UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 1-11277
----------------------
VALLEY NATIONAL BANCORP
(Exact name of registrant as specified in its charter)
New Jersey
(State or other Jurisdiction of
incorporation or organization)
22-2477875
(I.R.S. Employer Identification No.)
1455 Valley Road, Wayne, New Jersey 07474-0558
(Address of principal executive offices)
973-305-8800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock (No par value), of which 78,159,382 shares were outstanding as of
May 7, 2001.
TABLE OF CONTENTS
Page Number
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition (Unaudited)
March 31, 2001 and December 31, 2000 3
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2001 and 2000 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 22
PART II OTHER INFORMATION
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
PART I
Item 1. Financial Statements
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except for share data)
March 31, December 31,
2001 2000
Assets
Cash and due from banks $ 191,481 $ 239,105
Federal funds sold 142,000 85,000
Investment securities held to maturity, fair value of $419,592
and $543,034 in 2001 and 2000, respectively 443,911 577,450
Investment securities available for sale 1,959,213 1,626,086
Loans 5,071,491 5,171,183
Loans held for sale 42,915 17,927
Total loans 5,114,406 5,189,110
Less: Allowance for loan losses (62,547) (61,995)
Net loans 5,051,859 5,127,115
Premises and equipment, net 90,571 91,215
Accrued interest receivable 48,423 49,870
Other assets 89,735 104,338
Total assets $8,017,193 $7,900,179
Liabilities
Deposits:
Non-interest bearing $ 1,257,068 $ 1,344,802
Interest bearing:
Savings 2,359,155 2,287,793
Time 2,496,327 2,504,233
Total deposits 6,112,550 6,136,828
Short-term borrowings 302,470 426,014
Long-term debt 819,788 591,808
Accrued expenses and other liabilities 101,083 89,547
Total liabilities 7,335,891 7,244,197
Shareholders' Equity
Preferred stock, no par value, authorized 30,000,000 shares,
none issued - -
Common stock, no par value, authorized 108,527,344
shares; issued 74,791,831 shares in 2001 and
74,792,815 shares in 2000 31,994 32,015
Surplus 320,849 321,970
Retained earnings 326,287 317,855
Unallocated common stock held by employee benefit plan (729) (775)
Accumulated other comprehensive income (loss) 12,450 (2,307)
690,851 668,758
Treasury stock, at cost (375,561 shares in 2001 and
502,471 shares in 2000) (9,549) (12,776)
Total shareholders' equity 681,302 655,982
Total liabilities and shareholders' equity $ 8,017,193 $ 7,900,179
See accompanying notes to consolidated financial statements.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Three Months Ended
March 31,
2001 2000
Interest Income
Interest and fees on loans $ 104,333 $ 100,429
Interest and dividends on investment securities:
Taxable 34,240 31,873
Tax-exempt 2,620 2,973
Dividends 1,370 1,280
Interest on federal funds sold and other short-term investments 1,639 1,133
Total interest income 144,202 137,688
Interest Expense
Interest on deposits:
Savings deposits 13,805 14,340
Time deposits 33,849 30,935
Interest on short-term borrowings 5,761 5,473
Interest on long-term debt 9,762 8,447
Total interest expense 63,177 59,195
Net Interest Income 81,025 78,493
Provision for loan losses 2,100 2,450
Net Interest Income after Provision for Loan Losses 78,925 76,043
Non-Interest Income
Trust and investment services 1,211 720
Service charges on deposit accounts 4,548 3,998
Gains on securities transactions, net 163 -
Fees from loan servicing 2,685 2,730
Credit card fee income 997 1,949
Gains on sales of loans, net 5,638 765
Other 3,442 3,244
Total non-interest income 18,684 13,406
Non-Interest Expense
Salary expense 19,448 18,424
Employee benefit expense 4,859 4,090
FDIC insurance premiums 291 313
Occupancy and equipment expense 7,838 6,070
Credit card expense 626 1,231
Amortization of intangible assets 1,818 1,688
Advertising 795 960
Merger-related charges 9,017 -
Other 7,264 8,072
Total non-interest expense 51,956 40,848
Income Before Income Taxes 45,653 48,601
Income tax expense 17,090 16,607
Net Income $ 28,563 $ 31,994
Earnings Per Share:
Basic $ 0.37 $ 0.40
Diluted 0.36 0.40
Weighted Average Number of Shares Outstanding:
Basic 77,935,200 80,159,333
Diluted 78,643,691 80,782,279
See accompanying notes to consolidated financial statements.
VALLEY NATIONAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 28,563 $ 31,994
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,433 3,852
Amortization of compensation costs pursuant to
long-term stock incentive plan 488 311
Provision for loan losses 2,100 2,450
Net amortization of premiums and accretion of discounts 1,078 897
Net gains on securities transactions (163) -
Proceeds from sales of loans 90,189 14,626
Gain on sales of loans (5,638) (765)
Originations of loans held for sale (63,519) (11,352)
Net decrease in accrued interest receivable
and other assets 16,902 3,179
Net decrease in accrued expenses and other liabilities (1,243) (4,065)
Net cash provided by operating activities 73,190 41,127
Cash flows from investing activities:
Purchases and originations of mortgage servicing rights (2,843) (145)
Proceeds from sales of investment securities available for sale 55,346 -
Proceeds from maturing investment securities available for sale 128,357 105,578
Purchases of investment securities available for sale (380,753) (7,831)
Purchases of investment securities held to maturity (4,035) (70,854)
Proceeds from maturing investment securities held to maturity 24,752 13,833
Net(increase)decrease in federal funds sold and other
short-term investments (57,000) 101,000
Net decrease (increase) in loans made to customers 52,124 (39,758)
Purchases of premises and equipment, net of sales (1,971) (2,944)
Net cash (used in) provided by investing activities (186,023) 98,879
Cash flows from financing activities:
Net decrease in deposits (24,278) (43,824)
Net decrease in short-term borrowings (123,544) (52,995)
Advances of long-term debt 320,000 30,000
Repayments of long-term debt (92,020) (3,018)
Dividends paid to common shareholders (15,593) (18,080)
Addition of common shares to treasury - (39,944)
Common stock issued, net of cancellations 644 737
Net cash provided by (used in) financing activities 65,209 (127,124)
Net (decrease) increase in cash and cash equivalents (47,624) 12,882
Cash and cash equivalents at beginning of period 239,105 194,502
Cash and cash equivalents at end of period $191,481 $ 207,384
Supplemental disclosure of cash flow information:
Cash paid during the year for interest on deposits
and borrowings $ 59,754 $ 60,973
Cash paid during the period for federal and state income taxes 543 181
Transfer of securities from held to maturity to available for sale 162,433 -
Transfer of securities from available for sale to held to maturity 50,044 -
See accompanying notes to consolidated financial statements.
VALLEY NATIONAL BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The Consolidated Statements of Financial Condition as of
March 31, 2001 and December 31, 2000, the Consolidated Statements of
Income for the three month periods ended March 31, 2001 and 2000 and the
Consolidated Statements of Cash Flows for the three month periods ended
March 31, 2001 and 2000 have been prepared by Valley National Bancorp
("Valley") without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
Valley's financial position, results of operations, and cash flows at March 31,
2001 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These consolidated financial statements are to be read in
conjunction with the financial statements and notes thereto included in
Valley's December 31, 2000 report on Form 10-K. Certain prior
period amounts have been reclassified to conform to 2001 financial
presentations. The consolidated financial statements of Valley have been
restated to include Merchants New York Bancorp, Inc. (Merchants), acquired
January 19, 2001 using the pooling of interests method of accounting.
2. Earnings Per Share
Earnings per share ("EPS") amounts and weighted average shares outstanding
have been restated to reflect the 5 percent stock dividend declared April 4,
2001 to Shareholders of record on May 4, 2001 and to be issued May 18, 2001.
For Valley, the numerator of both the Basic and Diluted EPS is equivalent to
net income. The weighted average number of shares outstanding used in the
denominator for Diluted EPS is increased over the denominator used for
Basic EPS by the effect of potentially dilutive common stock equivalents
utilizing the treasury stock method. For Valley, common stock equivalents
are common stock options outstanding.
The following table shows the calculation of both Basic and Diluted EPS for the
three months ended March 31, 2001 and 2000.
Three Months Ended March 31,
(in thousands, except for share data)
2001 2000
Net income $28,563 $31,994
Basic weighted-average number of shares
outstanding 77,935,200 80,159,333
Plus: Common stock equivalents 708,491 622,946
Diluted weighted-average number of shares
outstanding 78,643,691 80,782,279
Earnings per share:
Basic $ 0.37 $ 0.40
Diluted 0.36 0.40
At March 31, 2001 and 2000 there were 107 thousand and 551 thousand common
stock options, respectively, not included as common stock equivalents
because the exercise prices exceeded the average market prices during the
quarter.
3. Recent Developments
On January 19, 2001, Valley acquired Merchants, parent of The Merchants Bank
of New York headquartered in Manhattan. At the date of acquisition, Merchants
Bank, a commercial bank, had total assets of approximately $1.5 billion and
seven branch offices, all located in Manhattan. The transaction was
accounted for using the pooling of interests method of accounting. Each
of the 18,679,945 outstanding shares of Merchants common stock were exchanged
for 0.7634 shares of Valley common stock. Valley issued approximately
14,260,270 shares of its common stock in exchange for the outstanding
shares of Merchants. The consolidated financial statements of Valley have
been restated to include Merchants for all periods presented. Separate results
of the combining companies is as follows:
Three Months Ended
March 31, 2000
(in thousands)
Net interest income after provision for loan losses:
Valley $62,821
Merchants 13,222
$76,043
Net income:
Valley $26,943
Merchants 5,051
$31,994
December 31, 2000
(in thousands)
Shareholders' Equity:
Valley $545,074
Merchants 110,908
$655,982
During the first quarter of 2001, Valley recorded merger-related charges of
$9.0 million related to the acquisition of Merchants. On an after tax basis,
these charges totaled $7.0 million or $0.09 per diluted share. These
charges include only identified direct and incremental costs associated
with this acquisition. Items included in these charges include the following:
personnel expenses which include severance payments for terminated directors
at Merchants; professional fees which include investment banking, accounting
and legal fees; and other expenses which include the disposal of data
processing equipment and the write-off of supplies and other assets not
considered useful in the operation of the combined entities. The major
components of the merger-related charge, consisting of professional fees,
personnel and the disposal of data processing equipment, totaled $4.4 million,
$3.2 million and $486 thousand, respectively. Of the total merger-related
charge $4.7 million, or 52.1% was paid through March 31, 2001.
4. Accumulated Other Comprehensive Income
Valley's accumulated other comprehensive income consists of foreign currency
translation adjustments and unrealized gains (losses) on securities. The
following table shows the related tax effects on each component of accumulated
other comprehensive income for the three months ended March 31, 2001 and 2000.
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
(in thousands)
Net income $28,563 $31,994
Other comprehensive income, net of tax:
Foreign currency translation adjustments (345) (13)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period $15,206 $(3,106)
Less reclassification adjustment for gains included in
net income (104) -
Net unrealized gains (losses) 15,102 (3,106)
Other comprehensive income (loss) 14,757 (3,119)
Comprehensive income $43,320 $ 23,264
Adoption of SFAS No. 133 and 140 had no material impact on the financial
statements. See Recent Accounting Pronouncements discussion on page 21.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q, both in the MD & A and elsewhere, contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are not historical facts and include expressions
about management's confidence and strategies and management's expectations
about new and existing programs and products, relationships, opportunities,
technology and market conditions. These statements may be identified by an
"asterisk" (*) or such forward-looking terminology as "expect," "look,"
"believe," "anticipate," "may," "will," or similar statements or variations
of such terms. Such forward-looking statements involve certain risks and
uncertainties. These include, but are not limited to, the direction of
interest rates, continued levels of loan quality and origination volume,
continued relationships with major customers including sources for loans, as
well as the effects of economic conditions and legal and regulatory barriers
and structure. Actual results may differ materially from such forward-looking
statements. Valley assumes no obligation for updating any such forward-looking
statement at any time.
Earnings Summary
Net income for the three months ended March 31, 2001 was $28.6 million, or
$0.36 per diluted share including a merger related charge of $7.0 million, net
of tax or $0.09 per diluted share. These results compare with net income of
$32.0 million, or $0.40 per diluted share for the same period in 2000 (2000
amounts have been restated for the Merchants merger and earnings per share
amounts have been restated to give effect to the 5 percent stock dividend to
be issued May 18, 2001). Excluding the merger related charges net income
was $35.6 million, or $0.45 per diluted share for the quarter ended
March 31, 2001. Excluding the merger related charges the annualized return
on average equity increased to 21.43 percent from 20.08 percent, and the
annualized return on average assets increased to 1.82 percent from 1.69
percent, for the three months ended March 31, 2001 and 2000, respectively.
Net Interest Income
Net interest income continues to be the largest source of Valley's operating
income. Net interest income on a tax equivalent basis increased to $82.6
million, for the three months ended March 31, 2001, compared with $80.2
million for the three months ended March 31, 2000. The increase in net interest
income is due to higher average balances of total interest earning assets,
primarily loans, combined with higher average interest rates for all
interest earning assets. This was offset by an increase in both average
balances, primarily time deposits, as well as short-term borrowings and
long-term debt, and an increase in average interest rates of total interest
bearing liabilities. The net interest margin decreased slightly to 4.40
percent for the three months ended March 31, 2001 compared with 4.41 percent
for the same period in 2000. Beginning in January 2001 the Federal Reserve
decreased interest rates three times during the quarter amounting to
150 basis points. This decline in interest rates continued into the second
quarter due to general weakness in the economy. Further declines in
short-term interest rates are possible which may affect net interest income
during the remainder of 2001.* While loans have been growing, competition
for loans has caused rates on new loans and total interest earning assets to
increase at a slower pace than rates on interest bearing liabilities.
Average interest earning assets increased $217.8 million or 3.0 percent
for the three months ended March 31, 2001 over the same period in 2000. This
was mainly the result of the increase in average balance of loans of $147.1
million or 3.0 percent.
Average interest bearing liabilities for the three months ended March 31,
2001 increased $224.9 million or 4.0 percent from the same period in 2000.
Average savings deposits remained relatively unchanged while average time
deposits increased $79.4 million. Average short-term borrowings increased
$41.8 million or 10.9 percent and long-term debt, which includes primarily
FHLB advances, increased $96.0 million, or 16.9 percent. Average demand
deposits remained relatively unchanged from 2000 balances. During the first
quarter of 2001, in conjunction with declining interest rates, Valley began to
extend maturities on its short-term borrowings. The extension of maturities
is part of an effort to more closely match a portion of Valley's funding
sources with its mortgage portfolio and reduce interest rate risk.*
Average interest rates, in all categories of interest earning assets increased
during the quarter ended March 31, 2001 compared with the quarter ended March
31, 2000. The average interest rate for loans increased 8 basis points to
8.17 percent. Average interest rates on total interest earning assets
increased 11 basis points to 7.77 percent. Average interest rates also
increased on total interest bearing liabilities by 11 basis points to 4.29
percent from 4.18 percent. Average interest rates on deposits increased 12
basis points to 3.97 percent.
The following table reflects the components of net interest income for each of
the three months ended March 31, 2001 and 2000.
ANALYSIS OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY AND
NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
Three Months Ended March 31, Three Months Ended March 31, 2000
2001
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(in thousands)
Assets
Interest earning assets
Loans (1)(2) $5,116,640 $104,463 8.17% $ 4,969,582 $100,568 8.09%
Taxable investments (3) 2,049,425 35,610 6.95 1,981,603 33,153 6.69
Tax-exempt
investments(1)(3) 218,199 4,031 7.39 250,704 4,574 7.30
Federal funds sold and
other short-term
investments 116,038 1,639 5.65 1,133 5.62
80,622
Total interest earning
assets 7,500,302 $145,743 7.77 7,282,511 $ 139,428 7.66
Allowance for
loan losses (63,398) (64,863)
Cash and due from
banks 187,222 191,793
Other assets 197,662 216,722
Unrealized gain (loss)
on securities available
for sale 7,446
(46,024)
Total assets $7,829,234 $7,580,139
Liabilities and
Shareholders' Equity
Interest bearing
liabilities
Savings deposits $2,296,661 $13,805 2.40% $2,288,903 $14,340 2.51%
Time deposits 2,500,286 33,849 5.42 2,420,897 30,935 5.11
Total interest
bearing deposits 4,796,947 47,654 3.97 4,709,800 45,275 3.85
Short-term borrowings 425,911 5,761 5.41 384,136 5,473 5.70
Long-term debt 662,556 9,762 5.89 566,547 8,447
5.96
Total interest bearing
liabilities 5,885,414 63,177 4.29 5,660,483 59,195 4.18
Demand deposits 1,251,264 1,244,892
Other liabilities 27,805 37,343
Shareholders' equity 664,751 637,421
Total liabilities and
shareholders' equity $7,829,234 $7,580,139
Net interest income
(tax equivalent basis) 82,566 80,233
Tax equivalent
adjustment (1,541) (1,740)
Net interest income $ 81,025 $78,493
Net interest rate
differential 3.48% 3.48%
Net interest margin (4) 4.40% 4.41%
(1 ) Interest income is presented on a tax equivalent basis using a 35 percent
tax rate.
(2) Loans are stated net of unearned income and include non-accrual loans.
(3) The yield for securities that are classified as available for sale is
based on the average historical amortized cost.
(4) Net interest income on a tax equivalent basis as a percentage of earning
assets.
>PAGE>
The following table demonstrates the relative impact on net interest
income of changes in volume of interest earning assets and interest bearing
liabilities and changes in rates earned and paid by Valley on such assets and
liabilities.
CHANGE IN NET INTEREST INCOME ON A TAX EQUIVALENT BASIS
Three Months Ended March 31,
2001 Compared with 2000
Increase (Decrease) (2)
Interest Volume Rate
(in thousands)
Interest income:
Loans (1) $ 3,895 $ 2,995 $ 900
Taxable investments 2,457 1,155 1,302
Tax-exempt investments(1) (543) (600) 57
Federal funds sold and
other short-term
investments 506 501 5
6,315 4,051 2,264
Interest expense:
Savings deposits (535) 48 (583)
Time deposits 2,914 1,036 1,878
Short-term borrowings 288 575 (287)
Long-term debt 1,315 1,416 (101)
3,982 3,075 907
Net $ 2,333 $ 976 $1,357
(1) Interest income is adjusted to a tax equivalent basis using a 35 percent
tax rate.
(2) Variances resulting from a combination of changes in volume and rates
are allocated to the categories in proportion to the absolute dollar
amounts of the change in each category.
Non-Interest Income
The following table presents the components of non-interest income for the
three months ended March 31, 2001 and 2000.
NON-INTEREST INCOME
Three Months Ended March 31,
2001 2000
(in thousands)
Trust and investment services $ 1,211 $ 720
Service charges on deposit accounts 4,548 3,998
Gains on securities transactions, net 163 -
Fees from loan servicing 2,685 2,730
Credit card fee income 997 1,949
Gains on sales of loans, net 5,638 765
Other 3,442 3,244
Total non-interest income $ 18,684 $ 13,406
Non-interest income continues to represent a considerable source of income
for Valley. Total non-interest income amounted to $18.5 million, excluding
security gains, for the three months ended March 31, 2001 while the comparable
amount for the prior year period was $13.4 million.
Trust and investment services includes income from trust operations, brokerage
commissions, and asset management fees. Trust and investment services income
increased $491 thousand or 68.2% for the three months ended March 31, 2001
compared with the same period in 2000. This increase is primarily the result
of the acquisition, on July 6, 2000, of Hallmark Capital Management, Inc.
("Hallmark"), a NJ-based money manager. The transaction was accounted for as a
purchase accounting transaction.
Service charges on deposit accounts increased 13.8 percent from $4.0
million for the three months ended March 31, 2000 to $4.5 million for the three
months ended March 31, 2001 mostly due to the implementation of a new service
charge.
Gains on the sales of loans were $5.6 million for the three months ended
March 31, 2001 compared with $765 thousand for the three
months ended March 31, 2000. On January 29, 2001 Valley recorded a gain of
approximately $4.9 million relating to the sale of its cobranded ShopRite
MasterCard credit card portfolio.
Credit card fee income decreased 48.8 percent from $1.9 million for the
three months ended March 31, 2000 to $1.0 million for the
three months ended March 31, 2001 due to the sale of the credit card portfolio
described above.
Non-Interest Expense
The following table presents the components of non-interest expense for the
three months ended March 31, 2001 and 2000.
NON-INTEREST EXPENSE
Three Months Ended March 31,
----------------------------------------------
2001 2000
(in thousands)
Salary expense $ 19,448 $ 18,424
Employee benefit expense 4,859 4,090
FDIC insurance premiums 291 313
Occupancy and equipment expense 7,838 6,070
Credit card expense 626 1,231
Amortization of intangible assets 1,818 1,688
Advertising 795 960
Merger-related charges 9,017 -
Other 7,264 8,072
Total non-interest expense $ 51,956 $ 40,848
Excluding merger-related charges, non-interest expense totaled $42.9
million for the three months ended March 31, 2001, an increase of $2.1 million
or 5.1% from the comparable 2000 period.
The largest components of non-interest expense are salaries and employee
benefit expense which totaled $24.3 million for the three months ended March
31, 2001 compared with $22.5 million in the comparable period of 2000. At
March 31, 2001, full-time equivalent staff was 2,063 compared with 2,096 at
March 31, 2000.
Salaries increased $1.0 million or 5.6%, for the three months ended March 31,
2001 compared with the prior year quarter, due to the addition of fee based
services as well as increases in sales-related incentives.
Benefits increased $769 thousand or 18.8%, for the three months ended
March 31, 2001 compared with the three months ended March 31, 2000, due
primarily to increases in health insurance costs.
Occupancy and equipment expense increased $1.8 million, from $6.1 million
for the three months ended March 31, 2000 to $7.8 million for the three
months ended March 31, 2001. This increase can be attributed to an overall
increase in the cost of operating bank facilities.
Credit card expense decreased 49.1 percent from $1.2 million for the three
months ended March 31, 2000 to $626 thousand for the three months ended March
31, 2001 due to the sale of the credit card portfolio described under gains on
sale of loans.
During the first quarter of 2001, Valley recorded merger-related charges of
$9.0 million related to the acquisition of Merchants. On an after tax basis,
these charges totaled $7.0 million or $0.09 per diluted share. These
charges include only identified direct and incremental costs associated
with this acquisition. Items included in these charges include the following:
personnel expenses which include severance payments for terminated
directors at Merchants; professional fees which include investment banking,
accounting and legal fees; and other expenses which include the disposal of
data processing equipment and the write-off of supplies and other assets
not considered useful in the operation of the combined entities. The
major components of the merger-related charge, consisting of professional
fees, personnel and the disposal of data processing equipment, totaled $4.4
million, $3.2 million and $486 thousand, respectively. Of the total
merger-related charge $4.7 million, or 52.1% was paid through March 31, 2001.
The efficiency ratio measures a bank's gross operating expense as a percentage
of fully-taxable equivalent net interest income and other non-interest income
without taking into account security gains and losses and other non-recurring
items. Valley's efficiency ratio for the three months ended March 31, 2001
was 44.6 percent, one of the lowest in the industry, compared with an
efficiency ratio of 45.2 percent for the year ended December 31, 2000 and
43.6 percent for the quarter ended March 31, 2000. Valley strives to control
its efficiency ratio and expenses as a means of producing increased
earnings for its shareholders.
The significant components of other non-interest expense include data
processing, professional fees, postage, telephone and stationery expense
which totaled approximately $3.1 million and $3.4 million for the three
months ended March 31, 2001 and 2000, respectively.
Income Taxes
Income tax expense as a percentage of pre-tax income was 37.4 percent for the
three months ended March 31, 2001 compared with 34.2 percent for the same
period in 2000. After adjusting for the effect of non-deductible merger
expenses, the effective tax rate for the three months ended March 31, 2001
would be 34.3%. The effective tax rate for 2001 is expected to approximate
34 percent.*
Business Segments
VNB has four business segments it monitors and reports on to manage its
business operations. These segments are consumer lending, commercial lending,
investment management and corporate and other adjustments. Lines of
business and actual structure of operations determine each segment. Each is
reviewed routinely for its asset growth, contribution to pretax net income
and return on assets. Expenses related to the branch network, all other
components of retail banking, along with the back office departments of the
bank are allocated from the corporate and other adjustments segment to
each of the other three business segments. The financial reporting for each
segment contains allocations and reporting in line with VNB's operations,
which may not necessarily be compared to any other financial institution. The
accounting for each segment includes internal accounting policies designed to
measure consistent and reasonable financial reporting.
The following table represents the financial data for the three months ended
March 31, 2001 and 2000.
Three Months Ended March 31, 2001
(in thousands)
Corporate
Consumer Commercial Investment and Other
Lending Lending Management Adjustments Total
Average interest-earning assets $ 2,728,858 $ 2,423,831 $ 2,347,613 $ - $ 7,500,302
Income (loss) before income taxes $ 17,494 $ 20,748 $ 13,988 $ (6,577) $ 45,653
Return on average interest-earning
assets (pre-tax) 2.56% 3.42% 2.38% - % 2.43%
Three Months Ended March 31, 2000
(in thousands)
Corporate
Consumer Commercial Investment and Other
Lending Lending Management Adjustments Total
Average interest-earning assets $ 2,792,176 $ 2,214,483 $ 2,275,852 $ - $ 7,282,511
Income (loss) before income taxes $ 18,064 $ 18,895 $ 13,637 $ (1,995) $ 48,601
Return on average interest-earning
assets (pre-tax) 2.59% 3.41% 2.40% - % 2.67%
Consumer Lending
The consumer lending segment had a return on average interest-earning
assets before taxes of 2.56 percent for the three months ended March 31, 2001
compared to 2.59 percent for the three months ended March 31, 2000.
Average interest-earning assets decreased $63.3 million, attributable to
the sale of the credit card portfolio. Average interest rates on consumer
loans increased by 10 basis points, while the cost of funds increased by 12
basis points. Income before income taxes decreased $570 thousand.
Commercial Lending
The return on average interest-earning assets before taxes decreased 1
basis point to 3.42 percent for the three months ended March 31, 2001. Average
interest-earning assets increased $209.3 million as a result of an increased
volume of loans. Interest rates on commercial loans decreased by 6 basis
points, and the cost of funds increased by 12 basis points. Income before
income taxes increased by $1.9 million as a result of an increase in average
interest-earning assets.
Investment Management
The return on average interest earning assets before taxes decreased to
2.38 percent for the three months ended March 31, 2001 compared to 2.40 percent
for the three months ended March 31, 2000. The yield on interest earning
assets increased by 26 basis points to 7.00 percent, and the cost of funds
increased by 12 basis points. Average interest-earning assets increased by
$71.8 million and income before income taxes increased $351 thousand.
Corporate Segment
The corporate segment represents income and expense items not directly
attributable to a specific segment which may include merger-related charges,
non-recurring gains on sale of loans, service charges on deposit accounts, and
certain revenues and expenses recorded by acquired banks that could not be
allocated to a line of business. The loss before taxes was $6.6 million
for the three months ended March 31, 2001 compared to a loss of $2.0 million
for the three months ended March 31, 2000. The increase in the loss is the
result of merger-related charges incurred in the first quarter of 2001.
ASSET/LIABILITY MANAGEMENT
Interest Rate Sensitivity
Valley's success is largely dependent upon its ability to manage interest
rate risk. Interest rate risk can be defined as the exposure of Valley's net
interest income to the movement in interest rates. Valley does not currently
use derivatives to manage market and interest rate risks. Valley's interest
rate risk management is the responsibility of the Asset/Liability Management
Committee ("ALCO"), which reports to the Board of Directors. ALCO
establishes policies that monitor and coordinate Valley's sources, uses and
pricing of funds.
Valley uses a simulation model to analyze net interest income sensitivity to
movements in interest rates. The simulation model projects net interest
income based on various interest rate scenarios over a twelve and twenty-four
month period. The model is based on the actual maturity and repricing
characteristics of rate sensitive assets and liabilities. The model
incorporates assumptions regarding the impact of changing interest rates on the
prepayment rates of certain assets and liabilities.
Liquidity
Liquidity measures the ability to satisfy current and future cash flow
needs as they become due. Maintaining a level of liquid funds through
asset/liability management seeks to ensure that these needs are met at a
reasonable cost. On the asset side, liquid funds are maintained in the form of
cash and due from banks, federal funds sold, investments securities held to
maturity maturing within one year, investment securities available for sale
and loans held for sale. Liquid assets amounted to $2.4 billion and $2.0
billion at March 31, 2001 and December 31, 2000, respectively. This
represents 31.9 percent and 26.7 percent of earning assets, and 30.5 percent
and 25.3 percent of total assets at March 31, 2001 and December 31, 2000,
respectively.
On the liability side, the primary source of funds available to meet
liquidity needs is Valley's core deposit base, which generally excludes
certificates of deposit over $100 thousand. Core deposits averaged
approximately $5.1 billion and 5.0 billion for the three months ended March 31,
2001 and for the year ended December 31, 2000, representing 68.3 percent and
68.5 percent of average earning assets. Short-term and long-term borrowings
through Federal funds lines, repurchase agreements, Federal Home Loan
Bank ("FHLB") advances and large dollar certificates of deposit, generally
those over $100 thousand, are used as supplemental funding sources.
Additional liquidity is derived from scheduled loan and investment payments
of principal and interest, as well as prepayments received. For the three
months ended March 31, 2001 there were proceeds of $55.3 million from
the sales of investment securities available for sale, and proceeds of $153.1
million were generated from investment maturities. Purchases of investment
securities for the three months ended March 31, 2001 were $384.8 million.
Short-term borrowings and certificates of deposit over $100 thousand
amounted to $1.4 billion on average, for both the three months ended March 31,
2001 and the year ended December 31, 2000.
Cash requirements for Valley's parent company consist primarily of
dividends to shareholders. This cash need is routinely satisfied by dividends
collected from its subsidiary bank along with cash and investments owned.
Projected cash flows from this source are expected to be adequate to pay
dividends, given the current capital levels and current profitable
operations of its subsidiary.* In addition, Valley may repurchase, with
approval from its Board of Directors, shares of its outstanding common
stock. The cash required for a purchase of shares can be met by using its own
funds, dividends received from its subsidiary bank as well as borrowed funds.
At March 31, 2001 Valley maintained a floating rate line of credit in the
amount of $35 million, of which $10 million was outstanding. This line is
available for general corporate purposes and expires June 15, 2001.
Borrowings under this facility are collateralized by mortgage-backed and equity
securities of no less than 120 percent of the loan balance.
During the quarter, the total investment portfolio increased by approximately
$180.0 million. Approximately $66.6 million is the result of investing the
proceeds from the sale of the credit card portfolio. In addition excess
liquidity due to the slow down in the economy reflected in some of the lending
areas was used to purchase securities.
As of March 31, 2001, Valley had $2.0 billion of securities available for
sale recorded at their fair value, compared with $1.6 billion at December 31,
2000. As of March 31, 2001, the investment securities available for sale had
an unrealized gain of $13.5 million, net of deferred taxes, compared with
an unrealized loss of $1.6 million, net of deferred taxes, at December 31,
2000. This change was primarily due to an increase in fair value resulting
from a decreasing interest rate environment for investments and other
instruments effective with the beginning of 2001 and continuing through the
first quarter. Securities available for sale are not considered trading
account securities, which may be sold on a continuous basis, but rather are
securities which may be sold to meet the various liquidity and interest rate
requirements of Valley.
In connection with the Merchants acquisition, Valley reassessed the
classification of securities held in the Merchants investment portfolio and
transferred $162.4 million of securities held to maturity to securities
available for sale and $50.0 million of securities available for sale to
securities held to maturity to conform to Valley's investment objectives.
Loan Portfolio
As of March 31, 2001, total loans were $5.1 billion, compared with $5.2
billion at December 31, 2000. The following table reflects the composition
of the loan portfolio as of March 31, 2001 and December 31, 2000.
LOAN PORTFOLIO
March 31, December 31,
2001 2000
(in thousands)
Commercial $ 1,039,487 $ 1,026,793
Total commercial loans 1,039,487 1,026,793
Construction 166,149 160,932
Residential mortgage 1,294,160 1,301,851
Commercial mortgage 1,279,139 1,258,549
Total mortgage loans 2,739,448 2,721,332
Home equity 305,543 306,038
Credit card 22,992 94,293
Automobile 950,345 976,177
Other consumer 64,477
56,591
Total consumer loans 1,335,471 1,440,985
Total loans $5,114,406 $5,189,110
As a percent of total loans:
Commercial loans 20.3 % 19.8 %
Mortgage loans 53.6 52.4
Consumer loans
26.1 27.8
Total % 100.0 %
100.0
During the first quarter of 2001 Valley sold approximately $66.6 million
of credit card loans from its cobranded ShopRite MasterCard credit card
portfolio. Residential mortgage loans declined as prepayments, due to lower
interest rates, were exceeding new loans. Additionally, newly originated
residential mortgage loans with low long term fixed rates are being sold
into the secondary market which will also maintain or reduce the residential
mortgage portfolio in the near term.* Automobile lending remained slow
during the quarter due to a decrease in automobile sales volume, and a
reduction in State Farm applications. In addition, fewer applications are
being approved than have been historically due to a decline in the credit
quality of applications received.
Non-performing Assets
Non-performing assets include non-accrual loans and other real estate owned
("OREO"). Loans are generally placed on a non-accrual status when they become
past due in excess of 90 days as to payment of principal or interest.
Exceptions to the non-accrual policy may be permitted if the loan is
sufficiently collateralized and in the process of collection. OREO is
acquired through foreclosure on loans secured by land or real estate.
OREO is reported at the lower of cost or fair value at the time of
acquisition and at the lower of fair value, less estimated costs to sell, or
cost thereafter.
Non-performing assets totaled $4.0 million at March 31, 2001, unchanged
from December 31, 2000. Non-performing assets at March 31, 2001 and December
31, 2000, amounted to 0.08 percent of loans and OREO, respectively.
Loans 90 days or more past due and not included in the non-performing
category totaled $19.6 million at March 31, 2001, compared with $15.0
million at December 31, 2000. These loans are primarily residential mortgage
loans, commercial mortgage loans and commercial loans which are generally
well-secured and in the process of collection. Also included are matured
commercial mortgage loans in the process of being renewed, which totaled $4.9
million at March 31, 2001 and $2.8 million at December 31, 2000.
Total loans past due in excess of 30 days were 1.27 percent of all loans at
March 31, 2001 compared to 1.30 percent at March 31, 2000 and 1.58 percent at
December 31, 2000.
The following table sets forth non-performing assets and accruing loans
which were 90 days or more past due as to principal or interest payments on the
dates indicated, in conjunction with asset quality ratios for Valley.
LOAN QUALITY
March 31, December 31,
2001 2000
(in thousands)
Loans past due in excess of
90 days and still accruing $ 19,627 $ 14,952
Non-accrual loans $ 3,897 $ 3,883
Other real estate owned 88 129
Total non-performing assets $ 3,985 $ 4,012
Troubled debt restructured loans $ 938 $ 949
Non-performing loans as a % of
loans 0.08% 0.07%
Non-performing assets as a % of
loans plus other real estate owned 0.08% 0.08%
Allowance as a % of loans 1.22% 1.19%
At March 31, 2001 the allowance for loan losses amounted to $62.5 million,
compared with $62.0 million at year-end 2000. The allowance is adjusted by
provisions charged against income and loans charged-off, net of recoveries.
Net loan charge-offs were $1.5 million for the three months ended March 31,
2001 compared with $1.7 million for the three months ended March 31, 2000.
The allowance for loan losses is maintained at a level estimated to absorb
loan losses inherent in the loan portfolio as well as other credit risk
related charge-offs. The allowance is based on ongoing evaluations of the
probable estimated losses inherent in the loan portfolio. VNB's methodology
for evaluating the appropriateness of the allowance consists of several
significant elements, which include the allocated allowance, specific
allowances for identified problem loans and portfolio segments and the
unallocated allowance. The allowance also incorporates the results of
measuring impaired loans as required for in Statements of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures."
During the first quarter of 2001, continued emphasis was placed on the
current economic climate and the condition of the real estate market in the
northern New Jersey area and the surrounding market. Management addressed
these economic conditions and applied that information to changes in the
composition of the loan portfolio and net charge-off levels. The provision
charged to operations was $2.1 million during the first quarter of 2001
compared with $2.5 million during the first quarter of 2000. We do not know
at this time if lower levels of charge-offs will continue.*
Capital Adequacy
A significant measure of the strength of a financial institution is its
shareholders' equity. At March 31, 2001, shareholders' equity totaled $681.3
million or 8.5 percent of total assets, compared with $656.0 million or 8.3
percent at year-end 2000.
Included in shareholders' equity, as components of accumulated other
comprehensive income, at March 31, 2001 was a $13.5 million unrealized gain on
investment securities available for sale, net of tax, and a translation
adjustment loss of $1.0 million related to the Canadian subsidiary of VNB,
compared with an unrealized loss of $1.6 million and a $678 thousand
translation adjustment loss at December 31, 2000.
Valley's capital position at March 31, 2001 under risk-based capital
guidelines was $663.6 million, or 11.8 percent of risk-weighted assets,
for Tier 1 capital and $726.1 million, or 12.9 percent for Total risk-based
capital. The comparable ratios at December 31, 2000 were 11.3 percent for
Tier 1 capital and 12.3 percent for Total risk-based capital. At March 31,
2001 and 2000, Valley was in compliance with the leverage requirement
having Tier 1 leverage ratios of 8.5 percent for both periods. Valley's
ratios at March 31, 2001 were above the "well capitalized" requirements,
which require Tier I capital to risk-adjusted assets of at least 6 percent,
Total risk-based capital to risk-adjusted assets of 10 percent and a minimum
leverage ratio of 5 percent.
Book value per share amounted to $8.72 at March 31, 2001 compared with $8.41
per share at December 31, 2000.
The primary source of capital growth is through retention of earnings.
Valley's rate of earnings retention, derived by dividing undistributed
earnings by net income, was 45.4 percent at March 31, 2001, compared with
41.7 percent at March 31, 2000. Cash dividends declared amounted to $0.26
per share, for the quarter ended March 31, 2001, equivalent to a dividend
payout ratio of 54.6 percent, compared with 58.3 percent for the year 2000.
Valley's Board of Directors declared a five percent stock dividend on April 4,
2001, to shareholders of record on May 4, 2001, to be issued May 18, 2001.
The Board also agreed to increase the annual dividend rate from $0.99 per
share, on an after stock dividend basis, to $1.06 per share. The increased
cash dividend would be payable quarterly beginning on July 2, 2001. Valley's
Board of Directors continues to believe that cash dividends are an
important component of shareholder value and that, at its current level of
performance and capital, Valley expects to continue its current dividend
policy of a quarterly distribution of earnings to its shareholders.*
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), was
issued by the FASB in June 1998. SFAS No. 133 standardizes the accounting
for derivative instruments, including certain derivative instruments
embedded in other contracts. Under the standard, entities are required to
carry all derivative instruments in the statement of financial condition
at fair value. Valley would have had to adopt SFAS No. 133 by January 1,
2000. However, SFAS No. 137 extended the adoption of SFAS No. 133 to fiscal
years beginning after June 15, 2000. The provisions of SFAS
No. 133 must be applied prospectively. The adoption of SFAS No. 133 did not
have a material impact on the financial statements.
The FASB issued Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." ("SFAS No.140"). SFAS No. 10 replaces
SFAS No. 125. SFAS No. 140 resolves certain implementation issues, but it
carries forward most of SFAS No. 125's provisions without change. SFAS No.
140 is effective for transfers occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for
fiscal years ending after December 15, 2000. The transition provisions
contained in SFAS No. 133 provide that at the date of initial application, an
entity may transfer any debt security classified as "held to maturity" to
"available for sale" or "trading". On the initial adoption date of SFAS No.
133 as amended by SFAS No. 138, Valley did not transfer any of its
securities under the transition provisions contained in SFAS No. 133. The
adoption of SFAS No. 140 did not have a material impact on the financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See page 17 for a discussion of interest rate sensitivity.
PART II
Item 5. Other Information
a) The Board of Directors approved a five percent stock dividend on April
4, 2001. The new stock will be issued May 18, 2001 to shareholders of
record as of May 4, 2001.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(3) Articles of Incorporation and By-laws
A) Certificate of Incorporation of the
Registrant restated to show all changes through
May 7, 2001.
(10) Material Contracts
A) "Employment Continuation And Non-Competition Agreements" dated
September 5, 2000 between Valley, VNB and Spencer B. Witty,
James G. Lawrence, William J. Cardew and Eric W. Gould.
B) "Change in Control Agreement" dated September 5, 2000 between Valley,
VNB and James G. Lawrence.
b) Reports on Form 8-K
1) Filed January 29, 2001 to report the merger,
effective on January 19, 2001, between Valley
National Bancorp and Merchants New York Bancorp, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY NATIONAL BANCORP
(Registrant)
Date: May 11, 2001 /s/ Peter Southway
PETER SOUTHWAY
VICE CHAIRMAN
Date: May 11, 2001 /s/ Alan D. Eskow
ALAN D. ESKOW
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Exhibit (3) A)
AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
VALLEY NATIONAL BANCORP
Valley National Bancorp, a New Jersey corporation, pursuant
to N.J.S.A.-14A:7-15.1(3) and Section 9-2(2), does hereby certify as follows:
(a) The name of the Corporation is: Valley National
Bancorp.
(b) A five percent (5%) stock dividend was declared by
the Corporation on April 4, 2001, pursuant to which one share of Common Stock,
no par value, will be distributed for each twenty (20) shares of Common Stock,
no par value, held by shareholders on the record date of May 4, 2001 and
payable May 18, 2001. A resolution approving the stock dividend was adopted by
the Board of Directors of the Corporation at its special meeting held on April
4,2001.
(c) The stock dividend will not adversely affect the
rights or preferences of the holders of any of the outstanding shares and will
not result in the percentage of authorized shares that remains unissued after
the stock dividend exceeding the percentage of authorized shares that was
unissued before the stock dividend.
(d) There were issued and outstanding, as of the record
date of May 4, 2001, 74,437,507 shares of Common Stock without par value, which
are the shares subject to the stock dividend. Pursuant to the 5% stock
dividend, the number of shares of Common Stock without par value to be issued
is 3,721,875.
(e) The Corporation is hereby amending its Certificate
of Incorporation in connection with the stock dividend as follows:
The first sentence of Article V shall be amended to read:
"The total authorized capital stock of the Corporation shall
be 143,953,711 shares, consisting of 113,953,711 shares
of Common Stock and 30,000,000 shares of Preferred Stock
which may be issued in one or more classes or series."
IN WITNESS WHEREOF, Alan D. Eskow, Executive Vice President,
Chief Financial Officer and Corporate Secretary of Valley National Bancorp has
executed this Certificate on behalf of Valley National Bancorp on this seventh
day of May, 2001.
VALLEY NATIONAL BANCORP
By:
Alan D. Eskow, Executive Vice President,
Chief Financial Officer and Corporate Secretary
Exhibit (10) A-1
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
BY AND BETWEEN
SPENCER B. WITTY
VALLEY NATIONAL BANCORP,
a New Jersey Corporation
and
VALLEY NATIONAL BANK,
a national bank
DATED: As of September 5, 2000
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
THIS EMPLOYMENT CONTINUATION AND NON-COMPETITION AGREEMENT
(this "Agreement"), is entered into as of September 5, 2000 by and among
Valley Bancorp, a New Jersey corporation ("Valley"), Valley National Bank,
a national bank (the "Bank"), (Valley and the Bank are jointly hereinafter
referred to as the "Company") and Spencer B. Witty (hereinafter referred to as
the "Executive").
BACKGROUND
WHEREAS, the Executive is currently employed by The
Merchants Bank of New York ("Merchants Bank") and Merchants New York Bancorp,
Inc. ("Merchants"); and
WHEREAS, Valley and the Bank have entered into an Agreement
and Plan of Merger, dated September 5, 2000 (the "Merger Agreement") pursuant
to which Merchants will be merged into Valley and Merchants Bank will be
merged into the Bank, and the Executive will become an employee of the Bank;
WHEREAS, the Boards of Directors of the Bank and Valley
each are of the opinion that it would be of substantial value to the Company
to continue the employment of the Executive and obtain from the Executive
covenants not to compete during the term of his employment by Valley and for a
period of up to two (2) years thereafter; and
WHEREAS, to achieve such a goal, the Boards of Directors of
the Company and the Executive have agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the
Company and the Executive, each intending to be legally bound hereby, agree as
follows:
ARTICLE I
TERM OF AGREEMENT
The term of this Agreement shall commence on the date hereof
and shall terminate on the date which is two (2) years following the
termination (for any reason whatsoever) of Executive's employment with the
Company (hereinafter the "Term"), unless this Agreement expressly provides
for a shorter period. Notwithstanding the foregoing, this Agreement shall be
void and of no force and effect unless the Merger contemplated by the Merger
Agreement is consummated and the Executive is employed by Merchants Bank at
the Effective Time (as such term is defined in the Merger Agreement) and shall
not take effect until such time.
ARTICLE II
CONTINUED EMPLOYMENT; ADDITIONAL COMPENSATION
As consideration for the covenants of the Executive
hereunder, the Company agrees to employ the Executive and the Executive agrees
to be employed by the Company through May 1, 2003 with the same salary
(excluding Board of Director fees from Merchants and Merchants Bank) and
substantially the same benefits as are enjoyed by the Executive currently
as an employee of Merchants Bank. The Company shall pay to the Executive an
annual bonus equal to 12.5% of his base salary, in the same manner and
with the same timing as is the current practice of Merchants or, if the
Company terminates that practice, it shall increase the Executive's base
salary to cover the foregone bonus. In addition, the Company shall pay the
Executive an additional $24,000 per year for each of the two years of the
employment period and shall provide the Executive with medical and hospital
insurance supplemental to his Medicare benefits. The Executive shall also
be eligible to participate in the Company's annual incentive plan for
executives. The Executive agrees with the Company that he will serve as
Vice Chairman of Valley and of the Bank and have the additional title
"Chairman- Merchants Division" of Valley National Bank. He will also be
appointed as a director of Valley and the Bank, pursuant to the Merger
Agreement. The Company's obligation to employ and compensate the Executive
shall cease if he dies or is permanently disabled. The Executive shall have
the discretion to determine the amount of time per week he devotes to his
duties, provided that he continues to devote an amount of time which is
comparable to his current time commitments to Merchants. Following
termination of the Executive's employment by the Company, the Company shall
continue during the Executive's lifetime: (a) to supply the Executive with
medical and hospital insurance supplemental to his Medicare benefits, and
(b) to supply the Executive with use of his office at 275 Madison Avenue,
New York, NY so long as that remains part of the premises used by the Bank,
and if the Bank no longer uses that space, then at another Bank location in
Manhattan between the Battery and 59th Street that is reasonably acceptable
to the Bank and the Executive.
ARTICLE III
NON-COMPETITION COVENANTS
3.1 Non-Competition. In consideration for his
continued employment with the Bank and the compensation set forth in
Article II, the Executive agrees that while he is employed by the Bank
and for a period of two years following his termination of employment with
the Bank for any reason whatsoever (the "Two Year Post-Employment Period"),
the Executive will not, directly or indirectly, as shareholder, employee,
director, officer, principal or agent, or in any other capacity (other than
on behalf of the Company and in pursuit of Company business): (i) own, manage,
operate, consult with or be employed by, directly or indirectly, through a
holding company or affiliate, any bank, savings bank, savings and loan, trust
company or lending organization which maintains a branch office or a lending
office within 25 miles of New York City, or any bank, savings bank, savings
and loan, trust company or lending organization which conducts substantially
all of its business over the internet, or (ii) solicit the Banking Business
(as defined herein) of persons or entities who are known to the Executive
to be customers of the Company or any of its subsidiaries ("Company
Customers"), or encourage any Company Customers to terminate or reduce the
amount of Banking Business they do with the Company or any of its subsidiaries,
or (iii) solicit, induce or encourage any employee of the Bank to leave the
employment of the Bank; provided, however, that this provision shall not
prohibit the Executive from owning common stock of Valley (in any amount) or
from owning bonds, preferred stock or up to two percent (2%) of the
outstanding common shares of any such institution or its parent holding
company if the shares of the parent holding company or of the institution are
publicly traded. "Banking Business" means the traditional depository and
loan relationships between banks and their customers and shall not include
ancillary businesses such as the sale of mutual funds or life insurance
products. If at any time while Executive remains employed by the Bank (i)
there is a Change in Control, as that term is defined in the Valley National
Bancorp 1999 Long-Term Stock Incentive Plan, (the "Plan"), as interpreted by
the Valley National Bancorp Board of Directors in connection with the Plan,
and (ii) within 6 months after the date on which the Change in Control occurs,
the Executive's employment with the Bank is terminated for any reason other
than for Cause, as that term is defined in the Plan, the covenants not to
compete contained in this Section 3.1 shall terminate on the same day as the
termination of Executive's employment.
3.2 Reasonableness of Restraints. Executive
acknowledges that he has carefully read and considered all of the terms and
conditions of the foregoing covenants in Section 3.1, including the
restraints imposed upon him thereby, the Executive agrees that such
restraints are necessary for the reasonable and proper protection of Valley
and the Bank and that such restraints are reasonable with respect to subject
matter, length of time and area covered. However, both the Company and the
Executive agree that if a court finds this agreement unenforceable due to
restrictions unreasonable in scope, duration or geographical area, then
such court may reform this agreement so that the restrictions in it are
reasonable and this agreement is enforceable.
3.3 Specific Performance. In the event of an actual or
threatened breach by Executive of any of the covenants contained in Section
3.1, it is agreed that the remedies at law of Valley and the Bank would be
inadequate and Valley and the Bank and their respective successors shall be
entitled to injunctive relief restraining Executive from committing or
attempting such breach. The remedy set forth in this Section 3.3 shall be
in addition to any other remedies available to Valley and the Bank for
such breach or threatened breach.
3.4 Jurisdiction. Executive consents to and agrees to
the exclusive jurisdiction of the courts of New Jersey with respect to the
enforcement of these provisions.
3.5 Survival. This Article II shall survive the
termination or expiration of the Term of this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Changes. This Agreement may not be modified,
changed, amended, or altered except in a writing signed by the Executive and
by the Chief Executive Officer of Valley.
4.2 Notices. All notices given or required to be given
herein shall be in writing and be hand-delivered or sent by United States
first-class certified or registered mail, return receipt requested, postage
prepaid, to the Executive at the last-known address for the Executive, and to
Valley at the principal executive office for Valley (or any successor thereto),
to the attention of the Chief Executive Officer. All such notices shall be
effective when received or open refusal of the addressee to accept delivery.
Either party by a notice in writing to the other party may change or
designate the place for receipt of such notices.
4.3 Successors. This Agreement shall inure to the
benefit of and be binding upon the Company, and its successors, including
any company with or into which the Company may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger or
consolidation.
4.4 Entire Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the matters
contemplated hereby, and supersedes all prior negotiations, arrangements or
understandings, written or oral, with respect thereto.
4.5 Governing Law. This Agreement shall be governed
in all respects and be interpreted by and under the laws of the State of New
Jersey, without reference to the conflict of laws provisions of the State of
New Jersey.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date and year first written above.
ATTEST: VALLEY NATIONAL BANCORP
By: _________________________ By: ____/s/ Gerald H. Lipkin
ATTEST: VALLEY NATIONAL BANK
By: ________________________ By: ____/s/ Gerald H. Lipkin
WITNESS:
____________________________ _______/s/ Spencer B. Witty
SPENCER B. WITTY
Exhibit (10) A-2
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
BY AND BETWEEN
JAMES G. LAWRENCE
VALLEY NATIONAL BANCORP,
a New Jersey Corporation
and
VALLEY NATIONAL BANK,
a national bank
DATED: As of September 5, 2000
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
THIS EMPLOYMENT CONTINUATION AND NON-COMPETITION AGREEMENT
(this "Agreement"), is entered into as of September 5, 2000 by and among
Valley Bancorp, a New Jersey corporation ("Valley"), Valley National Bank,
a national bank (the "Bank"), (Valley and the Bank are jointly hereinafter
referred to as the "Company") and James G. Lawrence (hereinafter referred to as
the "Executive").
BACKGROUND
WHEREAS, the Executive is currently employed by The
Merchants Bank of New York ("Merchants Bank") and Merchants New York Bancorp,
Inc. ("Merchants"); and
WHEREAS, Valley and the Bank have entered into an Agreement
and Plan of Merger, dated September 5, 2000 (the "Merger Agreement") pursuant
to which Merchants will be merged into Valley and Merchants Bank will be
merged into the Bank, and the Executive will become an employee of the Bank;
WHEREAS, the Boards of Directors of the Bank and Valley
each are of the opinion that it would be of substantial value to the Company
to continue the employment of the Executive and obtain from the Executive
covenants not to compete during the term of his employment by Valley and for a
period of up to two (2) years thereafter; and
WHEREAS, to achieve such a goal, the Boards of Directors of
the Company and the Executive have agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the
Company and the Executive, each intending to be legally bound hereby, agree as
follows:
ARTICLE I
TERM OF AGREEMENT
The term of this Agreement shall commence on the date hereof
and shall terminate on the date which is two (2) years following the
termination (for any reason whatsoever) of Executive's employment with the
Company (hereinafter the "Term"), unless this Agreement expressly provides
for a shorter period. Notwithstanding the foregoing, this Agreement shall be
void and of no force and effect unless the Merger contemplated by the Merger
Agreement is consummated and the Executive is employed by Merchants Bank at
the Effective Time (as such term is defined in the Merger Agreement) and shall
not take effect until such time.
ARTICLE II
CONTINUED EMPLOYMENT; ADDITIONAL COMPENSATION
As consideration for the covenants of the Executive
hereunder, the Company agrees to employ the Executive and the Executive agrees
to be employed by the Company with the same salary (excluding Board of
Director fees from Merchants and Merchants Bank) and substantially the same
benefits as are enjoyed by the Executive currently as an employee of Merchants
Bank. The Company will continue to pay to the Executive an annual bonus
equal to 12.5% of his base salary, in the same manner and with the same timing
as is the current practice of Merchants or, if the Company terminates that
practice, it shall increase the Executive's base salary to cover the foregone
bonus. In addition, the Company shall pay the Executive an additional
$24,000 per year for each year that he continues as an employee of the Company.
The Executive will also be eligible to participate in the Company's annual
incentive plan for executives. The Company and the Executive will on the date
hereof enter into a Change in Control Agreement. The Company agrees, except
as otherwise provided in the Change in Control Agreement, to be bound by and
honor the employment agreement dated January 25, 2000, between the Executive
and Merchants (the "Employment Agreement") and the special pension benefits
arrangements the Executive has with Merchants Bank, evidenced to the
Executive by a letter dated August 21, 1998, (the "Special Pension Benefits").
Provided however, that the Executive agrees with the Company that his
Employment Agreement is hereby amended to provide that he will serve as an
Executive Vice-President of the Bank, with the additional title,
"President-Merchants Division" of the Bank, reporting to the Chief Executive
Officer of the Bank, and will not serve as a director of Merchants,
Merchants Bank, Valley or the Bank.
ARTICLE III
NON-COMPETITION COVENANTS
3.1 Non-Competition. The Executive agrees that while
he is employed by the Bank and for a period of two years following his
termination of employment with the Bank for any reason whatsoever (the
"Two Year Post-Employment Period"), the Executive will not, directly or
indirectly, as shareholder, employee, director, officer, principal or agent,
or in any other capacity (other than on behalf of the Company and in pursuit of
Company business): (i) own, manage, operate, consult with or be employed by,
directly or indirectly, through a holding company or affiliate, any bank,
savings bank, savings and loan, trust company or lending organization which
maintains a branch office or a lending office within 25 miles of New York City,
or any bank, savings bank, savings and loan, trust company or lending
organization which conducts substantially all of its business over the
internet, or (ii) solicit the Banking Business (as defined herein) of
persons or entities who are known to the Executive to be customers of the
Company or any of its subsidiaries ("Company Customers"), or encourage any
Company Customers to terminate or reduce the amount of Banking Business
they do with the Company or any of its subsidiaries, or (iii) solicit,
induce or encourage any employee of the Bank to leave the employment of the
Bank; provided, however, that this provision shall not prohibit the
Executive from owning common stock of Valley (in any amount) or from owning
bonds, preferred stock or up to two percent (2%) of the outstanding common
shares of any such institution or its parent holding company if the shares of
the parent holding company or of the institution are publicly traded.
"Banking Business" means the traditional depository and loan relationships
between banks and their customers and shall not include ancillary businesses
such as the sale of mutual funds or life insurance products. Commencing with
the fourth anniversary of the date of the execution of this Agreement, the Two
Year Post-Employment Period shall be reduced to one year. If at any time
while Executive remains employed by the Bank (i) there is a Change in Control,
as that term is defined in the Valley National Bancorp 1999 Long-Term Stock
Incentive Plan, (the "Plan"), as interpreted by the Valley National Bancorp
Board of Directors in connection with the Plan, and (ii) within 6 months after
the date on which the Change in Control occurs, the Executive's employment
with the Bank is terminated for any reason other than for Cause , as that term
is defined in the Plan, the covenants not to compete contained in this
Section 3.1 shall terminate on the same day as the termination of Executive's
employment.
3.2 Reasonableness of Restraints. Executive
acknowledges that he has carefully read and considered all of the terms and
conditions of the foregoing covenants in Section 3.1, including the
restraints imposed upon him thereby, the Executive agrees that such
restraints are necessary for the reasonable and proper protection of Valley
and the Bank and that such restraints are reasonable with respect to subject
matter, length of time and area covered. However, both the Company and the
Executive agree that if a court finds this agreement unenforceable due to
restrictions unreasonable in scope, duration or geographical area, then such
court may reform this agreement so that the restrictions in it are reasonable
and this agreement is enforceable.
3.3 Specific Performance. In the event of an actual or
threatened breach by Executive of any of the covenants contained in Section
3.1, it is agreed that the remedies at law of Valley and the Bank would be
inadequate and Valley and the Bank and their respective successors shall be
entitled to injunctive relief restraining Executive from committing or
attempting such breach. The remedy set forth in this Section 3.3 shall be
in addition to any other remedies available to Valley and the Bank for
such breach or threatened breach.
3.4 Jurisdiction. Executive consents to and agrees to
the exclusive jurisdiction of the courts of New Jersey with respect to the
enforcement of these provisions.
3.5 Survival. This Article II shall survive the
termination or expiration of the Term of this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Changes. This Agreement may not be modified,
changed, amended, or altered except in a writing signed by the Executive and
by the Chief Executive Officer of Valley.
4.2 Notices. All notices given or required to be given
herein shall be in writing and be hand-delivered or sent by United States
first-class certified or registered mail, return receipt requested, postage
prepaid, to the Executive at the last-known address for the Executive, and to
Valley at the principal executive office for Valley (or any successor
thereto), to the attention of the Chief Executive Officer. All such notices
shall be effective when received or open refusal of the addressee to
accept delivery. Either party by a notice in writing to the other party
may change or designate the place for receipt of such notices.
4.3 Successors. This Agreement shall inure to the
benefit of and be binding upon the Company, and its successors, including
any company with or into which the Company may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger or
consolidation.
4.4 Entire Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the matters
contemplated hereby, and supersedes all prior negotiations, arrangements or
understandings, written or oral, with respect thereto.
4.5 Governing Law. This Agreement shall be governed
in all respects and be interpreted by and under the laws of the State of
New Jersey, without reference to the conflict of laws provisions of the State
of New Jersey.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date and year first written above.
ATTEST: VALLEY NATIONAL BANCORP
By: _________________________ By: _____/s/ Gerald H. Lipkin
ATTEST: VALLEY NATIONAL BANK
By: ________________________ By: _____/s/ Gerald H. Lipkin
WITNESS:
__/s/ Spencer B. Witty___________ ________/s/ James G. Lawrence
Exhibit (10) A-3
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
BY AND BETWEEN
WILLIAM J. CARDEW
VALLEY NATIONAL BANCORP,
a New Jersey Corporation
and
VALLEY NATIONAL BANK,
a national bank
DATED: As of September 5, 2000
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
THIS EMPLOYMENT CONTINUATION AND NON-COMPETITION AGREEMENT
(this "Agreement"), is entered into as of September 5, 2000 by and among
Valley Bancorp, a New Jersey corporation ("Valley"), Valley National Bank,
a national bank (the "Bank"), (Valley and the Bank are jointly hereinafter
referred to as the "Company") and William J. Cardew (hereinafter referred to as
the "Executive").
BACKGROUND
WHEREAS, the Executive is currently employed by The
Merchants Bank of New York ("Merchants Bank") and Merchants New York Bancorp,
Inc. ("Merchants"); and
WHEREAS, Valley and the Bank have entered into an Agreement
and Plan of Merger, dated September 5, 2000 (the "Merger Agreement") pursuant
to which Merchants will be merged into Valley and Merchants Bank will be
merged into the Bank, and the Executive will become an employee of the Bank;
WHEREAS, the Boards of Directors of the Bank and Valley
each are of the opinion that it would be of substantial value to the Company
to continue the employment of the Executive and obtain from the Executive
covenants not to compete during the term of his employment by Valley and for a
period of up to two (2) years thereafter; and
WHEREAS, to achieve such a goal, the Boards of Directors of
the Company and the Executive have agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the
Company and the Executive, each intending to be legally bound hereby, agree as
follows:
ARTICLE I
TERM OF AGREEMENT
The term of this Agreement shall commence on the date hereof
and shall terminate on the date which is two (2) years following the
termination (for any reason whatsoever) of Executive's employment with the
Company (hereinafter the "Term"), unless this Agreement expressly provides
for a shorter period. Notwithstanding the foregoing, this Agreement shall be
void and of no force and effect unless the Merger contemplated by the Merger
Agreement is consummated and the Executive is employed by Merchants Bank at
the Effective Time (as such term is defined in the Merger Agreement) and shall
not take effect until such time.
ARTICLE II
CONTINUED EMPLOYMENT; ADDITIONAL COMPENSATION
As consideration for the covenants of the Executive
hereunder, the Company agrees to employ the Executive and the Executive agrees
to be employed by the Company, through May 1, 2003, with the same salary
(excluding Board of Director fees from Merchants and Merchants Bank) and
substantially the same benefits as are enjoyed by the Executive currently
as an employee of Merchants Bank. The Company shall pay to the Executive an
annual bonus equal to 12.5% of his base salary, in the same manner and
with the same timing as is the current practice of Merchants or, if the
Company terminates that practice, it shall increase the Executive's base
salary to cover the foregone bonus. In addition, the Company shall pay the
Executive an additional $24,000 per year for each year that he continues as an
employee of the Company. The Executive shall also be eligible to participate
in the Company's annual incentive plan for executives. The Company agrees to
be bound by and honor the employment agreement dated January 31, 2000,
between the Executive and Merchants (the "Employment Agreement"); provided
however, that the Executive agrees with the Company that his Employment
Agreement is hereby amended to provide that he will serve as a First Senior
Vice-President of the Bank, with the additional title, "Vice Chairman,
Merchants Division" of the Bank, and will not serve as a director of
Merchants, Merchants Bank, Valley or the Bank. The Company's obligation to
employ and compensate the Executive shall cease if he dies, is permanently
disabled or is removed for "cause," as defined in the Employment Agreement.
ARTICLE III
NON-COMPETITION COVENANTS
3.1 Non-Competition. The Executive agrees that while
he is employed by the Bank and for a period of two years following his
termination of employment with the Bank for any reason whatsoever (the
"Two Year Post-Employment Period"), the Executive will not, directly or
indirectly, as shareholder, employee, director, officer, principal or agent,
or in any other capacity (other than on behalf of the Company and in pursuit of
Company business): (i) own, manage, operate, consult with or be employed
by, directly or indirectly, through a holding company or affiliate, any bank,
savings bank, savings and loan, trust company or lending organization which
maintains a branch office or a lending office within 25 miles of New York City,
or any bank, savings bank, savings and loan, trust company or lending
organization which conducts substantially all of its business over the
internet, or (ii) solicit the Banking Business (as defined herein) of
persons or entities who are known to the Executive to be customers of the
Company or any of its subsidiaries ("Company Customers"), or encourage any
Company Customers to terminate or reduce the amount of Banking Business
they do with the Company or any of its subsidiaries, or (iii) solicit,
induce or encourage any employee of the Bank to leave the employment of the
Bank; provided, however, that this provision shall not prohibit the
Executive from owning common stock of Valley (in any amount) or from owning
bonds, preferred stock or up to two percent (2%) of the outstanding common
shares of any such institution or its parent holding company if the shares of
the parent holding company or of the institution are publicly traded.
"Banking Business" means the traditional depository and loan relationships
between banks and their customers and shall not include ancillary businesses
such as the sale of mutual funds or life insurance products. If at any time
while Executive remains employed by the Bank (i) there is a Change in Control,
as that term is defined in the Valley National Bancorp 1999 Long-Term
Stock Incentive Plan, (the "Plan"), as interpreted by the Valley National
Bancorp Board of Directors in connection with the Plan, and (ii) within 6
months after the date on which the Change in Control occurs, the Executive's
employment with the Bank is terminated for any reason other than for Cause,
as that term is defined in the Plan, the covenants not to compete
contained in this Section 3.1 shall terminate on the same day as the
termination of Executive's employment.
3.2 Reasonableness of Restraints. Executive
acknowledges that he has carefully read and considered all of the terms and
conditions of the foregoing covenants in Section 3.1, including the
restraints imposed upon him thereby, the Executive agrees that such
restraints are necessary for the reasonable and proper protection of Valley
and the Bank and that such restraints are reasonable with respect to subject
matter, length of time and area covered. However, both the Company and the
Executive agree that if a court finds this agreement unenforceable due to
restrictions unreasonable in scope, duration or geographical area, then
such court may reform this agreement so that the restrictions in it are
reasonable and this agreement is enforceable.
3.3 Specific Performance. In the event of an actual or
threatened breach by Executive of any of the covenants contained in Section
3.1, it is agreed that the remedies at law of Valley and the Bank would be
inadequate and Valley and the Bank and their respective successors shall be
entitled to injunctive relief restraining Executive from committing or
attempting such breach. The remedy set forth in this Section 3.3 shall be
in addition to any other remedies available to Valley and the Bank for
such breach or threatened breach.
3.4 Jurisdiction. Executive consents to and agrees to
the exclusive jurisdiction of the courts of New Jersey with respect to the
enforcement of these provisions.
3.5 Survival. This Article II shall survive the
termination or expiration of the Term of this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Changes. This Agreement may not be modified,
changed, amended, or altered except in a writing signed by the Executive and
by the Chief Executive Officer of Valley.
4.2 Notices. All notices given or required to be given
herein shall be in writing and be hand-delivered or sent by United States
first-class certified or registered mail, return receipt requested, postage
prepaid, to the Executive at the last-known address for the Executive, and to
Valley at the principal executive office for Valley (or any successor thereto),
to the attention of the Chief Executive Officer. All such notices shall be
effective when received or open refusal of the addressee to accept delivery.
Either party by a notice in writing to the other party may change or
designate the place for receipt of such notices.
4.3 Successors. This Agreement shall inure to the
benefit of and be binding upon the Company, and its successors, including
any company with or into which the Company may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger or
consolidation.
4.4 Entire Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the matters
contemplated hereby, and supersedes all prior negotiations, arrangements or
understandings, written or oral, with respect thereto.
4.5 Governing Law. This Agreement shall be governed
in all respects and be interpreted by and under the laws of the State of
New Jersey, without reference to the conflict of laws provisions of the State
of New Jersey.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date and year first written above.
ATTEST: VALLEY NATIONAL BANCORP
By: __/s/ Peter Southway________ By: ____/s/ Gerald H. Lipkin________
ATTEST: VALLEY NATIONAL BANK
By: __/s/ Peter Southway________ By: ____/s/ Gerald H. Lipkin________
WITNESS:
_/s/ Robinson Markel___________ _______/s/ William J. Cardew_______
WILLIAM J. CARDEW
Exhibit (10) A-4
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
BY AND BETWEEN
ERIC W. GOULD
VALLEY NATIONAL BANCORP,
a New Jersey Corporation
and
VALLEY NATIONAL BANK,
a national bank
DATED: As of September 5, 2000
EMPLOYMENT CONTINUATION AND
NON-COMPETITION AGREEMENT
THIS EMPLOYMENT CONTINUATION AND NON-COMPETITION AGREEMENT
(this "Agreement"), is entered into as of September 5, 2000 by and among
Valley Bancorp, a New Jersey corporation ("Valley"), Valley National Bank,
a national bank (the "Bank"), (Valley and the Bank are jointly hereinafter
referred to as the "Company") and Eric W. Gould (hereinafter referred to as the
"Executive").
BACKGROUND
WHEREAS, the Executive is currently employed by The
Merchants Bank of New York ("Merchants Bank") and Merchants New York Bancorp,
Inc. ("Merchants"); and
WHEREAS, Valley and the Bank have entered into an Agreement
and Plan of Merger, dated September 5, 2000 (the "Merger Agreement") pursuant
to which Merchants will be merged into Valley and Merchants Bank will be
merged into the Bank, and the Executive will become an employee of the Bank;
WHEREAS, the Boards of Directors of the Bank and Valley
each are of the opinion that it would be of substantial value to the Company
to continue the employment of the Executive and obtain from the Executive
covenants not to compete during the term of his employment by Valley and for a
period of up to two (2) years thereafter; and
WHEREAS, to achieve such a goal, the Boards of Directors of
the Company and the Executive have agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the
Company and the Executive, each intending to be legally bound hereby, agree as
follows:
ARTICLE I
TERM OF AGREEMENT
The term of this Agreement shall commence on the date hereof
and shall terminate on the date which is two (2) years following the
termination (for any reason whatsoever) of Executive's employment with the
Company (hereinafter the "Term"), unless this Agreement expressly provides
for a shorter period. Notwithstanding the foregoing, this Agreement shall be
void and of no force and effect unless the Merger contemplated by the Merger
Agreement is consummated and the Executive is employed by Merchants Bank at
the Effective Time (as such term is defined in the Merger Agreement) and shall
not take effect until such time.
ARTICLE II
CONTINUED EMPLOYMENT; ADDITIONAL COMPENSATION
As consideration for the covenants of the Executive
hereunder, the Company agrees to employ the Executive for two years and the
Executive agrees to be employed by the Company with the same salary
(excluding Board of Director fees from Merchants and Merchants Bank) and
substantially the same benefits as are enjoyed by the Executive currently as
an employee of Merchants Bank. The Company shall pay to the Executive an
annual bonus equal to 12.5% of his base salary, in the same manner and with
the same timing as is the current practice of Merchants or, if the Company
terminates that practice, it shall increase the Executive's base salary to
cover the foregone bonus. In addition, the Company shall pay the Executive
an additional $45,000 per year for each year that he continues as an employee
of the Company. The Executive shall also be eligible to participate in the
Company's annual incentive plan for executives. The Executive agrees with
the Company that he will serve as a First Senior Vice-President of the Bank,
and will not serve as a director of Merchants, Merchants Bank, Valley or
the Bank. The Company's obligation to employ and compensate the
executive shall cease if he dies, or is currently disabled, or is terminated
for cause as defined in the Company's employee manual.
ARTICLE III
NON-COMPETITION COVENANTS
3.1 Non-Competition. The Executive agrees that while
he is employed by the Bank and for a period of two years following his
termination of employment with the Bank for any reason whatsoever (the
"Two Year Post-Employment Period"), the Executive will not, directly or
indirectly, as shareholder, employee, director, officer, principal or agent,
or in any other capacity (other than on behalf of the Company and in pursuit of
Company business): (i) own, manage, operate, consult with or be employed by,
directly or indirectly, through a holding company or affiliate, any bank,
savings bank, savings and loan, trust company or lending organization which
maintains a branch office or a lending office within 25 miles of New York City,
or any bank, savings bank, savings and loan, trust company or lending
organization which conducts substantially all of its business over the
internet, or (ii) solicit the Banking Business (as defined herein) of
persons or entities who are known to the Executive to be customers of the
Company or any of its subsidiaries ("Company Customers"), or encourage any
Company Customers to terminate or reduce the amount of Banking Business
they do with the Company or any of its subsidiaries, or (iii) solicit,
induce or encourage any employee of the Bank to leave the employment of the
Bank; provided, however, that this provision shall not prohibit the
Executive from owning common stock of Valley (in any amount) or from owning
bonds, preferred stock or up to two percent (2%) of the outstanding
common shares of any such institution or its parent holding company if the
shares of the parent holding company or of the institution are publicly
traded. "Banking Business" means the traditional depository and loan
relationships between banks and their customers and shall not include
ancillary businesses such as the sale of mutual funds or life insurance
products. Commencing on April 30, 2003, the Two Year Post-Employment
Period shall be reduced to one year. If at any time while Executive remains
employed by the Bank (i) there is a Change in Control, as that term is
defined in the Valley National Bancorp 1999 Long-Term Stock Incentive Plan,
(the "Plan"), as interpreted by the Valley National Bancorp Board of
Directors in connection with the Plan, and (ii) within 6 months after the date
on which the Change in Control occurs, the Executive's employment with the
Bank is terminated for any reason other than for Cause , as that term is
defined in the Plan, the covenants not to compete contained in this Section
3.1 shall terminate on the same day as the termination of Executive's
employment.
3.2 Reasonableness of Restraints. Executive
acknowledges that he has carefully read and considered all of the terms and
conditions of the foregoing covenants in Section 3.1, including the
restraints imposed upon him thereby, the Executive agrees that such
restraints are necessary for the reasonable and proper protection of Valley
and the Bank and that such restraints are reasonable with respect to subject
matter, length of time and area covered. However, both the Company and the
Executive agree that if a court finds this agreement unenforceable due to
restrictions unreasonable in scope, duration or geographical area, then
such court may reform this agreement so that the restrictions in it are
reasonable and this agreement is enforceable.
3.3 Specific Performance. In the event of an actual or
threatened breach by Executive of any of the covenants contained in Section
3.1, it is agreed that the remedies at law of Valley and the Bank would be
inadequate and Valley and the Bank and their respective successors shall be
entitled to injunctive relief restraining Executive from committing or
attempting such breach. The remedy set forth in this Section 3.3 shall be
in addition to any other remedies available to Valley and the Bank for
such breach or threatened breach.
3.4 Jurisdiction. Executive consents to and agrees to
the exclusive jurisdiction of the courts of New Jersey with respect to the
enforcement of these provisions.
3.5 Survival. This Article II shall survive the
termination or expiration of the Term of this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Changes. This Agreement may not be modified,
changed, amended, or altered except in a writing signed by the Executive and
by the Chief Executive Officer of Valley.
4.2 Notices. All notices given or required to be given
herein shall be in writing and be hand-delivered or sent by United States
first-class certified or registered mail, return receipt requested, postage
prepaid, to the Executive at the last-known address for the Executive, and to
Valley at the principal executive office for Valley (or any successor thereto),
to the attention of the Chief Executive Officer. All such notices shall be
effective when received or open refusal of the addressee to accept delivery.
Either party by a notice in writing to the other party may change or
designate the place for receipt of such notices.
4.3 Successors. This Agreement shall inure to the
benefit of and be binding upon the Company, and its successors, including
any company with or into which the Company may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger or
consolidation.
4.4 Entire Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the matters
contemplated hereby, and supersedes all prior negotiations, arrangements or
understandings, written or oral, with respect thereto.
4.5 Governing Law. This Agreement shall be governed
in all respects and be interpreted by and under the laws of the State of New
Jersey, without reference to the conflict of laws provisions of the State of
New Jersey.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date and year first written above.
ATTEST: VALLEY NATIONAL BANCORP
By: ___/s/ Peter Southway_______ By: ____/s/ Gerald H. Lipkin ______
ATTEST: VALLEY NATIONAL BANK
By: ___/s/ Peter Southway __ By: ____/s/ Gerald H. Lipkin ______
WITNESS:
___/s/ Spencer B. Witty__________ _______/s/ Eric W. Gould___________
ERIC W. GOULD
Exhibit (10) B
CHANGE-IN-CONTROL AGREEMENT
(Executive Vice President)
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of
this 5th day of September, 2000 among VALLEY NATIONAL BANK ("Bank"), a national
banking association with its principal office at 1455 Valley Road, Wayne,
New Jersey, VALLEY NATIONAL BANCORP ("Valley"), a New Jersey Corporation
which maintains its principal office at 1445 Valley Road, Wayne, New Jersey
(Valley and the Bank collectively are the "Company") and James G. Lawrence (the
"Executive").
BACKGROUND
WHEREAS, the Executive entered into an Employment Agreement
with Merchants New York Bancorp, Inc. ("Merchants") dated January 25, 2000
(the "Employment Agreement") pursuant to which he works for Merchants and
The Merchants Bank of New York ("Merchants Bank");
WHEREAS, Valley and the Bank have entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Merchants and
Merchants Bank pursuant to which Merchants will be merged into Valley, and
Merchants Bank will be merged into The Bank, and Executive will become an
Executive of the Bank upon the closing of the transactions contemplated by the
Merger Agreement;
WHEREAS, the Executive has been continuously employed by
Merchants Bank for many years;
WHEREAS, the Executive throughout his tenure has worked
diligently in his position in the business of Merchants and Merchants Bank and
is expected to work for the Bank;
WHEREAS, the Board of Directors of the Bank and Valley
believe that the future services of the Executive are of great value to the
Bank and Valley and that it is important for the growth and development of the
Bank that the Executive continue in his position;
WHEREAS, if the Company receives any proposal from a third
person concerning a possible business combination with, or acquisition of
equities securities of, the Company, the Board of Directors of the Company
(the "Board") believes it is imperative that the Company and the Board be able
to rely upon the Executive to continue in his position, and that they be
able to receive and rely upon his advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that the
Executive might be distracted by the personal uncertainties and risks created
by such a proposal;
WHEREAS, to achieve that goal, and to retain the Executive's
services prior to any such activity, the Board of Directors and the
Executive have agreed to enter into this Agreement to govern the Executive's
termination benefits in the event of a Change in Control of the Company, as
hereinafter defined.
NOW, THEREFORE, to assure the Company that it will have
the continued dedication of the Executive and the availability of his
advice and counsel notwithstanding the possibility, threat or occurrence
of a bid to take over control of the Company, and to induce the Executive to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Executive, each intending to be legally
bound hereby agree as follows:
Definitions
a. Base Salary. "Base Salary", as used in Section 9 hereof, means
the annual cash base salary (excluding any bonus and
the value of any fringe benefits) paid to the
Executive at the time of the termination of
employment unless such amount has been reduced
after a Change in Control, in which case such
amount shall be the highest annual base salary in
effect during the shorter of 18 months prior to the
Change in Control or the period he was working for
the Bank (excluding any period he worked for
Merchants and Merchants Bank).
b. Cause. For purposes of this Agreement "Cause" with
respect to the termination by the Company of
Executive's employment shall mean (i) willful and
continued failure by the Executive to perform his
duties for the Company under this Agreement after
at least one warning in writing from the Company's
Board of Directors identifying specifically any
such failure; (ii) the willful engaging by the
Executive in misconduct which causes material injury
to the Company as specified in a written notice to
the Executive from the Board of Directors; or (iii)
conviction of a crime, other than a traffic
violation, habitual drunkenness, drug abuse, or
excessive absenteeism other than for illness,
after a warning (with respect to drunkenness or
absenteeism only) in writing from the Board of
Directors to refrain from such behavior. No act or
failure to act on the part of the Executive shall be
considered willful unless done, or omitted to be
done, by the Executive not in good faith and without
reasonable belief that the action or omission was
in the best interest of the Company.
c. Change in Control. "Change in Control" means any of the following
events: (i) when Valley or a Subsidiary acquires
actual knowledge that any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange
Act), other than an affiliate of Valley or a
Subsidiary or an employee benefit plan established
or maintained by Valley, a Subsidiary or any of
their respective affiliates, is or becomes the
beneficial owner (as defined in Rule 13d-3 of the
Exchange Act) directly or indirectly, of securities
of Valley representing more than twenty-five
percent (25%) of the combined voting power of
Valley's then outstanding securities (a "Control
Person"), (ii) upon the first purchase of Valley's
common stock pursuant to a tender or exchange
offer (other than a tender or exchange offer made by
Valley, a Subsidiary or an employee benefit plan
established or maintained by Valley, a Subsidiary or
any of their respective affiliates), (iii) upon
the approval by Valley's stockholders of (A) a
merger or consolidation of Valley with or into
another corporation (other than a merger or
consolidation which is approved by at least
two-thirds of the Continuing Directors (as
hereinafter defined) or the definitive agreement
for which provides that at least two-thirds of
the directors of the surviving or resulting
corporation immediately after the transaction are
Continuing Directors (in either case, a
"Non-Control Transaction")), (B) a sale or
disposition of all or substantially all of Valley's
assets or (C) a plan of liquidation or dissolution
of Valley, (iv) if during any period of two (2)
consecutive years, individuals who at the
beginning of such period constitute the Board (the
"Continuing Directors") cease for any reason to
constitute at least two-thirds thereof or,
following a Non-Control Transaction, two-thirds
of the board of directors of the surviving or
resulting corporation; provided that any
individual whose election or nomination for
election as a member of the Board (or, following a
Non-Control Transaction, the board of directors of
the surviving or resulting corporation) was
approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be
considered a Continuing Director, or (v) upon a
sale of (A) common stock of the Bank if after such
sale any person (as such term is used in Section
13(d) and 14(d)(2) of the Exchange Act) other than
Valley, an employee benefit plan established or
maintained by Valley or a Subsidiary, or an
affiliate of Valley or a Subsidiary, owns a
majority of the Bank's common stock or (B) all or
substantially all of the Bank's assets (other than
in the ordinary course of business). No person
shall be considered a Control Person for purposes
of clause (i) above if (A) such person is or becomes
the beneficial owner, directly or indirectly,
of more than ten percent (10%) but less than
twenty-five percent (25%) of the combined voting
power of Valley's then outstanding securities if
the acquisition of all voting securities in
excess of ten percent (10%) was approved in advance
by a majority of the Continuing Directors then in
office or (B) such person acquires in excess of ten
percent (10%) of the combined voting power of
Valley's then outstanding voting securities in
violation of law and by order of a court of
competent jurisdiction, settlement or otherwise,
disposes or is required to dispose of all securities
acquired in violation of law.
d. Contract Period. "Contract Period" shall mean the period commencing
the day immediately preceding a Change in Control
and ending on the earlier of (i) the third
anniversary of the Change in Control or (ii) the
date the Executive would attain age 65 or (iii) the
death of the Executive. For the purpose of this
Agreement, a Change in Control shall be deemed to
have occurred at the date specified in the
definition of Change-in-Control.
e. Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
f. Good Reason. When used with reference to a voluntary termination
by Executive of his employment with the Company,
"Good Reason" shall mean any of the following, if
taken without Executive's express written consent:
(1) The assignment to Executive of any duties inconsistent with, or
the reduction of powers or functions associated
with, Executive's position, title, duties,
responsibilities and status with the Company
immediately prior to a Change in Control; any
removal of Executive from, or any failure to
re-elect Executive to, any position(s)
or office(s) Executive held immediately prior to
such Change in Control. A change in title or
positions resulting merely from a merger of the
Company into or with another bank or company which
does not downgrade in any way the Executive's
powers, duties and responsibilities shall not meet
the requirements of this paragraph;
(2) A reduction by the Company in Executive's annual base
compensation as in effect immediately prior to a
Change in Control or the failure to award Executive
annual increases in accordance herewith;
(3) A failure by the Company to continue any bonus plan in which
Executive participated immediately prior to the
Change in Control or a failure by the Company to
continue Executive as a participant in such plan
on at least the same basis as Executive participated
in such plan prior to the Change in Control;
(4) The Company's transfer of Executive to another geographic
location outside of New Jersey or more than 25 miles
from his present office location, except for
required travel on the Company's business to
an extent substantially consistent with Executive's
business travel obligations immediately prior to
such Change in Control;
(5) The failure by the Company to continue in effect any
employee benefit plan, program or arrangement
(including, without limitation the Company's
retirement plan, benefit equalization plan, life
insurance plan, health and accident plan, disability
plan, deferred compensation plan or long term stock
incentive plan) in which Executive is participating
immediately prior to a Change in Control (except
that the Company may institute or continue plans,
programs or arrangements providing Executive with
substantially similar benefits); the taking of any
action by the Company which would adversely affect
Executive's participation in or materially
reduce Executive's benefits under, any of such
plans, programs or arrangements; the failure to
continue, or the taking of any action which would
deprive Executive, of any material fringe benefit
enjoyed by Executive immediately prior to such
Change in Control; or the failure by the Company to
provide Executive with the number of paid
vacation days to which Executive was entitled
immediately prior to such Change in Control;
(6) The failure by the Company to obtain an assumption in
writing of the obligations of the Company to
perform this Agreement by any successor to the
Company and to provide such assumption to the
Executive prior to any Change in Control; or
(7) Any purported termination of Executive's employment by the
Company during the term of this Agreement which is
not effected pursuant to all of the requirements
of this Agreement; and, for purposes of this
Agreement, no such purported termination shall be
effective.
g. Subsidiary. "Subsidiary" means any corporation in an unbroken
chain of corporations, beginning with Valley, if
each of the corporations other than the last
corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in such chain.
2. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts
employment, during the Contract Period upon the
terms and conditions set forth herein.
3. Position. During the Contract Period the Executive shall be
employed as an Executive Vice President of the Bank,
or such other corporate or divisional profit
center as shall then be the principal successor to
the business, assets and properties of the
Company, with substantially the same title and
the same duties and responsibilities as before
the Change in Control. The Executive shall devote
his full time and attention to the business of the
Company, and shall not during the Contract Period
be engaged in any other business activity. This
paragraph shall not be construed as preventing the
Executive from managing any investments
of his which do not require any service on his part
in the operation of such investments.
4. Cash Compensation. The Company shall pay to the Executive
compensation for his services during the Contract
Period as follows:
a. Base Salary. A base annual salary equal to the annual
salary in effect as of the Change in Control. The
annual salary shall be payable in installments in
accordance with the Company's usual payroll method.
b. Annual Bonus. An annual cash bonus equal to at least the
average of the bonuses paid to the Executive in the
three years prior to the Change in Control. The
bonus shall be payable at the time and in the
manner which the Company paid such bonuses prior to
the Change in Control.
c. Annual Review. The Board of Directors of the Company during the
Contract Period shall review annually, or at
more frequent intervals which the Board determines
is appropriate, the Executive's compensation and
shall award him additional compensation to reflect
the Executive's performance, the performance of
the Company and competitive compensation levels, all
as determined in the discretion of the Board of
Directors.
5. Expenses and Fringe Benefits.
a. Expenses. During the Contract Period, the Executive shall be
entitled to reimbursement for all business expenses
incurred by him with respect to the business of
the Company in the same manner and to the same
extent as such expenses were previously reimbursed
to him immediately prior to the Change in Control.
b. Benefit Equalization Plan. During the Contract Period, if the
Executive was entitled to benefits under the
Company's Benefit Equalization Plan ("BEP") prior
to the Change in Control, the Executive shall be
entitled to continued benefits under the BEP after
the Change in Control and such BEP may not be
modified to reduce or eliminate such benefits during
the Contract Period.
c. Club Membership and Automobile. If prior to the Change in
Control, the Executive was entitled to membership
in a country club and/or the use of an
automobile, he shall be entitled to the same
membership and/or use of an automobile at least
comparable to the automobile provided to him prior
to the Change in Control.
d. Other Benefits. The Executive also shall be entitled to vacations
and sick days, in accordance with the practices
and procedures of the Company, as such existed
immediately prior to the Change in Control. During
the Contract Period, the Executive also shall be
entitled to hospital, health, medical and life
insurance, and any other benefits enjoyed, from
time to time, by senior officers of the Company,
all upon terms as favorable as those enjoyed by
other senior officers of the Company.
Notwithstanding anything in this paragraph 5(d) to
the contrary, if the Company adopts any change in
the benefits provided for senior officers of the
Company, and such policy is uniformly applied to
all officers of the Company (and any successor or
acquiror of the Company, if any), including the
chief executive officer of such entities, then
no such change shall be deemed to be contrary to
this paragraph.
6. Termination for Cause. The Company shall have the right to
terminate the Executive for Cause, upon written
notice to him of the termination which notice
shall specify the reasons for the termination. In
the event of termination for Cause the Executive
shall not be entitled to any further benefits under
this Agreement.
7. Disability. During the Contract Period if the Executive
becomes permanently disabled, or is unable to
perform his duties hereunder for 4 consecutive
months in any 12 month period, the Company may
terminate the employment of the Executive. In such
event, the Executive shall not be entitled to any
further benefits under this Agreement.
8. Death Benefits. Upon the Executive's death during the
Contract Period, his estate shall not be entitled
to any further benefits under this Agreement.
9. Termination Without Cause or Resignation for Good Reason.
The Company may terminate the Executive without
Cause during the Contract Period by written notice
to the Executive providing four weeks notice. The
Executive may resign for Good Reason during the
Contract Period upon four weeks' written notice
to the Company specifying facts and circumstances
claimed to support the Good Reason. The Executive
shall be entitled to give a Notice of Termination
that his or her employment is being terminated for
Good Reason at any time during the Contract Period,
not later than twelve months after any occurrence
of an event stated to constitute Good Reason. If
the Company terminates the Executive's employment
during the Contract Period without Cause or if the
Executive Resigns for Good Reason, the Company
shall, subject to section 12 hereof:
a. Within 20 business days of the termination of employment pay
the Executive a lump sum equal to three (3) times
the Executive's Base Salary; and
b. Continue to provide the Executive during the remainder of the
Contract Period with health, hospitalization and
medical insurance, as were provided at the time of
the termination of his employment with the
Company, at the Company's cost.
The Executive shall not
have a duty to mitigate the damages suffered by
him in connection with the termination by the
Company of his employment without Cause or a
resignation for Good Reason during the Contract
Period. If the Company fails to pay the Executive
the lump sum amount due him hereunder or to provide
him with the health, hospitalization and medical
insurance benefits due under this section, the
Executive, after giving 10 days' written notice
to the Company identifying the Company's
failure, shall be entitled to recover from the
Company all of his reasonable legal fees and
expenses incurred in connection with his
enforcement against the Company of the terms of
this Agreement. The Executive shall be denied
payment of his legal fees and expenses only if a
court finds that the Executive
sought payment of such fees without reasonable cause.
10. Resignation Without Good Reason. The Executive shall be
entitled to resign from the employment of the
Company at any time during the Contact Period
without Good Reason, but upon such resignation the
Executive shall not be entitled to any additional
compensation for the time after which he ceases
to be employed by the Company, and shall not be
entitled to any of the other benefits provided
hereunder. No such resignation shall be effective
unless in writing with four weeks' notice thereof.
11. Non-Disclosure of Confidential Information.
a. Non-Disclosure of Confidential Information. Except in the
course of his employment with the Company and in
the pursuit of the business of the Company or any of
its subsidiaries or affiliates, the Executive
shall not, at any time during or following the
Contract Period, disclose or use, any confidential
information or proprietary data of the Company or
any of its subsidiaries or affiliates. The
Executive agrees that, among other things, all
information concerning the identity of and the
Company's relations with its customers is
confidential information.
b. Specific Performance. Executive agrees that the Company
does not have an adequate remedy at law for the
breach of this section and agrees that he shall be
subject to injunctive relief and equitable remedies
as a result of the breach of this section. The
invalidity or unenforceability of any provision of
this Agreement shall not affect the force and
effect of the remaining valid portions.
c. Survival. This section shall survive the termination of the
Executive's employment hereunder and the expiration
of this Agreement.
12. Certain Reduction of Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding, prior
to the payment of any lump sum amount payable
hereunder, the certified public accountants of the
Company immediately prior to a Change of Control
(the "Certified Public Accountants) shall
determine as promptly as practical and in any
event within 20 business days following the
termination of employment of Executive whether any
payment or distribution by the Company to
or for the benefit of the Executive (whether paid
or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise)
(a "Payment") would more likely than not be
nondeductible by the Company for Federal income
purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), and
if it is then the aggregate present value of
amounts payable or distributable to or for the
benefit of Executive pursuant to this Agreement
(such payments or distributions pursuant to this
Agreement are thereinafter referred to as
"Agreement Payments") shall be reduced (but not
below zero) to the reduced Amount. For purposes of
this paragraph, the "Reduced Amount" shall be an
amount expressed in present value which maximizes
the aggregate present value of Agreement Payments
without causing any Payment to be nondeductible by
the Company because of said Section 280G of the Code.
b. If under paragraph (a) of this section the Certified Public
Accountants determine that any Payment would more
likely than not be nondeductible by the Company
because of Section 280G of the Code, the Company
shall promptly give the Executive notice to that
effect and a copy of the detailed calculation
thereof and of the Reduced Amount, and the
Executive may then elect, in his sole discretion,
which and how much of the Agreement Payments shall
be eliminated or reduced (as long as after such
election the aggregate present value of the
Agreement Payments equals the Reduced Amount),
and shall advise the Company in writing of his
election within 20 business days of his receipt of
notice. If no such election is made by the
Executive within such 20-day period, the Company
may elect which and how much of the Agreement
Payments shall be eliminated or reduced (as long as
after such election the Aggregate present Value of
the Agreement Payments equals the Reduced Amount)
and shall notify the Executive promptly of such
election. For purposes of this paragraph,
present Value shall be determined in accordance
with Section 280G(d)(4) of the Code. All
determinations made by the Certified Public
Accountants shall be binding upon the Company and
Executive shall be made within 20 business days of
a termination of employment of Executive. With
the consent of the Executive, the Company may
suspend part or all of the lump sum payment due
under Section 9 hereof and any other payments due
to the Executive hereunder until the Certified
Public Accountants finish the determination and
the Executive (or the Company, as the case may
be) elect how to reduce the Agreement Payments,
if necessary. As promptly as practicable following
such determination and the elections hereunder,
the Company shall pay to or distribute to or for
the benefit of Executive such amounts as are then
due to Executive under this Agreement and shall
promptly pay to or distribute for the benefit of
Executive in the future such amounts as become due
to Executive under this Agreement.
c. As a result of the uncertainty in the application of Section 280G
of the Code, it is possible that Agreement Payments
may have been made by the Company which should not
have been made ("Overpayment") or that additional
Agreement Payments which will have not been made by
the Company could have been made ("Underpayment"),
in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that the
Certified Public Accountants, based upon the
assertion of a deficiency by the Internal Revenue
Service against the Company or Executive which said
Certified Public Accountants believe has a high
probability of success, determines that an
Overpayment has been made, any such Overpayment
shall be treated for all purposes as a loan to
Executive which Executive shall repay to the Company
together with interest at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the
Code; provided, however, that no amount shall be
payable by Executive to the Company in and for the
extent such payment would not reduce the amount
which is subject to taxation under Section 4999 of
the Code. In the event that the Certified Public
Accountants, based upon controlling precedent,
determine that an Underpayment has occurred, any
such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive
together with interest at the applicable Federal
rate provided for in Section 7872(f)(2)(A) of the
Code.
13. Term and Effect Prior to Change in Control.
a. Term. This Agreement shall commence on the date hereof and
shall remain in effect for a period of 3 years
from the Effective Time (as such term is defined in
the Merger Agreement) (the "Initial Term") or
until the end of the Contract Period, whichever is
later. Notwithstanding the foregoing, this
Agreement shall be void and of no force and effect
unless the Merger contemplated by the Merger
Agreement is consummated and the
Executive is employed by Merchants Bank at the
Effective Time and shall not take effect until such
time. The Initial Term shall be automatically
extended for an additional one year period on the
anniversary date hereof (so that the Initial Term
is always 3 years) unless, prior to a Change in
Control, the Chief Executive Officer of the Bank
notifies the Executive in writing at any time
that the Contract is not so extended, in which case
the Initial Term shall end upon the later of (i) 3
years after the date hereof, or
(ii) nine months after the date of such written
notice. Notwithstanding anything to the contrary
contained herein, the Initial Term shall cease when
the Executive attains age 65.
b. No Effect Prior to Change in Control. This Agreement shall not
effect any rights of the Company to terminate
the Executive prior to a Change in Control or any
rights of the Executive granted in any other
agreement or contract or plan with the Company. The
rights, duties and benefits provided hereunder
shall only become effective upon and after a Change
in Control. If the full-time employment of the
Executive by the Company is ended for any reason
prior to a Change in Control, this Agreement shall
thereafter be of no further force and effect.
14. Severance Compensation and Benefits Not in Derogation of Other
Benefits, Employment Agreement.
a. Anything to the contrary herein contained notwithstanding, the
payment or obligation to pay any monies, or granting
of any benefits, rights or privileges to
Executive as provided in this Agreement shall
not be in lieu or derogation of the rights and
privileges that the Executive now has or will have
under any plans or programs of or agreements with
the Company, except that if the Executive received
any payment hereunder, he shall not be entitled to
any payment under the Company's severance policy
for officers and directors and if he
elects to have this Agreement be applicable under
paragraph b below then he shall not be entitled to
any payment under his Employment Agreement.
b. Valley shall give written notice of a Change in Control to
Executive within 30 days of the occurrence of a
Change in Control. Executive shall elect by
written notice to Valley given within 60 days
after receipt by him of such written notice from
Valley whether his continued employment shall be
governed by this Agreement or his Employment
Agreement. Anything to the contrary in this
Agreement or his Employment Agreement
notwithstanding, the employment terms of the
Executive shall be governed by his election.
Valley and Executive shall treat this Change in
Control Agreement as applicable and the Employment
Agreement as being terminated and of no further
force and effect if the Executive elects to have
this Change in Control Agreement be applicable.
If the Executive elects to have the Employment
Agreement applicable then this Change in Control
Agreement shall be of no further force and effect.
If the Executive fails to give Valley
written notice of his election within the
applicable 60 day period then this Change in Control
Agreement shall apply and the Employment Agreement
shall be of no further force and effect.
15. Miscellaneous. This Agreement is the joint and several
obligation of the Bank and Valley. The terms of
this Agreement shall be governed by, and
interpreted and construed in accordance with the
provisions of, the laws of New Jersey. This Agreement
supersedes all prior agreements and understandings
with respect to the matters covered hereby,
including expressly any prior agreement with the
Company concerning change in control benefits.
The amendment or termination of this Agreement may
be made only in a writing executed by the Company
and the Executive, and no amendment or termination
of this Agreement shall be effective unless
and until made in such a writing. This Agreement
shall be binding upon any successor (whether
direct or indirect, by purchase, merge,
consolidation, liquidation or otherwise) to all or
substantially all of the assets of the Company. This
Agreement is personal to the Executive and the
Executive may not assign any of his rights or
duties hereunder but this Agreement shall be
enforceable by the Executive's legal
representatives, executors or administrators. This
Agreement may be executed in two or more
counterparts, each of which shall be deemed an
original, and it shall not be necessary in making
proof of this Agreement to produce or account for
more than one such counterpart.
IN WITNESS WHEREOF, Valley National Bank and Valley National
Bancorp each have caused this Agreement to be signed by their duly authorized
representatives pursuant to the authority of their Boards of Directors, and
the Executive has personally executed this Agreement, all as of the day and
year first written above.
ATTEST: VALLEY NATIONAL BANCORP
__/s/ Peter Southway_____________ By: /s/ Gerald H. Lipkin
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer
ATTEST: VALLEY NATIONAL BANK
__/s/ Peter Southway_____________ By: /s/ Gerald H. Lipkin
, Secretary Gerald H. Lipkin, Chairman
and Chief Executive Officer
WITNESS:
__/s/ Spency B. Witty_____________ /s/ James G. Lawrence
James G. Lawrence, Executive