective times such documents are filed,
and, with respect to the Prospectus/Proxy Statement, when first mailed to the of
WFC Shareholders, be false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, in
the case of the Prospectus/Proxy Statement or any amendment thereof or
supplement thereto, at the time of the WFC Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the WFC Shareholders' Meeting. All documents
which WFC or any WFC Subsidiary is responsible for filing with the SEC or any
other Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Laws and the
rules and regulations promulgated thereunder.
4.30 Investment Securities. Section 1 of Schedule 4.30 sets
forth the book and market value as of June 30, 1997 of the investment
securities, mortgage-backed securities and securities held for sale of WFC and
Westwood Bank as of such date. Section 2 of Schedule 4.30 sets forth an
investment securities report which includes (to the extent known or reasonably
obtainable) security descriptions, CUSIP or Agency Pool numbers, current pool
face values, book values, coupon rates, market values and book yields in each
case as of June 30, 1997.
4.31 Certain Regulatory Matters.
(a) Westwood Bank is a qualified thrift lender under
Section 10(m) of HOLA and is a member of the Federal Home Loan Bank of New York.
(b) Westwood Bank has not paid any dividends to WFC
or any affiliate thereof that (i) caused the regulatory capital of Westwood Bank
to be less than the amount then required by applicable law or (ii) exceeded any
other limitation on the payment of dividends imposed by law, agreement or
regulatory policy. Other than as reflected on Schedule 4.31 and as required by
applicable law, there are no restrictions on the payment of dividends by WFC or
Westwood Bank.
(c) WFC and Westwood Bank have adopted policies and
procedures designed to promote overall compliance with the Bank Secrecy Act (31
U.S.C. Section 5301), the Truth-in-Lending Act (15 U.S.C. Section 1601 et seq.),
the Expedited Funds Availability Act (12 U.S.C. Section 4001) and the
regulations adopted under each such act and have materially complied with the
reporting requirements under the Bank Secrecy Act and the regulations
thereunder.
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4.32 Corporate Approval.
(a) The affirmative vote of a majority of the votes
cast by shareholders of WFC entitled to vote at a meeting is required to adopt
this Reorganization Agreement and approve the Merger and the other transactions
contemplated hereby. No other vote of the stockholders of WFC is required by
law, the Certificate of Incorporation or Bylaws of WFC or otherwise to adopt
this Reorganization Agreement and approve the Merger and the other transactions
contemplated hereby.
(b) At a duly constituted meeting of the Board of
Directors of WFC directors constituting at least a majority of the Directors
granted their prior approval to the Merger and, accordingly, the provisions of
Article XV of WFC's Certificate of Incorporation do not and will not apply to
this Reorganization Agreement or the consummation of any of the transactions
contemplated hereby or thereby.
(c) The provisions of the New Jersey Shareholders'
Protection Act of the NJBCA will not apply to this Reorganization Agreement, the
Merger or the transactions contemplated hereby and thereby.
4.33 Broker's and Finder's Fees. Except for payments to
FinPro, Inc., which has been engaged by WFC as its financial advisor (pursuant
to an agreement, a copy of which has been separately provided to Lakeview),
neither WFC nor any of its subsidiaries has any liability to any broker, finder,
or similar agent, nor have any of them agreed to pay any broker's fee, finder's
fee or commission, with respect hereto or to the transactions contemplated
hereby.
ARTICLE 5
COVENANTS OF LAKEVIEW
5.1 Regulatory and Other Approvals. Within a reasonable time
after execution of this Reorganization Agreement, Lakeview shall file any and
all applications with the appropriate government Regulatory Authorities in order
to obtain the Government Approvals and shall take such other actions as may be
reasonably required to consummate the transactions contemplated in this
Reorganization Agreement and the Plan of Merger with reasonable promptness.
Lakeview shall pay all fees and expenses arising in connection with such
applications for regulatory approval. Lakeview agrees to use its best efforts to
provide the appropriate Regulatory Authorities with the information required by
such authorities in connection with Lakeview's applications for regulatory
approval and to use its best efforts to obtain such regulatory approvals, and
any other approvals and consents as may be required for the Closing, as promptly
as practicable; provided, however, that nothing in this Section shall be
construed to obligate Lakeview to take any action to meet any condition required
to obtain prior regulatory approval if Lakeview shall, in its sole discretion,
deem such condition to be unreasonable or to constitute a significant impediment
upon its ability to carry on its business or acquisition programs. Lakeview
shall provide WFC the opportunity to review and comment on all required
applications within a reasonable period prior to the filing thereof and provide
WFC with copies of all written communications with Regulatory Authorities
regarding the transactions provided for herein and related applications and
proceedings. Subject to the terms and conditions of this Reorganization
Agreement, Lakeview and Lakeview Bank agree to use all reasonable efforts and to
take, or to cause to be taken, all actions, and to do, or to cause to be done,
all things necessary, proper, or advisable under applicable laws and regulations
to consummate and make effective, with reasonable promptness after the date of
this Reorganization
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Agreement, the transactions contemplated by this Reorganization Agreement,
including, without limitation, using reasonable efforts to lift or rescind any
injunction or restraining or other order adversely affecting the ability of the
Parties to consummate the transaction contemplated by this Reorganization
Agreement. Subject to the provisions of this Section, Lakeview shall use, and
shall cause each of its Subsidiaries to use, its best efforts to obtain consents
of all third parties and Regulatory Authorities necessary or desirable for the
consummation of each of the transactions contemplated by this Reorganization
Agreement.
5.2 Approvals and Registrations. Lakeview will use its best
efforts to prepare and file (a) with the SEC, the Registration Statement on Form
S-4 (the "Registration Statement"), (b) with the FDIC, an application for
approval of the Merger, if applicable, (c) with the NJDB, an application for
approval of the Merger, (d) with the OTS, an application for approval of
Lakeview as a savings and loan holding company, and (e) with the Nasdaq National
Market, an application for the listing of the Shares of Lakeview Stock issuable
upon the Merger, subject to official notice of issuance, except that Lakeview
shall have no obligations to file a new registration statement or a
post-effective amendment to the Registration Statement covering any reoffering
of Lakeview Stock by WFC Affiliates. Lakeview, reasonably in advance of making
such filings, will provide WFC and its counsel a reasonable opportunity to
comment on such filings and regulatory applications and will give due
consideration to any comments of WFC and its counsel before making any such
filing or application; and Lakeview will provide WFC and its counsel with copies
of all such filings and applications at the time filed if such filings and
applications are made at any time before the Effective Time of the Merger.
Lakeview covenants and agrees that all information furnished by Lakeview for
inclusion in the Registration Statement, the Prospectus/Proxy Statement, and all
applications and submissions for the Required Consents (as defined in Section
6.1 herein) will comply in all material respects with the provisions of
applicable law, including the Securities Act and the Exchange Act and the rules
and regulations of the SEC, the FDIC, the NJDB, and OTS, and will not contain
any untrue statement of a material fact and will not omit to state any material
fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, Lakeview will furnish to FinPro, investment bankers advising WFC,
such information as they may reasonably request for purposes of the opinion
referred to in Section 7.1.
5.3 Employee Benefits. Following the consummation of the
transactions contemplated herein, Lakeview shall not be obligated to make
further contributions to any of the Employee Plans or Benefit Arrangements of
WFC or Westwood Bank and all employees of WFC and Westwood Bank immediately
prior to the Effective Time of the Merger who shall continue as employees of
Lakeview as the Surviving Corporation or as employees of any other Lakeview
Subsidiary will be afforded the opportunity to participate in any employee
benefit plans maintained by Lakeview or Lakeview's Subsidiaries, including but
not limited to any "employee benefit plan," as that term is defined in ERISA, on
an equal basis with employees of Lakeview or any Lakeview Subsidiary with
comparable positions, compensation, and tenure, subject to the provisions of
this Section. Service with WFC or with any WFC Subsidiary prior to the Effective
Time of the Merger by such former WFC employees will be deemed service with
Lakeview for purposes of determining eligibility for participation and for
crediting of service for vesting purposes in such employee benefit plans of
Lakeview and Lakeview's Subsidiaries; provided, however, that in no event shall
any former WFC employee be entitled to or be given credit for past service with
such former WFC for purposes of the accrual, calculation, or determination of
benefit amounts under any pension plan maintained by Lakeview or any Lakeview
subsidiaries. The employees of WFC will be treated as new employees for purposes
of Lakeview Bank's ESOP and other qualified pension plans. Lakeview shall take
all steps necessary to cause the 401(k) plan maintained by WFC to
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be terminated, and distributions made thereunder in accordance with the
provisions of Code Section 401(k)(10)(A)(i), as soon as practicable after the
Effective Time of the Merger. Following the transfer of the former WFC employees
to Lakeview's health plan, there shall be no exclusion from coverage for any
pre-existing medical condition of any such employee to the extent such condition
was covered under a health plan of Westwood.
5.4 Notification. Lakeview shall notify WFC promptly after
becoming aware of the occurrence of, or the impending or threatened occurrence
of, any event that would constitute a breach on its part of any obligation under
this Reorganization Agreement or the occurrence of any event that would cause
any representation or warranty made by it herein to be false or misleading, or
if it becomes a party or is threatened with becoming a party to any legal or
equitable proceeding or governmental investigation or upon the occurrence of any
event that would result in a change in the circumstances described in the
representations and warranties contained herein. At all times up to and
including, and as of, the Closing, Lakeview and Lakeview Bank shall inform WFC
in writing of any and all facts necessary to amend or supplement the
representations and warranties made herein and the Lakeview Schedules attached
hereto as necessary so that the information contained herein and therein will
accurately reflect the current status of Lakeview and Lakeview Bank; provided,
however, that any such updates to the Lakeview Schedules shall be required prior
to the Closing only with respect to matters which represent material changes to
the Lakeview Schedules and the information contained therein.
5.5 Tax Representations. Neither Lakeview nor any of its
Subsidiaries has taken, agreed to take, or will take any action or has any
knowledge of any fact or circumstance that would prevent the transactions
contemplated hereby, including the Merger, from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
5.6 Directors and Officers Indemnification and Insurance
Coverage.
(a) Lakeview will continue to indemnify officers,
directors, and employees of WFC and Westwood Bank to the full extent required
under the provisions of Article XVII of Lakeview's Certificate of Incorporation
from the Effective Time of the Merger.
(b) For a period of three (3) year after the
Effective Time, Lakeview will provide to the persons who served as directors or
officers of WFC or any subsidiary of WFC on or before the Effective Time of the
Merger insurance against liabilities and claims (and related expenses) made
against them resulting from their service as such prior to the Effective Time
substantially similar in all material respects to the insurance coverage
provided to them in such capacities at the date hereof; provided, however, that
if Lakeview is unable to maintain or obtain the insurance called for by this
Section on commercially reasonable terms, Lakeview shall use its best efforts to
obtain as much comparable insurance as available. In lieu of the foregoing, WFC
shall renew any existing insurance or purchase any "discovery period" insurance
provided for thereunder at Lakeview's request and expense.
5.7 Conduct of Lakeview and Lakeview Bank Prior to the
Effective Time. Except as expressly provided in this Agreement, as agreed to by
WFC or as required by applicable law, rules or regulations, during the period
from the date of this Agreement to the Effective Time, Lakeview and Lakeview
Bank shall, and shall cause its subsidiaries to, (i) take no action which would
adversely affect or delay the ability of WFC, Lakeview or Lakeview Bank to
obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements on a timely basis under this Agreement, (ii) take no
action that could
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reasonably be expected to have a material adverse effect on Lakeview and
Lakeview Bank and (iii) continue to conduct its business consistent with past
practices.
ARTICLE 6
COVENANTS OF WFC AND WESTWOOD BANK
6.1 Preparation of Registration Statement and Applications for
Required Consents. WFC will cooperate with Lakeview in the preparation of a
Registration Statement to be filed with the SEC under the Securities Act for the
registration of the offering of Lakeview Stock to be issued in connection with
the Merger and the Prospectus/Proxy Statement constituting part of the
Registration Statement that will be used by WFC to solicit shareholders of WFC
for approval of the Merger. In connection therewith, WFC will furnish all
financial or other information, including using best efforts to obtain customary
consents, certificates, opinions of counsel and other items concerning WFC
reasonably deemed necessary by counsel to Lakeview for the filing or preparation
for filing under the Securities Act and the Exchange Act of the Registration
Statement (including the proxy statement portion thereof). WFC will cooperate
with Lakeview and provide such information as may be advisable in obtaining an
order of effectiveness for the Registration Statement, appropriate permits or
approvals under state securities and "blue sky" law, the required approval under
the NJDB, the required approval under HOLA of the OTS, the listing of the Shares
on the Nasdaq National Market (subject to official notice of issuance) and any
other governmental or regulatory consents or approvals or the taking of any
other governmental or regulatory action necessary to consummate the Merger
without a material adverse effect on the business, results of operations, assets
or financial condition of the Surviving Corporation and its subsidiaries, taken
as a whole (the "Required Consents"). WFC covenants and agrees that all
information furnished by WFC for inclusion in the Registration Statement, the
Prospectus/Proxy Statement, all applications to appropriate regulatory agencies
for approval of the Merger, and all information furnished by WFC to Lakeview
pursuant to this Agreement or in connection with obtaining Required Consents,
will comply in all material respects with the provisions of applicable law,
including the Securities Act and the rules and regulations of the SEC
thereunder, and will not contain any untrue statement of a material fact and
will not omit to state any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. WFC will furnish to
FinPro such information as FinPro may reasonably request for purposes of the
opinion referred to in Section 7.1
6.2 Conduct of Business -- Affirmative Covenants. Unless the
prior written consent of Lakeview shall have been obtained:
(a) WFC and Westwood Bank shall:
(i) Operate its business only in the usual,
regular, and ordinary course;
(ii) Preserve intact its business
organizations and assets and to maintain its rights and franchises;
(iii) Take no action, unless otherwise
required by law, rules or regulation, that would reasonably be considered to
(A) adversely affect the ability of any of them or Lakeview to obtain any
necessary approvals of Regulatory Authorities required to consummate
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the transactions contemplated by this Reorganization Agreement, or (B)
adversely affect the ability of such Party to perform its covenants and
agreements under this Reorganization Agreement;
(iv) Except as they may terminate in
accordance with their terms, keep in full force and effect, and not default
in any of their obligations under, all material contracts;
(v) Keep in full force and effect insurance
coverage with responsible insurance carriers which is reasonably adequate in
coverage and amount for companies the size of WFC or such WFC Subsidiary and
for the businesses and properties owned by each and in which each is
engaged, to the extent that such insurance is reasonably available;
(vi) Use its best efforts to retain Westwood
Bank's present customer base and to facilitate the retention of such
customers by Westwood Bank and its branches after the Effective Time of the
Merger; and
(vii) Maintain, renew, keep in full force
and effect, and preserve its business organization and material rights and
franchises, permits and licenses, and to use its best efforts to maintain
positive relations with its present employees so that such employees will
continue to perform effectively and will be available to WFC, Westwood Bank
or Lakeview and Lakeview's Subsidiaries at and after the Effective Time of
the Merger, and to use its best efforts to maintain its existing, or
substantially equivalent, credit arrangements with banks and other financial
institutions and to assure the continuance of Westwood Bank's customer
relationships.
(b) WFC and Westwood Bank agree to use their best
efforts to assist Lakeview in obtaining the Government Approvals necessary to
complete the transactions contemplated hereby and do not know of any reason that
such Government Approvals can not be obtained, and WFC and Westwood Bank shall
provide to Lakeview or to the appropriate governmental authorities all
information reasonably required to be submitted in connection with obtaining
such approvals.
(c) WFC and Westwood Bank, at their own cost and
expense, shall use their best efforts to secure all necessary consents and all
consents and releases, if any, required of WFC, Westwood Bank or third parties
and shall comply with all applicable laws, regulations and rulings in connection
with this Reorganization Agreement and the consummation of the transactions
contemplated hereby.
(d) At all times to and including, and as of, the
Closing, WFC and Westwood Bank shall inform Lakeview of any and all facts
necessary to amend or supplement the representations and warranties made herein
and the WFC Schedules attached hereto as necessary so that the information
contained herein and therein will accurately reflect the current status of WFC
and Westwood Bank; provided, however, that any such updates to the WFC Schedules
shall be required prior to the Closing only with respect to matters which
represent material changes to the WFC Schedules and the information contained
therein.
(e) Subject to the terms and conditions of this
Reorganization Agreement, WFC and Westwood Bank agree to use all reasonable
efforts and to take, or to cause to be taken, all actions, and to do, or to
cause to be done, all things necessary, proper, or advisable under applicable
laws and regulations to consummate and make effective, with reasonable
promptness after the date of this
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Reorganization Agreement, the transactions contemplated by this Reorganization
Agreement, including, without limitation, using reasonable efforts to lift or
rescind any injunction or restraining or other order adversely affecting the
ability of the Parties to consummate the transaction contemplated by this
Reorganization Agreement. WFC shall use, and shall cause each of its
Subsidiaries to use, its best efforts to obtain consents of all third parties
and Regulatory Authorities necessary or desirable for the consummation of each
of the transactions contemplated by this Reorganization Agreement.
(f) WFC shall notify Lakeview promptly after
becoming aware of the occurrence of, or the impending or threatened occurrence
of, any event that would constitute a breach on its part of any obligation under
this Agreement or the occurrence of any event that would cause any
representation or warranty made by it herein to be false or misleading, or if it
becomes a party or is threatened with becoming a party to any legal or equitable
proceeding or governmental investigation or upon the occurrence of any event
that would result in a change in the circumstances described in the
representations and warranties contained herein.
(g) On the business day immediately prior to the
Effective Time of the Merger or on such other day after the satisfaction of all
conditions precedent to the Merger as Lakeview may require WFC shall, at the
request of Lakeview, take all legally permissible action necessary to convert to
the accounting policies and practices of Lakeview, such actions to include,
without limitation, at Lakeview's option, adjustments to loan loss reserves,
reserves for federal income taxes, accounting for post-retirement medical
benefits, and accruals for severance and related costs and accrued vacation and
disability leave. WFC's and Westwood Bank's representations, warranties and
covenants contained in this Reorganization Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of this Section 6.2(g).
6.3 Conduct of Business -- Negative Covenants. From the date
of this Reorganization Agreement until the earlier of the Effective Time of the
Merger or the termination of this Reorganization Agreement, WFC and Westwood
Bank covenant and agree that they will neither do, nor agree or commit to do,
nor permit any WFC Subsidiary to do or commit or agree to do, any of the
following without requesting Lakeview's approval and receiving the prior written
consent of the president of Lakeview, which consent will not be unreasonably
withheld and shall be deemed given unless Lakeview disapproves the same within
five (5) business days of having received WFC's written request for such
approval:
(a) Except as expressly contemplated by this
Reorganization Agreement or the Plan of Merger, amend its Certificate of
Incorporation or Bylaws; or
(b) Impose on any share of capital stock held by it
or by any of its Subsidiaries of any lien, charge, or encumbrance, or permit any
such lien, charge, or encumbrance to exist; or
(c) (i) Repurchase, redeem, or otherwise acquire or
exchange, directly or indirectly, any shares of its capital stock or other
equity securities or any securities or instruments convertible into any shares
of its capital stock, or any rights or options to acquire any shares of its
capital stock or other equity securities except as expressly permitted by this
Reorganization Agreement or the Plan of Merger; or (ii) split or otherwise
subdivide its capital stock; or (iii) recapitalize in any way; or (iv) declare a
stock dividend on the WFC Common Stock; or (v) pay or declare a cash dividend or
make or declare any other type of distribution on the WFC Common Stock except
for any cash dividend already
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declared prior to this Reorganization Agreement or regular quarterly cash
dividends payable in the same amount and during the same time periods as past
quarterly dividends; or
(d) Except as expressly permitted by this
Reorganization Agreement, acquire direct or indirect control over any
corporation, association, firm, organization or other entity, other than in
connection with (i) mergers, acquisitions, or other transactions approved in
writing by Lakeview, (ii) internal reorganizations or consolidations involving
existing Subsidiaries, (iii) acquisitions of control in its fiduciary capacity,
or (iv) the creation of new subsidiaries organized to conduct or continue
activities otherwise permitted by this Reorganization Agreement;
(e) Except as expressly permitted by this
Reorganization Agreement or the Plan of Merger, to (i) issue, sell, agree to
sell, or otherwise dispose of or otherwise permit to become outstanding any
additional shares of WFC Common Stock (not including shares issuable upon the
exercise of validly issued and WFC Stock Options outstanding as of the date of
this Reorganization Agreement), or any other capital stock of WFC or of any WFC
Subsidiary, or any stock appreciation rights, or any option, warrant,
conversion, call, scrip, or other right to acquire any such stock, or any
security convertible into any such stock, unless any such shares of such stock
are directly sold or otherwise directly transferred to WFC or any WFC
Subsidiary, (ii) sell, agree to sell, or otherwise dispose of any substantial
part of the assets or earning power of WFC or of any WFC Subsidiary; (iii) sell,
agree to sell, or otherwise dispose of any asset of WFC or any WFC Subsidiary
other than in the ordinary course of business for reasonable and adequate
consideration or (iv) buy, agree to buy or otherwise acquire a substantial part
of the assets or earning power of any other Person or entity;
(f) Incur, or permit any WFC Subsidiary to incur,
any additional debt obligation or other obligation for borrowed money other than
(i) in replacement of existing short-term debt with other short-term debt of an
equal or lesser amount, (ii) financing of banking related activities, or (iii)
indebtedness of WFC or any WFC Subsidiary to Westwood Bank or another WFC
Subsidiary in excess of an aggregate of $50,000 (for WFC and its Subsidiaries on
a consolidated basis) except in the ordinary course of the business of WFC or
such WFC Subsidiary (and such ordinary course of business shall include, but
shall not be limited to, creation of deposit liabilities, entry into repurchase
agreements or reverse repurchase agreements, purchases or sales of federal
funds, Federal Home Loan Bank advances, and sales of certificates of deposit);
(g) Grant any increase in compensation or benefits
to any of its employees or officers in excess of the lesser of five percent (5%)
per annum or $5,000 for any of them individually, except in accordance with past
practices or as required by law; pay any bonus except in accordance with past
practices or any plan or arrangement disclosed in WFC Schedule 6.3(g); enter
into any severance agreements with any of its officers or employees; grant any
material increase in fees or other increases in new compensation or other
benefits to any director of WFC or of any WFC Subsidiary; or effect any change
in retirement benefits for any class of its employees or officers, unless such
change is required by applicable law;
(h) Amend any existing employment contract between
it and any person to increase the compensation or benefits payable thereunder;
or enter into any new employment contract with any person that WFC or Westwood
Bank do not have the unconditional right to terminate without liability (other
than liability for services already rendered), at any time on or after the
Effective Time of the Merger;
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(i) Adopt any new employee benefit plan or terminate
or make any material change in or to any existing employee benefit plan other
than any change that is required by law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax-qualified status of any such plan;
(j) Enter into any new service contracts, purchase
or sale agreements or lease agreements in excess of $25,000 that are material to
WFC or any WFC Subsidiary;
(k) Make any capital expenditure exceeding $50,000;
(l) Knowingly take any action that is intended or
may reasonably be expected to result in any of its representations and
warranties set forth in this Reorganization Agreement being or becoming untrue
in any material respect, or in any of the conditions to the Merger set forth in
Article 7 not being satisfied, or in violation of any provision of this
Reorganization Agreement, except, in every case, as may be required by
applicable law;
(m) Change its methods of accounting in effect at
March 31, 1997, except as required by changes in generally accepted accounting
principles as concurred in, in writing, by WFC's independent auditors (a copy of
which shall be provided to Lakeview) or regulatory accounting principles;
(n) Except as required by applicable law, knowingly
take or cause to be taken any action that could reasonably be expected to
jeopardize or delay the receipt of any of the required regulatory approvals or
which would reasonably be expected to result in any such required regulatory
approval containing a condition that is determined by Lakeview to be unduly
burdensome;
(o) Fail to use its best efforts to keep in full
force and effect its insurance and bonds in such amounts as are reasonable to
cover such risks customary in relation to the character and location of its
properties and the nature of its business and in any event at least equal in
scope and amount of coverage of insurance and bonds now carried;
(p) Fail to notify Lakeview promptly of its receipt
of any letter, notice or other communication, whether written or oral, from any
governmental entity advising WFC that it is contemplating issuing, requiring, or
requesting any agreement, memorandum of understanding, or similar undertaking,
order or directive;
(q) Fail promptly to notify Lakeview of (i) the
commencement or threat of any audit, action, or proceeding involving any
material amount of taxes against either WFC or any WFC Subsidiary or (ii) the
receipt by WFC or any WFC Subsidiary of any deficiency or audit notices or
reports in respect of any material deficiencies asserted by any federal, state,
local or other tax authorities;
(r) Fail to maintain and keep its properties in good
repair and condition, except for depreciation due to ordinary wear and tear;
(s) Engage in any off-balance sheet hedge
transactions.
6.4 Conduct of Business -- Certain Actions.
Except to the extent necessary to consummate the
transactions specifically contemplated by this Reorganization Agreement, WFC and
Westwood Bank shall not, and shall use their
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respective best efforts to ensure that their respective directors, officers,
employees, and advisors do not, directly or indirectly, institute, solicit, or
knowingly encourage (including by way of furnishing any information not legally
required to be furnished) any inquiry, discussion, or proposal, or participate
in any discussions or negotiations with, or provide any confidential or
non-public information to, any corporation, partnership, person or other entity
or group (other than to Lakeview or any Lakeview Subsidiary) concerning any
"Acquisition Proposal" (as defined below), except for actions reasonably
considered by the Board of Directors of WFC, based upon the advice of outside
legal counsel, to be required in order to fulfill its fiduciary obligations. WFC
shall notify Lakeview immediately if any Acquisition Proposal has been or should
hereafter be received by WFC or Westwood Bank, such notice to contain, at a
minimum, the identity of such persons, and, subject to disclosure being
consistent with the fiduciary obligations of WFC's Board of Directors, a copy of
any written inquiry, the terms of any proposal or inquiry, any information
requested or discussions sought to be initiated, and the status of any reports,
negotiations or expressions of interest. For purposes of this Section,
"Acquisition Proposal" means any tender offer, agreement, understanding or other
proposal of any nature pursuant to which any corporation, partnership, person or
other entity or group, other than Lakeview or any Lakeview Subsidiary, would
directly or indirectly (i) acquire or participate in a merger, share exchange,
consolidation or any other business combination involving WFC or Westwood Bank;
(ii) acquire the right to vote ten percent (10%) or more of the WFC Common Stock
or Westwood Bank Common Stock; (iii) acquire a significant portion of the assets
or earning power of WFC or of Westwood Bank; or (iv) acquire in excess of ten
percent (10%) of the outstanding WFC Common Stock or Westwood Bank common stock.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of WFC. Unless waived in
writing by WFC, the obligation of WFC to consummate the transaction contemplated
by this Reorganization Agreement is subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of Lakeview to be performed at or prior to the Closing Date
pursuant to this Reorganization Agreement shall have been duly performed in all
material respects;
(b) No Material Adverse Change. No material adverse
change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), operations, liquidity,
income, or financial condition of Lakeview and Lakeview Bank taken as a whole
shall have occurred since the date of this Reorganization Agreement;
(c) Representations and Warranties. The
representations and warranties of Lakeview and Lakeview Bank contained in this
Reorganization Agreement shall be true and correct, in all material respects, on
and as of the Closing Date with the same effect as though made on and as of the
Effective Time of the Merger;
(d) Documents. In addition to the other deliveries
of Lakeview described elsewhere in this Reorganization Agreement, WFC shall have
received the following documents and instruments:
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(i) a certificate signed by the Secretary
or an assistant secretary of Lakeview and Lakeview Bank dated as of the Closing
Date certifying that:
(A) Lakeview's and Lakeview Bank's
respective Boards of Directors have duly adopted resolutions (copies
of which shall be attached to such certificate) approving the
substantive terms of this Reorganization Agreement (including the
Plan of Merger) and authorizing the consummation of the transactions
contemplated by this Reorganization Agreement and certifying that
such resolutions have not been amended or modified and remain in
full force and effect;
(B) the persons executing this
Reorganization Agreement on behalf of Lakeview and Lakeview Bank are
officers of Lakeview and Lakeview Bank, respectively, holding the
offices so specified with full power and authority to execute this
Reorganization Agreement and any and all other documents in
connection with the Merger, and that the signature of such person
set forth on such certificate is his genuine signature;
(C) the organization documents of Lakeview and
Lakeview Bank attached to such certificate remain in full force and
effect; and
(ii) a certificate signed respectively by
duly authorized officers of Lakeview and Lakeview Bank stating that
the conditions set forth in Sections 7.1(a), 7.1(b) and 7.1(c) of
this Reorganization Agreement have been satisfied;
(e) Consideration. WFC shall have received a
certificate executed by an authorized officer of the Exchange Agent to the
effect that the Exchange Agent has received and holds in its possession proper
authorization to issue certificates evidencing shares of Lakeview Common Stock
and cash or other good funds sufficient to meet the obligations of Lakeview to
the WFC Record Holders to deliver the Consideration under this Reorganization
Agreement and the Plan of Merger; and
(f) Opinion of Lakeview's Counsel. WFC shall have
been furnished with an opinion of counsel to Lakeview, dated as of the Closing
Date, addressed to WFC, substantially to the effect that:
(i) Lakeview is incorporated and validly
existing as a corporation in good standing under the laws of the State of New
Jersey; Lakeview Bank is a wholly-owned subsidiary of Lakeview organized and
validly existing and in good standing as a state stock savings bank chartered
under the laws of the State of New Jersey;
(ii) The authorized capital stock of
Lakeview consists of 10,000,000 shares of Lakeview Common Stock, par value $2.00
per share, of which 2,254,527 shares of Lakeview Common Stock are validly issued
and outstanding; all necessary corporate proceedings have been taken in order to
validly authorize such Lakeview Common Stock; and to the best of their
knowledge, all outstanding shares of Lakeview Common Stock have been duly and
validly issued, are fully paid and nonassessable, were not issued in violation
of or subject to any statutory preemptive rights;
(iii) The certificates evidencing the
Lakeview Common Stock to be delivered pursuant to the Reorganization Agreement
are in all material respects in due and proper form
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under New Jersey Law, and when fully countersigned by Lakeview's transfer agent
and register and issued in accordance with the provisions of the Reorganization
Agreement, the Lakeview Common Stock represented thereby will be duly authorized
and validly issued, fully paid and nonassessable, and will not have been issued
in violation of or subject to any statutory preemptive rights;
(iv) Lakeview and Lakeview Bank have full
corporate power and authority to enter into the Reorganization Agreement and
Lakeview has full corporate power and authority to issue the Lakeview Common
Stock pursuant to the Reorganization Agreement, the Reorganization Agreement has
been duly and validly authorized by all necessary corporate action by Lakeview
and Lakeview Bank and has been duly and validly executed and delivered by and on
behalf of Lakeview and Lakeview Bank and no approval, authorization, order
consent, registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is required under
any federal or New Jersey statute or regulation for the execution and delivery
of the Reorganization Agreement by Lakeview and Lakeview Bank or the
consummation of the transactions contemplated by the Reorganization Agreement,
except such as have been obtained and are in full force and effect;
(v) Neither the execution and delivery by
Lakeview of this Reorganization Agreement nor any of the documents to be
executed and delivered by Lakeview in connection herewith violates or conflicts
with Lakeview's Certificate of Incorporation or Bylaws.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Lakeview or appropriate government
officials; (ii) in the case of matters of law governed by the laws of the states
in which they are not licensed, reasonably rely upon the opinions of legal
counsel duly licensed in such states and may be limited, in any event, to
Federal Law and the State of New Jersey; and (iii) incorporate, be guided by,
and be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991); and
(g) Fairness Opinion. WFC shall have received a
"fairness opinion" letter from its independent financial adviser, FinPro, dated
the date hereof and to the effect that, in the opinion of such adviser the
Consideration to be received by the WFC Record Holders is fair to the WFC Record
Holders from a financial point of view, and WFC shall have received an updated
"fairness opinion" letter from such advisers at the time of the mailing of the
proxy statement for the WFC Shareholders' Meeting confirming the opinions
provided in the initial "fairness opinion" letter.
7.2 Conditions to the Obligations of Lakeview. Unless waived
in writing by Lakeview, the obligation of Lakeview to consummate the
transactions contemplated by this Reorganization Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of WFC and Westwood Bank to be performed at or before the Closing
Date pursuant to this Reorganization Agreement shall have been duly performed;
(b) Representations and Warranties. The
representations and warranties of WFC and Westwood Bank contained in Article 5
of this Reorganization Agreement shall be true and correct, in all material
respects, on and as of the Closing Date with the same effect as though made on
and as of the Closing Date;
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(c) Documents. In addition to the documents
described elsewhere in this Reorganization Agreement, Lakeview shall have
received the following documents and instruments:
(i) a certificate signed by the Secretary
or an assistant secretary of WFC and Westwood Bank dated as of the Closing
Date certifying that:
(A) WFC's and Westwood Bank's
respective Boards of Directors and shareholders have duly adopted
resolutions (copies of which shall be attached to such certificate)
approving the substantive terms of this Reorganization Agreement
(including the Plan of Merger) and authorizing the consummation of the
transactions contemplated by this Reorganization Agreement and
certifying that such resolutions have not been amended or modified and
remain in full force and effect;
(B) each person executing this
Reorganization Agreement on behalf of WFC and Westwood Bank is an
officer of WFC or Westwood Bank, as the case may be, holding the office
or offices specified therein, with full power and authority to execute
this Reorganization Agreement and any and all other documents in
connection with the Merger, and that the signature of each person set
forth on such certificate is his or her genuine signature;
(C) the charter documents of WFC
and Westwood Bank attached to such certificate remain in full force and
effect; and
(ii) a certificate signed by the respective
Chairman of the Board, President and Chief Financial Officer of each of WFC
and Westwood Bank stating that the conditions set forth in Sections 7.2(a),
7.2(b) and 7.2(e) this Reorganization Agreement have been satisfied.
(d) Inspections Permitted. Between the date of this
Reorganization Agreement and the Closing Date, WFC and Westwood Bank shall have
afforded Lakeview and its authorized agents and representatives reasonable
access during normal business hours to the properties, operations, books,
records, contracts, documents, loan files and other information of or relating
to WFC and Westwood Bank. Lakeview will provide WFC and Westwood Bank at least
48 hours notice of any inspection and conduct any inspection in a reasonable
manner that will not interfere with business operations. WFC and Westwood Bank
shall have caused all WFC or Westwood Bank personnel to provide reasonable
assistance to Lakeview in its investigation of matters relating to WFC and
Westwood Bank.
(e) No Material Adverse Change. No material adverse
change in the business, property, assets (including loan portfolios),
liabilities (whether absolute, contingent or otherwise), operations, liquidity,
income, or financial condition of WFC and Westwood Bank taken as a whole shall
have occurred since the date of this Reorganization Agreement.
(f) Opinion of WFC's Counsel. Lakeview shall have
been furnished with an opinion of legal counsel to WFC and Westwood Bank, dated
the Closing Date, addressed to Lakeview, substantially to the effect that:
(i) WFC is a corporation validly existing
and in good standing under the laws of the State of New Jersey;
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(ii) Westwood Bank is a state stock savings
bank, validly existing, and in good standing under the laws of the State of
New Jersey;
(iii) WFC and Westwood Bank have full
corporate power and authority to enter into the Reorganization Agreement;
the Reorganization Agreement has been duly and validly authorized by all
necessary corporate action by WFC and Westwood Bank and has been duly and
validly executed and delivered by and on behalf of WFC and Westwood Bank;
and no approval, authorization, order, consent, registration, filing,
qualification, license or permit of or with any court, regulatory,
administrative or other governmental body is required under any federal or
New Jersey statute or regulation for the execution and delivery of the
Reorganization Agreement by WFC and Westwood Bank or the consummation of the
transactions contemplated by the Reorganization Agreement, except such as
have been obtained and are in full force and effect; and
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of WFC or Westwood Bank or appropriate
government officials; (ii) in the case of matters of law governed by the laws of
the states in which they are not licensed, reasonably rely upon the opinions of
legal counsel duly licensed in such states and may be limited, in any event, to
federal law and the NJBCA and (iii) incorporate, be guided by, and be
interpreted in accordance with, the Legal Opinion Accord of the ABA Section of
Business Law (1991);
(g) Other Business Combinations, Etc. Neither WFC
nor Westwood Bank shall have entered into any agreement, letter of intent,
understanding or other arrangement pursuant to which WFC or Westwood Bank would
merge, consolidate with; effect a business combination with, sell any
substantial part of WFC's or Westwood Bank's assets to, or; acquire a
significant part of the shares or assets of, any other Person or entity
(financial or otherwise); adopt any "poison pill" or other type of anti-takeover
arrangement, any shareholder rights provision, any "golden parachute" or similar
program which would have the effect of materially decreasing the value of WFC or
Westwood Bank or the benefits of acquiring the WFC Common Stock;
(h) Regulatory Approvals. Except for the filing of
the Certificate of Merger with the Secretary of State of the State of New
Jersey, all Regulatory Approvals for the transactions contemplated by this
Reorganization Agreement shall have been obtained without the imposition of any
conditions not typically imposed in similar transactions which Lakeview
determines in its sole judgment to be materially burdensome upon the conduct of
the business of Lakeview or which would so adversely impact the economic and
business benefits of the Merger to Lakeview as to render it inadvisable in the
sole judgment of Lakeview to proceed with the Merger; such approvals shall be in
effect and no proceedings shall have been instituted or threatened with respect
thereto; all applicable waiting periods with respect to such approvals shall
have expired; and all conditions and requirements prescribed by law or otherwise
imposed in connection with the Regulatory Approvals shall have been satisfied;
(i) WFC Stockholder Approval. WFC shall have
furnished Lakeview with a certified copy of resolutions duly adopted by the
holders of a vote of the outstanding shares of WFC Common Stock entitled to vote
thereon approving this Reorganization Agreement, the Merger, and the
transactions contemplated hereby; such resolutions shall be in full force and
effect and shall not have been modified, rescinded or annulled; and
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<PAGE>
(j) No Lakeview Stockholder Approval. Lakeview,
pursuant to applicable laws, its certificate of incorporation, and NASD rules,
will not be required to obtain approval of the Merger from its stockholders.
7.3 Conditions to Obligations of All Parties. The obligations
of each party to effect the transactions contemplated hereby shall be subject to
the fulfillment, at or prior to the Closing, of the following conditions:
(a) No Pending or Threatened Claims. No claim,
action, suit, investigation or other proceeding shall be pending or threatened
before any court or governmental agency which presents a substantial risk of the
restraint or prohibition of the transactions contemplated by this Reorganization
Agreement or the obtaining of material damages or other relief in connection
therewith;
(b) Governmental Approvals and Acquiescence
Obtained. The Parties hereto shall have received all applicable Governmental
Approvals for the consummation of the transactions contemplated herein and all
waiting periods incidental to such approvals or notices given shall have
expired; and
(c) Approval of Stockholders. Approval of this
Agreement and the transactions contemplated hereby by the stockholders of WFC,
as required by applicable law, the rules of the Nasdaq Small Cap Market or
applicable provisions of WFC's Certificate of Incorporated and Bylaws.
(d) Effectiveness of Registration Statement. The
Registration Statement has become effective under the 1933 Act, and no stop
order suspending the effectiveness of the Registration Statement or preventing
the use of the Proxy Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the SEC or any
state securities or other regulatory authority.
(e) Tax Opinion. Lakeview and WFC shall receive an
opinion of Lakeview's counsel to the effect that the transaction will constitute
a tax free reorganization within the meaning of Section 368 of the Internal
Revenue Code and that no gain or loss will be recognized by WFC shareholders who
receive solely shares of Lakeview Common Stock in exchange for their shares of
WFC Common Stock.
ARTICLE 8
TERMINATION
8.1 Termination. This Reorganization Agreement and the Plan of
Merger may be terminated at any time prior to the Closing, as follows:
(a) By mutual consent in writing of the Parties;
(b) By Lakeview or WFC in the event the Closing
shall not have occurred by June 30, 1998 (the "Target Date"), unless the failure
of the Closing to occur shall be due to the failure
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<PAGE>
of the Party seeking to terminate this Agreement to perform its obligations
hereunder in a timely manner;
(c) By either Lakeview or WFC upon written notice to
the other Party, upon (i) denial of any Governmental Approval necessary for the
consummation of the Merger (or should such approval be conditioned upon a
substantial deviation from the transactions contemplated); provided, however,
that either Lakeview or WFC may, upon written notice to the other, extend the
term of this Reorganization Agreement for only one or more sixty (60) day
periods to prosecute diligently and overturn such denial, provided that such
denial has been appealed within twenty (20) business days of the receipt thereof
or (ii) upon the failure to obtain the approval of the WFC shareholders at the
WFC shareholders meeting;
(d) By Lakeview or WFC in the event that there shall
have been a material breach of any obligation or covenant of the other Party
hereunder and such breach shall not have been remedied within sixty (60) days
after receipt by the breaching Party of written notice from the other Party
specifying the nature of such breach and requesting that it be remedied;
(e) By Lakeview or WFC should WFC or any WFC
Subsidiary enter into any letter of intent or agreement with a view to being
acquired by or effecting a business combination with any other Person; or any
agreement to merge, to consolidate, to combine or to sell a material portion of
its assets or to be acquired in any other manner by any other Person or to
acquire a material amount of assets or a material equity position in any other
Person, whether financial or otherwise;
(f) By Lakeview should either WFC or Westwood Bank
enter into any formal agreement, letter of understanding, memorandum or other
similar arrangement with any bank regulatory authority establishing a formal
capital plan requiring WFC or Westwood Bank to raise additional capital or to
sell a substantial portion of its assets.
If a Party should elect to terminate this Reorganization Agreement pursuant to
subsections (b), (c), (d), (e) or (f) of this Section, it shall give notice to
the other Party, in writing, of its election in the manner prescribed in Section
9 ("Notices") of this Reorganization Agreement.
8.2 Effect of Termination. In the event that this
Reorganization Agreement should be terminated pursuant to this Section, all
further obligations of the Parties under this Reorganization Agreement shall
terminate without further liability of any Party to another; provided, however,
that a termination under this Section shall not relieve any Party of any
liability for breach of this Reorganization Agreement or for any misstatement or
misrepresentation made hereunder prior to such termination, or be deemed to
constitute a waiver of any available remedy for any such breach, misstatement or
misrepresentation.
8.3 Fees.
(a) WFC hereby agrees to pay Lakeview and Lakeview
shall be entitled to receipt of a fee (the "Fee") of $900,000 following the
occurrence of a Purchase Event (as defined below). Such payment shall be made
immediately available funds within five business days after delivery of notice
of entitlement by Lakeview. Notwithstanding the foregoing, payments pursuant to
this Section shall not be required in the event of termination of this
Reorganization Agreement pursuant to Section 8.1(a), (b), (c)(i), (d) (in the
event terminated by WFC due to a material breach by Lakeview) or (f) prior to
the occurrence of a Purchase Event.
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<PAGE>
(b) The term "Purchase Event" shall mean any of the
following events, or the WFC or its Subsidiary agreeing to, orally or in
writing, to enter into an agreement relating to any of the following events,
occurring after the date hereof and before the Effective Time or occurring
within 12 months of the date of termination of this Agreement pursuant to this
Article:
(i) the acquisition by any person, other
than Lakeview or any of its
subsidiaries, alone or together with
such person's affiliates and
associates or any group, of
beneficial ownership of 25% or more
of the WFC Common Stock (for
purposes of this Subsection (b)(i),
the terms "group" and "beneficial
ownership" shall be as defined in
Section 13(d) of the Exchange Act
and regulations promulgated
thereunder and as interpreted
thereunder);
(ii) a merger, consolidation, share
exchange, business combination or
any other similar transaction
involving WFC or Westwood Bank;
(iii) any sale, lease, exchange, mortgage,
pledge, transfer or other
disposition of 50% or more of the
assets of the WFC or Westwood Bank,
in a single transaction or series of
transactions; or
(iv) the Board of Directors of WFC does
not recommend approval of the
Reorganization to their shareholders
and the transaction contemplated
thereby unless Lakeview has
materially breached its
representations, warranties or
covenants provided herein and has
not attempted to cure such breach to
the reasonable satisfaction of WFC.
(c) WFC shall notify Lakeview promptly in writing of
its knowledge of the occurrence of any Purchase Event; provided, however, that
the giving of such notice by WFC shall not be a condition to the right of
Lakeview to the Fee.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. Any notice, request, demand and other
communication which either Party hereto may desire or may be required hereunder
to give shall be in writing and shall be deemed to be duly given if delivered
personally or mailed by certified or registered mail (postage prepaid, return
receipt requested), air courier or facsimile transmission, addressed or
transmitted to such other Party as follows:
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<PAGE>
If to WFC:
Westwood Financial Corporation
700-88 Broadway
Westwood, New Jersey 07675
Fax: (201) 666-4265
Attn: William J. Woods, Chairman of the Board
With a copy to:
Breyer & Aguggia
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Fax: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
If to Lakeview:
Lakeview Financial Corp.
989 McBride Avenue
Paterson, New Jersey 07424
Fax: (201) 890-3182
Attn: Kevin J. Coogan, President
With a copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W.
Suite 700 East
Washington, D.C. 20005
Fax: (202) 434-4661
Attn: Samuel J. Malizia, Esq.
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery, or if none, on the date actually
received.
9.2 Governing Law. This Reorganization Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws,
and not the laws pertaining to choice or conflicts of laws, of the State of New
Jersey, unless and to the extent that federal law controls. Any dispute arising
between the Parties in connection with the transactions which are the subject of
this Reorganization Agreement shall be heard in a court of competent
jurisdiction located in New Jersey.
9.3 Counterparts. This Reorganization Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which shall constitute but one and the same
instrument.
9.4 Publicity. The Parties hereto will consult with each other
with regard to the terms and substance of any press releases, announcements or
other public statements with respect to the
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<PAGE>
transactions contemplated hereby. To the extent practicable, each Party shall
provide the proposed text of any such press release, announcement or public
statement to the other Party prior to its publication and shall permit such
other Party a reasonable period to provide comments thereon.
9.5 Entire Agreement. This Reorganization Agreement, together
with the Plan of Merger which is Exhibit A hereto, the Schedules, Annexes,
Exhibits and certificates required to be delivered hereunder and any amendments
or addenda hereafter executed and delivered in accordance with this Section
constitute the entire agreement of the Parties hereto pertaining to the
transactions contemplated hereby and supersede all prior written and oral (and
all contemporaneous oral) agreements and understandings of the Parties hereto
concerning the subject matter hereof. The Schedules, Annexes, Exhibits and
certificates attached hereto or furnished pursuant to this Reorganization
Agreement are hereby incorporated as integral parts of this Reorganization
Agreement. Except to the extent otherwise, provided herein, by specific language
and not by mere implication, this Reorganization Agreement is not intended to
confer upon any other person not a Party to this Reorganization Agreement any
rights or remedies hereunder.
9.6 Severability. If any portion or provision of this
Reorganization Agreement should be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any jurisdiction, such
portion or provision shall be ineffective as to that jurisdiction to the extent
of such invalidity, illegality or unenforceability, without affecting in any way
the validity or enforceability of the remaining portions or provisions hereof in
such jurisdiction or rendering that or any other portions or provisions of this
Reorganization Agreement invalid, illegal or unenforceable in any other
jurisdiction.
9.7 Modifications, Amendments and Waivers. At any time prior
to the Closing or termination of this Reorganization Agreement, the Parties may,
solely by written agreement executed by their duly authorized officers:
(a) extend the time for the performance of any of
the obligations or other acts
of the other Party hereto;
(b) waive any inaccuracies in the representations
and warranties made by the other Party contained in this Reorganization
Agreement or in the Schedules or Exhibits hereto or any other document delivered
pursuant to this Reorganization Agreement;
(c) waive compliance with any of the covenants or
agreements of the other Party contained in this Reorganization Agreement to the
extent permitted by applicable law; and
(d) amend or add to any provision of this
Reorganization Agreement or the Plan of Merger; provided, however, that no
provision of this Reorganization Agreement may be amended or added to except by
an agreement in writing signed by the Parties hereto or their respective
successors in interest and expressly stating that it is an amendment to this
Reorganization Agreement.
9.8 Interpretation. The headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Reorganization Agreement.
- 45 -
<PAGE>
9.9 Payment of Expenses. Except as set forth herein, Lakeview
and WFC shall each pay its own fees and expenses (including, without limitation,
legal fees and expenses) incurred by it in connection with the transactions
contemplated hereunder.
9.10 Attorneys' Fees. If any Party hereto shall bring an
action at law or in equity to enforce its rights under this Reorganization
Agreement (including an action based upon a misrepresentation or the breach of
any warranty, covenant, agreement or obligation contained herein), the
prevailing Party in such action shall be entitled to recover from the other
Party its reasonable costs and expenses necessarily incurred in connection with
such action (including fees, disbursements and expenses of attorneys and costs
of investigation).
9.11 No Survival of Representations and Warranties. Except for
the agreements of the parties in Sections 1.2(d), 1.6, 1.7, 5.3, 5.6 and 9.14,
which shall survive the Closing, none of the representations, warranties and
conditions of the Parties contained in this Reorganization Agreement or in any
instrument of transfer or other document delivered in connection with the
transactions contemplated by this Reorganization Agreement shall survive the
Closing or other termination of this Reorganization Agreement. The agreements of
the parties in Sections 1.2(d), 1.6, 1.7, 5.3 and 5.6 shall be enforceable
directly by each person benefitted or intended to be benefitted by such
sections.
9.12 No Waiver. No failure, delay or omission of or by any
Party in exercising any right, power or remedy upon any breach or default of any
other Party shall impair any such rights, powers or remedies of the Party not in
breach or default, nor shall it be construed to be a waiver of any such right,
power or remedy, or an acquiescence in any similar breach or default; nor shall
any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Reorganization Agreement must be in writing and must be
executed by the Parties to this Reorganization Agreement and shall be effective
only to the extent specifically set forth in such writing.
9.13 Remedies Cumulative. All remedies provided in this
Reorganization Agreement, by law or equity, shall be cumulative and not
alternative.
9.14 Confidentiality. Any non-public or confidential
information disclosed by either WFC (including any WFC Subsidiaries) or Lakeview
(including any Lakeview Subsidiary) to the other Parties pursuant to this
Agreement or as a result of the discussions and negotiations leading to this
Agreement, or otherwise disclosed, or to which any other party has acquired or
may acquire access, and indicated (either expressly, in writing or orally, or by
the context of the disclosure or access) by the disclosing Party to be
non-public or confidential, or which by the content thereof reasonably appears
to be non-public or confidential, shall be kept strictly confidential and shall
not be used in any manner by the recipient except in connection with the
transactions contemplated by this Reorganization Agreement. To that end, the
Parties hereto will each, to the maximum extent practicable, restrict knowledge
of and access to non-public or confidential information of the other Party to
its officers, directors, employees and professional advisors who are directly
involved in the transactions contemplated hereby and reasonably need to know
such information. Further to that end, all non-public or confidential documents
(including all copies thereof) obtained hereunder by any Party shall be returned
as soon as practicable after any termination of this Reorganization Agreement.
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<PAGE>
I WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Reorganization Agreement or has caused this Reorganization
Agreement to be executed and delivered in its name and on its behalf by its
representative thereunto duly authorized, all as of the date first written
above.
WESTWOOD FINANCIAL CORPORATION
By: /s/William J. Woods
-------------------------------------
William J. Woods
Chairman of the Board and Chief
Executive Officer
ATTEST:
/s/Joanne Miller
- ---------------------------------
Joanne Miller, Secretary
WESTWOOD SAVINGS BANK
By: /s/Joanne Miller
-------------------------------------
Joanne Miller
President
ATTEST:
/s/Catherine Solimando, Secretary
- ----------------------------------
Catherine Solimando, Secretary
- 47 -
<PAGE>
LAKEVIEW FINANCIAL CORPORATION
By: /s/Kevin J. Coogan
-------------------------------------
Kevin J. Coogan
President and Chief Executive Officer
ATTEST:
/s/Helen Saco
- ----------------------------------
Helen Saco, Secretary
LAKEVIEW SAVINGS BANK
By: /s/Kevin J. Coogan
-------------------------------------
Kevin J. Coogan
President Chief Executive Officer
ATTEST:
/s/Helen Saco
- ----------------------------------
Helen Saco, Secretary
- 48 -
<PAGE>
Appendix II
FINPRO 26 Church Street . P.O. Box 323
Liberty Corner, NJ 07938
(908) 604-9336 . (908) 604-5951 (FAX)
- --------------------------------------------------------------------------------
^ January 15, 1998
Board of Directors
^ Westwood Financial Corporation
700-88 Broadway
Westwood, NJ 07675-9956
Members of the Board:
You have requested our opinion, as an independent financial analyst to the
common shareholders of ^ Westwood Financial Corporation and its wholly owned
subsidiary ^ Westwood Savings Bank, ^ Westwood, New Jersey ^("Westwood"), as to
the fairness, from a financial point of view to the common shareholders of ^
Westwood, of the terms of the proposed merger of ^ Westwood with ^ Lakeview
Financial ^ Corporation, West Paterson, New Jersey, ^ ("Lakeview") and
Lakeview's subsidiary bank ^ Lakewood Savings Bank, West Paterson, New Jersey.
Pursuant to the Agreement and Plan of Merger dated September ^ 10, 1997, and
discussions with management, each share of ^ Westwood common stock issued and
outstanding immediately prior to the Effective Time shall, at the election of
the holder, be converted at the Effective Time into the right to receive either
shares of common stock, $2.00 par value, of ^ Lakewood, with a value of $29.25
based on an exchange ratio to be set prior to closing or $29.25 in cash;
provided that 50.1% of the aggregate merger consideration shall be paid in ^
Lakeview Common Stock and 49.9% of the aggregate merger consideration will be
paid in cash. It is understood that ^ Westwood's outstanding options, of 58,335
common shares, will either be exercised prior to the merger, be converted into ^
Lakeview Common Stock at the exchange ratio less the exercise price or paid out
in cash at the difference between the purchase price of $29.25 per share and the
exercise price. Based upon an exchange value of $29.25, ^ Lakeview will issue
common shares and cash to ^ Westwood shareholders for a total transaction value
of $20,581,178. This transaction will be accounted for under the purchase method
of accounting.
As part of its banking analysis business, FinPro, Inc. is continually engaged in
the valuation of bank, bank holding company and thrift securities in connection
with mergers and acquisitions nationwide. Prior to being retained for this
assignment, FinPro, Inc. had provided professional services and products to ^
Westwood. The revenues derived from such services and products are insignificant
when compared to the firm's total gross revenues.
In connection with this assignment, we reviewed: (i) the Agreement and Plan of
Merger dated September 10, 1997; (ii) the most recent external auditor's reports
to the Boards of Directors of each organization; (iii) the last 10-Ks and recent
10-Qs for both companies; (iv) the June 30, 1997 Report of Condition and Income
for each organization; (v) the Rate Sensitivity Analysis reports for each
organization; (vi) each organization's listing of marketable securities showing
rate, maturity, and market value as compared to book value; (vii) each
organization's internal loan classification list; (viii) a listing of other real
estate owned for each organization; (ix) the budget and long range operating
plan of each organization; (x) the Minutes of the Board of Directors meetings
for ^ Westwood; (xi) the most recent Board report for ^ Westwood; (xii) the
listing and description of significant real properties for each organization;
and (xiii) the directors and officers liability and blanket bond insurance
policies for each
<PAGE>
organization. FinPro conducted an on-site review of each organization's
historical performance and current financial condition and performed a market
area analysis.
We have also had discussions with the management of ^ Westwood and ^ Lakeview
regarding their respective financial results and have analyzed the most current
financial data available on ^ Westwood and ^ Lakeview. We also considered such
other information, financial studies, analyses and investigations, and economic
and market criteria which we deemed relevant. We have met with the management of
^ Westwood and ^ Lakeview to discuss the foregoing information with them.
We also considered: (a) a transaction summary of the financial terms of the
merger, including the aggregate merger consideration relative to fully diluted
book value, fully diluted earnings, fully diluted assets, and deposit
liabilities of ^ Westwood; (b) the financial terms, financial condition,
operating performance, and market areas of other recently completed mergers and
acquisitions of comparable financial institution entities, including evaluating
Northeast U.S. transactions both generally and specifically; (c) discounted cash
flow analyses for ^ Westwood on a stand-alone basis, incorporating the current
business plan and future prospects; and (d) the pro forma impact of the Merger
to the holders of ^ Westwood common stock (incorporating the Exchange Ratio,
transaction adjustments and potential earnings improvements), including the
resulting impact to the market value per share, tangible book value per share,
earnings per share, and dividends per share of the ^ Westwood Common Stock. We
also considered the improved liquidity characteristics of ^ Lakeview Common
Stock relative to the ^ Westwood Common Stock, the enhanced competitive position
of ^ Lakeview resulting from the merger, the greater return on equity of ^
Lakeview Common Stock relative to the ^ Westwood Common Stock, and the
opportunities for ^ Lakeview to increase earnings in the future. The results of
these analyses and the other factors considered were evaluated as a whole, with
the aggregate results indicating a range of financial parameters utilized to
assess the merger consideration as described in the Agreement.
We have not independently verified any of the information reviewed by us and
have relied on its being complete and accurate in all material respects. In
addition, we have not made an independent evaluation of the assets of ^ Westwood
and ^ Lakeview .
In reaching our opinion we took into consideration the financial benefits of the
proposed transaction to all ^ Westwood shareholders. Based on all factors that
we deem relevant and assuming the accuracy and completeness of the information
and data provided by us by ^ Westwood and ^ Lakeview, it is our opinion as of
September ^ 10, 1997, that the proposed transaction is fair and equitable to all
^ Westwood shareholders from a financial point of view.
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Respectfully submitted,
/s/FinPro, Inc.
FinPro, Inc.
Liberty Corner, New Jersey
By /s/Donald J. Musso
Donald J. Musso
President
<PAGE>
Appendix III
Annual Report to Stockholders for Fiscal Year
Ended March 31, 1997
<PAGE>
[** LOGO **]
WESTWOOD FINANCIAL CORPORATION
ANNUAL REPORT - 1997
----------------------------------------------------------
<PAGE>
WESTWOOD
ANNUAL REPORT - 1997
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Letter to Stockholders.................................................... 1
Corporate Profile and Stock Market Information............................ 2
Selected Financial and Other Data......................................... 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 5
Independent Auditors' Report............................................ F-1
Consolidated Financial Statements....................................... F-2
Notes to Consolidated Financial Statements.............................. F-6
Office Locations and Other Corporate Information......................... 12
<PAGE>
WESTWOOD
[LOGO] FINANCIAL
Since 1906 CORPORATION
-----------------------------------------------------------------
June 9, 1997
To Our Stockholders:
I am pleased to present the First Annual Report of Westwood Financial
Corporation covering the year ended March 31, 1997.
The financial statements contained in this report include the operations
of Westwood Savings Bank ("Westwood Savings" or the "Bank") for the full twelve
month period as well as the accounts of Westwood Financial Corporation (the
"Corporation"), which assumed ownership of the Bank effective June 6, 1996.
Since its inception on that date, the Corporation's principal business activity
has been ownership of the Bank's common stock.
Fiscal 1997 earnings were significantly impacted by a one-time Savings
Association Insurance Fund ("SAIF") special assessment charged to all
SAIF-insured institutions nationwide. The one benefit from this assessment will
be the significant reduction in future deposit premiums effective January 1,
1997. In our case, the pre-tax assessment was $454,000, basically taking all of
our Bank's net income for the first six months of this year. Reflecting the
impact of this one-time special assessment, net income for fiscal 1997 amounted
to $435,000 compared to $552,000 for fiscal 1996.
We are well-positioned to meet tomorrow's challenges and demands. Our
Board of Directors looks forward to the future with optimism. As we look forward
to the introduction of new and expansion of existing facilities, products and
services, we remain alert to our organization's responsibility to protect and
advance the value of our shareholders' investment as well as the economic growth
of the communities and customers we serve.
Finally, we acknowledge and thank those who have made Westwood Savings'
growth and prosperity a continuing reality - first, to our customers, whose
confidence constantly motivates us to provide premium quality services, to our
employees who take justified pride in the unequalled personal attention they
provide, and to our Board members and shareholders who, with their participation
and investment, provide the capital that makes our institution's growth and
prosperity possible.
Our Board of Directors and all of our employees thank you for your past
confidence and we look forward to your continued support of Westwood Savings.
Very truly yours,
/s/William J. Woods
William J. Woods
Chairman of the Board
President & Chief Executive Officer
1
700-88 Broadway - Westwood, New Jersey 07675 -
Tel. (201) 666-5002 - FAX (201) 666-4265
<PAGE>
BUSINESS OF THE CORPORATION
WESTWOOD FINANCIAL CORPORATION
Westwood Financial Corporation (the "Corporation") is a New Jersey corporation
organized in December 1995, to facilitate the conversion of Bergen North
Financial, M.H.C. from the mutual to stock form of ownership and to acquire and
hold all of the capital stock of Westwood Savings Bank (the "Bank"). Prior to
the consummation of the Conversion and Reorganization, the Mutual Holding
Company was the majority stockholder of the Bank and upon consummation of the
Conversion and Reorganization, the Mutual Holding Company was merged into the
Bank. The Corporation acquired the Bank as a wholly owned subsidiary upon the
consummation of the Conversion and Reorganization on June 6, 1996. Since the
inception on that date, the Corporation's principal business activity has been
the ownership of the Bank's common stock.
WESTWOOD SAVINGS BANK
Westwood Savings Bank is a New Jersey chartered stock savings bank that was
formed as a result of the MHC Reorganization on December 9, 1993. The Bank is a
community oriented savings institutions offering a variety of financial services
to meet the needs of the communities its serves. It is the Bank's present
intention to remain an independent community savings bank serving the local
needs of northern Bergen County, New Jersey. The Bank operates from its main
office in Westwood, New Jersey, and one branch office in Haworth, New Jersey.
The Bank is primarily engaged in the business of attracting deposits from the
general public and using those deposits, together with other funds, to originate
mortgage loans for the purchase or refinance of residential properties and to
purchase mortgage-backed and investment securities.
Stock Market Information
On June 6, 1996, the Corporation became a public company and its Common Stock is
currently traded on the Nasdaq "Small Cap" Market under the trading symbol
"WWFC". The daily stock quotation for Westwood Financial Corporation is
published in The Wall Street Journal under the trading symbols of "WWFC" or
"WstwdF".
The following table reflects the per share stock price trading range as
published by the Nasdaq "Small Cap" Market Statistical Report. The stock price
in the initial offering was $10.00 per share.
High Low
First Quarter 6/30/96 $11 $10 1/4
Second Quarter 9/30/96 $13 1/4 $10 1/4
Third Quarter 12/31/96 $16 3/4 $13 1/4
Fourth Quarter 3/31/97 $19 3/4 $15 1/2
2
<PAGE>
The number of shareholders of record of common stock as of the record date May
28, 1997 was approximately 342. This does not reflect the number of persons or
entities who held stock in nominee or "street" name through various brokerage
firms. At March 31, 1997, there were 645,241 shares outstanding. Quarterly cash
dividends of $0.05 per share were paid on July 19, 1996, October 18, 1996,
January 18, 1997 and April 18, 1997, to the shareholders of common stock on the
record dates of June 30, 1996, September 30, 1996, December 31, 1996 and March
31, 1997, respectively.
The Corporation's ability to pay dividends to shareholders is dependent upon the
earnings from investments and dividends it receives from the Bank. The Bank may
not declare or pay a dividend on any of its stock if the effect thereof would
cause the Bank's regulatory capital to be reduced below (1) the amount required
for the liquidation account established in connection with the Bank's conversion
from mutual to stock form, or (2) the regulatory capital requirements imposed by
the FDIC.
3
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OTHER DATA
Financial Condition (In Thousands)
========================================================================================================================
At March 31, 1996 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Amount of:
Assets................................ $86,564 $107,981
Loans receivable, net(1).............. 34,504 40,371
Mortgage-backed and investment securities
held to maturity .................. 39,023 58,631
Investment securities available 4,422 2
for sale............................
Goodwill.............................. 1,238 1,132
Total retained earnings/shareholders'
equity.............................. 6,127 9,950(2)
Summary of Operations (In thousands)
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31, 1996 1997
- ------------------------------------------------------------------------------------------------------------------------
Interest and dividend income............ $5,566 $6,648
Interest expense........................ 3,314 3,775
Net interest income................... 2,252 2,873
Provision for loan losses............... 35 52
Net interest income after
provision for loan losses........... 2,217 2,821
----- -----
Total non-interest income............... 108 149
----- -----
Total non-interest expenses(3).......... 1,476 2,211
----- -----
Income before income taxes.............. 849 759
Provision for income taxes.............. 297 324
------ ------
Net income (loss)....................... $ 552 $ 435
====== ======
Other Selected Data
- ------------------------------------------------------------------------------------------------------------------------
Year Ended March 31, 1996 1997
- ------------------------------------------------------------------------------------------------------------------------
Return on average assets................ 0.7% 0.5%
Return on average equity................ 9.4 4.8
Average equity to average assets........ 7.2 9.4
Net interest rate spread................ 2.7 2.7
Net interest margin..................... 2.9 3.0
Non-performing assets to total assets(4) N/A N/A
Allowance for loan losses to total loans .5 .5
Non-performing loans to total loans(4).. N/A N/A
Non-interest expense to average assets(5) 1.8 2.3
Earnings per share...................... NM $0.73
Dividends payout ratio.................. NM 27.40%
Book value per share.................... NM $15.42
</TABLE>
NM - Not meaningful as a result of the Conversion and Reorganization completed
June 6, 1996.
- -----------------------------
(1) Net of accrued interest, loan origination fees and valuation allowances.
(2) Includes stock offering proceeds of $3.4 million related to the
Conversion and Reorganization on June 6, 1996.
(3) At March 31, 1997, includes a non-recurring expense of $454,000 in regard
to a one-time deposit premium to recapitalize the SAIF.
(4) During all periods presented, the Bank did not have any loans which
qualified for nonperforming status, and had no real estate owned.
(5) Non-interest expense at or for the years ended March 31, 1996 and 1997
includes amortization of goodwill.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Consolidated Financial Statements and Notes to the Consolidated
Financial Statements elsewhere in this document.
Our results of operations depend primarily on net interest income, which
is determined by (i) the difference between rates of interest we earn on our
interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and interest-bearing liabilities. In addition, our results of operations are
also affected by non-interest income, primarily, income from customer deposit
account service charges and non-interest expense, including, primarily, salaries
and employee benefits, federal deposit insurance premiums, office occupancy
expenses and other general and administrative expenses. We are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities, which events are beyond our control.
Asset/Liability Management
Our assets and liabilities may be analyzed by examining the extent to
which our assets and liabilities are interest rate sensitive and by monitoring
the expected effects of interest rate changes on our net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period, if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
net portfolio value and net interest income would tend to increase during
periods of rising interest rates but decrease during periods of falling interest
rates. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates. Our policy has been to mitigate the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by pursuing certain
strategies designed to decrease the vulnerability of our earnings to material
and prolonged changes in interest rates.
Net Portfolio Value
In order to measure our interest rate risk, we use a interest rate
sensitivity model similar to that used by the OTS for OTS regulated
institutions. We compute our interest rate risk by which the net present value
of our cash flow from assets, liabilities and off balance sheet items (our net
portfolio value or "NPV") would change in the event of a range of assumed
changes in market interest rates. These computations estimate the effect on our
NPV from instantaneous and permanent 1% to 3% increases and decreases in market
interest rates. At March 31, 1997, we estimated that our NPV would decrease 11%,
23%, and 35% and increase 11%, 21%, and 31% in the event of 1%, 2%, and 3%,
increases and decreases in market rates, respectively. These calculations
indicate that our net portfolio value could be adversely affected by increases
in interest rates but could be favorably affected by decreases in interest
rates. Changes in interest rates also may affect our net interest income, while
increases in rates expected to decrease income and decreases in rates expected
to increase income, our interest-bearing liabilities
5
<PAGE>
would be expected to mature or reprice more quickly than our interest-earning
assets. In addition, we would be deemed to have more than a normal level of
interest rate risk under applicable regulatory capital requirements.
While we cannot predict future interest rates or their effects on our
NPV or net interest income, we do not expect current interest rates to have a
material adverse effect on our NPV or net interest income in the future.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, prepayments and deposit run- offs and should not be relied upon as
indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and liabilities may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features which restrict changes in interest rates on a
short term basis and over the life of the asset. In the event of a change in
interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
Financial Condition
Our total consolidated assets increased by $21.4 million or 24.7% from
$86.6 million at March 31, 1996 to $108.0 million at March 31, 1997. The
increase in assets for the period was primarily attributable to the growth in
our loan portfolio of $5.8 million which was the result of increase loan demand
in our market area. In addition, our investment and mortgage-backed securities
portfolios held to maturity increased $13.2 million and $6.4 million,
respectively, which was offset by the sale of $4.4 million of securities
available for resale. Loan growth and investment and mortgage-backed securities
held for maturity were primarily funded from $3.4 million in net proceeds
received in connection with our stock offering which was completed in June 1996,
increases of $7.5 million in net deposits and $10.0 million in FHLB advances.
Our total liabilities increased $17.6 million or 21.9% from $80.4 million at
March 31, 1996 as compared to $98.0 million at March 31, 1997. Shareholders'
equity increased $3.8 million, or 62.4%, from $6.1 million at March 31, 1996 to
$9.9 million at March 31, 1997. The net increase in shareholders' equity is the
result of $3.4 million in net proceeds from our stock offering and $435,000 in
net income.
Results Of Operations for the Year Ending March 31, 1997
Net Income. Net income decreased $117,000 or 21.2% from $552,000 for
1996 to $435,000 for 1997. The decrease was primarily the result of the
recognition of the one-time SAIF special insurance assessment in the amount of
$291,000 (after taxes), which was partially offset by an increase in net
interest income of $397,000 (after taxes).
Net Interest Income. Net interest income is the most significant
component of our operations. Net interest income is the difference between
interest we receive on our interest-earning assets (primarily loans, investment
and mortgage-backed securities) and interest we pay on our interest-bearing
liabilities (primarily deposits and borrowed funds). Net interest income depends
on the volume of and rates earned on interest-earning assets and the volume of
and rates paid on interest-bearing liabilities.
6
<PAGE>
The following table sets forth a summary of average balances of assets
and liabilities with corresponding interest income and interest expense as well
as average yield and cost information. Average balances are derived from monthly
balances. However, we do not believe the use of month-end balances has caused
any material difference in the information presented. There have been no tax
equivalent adjustments made to the yields.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------------------------------------
1996 1997
------------------------------------------ -----------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable............... $32,958 $2,617 7.94% $38,503 $3,009 7.82%
Mortgage-backed securities..... 13,095 848 6.48 16,948 1,147 6.77
Cash and investment securities(1) 33,006 2,101 6.37 38,988 2,493 6.39
------ ----- ------ -----
Total interest-earning assets. 79,059 5,566 7.04 94,439 6,649 7.04
----- ---- ----- ----
Non-interest-earning assets..... 2,838 2,925
------ ------
Total assets.................. $81,897 $97,364
====== ======
Interest-bearing liabilities:
Borrowings.................... - - - 4,167 215 5.16
Deposit accounts............... 75,714 3,314 4.38 $83,563 3,560 4.26
------ ----- ------ -----
Total interest-bearing liabilities 75,714 3,314 4.38 87,730 3,775 4.30
----- ------ ----- ------
Non-interest bearing liabilities 328 487
------ ------
Total liabilities.............. 76,042 88,217
Shareholders' equity............ 5,855 9,147
------ ------
Total liabilities and shareholders' $81,897 $97,364
====== ======
equity........................
Net interest income............. $2,252 $2,874
===== =====
Interest rate spread(2)......... 2.66% 2.74%
====== ======
Net yield on interest-earning assets(3) 2.85% 3.04%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 104.42% 107.65%
====== ======
</TABLE>
- ---------------------------------
(1) Includes interest-bearing deposits in other financial institutions.
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest- bearing
liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
7
<PAGE>
The table below sets forth information regarding changes in our interest
income and interest expense for the periods indicated. For each category of our
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to (i) changes in volume (changes in volume
multiplied by old rate); (ii) changes in rate (changes in rate multiplied by old
volume); (iii) changes in rate-volume (changes in rate multiplied by the change
in volume). Increases and decreases due to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
change due to rate.
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------------------------
1995 vs. 1996 1996 vs. 1997
----------------------------------------- ----------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
----------------------------------------- ----------------------------------------
Rate/ Rate/
Volume Rate Volume Net Volume Rate Volume Net
------ ---- ------ --- ------ ---- ------ ---
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Mortgage loan portfolio... $ 177 $(28) $ (2) $ 147 $ 440 $ (40) $ (7) $ 343
Mortgage-backed securities 36 91 5 132 250 38 11 299
Investment securities/
FHLB stock.............. 490 193 70 753 380 7 1 388
----- ---- ----- ----- ---- ---- ---- ----
Total change in
interest income........ $ 703 $ 256 $ 73 $ 1,032 $ 1,070 $ 5 $ 5 $ 1,080
==== ==== ===== ====== ====== ==== ==== ======
Interest expense:
Deposits................. $ 434 $ 490 $ 92 $ 1,016 $ 344 $ (91) $ (9) $ 244
Borrowings............... 0 0 0 0 0 0 215 215
----- ---- ---- ----- ---- --- ------ -----
Total change in
interest expense...... $ 434 $ 490 $ 92 $ 1,016 $ 344 $ (91) $ 206 $ 459
==== ===== ==== ====== ===== ===== ====== ====
NET CHANGE IN NET
INTEREST INCOME.......... $ 269 $ (256) $ (19) $ 16 $ 726 $ 96 $ (201) $ 621
==== ====== ===== ===== ===== ==== ====== ====
</TABLE>
Our net interest income increased $621,000 or 27.6% to $2.9 million in
1997 compared to $2.3 million in 1996. The increase was due primarily to the
growth of average interest-earning assets from $79.0 million in 1996 to $94.4
million in 1997. The increase in our average interest-earning assets of $15.4
million reflects an increase of $5.5 million in average loans, an increase of
$3.8 million in average mortgage-backed securities and an increase of $6.0
million in average cash and investment securities, which was funded by an
increase of $7.8 in average deposit accounts and $4.1 million in average
borrowings.
Our interest rate spread and net interest margin increased in 1997
compared to 1996. This was due to a decrease in the interest cost of average
interest-bearing liabilities from 4.38% in 1996 to 4.30% in 1997. The yield on
our average interest-earning assets was 7.04% in 1996 and 1997.
The decrease in the cost of our average interest-bearing liabilities was
due primarily to decreases in the cost of our deposit accounts from 4.38% in
1996 to 4.26% in 1997, offset by borrowed money which increased to 5.16% in
1997. The lower costs of deposit accounts reflects our reduction of deposit
rates to match the decrease in interest rates during 1996 and the increase in
the cost of borrowings reflects the increase in average advances from the
Federal Home Loan Bank .
8
<PAGE>
Provision for Loan Losses. We recorded a provision for loan losses of
$52,000 in 1997 compared with $35,000 in 1996. The increase in our loan for loan
losses in 1997 and 1996 reflects the increase in the size of our loan portfolio
due to internal loan growth.
Historically, we have emphasized our loss experience over other factors
in establishing the provision for loan losses. We review the allowance for loan
losses in relation to: (i) the composition of our loan portfolio, (ii)
observations of the general economic climate and (iii) loan loss expectations
(identification of problem loans and the establishment of specific loan loss
allowances on such loans).
We will continue to monitor our allowance for loan losses and make
future adjustments to the allowance through the provision for loan losses as
economic conditions dictate. We maintain an allowance for loan losses at a level
that we consider to be adequate to provide for the inherent risk of loss in our
loan portfolio, however, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods. In addition, our determination as to the amount
of our allowance for loan losses is subject to review by the FDIC and the New
Jersey Department of Banking (the "Regulators"), as part of the examination
process, which may result in the establishment of an additional allowance based
upon the judgment of the Regulators after review of the information available at
the time of their examination.
Non-Interest Income. Our non-interest income increased $41,000 in 1997
or 37.9% from $108,000 for the year ended March 31, 1996 to $149,000 for the
year ended March 31, 1997, primarily due to an increase in ATM fees and personal
and business checking accounts which resulted in increased fee income.
Non-Interest Expense. Our non-interest expense increased by $735,000 or
49.8% from $1.48 million for 1996 to $2.21 million for 1997. The increase was
primarily attributable to the one-time special SAIF assessment of $454,000.
Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"),
the FDIC imposed a special assessment on SAIF members to capitalize the SAIF at
the designated reserve level of 1.25% as of October 1, 1996. Based on our
deposits as of March 31, 1995, the date for measuring the amount of the special
assessment pursuant to the Act, our special assessment was $454,000. Due to the
recapitalization of the SAIF, we expect lower premiums for deposit insurance in
future periods.
Pursuant to the Act, we will pay, in addition to our normal deposit
insurance premium as a member of the SAIF, an annual amount equal to
approximately 6.4 basis points of outstanding SAIF deposits toward the
retirement of the Financing Corporation Bonds ("Fico Bonds") issued in the
1980's to assist in the recovery of the savings and loan industry. Members of
the Bank Insurance Fund ("BIF"), by contrast, will pay, in addition to their
normal deposit insurance premium, approximately 1.3 basis points. Beginning no
later than January 1, 2000, the rate paid to retire the Fico Bonds will be equal
for members of the BIF and the SAIF. The Act also provides for the merging of
the BIF and the SAIF by January 1, 1999 provided there are no financial
institutions still chartered as savings associations at that time. Should the
insurance funds be merged before January 1, 2000, the rate paid by all members
of this new fund to retire the Fico Bonds would be equal.
In addition, salaries and employee benefits increased $48,000 in 1997
compared to 1996 due to our hiring of additional staff. We also recognized a
$98,000 loss on the sale of mutual funds from our investment securities
portfolio held for resale.
9
<PAGE>
Income Tax Expense. Our income tax expense increased $27,000 or 9.0%
from $297,000 for 1996 to $324,000 for 1997 as a result of a non-deductible
capital loss of $98,000 from our sale of mutual funds.
Liquidity and Capital Resources
Our primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations and advances from the FHLB of New York.
While scheduled repayments of loans and mortgage-backed securities and
maturities of investment securities are predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by the general level of
interest rates, economic conditions and competition. We use our liquidity
resources principally to fund existing and future loan commitments, to fund
maturing certificates of deposit and demand deposit withdrawals, to invest in
other interest-earning assets, to maintain liquidity, and to meet operating
expenses.
Net cash provided by our operating activities for the year ended March
31, 1997 totalled $730,000 as compared to $494,000 for the year ended March 31,
1996.
Net cash used in our investing activities for the year ended March
31,1997 totalled $21.3 an increase of $10.5 million from March 31, 1996. The
increase was primarily attributable to net loan originations of $3.6 million and
net proceeds of $6.9 from calls and maturities of our investment and
mortgage-backed securities portfolio held to maturity and the sales from our
investment securities portfolio held for resale.
Net cash provided by our financing activities for 1997 totalled $20.8
million. This was the result of a net increase in deposits of $7.5 million,
$10.0 million in FHLB advances and $3.4 million in net proceeds from our stock
offering.
Liquidity may be adversely affected by unexpected deposit outflows,
excessive interest rates paid by competitors, adverse publicity relating to the
savings and loan industry, and similar matters. Further, the disparity in Fico
Bond interest payments as described herein could result in us losing deposits to
BIF members that have lower costs of funds and therefore are able to pay higher
rates of interest on deposits. Management monitors projected liquidity needs and
determines the level desirable, based in part on our commitments to make loans
and management's assessment of our ability to generate funds. We are also
subject to federal and state regulations that impose certain minimum capital
requirements.
Impact of Inflation and Changing Prices
Our consolidated financial statements and the accompanying notes
presented elsewhere in this document, have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
our operations. As a result, interest rates have a greater impact on our
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
10
<PAGE>
Recent Accounting Pronouncements
FASB Statement on Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities. In June 1996, FASB issued SFAS No.
125, which will be effective, on a prospective basis, for fiscal years beginning
after December 31, 1996. SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components approach
that focuses on control. SFAS No. 125 extends the "available for sale" and
"trading" approach of SFAS No. 115 to non-security financial assets that can be
contractually prepaid or otherwise settled in such a way that the holder of the
asset would not recover substantially all of its recorded investment. In
addition, SFAS No. 125 amends SFAS No. 115 to prevent a security from being
classified as held to maturity if the security can be prepaid or settled in such
a manner that the holder of the security would not recover substantially all of
its recorded investment. The extension of the SFAS No. 115 approach to certain
non-security financial assets and the amendment to SFAS No. 115 are effective
for financial assets held on or acquired after January 1, 1997. The FASB has
proposed to defer the effective date of SFAS No. 125 until January 1, 1998 for
certain transactions including repurchase agreements, dollar-roll, securities
lending and similar transactions. FASB 125 will not have a material effect on
our financial statements.
FASB Statement on Earnings Per Share. In March 1997, FASB issued SFAS
No. 128, which will be effective, for fiscal years and interim periods ending
after December 15, 1997. SFAS No. 128 will require an institution to change the
method by which it calculates earnings per share. Earlier application of this
statement is not permitted, however, pro forma earnings per share amounts using
SFAS No. 128 is permitted. We do not believe the implementation of SFAS No. 128
will have a material effect upon our earnings per share calculation.
11
<PAGE>
F-1
- --------------------------------- RDH LOGO -------------------------------------
<TABLE>
<CAPTION>
RD HUNTER & COMPANY LLP
<S> <C> <C>
One Mack Centre Drive Certified Public Accountants Members
Paramus, New Jersey American Institute of
07652-3900 Certified Public Accountants
Tel 201 261-4030 New Jersey Society of
Fax 201 261-8588 Certified Public Accountants
http://www.rdhunter.com Accounting Firms Associated, Inc.
Alliott Peirson International
</TABLE>
Independent Auditors' Report
----------------------------
Board of Directors and Shareholders of
Westwood Financial Corporation and Subsidiary
700-88 Broadway
Westwood, New Jersey 07675
We have audited the accompanying consolidated balance sheets of Westwood
Financial Corporation and Subsidiary (the "Company") as of March 31, 1997 and
1996, and the related consolidated statements of shareholders' equity, income
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Westwood Financial
Corporation and Subsidiary at March 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/RD Hunter & Company LLP
----------------------------
Paramus, New Jersey RD Hunter & Company LLP
May 1, 1997 Certified Public Accountants
Offices in Paramus, New Jersey - Princeton, New Jersey - New York, New York
<PAGE>
Westwood Financial Corporation and Subsidiary F-2
Consolidated Balance Sheets
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ --------
(in thousands)
Assets
------
<S> <C> <C>
Cash and cash equivalents $ 5,408 $ 5,208
--------- ---------
Investments
Held for resale, at market value 2 4,422
Held to maturity, at amortized cost (market value of $38,124
and $25,587 at March 31, 1997 and March 31, 1996, respectively) 38,903 25,742
--------- ---------
Total investments 38,905 30,164
--------- ---------
Mortgage-backed securities, held to maturity
(market value of $19,581 and $13,266 at
March 31, 1997 and March 31, 1996, respectively) 19,728 13,281
--------- ---------
Loans and interest receivable 40,596 34,715
--------- ---------
Stock in Federal Home Loan Bank, at cost 576 440
Accrued interest receivable 852 488
Property and equipment, net 734 750
Prepaid expenses and other assets 50 279
Prepaid corporate taxes - 1
Goodwill 1,132 1,238
--------- ---------
Total other assets 3,344 3,196
--------- ---------
Total $ 107,981 $ 86,564
----- ========= =========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Deposits $ 87,857 $ 80,356
Loan payable 10,000 --
Accrued expenses 83 82
Dividends payable 32 --
Corporate taxes payable 59 --
--------- ---------
Total liabilities 98,031 80,438
--------- ---------
Shareholders' Equity:
Common stock $.10 par value 747,500 shares authorized,
645,241 issued and outstanding at 3/31/97
$2 par value 5,000,000 shares authorized,
380,000 issued and outstanding at 3/31/96 65 760
Additional paid in surplus 3,212 4,413
Stock bonus plans (80) (128)
Unrealized loss on investments -- (93)
Retained earnings 6,753 1,174
--------- ---------
Total shareholders' equity 9,950 6,126
--------- ---------
Total $ 107,981 $ 86,564
----- ========= =========
</TABLE>
(The accompanying notes are an integral part of these
consolidated financial statements)
<PAGE>
Westwood Financial Corporation and Subsidiary F-3
Consolidated Statements of Shareholders' Equity
Years Ended March 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Additional (Loss) Total
(in thousands) Common Paid in Stock Bonus Recovery on Retained Shareholders'
Stock Surplus Plans Investments Earnings Equity
----- ------- ----- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance March 31, 1995 $ 760 $ 4,413 $ (176) $ (109) $ 654 $ 5,542
Recovery of unrealized loss
on investments - - - - - - - - - 16 - - - 16
Release of stock bonus plans
shares - - - - - - 48 - - - - - - 48
Net income - - - - - - - - - - - - 552 552
Cash dividends declared - - - - - - - - - - - - (32) (32)
---------- ---------- ---------- ------- ------- -------
Balance March 31, 1996 760 4,413 (128) (93) 1,174 6,126
Exchange of Westwood Savings Bank
stock to Westwood Financial
Corporation and Subsidiary (760) (4,413) - - - - - - 5,273 100
Proceeds from Westwood Financial
Corporation and Subsidiary
initial public offering 65 3,263 - - - - - - - - - 3,328
Purchase and retirement of
treasury stock - - - (51) - - - - - - - - - (51)
Loss realized on sale of
investments held for resale - - - - - - - - - 93 - - - 93
Release of stock bonus plan shares - - - - - - 48 - - - - - - 48
Net income - - - - - - - - - - - - 435 435
Cash dividends declared - - - - - - - - - - - - (129) (129)
---------- ---------- ---------- ------- ------- -------
Balance March 31, 1997 $ 65 $ 3,212 $ (80) $ - - - $ 6,753 $ 9,950
---------------------- ========== ========== ========== ======= ======= =======
</TABLE>
(The accompanying notes are an integral part of these
consolidated financial statements)
<PAGE>
Westwood Financial Corporation and Subsidiary F-4
Consolidated Statements of Income
Years Ended March 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
---- ----
( $ in thousands except
earnings per share data)
Interest and dividend income:
Loans receivable $ 3,008 $ 2,616
Mortgage backed securities 1,147 849
Investment securities and other
interest bearing assets 2,463 2,070
Federal Home Loan Bank stock 30 31
------ ------
6,648 5,566
------ ------
Interest expense:
Deposits 3,560 3,314
Borrowings 215 - - -
------ -------
3,775 3,314
------ -------
Net interest income 2,873 2,252
Provision for loan losses 52 35
------- ------
Net interest income after
provision for loan losses 2,821 2,217
------ -----
Non-interest income:
Late charges 6 7
Miscellaneous charges and fees 143 101
------ ------
149 108
------ -----
Non-interest expenses:
General and administrative 882 748
Salaries and employee benefits 672 624
Rent and utilities 105 104
SAIF Special assessment 454 - - -
Loss on sale of investments held for resale 98 - - -
------- -------
2,211 1,476
------ -----
Income before taxes on income 759 849
------- ------
Taxes on income:
Federal income tax 314 272
NJ Savings Institution tax 10 25
-------- -------
Total taxes on income 324 297
------- ------
Net income $ 435 $ 552
---------- ======= =======
Earnings per share $ .73
------------------ =======
(The accompanying notes are an integral part of these
consolidated financial statements)
<PAGE>
Westwood Financial Corporation and Subsidiary F-5
Consolidated Statements of Cash Flows
Years Ended March 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
---- ----
Operating activities:
Net income $ 435 $ 552
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 163 155
Provision for loan losses 52 35
Stock bonus plans expense 48 48
Loss on sale of investments 98 -
(Increase) decrease in assets:
Interest receivable (364) (96)
Prepaid corporate taxes 1 8
Prepaid expenses 229 (223)
Increase (decrease) in liabilities:
Interest payable 8 46
Deferred income - (19)
Corporate taxes payable 59 22
Accrued expenses 1 (34)
------- ------
Net cash provided by operating activities 730 494
------- ------
Investing activities:
Loans made to customers (13,797) (9,445)
Principal collected on loans 7,864 7,129
Purchase of FHLB stock (136) (19)
Purchase of investments (25,609) (24,376)
Proceeds from matured/called investments 10,416 15,986
Purchases of property and equipment (53) (55)
Acquisition of goodwill 12 -
------- ------
Net cash used in investing activities (21,303) (10,780)
------- -------
Financing activities:
Net increase in deposit accounts 7,493 10,487
Proceeds from borrowings 10,000 -
Dividends paid (97) (48)
Proceeds from public stock offering, net 3,428 -
Purchase of treasury stock (51) -
------- -------
Net cash provided by financing activities 20,773 10,439
------- -------
Increase in cash and cash equivalents 200 153
Cash and cash equivalents, beginning of year 5,208 5,055
------- -------
Cash and cash equivalents, end of year $ 5,408 $ 5,208
-------------------------------------- ====== ======
Supplemental disclosures of cash flow information:
- --------------------------------------------------
Cash paid for interest $ 3,767 $ 3,267
====== ======
Cash paid for taxes on income $ 264 $ 267
====== ======
(The accompanying notes are an integral part of these
consolidated financial statements)
<PAGE>
Westwood Financial Corporation and Subsidiary F-6
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
Westwood Financial Corporation is a holding company whose subsidiary, Westwood
Savings Bank, has been serving Northern Bergen County, New Jersey since 1906.
The Bank is a full service financial institution which primarily grants first
and second mortgages on one and two family homes to qualified applicants within
the Northern Bergen County region secured by security liens on the respective
properties.
A. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of Westwood Financial Corporation and Westwood Savings
Bank, a wholly-owned subsidiary of the Corporation. All significant
intercompany balances and transactions have been eliminated in
consolidation. The financial statements at March 31, 1996 are the
audited financial statements at that date of Westwood Savings Bank.
B. Organization
------------
The Corporation is a New Jersey stock corporation organized in
December 1995 to facilitate the conversion of the Bank's holding
company (formerly Bergen North Financial, M.H.C.) from the mutual to
stock form of ownership and to acquire and hold all of the capital
stock of the Bank. In connection with the conversion, Bergen North
Financial, M.H.C., which had owned 58% of the Bank's common stock,
was merged with and into the Bank, and its shares of the Bank were
canceled. On June 6, 1996, the Corporation issued 261,488 shares of
its common stock for all of the remaining outstanding shares of the
Bank, and issued and sold 385,184 shares of its common stock at a
price of $10.00 per share which after giving effect to offering
expenses of $424,000 resulted in net proceeds of $3,428,000. Since
June 6, 1996, the Corporation engaged in no significant business
activity other than its ownership of the Bank's common stock.
C. Use of Estimates
----------------
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could
differ significantly from these estimates.
Material estimates that are particularly susceptible to significant
change relates to the determination of the allowance for loan
losses.
<PAGE>
Westwood Financial Corporation and Subsidiary F-7
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies - (continued)
--------------------------------------------------------
D. Investments and Mortgage-Backed Securities
------------------------------------------
The Bank adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), effective March 31, 1994. SFAS 115 requires
the Bank to classify its securities as: (1) held to maturity, (2)
available for sale and (3) trading.
Securities held to maturity consist of debt securities that
management intends to, and the Bank has the ability to, hold until
maturity. Such securities are stated at cost, adjusted for
amortization of premium and accretion of discount.
Securities available for sale consist of debt and equity securities
that are not intended to be held to maturity and are not held for
trading. Securities available for sale are reported at fair value,
with unrealized gains and losses credited or charged, net of tax
effect, directly to stockholders' equity. Realized gains and losses
on securities available for sale are determined on a specific
identification basis.
The Bank has not classified any of its securities as trading.
E. Loans Receivable
----------------
Loans are stated at their principal amounts outstanding, net of
unearned income and loan origination fees and costs. Interest on
loans is accrued and credited to interest income based on loan
principal amounts outstanding at appropriate interest rates. Loan
origination fees and certain direct loan origination costs are
deferred and recognized over the life of the loan as an adjustment
to the loan's yield. When management believes there is sufficient
doubt as to the ultimate collectibility of interest on any loan, the
accrual of applicable interest is discontinued. Any subsequent
payments are credited to income as received. Other loan fees are
recorded as earned and included in non-interest income.
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan," (SFAS No. 114) as amended by
Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan- Income Recognition and
Disclosures," (SFAS No. 118) were adopted prospectively by the Bank
on January 1, 1995. SFAS No. 114 defines an impaired loan as a loan
for which it is probable based on current information, that the
lender will not collect all amounts due under the contractual terms
of the loan agreement. The Bank has defined the population of
impaired loans to be all non-accrual loans. Commercial and mortgage
impaired loans are individually assessed to determine that each
loan's carrying value is not in excess of the fair value of the
related collateral or the present value of the expected future cash
flows. There were no impaired loans at March 31, 1997 as defined by
SFAS 114 and SFAS 118.
<PAGE>
Westwood Financial Corporation and Subsidiary F-8
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies: (continued)
-------------------------------------------------------
F. Provision for Loan Losses
-------------------------
The allowance for loan losses is established through a provision for
loan losses charged to income. Losses on loans are charged against
the allowance when management believes the collectibility of
principal is unlikely. Subsequent recoveries, if any, are credited
to the allowance. The allowance for loan losses is based upon
factors such as individual loan characteristics, changes in
composition and volume of the loan portfolio, economic conditions
and other factors that may warrant recognition in maintaining an
allowance at a level sufficient to provide for estimated loan
losses. Management believes that the allowance for loan losses is
adequate. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions, particularly in Northern
New Jersey. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank to
recognize additions to the allowance based on their judgements about
information available to them at the time of their examination.
G. Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization charges
are computed using the straight-line method, over the estimated
useful lives of the assets. The estimated useful lives are as
follows:
Classification Life (Years)
-------------- ------------
Building and building improvements 39
Office property and equipment 5 to 10
Leasehold improvements 10
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," in
fiscal year 1997. This statement requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present. Impairment would be considered when the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Implementation of this
statement had no effect on the consolidated financial statements.
<PAGE>
Westwood Financial Corporation and Subsidiary F-9
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies: (continued)
-------------------------------------------------------
H. Goodwill
--------
Goodwill, which represents the excess of the cost of acquiring the
Haworth, New Jersey branch over the fair value of the net assets at
the date of acquisition, is being amortized using the straight line
method over 15 years. The asset is evaluated annually for potential
impairment.
I. Interest Rate Risk
------------------
The Company is engaged principally in providing first mortgage loans
to individuals. At March 31, 1997, the Company's assets consist
primarily of assets that earned interest at fixed interest rates.
Those assets were funded primarily with short-term liabilities that
have interest rates that vary with market rates over time.
The shorter duration of the interest-sensitive liabilities indicates
that the Company is exposed to interest rate risk because, in a
rising rate environment, liabilities will be repricing faster at
high interest rates, thereby reducing the market value of long-term
assets and net interest income.
J. Statement of Cash Flows
-----------------------
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks with original
maturities of three months or less, and Federal funds sold.
Generally, Federal funds sold are for a one-day period.
K. Income Taxes
------------
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). Under the asset and liability method of SFAS
No. 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
<PAGE>
Westwood Financial Corporation and Subsidiary F-10
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies: (continued)
-------------------------------------------------------
L. Earnings per Share
------------------
Earnings per share amounts for the year end March 31, 1997 are
determined by dividing net income by the calculated weighted average
number of shares of common stock and common stock equivalents
outstanding. Stock options are regarded as common stock equivalents
computed using the Treasury Stock method, however, they did not have
a material effect on primary and fully diluted earnings per share.
Earnings per share data is not presented for the year end March 31,
1996 due to the conversion and reorganization effective June 6,
1996, and such information would not be meaningful.
Note 2 - Cash and Cash Equivalents:
-------------------------
Cash and cash equivalents consist of the following at March 31:
1997 1996
---- ----
Noninterest bearing:
Cash on hand $ 1,475 $ 330
Fleet Bank 19 36
Core States Bank 31 50
Westwood Savings Bank 5 -
------ ------
1,530 416
----- -----
Interest bearing:
Federal Reserve Bank 1,751 1,236
F.H.L.B. - Demand 327 256
F.H.L.B. - Overnight 700 300
First USA 1,000 3,000
Bogota Savings Bank 100 -
----- ------
3,878 4,792
----- ------
Total $ 5,408 $ 5,208
----- ===== =====
<PAGE>
Westwood Financial Corporation and Subsidiary F-11
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 3 - Loans Receivable and Interest Receivable:
----------------------------------------
March 31, 1997
--------------
Loans receivable and interest receivable consist of the following:
Loans
Receivable
----------
(in thousands)
Conventional direct reduction mortgages $ 29,215
Second mortgages 6,592
Mortgage loan participation 436
V.A. Direct Reduction Mortgages 12
Account loans 971
Property improvement loans 1,062
Home equity lines of credit 1,708
Student loans 113
Automobile loans 300
Personal loans 189
Construction loans 68
NOW credit reserve loans 1
--------
40,667
Add, interest receivable 225
Less, Deferred loan origination
fees (see Note 4) (78)
Valuation allowance relating
to loan losses (see Note 5) (218)
--------
Total $ 40,596
----- ========
The following table sets forth the maturity of loans receivable as of
March 31, 1997:
(In Thousands)
--------------
Maturity of one year or less $ 3,534
Maturity of over one through two years 1,148
Maturity of over two through three years 1,796
Maturity of over three through five years 5,988
Maturity of over five through ten years 8,029
Maturity of over ten years 20,172
------
Total $ 40,667
----- ======
<PAGE>
Westwood Financial Corporation and Subsidiary F-12
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 3 - Loans Receivable and Interest Receivable: - (continued)
----------------------------------------
March 31, 1996
--------------
Loans receivable and interest receivable consist of the following:
Loans
Receivable
----------
(in thousands)
Conventional direct reduction mortgages $ 26,578
Second mortgages 4,782
Mortgage loan participation 439
F.H.A. Direct Reduction Mortgages 9
V.A. Direct Reduction Mortgages 13
Account loans 489
Property improvement loans 830
Home equity lines of credit 1,075
Student loans 87
Automobile loans 356
Personal loans 180
--------
34,838
Add, interest receivable 211
Less, Deferred loan origination
fees (see Note 4) (165)
Valuation allowance relating
to loan losses (see Note 5) (169)
--------
Total $ 34,715
----- ======
<PAGE>
Westwood Financial Corporation and Subsidiary F-13
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 4 - Deferred Income:
---------------
March 31,
---------
1997 1996
---- ----
(in thousands)
Deferred income deducted from loans
receivable in Note 3 (above) consists
of the following:
Deferred loan fees $ 54 $ 125
Modification origination fees 24 40
----- -----
Total $ 78 $ 165
----- ===== =====
Note 5 - Valuation Allowance:
-------------------
The valuation allowance pertaining to loan losses deducted from loans
receivable in Note 3 (above) consists of the following:
March 31,
---------
1997 1996
---- ----
(in thousands)
Balance, beginning of period $ 169 $ 134
Add, provision charged to income 52 35
Less, losses charged against
allowance (3) -
----- ----
Balance, end of period $ 218 $ 169
---------------------- ===== =====
<PAGE>
Westwood Financial Corporation and Subsidiary F-14
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 6 - Investments and Accrued Interest:
-----------------------------------
<TABLE>
<CAPTION>
March 31, 1997
--------------
Gross Gross
Interest Face Amortized Unrealized Unrealized Market Accrued
Maturity Rate Amount Cost Gains Losses Value Interest
-------- ---- ------ ---- ----- ------ ----- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Investments held for resale:
Asset Manage-
ment Fund
Adjustable
Rate
Mortgages N/A 6.144% $ 2 $ 2 $ - $ - $ 2 $ -
===== ===== ======= ====== ===== ====== ======= ========
2. Investments held to maturity:
Federal Home 5.04%
Loan Bank to
Notes Various 8.31% $ 15,500 $15,497 $ - $ (282) $15,215 $ 259
Federal Home 04/21/97 5.47%
Loan Bank to to
Term Deposits 05/19/97 5.51% 1,000 1,000 - - 1,000 1
US Treasury
Note 01/15/99 6.375% 500 497 3 - 500 6
Federal National 5.3%
Mortgage Assoc. to
Bonds Various 8.0% 8,000 8,000 - (122) 7,878 154
Westwood Board
of Education
Bond 06/15/00 5.35% 400 409 2 - 411 6
Student Loan
Marketing
Association
Bonds 07/25/00 6.445% 500 500 - (6) 494 6
Federal Home
Loan Mortgage 02/02/99 5.7%
Corporation to to
Bonds 11/20/06 8.04% 13,000 13,000 - (374) 12,626 311
------ ------ ------ ----- ------ --------
Total $38,900 $8,903 $ 5 $ (784) $38,124 $ 743
----- ======= ====== ====== ====== ======= =======
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-15
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 6 - Investments and Accrued Interest: - (continued)
--------------------------------
<TABLE>
<CAPTION>
March 31, 1996
--------------
Gross Gross
Interest Face Amortized Unrealized Unrealized Market Accrued
Maturity Rate Amount Cost Gains Losses Value Interest
-------- ---- ------ ---- ----- ------ ----- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Investments held for resale:
Asset Manage-
ment Fund
Adjustable
Rate
Mortgages N/A 5.944% $ 3,500 $ 3,500 $ - $ (14) $ 3,486 $ 18
Overland Express
Variable Rate
Government Fund N/A 4.786% 1,015 1,015 - (79) 936 4
------- ------- ------ ----- ------ ------
$ 4,515 $ 4,515 $ - $ (93) $ 4,422 $ 22
======= ===== ====== ===== ====== ======
2. Investments held to maturity:
Federal Home 5.04%
Loan Bank to
Notes Various 8.31% $ 13,000 $ 12,997 $ - $ (89) $12,908 $ 196
Federal Home 04/08/96 5.13%
Loan Bank to to
Term Deposits 04/22/96 5.66% 2,000 2,000 - - 2,000 18
US Treasury
Note 01/15/99 6.375% 500 496 10 - 506 6
Federal National
Mortgage Assoc.
Bonds Various 8.0% 6,500 6,500 - (52) 6,448 121
First USA Bank
Certificate of
Deposit 03/21/97 5.85% 750 750 - - 750 1
Student Loan
Marketing 10/14/99 6.445%
Association and to
Bonds 03/25/00 7.82% 1,000 1,000 4 - 1,004 24
Federal Home
Loan Mortgage 02/02/99 5.7%
Corporation to to
Bonds 02/27/06 7.584% 2,000 1,999 - (28) 1,971 16
-------- ------- -------- ------- ------- ------
Total $ 25,750 $ 25,742 $ 14 $ (169) $25,587 $ 382
----- ======== ======= ====== ===== ======= ======
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-16
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 6 - Investments and Accrued Interest: (continued)
--------------------------------
Investments held to maturity are scheduled to mature contractually
within the following periods as of March 31, 1997:
<TABLE>
<CAPTION>
(In Thousands)
--------------
Amortized Market
Cost Value
---- -----
<S> <C> <C>
Maturity of one year or less $ 1,000 $ 1,000
Maturity of more than one year through five years 15,905 15,760
Maturity of more than five years through ten years 17,998 17,514
Maturity of more than ten years 4,000 3,850
------ ------
Total $ 38,903 $ 38,124
----- ====== ======
</TABLE>
Note 7 - Mortgage-backed Securities and Accrued Interest:
-----------------------------------------------
<TABLE>
<CAPTION>
March 31, 1997
--------------
Gross Gross
Interest Face Amortized Unrealized Unrealized Market Accrued
Maturity Rate Amount Cost Gains Losses Value Interest
-------- ---- ------ ---- ----- ------ ----- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments held to maturity:
Federal National
Mortgage Assoc 1/1/99 6.5%
Participating to to
Certificates 3/1/26 7.5% $ 5,029 $ 3,227 $ - $ (80) $ 3,147 $ 19
Federal Home
Loan Mortgage
Corporation 4/1/96 5.0%
Participating to to
Certificates 1/1/02 8.75% 14,498 5,256 - (119) 5,137 29
Federal Home
Loan Mortgage
Corporation 4/1/17
Participating to
Certificates 9/1/22 ARM 3,184 684 12 - 696 8
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-17
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 7 - Mortgage-backed Securities and Accrued Interest: (continued)
-----------------------------------------------
<TABLE>
<CAPTION>
March 31, 1997
--------------
Gross Gross
Interest Face Amortized Unrealized Unrealized Market Accrued
Maturity Rate Amount Cost Gains Losses Value Interest
-------- ---- ------ ---- ----- ------ ----- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments held to maturity:
Government National
Mortgage Assoc
Participating
Certificate 5/15/01 8% 9 9 - - 9 -
Government National 11/20/22 5.0%
Mortgage to to
Association 3/20/27 7.125% 10,040 9,208 27 - 9,235 44
Federal National
Mortgage Assoc 1/1/17
Participating to
Certificates 11/1/22 ARM 2,129 1,344 13 - 1,357 8
------ ------ ----- ----- ------ ----
Total $ 34,889 $ 19,728 $ 52 $ (199) $ 19,581 $ 108
----- ====== ====== ===== ==== ====== ====
</TABLE>
Mortgage-backed securities held to maturity are scheduled to mature
contractually within the following periods as of March 31, 1997:
<TABLE>
<CAPTION>
(In Thousands)
--------------
Amortized Market
Cost Value
---- -----
<S> <C> <C>
Maturity of one year or less $ 394 $ 393
Maturity of more than one year through five years 6,244 6,101
Maturity of more than five years through ten years - -
Maturity of more than ten years 13,090 13,087
------ ------
Total $ 19,728 $ 19,581
----- ====== ======
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-18
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 7 - Mortgage-backed Securities and Accrued Interest:- (continued)
-----------------------------------------------
<TABLE>
<CAPTION>
March 31, 1996
--------------
Gross Gross
Interest Face Amortized Unrealized Unrealized Market Accrued
Maturity Rate Amount Cost Gains Losses Value Interest
-------- ---- ------ ---- ----- ------ ----- --------
($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments held to maturity:
Federal National
Mortgage
Association 1/1/99 6.5%
Participating to to
Certificates 3/1/26 7.5% $ 4,015 $ 2,597 $ - $ (41) $ 2,556 $ 15
Federal Home
Loan Mortgage
Corporation 4/1/96 5%
Participating to to
Certificates 1/1/02 8.75% 14,763 6,527 - (55) 6,472 36
Federal Home
Loan Mortgage
Corporation 4/1/17
Participating to
Certificates 9/1/22 ARM 4,696 853 19 - 872 10
Government National
Mortgage
Association
Participating
Certificates 5/15/01 8% 11 11 1 - 12 -
Government National
Mortgage 11/20/22 to
Association 10/24/24 7.25% 2,015 1,661 47 - 1,708 10
Federal National
Mortgage
Association 1/1/17
Participating to
Certificates 11/1/22 ARM 2,129 1,632 14 - 1,646 10
------ ------ ---- ------ ------ ----
Total $ 27,629 $ 13,281 $ 81 $ (96) $ 13,266 $ 81
----- ====== ====== ===== ===== ====== =====
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-19
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 8 - Property and Equipment:
----------------------
Office property and equipment consist of the following at March 31:
1997 1996
---- ----
(in thousands)
Land $ 165 $ 165
Building and building improvements 370 363
Furniture, fixtures
and equipment 403 357
Leasehold improvements 158 158
----- -----
1,096 1,043
Less, accumulated depreciation
and amortization 362 293
----- -----
Total $ 734 $ 750
----- ===== ======
Depreciation expense was $69,726 and $60,012 for the years ended March
31, 1997 and 1996, respectively.
Note 9 - Deposits:
--------
Deposits, which include demand and savings accounts, certificates of
deposit, and individual retirement accounts are classified as follows
at March 31:
1997 1996
-------------- ----------------
Balances by Interest Rate Amount % Amount %
($ in thousands)
Demand accounts (1.5 to 3.0%) $ 13,111 15 $ 12,631 16
Savings accounts (2.53 to 3.1%) 17,817 20 17,459 21
------ --- ------ ---
30,928 35 30,090 37
------ --- ------ ---
Certificates and Individual
Retirement Accounts:
3.02 to 4.14% 537 1 759 1
4.15 to 5.5% 27,754 32 32,243 40
5.55 to 7.0% 28,514 32 16,682 21
7.10 to 7.82% - - 466 1
--------- ---- ------- ---
56,805 65 50,150 63
------ --- ------ ---
Accrued interest 124 - 116 -
------- ---- ------- ----
Total $ 87,857 100 $ 80,356 100
----- ====== === ====== ===
Included in deposits as of March 31, 1997 and 1996 were $3,011,000 and
$3,037,000, respectively, of individual deposits greater than
$100,000.
<PAGE>
Westwood Financial Corporation and Subsidiary F-20
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 10 - Time Deposits:
-------------
While frequently renewed at maturity rather than paid out, certificate
amounts are scheduled to mature contractually within the following
periods as of March 31, 1997:
(In Thousands)
Maturity of one year or less $ 50,151
Maturity of more than one year 5,676
Maturity of more than two years 506
Maturity of more than three years
through five years 472
Maturity of more than five years through
ten years -
Maturity of more than 10 years -
-------
Total $ 56,805
----- =======
Note 11 - Loans Payable
-------------
Balance at March 31:
--------------------
1997 1996
---- ----
(in thousands)
Federal Home Loan Bank of New York
$10,000,000 advance dated November 25, 1996
due November 25, 1998 with interest at 5.96%
paid monthly, secured by qualifying one to
four family first lien mortgages held by
the Company. $ 10,000 $ - - -
======== ========
Note 12 - Commitments and Contingencies:
Operating Leases:
Effective June 1, 1991 the Bank entered into a ten year lease for
office space. This lease calls for minimum rents of $50,700 the first
year escalating to $93,660 in the final year of the lease. The Bank is
also liable for its proportionate share of property taxes as well as
certain Merchant Association dues.
<PAGE>
Westwood Financial Corporation and Subsidiary F-21
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 12 - Commitments and Contingencies: - (continued)
-----------------------------
Operating Leases:
-----------------
The future minimum rental payments are as follows at March 31, 1997:
($ in thousands)
----------------
1998 $ 80
1999 84
2000 89
2001 93
Thereafter 16
---
Total $ 362
----- ===
Rental expense under operating leases for the years ended March 31,
1997 and 1996 was $91,728 and $89,902, respectively.
Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------
In the ordinary course of the business of meeting the financial needs
of its customers, the Bank is party to various financial instruments
which are properly not reflected in the financial statements. These
financial instruments include unused portions of lines of credit and
commitments to extend various types of credit.
These instruments involve, to varying degrees, elements of credit risk
in excess of the amounts recognized in the financial statements. The
Bank seeks to limit any exposure of credit loss by applying the same
credit underwriting standards it uses for on-balance sheet lending
facilities. The following table provides a summary of financial
instruments with off-balance sheet risk at March 31, 1997.
<TABLE>
<CAPTION>
Contract
Amount
------
($ in thousands)
<S> <C>
Commitments under unused lines of credit $ 2,127
Outstanding loan commitments 1,052
-----
Total financial instruments with off-balance sheet risk $ 3,179
------------------------------------------------------- =======
</TABLE>
Litigation
----------
In the normal course of business, the Bank may be a party to various
legal proceedings and claims. In the opinion of management, the
financial position or results of operations of the Bank will not be
materially affected by the outcome of such legal proceedings and
claims.
<PAGE>
Westwood Financial Corporation and Subsidiary F-22
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 13 - Federal Income Taxes:
--------------------
The Small Business Job Protection Act of 1996 (1996 Act) repealed the
"percentage of income method" for accounting for the provision for bad
debts. The Bank has used this method consistently in developing their
bad debt provision and reserve for income tax purposes through March
31, 1996. The 1996 Act requires the Bank to recapture any addition to
this reserve made subsequent to 1987. The Bank has approximately
$392,000 of post 1987 reserves for which no deferred income tax
liability, approximately $145,000, has be recognized.
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------
1997 1996
----------------- -----------------
($ in thousands) Amount % Amount %
-------- ----- ------- ---
<S> <C> <C> <C> <C>
Computed statutory federal tax expense $ 258 34.0% $ 289 34.0%
--- ---- --- ----
Changes in tax expense resulting from:
Benefit of state income tax deduction (4) (.5) (9) (1.0)
Bad debt deductions - - (25) (2.9)
Dividend income exclusion (7) (.9) (7) (0.9)
Other 34 4.4 24 2.8
Non-deductible capital loss 33 4.3 - -
----- ---- ---- ---
56 7.3 (17) (2.0)
----- ---- ---- ----
Federal income tax expense $ 314 41.3% $ 272 32.0%
-------------------------- ===== ==== === ====
</TABLE>
Note 14 - Capital Adequacy:
----------------
A reconciliation of shareholders' equity as reported in the
accompanying financial statements in accordance with generally
accepted accounting principles (GAAP) to the three components of
regulatory capital required by the Financial Institutions Reform,
Recovery, and Enforcement Act (FIRREA) of 1989 is as follows as of
March 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------------------------- -----------------------------------
Tier 1 Risk- Tier 1 Risk-
GAAP Leverage or Core Based GAAP Leverage or Core Based
Capital Capital Capital Capital Capital Capital Capital Capital
------- ------- ------- ------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net worth reported for financial
statement purposes: $ 8,385 $ 8,385 $ 8,385 $ 8,385 $ 6,126 $ 6,126 $ 6,126 $ 6,126
===== =====
Adjustments to arrive at regulatory capital:
Non-allowable capital (160) (160) (160) (112) (112) (112)
Non-allowable assets (1,132) (1,132) (1,132) (1,238) (1,238) (1,238)
General loan valuation allowance - - 218 - - 169
----- ----- ----- ----- ----- -----
Computed regulatory capital 7,093 7,093 7,311 4,776 4,776 4,945
Minimum capital requirement 3,124 1,531 3,063 2,520 1,320 2,639
----- ----- ----- ----- ----- -----
Regulatory capital-excess $ 3,969 $ 5,562 $ 4,248 $ 2,256 $ 3,456 $ 2,306
------------------------- ===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
Westwood Financial Corporation and Subsidiary F-23
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 15 - Treasury Stock:
--------------
On January 10, 1997, the Company completed a "Modified Dutch Auction"
self-tender offering which commenced on November 25, 1996. A total of
1,431 shares were purchased at a price of $15.00 per share plus costs
of the offering of $31,000 and held as treasury stock. The Board of
Directors approved the retirement of the shares held as treasury stock
which resulted in a reduction of additional paid in capital of
$51,000.
Note 16 - Interest on Deposits:
--------------------
Interest expense on customer deposits is summarized as follows at
March 31:
1997 1996
---------- ----------
(in thousands)
Interest expense on:
Certificates of deposit and
other time deposits $ 2,920 $ 2,693
Savings accounts 416 387
NOW accounts 230 238
------ ------
3,566 3,318
Less, penalties for early
withdrawal (6) (4)
------ ------
Total $ 3,560 $ 3,314
----- ====== ======
Note 17 - Loan Commitments:
----------------
The Bank had open loan commitments at March 31, 1997 and 1996 of
$1,052,000 and $1,073,000, respectively. All loan commitments expire
thirty to sixty days from the date issued. These commitments, which
are not reflected in the accompanying financial statements, are broken
down by interest rate as follows:
Years Ended March 31,
Rate 1997 1996
---------- ------------ --------
(in thousands)
6.5 - 6.9 $ 22 $ 430
7.0 - 7.4 405 378
7.5 - 8.0 273 -
8.1 - 8.5 110 265
8.6 - 9.0 230 -
9.1 -10.0 12 -
----- -----
$ 1,052 $ 1,073
===== =====
<PAGE>
Westwood Financial Corporation and Subsidiary F-24
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 18 - Loans to Related Parties:
------------------------
The Bank has had, and expects to have in the future, banking
transactions conducted in the ordinary course of business with
directors, executive officers and their affiliates on the same terms
as those prevailing for comparable transactions with other borrowers.
These loans amounted to $371,824 and $257,366 at March 31, 1997 and
1996, respectively, and do not involve more than normal risks of
repayment. At March 31, 1997 and 1996, these loans represented 3.7%
and 4.2%, respectively, of shareholders' equity.
Note 19 - Employee Benefit Plan:
---------------------
As of January 1, 1994 the bank adopted a financial institution thrift
plan pursuant to IRS Section 401(K). Employees of the bank may
participate in the 401(K) plan whereby they may elect to make
contributions pursuant to a salary reduction agreement upon meeting a
length of service requirement. The bank matched the employee
contribution at a rate of 25% of up to 4% of the employees salary. As
of January 1, 1996 the bank began matching the employee contribution
at a rate of 50% of up to 4% of the employees salary. The bank's
contributions to the plan for the years ended March 31, 1997 and 1996
were $7,214 and $5,011, respectively.
Note 20 - Stock Bonus Plans:
-----------------
Effective December 9, 1993, in connection with the reorganization of
Westwood Savings Bank, the Bank established three Management Stock
Bonus Plans ("MSBPs") to reward certain key directors, officers and
employees with proprietary interest in the Bank as compensation for
future professional service. The Bank contributed 24,000 shares of
common stock to the Plans, and accordingly, recorded no proceeds for
the issuance of the common stock. Shares are granted at the discretion
of a committee appointed by the Board of Directors and vested at a
rate of 20% per year over 5 years. The Bank will record compensation
expense and equity as individual employees vest in allocated shares.
After the conversion of Westwood Financial Corporation and Subsidiary,
the 24,000 shares were exchanged for 39,216 shares. As of March 31,
1997 and 1996 the Plan had granted 39,216 and 24,000 shares,
respectively, to employees of which 26,235 and 9,989 shares have been
vested as of March 31, 1997 and 1996, respectively. Compensation
expense recorded for the MSBP's shares totaled $48,000 for the years
ended March 31, 1997 and 1996. The expense is being recognized pro
rata over a sixty month period starting from the date of
reorganization (December 9, 1993) for financial statement purposes.
<PAGE>
Westwood Financial Corporation and Subsidiary F-25
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 21 - Stock Option Plan:
-----------------
In December 1995, in connection with the 1993 option plans, the
remaining options (8,003 shares) were granted to officers and
directors at an exercise price of $13.25 per share. After the
conversion of Westwood Financial Corporation and Subsidiary, the
exercise price was adjusted to $8.11. No options granted under 1993
option plans have been exercised as of March 31, 1997.
Financial Accounting Standards Board (FASB) Statement on Accounting
for Stock-Based Compensation - In October 1995, FASB issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock Based Compensation." SFAS No. 123 defines a "fair value based
method" of accounting for an employee stock option whereby
compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period. FASB encourages
all entities to continue the use of the "intrinsic value based method"
prescribed by Accounting Principles Board ("APB") Opinion No. 25.
Under the intrinsic value based method, compensation cost is the
excess of the market price of the stock at the grant date over the
amount an employee must pay to acquire the stock. However, most stock
option plans have no intrinsic value at the grant date and, as such,
no compensation cost is recognized under APB Opinion No. 25. Entities
electing to continue use of the accounting treatment of APB Opinion
No. 25 must make certain pro forma disclosures as if the fair value
based method had been applied. The accounting requirements of SFAS No.
123 are effective for transactions entered into in fiscal years
beginning after December 15, 1995. Pro forma disclosures must include
the effects of all awards granted in fiscal years beginning December
15, 1994. The Bank anticipates to continue using the "intrinsic value
based method" as prescribed by APB Opinion No. 25. Had compensation
cost for the Company's stock option plans been determined based on the
fair value at the dates of the awards under those plans consistent
with the method of SFAS No. 123, the effect on the Company's net
income and income per share would be immaterial to the financial
statements.
<PAGE>
Westwood Financial Corporation and Subsidiary F-26
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 22 - Fair Value of Financial Instruments
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" (SFAS 107), requires
disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. The fair value of a financial
instrument is defined as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. SFAS 107 excludes certain financial
instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Bank.
Fair value estimates are made at a specific point in time based on
relevant market information and information about the financial
instrument. In cases where the quoted market prices are not available,
fair values are based on estimates using present value or other
valuation techniques. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
entire holdings of a particular financial instrument. Those techniques
are significantly affected by the assumptions used, including the
discount rate and estimated future cash flows, and judgements
regarding expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors.
These estimates involve uncertainties and are subjective in nature,
and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Fair value estimates are determined for on and off balance sheet
financial instruments, without attempting to estimate the value of
anticipated future business, and the value of assets and liabilities
that are not considered financial instruments. Tax implications
related to the realization of the unrealized gains and losses have a
significant effect on fair value estimates and have not been
considered in any of the estimates.
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments.
Cash and cash equivalents and accrued interest receivable:
The fair value for cash and cash equivalents and accrued interest
receivable are equal to the carrying amounts reported in the financial
statements.
Securities:
The fair values for securities are based on quoted market prices,
where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.
<PAGE>
Westwood Financial Corporation and Subsidiary F-27
Notes to the Consolidated Financial Statement
March 31, 1997 and 1996
- --------------------------------------------------------------------------------
Note 22 - Fair Value of Financial Instruments (continued)
-----------------------------------
Loans:
-----
The fair values of loans are estimated by discounting future cash
flows, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.
Deposits:
--------
The fair value of demand and savings deposits are equal to the
carrying amounts reported in the financial statements. For
certificates of deposit, fair value is estimated using the rates
currently offered for deposits of similar maturities.
Commitments to extend credit:
----------------------------
These off-balance sheet instruments are comprised of unfunded loan
commitments which are generally priced at market at the time of
funding, therefore, the fair values of these items are substantially
similar to the related notional amounts.
The carrying values and estimated fair values of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
(In Thousands) (In Thousands)
March 31, 1997 March 31, 1996
------------------ --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 5,408 $ 5,408 $ 5,208 $ 5,208
Securities available for sale 2 2 4,422 4,422
Securities held to maturity 59,207 58,281 39,463 39,293
Loans 40,666 40,137 34,838 35,098
Accrued interest receivable 1,077 1,077 699 699
Financial liabilities:
Deposits 87,733 84,961 80,240 80,243
Accrued interest payable 124 124 116 116
Loan payable - FHLB 10,000 10,000
</TABLE>
<PAGE>
WESTWOOD FINANCIAL CORPORATION
<TABLE>
<CAPTION>
Directors Officers
- --------- --------
<S> <C>
William J. Woods* William J. Woods
Chairman of the Board Chief Executive Officer and
President
Joanne Miller*
Vice President Joanne Miller
Vice President and
Paul F. Becker* Secretary
Consultant to Quinn Funeral Service
George E. Niemczyk
John M. Caruso* Vice President/Controller
Home Restoration and Repair Company
William J. Durgin*
New York Life Insurance Agent
Sidney J. Hagan*
Retired construction official
* Also serves as Director of
Westwood Savings Bank.
WESTWOOD SAVINGS BANK OFFICERS
William J. Woods Margaret Flood
Chairman of the Board Asst. Vice President/Branch Manager - Westwood
Joanne Miller Lynne Kopp
President Asst. Vice President/Branch Manager - Haworth
Robert L. Pierson Catherine Solimando
Vice President Secretary
George E. Niemczyk
Vice President/Controller
Corporate Counsel Special Counsel
- ----------------- ---------------
Harry Randall, Jr. Malizia, Spidi, Sloane, & Fisch, P.C.
Randall, Randall, & Stevens One Franklin Square
287 Kinderkamack Road 1301 K Street, N.W. Suite 700E
Westwood, NJ 07675 Washington, DC 20005
Auditor Transfer Agent and Registrar
- ------- ----------------------------
RD Hunter and Company, LLP Registrar and Transfer Company
One Mack Center Drive 10 Commerce Drive
Paramus, NJ 07652 Cranford, NJ 07016
</TABLE>
The Corporation's Annual Report for the Year Ended March 31, 1997 filed with the
Securities and Exchange Commision on Form 10- KSB without exhibits is available
without charge upon written request. For a copy of the Form 10-KSB or any other
investor information, please write the Secretary of the Corporation at 700-88
Broadway, Westwood, New Jersey 07675. The Annual Meeting of Stockholders will be
held on July 15, 1997 at 4:00 PM at the main office of Westwood Savings Bank.
12
<PAGE>
WESTWOOD FINANCIAL
CORPORATION
WESTWOOD SAVINGS BANK
700-88 Broadway 139 Terrace Street
Westwood, NJ 07675 Haworth, NJ 07641
(201) 666-5002 (201) 387-6777
[FDIC LOGO] [EQUAL HOUSING LENDER LOGO]
<PAGE>
Appendix IV
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from to
---------- ----------
Commission File No. 0-28200
Westwood Financial Corporation
------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3413572
-------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700-88 Broadway, Westwood, New Jersey 07675
-------------------------------------------
(Address of principal executive offices)
201-666-5002
------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class: Common Stock, par value $0.10 per share
Outstanding shares at November 10, 1997: 645,295
<PAGE>
WESTWOOD FINANCIAL CORPORATION
INDEX TO FORM 10-QSB
Page
----
PART 1. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated statements of Financial Condition at September
30, 1997 (unaudited) and March 31, 1997 2
Consolidated Statements of Income for the three and six months
ended September 30, 1997 and 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the three and six months
ended September 30, 1997 and 1996 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
WESTWOOD FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(Dollars in Thousands)
SEPTEMBER 30, 1997 MARCH 31, 1997
------------------ --------------
ASSETS
------
Cash and cash equivalents $ 6,302 $ 5,408
Loans receivable, net 40,067 40,340
Interest receivable on loans 260 256
FHLB stock, at cost 576 576
Mortgage-backed securities held-to-maturity,
(market value of $18,311 and $19,581, respectively) 18,111 19,728
Investment securities held-to-maturity,
(market value of $41,472 and $38,124, respectively) 42,399 38,903
Investment securities available-for-sale,
(at market value) 2 2
Interest receivable on investments 855 852
Property and equipment, net 711 734
Goodwill 1,085 1,132
Prepaid expenses and other assets 57 50
--------- ---------
TOTAL ASSETS $ 110,425 $ 107,981
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Demand deposits $ 13,778 $ 13,111
Savings deposits 75,967 74,622
Interest payable on deposits 131 124
Loans and advances payable 10,000 10,000
Other liabilities 194 142
Dividends payable 65 32
--------- ---------
Total Liabilities 100,135 98,031
--------- ---------
Commitments and Contingencies (Note 4)
Shareholders' equity:
Common stock ($.10 par value, 747,500
authorized, 645,241 issued and
outstanding at September 30, 1997
and March 31, 1997) 65 65
Paid in capital 3,212 3,212
Retained earnings 7,013 6,753
Unearned stock bonus plan shares 0 (80)
--------- ---------
Total Shareholders' Equity 10,290 9,950
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 110,425 $ 107,981
========= =========
2
<PAGE>
WESTWOOD FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -----------------------
1997 1996 1997 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $ 774 $ 729 $ 1,560 $ 1,440
Mortgage-backed securities 328 225 672 449
Investment securities, including O/N deposits 783 591 1,526 1,158
Dividends on FHLB stock 10 7 19 14
--------- --------- --------- ---------
Total interest income 1,895 1,552 3,777 3,061
INTEREST EXPENSE
Deposits 983 872 1,936 1,716
Borrowings 150 0 299 0
--------- --------- --------- ---------
1,133 872 2,235 1,716
Net interest income 762 680 1,542 1,345
Provision for loan losses 9 5 17 40
--------- --------- --------- ---------
Net interest income after
provision for loan losses 753 675 1,525 1,305
NONINTEREST INCOME
Miscellaneous charges and fees 62 34 103 62
Late charges 2 1 4 3
--------- --------- --------- ---------
Total noninterest income 64 35 107 65
NONINTEREST EXPENSE
Compensation and employee benefits 244 164 423 330
FDIC insurance and regulatory expenses 27 54 49 100
SAIF Special Assessment 0 454 0 454
Depreciation and amortization 41 41 82 81
Data Processing 37 35 71 69
Occupancy 35 29 64 57
Loss on sale of securities 0 17 0 17
Merger acquisition costs 69 0 69 0
Other 126 124 252 212
--------- --------- --------- ---------
Total noninterest expense 579 918 1,010 1,320
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 238 (208) 622 50
INCOME TAX EXPENSE 118 (58) 265 31
--------- --------- --------- ---------
NET INCOME (LOSS) $ 120 $ (150) $ 357 $ 19
========= ========= ========= =========
Weighted Average Earnings Per Share $ 0.19 $ (0.23) $ 0.55 $ 0.03
========= ========= ========= =========
Weighted Average Shares Outstanding 645,268 646,700 645,268 549,038
</TABLE>
3
<PAGE>
WESTWOOD FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST OPERATING ACTIVITIES
NET INCOME $ 120 $ (150) $ 357 $ 19
======= ======= ====== ======
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation 18 18 35 34
Amortization of goodwill 23 23 47 47
Amortization of stock bonus plan 68 12 80 24
Provision for loan losses 9 5 17 40
Loss on sale of securities 0 17 0 17
(INCREASE) DECREASE IN ASSETS:
Interest receivable (187) (51) (7) (122)
Prepaid income taxes 0 (104) 0 (81)
Prepaid expenses 11 (6) (7) 187
INCREASE (DECREASE) IN LIABILITIES:
Interest payable (13) (11) 7 1
Taxes payable (46) (88) 61 (23)
Accrued expenses 41 338 (9) 447
------- ------- ------- -------
TOTAL ADJUSTMENTS (76) 153 224 571
------- ------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 44 3 581 590
======= ======= ======= =======
INVESTING ACTIVITIES:
Loans made of net repayments 1,085 (1,628) 256 (4,029)
Purchase of investments - net of sales (448) (1,771) (1,879) (3,240)
Acquisition of goodwill 0 12 0 (42)
Purchase of office property and equipment (4) (11) (12) 12
------- ------- ------- -------
NET CASH PROVIDED (USED BY)
INVESTING ACTIVITIES 633 (3,398) (1,635) (7,299)
------- ------- ------- -------
FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts (1,107) 2,098 2,012 3,185
Proceeds from sale of stock and reorganization,
net of conversion costs -- -- -- 3,428
Dividends paid (32) (32) (64) (32)
------- ------- ------- -------
NET CASH PROVIDED (USED BY)
FINANCING ACTIVITIES (1,139) 2,066 1,948 6,581
------- ------- ------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (462) (1,329) 894 (128)
CASH AND CASH EQUIVALENTS - Beginning of period 6,764 6,409 5,408 5,208
------- ------- ------- -------
CASH AND CASH EQUIVALENTS - End of period $ 6,302 $ 5,080 $ 6,302 $ 5,080
======= ======= ======= =======
CASH PAID DURING THE PERIOD FOR:
Interest $ 1,146 $ 883 $ 2,104 $ 1,715
Income taxes $ 164 $ 135 $ 204 $ 135
</TABLE>
4
<PAGE>
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Westwood Financial
Corporation (the "Corporation") and its a wholly-owned subsidiary, Westwood
Savings Bank. All significant intercompany balances and transactions have been
eliminated in consolidation.
These consolidated financial statements were prepared in accordance with
instructions for Form 10-QSB and therefore, do not include all disclosures
necessary for a complete presentation of the statement of the financial
condition, statement of operations, and statement of cash flows in conformity
with generally accepted accounting principles. However, all adjustments which
are, in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included and all such adjustments are of
a normal recurring nature. The results of operations for the six months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year March 31, 1998 or any other interim period. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes which are incorporated by
reference in the Corporation's Annual Report on Form 10-KSB for the year ended
March 31, 1997.
NOTE 2: PROPOSED MERGER
On September 10, 1997, the Corporation and Lakeview Financial Corporation
("Lakeview") the holding company of Lakeview Savings Bank ("Lakeview Savings"),
Paterson, New Jersey, signed a definitive merger agreement providing for the
merger of the Corporation into Lakeview and the merger of the Bank into Lakeview
Savings. Shares of the Corporation will be exchanged for $29.25, payable in the
aggregate in the form of 50% cash and 50% Lakeview Common Stock. The transaction
is subject to certain contingencies including satisfaction of state and federal
regulatory approvals, approval of the shareholders of the Corporation and a
receipt of a fairness opinion by the Corporation. It is anticipated that the
transaction will occur in the first calendar quarter of 1998. The transaction is
expected to be accounted for under the purchase method.
NOTE 3: STOCK BONUS PLANS
In conjunction with the signing of the letter of intent to merge, all shares
remaining in the stock bonus plans vest immediately. This resulted in an
additional $56,000 of amortization expense which is being recognized in the
current quarter.
NOTE 4: COMMITMENTS AND CONTINGENCIES
On July 2, 1997, the Savings Bank entered into a contract to purchase a tract of
land for $280,000. The contract is contingent upon receiving all municipal and
government approvals, as required. The land may be used for a possible branch
site.
5
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Westwood Financial Corporation, Inc, (the "Corporation") is a New Jersey
corporation organized in December 1995 at the direction of the Board of
Directors of the Westwood Savings Bank of New Jersey (the "Bank") to facilitate
the conversion of Bergen North Financial, M.H.C. (the Mutual Holding Company")
from the mutual to the stock form of ownership and to acquire and hold all of
the capital stock of the Bank (collectively, the "Conversion and
Reorganization"). Prior to the consummation of the Conversion and
Reorganization, the Mutual Holding Company was the majority stockholder of the
Bank and upon consummation of the Conversion and Reorganization, the Mutual
Holding Company was merged into the Bank. The Corporation acquired the Bank as a
wholly-owned subsidiary upon the consummation of the Conversion and
Reorganization on June 6, 1996.
On September 10, 1997, the Corporation and Lakeview Financial Corp. ("Lakeview")
the holding company of Lakeview Savings Bank ("Lakeview Savings"), Paterson, New
Jersey, signed a definitive merger agreement providing for the merger of the
Corporation into Lakeview and the merger of the Bank into Lakeview Savings.
Shares of the Corporation will be exchanged for $29.25, payable in the aggregate
in the form of 50% cash and 50% Lakeview Common Stock. The transaction is
subject to certain contingencies including satisfaction of state and federal
regulatory approvals, approval of the shareholders of the Corporation and a
receipt of a fairness opinion by the Corporation. It is anticipated that the
transaction will occur in the first calendar quarter of 1998. The transaction is
expected to be accounted for under the purchase method.
Financial Condition at September 30, 1997
- -----------------------------------------
Total assets at September 30, 1997 amounted to $110.4 million, an increase of
$2.4 million, or 2.26% over total assets at March 31, 1997. This increase was
due primarily to a $1.9 million increase in investment securities, an increase
of $900,000 in cash and cash equivalents, offset by a net decrease of $300,000
in loans receivable. Funding of asset growth was provided from the increase in
deposit accounts. Total liabilities amounted to $100.1 million at September 30,
1997, an increase of $2.1 million, or 2.14%, over total liabilities at March 31,
1997. The increase in liabilities is due primarily to a $2.0 million net
increase in deposits, which resulted in the Bank's response to the general
increase in rates offered by other bank's in the market area.
On July 2, 1997, the Savings Bank entered into a contract to purchase a tract of
land for $280,000. The contract is contingent upon receiving all municipal and
government approvals, as required. The land may be used for a possible branch
site.
The Bank had no non-performing assets at September 30, 1997 or at March 31,
1997.
Results of Operations - Comparison For the Three Months Ended September 30, 1997
and 1996
- --------------------------------------------------------------------------------
Net Interest Income. Net interest income increased $82,000, or 12.06%, for the
three months ended September 30, 1997 as compared to the same period ended
September 30, 1996. The primary reason for the increase was that average
balances of cash and investments securities increased $15.8 million due to the
purchase and sales of investment securities during the three months ended
September 30, 1997 compared to the same period in 1996. Declining interest rates
partially offset the increase in net interest income. The interest rate spread
and net interest margin declined to 2.50% and 2.83%, respectively during the
three months ended September 30, 1997 compared to 2.69% and 3.05%, respectively
for the same period in 1996. The lower interest rate spread and net interest
margin are primarily due to a lower yield on earning assets and higher costs of
funds in the second quarter of 1997.
6
<PAGE>
Provision for Loan Losses. At September 30, 1997, the Bank increased its
provision for loan losses by $4,000, from the comparable period in September
1996 due to a potential loss on a consumer loan. The loan is currently
performing.
Non-Interest Income. Non-interest income increased $19,000, or 54.29% during the
period ended September 30, 1997, as compared to the same period ended September
30, 1996. This increase was primarily due to a $9,000 increase in fee income
from additional checking account activity, increased ATM fees and increased
prepayment penalties.
Non-Interest Expense. Non-interest expense decreased $339,000 or 36.93% from
$918,000 for the three months ended September 30, 1996 to $579,000 for the three
months ended September 30, 1997. This decrease in expenses was primarily due to
the $456,000 one time special SAIF assessment that occurred in September 1996,
and a decrease in FDIC insurance and regulatory expenses of $27,000, offset by
an $80,000 increase in compensation and employee benefits and $69,000 in merger
expenses relating to legal and accounting expenses regarding the proposed
merger. The increase in compensation and employee benefits was primarily due to
an additional $56,000 expense to fully amortize the stock bonus plans. In
conjunction with the signing of the letter of intent to merge, all shares
remaining in the stock bonus plans vest immediately.
Results of Operations - Comparison of Six Months Ended September 30, 1997 and
September 30, 1996
- --------------------------------------------------------------------------------
Net Interest Income. Net interest income increased $197,000, or 14.65%, for the
six months ended September 30, 1997 as compared to the same period ended
September 30, 1996. The primary reason for the interest was that average
balances of cash and investments securities increased $16.1 million due to the
purchase and sales of investment securities during the six months ended
September 30, 1997 compared to the same period in 1996. Declining interest rates
partially offset the increase in net interest income. The interest rate spread
and net interest margin declined to 2.51% and 2.83%, respectively during the six
months ended September 30, 1997 compared to 2.78% and 3.07%, respectively for
the same period in 1996. The lower interest rate spread and net interest margin
are primarily due to a lower yield on earning assets and higher costs of funds
for the first six months of 1997.
Provision for Loan Losses. At September 30, 1997, the Bank decreased its
provision for loan losses by $23,000 or 57.50%, from the comparable period in
September, 1996. The Bank maintains a provision for losses on loans based upon
management's periodic evaluation of known and inherent risks in the loan
portfolio, the Bank's past loss experience, adverse situations that may affect
the borrower's ability to repay loans, estimated value of the underlying
collateral and current and expected market conditions. Based upon a review of
these factors, management determined that the Bank's allowance for loan losses
was adequate in view of the composition of the Bank's loan portfolio. At
September 30, 1997, the Bank's loan portfolio consisted of 88.31% of one-to
four-family loans.
Non-Interest Income. Non-interest income increased $32,000 from $19,000 for the
six months ended September 30, 1996 to $65,000 for the six months ended
September 30, 1997, primarily due to a $20,000 increase in checking account fees
and a $10,000 increase in ATM fees.
Non-Interest Expense. Non-interest expense decreased $310,000 from $1.3 million
to $1.0 million during the comparable periods ending September 30, 1996 and
1997, respectively. This decrease was primarily due to the one-time SAIF special
assessment of $454,000 made in 1996 offset by a $93,000 increase in compensation
and employee benefits, $69,000 in merger expenses relating to legal and
accounting expenses of the proposed merger and $40,000 in other expenses. The
increase in compensation and employee benefits was primarily due to amortization
of the stock bonus plans as previously discussed and the hiring of additional
staff. In regard to the increase in other expenses, there was no expense
included in this category that increased materially.
7
<PAGE>
Liquidity Resources
- -------------------
The Bank's liquidity is a measure of its ability to fund loans, pay withdrawals
of deposits, and other cash outflows in an efficient, cost effective manner. The
Bank's primary sources of funds are deposits and scheduled amortization and
prepayment of loans and mortgage-backed securities. During the past several
years, the Bank has used such funds primarily to fund maturing time deposits,
pay savings withdrawals, fund lending commitments, purchase new investments, and
increase liquidity. The Bank is currently able to fund its operations
internally. Additionally, sources of funds include the ability to utilize
Federal Home Loan Bank of New York advances and the ability to borrow against
mortgage-backed and investment securities. As of September 30, 1997, the Bank
had $10 million in borrowed funds.
The Bank anticipates that it will have sufficient funds available to meet its
current commitments. As of September 30, 1997, the Bank had mortgage commitments
to fund loans of $1.1 million. Also, at September 30, 1997, there were
commitments on unused lines of credit relating to home equity loans of $2.6
million. Certificates of deposit scheduled to mature in one year or less at
September 30, 1997 totaled $52.5 million. Based on historical deposit
withdrawals and outflows, and on internal monthly deposit reports monitored by
management, management believes that a majority of such deposits will remain
with the Bank. As a result, no adverse liquidity effects are expected. At
September 30, 1997, the Bank's total liquidity was 59.27%.
8
<PAGE>
Capital Compliance
- ------------------
The following table sets forth the institution's capital position at September
30, 1997 as compared to the minimum regulatory capital requirements imposed on
the institution by the FDIC at that date. The Bank also met the capital
requirements of the New Jersey Department of Banking.
At September 30, 1997
-----------------------------
Amount of Assets
------ ---------
GAAP Capital: $10,290 9.32%
======= =====
Leverage Capital:(1)(2)
Actual Leverage Capital $ 7,760 7.18%
Leverage Capital Requirement 3,243 3.00%
------- -----
Excess $ 4,517 4.18%
======= =====
Tier 1 Capital: (1)(3)
Actual Tier 1 Capital $ 7,760 19.22%
Tier 1 Capital Requirement 1,615 4.00%
------- -----
Excess $ 6,145 15.22%
======= =====
Total Risk-Based Capital:(1)(3)
Actual Risk-Based Capital $ 7,995 19.80%
Risk-Based Capital Requirement 3,230 8.00%
------- -----
Excess $ 4,765 11.80%
======= =====
(1) Regulatory capital reflects modifications from GAAP capital due to
identifiable intangible assets and constraints on allowance for loan and
lease losses.
(2) Leverage Capital is computed as a percentage of Average Total Assets of
$108,112.
(3) Tier 1 Capital and Total Risk-Based Capital are computed as a percentage of
Total Risk-Weighted Assets of $40,370.
9
<PAGE>
Key Operating Ratios
- --------------------
THE TABLE BELOW SETS FORTH CERTAIN PERFORMANCE RATIOS OF THE BANK FOR THE
PERIODS INDICATED.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
RETURN ON AVERAGE ASSETS (net income
divided by average total assets) (1) 0.43% (0.65%) 0.65% 0.04%
RETURN ON AVERAGE EQUITY (net income
divided by average equity) (1) 4.67% (6.19%) 7.00% 0.44%
INTEREST RATE SPREAD (1) (2) 2.50% 2.69% 2.51% 2.78%
NET INTEREST MARGIN (net yield on average
interest-earning assets) 2.83% 3.05% 2.83% 3.07%
NON-PERFORMING ASSETS TO TOTAL ASSETS N/A N/A N/A N/A
AVERAGE INTEREST-EARNING ASSETS TO
AVERAGE INTEREST-BEARING LIABILITIES 107.91% 109.20% 107.84% 107.50%
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES TO NON-INTEREST EXPENSE 130.05% 79.20% 150.99% 97.47%
NON-INTEREST EXPENSE TO AVERAGE ASSETS (1) 2.10% 3.62% 1.83% 3.00%
</TABLE>
(1) ANNUALIZED.
(2) INTEREST RATE SPREAD REPRESENTS THE DIFFERENCE BETWEEN THE WEIGHTED
AVERAGE YIELD ON INTEREST-EARNING ASSETS AND THE WEIGHTED AVERAGE RATE ON
INTEREST-BEARING LIABILITIES.
COMPUTED ON THE BASIS OF AVERAGE MONTHLY VALUES.
10
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
The Corporation was not involved in any material
legal proceedings at September 30, 1997. The Bank,
from time to time, is a party to litigation, which
arises in the ordinary course of business, such as
claims to enforce liens, claims involving the making
and servicing of loans, claims relating to the hiring
or termination of employees, and other issues
incident to the business of the Bank. In the opinion
of management, the resolution of these lawsuits would
not have a material adverse effect on the financial
condition or results of operations of the Bank or the
Corporation.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Shareholders of the Corporation
was held on July 15, 1997 and the following items
were acted upon:
1. Election of directors William J. Woods and Harry
Randall, Jr.for a term of three years ending in 2000.
Messrs. Woods and Randall were both elected for a
term of three years by the following vote:
<TABLE>
<CAPTION>
FOR WITHHELD
-------------------------- ---------------------------
# of Votes % of Shares # of Votes % of Shares
<S> <C> <C> <C> <C> <C>
William J. Woods 555,762 99% 6030 1%
Harry Randall, Jr. 555,712 99% 6080 1%
</TABLE>
2. The ratification of the 1997 Directors Stock
Plan. The number of abstention and the
percentage of shares were 12,929 and 2.3%,
respectively. The 1997 Directors Stock Plan
was ratified by the following vote:
<TABLE>
<CAPTION>
FOR WITHHELD
-------------------------- ---------------------------
# of Votes % of Shares # of Votes % of Shares
<S> <C> <C> <C> <C>
481,691 85.71% 67,222 12%
</TABLE>
11
<PAGE>
3. The ratification of the appointment of RD Hunter &
Company LLP as auditors for the Corporation for the
fiscal year ending March 31, 1998. The number of
abstention and the percentage of shares were 631 and
1%, respectively. RD Hunter & Company LLP was
ratified as the Corporation's auditors by the
following vote:
<TABLE>
<CAPTION>
FOR WITHHELD
-------------------------- ---------------------------
# of Votes % of Shares # of Votes % of Shares
<S> <C> <C> <C> <C>
555,161 98.8% 6,050 .01%
</TABLE>
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) List of Exhibits
3.1 Articles of Incorporation of Westwood Financial Corporation*
3.2 Bylaws of Westwood Financial Corporation*
4 Specimen Stock Certificate*
11 Statement re: Computation of per share earnings
27 Financial Data Schedule (electronic filing only)
</TABLE>
* Incorporated by reference to Registrant's Registration Statement on Form
S-1 initially filed with the SEC on December 20, 1995 (File No. 33-28200).
(b) Reports On Form 8-K
On September 10, 1997, the Corporation filed
a Form 8-K reporting the announcement of the
definitive merger agreement with Lakeview
Financial Corp.
12
<PAGE>
WESTWOOD FINANCIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Westwood Financial Corporation
Date: 11/12/97 By: /s/William J. Woods
----------------- -------------------------------------------------
William J. Woods
Chief Executive Officer
(Principal Executive Officer)
Date: 11/12/97 By: /s/George E. Niemczyk
----------------- -------------------------------------------------
George E. Niemczyk
Controller
(Principal Accounting and Financial Officer)
<PAGE>
EXHIBIT 11
WESTWOOD FINANCIAL CORPORATION
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Six Months Ended
September 30, 1997
------------------
Net Income ................................ $357,000
========
Primary and fully diluted
Average shares outstanding.................. 645,268
=======
Per share amount............................ .55
===
Earnings per share of common stock for the six months ended September 30, 1997
have been determined by dividing net income for the six month period by the
weighted average number of shares of common stock outstanding.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
(i) Limitation of Liability of Directors and Officers. Section
14A:2-7(3) of the New Jersey Business Corporation Act permits a corporation to
provide in its Certificate of Incorporation that a director or officer shall not
be personally liable to the corporation or its shareholders for breach of any
duty owed to the corporation or its shareholders, except that such provision
shall not relieve a director or officer from liability for any breach of duty
based upon an act or omission (a) in breach of such person's duty of loyalty to
the corporation or its shareholders, (b) not in good faith or involving a
knowing violation of law or (c) resulting in receipt by such person of any
improper personal benefit. LFC's Certificate of Incorporation includes
limitations on the liability of officers and directors to the fullest extent
permitted by New Jersey law.
(ii) Indemnification of Directors, Officers, Employees and Agents.
Under Article XVI and XVII of its Certificate of Incorporation, LFC must, to the
fullest extent permitted by law, indemnify its directors, officers, employees
and agents. Section 14A:3-5 of the New Jersey Business Corporation Act provides
that a corporation may indemnify its directors, officers, employees and agents
against judgments, fines, penalties, amounts paid in settlement and expenses,
including attorneys' fees, resulting from various types of legal actions or
proceedings if the actions of the party being indemnified meet the standards of
conduct specified therein. Determinations concerning whether or not the
applicable standard of conduct has been met can be made by (a) a disinterested
majority of the Board of Directors, (b) independent legal counsel, or (c) an
affirmative vote of a majority of shares held by the shareholders. No
indemnification is permitted to be made to or on behalf of a corporate director,
officer, employee or agent if a judgment or other final adjudication adverse to
such person establishes that his acts or omissions (A) were in breach of his
duty of loyalty to the corporation or its shareholders, (B) were not in good
faith or involved a knowing violation of law or (C) resulted in receipt by such
person of an improper personal benefit.
(iii) Insurance. LFC's directors and officers are insured against
losses arising from any claim against them such as wrongful acts or omissions,
subject to certain limitations.
Item 21. Exhibits
2.1 Agreement and Plan of Reorganization dated as of September 10, 1997, by
and between Lakeview Financial Corp.,, Lakeview Savings Bank, Westwood
Financial Corporation and Westwood Savings Bank (attached as Appendix I
to the Proxy Statement/Prospectus filed as a part
of this Registration Statement).
5.1 Opinion of Malizia, Spidi, Sloane & Fisch, P.C. as to the legality of
the securities being registered and the Merger.^
8.1 Opinion of Malizia, Spidi, Sloane & Fisch, P.C. concerning certain
federal tax consequences.
^23.1 Consent of Malizia, Spidi, Sloane & Fisch, P.C. (contained in its
Opinions 5.1 and 8.1).
^23.2 Consent of KPMG Peat Marwick LLP.^
23.3 Consent of RD Hunter & Company^ LLP.
23.4 Consent of FinPro, Inc..
^99.1 Opinion of FinPro, Inc. (attached as Appendix II to the Proxy
Statement/Prospectus filed as a part of this Registration Statement).
99.2 Form of Proxy of Westwood Financial Corporation.
<PAGE>
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
and of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) ^ To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933
^, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be initial bona fide offering thereof.
^ The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of
responding to the request.
^ The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the Company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant 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 registrant 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 Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, LFC has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Paterson, New Jersey, on ^ January 15, 1998.
LAKEVIEW FINANCIAL CORP.
By: /s/Kevin J. Coogan
--------------------------------------
Kevin J. Coogan
President, Chief Executive
Officer and Director
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities as of ^ January 15, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By: /s/Kevin J. Coogan By: /s/Leo J. Dean
---------------------------------- ----------------------------------
Kevin J. Coogan Leo J. Dean
President, Chief Executive Officer Director
and Director
(Principal Executive Officer)
By: /s/Leo J. Costello By: /s/Michael R. Rowe
---------------------------------- ----------------------------------
Leo J. Costello Michael R. Rowe
Director Director
By: /s/Robert J. Davenport By: /s/Dennis D. Pedra
---------------------------------- ----------------------------------
Robert J. Davenport Dennis D. Pedra
Director Director
By: /s/Vincent A. Scola By: /s/Anthony G. Gallo
---------------------------------- -----------------------------------
Vincent A. Scola Anthony G. Gallo
Director Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
EXHIBIT 5.1
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
ATTORNEYS AT LAW
1301 K STREET, N.W.
SUITE 700 EAST
WASHINGTON, D.C. 20005
(202) 434-4660
FACSIMILE: (202) 434-4661
WRITER'S DIRECT DIAL NUMBER
(202) 434-4660
January 15, 1998
Board of Directors
Lakeview Financial Corp.
1117 Main Street
Paterson, New Jersey 07503
Ladies and Gentlemen:
Reference is made to the registration statement on Form S-4 (the
"Registration Statement") being filed by Lakeview Financial Corp., a New Jersey
corporation (the "Company") with the Securities and Exchange Commission for the
purpose of registering under the Securities Act of 1933, as amended (the
"Securities Act"), 520,000 shares of the Company's common stock, $1.00 per
value, to be issued or reserved for issuance in connection with the merger (the
"Merger") by and between the Company, Lakeview Savings Bank, Westwood Financial
Corporation and Westwood Savings Bank, as described in the Registration
Statement.
In this regard, we have examined the Certificate of Incorporation and
Bylaws of the Company, resolutions of the Board of Directors, the Agreement and
Plan of Reorganization and such other documents and matters of law as we deemed
relevant for the purpose of rendering this opinion. Based solely upon the
foregoing and relying upon the Company as to the accuracy of the facts and
documents (without independent verification), we are of the opinion that the
Common Stock, when issued in accordance with the terms of the Registration
Statement, will be legally issued, fully paid and non-assessable.
We consent to the filing of this opinion only as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Proxy Statement/Prospectus forming a part of the Registration
Statement. This opinion may not be used for any other purposes without our
written permission. In giving this consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fisch, P.C.
Malizia, Spidi, Sloane & Fisch, P.C.
EXHIBIT 8.1
<PAGE>
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
ATTORNEYS AT LAW
1301 K STREET, N.W.
SUITE 700 EAST
WASHINGTON, D.C. 20005
(202) 434-4660
FACSIMILE: (202) 434-4661
WRITER'S DIRECT DIAL NUMBER
(202) 434-4660
January 15, 1998
Board of Directors
Lakeview Financial Corp.
1117 Main Street
Paterson, New Jersey 07503
Dear Board Members:
In accordance with your request, set forth herein below is the opinion
of this firm regarding certain federal income tax consequences of the proposed
merger ("Merger") between Lakeview Financial Corp. ("Lakeview") and Westwood
Financial Corporation ("WFC"), with Lakeview as the surviving corporation,
pursuant to the Agreement and Plan of Reorganization by and between Lakeview and
Lakeview Savings Bank, and WFC and Westwood Savings Bank (the "Merger
Agreement") dated September 10, 1997. The Merger and its component and related
transactions are described in the Merger Agreement and Registration Statement on
Form S-4 ("Form S-4"), as filed with the Securities and Exchange Commission on
December 17, 1997, and thereafter subsequently amended. We are rendering this
opinion pursuant to Section 7.3(e) of the Merger Agreement. All capitalized
terms used but not defined in this letter have the meanings assigned to them in
the Merger Agreement.
The Merger Agreement provides that, subject to the election and
allocation procedures provided for therein, each issued and outstanding share of
WFC Common Stock will be converted into the right to receive, at the election of
each holder thereof, either a) cash equal to $29.25 or b) a number of shares of
Lakeview Common Stock equal to $29.25 divided by the "Final Market Price." Final
Market Price will be the average closing price per share of the last real time
trades of the Lakeview Common Stock as reported on the Nasdaq National Market
for each of the 15 Nasdaq National Market general market trading days preceding
one week prior to the closing date on which the Nasdaq National Market was open
for business.
Fractional shares of Lakeview Common Stock will not be issued in the
Merger. WFC shareholders otherwise entitled to a fractional share will be paid
the value of such fraction in cash as determined pursuant to the Merger
Agreement. Further, in accordance with the terms of the Merger Agreement, not
less than 50.1% of the outstanding shares of WFC Common Stock will be exchanged
for Lakeview Common Stock.
<PAGE>
Board of Directors
January 15, 1998
Page 2
The following representations have been made by Lakeview with respect
to the Merger:
1. To the best of Lakeview's and Lakeview Bank's management's knowledge
and belief, the transaction will qualify as a statutory merger under applicable
State and/or federal laws.
2. The fair market value of the Lakeview Common Stock and other
consideration received by each WFC Shareholder will be approximately equal to
the fair market value of the WFC Common Stock surrendered in the exchange.
3. There is no plan or intention by the WFC Shareholders who own five
percent (5%) or more of the WFC Stock, and to the best of the knowledge of the
management of Lakeview or Lakeview Bank, there is no plan or intention on the
part of the remaining WFC Shareholders to sell, exchange, or otherwise dispose
of a number of shares of Lakeview Common Stock received in the transaction that
would reduce the WFC Shareholders' ownership of Lakeview Common Stock to a
number of shares having a value, as of the date of the transaction, of less than
50 percent (50%) of the value of all of the formerly outstanding stock of WFC as
of the same date. For purposes of this representation, shares of WFC Common
Stock exchanged for cash or other property or exchanged for cash in lieu of
fractional shares of Lakeview Common Stock will be treated as outstanding WFC
Common Stock on the date of the transaction. Moreover, shares of WFC Common
Stock and shares of Lakeview Common Stock held by WFC Shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the transaction will be
considered in making this representation.
4. Lakeview has no plan or intention to reacquire any of its stock
issued in the transaction.
5. Lakeview has no plan or intention to sell or otherwise dispose of
any of the assets of WFC acquired in the transaction, except for dispositions
made in the ordinary course of business or transfers described in ss.
368(a)(2)(C) of the Internal Revenue Code of 1986, as amended ("Code").
6. The liabilities of WFC assumed by Lakeview and the liabilities to
which the transferred assets of WFC are subject were incurred by WFC in the
ordinary course of its business.
7. Following the transaction, Lakeview will continue the historic
business of WFC or use a significant portion of WFC's historic business assets
in a business.
8. Lakeview, WFC, and WFC Shareholders will pay their respective
expenses, if any, incurred in connection with the transaction.
<PAGE>
Board of Directors
January 15, 1998
Page 3
9. There is no intercorporate indebtedness existing between WFC and
Lakeview that was issued, acquired, or will be settled at a discount.
10. No two parties to the transaction are investment companies as
defined in ss. 368(a)(2)(F)(iii) and (iv) of the Code.
11. WFC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of ss. 368(a)(3)(A) of the Code.
12. The fair market value of the assets of WFC transferred to Lakeview
will equal or exceed the sum of the liabilities assumed by Lakeview plus the
amount of liabilities, if any, to which the transferred assets are subject.
The following representations have been made by WFC with respect to the
Merger:
1. To the best of WFC's and Westwood Bank's management's knowledge and
belief, the transaction will qualify as a statutory merger under applicable
State and or federal laws.
2. There is no plan or intention by the WFC Shareholders who own five
percent (5%) or more of the WFC Stock, and to the best of the knowledge of the
management of WFC and Westwood Bank, there is no plan or intention on the part
of the remaining WFC Shareholders to sell, exchange, or otherwise dispose of a
number of shares of Lakeview Common Stock received in the transaction that would
reduce the WFC Shareholders' ownership of Lakeview Common Stock to a number of
shares having a value, as of the date of the transaction, of less than 50
percent (50%) of the value of all of the formerly outstanding stock of WFC as of
the same date. For purposes of this representation, shares of WFC Common Stock
exchanged for cash or other property or exchanged for cash in lieu of fractional
shares of Lakeview Common Stock will be treated as outstanding WFC Common Stock
on the date of the transaction. Moreover, shares of WFC Common Stock and shares
of Lakeview Common Stock held by WFC Shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the transaction will be considered in
making this representation.
3. The liabilities of WFC assumed by Lakeview and the liabilities to
which the transferred assets of WFC are subject were incurred by WFC in the
ordinary course of its business.
4. Lakeview, WFC, and WFC Shareholders will pay their respective
expenses, if any, incurred in connection with the transaction.
5. There is no intercorporate indebtedness existing between WFC and
Lakeview that was issued, acquired, or will be settled at a discount.
<PAGE>
Board of Directors
January 15, 1998
Page 4
6. No two parties to the transaction are investment companies as
defined in ss. 368(a)(2)(F)(iii) and (iv) of the Code.
7. WFC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of ss. 368(a)(3)(A) of the Code.
8. The fair market value of the assets of WFC transferred to Lakeview
will equal or exceed the sum of the liabilities assumed by Lakeview plus the
amount of liabilities, if any, to which the transferred assets are subject.
In connection with the opinions expressed below, we have examined and
relied upon originals, or copies certified or otherwise identified to our
satisfaction, of the Merger Agreement, Form S-4, and of such corporate records
of the parties to the Merger as we have deemed appropriate. We have also relied,
without independent verification, upon the representations of Lakeview and WFC.
We have assumed that such representations are true and that the parties to the
Merger will act in accordance with the Merger Agreement. In addition, we have
made such investigations of law as we have deemed appropriate to form a basis
for the opinions expressed below.
Based on and subject to the foregoing, it is our opinion that for
federal income tax purposes, under current law:
1. The Merger will constitute a reorganization within the meaning of
ss. 368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by WFC shareholders who receive
solely shares of Lakeview Common Stock in exchange for their shares of WFC
Common Stock.
This opinion is given solely for the benefit of the parties to the
Merger and may not be relied upon by any other party or entity or referred to in
any document without our express written consent. We consent to the filing of
this opinion as an exhibit to the Form S-4 filed with the Securities and
Exchange Commission and to the references to this firm in the Form S-4.
Very truly yours,
/s/Malizia, Spidi, Sloane & Fisch, P.C.
MALIZIA, SPIDI, SLOANE & FISCH, P.C.
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Lakeview Financial Corp.:
We consent to incorporation by reference and to the reference to our Firm under
the heading "Experts" in the Registration Statement on Form S-4 of Lakeview
Financial Corp. of our report dated September 4, 1997, relating to the
consolidated balance sheets of Lakeview Financial Corp. and subsidiaries as of
July 31, 1997 and 1996 and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of the years in the
three-year period ended July 31, 1997, which report is included in the July 31,
1997 Annual Report on Form 10-K of Lakeview Financial Corp.
/s/ KPMG Peat Marwick
KPMG Peat Marwick LLP
Short Hills, New Jersey
January 15, 1998
EXHIBIT 23.3
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RD HUNTER & COMPANY LLP
Certified Public Accountants
One Mack Centre Drive Members
Paramus, New Jersey American Institute of
07652-3900 Certified Public Accountants
Tel 201 261-4030 New Jersey Society of
Fax 201 261-8588 Certified Public Accountants
http://www.rdhunter.com Accounting Firms Associated, Inc.
Alliott Peirson International
CONSENT OF RD HUNTER & COMPANY LLP
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated May 1, 1997, in the Registration
Statement (Form S-4) and related Proxy Statement/Prospectus of Lakeview
Financial Corp. for the registration of its common stock.
/s/ RD Hunter & Company LLP
Paramus, New Jersey RD Hunter & Company LLP
January 15, 1998 Certified Public Accountants
EXHIBIT 23.4
<PAGE>
FINPRO 26 Church Street o P.O. Box 323
Liberty Corner, NJ 07938
(908) 604-9336 o (908) 604-5951 (FAX)
================================================================================
Consent of FinPro, Inc.
We hereby consent to the use of the form of our opinion letter to the Board of
Directors of Westwood Financial Corporation, to the Proxy Statement/Prospectus
relating to the proposed merger of Lakeview Financial Corp., Lakeview Savings
Bank and Westwood Financial Corporation, Westwood Savings Bank and to the
references to our Firm and such opinion in such Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ FinPro, Inc.
FinPro, Inc.
January 15, 1998
EXHIBIT 99.2
<PAGE>
WESTWOOD FINANCIAL CORPORATION
700-88 BROADWAY
WESTWOOD, NEW JERSEY
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 24, 1998
The undersigned hereby appoints the Board of Directors of Westwood
Financial Corporation ("WFC"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of capital stock of WFC which the undersigned is entitled to vote at the
Special Meeting of Stockholders ("Meeting"), to be held at the _____________,
_____________, New Jersey, on Tuesday, February 24, 1998 at ____:____ ____.m.
local time, and at any and all adjournments thereof, as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
--- ------- -------
1. To consider and vote upon a proposal to approve an
Agreement and Plan of Reorganization, dated
September 10, 1997 (the "Reorganization Agreement")
by and between WFC, Westwood Savings Bank ("WSB"),
and Lakeview Financial Corp. ("LFC"), a
New Jersey corporation and the holding company for
Lakeview Savings Bank, a New Jersey stock savings
bank ("LSB") and LSB. Pursuant to the
Reorganization Agreement, WFC will be merged with
and into LFC, and as soon as practicable thereafter,
WSB will be merged with and into LSB (together, the
"Merger"). According to the terms of the Reorganization
Agreement, shareholders of WFC may elect, subject to
certain election and allocation procedures, to
exchange their shares of WFC common stock for $29.25,
payable in the aggregate form of 50% cash and 50%
LFC common stock. |_| |_| |_|
</TABLE>
The Board of Directors recommends a vote "FOR" the above listed
proposition.
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THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY
OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS SIGNED PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of WFC at
the Meeting of the stockholder's decision to terminate this proxy, the power of
said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this proxy by filing a subsequently
dated proxy or by notifying the Secretary of WFC of his or her decision to
terminate this proxy.
The undersigned acknowledges receipt from WFC prior to the execution of
this proxy of Notice of the Meeting, and a Proxy Statement dated January 23,
1998.
Please check here if you
Dated: , 1998 plan to attend the Meeting |_|
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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