<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 6, 1999
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO.1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
Independence Community Bank Corp.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 6035 13-3387931
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation
or Organization) Classification Code Number) Identification No.)
</TABLE>
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
(718) 722-5300
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------
Charles J. Hamm
Chairman of the Board, President and Chief Executive Officer
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
(718) 722-5300
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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies To:
Philip R. Bevan, Esq. Howard H. Mick, Esq.
Kevin M. Houlihan, Esq. James W. Allen, Esq.
Elias, Matz, Tiernan & Herrick L.L.P. Stinson, Mag & Fizzell P.C.
734 15th Street, N.W. 1201 Walnut Street, Suite 2800
Washington, D.C. 20005 Kansas City, Missouri 64106
(202) 347-0300 (816) 892-8600
--------------------------------
Approximate Date of Commencement of the Proposed Sale of the Securities
to the Public: As soon as practicable after the effective date of this
Registration Statement and the satisfaction or waiver of all other conditions to
the Merger described in the Proxy Statement-Prospectus.
If 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. [_]
<PAGE> 2
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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TITLE OF EACH PROPOSED PROPOSED
CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO TO BE OFFERING AGGREGATE REGISTRATION
BE REGISTERED REGISTERED (1) PRICE PER UNIT OFFERING PRICE (1) FEE (1)
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<S> <C> <C> <C> <C>
Common stock, N/A N/A $72,299,049 $20,099.14(2)
($.01 par value)
</TABLE>
- --------------------
(1) In accordance with the provision of Rule 457(o) under the Securities
Act of 1933, as amended, the number of shares is not set forth herein.
Pursuant to Rule 457(o), the registration fee has been computed on the
basis of the maximum aggregate offering price of the shares of the
Registrant's common stock expected to be issued upon consummation of
the merger of Broad National Bancorporation with and into the
Registrant, pursuant to the Agreement and Plan of Merger, dated as of
February 1, 1999, between Broad National Bancorporation and the
Registrant, taking into account the maximum number of shares of Broad
National Bancorporation that may be exchanged, including shares
issuable upon the exercise of outstanding stock options, reduced by the
amount of cash to be paid by the Registrant for such shares.
(2) The registration fee has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL 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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
------------------------------------------------------------------------
<PAGE> 3
SUBJECT TO COMPLETION, DATED MAY __, 1999
------------
[LOGO] BROAD NATIONAL BANCORPORATION
MERGER PROPOSED-YOUR VOTE IS VERY IMPORTANT
-------------
PROSPECTUS OF INDEPENDENCE COMMUNITY BANK CORP.
-------------
The Boards of Directors of Broad National Bancorporation ("Broad") and
Independence Community Bank Corp. ("Independence") has agreed on a merger of
Broad and Independence Community Bank Corp. The combined company will be an
effective competitor on many fronts in its New York and New Jersey market areas,
with total assets approaching $[6.1] billion, and stockholders' equity of
approximately $ [_] million. We are convinced that this merger will position our
two companies to grow and flourish as the financial services business evolves
and consolidates. As a result of the merger, each share of Broad common stock
that you hold will be converted automatically into the right to receive shares
of common stock of Independence or an equivalent value in cash. As of ______ __,
1999, this was worth about $______ for each share of Broad common stock.
We cannot complete the merger unless we receive the affirmative vote of
at least two-thirds of the Broad common stock. Your vote is very important.
Whether or not you plan to attend the special meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy card will be counted as a vote in favor of the merger. Not returning your
card or not instructing your broker how to vote any shares held for you in
"street name" will have the same effect as a vote against the merger.
The date, time, and place of the meeting are as follows:
June __, 1999, _____ _.m., Eastern Time
Broad National Bancorporation
905 Broad Street
Newark, New Jersey
This document provides you with detailed information about this
meeting and the proposed merger. You can also get information about our company
and Independence from publicly available documents that our company and
Independence have filed with Securities and Exchange Commission. We encourage
you to read this entire document carefully.
We strongly support the combination of Broad and Independence and we
strongly urge that you vote in favor of the merger.
Donald M. Karp
Chairman and Chief Executive Officer
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF ANY OF THE PARTIES, AND THEY
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND OR ANY GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------
Independence's and Broad's common
stock are both traded on the Nasdaq Stock Market.
The trading symbol for Independence common stock in "ICBC".
The trading symbol for Broad common stock is "BNBC".
For any questions, or to request assistance, please call our proxy
solicitor, D.F. King & Co., Inc. at ______
Proxy Statement/Prospectus dated May __, 1999 and first mailed to
stockholders on May __, 1999
<PAGE> 4
BROAD NATIONAL BANCORPORATION
905 BROAD STREET
NEWARK, NEW JERSEY 07102
(973) 624-2300
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE __, 1999
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Broad
National Bancorporation ("Broad") will be held on June __, 1999, at _:__
_.m., Eastern Standard Time, at the principal executive offices of Broad,
located at 905 Broad Street, Newark, New Jersey. A Proxy Statement-Prospectus
and Proxy Card for the Special Meeting are enclosed.
The Special Meeting will be held for the purpose of considering and
voting upon the following matters:
1. The approval and adoption of the Agreement and Plan of Merger, dated
as of February 1, 1999, by and between Independence Community Bank
Corp. ("Independence") and Broad (the "Merger Agreement") pursuant to
which Broad will merge into Independence and each outstanding share of
common stock, par value $1.00 per share, of Broad will be converted
into the right to receive, at the election of the holder thereof,
either shares of common stock of Independence or cash, subject to the
election, allocation and proration procedures set forth in the Merger
Agreement; and
2. Such other business incident to the conduct of the Special Meeting
as may properly come before the Special Meeting and any adjournment or
postponement thereof, including, without limitation, a motion to
adjourn the Special Meeting to another time or place for the purpose of
soliciting additional proxies in order to approve and adopt the Merger
Agreement.
The Board of Directors of Broad has established May __, 1999 as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Special Meeting and at any adjournment or postponement
thereof. Only record holders of Broad common stock as of the close of business
on that date will be entitled to vote at the Special Meeting or any adjournment
or postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS
SOON AS POSSIBLE.
By Order of the Board of Directors,
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
Newark, New Jersey
May __ , 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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PAGE
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SUMMARY
<S> <C>
The Companies............................................................................................. 2
The Broad Stockholders' Meeting........................................................................... 2
Who Can Vote at the Special Meeting; What Vote is Required for Approval of the Merger Agreement........... 2
The Merger................................................................................................ 3
Merger Consideration...................................................................................... 3
Manner of Payment......................................................................................... 3
When and how to Choose the Method of Payment for your shares.............................................. 3
Tax Consequences for Broad Stockholders................................................................... 4
You Do Not Have Appraisal Rights in the Merger............................................................ 4
Accounting Treatment of the Merger........................................................................ 4
Interests of Broad's Directors and Officers in the Merger That Are Different From Your Interests.......... 4
Differences in the Rights of Independence's and Broad's Stockholders...................................... 4
Our Reasons for the Merger................................................................................ 4
Our Recommendations to Stockholders....................................................................... 5
The Consideration Is Fair to Stockholders According to Broad's Financial Advisor.......................... 5
What We Need to do to Complete the Merger................................................................. 5
Terminating the Merger Agreement.......................................................................... 5
Termination Fee if Merger is not Completed................................................................ 5
Amending Provisions of the Merger Agreement............................................................... 5
Broad Stockholders' Agreement............................................................................. 5
The Statewide Merger...................................................................................... 6
COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION..................................................... 7
SELECTED PRO FORMA CONSOLIDATED COMPARATIVE PER SHARE DATA.................................................. 8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INDEPENDENCE............................................. 9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BROAD.................................................... 12
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION................................................. 14
WHERE YOU CAN FIND MORE INFORMATION......................................................................... 15
FORWARD-LOOKING STATEMENTS.................................................................................. 17
THE SPECIAL MEETING......................................................................................... 18
Date, Time and Place; Purpose of Special Meeting.......................................................... 18
Recommendation of the Broad Board......................................................................... 18
Who Can Vote on Matters Addressed in this Document........................................................ 18
Voting and Solicitation of Proxies........................................................................ 18
Vote Required .......................................................................................... 19
Solicitation of Proxies................................................................................... 19
THE MERGER.................................................................................................. 20
Parties to the Merger..................................................................................... 20
General................................................................................................... 20
Background of the Merger.................................................................................. 20
Broad's Reasons for the Merger; Recommendation of the Broad Board ........................................ 23
The Consideration is Fair to Broad's Stockholders According to Broad's Financial Advisor.................. 24
Broad Stockholders Will Receive Shares of Independence Common Stock
and/or Cash For Each Broad Share....................................................................... 32
Procedures for Exchanging Your Stock Certificates......................................................... 37
Interests of Directors and Officers in the Merger that are Different from Your Interests.................. 37
Management and Operations Following the Merger............................................................ 39
Employee Matters.......................................................................................... 40
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
Conditions to the Merger.................................................................................. 40
Regulatory Approvals Needed to Complete the Merger........................................................ 42
Conduct of Business Pending the Merger.................................................................... 43
Representations and Warranties Made by Independence and Broad in the Merger Agreement..................... 46
What Happens if a Third Party Offers to Buy Broad......................................................... 46
Waiving and Amending Provisions in, or Terminating, the Merger Agreement.................................. 47
Price-Based Termination of the Merger Agreement........................................................... 48
Termination Fee .......................................................................................... 48
Nasdaq National Market Listing............................................................................ 49
Accounting Treatment of the Merger........................................................................ 49
Federal Income Tax Consequences for Broad Stockholders.................................................... 49
Selling the Independence Common Stock You Receive in the Merger........................................... 51
You Do Not Have Appraisal Rights in the Merger............................................................ 51
Who Pays for What......................................................................................... 52
When Will the Merger be Completed......................................................................... 52
CERTAIN RELATED TRANSACTIONS................................................................................ 52
Stockholders' Agreement................................................................................... 52
Bank Merger Agreement..................................................................................... 53
THE STATEWIDE MERGER........................................................................................ 53
BENEFICIAL OWNERSHIP OF BROAD COMMON STOCK................................................................. 54
REGULATION AND SUPERVISION.................................................................................. 57
General................................................................................................... 57
New York State Law........................................................................................ 57
FDIC Regulations.......................................................................................... 58
Investment Activities .................................................................................... 59
Transactions with Companies or Entities that Control Savings Banks........................................ 60
The FDIC Enforcement Authority............................................................................ 60
Insurance of Deposit Accounts............................................................................. 61
Payment of Financing Corporation Bonds.................................................................... 61
Federal Reserve System.................................................................................... 61
Community Reinvestment Act................................................................................ 62
Holding Company Regulation................................................................................ 62
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF INDEPENDENCE AND BROAD.......................................... 64
Special Meetings of Stockholders.......................................................................... 65
Voting Requirements....................................................................................... 65
Cumulative Voting......................................................................................... 65
Rights of Dissenting Stockholders......................................................................... 66
Stockholder Consent to Corporate Act...................................................................... 66
Dividends................................................................................................. 66
Classified Board of Directors............................................................................. 67
Removal of Directors; Number of Directors................................................................. 67
Limitations of Liability of Directors and Officers........................................................ 67
Indemnification of Directors and Officers................................................................. 68
Consideration of Acquisition Proposals.................................................................... 68
Bylaws.................................................................................................... 69
Preemptive Rights......................................................................................... 69
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS................................................................................................ 70
DESCRIPTION OF CAPITAL STOCK OF INDEPENDENCE................................................................ 77
General................................................................................................... 77
Common Stock.............................................................................................. 77
Preferred Stock........................................................................................... 77
LEGAL MATTERS............................................................................................... 78
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PAGE
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EXPERTS..................................................................................................... 78
APPENDIX A Agreement and Plan of Merger..................................................................... A-1
APPENDIX B Stockholders' Agreement.......................................................................... B-1
APPENDIX C Opinion of Broad 's Financial Advisor............................................................ C-1
</TABLE>
1
<PAGE> 8
SUMMARY
You are urged to read the entire proxy statement-prospectus and the
other documents to which this document refers to fully understand the
merger. See "Where You Can Find More Information" on page _.
THE COMPANIES (PAGE 19)
INDEPENDENCE COMMUNITY BANK CORP.
195 Montague Street
Brooklyn, New York 11201
(718) 722-5300
Independence is a Delaware-chartered savings and loan holding company.
Independence operates Independence Community Bank which has 32 full-service bank
offices in the greater New York City metropolitan area. At December 31, 1998,
Independence had total assets of $5.3 billion, deposits of $3.4 billion and
stockholders' equity of $914.0 million.
BROAD NATIONAL BANCORPORATION
905 Broad Street
Newark, New Jersey 07102
(201) 624-2300
Broad is a New Jersey-chartered bank holding company organized under
the laws of the State of New Jersey in April 1981 and commenced business in
February 1983. Broad operates Broad National Bank, which has 16 full-service
bank offices located in Bergen, Essex, Hudson, Middlesex and Union counties,
New Jersey. At December 31, 1998, Broad had total assets of $684.8 million,
deposits of $575.1 million and stockholders' equity of $44.7 million.
THE BROAD STOCKHOLDERS' MEETING (PAGE 17)
A special meeting of Broad's stockholders will be held on June __,
1999 at __:__ _.m., Eastern Standard Time, at the principal executive offices of
Broad located at 905 Broad Street, Newark, New Jersey. At the Broad special
meeting, you will be asked to:
1. approve and adopt the merger agreement under which our company
will merge with Independence; and
2. act on any other items that may be submitted to a vote at the
special meeting, including a motion to adjourn the special
meeting for the purpose of soliciting additional proxies in
order to approve the merger of Broad and Independence.
WHO CAN VOTE AT THE SPECIAL MEETING; WHAT VOTE IS REQUIRED FOR APPROVAL OF
THE MERGER AGREEMENT (PAGE 17)
You can vote at the special meeting of Broad stockholders if you owned
Broad common stock at the close of business on May __, 1999. You can cast one
vote for each share of Broad common stock you owned at that time. In order to
approve the merger, the holders of two-thirds of the outstanding shares of Broad
common stock must vote in favor of the merger.
You can vote your shares by attending the special meeting and voting in
person, or by completing and mailing the enclosed proxy card. You can revoke
your proxy as late as the date of the meeting either by sending in a new proxy
or by attending the meeting and voting in person.
2
<PAGE> 9
THE MERGER (PAGE 19)
We propose to merge Broad with and into Independence. We hope to
complete this merger during the third quarter of 1999. We have attached the
agreement and plan of merger to this document as Appendix A. Please read the
merger agreement. It is the legal document that governs the merger.
MERGER CONSIDERATION (PAGE 30)
The negotiated merger consideration for your shares of Broad common
stock is $26.50 per share, but the actual value will depend in part on the
average closing price of Independence common stock during a ten-day pricing
period which ends approximately two weeks prior to the date the merger is
expected to be completed. If the average closing price on the Nasdaq Stock
Market during the pricing period is less than $12.75 per share, the actual value
could be less than $26.50 and if the average trading price is above $17.25 per
share, it could be higher.
A table on page 33 sets forth the price you would receive based upon
various assumptions as to the average closing price of Independence common stock
during the pricing period. If that period has ended on May ___, when the average
closing price of Independence common stock was $____, ____ shares of
Independence common stock would be issued for each share of Broad common stock
received in exchange for Independence common stock and $26.50 in cash would be
paid for shares of Broad common stock surrendered for cash. Of course, the
market value of Independence common stock will fluctuate prior to the merger.
MANNER OF PAYMENT (PAGE 34)
In total, approximately one-half of the merger consideration will be
paid in Independence common stock and one-half in cash. If the merger is
approved at the June ___, 1999 meeting of Broad's stockholders, you will be sent
a form on which you may specify whether you wish to receive all cash, all
Independence common stock or a combination in payment for your Broad shares.
Your choice will be honored to the extent possible, but because of the overall
limitation on the amount of cash and shares of Independence common stock which
are available, whether you receive the amount of cash or stock you request will
depend in part on how many other Broad stockholders submit instructions, how
many choose to receive cash and how many chose to receive stock. Independence
will not issue fractional shares. Instead, you will receive the value of any
fractional share in cash.
WHEN AND HOW TO CHOOSE THE METHOD OF PAYMENT FOR YOUR SHARES (PAGE 33)
Detailed instructions on how to choose your preferred method of payment
will be sent to you if the merger is approved by the stockholders. You will then
have a period of approximately three weeks in which to complete the form and
return it as instructed with your stock certificates. After the forms have been
received and processed and the merger consideration has been determined, and all
other conditions necessary to complete the merger have been satisfied, the
merger will take place and you will be sent the cash and/or Independence common
stock to which you are entitled.
IF YOU HAVE A PREFERENCE AS TO THE FORM OF CONSIDERATION YOU WISH TO
RECEIVE FOR YOUR SHARES OF BROAD COMMON STOCK, YOU SHOULD NOTIFY US ON THE FORMS
THAT WILL BE PROVIDED TO YOU BECAUSE SHARES AS TO WHICH A CHOICE HAS BEEN MADE
WILL BE GIVEN PRIORITY IN PROVIDING SUCH CONSIDERATION OVER SHARES AS TO WHICH
NO CHOICE HAS BEEN MADE.
NEITHER THE BROAD BOARD NOR BROAD'S FINANCIAL ADVISOR MAKES ANY
RECOMMENDATION AS TO WHETHER BROAD STOCKHOLDERS SHOULD CHOOSE TO RECEIVE THE
CASH CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. YOU MUST MAKE YOUR
OWN DECISION WITH RESPECT TO SUCH CHOICE.
3
<PAGE> 10
TAX CONSEQUENCES FOR BROAD STOCKHOLDERS (PAGE 49)
For United States federal income tax purposes, your exchange of shares
of Broad common stock for shares of Independence common stock generally will not
cause you to have any gain or loss. You will, however, have gain in connection
with any cash received.
The requirement to complete the merger depends on our receipt of legal
opinions about the federal income tax treatment of our companies and our
stockholders. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING
OF THE MERGER'S TAX CONSEQUENCES THAT ARE PARTICULAR TO YOU.
YOU DO NOT HAVE DISSENTERS RIGHTS IN THE MERGER (PAGE 51)
New Jersey law does not provide Broad stockholders with dissenters'
rights in the merger. This means that you cannot receive payment for your shares
of Broad common stock based upon an independent determination of their value.
ACCOUNTING TREATMENT OF THE MERGER (PAGE 49)
We will account for the merger as a "purchase." In addition, because
Independence is paying more for the Broad common stock than the fair market
value of Broad's net assets, Independence will record an asset called
"goodwill," currently estimated to be approximately $107.0 million. Independence
will write off this goodwill as an expense over approximately the next 15 years,
reducing net income during that period. The Statewide merger, discussed on page
5, will create additional goodwill of approximately $67.2 million which
Independence will also write off over 15 years.
INTERESTS OF BROAD'S DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT
FROM YOUR INTERESTS (PAGE 37)
Some of Broad's directors and officers have interests in the merger
that are different from, or are in addition to, their interests as Broad
stockholders. The members of our boards of directors knew about these additional
interests, and considered them, when they approved the merger agreement and the
merger. Under the terms of the merger agreement, eight officers, including Mr.
Donald M. Karp, chairman of the board and chief executive officer of Broad, and
John A. Dorman, the president and chief operating officer, will receive cash
payments upon the completion of the merger totaling approximately $7.5 million
in connection with the termination of their employment or change in control
agreements. In addition, the non-officer directors of Broad will be appointed to
a consulting board of Independence Community Bank for a two year period and will
receive total fees per individual ranging from $20,000 to $60,600 over that
period. One of Broad's directors will also receive payments totalling
approximately $378,000 as a result of the merger due to the termination of his
consulting agreement.
See "The Merger - Interests of Directors and Officers in the Merger
that are Different from Your Interests" on page 36 for a more detailed
discussion of the benefits and interests of Broad's directors and officers.
DIFFERENCES IN THE RIGHT OF INDEPENDENCE'S AND BROAD'S STOCKHOLDERS (PAGE 64)
After the merger is completed, Broad's stockholders who receive
Independence common stock will become stockholders of Independence. Their rights
as stockholders of Independence will be governed by Delaware General Corporation
Law and by Independence's certificate of incorporation and bylaws. The rights of
stockholders of Independence materially differ from the rights of the
stockholders of Broad in certain instances. See "Comparison of Rights of
Stockholders of Independence and Broad" on page 64.
OUR REASONS FOR THE MERGER (PAGE 23)
Broad and Independence are proposing to merge because we believe that
by combining them we can create a stronger and more diversified company that
will provide significant benefits to our stockholders and customers
4
<PAGE> 11
alike and strengthen our position as a competitor in the financial services
business, Broad's board of directors also believes that the transaction is
financially attractive to the Broad stockholders because it gives them the
opportunity to receive a favorable price in cash or in stock. To review our
reasons for the merger in greater detail, as well as how we came to agree on the
merger, please see pages 22 to 24 of this document.
OUR RECOMMENDATION TO STOCKHOLDERS (PAGE 23)
The board of directors of Broad believes that the terms of the merger
agreement are fair to, and in the best interests of, Broad and its stockholders.
The Broad board unanimously recommends that you vote "FOR" the proposal to
approve the merger agreement.
THE CONSIDERATION IS FAIR TO STOCKHOLDERS ACCORDING TO BROAD'S FINANCIAL
ADVISOR (PAGE 24)
Ryan, Beck & Co., Inc. Broad's financial advisor, has delivered to the
Broad board its opinion that, as of the date of this document, the merger
consideration is fair to Broad stockholders from a financial point of view.
See "The Merger-The transaction is fair to Broad's Stockholders According to
Broad's Investment Advisor" on page 24.
WHAT WE NEED TO DO TO COMPLETE THE MERGER (PAGE 40)
The completion of the merger depends on a number of conditions being
met. See "The Merger Conditions to the Merger" on page 40.
TERMINATING THE MERGER AGREEMENT (PAGE 47)
We can agree at any time to terminate the merger agreement without
completing the merger, even if have approved it. Under certain circumstances,
either Independence or Broad may unilaterally terminate the merger agreement. In
addition, the merger agreement allows Broad to terminate the merger if the
average closing price of Independence's common stock is less than or equal to
$10.34 and has declined by more than 15% compared to a select group of its peers
during a specified period prior to the anticipated date of completing the
Merger, unless Independence elects to increase the merger consideration to equal
a minimum value. See "The Merger -Broad Stockholders Will Receive Shares of
Independence Common Stock and/or Cash for Each Broad Share," " -Waiving and
Amending Provisions in, or Terminating, the Merger Agreement" and " -Price Based
Termination of the Merger Agreement" at pages 31 to 36, and 46 to 47.
TERMINATION FEE IF MERGER IS NOT COMPLETED (PAGE 48)
If the merger is not completed, the merger agreement provides that
Independence may receive up to a $6.5 million termination fee from Broad under
certain circumstances.
AMENDING PROVISIONS OF THE MERGER AGREEMENT (PAGE 47)
We can agree to amend the merger agreement, and each of us can waive
our right to require the other party to adhere to the terms and conditions of
the merger agreement, where the law allows. However, we may not do so after you
approve the merger agreement if the amendment or waiver reduces or changes the
consideration that will be received by you. In that case, you would have to
approve the amendment or waiver.
BROAD STOCKHOLDERS' AGREEMENT (PAGE 52)
Each of the directors and certain of the executive officers of Broad
entered into an agreement agreeing to vote in favor of the merger with
Independence. These persons have the right to vote 1,237,484 shares. The
stockholders' agreement may increase the chances of the approval of the merger
agreement at Broad's special meeting of stockholders. A copy of the
stockholders' agreement is attached to this document as Appendix B.
5
<PAGE> 12
THE STATEWIDE MERGER (PAGE 52)
In a separate and unrelated transaction, Independence is also
acquiring Statewide Financial Corp., a New Jersey savings and loan holding
company headquartered in Jersey City, New Jersey. Statewide operates Statewide
Savings Bank, S.L.A., a New Jersey-chartered savings and loan association
operating 16 branches in Bergen, Hudson, and Union counties. At December 31,
1998 Statewide had assets totalling $717.5 million, deposits totaling $ 443.7
million and stockholder's equity of $60.5 million. The Statewide merger does
not require the approval of Independence's or stockholders.
6
<PAGE> 13
COMPARATIVE COMMON STOCK PRICE AND DIVIDEND INFORMATION
Independence common stock and Broad common stock are included for
quotation on the Nasdaq Stock Market (symbols: "ICBC" and "BNBC," respectively).
The following table sets forth the high and low sale prices of shares of
Independence common stock and Broad common stock as reported in the Nasdaq Stock
Market, and the quarterly cash dividends declared per share, for the periods
indicated.
<TABLE>
<CAPTION>
Independence Common Stock Broad Common Stock (1)
--------------------------------------------------------------------------------------
High Low Dividends High Low Dividends
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997
Quarter ended March 31.......... NA NA NA $15.476 $10.238 $.10
Quarter ended June 30........... NA NA NA 16.786 13.333 .10
Quarter ended September 30...... NA NA NA 19.286 15.595 .10
Quarter ended December 31....... NA NA NA 23.333 14.881 .10
1998
Quarter ended March 31.......... $18.180 $17.250 NA $22.381 $18.333 $.10
Quarter ended June 30........... 19.063 14.938 NA 24.286 19.881 .10
Quarter ended September 30...... 17.250 11.000 NA 23.929 15.238 .11
Quarter ended December 31....... 16.000 11.906 $.03 20.298 15.000 .12
1999
Quarter ended March 31.......... $16.375 $13.438 $.03 $25.000 $19.500 $.12
</TABLE>
- ----------------------------
(1) The market prices and dividends have been restated to give effect to
the 5% stock dividend declared December 17, 1998 and distributed
January 7, 1999 and the 5% stock dividend which was declared December
18, 1997 and distributed January 6, 1998.
The following table sets forth the last reported sale price per share
of Independence common stock and Broad common stock, as reported on the Nasdaq
Stock Market, on (i) January 29, 1999, the last business day preceding public
announcement of the signing of the merger agreement and (ii) May __, 1999, the
latest practicable trading date prior to the mailing of this Proxy
Statement-Prospectus:
<TABLE>
<CAPTION>
Independence Equivalent Price Per Broad
Common Stock Broad Common Stock Share (1)
------------------------------------------------------------------------------
<S> <C> <C> <C>
January 29, 1999.................... $15.00 $21.50 $26.50
May __, 1999........................ 26.50
</TABLE>
- -----------------
(1) The equivalent prices per share of Broad common stock on January 29,
1999 and on May ___, 1999 respectively, were determined by
multiplying an assumed exchange ratio of 1.7667 and ___, respectively,
by the closing price of Independence common stock on the relevant date.
You should obtain current market quotations for Independence common
stock and Broad common stock since the market price of Independence common stock
will continue to fluctuate between the date of this document and the date on
which the merger is completed and thereafter.
7
<PAGE> 14
SELECTED PRO FORMA
CONSOLIDATED COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth information about earnings per share,
dividends per share and book value per share, and similar information reflecting
the Broad merger. In addition, we have included similar information relating to
the Statewide merger. You can use this table to understand how the Broad and
Statewide mergers would have affected Independence's earnings, dividends and
book value, all on a per share basis, if the merger had taken effect on the
first day of the periods described below. The first item listed in each category
gives you historical information relating to Independence. The information set
forth below is only a summary and you should read it together with the
historical financial statements and related notes contained in the annual
reports and other information that Independence and Broad have either attached
to this document or have filed previously with the SEC. See "Where You Can Find
More Information" on page 15.
The pro forma and pro forma equivalent per share data in the following
tables are presented for comparative purposes only and are not necessarily
indicative of what the combined financial position or results of operations
would have been had the merger been consummated during the period or as of the
date for which such pro forma tables are presented.
<TABLE>
<CAPTION>
At or For the At or For the
Nine Months Ended Year Ended
December 31, 1998 March 31, 1998
-------------------------------------------------
<S> <C> <C>
Cash dividend per common share:
Independence...................................... $ 0.03 $ 0.00
Broad............................................. $ 0.32 $ 0.35
Independence pro forma (with Broad only) (1)...... $ 0.03 $ 0.00
Per equivalent Broad share (2).................... $ 0.05 $ 0.00
Per equivalent Broad share with Statewide (3)..... $ 0.05 $ 0.00
Book value per common share:
Independence...................................... $ 12.33 $ 12.48
Broad............................................. $ 9.09 $ 7.93
Independence pro forma (with Broad only) (4)...... $ 12.41 $ 12.48
Per equivalent Broad share (2).................... $ 21.93 $ 22.05
Per equivalent Broad share with Statewide (3)..... $ 21.92 $ 22.05
Tangible book value per common share:
Independence...................................... $ 11.66 $ 11.75
Broad............................................. $ 9.06 $ 7.93
Independence pro forma (with Broad only) (4)...... $ 10.36 $ 10.34
Per equivalent Broad share (2).................... $ 18.29 $ 18.27
Per equivalent Broad share with Statewide (3)..... $ 16.73 $ 16.86
Basic earnings (loss) per common share:
Independence...................................... $ 0.47 $ (0.52)(5)
Broad............................................. $ 1.27 $ 1.28
Independence pro forma (with Broad only) (4)...... $ 0.44 $ (0.22)
Per equivalent Broad share (2).................... $ 0.77 $ (0.38)
Per equivalent Broad share with Statewide (3)..... $ 0.67 $ (0.40)
Diluted earnings (loss) per common share:
Independence...................................... $ 0.47 $ (0.52)(5)
Broad............................................. $ 1.21 $ 1.23
Independence pro forma (with Broad only) (4)...... $ 0.44 $ (0.22)
Per equivalent Broad share (2).................... $ 0.77 $ (0.38)
Per equivalent Broad share with Statewide (3)..... $ 0.67 $ (0.40)
</TABLE>
- ------------------
(1) Independence pro forma cash dividends per share represent historical
cash dividends declared by Independence and assumes no changes in cash
dividends declared per share.
(2) Assuming the conversion of 50% of the outstanding shares of Broad common
stock into shares of Independence common stock at an exchange ratio of
1.7667 and a Broad stockholder receives all Independence common stock in
exchange for his or her shares of Broad common stock.
(3) Assuming the conversion of 50% of the outstanding shares of Broad
common stock into shares of Independence common stock at an exchange
ratio of 1.7667 and a Broad stockholder receives all Independence common
stock in exchange for his or her shares of Broad common stock. Based
upon the combined pro forma data including Independence, Broad and
Statewide.
(4) Independence pro forma book value per common share and tangible book
value per common share amounts are based on the historical total
stockholders' equity of the combined entity divided by the total pro
forma common shares of the combined entity assuming conversion of 50% of
the outstanding shares of Broad common stock into shares of Independence
common stock at an exchange ratio of 1.7667 and a Broad stockholder
receives all Independence common stock in exchange for his or her shares
of Broad common stock.
(5) Independence converted to stock form on March 13, 1998. Accordingly,
earnings per shares for the fiscal year ended March 31, 1998 are
presented on an historical basis from March 13, 1998 to March 31, 1998.
Includes the one time non-recurring charge of $56.4 million ($37.2
million , net of tax) for funding of the Independence Community
Foundation at the time of Independence's reorganization to a stock
holding company.
8
<PAGE> 15
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF INDEPENDENCE
The following tables set forth selected historical consolidated financial
and other data of Independence for the five years ended March 31, 1998 and for
the nine months ended December 31, 1998 and 1997. The historical consolidated
financial data for the nine months ended December 31, 1998 and 1997 is derived
from unaudited consolidated financial statements. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
for a fair presentation at such dates and for such periods have been made.
Operating results for the nine months ended December 31, 1998 are not
necessarily indicative of the results that may be expected for any other interim
period or the entire year ending March 31, 1999. The financial information for
the five years ended March 31, 1998 of Independence is based on, and qualified
in its entirety by, the consolidated financial statements of Independence,
including the notes thereto, which are incorporated by reference in this Proxy
Statement-Prospectus and should be read in conjunction therewith.
<TABLE>
<CAPTION>
At March 31,
At December 31, ------------------------------------------------------------------
1998 1998 1997 1996 1995 1994
--------------- ---------- ---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets $5,313,371 $5,222,996 $3,734,723 $3,869,782 $2,619,935 $2,549,180
Cash and cash equivalents 279,470 857,251 374,636 103,192 110,394 37,667
Investment securities -- -- -- 39,995 29,427 355,886
held-to-maturity
Mortgage-backed and mortgage-related
securities held-to-maturity -- -- -- 120,702 305,545 376,704
Mortgage-backed and mortgage-
related securities 736,959 84,610 190,979 395,321 -- --
available- for- sale
Investment securities available- 783,677 1,282,072 357,487 683,828 61,818 --
for- sale
Loans receivable, net 3,258,393 2,745,540 2,504,496 2,322,808 2,020,262 1,693,994
Intangible assets (1) 49,399 55,873 60,499 80,268 1,023 1,728
Deposit accounts 3,412,226 3,393,839 3,325,558 3,396,890 2,236,422 2,207,441
FHLB advances 736,675 14,300 14,550 56,045 67,462 60,489
Borrowings-securities loaned 55,620 701,160 -- -- -- --
Other borrowings 1,771 2,381 2,682 1,250 1,286 1,100
Total equity 913,942 949,124 309,114 289,819 259,197 220,690
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31, For the Year Ended March 31,
------------------------- ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
------------ ----------- --------- --------- -------- --------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income $247,047 $202,810 $ 293,043 $ 255,303 $213,100 $ 191,539 $179,697
Interest expense 121,454 108,704 160,943 140,187 110,619 80,562 75,633
-------- -------- --------- --------- -------- --------- --------
Net interest income 125,593 94,106 132,100 115,116 102,481 110,977 104,064
-------- -------- --------- --------- -------- --------- --------
Provision for loan losses 7,764 7,680 10,011 7,960 3,679 3,592 5,014
-------- -------- --------- --------- -------- --------- --------
Net interest income after provision for
loan losses 117,829 86,426 122,089 107,156 98,802 107,385 99,050
Net gain (loss) on sales of loans and
securities 47 63 115 (3,347) 12,222 (3,952) 849
Other non-interest income 8,054 7,033 10,233 6,256 7,860 6,416 6,873
Amortization of intangible assets 6,474 6,571 8,740 8,278 1,842 905 864
Charitable contribution to Independence
Community Foundation -- -- 56,422 -- -- -- --
Other non-interest expenses (2) 67,312 56,935 80,713 73,875 50,288 46,713 41,176
-------- -------- --------- --------- -------- --------- --------
Income (loss) before provision (benefit)
for income taxes 52,144 30,016 (13,438) 27,912 66,754 62,231 64,732
Provision (benefit) for income taxes 19,253 9,008 (3,482) 10,732 30,782 27,327 25,808
Cumulative effect of change in
accounting principle(3) -- -- -- -- -- -- 3,321
-------- -------- --------- --------- -------- --------- --------
Net income (loss) $ 32,891 $ 21,008 $ (9,956) $ 17,180 $ 35,972 $ 34,904 $ 42,245
======== ======== ========= ========= ======== ========= ========
Basic and diluted income (loss) per share
since conversion to stock form $ 0.47 NA $ (0.52) NA NA NA NA
======== =========
</TABLE>
9
<PAGE> 16
<TABLE>
<CAPTION>
For the Nine Months
Ended December 31, At of For the Year Ended March 31,
-------------------- ----------------------------------------------
1998 1997 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:(4)
Return on assets (2) 0.89% 1.10% 0.64% 0.46% 1.27% 1.37% 1.71%
Return on equity (2) 4.62 8.71 7.59 5.69 13.13 14.81 21.80
Interest-earning assets to
interest-bearing
liabilities 122.39 106.48 108.71 105.80 109.28 110.55 107.97
Interest rate spread (5) 2.80 3.20 2.91 3.09 3.39 4.18 4.13
Net interest margin (5) 3.54 3.45 3.26 3.32 3.77 4.52 4.38
Non-interest expense, exclusive of
amortization of intangible assets, to
total assets(2) 1.82 1.99 1.90 1.99 1.77 1.83 1.67
Efficiency ratio(6) 50.37 56.29 56.71 53.82 45.58 39.79 37.12
ASSET QUALITY RATIOS:
Non-performing loans as a percent of total
loans at end of period 1.21% 0.97% 1.07% 1.07% 1.52% 1.05% 1.24%
Non-performing assets to total assets at
end of period(7) 0.76 0.70 0.57 0.74 0.94 0.88 0.90
Allowance for loan losses to non-
performing loans at end of period 110.73 127.22 122.19 99.76 57.81 55.73 41.68
Allowance for loan losses to non-
performing loans at end of period 1.34 1.23 1.31 1.07 0.88 0.58 0.52
CAPITAL AND OTHER RATIOS:(4)
Equity to assets at end of period 17.20% 8.67% 18.17% 8.28% 7.49% 9.89% 8.66%
Leverage capital 12.79 7.26 11.16 6.83 6.13 9.54 8.52
Tangible equity to risk-weighted assets at
end of period 20.51 10.66 22.25 10.05 9.82 13.76 13.85
Total capital to risk-weighted assets at
end of period 21.82 11.91 23.50 11.15 10.82 14.43 14.41
Number of full service offices at end of
period 33(8) 34 34 32 33 21 20
</TABLE>
- -----------------------
(1) Represents the excess of cost over fair value of net assets acquired
which consists of $20.4 million of goodwill and $29.0 million of other
intangibles at December 31, 1998. The reduction from March 31, 1996 to
March 31, 1997 reflected the amortization of such intangible assets,
certain adjustments relating to the acquisition in 1996 of Bay Ridge
Bancorp, Inc. as well as the acquisition of five branch offices. The
goodwill resulting from the Bay Ridge acquisition decreased during
fiscal 1997 due primarily to the repayment of the Bay Ridge employee
stock ownership plan loan and the receipt of tax refunds. The
intangible related to the acquisition of five branch offices was
affected by the sale of the deposits related to one of the offices
acquired, resulting in a $5.3 million decrease in the remaining premium
related to this branch office.
(2) At and for the year ended March 31, 1998 excludes the one time
non-recurring charge of $56.4 million ($37.2 million net of tax) for
the funding of the Independence Community Foundation. At and for the
year ended March 31, 1997 reflects the effects of a special one-time
assessment imposed on institutions which had deposits insured by the
Savings Association Insurance Fund. As a result of the various
acquisitions Independence Community Bank has completed, it is deemed to
have Savings Association Insurance Fund insured deposits. As a
consequence, during fiscal 1997, it paid $8.6 million in satisfaction
of the special assessment. Had this amount not been paid for the year
ended March 31, 1997, Independence Community Bank's return on assets
would have been 0.61% and its return on equity would have been 7.44%.
Independence Community Bank's ratio of non-interest expenses, exclusive
of amortization of intangible assets, to total assets would have been
1.76%.
(3) Reflects adoption of Statement of Financial Accounting Standards No.
109.
(footnotes continued on following page)
10
<PAGE> 17
(4) With the exception of end of period ratios and the efficiency ratio,
all ratios are based on average daily balances during the respective
periods and are annualized where appropriate.
(5) Interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost
of interest-bearing liabilities; net interest margin represents net
interest income as a percentage of average interest-earning assets.
(6) Reflects adjusted operating expense (net of amortization of
intangibles, the special Savings Association Insurance Fund assessment
and the contribution to the Independence Community Foundation) as a
percent of the aggregate of net interest income and adjusted
non-interest income (excluding gains and losses on the sales of loans
and securities).
(7) Non-performing assets consist of non-accrual loans, loans past due 90
days or more as to interest or principal repayment and accruing and
real estate acquired through foreclosure or by deed-in-lieu thereof.
(8) Subsequent to December 31, 1998, Independence Community Bank closed one
of its branch offices.
11
<PAGE> 18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BROAD
The following tables set forth selected historical consolidated
financial and other data of Broad for the five years ended December 31, 1997 and
for the nine months ended December 31, 1998 and 1997. The historical
consolidated financial data for the nine months ended December 31, 1998 and 1997
is derived from unaudited consolidated financial statements. However, such data
reflect all normal, recurring adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. The results of operations for the interim periods presented
are not necessarily an indication of the results that can be expected for the
entire years ending December 31, 1998 and 1997. The financial information for
the five years ended December 31, 1997 of Broad is based on, and qualified in
its entirety by, the consolidated financial statements of Broad and
subsidiaries, including the notes thereto, which are incorporated by reference
in this Proxy Statement-Prospectus and should be read in conjunction therewith.
<TABLE>
<CAPTION>
At December 31, At December 31,
--------------- ----------------------------------------------------
1998 1997 1996 1995 1994 1993
--------------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
SELECTED CONSOLIDATED
STATEMENTS OF CONDITION
INFORMATION:
Total assets $684,793 $601,669 $533,615 $481,185 $428,630 $438,532
Loans, gross 360,389 322,752 287,364 267,419 267,422 265,920
Securities Held-To-Maturity 32,949 65,330 90,170 60,266 89,789 102,165
Securities Available-For-Sale 231,828 141,077 69,044 55,946 21,144 --
Total deposits 575,064 518,238 485,073 429,681 391,466 406,066
Short-term borrowings 40,651 13,000 1,000 782 177 342
Long-term debt -- 9,000 -- -- -- --
9.5% Cumulative Trust Preferred
Securities 11,500 11,500 -- -- -- --
Shareholders' equity 44,689 39,231 38,358 34,529 30,266 27,421
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31, For the year ended December 31,
------------------------- -------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
INCOME INFORMATION: (1)
Interest income $34,817 $31,173 $40,855 $35,162 $33,398 $29,795 28,313
Interest expense 13,993 12,409 15,930 11,818 10,082 7,464 8,082
------- ------- ------- ------- ------- ------- -------
Net interest income (1) 20,824 18,764 24,925 23,344 23,316 22,331 20,231
Provision for possible loan losses (1) 675 1,350 1,800 1,350 720 450 900
------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for possible loan
losses 20,149 17,414 23,125 21,994 22,596 21,881 19,331
Non-interest income (1) 5,685 5,224 7,117 6,556 4,491 3,649 4,023
Non-interest expense (1) 16,332 14,859 19,549 19,849 19,536 20,073 19,813
Provision for income taxes 3,260 3,029 4,282 3,428 3,131 768 1,491
Net income before cumulative
effect of a change in
accounting principle 6,242 4,750 6,411 5,273 4,420 4,689 2,050
Cumulative effect of a change in
accounting principle (2) -- -- -- -- -- -- 1,086
------- ------- ------- ------- ------- ------- -------
Net income (1) $ 6,242 $ 4,750 $ 6,411 $ 5,273 $ 4,420 $ 4,689 $ 3,136
======= ======= ======= ======= ======= ======= =======
Per Share Data: (3)
Net income per common share
Basic
Before cumulative effect of a
change in accounting
principle $ 1.27 $ 0.95 $ 1.28 $ 1.05 $ 1.08 $ 1.17 $ 0.42
Cumulative effect of a change
in accounting principle -- -- -- -- -- -- 0.31
------- ------- ------- ------- ------- ------- -------
Basic earnings per common
share $ 1.27 $ 0.95 $ 1.28 $ 1.05 $ 1.08 $ 1.17 $ 0.73
</TABLE>
(Table continued on the following page)
12
<PAGE> 19
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31, For the year ended December 31,
------------------------- -------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(Unaudited) (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Diluted
Before cumulative effect of a
change in accounting
principle $ 1.21 $ 0.92 $ 1.23 $ 1.01 $ 0.85 $ 0.91 $ 0.41
Cumulative effect of a change
in accounting principle -- -- -- -- -- -- $ 0.22
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per common
share $ 1.21 $ 0.92 $ 1.23 $ 1.01 $ 0.85 $ 0.91 $ 0.63
Cash dividends per common
share $ 0.32 $ 0.26 $ 0.35 $ 0.26 $ 0.15 $ 0.14 $ --
Book value per common share 9.09 7.93 7.93 7.45 6.71 6.49 5.68
Dividend payout ratio 26.85% 26.67% 27.16% 24.54% 26.58% 24.05% 20.37%
Weighted average number of
common shares outstanding (in
thousands):
Basic 4,932 4,990 5,027 5,028 3,577 3,488 3,440
Diluted 5,158 5,180 5,204 5,248 5,207 5,141 5,020
FINANCIAL RATIOS (4):
Return average assets 1.29% 1.10% 1.13% 1.05% 0.97% 1.04% 0.48%
Return on average shareholders'
equity 19.44 16.05 16.33 14.58 13.52 16.16 7.83
Average equity to average assets 6.66 6.84 6.94 7.20 7.14 6.44 6.12
Earnings to fixed charges (5) 1.41 1.47 1.56 1.74 1.71 1.68 1.30
Net interest margin 4.57 4.62 4.70 5.05 5.59 5.41 5.12
Net interest spread 3.73 3.79 3.89 4.33 4.88 4.92 4.55
ASSET QUALITY RATIOS:
Non-performing loans as a % of
gross loans 0.58% 1.49% 1.49% 3.39% 3.82% 3.63% 7.72%
Non-performing loans as a % of
total assets 0.30 0.80 0.80 1.82 2.12 2.26 4.68
Allowance for possible loan
losses as a % of gross loans 2.29 2.16 2.16 2.97 2.77 2.84 4.23
Allowance for possible loan
losses as a % of non-
performing loans 396.06 144.63 144.63 87.65 72.47 78.32 54.81
Net (recoveries) chargeoffs as a
% of average gross loans (0.26) 1.06 1.10 0.08 0.35 1.56 0.90
Non-performing assets as a % of
loans and OREO 1.69 2.19 2.19 5.03 6.00 5.81 10.03
CAPITAL RATIOS:
Leverage capital 8.22% 8.19% 8.19% 6.92% 7.17% 7.00% 6.23%
Tier 1 capital to total risk-
weighted assets 12.80 13.16 13.16 11.17 10.58 9.96 9.16
Total capital to total risk-
weighted assets 14.06 14.41 14.41 12.44 11.85 11.22 10.45
</TABLE>
(1) Net interest income was $6.5 million for the quarter ended March 31,
1998 compared to $6.2 million for the comparable prior year quarter.
The provision for possible loan losses was $300,000 for the quarter
ended March 31, 1998 compared to $450,000 for the quarter ended March
31, 1997. Non-interest income was $1.9 million for the three months
ended March 31, 1998 as compared to $1.9 million for the prior year's
three month period. Non-interest expenses were $5.2 million for the
three months ended March 31, 1998 as compared to $4.7 million for the
comparable prior year period. Net income was $1.8 million for the
quarter ended March 31, 1998 compared to $1.7 million for the quarter
ended March 31, 1997.
(2) Reflects adoption of Statement of Financial Accounting Standards No.
109.
(3) Share and per share amounts have been adjusted to reflect all prior
stock dividends.
(4) Annualized where appropriate.
(5) The ratio of earnings to fixed charges is computed by dividing the sum
of income before taxes, fixed charges and preferred stock dividends by
the sum of fixed charges and preferred stock dividends. Fixed charges
represent interest expense and payment of debt.
13
<PAGE> 20
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL INFORMATION
The following unaudited pro forma combined selected financial
information combine Independence's historical results with Broad's and
Statewide's historical results as if the merger had become effective as of the
date indicated in the case of the balance sheet information presented, and as if
the merger had become effective at the beginning of the periods indicated in the
case of the income statement information presented. We refer to this as pro
forma information. The pro forma information in the tables assumes that the
merger is accounted for using the purchase method of accounting.
The merger will be accounted for as a "purchase," which means that the
purchase price will be allocated to the assets acquired and the liabilities
assumed by Independence based on their estimated fair values at the time Broad
and Independence are combined. For a more detailed description of purchase
accounting, see "THE MERGER-Accounting Treatment of the Merger."
Because Independence's fiscal year ends on March 31 and Broad's and
Statewide's fiscal years end on December 31, the financial data for Broad and
Statewide for the nine months ended December 31, have been presented to coincide
with the fiscal reporting period for Independence. Following the merger, the
combined company's fiscal year, like that of Independence, will end on March 31.
When reviewing these tables, you should also read the historical
financial statements, including their notes, of Independence and Broad. See
"Where You Can Find More Information" on page 15 of this document. You should
also read the more detailed pro forma financial information, including their
notes, that are found on page 71 of this document.
This information is presented for informational purposes only. You
should not assume that Independence, Broad and Statewide would have achieved the
combined pro forma results if they had actually been combined during the periods
shown.
There may be certain cost savings and/or revenue enhancements that will
result from the Broad merger and the Statewide merger. The information furnished
in these tables does not reflect either such possible cost savings or revenue
enhancements.
14
<PAGE> 21
Selected Unaudited Pro Forma Financial Data
of Independence, Broad and Statewide
<TABLE>
<CAPTION>
At December 31,
1998
---------------
(In thousands)
<S> <C>
Selected Pro Forma Condensed Combined Balance Sheet:
Total securities held to maturity ............... $ 33,083
Total securities available for sale ............. 2,068,811
Total loans, net ................................ 3,981,379
Total assets .................................... 6,632,014
Total deposits................................... 4,433,531
Total Borrowings................................. 987,866
Total stockholders' equity ...................... 943,457
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
December 31, March 31,
1998 1998
----------------- ---------------
(In thousands, except per share data)
<S> <C> <C>
Selected Pro Forma Condensed Combined Statement
of Income :
Net interest income after provision for loan losses $ 144,456 $ 157,513
Net income (loss) 27,288 (16,235)(1)
Earnings from per common share:
Basic 0.38 (0.22)(1)
Diluted 0.38 (0.22)(1)
</TABLE>
- ----------------------
(1) Includes a one-time non-recurring charge of $56.4 million ($37.2
million, net of tax) for funding of the Independence Community
Foundation at the time of Independence Community Bank's reorganization
to a stock holding company.
WHERE YOU CAN FIND MORE INFORMATION
Independence and Broad file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that the companies file at the SEC's public reference rooms in Washington, D.C.,
New York, New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms.
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<PAGE> 22
Independence's and Broad's public filings are also available to the
public from commercial document retrieval services and at the Internet World
Wide Website maintained by the SEC at "http://www.sec.gov."
Independence has filed the registration statement to register with
the SEC the shares of Independence common stock to be issued to Broad
stockholders in the merger. This proxy statement-prospectus is a part of the
registration statement and constitutes a prospectus of Independence and a proxy
statement of Broad for the special meeting.
Independence common stock and Broad common stock are traded on the
Nasdaq Stock Market under the symbols "ICBC" and "BNBC", respectively. Documents
filed by Independence and Broad also can be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
As allowed by SEC rules, this document does not contain all the
information that stockholders can find in the registration statement or the
exhibits to the registration statement.
The SEC allows Independence and Broad to "incorporate by reference"
information into this document, which means that Independence and Broad can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this document, except for any information superseded by information
contained directly in the document. This document incorporates by reference
other documents which are listed below that Independence and Broad have
previously filed with the SEC. The documents contain important information about
their financial condition.
INDEPENDENCE SEC FILINGS (FILE NO. 0-23229):
- Independence's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998;
- Independence's Quarterly Reports on Form 10-Q for the
periods ended June 30, 1998, September 30, 1998 and
December 31, 1998;
- Independence's Registration Statement on Form 8-A,
dated October 17, 1997; and
- Independence's Current Report on Form 8-K, dated
February 9, 1999.
BROAD SEC FILINGS (FILE NO. 0-16637):
- Broad's Annual Report on Form 10-K for the year ended
December 31, 1998;
- Broad's Registration Statement on Form 8-A/A, dated
September 18, 1997; and
- Broad's Current Report on Form 8-K dated February 8,
1999.
Independence and Broad incorporate by reference additional documents
that they might file with the SEC between the date of this proxy
statement-prospectus and the date of the special meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K.
Independence has supplied all information contained or incorporated
by reference in this document relating to Independence.
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<PAGE> 23
Broad has supplied all information contained or incorporated by
reference in this document relating to Broad.
Copies of any of the documents incorporated by reference (excluding
exhibits unless specifically incorporated therein) are available without charge
upon written or oral request from John K. Schnock, Esq., Secretary, Independence
Community Bank Corp., 195 Montague Street, Brooklyn, New York 11201, (telephone
number: (718) 722-5300), as relates to Independence and from James Boyle,
Treasurer, Broad National Bancorporation, 905 Broad Street, Newark, New Jersey
07102 (telephone number: (973) 624-2300), as relates to Broad. In order to
ensure timely delivery of the documents, any request should be made by June ___,
1999.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the special meeting.
Independence and Broad have not authorized anyone to provide you with
information that is different from what is contained in this document. This
proxy statement-prospectus is dated ________, 1999. You should not assume that
the information contained in the proxy statement-prospectus is accurate as of
any date other than that date, and neither the mailing of this document to
stockholders nor the issuance of Independence's securities in the merger shall
create any implication to the contrary.
FORWARD-LOOKING STATEMENTS
This document, the documents incorporated by reference in this
document, or any other written or oral statements made by or on behalf of
Independence and Broad may include forward-looking statements with respect to
the financial condition, results of operations and business of Independence and
Broad based on management's belief and information currently available to
management. Such forward-looking statements are subject to risks, uncertainties
and assumptions. Actual results may vary materially from those anticipated,
estimated, projected or expected. Among the factors that may cause variations
from such forward-looking statements are:
- fluctuations in the economy, especially in the market
areas of Independence and Broad;
- changes in the interest rate environment;
- Independence's ability to realize anticipated cost
savings or revenue enhancements relating to the merger;
- changes in the amount of merger-related expenses;
- changes in real estate values;
- the continued growth of the markets in which
Independence and Broad operate; and
- the enactment of legislation impacting Independence.
Readers are cautioned not to place undue reliance on any
forward-looking statements made by or on behalf of Independence and Broad.
Additional information with respect to factors that may cause the results to
differ materially from those contemplated by such forward-looking statements is
included in Independence's and Broad's current and subsequent filings with the
SEC.
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<PAGE> 24
THE SPECIAL MEETING
DATE, TIME AND PLACE; PURPOSE OF SPECIAL MEETING. This document and the
accompanying proxy card are being furnished to you in connection with
solicitation by the Broad board of proxies to be used at the special meeting.
The special meeting is scheduled to be held on June __, 1999, at ____ _.m.,
Eastern Standard Time, at the principal executive offices of Broad located at
905 Broad Street, Newark, New Jersey. At the special meeting, Broad stockholders
will be asked to vote upon:
- a proposal to approve and adopt the merger agreement under
which Broad will merge with and into Independence; and
- other matters properly brought before the special meeting. As
of the date hereof, the board knows of no business that will
be presented for consideration at the special meeting, other
than matters described in this document.
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
YOU SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS.
RECOMMENDATION OF THE BROAD BOARD. The Broad board has unanimously
approved the merger agreement and has determined that the terms of the merger
and the merger agreement are fair to and in the best interests of Broad and its
stockholders. The Broad board therefore unanimously recommends that Broad's
stockholders vote for approval and adoption of the merger agreement. See "The
Merger - Broad's Reasons for the Merger; Recommendation of the Broad Board."
WHO CAN VOTE ON MATTERS ADDRESSED IN THIS DOCUMENT. The Broad board has
fixed the close of business on May __________, 1999 as the record date for
determining which stockholders are entitled to receive notice of and to vote at
the special meeting. Only holders of record of Broad common stock at the close
of business on the record date are entitled to receive notice of and to vote at
the special meeting.
VOTING AND SOLICITATION OF PROXIES. Each record holder of Broad common
stock is entitled to cast one vote for each share of Broad common stock owned.
The presence in person or by proxy of the holders of at least a majority of the
outstanding shares of Broad common stock on the record date is necessary to
constitute a quorum at the special meeting.
The shares of Broad common stock represented by properly executed
proxies received at or prior to the special meeting and not subsequently revoked
prior to the vote at the special meeting will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROPERLY EXECUTED
PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. If any
other matters incident to the conduct of the special meeting are properly
brought before the special meeting for consideration, including a motion to
adjourn the special meeting to another time or place for the purpose of
soliciting additional proxies or otherwise, shares represented by properly
executed proxies will be voted in the discretion of the persons named in the
proxy card enclosed herewith in accordance with their best judgment. However, no
proxy which is voted against the proposal to approve the merger agreement will
be voted in favor of any adjournment of the special meeting to solicit further
proxies for such proposal.
Any holder of Broad common stock who has executed and delivered a proxy
may revoke it at any time before it is voted by attending the special meeting
and voting in person, by giving timely notice of revocation in writing by
telephone or by submitting a signed proxy card bearing a later date to the
Secretary of Broad at 905 Broad Street, Newark, New Jersey 07102. In order to be
timely, the notice or proxy card must actually be received by Broad before the
vote of Broad stockholders. A proxy will not be revoked by death or supervening
incapacity of the Broad stockholder executing the proxy unless, before the vote,
notice of such death or incapacity is filed with the Secretary of Broad or other
person responsible for tabulating votes on behalf of Broad.
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<PAGE> 25
IF YOU ARE A BROAD STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR
OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE YOUR SHARES AT THE SPECIAL MEETING IN PERSON. EXAMPLES OF SUCH
ADDITIONAL DOCUMENTS INCLUDE A BROKER'S STATEMENT OR LETTER OR AN OMNIBUS PROXY,
CONFIRMING YOUR OWNERSHIP OF SHARES.
VOTE REQUIRED. The affirmative vote of at least two thirds of the
shares of Broad common stock outstanding and entitled to be voted at the special
meeting is required in order to approve and adopt the merger agreement. A
failure to return a properly executed proxy card or to vote in person or
abstaining from voting will have the same effect as a vote against the merger
agreement. Broker non-votes will not be counted as having been voted in person
or by proxy at the special meeting and will have the same effect as a vote
against the merger agreement. As of the record date, there were a total of
4,985,728 shares of Broad common stock outstanding and entitled to be voted at
the special meeting.
As of May _______, 1999, Broad's directors and executive officers and
their affiliates (18 persons) had voting power with respect to an aggregate of
1,514,746 shares, or approximately 30.4% of the outstanding shares, of Broad
common stock (exclusive of 148,922 shares which may be acquired through exercise
of stock options which are currently exercisable). Such persons have agreed to
vote their shares in favor of the approval and adoption of the merger agreement.
See "Beneficial Ownership of Broad Common Stock" and "Certain Related
Transactions -Stockholders' Agreement."
SOLICITATION OF PROXIES. Broad and Independence will evenly divide the
costs and expenses that are incurred in printing and mailing this document.
Broad will pay all other costs of soliciting proxies. Such solicitation will be
made by mail, but also may be made by telephone or in person by the directors,
officers and employees of Broad (who will receive no additional compensation for
doing so). Broad has retained D.F. King & Co., Inc., a proxy solicitation firm,
to assist in such solicitation. The fee to be paid to such firm is not expected
to exceed $5,000, plus reasonable out-of-pocket costs and expenses authorized by
Broad. In addition, Broad will make arrangements with brokerage firms and other
custodians, nominees and fiduciaries.
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<PAGE> 26
THE MERGER
The following information relates to matters contained in the merger
agreement. It describes the material aspects of the merger but is not a complete
description of the merger agreement. The merger agreement is attached as
Appendix A. Broad stockholders are urged to read the merger agreement carefully.
PARTIES TO THE MERGER
Independence is a Delaware corporation incorporated in June 1997 and is
the holding company for Independence Community Bank, a New York-chartered stock
savings bank organized in 1850 as a mutual savings bank. Independence Community
Bank reorganized from the mutual holding company structure to the stock holding
company structure in March 1998.
Independence Community Bank's principal business is gathering deposits
from customers within its market area and investing those deposits, primarily in
multi-family residential mortgage loans, single-family residential loans
(including cooperative apartment loans), commercial real estate loans, consumer
loans, commercial business loans, mortgage-backed and mortgage-related
securities and investment securities. Independence Community Bank's revenues are
derived principally from interest on its loan and securities portfolios while
its primary sources of funds are deposits, loan amortization and prepayments and
maturities of mortgage-backed and mortgage-related securities and investment
securities. Independence Community Bank offers a variety of loan and deposit
products to its customers. At March 31, 1999, Independence Community Bank
operated 32 full-service branches located in the greater New York metropolitan
area including 26 branches located in the boroughs of Brooklyn and Queens.
Broad is a New Jersey corporation incorporated in April 1981 and is the
holding company for Broad National Bank, a national bank. Broad National Bank,
organized in 1925, offers a broad range of commercial and retail banking
services. It offers checking accounts, savings accounts, money market accounts
and individual retirement accounts (IRAs), as well as various other types of
time deposits. Broad National Bank originates and services both secured and
unsecured loans including commercial and residential real estate loans as well
as consumer loans. At March 31, 1999, Broad National Bank operated from 16
full-service branches located in Bergen, Essex, Hudson, Middlesex and Union
counties, New Jersey.
GENERAL
Broad will be merged with and into Independence and Broad's
stockholders will receive the consideration discussed under "Broad Stockholders
Will Receive Shares of Independence Common Stock and/or Cash for Each Broad
Share." Independence will be the surviving corporation in the merger and will
continue its corporate existence under Delaware law. After the merger, the
separate corporate existence of Broad will terminate. The merger is subject to
the satisfaction of certain conditions, including the receipt of all necessary
regulatory approvals and the approval by the requisite vote of the stockholders
of Broad. Independence can modify the structure of the merger only if (a) there
are no material adverse federal tax consequences to Broad stockholders, (b) the
merger consideration is not changed in kind or reduced in amount solely because
of such change and (c) the modification is not likely to significantly delay the
anticipated date of completion of the merger or jeopardize receiving the
required regulatory approvals and tax opinions necessary to complete the merger.
See "-Conditions to the Merger."
As part of the merger, Broad National Bank will merge with and into
Independence Community Bank. See "Certain Related Transactions - Bank Merger
Agreement."
BACKGROUND OF THE MERGER
The board of directors and principal stockholders of Broad have long
taken great pride in the contribution which Broad National Bank as an
independent institution has made to Newark and the other areas served by Broad
National Bank. Nevertheless, in recent years, they have recognized that a merger
with a larger institution may in the
20
<PAGE> 27
long run be the best alternative for Broad National Bank to follow and the best
alternative to maximize the value of the stockholders' interest in Broad.
In considering possible business combinations, the board has focused on
three major considerations: (1) the price that the stockholders might receive in
the transaction; (2) whether they believe the stock of a given acquiror was of
sufficient quality to accept for long-term investment; and (3) the impact on
Broad National Bank, its employees and the community. The melding of these
considerations caused the board to respond to and ultimately seek inquiries from
certain large financial institutions which were viewed as being well capitalized
and well managed and having compatible operating philosophies.
In November of 1997, Broad was approached by a large foreign bank
regarding a possible acquisition of Broad by the foreign institution. Informal
discussions were then held between the senior management of Broad and the
management of the foreign institution. Broad also contacted an investment
banking firm (not Ryan Beck) to assist in the discussions and to make a study
and recommendation to the board concerning a possible transaction with the
foreign institution and other strategic alternatives.
At its January, 1998, monthly meeting, the board reviewed the
discussions with the foreign banking institution. At this board meeting, the
investment banking firm also commenced the process of reviewing Broad's
strategic alternatives with the board. The board determined to retain the
investment banking firm as its financial advisor for the purpose of initiating
formal discussions and negotiations regarding a possible acquisition of Broad by
the foreign banking institution.
An exchange of confidential information between Broad and the foreign
bank began in February 1998, but the discussions did not advance to a final
negotiations stage. Some inquiries from other banking organizations were also
received in 1997 and early 1998, but none resulted in an exchange of
confidential information.
Following the termination of discussions with the foreign bank, Broad's
financial advisor was requested to expand the scope of its activities to include
making discreet inquiries of other suitable banking organizations which might
have an interest in acquiring a substantially urban bank such as Broad National
Bank.
In April 1998, after contacting a number of potential acquirors,
Broad's financial advisor informed Broad of two expressions of interest: one
received from a New Jersey bank with a limited presence in Newark and one
received from a New York bank. The financial advisor, in consultation with
Broad's senior management, pursued informal discussions with both institutions,
which led to the presentation of offers from both.
At its June 1998 monthly meeting, the board formally reviewed the two
offers. At this meeting, Broad's financial advisor carefully reviewed the merits
of each of the proposals and discussed with the board other strategic
alternatives available to Broad. The board determined after sustained
deliberations to pursue the offer from the New Jersey bank, which was
financially superior, and authorized the financial advisor to begin negotiating
a definitive agreement for Broad to merge with the New Jersey bank.
The offer made by the New Jersey bank was for an exchange of shares at
a fixed exchange ratio. The offer contemplated that prior to signing a
definitive agreement, the acquiror would conduct due diligence. Upon completing
due diligence in June 1998, the proposed acquiror advised Broad that it no
longer wished to proceed with the transaction. The reason given was a difference
between the types of loans (urban commercial real estate and neighborhood
businesses) which were prevalent in Broad's loan portfolio and the types of
loans favored by the proposed acquiror. In addition, during the due diligence
period, the acquiror publicly announced another acquisition which was followed
by an immediate decline in the acquiror's stock price. The board believes that
issues related to the other acquisition and the decline in its stock price may
also have been factors in the decision by the New Jersey bank not to pursue its
acquisition of Broad. When negotiations with this potential acquiror ended, all
active efforts to locate an acquiror were discontinued and Broad terminated its
agreement with its investment advisor.
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<PAGE> 28
During the summer of 1998, the Chief Executive Officer of Independence
made an initial telephone contact with the Chief Executive Officer of Broad
regarding a possible sale of Broad, but such contacts did not immediately result
in an exchange of confidential information or substantive discussions. In
October 1998, after the Chief Executive Officer of Independence again approached
the Chief Executive Officer of Broad to initiate informal discussions regarding
a possible sale of Broad, the Chief Executive Officers of each organization met
and Broad agreed to provide certain information to enable Independence to
formulate a proposal.
On January 5, 1999, the Chief Executive Officer of Independence and
Independence's financial advisor, Merrill Lynch & Co., met with the Chief
Executive Officer and the President of Broad to present a proposal to acquire
Broad. Independence's initial proposal included a purchase price of
approximately $24.75 per share.
On January 8, 1999, the Chief Executive Officer, the President and the
Treasurer of Broad met with Ryan, Beck, which had had a previous investment
banking relationship with Broad, to discuss Independence's proposal. At Broad's
request, Ryan, Beck reviewed strategic alternatives available to Broad as well
as the merits of the proposal from Independence. The Broad representatives and
Ryan, Beck considered that the price in the Independence proposal was
inadequate, but agreed to provide Independence with a counter-proposal which
they would recommend to the board. On January 15, 1999, Ryan, Beck was formally
retained as Broad's financial advisor in this transaction.
After further negotiation, a revised offer of $26.50 per share was
formally presented to and reviewed by the board at its January 21, 1999 monthly
meeting. At the meeting, Ryan, Beck reviewed Broad's strategic alternatives and
discussed the merits of Independence's revised proposal. The Chief Executive
Officer of Independence was invited by the Chief Executive Officer of Broad to
personally address the board at the meeting, and a presentation was made
followed by detailed questioning by board members. After extended discussion,
the board authorized Ryan, Beck and Broad management to proceed with
negotiations concerning the sale of Broad to Independence. In the days following
that meeting, Independence began its due diligence and submitted a definitive
agreement to Broad.
Following negotiation of the definitive agreement, at a special meeting
of the board held on January 30, 1999, Ryan, Beck reviewed the proposed
transaction in detail. Broad's counsel, Stinson, Mag & Fizzell P.C., also
reviewed with the board the proposed merger agreement. Ryan, Beck indicated that
Independence's offer was a fair offer, although in the absence of offering the
Bank to other possible buyers, it could not assure the board that a higher price
might not be obtainable in a transaction accounted for as a pooling (all stock)
rather than a purchase.
The board decided that the Independence proposal met all three of the
criteria (price, quality of stock and preservation of the organization) which
the board considered paramount. The board noted that a more extensive marketing
effort in 1998 had resulted in only one offer which could be viewed as
comparable to the Independence offer based on current market values, and that
proposed buyer found Broad's lending operations (and implicitly its market area)
to be incompatible with its own. The board also noted that the market risk
involved in Independence's proposal was lessened by the substantial cash
component and the fact that the exchange ratio for Independence stock is not
fixed, but is tied to its market value shortly before closing. After a full
review, the board concluded that accepting the Independence offer would be in
the best interests of Broad's stockholders and Broad National Bank and approved
the merger agreement between Broad and Independence substantially as presented
to the meeting.
On February 1, 1999, Broad and Independence signed the definitive
agreement pursuant to which Broad would be merged with and into Independence and
Broad National Bank would be merged into Independence Community Bank.
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<PAGE> 29
BROAD'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BROAD BOARD
In the course of reaching its determination to approve the merger
agreement, the Broad board consulted with legal counsel with respect to its
legal duties and the terms of the merger agreement. The Broad board consulted
with its financial advisor with respect to the financial aspects of the
transaction and fairness of the consideration to be received by stockholders
from a financial point of view, and with senior management regarding, among
other things, operational matters.
The following discussion of the information and factors considered by
the Broad board is not intended to be exhaustive, but does include all material
factors considered by the board. In reaching its decision to approve the merger
agreement, the Broad board considered the following:
(1) The financial terms of the transaction, including (a) the
price of $26.50 per share, (b) the cash component and the
ability of Broad's stockholders to receive either cash or
stock and (c) the fact that the transaction will be accounted
for as a purchase, rather than a pooling, which allows
Independence to continue its stock repurchase program. These
last two factors are viewed by Broad's financial advisor as
providing greater price protection than is typically present
in a pooling transaction which does not permit the use of cash
and imposes certain restrictions on share repurchases by the
acquiror.
(2) That Broad and Independence serve contiguous market areas with
similar communities and that the expanded reach of the
combined company would benefit existing customers and make the
combined company more attractive to potential customers.
(3) That Independence offers a broader range of products and
services and that the merger would provide Broad's customers
with access to these products and services without Broad
having to undergo the expense of introducing them on its own.
(4) The strength of Independence's management and the similarity
of the commitment to the community and operating philosophies
of the companies.
(5) The financial condition, results of operations, cash flow,
businesses and prospects of Broad. In this regard, the board
analyzed the options of selling Broad or continuing on a
stand-alone basis. The range of values on a sale of control
basis were determined to generally exceed the present value of
Broad shares on a stand-alone basis.
(6) The written opinion of Ryan, Beck that, as of February 1,
1999, the consideration was fair to Broad stockholders from a
financial point of view.
(7) The financial condition, results of operations, cash flow,
businesses and prospects of Independence.
(8) The current operating environment, including the continued
consolidation and increasing competition in the banking and
financial services industries, the prospect for further
changes in these industries and the substantial investment
that may be required to remain technologically competitive.
(9) The other terms of the merger agreement, including the
opportunity for Broad stockholders to receive shares of
Independence common stock in a tax-free exchange for some, or
possibly all, of their shares of Broad common stock.
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<PAGE> 30
(10) The detailed financial analyses, pro forma and other
information, including the anticipated effects of purchase
accounting on the combined company on a prospective basis,
with respect to Broad and Independence discussed by Ryan,
Beck, as well as the board's knowledge of Broad, Independence
and their respective businesses.
(11) The likelihood of the merger and related transactions being
approved by the appropriate regulatory authorities. See
"-Regulatory Approvals Needed to Complete the Merger."
(12) The board's review of the status of Independence's
preparations to be Year 2000 compliant.
(13) The views of major stockholders, whose favorable vote would be
required for any merger proposal to receive the necessary
approval.
(14) The likelihood that because Independence is not now
represented in Broad's market area, the impact on customers,
employees and other relationships would be less than would be
the case with an in-market merger.
(15) Independence's expressed willingness to encourage continued
involvement by Independence Community Bank in community
charities and activities now supported by Broad and/or Broad
National Bank.
In reaching its determination to approve and recommend the merger
agreement, the Broad board did not assign any relative or specific weights to
the foregoing factors, and individual directors may have weighed factors
differently.
The Broad board believes that the merger is in the best interests of
Broad and its stockholders. ACCORDINGLY, THE BROAD BOARD UNANIMOUSLY RECOMMENDS
THAT BROAD'S STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
THE CONSIDERATION IS FAIR TO BROAD'S STOCKHOLDERS ACCORDING TO BROAD'S FINANCIAL
ADVISOR
Ryan, Beck began working with Broad in early January 1999, and on
January 15, 1999, Broad formally retained Ryan, Beck to act as Broad's financial
advisor with respect to the potential acquisition of Broad. Ryan, Beck is
regularly engaged in the valuation of banks, bank holding companies, savings and
loan associations, savings banks and savings and loan holding companies in
connection with mergers, acquisitions and other securities-related transactions.
Ryan, Beck has knowledge of, and experience with, the banking market in which
Broad and Independence operate and banking organizations within this market, and
was selected by Broad because of Ryan, Beck's knowledge of, experience with, and
reputation in the financial services industry.
Ryan, Beck participated in the negotiations with respect to the pricing
and other terms and conditions of the merger. However, the decision as to the
final pricing of the merger was ultimately made by Broad's board. Ryan, Beck
rendered a formal written opinion to Broad's board on February 1, 1999 and
rendered a subsequent written opinion dated as of May ______________ (a copy of
which is attached as Appendix C), that based on and subject to the assumptions,
factors, and limitations as set forth in the attached opinion and as described
below, the merger consideration is fair to Broad's stockholders from a financial
point of view. No limitations were imposed by the Broad board of directors upon
Ryan, Beck with respect to the investigations made or procedures followed by it
in arriving at its opinion.
THE FULL TEXT OF RYAN, BECK'S OPINION, WHICH SETS FORTH ASSUMPTIONS
MADE AND MATTERS CONSIDERED, IS ATTACHED AS APPENDIX C TO THIS PROXY
STATEMENT-PROSPECTUS. STOCKHOLDERS OF BROAD ARE URGED TO READ THE RYAN, BECK
OPINION IN ITS ENTIRETY. THE RYAN, BECK OPINION IS DIRECTED ONLY TO THE
FINANCIAL FAIRNESS OF THE CONSIDERATION TO BE RECEIVED IN THE MERGER AND DOES
NOT CONSTITUTE A RECOMMENDATION TO YOU AS TO HOW YOU
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<PAGE> 31
SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE RYAN, BECK OPINION SET
FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE RYAN, BECK OPINION. IN RENDERING ITS OPINIONS,
RYAN, BECK DOES NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED WITHIN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER, OR THAT ITS OPINIONS CONSTITUTE A REPORT OR VALUATION
WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
In connection with its opinion, Ryan, Beck reviewed the following
documents:
- the merger agreement and related documents;
- this proxy statement-prospectus;
- Independence's Annual Report to Stockholders and Annual Report
on Form 10-K for the year ended March 31, 1998 and
Independence's Quarterly Reports on Form 10-Q for the periods
ended December 31, 1998, September 30, 1998 and June 30, 1998;
- Independence's Registration Statement on Form S-1A, dated
December 12, 1997, and its 424(b) prospectus, dated January
12, 1998, with respect to Independence's conversion from
mutual to stock form of organization;
- Broad's Annual Reports to Stockholders and Annual Reports on
Form 10-K for the years ended December 31, 1998, 1997, 1996
and 1995, and Broad's Quarterly Reports on Form 10-Q for the
periods ended September 30, 1998, June 30, 1998, and March 31,
1998;
- certain operating and financial information provided to Ryan,
Beck by the managements of Independence and Broad relating to
their business and prospects;
- the historical stock prices and trading volume of
Independence's common stock;
- the publicly available financial data of thrift organizations
which Ryan, Beck deemed generally comparable to Independence;
- the historical stock prices and trading volume of Broad's
common stock;
- the publicly available financial data of commercial banking
organizations which Ryan, Beck deemed generally comparable to
Broad; and
- the terms of recent acquisitions of commercial banking
organizations which Ryan, Beck deemed generally comparable in
whole or in part to Broad.
Additionally, Ryan, Beck:
- conducted or reviewed such other studies, analyses, inquiries
and examinations as it deemed appropriate;
- analyzed Independence's ability to consummate the merger;
- considered the future prospects of Broad in the event it
remained independent; and
- met with certain members of Independence's and Broad's senior
management to discuss Independence's and Broad's past and
current business operations, regulatory standing, financial
condition, strategic plan and future prospects, including any
potential operating efficiencies and synergies which may arise
from the merger.
In connection with its review, Ryan, Beck relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
and other information regarding Independence, Broad, and their subsidiaries
provided to Ryan, Beck by Independence and Broad and their representatives.
Ryan, Beck is not an expert in the evaluation of allowances for loan losses.
Therefore, Ryan, Beck has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses set
forth in the balance sheets of Independence and Broad at December 31, 1998, and
Ryan, Beck assumed such allowances were adequate and complied fully with
applicable law, regulatory policy, sound banking practice and policies of the
SEC as of the date of such financial statements. Ryan, Beck reviewed certain
operating forecasts and financial projections (and the assumptions and basis
used to prepare these projections) provided by Independence and Broad. Ryan,
Beck assumed that such forecasts and projections reflected the best currently
available estimates and judgments of the
25
<PAGE> 32
respective managements. In certain instances, for the purposes of its analyses,
Ryan, Beck made adjustments to such forecasts and projections which in Ryan,
Beck's judgment were appropriate under the circumstances. Ryan, Beck was not
retained to nor did it make any independent evaluation or appraisal of the
assets or liabilities of Broad, Independence or their respective subsidiaries
nor did Ryan, Beck review any loan files of Broad, Independence or their
respective subsidiaries. Ryan, Beck also assumed that the merger in all respects
is, and will be, undertaken and consummated in compliance with all laws and
regulations that are applicable to Independence and Broad.
The preparation of a fairness opinion on a transaction such as the
merger involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, Ryan, Beck's opinion is not readily
susceptible to summary description. In arriving at its opinion, Ryan, Beck
performed a variety of financial analyses. Ryan, Beck believes that its analyses
must be considered as a whole and the consideration of portions of such analyses
and the factors considered therein, or any one method of analysis, without
considering all factors and analyses, could create an incomplete view of the
analyses and the process underlying Ryan, Beck's opinion. No one method of
analysis was assigned a greater significance than any other.
The forecasts and projections furnished to Ryan, Beck were prepared by
the respective managements of Independence and Broad without input or guidance
by Ryan, Beck. Independence and Broad do not publicly disclose internal
management projections of the type provided to Ryan, Beck in connection with the
review of the merger. Such projections were not prepared with a view towards
public disclosure. The public disclosure of such projections could be misleading
since the projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
In its analyses, Ryan, Beck made numerous assumptions with respect to
industry performance, general business and economic conditions, and other
matters, many of which are beyond the control of Broad or Independence. Any
estimates contained in Ryan, Beck's analyses are not necessarily indicative of
future results or values, which may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport to be appraisals
nor do they necessarily reflect the prices at which companies or their
securities may actually be sold.
Ryan, Beck's opinion was based solely upon the information available to
it and the economic, market and other circumstances as they existed as of the
date of the opinion. Ryan, Beck did not and does not express any opinion as to
the price or range of prices at which Independence common stock might trade
subsequent to the merger. Ryan, Beck was not requested to, and did not, solicit
third party indications of interest in acquiring Broad or in engaging in a
business combination or any other strategic transaction with Broad. Events
occurring after such date could materially affect the assumptions and
conclusions contained in Ryan, Beck's opinion. Ryan, Beck has not undertaken to
reaffirm or revise its opinion or otherwise comment upon any events occurring
after the date of its opinion.
The following is a brief summary of the analyses and procedures
performed by Ryan, Beck in the course of arriving at its opinion. The summary
does not purport to be a complete description, but is a brief summary of the
material analyses and procedures performed by Ryan, Beck in the course of
arriving at its opinion.
Analysis of Selected Publicly Traded Companies. Ryan, Beck compared the
financial data for Broad as of December 31, 1998 to a peer group of thirty three
selected commercial banks located in the Mid-Atlantic region of the United
States with assets between $400 million and $1 billion for which public trading
and pricing information
26
<PAGE> 33
was available. Ryan, Beck deemed this group to be generally comparable to Broad.
The following table compares selected statistics of Broad with the median ratios
and average ratios for the 33 selected commercial banks comprising the peer
group:
<TABLE>
<CAPTION>
PEER PEER
BROAD AVERAGE MEDIAN
-------- ------- -------
<S> <C> <C> <C>
Total Equity / Assets 6.53% 9.35% 8.92%
Tangible Equity / Tangible Assets 6.50 9.15 8.62
Non-Performing Loans / Loans (1) 0.58 1.10 0.52
Loan Loss Reserves / Non-Performing Loans (1) 396.06 245.93 205.12
Loan Loss Reserves / Loans 2.29 1.41 1.26
Total Loans / Total Assets 52.63 59.10 60.18
Return on Average Assets 1.28 1.14 1.19
Return on Average Equity 19.20 12.02 13.04
Net Interest Margin 4.59 4.37 4.37
Non Interest Income / Average Assets 1.20 0.80 0.66
Non Interest Expense/Average Assets 3.41 2.96 2.83
Salary Expense/Total Revenue 34.64 35.69 32.97
Efficiency Ratio 61.81 60.03 58.49
Stock Price as of January 28, 1999 $ 21.63
Price / LTM EPS 13.77x 17.85x 15.74x
Price / Book Value 237.90% 194.33% 194.47%
Price / Tangible Book Value 238.69 201.97 200.45
Dividend Yield 2.22 2.42 2.42
</TABLE>
- ------------
(1) Includes non-accrual loans and loans past due 90 days or more as to
principal or interest payments but not placed on non-accrual status.
Ryan, Beck noted that the performance of Broad as measured by return on
average assets and return on average equity was superior to that of the peer
group. It was further noted that Broad's net interest margin and non-interest
income to average assets was greater than the peer group; however Broad's
non-interest expense to average assets was also greater than the peer group.
Additionally, Ryan, Beck noted that Broad had a lower level of non-performing
loans and a significantly larger loan loss reserve as measured by loan loss
reserves as a percent of either loans or non-performing loans plus loans 90 days
past due than that of its peers. Lastly, Ryan, Beck noted that Broad was trading
at a lower multiple to earnings but trading at a higher percentage of book value
and tangible book value, when compared to its peers. Broad's dividend yield was
slightly less than that of the peer group.
27
<PAGE> 34
Ryan, Beck also compared Independence's financial data as of December
31, 1998 with that of a group of 26 selected thrifts located in the New England
and Mid-Atlantic regions of the United States with assets between $1 billion and
$15 billion for which public trading and pricing information was available.
Ryan, Beck deemed this group to be generally comparable to Independence. The
following table compares selected statistics of Independence with the median
ratios and average ratios for the 26 selected thrifts comprising the peer group:
<TABLE>
<CAPTION>
PEER PEER
INDEPENDENCE AVERAGE MEDIAN
------------ ------- --------
<S> <C> <C> <C>
Total Equity / Assets 17.20% 10.55% 8.78%
Tangible Equity / Tangible Assets 16.42 9.84 8.50
Non-Performing Loans / Loans (1) 1.21 0.67 0.50
Loan Loss Reserves / Non-performing Loans (1) 110.73 242.83 229.40
Loan Loss Reserves / Loans 1.34 1.11 1.05
Total Loans / Total Assets 62.16 62.55 60.29
1-4 Family Loans / Total Loans 27.76 63.76 71.03
5+ Family Loans / Total Loans 62.33 14.50 2.53
Real Estate Loans / Total Loans 96.42 89.94 95.00
Return on Average Assets 0.89 1.04 0.92
Return on Average Equity 4.62 10.10 9.50
Net Interest Margin 3.54 3.30 3.17
Yield on Interest Earning Assets 6.97 7.42 7.28
Cost of Interest Bearing Liabilities 4.17 4.51 4.60
Efficiency Ratio 50.37 52.08 49.37
Stock Price as of January 28, 1999 $15.34
Price / Current Fiscal Year EPS Estimate 24.75x 14.61x 13.81x
Price / Book Value 124.44% 151.43% 140.48%
Price / Tangible Book Value 131.60 172.62 148.55
Market Capitalization ($M) $1,137.36 $467.34 $211.99
Dividend Yield 0.78% 2.18% 2.17%
</TABLE>
- ----------------
(1) Includes non-accrual loans and loans past due 90 days or more as to
principal or interest payments but not placed on non-accrual status.
Ryan, Beck noted that Independence's performance, as measured by return
on average assets and return on average equity, was lower than its peer group.
However, Ryan, Beck noted that Independence is a recently converted company with
an overabundance of capital and that its financial performance is not unlike
other recently converted companies. Additionally, Ryan, Beck noted that
Independence has a higher percentage of non-performing loans than the companies
comprising Independence's peer group and a lower loan loss reserve as a
percentage of non-performing loans. Independence's net interest margin was
superior to its peers due to its lower cost of interest bearing liabilities and
level of stockholders' equity despite the fact that its yield on interest
earning assets was less than its peers. Independence has a significantly higher
level of multi-family loans and has a lower level of 1-4 family loans than its
peers. Lastly, Ryan, Beck noted that Independence was trading at a higher
multiple to earnings and trading at a lower percentage of book value and
tangible book value, when compared to its peers. Again, this is typical for a
recently converted company since it has not fully utilized its capital.
Independence's dividend yield was much lower than that of the peer group.
28
<PAGE> 35
Analysis of Selected Transactions. Ryan, Beck compared Broad's
financial data as of December 31, 1998 with that of a group of ten selected
transactions announced since January 1, 1998 and for which pricing data
pertaining to the transactions was publicly available. Ryan, Beck deemed these
companies to be generally comparable to Broad. The criteria for this group was
commercial banks located in the New England and Mid-Atlantic regions of the
United States with assets between $250.0 million and $1.25 billion. The
following table compares selected statistics of Broad with the median ratios and
average ratios for the ten acquired companies in these transactions:
<TABLE>
<CAPTION>
PEER GROUP PEER GROUP
BROAD MEDIAN AVERAGE
--------- ---------- ----------
<S> <C> <C> <C>
Total Assets (In Thousands) $684,793 $319,089 $517,141
Tangible Equity / Tangible Assets 6.50% 8.01% 8.41%
Return on Average Assets 1.28 1.13 1.05
Return on Average Equity 19.20 12.63 12.56
Non-Performing Assets / Assets 0.69 0.52 0.63
Operating Expenses / Assets 3.36 3.21 3.28
Efficiency Ratio 61.81 67.54 67.36
</TABLE>
Assuming a transaction value of $26.50 per share, Ryan, Beck calculated
the transaction value as a multiple of Broad's December 31, 1998 stated book
value, tangible book value, latest twelve months diluted earnings, core deposit
premium over tangible equity and stock price as follows:
<TABLE>
<S> <C>
Percentage of Stated Book Value: 291.51%
Percentage of Tangible Book Value: 292.50%
Multiple of Latest Twelve Months Diluted Earnings: 16.88x
Core Deposit Premium over Tangible Equity: 17.98%
Market Premium: 18.11%
</TABLE>
The average and median pricing ratios for the comparable transactions are
illustrated in the chart below:
<TABLE>
<CAPTION>
PRICE/ PRICE/TANGIBLE PRICE/ CORE DEPOSIT MARKET
BOOK VALUE BOOK VALUE LTM EARNINGS PREMIUM PREMIUM
------------ --------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
AVERAGE 323.77% 331.65% 29.08x 27.45% 44.55%
MEDIAN 320.83 325.94 30.42 28.38 44.75
</TABLE>
Ryan, Beck then adjusted the peer group statistics to reflect the
change in the Nasdaq Bank Stock Index from the date of announcement of each
stock transaction to the closing value of the index on January 29, 1999. The
adjusted average and median pricing ratios for the comparable transactions are
illustrated in the chart below:
<TABLE>
<CAPTION>
PRICE/ PRICE/TANGIBLE PRICE/ CORE DEPOSIT MARKET
BOOK VALUE BOOK VALUE LTM EARNINGS PREMIUM PREMIUM
---------- -------------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
AVERAGE 308.75% 316.99% 27.75x 26.08% 42.70%
MEDIAN 305.79 313.88 26.69 26.78 44.45
</TABLE>
29
<PAGE> 36
The imputed value of Broad, based upon the average and median ratios of
the comparable transactions, as adjusted, can be seen in the chart below:
<TABLE>
<CAPTION>
PRICE/ PRICE/TANGIBLE PRICE/ CORE DEPOSIT MARKET
BOOK VALUE BOOK VALUE LTM EARNINGS PREMIUM PREMIUM
---------- -------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
AVERAGE $28.07 $28.72 $43.56 $34.32 $32.02
MEDIAN $27.80 $28.44 $41.90 $35.00 $32.41
</TABLE>
While the value of the transaction at $26.50 is less than the imputed
value of the comparable transactions, Ryan, Beck noted the following financial
and non-financial issues. Ryan, Beck noted that the merger with Independence is
to be accounted for as a purchase with consideration being a combination of cash
and stock and the vast majority of the comparable transactions were accounted
for as pooling of interests. In addition, the structure of the transaction
allows Broad stockholders to elect the receipt of either cash or stock.
Additionally, the mix of consideration plus the price range within which
Independence must provide common stock with a value of $26.50 per share provides
Broad's stockholders with considerably more price protection than the typical
transaction accounted for as a pooling of interests. Ryan, Beck also noted the
market areas served by many of the acquired companies were more attractive than
the market areas served by Broad. Ryan, Beck noted that the purchase method of
accounting allows Independence to continue its stock repurchase programs which
provide further price protection for Broad's stockholders who elect to hold
Independence common stock. Finally, Ryan, Beck noted Broad's concerns regarding
many of the social issues involved in the merger including Independence's
commitment to operate Broad as a separate division and to preserve as many jobs
as possible.
No company or transaction used in the Analysis of Selected Publicly
Traded Companies and Analysis of Selected Transactions sections is identical to
Broad, Independence or the merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved, market areas in which the companies operate and other
factors that could affect the trading values of the securities of the company or
companies to which they are being compared.
Impact Analysis. Ryan, Beck analyzed the merger in terms of its effect
on Independence's projected fiscal year ending March 31, 2000 and 2001 earnings
per share, 2000 and 2001 cash earnings per share, stated book value and tangible
book value, based on Broad's projected 1999 and 2000 earnings. The projected
earnings for Independence and Broad were derived from information provided by
the managements of Independence and Broad, using certain assumed growth rates.
Based upon certain assumptions, including those with respect to cost savings and
other synergies from the merger, the stand-alone earnings projections provided
by Independence and Broad, Independence's announced and planned stock repurchase
programs and Independence's intention to use treasury shares of Independence
common stock as the source of shares to be issued to Broad, the analysis showed
that the merger would be dilutive to Independence's projected 2000 fiscal year
earnings per share by approximately 3.24%, accretive to projected 2001 fiscal
year earnings per share by approximately 1.23%, accretive to Independence's
projected 2000 fiscal year cash earnings per share by approximately 8.77%,
accretive to projected 2001 fiscal year cash earnings per share by approximately
11.70%, no impact on stated book value per share and dilutive to Independence's
tangible book value by approximately 13.86%. These forward-looking projections
may be affected by many factors beyond the control of Independence and/or Broad,
including the future direction of interest rates, economic conditions in the
companies' market place, the actual amount and timing of cost savings achieved
through the merger, the actual level of revenue enhancements brought about
through the merger, future regulatory changes and various other factors. The
actual results achieved may vary from the projected results and the variations
may be material.
30
<PAGE> 37
Discounted Dividend Analysis. Using a discounted dividend analysis,
Ryan, Beck estimated the present value of the future dividend stream that Broad
could produce in perpetuity. Projection ranges for Broad's five-year balance
sheet and income statement were provided by Broad's management. Management's
projections were based upon various factors and assumptions, many of which are
beyond the control of Broad. These projections are, by their nature,
forward-looking and may differ materially from the actual future values or
actual future results for the reasons discussed above. The actual future values
or results may be significantly more or less favorable than suggested by such
projections. In producing a range of per share Broad values, Ryan, Beck utilized
the following assumptions: discount rates range from 11% to 13%, terminal
price/earnings multiples range from 14x to 16x (which, when applied to terminal
year estimated earnings, produces a value which approximates the net present
value of the dividends in perpetuity, given certain assumptions regarding growth
rates and discount rates) and earnings that include estimated savings in Broad's
non-interest expense equal to 11.2% in the first year following the merger, and
22.4% in the second year following the merger, with 5.00% growth thereafter. The
discounted dividend analysis produced the range of net present values per share
of Broad common stock illustrated in the chart below:
<TABLE>
<CAPTION>
Discount rates:
----------------- --------------------- --------------
11% 12% 13%
----------------- --------------------- --------------
<S> <C> <C> <C> <C>
Terminal year 14x $27.77 $26.51 $25.33
Multiple 15x $29.38 $28.05 $26.79
Of Earnings 16x $30.99 $29.58 $28.25
</TABLE>
These analyses do not purport to be indicative of actual values or
expected values or an appraisal range of the shares of Broad common stock. The
discounted dividend analysis is a widely used valuation methodology, but Ryan,
Beck noted that it relies on numerous assumptions, including expense savings
levels, dividend payout rates, terminal values and discount rates, the future
values of which may be significantly more or less than such assumptions. Any
variation from these assumptions would likely produce different results.
In connection with Ryan, Beck's updated opinion dated May ____, 1999
and contained as Appendix C to this proxy statement-prospectus, Ryan, Beck
confirmed the appropriateness of its reliance on the analyses used to render its
February 1, 1999 opinion by performing procedures to update certain of such
analyses and by reviewing the assumptions and conclusions contained in the
February 1, 1999 opinion. As part of Ryan, Beck's updated analysis, Ryan, Beck
considered the effects of Independence's pending acquisition of Statewide.
With regard to Ryan, Beck's services in connection with the merger,
Broad will pay Ryan, Beck a transaction fee in connection with the merger, a
substantial part of which is contingent upon the consummation of the merger.
Broad will pay a transaction fee of approximately $1.38 million, of which
$100,000 has been paid and the remainder of which will be paid when the merger
is consummated. Additionally, Broad has paid Ryan, Beck $50,000 for issuing a
fairness opinion upon execution of the merger agreement which will be credited
against the advisory fees that will be paid upon completion of the merger. In
addition, Broad has agreed to reimburse Ryan, Beck for its reasonable
out-of-pocket expenses, which shall not exceed $10,000 without the prior consent
of Broad.
Broad has also agreed to indemnify Ryan, Beck and certain related
persons against certain liabilities, including liabilities under federal
securities law, incurred in connection with its services. The amounts of Ryan,
Beck's fees were determined by negotiation between Broad and Ryan, Beck.
Ryan, Beck has had an investment banking relationship with Broad for a
number of years. Ryan, Beck was the sole underwriter of the 8 1/2% Cumulative
Convertible Preferred Stock 1992 Class and BNB Capital Trust's 9.50% Cumulative
Trust Preferred Securities. Ryan, Beck is a market maker in Broad's Trust
Preferred Securities and, in such capacity, may from time to time own Trust
Preferred Securities. Ryan, Beck's research department has
31
<PAGE> 38
issued research reports on Broad and comments on Broad in its periodic
commentaries. Ryan, Beck is also a market maker in Broad's common stock and, in
such capacity, may from time to time own Broad common stock.
Ryan, Beck has had no investment banking relationship with
Independence. Ryan, Beck is a market maker in Independence common stock and, in
such capacity, may from time to time own Independence common stock. Ryan, Beck's
research department does not follow Independence; however, Ryan, Beck did
produce a report upon Independence's conversion from a mutual to stock form of
organization.
BROAD STOCKHOLDERS WILL RECEIVE SHARES OF INDEPENDENCE COMMON STOCK AND/OR CASH
FOR EACH BROAD SHARE
Upon consummation of the merger, each outstanding share of Broad common
stock will be converted into the right to receive, at the election of each Broad
stockholder and subject to the election, allocation and proration procedures set
forth in the merger agreement, either the stock consideration or the cash
consideration, in each case, as determined pursuant to the merger agreement. See
"Merger Consideration," "Election Procedures" and "Allocation Procedures" below.
No fractional shares of Independence common stock will be issued in connection
with the merger. Instead, Independence will make a cash payment to each Broad
stockholder who would otherwise receive a fractional share.
The number of shares of Independence common stock constituting the
stock consideration and the amount of cash constituting the cash consideration
will be determined pursuant to a formula set forth in the merger agreement,
which provides that so long as the average closing stock price of Independence
is between $12.75 and $17.25 per share, the merger consideration, whether in the
form of stock or cash, will have a value of $26.50 (with the stock consideration
valued at the average closing price for such purpose), and 50% of the total
consideration to be paid to Broad stockholders will consist of Independence
common stock and 50% will consist of cash. If the average closing price is less
than $12.75 or greater than $17.25 per share, then the value of the merger
consideration will be adjusted, and the percentages of the total consideration
consisting of Independence common stock and cash will change, all as set forth
in the merger agreement and as more fully described below.
THE FORM OF THE CONSIDERATION ULTIMATELY RECEIVED BY YOU WILL DEPEND
UPON THE ELECTION, ALLOCATION AND PRORATION PROCEDURES DESCRIBED BELOW AND THE
ELECTIONS OF OTHER STOCKHOLDERS. ACCORDINGLY, NO GUARANTEE CAN BE GIVEN THAT THE
ELECTION OF ANY GIVEN STOCKHOLDER OF BROAD WILL BE HONORED. In addition, because
the tax consequences of receiving the cash consideration will differ from the
tax consequences of receiving the stock consideration, Broad stockholders are
urged to read carefully the information set forth below under "Federal Income
Tax Consequences for Broad Stockholders."
MERGER CONSIDERATION. The merger agreement provides that each share of
Broad common stock issued and outstanding upon completion of the merger will be
converted into the right to receive, at the election of the holder thereof,
either:
(1) a number of shares of Independence common stock equal to the
final exchange ratio (as described below), or
(2) cash in an amount equal to the per share consideration (as
described below).
For purposes of determining the amount of the merger consideration each
holder of Broad common stock will be entitled to receive, the following
definitions apply:
"aggregate cash consideration" means the product obtained by
multiplying (x) the number of issued and outstanding shares of Broad common
stock immediately prior to completion of the merger by (y) $13.25.
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<PAGE> 39
"aggregate merger consideration" means the sum of (x) the aggregate
cash consideration and (y) the aggregate stock consideration.
"aggregate stock consideration" means (w) 0.5 multiplied by (x) the
number of issued and outstanding shares of Broad common stock immediately prior
to completion of the merger multiplied by (y) the average closing price
multiplied by (z) the preliminary stock ratio.
"average closing price" means the average of the closing sale prices
per share for Independence common stock as reported on the Nasdaq Stock Market
during the ten consecutive trading-day period ending on the tenth business day
immediately prior to the anticipated date of completion of the merger. This ten
consecutive trading-day period is called the pricing period.
"final exchange ratio" means the quotient, rounded to the nearest ten-
thousandth, obtained by dividing the per share consideration by the average
closing price.
"per share consideration" means the quotient obtained by dividing the
aggregate merger consideration by the number of issued and outstanding shares of
Broad common stock immediately prior to completion of the merger.
"preliminary stock ratio" means the quotient, rounded to the nearest
ten-thousandth, obtained by dividing $26.50 by the average closing price; except
that (i) if the average closing price is equal to or greater than $17.25, the
preliminary stock ratio will be 1.5362 (the "minimum stock ratio"), and (ii) if
the average closing price is equal to or less than $12.75, the preliminary stock
ratio will be 2.0784 (the "maximum stock ratio").
The following table sets forth the value of the merger consideration to
be received by the holders of Broad common stock, including the percentage of
the total consideration that will consist of Independence common stock and the
percentage that will consist of cash, at various average closing prices of
Independence common stock.
<TABLE>
<CAPTION>
Average Closing Per Share Final Exchange
Price Consideration Ratio % Stock % Cash
- --------------- ------------- -------------- ------- ------
<S> <C> <C> <C> <C>
$18.00 $ 27.08 1.5042 51.06% 48.94%
17.25 26.50 1.5362 50.00% 50.00%
16.00 26.50 1.6563 50.00% 50.00%
15.00 26.50 1.7667 50.00% 50.00%
14.00 26.50 1.8929 50.00% 50.00%
12.75 26.50 2.0784 50.00% 50.00%
12.00 25.72 2.1434 48.48% 51.52%
11.00 24.68 2.2437 46.32% 53.68%
10.00 23.64 2.3642 43.96% 56.04%
</TABLE>
However, if the percentage of the total consideration that will consist
of Independence common stock is below 50% and either Elias, Matz, Tiernan &
Herrick L.L.P., counsel to Independence, or Stinson, Mag & Fizzell P.C., counsel
to Broad, is unable to render its tax opinion, as described below under
"-Federal Income Tax Consequences for Broad Stockholders," as a result of the
merger potentially failing to qualify as a reorganization under Section 368(a)
of the Internal Revenue Code, then Independence will reduce the aggregate amount
of the cash consideration, and correspondingly increase the aggregate amount of
the stock consideration, to the minimum extent necessary to enable Elias, Matz,
Tiernan & Herrick L.L.P. or Stinson, Mag & Fizzell P.C., as the case may be, to
render its tax opinion.
Assuming the pricing period ended on January 29, 1999 (the last trading
day prior to announcement of the merger), the average closing price would be
$15.86, the stock consideration would be equal to 1.6709 shares of
33
<PAGE> 40
Independence common stock and the cash consideration per share of Broad common
stock would be $26.50. Assuming the pricing period ended on May __, 1999 (the
latest practicable trading date prior to the mailing of this Proxy
Statement-Prospectus), the average closing price would be $_____, the stock
consideration per share of Broad common stock would be equal to _______ shares
of Independence common stock and the cash consideration per share of Broad
common stock would be $____. The market price of Independence common stock will
fluctuate between the date of this Proxy Statement-Prospectus and the date on
which the merger is consummated and thereafter. Because the aggregate number of
shares of Independence common stock to be received by Broad stockholders in the
merger will be fixed following determination of the average closing price
(subject to possible adjustment as described below) and because the market price
of Independence common stock is subject to fluctuation, the value of the shares
of Independence common stock that a holder of Broad common stock may receive in
the merger may increase or decrease following determination of the average
closing price. For further information concerning the historical prices of
Independence common stock, see "Comparative Common Stock Price and Dividend
Information." You are urged to obtain current market prices for Independence
common stock in connection with voting your shares at the special meeting and
making your election decision.
Broad also may terminate the merger agreement if both of the following
conditions are applicable:
(1) the average closing price of Independence common stock is less
than $10.34; and
(2) the average closing price divided by $15.00 (the "Independence
ratio"), is less than (x) the number obtained by dividing the
weighted average daily per share closing prices of the common
stocks of 21 publicly-traded bank and thrift holding companies
(the "index group") set forth in Section 9.5 of the merger
agreement during the pricing period (the "final index price")
by the weighted average per share closing prices of the common
stocks of each company in the index group on January 29, 1999
(the "initial index price"), less (y) 0.15 (the "index
ratio").
If both of the foregoing conditions are applicable, Broad has the right to
terminate the merger agreement. However, in such event, Independence has the
option to increase the consideration to be received by holders of Broad common
stock by adjusting the final exchange ratio to equal the lesser of (x) a number
obtained by dividing (A) $24.00 by (B) the average closing price, and (y) a
number obtained by substituting the adjusted preliminary stock ratio (which is
1.0 plus the index ratio less the Independence ratio, with the net sum being
multiplied by the preliminary stock ratio then in effect as provided by the
terms of Section 1.4(e) of the merger agreement) for the preliminary stock ratio
when calculating the merger consideration. If Independence increases the final
exchange ratio as set forth above, the merger agreement will not be terminated.
The index group is the 21 financial institutions or financial
institution holding companies listed in the merger agreement whose common stock
is publicly traded and which is not identified as being acquired in any publicly
announced proposal since January 29, 1999 and before the end of the pricing
period. In the event that the common stock of any such company ceases to be
publicly traded or a proposal to acquire any such company is announced at any
time after January 29, 1999 and before the end of the pricing period, such
company will be removed from the index group, and the weights (which have been
determined based on the number of outstanding shares of common stock and the
market prices of such stock) attributed to the remaining companies will be
adjusted proportionately for purposes of determining the final index price and
the initial index price.
If Independence or any company belonging to the index group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between and including
January 29, 1999 and the end of the pricing period, the prices for the common
stock of Independence or such company and the final exchange ratio shall be
adjusted to take into account such change in capitalization.
Following approval of the merger agreement by the Broad stockholders at
the special meeting, the Broad board may elect not to terminate the merger
agreement and to consummate the merger without resoliciting the Broad
stockholders if the two conditions to termination described above are
applicable. The Broad board has not yet
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determined what action it might take under the merger agreement in such event.
In such a situation, in considering whether to consummate the merger without the
resolicitation of the Broad stockholders, the Broad board will take into account
all relevant facts and circumstances that exist at such time, including, without
limitation, the advice of its financial advisor and its legal counsel.
Independence is under no obligation to increase the per share
consideration, and there can be no assurance that Independence would elect to
increase the per share consideration, if the Broad board were to exercise its
right to terminate the merger agreement. Any such decision would be made by the
Independence board taking into account all relevant facts and circumstances that
exist at such time, including, without limitation, the advice of its financial
advisor and its legal counsel. If the Independence board elects to increase the
per share consideration as set forth in the merger agreement and as described
above, it must give Broad prompt notice of such election and of its proposed
increase in the per share consideration, in which case no termination of the
merger agreement would occur. See "The Merger - Price - Based Termination of the
Agreement."
ELECTIONS. At least 30 days prior to the completion of the merger, you
will be sent an election form, which will permit you to elect to receive for
each share of Broad common stock owned by you either (i) the stock consideration
in exchange for each share of Broad common stock held or (ii) the cash
consideration in exchange for each share of Broad common stock held. However,
you may elect not to receive Independence common stock with respect to fewer
than 100 shares of Broad common stock. If you either (i) do not submit a
properly completed election form in a timely fashion or (ii) revoke your
election form prior to the deadline for the submission of the election form, the
shares of Broad common stock held by you will be designated "no election
shares."
ELECTION PROCEDURES. All elections will be required to be made on an
election form. To make an effective election with respect to your shares of
Broad common stock, you must, in accordance with the election form, (i) properly
complete and return the letter of transmittal and election forms to the company
designated by Independence to receive these materials, (ii) either (a) deliver
the election form with your stock certificates representing such shares (or an
appropriate guarantee of delivery of such certificates), or (b) complete the
procedure for delivery by book-entry transfer of such shares on a timely basis,
and (iii) deliver with the election forms any other required documents, prior to
the deadline for returning the letter of transmittal and election form. It is
anticipated that the letter of transmittal and election forms will be mailed to
you at least thirty (30) days prior to the anticipated date on which the merger
will be completed.
The deadline for surrendering all documentation required for an
effective election ( the "Election Deadline Date") will be set forth in the
election instructions and will be approximately ten (10) days prior to the
anticipated date for completion of the merger, although the date may be extended
by mutual agreement of Independence and Broad. In the event the merger agreement
is terminated without the merger having been consummated, your certificates will
be promptly returned by the designated agent or they will be returned to you at
any time prior to consummation of the merger upon your request.
BROAD STOCKHOLDERS SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO THE DESIGNATED
AGENT UNTIL A BROAD STOCKHOLDER HAS RECEIVED THE LETTER OF TRANSMITTAL AND
ELECTION FORM.
If you have a particular preference as to the form of consideration to
be received for your shares of Broad common stock, you should make an election
because shares as to which an election has been made will be given priority in
allocating such consideration over shares as to which an election is not
received. Neither the Broad board nor its financial advisor makes any
recommendation as to whether stockholders should elect to receive the cash
consideration or the stock consideration in the merger. You must make your own
decision with respect to such election, bearing in mind the tax consequences of
the election you choose. See "-Federal Income Tax Consequences for Broad
Stockholders."
Even if you have no preference, it is suggested that you return your
transmittal and election forms by the Election Deadline Date, indicating that
you have no preference, so that you may receive the merger consideration
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allocable to you promptly following consummation of the merger, rather than
following completion of exchange procedures after the merger is consummated. See
"- Procedures for Exchanging Your Stock Certificates."
ALLOCATION PROCEDURES. If the aggregate cash consideration is greater
than the per share consideration multiplied by the total number of cash election
shares (the "cash election amount"), then:
(1) all cash election shares will be converted into the right to
receive an amount of cash equal to the per share consideration;
(2) the designated agent will select, on a pro rata basis, first from
among the holders of no election shares and then, if necessary, from among the
holders of stock election shares, a sufficient number of such shares ("cash
designee shares") so that the sum of the cash designee shares and the cash
election shares multiplied by the per share consideration equals as closely as
practicable the aggregate cash consideration (the cash designee shares will be
converted into the right to an amount of cash equal to the per share
consideration); and
(3) any stock election shares and any no election shares, in each case,
not so selected as cash designee shares will be converted into the right to
receive Independence common stock at the final exchange ratio.
If the aggregate cash consideration is less than the cash election
amount, then:
(1) all stock election shares and all no election shares will be
converted into the right to receive Independence common stock at the final
exchange ratio;
(2) the designated agent will select, on a pro rata basis from among
the holders of cash election shares, a sufficient number of such shares ("stock
designee shares") such that the number of stock designee shares multiplied by
the per share consideration equals as closely as practicable the difference
between the cash election amount and the aggregate cash consideration (the stock
designee shares will be converted into the right to receive Independence common
stock at the final exchange ratio); and
(3) any cash election shares not so selected as stock designee shares
will be converted into the right to receive an amount of cash equal to the per
share consideration.
In the event that the designated agent is required to designate from
among all stock election shares the cash designee shares to receive cash, each
holder of stock election shares will be allocated a pro rata portion of the
remainder of the total cash designee shares less the number of no election
shares which are cash designee shares. This proration will reflect the
proportion that the number of stock election shares of each holder of stock
election shares bears to the total number of stock election shares. In the event
the designated agent is required to designate from among all holders of cash
election shares the stock designee shares to receive Independence common stock,
each holder of cash election shares will be allocated a pro rata portion of the
total stock designee shares. This proration will reflect the proportion that the
number of cash election shares of each holder of cash election shares bears to
the total number of cash election shares.
Upon consummation of the merger, any shares of Broad common stock that
are owned by Broad as treasury stock or that are held directly or indirectly by
Independence, other than in a fiduciary capacity or in satisfaction of a debt
previously contracted, will be canceled and retired and no payment will be made
with respect to those shares and such shares will not be considered for purposes
of the foregoing allocation procedures.
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PROCEDURES FOR EXCHANGING YOUR STOCK CERTIFICATES
Broad stockholders who surrender their stock certificates and completed
transmittal and election forms prior to the Election Deadline Date, or any
extension of such time period, will automatically receive the merger
consideration allocated to them as the result of the merger promptly following
consummation of the merger. Other stockholders will receive the merger
consideration allocated to them as soon as practicable after their stock
certificates have been surrendered with appropriate documentation to the
designated agent or other steps have been taken to surrender the evidence of
their stock interest in Broad in accordance with the instructions accompanying
the letter of transmittal form.
Within seven business days after the completion of the merger, a bank
or trust company selected by Independence and reasonably satisfactory to Broad,
will mail to each holder of record of Broad common stock who has not previously
surrendered his or her stock certificates representing Broad common stock a
letter of transmittal and instructions for use in effecting the surrender of the
certificates in exchange for the merger consideration allocated to them. Upon
surrender of a stock certificate for Broad common stock for exchange and
cancellation to the designated agent, together with a duly executed letter of
transmittal, the holder of such certificate will be entitled to receive such
merger consideration allocated to them and the certificate for Broad common
stock so surrendered will be cancelled. No interest will be paid or accrued on
any cash constituting merger consideration (including the cash in lieu of
fractional shares) and any unpaid dividends and distributions, if any, payable
to holders of stock certificates for Broad common stock.
No stock certificates representing fractional shares of Independence
common stock will be issued upon the surrender for exchange of Broad stock
certificates. In lieu of the issuance of any such fractional share, Independence
will pay to each former stockholder of Broad who otherwise would be entitled to
receive a fractional share of Independence common stock an amount in cash
determined by multiplying (i) the average closing price by (ii) the fraction of
a share of Independence common stock which such holder would otherwise be
entitled to receive pursuant to the merger agreement.
As a Broad stockholder, you will receive dividends on Independence
common stock or other distributions declared after the completion of the merger
only if you have surrendered your Broad stock certificates. Only then will you
be entitled to receive all previously withheld dividends and distributions,
without interest.
After the completion of the merger, no transfers of Broad common stock
issued and outstanding immediately prior to the completion of the merger will be
allowed. Broad stock certificates that are presented for transfer after the
completion of the merger, will be canceled and exchanged for the merger
consideration.
If your Broad stock certificates have been lost, stolen or destroyed,
you will have to prove your ownership of those certificates and that they were
lost, stolen or destroyed before you receive any consideration for your shares.
The designated agent will send you instructions on how to provide this evidence.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT ARE DIFFERENT FROM YOUR
INTERESTS
Some members of Broad's management and the Broad board may have
interests in the merger that are in addition to or different from the interests
of stockholders. The Broad board was aware of these interests and considered
them in approving the merger agreement.
EXISTING EMPLOYMENT, CHANGE IN CONTROL AND CONSULTING AGREEMENTS. Mr.
Donald M. Karp is Chairman of the Board and Chief Executive Officer of Broad and
Mr. John A. Dorman is President and Chief Operating Officer of Broad. Each of
them has an employment contract with Broad. Because of the merger, both Mr.
Karp's and Mr. Dorman's contracts will be terminated. In exchange for this Mr.
Karp will receive a cash payments of approximately $5.0 million and Mr. Dorman
will receive a cash payment of approximately $1.6 million. Following the merger,
Mr. Karp will be employed by Independence as a consultant and senior advisor
under a five-
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year consulting agreement. Mr. Dorman will be employed as President and Chief
Operating Officer of the Broad division of Independence Community Bank under a
three year change in control severance agreement. In addition, six other senior
officers of Broad and/or Broad National Bank, including James Boyle, Treasurer
of Broad, Peter Kenny, Senior Vice President of Broad National Bank and Fred
Perry, Senior Vice President of Broad National Bank, have change in control
severance agreements. All of these agreements will be terminated in connection
with the merger. As a result of the termination of the change in control
agreements, the six officers will receive severance payments totalling
approximately $920,000, including up to approximately $157,000, $167,000 and
$150,000 to be paid to Messrs. Boyle, Kenny and Perry, respectively. In
addition, Mr. Stanley J. Lesnik, a director of Broad, has a consulting agreement
which provides for certain severance payments in the event of the termination of
his agreement. Mr. Lesnik's consulting agreement will also be terminated in
connection with the merger, at which time Mr. Lesnik will receive a severance
payment totalling approximately $378,000. The payments will not be made to these
persons unless each of them executes a release which releases Independence and
Independence Community Bank from any further liability for monetary payments
under their respective agreements. To the extent that any of these persons is
entitled to the continued receipt of miscellaneous fringe benefits pursuant to
their agreements and they become directors, officers or employees of
Independence or any of its subsidiaries (including Independence Community Bank)
following completion of the merger and as a result become entitled to receive
comparable fringe benefits in their capacity as directors, officers or employees
of Independence or any of its subsidiaries, then the fringe benefits provided to
such persons shall be deemed to be provided in connection with such persons'
service as directors, officers or employees of Independence or any of its
subsidiaries for so long as such persons serve in such capacity and shall be in
lieu of, and not in addition to, any fringe benefits that would have otherwise
been provided pursuant to the employment, change in control or consulting
agreements discussed above.
VESTING OF RESTRICTED STOCK. Under the Broad Long-Term Capital
Accumulation Plan, in January 1999 performance awards were specified for the
next three-year performance period of the plan. The awards are payable in cash
and restricted stock. Such awards would normally be distributed to senior
management at the end of the three-year performance period, December 31, 2001,
if performance objectives set at the beginning of the performance period,
January 1999, are achieved. However, the plan provides that a pro rata portion
of the award, including the restricted shares of Broad common stock, become
vested upon a change in control of Broad. The merger is a change in control.
Officers of Broad will be granted pro rata performance awards , including a pro
rata portion of 28,698 shares of unvested restricted stock, which will be
converted into shares of Independence common stock at the final exchange ratio.
ESTABLISHMENT OF CONSULTING BOARD. Independence will create a
consulting board to advise Independence on deposit and lending activities in
Broad's market area and to maintain and develop customer relationships.
Independence will appoint all of the present members of the Broad board (other
than Messrs. Karp and Dorman) to the consulting board. The consulting board will
be maintained for two years. Each member of the consulting board will receive an
annual retainer of $10,000 except for Messrs. Licinio Cruz, Arthur Fischman and
Louis J. Owen who will receive $25,800, $25,800 and $30,300, respectively, per
year.
APPOINTMENT TO INDEPENDENCE BOARD OF DIRECTORS. Following the
completion of the merger, Independence will increase the size of the
Independence board by one member and appoint Mr. Karp to fill the newly created
vacancy and elect him as Vice Chairman of the Board. Mr. Karp's initial term
will expire in the year 2002. Independence will nominate Mr. Karp for an
additional term of at least two years upon expiration of his initial term in
2002. Mr. Karp will also be appointed to the Independence Community Bank board
for the same term. For his services as a member of the Independence board, Mr.
Karp will receive the customary Independence board fees and retainer.
NEW CONSULTING AND CHANGE IN CONTROL AGREEMENTS. Following the merger,
Mr. Karp will enter into a five year consulting agreement with Independence. He
will serve as Vice Chairman of the board and as a consultant to Independence and
Independence Community Bank. His initial compensation under the agreement will
be $75,000 per year. Upon completion of the merger, Mr. Dorman will enter into a
three year change in control agreement with
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Independence Community Bank which will provide for a severance payment and the
continuation of certain benefits after his termination for the remaining term of
his agreement (had it not been terminated) in connection with a change of
control of Independence.
BROAD STOCK OPTIONS. Unexercised options to purchase shares of Broad
common stock under the Broad Incentive Stock Option Plan, the Broad National
1993 Directors Non-Statutory Stock Option Plan, the 1993 Broad National
Incentive Stock Option Plan, 1996 Broad National Bancorporation Directors
Non-Statutory Stock Option Plan and the 1996 Broad National Bancorporation
Incentive Stock Option Plan (the "option plans") will be, at each option
holder's election, either converted into options to purchase Independence common
stock the number of shares and price per share to reflect the final exchange
ratio, or cancelled with a cash payment to be made in an amount equal to the
difference, if any, between the merger consideration per share and the exercise
price per share. In addition, under the terms of the option plans, the merger
will constitute a change of control of Broad which will result in the vesting of
the options granted under the option plans to be accelerated. As of February 15,
1999, the directors and executive officers of Broad held options to purchase a
total of 376,150 shares of Broad common stock. The duration of the converted
options will remain the same. Independence will reserve sufficient shares of
Independence common stock to allow the exercise of the converted option.
PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES AGAINST CLAIMS.
Independence has also agreed to protect and hold harmless each present and
former director, officer and employee of Broad and its subsidiaries and each
officer or employee of Broad and its subsidiaries that is serving or has served
as a director or trustee of another entity at Broad's request or direction.
These people will be protected against any costs, expenses, judgments, fines,
losses, claims, or liabilities incurred in connection with any claim, suit,
proceeding or investigation relating to matters existing or occurring at or
prior to the completion of the merger. Independence also agreed to advance these
persons costs they incur to the fullest extent the costs would have been
advanced to them if they were a director, officer, or employee of Broad under
applicable New Jersey law. The indemnification will last for six years following
the merger.
Moreover, Independence will maintain Broad's existing directors' and
officers' insurance policy provided that the aggregate premium for the six year
period cannot exceed 200% of the current annual premium.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the merger, Independence and Independence Community Bank will
each increase the size of their respective boards by one member and will appoint
Mr. Karp to fill the resulting vacancy. Mr. Karp's initial term as a member of
the Independence and the Independence Community Bank boards will expire in the
year 2002. Under the terms of the merger agreement, Independence has agreed to
nominate Mr. Karp for an additional two year term. For his services as a member
of the Independence boards, Mr. Karp will be paid the customary board fees. In
addition, Independence Community Bank will establish a consulting board with
respect to deposit and lending activities in Broad's market area and to maintain
and develop customer relationships.
Independence expects to achieve significant consolidation efficiencies
following the consummation of the merger, although there can be no assurance
that the anticipated efficiencies will be achieved. The efficiencies are
expected to be achieved primarily through the elimination of duplicative
compensation costs and computer system costs.
Following the merger, Independence intends to continue to utilize a
stock repurchase program, subject to regulatory limitations or conditions,
economic and market conditions and a review by the board and management of the
anticipated effects of such a program. Such a program may affect Independence's
ability to utilize pooling-of-interests accounting in any potential
acquisitions, although, like other public companies, Independence will retain
the ability to terminate the stock repurchase plan and reissue all or a portion
of these repurchased shares in order to utilize the pooling-of-interests method
of accounting for future acquisitions.
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EMPLOYEE MATTERS
Each Broad or Broad National Bank employee whose employment is not
specifically terminated will become an employee of Independence or Independence
Community Bank. However:
(1) Broad's continuing employees will not be, or act as, officers of
Independence or Independence Community Bank, unless elected or appointed to that
position by Independence or Independence Community Bank.
(2) All of Broad's continuing employees who remain following the
completion of the merger will be employed at the will of Independence or
Independence Community Bank.
(3) No employee of Broad will become a contractual employee of
Independence or Independence Community Bank unless the contract is in writing
with Independence or Independence Community Bank.
(4) Existing employment, change in control severance and consulting
agreements will be terminated in connection with the merger, including the
change in control provisions of those agreements and in certain benefit plans.
However, payments under the various Broad agreements may be made by Broad or
Independence immediately prior to the completion of the merger. See "- Existing
Employment, Change in Control and Consulting Agreements" above for a complete
explanation.
(5) Each Broad employee who becomes an employee of Independence or
Independence Community Bank will be eligible to participate in Independence or
Independence Community Bank employee plans, on the same basis as any newly-hired
employee of Independence or Independence Community Bank. However, with respect
to each Independence or Independence Community Bank employee plan, service with
Broad or Broad National Bank will be treated as service with Independence or
Independence Community Bank to determine eligibility to participate, vesting and
entitlement to benefits but not for purposes of benefit accrual. Service will
not be recognized to the extent that it would result in a duplication of
benefits.
CONDITIONS TO THE MERGER
The obligations of Independence and Broad to complete the merger are
conditioned on the following being satisfied at or prior to the completion of
the merger:
(1) Broad's stockholders must approve the merger agreement;
(2) the requisite regulatory approvals, consents and waivers must
be obtained and all statutory waiting periods must have
expired;
(3) any necessary material third party consents, waivers or
approvals must be obtained or made;
(4) the shares of Independence common stock which will be issued
to the Broad stockholders upon completion of the merger must
be authorized for listing for quotation on the Nasdaq Stock
Market.
(5) no approval or consent will have imposed any condition or
requirement that would materially and adversely impact the
economic or business benefits to either party giving effect to
the merger;
(6) no party to the merger will be subject to any order, decree or
injunction that prohibits closing any of the merger's
transactions;
(7) no statute, rule or regulation will prohibit completion of the
merger's transactions;
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(8) the registration statement will have been declared effective
by the SEC and the SEC will not be taking actions to stop the
merger from proceeding; and
(9) all required approvals by state securities or "blue sky"
authorities will have been obtained.
The obligations of Independence and Broad to complete the merger are
also conditioned on the following:
(1) all parties will have performed their respective obligations
under the merger agreement;
(2) subject to prior disclosure of any necessary qualifications,
the representations and warranties made by the parties in the
merger agreement will be materially true when the merger
closes. Each party will furnish the other with a certificate
attesting to this fact;
(3) Independence and Broad will have obtained all necessary
material consents or approvals to permit Independence to
assume Broad's contracts, leases and other agreements;
(4) Independence and Broad will have received an opinion from
their respective counsel dated as of the completion of the
merger, that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of the
Internal Revenue Code and that accordingly:
(a) no gain or loss will be recognized by Independence or
Broad as a result of the merger;
(b) no gain or loss will be recognized by the
stockholders of Broad who exchange all of their Broad
common stock solely for Independence common stock
pursuant to the merger (except with respect to cash
received in lieu of a fractional share of interest in
Independence common stock); and
(c) the aggregate tax basis of the Independence common
stock received by stockholders who exchange all of
their Broad common stock solely for Independence
common stock pursuant to the merger will be the same
as the aggregate tax basis of the Broad common stock
surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for
which cash is received).
(5) Independence and Broad must have delivered to the other
"comfort" letters or letters of procedures from their
respective independent certified public accountants, dated (i)
the date of the mailing of this Proxy Statement-Prospectus to
Broad's stockholders and (ii) a date not earlier than five
business day preceding the completion of the merger concerning
such matters as are customarily covered in transactions of the
type contemplated by the merger agreement; and
(6) the delivery to each of Independence and Broad of various
letters, certificates and other documents.
We cannot guarantee when, or whether, the regulatory consents and
approvals necessary to complete the merger will be obtained or whether all of
the other conditions to the merger will be satisfied or waived by the party
permitted to do so. See "-Regulatory Approvals Needed to Complete the Merger"
below. If the merger is not completed on or before November 30, 1999, the merger
agreement may be terminated by Independence's or Broad's board. However, the
failure to complete the merger by that date cannot be due to the breach of the
merger agreement by the party seeking to terminate.
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REGULATORY APPROVALS NEEDED TO COMPLETE THE MERGER
Completion of the merger and the bank merger is subject to a number of
regulatory approvals and consents. The bank merger is subject to the prior
approval of the FDIC under the Bank Merger Act. In reviewing applications under
the Bank Merger Act, the FDIC must consider, among other factors, the financial
and managerial resources and future prospects of the existing and resulting
institutions, and the convenience and needs of the communities to be served. In
addition, the FDIC may not approve a transaction if it will result in a monopoly
or otherwise be anticompetitive. In addition, as discussed below, a waiting
period of up to 30 days must be satisfied prior to consummation of the bank
merger after FDIC approval. Independence filed an application with the FDIC on
April 20, 1999.
Further, under the New York State Banking Law, the bank merger is
subject to the prior approval of the Superintendent of Banks of New York State.
Independence filed an application for approval of the bank merger with the
Superintendent on May 5, 1999. In determining whether to approve the
application for the merger of Broad with and into Independence, the
Superintendent will consider, among other factors, whether the bank merger would
be consistent with adequate or sound banking and would not result in
concentration of assets beyond limits consistent with effective competition. The
Superintendent will also consider the public interest and the needs and
convenience thereof. Further, it is the policy of the State of New York to
ensure the safe and sound conduct of banking organizations and to maintain
public confidence in the business of banking and protect the public interest and
the interests of depositors, creditors, and stockholders. These factors will be
considered by the Superintendent in connection with Independence's application.
The bank merger is also subject to the approval of the Commissioner of the New
Jersey Department of Banking and Insurance. Independence filed an application
for approval of the bank merger with the Commissioner on April 22, 1999.
Under the Community Reinvestment Act, the FDIC must take into account
the record of performance of Independence Community Bank and Broad National Bank
in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by each institution. As part of the review
process, the banking agencies frequently receive comments and protests from
community groups and others. See "Regulation and Supervision-Community
Reinvestment Act."
In addition, a period of up to 30 days must expire following approval
by the FDIC within which period the United States Department of Justice may file
objections to the merger under the federal antitrust laws. While Independence
believes that the likelihood of such action by the Department of Justice is
remote in this case, there can be no assurance that the Department of Justice
will not initiate such proceeding, or that the Attorney General of the State of
New York will not challenge the merger, or if such proceeding is instituted or
challenge is made, as to the result thereof.
The merger and bank merger cannot proceed in the absence of the
requisite regulatory approvals. There can be no assurance that such regulatory
approvals will be obtained, and if obtained, there can be no assurance as to the
date of any such approval. There can also be no assurance that any such
approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the merger agreement
and described below under "-Conditions to the Merger."
Independence is not aware of any other regulatory approvals that would
be required for completion of the merger, except as described above. If any
other approvals are required, it is presently contemplated that such approvals
would be sought. There can be no assurance that any other approvals, if
required, will be obtained.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which do not include review of the merger from
the standpoint of the adequacy of the consideration to be received by Broad
stockholders. Further, regulatory approvals do not constitute an endorsement or
recommendation of the merger.
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CONDUCT OF BUSINESS PENDING THE MERGER
Except as expressly provided for in the merger agreement and except to
the extent required by law or by regulatory authorities, Independence and Broad
have agreed that, during the period from February 1, 1999 to the completion of
the merger, Independence, Broad and their respective subsidiaries will use
commercially reasonable efforts to:
- conduct their business in the regular, ordinary and usual
course consistent with past practice;
- maintain and preserve intact their business organization,
properties, leases, employees and advantageous business
relationships and retain the services of their officers and
key employees;
- take no action which would materially adversely affect or
delay the ability of Independence or Broad to perform their
respective covenants and agreements on a timely basis under
the merger agreement; and
- take no action which would adversely affect or delay the
ability of Independence, Independence Community Bank, Broad or
Broad National Bank to obtain any necessary approvals,
consents or waivers of any governmental authority required for
the transactions contemplated by the merger agreement.
Further, except as otherwise provided in the merger agreement, during
the period from February 1, 1999 to the completion of the merger, Broad has
agreed that neither it nor any of its subsidiaries will take certain actions
unless permitted to by Independence or required to by law. These include:
(1) declare or pay any dividends on, or make other distributions
in respect of, any of its capital stock, other than normal
quarterly dividends not in excess of $0.12 per share of Broad
common stock;
(2) (a) repurchase, redeem or otherwise acquire any shares of the
capital stock of Broad or any subsidiary of Broad, or any
securities convertible into or exercisable for any shares of
the capital stock of Broad or any subsidiary of Broad, (b)
split, combine or reclassify any shares of its capital stock
or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (c) issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into
or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, except, in the case of
clauses (b) and (c), for the issuance of Broad common stock
upon the exercise or fulfillment of rights or options issued
or existing pursuant to the Broad option plans or the Broad
Long-Term Capital Accumulation Plan, all to the extent
outstanding and in existence on the date of the merger
agreement;
(3) amend its certificate of incorporation, bylaws or other
similar governing documents;
(4) make any capital expenditures other than those which (i) are
made in the ordinary course of business or are necessary to
maintain existing assets in good repair and (ii) in any event
are in an amount of no more than $100,000 in the aggregate;
(5) enter into any new line of business;
(6) acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or
other business organization or division thereof or otherwise
acquire any assets, which would be material, individually or
in the aggregate, to Broad,
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other than in connection with foreclosures, settlements in
lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with past
practices;
(7) take any action that is intended or may reasonably be expected
to result in any of the conditions to the merger not being
satisfied;
(8) change its methods of accounting in effect at September 30,
1998, except as required by changes in generally accepted
accounting principles or regulatory accounting principles as
concurred in writing by its independent auditors;
(9) (a) except as otherwise provided in the merger agreement, as
required by applicable law or as required to maintain
qualification pursuant to the Code, adopt, amend, or terminate
any employee benefit plan or any agreement, arrangement, plan,
trust, other funding arrangement or policy between Broad or
any subsidiary of Broad and one or more of its current or
former directors, officers, employees or independent
contractors except as required pursuant to irrevocable
commitments existing on the date of the merger agreement,
change any trustee or custodian of the assets of any plan or
transfer plan assets among trustees or custodians, except that
Broad may adopt the severance policy and pay retention bonuses
as provided in the merger agreement, (b) increase or
accelerate payment of in any manner the compensation or fringe
benefits or any director, officer or employee or pay any
benefit not required by any plan or agreement as in effect as
of February 1, 1999, except (1) as may be required pursuant to
binding commitments existing on February 1, 1999, (2) as may
be required by applicable law, and (3) in the case of
employees who are not officers at the level of Vice President
or above, normal salary increases in the ordinary course of
business consistent with past practice, or (c) grant or award
any stock options, stock appreciation rights, restricted
stock, restricted stock units, performance units or shares or
awards under the Broad Long-Term Capital Accumulation Plan
(provided, however that the awards for a maximum of 28,698
shares of Broad common stock under the current three year
cycle of the Broad Long-Term Capital Accumulation Plan may be
prorated from the date of grant through the date of completion
of the merger);
(10) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign
or otherwise dispose of, or agree to sell, lease, encumber,
assign or otherwise dispose of, any of its material assets,
properties or other rights or agreements except as otherwise
specifically contemplated by the merger agreement;
(11) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other
individual, corporation or other entity;
(12) file any application to relocate or terminate the operations
of any of its banking offices or any of its subsidiaries;
(13) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract,
agreement or lease for goods, services or office space to
which Broad or any of its subsidiaries is a party or by which
Broad or any of its subsidiaries or their respective
properties is bound, other than the renewal in the ordinary
course of business of any lease the term of which expires
prior to the completion of the merger;
(14) other than in the ordinary course of business consistent with
past practice, in individual amounts not to exceed $100,000,
make any investment either by purchase of stock or securities,
contributions to capital, property transfers or purchase of
any property or assets of any other individual, corporation or
other entity;
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(15) make any investment in any debt security, including
mortgage-backed and mortgage related securities, other than
U.S. government and U.S. government agency securities with
final maturities not greater than five years or
mortgage-backed or mortgage related securities which would not
be considered "high risk" securities that are purchased in the
ordinary course of business consistent with past practice;
(16) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with
respect to those involving aggregate payments of less than, or
the provision of goods or services with a market value of less
than, $100,000 per year;
(17) settle any claim, action or proceeding involving any liability
of Broad or any of its subsidiaries for money damages in
excess of $100,000 or involving any material restrictions upon
the operations of Broad or any of its subsidiaries;
(18) except in the ordinary course of business and in amounts less
than $100,000, waive or release any material right or
collateral or cancel or compromise any extension of credit or
other debt or claim;
(19) (a) make or commit to make any new loan or other extension of
credit in an amount of $300,000 or more, renew for a period in
excess of one year any existing loan or other extension of
credit in an amount of $300,000 or more, or increase by
$300,000 or more the aggregate credit outstanding to any
borrower or group of affiliated borrowers, except such loan
originations, commitments, extensions, renewals or increases
that have been reviewed by Independence, or (b) make,
renegotiate, renew, increase, extend, modify or purchase any
loan, lease (credit equivalent), advance, credit enhancement
or other extension of credit, or make any commitment in
respect of any of the foregoing, other than in the ordinary
course of business consistent with past practice and in strict
compliance with Broad's current board-approved loan policies
as in effect on the date of the merger agreement;
(20) incur any additional borrowings other than short-term (with a
final maturity of two years or less) Federal Home Loan Bank
borrowings and reverse repurchase agreements consistent with
past practice, or pledge any of its assets to secure any
borrowings other than as required pursuant to the terms of
borrowings of Broad or any subsidiary in effect at the date of
the merger agreement or in connection with borrowings or
reverse repurchase agreements permitted hereunder;
(21) make any investment or commitment to invest in real estate or
in any real estate development project, other than real estate
acquired in satisfaction of defaulted mortgage loans and
investments or commitments approved by Broad's board prior to
February 1, 1999 and disclosed in writing to Independence,
provided, however, the Company shall not take any further
action with respect to certain specific loans and properties
without the prior consent of Independence;
(22) except pursuant to commitments existing at February 1, 1999
which have previously been disclosed in writing to
Independence, make any real estate loans secured by
undeveloped land or real estate located outside the State of
New Jersey;
(23) establish or make any commitment relating to the establishment
of any new branch or other office facilities other than those
for which all regulatory approvals have been obtained; with
respect to any such new branch or other office facility for
which regulatory approval has been received, make any capital
expenditures that in the aggregate would exceed $50,000 except
as disclosed to Independence as of February 1, 1999; and
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(24) elect to the Broad board any person who was not a member of
the Broad board as of the date of the merger agreement.
In addition, pursuant to the merger agreement, except as otherwise
specifically provided by the merger agreement or consented to in writing by
Broad, Independence has agreed that it will not, and it will not permit any of
its subsidiaries to, take certain actions, including the following:
(1) declare or pay any dividends on or make any other
distributions in respect of any of its capital stock other
than its regular quarterly dividends;
(2) take any action that is intended or may reasonably be expected
to result in any of the conditions to the merger not being
satisfied;
(3) change its methods of accounting in effect at September 30,
1998, except in accordance with changes in generally accepted
accounting principles or regulatory accounting principles as
concurred to by its independent auditors; and
(4) repurchase any of the Independence common stock during the
pricing period or the three (3) consecutive trading days
immediately preceding the commencement of the pricing period.
At Independence's request, Broad will change its loan, litigation and
real estate valuation policies and practices and investment and asset/liability
management policies and practices. This will occur after the date on which all
required regulatory approvals and stockholder approvals are received, and after
receipt of written confirmation from Independence that it is not aware of
anything that would prevent completion of the merger. Such adjustments will not
occur earlier than five days prior to the completion of the merger.
REPRESENTATIONS AND WARRANTIES MADE BY INDEPENDENCE AND BROAD IN THE MERGER
AGREEMENT
Both Independence and Broad have made customary representations and
warranties relating to their businesses. For detailed information on these
representations and warranties, see the merger agreement attached as Appendix A.
Such representations and warranties must remain true in all material respects
through the completion of the merger unless such change does not have a material
negative impact on the party's business, financial condition or results of
operations. See "-Conditions to the Merger."
WHAT HAPPENS IF A THIRD PARTY OFFERS TO BUY BROAD
Broad has agreed not to seek to have an outside third party try to buy
a material interest in Broad or its subsidiaries. Generally, an offer to buy at
least 10% of Broad's or Broad National Bank's assets or, at least 10% of Broad's
stock would violate this covenant.
However, the Broad board may enter into discussions or negotiations
with anyone who makes an unsolicited written, bona fide proposal to acquire
Broad if (1) Broad's board, based upon written advice of outside legal counsel,
in good faith deems such action to be legally necessary to fulfill its fiduciary
duties and (2) Broad's board determines in good faith (based upon written advice
of its financial advisor) that such acquisition proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of
the acquisition proposal and the person making the acquisition proposal and
would, if consummated, result in a more favorable transaction than this merger.
Broad must notify Independence immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with Broad and the identity of the person making such inquiry, proposal or offer
and the substance thereof. Broad must also keep Independence informed of any
developments with respect to such matters.
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The Broad board may also withdraw or modify its recommendation for the
merger if, after consulting with independent legal counsel, the board determines
in good faith that such action is necessary for it to comply with its fiduciary
duties to stockholders.
WAIVING AND AMENDING PROVISIONS IN, OR TERMINATING, THE MERGER AGREEMENT
Prior to the completion of the merger, any provision of the merger
agreement may be waived, amended or modified by the parties. However, after the
vote by the stockholders of Broad, no amendment or modification may be made that
would reduce the amount to be received by Broad's stockholders under the terms
of the merger.
The merger agreement may also be terminated at any time prior to the
completion of the merger, either before or after approval of the matters
presented in connection with the merger by the stockholders of Broad by:
(1) the mutual consent of both boards;
(2) either party's board if the stockholders of Broad do not
approve the merger agreement. However, Broad can only
terminate the merger agreement if it has complied in all
material respects with its obligations to solicit the support
of its stockholders for the merger and has complied, in all
material respects, with its representations and warranties;
(3) by either party upon written notice to the other party (a) 30
days after the date on which any request or application for
the approval, consent or waiver of a governmental agency
required to permit consummation of the merger shall have been
denied or withdrawn at the request or recommendation of the
governmental entity which must grant such approval, consent or
waiver, unless within the 30-day period following such denial
or withdrawal a petition for rehearing or an amended
application has been filed with the applicable governmental
entity, unless such denial or request or recommendation for
withdrawal shall be due to the failure of the party seeking to
terminate the merger agreement to perform or observe the
covenants and agreements of such party set forth therein or
(b) if any governmental entity of competent jurisdiction shall
have issued a final nonappealable order enjoining or otherwise
prohibiting the merger;
(4) either party's board if the merger is not completed by
November 30, 1999. The failure to complete the merger cannot
be due to the breach of any representation, warranty or
covenant contained in the merger agreement by the party
seeking to terminate;
(5) by either Broad or Independence if there shall have been a
material breach of any of the representations or warranties
set forth in the merger agreement on the part of the other
party. Each party must give the other party 30 days to cure
the breach. The party seeking to terminate the merger
agreement cannot be in material breach of any representation,
warranty, covenant or other agreement in the merger agreement.
(6) by either party if there shall have been a material breach of
any of the covenants or agreements set forth in the merger
agreement. Each party must give the other party 30 days to
cure the breach. The party seeking to terminate the merger
agreement cannot be in material breach of any representation
warranty, covenant or other agreement in the merger agreement.
(7) by Broad as discussed below under "-Price-Based Termination of
the Merger Agreement."
In the event of termination of the merger agreement by either
Independence or Broad as set forth above, the merger agreement shall become void
and have no effect, except that the provisions of the merger agreement relating
to confidentiality of information, expenses and the payment of a termination fee
in certain circumstances (see "Termination Fee" below) shall survive any such
termination. Notwithstanding the foregoing, neither Independence
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nor Broad shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of the merger agreement.
PRICE-BASED TERMINATION OF THE MERGER AGREEMENT
Generally, the merger agreement provides that if the average closing
price of Independence common stock is below $10.34 and has underperformed the
stock of a group of its peers by 15% or more, then Broad may terminate the
merger agreement. This termination can occur during the four business days
following the end of the pricing period. The peer group against which
Independence's stock prices will be compared is comprised of 21 bank and savings
institution holding companies identified in the merger agreement that are
publicly traded and for which no publicly announced acquisition transaction has
occurred. The peer group's stock prices are evaluated for the 10 consecutive
trading days ending on the last day of the pricing period. However, no
termination will occur if Independence agrees to increase the exchange ratio.
The increase required by the merger agreement is generally designed to make up
for the extent to which Independence's common stock has underperformed those of
its peers, should that be the case. The calculations necessary to arrive at such
an increase are complex and we encourage you to read them in context within
Section 9.5 of the merger agreement. See also " -Broad Stockholders Will Receive
Shares of Independence Common Stock and/or Cash for Each Broad Share." [PLEASE
NOTE, HOWEVER, THAT BASED ON INDEPENDENCE'S STOCK PRICE ALONE AS OF _______,
1999, NO SUCH INCREASE WOULD BE NECESSARY. OF COURSE, THIS COULD CHANGE DUE TO
MARKET FLUCTUATIONS BEYOND THE PARTIES' CONTROL.] See also "Merger Consideration
and Election, Allocation and Proration."
TERMINATION FEE
In recognition of the efforts and expense of Independence in
structuring and negotiating the terms of the merger, the merger agreement
provides that Broad shall pay to Independence a termination fee of up to $6.5
million in cash upon the occurrence of any of the following:
(1) Broad enters into an agreement to be acquired and
recommends that Broad's stockholders approve or accept any acquisition
proposal with any person other than Independence. For purposes of the
termination provision, to be acquired shall mean (x) a merger or
consolidation, or any similar transaction, involving Broad or any
subsidiary, (y) a purchase, lease or other acquisition of all or 10% or
more of the assets or deposits of Broad or any subsidiary or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) or securities representing
15% or more of the voting power of Broad or any subsidiary;
(2) Any person (other than Independence or Donald M. Karp
and/or Harriet M. Alpert) acquires beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the outstanding shares
of Broad common stock and subsequent to such acquisition either (a)
Broad stockholders do not approve the merger agreement (except that the
termination fee in such event would be $1.5 million with an additional
$5.0 million to be paid upon the execution by Broad within 15 months
following the Broad stockholder meeting of an agreement or letter of
intent to be acquired by other than Independence), (b) the meeting of
Broad stockholders is not held by October 31, 1999 or is canceled after
a voting record date for such meeting has been established by Broad,
(c) Broad's board publicly withdraws or modifies, or publicly announces
its intent to withdraw or modify, in any manner adverse to
Independence, its recommendation that the Broad stockholders approve
the merger agreement, or (d) Broad breaches any covenant or obligation
contained in the merger agreement and such breach would entitle
Independence to terminate the merger agreement;
(3) Any person other than Independence makes a bona fide
proposal to Broad or its stockholders, by public announcement or
written communication that is or becomes the subject of public
disclosure, to be acquired (including a tender or exchange offer or to
purchase 15% or more of the outstanding shares of Broad common stock)
and after such public announcement or public disclosure either
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(a) the Broad stockholders do not approve the merger agreement at the
stockholders' meeting, held to vote on the merger agreement (except
that the initial termination fee in such event would be $1.5 million
with an additional $5.0 million termination fee to be paid upon the
execution by Broad within 15 months following such meeting of an
agreement or letter of intent to be acquired by anyone other than
Independence), (b) such meeting is not held by October 31, 1999 or is
canceled after a voting record date for the meeting has been
established by Broad, (c) Broad's board publicly withdraws or modifies,
or publicly announces its intent to withdraw or modify, in any manner
adverse to Independence, its recommendation that the stockholders of
Broad approve the merger agreement, or (d) Broad breaches any covenant
or obligation contained in the merger agreement and such breach
entitles Independence to terminate the merger agreement; or
(4) after a bona fide proposal to acquire Broad is made by any
person other than Independence, either (a) the stockholders meeting to
vote on the merger agreement is not held by October 31, 1999 or is
canceled after a voting record date for such meeting shall have been
established by Broad, (b) Broad's board publicly withdraws or modifies,
or publicly announces its intent to withdraw or modify, in any manner
adverse to Independence, its recommendation that the stockholders
approve the merger agreement, or (c) Broad breaches any covenant or
obligation contained in the merger agreement and such breach would
entitle Independence to terminate the merger agreement.
NASDAQ STOCK MARKET LISTING
Independence common stock is listed on the Nasdaq Stock Market.
Independence has agreed to use reasonable efforts to cause the shares of
Independence common stock to be issued in the merger to be approved for
quotation on the Nasdaq Stock Market prior to or at the completion of the
merger. The obligations of the parties to complete the merger are subject to
approval for quotation on the Nasdaq Stock Market of such shares.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for under the purchase method of
accounting in accordance with generally accepted accounting principles. This
means that Independence and Broad will be treated as one company as of the date
of the combination, and that Independence will record the fair market value of
Broad's assets and liabilities on its financial statements. Any difference
between purchase price and the fair value of the identifiable net assets is
recorded as goodwill. The income statements incorporate the recorded income of
Broad's operations beginning at the completion of the merger.
FEDERAL INCOME TAX CONSEQUENCES FOR BROAD STOCKHOLDERS
The following is a discussion of the material federal income tax
consequences of the merger to Independence, Broad and holders of Broad common
stock. The discussion is based upon the Internal Revenue Code, Treasury
regulations, Internal Revenue Service rulings, and judicial and administrative
decisions in effect as of the date of this document. This discussion assumes
that Broad common stock is generally held for investment. In addition, this
discussion does not address all of the tax consequences that may be relevant to
a holder of Broad common stock in light of his or her particular circumstances
or to holders subject to special rules, such as foreign persons, financial
institutions, tax-exempt organizations, dealers in securities or foreign
currencies or insurance companies. The opinions of counsel referred to in this
section will be based on facts existing at the completion of the merger. In
rendering their opinions, counsel will require and rely upon representations
contained in certificates of officers of Independence, Broad and others.
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HOLDERS OF BROAD COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER.
It is a condition to the obligation of Independence and Broad to
complete the merger that the parties each will have received an opinion of their
respective counsel, dated as of the completion of the merger, that the merger
will be treated as a reorganization within the meaning of the Internal Revenue
Code. In addition, such opinions will state that:
(1) none of the companies involved in the merger will recognize a
gain or a loss;
(2) no stockholders of Broad who exchange all their Broad common
stock solely for Independence common stock will recognize a
gain or a loss for exchanging their Broad shares for
Independence shares except for cash received instead of
fractional shares; and
(3) Broad stockholders who exchange all their shares of Broad
common stock solely for shares of Independence common stock
will not have their individual tax basis or holding periods
affected by exchanging their Broad shares for Independence
shares, except to the extent cash is received instead of
fractional shares.
The federal income tax consequences of the merger to a Broad
stockholder generally will depend on whether the stockholder receives cash,
Independence common stock or a combination thereof in exchange for such
stockholder's Broad common stock.
No gain or loss will be recognized by a Broad stockholder who receives
solely Independence common stock in exchange for all of such stockholder's
shares of Broad common stock pursuant to the merger (except to the extent such a
stockholder receives cash in lieu of a fractional share interest in Independence
common stock). Such stockholder's tax basis in the Independence common stock
received pursuant to the merger will equal such stockholder's tax basis in the
shares of Broad common stock being exchanged reduced by any amount allocable to
a fractional share interest of Independence common stock for which cash is
received. The holding period of Independence common stock received will include
the holding period of the shares of Broad common stock being exchanged.
A Broad stockholder who receives both Independence common stock and
cash consideration in exchange for all of his or her shares of Broad common
stock will generally recognize gain, but not loss, to the extent of the lesser
of:
(1) the excess of (a) the sum of the aggregate fair market value of the
Independence common stock received and the amount of cash received over (b) the
stockholder's aggregate tax basis for the shares of Broad common stock
exchanged; and
(2) the amount of cash received by such stockholder.
For this purpose, gain or loss must be calculated separately for each
identifiable block of shares surrendered in the exchange, and a loss realized on
one block of shares may not be used to offset gain realized on another block of
shares. Any such gain will be long-term capital gain if the shares of Broad
common stock exchanged were held for more than one year, unless the receipt of
cash has the effect of a distribution of a dividend under the provisions of the
Internal Revenue Code, in which case such gain will be treated as a dividend to
the extent of such stockholder's ratable share of the undistributed accumulated
earnings and profits of Broad. Broad stockholders should consult their tax
advisors as to the possibility that all or a portion of any cash received in
exchange for their Broad common stock will be treated as a dividend.
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Such stockholder's aggregate tax basis in the Independence common stock
received pursuant to the merger will equal such stockholder's aggregate tax
basis in the shares of Broad common stock being exchanged, reduced by any amount
allocable to a fractional share interest of Independence common stock for which
cash is received and by the amount of any cash consideration received, and
increased by the amount of gain, if any, recognized by such stockholder in the
merger (including any portion of such gain that is treated as a dividend). The
holding period of Independence common stock received will include the holding
period of the shares of Broad common stock being exchanged.
A Broad stockholder who receives solely cash in exchange for all of
such stockholder's shares of Broad common stock pursuant to the merger will
generally recognize capital gain or loss in an amount equal to the difference
between the amount of cash received and the stockholder's aggregate tax basis
for such shares of Broad common stock, which gain or loss will be long-term
capital gain or loss if such shares of Broad common stock were held for more
than one year. If, however, any such Broad stockholder constructively owns
shares of Broad common stock that are exchanged for shares of Independence
common stock in the merger or owns shares of Independence common stock actually
or constructively after the merger, the consequences to such stockholder may be
similar to the consequences described above, except that the amount of
consideration, if any, treated as a dividend may not be limited to the amount of
such stockholder's gain. Broad stockholders should consult their tax advisors as
to the possibility that all or a portion of any cash received in exchange for
their shares of Broad common stock will be treated as a dividend.
No fractional shares of Independence common stock will be issued in the
merger. A Broad stockholder who receives cash in lieu of such a fractional share
will be treated as having received such fractional share pursuant to the merger
and then as having exchanged such fractional share for cash in a redemption by
Independence. A Broad stockholder will generally recognize capital gain or loss
on such a deemed redemption of the fractional share in an amount determined by
the excess of the amount of cash received and the stockholder's tax basis in the
fractional share. Any capital gain or loss will be long-term capital gain or
loss if the Broad common stock exchanged was held for more than one year.
SELLING THE INDEPENDENCE COMMON STOCK YOU RECEIVE IN THE MERGER
The shares of Independence common stock to be issued in the merger will
be registered under the Securities Act of 1933 and will be freely transferable
under the Securities Act of 1933 except for shares issued to any Broad
stockholder who may be deemed to control Broad, such as an executive officer,
director or someone who owns a significant amount of Broad's stock. These
controlling persons may not sell their shares of Independence common stock
acquired in connection with the merger except under an effective registration
statement under the Securities Act of 1933 covering such shares or in compliance
with an applicable exemption from the registration requirements of the
Securities Act of 1933. This document does not cover any resales of Independence
common stock received in the merger by persons who may be deemed to be
controlling persons of Broad. Broad has obtained from each person who is a
controlling person and has delivered to Independence a written agreement
intended to ensure compliance with the Securities Act of 1933.
YOU DO NOT HAVE APPRAISAL RIGHTS IN THE MERGER
The New Jersey Business Corporation Act provides that stockholders of a
corporation in a merger generally are not entitled to appraisal rights if the
shares of stock they own are, as of the record date, either listed on a national
securities exchange or held of record by more than 1,000 stockholders or if
pursuant to a merger, stockholders will receive shares listed on a national
securities exchange or held of record by more than 1,000 stockholders. Broad
stockholders are not entitled to appraisal rights in connection with the merger
because the shares of Independence common stock are held by more than 1,000
stockholders of record.
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WHO PAYS FOR WHAT
All costs and expenses incurred in connection with the merger will be
paid by the party incurring such expense. However, Broad and Independence will
bear equally the expenses incurred in connection with printing and mailing this
document.
WHEN WILL THE MERGER BE COMPLETED
The merger will become effective at the time set forth in the
certificate of merger that will be filed with the Secretary of State of the
States of Delaware and New Jersey. The certificate of merger will be filed
within two days and not more than five days of the satisfaction or waiver of
certain conditions to the merger, unless another date is agreed to in writing by
Independence and Broad. See "-Conditions to the Merger." The closing of the
transactions contemplated by the merger agreement will take place on the date of
such filing. It is expected that a period of time will elapse between the Broad
meeting and the completion of the merger while the parties seek to obtain the
regulatory approvals required to complete the merger. There can be no assurance
that such regulatory approvals will be obtained, and if obtained, there can be
no assurance as to the date of any such approval. There can likewise be no
assurance that the Department of Justice or the Attorney General of the State of
New York will not challenge the merger or, if such a challenge is made, the
result of the challenge. See "-Regulatory Approvals Needed to Complete the
Merger." The merger agreement may be terminated by either party if, among other
reasons, the merger has not been completed on or before November 30, 1999. See
"-Waiving and Amending Provisions in, or Terminating, the Merger Agreement."
CERTAIN RELATED TRANSACTIONS
STOCKHOLDERS' AGREEMENT
The following is a summary of the material provisions of the
Stockholders' Agreement, which is attached to this document as Appendix B. The
following summary is qualified in its entirety by reference to the Stockholders'
Agreement.
Concurrently with the execution of the merger agreement, the members of
the Broad board as well as certain executive officers beneficially owning an
aggregate of 1,216,962 or 24.6% of the issued and outstanding shares of Broad
common stock entered into the stockholders' agreement. Under the terms of the
stockholders' agreement, each of the directors and the executive officers agreed
to vote the shares of Broad common stock they beneficially own in favor of the
merger agreement and against any plan or proposal to acquire Broad or
substantially all of its assets and liabilities other than by Independence. In
addition, each of the directors and executive officers signing the stockholders'
agreement also agreed not to sell, pledge or transfer or otherwise dispose of
their shares of Broad common stock (except that the shares could be gifted if
the person receiving the shares by gift offers to abide by the terms of the
stockholders' agreement). The directors and executive officers also agreed to
not (a) directly or indirectly initiate, solicit or encourage any inquiries or a
proposal or offer relating to an acquisition of Broad or more than 10% of its
assets or any stock (common or preferred) of Broad or (b) engage in any
discussions or provide confidential information to anyone regarding the possible
acquisition of Broad or its assets or securities.
The stockholders' agreement will be terminated by the mutual written
consent of all the parties to it and will terminate in the event the merger
agreement is terminated.
The obligation of the directors and the executive officers who are
parties to the stockholders' agreement to vote in favor of the merger agreement
does not assure such approval by the required amount of the Broad stockholders
(the merger agreement must receive the approval of holders of at least
two-thirds of the issued and outstanding Broad shares). However, it
significantly increases the likelihood that Broad will receive the votes
necessary to approve the merger agreement.
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<PAGE> 59
BANK MERGER AGREEMENT
In connection with the merger, Independence Community Bank and Broad
National Bank have entered into a bank merger agreement under which Broad
National Bank and Independence Community Bank will merge, with Independence
Community Bank being the surviving bank. The bank merger agreement may be
terminated by mutual consent of the parties at any time and will be terminated
automatically if the merger agreement is terminated.
THE STATEWIDE MERGER
In a separate and unrelated transaction, Independence is also acquiring
Statewide Financial Corp. Statewide is a New Jersey savings and loan holding
company. Statewide's wholly owned subsidiary, Statewide Savings Bank, S.L.A.,
is a New Jersey-chartered savings and loan association that operates 16 branch
offices in the New Jersey counties of Bergen, Hudson and Union. Statewide's
deposits are insured by the FDIC under the Savings Association Insurance Fund.
At December 31, 1998, Statewide had total assets of $717.5 million, deposits of
$443.7 million, and stockholders' equity of $60.5 million. Statewide's
principal office is located at 70 Sip Avenue, Jersey City, New Jersey 07306,
and its telephone number is (201)795-4000. After the Statewide merger,
Statewide will be merged with and into Independence, and Statewide
stockholders, to the extent they elect and receive shares of Independence
common stock in exchange for their shares of Statewide common stock, will
become stockholders of Independence. It is currently expected that the
Statewide merger will be completed in the fourth quarter of 1999 or by January
31, 2000. Immediately following the completion of the Statewide merger,
Independence Community Bank and Statewide Savings will also merge. The
completion of the Statewide merger is not dependent on the completion of the
Broad merger. THE INDEPENDENCE BOARD HAS UNANIMOUSLY APPROVED THE STATEWIDE
MERGER. THE STATEWIDE MERGER DOES NOT REQUIRE THE APPROVAL OF INDEPENDENCE'S
STOCKHOLDERS.
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BENEFICIAL OWNERSHIP OF BROAD COMMON STOCK
The following table sets forth certain information, as of February 15,
1999, relating to the beneficial ownership of Broad's common stock by each
person known to the board of directors to own beneficially 5% or more of Broad's
stock, by each director of Broad, by the Chief Executive Officer of Broad and
the next four most highly compensated executive officers of Broad and by all
directors and officers of Broad as a group. All information with respect to
beneficial ownership has been furnished by the respective directors, officers or
5% or more stockholders, as the case may be. Except as otherwise indicated, each
beneficial owner, listed has sole voting and investment power with respect to
the shares of Broad common stock reported.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of Shares of
Name Beneficial Ownership (1) Outstanding (1)
- ------------------------------- ------------------------ -----------------------
<S> <C> <C>
Harriet M. Alpert (2)
360 East 72nd Street
New York, New York 542,447 10.9%
James Boyle (3) 18,693 *
Licinio Cruz (4) (5) 25,114 *
John A. Dorman (4) (6) 83,418 1.7
Arthur Fischman (4) (7) 26,508 *
John J. Iannuzzi (4) (8) 16,483 *
Donald M. Karp (4) (9)
18 Shawnee Road
Short Hills, New Jersey 1,202,948 24.0
Peter Kenny (10) 22,601 *
James J. Lazarus (4) 28,027 *
Edward J. Lenihan (4) (11) 29,836 *
Stanley J. Lesnik (4) (12) 33,264 *
Catherine McFarland (4) (13) 5,607 *
Louis J. Owen (4) (14) 18,486 *
Fred Perry, Jr. (15) 27,761 *
A. Harold Schwartz (4) 60,724 1.2
Hubert Williams (4) (16) 26,451 *
All directors and officers as a
group (18 persons) (17) 1,663,668 32.4
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
SEC which generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power and/or investment power
with respect to those securities. Unless otherwise indicated, the
persons or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially owned
by them. Percentage ownership calculations are based on 4,985,728
shares of Broad common stock outstanding.
(2) Includes 537,688 shares of Broad common stock as to which Ms. Alpert
has shared voting and investment power with Donald M. Karp; and 4,759
shares of Broad common stock beneficially owned by Ms. Alpert's husband
and as to which Ms. Alpert has power of attorney.
(footnotes continued on following page)
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<PAGE> 61
- -----------
(3) Treasurer of Broad and Senior Vice President of Broad National Bank.
Includes 15,787 shares of Broad common stock subject to immediately
exercisable options.
(4) Director of Broad and of Broad National Bank.
(5) Includes 13,362 shares of Broad common stock held by Mr. Cruz individually;
and 11,752 shares of Broad common stock held by him as custodian for his
children.
(6) Includes 32,678 shares of Broad common stock subject to an immediately
exercisable option, 8,101 shares of Broad common stock held by Mr. Dorman
jointly with his wife and as to which he has shared voting and investment
power; 26,281 shares of Broad common stock held by Mr. Dorman
individually; and 16,358 shares of Broad common stock owned by Mr.
Dorman's wife.
(7) Includes 5,216 shares of Broad common stock subject to an immediately
exercisable option; 18,713 shares of Broad common stock held by Mr.
Fischman individually; and 2,579 shares of Broad common stock beneficially
owned by Mr. Fischman's wife and as to which Mr. Fischman disclaims
beneficial ownership.
(8) Includes 5,669 shares of Broad common stock subject to an immediately
exercisable option; 3,735 shares of Broad common stock held by Mr. Iannuzzi
jointly with his wife and as to which Mr. Iannuzzi has shared voting and
investment power; 4,149 shares of Broad common stock held by Mr. Iannuzzi
individually; 182 shares of Broad common stock held by him as trustee of a
trust for the benefit of his grandsons; and 2,748 shares of Broad common
stock held by Mr. Iannuzzi's wife.
(9) Includes 25,784 shares of Broad common stock subject to immediately
exercisable options. Also includes 309,312 shares of Broad common stock
held by Mr. Karp individually; 52,949 shares of Broad common stock held by
Mr. Karp for the benefit of his children, and 3,158 shares of Broad common
stock held by Mr. Karp as agent for Harriet M. Alpert. The number of shares
reported for Mr. Karp also includes 534,530 shares of Broad common stock
held by Ms. Alpert, as to which Mr. Karp shares voting and investment power
and 52,538 shares of common stock held by Mr. Karp's wife as Trustee, as to
which Mr. Karp shares voting and investment power. The number of shares
reported for Mr. Karp includes 127,679 shares of Broad common stock owned
by Mr. Karp's wife and 96,998 shares of common stock held by Mr. Karp's
wife as Trustee for Mr. Karp's children, as to which Mr. Karp disclaims
beneficial ownership.
(10) Senior Vice President of Broad National Bank. Includes 13,635 shares of
Broad common stock subject to an immediately exercisable option, 7,457
shares of Broad common stock held by Mr. Kenny individually; and 126 shares
of Broad common stock held by Mr. Kenny jointly with his minor son and
as to which he has shared voting and investment power. Also includes 1,155
shares of Broad common stock held by Mr. Kenny's wife and 228 shares of
Broad common stock held by Mr. Kenny's wife jointly with his two minor
children, as to which 1,383 shares of Broad common stock Mr. Kenny
disclaims beneficial ownership.
(11) Includes 8,216 shares of Broad common stock subject to an immediately
exercisable option.
(footnotes continued on following page)
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<PAGE> 62
- ---------------
(12) Includes 8,439 shares of Broad common stock subject to an immediately
exercisable option; 20,347 shares of Broad common stock held
individually by Mr. Lesnik; and 4,478 shares of Broad common stock
beneficially owned by Mr. Lesnik's wife, as to which Mr. Lesnik
disclaims beneficial ownership.
(13) Includes 1,213 shares of Broad common stock subject to an immediately
exercisable option; 3,182 shares of Broad common stock held by Ms.
McFarland individually; and 1,212 shares of Broad common stock held by
Ms. McFarland's husband.
(14) Mr. Owen has sole voting and investment power with respect to 12,844
shares of Broad common stock held by him individually and shared voting
and investment power with respect to 5,642 shares of Broad common stock
held jointly with his wife.
(15) Senior Vice President of Broad National Bank. Shares beneficially owned
by Mr. Perry, Jr. include 9,225 shares of Broad common stock subject to
an immediately exercisable option and 18,536 shares of Broad common
stock held by Mr. Perry, Jr. jointly with his wife and as to which he
has shared voting and investment power.
(16) Includes 5,669 shares of Broad common stock subject to an immediately
exercisable option; 6,874 shares of Broad common stock held by Mr.
Williams individually; 693 shares of Broad common stock held by him
jointly with his wife and as to which he has shared voting and
investment power; 1,507 shares of Broad common stock held by him as
trustee for the benefit of his son; 8,237 shares of Broad common stock
held by Mr. Williams jointly with his brother and as to which he has
shared voting and investment power; and 3,471 shares of Broad common
stock held by Mr. Williams' wife.
(17) Includes 148,922 shares of Broad common stock subject to immediately
exercisable options.
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REGULATION AND SUPERVISION
GENERAL
Independence Community Bank is a New York-chartered stock savings bank
and its deposit accounts are insured up to applicable limits by the FDIC under
the Bank Insurance Fund and the Savings Association Insurance Fund. Independence
Community Bank is subject to extensive regulation by the Superintendent and the
New York Banking Board as its chartering agency, and by the FDIC, as the deposit
insurer. Independence Community Bank must file reports with the New York Banking
Board, the Superintendent and the FDIC concerning its activities and financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as establishing branches and mergers with, or
acquisitions of, other depository institutions. There are periodic examinations
by the New York Banking Board and the Superintendent and the FDIC to assess
Independence's compliance with various regulatory requirements and financial
condition. Certain of the regulatory requirements applicable to Independence and
to Independence Community Bank are referred to below or elsewhere herein. This
description of the statutory provisions and regulations applicable to
Independence and Independence Community Bank does not purport to be complete,
and is qualified in its entirety by reference to such statutes and regulations.
NEW YORK STATE LAW
Independence Community Bank derives its lending, investment and other
authority primarily from the applicable provisions of New York Banking Law and
the regulations of the New York Banking Board and the Superintendent, as limited
by FDIC regulations. See "-Investment Activities." Under these laws and
regulations, savings banks, including Independence Community Bank, may invest in
real estate mortgages, consumer and commercial loans, certain types of debt
securities, including certain corporate debt securities and obligations of
federal, state and local governments and agencies, certain types of corporate
equity securities and certain other assets. Under the statutory authority for
investing in equity securities, a savings bank may directly invest up to 7.5% of
its assets in certain corporate stock and may also invest up to 7.5% of its
assets in certain mutual fund securities. Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below. Such
equity securities must meet certain tests of financial performance. A savings
bank's lending powers are not subject to percentage of asset limitations,
although there are limits applicable to single borrowers. A savings bank may
also, pursuant to the "leeway" authority, make investments not otherwise
authorized under the New York Banking Law. This authority permits investments
not otherwise authorized of up to 1% of the savings bank's assets in any single
investment, subject to certain restrictions, and to an aggregate limit for all
such investments of up to 5% of assets. Additionally, in lieu of investing in
such securities in accordance with and reliance upon the specific investment
authority set forth in the New York Banking Law, savings banks are authorized to
elect to invest under a "prudent person" standard in a wider range of debt and
equity securities as compared to the types of investments permissible under such
specific investment authority. However, in the event a savings bank elects to
utilize the "prudent person" standard, it will be unable to avail itself of the
other provisions of the New York Banking Law and regulations which set forth
specific investment authority. A New York-chartered stock savings bank may also
exercise trust powers upon approval of the New York Banking Board and the
Superintendent.
New York-chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power to
invest in corporations that engage in various activities authorized for savings
banks, plus any additional activities that may be authorized by the New York
Banking Board. Investment by a savings bank in the stock, capital notes and
debentures of its service corporations is limited to 3% of the bank's assets,
and such investments, together with the bank's loans to its service
corporations, may not exceed 10% of the savings bank's assets.
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The exercise by an FDIC-insured New York-chartered savings bank of the
lending and investment powers of a savings bank under the New York Banking Law
is limited by FDIC regulations and other federal law and regulations. In
particular, the applicable provisions of the New York Banking Law and
regulations governing the investment authority and activities of an FDIC insured
state-chartered savings bank have been effectively limited by the Federal
Deposit Insurance Corporation Improvement Act of 1991 and the FDIC regulations
issued pursuant thereto. See "-Investment Activities."
With certain limited exceptions, a New York-chartered savings bank may
not make loans or extend unsecured credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth. Independence
Community Bank currently complies with all applicable loans-to-one-borrower
limitations.
Under the New York Banking Law, a New York-chartered stock savings bank
may declare and pay dividends out of its net profits, unless there is an
impairment of capital. However, approval of the Superintendent is required if
the total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years.
FDIC REGULATIONS
CAPITAL REQUIREMENTS. The FDIC has adopted risk-based capital
guidelines to which Independence Community Bank is subject. The guidelines
establish a systematic analytical framework that makes regulatory capital
requirements more sensitive to differences in risk profiles among banking
organizations. Independence Community Bank is required to maintain minimum
levels of regulatory capital in relation to its regulatory risk-weighted assets.
The ratio of such regulatory capital to regulatory risk-weighted assets is
referred to as the "risk-based capital ratio." Risk-based capital ratios are
determined by allocating assets and specified off-balance sheet items to four
risk-weighted categories ranging from 0% to 100%, with higher levels of capital
being required for the categories considered as representing greater risk.
These guidelines divide a bank's capital into two tiers. The first tier
("Tier I") includes common equity, retained earnings, certain non-cumulative
perpetual preferred stock and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and other intangible assets. Tier I
generally excludes auction note issues, mortgage servicing rights and purchased
credit card limitations. Supplementary ("Tier II") capital includes, among other
items, cumulative perpetual and long-term limited-life preferred stock,
mandatory convertible securities, certain hybrid capital instruments, term
subordinated debt and the allowance for loan and lease losses, subject to
certain limitations, less required deductions. Banks are required to maintain a
total risk-based capital ratio of at least 8%, of which at least 4% must be Tier
I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio. The minimum Tier I leverage ratio is the ratio of Tier I
capital to adjusted total average balance of assets as specified in the
regulations. These regulations provide for a minimum Tier I leverage ratio of 3%
for banks that meet certain specified criteria, including that they have the
highest examination rating and are not experiencing or anticipating significant
growth. All other banks are required to maintain a Tier I leverage ratio of 3%
plus an additional cushion of at least 100 to 200 basis points. The federal
banking agencies, including the FDIC, have established a uniform minimum Tier I
leverage ratio of 4% for all but the highest rated banks. The FDIC may, however,
set higher leverage and risk-based capital requirements on individual
institutions when particular circumstances warrant. Banks experiencing or
anticipating significant growth are expected to maintain capital ratios,
including tangible capital positions, well above the minimum levels.
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<PAGE> 65
The following is a summary of Independence Community Bank's regulatory
capital ratios at December 31, 1998:
<TABLE>
<S> <C>
Tier I Risk-Based Capital................................... 20.5%
Total Risk-Based Capital.................................... 21.8%
Leverage Capital............................................ 12.8%
</TABLE>
REAL ESTATE LENDING STANDARDS. The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (1) are secured by real estate or (2) are made for the purpose of
financing the construction or improvements on real estate. The FDIC regulations
require each institution to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the institution and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real estate loans. Institutions are also permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standard are justified.
DIVIDEND LIMITATIONS. The FDIC has authority to use its enforcement
powers to prohibit a bank from paying dividends if, in its opinion, the payment
of dividends would constitute an unsafe or unsound practice. Federal law
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable minimum capital requirements on a pro forma basis.
Additionally, Independence Community Bank, as a subsidiary of a savings and loan
holding company, is required to provide the OTS with 30 days prior written
notice before declaring any dividend. The plan of conversion adopted by
Independence Community Bank in connection with its conversion and reorganization
from the mutual holding company structure to the stock holding company structure
also restricts the institution's payment of dividends in the event the dividend
would impair the liquidation account established in connection with the
conversion. Independence Community Bank is also subject to dividend declaration
restrictions imposed by New York State law. See "-New York State Law."
INVESTMENT ACTIVITIES
Since the enactment of the Federal Deposit Insurance Corporation
Improvement Act, all insured state-chartered banks, including savings banks and
their subsidiaries, have generally been limited to activities as principal and
equity investments of the type and in the amount authorized for national banks,
notwithstanding state law. The Federal Deposit Insurance Corporation Improvement
Act of 1991 and the FDIC regulations permit certain exceptions to these
limitations. For example, certain state-chartered banks, such as Independence
Community Bank, may, with FDIC approval, continue to exercise state authority to
invest in common or preferred stocks listed on a national securities exchange or
the Nasdaq National Market and in the shares of an investment company registered
under the Investment Company Act of 1940, as amended. Such banks may also
continue to sell savings bank life insurance. In addition, the FDIC is
authorized to permit such institutions to engage in state authorized activities
or investments that do not meet this standard (other than non-subsidiary equity
investments) for institutions that meet all applicable capital requirements if
it is determined that such activities or investments do not pose a significant
risk to the Bank Insurance Fund. The FDIC has recently proposed revisions to its
regulations governing the procedures for institutions seeking approval to engage
in such activities or investments. These proposed revisions would, among other
things, streamline certain application procedures for healthy banks and impose
certain quantitative and qualitative restrictions on a bank's merging with its
subsidiaries engaged in activities not permitted for national bank subsidiaries.
All non-subsidiary equity investments, unless otherwise authorized or approved
by the FDIC, must have been divested by December 19, 1996, pursuant to a FDIC
approved divestiture plan unless such investments were grandfathered by the
FDIC. Independence Community Bank received grandfathering authority from the
FDIC in February 1993 to invest in listed stocks and/or registered shares
subject to the maximum permissible investment
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of 100% of Tier I capital, as specified by the FDIC's regulations, or the
maximum amount permitted by the New York Banking Law, whichever is less. Such
grandfathering authority is subject to termination upon the FDIC's determination
that such investments pose a safety and soundness risk to Independence Community
Bank or in the event Independence Community Bank converts its charter, other
than a mutual to stock conversion, or undergoes a change in control.
TRANSACTIONS WITH COMPANIES OR ENTITIES THAT CONTROL SAVINGS BANKS
Under current federal law, transactions between depository institutions
and their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
nonbanking subsidiary of the bank. In a holding company context, at a minimum,
the parent holding company of a savings bank and any companies which are
controlled by such parent holding company are affiliates of the savings bank.
The Board of Governors of the Federal Reserve System has proposed regulations
that would treat as an affiliate any subsidiary of a savings bank that engages
in activities not permissible for the parent savings bank to engage in directly.
Generally, Section 23A limits the extent to which the savings bank or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such savings bank's capital stock and surplus, and
contains an aggregate limit on all such transactions with all affiliates to an
amount equal to 20% of such capital stock and surplus. The term "covered
transaction" includes the making of loans or other extensions of credit to an
affiliate; the purchase of assets from an affiliate, the purchase of, or an
investment in, the securities of an affiliate; the acceptance of securities of
an affiliate as collateral for a loan or extension of credit to any person; or
issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Section 23A also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings
bank with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to any director, executive officer and
stockholder who controls, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total unimpaired capital and
unimpaired surplus. Section 22(h) also prohibits loans above amounts prescribed
by the appropriate federal banking agency to directors, executive officers, and
stockholders who control 10% or more of voting securities of a stock savings
bank, and their respective related interests, unless such loan is approved in
advance by a majority of the board of directors of the savings bank. Any
director who has an interest in the outcome of whether the loan is granted may
not participate in the voting. The loan amount, which includes all other
outstanding loans to such person, as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal stockholders must be made on terms, including
interest rates and collateral, substantially the same as offered in comparable
transactions to other persons, must involve no more than the normal risk of
repayment or present other unfavorable features, and must be made using credit
underwriting procedures that are not less stringent than those applicable in
comparable transactions with other persons, except for extensions of credit made
pursuant to a benefit or compensation program that is widely available to the
institution's employees and does not give preference to insiders over other
employees. Section 22(g) of the Federal Reserve Act places additional
limitations on loans to executive officers.
THE FDIC'S ENFORCEMENT AUTHORITY
The FDIC has extensive enforcement authority over insured savings banks,
including Independence Community Bank. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease
and desist orders and to remove directors and officers. In general, these
enforcement actions may be initiated
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in response to violations of laws and regulations and to unsafe or unsound
practices. The FDIC also has authority under federal law to appoint a
conservator or receiver for an insured savings bank under certain circumstances.
INSURANCE OF DEPOSIT ACCOUNTS
An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned by the FDIC. Deposits of
Independence Community Bank are presently insured by the Bank Insurance Fund and
the Savings Association Insurance Fund. Independence Community Bank has Savings
Association Insurance Fund insured deposits as a result of acquisitions of
thrift institutions as well as branch purchases. Assessment rates for Bank
Insurance Fund deposits, exclusive of assessments for Financing Corporation
bonds described below, currently range from 0 basis points to 27 basis points.
The FDIC is authorized to raise the assessment rates in certain circumstances,
including to maintain or achieve the designated reserve ratio of 1.25%, which
requirement the Bank Insurance Fund currently meets. The FDIC has exercised its
authority to raise rates in the past and may raise insurance premiums in the
future. If such action is taken by the FDIC, it could have an adverse effect on
the earnings of Independence Community Bank. In addition, recent legislation
requires Bank Insurance Fund insured institutions like Independence Community
Bank to assist in the payment of Financing Corporation bonds.
Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC. The management of
Independence Community Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.
PAYMENT OF FINANCING CORPORATION BONDS
Bank Insurance Fund and Savings Association Insurance Fund deposits are
also assessed for payments on bonds issued by Financing Corporation, which were
issued in the late 1980s to recapitalize the predecessor Savings Association
Insurance Fund. For the fourth quarter of 1998, the Financing Corporation
assessment rates, on an annual basis, are 1.22 basis points for Bank Insurance
Fund assessable deposits and 6.10 basis points for Savings Association Insurance
Fund assessable deposits. Full pro rata sharing of the Financing Corporation
payments by Bank Insurance Fund members will occur on the earlier of January 1,
2000 or the date the Bank Insurance Fund and Savings Association Insurance Fund
are merged.
FEDERAL RESERVE SYSTEM
The Federal Reserve System regulations require depository institutions
to maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve System
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for that portion of transaction accounts
aggregating $47.8 million or less (subject to adjustment by the Federal Reserve
System) the reserve requirement is 3%; and for accounts greater than $47.8
million, the reserve requirement is $1.4 million plus 10% (subject to adjustment
by the Federal Reserve System between 8% and 14%) against that portion of total
transaction accounts in excess of $47.8 million. The first $4.7 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
System) are exempted from the reserve requirements. Independence Community Bank
is in compliance with the foregoing requirements. Because required reserves must
be maintained in the form of either vault cash, a non-interest-bearing account
at a Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve System, the effect of this reserve requirement is to reduce Independence
Community Bank's interest-earning assets.
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COMMUNITY REINVESTMENT ACT
NEW YORK STATE REGULATION. Independence Community Bank is also subject
to provisions of the New York Banking Law that impose continuing and affirmative
obligations upon banking institutions organized in New York State to serve the
credit needs of its local community, which are substantially similar to those
imposed by the Community Reinvestment Act. Under the New York Community
Reinvestment Act, a bank must file copies of all federal Community Reinvestment
Act reports with the New York Banking Board and the Superintendent. The New York
Community Reinvestment Act also requires the Superintendent to consider a bank's
New York Community Reinvestment Act rating when reviewing a bank's application
to engage in certain transactions, including mergers, asset purchases and the
establishment of branch offices or automated teller machines, and provides that
such assessment may serve as a basis for the denial of any such application. The
New York regulations require a biennial assessment of a bank's compliance with
the New York Community Reinvestment Act, utilizing a four-tiered rating system,
and require the New York Banking Board and the Superintendent to make available
to the public such rating and a written summary of the results.
FEDERAL REGULATION. Under the Community Reinvestment Act, as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods.
The Community Reinvestment Act does not establish specific lending requirements
or programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the Community
Reinvestment Act. The Community Reinvestment Act requires the FDIC to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The FDIC utilizes a four-tier descriptive rating system in its
Community Reinvestment Act evaluations. Public disclosure is made of such
evaluations.
HOLDING COMPANY REGULATION
FEDERAL REGULATION. As a unitary savings and loan holding company,
Independence generally is not restricted under existing laws as to the types of
business activities in which it may engage. Upon any non-supervisory acquisition
by Independence of another savings association to be held as a separate
subsidiary, Independence would become a multiple savings and loan holding
company and would be subject to extensive limitations on the types of business
activities in which it could engage. The Home Owners' Loan Act limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act of 1956, as
amended, subject to the prior approval of the OTS, and to other activities
authorized by OTS regulations. Multiple savings and loan holding companies are
prohibited from acquiring or retaining, with certain exceptions, more than 5% of
the voting shares of a non-subsidiary holding company or other company engaged
in activities other than those permitted by the Home Owners' Loan Act.
Recently enacted legislation provides that the Bank Insurance Fund and
the Savings Association Insurance Fund would have merged on January 1, 1999 if
there were no more savings associations as of that date. Several bills were
introduced in Congress that would have eliminated the federal thrift charter and
the OTS, but no such legislation was enacted in 1998. Independence in unable to
predict whether legislation on this matter will be enacted or, given such
uncertainty, determine the extent to which the legislation, if enacted, would
affect its business.
The Home Owners' Loan Act prohibits a savings and loan holding company,
directly or indirectly, or through one or more subsidiaries, from acquiring more
than 5% of the voting stock of another savings association or holding company
thereof, or from acquiring such an institution or company by merger,
consolidation or purchase of its assets, without prior written approval of the
OTS. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources and
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.
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The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings institutions
in more than one state, except (1) interstate supervisory acquisitions by
savings and loan holding companies, and (2) the acquisition of a savings
institution in another state if the laws of the state of the target savings
institution specifically permit such acquisitions. The states vary in the extent
to which they permit interstate savings and loan holding company acquisitions.
In order to elect and continue to be regulated as a savings and loan
holding company by the OTS, Independence Community Bank must continue to qualify
as a Qualified Thrift Lender ("QTL"). In order to qualify as a QTL, Independence
Community Bank must maintain compliance with a Qualified Thrift Lender Test
("QTL test"). Under the QTL test, a savings institution is required to maintain
at least 65% of its "portfolio assets" in certain "qualified thrift investments"
in at least 9 months out of each 12 month period. "Portfolio assets" are total
assets less (1) specified liquid assets up to 20% of total assets; (2)
intangibles, including goodwill; and (3) the value of property used to conduct
business. "Qualified thrift investments" are primarily residential mortgages and
related investments. A holding company of a savings institution that fails the
QTL test must either convert to a bank holding company and thereby become
subject to the regulation and supervision of the Federal Reserve System or
operate under certain restrictions. As of December 31, 1998, Independence
Community Bank maintained in excess of 65% its portfolio assets in qualified
thrift investments. Independence Community Bank also met the QTL test in each of
the prior 12 months and, therefore, met the QTL test. Recent legislative
amendments have broadened the scope of "qualified thrift investments" that go
toward meeting the QTL test to fully include credit card loans, student loans
and small business loans. A savings association may also satisfy the QTL test by
qualifying as a "domestic building and loan association" as defined in the
Internal Revenue Code.
NEW YORK STATE HOLDING COMPANY REGULATION. In addition to the federal
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the New York Banking
Law. The term "bank holding company," for the purposes of the New York Banking
Law, is defined generally to include any person, company or trust that directly
or indirectly either controls the election of a majority of the directors or
owns, controls or holds with power to vote more than 10% of the voting stock of
a bank holding company or, if the company is a banking institution, another
banking institution, or 10% or more of the voting stock of each of two or more
banking institutions, including commercial banks and state savings banks and
savings and loan associations organized in stock form. In general, a holding
company controlling, directly or indirectly, only one banking institution will
not be deemed to be a bank holding company for the purposes of the New York
Banking Law. Under New York Banking Law, the prior approval of the New York
Banking Board and the Superintendent is required before:
(1) any action is taken that causes any company to become a bank
holding company;
(2) any action is taken that causes any banking institution to
merge or consolidate with a subsidiary of a bank holding
company;
(3) any bank holding company acquires ownership or control of more
than 5% of the voting stock of a banking institution;
(4) any bank holding company or subsidiary acquires all or
substantially all of the assets of a banking institution; or
(5) any action is taken that causes any bank holding company to
merge or consolidate with another bank holding company.
Additionally, certain restrictions apply to New York bank
holding companies regarding the acquisition of banking
institutions which have been chartered five years or less and
are located in smaller communities. Officers, directors and
employees of New York bank holding companies are subject to
limitations regarding their affiliation with securities
underwriting or brokerage firms and other bank holding
companies and limitations regarding loans obtained from its
subsidiaries.
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INTERSTATE BANKING AND BRANCHING
Independence, as a savings and loan holding company, is limited under
the Home Owners' Loan Act with respect to its acquisition of a savings
association located in a state other than New York. In general, a savings and
loan holding company may not acquire an additional savings association
subsidiary that is located in a state other than the home state of its first
savings association subsidiary unless such an interstate acquisition is
permitted by the statutes of such other state. Many states permit such
interstate acquisitions if the statutes of the home state of the acquiring
savings and loan holding company satisfy various reciprocity conditions. New
York is one of a number of states that permit out-of-state bank and savings and
loan holding companies to acquire New York savings banks and savings
associations. New Jersey has similar statutory provisions.
In contrast, bank holding companies are generally authorized to acquire
banking subsidiaries in more than one state irrespective of any state law
restrictions on such acquisitions. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, which was enacted in September 1994, permits
approval under the Bank Holding Company Act of the acquisition of a bank located
outside of the holding company's home state regardless of whether the
acquisition is permitted under the law of the state of the acquired bank. The
Federal Reserve System may not approve an acquisition under the Bank Holding
Company Act that would result in the acquiring holding company controlling more
than 10% of the deposits in the United States or more than 30% of the deposits
in any particular state.
In the past, branching across state lines was not generally available
to a state bank such as Independence Community Bank. Out-of-state branches of
savings banks are authorized under the New York Banking Law, but similar
authority does not exist generally under the laws of most other states. The
Interstate Banking Act permitted, beginning June 1, 1997, the responsible
federal banking agencies to approve merger transactions between banks located in
different states, regardless of whether the merger would be prohibited under the
law of the two states. The Interstate Banking Act also permitted a state to "opt
in" to the provisions of the Interstate Banking Act prior to June 1, 1997, and
permitted a state to "opt out" of the provisions of the Interstate Banking Act
by adopting appropriate legislation, beginning June 1, 1997, before that date.
Accordingly, the Interstate Banking Act permits a bank, such as Independence
Community Bank, to acquire branches in a state other than New York unless the
other state has opted out of the Interstate Banking Act. The Interstate Banking
Act also authorizes de novo branching into another state if the host state
enacts a law expressly permitting out-of-state banks to establish such branches
within its borders.
The Interstate Banking Act may facilitate the further consolidation of
the banking industry. The effect of the Interstate Banking Act on Independence
Community Bank, if any, is likely to occur as banking institutions, state
legislators, and bank regulators respond to the new federal regulatory
structure. The states will have to establish appropriate corporate law, tax and
regulatory structures to adjust to the growth of new interstate banks.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF INDEPENDENCE AND BROAD
Independence is a business corporation incorporated in Delaware under
the Delaware General Corporation Law and Broad is a business corporation
incorporated in New Jersey under the New Jersey Business Corporation Act. The
rights of Broad stockholders are currently governed by New Jersey corporate law.
Upon the completion of the merger, each Broad stockholder who is allocated
shares of Independence common stock will become a stockholder of Independence
and the rights of stockholders of Independence are governed by Delaware
corporate law. The following is a comparison of certain provisions of Delaware
corporate law and New Jersey corporate law and the respective certificates of
incorporation and bylaws of each of Independence and Broad. This summary does
not purport to be complete and is qualified in its entirety by reference to
Delaware and New Jersey law, which statutes may change from time to time, and
the respective certificates of incorporation and bylaws of Independence and
Broad, which also may be changed.
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SPECIAL MEETING OF STOCKHOLDERS
Under Independence's bylaws, special meetings of stockholders may be
called only by the board of directors pursuant to a resolution approved by the
affirmative vote of at least three-fourths of the directors then in office,
except as otherwise required by law and subject to the rights of the holders of
any class or series of preferred stock.
Broad's bylaws provide that special meetings of stockholders may be
held for any purpose and may be called by the chairman of the board of
directors, by the president, by the secretary, by the board of directors or the
holders of, or by any officer or stockholder upon the written request of the
holders of, not less than one-fifth of all outstanding shares entitled to vote
at any such meeting.
VOTING REQUIREMENTS
Under Delaware law, unless otherwise specified in the certificate of
incorporation of a Delaware corporation, the amendment to the certificate of
incorporation, the sale or other disposition of all or substantially all of the
assets of a corporation, or the merger or consolidation of a stock corporation
with another stock corporation requires the affirmative vote of a majority of
the outstanding stock entitled to vote thereon (with respect to the amendment of
the certificate of incorporation, the affirmative vote of a majority of the
outstanding shares of stock of each class entitled to vote thereon is also
required).
Under Independence's certificate of incorporation, the affirmative vote
of the holders of at least 80% of the outstanding voting stock entitled to vote
in the election of directors is required for certain business combinations,
certain liquidations or dissolutions, and certain reclassifications of
securities. If, however, any such action is recommended by at least two-thirds
of Independence's board, then approval of the action will require only such
affirmative vote as is required by Delaware law.
Under New Jersey law, unless a greater vote is specified in the
certificate of incorporation, any amendment to a New Jersey corporation's
certificate of incorporation, the voluntary dissolution of the corporation, the
sale or other disposition of all or substantially all of a corporation's assets
otherwise than in the ordinary course of business or the merger or consolidation
of the corporation with another corporation, requires the affirmative vote of a
majority of the votes cast by stockholders of the corporation entitled to vote
thereon. Broad's certificate of incorporation provides that the affirmative vote
of two-thirds of the outstanding shares of its common stock is required to take
such actions. And, where required by New Jersey law, a separate affirmative vote
of two-thirds of the preferred stock is necessary to take such action.
The New Jersey Stockholders Protection Act limits certain transactions
involving an "interested stockholder" and a "resident domestic corporation." An
"interested stockholder" is one that is directly or indirectly, a beneficial
owner of 10% or more of the voting power of the outstanding voting stock of a
resident domestic corporation. The New Jersey Stockholders Protection Act
prohibits certain business combinations between an interested stockholder and a
resident domestic corporation for a period of five years after the date the
interested stockholder acquired its stock, unless the business combination was
approved by the resident domestic corporation's board of directors prior to the
interested stockholder's stock acquisition date. After the five-year period
expires, the prohibition on certain business combinations continues unless the
combination is approved by the affirmative vote of two-thirds of the voting
stock not beneficially owned by the interested stockholder, the combination is
approved by the board of directors prior to the interested stockholder's stock
acquisition date or certain fair price provisions are satisfied.
CUMULATIVE VOTING
Under Delaware law, stockholders of a Delaware corporation do not have
cumulative voting rights in the election of directors unless the certificate of
incorporation so provides. Independence's certificate of incorporation does not
provide for cumulative voting.
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Under New Jersey law, stockholders of a New Jersey corporation do not
have cumulative voting rights in the election of directors unless the
certificate of incorporation so provides. Broad's certificate of incorporation
does allow for cumulative voting.
RIGHTS OF DISSENTING STOCKHOLDERS
Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation may be entitled to appraisal rights. There are
no statutory rights of appraisal with respect to stockholders of a corporation
whose shares are either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (ii) held of
record by more than 2,000 stockholders, where such stockholders receive only
shares of stock or depository receipts of the corporation surviving or resulting
from the merger or consolidation or shares of stock or depository receipts of
any other corporation which at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders (or cash in lieu of fractional share interests therein). The
exceptions from the Delaware statutory right of appraisal apply to Independence
since its common stock is presently listed on the Nasdaq Stock Market and are
held of record by more than 2,000 stockholders.
Stockholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) is held
of record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
Broad stockholders do not qualify for statutory dissenters' appraisal rights in
connection with the merger since Independence's common stock is held of record
by more than 1,000 stockholders.
STOCKHOLDER CONSENT TO CORPORATE ACTION
Independence's certificate of incorporation provides that stockholders'
action cannot be effected by written consent.
Except as otherwise provided by the certificate of incorporation, New
Jersey law permits any action required or permitted to be taken at any meeting
of a corporation's stockholders, other than the annual election of directors, to
be taken without a meeting upon the written consent of stockholders who would
have been entitled to cast the minimum number of votes necessary to authorize
such action at a meeting of stockholders at which all stockholders entitled to
vote were present and voting. The annual election of directors, if not conducted
at a stockholders' meeting, may only be effected by unanimous written consent.
Under New Jersey law, a stockholder vote on a plan of merger or consolidation,
if not conducted at a stockholders' meeting, may only be effected by either: (i)
unanimous written consent of all stockholders entitled to vote on the issue with
advance notice to any other stockholders, or (ii) written consent of
stockholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other stockholders. Broad's bylaws permit stockholders to take such actions
without a meeting.
DIVIDENDS
Delaware law generally limits dividends by Independence to an amount
equal to the excess of the net assets of Independence (the amount by which total
assets exceed total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately preceding
fiscal year. Because Independence does not conduct any material activities at
the holding company level, its ability to pay dividends depends in part on
capital distributions from its subsidiaries. For a discussion of the regulatory
restrictions on dividend payments by Independence Community Bank, see
"Regulation and Supervision - New York State Law" on page 57.
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Unless other restrictions are contained in the certificate of
incorporation, New Jersey law generally provides that a New Jersey corporation
may declare and pay dividends on its outstanding stock so long as the
corporation is not insolvent and would not become insolvent as a consequence of
the dividend payment. Stockholders of Broad's common stock are entitled to
dividends, subject only to the prior rights of holders of preferred stock. Broad
has two classes of preferred stock, the 1985 Class and the 1992 Class, no shares
of which are currently outstanding. Because funds for the payment of dividends
by Broad must come primarily from the earnings of Broad National Bank, as a
practical matter, any restrictions on the ability of Broad National Bank to pay
dividends limits the amount of funds available for the payment of dividends by
Broad.
CLASSIFIED BOARD OF DIRECTORS
Delaware law permits a Delaware corporation to provide for a classified
board in its certificate of incorporation or bylaws. Independence's certificate
of incorporation provides for the board of directors to be divided into three
classes, each of which contains approximately one-third of the whole number of
members of the board. Each class serves a staggered term, with approximately
one-third of the total number of directors being elected each year.
New Jersey law permits a New Jersey corporation to provide for a
classified board in its certificate of incorporation. Broad's certificate of
incorporation does not provide for a classified board.
REMOVAL OF DIRECTORS; NUMBER OF DIRECTORS
Under Independence's certificate of incorporation, directors may be
removed from office only with cause by an affirmative vote of not less than 80%
of the outstanding voting stock entitled to vote in the election of directors at
a meeting called expressly for such purpose. Independence's bylaws provide that
the board of directors may change the number of directors by a vote of a
majority of the board of directors.
New Jersey law allows removal of directors for cause or, unless
otherwise provided in the certificate of incorporation, without cause by the
affirmative vote of the majority of the votes cast by the holders of shares
entitled to vote for the election of directors. Broad's certificate of
incorporation does not provide for different standards for removal. Broad's
bylaws provide that the board of directors may change the number of directors by
resolution adopted by a majority of the whole board of directors.
LIMITATIONS OF LIABILITY OF DIRECTORS AND OFFICERS
Under Delaware Law, a Delaware corporation may include in its
certificate of incorporation a provision which would, subject to the limitations
described below, eliminate or limit directors' or officers' liability to the
corporation or its stockholders, for monetary damage for breaches of their
fiduciary duty of care. A director cannot be relieved from liability or
otherwise indemnified (i) for breach of the director's duty of loyalty, (ii) for
acts or omissions not in good faith or involving intentional misconduct or
knowing violation of law, (iii) for willful or negligent conduct in paying
dividends or repurchasing stock out of other than lawfully available funds, or
(iv) for any transaction from which the director derives an improper personal
benefit. Independence's certificate of incorporation contains provisions which
limit a director's or officer's liability to the full extent permitted by
Delaware law.
Under New Jersey law, a New Jersey corporation may include in its
certificate of incorporation a provision which would, subject to the limitations
described below, eliminate or limit directors' or officers' liability to the
corporation or bank, as the case may be, or to its stockholders, for monetary
damage for breaches of their fiduciary duty of care. A director or officer
cannot be relieved from liability or otherwise indemnified for any breach of
duty based upon an act or omission (i) in breach of such person's duty of
loyalty to the entity or its stockholders, (ii) not in good faith or involving a
knowing violation of law, or (iii) resulting in receipt by such person of an
improper personal benefit. Broad's certificate of incorporation contains
provisions which limit a director's or officer's liability to the full extent
permitted by New Jersey law.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, a Delaware corporation may indemnify fully its
directors, officers, employees, and agents acting in good faith and in a manner
that he reasonably believed was in, or not opposed to, the best interests of the
corporation. A Delaware corporation also may indemnify fully such individuals
with respect to criminal actions or proceedings, provided that such individual
had no reasonable cause to believe his conduct was unlawful. Independence's
certificate of incorporation provides that Independence will indemnify its
directors, officers, employees, and agents to the fullest extent authorized by
Delaware Law against all expense, liability and loss reasonably incurred or
suffered by him; provided, however, that Independence will not be liable for any
amount which may be due to a person in connection with a proceeding or action
effected without Independence's prior written consent. Independence's
certificate of incorporation further permits it to maintain insurance on behalf
of any director, officer, employee, or agent of Independence.
New Jersey law provides that a corporation has the power to indemnify a
director, officer, employee or agent against his expenses and liabilities in
connection with any proceeding involving such person by reason of his being or
having been a director, officer, employee or agent of the corporation, other
than a proceeding by or in the right of the corporation, if: (i) such person was
acting in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; and (ii) with respect to any
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation has the power to indemnify such person against his
expenses in connection with any proceeding to procure a judgment in its favor
which involves the director, officer, employee or agent because he was or is a
director, officer, employee or agent, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation. Broad's certificate of incorporation provides that it will
indemnify its current and former officers, directors and agents against expenses
incurred in connection with any pending or threatened action to the full extent
permitted by New Jersey law.
CONSIDERATION OF ACQUISITION PROPOSALS
Independence's certificate of incorporation provides that, when
evaluating any offer by another person to acquire Independence, the board of
directors may consider all relevant factors, including, without limitation, the
social and economic effect of acceptance of such offer:
- on the present and future customers and employees of
Independence and Independence Community Bank;
- on the communities in which Independence and Independence
Community Bank operate or are located;
- on the ability of Independence to fulfill its corporate
objective as a bank holding company under applicable laws and
regulations; and
- on the ability of Independence Community Bank to fulfill the
objectives of a stock form savings bank under applicable
statutes and regulations.
New Jersey law provides that in determining whether a proposal or offer
to acquire a corporation is in the best interest of the corporation, the board
may, in addition to considering the effects of any action on stockholders,
consider any of the following:
- the effects of the proposed action on the corporation's
employees, suppliers, creditors and customers;
- the effects on the community in which the corporation
operates, and
- the long-term as well as short-term interests of the
corporation and its stockholders, including the possibility
that those interests may be served best by the continued
independence of the corporation.
The statute further provides that if, based on those factors, the board
of directors determines that any such offer is not in the best interest of the
corporation, it may reject the offer. These provisions may make it more
difficult for a stockholder to challenge the board's rejection of, and may
facilitate the board's rejection of, an offer to acquire Broad.
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BYLAWS
Under Delaware law, the stockholders of a Delaware corporation have the
power to adopt, amend or repeal the corporation's bylaws, unless such powers are
reserved in the certificate of incorporation to the board of directors.
Independence's bylaws may be adopted, altered, amended or repealed by its board
of directors or the stockholders. The affirmative vote of a majority of the
directors then in office or the affirmative vote of at least a majority of the
outstanding voting stock entitled to vote in the election of directors, as well
as such additional vote of any preferred stock as may be provided for, is
required to take such action. Further, the affirmative vote of 80% of the
outstanding voting stock entitled to vote in the election of directors, voting
together in a single class, as well as such additional vote of any preferred
stock as may be provided for, is required to amend, alter, change or repeal any
provision of, or adopt any provision inconsistent with, Sections 2.4, 2.14,
4.1-4.5 and 4.15 and Article VI of Independence's bylaws.
Under New Jersey law, the board of directors of a New Jersey
corporation has the power to adopt, amend or repeal a corporation's bylaws,
unless such powers are reserved in the certificate of incorporation to the
stockholders. Broad's certificate of incorporation provides for the alteration,
amendment, repeal or adoption of bylaws in any of the following ways: (i) by the
affirmative vote of two-thirds of the outstanding shares at an annual or special
meeting; (ii) by resolution of a majority of the full board of directors; or
(iii) by unanimous written consent of all stockholders or all directors;
provided, however, that the stockholders must expressly permit the directors to
amend, alter, suspend or repeal any bylaw enacted by the stockholders.
PREEMPTIVE RIGHTS
Independence's certificate of incorporation does not provide for
preemptive rights for its stockholders.
Broad's certificate of incorporation grants certain preemptive rights
to its stockholders of both common stock and preferred stock. If Broad issues
additional shares of common stock or securities convertible into common stock,
then stockholders are granted the right to purchase shares of common stock at
the issue price. The preemptive right allows stockholders to purchase an amount
of common stock or securities convertible into common stock proportionate to the
number of shares to be issued relative to the number of shares of common stock
and preferred stock then held. No preemptive rights are available, however, to
purchase additional (i) shares of common stock issued as dividends, (ii) shares
of common stock issued upon conversion of preferred stock to common stock, or
(iii) shares of common stock issued pursuant to a benefit plan. In addition, if
three-fourths of the board of directors then in office determine that regulatory
requirements or concerns warrant the issuance of shares of common stock or
securities convertible into common stock for the primary purpose of raising
capital to fund a banking subsidiary or for the primary purpose of increasing
Broad's equity capital or to retire indebtedness, then no preemptive rights are
available.
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
The following statements contain selected condensed financial
information for Independence, Broad and Statewide on an unaudited pro forma
condensed combined consolidated basis giving effect to the Broad merger and
Statewide merger applying the purchase method of accounting. The pro forma
condensed statements of operations and income reflecting the Broad and
Statewide mergers assume the acquisitions were completed on the first day of
each of the periods presented. Due to Broad and Statewide having different
fiscal year ends than Independence, the pro forma condensed statement of
operations for the year ended March 31, 1998 reflects the combination of
Broad's Statewide December 31, 1997 fiscal year ends with Independence's March
31, 1998 year end.
The unaudited pro forma condensed balance sheet presents the combined
financial position of Independence, Broad and Statewide as of December 31,
1998. The unaudited pro forma condensed balance sheet reflects (1) the
acquisition of Broad and Statewide applying the purchase method of accounting;
and (2) certain adjustments that are directly attributable to the Broad merger
and Statewide merger, including the allocation of the purchase price. The pro
forma condensed balance sheet assumes that the acquisition of Broad and
Statewide were completed as of December 31, 1998.
The unaudited pro forma condensed financial statements have been
prepared based upon currently available information and assumptions deemed
appropriate by management of Independence, Broad and Statewide. This pro forma
information may not be indicative of what actual results would have been, nor
does such data purport to represent the combined financial results of
Independence, Broad and Statewide for future periods.
There may be certain cost savings and/or revenue enhancements that will
result from the Broad and Statewide mergers. The information furnished in these
tables does not reflect either such possible cost savings or revenue
enhancements.
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Broad National Bancorporation
Statewide Financial Corp.
Unaudited Pro Forma Condensed Combined Consolidated
Statement of Financial Condition
<TABLE>
<CAPTION>
At December 31, 1998
----------------------------------------------------------------------------------
Pro Forma Independence/Broad
Independence Broad Adjustments Pro Forma
--------------- ----------- -------------- ----------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks $164,658 $45,793 $(69,172)(2) $83,306
(18,720)(2)
(39,253)(2)
Commercial paper 18,547 -- 18,547
Federal funds sold 96,265 -- 96,265
---------- --------- --------- -----------
Total cash and cash
equivalents 279,470 45,793 (127,145) 198,118
Securities held to maturity -- 32,949 134(3) 33,083
Securities available for sale 1,520,636 231,828 1,752,464
Mortgage loans on real estate 2,758,826 204,537 591(3) 2,963,954
Other loans 543,707 155,605 699,312
---------- --------- --------- -----------
Total loans 3,302,533 360,142 591 3,663,266
Less: allowance for
possible loan losses (44,140) (8,246) (52,386)
---------- --------- --------- -----------
Total loans, net 3,258,393 351,896 591 3,610,880
Premises, furniture &
equipment, net 65,845 9,862 75,707
Accrued interest receivable 30,341 4,227 34,568
Intangible assets, net 49,399 166 (166)(3) 156,406
107,007 (4)
Other assets 109,287 8,072 117,359
---------- --------- --------- -----------
Total assets $5,313,371 $684,793 $(19,579) $5,978,585
========== ========= ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Deposits $3,412,226 $575,064 $2,549(3) $3,989,839
Borrowings 738,446 40,651 130(3) 779,227
Securities lent 55,620 -- 55,620
Escrow and other deposits 33,466 -- 33,466
Preferred trust securities -- 11,500 11,500
Accrued expenses and other
liabilities 159,671 12,889 (7,488)(2) 165,072
---------- --------- --------- -----------
Total liabilities 4,399,429 640,104 (4,809) 5,034,724
Stockholders' equity
Preferred stock -- -- -- --
Common stock 760 5,213 (5,213)(8) 760
Additional
paid-in-capital 739,173 35,131 (35,131)(8) 739,173
Treasury stock at cost (29,919) (5,089) 5,089 (8)
69,172 (2)
(39,253)(2) --
Unallocated common stock
held by ESOP (93,928) -- (93,928)
Unearned common stock
held by RRP (35,366) -- (35,366)
Retained earnings 329,654 8,717 (8,717)(8) 329,654
Net unrealized gain on
securities
available-for-sale,
net of tax 3,568 717 (717)(8) 3,568
---------- --------- --------- -----------
Total stockholders' equity 913,942 44,689 (14,770) 943,861
Total liabilities &
stockholders' equity $5,313,371 $684,793 $(19,579) $5,978,585
========== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1998
-----------------------------------------------------
All Combined
Pro Forma Transactions
Statewide Adjustments Pro Forma
------------ -------------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $7,090 $(53,706)(5) $8,878
(30,668)(5)
2,856(6)
Commercial paper -- 18,547
Federal funds sold -- (53,706)(5) 42,559
-------- --------- -----------
Total cash and cash
equivalents 7,090 (135,224) 69,984
Securities held to maturity -- 33,083
Securities available for sale 316,347 2,068,811
Mortgage loans on real estate 307,550 4,041(6) 3,275,545
Other loans 61,964 -- 761,276
-------- --------- -----------
Total loans 369,514 4,041 4,036,821
Less: allowance for
possible loan losses (3,056) -- (55,442)
-------- --------- -----------
Total loans, net 366,458 4,041 3,981,379
Premises, furniture &
equipment, net 6,547 82,254
Accrued interest receivable 4,759 39,327
Intangible assets, net 70 (70)(6) 223,571
67,165(7)
Other assets 16,246 133,605
-------- --------- -----------
Total assets $717,517 $(64,088) $6,632,014
======== ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Deposits $443,705 $(13)(6) $4,433,531
Borrowings 206,681 1,958(6) 987,866
Securities lent -- 55,620
Escrow and other deposits 1,611 35,077
Preferred trust securities -- 11,500
Accrued expenses and other
liabilities 5,021 (5,130)(5) 164,963
-------- --------- -----------
Total liabilities 657,018 (3,185) 5,688,557
Stockholders' equity
Preferred stock -- -- --
Common stock -- -- 760
Additional
paid-in-capital 32,904 (32,904)(8) 739,173
Treasury stock at cost (44) 44(8)
53,706(5)
(53,706)(5) --
Unallocated common stock
held by ESOP (2,856) 2,856(8) (93,928)
Unearned common stock
held by RRP (1,282) 1,282(8) (35,366)
Retained earnings 31,190 (31,190)(8) 329,250
Net unrealized gain on
securities
available-for-sale, (404)(6)
net of tax 587 (587)(8) 3,568
-------- --------- -----------
Total stockholders' equity 60,499 (60,903) 943,457
Total liabilities &
stockholders' equity $717,517 $(64,088) $6,632,014
======== ========= ===========
</TABLE>
See "Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements."
71
<PAGE> 78
INDEPENDENCE COMMUNITY BANK CORP.
BROAD NATIONAL BANCORPORATION
STATEWIDE FINANCIAL CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------
INDEPENDENCE/ ALL COMBINED
PRO FORMA BROAD PRO FORMA TRANSACTIONS
INDEPENDENCE BROAD ADJUSTMENTS PRO FORMA STATEWIDE ADJUSTMENTS PRO FORMA
------------ ------- ----------- ------------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $247,047 $34,817 $ (4,936)(9) $276,928 $33,294 $(5,050)(10) $305,172
Interest expense 121,454 13,993 (402)(9) 135,045 17,318 (578)(10) 151,785
-------- ------- -------- -------- ------- ------- --------
Net interest income 125,593 20,824 (4,534) 141,883 15,976 (4,472) 153,387
Provision for loan losses 7,764 675 8,439 492 8,931
-------- ------- -------- -------- ------- ------- --------
Net interest income after
provision for loan
losses 117,829 20,149 (4,534) 133,444 15,484 (4,472) 144,456
Non-interest income 8,101 5,685 13,786 2,318 16,104
General and administrative
expense 67,312 16,317 83,629 14,094 97,723
Amortization of intangible
assets 6,474 15 5,335(4)(11) 11,824 29 3,329(11) 15,182
-------- ------- -------- -------- ------- ------- --------
Income before provision for
income taxes 52,144 9,502 (9,869) 51,777 3,679 (7,801) 47,655
Provision for income taxes 19,253 3,260 (2,046) 20,467(12) 1,453 (1,553) 20,367(12)
-------- ------- -------- -------- ------- ------- --------
Net income $ 32,891 $ 6,242 $ (7,823) $ 31,310 $ 2,226 $(6,248) $ 27,288
======== ======= ======== ======== ======= ======= ========
Weighted average shares
outstanding:
Basic 69,544 4,932 71,463(13) 3,906 71,463(13)
Diluted 69,676 5,158 71,595(13) 4,057 71,595(13)
Earnings per share:
Basic $ 0.47 $ 1.27 $ 0.44(13) $ 0.57 -- $ 0.38
Diluted $ 0.47 $ 1.21 $ 0.44(13) $ 0.55 -- $ 0.38
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31, 1998
---------------------------------------------------------------------------------------------------
INDEPENDENCE/ ALL COMBINED
PRO FORMA BROAD PRO FORMA TRANSACTIONS
INDEPENDENCE BROAD ADJUSTMENTS PRO FORMA STATEWIDE ADJUSTMENTS PRO FORMA
------------ ------- ----------- ------------- --------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $293,043 $40,855 $ (6,581)(9) $327,317 $50,191 $ 6,733)(10) $370,775
Interest expense 160,943 15,930 (536)(9) 176,337 25,384 (770)(10) 200,951
-------- ------- -------- -------- ------- ------- --------
Net interest income 132,100 24,925 (6,045) 150,980 24,807 (5,963) 169,824
Provision for loan losses 10,011 1,800 11,811 500 12,311
-------- ------- -------- -------- ------- ------- --------
Net interest income after
provision for loan
losses 122,089 23,125 (6,045) 139,169 24,307 (5,963) 157,513
Non-interest income 10,348 7,117 17,465 1,725 19,190
General and administrative
expense 80,713 19,549 100,262 17,081 117,343
Amortization of intangible
assets 8,740 -- 7,134(4)(11) 15,874 31 4,447(11) 20,352
Charitable contribution to
Independence Community
Foundation 56,422 -- 56,422 56,422
-------- ------- -------- -------- ------- ------- --------
(Loss) income before
(benefit) provisions for
income taxes (13,438) 10,693 (13,179) (15,924) 8,920 (10,410) (17,414)
(Benefit) provisions for
income taxes (3,482) 4,282 (997) (197)(12) 3,333 (4,315) (1,179)(12)
-------- ------- -------- -------- ------- ------- --------
Net (loss) income $ (9,956) $ 6,411 $(12,182) $(15,727) $ 5,587 $(6,095) $(16,235)
======== ======= ======== ======== ======= ======= ========
Weighted average shares
outstanding:
Basic 72,443 5,027 72,443(13) 4,165 72,443(13)
Diluted 72,443 5,204 72,443(13) 4,310 72,443(13)
Earnings per share:
Basic $ (0.52) $ 1.28 $ (0.22)(13) $ 1.34 -- $ (0.22)
Diluted $ (0.52) $ 1.23 $ (0.22)(13) $ 1.30 -- $ (0.22)
</TABLE>
72
<PAGE> 79
INDEPENDENCE COMMUNITY BANK CORP.
BROAD NATIONAL BANCORPORATION
STATEWIDE FINANCIAL CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements as of December 31, 1998 have been prepared as if both the Broad and
the Statewide mergers had been consummated on that date. The Unaudited Pro Forma
Condensed Combined Consolidated Statement of Operations for the year ended
March 31, 1998 and the Unaudited Pro Forma Condensed Combined Consolidated
Statement of Income for the nine months ended December 31, 1998 were prepared as
if the mergers had been consummated on April 1, 1997. The Unaudited Pro forma
Condensed Combined Consolidated financial Statements are based on the historical
financial statements of Independence, Broad and Statewide after giving effect to
the mergers under the purchase method of accounting and the assumptions and
adjustments in the notes that follow.
Assumptions relating to the pro forma adjustments set forth in the
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements are
summarized as follows:
Estimated fair values - Estimated fair values for securities held-to-
maturity, loans, deposits and borrowings were obtained from Broad's 1998 Annual
Report to Stockholders-Footnote Number 16 of "Notes to Consolidated Financial
Statements"-Fair Value of Financial Instruments and Statewide's 1998 Annual
Report to Stockholders - Footnote Number 17 of "Notes to Consolidated Financial
Statements"-Disclosures About Fair Value of Financial Instruments. The
resulting premium on securities held-to-maturity accreted for purposes of these
pro forma financial statements is being amortized to interest income on a
straight-line basis over the weighted average life of five years for Broad
securities. The premium on loans is being amortized to interest income on a
straight line basis over the weighted average lives of 12 and 14 years for
Broad and Statewide loans, respectively. The actual premium will be amortized
to interest income to produce a constant yield to maturity. The resulting net
discount/premium on deposits and borrowings is being accreted/amortized into
interest expense on a straight-line basis over the remaining estimated lives of
five years for Broad and one year for Statewide. The premium on borrowings is
being amortized into interest expense on a straight line basis over the
remaining estimated lives of five years for Broad and two and a half years for
Statewide.
(2) The cost to acquire Broad assumes 5,220,504 shares of Broad common
stock (which assumes all options to purchase Broad common stock were
exercised prior to completion of the merger) multiplied by the price
per share of $26.50 will be exchanged for 50% cash and 50%
Independence common stock at an exchange ratio of 1.7667.
<TABLE>
<S> <C>
Cash consideration (assumes 50% of the 5,220,504 shares of
Broad common stock at $26.50 per share) $ 69,172
Stock consideration (assumes issuance of Independence common stock
for 50% of 5,220,504 shares of Broad common stock at $26.50
per share)
Shares to be issued from existing treasury stock 29,919
Shares to be repurchased in the open market and reissued 39,253
Total stock value 69,172
Acquisition costs:
Transaction costs 6,020
Severance and other payments 12,700
Total acquisition costs 18,720
Tax benefit of acquisition costs (7,488)
Total cost $149,576
</TABLE>
73
<PAGE> 80
(3) Purchase accounting adjustments recorded for the Broad merger were
as follows:
<TABLE>
<S> <C>
Broad net assets-historical at December 31, 1998 $ 44,689
Fair value adjustments:
Securities held-to-maturity 134
Loans receivable 591
Intangible assets, net (166)
Deposits (2,549)
Borrowings (130)
Subtotal-net fair value adjustments (2,120)
Net assets acquired $ 42,569
</TABLE>
(4) Excess of cost over fair value of net assets acquired for the Broad
merger was calculated as follows:
<TABLE>
<S> <C>
Total cost $149,576
Net assets acquired (42,569)
Total excess of cost over fair value of net assets
acquired generated from the merger $107,007
</TABLE>
(5) The cost to acquire Statewide assumes 4,253,936 shares of Statewide
common stock (which assumes all options to purchase Statewide common
stock were exercised prior to completion of the merger) multiplied
by the price per share of $25.25 will be exchanged for 50% cash and
50% Independence common stock at an exchange ratio of 2.061.
<TABLE>
<S> <C>
Cash consideration (assumes 50% of the 4,253,936 shares of
Statewide common stock at $25.25 per share) $53,706
Stock consideration (assumes issuance of Independence common stock
for 50% of 4,253,936 shares of Statewide common
stock at $25.25 per share)
Shares to be issued from existing treasury stock --
Shares to be repurchased in the open market and reissued 53,706
Total stock value 53,706
Acquisition costs:
Transaction costs 7,573
Severance and other payments 23,095
Total acquisition costs 30,668
Tax benefit of acquisition costs (5,130)
Total cost $132,950
</TABLE>
74
<PAGE> 81
(6) Purchase accounting adjustments recorded for the Statewide merger
were as follows:
<TABLE>
<S> <C>
Statewide net assets-historical at December 31, 1998 $60,499
Adjustment to Statewide's consolidated statement of financial
condition:
Termination of the Statewide ESOP (pay off of inter company loan payable) 2,856
Termination of the Statewide ESOP 404
Fair value adjustments:
Loans receivable 4,041
Intangible assets, net (70)
Deposits 13
Borrowings (1,958)
Subtotal-net fair value adjustments 2,026
Net assets acquired $65,785
</TABLE>
(7) Excess of cost over fair value of net assets acquired for the
Statewide merger was calculated as follows:
<TABLE>
<S> <C>
Total cost $132,950
Net assets acquired 65,785
Total excess of cost over fair value of net assets
acquired generated from the merger $67,165
</TABLE>
(8) Purchase accounting adjustments to eliminate $44.7 million and
$60.5 million of Broad's and Statewide's stockholders' equity
accounts, respectively.
(9) Pro forma adjustments to interest income and interest expense were
calculated for the Broad merger as follows:
<TABLE>
<CAPTION>
For the Fiscal For the Nine
Year Ended Months Ended
March 31, December 31,
1998 1998
---- ----
<S> <C> <C>
Reduction in interest income for cash
utilized to purchase Broad common
stock (based $(6,505) $(4,878)
on an average annual rate of
6.00%)
Amortization of premium on securities
held-to- (27) (21)
maturity (5 years)
Amortization of premium on loans (12 (49) (37)
years)
Total net adjustments to interest income $(6,581) $(4,936)
Amortization of premium on deposits (5 $ 510 $ 382
years)
Amortization of premium on 26 20
borrowings (5 years)
Total net adjustments to interest $ 536 $ 402
expense
</TABLE>
75
<PAGE> 82
(10) Pro forma adjustments to interest income and interest expense were
calculated for the Statewide merger as follows:
<TABLE>
<CAPTION>
For the Fiscal For the Nine
Year Ended Months Ended
March 31, December 31,
1998 1998
---- ----
<S> <C> <C>
Reduction in interest income for cash
utilized to purchase Statewide
common stock (based on an $(6,445) $(4,834)
average annual rate of 6.00%)
Amortization of premium on loans (14 288 (216)
years)
Total net adjustments to interest income $(6,733) $(5,050)
Accretion of discount on deposits (1 $ (13) $ (9)
year)
Amortization of premium on
borrowings (2.5 years) 783 587
Total net adjustments to interest $ 770 $ (578)
expense
</TABLE>
(11) The amortization of the excess of cost over the fair value of net
assets acquired for both the Broad and the Statewide mergers is
assumed straight-line over a period of 15 years.
(12) Income tax expense was calculated using Independence's actual nine
months ended December 31, 1998 and fiscal year ended March 31,
1998 effective tax rates of 36.9% and 36.7%, respectively,
adjusted for the non-deductibility of the amortization charge of
the excess of cost over fair value of net assets acquired.
(13) Basic earnings per share for the nine months ended December 31,
1998 is calculated by dividing net income by the weighted average
number of common shares outstanding. Diluted earnings per common
share is calculated using the same method as basic earnings per
common share, but reflects potential dilution of common stock
equivalents. Basic and diluted weighted average number of common
stock and common stock equivalents utilized for the calculation of
earnings per share for the periods presented were calculated using
Independence's historical weighted average common stock and common
stock equivalents plus 1,919,400 of treasury shares issued to
Broad stockholders under the terms of the Broad merger. There were
no pre-existing treasury shares issued to Statewide stockholders.
Basic earnings per share for the year ended March 31, 1998 is
calculated by dividing net income since the Independence
conversion on March 13, 1998 by the weighted average number of
common shares outstanding. There were no dilutive common stock
equivalents or treasury shares for the year ended March 31, 1998.
(14) The following table summarizes the estimated impact of the
amortization and accretion of the purchase accounting adjustments
made in connection with the Broad and Statewide mergers on
Independence's results of operations:
<TABLE>
<CAPTION>
Projected Excess of Cost
Future Over Fair Net Net Decrease
Amounts for Value (Accretion) In Income
the of Net Assets Amortization Before Taxes
Fiscal Years Acquired
Ended
March 31,
<S> <C> <C> <C> <C>
1998 $11,611 $(941) $10,670
1999 11,611 (954) 10,657
2000 11,611 (563) 11,048
2001 11,611 (171) 11,440
2002 11,611 (171) 11,440
2003 and 116,117 2,942 119,059
thereafter
$174,172 $ 142 $174,314
</TABLE>
76
<PAGE> 83
DESCRIPTION OF CAPITAL STOCK OF INDEPENDENCE
GENERAL
Independence is authorized to issue 125,000,000 shares of common stock
having a par value of $0.01 per share, and 25,000,000 shares of preferred stock
having a par value of $0.01 per share. Each share of Independence common stock
has the same relative rights as, and is identical in all respects with, each
other share of Independence common stock. Presented below is a description of
all aspects of Independence's capital stock which are deemed material to an
investment decision with respect to the conversion.
COMMON STOCK
DISTRIBUTIONS. Independence can pay dividends if, as and when declared
by its board, subject to compliance with limitations which are imposed by law.
The holders of Independence common stock are entitled to receive and share
equally in such dividends as may be declared by the board out of funds legally
available therefor. If Independence issues preferred stock, the holders of the
preferred stock may have a priority over the holders of Independence common
stock with respect to dividends.
VOTING RIGHTS. The holders of Independence common stock possess
exclusive voting rights in Independence. They elect Independence's board and act
on such other matters as are required to be presented to them under Delaware law
or Independence's certificate of incorporation or as are otherwise presented to
them by the board of directors. Each holder of Independence common stock is
entitled to one vote per share and does not have any right to cumulate votes in
the election of directors. Under certain circumstances, shares in excess of 10%
of the issued and outstanding shares of Independence common stock may be
considered "excess shares" and not be entitled to vote. If Independence issues
preferred stock, holders of the preferred stock may also possess voting rights.
LIQUIDATION. In the event of any liquidation, dissolution or winding up
of Independence Community Bank, Independence, as holder of Independence
Community Bank's capital stock, would be entitled to receive, after payment or
provision for payment of all debts and liabilities of Independence Community
Bank (including all deposit accounts and accrued interest thereon) and after
distribution of the balance in the special liquidation account to certain
depositors of Independence Community Bank, all assets of Independence Community
Bank available for distribution. In the event of liquidation, dissolution or
winding up of Independence, the holders of its common stock would be entitled to
receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of Independence available for distribution. If
preferred stock is issued, the holders of the preferred stock may have a
priority over the holders of the common stock in the event of liquidation or
dissolution.
PREEMPTIVE RIGHTS. Holders of Independence common stock do not have
preemptive rights with respect to any shares which may be issued. Independence
common stock is not subject to redemption.
PREFERRED STOCK
None of the shares of Independence's authorized preferred stock has
been issued. Such stock may be issued with such preferences and designations as
the board of directors may from time to time determine. The board of directors
can, without stockholder approval, issue preferred stock with voting, dividend,
liquidation and conversion rights which could dilute the voting strength of the
holders of Independence common stock and may assist management in impeding an
unfriendly takeover or attempted change in control.
77
<PAGE> 84
LEGAL MATTERS
The validity of the shares of Independence common stock which will be
issued in the merger will be passed upon for Independence by Elias, Matz,
Tiernan & Herrick L.L.P., Washington, D.C. In addition, Elias, Matz, Tiernan &
Herrick L.L.P., Washington, D.C., will pass upon the tax-free nature of the
merger for Independence and Stinson, Mag & Fizzell P.C., Kansas City, Missouri,
will pass on the tax-free nature of the merger for Broad.
EXPERTS
The consolidated financial statements of Independence and subsidiaries
as of March 31, 1998 and 1997, and for each of the years in the three-year
period ended March 31, 1998, incorporated by reference in the 1998 Independence
Form 10-K and incorporated by reference herein and in the registration statement
of which this document is a part, have been so incorporated by reference in
reliance upon the report of Ernst & Young LLP, independent public accountants,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Broad and subsidiaries as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998 included in the 1998 Broad Form 10-K and incorporated by
reference herein and in the registration statement of which this document is a
part, have been so incorporated by reference in reliance upon the report of KPMG
LLP, independent public accountants, included in the 1998 Broad Form 10-K and
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
78
<PAGE> 85
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
INDEPENDENCE COMMUNITY BANK CORP.
AND
BROAD NATIONAL BANCORPORATION
DATED AS OF FEBRUARY 1, 1999
<PAGE> 86
TABLE OF CONTENTS
ARTICLE I
THE MERGER
PAGE
1.1 The Merger....................................................... 1
1.2 Effective Time................................................... 1
1.3 Effects of the Merger............................................ 2
1.4 Conversion of Company Common Stock............................... 2
1.5 Election Procedures.............................................. 4
1.6 Stock Options.................................................... 6
1.7 ICBC Common Stock................................................ 8
1.8 Tax Opinion Adjustment........................................... 8
1.9 Certificate of Incorporation..................................... 8
1.10 Bylaws........................................................... 8
1.11 Directors and Officers........................................... 8
1.12 Tax Consequences................................................. 9
1.13 Bank Merger...................................................... 9
1.14 Modification of Structure........................................ 9
ARTICLE II
EXCHANGE OF SHARES
2.1 ICBC to Make Shares Available.................................... 9
2.2 Exchange of Shares............................................... 10
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS FOR
REPRESENTATIONS AND WARRANTIES
3.1 Disclosure Schedules............................................. 11
3.2 Standards........................................................ 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Corporate Organization........................................... 13
4.2 Capitalization................................................... 13
4.3 Authority; No Violation.......................................... 14
4.4 Consents and Approvals........................................... 16
4.5 Reports.......................................................... 16
i
<PAGE> 87
4.6 Financial Statements............................................. 16
4.7 Broker's Fees.................................................... 17
4.8 Absence of Certain Changes or Events............................. 17
4.9 Legal Proceedings................................................ 18
4.10 Taxes............................................................ 18
4.11 Employees........................................................ 19
4.12 SEC Reports...................................................... 20
4.13 Company Information.............................................. 21
4.14 Compliance with Applicable Law................................... 21
4.15 Certain Contracts................................................ 21
4.16 Agreements with Regulatory Agencies.............................. 22
4.17 Environmental Matters............................................ 22
4.18 Opinion.......................................................... 23
4.19 Approvals........................................................ 23
4.20 Loan Portfolio................................................... 23
4.21 Property......................................................... 25
4.22 Reorganization................................................... 25
4.23 Antitakeover Provisions Inapplicable............................. 25
4.24 Insurance........................................................ 25
4.25 Investment Securities; Borrowings; Deposits...................... 25
4.26 Indemnification.................................................. 26
4.27 Year 2000 Matters................................................ 26
4.28 Undisclosed Liabilities.......................................... 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ICBC
5.1 Corporate Organization........................................... 27
5.2 Capitalization................................................... 28
5.3 Authority; No Violation.......................................... 28
5.4 Consents and Approvals........................................... 30
5.5 Reports.......................................................... 30
5.6 Financial Statements............................................. 30
5.7 Broker's Fees.................................................... 31
5.8 Absence of Certain Changes or Events............................. 31
5.9 Legal Proceedings................................................ 31
5.10 Taxes............................................................ 31
5.11 Employees........................................................ 32
5.12 SEC Reports...................................................... 33
5.13 ICBC Information................................................. 33
5.14 Compliance with Applicable Law................................... 33
5.15 Ownership of Company Common Stock................................ 33
5.16 Agreements with Regulatory Agencies.............................. 34
ii
<PAGE> 88
5.17 Opinion.......................................................... 34
5.18 Environmental Matters............................................ 34
5.19 Loan Portfolio................................................... 35
5.20 Insurance........................................................ 35
5.21 Year 2000 Matters................................................ 35
5.22 Approvals........................................................ 36
5.23 Reorganization................................................... 36
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Covenants of the Company......................................... 36
6.2 Covenants of ICBC................................................ 41
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters............................................... 41
7.2 Access to Information............................................ 42
7.3 Stockholder Meeting.............................................. 43
7.4 Legal Conditions to Merger....................................... 43
7.5 Affiliates....................................................... 43
7.6 Stock Exchange Listing........................................... 44
7.7 Employee Benefit Plans; Existing Agreements...................... 44
7.8 Indemnification.................................................. 45
7.9 Additional Agreements............................................ 46
7.10 Coordination of Dividends........................................ 47
7.11 Notification of Certain Matters.................................. 47
7.12 Certain Matters, Certain Revaluations, Changes and Adjustments... 47
7.13 Appointments..................................................... 47
7.14 Charitable Contributions......................................... 48
7.15 Advisory Board................................................... 48
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Merger....... 49
8.2 Conditions to Obligations of ICBC................................ 49
8.3 Conditions to Obligations of the Company......................... 51
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination...................................................... 52
9.2 Effect of Termination............................................ 56
iii
<PAGE> 89
9.3 Amendment........................................................ 56
9.4 Extension; Waiver................................................ 56
9.5 Termination Fee.................................................. 57
ARTICLE X
GENERAL PROVISIONS
10.1 Closing.......................................................... 59
10.2 Nonsurvival of Representations, Warranties and Agreements........ 59
10.3 Expenses......................................................... 59
10.4 Notices.......................................................... 59
10.5 Interpretation................................................... 60
10.6 Counterparts..................................................... 60
10.7 Entire Agreement................................................. 60
10.8 Governing Law.................................................... 60
10.9 Severability..................................................... 60
10.10 Publicity........................................................ 61
10.11 Assignment; No Third Party Beneficiaries......................... 61
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 1, 1999, between
Independence Community Bank Corp., a Delaware corporation ("ICBC"), and Broad
National Bancorporation, a New Jersey corporation (the "Company"). ICBC and the
Company are sometimes collectively referred to herein as the "Constituent
Corporations".
WHEREAS, the Boards of Directors of ICBC and the Company have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the business combination transaction provided
for herein in which the Company will, subject to the terms and conditions set
forth herein, merge (the "Merger") with and into ICBC and immediately
thereafter, Broad National Bank, the wholly owned subsidiary of the Company,
will be merged with and into Independence Community Bank, the wholly owned
subsidiary of ICBC (the "Bank Merger"); and
WHEREAS, each of the directors of the Company has executed a
stockholder agreement as of the date hereof pursuant to which they have agreed
to certain matters with respect to the Merger; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
in accordance with the Delaware General Corporation Law (the "DGCL") and the New
Jersey Business Corporation Act (the "NJBCA"), at the Effective Time (as defined
in Section 1.2 hereof), the Company shall merge with and into ICBC. ICBC shall
be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger, and shall continue its corporate existence under
the laws of the State of Delaware. The name of the Surviving Corporation shall
continue to be Independence Community Bank Corp. Upon consummation of the
Merger, the separate corporate existence of the Company shall terminate.
1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in
the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretaries of State of the States of Delaware and New Jersey (the
"Secretaries") on the Closing Date (as defined in Section 10.1
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hereof). The term "Effective Time" shall be the date and time when the Merger
becomes effective, as set forth in the Certificate of Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Sections 259 and 261 of the DGCL and
Sections 14A:10-6 and 14A:10-7 of the NJBCA.
1.4 CONVERSION OF COMPANY COMMON STOCK. (a) At the Effective Time,
subject to Section 2.2(e) hereof, each share of Company common stock, par value
$1.00 per share (the "Company Common Stock"), issued and outstanding immediately
prior to the Effective Time (other than (i) shares of Company Common Stock held
in the Company's treasury, (ii) unallocated and/or unvested shares of Company
Common Stock held in the Company's Long-Term Capital Accumulation Plan (the
"LCAP"), and (iii) shares of Company Common Stock held directly or indirectly by
ICBC or the Company or any of their respective Subsidiaries (as defined below)
(except for Trust Account Shares and DPC Shares, as such terms are defined in
Section 1.4(b) hereof), shall by virtue of this Agreement and without any action
on the part of the Company, ICBC or the holder thereof, cease to be outstanding
and shall be converted into and become the right to receive (subject to
adjustment as provided by Section 9.1(g) hereof), at the election of the holder
thereof as provided in Section 1.5, either:
(i) a number of shares of common stock, par value $0.01 per share,
of ICBC ("ICBC Common Stock") equal to the Final Exchange
Ratio, or
(ii) cash in an amount equal to the Per Share Consideration.
(b) At the Effective Time, (i) all shares of Company Common Stock that
are owned by the Company as treasury stock, (ii) all unallocated and/or unvested
shares of Company Common Stock held in the Company's LCAP, and (iii) all shares
of Company Common Stock that are owned directly or indirectly by ICBC or the
Company or any of their respective Subsidiaries (other than shares of Company
Common Stock (x) held directly or indirectly in trust accounts, managed accounts
and the like or otherwise held in a fiduciary capacity for the benefit of third
parties (any such shares, and shares of ICBC Common Stock which are similarly
held, whether held directly or indirectly by ICBC or the Company, as the case
may be, being referred to herein as "Trust Account Shares")) and (y) held by
ICBC or the Company or any of their respective Subsidiaries in respect of a debt
previously contracted (any such shares of Company Common Stock, and shares of
ICBC Common Stock which are similarly held, being referred to herein as "DPC
Shares"), shall be cancelled and shall cease to exist and no stock of ICBC or
other consideration shall be delivered in exchange therefor. All shares of ICBC
Common Stock that are owned by the Company or any of its Subsidiaries (other
than Trust Account Shares and DPC Shares) shall become treasury stock of ICBC.
(c) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates")
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shall cease to have any rights as stockholders of the Company, except the right
to receive the consideration set forth in this Article I, as such consideration
may be adjusted pursuant to the provisions of Section 9.1(g) hereof (the "Merger
Consideration"), for each such share held by them.
(d) If, between the date of this Agreement and the Effective Time,
the shares of ICBC Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, appropriate adjustments
shall be made to the Preliminary Stock Ratio, the Minimum Stock Ratio, the
Maximum Stock Ratio and the Final Exchange Ratio (as such terms are defined
herein).
(e) For purposes of this Agreement, the following terms shall
(subject to Section 9.1(g) hereof) have the meanings indicated:
"Aggregate Cash Consideration" shall mean (w) 0.5 multiplied
by (x) the Outstanding Shares Number multiplied by (y) $26.50.
"Aggregate Merger Consideration" shall mean the sum of (x) the
Aggregate Cash Consideration and (y) the Aggregate Stock
Consideration.
"Aggregate Stock Consideration" shall mean (w) 0.5 multiplied
by (x) the Outstanding Shares Number multiplied by (y) the
Average Closing Price multiplied by (z) the Preliminary Stock
Ratio.
"Average Closing Price" shall mean the average of the closing
sale prices per share for ICBC Common Stock as reported on the
Nasdaq Stock Market/National Market System ("Nasdaq/ NMS") (as
reported by The Wall Street Journal, or, if not reported
thereby, another authoritative source), during the ten (10)
consecutive trading-day period during which the shares of ICBC
Common Stock are traded on the Nasdaq/NMS ending on the tenth
business day immediately prior to the anticipated Effective
Time (the "Pricing Period").
"Final Exchange Ratio" shall mean the quotient, rounded to the
nearest ten-thousandth, obtained by dividing the Per Share
Consideration by the Average Closing Price.
"Outstanding Shares Number" shall mean shares of Company
Common Stock issued and outstanding immediately prior to the
Effective Time.
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"Per Share Consideration" shall mean the quotient obtained by
dividing the Aggregate Merger Consideration by the Outstanding
Shares Number.
"Preliminary Stock Ratio" shall mean the quotient, rounded to
the nearest ten-thousandth obtained by dividing $26.50 by the
Average Closing Price provided, that (i) if the Average
Closing Price is equal to or greater than $17.25, the
Preliminary Stock Ratio shall be 1.5362 (the "Minimum Stock
Ratio"), and (ii) if the Average Closing Price is equal to or
less than $12.75, the Preliminary Stock Ratio shall be 2.0784
(the "Maximum Stock Ratio").
1.5 ELECTION PROCEDURES. (a) An election form and other
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to Certificates shall
pass, only upon proper delivery of such Certificates to a bank or trust company
designated by ICBC and reasonably satisfactory to the Company (the "Exchange
Agent")) in such form as the Company and ICBC shall mutually agree (the
"Election Form"), shall be mailed 30 days prior to the anticipated Effective
Time or on such earlier date as ICBC and the Company shall mutually agree (the
"Mailing Date") to each holder of record of Company Common Stock as of five
business days prior to the Mailing Date ("Election Form Record Date").
Each Election Form shall permit a holder (or the beneficial owner
through appropriate and customary documentation and instructions) of outstanding
Company Common Stock to elect, subject to provisions of this Section 1.5, to
receive, on a per share basis, with respect to such holder's Company Common
Stock (i) cash (shares as to which such election is made, the "Cash Election
Shares") or (ii) ICBC Common Stock (shares as to which such election is made,
the "Stock Election Shares"). A holder of Company Common Stock may elect to
receive a combination of ICBC Common Stock and cash with respect to his shares
of Company Common Stock. Notwithstanding the foregoing, no holder of Company
Common Stock may elect to receive ICBC Common Stock pursuant to the election
procedures provided herein with respect to fewer than 100 shares of Company
Common Stock. To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m., New York City time, on
the 20th day following the Mailing Date (or such other time and date as ICBC and
the Company may mutually agree) (the "Election Deadline"); provided, however,
that the Election Deadline may not occur on or after the Closing Date (as
defined in Section 10.1 hereof).
ICBC shall make available up to two separate Election Forms, or such
additional Election Forms as ICBC may permit, to all persons who become holders
(or beneficial owners) of Company Common Stock between the Election Form Record
Date and close of business on the business day prior to the Election Deadline.
The Company shall provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein. An election shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline.
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An Election Form shall be deemed properly completed only if accompanied
by one or more Certificates (or customary affidavits and indemnification
regarding the loss or destruction of such Certificates or the guaranteed
delivery of such Certificates) representing all shares of Company Common Stock
covered by such Election Form, together with duly executed transmittal materials
included with the Election Form. If a stockholder either (i) does not submit a
properly completed Election Form in a timely fashion, or (ii) revokes its
Election Form prior to the Election Deadline, the shares of Company Common Stock
held by such stockholder shall be designated "No Election Shares." Shares of
Company Common Stock held by holders who acquired such shares subsequent to the
Election Deadline will be designated "No Election Shares." ICBC shall cause the
Certificates described in clause (ii) of the immediately preceding sentence to
be promptly returned without charge to the person submitting the Election Form
upon written request to that effect from the person who submitted the Election
Form. Subject to the terms of this Agreement and of the Election Form, the
Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to disregard
immaterial defects in any Election Form, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive. Neither
ICBC nor the Exchange Agent shall be under any obligation to notify any person
of any defect in an Election Form.
(b) The "Cash Election Amount" shall be equal to the Per Share
Consideration multiplied by the total number of Cash Election Shares. Within
seven business days after the Election Deadline, unless the Effective Time has
not yet occurred, in which case as soon thereafter as practicable, ICBC shall
cause the Exchange Agent to effect the allocation among the holders of Company
Common Stock of rights to receive ICBC Common Stock or cash in the Merger in
accordance with the Election Forms as follows:
(i) If the Aggregate Cash Consideration is greater than
the Cash Election Amount, then:
(A) all Cash Election Shares shall be converted into
the right to receive an amount of cash equal to the Per Share
Consideration,
(B) the Exchange Agent will select, on a pro rata
basis, first from among the holders of No Election Shares and
then, if necessary, from among the holders of Stock Election
Shares, a sufficient number of such shares ("Cash Designee
Shares") such that the sum of Cash Designee Shares and Cash
Election Shares multiplied by the Per Share Consideration
equals as closely as practicable the Aggregate Cash
Consideration (the Cash Designee Shares shall be converted
into the right to receive an amount of cash equal to the Per
Share Consideration), and
(C) any Stock Election Shares and any No Election
Shares, in each case, not so selected as Cash Designee Shares
shall be converted into the right to receive ICBC Common Stock
at the Final Exchange Ratio.
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(ii) If the Aggregate Cash Consideration is less than the
Cash Election Amount, then:
(A) all Stock Election Shares and all No Election
Shares shall be converted into the right to receive ICBC
Common Stock at the Final Exchange Ratio,
(B) the Exchange Agent will select, on a pro rata
basis from among the holders of Cash Election Shares, a
sufficient number of such shares ("Stock Designee Shares")
such that the number of Stock Designee Shares multiplied by
the Per Share Consideration equals as closely as practicable
the difference between the Cash Election Amount and the
Aggregate Cash Consideration (the Stock Designee Shares shall
be converted into the right to receive ICBC Common Stock at
the Final Exchange Ratio), and
(C) any Cash Election Shares not so selected as Stock
Designee Shares shall be converted into the right to receive
an amount of cash equal to the Per Share Consideration.
In the event that the Exchange Agent is required pursuant to Section
1.5(b)(i)(B) to designate from among all Stock Election Shares the Cash Designee
Shares to receive cash, each holder of Stock Election Shares shall be allocated
a pro rata portion of the remainder of the total Cash Designee Shares less the
number of No Election Shares which are Cash Designee Shares. Such proration
shall reflect the proportion that the number of Stock Election Shares of each
holder of Stock Election Shares bears to the total number of Stock Election
Shares. In the event the Exchange Agent is required pursuant to Section
1.5(b)(ii)(B) to designate from among all holders of Cash Election Shares the
Stock Designee Shares to receive ICBC Common Stock, each holder of Cash Election
Shares shall be allocated a pro rata portion of the total Stock Designee Shares.
Such proration shall reflect the proportion that the number of Cash Election
Shares of each holder of Cash Election Shares bears to the total number of Cash
Election Shares.
1.6 STOCK OPTIONS. (a) At the Effective Time, each option granted
by the Company to purchase shares of Company Common Stock (each a "Company
Option") pursuant to the Company's Stock Option Plans set forth in Section
4.2(a) of the Company Disclosure Schedule (as hereinafter defined) (the "Company
Option Plans") which is outstanding and unexercised, immediately prior thereto,
whether or not then vested or exercisable, will, at the election of the
individual holders of the Company Options be either:
(i) cancelled and all rights thereunder be extinguished
("Cancelled Option Holder"), in consideration for which the Company shall make
payment immediately prior to the Effective Time an amount determined by
multiplying (A) the number of shares of Company Common Stock underlying such
Company Option by (B) an amount equal to the excess (if any) of (1) the Per
Share Consideration, over (2) the exercise price per share of such Company
Option; or
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(ii) converted automatically into an option to purchase
shares of ICBC Common Stock ("Continuing Option Holder") in an amount, for a
term and at an exercise price determined as provided below (and otherwise
subject to the terms of the particular Company Option Plan pursuant to which
each such Company Option was issued, the agreements evidencing grants thereunder
and any other agreements between the Company and an optionee regarding Company
Options which have been delivered to ICBC prior to the date of this Agreement):
(A) the number of shares to be subject to the new
option shall be equal to the product of the number of shares of Company Common
Stock subject to the Company Option immediately prior to the Effective Time and
the Final Exchange Ratio, provided that any fractional shares of ICBC Common
Stock resulting from such multiplication shall be rounded down to the nearest
whole share;
(B) the exercise price per share of ICBC Common Stock
under the new option shall be equal to the exercise price per share of Company
Common Stock under the Company Option divided by the Final Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest cent;
(C) The term or duration of the new option shall be
the same as that of the Company Option; and
(D) The Board of Directors or the Compensation
Committee thereof may cause the vesting schedule of unvested stock options
granted under the 1993 and 1996 Company Option Plans to be accelerated so that
such options are exercisable as of the Effective Time.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code and, to the
extent it is not so consistent, such Section 424(a) shall override anything to
the contrary contained herein. The duration and other terms of the new option
shall be the same as the original option except as provided for above and that
all references to the Company shall be deemed to be references to ICBC.
(b) In order for any Continuing Option Holder to have his
or her Company Options converted into an option to purchase ICBC Common Stock as
set forth in this Section 1.6(a) or for a Cancelled Option Holder to have his or
her Company Option converted into the right to receive cash, such Continuing
Option Holder or Cancelled Option Holder shall have executed a written election
with respect to such conversion or cancellation no later than the Election
Deadline, which written election shall be in such form as shall be prescribed by
ICBC and reasonably satisfactory to the Company. No payment shall be made to a
Cancelled Option Holder unless and until such holder has executed and delivered
the foregoing written election. In the event any holder of a Company Option
fails to make an election within the time frame set forth herein, the Company
Option held thereby shall automatically be converted at the Effective Time into
an option to purchase
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ICBC Common Stock in the amount and at the exercise price as calculated pursuant
to Section 1.6(a)(ii) hereof.
(c) Prior to the Effective Time, ICBC shall reserve for
issuance the number of shares of ICBC Common Stock necessary to satisfy ICBC's
obligations under Section 1.6(a) hereof. Promptly after the Effective Time (but
in no event later than twenty business days thereafter), ICBC shall file with
the Securities and Exchange Commission (the "SEC") a registration statement on
an appropriate form under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of ICBC Common Stock subject to
options to acquire ICBC Common Stock issued pursuant to Section 1.6(a) hereof,
and shall use its best efforts to maintain the current status of the prospectus
contained therein, as well as comply with applicable state securities or "blue
sky" laws, for so long as such options remain outstanding.
(d) Prior to the Effective Time, the Company shall take or
cause to be taken all actions required under the Company Option Plans to provide
for the foregoing.
1.7 ICBC COMMON STOCK. Except for shares of ICBC Common Stock
owned by the Company or any of its Subsidiaries (other than Trust Account Shares
and DPC Shares), which shall be converted into treasury stock of ICBC as
contemplated by Section 1.4 hereof, the shares of ICBC Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Merger and such shares shall remain issued and outstanding.
1.8 TAX OPINION ADJUSTMENT. If either (i) the tax opinion referred
to in Section 8.2(c) cannot be rendered (as reasonably determined by Elias,
Matz, Tiernan & Herrick L.L.P.) or (ii) the tax opinion referred to in Section
8.3(c) cannot be rendered (as reasonably determined by Stinson, Mag & Fizzell
P.C.), in either case as a result of the Merger potentially failing to qualify
as a reorganization under Section 368(a) of the Code, then ICBC shall reduce the
Aggregate Cash Consideration to the minimum extent necessary to enable the
relevant tax opinion or opinions, as the case may be, to be rendered, and
correspondingly increase the Aggregate Stock Consideration, based on the Average
Closing Price for the ICBC Common Stock.
1.9 CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of ICBC, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable laws.
1.10 BYLAWS. At the Effective Time, the Bylaws of ICBC, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.11 DIRECTORS AND OFFICERS. The directors and officers of ICBC
immediately prior to the Effective Time, together with the director appointed
pursuant to Section 7.13 hereof, shall be the directors and officers of the
Surviving Corporation, each to hold office in accordance with the
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Certificate of Incorporation and Bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
1.12 TAX CONSEQUENCES. It is intended that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
1.13 BANK MERGER. Promptly following the execution of this Agreement,
ICBC Bank (as defined below) and Company Bank (as defined below) shall enter
into the Agreement of Merger (the "Bank Merger Agreement") in the form annexed
hereto as Exhibit A (which shall qualify as a reorganization under Section
368(a) of the Code) pursuant to which the Bank Merger Agreement will be effected
pursuant to and with the effect set forth in the rules and regulations of the
New York State Banking Department (the "Department"), the Federal Deposit
Insurance Corporation (the "FDIC") and the New Jersey Department of Banking (the
"New Jersey Department"), if applicable. The parties hereto intend that the Bank
Merger shall become effective substantially simultaneously with or immediately
following the Effective Time. The documentation relating to the Bank Merger
shall provide that the directors of ICBC Bank as the surviving entity of the
Bank Merger shall be all of the respective directors of ICBC Bank immediately
prior to such merger together with the director appointed pursuant to Section
7.13 hereof.
1.14 MODIFICATION OF STRUCTURE. Notwithstanding any provision of this
Agreement to the contrary, ICBC may elect, subject to the filing of all
necessary applications and the receipt of all required regulatory approvals, to
modify the structure of the transactions contemplated hereby so long as (i)
there are no material adverse federal income tax consequences to the
stockholders of the Company as a result of such modification, (ii) the
consideration to be paid to holders of Company Common Stock, including shares of
Company Common Stock underlying the Company Options granted pursuant to the
Company Option Plans, under this Agreement is not thereby changed in kind or
reduced in amount solely because of such modification, and (iii) such
modification will not be likely to materially delay the Effective Time or
materially delay or jeopardize receipt of any required regulatory approvals or
of the tax opinions required under Sections 8.2(c) and 8.3(c).
ARTICLE II
EXCHANGE OF SHARES
2.1 ICBC TO MAKE SHARES AVAILABLE. At or prior to the Effective Time,
ICBC shall deposit, or shall cause to be deposited, with the Exchange Agent, for
the benefit of the holders of Certificates, for exchange in accordance with this
Article II, certificates representing the shares of ICBC Common Stock, the cash
in lieu of fractional shares and an amount of cash sufficient to pay the
Aggregate Cash Consideration (such cash and certificates for shares of ICBC
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding
shares of Company Common Stock.
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2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, and in no event more than seven business days thereafter, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates who
has not previously surrendered such Certificate or Certificates with a Form of
Election a form letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration into which the shares of Company Common Stock represented
by such Certificate or Certificates shall have been converted pursuant to this
Agreement. The Company shall have the right to review both the letter of
transmittal and the instructions prior to the Effective Time and provide
reasonable comments thereon. Upon surrender of a Certificate for exchange and
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration to which such holder of Company
Common Stock shall have become entitled pursuant to the provisions of Article I
hereof, and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any cash constituting Merger Consideration
(including the cash in lieu of fractional shares) and any unpaid dividends and
distributions, if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to ICBC Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Article
II. After the surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of ICBC Common Stock, if any, represented by such
Certificate.
(c) If any certificate representing shares of ICBC Common Stock is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be properly endorsed (or accompanied
by an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of ICBC Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or required for
any other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for Merger
Consideration as determined in accordance with Article I and this Article II.
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(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of ICBC Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to ICBC Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
ICBC. In lieu of the issuance of any such fractional share, ICBC shall pay to
each former stockholder of the Company who otherwise would be entitled to
receive a fractional share of ICBC Common Stock an amount in cash determined by
multiplying (i) the Average Closing Price by (ii) the fraction of a share of
ICBC Common Stock which such holder would otherwise be entitled to receive
pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for nine months after the Effective Time shall be
paid to ICBC. Any stockholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to ICBC for payment of the cash,
shares of ICBC Common Stock, cash in lieu of fractional shares and unpaid
dividends and distributions on the ICBC Common Stock deliverable in respect of
each share of Company Common Stock such stockholder holds as determined pursuant
to this Agreement, in each case, without any interest thereon. If outstanding
Certificates are not surrendered or the payment for them is not claimed prior to
the date on which such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to the
extent permitted by abandoned property and any other applicable law, become the
property of ICBC (and to the extent not in its possession shall be paid over to
it), free and clear of all claims or interest of any person previously entitled
to such claims. Notwithstanding the foregoing, none of ICBC, the Company, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Company Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by ICBC, the
posting by such person of a bond in such amount as ICBC may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the cash and/or shares of ICBC Common Stock and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1 DISCLOSURE SCHEDULES. Prior to the execution and delivery of this
Agreement, the Company has delivered to ICBC, and ICBC has delivered to the
Company, a schedule (in the case of the Company, the "Company Disclosure
Schedule," and in the case of ICBC, the "ICBC
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Disclosure Schedule") setting forth, among other things, items the disclosure of
which is necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more of
such party's representations or warranties contained in Article IV, in the case
of the Company, or Article V, in the case of ICBC, or to one or more of such
party's covenants contained in Article VI or agreements contained in Article
VII; provided, however, that notwithstanding anything in this Agreement to the
contrary, the mere inclusion of an item in a Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or material fact, event or
circumstance or that such item has had or would have a Material Adverse Effect
(as defined herein) with respect to either the Company or ICBC, respectively.
3.2 STANDARDS. (a) No representation or warranty of the Company
contained in Article IV (other than the representations set forth in the first
and third sentences of Section 4.1(a), the first two sentences of Section 4.1(b)
and Sections 4.2, 4.6, 4.8(a), 4.10 and 4.18) or of ICBC contained in Article V
(other than the representations set forth in the first and third sentences of
Section 5.1(a), the first two sentences of Section 5.1(b) and Sections 5.2, 5.6
and 5.8) shall be deemed untrue or incorrect for any purpose under this
Agreement, and no party hereto shall be deemed to have breached a representation
or warranty for any purpose under this Agreement, in any case as a consequence
of the existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or warranties
contained in Article IV, in the case of the Company, or Article V, in the case
of ICBC, has had a Material Adverse Effect with respect to the Company or ICBC,
respectively.
(b) As used in this Agreement, the term "Material Adverse Effect"
means, with respect to ICBC or the Company, as the case may be, a material
adverse effect on (i) the business, results of operations or financial condition
of such party and its Subsidiaries taken as a whole, other than any such effect
attributable to or resulting from (x) any change in banking or similar laws,
rules or regulations of general applicability to banks, thrift institutions or
their holding companies or interpretations thereof by courts or governmental
authorities, (y) any change in GAAP (as defined herein) or regulatory accounting
principles applicable to banks, thrifts or their holding companies generally, or
(z) any action or omission of the Company or ICBC or any Subsidiary of either of
them taken with the prior written consent of the other party hereto or (ii) the
ability of such party and its Subsidiaries to consummate the transactions
contemplated hereby. As used in this Agreement, the word "Subsidiary" when used
with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated with
such party for financial reporting purposes.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article III, the Company hereby represents and warrants to
ICBC (subject to the Company Disclosure Schedule) as follows:
4.1 CORPORATE ORGANIZATION. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary. The Company is duly registered as a bank holding
company under the Bank Holding Company Act, as amended ("BHCA") and the
regulations of the Board of Governors of the Federal Reserve System (the "FRB")
promulgated thereunder. The Certificate of Incorporation and Bylaws of the
Company, copies of which are set forth in Section 4.1 of the Company Disclosure
Schedule, are true and correct copies of such documents as in effect as of the
date of this Agreement.
(b) Broad National Bank (the "Company Bank") is a stock national bank
duly organized, validly existing and in good standing under the laws of the
United States of America. The deposit accounts of the Company Bank are insured
by the FDIC through the Bank Insurance Fund (the "BIF") to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Each of the Company's other
Subsidiaries, whether direct or indirect, is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the Company's Subsidiaries has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or the location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The certificate of incorporation, articles of association, bylaws and similar
governing documents of each Subsidiary of the Company, copies of which have
previously been delivered to ICBC, are true and correct copies of such documents
as in effect as of the date of this Agreement.
(c) The minute books of the Company and each of its Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1995 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
4.2 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock, 20,000 shares of
preferred stock 1985 class, par value $10.00 per share, and 1,500,000 shares of
preferred stock, par value $1.00 per share (collectively, the "Company Preferred
Stock"). As of date hereof, there were 4,950,254 shares of
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Company Common Stock outstanding and 296,500 shares of Company Common Stock held
by the Company as treasury stock. As of the date hereof, there were (i) no
shares of Company Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise except for (x) 462,035 shares of Company
Common Stock reserved for issuance pursuant to the Company Option Plans
described in Section 4.2(a) of the Company Disclosure Schedule and (y) 64,172
shares of Company Common Stock reserved for issuance pursuant to the LCAP
described in Section 4.2(a) of the Company Disclosure Schedule and (ii) no
shares of Company Preferred Stock issued or outstanding, held in the Company's
treasury or reserved for issuance upon exercise of outstanding stock options or
otherwise. All of the issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. Except as referred to above or reflected in Section 4.2(a) of the
Company Disclosure Schedule, the Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Company
Common Stock, or Company Preferred Stock or any other equity security of the
Company or any securities representing the right to purchase or otherwise
receive any shares of Company Common Stock or any other equity security of the
Company. The names of the optionees, the date of each option to purchase Company
Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, any vesting schedule with respect to an
option which is not yet fully vested, and the price at which each such option
may be exercised under the Company Option Plans are set forth in Section 4.2(a)
of the Company Disclosure Schedule. The names of the awardees, date of all
awards, the number of shares subject to such awards, the amount of shares vested
thereunder and the amount of shares subject to proration pursuant to the LCAP
are set hereof in Section 4.2(a) of the Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets forth a true
and correct list of all of the Subsidiaries of the Company, including a listing
of the jurisdiction of incorporation thereof. Except as set forth in Section
4.2(b) of the Company Disclosure Schedule, the Company owns, directly or
indirectly, all of the issued and outstanding shares of the capital stock of
each of such Subsidiaries, free and clear of all liens, charges, encumbrances
and security interests whatsoever, and all of such shares are duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No
Subsidiary of the Company has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary. Assuming compliance by ICBC with Section 1.6 hereof, and the
satisfaction of the conditions contained in Sections 8.1 and 8.2 hereof, at the
Effective Time, there will not be any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character by which the Company
or any of its Subsidiaries will be bound calling for the purchase or issuance of
any shares of the capital stock of the Company or any of its Subsidiaries.
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4.3 AUTHORITY; NO VIOLATION. (a) The Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the Board of Directors of the Company. The
Board of Directors of the Company has directed that this Agreement and the
transactions contemplated hereby be submitted to the Company's stockholders for
approval at a meeting of such stockholders and, except for the adoption of this
Agreement by the requisite vote of the Company's stockholders, no other
corporate proceedings on the part of the Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Company and (assuming
due authorization, execution and delivery by ICBC) this Agreement constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) The Company Bank has full corporate power and authority to execute
and deliver the Bank Merger Agreement and, subject to the receipt of all
regulatory approvals and the approval of the Company as the sole stockholder of
the Company Bank, to consummate the transactions contemplated thereby. The
execution and delivery of the Bank Merger Agreement and the consummation of the
transactions contemplated thereby will be duly and validly approved by the Board
of Directors of the Company Bank and by the Company as the sole stockholder of
the Company Bank. Upon the due and valid approval of the Bank Merger Agreement
by the Company as the sole stockholder of the Company Bank and by the Board of
Directors of the Company Bank, no other corporate proceedings on the part of the
Company Bank will be necessary to consummate the transactions contemplated
thereby. The Bank Merger Agreement, upon execution and delivery by the Company
Bank, will be duly and validly executed and delivered by the Company Bank and
will (assuming due authorization, execution and delivery by ICBC Bank)
constitute a valid and binding obligation of the Company Bank, enforceable
against the Company Bank in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement by the Company
or the execution and delivery of the Bank Merger Agreement by the Company Bank,
nor the consummation by the Company of the transactions contemplated hereby or
the Company Bank of the transactions contemplated by the Bank Merger Agreement,
nor compliance by the Company with any of the terms or provisions hereof or the
Company Bank with the provisions of the Bank Merger Agreement, will (i) violate
any provision of the Restated Certificate of Incorporation or Bylaws of the
Company, the Articles of Association or Bylaws of the Company Bank or the
certificate of incorporation, bylaws or similar governing documents of any of
its Subsidiaries, or (ii) assuming that the consents and approvals referred to
in Section 4.4 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Company or any of its
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Subsidiaries, or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets may
be bound or affected.
4.4 CONSENTS AND APPROVALS. Except for (a) the filing of applications
and notices, as applicable, with the Office of Thrift Supervision ("OTS") under
the Home Owners Loan Act, as amended ("HOLA"), and the rules and regulations of
the OTS, with the FDIC under the Bank Merger Act and the Federal Deposit
Insurance Act and the rules and regulations of the FDIC, and, to the extent
applicable, the filing of applications and notices with the FRB and the OCC, and
approval of such applications and notices, (b) the filing of such applications,
filings, authorizations, orders and approvals as may be required under
applicable state law (the "State Banking Approvals"), (c) the filing with the
SEC of a proxy statement in definitive form relating to the meeting of the
Company's stockholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Statement") and the filing and
declaration of effectiveness of the registration statement on Form S-4 (the
"Form S-4") in which the Proxy Statement will be included as part of the
prospectus contained therein, (d) the approval of this Agreement by the
requisite vote of the stockholders of the Company, (e) the filing of the
Certificate of Merger with the Secretaries pursuant to the DGCL and the NJBCA,
(f) approval of the listing of the ICBC Common Stock to be issued in the Merger
on the Nasdaq/NMS, and (g) such other filings, authorizations or approvals as
may be set forth in Section 4.4 of the Company Disclosure Schedule, no consents
or approvals of or filings or registrations with any court, administrative
agency or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or of or with any third party are necessary in connection
with (1) the execution and delivery by the Company of this Agreement and the
Bank Merger Agreement by the Company Bank and (2) the consummation by the
Company of the Merger and the Company Bank of the Bank Merger Agreement and the
other transactions contemplated hereby.
4.5 REPORTS. The Company and each of its Subsidiaries have timely filed
all reports, registrations and statements, together with any amendments required
to be made with respect thereto, that they were required to file since December
31, 1995 with (i) the FRB, (ii) the Office of the Comptroller (the "OCC"), (iii)
the FDIC, (iv) any state banking commissions or any other state regulatory
authority (each a "State Regulator") and (v) any other self-regulatory
organization ("SRO") (collectively the "Regulatory Agencies"), and have paid all
fees and assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of the Company and its Subsidiaries and except as set forth in Section
4.5 of the Company Disclosure Schedule, no Regulatory Agency has initiated any
proceeding or investigation into the business or operations of the Company or
any of its Subsidiaries since
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December 31, 1995. Except as set forth in Section 4.5 of the Company Disclosure
Schedule, there is no unresolved violation, criticism or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries.
4.6 FINANCIAL STATEMENTS. The Company has previously delivered to ICBC
copies of (a) the consolidated statements of financial condition of the Company
and its Subsidiaries as of December 31, for the fiscal years 1996 and 1997, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years 1995, 1996 and 1997, inclusive, as reported
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997 filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in each case accompanied by the audit report of
KPMG Peat Marwick LLP, independent public accountants with respect to the
Company, and (b) the unaudited consolidated statement of financial condition of
the Company and its Subsidiaries as of September 30, 1998 and the related
unaudited consolidated statements of income, cash flows and changes in
shareholders' equity for the nine-month periods then ended as reported in the
Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998
filed with the SEC under the Exchange Act. The December 31, 1997 consolidated
statement of financial condition of the Company (including the related notes,
where applicable) fairly presents the consolidated financial position of the
Company and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 4.6 (including the related notes, where
applicable) fairly present, and the financial statements to be filed with the
SEC after the date hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
position of the Company and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies, and the financial
statements to be filed with the SEC after the date hereof will comply, with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been, and the financial statements to be
filed with the SEC after the date hereof will be, prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, or, in the case of unaudited statements, as permitted by
Form 10-Q. The books and records of the Company and its Subsidiaries have been,
and are being, maintained in accordance with GAAP and any other applicable legal
and accounting requirements and reflect only actual transactions.
4.7 BROKER'S FEES. Neither the Company nor any Subsidiary of the
Company nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement, except that the Company has engaged, and will pay a fee or commission
to, Ryan, Beck & Co., Inc. ("Ryan, Beck") in accordance with the terms of a
letter agreement between Ryan, Beck and the Company, a true and correct copy of
which has been previously delivered by the Company to ICBC.
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4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Since September 30, 1998,
there has been no change or development or combination of changes or
developments which, individually or in the aggregate, has had a Material Adverse
Effect on the Company.
(b) Since September 30, 1998, the Company and its Subsidiaries have
carried on their respective businesses in the ordinary course consistent with
their past practices.
(c) Except as set forth in Section 4.8(c) of the Company Disclosure
Schedule, since December 31, 1998, neither the Company nor any of its
Subsidiaries has (i) increased the wages, salaries, compensation, pension, or
other fringe benefits or perquisites payable to any executive officer, employee,
or director from the amount thereof in effect as of December 31, 1998 (which
amounts have been previously disclosed to ICBC), granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus (except for salary increases and bonus
payments made in the ordinary course of business consistent with past
practices), (ii) suffered any strike, work stoppage, slow-down, or other labor
disturbance, (iii) been a party to a collective bargaining agreement, contract
or other agreement or understanding with a labor union or organization, or (iv)
had any union organizing activities.
4.9 LEGAL PROCEEDINGS. (a) Neither the Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the Company's
best knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against the Company or any of its Subsidiaries or challenging the
validity or propriety of the transactions contemplated by this Agreement or the
Bank Merger Agreement.
(b) Except as set forth in Section 4.9(a) of the Company Disclosure
Schedule, there is no injunction, order, judgment, decree or regulatory
restriction imposed upon the Company, any of its Subsidiaries or the assets of
the Company or any of its Subsidiaries.
4.10 TAXES. (a) Each of the Company and its Subsidiaries has (i) duly
and timely filed or will duly and timely file (including applicable extensions
granted without penalty) all Tax Returns (as hereinafter defined) required to be
filed at or prior to the Effective Time, and such Tax Returns which have been
filed are, and those to be hereinafter filed will be, true, correct and complete
in all material respects, and (ii) paid in full or made adequate provision in
the financial statements of the Company (in accordance with GAAP) for all Taxes
(as hereinafter defined) shown to be due on such Tax Returns and will pay in
full or make adequate provision for all Taxes other than Taxes being contested
by the Company in good faith for which adequate provision for on the financial
statements of the Company (in accordance with GAAP) have been made. There are no
material liens for Taxes upon the assets of either the Company or its
Subsidiaries except for statutory liens for current Taxes not yet due. As of the
date hereof (i) neither the Company nor any of its Subsidiaries has requested
any extension of time within which to file any Tax Returns in respect of any
fiscal year which have not since been filed and no request for waivers of the
time to assess any Taxes are pending or outstanding, and (ii) except as set
forth in Section 4.10(a) of the Company Disclosure Schedule with respect to each
taxable period of the Company and its Subsidiaries, the federal and state income
Tax
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Returns of the Company and its Subsidiaries have been audited by the Internal
Revenue Service or appropriate state tax authorities or the time for assessing
and collecting income Tax with respect to such taxable period has closed and
such taxable period is not subject to review. Neither the Company nor any of its
Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii)
except as set forth in Section 4.10(a) of the Company Disclosure Schedule has
made any payment, is obligated to make any payment, or is a party to any
agreement that could obligate it to make any payment that would not be
deductible under Section 280G of the Code, (iii) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount obligation as
described in Section 163(i) of the Code or any registration- required obligation
within the meaning of Section 163(f)(2) of the Code that is not in registered
form, or (iv) is or has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
(b) For the purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest, penalties
or additions attributable thereto. For purposes of this Agreement, "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) with respect to Taxes.
4.11 EMPLOYEES. (a) Section 4.11(a) of the Company Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); "pension" plan, fund or program (within the
meaning of Section 3(2) of ERISA); each "stay in place" bonus, retention,
employment, consulting, independent contractor, termination, severance or change
in control agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by, or with respect to which an
obligation or liability exists of (the "Plans"), the Company, any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), all of which together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of the ERISA, for the benefit of
any employee or director or former employee or former director of the Company,
any Subsidiary or any ERISA Affiliate or any person who is an independent
contractor or consultant to the Company, any of its Subsidiaries or any ERISA
Affiliate.
(b) The Company has heretofore delivered to ICBC with respect to each
of the Plans true and correct copies of each of the following documents if
applicable: (i) the Plan document, including all amendments thereto, and trust
agreement or other funding arrangement including insurance contracts and
policies; (ii) the actuarial report for such Plan for each of the last two years
and any subsequent changes to actuarial assumptions; (iii) the most recent
determination letter from the Internal Revenue Service ("IRS") for such Plan;
and (iv) the most recent Form 5500, summary plan description and related
summaries of material modifications.
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(c) Each of the Plans has been and is being operated and administered
in accordance with its terms and is in compliance with applicable law, including
but not limited to, the Code and ERISA; each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS and the Company is not aware of any
circumstances likely to result in the revocation of any such favorable
determination letter except as set forth in Section 4.11(c) of the Company
Disclosure Schedule; except as set forth in Section 4.11(c) of the Company
Disclosure Schedule, no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company, its Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of the
Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary); no
liability under Title IV of ERISA has been incurred by the Company, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company, its Subsidiaries
or an ERISA Affiliate of incurring a material liability thereunder; no Plan has
an accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; neither the Company nor any ERISA Affiliate has incurred, directly or
indirectly, any liability to or on account of a Plan pursuant to Title IV of
ERISA (other than Pension Benefit Guarantee Corporation ("PBGC") premiums); to
the knowledge of the Company, no proceedings have been instituted to terminate
any Plan that is subject to Title IV of ERISA; no "reportable event," as such
term is defined in Section 4043(c) of ERISA, has occurred with respect to any
Plan (other than a reportable event with respect to which the thirty day notice
period has been waived); no condition exists that presents a material risk to
the Company of incurring a liability to or on account of a Plan pursuant to
Title IV of ERISA; no Plan is a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA and no Plan is a multiple employer plan as defined
in Section 413 of the Code; there are no pending or, to the knowledge of the
Company, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto; except as set forth in Section 4.11(c) of the Company Disclosure
Schedule, the fair market value of the assets of each Plan subject to Title IV
of ERISA exceeds the present value of the benefit liabilities (as defined in
Section 4001(a)(16) of ERISA) under such Plan as of the most recent plan year
end prior to the date hereof, calculated using the actuarial assumptions used in
the most recent actuarial valuation of such Plan as of the date hereof; and
there is not currently any legally binding commitment by the Company or any
ERISA Affiliate to create an additional Plan or amend any Plan (except
amendments to comply with law which do not materially increase the cost of such
Plan) and the Company and its Subsidiaries do not have any obligations for
post-retirement or post-employment welfare benefits that cannot be amended or
terminated upon sixty days' notice or less without incurring any liability
thereunder, except for coverage required by Part 6 of Title 1 of ERISA or
Section 4980B of the Code, the premium cost of which is borne (to the extent
permitted by law) by the insured individuals.
4.12 SEC REPORTS. The Company has previously delivered to ICBC a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy
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statement filed since December 31, 1995 by the Company with the SEC pursuant to
the Securities Act or the Exchange Act (the "Company Reports") and (b)
communication mailed by the Company to its stockholders since December 31, 1995,
and no such registration statement, prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that information as of a later date shall
be deemed to modify information as of an earlier date. The Company has timely
filed all Company Reports and other documents required to be filed by it under
the Securities Act and the Exchange Act, and, as of their respective dates, all
Company Reports complied with the published rules and regulations of the SEC
with respect thereto.
4.13 COMPANY INFORMATION. The information relating to the Company and
its Subsidiaries which is provided to ICBC by the Company for inclusion in the
Proxy Statement and the Form S-4, or in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement (except for such portions thereof that relate
only to ICBC or any of its Subsidiaries) will comply with the provisions of the
Exchange Act and the rules and regulations thereunder.
4.14 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries knows of or has received notice of any violations of any of the
above.
4.15 CERTAIN CONTRACTS. (a) Except as set forth in Section 4.15(a) of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to or bound by any contract (whether written or oral including, but
not limited to, any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan or other similar plan) (i) with
respect to the employment of any directors, officers, employees or consultants,
(ii) which, upon the consummation of the transactions contemplated by this
Agreement or the Bank Merger Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment or benefits
(whether of severance pay or otherwise) becoming due, or the acceleration or
vesting of any rights to any payment or benefits, from ICBC, the Company, the
Surviving Corporation or any of their respective Subsidiaries to any director,
officer, employee or consultant thereof, (iii) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement that has not been filed or incorporated by reference
in the Company Reports, (iv) which is a consulting agreement (including data
processing, software programming and licensing contracts) not terminable on 30
days or less notice involving the payment of more than $75,000 per annum, (v)
which materially restricts the conduct of any line of business by the
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Company or any of its Subsidiaries or (vi) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the Bank
Merger Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the Bank Merger Agreement. Each contract, arrangement, commitment
or understanding of the type described in this Section 4.15(a), whether or not
set forth in Section 4.15(a) of the Company Disclosure Schedule, is referred to
herein as a "Company Contract". The Company has previously delivered to ICBC
true and correct copies of each Company Contract.
(b) With respect to Company Contracts, (i) each Company Contract is
valid and binding and in full force and effect and has received, if required,
all regulatory and/or shareholder approvals, (ii) the Company and each of its
Subsidiaries has performed all obligations required to be performed by it to
date under each Company Contract, (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
default on the part of the Company or any of its Subsidiaries under any Company
Contract, and (iv) no other party to any Company Contract is, to the knowledge
of the Company, in default in any respect thereunder.
(c) Section 4.15 of the Company Disclosure Schedule contains a schedule
showing the maximum monetary amounts payable, whether individually or in the
aggregate (including any tax indemnification payments in respect of income
and/or excise taxes), and identifying the types and estimated amounts of the
in-kind benefits due under any Plan or Company Contract other than a
tax-qualified plan for each director of the Company or Company Bank, each
officer of the Company or the Company Bank with the position of vice president
or higher and any consultant to the Company or the Company Bank, specifying the
assumptions in such schedule.
4.16 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in
Section 4.16 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth on Section 4.16 of the Company
Disclosure Schedule, a "Regulatory Agreement"), any Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
the Company or any of its Subsidiaries been advised by any Governmental Entity
that it is considering issuing or requesting any Regulatory Agreement.
4.17 ENVIRONMENTAL MATTERS. (a) Except as set forth in Section 4.17(a)
of the Company Disclosure Schedule, each of the Company and its Subsidiaries,
each of the Participation Facilities and, to the best knowledge of the Company,
the Loan Properties (each as hereinafter defined), are in compliance with all
applicable federal, state and local laws, including common law, regulations and
ordinances, and with all applicable decrees, orders and contractual obligations
relating to pollution or the discharge of, or exposure to, Hazardous Materials
(as hereinafter defined) in the environment or workplace ("Environmental Laws");
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(b) There is no suit, claim, action, proceeding or investigation,
pending or, to the best knowledge of the Company, threatened (or to the best
knowledge of the Company, no past or present actions activities, circumstances,
conditions, events or incidents that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), before any Governmental
Entity or other forum in which the Company, any of its Subsidiaries, any
Participation Facility or any Loan Property (or person or entity whose liability
for any such suit, claim, action, proceeding, investigation or notice the
Company, any of its Subsidiaries, Participation Facility or Loan Property has or
may have been retained or assumed either contractually or by operation of law),
has been or, with respect to threatened proceedings, may be, named as a
defendant (x) for alleged noncompliance (including by any predecessor) with any
Environmental Laws, or (y) relating to the release, threatened release or
exposure to or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Material whether or not occurring at or on a site owned, leased or operated by
the Company or any of its Subsidiaries, any Participation Facility or any Loan
Property;
(c) Except as set forth in Section 4.17(c) of the Company Disclosure
Schedule, to the best knowledge of the Company, during the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property, there
has been no release of Hazardous Materials in, on, under or affecting any such
property. Except as set forth in Section 4.17(c) of the Company Disclosure
Schedule, to the best knowledge of the Company, prior to the period of (x) the
Company's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) the Company's or any of its Subsidiaries' interest in a Loan Property, there
was no release of Hazardous Materials in, on, under or affecting any such
property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this Section 4.17:
(x) "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
hazardous or toxic substances, petroleum or other regulated substances or
materials, (y) "Loan Property" means any property in which the Company or any of
its Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (z) "Participation
Facility" means any facility in which the Company or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
4.18 OPINION. Prior to the execution of this Agreement, the Company has
received an opinion from Ryan, Beck to the effect that as of the date thereof
and based upon and subject to the matters set forth therein, the Merger
Consideration is fair to the stockholders of the Company from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
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4.19 APPROVALS. As of the date of this Agreement, the Company knows
of no reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger and
the Bank Merger) should not be obtained.
4.20 LOAN PORTFOLIO. (a) Except as set forth in Schedule 4.20(a) of
the Company Disclosure Schedule, with respect to each loan owned by the Company
or its Subsidiaries in whole or in part (each, a "Loan"), to the best knowledge
of the Company:
(i) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
(ii) neither the Company nor any of its Subsidiaries nor
any prior holder of a Loan has modified the note or any of the related security
documents in any material respect or satisfied, canceled or subordinated the
note or any of the related security documents except as otherwise disclosed by
documents in the applicable Loan file;
(iii) the Company or a Subsidiary is the sole holder of
legal and beneficial title to each Loan (or the Company's applicable
participation interest, as applicable), except as otherwise referenced on the
books and records of the Company;
(iv) the note and the related security documents, copies
of which are included in the Loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended, modified,
canceled or otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;
(v) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property which serves as security
for a Loan, except as otherwise referenced on the books and records of the
Company;
(vi) there is no pending or threatened litigation or
proceeding relating to the property which serves as security for a Loan; and
(vii) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable.
(b) Except as set forth in Section 4.20(b) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any written or oral (i) loan agreement, note or borrowing arrangement
(including, without limitation, leases, credit enhancements, commitments,
guarantees and interest-bearing assets) (collectively, "Loans"), under the terms
of which the obligor was, as of December 31, 1998, 90 days or more delinquent in
payment of principal or interest or in default of any other provision, or (ii)
Loan with any director, executive officer or five percent or greater stockholder
of the Company or any of its Subsidiaries, or to the knowledge of the Company,
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any person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. Section 4.20 of the Company Disclosure
Schedule sets forth (i) all of the Loans of the Company or any of its
Subsidiaries that as of December 31, 1998 were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit
Risk Assets", "Concerned Loans", "Watch List" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, (ii) by category of Loan
(i.e., commercial, consumer, etc.), all of the other Loans of the Company and
its Subsidiaries that as of December 31, 1998 were classified as such, together
with the aggregate principal amount of and accrued and unpaid interest on such
Loans by category and (iii) each asset of the Company that as of December 31,
1998 was classified as "Other Real Estate Owned" and the book value thereof.
4.21 PROPERTY. Each of the Company and its Subsidiaries has good and
marketable title free and clear of all liens, encumbrances, mortgages, pledges,
charges, defaults or equitable interests to all of the properties and assets,
real and personal, tangible or intangible, which are reflected on the
consolidated statement of financial condition of the Company as of September 30,
1998 or acquired after such date, except (i) liens for Taxes not yet due and
payable or contested in good faith by appropriate proceedings, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of business,
(iii) such imperfections of title, easements and encumbrances, if any, as do not
interfere with the use of the respective property as such property is used on
the date of this Agreement, (iv) for dispositions and encumbrances of, or on,
such properties or assets in the ordinary course of business and (v) mechanics',
materialmen's, workmen's, repairmen's, warehousemen's, carrier's and other
similar liens and encumbrances arising in the ordinary course of business. All
leases pursuant to which the Company or any Subsidiary of the Company, as
lessee, leases real or personal property are valid and enforceable in accordance
with their respective terms and neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any other party thereto, is in default
thereunder. All material tangible properties of the Company and each of its
Subsidiaries are in good state of maintenance and repair, conform with all
applicable ordinances, regulations and zoning laws and are considered by the
Company to be adequate for the current business of the Company and its
Subsidiaries.
4.22 REORGANIZATION. The Company has no reason to believe that the
Merger will fail to qualify as a reorganization under Section 368(a) of the
Code.
4.23 ANTITAKEOVER PROVISIONS INAPPLICABLE. The Board of Directors of
the Company has approved the transactions contemplated by this Agreement and the
Bank Merger Agreement such that the provisions of Section 14A:10A-5 of the NJBCA
and 49:5-3 of the New Jersey Revised Statutes will not apply to this Agreement,
the Bank Merger Agreement or any of the transactions contemplated hereby or
thereby.
4.24 INSURANCE. The Company and its Subsidiaries are presently insured,
and since December 31, 1995 have been insured, for reasonable amounts with
financially sound and reputable
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insurance companies, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. All of the insurance policies and bonds maintained by the Company and
its Subsidiaries are in full force and effect, the Company and its Subsidiaries
are not in default thereunder and all material claims thereunder have been filed
in due and timely fashion.
4.25 INVESTMENT SECURITIES; BORROWINGS; DEPOSITS. (a) Except for
investments in Federal Home Loan Bank Stock, pledges to secure Federal Home Loan
Bank borrowings and reverse repurchase agreements entered into in arm's-length
transactions pursuant to normal commercial terms and conditions and entered into
in the ordinary course of business, restrictions that exist for securities to be
classified as "held to maturity," and securities pledged with respect to certain
public and fiduciary deposits in the ordinary course of business, none of the
investments reflected in the consolidated balance sheet of the Company included
in the Company's Report on Form 10-Q for the quarter ended September 30, 1998
and none of the investment securities held by it or any of its Subsidiaries
since September 30, 1998 is subject to any restriction (contractual or
statutory) that would materially impair the ability of the entity holding such
investment freely to dispose of such investment at any time.
(b) Neither the Company nor any Subsidiary is a party to or has agreed
to enter into an exchange-traded or over the-counter equity, interest rate,
foreign exchange or other swap, forward, future, option, cap, floor or collar or
any other contract that is not included on the consolidated statements of
condition and is a derivative contract (including various combinations thereof)
(each, a "Derivatives Contract") or owns securities that (A) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (B) are
likely to have changes in value as a result of interest or exchange rate changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with regulatory requirements and listed (as of the date
hereof) in Section 4.25(b) of the Company Disclosure Schedule or disclosed in
any Company Reports filed on or prior to the date hereof.
(c) Set forth in Section 4.25(c) of the Company Disclosure Schedule is
a true and correct list of the Company's borrowed funds (excluding deposit
accounts) as of the date hereof.
(d) None of the deposits of the Company or any of its Subsidiaries is a
"brokered" deposit.
4.26 INDEMNIFICATION. Except as provided in the Company Contracts or
the Restated Certificate of Incorporation or Bylaws of the Company, neither the
Company nor any Company Subsidiary is a party to any indemnification agreement
with any of its present or former directors, officers, employees, agents or
other persons who serve or served in any other capacity with any other
enterprise at the request of the Company (a "Covered Person"), and, to the best
knowledge of the Company, there are no claims for which any Covered Person would
be entitled to indemnification
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under the Restated Certificate of Incorporation or Bylaws of the Company or any
Subsidiary of the Company, applicable law or regulation or any indemnification
agreement.
4.27 YEAR 2000 MATTERS. Section 4.27 of the Company Disclosure Schedule
contains a true and correct copy of the Company's plan for addressing year 2000
computer issues (the "Year 2000 Plan"). The Company is in compliance with the
Company's Year 2000 Plan. The Company Bank has been examined by the OCC with
respect to being "Year 2000 Compliant" and neither the Company nor the Company
Bank has received any written communication from the OCC commenting adversely
with respect to the ability of the Company Bank to become Year 2000 compliant.
4.28. UNDISCLOSED LIABILITIES. Except (a) for those liabilities that
are fully reflected or reserved against on the consolidated balance sheet of the
Company as of September 30, 1998 and (b) for liabilities incurred in the
ordinary course of business consistent with past practice since September 30,
1998 that, either alone or when combined with all similar liabilities, have not
had, and could not reasonably be expect to have, a Material Adverse Effect on
the Company, neither the Company nor any of its Subsidiaries has incurred any
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ICBC
Subject to Article III, ICBC hereby represents and warrants to the
Company (subject to the ICBC Disclosure Schedule) as follows:
5.1 CORPORATE ORGANIZATION. (a) ICBC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
ICBC has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. ICBC is duly registered as a savings and loan holding
company under the HOLA. The Certificate of Incorporation and Bylaws of ICBC,
copies of which have previously been delivered to the Company, are true and
correct copies of such documents as in effect as of the date of this Agreement.
(b) Independence Community Bank ("ICBC Bank") is a stock savings bank
duly organized, validly existing and in good standing under the laws of the
State of New York. The deposit accounts of ICBC Bank are insured by the FDIC
through the BIF and the Savings Association Insurance Fund to the fullest extent
permitted by law, and all premiums and assessments required in connection
therewith have been paid when due. Each of ICBC's other Subsidiaries which is a
"Significant Subsidiary" (each a "Significant Subsidiary" and together the
"Significant Subsidiaries") as such term is defined in Regulation S-X
promulgated by the SEC is duly organized,
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validly existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Significant Subsidiary of ICBC has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The Restated Organization
Certificate, Bylaws and other similar governing documents of ICBC Bank, copies
of which have previously been delivered to the Company, are true and correct
copies of such documents as in effect as of the date of this Agreement.
(c) The minute books of ICBC and each of its Significant Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1995 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
5.2 CAPITALIZATION. (a) As of the date of this Agreement, the
authorized capital stock of ICBC consists of 125,000,000 shares of ICBC Common
Stock and 25,000,000 shares of preferred stock, par value $0.01 per share ("ICBC
Preferred Stock"). As of the date hereof, there were 71,421,563 shares of ICBC
Common Stock and no shares of ICBC Preferred Stock issued and outstanding, and
4,622,187 shares of ICBC Common Stock held in ICBC's treasury. As of the date of
this Agreement, no shares of ICBC Common Stock or ICBC Preferred Stock were
reserved for issuance, except that 7,041,088 shares of ICBC Common Stock were
reserved for issuance upon the exercise of stock options pursuant to the
Independence Community Bank Corp. 1998 Stock Option Plan (the "ICBC Stock
Plan"). All of the issued and outstanding shares of ICBC Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as referred to above or
reflected in Section 5.2(a) of the ICBC Disclosure Schedule, ICBC does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of ICBC Common Stock or ICBC Preferred Stock or any other equity
securities of ICBC or any securities representing the right to purchase or
otherwise receive any shares of ICBC Common Stock or ICBC Preferred Stock. The
shares of ICBC Common Stock to be issued pursuant to the Merger will be duly
authorized and validly issued and, at the Effective Time, all such shares will
be fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(b) Section 5.2(b) of the ICBC Disclosure Schedule sets forth a true
and correct list of all of the ICBC Subsidiaries as of the date of this
Agreement. Except as set forth in Section 5.2(b) of the ICBC Disclosure
Schedule, as of the date of this Agreement, ICBC owns, directly or indirectly,
all of the issued and outstanding shares of capital stock of each of the
Subsidiaries of ICBC, free and clear of all liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. As of the date of
this Agreement, no Subsidiary of ICBC has or is bound by any outstanding
subscriptions, options,
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warrants, calls, commitments or agreements of any character with any party that
is not a direct or indirect Subsidiary of ICBC calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary.
5.3 AUTHORITY; NO VIOLATION. (a) ICBC has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of ICBC, and no other corporate
proceedings on the part of ICBC are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by ICBC and (assuming due authorization,
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of ICBC, enforceable against ICBC in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(b) ICBC Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby will be duly and
validly approved by the Board of Directors of ICBC Bank. Upon the due and valid
approval of the Bank Merger Agreement by ICBC, as the sole stockholder of ICBC
Bank, and by the Board of Directors of ICBC Bank, no other corporate proceedings
on the part of ICBC Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
ICBC Bank, will be duly and validly executed and delivered by ICBC Bank and will
(assuming due authorization, execution and delivery by ICBC Bank) constitute a
valid and binding obligation of ICBC Bank, enforceable against ICBC Bank in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(c) Except as set forth in Section 5.3(b) of the ICBC Disclosure
Schedule, neither the execution and delivery of this Agreement by ICBC or the
Bank Merger by ICBC Bank, nor the consummation by ICBC of the transactions
contemplated hereby or thereby, nor compliance by ICBC with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the Certificate
of Incorporation or Bylaws of ICBC, or the restated organization certificate,
articles of incorporation or bylaws or similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to ICBC or
any of its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required
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by, or result in the creation of any lien, pledge, security interest, charge or
other encumbrance upon any of the respective properties or assets of ICBC or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which ICBC or any of its Subsidiaries is a
party, or by which they or any of their respective properties or assets may be
bound or affected except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which either individually or in the aggregate
will not have or be reasonably likely to have a material adverse effect on
ICBC's ability to consummate the transactions contemplated hereby or ICBC Bank's
ability to consummate the transactions contemplated by the Bank Merger
Agreement.
5.4 CONSENTS AND APPROVALS. Except for (a) the filing of applications
and notices, as applicable, with the OTS under the HOLA and the rules and
regulations of the OTS, the FDIC under the Bank Merger Act and the Federal
Deposit Insurance Act and the rules and regulations of the FDIC, and, if
applicable, filing of applications and notices with the FRB and the OCC, and
approval of such applications and notices, (b) the State Banking Approvals, (c)
the filing with the SEC of the Proxy Statement and the filing and declaration of
effectiveness of the Form S-4, (d) the filing of the Certificate of Merger with
the Secretaries pursuant to the DGCL and the NJBCA, (e) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of the shares of
ICBC Common Stock pursuant to this Agreement, (f) approval of the listing for
quotation of the ICBC Common Stock to be issued in the Merger on the Nasdaq/NMS,
and (g) such other filings, authorizations or approvals as may be set forth in
Section 5.4 of the ICBC Disclosure Schedule, no consents or approvals of or
filings or registrations with any Governmental Entity or of or with any third
party are necessary in connection with (1) the execution and delivery by ICBC of
this Agreement and (2) the consummation by ICBC of the Merger and the other
transactions contemplated hereby.
5.5 REPORTS. ICBC and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since December 31,
1995 with any Regulatory Agency, and have paid all fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of ICBC and its
Subsidiaries, and except as set forth in Section 5.5 of the ICBC Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or, to the knowledge
of ICBC, investigation into the business or operations of ICBC or any of its
Subsidiaries since December 31, 1995. There is no unresolved violation,
criticism or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of ICBC or any of its Subsidiaries.
5.6 FINANCIAL STATEMENTS. ICBC has previously made available to the
Company copies of (a) the consolidated statements of financial condition of ICBC
and its Subsidiaries as of March 31 for the fiscal years 1997 and 1998 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the fiscal years 1996, 1997 and 1998, inclusive, as reported
in ICBC's Annual Report on Form 10-K for the fiscal year ended March 31, 1998
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of Ernst & Young LLP,
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independent public accountants with respect to ICBC, and (b) the unaudited
consolidated statement of financial condition of ICBC and its Subsidiaries as of
September 30, 1998 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 ICBC's Quarterly Report on Form 10-Q for the
period ended September 30, 1998 filed with the SEC under the Exchange Act. The
March 31, 1998 consolidated statement of financial condition of ICBC (including
the related notes, where applicable) fairly presents the consolidated financial
condition of ICBC and its Subsidiaries as of the date thereof, and the other
financial statements referred to in this Section 5.6 (including the related
notes, where applicable) fairly present and the financial statements to be filed
with the SEC after the date hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and changes in stockholders'
equity and consolidated financial condition of ICBC and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth; each
of such statements (including the related notes, where applicable) complies, and
the financial statements to be filed with the SEC after the date hereof will
comply in all material respects, with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed with the SEC after the date
hereof will be, prepared in accordance in all material respects with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of ICBC and its Significant Subsidiaries have been,
and are being, maintained in accordance in all material respects with GAAP and
any other applicable legal and accounting requirements.
5.7 BROKER'S FEES. Neither ICBC nor any Subsidiary of ICBC, nor any of
their respective officers or directors, has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement, except
that ICBC has engaged, and will pay a fee or commission to, Merrill Lynch & Co.
("Merrill Lynch").
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as may be disclosed in
any ICBC Report (as defined in Section 5.12) filed with the SEC prior to the
date of this Agreement, since September 30, 1998, there has been no change or
development or combination of changes or developments which, individually or in
the aggregate, has had a Material Adverse Effect on ICBC.
5.9 LEGAL PROCEEDINGS. As of the date of this Agreement, there are no
judicial, administrative, arbitral or other actions, suits, proceeding or
investigations pending or, to ICBC's knowledge, threatened, against ICBC or any
of its Subsidiaries which, if adversely determined. would materially adversely
affect the ability of ICBC to consummate the transactions contemplated hereby.
As of the date of this Agreement, to the best of ICBC's knowledge, there is no
reasonable basis for any other proceeding, claim, action or governmental
investigation against ICBC or any Subsidiary, except such proceedings, claims,
actions or governmental investigations which would
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not have a material adverse effect on the ability of ICBC to consummate the
transactions contemplated hereby.
5.10 TAXES. Except as set forth in Section 5.10 of the ICBC Disclosure
Schedule, each of ICBC and its Subsidiaries has (i) duly and timely filed and
will duly and timely file (including applicable extensions granted without
penalty) all material Tax Returns required to be filed at or prior to the
Effective Time, and such Tax Returns are true and correct in all material
respects, and (ii) paid in full or made adequate provision in the financial
statements of ICBC (in accordance with GAAP) for all material Taxes shown to be
due on such Tax Returns. Except as set forth in Section 5.10 of the ICBC
Disclosure Schedule, (i) as of the date hereof, neither ICBC nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Returns in respect of any fiscal year which have not since been filed and no
request for waivers of the time to assess any Taxes are pending or outstanding,
and (ii) as of the date hereof, with respect to each taxable period of ICBC and
its Subsidiaries, the federal and state income Tax Returns of ICBC and its
Subsidiaries have been audited by the Internal Revenue Service or appropriate
state tax authorities or the time for assessing and collecting income Tax with
respect to such taxable period has closed and such taxable period is not subject
to review. Except as set forth in Section 5.10 of the ICBC Disclosure Schedule,
neither ICBC nor any of its Subsidiaries (i) has made an election under Section
341(f) of the Code, (ii) has issued or assumed any obligation under Section 279
of the Code, any high yield discount obligation as described in Section 163f(i)
of the Code or any registration-required obligation within the meaning of
Section 163f(2) of the Code that is not in registered form, (iii) has made any
payment, is obligated to make payment, or is party to any agreement that could
obligate it to make any payment that would not be deductible under Section 280G
of the Code or (iv) is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
5.11 EMPLOYEES. (a) Section 5.11(a) of the ICBC Disclosure Schedule
sets forth a true and correct list of each deferred compensation plan, incentive
compensation plan, equity compensation plan, "welfare" plan, fund or program
(within the meaning of Section 3(1) of ERISA); "pension" plan, fund or program
(within the meaning of Section 3(2) of ERISA) that is sponsored, maintained or
contributed to or required to be contributed to as of the date of this Agreement
by, or with respect to which an obligation or liability exists of (the "ICBC
Plans"), ICBC, any of its Subsidiaries or any trade or business, whether or not
incorporated (an "ICBC ERISA Affiliate"), all of which together with ICBC would
be deemed a "single employer" within the meaning of Section 4001 of ERISA, for
the benefit of any employee or former employee of ICBC, any Subsidiary or any
ICBC ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the ICBC Disclosure
Schedule, each of the ICBC Plans is in compliance in all material respects with
applicable law, including but not limited to, the Code and ERISA; each of the
ICBC Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code has received a favorable determination letter from the IRS; no ICBC
Plan has an accumulated or waived funding deficiency within the meaning of
Section 412 of the Code; neither ICBC nor any ICBC ERISA Affiliate has incurred,
directly or indirectly, any liability to or on account of an ICBC Plan pursuant
to Title IV of ERISA (other than PBGC premiums); to the
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knowledge of ICBC, no proceedings have been instituted to terminate any ICBC
Plan that is subject to Title IV of ERISA; no "reportable event," as such term
is defined in Section 4043(c) of ERISA, has occurred with respect to any ICBC
Plan (other than a reportable event with respect to which the thirty day notice
period has been waived); no condition exists that presents a material risk to
ICBC of incurring a liability to or on account of an ICBC Plan pursuant to Title
IV of ERISA; no ICBC Plan is a multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA and no ICBC Plan is a multiple employer plan as defined in
Section 413 of the Code; there are no pending or, to the knowledge of ICBC,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the ICBC Plans or any trusts related thereto; the
fair market value of the assets of each ICBC Plan subject to Title IV of ERISA
exceeds the present value of the benefit liabilities (as defined in Section
4001(a)(16) of ERISA) under such ICBC Plan as of the most recent plan year end
prior to the date hereof, calculated using the actuarial assumptions used in the
most recent actuarial valuation of such Plan as of the date hereof; with respect
to each qualified plan which is an employee stock ownership plan (as defined in
Section 4975(e)(7) of the Code), any assets of any such plan that are not
allocated to participants' individual accounts are pledged as security for, and
may be applied to satisfy, any securities acquisition indebtedness; and there is
not currently any legally binding commitment by ICBC or any ICBC ERISA Affiliate
to create an additional ICBC Plan or amend any ICBC Plan (except amendments to
comply with law which do not materially increase the cost of such Plan) and ICBC
and its Subsidiaries do not have any obligations for post-retirement or
post-employment welfare benefits that cannot be amended or terminated upon sixty
days' notice or less without incurring any liability thereunder, except for
coverage required by Part 6 of Title 1 of ERISA or Section 4980B of the Code,
the premium cost of which is borne (to the extent permitted by law) by the
insured individuals.
5.12 SEC REPORTS. ICBC has previously delivered to the Company a true
and correct copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since December 31, 1996 by ICBC
with the SEC pursuant to the Securities Act or the Exchange Act (the "ICBC
Reports") and (b) communication mailed by ICBC to its stockholders since March
13, 1998, and no such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that information as of a
later date shall be deemed to modify information as of an earlier date. ICBC has
timely filed all ICBC Reports and other documents required to be filed by it
under the Securities Act and the Exchange Act, and, as of their respective
dates, all ICBC Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
5.13 ICBC INFORMATION. The information relating to ICBC and its
Subsidiaries to be contained in the Proxy Statement and the Form S-4, or in any
other document filed with any other regulatory agency in connection herewith,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to the Company or any of its
Subsidiaries) will comply with the provisions of the
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Exchange Act and the rules and regulations thereunder. The Form S-4 will comply
with the provisions of the Securities Act and the rules and regulations
thereunder.
5.14 COMPLIANCE WITH APPLICABLE LAW. ICBC and each of its Subsidiaries
holds all licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to all, and
have complied in all material respect with and are not in default in any respect
under any, applicable law, statute, order, rule, regulation, policy and/or
guideline of any Governmental Entity relating to ICBC or any of its Subsidiaries
and neither ICBC nor any of its Subsidiaries knows of or has received notice of
any violations of any of the above.
5.15 OWNERSHIP OF COMPANY COMMON STOCK. Neither ICBC nor any of its
affiliates or associates (as such terms are defined under the Exchange Act)
beneficially owns, directly or indirectly, or is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, any shares of capital stock of the Company (other than Trust
Account Shares and DPC Shares).
5.16 AGREEMENTS WITH REGULATORY AGENCIES. Neither ICBC nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each, whether or not set forth in Section 5.16 of the ICBC
Disclosure Schedule, an "ICBC Regulatory Agreement"), any Governmental Entity
that restricts materially the conduct of its business or that in any manner
relates to its capital adequacy, its credit policies, its management or its
business, nor has ICBC or any of its Subsidiaries been advised by any
Governmental Entity that it is considering issuing or requesting any ICBC
Regulatory Agreement.
5.17 OPINION. Prior to the execution of this Agreement, ICBC has
received an oral opinion from Merrill Lynch to the effect that as of the date
thereof and based upon and subject to the matters set forth therein, the Merger
Consideration pursuant to this Agreement is fair from a financial point of view
to ICBC. Such opinion has not been amended or rescinded as of the date of this
Agreement.
5.18 ENVIRONMENTAL MATTERS. (a) Each of ICBC and its Subsidiaries, each
of the Participation Facilities and, to the best knowledge of ICBC, the Loan
Properties (each as hereinafter defined), are in compliance with Environment
Laws and with all applicable decrees, orders and contractual obligations
relating to pollution or the discharge of, or exposure to, Hazardous Materials
in the environment or workplace;
(b) There is no suit, claim, action, proceeding or investigation,
pending or, to the best knowledge of ICBC, threatened (or to the best knowledge
of ICBC, no past or present actions activities, circumstances, conditions,
events or incidents that could form the basis of any such suit, claim, action,
proceeding, investigation or notice), before any Governmental Entity or other
forum in which ICBC, any of its Subsidiaries, any Participation Facility or any
Loan Property (or person
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or entity whose liability for any such suit, claim, action, proceeding,
investigation or notice ICBC, any of its Subsidiaries, Participation Facility or
Loan Property has or may have been retained or assumed either contractually or
by operation of law), has been or, with respect to threatened proceedings, may
be, named as a defendant (x) for alleged noncompliance (including by any
predecessor) with any Environmental Laws, or (y) relating to the release,
threatened release or exposure to or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any Hazardous Material whether or not occurring at or on a site
owned, leased or operated by ICBC or any of its Subsidiaries, any Participation
Facility or any Loan Property;
(c) To the best knowledge of ICBC, during the period of (x) ICBC's or
any of its Subsidiaries' ownership or operation of any of their respective
current or former properties, (y) ICBC's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) ICBC's or
any of its Subsidiaries' interest in a Loan Property, there has been no release
of Hazardous Materials in, on, under or affecting any such property. To the best
knowledge of ICBC, prior to the period of (x) ICBC's or any of its Subsidiaries'
ownership or operation of any of their respective current or former properties,
(y) ICBC's or any of its Subsidiaries' participation in the management of any
Participation Facility, or (z) ICBC's or any of its Subsidiaries' interest in a
Loan Property, there was no release of Hazardous Materials in, on, under or
affecting any such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this Section 5.18:
(x) "Hazardous Materials" means any chemicals, pollutants, contaminants, wastes,
hazardous or toxic substances, petroleum or other regulated substances or
materials, (y) "Loan Property" means any property in which ICBC or any of its
Subsidiaries holds a security interest, and, where required by the context, said
term means the owner or operator of such property; and (z) "Participation
Facility" means any facility in which ICBC or any of its Subsidiaries
participates in the management and, where required by the context, said term
means the owner or operator of such property.
5.19 LOAN PORTFOLIO. Except as set forth in Section 5.19 of the ICBC
Disclosure Schedule, neither ICBC nor any of its Subsidiaries is a party to any
written or oral Loans, other than Loans the unpaid principal balance of which
does not exceed $350,000, under the terms of which the obligor was, as of
December 31, 1998, 90 days or more delinquent in payment of principal or
interest or in default of any other provision. Section 5.19 of the ICBC
Disclosure Schedule sets forth (i) all of the Loans of ICBC or any of its
Subsidiaries that as of December 31, 1998 were classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit
Risk Assets", "Concerned Loans", "Watch List" or words of similar import,
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, (ii) by category of Loan
(i.e., commercial, consumer, etc.), all of the other Loans of ICBC and its
Subsidiaries that as of December 31, 1998 were classified as nonaccrual,
together with the aggregate principal amount on such Loans by category and (iii)
each asset of ICBC that as of December 31, 1998 was classified as "Other Real
Estate Owned" and the book value thereof.
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5.20 INSURANCE. ICBC and its Subsidiaries are presently insured, and
since December 31, 1995 have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by ICBC and its Subsidiaries are in full force and effect, ICBC and
its Subsidiaries are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion.
5.21 YEAR 2000 MATTERS. Section 5.21 of the ICBC Disclosure Schedule
contains a true and correct copy of ICBC's plan for addressing year 2000
computer issues (the "Year 2000 Plan"). ICBC is in compliance with ICBC's Year
2000 Plan. ICBC Bank has been examined by the FDIC with respect to being "Year
2000 Compliant" and neither ICBC nor ICBC Bank has received any written
communication from the FDIC commenting adversely with respect to the ability of
ICBC Bank to become Year 2000 compliant.
5.22 APPROVALS. As of the date of this Agreement, ICBC knows of no
reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger and
the Bank Merger) should not be obtained.
5.23 REORGANIZATION. ICBC has no reason to believe that the Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 COVENANTS OF THE COMPANY. Except as expressly provided in this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company shall use commercially reasonable efforts to, and shall cause
its Subsidiaries to use commercially reasonable efforts to, (i) conduct its
business in the ordinary and usual course consistent with past practices and
prudent banking practice; (ii) maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of the Company,
the Company Bank, ICBC or ICBC Bank to perform its covenants and agreements on a
timely basis under this Agreement, and (iv) take no action which would adversely
affect or delay the ability of the Company, the Company Bank, ICBC or ICBC Bank
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or which would
reasonably be expected to result in any such approvals, consents or waivers
containing any material condition or restriction. Without limiting the
generality of the foregoing, and except as set forth in Section 6.1 of the
Company Disclosure Schedule or as otherwise specifically provided by this
Agreement or consented to in writing by ICBC, the Company shall not, and shall
not permit any of its Subsidiaries to:
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(a) solely in the case of the Company, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than normal quarterly dividends not in excess of $0.12 per share of
Company Common Stock;
(b) (i) repurchase, redeem or otherwise acquire (except for
the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(b) hereof) any shares of the capital stock of the Company
or any Subsidiary of the Company, or any securities convertible into or
exercisable for any shares of the capital stock of the Company or any Subsidiary
of the Company, (ii) split, combine or reclassify any shares of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
(iii) issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares,
or enter into any agreement with respect to any of the foregoing, except, in the
case of clauses (ii) and (iii), for the issuance of Company Common Stock upon
the exercise or fulfillment of rights or options issued or existing or grants
made pursuant to the Company Option Plans or the LCAP, all to the extent
outstanding and in existence on the date of this Agreement as set forth in the
Company Disclosure Schedule and in accordance with their present terms;
(c) amend its certificate of incorporation, articles of
association or bylaws or other similar governing documents;
(d) (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of the Company) with
respect to a merger, consolidation or similar transaction involving, or any
purchase, lease or other acquisition of, all or more than 10% of the assets or
any equity securities of the Company or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal"),
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or (iii) authorize or permit any of its directors,
officers, employees or agents to directly or indirectly engage in any of the
activities specified in clauses (i) or (ii); provided, however, that nothing
contained in this Agreement shall prevent the Company or its Board of Directors
from engaging in any negotiations or discussions with, or providing any
confidential information or data to, any person who has made an unsolicited bona
fide written Acquisition Proposal, if and only to the extent that, in each such
case referred to above, (A) the Board of Directors of the Company, based upon
written advice of outside legal counsel, in good faith deems such action to be
legally necessary for the proper discharge of its fiduciary duties under
applicable law and (B) the Board of Directors of the Company determines in good
faith (based upon written advice of its financial advisor) that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the Acquisition Proposal
and the person making the Acquisition Proposal and would, if consummated, result
in a more favorable transaction than the transaction contemplated by this
Agreement; provided further, however, that the Company may communicate
information about any such Acquisition Proposal to its stockholders if, in the
judgment of the Company's Board
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of Directors, based upon the written advice of outside counsel, such
communication is required under applicable law. The Company will notify ICBC
immediately orally (within one day) and in writing (within three days) if any
such inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with the Company after the date hereof, and the identity
of the person making such inquiry, proposal or offer and the substance thereof
and will keep ICBC informed of any developments with respect thereto immediately
upon occurrence thereof. Subject to the foregoing, the Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company and its Subsidiaries will take the necessary steps to
inform their respective officers, directors, agents, and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) of the obligations undertaken in this Section 6.1(d). The
Company will promptly request each person (other than ICBC) that has executed a
confidentiality agreement prior to the date hereof in connection with its
consideration of a business combination with the Company or any of its
Subsidiaries to return or destroy all confidential information previously
furnished to such person by or on behalf of the Company or any of its
Subsidiaries. The Company shall take all steps reasonably necessary to enforce
all such confidentiality agreements;
(e) make any capital expenditures other than those which (i)
are made in the ordinary course of business or are necessary to maintain
existing assets in good repair, (ii) are set forth in Section 6.1(e) of the
Company Disclosure Schedule, and (iii) in any event (excluding those
expenditures set forth in Section 6.1(e) of the Company Disclosure Schedule) are
in an amount of no more than $100,000 in the aggregate;
(f) enter into any new line of business;
(g) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Company, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with past practices;
(h) take any action that is intended or may reasonably be
expected to result in any of the conditions to the Merger set forth in Article
VIII not being satisfied;
(i) change its methods of accounting in effect at September
30, 1998, except as required by changes in GAAP or regulatory accounting
principles as concurred in writing by the Company's independent auditors;
(j) (i) except as required by applicable law or as required to
maintain qualification pursuant to the Code, adopt, amend or terminate any
employee benefit plan (including, without
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limitation, any Plan) or any agreement, arrangement, plan, trust, other funding
arrangement or policy between the Company or any Subsidiary of the Company and
one or more of its current or former directors, officers, employees or
independent contractors except as required pursuant to irrevocable commitments
existing on the date of this Agreement, change any trustee or custodian of the
assets of any plan or transfer plan assets among trustees or custodians, (ii)
increase or accelerate payment of in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any Plan or agreement as in effect as of the date hereof, except (A) as may be
required pursuant to binding commitments existing on the date hereof as set
forth in Section 4.15 of the Company Disclosure Schedule, (B) as may be required
by applicable law, and (C) in the case of employees who are not officers at the
level of Vice President or above, normal salary increases in the ordinary course
of business consistent with past practice, or (iii) grant or award any stock
options, stock appreciation rights, restricted stock, restricted stock units,
performance units or shares or awards under the LCAP (provided, however that the
awards for a maximum of 28,698 shares of Company Common Stock under the current
three year cycle of the LCAP may be prorated pursuant to Section 4.8 of the
LCAP);
(k) other than activities in the ordinary course of business
consistent with past practice, sell, lease, encumber, assign or otherwise
dispose of, or agree to sell, lease, encumber, assign or otherwise dispose of,
any of its material assets, properties or other rights or agreements except as
otherwise specifically contemplated by this Agreement;
(l) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity;
(m) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(n) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any employment, consulting or
severance agreement or of any material contract, agreement or lease for goods,
services or office space to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or their respective
properties is bound, other than the renewal in the ordinary course of business
of any lease the term of which expires prior to the Closing Date;
(o) other than in the ordinary course of business consistent
with past practice, in individual amounts not to exceed $100,000, and other than
investments for the Company's portfolio made in accordance with Section 6.1(p),
make any investment either by purchase of stock or securities, contributions to
capital, property transfers or purchase of any property or assets of any other
individual, corporation or other entity;
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(p) make any investment in any debt security, including
mortgage-backed and mortgage related securities, other than U.S. government and
U.S. government agency securities with final maturities not greater than five
years or mortgage-backed or mortgage related securities which would not be
considered "high risk" securities under applicable regulatory pronouncements,
that are purchased in the ordinary course of business consistent with past
practice;
(q) enter into or terminate any contract or agreement, or make
any change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or services
with a market value of less than, $100,000 per annum and other than contracts or
agreements covered by Section 6.1(t);
(r) settle any claim, action or proceeding involving any
liability of the Company or any of its Subsidiaries for money damages in excess
of $100,000 or involving any material restrictions upon the operations of the
Company or any of its Subsidiaries;
(s) except in the ordinary course of business and in amounts
less than $100,000, waive or release any material right or collateral or cancel
or compromise any extension of credit or other debt or claim;
(t) (i) make or commit to make any new loan or other extension
of credit in an amount of $300,000 or more, renew for a period in excess of one
year any existing loan or other extension of credit in an amount of $300,000 or
more, or increase by $300,000 or more the aggregate credit outstanding to any
borrower or group of affiliated borrowers, except such loan originations,
commitments, extensions, renewals or increases that have been reviewed by ICBC,
or (ii) make, renegotiate, renew, increase, extend, modify or purchase any loan,
lease (credit equivalent), advance, credit enhancement or other extension of
credit, or make any commitment in respect of any of the foregoing, other than in
the ordinary course of business consistent with past practice and in strict
compliance with the Company's current Board-approved loan policies as in effect
on the date hereof;
(u) incur any additional borrowings beyond those set forth in
the Company Disclosure Schedule other than short-term (with a final maturity of
two years or less) Federal Home Loan Bank borrowings and reverse repurchase
agreements consistent with past practice, or pledge any of its assets to secure
any borrowings other than as required pursuant to the terms of borrowings of the
Company or any Subsidiary in effect at the date hereof or in connection with
borrowings or reverse repurchase agreements permitted hereunder. Deposits shall
not be deemed to be borrowings within the meaning of this paragraph;
(v) make any investment or commitment to invest in real estate
or in any real estate development project, other than real estate acquired in
satisfaction of defaulted mortgage loans and investments or commitments approved
by the Board of Directors of the Company prior to the date of this Agreement and
disclosed in writing to ICBC, provided, however, the Company shall not take any
further action with respect to the loans and properties set forth in Section
4.17 of the Company Disclosure Schedule without the prior consent of ICBC;
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(w) except pursuant to commitments existing at the date hereof
which have previously been disclosed in writing to the ICBC, make any real
estate loans secured by undeveloped land or real estate located outside the
State of New Jersey;
(x) establish or make any commitment relating to the
establishment of any new branch or other office facilities other than those for
which all regulatory approvals have been obtained; with respect to any such new
branch or other office facility for which regulatory approval has been received,
make any capital expenditures that in the aggregate would exceed $50,000, other
than as set forth in Section 6.1(x) of the Company Disclosure Schedule;
(y) organize, capitalize, lend to or otherwise invest in any
Subsidiary, or invest in or acquire a 10% or greater equity or voting interest
in any firm, corporation or business enterprise;
(z) appoint or nominate for election to the Board of Directors
of the Company any person who is not a member of the Board of Directors of the
Company as of the last Company Report; or
(aa) agree to do any of the foregoing.
6.2 COVENANTS OF ICBC. Except as expressly provided in this
Agreement, during the period from the date of this Agreement to the Effective
Time, ICBC shall use commercially reasonable efforts to, and shall cause its
Subsidiaries to use commercially reasonable efforts to, (i) conduct its business
in the ordinary and usual course consistent with past practices and prudent
banking practice, (ii) maintain and preserve intact its business organization,
properties, leases, employees and advantageous business relationships and retain
the services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of the Company or ICBC to perform its
covenants and agreements on a timely basis under this Agreement, and (iv) take
no action which would adversely affect or delay the ability of the Company,
ICBC, the Company Bank or ICBC Bank to obtain any necessary approvals, consents
or waivers of any governmental authority required for the transactions
contemplated hereby or which would reasonably be expected to result in any such
approvals, consents or waivers containing any material condition or restriction.
Without limiting the generality of the foregoing, and except as set forth in
Section 6.2 of the ICBC Disclosure Schedule or as otherwise specifically
provided by the Agreement or consented to in writing by the Company, ICBC shall
not, and shall not permit any of its Subsidiaries to:
(a) solely in the case of ICBC, declare or pay any dividends
on or make any other distributions in respect of any of its capital stock other
than its regular quarterly dividends;
(b) take any action that is intended or may reasonably be
expected to result in any of the conditions to the Merger set forth in Article
VIII not being satisfied;
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(c) change its methods of accounting in effect at September
30, 1998, except in accordance with changes in GAAP or regulatory accounting
principles as concurred in by ICBC's independent auditors;
(d) repurchase any of the ICBC Common Stock during the Pricing
Period or the three (3) consecutive trading days immediately preceding the
commencement of the Pricing Period; or
(e) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 REGULATORY MATTERS. (a) Within forty-five days after the date
hereof or as soon as thereafter as is reasonably practicable, ICBC and the
Company shall promptly prepare and file with the SEC the Proxy Statement and
ICBC shall promptly prepare and file with the SEC the Form S-4, in which the
Proxy Statement will be included as a part of the prospectus contained therein.
Each of the Company and ICBC shall use its reasonable best efforts to have the
Form S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and the Company shall thereafter mail the Proxy Statement to
its stockholders. ICBC shall also use its reasonable best efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to prepare and file within forty-five (45) days
after the date hereof or as soon as thereafter as is reasonably practicable, all
necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary or advisable to consummate the transactions contemplated by
this Agreement (including without limitation the Merger and the Bank Merger).
The Company and ICBC shall have the right to review in advance, and to the
extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to the Company or ICBC, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as practicable.
The parties hereto agree that they will consult with each other with respect to
the obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
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(c) ICBC and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement, the Form S-4 or any other
statement, filing, notice or application made by or on behalf of ICBC, the
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) ICBC and the Company shall promptly furnish each other
with copies of written communications received by ICBC or the Company, as the
case may be, or any of their respective Subsidiaries, Affiliates or Associates
(as such terms are defined in Rule 12b-2 under the Exchange Act as in effect on
the date of this Agreement) from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated hereby.
7.2 ACCESS TO INFORMATION. (a) Upon reasonable notice and subject
to applicable laws relating to the exchange of information, each party shall,
and shall cause each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel and other representatives of the other party, access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, it
shall, and shall cause its Subsidiaries to, make available to the other party
all information concerning its business, properties and personnel as the other
party may reasonably request.
Neither party nor any of its Subsidiaries shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of its customers, jeopardize any attorney-
client privilege or contravene any law, rule, regulation, order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) All information furnished pursuant to Section 7.2(a) shall
be subject to, and each of the Company and ICBC shall hold all such information
in confidence in accordance with, the provisions of the confidentiality
agreement, dated November 5, 1998 (the "Confidentiality Agreement"), between
ICBC and the Company.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
7.3 STOCKHOLDER MEETING. The Company shall take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders to be held as soon as is reasonably practicable after the date on
which the Form S-4 becomes effective for the purpose of voting upon the approval
and adoption of this Agreement and the consummation of the transactions
contemplated hereby. The Company will, through its Board of Directors, recommend
to its stockholders approval of this Agreement and the transactions contemplated
hereby and such other matters as may be
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submitted to its stockholders in connection with this Agreement, unless the
Board of Directors determines, based upon written advice of outside legal
counsel, that the fiduciary duties of such Board preclude it from making such
recommendation. The Company shall engage a nationally recognized proxy
solicitation firm mutually acceptable to the Company and ICBC to assist the
Company in solicitation of the approval and adoption of the Agreement by its
shareholders at the meeting thereof called to consider the Agreement.
7.4 LEGAL CONDITIONS TO MERGER. Each of ICBC and the Company shall, and
shall cause its Subsidiaries to, use their reasonable best efforts (a) to take,
or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VIII hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company or ICBC or any of their respective Subsidiaries in connection
with the Merger and the other transactions contemplated by this Agreement, and
to comply with the terms and conditions of such consent, authorization, order or
approval.
7.5 AFFILIATES. Promptly, but in any event within one week after the
execution and delivery of this Agreement, the Company shall deliver to ICBC a
letter identifying all persons who, to the knowledge of the Company, may be
deemed to be "affiliates" of the Company under Rule 145 of the Securities Act,
including, without limitation, all directors and executive officers of the
Company, together with executed letter agreements, each substantially in the
form of Exhibit B hereto, executed by each such person so identified as an
affiliate of the Company agreeing (i) to comply with Rule 145 and (ii) to be
present in person or by proxy and vote in favor of the Merger at the Company's
stockholders' meeting.
7.6 STOCK EXCHANGE LISTING. ICBC shall use its reasonable best efforts
to cause the shares of ICBC Common Stock to be issued in the Merger to be
approved for listing for quotation on the Nasdaq/NMS, subject to official notice
of issuance, as of the Effective Time.
7.7 EMPLOYEE BENEFIT PLANS; EXISTING AGREEMENTS. (a) As of or as soon
as practicable following the Effective Time, the employees of the Company and
its Subsidiaries (the "Company Employees") shall become employees of ICBC or a
Subsidiary thereof and shall be eligible to participate in the employee benefit
plans of ICBC and its Subsidiaries in which similarly situated employees of ICBC
or ICBC Bank participate, to the same extent as similarly situated employees of
ICBC or ICBC Bank (it being understood that inclusion of Company Employees in
such employee benefit plans may occur at different times with respect to
different plans); provided, however, that (i) nothing contained herein shall
require ICBC or any of its Subsidiaries to make any grants to any Company
Employee under either the ICBC Stock Plan or the ICBC 1998 Recognition and
Retention Plan and Trust Agreement, it being understood that any such grants are
completely discretionary, and (ii) other than as provided in Section 7.13(b)
hereof, nothing contained herein shall require ICBC or any of its Subsidiaries
to permit a Company Employee who is receiving severance as a result of
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the transactions contemplated by this Agreement pursuant to any employment,
severance, consulting or other compensation agreements, plans and arrangements
with the Company or any of its Subsidiaries to participate in any severance or
change in control agreement or plan offered by ICBC or any of its Subsidiaries.
The Company agrees to take any necessary actions to cease benefit accruals under
any Plan that is a tax-qualified defined benefit plan as of the Effective Time.
(b) With respect to each ICBC Plan, for purposes of
determining eligibility to participate, vesting, and vacation entitlement (but
not for accrual of pension benefits), service with the Company shall be treated
as service with ICBC; provided, however, that such service shall not be
recognized to the extent that such recognition would result in a duplication of
benefits. Such service also shall apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the application of any
preexisting condition limitations. Each ICBC Plan shall waive pre-existing
condition limitations to the same extent waived under the applicable Plan.
Company Employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the ICBC Plan during the applicable
plan year.
(c) As of the Effective Time, ICBC shall assume and honor and
shall cause the appropriate Subsidiaries of ICBC to assume and honor in
accordance with their terms all employment, severance, consulting and other
compensation agreements, plans and arrangements existing immediately prior to
the execution of this Agreement which are between the Company or any of its
Subsidiaries and any director, officer or employee thereof and which have been
disclosed in Section 7.7(c) of the Company Disclosure Schedule. ICBC
acknowledges and agrees that (i) the Merger constitutes a "Change in Control"
for all purposes pursuant to such agreements and arrangements, and (ii) in light
of ICBC's plans relating to management assignments and responsibilities with
respect to the business of ICBC from and after the Effective Time, each
director, officer or employee who is a party to, or is otherwise subject to, any
such agreement or arrangement will, upon consummation of the Merger, be entitled
to receive the severance or other similar benefits that are provided thereunder
in the event of a termination of employment for "Good Reason" as defined in such
agreements and arrangements (whether or not such person continues in the
employment of ICBC or its subsidiaries). Any director, officer or employee of
the Company or any of its Subsidiaries who is a party to an agreement set forth
in Section 7.7(c) of the Company Disclosure Schedule shall be entitled to
receive the cash benefits payable under such agreement within 30 days following
the Closing Date; provided, however, that (i) the amounts payable shall not
exceed, individually or in the aggregate, the amounts reflected in Section 4.15
of the Company Disclosure Schedule (except to the extent that any tax
indemnification payments in respect of income and/or excise taxes change due to
changes in the assumptions underlying such amounts) and (ii) the employee
executes and delivers to the Company an instrument in form and substance
satisfactory to ICBC releasing ICBC and its affiliates from any further
liability for monetary payments under such agreement. To the extent that a
director, officer or employee of the Company or any of its Subsidiaries is
entitled to the continued receipt of miscellaneous fringe benefits pursuant to
an agreement set forth in Section 7.7(c) of the Company Disclosure Schedule, and
such director, officer
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or employee becomes a director, officer or employee of ICBC or any of its
Subsidiaries following the Effective Time and as a result becomes entitled to
receive comparable fringe benefits in his or her capacity as a director, officer
or employee of ICBC or any of its Subsidiaries, then the fringe benefits
provided to such person shall be deemed to be provided in connection with such
person's service as a director, officer or employee of ICBC or any of its
Subsidiaries for so long as such person serves in such capacity and shall be in
lieu of, and not in addition to, any fringe benefits that would have otherwise
been provided pursuant to the agreement set forth in Section 7.7(c) of the
Company Disclosure Schedule.
7.8 INDEMNIFICATION. (a) It is understood and agreed that after the
Effective Time, ICBC shall indemnify and hold harmless, to the fullest extent
that the Company is permitted to indemnify (including advancement of expenses)
its directors and officers under New Jersey law or OCC regulations, as
applicable, and the Restated Certificate of Incorporation and Bylaws of the
Company as in effect at the Effective Time, any person who is now, or has been
at any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director, officer or employee of the Company or any of its
Subsidiaries (the "Indemnified Parties") against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with ICBC; provided, however,
that (1) ICBC shall have the right to assume the defense thereof and upon such
assumption ICBC shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if ICBC
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are issues which raise conflicts of interest
between ICBC and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with ICBC, and ICBC
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) ICBC shall in all cases be obligated pursuant to this paragraph to
pay for only one firm of counsel for all Indemnified Parties, (3) ICBC shall not
be liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld) and (4) ICBC shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim Indemnification under this Section 7.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify ICBC thereof, provided that the failure to so notify shall not
affect the obligations of ICBC under this Section 7.8 except to the extent such
failure to notify materially prejudices ICBC. ICBC's obligations under this
Section 7.8 shall continue in full force and effect for a period of six years
from and after the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
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(b) ICBC shall cause the persons serving as officers and
directors of the Company immediately prior to the Effective Time to be covered
for a period of six years from the Effective Time by the directors' and
officers' liability insurance policy maintained by the Company (provided that
ICBC may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than such policy
or single premium tail coverage with policy limits equal to the Company's
existing annual coverage limits) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and directors
in their capacity as such; provided, however, that in no event shall ICBC be
required to expend an aggregate premium for such six-year period in excess of
200% of the current annual premiums expended by the Company (the "Insurance
Amount") to maintain or procure insurance coverage, and further provided that if
ICBC is unable to maintain or obtain the insurance called for by this Section
7.8(b), ICBC shall use all reasonable efforts to obtain as much comparable
insurance as is available for the Insurance Amount.
(c) In the event ICBC or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of ICBC assume
the obligations set forth in this Section.
(d) The provisions of this Section 7.8 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
7.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary action
as may be reasonably requested by ICBC.
7.10 COORDINATION OF DIVIDENDS. After the date of this Agreement,
the Company shall coordinate the declaration of any dividends in respect of the
Company Common Stock and the record dates and payment dates relating thereto
with that of the ICBC Common Stock, it being the intention of the parties that
the holders of ICBC Common Stock or Company Common Stock shall not receive more
than one dividend, or fail to receive one dividend, for any single calendar
quarter with respect to their shares of ICBC Common Stock and/or Company Common
Stock and any shares of ICBC Common Stock any holder of Company Common Stock
receives in exchange therefor in the Merger.
7.11 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
notice to the others of (a) any event or notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its Subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the
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financial condition, properties, businesses or results or operations of such
party and its Subsidiaries taken as a whole to which such party or any
Subsidiary is a party or is subject; and (b) any event, condition, change or
occurrence which individually or in the aggregate has, or which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in a Material Adverse Event. Each of the Company and ICBC shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
7.12 CERTAIN MATTERS, CERTAIN REVALUATIONS, CHANGES AND ADJUSTMENTS. At
or before the Effective Time, upon the request of ICBC, the Company shall,
consistent with GAAP, modify and change its loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to be applied consistently on a mutually satisfactory basis with
those of ICBC and establish such accruals and reserves as shall be necessary to
reflect Merger-related expenses and costs incurred by the Company, provided,
however, that the Company shall not be required to take such action (A) more
than five days prior to the Effective Time, and (B) unless ICBC agrees in
writing that all conditions to closing set forth in Article VIII have been
satisfied or waived (other than those conditions relating to delivery of
documents on the Closing Date); and provided further, however, that no accrual
or reserve made by the Company or any Company Subsidiary pursuant to this
Section 7.12 or any litigation or regulatory proceeding arising out of any such
accrual or reserve, shall constitute or be deemed to be a breach, violation of
or failure to satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining whether
any such breach, violation or failure to satisfy shall have occurred.
7.13 APPOINTMENTS. (a) Donald M. Karp shall be appointed as a director
and Vice Chairman of the Board of Directors of ICBC as of the Effective Time,
with Mr. Karp to be placed in the class of directors whose term is scheduled to
expire in the year 2002; provided, however, that if the Effective Time is prior
to the 1999 Annual Meeting of Stockholders of ICBC, then Mr. Karp will be placed
in the class of directors scheduled to be elected at such annual meeting for a
three-year term and ICBC agrees to nominate Mr. Karp for election to the
three-year term expiring in the year 2002; and provided further, that upon the
expiration of his term in the year 2002, the Board of Directors shall nominate
Mr. Karp to serve for an additional term of at least two years. In addition, Mr.
Karp will receive a five-year contract for services to be actually rendered as a
consultant and senior advisor following the Effective Time, substantially in the
form set forth in Section 7.13(a) of the ICBC Disclosure Schedule. Mr. Karp
shall also be appointed as a director of ICBC Bank as of the Effective Time,
with Mr. Karp to be placed in the class of directors whose term is scheduled to
expire in the year 2002; provided, however, that if the Effective Time is prior
to the 1999 annual meeting of the sole stockholder of ICBC Bank, then ICBC
agrees to elect Mr. Karp for a three-year term expiring in the year 2002 in its
capacity as the sole stockholder of ICBC Bank; and provided further, that upon
the expiration of his term in the year 2002, ICBC agrees to re-elect Mr. Karp as
a director of ICBC Bank for an additional term of at least two years.
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(b) John A. Dorman shall be appointed as President and Chief Operating
Officer of the Broad National Division of ICBC Bank as of the Effective Time,
with his annual salary to be at least equal to his annual salary in effect as of
the date of this Agreement, and shall receive a change in control severance
agreement from ICBC Bank substantially in the form set forth in Section 7.13(b)
of the ICBC Disclosure Schedule.
7.14 CHARITABLE CONTRIBUTIONS. ICBC agrees to continue the Company's
charitable contributions in accordance with past practices and in the aggregate
amount set forth in Section 7.14 of the Company Disclosure Schedule for a period
of at least 12 months following the Effective Time.
7.15 CONSULTING BOARD. ICBC Bank shall, effective as of the Effective
Time, cause each person serving as a director of the Company as of the date of
this Agreement (other than Donald M. Karp), if such persons are willing to so
serve, to be elected or appointed as members of a Consulting Board to the Broad
National Division of ICBC Bank ("Consulting Board") to be established by ICBC
Bank, the function of which shall be to advise ICBC with respect to deposit and
lending activities in the Company's market area and to maintain and develop
customer relationships. The members of the Consulting Board who are willing to
so serve initially shall be elected or appointed for a term of one year. ICBC
Bank agrees to re-elect or re-appoint each of the initial members of the
Consulting Board to an additional one-year term following the initial one-year
term; provided, however, that ICBC Bank shall have no obligation to re-elect or
re-appoint any member if ICBC Bank reasonably determines that such member has a
conflict of interest that compromises such member's ability to serve effectively
as a member of the Consulting Board or any cause exists that otherwise would
allow for removal of such person as a director of ICBC Bank if such person were
a member of ICBC Bank's Board of Directors. Each member of the Consulting Board
shall receive a retainer fee for such service in the amounts set forth in
Section 7.15 of the Company Disclosure Schedule, which fees shall be payable in
quarterly installments or in one lump sum at any time in advance at the option
of ICBC Bank.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the outstanding
shares of Company Common Stock under applicable law and the Company's Restated
Certificate of Incorporation and Bylaws.
(b) Listing of Shares. The shares of ICBC Common Stock which
shall be issued to the stockholders of the Company upon consummation of the
Merger shall have been authorized for listing for quotation on the Nasdaq/NMS,
subject to official notice of issuance.
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(c) Other Approvals. All necessary regulatory or governmental
approvals, consents or waivers required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired;
and all other consents, waivers and approvals of any third parties which are
necessary to permit the consummation of the Merger and the other transactions
contemplated hereby shall have been obtained or made except for those the
failure to obtain would not have a Material Adverse Effect (i) on the Company
and its subsidiaries taken as a whole or (ii) on ICBC and its Subsidiaries taken
as a whole. None of the approvals or waivers referred to herein shall contain
any term or condition which would have a Material Adverse Effect on the
Surviving Corporation and its Subsidiaries, taken as a whole, after giving
effect to the Merger.
(d) Form S-4. The Form S-4 shall have become effective under
the Securities Act and no stop order suspending the effectiveness of the Form
S-4 shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(f) Affiliate Letters. ICBC shall have received the letter
agreements referred to in Section 7.5.
8.2 CONDITIONS TO OBLIGATIONS OF ICBC. The obligation of ICBC to
effect the Merger is also subject to the satisfaction or waiver by ICBC at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section
3.2, the representations and warranties of the Company set forth in this
Agreement (other than those set forth in the first and third sentences of
Section 4.1(a), the first two sentences of Section 4.1(b) and Sections 4.2, 4.6,
4.8(a), 4.10 and 4.18) shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; and (ii) the representations and warranties of the Company set
forth in the first and third sentences of Section 4.1(a), the first two
sentences of Section 4.1(b) and Sections 4.2, 4.6, 4.8(a), 4.10 and 4.18 of this
Agreement shall be true and correct in all material respects (without giving
effect to Section 3.2 of this Agreement) as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date. ICBC
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to the
foregoing effect.
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(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and
ICBC shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to such
effect.
(c) Federal Tax Opinion. ICBC shall have received an
opinion from Elias, Matz, Tiernan & Herrick L.L.P., counsel to ICBC ("ICBC's
Counsel"), in form and substance reasonably satisfactory to ICBC, dated the
Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code and
that, accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by ICBC
or the Company as a result of the Merger;
(ii) No gain or loss will be recognized by the
stockholders of the Company who exchange all of their Company Common Stock
solely for ICBC Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in ICBC Common Stock); and
(iii) The aggregate tax basis of the ICBC Common
Stock received by stockholders who exchange all of their Company Common Stock
solely for ICBC Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share interest for which cash
is received).
In rendering such opinion, ICBC's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of ICBC, the Company and others, reasonably satisfactory in form and
substance to such counsel.
(d) Accountant's Letter. The Company shall have caused to
be delivered to ICBC "cold comfort" letters or letters of procedures from the
Company's independent certified public accountants, dated (i) the date of the
mailing of the Proxy Statement to the Company's stockholders and (ii) a date not
earlier than five business days preceding the Closing Date and addressed to
ICBC, concerning such matters as are customarily covered in transactions of the
type contemplated hereby.
(e) Approvals. Any and all permits, consents, waivers,
clearances, approvals and authorizations of all Governmental Entities and third
parties which are necessary in connection with the consummation of the Merger
and the Bank Merger shall have been obtained; provided, however, that no
approval or consent referred to in this Section 8.1(e) shall be deemed to have
been received if it shall include any term, condition or requirement that,
individually or in the aggregate, (i) would result in a material adverse effect
on the results, business, operation, assets, financial condition or
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prospects of ICBC on a consolidated basis, or (ii) would reduce the economic or
business benefits of the transactions contemplated by this Agreement to ICBC in
so significant a manner that ICBC, in its reasonable judgement, would not have
entered into this Agreement.
8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to
Section 3.2, the representations and warranties of ICBC set forth in this
Agreement (other than those set forth in the first and third sentences of
Section 5.1(a), the first two sentences of Section 5.1(b) and Sections 5.2, 5.6
and 5.8 shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; and (ii)
the representations and warranties of ICBC set forth in the first and third
sentences of Section 5.1(a), the first two sentences of Section 5.1(b) and
Sections 5.2, 5.6 and 5.8 of this Agreement shall be true and correct in all
material respects (without giving effect to Section 3.2 of this Agreement) as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date. The Company shall have received a certificate signed
on behalf of ICBC by the Chief Executive Officer and the Chief Financial Officer
of ICBC to the foregoing effect.
(b) Performance of Obligations of ICBC. ICBC shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of ICBC by the Chief Executive
Officer and the Chief Financial Officer of ICBC to such effect.
(c) Federal Tax Opinion. The Company shall have received
an opinion from Stinson, Mag & Fizzell P.C. (the "Company's Counsel"), in form
and substance reasonably satisfactory to the Company, dated the Effective Time,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, for federal income tax purposes:
(i) No gain or loss will be recognized by ICBC
or the Company as a result of the Merger;
(ii) No gain or loss will be recognized by the
stockholders of the Company who exchange all of their Company Common Stock
solely for ICBC Common Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in ICBC Common Stock); and
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(iii) The aggregate tax basis of the ICBC Common
Stock received by stockholders who exchange all of their Company Common Stock
solely for ICBC Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Company Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional share interest for which cash
is received).
In rendering such opinion, the Company's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of ICBC, the Company and others, reasonably satisfactory in form and
substance to such counsel.
(d) Accountant's Letter. ICBC shall have caused to be
delivered to the Company "cold comfort" letters or letters of procedures from
ICBC's independent certified public accountants, dated (i) the date of the
mailing of the Proxy Statement to the Company's stockholders and (ii) a date not
earlier than five business days preceding the Closing Date and addressed to the
Company, concerning such matters as are customarily covered in transactions of
the type contemplated hereby.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual consent of the Company and ICBC in a
written instrument, if the Board of Directors of each so determines by a vote of
a majority of the members of its entire Board;
(b) by either ICBC or the Company upon written notice to
the other party (i) 30 days after the date on which any request or application
for a Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 30-day period following such
denial or withdrawal a petition for rehearing or an amended application has been
filed with the applicable Governmental Entity, provided, however, that no party
shall have the right to terminate this Agreement pursuant to this Section
9.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger;
(c) by either ICBC or the Company, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board, if the Merger shall not have been consummated on or before November 30,
1999, unless the failure of the Closing to occur by such date shall be due
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to the failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein;
(d) by either ICBC or the Company, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board (provided that if the Company is the terminating party, it shall not be in
material breach of any of its obligations under Section 7.3) if any approval of
the stockholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of such stockholders or at any adjournment or
postponement thereof;
(e) by either ICBC or the Company, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board (provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
there shall have been a material breach of any of the representations or
warranties set forth in this Agreement on the part of the other party, which
breach is not cured within 30 days following written notice to the party
committing such breach, or which breach, by its nature, cannot be cured prior to
the Closing; provided, however, that neither party shall have the right to
terminate this Agreement pursuant to this Section 9.1(e) unless the breach of
representation or warranty, together with all other such breaches, would entitle
the party receiving such representation not to consummate the transactions
contemplated hereby under Section 8.2(a) (in the case of a breach of
representation or warranty by the Company) or Section 8.3(a) (in the case of a
breach of representation or warranty by ICBC);
(f) by either ICBC or the Company, if its Board of
Directors so determines by a vote of a majority of the members of its entire
Board (provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if
there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, which breach shall
not have been cured within 30 days following receipt by the breaching party of
written notice of such breach from the other party hereto, or which breach, by
its nature, cannot be cured prior to the Closing; or
(g) By the Company, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, at any
time during the four business day period commencing with the first business day
after the end of the Pricing Period (as defined in Section 1.4(e) hereof), if
both of the following conditions are satisfied:
(i) the product of the Average Closing Price
multiplied by the Final Exchange Ratio (as such terms are defined in
Section 1.4(e) hereof) shall be less than $24.00; and
(ii) (x) the number (the "ICBC Ratio") obtained
by dividing the Average Closing Price by the Starting Price shall be
less than (y) the number obtained by dividing the Final Index Price by
the Initial Index Price (each as defined below) and subtracting 0.15
from
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<PAGE> 144
the quotient in this clause (ii)(y) (such number in this clause (ii)(y)
being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If the Company elects to
exercise its termination right pursuant to this Section 9.1(g), it shall give
prompt written notice to ICBC (provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned four business
day period). During the four business day period commencing with the first
business day after its receipt of such notice from the Company, ICBC shall have
the option to increase the consideration to be received by the holders of
Company Common Stock hereunder, by adjusting the Final Exchange Ratio to equal
the lesser of (x) a number (rounded to the nearest ten-thousandth) obtained by
dividing (A) $24.00 by (B) the Average Closing Price, and (y) a number (rounded
to the nearest ten-thousandth) obtained by substituting the Adjusted Preliminary
Stock Ratio (as defined below) for the Preliminary Stock Ratio in the
definitions contained in Section 1.4(e) hereof. If ICBC so elects within such
four business day period, it shall give prompt written notice to the Company of
such election and the revised Final Exchange Ratio, whereupon no termination
shall have occurred pursuant to this Section 9.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as the Final Exchange
Ratio shall have been so modified).
For purposes of this Section 9.1(g), the following terms shall have the
meanings indicated:
"Adjusted Preliminary Stock Ratio" shall mean 1.0 plus the Index Ratio
less the ICBC Ratio, with the net sum being multiplied by the Preliminary Stock
Ratio then in effect as provided by 1.4(e) hereof.
"Final Index Price" shall mean the average of the Final Prices for each
company comprising the Index Group multiplied by the appropriate weighting.
"Final Price," with respect to any company belonging to the Index
Group, means the average of the daily closing sales prices of a share of common
stock of such company, as reported on the consolidated transaction reporting
system for the market or exchange on which such common stock is principally
traded, during the Pricing Period.
"Index Group" shall mean the 21 financial institutions or financial
institution holding companies listed below, the common stock of which shall be
publicly traded and as to which there shall not have been a publicly announced
proposal since the Starting Date and before the end of the Pricing Period for
any such company to be acquired. In the event that the common stock of any such
company ceases to be publicly traded or a proposal to acquire any such company
is announced at any time after the Starting Date and before the end of the
Pricing Period, such company shall be removed from the Index Group, and the
weights (which have been determined based on the number of outstanding shares of
common stock and the market prices of such stock) attributed to the remaining
companies shall be adjusted proportionately for purposes of determining the
Final Index Price and the Initial Index Price. The 21 financial institutions or
financial institution holding companies and the weights attributed to them are
as follows:
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<TABLE>
<CAPTION>
Company Weighting
------------------------------------------------------
<S> <C>
Astoria Financial Corp. 4.3%
Charter One Financial 12.9%
Commerce Bancorp Inc. 1.9%
Dime Bancorp Inc. 8.7%
Dime Community 0.9%
Fulton Financial Corp. 4.9%
GreenPoint Financial Corp. 7.5%
HUBCO Inc. 3.2%
JSB Financial Inc. 0.8%
Keystone Financial Inc. 3.9%
M&T Bank Corp. 0.6%
North Fork Bancorp 11.0%
Peoples Heritage Financial Group 6.8%
Queens County Bancorp Inc. 1.7%
Richmond County 2.0%
S&T Bancorp Inc. 2.2%
Sovereign Bancorp Inc. 12.8%
Staten Island Bancorp Inc. 3.4%
UST Corp. 3.3%
Valley National Bancorp 4.3%
Webster Financial Corp. 2.9%
------
100.0%
======
</TABLE>
"Initial Index Price" means the weighted average (weighted in
accordance with the factors listed above) of the per share closing prices of the
common stock of each of the companies comprising the Index Group, as such prices
are reported on the consolidated transactions reporting system for the market or
exchange on which such common stock is principally traded on the Starting Date.
"Starting Date" shall mean the last trading day immediately preceding
the date of the first public announcement of entry into this Agreement.
"Starting Price" shall mean the closing price of a share of ICBC Common
Stock on the Nasdaq/NMS (as reported by The Wall Street Journal or, if not
reported therein, by another authoritative source) on the Starting Date.
If any company belonging to the Index Group or ICBC declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between and including the Starting
Date and the end of the Pricing Period, the prices for the common stock of such
company or ICBC and the Final Exchange Ratio shall be appropriately adjusted for
the purposes of applying this Section 9.1(g).
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<PAGE> 146
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either ICBC or the Company as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect except (i) Sections
7.2(b), 9.2, 9.5 and 10.3 shall survive any termination of this Agreement and
(ii) that notwithstanding anything to the contrary contained in this Agreement,
no party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Agreement.
9.3 AMENDMENT. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the stockholders of the
Company; provided, however, that after any approval of the transactions
contemplated by this Agreement by the Company's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Company stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time, each of
the parties hereto, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (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 of the other party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument signed on behalf of
such party, but such extension or waiver or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
9.5 TERMINATION FEE. (a) The Company hereby agrees to pay ICBC, and
ICBC shall be entitled to payment of, a fee (the "Fee") of $6.5 million upon the
occurrence of a Triggering Event (as defined herein) so long as the Triggering
Event occurs prior to a Fee Termination Event (as defined herein). Such payment
shall be made to ICBC in immediately available funds within five business days
after the occurrence of a Triggering Event. A Fee Termination Event shall be the
first to occur of the following: (i) the Effective Time, (ii) termination of
this Agreement in accordance with the terms hereof prior to the occurrence of a
Triggering Event (other than a termination of this Agreement by ICBC pursuant to
Sections (9.1(e) or 9.1(f) hereof as a result of a willful breach of any
representation, warranty, covenant or agreement of the Company) or (iii) 15
months after the termination of this Agreement by ICBC pursuant to Sections
9.1(e) or 9.1(f) hereof as a result of a willful breach of any representation,
warranty, covenant or agreement of the Company.
(b) The term "Triggering Event" shall mean any of the following events
or transactions occurring after the date hereof:
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(i) The Company or any Subsidiary thereof, without having
received ICBC's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as defined below)
with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act and the rules and regulations thereunder) other than
ICBC or any ICBC subsidiary, or the Board of Directors of the Company
shall have recommended that the stockholders of the Company approve or
accept any Acquisition Transaction with any person other than ICBC or
any ICBC Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Company or any Company Subsidiary, (y) a
purchase, lease or other acquisition of all or 10% or more of the
assets or deposits of the Company or any Company Subsidiary or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) or securities representing
15% or more of the voting power of the Company or any Company
Subsidiary; provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only the Company
and/or Company Subsidiaries;
(ii) Any person (other than ICBC, any ICBC Subsidiary or
Donald M. Karp and/or Harriet M. Alpert), other than in connection with
a transaction to which ICBC has given its prior written consent, shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the outstanding shares of Company Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the Exchange
Act, and the rules and regulations thereunder) and subsequent to such
acquisition either (A) the holders of Company Common Stock shall not
have approved this Agreement and the transactions contemplated hereby
at the meeting, or any adjournment thereof, of such stockholders held
for the purpose of voting on this Agreement (except that the initial
Fee in such event shall be $1.5 million with an additional $5.0 million
Fee to be paid upon the execution by the Company or any Subsidiary
thereof within 15 months following such meeting of an agreement or
letter of intent to engage in an Acquisition Transaction with any
person other than ICBC or an ICBC Subsidiary), (B) such meeting shall
not have been held by October 31, 1999 or shall have been canceled
after a voting record date for such meeting shall have been established
by the Company, (C) the Board of Directors of the Company shall have
publicly withdrawn or modified, or publicly announced its intent to
withdraw or modify, in any manner adverse to ICBC, its recommendation
that the stockholders of the Company approve the transactions
contemplated by this Agreement, or (D) the Company shall have breached
any covenant or obligation contained in this Agreement and such breach
would entitle ICBC to terminate this Agreement;
(iii) Any person other than ICBC or any ICBC Subsidiary, other
than in connection with a transaction to which ICBC has given its prior
written consent, shall have made a bona fide proposal to the Company or
its stockholders, by public announcement or written communication that
is or becomes the subject of public disclosure, to engage in an
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Acquisition Transaction (including, without limitation, any situation
in which any person other than ICBC or any ICBC Subsidiary shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) a tender offer or shall have filed a registration statement under
the Securities Act with respect to an exchange offer, to purchase any
shares of Company Common Stock such that, upon consummation of such
offer, such person would own or control 15% or more of the then
outstanding shares of Company Common Stock) and after such public
announcement or public disclosure either (A) the holders of Company
Common Stock shall not have approved this Agreement and the
transactions contemplated hereby at the meeting, or any adjournment
thereof, of such stockholders held for the purpose of voting on this
Agreement (except that the initial Fee in such event shall be $1.5
million with an additional $5.0 million Fee to be paid upon the
execution by the Company or any Subsidiary thereof within 15 months
following such meeting of an agreement or letter of intent to engage in
an Acquisition Transaction with any person other than ICBC or an ICBC
Subsidiary), (B) such meeting shall not have been held by October 31,
1999 or shall have been canceled after a voting record date for such
meeting shall have been established by the Company, (C) the Board of
Directors of the Company shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner
adverse to ICBC, its recommendation that the stockholders of the
Company approve the transactions contemplated by this Agreement, or (D)
the Company shall have breached any covenant or obligation contained in
this Agreement and such breach would entitle ICBC to terminate this
Agreement; or
(iv) after a bona fide proposal is made by any person, other
than ICBC or any ICBC Subsidiary, to the Company to engage in an
Acquisition Transaction, either (A) such meeting shall not have been
held by October 31, 1999 or shall have been canceled after a voting
record date for such meeting shall have been established by the
Company, (B) the Board of Directors of the Company shall have publicly
withdrawn or modified, or publicly announced its intent to withdraw or
modify, in any manner adverse to ICBC, its recommendation that the
stockholders of the Company approve the transactions contemplated by
this Agreement, or (C) the Company shall have breached any covenant or
obligation contained in this Agreement and such breach would entitle
ICBC to terminate this Agreement.
(c) The Company shall notify ICBC promptly in writing of the
occurrence of any Triggering Event.
ARTICLE X
GENERAL PROVISIONS
10.1 CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on the first day which is at least two and not more than five business days
after the satisfaction or waiver (subject to applicable law) of the latest
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to occur of the conditions set forth in Article VIII hereof (other than those
conditions which relate to actions to be taken at the Closing) (the "Closing
Date"), at the offices of ICBC, unless another time, date or place is agreed to
in writing by the parties hereto; provided, however, that the Closing shall not
occur until after the Election Deadline.
10.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for those covenants and agreements contained
herein and therein which by their terms apply in whole or in part after the
Effective Time, including, but not limited to, the provisions of Section 9.5
hereof.
10.3 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses; provided, however, that the costs of
printing and mailing the Proxy Statement shall be borne equally by the parties
hereto.
10.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to ICBC, to:
Independence Community Bank Corp.
195 Montague Street
Brooklyn, NY 11201
Attention: Chief Executive Officer
with a copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 Fifteenth Street, N.W., 12th Floor
Washington, DC 20005
Attention: Philip Ross Bevan, Esq.
and
(b) if to the Company, to:
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<PAGE> 150
Broad National Bancorporation
905 Broad Street
Newark, NJ 07102
Attention: Chief Executive Officer
with a copy to:
Stinson, Mag & Fizzell P.C.
1201 Walnut Street, Suite 2800
Kansas City, MO 64106
Attention: James W. Allen, Esq.
10.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to February 1, 1999. No provision of this Agreement shall be construed
to require the Company, ICBC or any of their respective Subsidiaries or
affiliates to take any action that would violate any applicable law, rule or
regulation.
10.6 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.7 ENTIRE AGREEMENT. This Agreement (including the documents and
the instruments referred to herein), together with the Confidentiality
Agreement, constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
10.8 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.
10.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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10.10 PUBLICITY. Except as otherwise required by law or the rules of
the Nasdaq/NMS, so long as this Agreement is in effect, neither ICBC nor the
Company shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.
10.11 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
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IN WITNESS WHEREOF, ICBC and the Company have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
INDEPENDENCE COMMUNITY BANK CORP.
By: /s/ Charles J. Hamm
------------------------------------
Name: Charles J. Hamm
Title: Chairman, President and Chief
Executive Officer
BROAD NATIONAL BANCORPORATION
By: /s/ Donald M. Karp
------------------------------------
Name: Donald M. Karp
Title: Chairman and Chief
Executive Officer
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APPENDIX B
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of February 1, 1999, by and among
certain stockholders of Broad National Bancorporation (the "Company"), a New
Jersey corporation, identified on Schedule I hereto (collectively the
"Stockholders"), and Independence Community Bank Corp., a Delaware corporation
("ICBC").
WHEREAS, ICBC and the Company have entered into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which is being
executed substantially simultaneously with the execution of this Stockholders'
Agreement and provides for, among other things, the merger of the Company with
and into ICBC (the "Merger"); and
WHEREAS, in order to induce ICBC to enter into the Merger Agreement,
the Stockholders agree to, among other things, vote in favor of the Merger
Agreement in their capacity as stockholders of the Company.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. The Stockholders represent
and warrant that they have or share the right to vote and dispose of the number
of shares of common stock of the Company, $1.00 par value per share ("Company
Common Stock"), set forth on Schedule I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall vote, or cause to be voted, all
shares of Company Common Stock which such stockholder has the right to
vote (whether owned as of the date hereof or hereafter acquired) in
favor of the Merger Agreement and against any plan or proposal pursuant
to which the Company is to be acquired by or merged with, or pursuant
to which the Company proposes to sell all or substantially all of its
assets and liabilities to, any person, entity or group (other than ICBC
or any affiliate thereof);
(b) such Stockholder shall not, prior to the termination of
the Merger Agreement in accordance with its terms, sell, pledge,
transfer or otherwise dispose of their respective shares of Company
Common Stock (other than by means of gift where the donee has agreed to
abide by the terms of this Agreement in a form reasonably satisfactory
to ICBC);
(c) such Stockholder shall not directly or indirectly
initiate, solicit or encourage, any inquiries or the making of any
proposal or offer (including, without limitation, any
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<PAGE> 154
proposal or offer to stockholders of the Company) with respect to a
merger, consolidation or similar transaction involving, or any
purchase, lease or other acquisition of, all or more than 10% of the
assets or any equity securities of the Company or any of its
Subsidiaries (as defined in the Merger Agreement) (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Acquisition Proposal (provided that nothing herein shall
be deemed to affect the ability of the Stockholders who are directors
of the Company to, in good faith based upon written advice of counsel,
fulfill their fiduciary duties as a director of the Company); and
(d) such Stockholder shall use all reasonable efforts to take
or cause to be taken all action, and to do or cause to be done all
things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the agreements
contemplated by this Stockholders' Agreement (provided that nothing
herein shall be deemed to affect the ability of the Stockholders who
are directors of the Company to fulfill their fiduciary duties as a
director of the Company).
3. TERMINATION. The parties agree and intend that this
Stockholders' Agreement be a valid and binding agreement enforceable against the
parties hereto, that damages and other remedies at law for the breach of this
Stockholders' Agreement are inadequate and that the obligations of the parties
hereto shall be enforceable through injunctive or other equitable relief. This
Stockholders' Agreement may be terminated at any time prior to the consummation
of the Merger by mutual written consent of all the parties hereto and shall be
automatically terminated in the event that the Merger Agreement is terminated in
accordance with its terms.
4. NOTICES. Notices may be provided to the Company and the
Stockholders in the manner specified in Section 10.4 of the Merger Agreement,
with all notices to the Stockholders being provided to them at the Company in
the manner specified in such section.
5. GOVERNING LAW. This Stockholders' Agreement shall be governed
by the laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.
6. COUNTERPARTS. This Stockholders' Agreement may be executed in
counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
7. HEADINGS. The section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholders' Agreement.
8. SEVERABILITY. Any term or provision of this Stockholders'
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Stockholders' Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Stockholders' Agreement
in any other jurisdiction. If any provision of this
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<PAGE> 155
Stockholders' Agreement is so broad as to be unenforceable, the provision shall
be interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, the Company, by a duly authorized officer, and the
Stockholders have caused this Stockholders' Agreement to be executed as of the
day and year first above written.
INDEPENDENCE COMMUNITY BANK CORP.
/s/ Charles J. Hamm
By: ---------------------------------------
Charles J. Hamm
Chairman, President and Chief Executive
Officer
BROAD NATIONAL BANCORPORATION
STOCKHOLDERS
/s/ Donald M. Karp /s/ Edward J. Lenihan
- ----------------------------- ---------------------------------------
Donald M. Karp Edward J. Lenihan
/s/ James Boyle /s/ Stanley J. Lesnik
- ----------------------------- ---------------------------------------
James Boyle Stanley J. Lesnik
/s/ Licinio Cruz /s/ Catherine McFarland
- ----------------------------- ---------------------------------------
Licinio Cruz Catherine McFarland
/s/ John A. Dorman /s/ Louis J. Owen
- ----------------------------- ---------------------------------------
John A. Dorman Louis J. Owen
/s/ Arthur Fischman /s/ Fred Perry, Jr.
- ----------------------------- ---------------------------------------
Arthur Fischman Fred Perry, Jr.
/s/ John J. Iannuzzi /s/ A. Harold Schwartz
- ----------------------------- ---------------------------------------
John J. Iannuzzi A. Harold Schwartz
/s/ Peter Kenny /s/ Hubert Williams
- ----------------------------- ---------------------------------------
Peter Kenny Hubert Williams
/s/ James J. Lazarus
- -----------------------------
James J. Lazarus
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<PAGE> 156
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- --------------------------------------------------------------------------------
<S> <C>
Donald M. Karp 961,299
James Boyle 693
Licinio Cruz 13,362
John A. Dorman 26,888
Arthur Fischman 18,713
John J. Iannuzzi 7,885
Peter Kenny 4,516
James J. Lazarus 28,027
Edward J. Lenihan 21,620
Stanley J. Lesnik 20,347
Catherine McFarland 3,182
Louis J. Owen 18,486
Fred Perry 15,416
A. Harold Schwartz 60,724
Hubert Williams 15,804
---------
Total 1,216,962
</TABLE>
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<PAGE> 157
APPENDIX C
May __, 1999
The Board of Directors
Broad National Bancorporation
905 Broad Street
Newark, New Jersey 07102
Members of the Board:
You have requested our opinion as investment bankers that the consideration in
the Merger (the "Merger") between Broad National Bancorporation ("Broad") and
Independence Community Bank Corp., ("Independence") the holding company for
Independence Community Bank, as provided and described in the Merger Agreement
is fair to the holders of Broad Common Stock from a financial point of view.
Pursuant to the Agreement and Plan of Merger (the "Agreement") dated February 1,
1999, Broad will merge with Independence, and holders of Broad common stock will
receive cash or shares of Independence Common Stock pursuant to an election,
proration and allocation procedure subject to the total consideration being
comprised of 50% Independence common stock and 50% cash provided the average
closing price (as defined) of Independence Common Stock is between $12.75 and
$17.25 per share. The merger consideration any Broad stockholder receives will
be determined based upon a conversion ratio designed to produce a value of
$26.50 per share whether in stock (measured by the average closing price) or
cash when Independence stock has an average closing price as calculated in the
Agreement of between $12.75 and $17.25. To the extent that the average closing
price of Independence common stock during the pricing period exceeds $17.25 or
is less than $12.75, the per share value of the consideration, whether in cash
or stock, will increase or decrease, respectively. We have assumed that the
Merger will be accounted for by Independence as a purchase transaction and will
be a tax-free reorganization, except to the extent of cash received by a
shareholder.
Ryan, Beck & Co., Inc. as a customary part of its investment banking business,
is engaged in the valuation of banking and savings institutions and their
securities in connection with mergers and acquisitions. In conducting our
investigation and analysis of the Merger, we have met separately with members of
senior management of Independence and Broad to discuss their respective
operations, historical financial statements, strategic plans and future
prospects. We have reviewed and analyzed material prepared in connection with
the Merger, including but not limited to the following: (i) the Agreement and
related documents; (ii) the proxy statement-prospectus; (iii) Independence's
Annual Report to Shareholders and Annual Report on Form 10-K for the year ended
March 31, 1998 and Independence's Quarterly Reports on Form 10-Q for the periods
ended December 31, 1998, September 30, 1998 and June 30, 1998; (iv)
Independence's Registration Statement on Forms S-1A and 424(b) Prospectus, dated
December 12, 1997 and January 12, 1998,
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Broad National Bancorporation
April __, 1999
Page 2
respectively, with respect to Independence's conversion from mutual to stock
form of organization; (v) Independence's Current Report on Form 8-K dated April
20, 1999 with respect to Independence's pending acquisition of Statewide
Financial Corp.; (vi) Statewide's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the periods ended December 31, 1998, 1997, and 1996,
and Statewide's Quarterly Reports on Form 10-Q for the periods ended September
30, 1998, June 30, 1998, and March 31, 1998; (vii) Broad's Annual Reports to
Shareholders and Annual Reports on Form 10-K for the years ended December 31,
1998, 1997, 1996 and 1995, and Broad's Quarterly Reports on Form 10-Q for the
periods ended September 30, 1998, June 30, 1998, and March 31, 1998; (viii)
certain operating and financial information provided to Ryan, Beck by the
managements of Independence and Broad relating to their business and prospects;
(ix) the historical stock prices and trading volume of Independence's common
stock; (x) the publicly available financial data of thrift organizations which
Ryan, Beck deemed generally comparable to Independence; (xi) the historical
stock prices and trading volume of Broad's common stock; (xii) the publicly
available financial data of commercial banking organizations which Ryan, Beck
deemed generally comparable to Broad; (xiii) the terms of recent acquisitions
of commercial banking organizations which Ryan, Beck deemed generally
comparable in whole or in part to Broad; and (xiv) the potential pro forma
impact of the Merger on Independence's financial condition, operating results
and per share figures. We also conducted or reviewed such other studies,
analyses, inquiries and examinations as we deemed appropriate. Ryan, Beck as
part of its review of the Merger, also analyzed Independence's ability to
consummate the Merger and considered the future prospects of Broad in the event
it remained independent.
While we have taken care in our investigation and analyses, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the respective institutions or which was publicly
available and have not assumed any responsibility for independently verifying
such information. We have also relied upon the managements of Broad and
Independence as to the reasonableness and achievability of the financial and
operating forecasts and projections (and the assumptions and bases therefor)
provided to us and in certain instances we have made certain adjustments to such
financial and operating forecasts which in our judgment were appropriate under
the circumstances. In addition, we have assumed with your consent that such
forecasts and projections reflect the best currently available estimates and
judgments of the respective managements. We are not experts in the evaluation of
allowances for loan losses. Therefore, we have not assumed any responsibility
for making an independent valuation of the adequacy of the allowances for loan
losses set forth in the balance sheets of Broad and Independence at December 31,
1998, and we assumed such allowances were adequate and comply fully with
applicable law, regulatory policy, sound banking practice and policies of the
Securities and Exchange Commission as of the date of such financial statements.
We also assumed that the Merger in all respects is, and will be consummated in
compliance with all laws and regulations applicable to Broad and Independence.
We have not made or obtained any independent evaluations or appraisals of the
assets and liabilities of either Broad or Independence or their respective
subsidiaries, nor have we reviewed any individual loan files of Broad or
Independence or their respective subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
in the circumstances. In rendering our
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Broad National Bancorporation
April __, 1999
Page 3
opinion, we have assumed that in the course of obtaining the necessary
regulatory approvals for the Merger, no conditions will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger to
Broad. Our opinion is necessarily based on economic, market and other conditions
and projections as they exist and can be evaluated on the date hereof,
including Independence's pending acquisition of Statewide Financial Corp. Ryan,
Beck did not and does not express any opinion as to the price or range of prices
at which Independence Common Stock might trade during the pricing period or
subsequent to the Merger. We were not requested to, and did not, solicit third
party indications of interest in acquiring Broad or in engaging in a business
combination or any other strategic transaction with Broad. We have not opined on
the fairness of the transaction should Independence elect not to increase the
Exchange Ratio above the maximum in order to avoid a termination of the
Agreement by Broad because the per share consideration declined below $24.00 per
share and Independence's Common Stock price declined in excess of 15% of the
index (as defined in the Agreement).
We have been retained by the Board of Directors of Broad as an independent
contractor to act as financial advisor to Broad with respect to the Merger and
will receive a fee for our services. Ryan, Beck has had no investment banking
relationship with Independence. Ryan, Beck is a market maker in Independence
Common Stock and, in such capacity, may from time to time own Independence
Common Stock. Ryan, Beck's research department does not follow Independence,
however, Ryan, Beck did produce a report upon Independence's conversion from a
mutual to stock form of organization. Ryan, Beck has had an investment banking
relationship with Broad for a number of years. Ryan, Beck was the sole
underwriter of the 8 1/2% Cumulative Convertible Preferred Stock 1992 Class and
BNB Capital Trust's 9.50% Cumulative Trust Preferred Securities. Ryan, Beck is a
market maker in Broad's Trust Preferred Securities and, in such capacity, may
from time to time own Trust Preferred Securities. Ryan, Beck's research
department has issued research reports on Broad and comments on Broad in its
periodic commentaries. Ryan, Beck is also a market maker in Broad's common stock
and, in such capacity, may from time to time own Broad Common Stock.
Our opinion is directed to the Board of Directors of Broad and does not
constitute a recommendation to any shareholder of Broad as to how such
shareholder should vote at any shareholder meeting held in connection with the
Merger.
Based upon and subject to the foregoing it is our opinion as investment bankers
that the consideration in the Merger as provided and described in the Merger
Agreement is fair to the holders of Broad common stock from a financial point of
view.
Very truly yours,
Ryan, Beck & Co., Inc.
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<PAGE> 160
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with the General Corporation law of the State of
Delaware, Articles 9 and 10 of the Registrant's Certification of Incorporation
and Article VI of the Registrant's Bylaws provide as follows:
ARTICLE 9 OF CERTIFICATION OF INCORPORATION
LIABILITY OF DIRECTORS AND OFFICERS. The personal liability of the
directors and officers of the Corporation for monetary damages shall be
eliminated to the fullest extent permitted by the General Corporation Law of the
State of Delaware as it exists on the effective date of this Certificate of
Incorporation or as such law may be thereafter in effect. No amendment,
modification or repeal of this Article 9 shall adversely affect the rights
provided hereby with respect to any claim, issue or matter in any proceeding
that is based in any respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
ARTICLE 10 OF CERTIFICATE OF INCORPORATION
INDEMNIFICATION. The Corporation shall indemnify its directors,
officers, employees, agents and former directors, officers, employees and
agents, and any other persons serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, association,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees, judgments, fines and amounts paid in settlement)
incurred in connection with any pending or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, with
respect to which such director, officer, employee, agent or other person is a
party, or is threatened to be made a party, to the full extent permitted by the
General Corporation Law of the State of Delaware, provided, however, that the
Corporation shall not be liable for any amounts which may be due to any person
in connection with a settlement of any action, suit or proceeding effected
without its prior written consent or any action, suit or proceeding initiated by
any person seeking indemnification hereunder without its prior written consent.
The indemnification provided herein (i) shall not be deemed exclusive of any
other right to which any person seeking indemnification may be entitled under
any bylaw, agreement or vote of shareholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
any other capacity, and (ii) shall inure to the benefit of the heirs, executors
and administrators of any such person. The Corporation shall have the power, but
shall not be obligated, to purchase and maintain insurance on behalf of any
person or persons enumerated above against any liability asserted against or
incurred by them or any of them arising out of their status as corporate
directors, officers, employees, or agents whether or not the Corporation would
have the power to indemnify them against such liability under the provisions of
this Article 10.
ARTICLE VI OF BYLAWS - INDEMNIFICATION, ETC. OF DIRECTORS, OFFICERS AND
EMPLOYEES
6.1 Indemnification. The Corporation shall provide indemnification to
its directors, officers, employees, agents and former directors, officers,
employees and agents and to others in accordance with the Corporation's
Certificate of Incorporation.
6.2 Advancement of Expenses. Reasonable expenses (including attorneys'
fees) incurred by a director, officer or employee of the Corporation in
defending any civil, criminal, administrative or investigative action, suit or
proceeding described in Section 6.1 may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors only upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that the person
is not entitled to be indemnified by the Corporation.
6.3 Other Rights and Remedies. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall not be
deemed exclusive of any other rights to which those seeking
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<PAGE> 161
indemnification or advancement of expenses may be entitled under the
Corporation's Certificate of Incorporation, any agreement, vote of stockholders
or disinterested directors or otherwise, both as to actions in their official
capacity and as to actions in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such person.
6.4 Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer of employee of the Corporation, or is or was serving
at the request of the corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of its
Certificate of Incorporation or this Article VI.
6.5 Modification. The duties of the Corporation to indemnify and to
advance expenses to a director, officer or employee provided in this Article VI
shall be in the nature of a contract between the Corporation and each such
person, and no amendment or repeal of any provision of this Article VI shall
alter, to the detriment of such person, the right of such person to the advance
of expenses or indemnification related to a claim based on an act or failure to
act which took place prior to such amendment or repeal.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) LIST OF EXHIBITS (filed herewith unless otherwise noted)
2.1 Agreement and Plan of Merger, dated as of February 1, 1999, between
Independence Community Bank Corp. and Broad National Bancorporation is
included as Appendix A to the Proxy Statement - Prospectus which is
part of this Registration Statement
3.1 Certificate of Incorporation of Independence Community Bank Corp.(1)
3.2 Bylaws of Independence Community Bank Corp.(1)
4.1 Form of Stock Certificate of Independence Community Bank Corp.(1)
5.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: legality*
8.1 Form of Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: federal
tax matters
10.1 Form of Change of Control Agreement entered into among Independence
Community Bank Corp., Independence Savings Bank and certain senior
executive officers of the Company and the Bank (1)
10.2 1998 Stock Option Plan (2)
10.3 1998 Recognition and Retention Plan and Trust Agreement (2)
10.4 Stockholders' Agreement, dated as of February 1, 1999, by and among
certain stockholders of Broad National Bancorporation is included as
Appendix B to the Proxy Statement - Prospectus which is part of this
Registration Statement
11.0 Statement re: computation of per share earnings (3)
23.1 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in Exhibits
5.1 and 8.1, respectively)
23.2 Consent of Ernst & Young LLP (independent auditors for Independence
Community Bank Corp)
23.3 Consent of KPMG LLP (independent auditors for Broad National
Bancorporation)
23.4 Consent of Ryan, Beck & Co., Inc.*
24.1 Power of Attorney (included in Signature Page of the Registration
Statement)*
99.1 Broad National Bancorporation Proxy Card*
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<PAGE> 162
- -----------
* Previously filed.
(1) Incorporated by reference from the Registrant's Registration Statement
on From S-1 (333-30757) filed on July 3, 1997.
(2) Incorporated by reference from the Appendix to the Proxy Statement for
the Annual Meeting of Stockholders held on September 25, 1998, filed
with the SEC on August 17, 1998.
(3) Incorporated by reference from the Registrant's Annual Report on From
10-K for the year ended March 31, 1998 filed with the SEC on June 26,
1998.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted as not applicable or not
required under the rules of Regulation S-X.
(c) REPORTS, OPINIONS, OR APPRAISALS OF OUTSIDE PARTIES
The opinion of Ryan, Beck & Co. is included as Appendix C to
the Proxy Statement - Prospectus.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(A) (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 the securities offered would not exceed that which was
registered) and any deviation from the low or high and 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.
(B) 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 each
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<PAGE> 163
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 the Registration Statement shall be deemed 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.
(C) To respond to requests for information that is
incorporated by reference into the Joint Proxy Statement-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.
(D) 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.
(E) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(F) That every prospectus: (i) that is filed pursuant to paragraph
(E) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes 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.
(G) 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 of 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.
II-4
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Pre-Effective Amendment No. 1 to Form S-4
Registration Statement to be signed on its behalf by the undersigned, hereunto
duly authorized, in the State of New York on May 5, 1999.
INDEPENDENCE COMMUNITY BANK CORP.
By: /s/ Charles J. Hamm
-----------------------------------------------
Charles J. Hamm
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- -------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/Charles J. Hamm Chairman, President and Chief May 5, 1999
- -------------------------- Executive Officer
Charles J. Hamm (principal executive officer)
/s/Joseph S. Morgano Director, Executive Vice President and May 5, 1999
- -------------------------- Mortgage Officer
Joseph S. Morgano
/s/John B. Zurell Executive Vice President and Chief May 5, 1999
- -------------------------- Financial Officer (principal financial
John B. Zurell and accounting officer)
/s/Willard N. Archie* Director May 5, 1999
- --------------------------
Willard N. Archie
/s/Robert D. Catell* Director May 5, 1999
- --------------------------
Robert D. Catell
/s/Rohit M. Desai* Director May 5, 1999
- --------------------------
Rohit M. Desai
/s/Chaim Y. Edelstein* Director May 5, 1999
- --------------------------
Chaim Y. Edelstein
</TABLE>
II-5
<PAGE> 165
<TABLE>
<CAPTION>
Name Title Date
- -------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/Robert W. Gelfman* Director May 5, 1999
- --------------------------
Robert W. Gelfman
/s/Scott M. Hand* Director May 5, 1999
- --------------------------
Scott M. Hand
/s/Donald E. Kolowsky* Director May 5, 1999
- --------------------------
Donald E. Kolowsky
/s/Janine Luke* Director May 5, 1999
- --------------------------
Janine Luke
/s/Wesley D. Ratcliff* Director May 5, 1999
- --------------------------
Wesley D. Ratcliff
/s/Donald H. Elliott* Director May 5, 1999
- --------------------------
Donald H. Elliott
/s/Malcolm MacKay* Director May 5, 1999
- --------------------------
Malcolm MacKay
</TABLE>
Signed by Charles J. Hamm pursuant to power of attorney granted thereto.
II-6
<PAGE> 166
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of February 1, 1999, between
Independence Community Bank Corp. and Broad National Bancorporation is
included as Appendix A to the Proxy Statement - Prospectus which is
part of this Registration Statement
3.1 Certificate of Incorporation of Independence Community Bank Corp.(1)
3.2 Bylaws of Independence Community Bank Corp.(1)
4.1 Form of Stock Certificate of Independence Community Bank Corp.(1)
5.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: legality
8.1 Form of opinion of Elias, Matz, Tiernan & Herrick L.L.P. re: federal
tax matters
10.1 Form of Change of Control Agreement entered into among Independence
Community Bank Corp., Independence Savings Bank and certain senior
executive officers of the Company and the Bank (1)
10.2 1998 Stock Option Plan (2)
10.3 1998 Recognition and Retention Plan and Trust Agreement (2)
10.4 Stockholders' Agreement, dated as of February 1, 1999, by and among
certain stockholders of Broad National Bancorporation is included as
Appendix B to the Proxy Statement - Prospectus which is part of this
Registration Statement
11.0 Statement re: computation of per share earnings (3)
23.1 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in Exhibits
5.1 and 8.1, respectively)
23.2 Consent of Ernst & Young LLP (independent auditors for Independence
Community Bank Corp)
23.3 Consent of KPMG LLP (independent auditors for Broad National
Bancorporation)
23.4 Consent of Ryan, Beck & Co., Inc.*
24.1 Power of Attorney (included in Signature Page of this Registration
Statement)
23.4 Consent of Ryan, Beck & Co., Inc.*
24.1 Power of Attorney (included in Signature Page of the Registration
Statement)*
99.1 Broad National Bancorporation Proxy Card*
- -----------
* Previously filed.
(1) Incorporated by reference from the Registrant's Registration Statement
on From S-1 (333-30757) filed on July 3, 1997.
(2) Incorporated by reference from the Appendix to the Proxy Statement for
the Annual Meeting of Stockholders held on September 25, 1998, filed
with the SEC on August 17, 1998.
(3) Incorporated by reference from the Registrant's Annual Report on From
10-K for the year ended March 31, 1998 filed with the SEC on June 26,
1998.
<PAGE> 1
Exhibit 5.1
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
-----
TIMOTHY B. MATZ Telephone: (202) 347-0300 JEFFREY D. HAAS
STEPHEN M. EGE Facsimile: (202) 347-2172 KEVIN M. HOULIHAN
RAYMOND A. TIERNAN KENNETH B. TABACH
W. MICHAEL HERRICK PATRICIA J. WOHL
GERARD L. HAWKINS FIORELLO J. VICENCIO*
NORMAN B. ANTIN DAVID TEEPLES
JOHN P. SOUKENIK* CRISTIN ZEISLER
GERALD F. HEUPEL, JR. ANDREW B. ROSENSTEIN
JEFFREY A. KOEPPEL ERIC M. MARION*
DANIEL P. WEITZEL DANIEL R. KLEINMAN*
PHILIP ROSS BEVAN ______________
HUGH T. WILKINSON
OF COUNSEL
May 5, 1999 ALLIN P. BAXTER
JACK I. ELIAS
*NOT ADMITTED IN D.C. VIA EDGAR SHERYL JONES ALU
Board of Directors
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
Re: Registration Statement on Form S-4
Issuance of Shares of Common Stock
Ladies and Gentlemen:
We have acted as special counsel to Independence Community Bank Corp.
(the "Company") in connection with the preparation and filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of the registration statement on Form S-4 (the "Registration
Statement") relating to the issuance of shares of the Company's common stock,
$0.01 par value per share (the "Shares"), in connection with the proposed merger
(the "Merger") of Broad National Bancorporation ("Broad") with and into the
Company pursuant to the agreement and Plan of Merger between the Company and
Broad dated February 1, 1999 (the "Agreement"), all as described in the
Registration Statement. In rendering the opinion set forth below, we do not
express any opinion concerning law other than the federal law of the United
States and the corporate law of the State of Delaware.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records and other instruments,
and have examined such matters of law, as we have deemed necessary or advisable
for purposes of rendering the opinion set forth below. As to the matters of
fact, we have examined and relied upon the representations of the Company and
Broad contained in the Agreement and the Registration Statement, and, where we
have deemed appropriate, representations or certificates of officers of the
Company or Broad or public officials. We have assumed the authenticity of all
documents submitted to us as originals, the genuiness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
documents submitted to us as copies. In making our examination of any documents,
we have assumed that all parties, other than the Company, had the corporate
power and authority to enter into and perform all
<PAGE> 2
obligations thereunder, and, as to such parties, we have also assumed the due
authorization by all requisite action, the due execution and delivery of such
documents and the validity and binding effect and enforceability thereof.
Based on the foregoing, we are of the opinion that, upon effectiveness
of the Registration Statement and the approval of the Agreement by the Broad
stockholders, the issuance of the Shares in accordance with the terms of the
Agreement (including compliance with all conditions of the Merger set forth
therein unless waived by the parities thereto) will have been duly authorized
and, when the Shares are issued in accordance with the terms of the Agreement
and the Registration Statement, such Shares will be validly issued, fully paid
and non-assessable.
This opinion is given solely for the benefit of the Company and Broad
and may not be relied upon by any other person or entity, nor quoted in whole or
in part, or otherwise referred to in any document without our express written
consent.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement, and we consent to the use of our name under
the heading "Legal Matters" in the Proxy Statement-Prospectus constituting a
part hereof. In giving such consent we do not hereby admit that we are experts
or otherwise within the category of persons whose consent is required under
Section 7 of the Act or the rules or regulations of the Securities and Exchange
Commission thereunder.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ PHILIP R. BEVAN
-----------------------------------
Philip R. Bevan, a Partner
<PAGE> 1
EXHIBIT 8.1
[EMTH letterhead]
May ___, 1999
Board of Directors
Independence Community Bank Corp.
195 Montague Street
Brooklyn, New York 11201
Ladies and Gentlemen:
This letter is in response to your request for our opinion with respect
to the material federal income tax consequences of the proposed merger of Broad
National Bancorporation, a New Jersey corporation ("Broad") with and into
Independence Community Bank Corporation, a Delaware corporation ("ICBC") (the
"Merger"), pursuant to the Agreement and Plan of Merger dated February 1, 1999
between ICBC and Broad (the "Agreement"). Unless otherwise specified, the terms
used herein are defined in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on April 1, 1999, as amended or the
Agreement. For purposes of the opinions set forth below, we have relied, with
the consent of both ICBC and Broad, upon the accuracy and completeness of the
factual statements and representations (which statements and representations we
have neither investigated nor verified) contained in the letters, dated as of
May __, 1999, of ICBC and Broad, copies of which are attached hereto. Pursuant
to Section 8.2(c) of the Agreement, consummation of the Merger is conditioned
upon the re-issuance of the opinions stated below as of the Effective DATE. THE
re-issuance of our opinion at such time is contingent upon the receipt of
representation letters of ICBC and Broad as of the Effective Date which are
identical to the May __ 1999 representation letters.
In connection with the proposed Merger, we understand the following:
(a) In accordance with the Delaware General Corporation Law and the New
Jersey Business Corporation Act, Broad will merge with and into ICBC, and
ICBC will be the surviving corporation;
(b) Pursuant to the Merger, all of the assets of Broad will be transferred to
ICBC and ICBC will assume all of Broad's liabilities;
(c) At the Effective Time, all shares (excluding Trust Account Shares and DDC
Shares) of Broad's common stock, par value $1.00 per share ("Broad Common
Stock"), owned by Broad (including treasury shares and unallocated and/or
unvested shares held in Broad's
<PAGE> 2
Board of Directors
May ____, 1999
Page 2
Long-Term Capital Accumulation Plan) or ICBC, or any of their respective
wholly owned subsidiaries, will be cancelled;
(d) At the Effective Time, each outstanding share of Broad Common Stock not
cancelled pursuant to paragraph (c) above shall cease to be outstanding
and shall be converted, at the election of the holder, into a right to
receive either a number of shares of ICBC common stock, par value $0.01
per share ("ICBC Common Stock"), equal to the Final Exchange Ratio or a
cash amount equal to the Per Share Consideration;
(e) At the Effective Time, each holder of Broad Common Stock who otherwise
would have been entitled to a fraction of an ICBC Common Share will
receive in lieu thereof a right to receive cash (without interest) equal
to such fraction multiplied by the Average Closing Price; and
(f) ICBC will continue to conduct the historic business of Broad or use a
significant portion of Broad's historic business assets in a business
within the meaning of Treasury Regulation Section 1.368-1(d).
In connection herewith, we have examined the Agreement, the Registration
Statement on Form S-4 filed by ICBC with the Securities and Exchange Commission
(which contains a Prospectus-Proxy Statement) and such other information as we
have deemed relevant. As to questions of fact material to the opinions herein,
we have relied upon representations of ICBC and Broad, as set forth in letters
certified by their respective officers. On the basis of the foregoing and
subject to the conditions, qualifications and limitations set forth herein, we
are of the opinion that for federal income tax purposes:
(a) The Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code 1986, as amended (the "Code");
(b) No gain or loss will be recognized by ICBC or Broad as a result of the
Merger;
(c) No gain or loss will be recognized by the shareholders of Broad who
exchange all of their Broad Common Stock solely for ICBC Common Stock,
except with respect to cash received in lieu of a fractional share
interest in ICBC Common Stock;
(d) The aggregate adjusted tax basis of the ICBC Common Stock received by
shareholders of Broad who exchange all of their Broad Common Stock solely
for ICBC Common Stock in the Merger will be the same as the aggregate
adjusted tax basis of the Broad Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received); and
(e) A shareholder of Broad who receives cash in lieu of a fractional share
of ICBC Common Stock will be treated as if a fractional share of ICBC
Common Stock was distributed in exchange of such shareholder's interest
in Broad, immediately redeemed and having received
<PAGE> 3
Board of Directors
May ____, 1999
Page 3
a cash distribution in full payment of the stock thus redeemed as
provided in Section 302 of the Code.
This opinion does not relate to or purport to cover any matters other
than the ones expressly stated herein. The opinion expressed herein is limited
to the material consequences of the Merger under current federal income tax law
as of the date of this opinion letter. No opinion is expressed with respect to
state, local or other tax laws, nor with respect to the treatment of shares
received as a result of the exercise of employee stock options. We assume no
obligation to revise or supplement this opinion should the present federal
income tax laws be changed by any legislation, judicial decisions, or otherwise.
We hereby consent to the reference to us under the caption "Legal
Matters" in the Prospectus-Proxy Statement forming a part of the Registration
Statement and to the filing of a copy of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Elias, Matz, Tiernan and Herrick L.L.P
By:
---------------------------
Phillip Ross Bevan, a Partner
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT ACCOUNTANTS
We consent to the reference of our firm under the caption "Experts" in the
Pre-effective Amendment No. 1 to the Registration Statement Form S-4 No.
333-75545) pertaining to the Proxy Statement-Prospectus of Independence
Community Bank Corp. and the incorporation by reference therein of our report
dated June 2, 1998, with respect to the consolidated financial statements of
Independence Community Bank Corp., included in its Annual Report (Form 10-K)
for the year ended March 31, 1998, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
New York, new York
May 5, 1999
<PAGE> 1
Exhibit 23.3
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Broad National Bancorporation:
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Broad National Bancorporation of our report dated January 21, 1999,
relating to the consolidated statements of condition of Broad National
Bancorporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, which report appears in the December 31, 1998 Annual Report on Form 10-K
of Broad National Bancorporation, and to the reference to the Firm under the
heading "Experts".
/s/ KPMG LLP
Short Hills, New Jersey
May 4, 1999
