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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 7, 1995
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-16533 23-2453088
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 320-8400
N/A
(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Termination of Patriot Savings Bank Acquisition.
On March 7, 1995, after discussions with the staff of the
Federal Deposit Insurance Corporation (the "FDIC"), Patriot
Savings Bank ("Patriot") withdrew its request for a letter of
non-objection from the FDIC with respect to Patriot's conversion
from mutual to stock form of organization and simultaneous
acquisition by Sovereign Bancorp, Inc. ("Sovereign"). Sovereign
and Patriot have withdrawn their respective applications with the
Office of Thrift Supervision and the Pennsylvania Department of
Banking and have terminated the Agreement dated April 14, 1994,
as amended and restated May 26, 1994, and October 13, 1994.
Acquisition of Colonial Savings Bank.
On March 23, 1995, Sovereign and Colonial State Bank, a New
Jersey chartered commercial bank with one banking office located
in Freehold, New Jersey ("Colonial"), executed an Agreement and
Plan of Merger (the "Agreement") pursuant to which Sovereign will
acquire Colonial for approximately $6.25 million in cash (the
"Acquisition"). As of December 31, 1994, Colonial had
approximately $43.8 million in assets, $40.5 million in deposit
liabilities and shareholders' equity of $3.3 million. Following
the Acquisition, Colonial will operate as a separate Federal
savings bank subsidiary of Sovereign, the deposits of which will
be insured by the Federal Deposit Insurance Corporation's Bank
Insurance Fund (the "BIF"). The Agreement replaced a nonbinding
letter of intent dated March 2, 1995, between Sovereign and
Colonial providing for the Acquisition. The Acquisition is
subject to approval by Colonial's shareholders and regulatory
approvals from the New Jersey Department of Banking, the Office
of Thrift Supervision, the Pennsylvania Department of Banking and
the Federal Deposit Insurance Corporation.
For financial accounting purposes, the transaction will be
accounted for using the purchase method of accounting.
In connection with execution of the Agreement, Sovereign and
Colonial entered into a Stock Option Agreement, dated March 23,
1995 (the "Stock Option Agreement"). The Stock Option Agreement
grants an option to Sovereign to purchase up to 19.9% of the
issued and outstanding shares of Colonial common stock at a
purchase price of the lower of (i) $6.25 per share or (ii) the
lowest price that a person or group, as defined in the Stock
Option Agreement, pays or agrees to pay for Colonial common stock
in a transaction that constitutes a triggering event under the
Stock Option Agreement. Sovereign's option may be exercised only
in the event of the occurrence of specified events, as defined,
including (i) the acquisition by a person or group of more than
9.9% of the shares of Colonial common stock, (ii) Colonial
entering an agreement to merge, consolidate or sell assets, or
(iii), under certain circumstances, public announcement by a
third party of an intent to acquire control of Colonial. The
Stock Option Agreement will terminate upon consummation of the
Acquisition or, under certain circumstances, in the event of
termination of the Agreement prior to consummation of the
Acquisition.
Pursuant to the terms of a letter agreement entered into
contemporaneously with the Agreement, Colonial's officers and
directors are, among other things, prohibited from soliciting,
encouraging, initiating, or engaging in any negotiations or
discussions with or responding to any person, with respect to the
Agreement, the Stock Option Agreement or any acquisition of
Colonial, or any assets or business thereof, while the Agreement
is in effect, subject to certain exceptions. The form of letter
agreement is attached as Exhibit E to the Agreement which
Agreement is attached hereto as Exhibit 2.1.
The Agreement provides for termination (i) by mutual consent
of the parties, (ii) by either party, if, upon notice to the
other party of a material breach, such breach cannot be, or has
not been, remedied within 30 days, (iii) by either party, if such
party has been informed in writing by a regulatory authority
whose approval or consent is required that such approval or
consent is unlikely to be granted, or (iv) by either party, if
closing shall not have occurred prior to November 15, 1995,
unless the failure to close is due to the terminating party's
failure to perform. Sovereign may unilaterally terminate the
Agreement upon written notice to Colonial if, (i) within 60 days
after the execution of the Agreement, Sovereign reasonably
concludes that adverse results of any environmental audits
performed by Sovereign make consummation of the Acquisition
inadvisable, or (ii) Sovereign determines that a change or
development in state or federal law or regulatory policy so
adversely effects the legal, regulatory, business and/or
financial assumptions underlying the Acquisition that it would be
unadvisable for Sovereign to consummate the Acquisition.
In the event that Sovereign terminates the Agreement on
account of an unremediated material breach by Colonial, then for
a period of 18 months following such termination, if a Person, as
defined, enters into an agreement with Colonial pursuant to which
such Person would: (i) merge or consolidate, or enter into any
similar transaction, with Colonial, (ii) acquire all or
substantially all of the assets of Colonial, or (iii) acquire
beneficial ownership or securities representing, or the right to
acquire beneficial ownership or to vote securities representing,
25% or more of the then outstanding shares of Colonial common
stock and if Sovereign is prohibited for any reason from
exercising (or causing Colonial to purchase) Sovereign's option
under the Stock Option Agreement or Sovereign is otherwise unable
to exercise (or to cause Colonial to purchase) the option, then
Colonial shall pay Sovereign a fee of $500,000 as reimbursement
to Sovereign for its costs and expenses, including legal fees and
expenses, incurred in connection with the Agreement and the
transactions contemplated thereby.
If the Agreement is terminated by Colonial on account of an
unremediated material breach by Sovereign, then Sovereign shall
immediately pay to Colonial a fee of $500,000, constituting
reimbursement to Colonial for costs and expenses, including legal
fees and expenses, incurred in connection with the Agreement and
the transactions contemplated thereby.
In the event that Sovereign terminates the Agreement due to
a change or development in state or federal law or regulatory
policy, then Sovereign shall immediately pay to Colonial a fee of
$500,000.
The deposits of Sovereign Bank, Sovereign's wholly-owned
subsidiary savings bank, are insured by the FDIC's Savings
Association Insurance Fund (the "SAIF"). Colonial's deposits are
insured by the BIF. On January 31, 1995, the FDIC proposed that
as early as June, 1995, BIF insurance premiums be reduced by 83%;
no reduction in SAIF insurance premiums is proposed or expected
at this time. The substantial differential between BIF and SAIF
premiums will place SAIF-insured thrift institutions at a
competitive disadvantage. Upon consummation of the Acquisition,
Sovereign proposes to encourage Sovereign Bank depositors, whose
deposits are insured by the SAIF, to transfer their deposits to
Colonial, in order to mitigate the adverse competitive impact of
the proposed FDIC insurance premium disparity on Sovereign.
Sovereign anticipates that the transaction will be completed
in the third quarter of 1995. However, completion of the
transaction is subject to a number of customary conditions,
including regulatory approval and Colonial shareholder approval.
No assurance can be given that all conditions will be met or that
completion of the transaction will occur.
The foregoing summary of the acquisition of Colonial is
qualified in its entirety by reference to the Agreement and the
Stock Option Agreement, which are attached hereto as Exhibit 2.1
and Exhibit 2.2, respectively, and incorporated herein by
reference.
The press release, dated March 8, 1995, of Sovereign,
outlining plans for the acquisition of Colonial and the press
release, dated March 24, 1995, of Sovereign, announcing signing
of the Agreement are attached hereto as Exhibit 99.1 and
Exhibit 99.2, respectively. The terms of the Acquisition
described in the press releases are qualified in their entirety
by reference to the Agreement and the Stock Option Agreement.
Item 7. Financial Statements and Exhibits.
(a) No financial statements of businesses acquired are
required.
(b) No pro forma financial information is required.
(c) Exhibits.
The following exhibits are filed herewith:
2.1 Agreement and Plan of Merger, dated March 23,
1995, between Sovereign Bancorp, Inc. and Colonial
State Bank.
2.2 Stock Option Agreement, dated March 23, 1995,
between Sovereign Bancorp, Inc. and Colonial State
Bank.
99.1 Press Release, dated March 8, 1995, of Sovereign
Bancorp, Inc.
99.2 Press Release, dated March 24, 1995, of Sovereign
Bancorp, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
SOVEREIGN BANCORP, INC.
Dated: March 24, 1995
By /s/ Karl D. Gerhart
Karl D. Gerhart
Chief Financial Officer and
Treasurer
EXHIBIT INDEX
Page Number
In Manually
Signed
Exhibit Number Original
2.1 Agreement and Plan of Merger
dated March 23, 1995,
between Sovereign Bancorp,
Inc. and Colonial State Bank.
2.2 Stock Option Agreement, dated
March 23, 1995, between
Sovereign Bancorp, Inc. and
Colonial State Bank.
99.1 Press Release, dated March 8,
1995, of Sovereign Bancorp, Inc.
99.2 Press Release, dated March 24,
1995, of Sovereign Bancorp, Inc.