SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
|_| Preliminary proxy statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-12
West Essex Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of filing fee (Check the appropriate box):
|_| No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies: Common
stock, par value $0.01 per share
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(2) Aggregate number of securities to which transactions applies:
2,099,577
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule
0-11:
$35.10
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(4) Proposed maximum aggregate value of transaction:
$73,695,153
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(5) Total Fee paid:
$14,740
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[X] Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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[West Essex Bancorp Logo]
January 9, 2003
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders
of West Essex Bancorp, Inc., the holding company for West Essex Bank. The
meeting will be held at the Radisson Hotel, Route 46, Fairfield, New Jersey on
Thursday, February 13, 2003, at 10:00 a.m., local time.
At the special meeting, you will be asked to approve a merger agreement by
and between West Essex Bancorp, West Essex Bank, and West Essex Bancorp, M.H.C.
and Kearny Financial Corp., Kearny Federal Savings Bank and Kearny MHC. Upon
completion of the merger, you will be entitled to receive a cash payment of
$35.10 for each share of West Essex Bancorp stock that you own.
The completion of the merger is subject to certain conditions, including
the approval of the merger agreement by the affirmative vote of a majority of
the outstanding shares of West Essex Bancorp common stock that are not held by
West Essex MHC. We urge you to read the attached proxy statement carefully. It
describes the merger agreement in detail and includes a copy of the merger
agreement as Appendix A.
Your board of directors has unanimously approved the merger agreement and
recommends that you vote "FOR" approval of the merger agreement because the
board believes it to be in the best interests of the West Essex Bancorp
stockholders.
Your Vote Is Very Important
Whether or not you plan to attend the special meeting, please complete,
date and sign the enclosed proxy card and return it promptly in the postage-paid
envelope provided.
On behalf of the board of directors, I thank you for your prompt attention
to this important matter.
Sincerely,
/s/ Leopold W. Montanaro
--------------------------------------
Leopold W. Montanaro
Chairman of the Board,
President and Chief Executive Officer
WEST ESSEX BANCORP, INC.
417 Bloomfield Avenue
Caldwell, New Jersey 07006
(973) 226-7911
NOTICE OF SPECIAL MEETING OF STOCKHOLDERSs
TO BE HELD ON FEBRUARY 13, 2003
A special meeting of stockholders of West Essex Bancorp, Inc. will held at
the Radisson Hotel, Route 46, Fairfield, New Jersey on Thursday, February 13,
2003 at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated September 11, 2002, by and between
West Essex Bancorp, West Essex Bank and West Essex Bancorp, M.H.C and
Kearny Financial Corp., Kearny Federal Savings Bank and Kearny MHC.
Upon completion of the merger, you will be entitled to receive $35.10
in cash for each share of West Essex Bancorp common stock that you
own. A copy of the merger agreement is included as Appendix A to the
accompanying proxy statement.
2. To transact any other business as may properly come before the
meeting, including adjourning the special meeting to permit, if
necessary, further solicitation of proxies or any adjournment thereof.
The board of directors is not aware of any such other business.
Only stockholders of record at the close of business on December 30, 2002
are entitled to vote at the meeting or any adjournments or postponements of the
meeting.
Remember, if your shares are held in the name of a broker, only your broker
can vote your shares on the merger agreement and only after receiving your
instructions. Please contact the person responsible for your account and
instruct him/her to execute a proxy card on your behalf. You should also sign,
date and mail your instruction card at your earliest convenience.
By Order of the Board of Directors
Caldwell, New Jersey /s/ Craig L. Montanaro
January 9, 2003 -------------------------------------------
Craig L. montaanaro
Senior Vice President, Corporate Secretary
and Treasurer
The board of directors of West Essex Bancorp unanimously recommends that you
vote "FOR" the approval of the merger agreement. Whether or not you plan to
attend the meeting, please complete, sign, date and return the enclosed proxy in
the accompanying pre-addressed postage-paid envelope.
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET................................................................................................1
THE SPECIAL MEETING
Place, Date and Time.....................................................................................7
Purpose of the Meeting...................................................................................7
Who Can Vote at the Meeting; Record Date.................................................................7
Quorum and Vote Required.................................................................................7
Shares Held by Officers and Directors of West Essex Bancorp; Voting Agreements...........................8
Voting by Proxy..........................................................................................8
Revocability of Proxies..................................................................................8
Participants in West Essex Bank's ESOP and 401(k) Plan...................................................8
THE MERGER
The Parties to the Merger................................................................................9
Form of the Merger......................................................................................10
Treatment of West Essex Bancorp Stock Options...........................................................11
Treatment of West Essex Bancorp Stock Awards............................................................11
Procedures for Surrendering Your Certificates...........................................................11
Material Federal Income Tax Consequences of the Merger..................................................12
Background of the Merger................................................................................13
West Essex Bancorp's Reasons for the Merger.............................................................14
Opinion of West Essex Bancorp's Financial Advisor.......................................................15
Interests of Directors and Officers in the Merger that Are Different From Your Interests................20
Approvals Needed to Complete the Merger.................................................................23
Accounting Treatment of the Merger......................................................................24
Dissenters' Rights......................................................................................24
THE MERGER AGREEMENT
When Will the Merger Be Completed.......................................................................24
Conditions to Completing the Merger.....................................................................25
Other Provisions of the Merger Agreement................................................................25
ADDITIONAL INFORMATION REGARDING THE SPECIAL MEETING
Stock Ownership.........................................................................................28
STOCKHOLDER PROPOSALS AND NOMINATIONS............................................................................30
SOLICITATION OF PROXIES..........................................................................................30
WHERE YOU CAN FIND MORE INFORMATION..............................................................................30
APPENDIX A Agreement and Plan of Merger, dated September 11, 2002 between West Essex Bancorp,
M.H.C., West Essex Bancorp, Inc. and West Essex Bank and Kearny MHC, Kearny
Financial Corp. and Kearny Federal Savings Bank (exhibits omitted)
APPENDIX B Fairness Opinion of FinPro, Inc.
Summary Term Sheet
This summary term sheet highlights selected information regarding the
merger from this proxy statement and does not contain all the information that
is important to you. For a more complete description of the terms of the
proposed merger, we urge you to read carefully the entire document and the other
documents to which we refer, including the merger agreement, attached as
Appendix A.
THE COMPANIES
West Essex Bancorp, Inc. We are the parent company of West Essex Bank,
West Essex Bank a federally- chartered stock savings bank, and
West Essex Bancorp, M.H.C. are a federally-chartered mid-tier holding
417 Bloomfield Avenue company and wholly-owned subsidiary of West
Caldwell, New Jersey 07006 Essex MHC, a federally-chartered mutual
(973) 226-7911 holding company. West Essex Bank operates
eight banking offices in Essex, Morris and
Bergen Counties, New Jersey. At September 30,
2002, we had total assets of $389.1 million,
deposits of $251.1 million and stockholders'
equity of $51.2 million.
Kearny Financial Corp. Kearny Financial is the parent company of
Kearny Federal Savings Bank Kearny Federal Savings Bank, a
Kearny MHC federally-chartered stock savings bank, and is
614 Kearny Avenue a federally-chartered mid-tier holding company
Kearny, New Jersey 07032 and wholly-owned subsidiary of Kearny MHC, a
(201) 991-4100 federally- chartered mutual holding company.
Kearny Federal operates 17 banking offices in
Hudson, Bergen, Passaic, Morris, Union,
Middlesex, Essex and Ocean Counties, New
Jersey. At September 30, 2002, Kearny
Financial had total assets of $1.6 billion,
deposits of $1.3 billion and capital of $246.0
million.
THE SPECIAL MEETING
Place, Date and Time (page 7) A special meeting of our stockholders will be
held at the Radisson Hotel, Route 46,
Fairfield, New Jersey on February 13, 2003 at
10:00 a.m., local time.
Purpose of the Meeting At the special meeting, our stockholders will
(page 7) be asked to approve the merger agreement with
Kearny and to transact any other business that
may properly come before meeting.
Who Can Vote at the Meeting You can vote at the special meeting of West
(page 7) Essex Bancorp stockholders if you owned our
common stock at the close of business on
December 30, 2002. You will be able to cast
one vote for each share of our common stock
you owned at that time. As of December 30,
2002, there were 4,890,733 shares of our
common stock outstanding.
1
What Vote is Required for In order to approve the merger agreement, the
Approval of the Merger holders of at least a majority of the
Agreement (page 7) outstanding shares of our common stock
entitled to vote, other than shares held by
West Essex MHC, must vote in favor of the
merger agreement. You can vote your shares by
attending the special meeting and voting in
person or by completing and mailing the
enclosed proxy card. As of December 30, 2002,
our directors and executive officers owned
approximately 7.8% of our outstanding common
stock.
THE MERGER
Overview of the Transaction We propose a business combination in which we
(page 9) will merge with Kearny Financial. Kearny
Financial will be the surviving corporation in
the merger. In addition, West Essex MHC will
merge with Kearny MHC with Kearny MHC as the
surviving mutual holding company, and West
Essex Bank will merge with Kearny Federal with
Kearny Federal as the surviving financial
institution.
Each West Essex Bancorp Share As our stockholder, upon the closing of the
Will Be Exchanged for $35.10 merger, each of your shares of our common
in Cash (page 10) stock will automatically be converted into the
right to receive $35.10 in cash.
Shares of our common stock held by West Essex
MHC will not be converted into the right to
receive any cash.
How to Receive Cash in Exchange In order to receive cash in exchange for your
for Your West Essex Bancorp West Essex Bancorp stock certificates, you
Stock Certificates will need to surrender your West Essex Bancorp
(page 11) stock certificates. Kearny will send you
written instructions for surrendering your
certificates after we have completed the
merger.
West Essex Bancorp Stock Price Our common stock trades on the Nasdaq National
Market under the symbol "WEBK." On September
10, 2002, which was the last trading day
before we announced the merger, our common
stock closed at $23.11 per share. On December
30, 2002, which is the last practicable
trading day before the printing of this
document, our common stock closed at $34.89
per share.
Tax Consequences of the Merger When you exchange your West Essex Bancorp
(page 12) shares solely for cash, you should recognize
capital gain or loss on the exchange.
2
This tax treatment may not apply to all West
Essex Bancorp stockholders. Determining the
actual tax consequences of the merger to you
can be complicated. You should consult your
own tax advisor for a full understanding of
the merger's tax consequences that are
particular to you.
West Essex Bancorp's Board of Our board of directors believes that the
Directors Recommends That merger is fair and in the stockholders' best
Stockholders Approve the Merger interests, and unanimously recommends that you
vote "FOR" the proposal to approve the merger
agreement.
For a discussion of the circumstances
surrounding the merger and the factors
considered by our board of directors in
approving the merger agreement, see page 14.
West Essex Bancorp's Financial FinPro, Inc. has delivered to our board of
Advisor Believes the Merger directors its opinion that, as of the date of
Consideration Is Fair to this document, the merger consideration is
Stockholders fair to the holders of West Essex Bancorp
(page 15) common stock from a financial point of view. A
copy of this opinion is provided as Appendix B
to this document. You should read it
completely to understand the procedures
followed, assumptions made, matters
considered, and qualifications and limitations
on the review made by FinPro in providing this
opinion. We have agreed to pay FinPro
approximately $722,000, of which $52,000 has
been paid as of September 30, 2002, plus
expenses for its services in connection with
the merger.
Interests of West Essex Some of our directors and officers have
Bancorp's Directors and Officers interests in the merger that are different
in the Merger That Differ From from, or are in addition to, their interests
Your Interests (page 20) as stockholders in West Essex Bancorp. The
members of our board of directors knew about
these additional interests, and considered
them, when they approved the merger. These
include:
o severance payments to Leopold W. Montanaro,
our President and Chief Executive Officer,
Charles E. Filippo, our Executive Vice
President, and Craig L. Montanaro, our
Senior Vice President, Corporate Secretary
and Treasurer, under their existing
employment contracts and change in control
agreements, respectively;
o the consulting and non-competition
agreements that Leopold W. Montanaro and
Charles E. Filippo are expected to enter
upon completion of the merger;
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o the employment of Craig L. Montanaro as an
officer of Kearny Federal;
o the vesting of unvested West Essex Bancorp
stock options and restricted stock awards as
a result of completion of the merger;
o provisions in the merger agreement relating
to the indemnification of directors and
officers and insurance for our directors and
officers for events occurring before the
merger;
o the appointment of Leopold W. Montanaro to
the board of directors of Kearny Federal;
and
o Kearny's maintenance of an advisory board
consisting of all of our directors except
for Leopold W. Montanaro.
Regulatory Approval Needed to We cannot complete the merger unless it is
Complete the Merger first approved by the Office of Thrift
(page 23) Supervision. Kearny has filed the required
application with the Office of Thrift
Supervision. As of the date of this document,
Kearny has not received the approval of the
Office of Thrift Supervision. While we do not
know of any reason why Kearny would not be
able to obtain this approval in a timely
manner, we cannot be certain when or if Kearny
will receive it.
You Do Not Have Dissenters' Under Office of Thrift Supervision
Rights in the Merger (page 24) regulations, you do not have dissenters'
rights in the merger.
THE MERGER AGREEMENT
A copy of the merger agreement is provided as Appendix A to this proxy
statement. Please read the entire merger agreement carefully. It is the legal
document that governs the merger.
Conditions to Completing the The completion of the merger depends on a
Merger (page 25) number of conditions being met. These
conditions include:
o approval of the merger agreement by our
stockholders;
o approval of the merger by regulatory
authorities;
o the continued accuracy of certain
representations and warranties made on the
date of the merger agreement; and
o the absence of adverse changes in certain
aspects of our operations and financial
position.
4
We cannot be certain when or if the conditions
to the merger will be satisfied or waived, or
that the merger will be completed.
Dividend Limits We have agreed that, until completion of the
merger and unless permitted by Kearny, we will
not pay any cash or stock dividends or make
any other distribution on our capital stock,
other than regular quarterly cash dividends on
our common stock not in excess of $0.14 per
share.
Agreement Not to Solicit We have agreed not to initiate, solicit,
Other Proposals (page 26) encourage or facilitate any acquisition
proposal with a third party. Despite our
agreement not to solicit other acquisition
proposals, our board of directors may
generally negotiate or have discussions with,
or provide information to, a third party who
makes an unsolicited, written, bona fide
acquisition proposal, provided that our board
of directors:
o receives a written opinion from its
financial advisor that such unsolicited
acquisition proposal may be more superior to
the transaction contemplated by the merger
agreement with Kearny from a financial point
of view;
o receives advice from legal counsel that the
proposed acquiror may legally acquire West
Essex Bancorp and West Essex Bank;
o after receipt of advice from independent
legal counsel, in good faith deems such
action to be necessary for it to comply with
its fiduciary responsibilities to our
stockholders; and
o the special meeting of stockholders has not
occurred.
Terminating the Merger Kearny and West Essex can agree at any time
Agreement (page 27) not to complete the merger, even if our
stockholders have approved it. Also, either of
us can decide to terminate the merger
agreement:
o in response to a material breach which is
not cured within 30 days;
o if the merger is not completed by July 31,
2003, or 120 days thereafter; or
o if any required regulatory, stockholder or
member (if required) approval is not
obtained.
Kearny may also terminate the merger agreement
if our board of directors withdraws its
recommendation to approve the merger agreement
or modifies or qualifies its
5
recommendation in a manner adverse to Kearny,
or if we enter into another agreement with
someone else in connection with a superior
proposal.
We may also terminate the merger agreement if
our board of directors determine, after
consultation with its advisors, that it is
their fiduciary duty to accept a superior
proposal.
Termination Fee (page 27)
We must pay Kearny a termination fee of $4.0
million if:
o Kearny terminates the merger agreement as a
result of our board of directors withdrawing
its recommendation to approve the merger
agreement or modifying or qualifying its
recommendation in a manner adverse to Kearny
or as a result of West Essex entering into
another agreement with someone else, in
connection with a superior proposal; or
o if we terminate the merger agreement as a
result of our board of directors determining
after consultation with its advisors, that
it is their fiduciary duty to accept a
superior proposal.
6
The Special Meeting
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of West Essex Bancorp to be used at the
special meeting of stockholders. This proxy statement and the enclosed proxy
card are being first mailed on or about January 9, 2003 to stockholders of
record.
Place, Date and Time
The special meeting will be held at the Radisson Hotel, Route 46,
Fairfield, New Jersey on Thursday, February 13, 2003 at 10:00 a.m., local time.
Purpose of the Meeting
The purpose of the meeting is to consider and vote on a proposal to approve
and adopt the merger agreement and to act on any other matters brought before
the meeting.
Who Can Vote at the Meeting; Record Date
You are entitled to vote your West Essex Bancorp common stock only if the
records of West Essex Bancorp show that you held your shares as of the close of
business on December 30, 2002. As of the close of business on December 30, 2002,
a total of 4,890,733 shares of West Essex Bancorp's common stock were
outstanding, including 2,937,651 shares of common stock issued to and held by
West Essex MHC. Each share of common stock has one vote. As provided in West
Essex Bancorp's charter, record holders of West Essex Bancorp's common stock
(other than West Essex MHC) who beneficially own, either directly or indirectly,
in excess of 10% of West Essex Bancorp's outstanding shares are not entitled to
any vote in respect of the shares held in excess of the 10% limit.
Quorum and Vote Required
Quorum. The special meeting will be held only if a majority of the
outstanding shares of common stock entitled to vote (excluding any shares in
excess of the 10% limit) are represented at the meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum present, even if you
abstain from voting. Broker non-votes also will be counted for purposes of
determining the existence of a quorum. A broker non-vote occurs when a broker,
bank or other nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received voting instructions from the
beneficial owner. Under applicable rules, brokers, banks and other nominees may
not exercise their voting discretion on the proposal to approve and adopt the
merger agreement and, for this reason, may not vote shares held for beneficial
owners without specific instructions from the beneficial owners.
Vote Required. Approval and adoption of the merger agreement requires the
affirmative vote of the majority of the outstanding shares of West Essex
Bancorp's common stock that are not held by West Essex MHC. Failure to return a
properly executed proxy card or to vote in person and abstentions and broker
non-votes will have the same effect as a vote "Against" the merger agreement.
7
Shares Held by Officers and Directors of West Essex Bancorp; Voting Agreements
As of December 30, 2002, directors and executive officers of West Essex
Bancorp owned approximately 7.8% of the shares of West Essex Bancorp common
stock, not including shares that may be acquired upon the exercise of stock
options, entitling them to approximately 19.5% of the voting power of the West
Essex Bancorp common stock entitled to vote at the special meeting. All of the
West Essex Bancorp directors have entered into voting agreements with Kearny to
vote all of the shares of West Essex Bancorp common stock owned by them on
December 30, 2002 in favor of the proposal to approve the merger agreement.
Voting by Proxy
The board of directors of West Essex Bancorp is sending you this proxy
statement for the purpose of requesting that you allow your shares of West Essex
Bancorp common stock to be represented at the special meeting by the persons
named in the enclosed proxy card. All shares of West Essex Bancorp's common
stock represented at the special meeting by properly executed proxies will be
voted according to the instructions indicated on the proxy card. If you sign,
date and return a proxy card without giving voting instructions, your shares
will be voted as recommended by West Essex Bancorp's board of directors. The
Board of Directors unanimously recommends a vote "FOR" approval of the merger
agreement.
If any matters not described in this proxy statement are properly presented
at the special meeting, the persons named in the proxy card will use their own
best judgement to determine how to vote your shares. This includes a motion to
adjourn or postpone the special meeting in order to solicit additional proxies.
However, no proxy voted against the proposal to approve the merger agreement
will be voted in favor of an adjournment or postponement to solicit additional
votes in favor of the merger agreement. If the special meeting is postponed or
adjourned, West Essex Bancorp common stock may be voted by the persons named in
the proxy card on the new special meeting date as well, unless you have revoked
your proxy. West Essex Bancorp does not know of any other matters to be
presented at the special meeting.
If West Essex Bancorp common stock is held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form that accompanies this proxy statement.
Revocability of Proxies
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Corporate Secretary of
West Essex Bancorp in writing before your common stock has been voted at the
special meeting, deliver a later dated proxy card, or attend the meeting and
vote your shares in person. Attendance at the special meeting will not in itself
constitute revocation of your proxy.
Participants in West Essex Bank's ESOP and 401(k) Plan
If you participate in the West Essex Bank Employee Stock Ownership Plan or
if you hold shares through the West Essex Bank 401(k) Savings Plan in the RSI
Retirement Trust, you will receive a vote authorization form for each plan that
reflects all shares you may vote under the plans. Under the terms of the ESOP,
the ESOP trustee votes all shares held by the ESOP, but each participant in the
ESOP may direct the trustee how to vote the shares of West Essex Bancorp common
stock allocated to his or her
8
account. The ESOP trustee, subject to the exercise of its fiduciary duties, will
vote all unallocated shares of common stock held by the ESOP and allocated
shares for which no timely voting instructions are received in the same
proportion as shares for which the trustee has received voting instructions.
Under the terms of the 401(k) Plan, a participant is entitled to direct the
trustee how to vote the shares of West Essex Bancorp common stock held in the
West Essex Bancorp, Inc. Stock Fund and credited to his or her account. The
trustee will vote all shares of West Essex Bancorp common stock for which no
directions are given or for which timely instructions were not received in the
same proportion as shares for which the trustee received voting instructions.
The deadline for returning your voting instructions to each plan's trustee is
February 6, 2003.
The Merger
The following discussion of the merger is qualified by reference to the
merger agreement, which is attached to this proxy statement as Appendix A. You
should read the entire merger agreement carefully. It is the legal document that
governs the merger.
West Essex Bancorp, Inc., West Essex Bank and West Essex Bancorp, M.H.C.
are sometimes collectively referred to as "West Essex." Kearny Financial Corp.,
Kearny Federal Savings Bank and Kearny MHC are sometimes collectively referred
to as "Kearny."
The Parties to the Merger
West Essex Bancorp, Inc.
West Essex Bank
West Essex Bancorp, M.H.C.
West Essex Bancorp became the federally chartered stock holding company for
West Essex Bank in connection with the conversion of West Essex Bank from the
mutual to stock form of ownership and the reorganization of West Essex Bank into
a mutual holding company structure. The reorganization was completed on October
2, 1998. In connection with the reorganization, West Essex MHC was organized and
became a majority holder of West Essex Bancorp's outstanding common stock. As
savings and loan holding companies, West Essex Bancorp and West Essex MHC are
regulated by the Office of Thrift Supervision. Since their formation, West Essex
Bancorp's and West Essex MHC's principal activity has been to direct and
coordinate the business of West Essex Bank. At September 30, 2002, West Essex
Bancorp had total assets of $389.1 million, total deposits of $251.1 million and
total stockholders' equity of $51.2 million.
West Essex Bank is a federally chartered savings bank located in Caldwell,
New Jersey. West Essex Bank is regulated by the Office of Thrift Supervision and
its deposits are insured by the Federal Deposit Insurance Corporation up to
applicable limits. West Essex Bank conducts its business through its
administrative and branch office located in Caldwell, New Jersey, and seven
other full service branch offices located in the Northern New Jersey counties of
Essex, Morris and Bergen. West Essex Bank is a community-oriented savings
institution dedicated to financing home ownership and other consumer needs.
9
Kearny Financial Corp.
Kearny Federal Savings Bank
Kearny M.H.C.
Kearny Federal operates in the mutual holding company structure. All of the
issued and outstanding shares of Kearny Federal common stock are owned by Kearny
Financial and all of the issued and outstanding shares of Kearny Financial
common stock are owned by Kearny MHC. As savings and loan holding companies,
Kearny Financial and Kearny MHC are regulated by the Office of Thrift
Supervision. Kearny Financial's and Kearny MHC's principal activity is to direct
and coordinate the business of Kearny Federal. At September 30, 2002, Kearny
Financial had total assets of $1.6 billion, total deposits of $1.3 billion and
capital of $246.0 million.
Kearny Federal is a federally chartered stock savings bank located in
Kearny, New Jersey. Kearny Federal is regulated by the Office of Thrift
Supervision and its deposits are insured by the Federal Deposit Insurance
Corporation up to applicable limits. Kearny Federal currently operates seventeen
offices in Hudson, Bergen, Passaic, Morris, Union, Middlesex, Essex and Ocean
Counties, New Jersey. Kearny is a community-oriented financial institution
dedicated to financing home ownership and serving the financial needs of
consumers and business in its market area.
Form of the Merger
The West Essex and Kearny boards of directors each have unanimously
approved the merger agreement that provides for the merger of West Essex with
and into Kearny. Kearny will survive the merger. Upon completion of the merger,
each share of West Essex Bancorp common stock, other than shares held by West
Essex MHC, will be converted into $35.10 in cash. As soon as possible after the
conditions to consummation of the merger have been satisfied or waived, and
unless the merger agreement has been terminated or an alternative structure is
used as discussed below, the merger will be effected as follows:
o West Essex Bancorp will merge with a newly formed, wholly owned
subsidiary of Kearny Financial and after completion of such merger,
West Essex Bancorp will then merge into Kearny Financial with Kearny
Financial as the surviving entity;
o Each share of West Essex Bancorp common stock held by its
stockholders, other than West Essex MHC, will be converted into the
right to receive $35.10 in cash and you will no longer have any rights
or interests in West Essex Bancorp;
o West Essex MHC will merge with and into Kearny MHC with Kearny MHC as
the surviving mutual holding company;
o West Essex Bank will merge with and into Kearny Federal, with Kearny
Federal as the surviving financial institution; and
o Depositors of West Essex Bank will have the same rights, privileges
and obligations as other depositors of Kearny Federal.
The transactions outlined above will happen simultaneously.
10
The merger agreement provides that Kearny may change the way it combines
with West Essex, provided that it cannot:
o Alter or reduce the consideration to be received by West Essex
Bancorp's stockholders;
o Adversely affect the tax consequences for West Essex Bancorp's
stockholders; or
o Jeopardize receipt of required regulatory approval or impair the
satisfaction of any condition to the closing of the merger.
Treatment of West Essex Bancorp Stock Options
At the closing of the merger, each option to purchase shares of West Essex
Bancorp common stock issued and outstanding immediately prior to the closing,
whether or not exercisable, will become vested and will be converted into the
right to receive a cancellation payment equal to the excess of the $35.10 per
share merger consideration over the exercise price per share of each option, net
of any cash which must be withheld under federal and state income and employment
tax requirements.
Treatment of West Essex Bancorp Stock Awards
At the closing of the merger, each share of restricted stock outstanding at
the effective time and issued pursuant to the West Essex Bancorp stock-based
incentive plan, to the extent not already vested, will vest and will represent a
right to receive the $35.10 per share merger consideration.
Procedures for Surrendering Your Certificates
On or prior to the closing of the merger, Kearny will deposit with the
exchange agent an amount of cash equal to the aggregate merger consideration.
The exchange agent will act as paying agent for the benefit of the holders of
West Essex Bancorp common stock. Each holder of West Essex Bancorp common stock
who surrenders his or her West Essex Bancorp shares to the exchange agent will
be entitled to receive a cash payment of $35.10 per share of West Essex Bancorp
common stock upon acceptance of the shares by the exchange agent.
No later than five business days after the closing of the merger, the
exchange agent, or if you hold your West Essex Bancorp common stock in "street
name," your broker, bank or nominee, will send you a letter of transmittal which
will contain instructions for surrendering your certificates of West Essex
Bancorp common stock.
You should not return your West Essex Bancorp common stock certificates
with the enclosed proxy, and you should not send your stock certificates to the
exchange agent until you receive the letter of transmittal.
If your West Essex Bancorp common stock certificates have been lost, stolen
or destroyed, you will have to prove your ownership of these certificates and
that they were lost, stolen or destroyed before you receive any payment for your
shares by submitting to Kearny or the exchange agent an appropriate affidavit of
loss, theft or destruction and indemnity agreement and bond as may be reasonably
required by Kearny.
Twelve months following the closing of the merger, the exchange agent will
deliver to Kearny any funds, certificates, and other documents, not claimed by
former West Essex Bancorp stockholders.
11
Thereafter, the payment obligation for any certificate representing West Essex
Bancorp common stock which has not been satisfied will become the responsibility
of Kearny.
If certificates for West Essex Bancorp common stock are not surrendered
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental agency, the unclaimed amounts will become the
property of Kearny to the extent permitted by applicable law, free and clear of
all claims or interest of any person previously entitled to such property. None
of Kearny, West Essex Bancorp, the exchange agent or any other party to the
merger will be liable to any former holder of West Essex Bancorp common stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
Material Federal Income Tax Consequences of the Merger
The following discussion addresses the material United States federal
income tax consequences of the merger to holders of West Essex Bancorp common
stock. This discussion applies only to West Essex Bancorp stockholders that hold
their West Essex Bancorp common stock as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code. Further, this discussion does not
address all aspects of United States federal taxation that may be relevant to a
particular stockholder in light of its personal circumstances or to stockholders
subject to special treatment under the United States federal income tax laws
including: banks or trusts; tax-exempt organizations; insurance companies;
dealers in securities or foreign currency; traders in securities who elect to
apply a mark-to-market method of accounting; pass-through entities and investors
in such entities; foreign persons; stockholders who received their West Essex
Bancorp common stock through the exercise of employee stock options, through a
tax-qualified retirement plan or otherwise as compensation; and stockholders who
hold West Essex Bancorp common stock as part of a hedge, straddle, constructive
sale, conversion transaction or other integrated instrument.
This discussion is based on the Internal Revenue Code, Treasury
regulations, administrative rulings and judicial decisions, all as in effect as
of the date of this proxy statement and all of which are subject to change
(possibly with retroactive effect) and to differing interpretations. Tax
considerations under state, local and foreign laws are not addressed in this
document. The tax consequences of the merger to you may vary depending upon your
particular circumstances. Therefore, you should consult your tax advisor to
determine the particular tax consequences of the merger to you, including those
relating to state and/or local taxes.
Neither West Essex nor Kearny has requested or will request a ruling from
the Internal Revenue Service as to any of the tax effects to West Essex
Bancorp's stockholders of the transactions discussed in this proxy statement,
and no opinion of counsel has been or will be rendered to West Essex Bancorp's
stockholders with respect to any of the tax effects of the merger to
stockholders.
West Essex Bancorp stockholders will recognize gain or loss for federal
income tax purposes equal to the difference between the cash received and such
stockholder's tax basis in the West Essex Bancorp common stock surrendered in
exchange for the cash. Such gain or loss will be a capital gain or loss,
provided that such shares were held as capital assets of the West Essex Bancorp
stockholder at the effective time of the merger. Such gain or loss will be
long-term capital gain or loss if the West Essex Bancorp stockholder's holding
period is more than one year. The Internal Revenue Code contains limitations on
the extent to which a taxpayer may deduct capital losses from ordinary income.
12
Background of the Merger
West Essex Bank was reorganized into a mutual holding company form of
organization on October 2, 1998 and formed West Essex MHC and West Essex
Bancorp. Since reorganizing West Essex Bank into the mutual holding company form
of organization, management continually analyzed options for enhancing
shareholder value, including remaining an independent mutual holding company,
undertaking a second-step conversion, or undertaking a remutualization. On June
6, 2002, the West Essex Bancorp board of directors retained FinPro to help the
board of directors analyze alternative means of enhancing stockholder value.
FinPro compared the alternatives of remaining independent, converting to a full
stock company and a remutualization transaction. FinPro was specifically
authorized to explore potential remutualization opportunities through a
confidential bidding process. On June 13, 2002, FinPro met with the board of
directors to review a list of potential acquirers. Except for one mutual holding
company with minority stock outstanding, all of the potential acquirers were
large mutual organizations or mutual holding companies with no common stock
outstanding. During the following weeks of June 2002, a confidential investor
memorandum was prepared. FinPro contacted 14 selected potential acquirers to
ascertain interest during the weeks of June 24, 2002 and July 1, 2002. West
Essex Bancorp entered into confidentiality agreements with 8 potential acquirers
who then each received a confidential investor memorandum. All potential
acquirers were told to present expressions of interest by July 26, 2002.
On July 26, 2002, FinPro received two written non-binding expressions of
interest. The board of directors directed FinPro to negotiate with the two
potential acquirers and to direct them to clarify the terms of their expressions
of interest. Kearny submitted a revised expression of interest on July 29, 2002,
and clarified its offer on August 12, 2002. Each potential acquirer was then
advised by Fin Pro that each should submit updated expressions of interest by
August 12, 2002. Each potential acquirer submitted letters clarifying the terms
of their expressions of interest on August 16, 2002. After considering the two
updated expressions of interest, the board of directors instructed FinPro to
advise each potential acquirer that each would be permitted an opportunity to
perform due diligence on West Essex Bancorp and that final expressions of
interest must be received by August 30, 2002. Offsite due diligence on West
Essex was conducted during the second half of August 2002. Final expressions of
interest were received from both potential acquirers on August 30, 2002. After
reviewing those two final expressions of interest, it was determined that the
Kearny offer of $35.10 per share was superior in all respects. The board of
directors instructed Muldoon Murphy & Faucette LLP, West Essex Bancorp legal
counsel, to begin negotiating a definitive agreement.
On September 10, 2002, the West Essex boards of directors met to consider
the terms of a definitive agreement with Kearny. At the meeting, FinPro
presented an oral fairness opinion, which concluded that the consideration
offered by Kearny was fair from a financial perspective to West Essex Bancorp
minority shareholders and the transaction was equitable to West Essex MHC's
members. Muldoon Murphy & Faucette reviewed each section of the definitive
merger agreement with West Essex Bancorp's board of directors, as well as the
board of directors' fiduciary duties to West Essex Bancorp's stockholders in the
merger context and to members of West Essex MHC. Following detailed discussions
of the foregoing, the board of directors of each of West Essex Bancorp, West
Essex MHC and West Essex Bank approved the agreement, subject to Muldoon Murphy
& Faucette further negotiating certain modifications to the terms of the merger
agreement. Mr. Leopold W. Montanaro was authorized and instructed to execute the
final merger agreement on behalf of each of West Essex Bancorp, West Essex MHC
and West Essex Bank, provided those changes were agreed to by Kearny. The merger
agreement was finalized on September 11, 2002, and the parties executed the
final merger agreement as of September 11, 2002.
13
West Essex Bancorp's Reasons for the Merger
West Essex Bancorp's board of directors has unanimously approved the merger
agreement and recommends that West Essex Bancorp stockholders vote "FOR" the
approval of the merger agreement.
West Essex Bancorp's board of directors has determined that the merger and
the merger agreement are fair to, and in the best interests of, West Essex
Bancorp and its stockholders. In approving the merger agreement, West Essex
Bancorp's board of directors also consulted with legal counsel regarding its
legal duties and the terms of the merger agreement, and with its financial
advisor with respect to the financial aspects and fairness of the transaction
from a financial point of view to its stockholders and with respect to whether
the transaction was equitable to depositors. In arriving at its determination,
West Essex Bancorp's board of directors also considered a number of factors,
including the following:
o The process followed by West Essex Bancorp and its financial advisor
in connection with the sale, including performing a market check of
other likely bidders, helped to ensure that an offer more favorable
than Kearny's was not available;
o The consideration offered by Kearny was significantly higher than any
other bids received by West Essex Bancorp;
o The $35.10 cash merger consideration to be paid to all of West Essex
Bancorp's stockholders, other than West Essex MHC, in relation to
current and the historic fair market value of West Essex Bancorp's
common stock. The board of directors also considered the book value
and earnings per share of West Essex Bancorp's common stock;
o Information concerning the businesses, earnings, operations, financial
condition and prospects of West Essex and Kearny, both individually
and as combined. The board of directors also took into account the
results of West Essex's due diligence review of Kearny;
o West Essex's assessment of Kearny's ability to pay the aggregate
merger consideration without third party financing;
o The opinion of West Essex Bancorp's financial advisor that the $35.10
merger consideration is fair from a financial point of view to the
minority stockholders;
o The review conducted by the board of directors of the strategic
options available to West Essex and the assessment of the board of
directors that none of those options presented superior opportunities
or were likely to create greater value for West Essex Bancorp
stockholders than the prospects presented by the proposed merger with
Kearny;
o That in the event of a stock offering transaction by Kearny MHC,
depositors of West Essex Bank would retain their subscription rights
as of the date of their original deposit at West Essex Bank;
o Kearny's representation that it intended to retain all West Essex
employees;
o The proposed management of the combined company, including that Mr.
Montanaro will serve as a member of the Kearny Federal board of
directors;
14
o The current and prospective economic, competitive and regulatory
environment facing West Essex, Kearny and the financial services
industry generally;
o The board of directors' assessment that West Essex would better serve
the convenience and needs of its customers and the communities that it
serves through affiliation with a financial institution such as Kearny
that had a larger infrastructure, wider selection of financial
products and services and more prominent market position;
o The board of directors' belief that, while no assurances could be
given, the level of execution risk in the merger appeared to be low
and the business and financial advantages contemplated in connection
with the merger appeared achievable within a reasonable time frame;
o The likelihood of Kearny obtaining the Office of Thrift Supervision's
approval of the merger; and
o The likelihood of West Essex Bancorp stockholders approving the
merger.
The foregoing discussion of the information and factors considered by West
Essex Bancorp's board of directors is not intended to be exhaustive, but
constitutes all material factors considered by the West Essex Bancorp board of
directors. In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the transactions contemplated by it, the
West Essex Bancorp board of directors did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching its determination and individual directors may
have given different weights to the different factors.
Opinion of West Essex Bancorp's Financial Advisor
West Essex Bancorp retained FinPro, a financial consulting firm, on the
basis of its experience, to render a written opinion to us and our shareholders
as to the fairness, from a financial point of view, of the per share price to be
paid for each outstanding minority share of West Essex Bancorp common stock, and
the treatment of West Essex Bank depositors is equitable, as set forth in the
merger agreement. West Essex Bancorp placed no limitations on FinPro with
respect to the investigation made, or procedures followed by FinPro in rendering
its opinion.
FinPro has been in the business of consulting for the bank and thrift
industry for fourteen years, including the appraisal and valuation of bank and
thrift institutions and their securities in connection with mergers,
acquisitions and other securities transactions. FinPro has knowledge of, and
experience with, the Mid Atlantic bank and thrift market and financial
organizations operating in that market. In addition, FinPro is experienced in
area of remutualizations. FinPro reviewed the negotiated terms of the merger
agreement.
On September 10, 2002, in connection with its consideration of the merger
agreement, FinPro issued an oral opinion to the Board of Directors of West Essex
Bancorp that the proposed per share cash consideration value to the minority
shareholders of $35.10 as provided in the merger agreement is fair and
equitable, from a financial perspective, to West Essex Bancorp, its minority
shareholders and that the proposed Agreement is equitable to the depositors of
West Essex Bank. The analysis presented in the oral opinion was confirmed in
writing. A copy of the written opinion is attached as Appendix B to this proxy
statement and should be read in its entirety by West Essex Bancorp shareholders.
FinPro's written
15
opinion does not constitute an endorsement of the merger or a recommendation to
any shareholder as to how such shareholder should vote at the special meeting.
In rendering its opinion, FinPro reviewed certain publicly available
information concerning West Essex Bancorp and Kearny Financial, including each
party's audited financial statements and annual reports. FinPro considered many
factors in making its evaluation. In arriving at its opinion regarding the
fairness of the per share price, FinPro reviewed: (i) the merger agreement and
the exhibits thereto; (ii) changes in the market for bank and thrift stocks,
particularly mutual holding company stocks; (iii) the performance of West Essex
Bancorp common stock; (iv) trends and changes in the financial condition of
Kearny Financial and West Essex Bancorp; (v) the most recent annual report for
West Essex Bancorp; (vi) quarterly regulatory reports for Kearny Financial and
West Essex Bancorp; (vii) the budget of West Essex Bancorp and Kearny Financial;
(vii) other remutualization transactions and (viii) other market data, studies
and analyses that were considered appropriate.
In addition, FinPro discussed with the management of West Essex Bancorp
it's operating performance and future prospects, primarily with respect to the
current level of West Essex Bancorp's earnings and future expected operating
results, giving weight to FinPro's assessment of the future of the thrift
industry, the mutual holding company market and West Essex Bancorp's performance
within the industry. FinPro compared the results of operation of West Essex
Bancorp with the results of operation of all publicly traded thrift institutions
and a selected Comparable Trading Group.
16
The Comparable Trading Group was comprised of liquidly traded Mid-Atlantic
mutual holding companies with assets between $100 million and $1 billion.
Additionally, any institution involved in a remutualization or second step
conversion was eliminated from the Comparable Trading Group.
For the Last Twelve Months
-----------------------------------------------------------------------
All Mutual
Comparable Mutual Holding
Holding Company Companies
West Essex Trading Group - Nationally -
Bancorp Median Median
------------------ ------------------ ---------------
BALANCE SHEET:
Assets ($000's) ......................... 390,333 257,966 441,799
Asset Growth (%) ........................ 8.29 9.58 8.14
Loans to Assets (%) ..................... 41.68 58.80 62.31
Deposits to Assets (%) .................. 63.12 73.13 75.69
Borrowing to Assets (%) ................. 23.23 16.73 10.85
Tangible Equity to Tangible Assets (%) .. 12.31 9.92 9.75
ASSET QUALITY:
Nonperforming Loans to Loans (%) ........ 0.73 0.30 0.40
Nonperforming Assets to Assets (%) ...... 0.36 0.19 0.34
Reserves to Nonperforming Loans (%) ..... 114.15 176.43 177.57
Reserves to Loans (%) ................... 0.84 0.92 0.92
INCOME STATEMENT AND PROFITABILITY:
Return on Ave. Assets (%) ............... 0.88 0.74 0.79
Return on Ave. Equity (%) ............... 6.35 6.44 6.44
Yield on Earning Assets (%) ............. 6.43 6.72 6.65
Cost of Funds (%) ....................... 3.91 3.95 3.86
Net Interest Margin (%) ................. 3.15 3.15 3.25
Noninterest Income to Ave. Assets (%) ... 0.20 0.42 0.42
Noninterest Expense to Ave. Assets (%) .. 1.89 2.98 2.36
Efficiency Ratio (%) .................... 53.55 74.19 65.63
DIVIDENDS:
Current Dividend Yield (%) .............. 1.62 2.76 2.09
LTM Dividend Payout Ratio (%) ........... 79.10 64.63 49.92
MARKET PRICING AT SEPTEMBER 5, 2002
Price to LTM EPS (x) .................... 35.22 31.48 28.69
Price to LTM Core EPS (x) ............... 35.22 33.14 28.90
Price to Book Value (%) ................. 224.98 171.35 188.58
Price to Tangible Book Value (%) ........ 239.84 171.35 194.12
- ---------------------------------------------------
Source: SNL DataSource, FinPro Calculations
The Comparable Mutual Holding Company Trading Group is composed of: Skibo
Financial Corp., Greene County Bancorp, Inc., Rome Bancorp, Inc., Pathfinder
Bancorp, Inc., Alliance Bank, Oneida Financial Corp. and BCSB Bankcorp, Inc.
17
Many variables affect the value of financial institutions, not the least of
which is the uncertainty of future events, so that the relative importance of
the different valuation variables differs in different situations, with the
result that appraisal theorists argue about which variables are the most
appropriate ones on which to focus. However, most appraisers agree that the
primary financial variables to be considered are earnings, equity, dividends or
dividend-paying capacity, asset quality and cash flow. In addition, in most
instances, if not all, value is further tempered by non-financial factors such
as marketability, voting rights or block size, history of past sales of the
entity's stock and special ownership or management considerations.
FinPro analyzed the total deal price on a cash equivalent fair market value
basis using the standard evaluation techniques (as discussed below) including,
but not limited to, comparable sales multiples and the net present value of
dividends and terminal value based on certain assumptions of projected growth,
earnings and dividends.
Market Value. Market value is generally defined as the price, established
on an "arms-length" basis, at which knowledgeable, unrelated buyers and sellers
would agree to transfer shares. The market value is frequently used to determine
the price of a minority block of stock when both the quantity and the quality of
the "comparable" data are deemed sufficient. However, the relative thinness of
the specific market for the stock of the thrift institution being appraised may
result in the need to review alternative markets for comparative pricing
purposes. The "hypothetical" market value for a small thrift with a thin market
for its stock is normally determined by comparison to the median price to
earnings, price to equity and dividend yield of local or regional
publicly-traded thrift institutions, adjusting for significant differences in
financial performance criteria and for any lack of marketability or liquidity.
The market value in connection with the evaluation of control of a thrift is
determined by the previous sales of thrifts. In valuing a business enterprise,
when sufficient comparable trade data is available, the market value deserves
similar emphasis as the investment value as discussed below.
FinPro maintains substantial files concerning the prices paid for thrift
institutions nationwide. The database includes transactions involving New Jersey
thrift institutions and thrift institutions in the Mid-Atlantic region of the
United States. The database provides comparable pricing and financial
performance data for thrift institutions sold or acquired. Organized by
different peer groups, the data present averages of financial performance and
purchase price levels, thereby facilitating a valid comparative purchase price
analysis. In analyzing the transaction value of West Essex Bancorp, FinPro has
considered the market approach and has evaluated price to earnings, price to
equity, price to tangible equity and franchise premium to core deposits for
recently announced remutualization transactions.
During FinPro's analysis of recent remutualization multiples in
relationship to the proposed transaction, FinPro placed a heavy reliance on the
remutualization multiples with less emphasis on fully converted thrift
multiples. The remutualization group was composed of institutions that announced
sales between February 15, 2000 and May 16, 2002. The following table
illustrates the maximum, minimum and median GAAP multiples of the
remutualization transactions.
Franchise
Price Price to Price to Premium to
GAAP Basis to Book Tangible Book LTM Earnings Core Deposits
- ----------- -------- ------------- ------------ -------------
Maximum.............................. 289.07% 289.07% 50.00x 43.23%
Minimum.............................. 140.92% 140.92% 36.11x 14.61%
Median............................... 237.47% 237.47% 44.57x 20.33%
West Essex Bancorp Acquisition
Multiples............................ 334.60% 356.71% 52.39x 49.68%
- -------------------------------------
Source: FinPro Calculations
18
FinPro also analyzed the pricing multiples of the same remutualization
group on a minority basis, relative to the West Essex Bancorp acquisition
multiples.
Franchise
Price Price to Price to Premium to
Minority Basis to Book Tangible Book LTM Earnings Core Deposits
- -------------- -------- ------------- ------------ -------------
Maximum.............................. 105.86% 105.86% 27.76x 0.88%
Minimum.............................. 59.98% 59.98% 13.02x -15.75%
Median............................... 92.23% 92.23% 21.70x -1.43%
West Essex Bancorp Acquisition
Multiples............................ 131.71% 140.45% 20.78x 7.83%
- --------------------------------------
Source: FinPro Calculations (Although the minority basis data in the above table
does not conform with generally accepted accounting principles, FinPro deems
this information relevant due to the mutual holding company structure of West
Essex Bancorp.)
The financial performance characteristics of the selected thrift
organizations vary, sometimes substantially, from those of West Essex Bancorp.
As such, this analysis is not a simple mathematical formula, but rather a series
of considerations and judgements, regarding the financial performance and value
of each of the companies.
Investment Value. The investment value is sometimes referred to as the
income value or earnings value. One investment value method frequently used
estimates the present value of an enterprise's future earnings or cash flow.
Another popular investment value method is to determine the level of current
annual benefits (earnings, cash flow, dividends, etc.), and then capitalize one
or more of the benefit types using an appropriate capitalization rate such as an
earnings or dividend yield. Yet another method of calculating investment value
is a cash flow analysis of the ability of a thrift to service acquisition debt
obligations (at a certain price level) while providing sufficient earnings for
reasonable dividends and capital adequacy requirements. In connection with the
cash flow analysis, the return on investment that would accrue to a prospective
buyer at the transaction value is calculated. The investment value method, which
was analyzed in connection with this transaction, was the net present value of
dividends stream and terminal value, which is discussed below.
The investment value of any banking institution's stock is an estimate of
present value of the future benefits, usually earnings, cash flow or dividends,
which will accrue to the stock. FinPro calculated a net present value of
dividends stream and terminal value through 2006. It was assumed that West Essex
Bancorp would undertake a second step conversion, closing at the assumed maximum
of the range, which would result in a $23.73 per share exchange value to
existing minority shareholders. Earnings for 2002 were based on West Essex
Bancorp's budget. The annual income growth rate for years 2004 to 2006 was
assumed at 15.00%. To manage capital, West Essex Bancorp would maintain a 50%
dividend payout ratio and would repurchase shares. The terminal value was
approximated using an acquisition price to earnings multiple of 26.23x, which
resulted in acquisition price to book multiple of 180.25%. A discount rate of
9.00% was utilized.
Based on these assumptions, FinPro's calculation of the net present value
of the dividends stream and terminal value per share was $31.99. FinPro's
computations were based on an analysis of the thrift industry, the economic and
competitive situations currently existing in West Essex Bancorp's market area
and its current financial condition.
19
Conclusion. When the market value and investment value methods are
subjectively weighed, using the appraiser's experience and judgment, it is
FinPro's opinion that the proposed merger consideration is fair from a financial
prospective to the holders of West Essex Bancorp's common stock. Additionally,
it is FinPro's opinion that the treatment of the depositors in the proposed
merger is equitable.
In rendering its opinion, FinPro did not independently verify the asset
quality and financial condition of West Essex Bancorp or Kearny Financial, but
instead relied upon the data provided by or on behalf of West Essex Bancorp and
Kearny Financial to be true and accurate in all material respects.
Prior to being retained as West Essex Bancorp's financial advisor, FinPro
has provided financial advisory and consulting services to both West Essex
Bancorp and Kearny Financial. The revenues derived from these services are
insignificant when compared to the firm's total gross revenues.
FinPro acted as West Essex Bancorp's financial advisor in connection with
the merger and will receive a fee equal to 1.00% of the aggregate deal value, or
approximately $722,000, a significant portion of which is contingent upon
consummation of the merger. In addition, FinPro will be reimbursed for
reasonable expenses related to the merger and West Essex Bancorp has indemnified
FinPro in connection with any matter related to the merger.
Interests of Directors and Officers in the Merger that are Different From Your
Interests
Some members of West Essex Bancorp's management and board of directors may
have interests in the merger that are in addition to or different from the
interests of West Essex Bancorp stockholders. The West Essex Bancorp board of
directors was aware of these interests and considered them in approving the
merger agreement. Included below is a summary of some of the benefit plans under
which officers or directors participate and under which benefits will be paid in
accordance with the merger agreement.
Employment Agreements with Leopold W. Montanaro. Leopold W. Montanaro,
President and Chief Executive Officer of West Essex Bancorp and West Essex Bank,
currently has employment agreements with West Essex Bancorp and West Essex Bank
that provide him with a severance payment and continuation of certain employee
benefits if he is terminated following a change in control of West Essex Bancorp
or West Essex Bank. The merger with Kearny will constitute a change in control
of West Essex Bancorp and West Essex Bank and, as a result of Leopold W.
Montanaro's termination of employment after completion of the merger, he will
receive a severance payment in the amount of approximately $2.1 million.
Change in Control Agreements with Charles E. Filippo and Craig L.
Montanaro. Charles E. Filippo, Executive Vice President of West Essex Bancorp
and West Essex Bank, and Craig L. Montanaro, Senior Vice President, Corporate
Secretary and Treasurer of West Essex Bancorp and West Essex Bank currently have
change in control agreements with West Essex Bancorp and West Essex Bank that
provide them with severance payments and continuation of certain employee
benefits following a change in control of West Essex Bancorp or West Essex Bank.
The merger with Kearny will constitute a change in control of West Essex Bancorp
and West Essex Bank and, as a result, Charles E. Filippo and Craig L. Montanaro
will receive severance payments of approximately $807,000 and $528,000,
respectively.
20
Consulting and Non-Competition Agreements. Kearny would like to secure the
assistance of Leopold W. Montanaro and Charles E. Filippo in the operation of
the West Essex branches following the completion of the merger. Consequently,
Kearny intends to offer both Leopold W. Montanaro and Charles E. Filippo a
consulting and non-competition agreement with Kearny. Under these agreements,
Leopold W. Montanaro and Charles E. Filippo will advise Kearny with respect to
deposit and lending activities in West Essex's market area, as well as maintain
and develop customer relationships. Leopold W. Montanaro's agreement will have a
three-year term and will provide for annual cash compensation of approximately
$120,000 per year. Charles E. Filippo's agreement will have a one-year term and
will provide for cash compensation of approximately $55,000. Both individuals
will be paid on a monthly basis for their services as consultants and in
consideration of being subject to the non-competition requirements.
Vesting of West Essex Bancorp Restricted Stock. Directors, officers and
employees of West Essex received restricted stock awards which vest equally over
a five year period under the West Essex Bancorp, Inc. 1999 Stock-Based Incentive
Plan, as amended and restated. Under the terms of the plan, all unvested
restricted stock awards immediately vest upon a change in control of West Essex
Bancorp. The merger will constitute a change in control of West Essex Bancorp.
As of December 30, 2002, the directors and executive officers of West Essex
Bancorp held a total of 32,913 shares of unvested restricted stock, which will
be converted into the right to receive the same merger consideration as all
other shares of West Essex Bancorp common stock. The following table reflects
the number of shares of unvested restricted stock held by each director and
executive officer and the payment that each will receive in exchange for their
unvested shares of restricted stock.
Total
Payment for
Number of Unvested Shares
Unvested Shares of of Restricted
Name Restricted Stock Stock
- ------- --------------------- ----------------
David F. Brandley ................... 1,924 $ 67,532
John J. Burke ....................... 1,924 67,532
Charles E. Filippo .................. 4,617 162,057
William J. Foody .................... 1,924 67,532
S.M. Terry LaCorte .................. -- --
Everett N. Leonard .................. 1,924 67,532
Craig L. Montanaro .................. 10,982 385,468
Leopold W. Montanaro................. 9,618 337,592
West Essex Bancorp Stock Options. At the closing of the merger, each option
to purchase West Essex Bancorp common stock issued under the West Essex Bancorp,
Inc. 1999 Stock-Based Incentive Plan, as amended and restated, outstanding
immediately prior to the closing, whether or not exercisable, will become vested
and will be converted into the right to receive a cancellation payment equal to
the excess of the $35.10 per share merger consideration over the exercise price
per share of each option, net of any cash which must be withheld under federal
and state income and employment tax requirements. As of December 30, 2002, the
directors and executive officers of West Essex Bancorp held options to purchase
a total of 129,094 shares of West Essex Bancorp common stock with a weighted
average exercise price of $7.86. The following table reflects the number of
options held by each director and executive officer and the payment that each
will receive in exchange for their options.
21
Total Payment
Name Number of Options for Options
- ------ --------------------- --------------------
David F. Brandley................................. 11,713 $322,108
John J. Burke..................................... 11,713 322,108
Charles E. Filippo................................ 11,244 309,210
William J. Foody.................................. 9,370 257,675
S.M. Terry LaCorte................................ -- --
Everett N. Leonard................................ 11,713 322,108
Craig L. Montanaro................................ 16,073 408,205
Leopold W. Montanaro.............................. 23,534 647,185
Amended and Restated Supplemental Executive Retirement Plan. West Essex
Bank maintains the West Essex Bank Supplemental Executive Retirement Plan, as
amended and restated. In addition to making up for benefits lost under the
employee stock ownership plan due to Internal Revenue Service limitations, the
supplemental executive retirement plan also provides a supplemental employee
stock ownership plan benefit to participants in connection with a change in
control of West Essex Bank or West Essex Bancorp prior to the complete repayment
of the loan to the employee stock ownership plan. In connection with the merger,
Leopold W. Montanaro and Charles E. Filippo will receive approximately $721,000
and $143,000, respectively, under the supplemental executive retirement plan.
These amounts represent the difference between the benefit each executive would
have received under the employee stock ownership plan and the supplemental
executive retirement plan if he had remained employed throughout the scheduled
term of the employee stock ownership plan loan and the benefits he actually
received under the employee stock ownership plan.
Appointment of Leopold W. Montanaro to the Kearny Federal Board of
Directors. Upon completion of the merger, Kearny Federal will appoint Leopold W.
Montanaro to its board of directors in a class of directors who will stand for
reelection approximately three years following the closing of the merger.
Leopold W. Montanaro will be paid the same fees payable to other non-employee
Kearny Federal directors.
Maintenance of an Advisory Board. For a period of at least three years,
Kearny will maintain an advisory board for the purpose of advising Kearny on the
former West Essex operations. Each director of West Essex Bancorp, other than
Leopold W. Montanaro, will be invited to serve on the advisory board. Each
advisory board member will be paid fees in an amount comparable to that paid by
West Essex Bank for their service as a director of West Essex Bank. Currently,
the West Essex directors receive medical and dental benefits, plus cash amounts
totaling $20,400 per year, except for the current Chairman of the Board of West
Essex Bank, William J. Foody, who receives $24,900.
Employment of Craig L. Montanaro. Kearny has agreed that on the closing
date of the merger, Kearny will offer Craig L. Montanaro, Senior Vice President,
Corporate Secretary and Treasurer of West Essex Bancorp and West Essex Bank,
employment as an officer of Kearny Federal.
Termination of West Essex ESOP. West Essex will terminate its employee
stock ownership plan upon completion of the merger. The plan will repay its
existing loan from West Essex Bancorp and will allocate the remaining cash
representing earnings on trust assets to the accounts of the plan participants,
including Leopold W. Montanaro, Charles E. Filippo and Craig L. Montanaro, in
proportion to their account balances, to the extent allowed under applicable law
and the governing documents of the plan.
22
Protection of West Essex Directors and Officers Against Claims. Kearny has
agreed to indemnify and hold harmless each present and former director and
officer of West Essex Bancorp for a period of six years from liability and
expenses arising out of matters existing or occurring at or before the
consummation of the merger to the fullest extent allowed under federal law and
West Essex Bancorp's charter and bylaws. Kearny will advance any related costs
to each of these persons as they are incurred. Kearny will also maintain a
policy of directors' and officers' liability insurance coverage for the benefit
of West Essex Bancorp's directors and officers for three years following
consummation of the merger, subject to certain limitations on the amount of
premiums to be paid.
Approvals Needed to Complete the Merger
In addition to the approval of the merger agreement by the West Essex
Bancorp stockholders, completion of the merger and the transactions contemplated
by the merger agreement are subject to the prior approval of the Office of
Thrift Supervision. In reviewing applications, the Office of Thrift Supervision
must consider, among other factors, the financial and managerial resources and
future prospects of the existing and resulting institutions, and the convenience
and needs of the communities to be served. In addition, the Office of Thrift
Supervision may not approve a transaction if it will result in a monopoly or
otherwise be anti-competitive. Kearny filed an application with the Office of
Thrift Supervision on November 18, 2002.
Under the Community Reinvestment Act of 1977, the Office of Thrift
Supervision must take into account the record of performance of West Essex Bank
and Kearny Federal in meeting the credit needs of the entire community,
including low and moderate-income neighborhoods, served by each institution. As
part of the review process, bank regulatory agencies frequently receive comments
and protests from community groups and others. West Essex Bank and Kearny
Federal each received a "satisfactory" rating during their respective last
Community Reinvestment Act examinations.
In addition, a period of 15 to 30 days must expire following approval by
the Office of Thrift Supervision within which period the United States
Department of Justice may file objections to the merger under the federal
anti-trust laws. While we believe that the likelihood of such action by the
Department of Justice is remote in this case, there can be no assurance that the
Department of Justice will not initiate proceedings to block the merger. If such
proceeding is instituted or challenge is made, we cannot ensure a favorable
result.
The merger cannot proceed in the absence of the requisite regulatory
approvals. See "The Merger Agreement--Conditions to Completing the Merger" and
"The Merger Agreement -- Other Provisions of the Merger Agreement --Terminating
the Merger Agreement." There can be no assurance that the requisite regulatory
approvals will be obtained, and if obtained, there can be no assurance as to the
date of any approval. There can also be no assurance that any regulatory
approvals will not contain a condition or requirement that causes the approvals
to fail to satisfy the condition set forth in the merger agreement and described
under "The Merger Agreement--Conditions to Completing the Merger."
The approval of any application merely implies the satisfaction of
regulatory criteria for approval which does not include review of the merger
from the standpoint of the adequacy of the consideration to be received by West
Essex Bancorp stockholders. Furthermore, regulatory approvals do not constitute
an endorsement or recommendation of the merger.
23
Accounting Treatment of the Merger
The merger will be accounted for under the purchase method of accounting.
Under this method of accounting, Kearny Financial and West Essex Bancorp will be
treated as one company as of the date of the merger, and Kearny Financial will
record the fair value of West Essex Bancorp's assets (including intangible
assets which arise from either contractual or other legal rights or are
separable) and liabilities on its consolidated financial statements. Acquisition
costs in excess of the fair value of the net assets acquired will be recorded as
goodwill. Goodwill will not be amortized for financial accounting purposes, but
instead will be tested for impairment annually. West Essex Bancorp's results of
operations will be included in Kearny Financial's consolidated income statement
after completion of the merger.
Dissenters' Rights
Office of Thrift Supervision regulations do not grant dissenters' rights to
the stockholders of West Essex Bancorp.
The Merger Agreement
The following discussion of the merger is qualified by reference to the
merger agreement, which is attached to this proxy statement as Appendix A. You
should read the entire merger agreement carefully. It is the legal document that
governs the merger.
When Will the Merger be Completed
The closing of the merger will take place on a date designated by Kearny
that is no later than 15 days following the date on which all of the conditions
to the merger contained in the merger agreement are satisfied or waived, unless
West Essex and Kearny agree to a later date. See "--Conditions to Completing the
Merger." On the closing date, Kearny will file articles of combination with the
Office of Thrift Supervision for each of the merger transactions in the merger.
The merger will become effective at the time stated in the articles of
combination.
West Essex and Kearny expect to complete the merger in the first calendar
quarter of 2003. However, neither West Essex nor Kearny can guarantee when or if
the required regulatory approvals will be obtained. See "The Merger--Approvals
Needed to Complete the Merger." Furthermore, either West Essex or Kearny may
terminate the merger agreement if, among other reasons, the merger has not been
completed on or before July 31, 2003, unless failure to complete the merger by
that time is due to the failure of the party seeking to terminate the agreement
to perform or observe its obligations set forth in the merger agreement.
However, West Essex and Kearny have agreed to extend this deadline for an
additional 120 days if they reasonably believe the merger can be completed
within that time period. See "--Other Provisions of the Merger Agreement
- --Terminating the Merger Agreement."
24
Conditions to Completing the Merger
The respective obligations of West Essex Bancorp and Kearny Financial to
effect the merger are subject to the satisfaction or waiver of the following
conditions specified in the merger agreement. West Essex Bancorp and Kearny
Financial must:
o Obtain corporate approvals to execute the merger agreement;
o Fulfill their obligations under the merger agreement;
o Avoid any material breach of their representations and warranties;
o Obtain regulatory approvals (without burdensome conditions in the
reasonable judgment of Kearny Financial) from the Office of Thrift
Supervision;
o Not have in effect any order, decree, or injunction of a court or
agency of competent jurisdiction which would prevent the completion of
the merger transactions;
o Receive officer's certificates from each other regarding the
satisfaction of the merger agreement's conditions; and
o Obtain legal opinions from counsel.
West Essex must also:
o Obtain approval from stockholders;
o Do nothing that would have or result in any material adverse effect on
West Essex; and
o Provide Kearny with an accounting of all transaction related expenses.
Kearny Financial must also deposit with the exchange agent an amount of
cash equal to the merger consideration West Essex Bancorp stockholders will be
entitled to receive.
You can find the details of the conditions to the merger in Article VI of
the merger agreement located in Appendix A. We cannot guarantee that all of
these conditions will be satisfied or waived.
Other Provisions of the Merger Agreement
Although the completion of the merger requires stockholder approval, many
provisions of the merger agreement became effective immediately upon its
signing. Your vote was not required to make these provisions binding obligations
of Kearny and West Essex.
Representations and Warranties. Each party has made representations and
warranties to the other party with respect to various matters, including its
financial statements, capital structure, business loans, investments, regulatory
filings and benefit plans. These representations and warranties must be true and
correct upon both signing of the merger agreement and the completion of the
merger. A party can terminate the merger agreement if the other party's
representations and warranties are not true and correct resulting in a material
adverse effect on that other party. If the merger is completed, or if the
25
merger agreement is terminated for some unrelated reason, the representations
and warranties become void. You can find details of these obligations in
Articles III and IV of the merger agreement located in Appendix A.
Cooperation and Conduct of Business; Agreement Not to Solicit Other
Proposals. Each party has agreed to cooperate in completing the merger and to
avoid extraordinary transactions between the signing of the merger agreement and
the completion of the merger. In addition, West Essex has agreed not to
initiate, solicit, encourage or facilitate any acquisition proposal with a third
party. An acquisition proposal includes the following:
o Any merger, consolidation, share exchange, business combination, or
other similar transaction;
o Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 20% or more of the assets of West Essex Bancorp or West
Essex Bank, taken as a whole, in a single transaction or series of
transactions;
o Any tender offer or exchange offer for 20% or more of the outstanding
shares of capital stock of West Essex Bancorp or the filing of a
registration statement with the Securities Exchange Commission in
connection therewith; and
o Any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
Despite the agreement not to solicit other acquisition proposals, the board
of directors may generally negotiate or have discussions with, or provide
information to, a third party who makes an unsolicited, written, bona fide
acquisition proposal, provided that the board of directors:
o Receives a written opinion from its financial advisor that such
unsolicited acquisition proposal may be more superior to the
transaction contemplated by the merger agreement with Kearny from a
financial point of view;
o Receives advice from legal counsel that the proposed acquiror may
legally acquire West Essex Bancorp and West Essex Bank;
o After receipt of advice from independent legal counsel, in good faith
deems such action to be necessary for it to comply with its fiduciary
responsibilities to West Essex Bancorp stockholders (a proposal that
satisfies these first three requirements is defined as a "superior
proposal"); and
o The special meeting of stockholders has not occurred.
The obligations become void if the merger is completed. The obligations
also become void if the merger agreement is terminated, except for those related
to confidentiality and shared expenses. You can find details of these
obligations in Article V of the merger agreement located in Appendix A.
Waiver and Amendment. Section 8.03 of Article VIII of the merger agreement
located in Appendix A allows either Kearny or West Essex to extend the time for
the performance of any obligation
26
by the other party, and to waive (to the extent permitted by law) any condition
or obligation of the other party.
Terminating the Merger Agreement. Kearny and West Essex can agree at any
time not to complete the merger, even if West Essex Bancorp stockholders have
approved it. Also, either Kearny or West Essex can decide, without the consent
of the other, to terminate the merger agreement:
o In response to a material breach of the merger agreement which is not
cured within 30 days;
o If the merger is not completed by July 31, 2003, unless failure to
complete the merger by that time is due to the failure of the party
seeking to terminate the agreement to perform or observe its
obligations set forth in the merger agreement; provided, however, that
West Essex and Kearny have agreed to extend this deadline for an
additional 120 days if they reasonably believe the merger can be
completed within that time period; or
o If any required regulatory, stockholder or member (if required)
approval is not obtained.
Kearny may also terminate the merger agreement if the West Essex Bancorp
board of directors withdraws its recommendation to approve the merger agreement
or modifies or qualifies its recommendation in a manner adverse to Kearny or if
West Essex enters into another agreement with someone else, in connection with a
superior proposal.
West Essex may also terminate the merger agreement if the West Essex
Bancorp board of directors determines, after consultation with its advisors,
that it is their fiduciary duty to accept a superior proposal.
Termination Fee. West Essex must pay Kearny a termination fee of $4.0
million if:
o Kearny terminates the merger agreement as a result of the West Essex
Bancorp board of directors withdrawing its recommendation to approve
the merger agreement or modifying or qualifying its recommendation in
a manner adverse to Kearny or as a result of West Essex entering into
another agreement with someone else, in connection with a superior
proposal; or
o If West Essex terminates the merger agreement as a result of the West
Essex Bancorp board of directors determining, after consultation with
its advisors, that it is their fiduciary duty to accept a superior
proposal.
27
Additional Information Regarding
The Special Meeting
Stock Ownership
The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of West Essex Bancorp's
outstanding shares of common stock on December 30, 2002. Other than those
persons listed below, West Essex Bancorp is not aware of any person that owns
more than 5% of West Essex Bancorp's common stock as of December 30, 2002. A
person may be considered to own any shares of common stock over which he or she
has, directly or indirectly, sole or shared voting or investment power.
Percent of
Common
Name and Address Number of Stock
of Beneficial Owner Shares Owned Outstanding
- ------------------------------------ --------------- -------------
West Essex Bancorp, M.H.C.(1) 2,937,651 60.1%
417 Bloomfield Avenue
Caldwell, New Jersey 07006
The Baupost Group, L.L.C.(2) 311,000 6.4%
44 Brattle Street
Cambridge, Massachusetts 02138
- -----------------------------
(1) The members of the board of directors of West Essex Bancorp
also constitute the board of directors of West Essex MHC.
(2) Based on information in a Schedule 13G/A filed on February
12, 2002.
28
The following table provides information about the shares of West Essex
Bancorp common stock that may be considered to be owned by each director and
executive officer of West Essex Bancorp and by all directors and executive
officers of West Essex Bancorp as a group as of December 30, 2002. A person may
be considered to own any shares of common stock over which he or she has,
directly or indirectly, sole or shared voting or investment power. Unless
otherwise indicated, each of the named individuals has sole voting and
investment power with respect to the shares shown.
Number of Shares Percent of
Number of That May Be
Shares Acquired Within
Owned 60 Days By Common Stock
Name (excluding options)(1) Exercising Options Outstanding(2)
- ------ -------------------- ------------------ --------------
David F. Brandley.................. 17,248(3) 7,028 *
John J. Burke...................... 92,248(4) 7,028 2.0%
Charles E. Filippo................. 48,210(5) -- 1.0%
William J. Foody................... 19,592(6) 4,685 *
S.M. Terry LaCorte................. 3,000 -- *
Everett N. Leonard................. 14,123 7,028 *
Craig L. Montanaro................. 28,579 966 *
Leopold W. Montanaro............... 158,153(7) 109 3.2%
All Executive Officers and
Directors as a Group (8
persons)......................... 381,153 26,844 8.3%
- ----------------------------------
* Less than 1% of shares outstanding
(1) Includes unvested restricted shares, and shares purchased by the trustee
with cash dividends paid on the unvested restricted shares, awarded under
the West Essex Bancorp, Inc. 1999 Stock-Based Incentive Plan, as amended
and restated, for Messrs. Brandley, Burke, Filippo, Foody, Leonard, Craig
L. Montanaro and Leopold W. Montanaro, as to which the holder has voting
power but not investment power, as follows: 1,924 shares, 1,924 shares,
4,617 shares, 1,924 shares, 1,924 shares, 10,982 shares and 9,618 shares,
respectively. Includes 456 and 8,726 shares credited under the supplemental
executive retirement plan for Messrs. Filippo and Leopold W. Montanaro as
to which the holder has voting power but not investment power. Also
includes shares allocated under the employee stock ownership plan for
Messrs. Filippo, Craig L. Montanaro and Leopold W. Montanaro, as to which
the holder has voting power but not investment power, as follows: 6,508
shares, 4,886 shares and 6,508 shares, respectively.
(2) Percentages with respect to each person or group of persons have been
calculated on the basis of 4,890,733 shares of Company's common stock,
which includes the number of shares of the Company's common stock
outstanding and entitled to vote as of December 30, 2002, plus the number
of shares of the Company's common stock which such person or group of
persons has the right to acquire within 60 days after December 30, 2002, by
the exercise of stock options.
(3) Includes 5,000 shares owned by Mr. Brandley's spouse.
(4) Includes 43,750 shares owned by Mr. Burke's spouse.
(5) Includes 3,750 shares owned by Mr. Filippo's spouse.
(6) Includes 6,250 shares owned by Mr. Foody's spouse.
(7) Includes 43,750 shares owned by Mr. Leopold Montanaro's spouse.
29
Stockholder Proposals and Nominations
West Essex Bancorp will hold an annual meeting for the year ending December
31, 2002 only if the merger is not anticipated to be completed during the 2003
calendar year. Proposals that stockholders seek to have included in the proxy
statement for West Essex Bancorp's next annual meeting, if one is held, must
have been received by West Essex Bancorp no later than December 23, 2002. If
next year's annual meeting is held on a date more than 30 calendar days from May
21, 2003, a stockholder proposal must be received by a reasonable time before
the proxy solicitation for such annual meeting is made. Any such proposals will
be subject to the requirements of the proxy rules adopted by the Securities and
Exchange Commission.
West Essex Bancorp's bylaws provide that in order for a stockholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a stockholder must deliver notice of such
nominations and/or proposals to the Secretary of West Essex Bancorp not less
than 90 days before the date of the annual meeting; provided, however, that if
less than 100 days' notice of the annual meeting is given to stockholders, such
notice must be delivered not later than the close of the tenth day following the
day on which notice of the annual meeting was mailed to stockholders or public
disclosure of the meeting date was made. A copy of the bylaws may be obtained
from West Essex Bancorp.
Solicitation of Proxies
The cost of solicitation of proxies on behalf of the Board will be borne by
West Essex Bancorp. Proxies may be solicited personally or by telephone by
directors, officers and other employees of West Essex Bancorp and West Essex
Bank without any additional compensation. West Essex Bancorp will also request
persons, firms and corporations holding shares in their names, or in the name of
their nominees, which are beneficially owned by others, to send proxy material
to, and obtain proxies from, the beneficial owners, and will reimburse those
record holders for their reasonable expenses in doing so. Georgeson Shareholder
Communications, Inc., a proxy solicitation firm, will be paid a fee of $5,000,
plus out-of-pocket expenses to assist West Essex Bancorp.
Where You Can Find More Information
As a public company, West Essex Bancorp is obligated to file annually,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements or other information that we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, West Essex Bancorp's
public filings are available to the public from commercial document retrieval
services and on the Internet World Wide Website maintained by the SEC at
"http://www.sec.gov."
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Craig L. Montanaro
----------------------------------
Craig L. Montanaro
Corporate Secretary
Caldwell, New Jersey
January 9, 2003
30
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
KEARNY FEDERAL SAVINGS BANK
AND
KEARNY FINANCIAL CORP.
AND
KEARNY MHC
AND
WEST ESSEX BANK
AND
WEST ESSEX BANCORP, INC.
AND
WEST ESSEX BANCORP, M.H.C.
DATED AS OF SEPTEMBER 11, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 11, 2002, is by and between (i) Kearny Federal Savings Bank, a
Federally-chartered savings bank ("Bank"), Kearny Financial Corp.
("Corporation"), a Federal MHC subsidiary holding company and the parent
corporation of Bank, Kearny MHC ("MHC"), a federal mutual holding company of the
Bank and the parent company of Corporation, and (ii) WEST ESSEX Bank, a
Federally-chartered savings bank ("WEST ESSEX Bank"), WEST ESSEX Bancorp, Inc.,
a Federal MHC subsidiary holding company ("WEST ESSEX Bancorp"), and WEST ESSEX
Bancorp, M.H.C., a Federally- chartered mutual holding company ("WEST ESSEX
MHC"). Each of Bank, Corporation, MHC, WEST ESSEX Bank, WEST ESSEX Bancorp and
WEST ESSEX MHC is sometimes individually referred to herein as a "party," and
collectively as the "parties."
RECITALS
1. Bank is a stock savings bank with its principal offices located in
Kearny, New Jersey. Corporation is its parent company for Bank and MHC is
Corporation's parent company and the mutual holding company for Bank. Bank,
Corporation and MHC all have their principal offices in Kearny, New Jersey.
2. WEST ESSEX MHC owns a majority of the outstanding capital stock of WEST
ESSEX Bancorp, which owns all of the outstanding capital stock of WEST ESSEX
Bank. WEST ESSEX Bank, WEST ESSEX Bancorp and WEST ESSEX MHC all have their
principal offices in Caldwell, New Jersey.
3. The Boards of Directors of the respective parties deem it advisable and
in the best interests of the parties, including the members of MHC and WEST
ESSEX MHC, and the stockholders of WEST ESSEX Bancorp, for the following merger
transactions: (i) WEST ESSEX Bancorp will merge with Corporation Merger Sub (a
wholly owned subsidiary of Corporation), with WEST ESSEX Bancorp as the
surviving entity; (ii) WEST ESSEX MHC will merge with MHC, with MHC as the
surviving entity; (iii) WEST ESSEX Bancorp will merge or consolidate with
Corporation, with Corporation as the surviving entity; (iv) WEST ESSEX Bank will
merge with and into Bank, with Bank as the surviving institution, and Bank will
remain a subsidiary of Corporation; (v) concurrently with steps (i) through
(iv), 100% of the outstanding shares of WEST ESSEX Bancorp Common Stock
previously held by stockholders other than WEST ESSEX MHC will be canceled and
exchanged for a payment of $35.10 per share in cash paid by Corporation or
Corporation Merger Sub pursuant to the terms of this Agreement; and (vi) as a
result of the foregoing, the interests of WEST ESSEX MHC members shall cease to
exist and will be converted into interests of the same nature in MHC.
4. The parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.
In consideration of the premises and of the mutual representations,
warranties and covenants herein contained and intending to be legally bound
hereby, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01. DEFINITIONS.
Except as otherwise provided herein, as used in this Agreement, the
following terms shall have the indicated meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means, with respect to any Person, any Person who directly, or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control of, such Person and, without limiting the generality
of the foregoing, includes any executive officer or director of such Person and
any Affiliate of such executive officer or director.
"Agreement" means this agreement, and any amendment or supplement hereto,
which constitutes a "plan of merger" between Bank, Corporation, MHC, WEST ESSEX
MHC, WEST ESSEX Bancorp and WEST ESSEX Bank.
"Applications" means the applications to be filed with the appropriate
Regulatory Authorities requesting approval or nonobjection of the transactions
described in this Agreement.
"Bank" means Kearny Federal Savings Bank, a Federally-chartered stock
savings bank.
"Bank Merger" means the merger of WEST ESSEX Bank with and into Bank, with
Bank as the surviving institution.
"Bank Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by Bank, except any
corporation the stock of which is held as security by Bank in the ordinary
course of its lending activities.
"Closing" means the closing of the Merger as set forth in Section 2.07 of
this Agreement.
"Closing Date" means the date determined by Kearny, in consultation with
and upon no less than five (5) days prior written notice to WEST ESSEX Bancorp,
but in no event later than fifteen (15) days after the last condition precedent
pursuant to this Agreement has been fulfilled or waived (including the
expiration of any applicable waiting period), or such other date as to which the
parties shall mutually agree.
"Corporate Merger" means the merger of Corporation Merger Sub with and
into WEST ESSEX Bancorp with WEST ESSEX Bancorp as the surviving entity.
"Corporation Merger Sub" means a wholly owned subsidiary of Corporation to
be incorporated to facilitate the merger of WEST ESSEX Bancorp and Corporation.
"Environment" means ambient air, surface water, groundwater, soil,
sediment and land.
"Environmental Assessment" shall have the meaning given to such term in
Section 5.02(a) of this Agreement.
"Environmental Conditions" means any pollution or contamination or
threatened pollution or contamination of, or the Release or threatened Release
of Hazardous Materials into, the Environment.
"Environmental Law" means any Federal or state law, statute, rule,
regulation, code, order, judgment, decree, injunction, common law or agreement
with any Federal or state governmental authority relating to (i) the protection,
preservation or restoration of the environment (including air, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource), (ii) human health or safety, or
(iii) exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, hazardous substances, in each case as amended and now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated from time to time thereunder.
"Exchange Agent" means the third party entity selected by Kearny and
reasonably acceptable to WEST ESSEX, as provided in Section 2.03(a) of this
Agreement.
"FinPro" means FinPro, Inc., the financial advisor to WEST ESSEX in
connection with the transactions provided for in this Agreement.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" means the Federal Home Loan Bank.
"GAAP" means generally accepted accounting principles as in effect at the
relevant date and consistently applied.
"Hazardous Material" means any substance (whether solid, liquid or gas)
which is detrimental to human health or safety or to the environment, currently
listed, defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by type
or by quantity, including any substance containing any such substance as a
component. Hazardous Material includes, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance, oil or petroleum, or any derivative or
by-product thereof, radon, radioactive material, asbestos, asbestos-containing
material, urea formaldehyde foam insulation, lead and polychlorinated biphenyl.
"HOLA" means the Home Owners' Loan Act of 1956, as amended.
"IRC" or "Code" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"ISRA" means the New Jersey Industrial Site Recovery Act, N.J.S.A.13:1K-6
et seq., and the regulations promulgated thereunder, N.J.A.C. 7:26B-1.1 et seq.
"Kearny" means the Bank, the Corporation, the MHC and/or any direct or
indirect Subsidiary of such entities.
"Kearny Disclosure Schedules" means the Disclosure Schedules delivered by
Kearny to WEST ESSEX pursuant to Article IV of this Agreement.
"Kearny Financials" means the audited consolidated financial statements of
Corporation as of June 30, 2001 and 2000 and for the three years ended June 30,
2001, including the notes thereto, and (ii) the unaudited interim consolidated
financial statements of the Corporation as of each calendar quarter following
December 31, 2001.
"Loan Property" means any property or facility in which WEST ESSEX (or a
Subsidiary of WEST ESSEX) holds a security interest and, where required by the
context, includes the owner and/or operator of such property or facility, but
only with respect to such property or facility.
"Material Adverse Effect" shall mean, with respect to Kearny or WEST
ESSEX, any adverse effect on its assets, financial condition or results of
operations which is material to its assets, financial condition or results of
operations on a consolidated basis, except for any material adverse effect
caused by (i) any change in the value of the assets of Kearny or WEST ESSEX
resulting from a change in interest rates generally, (ii) any individual or
combination of changes occurring after the date hereof in any Federal or state
law, rule or regulation or in GAAP, which change(s) affect(s) financial
institutions generally, or (iii) reasonable expenses incurred in connection with
this Agreement and the transactions contemplated thereby.
"Member Proxy Statement" means any proxy statement, if any, together with
any supplements thereto, to be transmitted by WEST ESSEX MHC to its members in
connection with the transactions contemplated by this Agreement if a vote of
such members is required by any Regulatory Authority.
"Merger" shall mean collectively the Corporate Merger, the MHC Merger, the
Mid-Tier Merger, the Bank Merger and any other mergers by interim corporate
entities necessary to effectuate the transactions contemplated by this
Agreement.
"Merger Effective Date" means the date upon which the articles of
combination as to the Merger are filed and endorsed by the OTS or as otherwise
stated in the articles of combination, in accordance with HOLA and the
regulations of the OTS.
"Merger Consideration" has the meaning given to that term in Section
2.02(a) of this Agreement.
"MHC Merger" means the merger of the WEST ESSEX MHC with and into MHC with
MHC as the surviving entity.
"Mid-Tier Merger" means the merger of WEST ESSEX Bancorp with and into
Corporation with Corporation as the surviving entity.
"OTS" means the Office of Thrift Supervision.
"Participation Facility" means any property or facility in which WEST
ESSEX (or a Subsidiary of WEST ESSEX) participates in the management of such
property or facility (including all property or facilities held in trust or in
any other fiduciary capacity) and, where required by the context, includes the
owner and/or operator of such property, but only with respect to such property
or facility.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined under the Exchange Act).
"Proxy Statement" means the proxy statement, together with any supplements
thereto, to be transmitted to holders of WEST ESSEX Bancorp Common Stock and, if
required by any Regulatory Authority, any proxy statement together with any
supplements thereto to be transmitted by WEST ESSEX MHC to the members of WEST
ESSEX MHC in connection with the transactions contemplated by this Agreement.
"Release" means any intentional or unintentional release, discharge,
spill, leaking, pumping, pouring, emitting, emptying, injection, disposal or
dumping.
"Regulatory Agreement" has the meaning given to that term in Section 3.11
of this Agreement.
"Regulatory Authority" or "Regulatory Authorities" means any agency or
department of any Federal or state government, including, without limitation,
the OTS, the FDIC, the SEC and the respective staffs thereof.
"Rights" means warrants, options, rights, convertible securities and other
capital stock equivalents which obligate an entity to issue its securities.
"SAIF" means the Savings Association Insurance Fund, as administered by
the FDIC.
"Sandler O'Neill" means Sandler O'Neill & Partners, LLP, the financial
advisor to Kearny in connection with the transactions provided for in this
Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time thereunder.
"Securities Documents" means all registration statements, schedules,
statements, forms, reports, proxy material, and other documents required to be
filed under the Securities Laws.
"Securities Laws" means the Securities Act and the Exchange Act and the
rules and regulations promulgated from time to time thereunder.
"Stockholder Proxy Statement" means the proxy statement together with any
supplements thereto to be transmitted to holders of WEST ESSEX Bancorp Common
Stock in connection with the transactions contemplated by this Agreement.
"Subsidiary" means any corporation, 50% or more of the capital stock of
which is owned, either directly or indirectly, by another entity, except any
corporation the stock of which is held as security by either Kearny or WEST
ESSEX, as the case may be, in the ordinary course of its lending activities.
"WEST ESSEX" means WEST ESSEX MHC, WEST ESSEX Bancorp, WEST ESSEX Bank
and/or any direct or indirect Subsidiary of such entities.
"WEST ESSEX Disclosure Schedules" means the Disclosure Schedules delivered
by WEST ESSEX to Kearny pursuant to Article III of this Agreement.
"WEST ESSEX Employee Plan" has the meaning given to that term in Section
3.12 of this Agreement.
"WEST ESSEX Bancorp" means WEST ESSEX Bancorp, Inc., a Federal MHC
subsidiary holding company.
"WEST ESSEX Bancorp Financials" means (i) the audited consolidated
financial statements of WEST ESSEX Bancorp as of December 31, 2001 and 2000 and
for the three years ended December 31, 2001, including the notes thereto, and
(ii) the unaudited interim consolidated financial statements of WEST ESSEX
Bancorp as of each calendar quarter following December 31, 2001 included in
Securities Documents filed by WEST ESSEX Bancorp.
"WEST ESSEX Bancorp Common Stock" means the common stock of WEST ESSEX
Bancorp described in Section 3.02(a).
"WEST ESSEX Bancorp Options" means the options awarded to acquire shares
of WEST ESSEX Bancorp Common Stock as set forth in Section 3.02 and as disclosed
at WEST ESSEX Disclosure Schedule 3.12(i).
"WEST ESSEX MHC" means WEST ESSEX Bancorp, M.H.C., a Federally-chartered
mutual holding company.
"WEST ESSEX Pension Plan" has the meaning given to that term in Section
3.12 of this Agreement.
"WEST ESSEX Property" means any property or facility currently or formerly
owned, operated, leased or occupied by WEST ESSEX, or any of them (or a
predecessor of any of the foregoing), in connection with WEST ESSEX's business.
"WEST ESSEX Regulatory Reports " means the OTS Thrift Financial Reports
("TFRs") of WEST ESSEX Bank and accompanying schedules, as filed with the OTS
for each calendar quarter beginning with the quarter ended March 31, 1998,
through the Closing Date, and all Annual, Quarterly and Current Reports filed
with the OTS by WEST ESSEX Bancorp or WEST ESSEX MHC from March 31, 1998,
through the Closing Date.
"WEST ESSEX Restricted Stock" means awards of Common Stock under any stock
bonus plan of WEST ESSEX Bancorp or WEST ESSEX Bank as disclosed at WEST ESSEX
Disclosure Schedule 2.04(b).
"WEST ESSEX Bank" means WEST ESSEX Bank, a Federally- chartered stock
savings bank.
"WEST ESSEX Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by WEST ESSEX Bancorp,
and includes WEST ESSEX Bank, except that it does not include any corporation
the stock of which is held in the ordinary course of the lending activities of
WEST ESSEX Bank.
ARTICLE II
THE MERGER AND RELATED MATTERS
SECTION 2.01. EFFECTS OF MERGER; SURVIVING INSTITUTIONS.
On the Merger Effective Date, the Merger will be effected as follows:
(a) THE CORPORATE MERGER AND MID-TIER MERGER. Corporation Merger Sub shall
merge with and into WEST ESSEX Bancorp with WEST ESSEX Bancorp as the surviving
entity (the "Corporate Merger"). WEST ESSEX Bancorp and Corporation Merger Sub
shall enter into the Corporate Merger Agreement substantially in the form of
Exhibit A attached hereto. Immediately thereafter, WEST ESSEX Bancorp shall
merge with and into Corporation with Corporation as the surviving entity in
accordance with the Mid-Tier Merger Agreement substantially in the form of
Exhibit B attached hereto.
(b) THE MHC MERGER. WEST ESSEX MHC shall merge with and into MHC with MHC
as the surviving entity. The separate existence of WEST ESSEX MHC shall cease,
and all of the property (real, personal and mixed), rights, powers and duties
and obligations of WEST ESSEX MHC shall be taken and deemed to be transferred to
and vested in MHC, as the surviving entity in the MHC Merger, without further
act or deed, all in accordance with the applicable laws of the United States,
and regulations of the OTS. WEST ESSEX MHC and MHC shall enter into the MHC
Merger Agreement substantially in the form of Exhibit C attached hereto.
(c) THE BANK MERGER. WEST ESSEX Bank shall merge with and into Bank, with
Bank as the surviving institution (the "Bank Merger"). The Bank Merger shall be
effected pursuant to the Bank Merger Agreement substantially in the form of
Exhibit D attached hereto. As a result of the Bank Merger, the existence of WEST
ESSEX Bank shall cease and Bank shall be the surviving association and continue
its existence as a savings bank under the laws of the United States.
(d) MODIFICATION OF STRUCTURE. Notwithstanding any provision of this
Agreement to the contrary, Kearny may elect, subject to the filing of all
necessary applications and the receipt of all required regulatory approvals, to
modify the structure of the transactions described in (a) through (c) above, and
the parties shall enter into such alternative transactions, so long as (i) there
are no adverse tax consequences to any of the stockholders of WEST ESSEX Bancorp
as a result of such modification, (ii) the Merger Consideration is not thereby
changed in kind or reduced in amount because of such modification, (iii) such
modification will not be likely to jeopardize receipt of any required regulatory
approvals required under Sections 6.02(d), or impair or prevent the satisfaction
of any conditions to the Closing.
SECTION 2.02. CONVERSION AND CANCELLATION OF SHARES; EFFECT ON MEMBERS.
(a) On the Merger Effective Date and in accordance with the Corporate
Merger, MHC Merger, Mid-Tier Merger and the Bank Merger:
(i) Each issued and outstanding share of WEST ESSEX Bancorp Common
Stock (except shares held by WEST ESSEX MHC) shall cease to
exist and shall be converted into the right to receive $35.10
in cash (the "Merger Consideration");
(ii) the interests of members of WEST ESSEX MHC will be converted
into interests of the same nature in the MHC (the "Member
Conversion").
(b) Any shares of WEST ESSEX Bancorp Common Stock which are owned or held
by either party hereto or any of their respective Subsidiaries (other than in a
fiduciary capacity or in connection with debts previously contracted) at the
Merger Effective Date shall cease to exist, the certificates for such shares
shall be canceled as promptly as practicable, such shares shall not be converted
into the Merger Consideration, and no cash shall be issued or exchanged
therefor.
(c) The holders of certificates representing shares of WEST ESSEX Bancorp
Common Stock (any such certificate being hereinafter referred to as a
"Certificate") shall cease to have any rights as stockholders of WEST ESSEX
Bancorp.
(d) As a result of the Member Conversion, each holder of a deposit account
at WEST ESSEX Bank as of the effective time of the Bank Merger shall become a
holder of a deposit account at the Bank with the same rights, privileges and
obligations as a holder of a deposit account at the Bank at the effective time
of the Bank Merger, and all deposit accounts established at WEST ESSEX Bank
prior to the Merger Effective Date shall be deemed to have been established at
the Bank on the date that they were previously established at WEST ESSEX Bank.
SECTION 2.03. PAYMENT FOR SHARES.
(a) As promptly as practicable after the Merger Effective Date, and in any
event within five business days after the Merger Effective Date, the Exchange
Agent shall mail to each holder of record of an outstanding share Certificate or
Certificates a Letter of Transmittal containing instructions for the surrender
of the Certificate or Certificates held by such holder for payment therefor.
Upon surrender of the Certificate or Certificates to the Exchange Agent in
accordance with the instructions set forth in the Letter of Transmittal, such
holder shall promptly receive in exchange therefor the Merger Consideration,
without interest thereon. Approval of this Agreement by the stockholders of WEST
ESSEX Bancorp shall constitute authorization for Corporation to designate and
appoint the Exchange Agent, which appointment shall be reasonably acceptable to
WEST ESSEX Bancorp. Neither Corporation nor the Exchange Agent shall be
obligated to deliver the Merger Consideration to a former stockholder of WEST
ESSEX Bancorp until such former stockholder surrenders his Certificate or
Certificates or, in lieu thereof, any such appropriate affidavit of loss and
indemnity agreement and bond as may be reasonably required by Corporation.
(b) If payment of the Merger Consideration is to be made to a person other
than the person in whose name a Certificate surrendered in exchange therefor is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) On or prior to the Merger Effective Date, Kearny shall deposit or
cause to be deposited, in trust with the Exchange Agent, an amount of cash equal
to the aggregate Merger Consideration that the WEST ESSEX Bancorp stockholders
shall be entitled to receive on the Merger Effective Date pursuant to Section
2.02 hereof.
(d) The payment of the Merger Consideration upon the conversion of WEST
ESSEX Bancorp Common Stock in accordance with the above terms and conditions
shall be deemed to have been issued and paid in full satisfaction of all rights
pertaining to such WEST ESSEX Bancorp Common Stock.
(e) Promptly following the date which is 12 months after the Merger
Effective Date, the Exchange Agent shall deliver to Corporation all cash,
certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of WEST
ESSEX Bancorp Common Stock may surrender such Certificate to Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the Merger Consideration multiplied by the number of
shares of WEST ESSEX Bancorp Common Stock formerly represented by such
Certificate, without any interest or dividends thereon.
(f) After the close of business on the Merger Effective Date, there shall
be no transfers on the stock transfer books of WEST ESSEX Bancorp of the shares
of WEST ESSEX Bancorp
Common Stock which are outstanding immediately prior to the Merger Effective
Date, and the stock transfer books of WEST ESSEX Bancorp shall be closed with
respect to such shares. If, after the Merger Effective Date, Certificates
representing such shares are presented for transfer to the Exchange Agent, they
shall be canceled and exchanged for the Merger Consideration as provided in this
Article.
(g) In the event any certificate for WEST ESSEX Bancorp Common Stock shall
have been lost, stolen or destroyed, the Exchange Agent shall deliver (except as
otherwise provided in Section 2.02) in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of the fact by the holder
thereof, the cash to be paid in the Merger as provided for herein; provided,
however, that Corporation may, in its sole discretion and as a condition
precedent to the delivery thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such reasonable sum as Corporation
may specify as indemnity against any claim that may be made against WEST ESSEX
Bancorp, Corporation or any other party with respect to the certificate alleged
to have been lost, stolen or destroyed.
(h) Corporation is hereby authorized, with the consent of WEST ESSEX, to
adopt additional rules and regulations with respect to the matters referred to
in this Agreement not inconsistent with the provisions of this Agreement and
which do not adversely affect the rights of stockholders of WEST ESSEX Bancorp.
SECTION 2.04. CANCELLATION OF WEST ESSEX BANCORP STOCK OPTIONS AND
RESTRICTED STOCK.
(a) Each WEST ESSEX Bancorp Option issued and outstanding on the date
hereof and remaining outstanding immediately prior to the Closing Date, as set
forth in WEST ESSEX Disclosure Schedule 3.12(i), whether or not the option is
then exercisable, shall be converted into the right to receive a cancellation
payment in an amount equal to the product of (i) the number of shares of WEST
ESSEX Bancorp Common Stock subject to such option immediately prior to the
Closing Date and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of such option, net of any cash which must be withheld
under federal and state income and employment tax requirements. Such cash
payments shall be made by WEST ESSEX Bancorp not later than the Closing Date in
consideration for, and shall result in, the settlement and cancellation of all
such WEST ESSEX Bancorp Options. As a condition to the receipt of a cash payment
in cancellation of options, each option holder shall execute and deliver a
cancellation agreement in form and substance reasonably satisfactory to Kearny.
(b) Each share of WEST ESSEX Restricted Stock issued and outstanding
immediately prior to the Closing Date, as set forth in WEST ESSEX Disclosure
Schedule 2.04(b), shall be canceled and exchanged for payment to be made to the
recipient or holder thereof by WEST ESSEX not later than the Closing Date in an
amount equal to the Merger Consideration, less any cash which must be withheld
under federal and state income and employment tax requirements; provided that
such recipient or holder shall deliver to WEST ESSEX a cancellation agreement in
form and substance reasonably satisfactory to Kearny prior to receipt of such
payment.
SECTION 2.05. AVAILABILITY OF INFORMATION.
Promptly after the execution by the Parties of this Agreement, WEST ESSEX
shall provide to Kearny, its officers, employees, agents, and representatives
access, on reasonable notice and during customary business hours, to the books,
records, properties and facilities of WEST ESSEX and shall use its best efforts
to cause its officers, employees, agents and representatives to cooperate with
any reasonable request for information.
SECTION 2.06. EMPLOYMENT AGREEMENTS.
It is acknowledged that WEST ESSEX Bank currently has outstanding,
separate employment agreements and separate change of control agreements with
individuals detailed at WEST ESSEX Disclosure Schedule 2.06 ("Employment
Agreements"). Kearny will honor the terms of the Employment Agreements and WEST
ESSEX or Kearny shall make the payments required thereunder; details of such
estimated calculations are set forth in WEST ESSEX Disclosure Schedule 2.06;
provided that no such payments shall be made prior to delivery of an
acknowledgment and release agreement in form and substance reasonably
satisfactory to Kearny prior to delivery of such payments.
SECTION 2.07. CLOSING.
The closing of the Merger shall take place at the offices of the
Corporation in Kearny, New Jersey, or at such other location selected by Kearny,
on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
WEST ESSEX BANK, WEST ESSEX BANCORP AND WEST ESSEX MHC
WEST ESSEX represents and warrants to Kearny that the statements contained
in this Article III are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the WEST ESSEX Disclosure
Schedules delivered to Kearny on or prior to the date hereof, and except as to
any representation or warranty which specifically relates to an earlier date.
WEST ESSEX has made a good faith effort to ensure that the disclosure on each
schedule of the WEST ESSEX Disclosure Schedules corresponds to the section
reference herein. However, for purposes of the WEST ESSEX Disclosure Schedules,
any item disclosed on any schedule therein is deemed to be fully disclosed with
respect to all schedules under which such item may be relevant.
SECTION 3.01. ORGANIZATION.
(a) WEST ESSEX MHC is a Federal mutual holding company duly organized,
validly existing and in good standing under the laws of the United States, and
is duly registered as a savings and loan holding company under the HOLA. WEST
ESSEX MHC has full power and authority to carry on its business as now conducted
and is duly licensed or qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the
conduct of its business requires such qualification, except where the failure to
be so licensed or qualified would not have a Material Adverse Effect on WEST
ESSEX MHC. Except as set forth in WEST ESSEX Disclosure Schedule 3.01(a), WEST
ESSEX MHC has no subsidiary other than WEST ESSEX Bancorp.
(b) WEST ESSEX Bancorp is a Federal MHC subsidiary holding company duly
organized, validly existing and in good standing under the laws of the United
States, and is duly registered as a savings and loan holding company under the
HOLA. WEST ESSEX Bancorp has the full corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing would not have a Material Adverse
Effect on the business, operations, assets, financial condition or prospects of
WEST ESSEX Bancorp and its subsidiaries taken as a whole. Other than shares of
capital stock in WEST ESSEX Bank and its subsidiaries, as identified below
(collectively, the "WEST ESSEX Subsidiaries"), WEST ESSEX Bancorp does not own
or control, directly or indirectly, or have the right to acquire directly or
indirectly, an equity interest in any corporation, company, association,
partnership, joint venture or other entity.
(c) WEST ESSEX Bank is a Federal stock savings bank organized, validly
existing and in good standing under the laws of the United States. Except as set
forth in WEST ESSEX Disclosure Schedule 3.01(c), WEST ESSEX Bank is the only
WEST ESSEX Subsidiary. The deposits of WEST ESSEX Bank are insured by the FDIC
to the fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid when due by WEST
ESSEX Bank. Each WEST ESSEX Subsidiary is identified in WEST ESSEX Disclosure
Schedule 3.01(c), and is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization.
(d) WEST ESSEX Bank is a member in good standing of the FHLB of New York
and owns the requisite amount of stock therein.
(e) Except as disclosed in WEST ESSEX Disclosure Schedule 3.01(e), the
respective minute books of WEST ESSEX MHC, WEST ESSEX Bancorp, WEST ESSEX Bank
and each WEST ESSEX Subsidiary accurately records, in all material respects, all
material corporate actions of their respective stockholders and boards of
directors (including committees) through the date of this Agreement.
(f) Prior to the date of this Agreement, true and correct copies of the
charter and bylaws of WEST ESSEX Bank, WEST ESSEX Bancorp and WEST ESSEX MHC,
and each WEST ESSEX Subsidiary, have been made available to Kearny.
SECTION 3.02. CAPITALIZATION.
(a) The authorized capital stock of WEST ESSEX Bancorp consists of
9,000,000 shares of common stock, $0.01 par value ("WEST ESSEX Bancorp Common
Stock"), and 1,000,000 shares
of Preferred Stock, $0.01 par value (the "WEST ESSEX Preferred Stock"), of which
1,907,742 shares of WEST ESSEX Bancorp Common Stock are outstanding, validly
issued, fully paid and nonassessable, and free of preemptive rights which are
owned by parties other than WEST ESSEX MHC. Except for an aggregate of 191,835
shares of WEST ESSEX Bancorp Common Stock issuable upon exercise of stock
options, neither WEST ESSEX Bancorp nor any WEST ESSEX Subsidiary has or is
bound by any Right of any character relating to the purchase, sale or issuance
or voting of, or right to receive dividends or other distributions on any shares
of WEST ESSEX Bancorp Common Stock, or any other security of WEST ESSEX Bancorp
or any WEST ESSEX Subsidiary, or any securities representing the right to vote,
purchase or otherwise receive any shares of WEST ESSEX Bancorp Common Stock or
any other security of WEST ESSEX Bancorp, other than (i) as set forth in
reasonable detail in the WEST ESSEX Disclosure Schedule 3.02(a). There are no
shares of WEST ESSEX Bancorp Preferred Stock issued and outstanding. There are
401,068 shares of WEST ESSEX Bancorp Common Stock held by WEST ESSEX Bancorp as
treasury stock.
(b) WEST ESSEX MHC owns 2,937,651 shares of WEST ESSEX Bancorp Common
Stock, free and clear of any lien or encumbrance except as set forth in WEST
ESSEX Disclosure Schedule 3.02(b), which shares represent approximately 60.6
percent of the total shares of WEST ESSEX Bancorp issued and outstanding. Except
for shares of WEST ESSEX Bancorp Common Stock (and any equity interests that may
be attributed to WEST ESSEX MHC due to its ownership of WEST ESSEX Bancorp
Common Stock), WEST ESSEX MHC does not possess, directly or indirectly, any
equity interest in any corporation.
(c) To the best knowledge of WEST ESSEX Bancorp, no Person or "group" (as
that term is used in Section 13(d)(3) of the Exchange Act) other than WEST ESSEX
MHC, is the beneficial owner (as defined in Section 13(d) of the Exchange Act)
of 5% or more of the outstanding shares of WEST ESSEX Bancorp Common Stock,
except as disclosed in the WEST ESSEX Disclosure Schedule 3.02(c).
(d) The authorized capital stock of WEST ESSEX Bank consists of9,000,000
shares of common stock, $1.00 par value ("WEST ESSEX Bank Common Stock") and
1,000,000 shares of Preferred Stock, $1.00 par value, of which 100 shares of
common stock are issued and outstanding, validly issued, fully paid and
nonassessable and free of preemptive rights. All shares of WEST ESSEX Bank
Common Stock issued and outstanding are owned by WEST ESSEX Bancorp free and
clear of any liens, encumbrances, charges, restrictions or rights of third
parties of any kind whatsoever. There are no shares of preferred stock issued
and outstanding.
SECTION 3.03. AUTHORITY; NO VIOLATION.
(a) WEST ESSEX has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by WEST ESSEX and the completion by WEST ESSEX of
the transactions contemplated hereby have been duly and validly approved by the
requisite vote of the Boards of Directors of WEST ESSEX and, except for approval
of the stockholders of WEST ESSEX Bancorp and, if required, the members of WEST
ESSEX MHC, no other proceedings on the part of WEST ESSEX are necessary to
complete the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by WEST ESSEX; the MHC Merger has been
duly and validly approved by the Board of Directors of WEST ESSEX MHC; the
Mid-Tier Merger has been duly and validly approved by the Board of Directors of
WEST ESSEX Bancorp; and the Bank Merger has been duly and validly approved by
the Board of Directors of WEST ESSEX Bank and, subject to approval by the
stockholders of WEST ESSEX Bancorp and, if required, the members of WEST ESSEX
MHC, and receipt of the required approvals of the Regulatory Authorities,
constitutes the valid and binding obligations of WEST ESSEX Bank, WEST ESSEX
Bancorp and WEST ESSEX MHC, enforceable against them in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and as to WEST ESSEX Bank, the conservatorship or
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by WEST ESSEX and Kearny
with any conditions contained therein,
(A) the execution and delivery of this Agreement by WEST ESSEX,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by WEST ESSEX with any of the terms or provisions
hereof,
will not (i) conflict with or result in a material breach of any provision of
the charter or bylaws of WEST ESSEX; (ii) to the best knowledge of WEST ESSEX,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to WEST ESSEX or any of the properties or assets
of WEST ESSEX; or (iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in a right of termination or
acceleration or the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of WEST ESSEX under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other investment or obligation to which WEST
ESSEX is a party, or by which they or any of their respective properties or
assets may be bound or affected, except in the case of clauses (ii) and (iii)
above for violations which, individually or in the aggregate, would not have a
Material Adverse Effect on WEST ESSEX.
SECTION 3.04. CONSENTS.
Except as set forth in WEST ESSEX Disclosure Schedule 3.04, and except for
the consents, waivers, approvals, filings and registrations from or with the
Regulatory Authorities referred to in Section 5.03 hereof and compliance with
any conditions contained therein, and the approval of this Agreement by the
requisite vote of the stockholders of WEST ESSEX Bancorp and, if required, the
members of WEST ESSEX MHC, no consents, waivers or approvals of, or filings or
registrations with, any governmental authority are necessary, and, to the best
knowledge of WEST ESSEX, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are
necessary, in connection with (a) the execution and delivery of this Agreement
by WEST ESSEX, and (b) the completion by WEST ESSEX of the transactions
described in this Agreement.
Section 3.05. FINANCIAL STATEMENTS; REGULATORY REPORTS; AND SECURITIES
DOCUMENTS.
(a) WEST ESSEX REGULATORY REPORTS. WEST ESSEX has previously made
available to Kearny, in WEST ESSEX Disclosure Schedule 3.05(a) or otherwise, the
WEST ESSEX Regulatory Reports. The WEST ESSEX Regulatory Reports have been, or
will be, prepared in all material respects in accordance with applicable
regulatory accounting principles and practices throughout the periods covered by
such statements, and fairly present, or will fairly present in all material
respects, the consolidated financial position, results of operations and changes
in stockholders' equity of WEST ESSEX Bank and WEST ESSEX Bancorp, as the case
may be, as of and for the periods ended on the dates thereof, in accordance with
applicable regulatory accounting principles applied on a consistent basis,
except as otherwise required or stated therein. Except as set forth in WEST
ESSEX Disclosure Schedule 3.05(a), WEST ESSEX has timely filed all Regulatory
Reports, together with any material amendments thereto that WEST ESSEX is
required to file with (i) OTS, (ii) the FDIC, and (iii) any other federal,
state, municipal, local or foreign government, banking, savings and loan,
insurance and other governmental or regulatory authority and the agencies and
staffs thereof, except where failure to so timely file did not have a Material
Adverse Effect on WEST ESSEX.
(b) WEST ESSEX FINANCIALS. WEST ESSEX has previously made available to
Kearny, in WEST ESSEX Disclosure Schedule 3.05(b) or otherwise, the WEST ESSEX
Financials. The WEST ESSEX Financials have been prepared in accordance with
GAAP, and (including the related notes where applicable) fairly present, in each
case in all material respects (subject in the case of the unaudited interim
statements to normal year-end adjustments), the consolidated financial
condition, results of operations and cash flows of WEST ESSEX Bancorp and the
WEST ESSEX Subsidiaries as of and for the respective periods ending on the dates
thereof, in accordance with GAAP applied on consistent basis during the periods
involved, except as indicated therein, or in the case of unaudited statements,
as permitted by Form 10-QSB.
(c) NO UNDISCLOSED LIABILITIES. WEST ESSEX does not have any obligations
or liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, and regardless of when asserted),
including liabilities for any Tax (collectively, "Liabilities"), except: (i) as
reflected on the consolidated Balance Sheet of WEST ESSEX as of December 31,
2001, included in the WEST ESSEX Financials, (ii) for Liabilities that,
individually or in the aggregate, do not have a Material Adverse Effect on WEST
ESSEX, or that have arisen in the ordinary and usual course of business after
the date of such Balance Sheet, and which will be included in the next following
report provided to Kearny pursuant to Section 5.02(d), or (iii) as set forth in
the WEST ESSEX Disclosure Schedules.
(d) Securities Documents.
(i) WEST ESSEX has previously made available to Kearny, in WEST ESSEX
Disclosure Schedule 3.05(d) or otherwise, each Securities Document WEST ESSEX
Bancorp has filed, used or circulated since January 1, 1998 through the date of
this Agreement and will promptly deliver
each Securities Document filed, used or circulated after the date hereof, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(or, if not so filed, in the form used or circulated), including, without
limitation, WEST ESSEX Bancorp's Annual Reports on Form 10- KSB and Quarterly
Reports on Form 10-QSB.
(ii) No Securities Documents of WEST ESSEX Bancorp, on the date of
effectiveness in the case of such registration statements, or on the date of
filing in the case of such reports or schedules, or on the date of mailing in
the case of such proxy statements, and except as revised, amended or modified by
a subsequently filed document, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. WEST ESSEX Bancorp has timely filed all Securities
Documents required to be filed by it with the SEC, under various securities laws
and regulations for the last five years (or such shorter period as it may have
been subject to such filing requirements). All such documents, as finally
revised, modified or amended by any subsequently filed amendment, complied in
all material respects with applicable requirements of law.
SECTION 3.06. TAXES.
WEST ESSEX Bancorp and the WEST ESSEX Subsidiaries are members of the same
affiliated group within the meaning of IRC Section 1504(a). WEST ESSEX has duly
filed all Federal, state and material local tax returns required to be filed by
or with respect to WEST ESSEX on or prior to the date hereof (all such returns
being accurate and correct in all material respects) and has duly paid or has
made provisions for the payment of, all material Federal, state and local taxes
which have been incurred by or are due or claimed to be due from WEST ESSEX by
any taxing authority or pursuant to any written tax sharing agreement on or
prior to the date hereof other than taxes or other charges which (i) are not
delinquent, (ii) are being contested in good faith, or (iii) have not yet been
fully determined. Except as set forth in WEST ESSEX Disclosure Schedule 3.06, as
of the date of this Agreement, there is no audit examination, deficiency
assessment, tax investigation or refund litigation with respect to any taxes of
WEST ESSEX, and no claim has been made by any authority in a jurisdiction where
WEST ESSEX does not file tax returns that WEST ESSEX is subject to taxation in
that jurisdiction. Except as set forth in WEST ESSEX Disclosure Schedule 3.06,
WEST ESSEX has not executed an extension or waiver of any statute of limitations
on the assessment or collection of any material tax due that is currently in
effect. WEST ESSEX has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or stockholder, and WEST ESSEX has timely
complied with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the IRC and similar applicable state and local
information reporting requirements.
SECTION 3.07. NO MATERIAL ADVERSE EFFECT.
WEST ESSEX has not suffered any Material Adverse Effect since December 31,
2001.
SECTION 3.08. CONTRACTS.
(a) Except as set forth in WEST ESSEX Disclosure Schedule 3.08(a), WEST
ESSEX is not a party to or subject to: (i) any employment, consulting, change in
control or severance contract or material arrangement with any past or present
officer, director or employee of WEST ESSEX except for "at will" arrangements;
(ii) any plan, material arrangement or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit sharing or similar
material arrangements for or with any past or present officers, directors or
employees of WEST ESSEX; (iii) any collective bargaining agreement with any
labor union relating to employees of WEST ESSEX; (iv) any agreement which by its
terms limits the payment of dividends by WEST ESSEX Bank or WEST ESSEX Bancorp;
(v) any instrument evidencing or related to material indebtedness for borrowed
money whether directly or indirectly, by way of purchase money obligation,
conditional sale, lease purchase, guaranty or otherwise, in respect of which
WEST ESSEX is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, repurchase agreements, bankers' acceptances,
advances from the FHLB of New York, and "treasury tax and loan" accounts
established in the ordinary course of business and transactions in "Federal
funds" or which contains financial covenants or other restrictions (other than
those relating to the payment of principal and interest when due) which would be
applicable on or after the Closing Date to Kearny; or (vi) any contract (other
than this Agreement) limiting the freedom, in any material respect, of WEST
ESSEX to engage in any type of banking or bank-related business in which WEST
ESSEX is permitted to engage under applicable law as of the date of this
Agreement.
(b) True and correct copies of agreements, plans, contracts, arrangements
and instruments referred to in Section 3.08(a), have been made available to
Kearny on or before the date hereof, are listed in and attached to WEST ESSEX
Disclosure Schedule 3.08(a) and are in full force and effect on the date hereof,
and WEST ESSEX (nor, to the knowledge of WEST ESSEX, any other party to any such
contract, plan, arrangement or instrument) has not materially breached any
provision of, or is in default in any respect under any term of, any such
contract, plan, arrangement or instrument. Except as set forth in the WEST ESSEX
Disclosure Schedule 3.08(b), no party to any material contract, plan,
arrangement or instrument will have the right to terminate any or all of the
provisions of any such contract, plan, arrangement or instrument as a result of
the execution of, and the transactions contemplated by, this Agreement. Except
as set forth in WEST ESSEX Disclosure Schedule 3.08(b), none of the employees
(including officers) of WEST ESSEX possesses the right to terminate his/her
employment and receive or be paid (or cause WEST ESSEX to accrue on his/her
behalf) benefits solely as a result of the execution of this Agreement or the
consummation of the transactions contemplated thereby. Except as set forth in
WEST ESSEX Disclosure Schedule 3.08(b), no plan, contract, employment agreement,
change in control agreement, termination agreement, or similar agreement or
arrangement to which WEST ESSEX is a party or under which WEST ESSEX may be
liable contains provisions which permit any employee or independent contractor
to terminate it without cause and continue to accrue future benefits thereunder.
Except as set forth in WEST ESSEX Disclosure Schedule 3.08(b), no such
agreement, plan, contract, or arrangement: (x) provides for acceleration in the
vesting of benefits or payments due thereunder upon the occurrence of a change
in ownership or control of WEST ESSEX or upon the occurrence of a subsequent
event; or (y) requires WEST ESSEX to provide a benefit in the form of WEST ESSEX
Bancorp Common Stock or determined by reference to the value of WEST ESSEX
Bancorp Common Stock, except as disclosed in WEST ESSEX Disclosure Schedule
3.08(b). Except as disclosed in WEST ESSEX Disclosure Schedule 3.08(b), no such
agreement, plan or arrangement with respect to officers or directors of WEST
ESSEX or to any of their respective employees,
provides for benefits which may cause an "excess parachute payment" or the
disallowance of a Federal income tax deduction under IRC Sections 280G and
162(m).
SECTION 3.09. OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.
(a) Except as disclosed in WEST ESSEX Disclosure Schedule 3.09, WEST ESSEX
has good and, as to real property, marketable title to all material assets and
properties owned by WEST ESSEX in the conduct of its business, whether such
assets and properties are real or personal, tangible or intangible, including
assets and property reflected in the balance sheets contained in the WEST ESSEX
Regulatory Reports and in the WEST ESSEX Bancorp Financials or acquired
subsequent thereto (except to the extent that such assets and properties have
been disposed of in the ordinary course of business, since the date of such
balance sheets), subject to no material encumbrances, liens, mortgages, security
interests or pledges, except (i) those items which secure liabilities for public
or statutory obligations or any discount with, borrowing from or other
obligations to the FHLB of New York, inter-bank credit facilities, or any
transaction by WEST ESSEX acting in a fiduciary capacity, and (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith.
WEST ESSEX, as lessee, has the right under valid and subsisting leases of real
and personal properties used by WEST ESSEX in the conduct of its businesses to
occupy or use all such properties as presently occupied and used by each of
them. Except as disclosed in WEST ESSEX Disclosure Schedule 3.09, such existing
leases and commitments to lease constitute operating leases for both tax and
financial accounting purposes and the lease expense and minimum rental
commitments with respect to such leases and lease commitments are as disclosed
in the notes to the WEST ESSEX Bancorp Financials.
(b) With respect to all material agreements pursuant to which WEST ESSEX
has purchased securities subject to an agreement to resell, if any, WEST ESSEX
has a lien or security interest (which to WEST ESSEX's knowledge is a valid,
perfected first lien) in the securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(c) WEST ESSEX currently maintains insurance considered by WEST ESSEX to
be reasonable for its operations, in accordance with good business practice.
WEST ESSEX has not received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no material claims pending
under such policies of insurance and no notices have been given by WEST ESSEX
under such policies. All such insurance is valid and enforceable and in full
force and effect, and within the last three years, and WEST ESSEX has received
each type of insurance coverage for which it has applied and during such periods
has not been denied indemnification for any material claims submitted under any
of its insurance policies. WEST ESSEX Disclosure Schedule 3.09 identifies all
policies of insurance maintained by WEST ESSEX.
SECTION 3.10. LEGAL PROCEEDINGS.
Except as disclosed in WEST ESSEX Disclosure Schedule 3.10, WEST ESSEX is
not a party to any, and there are no pending or, to the best of WEST ESSEX's
knowledge, threatened legal,
administrative, arbitration or other proceedings, actions or governmental
investigations of any nature (i) against WEST ESSEX, (ii) to which WEST ESSEX's
assets are or may be subject, (iii) challenging the validity or propriety of any
of the transactions contemplated by this Agreement, or (iv) which could
adversely affect the ability of WEST ESSEX to perform under this Agreement,
except for any proceedings, claims, actions, investigations or inquiries
referred to in clauses (i) or (ii) which, if adversely determined, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on WEST ESSEX.
SECTION 3.11. COMPLIANCE WITH APPLICABLE LAW.
(a) WEST ESSEX holds all licenses, franchises, permits and authorizations
necessary for the lawful conduct of its businesses under, and has complied in
all material respects with, applicable laws, statutes, orders, rules or
regulations of any Federal, state or local governmental authority relating to
it, other than where such failure to hold or such noncompliance will neither
result in a limitation in any material respect on the conduct of its business
nor otherwise have a Material Adverse Effect on WEST ESSEX. WEST ESSEX, directly
or indirectly, owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and any applications therefor, technology, know-how and tangible or intangible
proprietary information or material that are material to the business of WEST
ESSEX.
(b) Except as disclosed in WEST ESSEX Disclosure Schedule 3.11(b), WEST
ESSEX has not received any notification or communication from any Regulatory
Authority (i) asserting that WEST ESSEX is not in material compliance with any
of the statutes, regulations or ordinances which such Regulatory Authority
enforces; (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to WEST ESSEX; (iii) requiring or
threatening to require WEST ESSEX, or indicating that WEST ESSEX may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any Federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of WEST
ESSEX, including without limitation any restriction on the payment of dividends;
or (iv) directing, restricting or limiting, or purporting to direct, restrict or
limit, in any material manner the operations of WEST ESSEX, including without
limitation any restriction on the payment of dividends (any such notice,
communication, memorandum, agreement or order described in this sentence is
hereinafter referred to as a "Regulatory Agreement"). WEST ESSEX has not
consented to or entered into any currently effective Regulatory Agreement,
except as set forth in WEST ESSEX Disclosure Schedule 3.11(b). The most recent
regulatory rating given to WEST ESSEX Bank as to compliance with the Community
Reinvestment Act ("CRA") is satisfactory or better. WEST ESSEX Bank is not in
the process of a regulatory review of CRA compliance and is aware of no intent
by Regulatory Authorities to issue WEST ESSEX a non-satisfactory CRA rating.
SECTION 3.12. ERISA AND CERTAIN BENEFIT PLANS.
(a) EMPLOYEE PLANS. (i) WEST ESSEX Disclosure Schedule 3.12(a)(i) contains
a true and complete list of all "employee benefit plans," as defined in section
3(3) of ERISA, currently effective or terminated, written or oral, (A)that are
maintained or contributed to by WEST ESSEX, have been maintained or contributed
to by WEST ESSEX in the last (6) six years, or with respect to which WEST ESSEX
has or may have any liability, and (B) in which employees, former employees, or
directors of WEST ESSEX (or their family members or dependents) participate, or
under which they have a right to benefits. WEST ESSEX Disclosure Schedule
3.12(a)(i) further identifies as such any Employee Plan that is or was (A) a
"Defined Benefit Plan" (as defined in section 414(j) of the Code), (B) intended
to meet the requirements of section 401(a) or 403(a) of the Code (a "Qualified
Plan"), (C) a "Multi-employer Plan" (as defined in section 3(37) of ERISA)
and/or (D) subject to Title IV of ERISA (a "Title IV Plan"). For purposes of
this section, the term WEST ESSEX shall include any person that, together with
WEST ESSEX, would be treated as a single employer under section 414 of the Code
or section 4001 of ERISA.
(ii) WEST ESSEX Disclosure Schedule 3.12(a)(ii) contains a true and
complete list of all other deferred-compensation, profit-sharing, bonus,
incentive, savings, stock bonus, stock purchase, employee stock ownership, stock
option, phantom stock, stock appreciation, severance, separation, termination,
employment, change-in-control, supplemental unemployment, fringe benefit,
collective purchase, voluntary employees' beneficiary association (as defined in
section 501(c)(9) of the Code), insurance, split-dollar, vacation, holiday,
sick-leave, or other plans, agreements, contracts, policies, practices,
programs, commitments, understandings, and arrangements, other than those
subject to ERISA which are identified on WEST ESSEX Disclosure Schedule
3.12(a)(i), whether formal or informal, currently effective or terminated,
written or oral, (A) that are maintained or contributed to by WEST ESSEX, have
been maintained or contributed to by WEST ESSEX in the last (3) three years, or
with respect to which WEST ESSEX has or may have any liability, and (B) in which
employees, former employees, or directors of WEST ESSEX (or their family members
or dependents) participate, or under which they have a right to benefits. All
such plans, agreements, contracts, policies, programs, commitments,
undertakings, and arrangements set forth on WEST ESSEX Disclosure Schedule
3.12(a)(i) or 3.12(a)(ii) shall be collectively referred to as "Employee Plans."
(b) DOCUMENTATION. Except as disclosed in WEST ESSEX Disclosure Schedule
3.12(b), with respect to each Employee Plan, to the extent applicable, WEST
ESSEX has provided to Kearny current, accurate, and complete copies of: (i) the
documents comprising such Plan (or, to the extent no such copy exists, a
complete and accurate description thereof), (ii) any related trust agreement,
insurance contract, or other funding instrument, (iii) the most recent IRS
determination letter, as well as any other ruling, no-action letter, or advisory
opinion that pertains to such Plan from the IRS, Department of Labor, Pension
Benefit Guaranty Corporation, or any other governmental agency, (iv) the summary
plan description, as well as any other summary, description, or handbook of plan
benefits that is provided by WEST ESSEX to its employees concerning the extent
of benefits under the Plan, (v) all securities registration statements filed
with respect to such Employee Plan, (vi) all collective bargaining agreements
pursuant to which contributions to such Plan(s) have been or are being made, or
obligations have been or are being incurred, by WEST ESSEX, (vii) any current or
prior written communications relating to any promise or guarantee of retiree
health or death benefits,
(viii) the contract(s) with any third-party administrator, provider, or insurer,
(ix) any documents relating to the correction (including self-correction) of any
operational or formal failure under the IRS employee plans compliance resolution
system; and (x) for the three most recent years (or since the date of the Plan's
inception): (A) the Form 5500 and attached schedules, (B) audited financial
statements, (C) actuarial valuation reports, and (D) attorney's response to an
auditor's request for information.
(c) COMPLIANCE WITH LAW. Each Employee Plan has been established and
administered in accordance with its terms and in material compliance with the
applicable provisions of ERISA, the Code, and other applicable laws, rules, and
regulations. Furthermore, no condition exists or event has occurred with respect
to any Employee Plan that would subject WEST ESSEX to any tax, fine, lien,
penalty, or other liability imposed by ERISA, the Code, or other applicable
laws, rules, and regulations. All reports, returns, and similar documents
required to be filed with any governmental agency, or to be distributed to any
plan participants, have been duly and timely filed or distributed. For each
Employee Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date thereof.
(d) QUALIFIED PLANS. Each Qualified Plan is so qualified and has received
a favorable determination letter as to its qualification, and nothing has
occurred, whether by action or failure to act, that would adversely affect its
qualification or increase its costs. No "reportable event" (as defined in
section 4043 of ERISA), "prohibited transaction" (as defined in section 406 of
ERISA or section 4975 of the Code), or "accumulated funding deficiency" (as
defined in section 302 of ERISA and section 412 of the Code, whether or not
waived) has occurred, and no Employee Plan has been amended in a fashion that
would require security to be provided in accordance with section 401(a)(29) of
the Code. Except as set forth in WEST ESSEX Disclosure Schedule 3.12(d), WEST
ESSEX does not now and has not ever maintained a Defined Benefit Plan or Title
IV Plan or participated in a Multiemployer Plan, and WEST ESSEX has not ever
incurred any liability under Title IV of ERISA. Any shares of WEST ESSEX
purchased by an Employee Plan were purchased for no more than adequate
consideration as defined in the Code, ERISA, and Department of Treasury and
Department of Labor regulations.
(e) WELFARE BENEFITS. Expect as provided in WEST ESSEX Disclosure Schedule
3.12(e), WEST ESSEX does not provide, and is not now and has not ever been
obligated to provide, medical or death benefits with respect to any employees,
directors or former employees or former directors (or their family members)
after termination of employment, except as specifically required under section
4980B of the Code. WEST ESSEX has fully complied with the notice and
continuation coverage requirements of section 4980B of the Code and the
regulations thereunder with respect to each "welfare plan" (as defined in
section 3(1) of ERISA) that is or was, during any taxable year for which the
statute of limitations on the assessment of federal income taxes remains open
(by consent or otherwise), a group health plan within the meaning of section
5000(b)(1) of the Code.
(f) LITIGATION. With respect to any Employee Plan, (i) no actions, suits,
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of WEST ESSEX, threatened, (ii) no facts or
circumstances exist that could give rise to any such actions, and (iii) no
administrative investigation, audit, or other administrative proceeding by the
IRS, Department of Labor, Pension Benefit Guaranty Corporation, or other
governmental agencies are
pending, in progress, or, to the knowledge of WEST ESSEX, threatened, except, in
each case, for proceedings, actions or governmental investigations that could
not reasonably be foreseen to have a Material Adverse Effect on WEST ESSEX.
(g) SEVERANCE PAY. Except as provided in WEST ESSEX Disclosure Schedules
3.12(g) or (e), no Employee Plan exists that is in the nature of a severance,
separation, termination, or change- in-control agreement, contract, plan,
policy, program, commitment, understanding, or arrangement, or that would result
in the payment of any money or property, or accelerate the time of payment or
vesting, or provide any other rights, to any present employees, former
employees, or directors of WEST ESSEX (or their family members) as a result of
the transactions contemplated by this Agreement.
(h) GOLDEN PARACHUTE PAYMENTS AND EXCESSIVE REMUNERATION. Except as
provided in WEST ESSEX Disclosure Schedule 3.12(h), there is no agreement,
contract, plan, policy, program, commitment, understanding, or arrangement,
written or otherwise, covering any employees, former employees, or directors of
WEST ESSEX (or their family members) that, individually or collectively,
provides for benefits which may cause an "excess parachute payment" or could
give rise to the payment of any amount that would not be deductible pursuant to
the terms of section 280G or section 162(m) of the Code.
(i) OPTIONS. WEST ESSEX Disclosure Schedule 3.12(i) sets forth a true and
complete list of each current or former employee, officer, director, former
director of WEST ESSEX or other person or entity who holds, as of the date
hereof, any option, warrant, or other right ("Option") to purchase WEST ESSEX
stock, preferred stock, or restricted stock, together with the number of shares
and class of WEST ESSEX stock subject to such Option, the date of grant or
issuance, the extent to which such Option is vested and/or exercisable, the
exercise price, whether such Option is intended to qualify as an incentive stock
option with the meaning of section 422(b) of the Code, and the expiration date.
True and complete copies of each agreement (including amendments and
modifications thereto) between WEST ESSEX and each Option holder shall be
furnished promptly to Kearny.
(j) ACCOUNTING TREATMENT. All required, customary, or usual payments,
premiums, contributions, reimbursements, or accruals with respect to Employee
Plans have been made or properly accrued on the WEST ESSEX Financials. None of
the Employee Plans has any unfunded liabilities which are not reflected on the
books and records of WEST ESSEX. If such plan, contract, agreement or
arrangement is funded through a trust or third party funding vehicle, such as an
insurance contract, the WEST ESSEX Disclosure Schedule 3.12 (a) includes such
trust or other funding arrangement.
(k) WEST ESSEX does not have any liability to any person for any
post-retirement health, medical or similar benefit of any kind whatsoever,
except as required by statute or regulation.
SECTION 3.13. BROKERS, FINDERS AND FINANCIAL ADVISORS.
Except the engagement of Finpro, Inc. in connection with transactions
contemplated by this
Agreement, neither WEST ESSEX, nor any of its officers, directors, employees or
agents, has engaged or retained any broker, finder or financial advisor in
connection with the transactions contemplated by this Agreement, or, except for
the commitments disclosed in WEST ESSEX Disclosure Schedule 3.13, incurred any
liability or commitment for any fees or commissions to any such person in
connection with the transactions contemplated by this Agreement, which has not
been reflected in the WEST ESSEX Bancorp Financials.
SECTION 3.14. ENVIRONMENTAL MATTERS.
(i) To their knowledge, the Participation Facilities, the WEST ESSEX
Properties and all operations conducted on the WEST ESSEX Properties and the
Participation Facilities are, and at all times have been, in compliance with
applicable Environmental Laws;
(ii) There are no suits, claims, actions, notices, demands, executive or
administrative orders, directives, investigations, proceedings or requests or
demands for information ("Environmental Proceedings") of any kind pending or, to
the knowledge of WEST ESSEX, threatened against WEST ESSEX or any of the WEST
ESSEX Properties or the Participation Facilities or any tenants or subtenants at
the any of the WEST ESSEX Properties or Participation Facilities, under
Environmental Laws in any court or before any governmental agency or board or
other forum, including, without limitation, Environmental Proceedings alleging,
asserting or relating to (y) noncompliance (including by a predecessor) with, or
liability under, any Environmental Law, or (z) the presence or Release of
Hazardous Materials into the Environment, whether or not occurring at, on, under
or from any WEST ESSEX Property or Participation Facility;
(iii) There are no Environmental Proceedings of any kind pending or, to
the knowledge of WEST ESSEX, threatened against any of the Loan Properties (or
WEST ESSEX in respect of any such Loan Properties) under Environmental Laws in
any court or before any governmental agency or board or other forum, including,
without limitation, Environmental Proceedings alleging, asserting or relating to
(y) noncompliance (including by a predecessor) with, or liability under, any
Environmental Law, or (z) the presence or Release of Hazardous Materials into
the Environment;
(iv) To their knowledge, there are no Environmental Conditions on, at,
under or emanating from any of the WEST ESSEX Properties or Participation
Facilities. No Hazardous Materials are being or, to their knowledge, have been
stored, used, treated or disposed of at or from any of the WEST ESSEX Properties
or the Participation Facilities other than in compliance with Environmental
Laws;
(v) WEST ESSEX has not received any notice, demand, letter, executive or
administrative order, directive or request for information from any federal,
state, local or foreign governmental entity or any third party indicating that
WEST ESSEX or any of the WEST ESSEX Properties or Participation Facilities is or
may be in violation of, or has liability under, any Environmental Law;
(vi) There are no above or below ground tanks or reservoirs used or
installed for the purpose of storage or containment of Hazardous Materials
("Tanks") at, on or under any of the WEST ESSEX Properties or Participation
Facilities, and no such Tanks have been abandoned on, or closed or removed from,
any of the WEST ESSEX Properties or Participation Facilities.
(vii) There are no Hazardous Materials within any structure, equipment or
building on any of the WEST ESSEX Properties or the Participation Facilities
requiring remediation, decommissioning, decontamination, abatement or removal
pursuant to Environmental Laws;
(viii) None of the WEST ESSEX Properties or the Participation Facilities,
or any of the business operations that are now and have been conducted at the
WEST ESSEX Properties or the Participation Facilities, is an "industrial
establishment" as such term is defined under ISRA; and
(ix) WEST ESSEX has delivered to Kearny copies of all reports and audits,
summaries, proposals, recommendations, work plans, field and laboratory data in
WEST ESSEX's possession, custody or control relating or referring to
Environmental Conditions on, at, under or emanating from any of the WEST ESSEX
Properties or the Participation Facilities.
(x) No federal, state, regional or local governmental authority or other
third party has filed, obtained or asserted an encumbrance or lien upon any of
the WEST ESSEX Properties, the Participation Facilities or, to the knowledge of
WEST ESSEX, the Loan Properties as a result of any Environmental Conditions on,
at, under or emanating from such properties.
SECTION 3.15. LOAN PORTFOLIO.
(a) With respect to each loan owned by WEST ESSEX in whole or in part
(each, a "Loan"):
(i) the note and the related security documents are each legal,
valid and binding obligations of the maker or obligor thereof, enforceable
against such maker or obligor in accordance with their terms;
(ii) neither WEST ESSEX nor any prior holder of a Loan, has modified
the note or any of the related security documents in any material respect or
satisfied, canceled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the applicable Loan
file;
(iii) WEST ESSEX is the sole holder of legal and beneficial title to
each Loan (or any applicable participation interest, as appropriate), except as
otherwise referenced on the books and records of WEST ESSEX;
(iv) the note and the related security documents, copies of which
are included in the Loan files, are true and correct copies of the documents
they purport to be and have not been suspended, amended, modified, canceled or
otherwise changed except as otherwise disclosed by documents in the applicable
Loan file;
(v) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property that serves as security for a Loan,
except as otherwise referenced on the books and records of WEST ESSEX;
(vi) there is no litigation or proceeding pending or threatened
relating to the property that serves as security for a Loan that would have a
Material Adverse Effect upon the related Loan, except as otherwise disclosed by
documents in the applicable Loan file;
(vii) with respect to a Loan held in the form of a participation,
the participation documentation is legal, valid, binding and enforceable, except
as otherwise disclosed by documents in the applicable Loan file; and
(viii)no representation or warranty set forth in this Section 3.15
shall be deemed to be breached unless such breach, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
WEST ESSEX.
(b) The allowance for possible losses reflected in WEST ESSEX Bancorp's
audited statement of condition at December 31, 2001 was, and the allowance for
possible losses shown on the balance sheets in WEST ESSEX Bancorp's Securities
Documents for periods ending after December 31, 2001 have been and will be,
adequate, as of the dates thereof, under GAAP.
(c) WEST ESSEX Disclosure Schedule 3.15 sets forth by category all loans,
leases, advances, credit enhancements, other extensions of credit, commitments
and interest-bearing assets of WEST ESSEX, including the amounts thereof and the
name of the obligor, that have been classified (whether regulatory or internal)
as "Special Mention," "Substandard," "Doubtful," "Loss" or words of similar
import as of June 30, 2002. The other real estate owned ("OREO") included in any
non-performing assets of WEST ESSEX is carried net of reserves at the lower of
cost or fair value, less estimated selling costs, based on current independent
appraisals or evaluations or current management appraisals or evaluations;
provided, however, that "current" shall mean within the past 12 months.
SECTION 3.16. INFORMATION TO BE SUPPLIED.
Except for any information provided by Kearny concerning Kearny for
inclusion therein, the Proxy Statement mailed to WEST ESSEX Bancorp's
stockholders and, if necessary, the members of WEST ESSEX MHC will not, at the
time it or they are mailed, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein not misleading. The information supplied, or to be supplied, by WEST
ESSEX for inclusion in the Applications will, at the time such documents are
filed with any Regulatory Authority, be accurate in all material aspects.
SECTION 3.17. FIDUCIARY ACCOUNTS.
WEST ESSEX Bank has properly administered in all material respects all
accounts for which it acts as a fiduciary, including but not limited to accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither WEST ESSEX nor any of its directors, officers or employees
has committed any breach of trust with respect to any such fiduciary account,
and the accountings for each such fiduciary account are true and correct and
accurately reflect the assets of such fiduciary account.
SECTION 3.18. RELATED PARTY TRANSACTIONS.
Except as disclosed in WEST ESSEX Disclosure Schedule 3.18, or as
described in WEST ESSEX Bancorp's proxy statement distributed in connection with
the 2002 annual meeting of stockholders (which has been provided to Kearny),
WEST ESSEX is not a party to any transaction (including any loan or other credit
accommodation) with an Affiliate. Except as disclosed in WEST ESSEX Disclosure
Schedule 3.18, all such transactions (a) were made in the ordinary course of
business, (b) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other Persons, and (c) did not involve more than the normal
risk of collectability or present other unfavorable features. Except as set
forth in WEST ESSEX Disclosure Schedule 3.18, no loan or credit accommodation to
an Affiliate is presently in default or, during the three-year period prior to
the date of this Agreement, has been in default or has been restructured,
modified or extended. WEST ESSEX has not been notified that principal and
interest with respect to any such loan or other credit accommodation will not be
paid when due or that the loan grade classification accorded such loan or credit
accommodation is inappropriate.
SECTION 3.19. SCHEDULE OF TERMINATION BENEFITS.
WEST ESSEX Disclosure Schedule 3.19 includes a schedule of all termination
benefits and related payments that would be payable to the individuals
identified thereon, under any and all employment agreements, special termination
agreements, supplemental executive retirement plans, deferred bonus plans,
deferred compensation plans, salary continuation plans, or any compensation
arrangement, or other pension benefit or welfare benefit plan maintained by WEST
ESSEX for the benefit of officers or directors of WEST ESSEX (the "Benefits
Schedule"), assuming their employment or service is terminated as of April 1,
2003 and the Closing Date occurs on or prior to such termination. No other
individuals are entitled to benefits under any such plans.
SECTION 3.20. DEPOSITS.
Except as set forth in WEST ESSEX Disclosure Schedule 3.20, none of the
deposits of WEST ESSEX is a "brokered" deposit as defined in 12 U.S.C. Section
1831f(g).
SECTION 3.21. FAIRNESS OPINION.
WEST ESSEX Bancorp has received an opinion from Finpro, Inc. to the effect
that, subject to the terms, conditions and qualifications set forth therein, as
of the date thereof, the Merger Consideration to be received by the stockholders
of WEST ESSEX Bancorp pursuant to this Agreement is fair to such stockholders
from a financial point of view and the Member Conversion is equitable to the
members of WEST ESSEX MHC (the "Fairness Opinion").
SECTION 3.22 ANTITAKEOVER PROVISIONS INAPPLICABLE; REQUIRED VOTE OF
STOCKHOLDERS.
Except as set forth on WEST ESSEX Disclosure Schedule 3.22, and except for
approvals required under the Federal and state banking laws, the transactions
contemplated by this Agreement are not subject to any applicable state takeover
law. The affirmative vote of a majority
of the votes eligible to be cast by stockholders of WEST ESSEX Bancorp Common
Stock is necessary to approve this Agreement and the transactions contemplated
hereby.
SECTION 3.23 DERIVATIVE TRANSACTIONS.
Except as set forth in WEST ESSEX Disclosure Schedule 3.23, WEST ESSEX has
not entered into any futures contract, option contract, interest rate caps,
interest rate floors, interest rate exchange agreement or other derivative
instruments.
SECTION 3.24 LABOR.
No work stoppage involving WEST ESSEX is pending or, to the best knowledge
of WEST ESSEX, threatened. WEST ESSEX is not involved in or, to the best
knowledge of WEST ESSEX, threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding involving the employees of
WEST ESSEX. Employees of WEST ESSEX are not represented by any labor union nor
are any collective bargaining agreements otherwise in effect with respect to
such employees, and to the best of WEST ESSEX's knowledge, there have been no
efforts to unionize or organize any employees of WEST ESSEX during the past five
years.
SECTION 3.25 MATERIAL INTERESTS OF CERTAIN PERSONS.
(a) No officer or director of WEST ESSEX or any "associate" (as such term
is defined in Rule 14a-1 under the Exchange Act) or related interest of any such
person has any material interest in any material contract or property (real or
personal, tangible or intangible), used in, or pertaining to, the business of
WEST ESSEX.
(b) Except as set forth on WEST ESSEX Disclosure Schedule 3.18, or as
disclosed in WEST ESSEX Bancorp's proxy statement distributed in connection with
the 2002 annual meeting of stockholders, there are no insider loans as of the
date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KEARNY
Kearny represents and warrants to WEST ESSEX that the statements contained
in this Article IV are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article IV), except as set forth in the Kearny Disclosure
Schedules delivered by Kearny on the date hereof. Kearny has made a good faith
effort to ensure that the disclosure on each schedule of the Kearny Disclosure
Schedules corresponds to the section referenced herein. However, for purposes of
the Kearny Disclosure Schedules, any item disclosed on any schedule therein is
deemed to be fully disclosed with respect to all schedules under which such item
may be relevant.
SECTION 4.01. ORGANIZATION.
(a) Bank is a stock savings bank duly organized, validly existing and in
good standing under the laws of the United States. The deposits of Bank are
insured by the FDIC to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when due
by Bank. Each Bank Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization. Corporation is a Federal MHC subsidiary holding company duly
organized, validly existing and in good standing under the laws of the United
States. MHC is a Federal mutual holding company of the Bank duly organized,
validly existing and in good standing under the laws of the United States.
(b) Bank is a member in good standing of the FHLB of New York and owns the
requisite amount of stock therein.
(c) Prior to the date of this Agreement, Kearny made available to WEST
ESSEX Bancorp true and correct copies of the charter and bylaws of Bank,
Corporation and MHC.
(d) As of the Closing Date, Corporation Merger Sub will have been duly
organized and will be validly existing as a federally-chartered corporation and
a wholly-owned subsidiary of the Corporation.
SECTION 4.02. AUTHORITY; NO VIOLATION.
(a) Kearny has full power and authority to execute and deliver this
Agreement and Corporation and MHC will have full power and authority to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Kearny and the completion by Kearny of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Kearny, and no other corporate proceedings on the part of Kearny
are necessary to complete the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Kearny and, subject to
receipt of the required approvals of Regulatory Authorities described in Section
4.03 hereof, constitutes the valid and binding obligation of Kearny, enforceable
against Kearny in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
(b) Subject to the receipt of approvals from the Regulatory Authorities
referred to in Section 5.03 hereof and the compliance by WEST ESSEX and Kearny
with any conditions contained therein,
(A) the execution and delivery of this Agreement by Kearny,
(B) the consummation of the transactions contemplated hereby, and
(C) compliance by Kearny with any of the terms or provisions
hereof,
will not (i) conflict with or result in a breach of any provision of the charter
or bylaws of Kearny or any of its subsidiaries ("Kearny Subsidiary"); (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Kearny or any Kearny Subsidiary
or any of their respective properties or assets; or (iii) violate, conflict
with, result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default),
under, result in the termination of, accelerate the performance required by, or
result in a right of termination or acceleration or the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Kearny under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
investment or obligation to which Kearny is a party, or by which it or any of
its properties or assets may be bound or affected.
SECTION 4.03. CONSENTS.
Except for consents, approvals, filings and registrations from or with the
OTS, FDIC and SEC, and compliance with any conditions contained therein, and the
approval of this Agreement by the stockholders of WEST ESSEX Bancorp and, if
necessary, the members of WEST ESSEX MHC, the appropriate filings to be made
with the OTS, and the chartering of any necessary interim savings entities by
the OTS, no consents or approvals of, or filings or registrations with, any
public body or authority are necessary, and no consents or approvals of any
third parties are necessary, or will be, in connection with the execution and
delivery of this Agreement by Kearny, and the completion by Kearny of the
transactions contemplated hereby. Kearny has no reason to believe that (i) any
required consents or approvals will not be received or will be received with
conditions, limitations or restrictions unacceptable to it or which would
adversely impact Kearny's ability to complete the transactions described in this
Agreement or that (ii) any public body or authority, the consent or approval of
which is not required or any filing which is not required, will object to the
completion of the transactions described in this Agreement.
SECTION 4.04. COMPLIANCE WITH APPLICABLE LAW.
(a) Kearny and the Kearny Subsidiaries hold all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their businesses
under, and have complied in all material respects with, applicable laws,
statutes, orders, rules or regulations of any Federal, state or local
governmental authority relating to them, other than where such failure to hold
or such noncompliance will neither result in a limitation in any material
respect on the conduct of their businesses nor otherwise have a Material Adverse
Effect on Kearny and its Subsidiaries taken as a whole.
(b) Except as set forth in Kearny Disclosure Schedule 4.04(b), neither
Kearny nor any Kearny Subsidiary has received any notification or communication
from any Regulatory Authority (i) asserting that Kearny or any Kearny Subsidiary
is not in compliance with any of the statutes, regulations or ordinances which
such Regulatory Authority enforces; (ii) threatening to revoke any license,
franchise, permit or governmental authorization which is material to Kearny or
any Kearny Subsidiary; (iii) requiring or threatening to require Kearny or any
Kearny Subsidiary, or indicating that Kearny or any Kearny Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting, or purporting to
restrict or limit, in any manner the operations of Kearny or any Kearny
Subsidiary; or (iv) directing, restricting or limiting, or purporting to direct,
restrict or limit, in any manner the operations of Kearny or any Kearny
Subsidiary, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither Kearny nor any Kearny Subsidiary is a party to, nor has
consented to any Regulatory Agreement. The most recent regulatory rating given
to Bank as to compliance with the CRA is satisfactory or better.
SECTION 4.05. INFORMATION TO BE SUPPLIED.
The information to be supplied by Kearny for inclusion in the Proxy
Statement or Proxy Statements will not, at the time the Proxy Statement or Proxy
Statements are mailed to WEST ESSEX Bancorp stockholders or the members of WEST
ESSEX MHC contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein not misleading.
The information supplied, or to be supplied, by Kearny for inclusion in the
Applications will, at the time such documents are filed with any Regulatory
Authority, be accurate in all material respects.
SECTION 4.06. FINANCING.
As of the date hereof, Kearny has, and at the Merger Effective Date,
Corporation will have, funds which are sufficient and available to meet its
obligations under this Agreement and to consummate in a timely manner the
transactions contemplated by this Agreement, and Bank will not fail to meet its
capital requirements as a result thereof.
SECTION 4.07. REGULATORY APPROVALS.
Kearny is not aware of any reason that it cannot obtain any of the
approvals of Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement and Kearny has not received any advice or
information from any regulatory authority indicating that such approvals will be
denied or are doubtful or will be unduly delayed.
SECTION 4.08. LEGAL PROCEEDINGS.
Except as set forth in Kearny Disclosure Schedule 4.08 hereto, Kearny is
not a party to any, and there are no pending or, to the best of Kearny's
knowledge, threatened legal, administrative, arbitration or other proceedings,
actions or governmental investigations of any nature (i) against Kearny, (ii) to
which Kearny's assets are or may be subject, (iii) challenging the validity or
propriety of any of the transactions contemplated by this Agreement, or (iv)
which could adversely affect the ability of Kearny to perform under this
Agreement, except for any proceedings, claims, actions, investigations or
inquiries referred to in clauses (i) or (ii) which, if adversely determined,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Kearny. Kearny has not consented to or entered into
any currently effective Regulatory Agreement.
Section 4.09. KEARNY FINANCIAL STATEMENTS.
Kearny has delivered to WEST ESSEX copies of the consolidated statements
of financial condition of Kearny as of June 30, for the fiscal years of 2001 and
2000, and the related consolidated
statements of operations, changes in equity and cash flows for the fiscal years
2000 through 2001, inclusive, in each case accompanied by the audit report of
independent public accountants. The consolidated statements of financial
condition of Kearny referred to herein (including the related notes, where
applicable) fairly present the consolidated financial condition of Kearny as of
the respective dates set forth therein, and the related consolidated statements
of operations, changes in equity and cash flows (including the related notes,
where applicable) fairly present the results of the consolidated operations,
changes in equity and cash flows of Kearny of the respective periods or as of
the respective dates set forth therein, in each case in conformity with GAAP
consistently applied.
SECTION 4.10. KEARNY BENEFIT PLANS.
(a) Kearny has provided WEST ESSEX with a complete and accurate list of
all pension, retirement, group insurance, and other employee benefit plan and
arrangements, including, but not limited to, "employee benefit plans," as
defined in Section 3(3) of ERISA, incentive and welfare policies, contracts,
plans and arrangements with respect to any present employees of Kearny
(hereinafter collectively referred to as the "Kearny Employee Plans" and
individually as a "Kearny Employee Plan"). Each of the Kearny Employee Plans
complies in all material respects with all applicable requirements of ERISA, the
IRC and other applicable laws.
(b) No Kearny Employee Plan which is subject to Title IV of ERISA (each
such plan shall be referred to herein as a "Kearny Pension Plan") had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, as of the last day of the end of the most recent plan year ending
prior to the date hereof; the fair market value of the assets of each Kearny
Pension Plan exceeds the present value of the "benefit liabilities" (as defined
in Section 4001(a)(16) of ERISA) under such Kearny Pension Plan as of the end of
the most recent plan year with respect to the respective Kearny Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such Kearny Pension
Plan as of the date hereof; and no notice of a "reportable event" (as defined in
Section 4043 of ERISA) for which the 30-day reporting requirement has not been
waived has been required to be filed for any Kearny Pension Plan within the
12-month period ending on the date hereof.
(c) Each Kearny Employee Plan that is an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) and which is intended to be qualified
under Section 401(a) of the IRC has received a favorable determination letter
from the IRS, and Kearny is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to Kearny's knowledge, threatened litigation, administrative action or
proceeding relating to any Kearny Employee Plan.
SECTION 4.11. ABSENCE OF CERTAIN CHANGES.
Except as disclosed in Schedule 4.11 or as provided for or contemplated in
this Agreement, Kearny has not suffered any Material Adverse Effect since June
30, 2002.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.01. CONDUCT OF WEST ESSEX'S BUSINESS.
(a) From the date of this Agreement to the Closing Date, WEST ESSEX will
conduct its business and engage in transactions, including extensions of credit,
only in the ordinary course and consistent with past practice and policies in
existence on the date hereof, except as otherwise required or contemplated by
this Agreement or with the written consent of Bank. WEST ESSEX will use its
reasonable good faith efforts, to (i) preserve its business organizations
intact, (ii) maintain good relationships with its employees, (iii) control
operating and compensation expenses and expenses incurred in connection with
this Agreement and (iv) preserve the goodwill of its customers and others with
whom business relationships exist. From the date hereof to the Closing Date,
except as otherwise consented to or approved by Kearny in writing or as
contemplated or required by this Agreement, which consent or approval shall not
be unreasonably withheld and in any case such request by WEST ESSEX for consent
or approval by Kearny shall be responded to within five business days, WEST
ESSEX will not:
(i) amend or change any provision of its charter or bylaws;
(ii) except as set forth in WEST ESSEX Disclosure Schedule
5.01(a)(ii), change the number of authorized or issued shares of its capital
stock or issue or grant any Right or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock, or split, combine or reclassify any shares of capital stock, or
declare, set aside or pay any dividend or other distribution in respect of
capital stock or redeem or otherwise acquire any shares of capital stock, except
that WEST ESSEX Bancorp may continue to pay its regular quarterly cash dividend
of $0.14 per share, with record and payment dates consistent with past practice;
Provided further, that if the Closing Date is more than forty-five (45) after
the next preceding WEST ESSEX Bancorp Common Stock dividend payment date, WEST
ESSEX Bancorp may declare and pay a final cash dividend per share at the
quarterly rate of $.14 per share, with the exact amount per share to be an
amount that is pro rata through the payment date (from the preceding payment
date);
(iii) except as set forth in the WEST ESSEX Disclosure Schedule
5.01(a)(iii), grant or agree to pay any bonus, severance or termination to,
enter into or amend, or take any action (other than executing this Agreement)
that would trigger obligations under any employment agreement, severance
agreement, supplemental executive agreement, or similar agreement or arrangement
with any of its directors, officers or employees, or increase in any manner the
compensation or fringe benefits of any employee, officer or director, except for
salary increases for non-officer employees in the ordinary course of business
and consistent with past practice or as may be required pursuant to legally
binding commitments existing on the date hereof as set forth in WEST ESSEX
Disclosure Schedules 3.08 and 3.12;
(iv) enter into or, except as may be required by law or by the terms
of this Agreement, modify any pension, retirement, stock option, stock purchase,
stock appreciation right, stock grant, savings, profit sharing, deferred
compensation, supplemental retirement, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to any defined contribution or
defined benefit plan not in the ordinary course
of business consistent with past practice; or materially amend any WEST ESSEX
Employee Plan except to the extent such modifications or amendments do not
result in an increase in cost;
(v) except as otherwise provided in Section 5.06 of this Agreement,
merge or consolidate WEST ESSEX with any other corporation; sell or lease all or
any substantial portion of the assets or business of WEST ESSEX; make any
acquisition of all or any substantial portion of the business or assets of any
other person, firm, association, corporation or business organization other than
in connection with foreclosures, settlements in lieu of foreclosure, troubled
loan or debt restructuring, or the collection of any loan or credit arrangement
between WEST ESSEX and any other person; enter into a purchase and assumption
transaction with respect to deposits and liabilities; permit the revocation or
surrender by WEST ESSEX of its certificate of authority to maintain, or file an
application for the relocation of, any existing branch office, or file an
application for a certificate of authority to establish a new branch office;
(vi) sell or otherwise dispose of the capital stock of WEST ESSEX
Bancorp or sell or otherwise dispose of any asset of WEST ESSEX other than in
the ordinary course of business consistent with past practice; subject any asset
of WEST ESSEX to any lien, pledge, security interest or other encumbrance (other
than in connection with deposits, repurchase agreements, bankers acceptances,
FHLB of New York advances, "treasury tax and loan" accounts established in the
ordinary course of business and transactions in "Federal funds" and the
satisfaction of legal requirements in the exercise of trust powers) other than
in the ordinary course of business consistent with past practice; incur any
indebtedness for borrowed money (or guarantee any indebtedness for borrowed
money), except in the ordinary course of business consistent with past practice;
(vii) take any action which would result in any of the
representations and warranties of WEST ESSEX set forth in Article III of this
Agreement becoming untrue as of any date after the date hereof (except as to any
representation or warranty which specifically relates to an earlier date) or in
any of the conditions set forth in Article VI hereof not being satisfied, except
in each case as may be required by applicable law;
(viii)change any method, practice or principle of accounting, except
as may be required from time to time by GAAP (without regard to any optional
early adoption date) or any Regulatory Authority responsible for regulating WEST
ESSEX;
(ix) waive, release, grant or transfer any material rights of value
or modify or change in any material respect any existing material agreement or
indebtedness to which WEST ESSEX is a party, other than in the ordinary course
of business, consistent with past practice;
(x) purchase or sell any security for its investment portfolio,
except for purchases of United States government treasury instruments, US
government agency securities and insured certificates of deposit, and in any
event with a maturity of two years or less, or federal funds;
(xi) make any new loan or other credit facility commitment
(including without limitation, lines of credit and letters of credit) to any
borrower or group of affiliated borrowers in excess of $250,000 in the
aggregate, or increase, compromise, extend, renew or modify any existing loan or
commitment outstanding in excess of $250,000, except for loans secured by one-
to four-
family, residential real property in an amount not exceeding $500,000 (on the
basis of and consistent with existing lending policies) and except for any
commitments disclosed on the WEST ESSEX Disclosure Schedule 5.01(a)(xi).
(xii) except as set forth on the WEST ESSEX Disclosure Schedule
5.01(a)(xii), enter into, renew, extend or modify any other transaction with any
Affiliate;
(xiii)enter into any futures contract, option, interest rate caps,
interest rate floors, interest rate exchange agreement or other agreement or,
except in the ordinary course of business and consistent with past practice,
take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xiv) except for the execution of, and as otherwise provided in,
this Agreement, take any action that would give rise to a right of payment to
any individual under any employment agreement, or take any action that would
give rise to a right of payment to any individual under any WEST ESSEX Employee
Plan;
(xv) make any change in policies with regard to the extension of
credit, the establishment of reserves with respect to the possible loss thereon
or the charge off of losses incurred thereon, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law or regulations or in GAAP or by
applicable regulatory authorities;
(xvi) except as set forth in WEST ESSEX Disclosure Schedule
5.01(a)(xvi), make any capital expenditures in excess of $10,000 individually or
$25,000 in the aggregate, other than pursuant to binding commitments existing on
the date hereof and other than expenditures necessary to maintain existing
assets in good repair;
(xvii) purchase or otherwise acquire, or sell or otherwise dispose
of, any assets or incur any liabilities other than in the ordinary course of
business consistent with past practices and policies;
(xviii) incur any non-deposit liability in excess of $50,000 other
than in the ordinary course of business consistent with past practice;
(xix) enter into or extend any agreement for professional services,
including legal, accounting and consulting (provided that such limitation shall
not restrict continuation of services being rendered by existing accountants or
legal counsel engaged on matters associated with the transactions contemplated
by the Agreement);
(xx) incur expenses related to attending any conventions, meetings,
outings or similar events of any regional, state and national trade
organizations which exceeds more than $5,000 in the aggregate, except as set
forth at WEST ESSEX Disclosure Schedule 5.01(xx); or
(xxi) agree to do any of the foregoing.
For purposes of this Section 5.01, unless provided for in a WEST ESSEX
Disclosure Schedule, business plan, budget or similar document delivered to
Kearny prior to the date of this Agreement, it shall not be considered in the
ordinary course of business for WEST ESSEX to do any of the following: (i)
except as set forth in WEST ESSEX Disclosure Schedule 5.01, make any sale,
assignment, transfer, pledge, hypothecation or other disposition of any assets
having a book or market value, whichever is greater, in the aggregate in excess
of $75,000, other than pledges of assets to secure government deposits, to
exercise trust powers, sales of assets received in satisfaction of debts
previously contracted in the normal course of business, issuance of loans, sales
of previously purchased government guaranteed loans, or transactions in the
investment securities portfolio by WEST ESSEX or repurchase agreements made, in
each case, in the ordinary course of business; or (ii) except as set forth in
WEST ESSEX Disclosure Schedule 5.01, undertake or enter any lease, contract or
other commitment for its account, other than in the normal course of providing
credit to customers as part of its banking business, involving a payment by WEST
ESSEX of more than $25,000 annually, or containing a material financial
commitment and extending beyond 12 months from the date hereof.
SECTION 5.02. ACCESS; CONFIDENTIALITY.
(a) WEST ESSEX shall permit Kearny and its representatives reasonable
access to its properties and make available to them all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of WEST ESSEX, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of boards
of directors (and any committees thereof) (other than minutes of any
confidential discussion of this Agreement and the transactions contemplated
hereby), and stockholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, plans affecting employees, and any other business activities
or prospects in which Kearny may have a reasonable interest (provided that WEST
ESSEX shall not be required to provide access to any information that would
violate their attorney-client privilege or any employee or customer privacy
policies, laws or regulations). WEST ESSEX shall make its respective officers,
employees and agents and authorized representatives (including counsel and
independent public accountants) available to confer with Kearny and its
representatives. WEST ESSEX Bank shall provide in a timely manner to Bank's
officer in charge of retail banking copies of current rate sheets for all
deposit and loan products. WEST ESSEX shall provide Kearny with access to
documents and records and access to and a license to enter the WEST ESSEX
Properties and the Participation Facilities to conduct, at Kearny's sole
expense, an environmental assessment of the WEST ESSEX Properties and the
Participation Facilities (the "Environmental Assessment"); provided that such
Environmental Assessment is scheduled to be conducted within thirty days of the
date of the Agreement and commenced within forty-five days of the date of the
Agreement. The Environmental Assessment may include, without limitation,
inspections of the WEST ESSEX Properties and the Participation Facilities,
invasive soil, surface water, groundwater and sediment sampling and a review of
records maintained by federal, state, regional, county or local governmental
authorities relating to WEST ESSEX, the WEST ESSEX Properties or the
Participation Facilities. The parties will hold all such information delivered
in confidence to the extent required by, and in accordance with, the provisions
of the confidentiality agreement, dated June 26, 2002, between WEST ESSEX and
Kearny (the "Confidentiality Agreement").
(b) Kearny agrees to conduct such investigations and discussions hereunder
in a manner so as not to interfere unreasonably with normal operations and
customer and employee relationships of the other party.
(c) In addition to the access permitted by subparagraph (a) above, from
the date of this Agreement through the Closing Date, WEST ESSEX shall permit
employees of Bank access to information relating to problem loans, loan
restructurings and loan work-outs of WEST ESSEX Bank.
(d) Without in any way limiting the generality of this Section 5.02, WEST
ESSEX shall provide to Kearny within 30 days after the last day of each calendar
month between the date hereof and the Closing Date (i) consolidated financial
statements (including a balance sheet and income statement) as of, and for the
period ended, on such last day, in the form in which such statements are
prepared for use by WEST ESSEX's management, and (ii) such other information
customarily prepared for use by WEST ESSEX's management as Kearny may request.
SECTION 5.03. REGULATORY MATTERS AND CONSENTS.
(a) Kearny will, in consultation with WEST ESSEX, prepare all Applications
and make all filings for, and use its best efforts to obtain as promptly as
practicable after the date hereof, all necessary permits, consents, approvals,
waivers and authorizations of all Regulatory Authorities necessary or advisable
to consummate the transactions contemplated by this Agreement. Kearny shall file
the Applications within forty-five days of the date of this Agreement, or as
soon thereafter as is practicable.
(b) WEST ESSEX will furnish Kearny with all information concerning WEST
ESSEX as may be necessary or advisable in connection with any Application or
filing made by or on behalf of Kearny to any Regulatory Authority in connection
with the transactions contemplated by this Agreement.
(c) Kearny and WEST ESSEX will promptly furnish the other with copies of
all material written communications to, or received by them from any Regulatory
Authority in respect of the transactions contemplated hereby, except information
which is filed by either party which is designated as confidential.
(d) Kearny will use its best efforts to obtain all necessary regulatory
approvals to effectuate the transactions contemplated by this Agreement and
related exhibits and appendices.
(e) WEST ESSEX will use its best efforts to obtain all necessary
regulatory approvals to effectuate the transactions contemplated by this
Agreement and related exhibits and appendices.
(f) The parties hereto agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities. Kearny will furnish WEST ESSEX
and its counsel with copies of all Applications prior to filing with any
Regulatory Authority and provide WEST ESSEX a reasonable opportunity to provide
changes to such Applications, and copies of all Applications filed by Kearny .
(g) WEST ESSEX and Kearny will cooperate with each other in the foregoing
matters and will furnish the responsible party with all information concerning
it and its subsidiaries as may be necessary or advisable in connection with any
Application or filing made by or on behalf of Kearny or WEST ESSEX to any
Regulatory Authority in connection with the transactions contemplated by this
Agreement, and such information will be accurate and complete in all material
respects. In connection therewith, each party will provide certificates and
other documents reasonably requested by the other.
SECTION 5.04. TAKING OF NECESSARY ACTION.
(a) Kearny and WEST ESSEX shall each use its best efforts in good faith to
(i) furnish such information as may be required in connection with the
preparation of the documents referred to in Section 5.03 of this Agreement, and
(ii) take or cause to be taken all action necessary or desirable on its part
using its best efforts so as to permit completion of the Merger and the
transactions contemplated by this Agreement, including, without limitation, (A)
obtaining the consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose consent or approval
is required for consummation of the transactions contemplated hereby (including
assignment of leases without any material change in terms), provided that WEST
ESSEX shall not agree to make any payments or modifications to agreements in
connection therewith without the prior written consent of Kearny, and (B)
requesting the delivery of appropriate opinions, consents and letters from its
counsel and independent auditors. No party hereto shall take, or cause, or to
the best of its ability permit to be taken, any action that would substantially
impair the prospects of completing the Bank Merger, the Corporate Merger, the
MHC Merger and the Mid-Tier Merger pursuant to this Agreement; provided that
nothing herein contained shall preclude Kearny or WEST ESSEX from exercising its
rights under this Agreement.
(b) WEST ESSEX shall prepare, subject to the review of Kearny with respect
to matters relating to Kearny and the transactions contemplated by this
Agreement, the Proxy Statement to be filed by WEST ESSEX Bancorp with the SEC
and to be mailed to the stockholders of WEST ESSEX Bancorp in connection with
the meeting of its stockholders and transactions contemplated hereby, which
Proxy Statement shall conform to all applicable legal requirements. Should it be
required by Regulatory Authorities, WEST ESSEX MHC and WEST ESSEX Bank shall
prepare, subject to the review and consent of Kearny with respect to matters
relating to Kearny and the transactions contemplated by this Agreement, the
Proxy Statement to be filed by WEST ESSEX MHC with the Regulatory Authorities
and to be mailed to members in connection with a meeting of members and the
transactions contemplated hereby. The parties shall cooperate with each other
with respect to the preparation of any Proxy Statement. WEST ESSEX shall, as
promptly as practicable following the preparation thereof and within forty-five
days of the date of this Agreement, file any Proxy Statement with the Regulatory
Authorities, and WEST ESSEX shall use all reasonable efforts to have any Proxy
Statement mailed to stockholders, and if necessary members, as promptly as
practicable after such filing. WEST ESSEX Bancorp and WEST ESSEX Bank will
promptly advise Kearny of the time when any Proxy Statement has been filed and
mailed, or of any comments from any Regulatory Authority or any request by any
Regulatory Authority for additional information.
SECTION 5.05. CERTAIN AGREEMENTS.
(a) Kearny shall maintain in effect for three years from the Merger
Effective Date, if available, the current directors' and officers' liability
insurance policy maintained by WEST ESSEX Bancorp (provided that Kearny may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Closing Date, provided such insurance coverage is
available at a reasonable premium. In connection with the foregoing, WEST ESSEX
Bancorp agrees to provide such insurer or substitute insurer with such
representations as such insurer may request with respect to the reporting of any
prior claims.
(b) For a period of six years from the Merger Effective Date, Kearny
agrees to indemnify, defend and hold harmless each present and former director
and officer of WEST ESSEX determined as of the Closing Date (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees and expenses), liabilities, judgments or amounts paid
in settlement (with the approval of Kearny, which approval shall not be
unreasonably withheld) or in connection with any claim, action, suit, proceeding
or investigation arising out of matters existing or occurring at or prior to the
Merger Effective Date (a "Claim") in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of WEST ESSEX, regardless of whether such Claim is asserted
or claimed prior to, at or after the Closing Date, to the fullest extent to
which directors and officers of WEST ESSEX are entitled under Federal law, WEST
ESSEX Bancorp's charter and bylaws, WEST ESSEX Bank's and WEST ESSEX MHC's
charter and bylaws, or other applicable law as in effect on the date hereof (and
Kearny shall pay expenses in advance of the final disposition of any such action
or proceeding to each Indemnified Party to the extent permissible to a Federal
corporation or savings bank, or WEST ESSEX Bancorp's charter and bylaws;
provided, that the person to whom expenses are advanced provides an undertaking
to repay such expenses if it is ultimately determined that such person is not
entitled to indemnification). All rights to indemnification in respect of a
Claim asserted or made within the period described in the preceding sentence
shall continue until the final disposition of such Claim.
(c) Any Indemnified Party wishing to claim indemnification under Section
5.05(b), upon learning of any Claim, shall promptly notify Kearny, but the
failure to so notify shall not relieve Kearny of any liability it may have to
such Indemnified Party except to the extent that such failure materially
prejudices Kearny. In the event of any Claim, (i) Kearny shall have the right to
assume the defense thereof (with counsel reasonably satisfactory to the
Indemnified Party) and shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that, if
Kearny elects not to assume such defense or counsel for the Indemnified Parties
advises that there are issues which raise conflicts of interest between Kearny
and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Kearny shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received, provided further that Kearny shall in all cases be obligated pursuant
to this paragraph to pay for only one firm of counsel for all Indemnified
Parties, (ii) the Indemnified Parties will cooperate in the defense of any such
Claim and (iii) Kearny shall not be liable for any settlement effected without
its prior written consent (which consent shall not unreasonably be withheld).
(d) In the event Kearny or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not continue or
survive such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary, proper provision shall be made so that the
successors and assigns of Kearny assume the obligations set forth in this
Section 5.05.
(e) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
SECTION 5.06. NO OTHER BIDS AND RELATED MATTERS.
From and after the date hereof until the termination of this Agreement,
neither WEST ESSEX nor any of its officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by WEST ESSEX), will,
directly or indirectly, initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain an Acquisition Proposal
or agree to or endorse any Acquisition Proposal, or authorize or permit any of
its officers, directors, or employees or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any of its subsidiaries to take any such action, and
WEST ESSEX shall notify Kearny orally (within one business day) and in writing,
within forty-eight hours, which writing shall be updated as promptly as
practicable, of all of the relevant details relating to all inquiries and
proposals which it or any such officer, director employee, investment banker,
financial advisor, attorney, accountant or other representative may receive
relating to any of such matters, PROVIDED, HOWEVER, that nothing contained in
this Section 5.06 shall prohibit the Board of Directors from: (i) furnishing
information to, or entering into discussions or negotiations with any person or
entity that makes an unsolicited written, bona fide proposal, to acquire WEST
ESSEX Bancorp and WEST ESSEX Bank pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of WEST
ESSEX Bancorp receives a written opinion from its independent financial advisor
that such proposal may be superior to the Merger from a financial point of view
to WEST ESSEX Bancorp stockholders, (B) legal counsel advises WEST ESSEX Bancorp
that the proposed acquiror may legally acquire WEST ESSEX Bancorp and WEST ESSEX
Bank, (C) the Board of Directors of WEST ESSEX Bancorp, after consultation with
and based upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of WEST ESSEX Bancorp
to comply with its fiduciary duties to stockholders under applicable law (such
proposal that satisfies (A) (B) and (C) being referred to herein as a "Superior
Proposal"), (D) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, WEST ESSEX Bancorp (x)
provides reasonable notice to Kearny to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such person
or entity and (y) receives from such person or entity an executed
confidentiality agreement in form and substance identical in all respects to the
Confidentiality Agreement, and (E) the WEST ESSEX Bancorp special meeting of
stockholders convened to approve this Agreement has not occurred; (ii) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer; or (iii)
prior to the WEST ESSEX Bancorp special meeting of stockholders convened to
approve this Agreement, failing to make or withdrawing or modifying its
recommendation to stockholders, and entering into a Superior Proposal if there
exists a Superior Proposal and the Board of Directors of WEST ESSEX Bancorp,
after consultation with and based upon the advice of independent legal counsel,
determined in good faith that such action is necessary for such Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law. For purposes of this Agreement, "Acquisition Proposal" shall mean any of
the following (other than the transactions contemplated hereunder) involving
WEST ESSEX: (i) any merger, consolidation, share exchange, business combination,
or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 20% or more of the assets of WEST ESSEX Bancorp
or WEST ESSEX Bank, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of WEST ESSEX Bancorp or the filing of a
registration statement under the Securities Laws in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 5.07. DUTY TO ADVISE; DUTY TO UPDATE THE WEST ESSEX DISCLOSURE
SCHEDULES.
WEST ESSEX shall promptly advise Kearny of any change or event having a
Material Adverse Effect on WEST ESSEX or which WEST ESSEX believes would or
would be reasonably likely to cause or constitute a material breach of any of
its representations, warranties or covenants set forth herein. WEST ESSEX shall
update the WEST ESSEX Disclosure Schedules as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had occurred prior
to the date of this Agreement, would have been disclosed in the WEST ESSEX
Disclosure Schedules. The delivery of such updated WEST ESSEX Disclosure
Schedule shall not relieve WEST ESSEX from any breach or violation of this
Agreement and shall not have any effect for the purposes of determining the
satisfaction of the condition set forth in Sections 6.02(c) hereof.
SECTION 5.08. CONDUCT OF Kearny'S BUSINESS.
From the date of this Agreement to the Closing Date, Kearny will use its
best efforts to (a) preserve its business organizations intact, (b) maintain
good relationships with employees, and (c) preserve for itself the goodwill of
customers of Kearny. From the date of this Agreement to the Closing Date, Kearny
will not (i) amend its charter or bylaws in any manner inconsistent with the
prompt and timely consummation of the transactions contemplated by this
Agreement; (ii) take any action which would result in any of the representations
and warranties of Kearny set forth in Article IV of this Agreement becoming
untrue as of any date after the date hereof or in any of the conditions set
forth in Article VI hereof not being satisfied, except in each case as may be
required by applicable law; (iii) take any action which would or is reasonably
likely to adversely effect or materially delay the receipt of the necessary
approvals from the Regulatory Authorities; (iv) take action which would or is
reasonably likely to materially and adversely affect Kearny's ability to perform
its covenants and agreements under this Agreement; (v) take any action that
would result in any of the conditions to the transactions contemplated by this
Agreement not being satisfied; or (vi) agree to do any of the foregoing.
SECTION 5.09. BOARD AND COMMITTEE MINUTES.
WEST ESSEX Bank, WEST ESSEX Bancorp and WEST ESSEX MHC shall each provide
to Kearny, within twenty (20) days after any meeting of their respective Board
of Directors, or any committee thereof, or any senior management committee, a
copy of the minutes of such meeting, except that with respect to any meeting
held within twenty (20) days of the Closing Date, such minutes shall be provided
to each party prior to the Closing Date. WEST ESSEX may exclude from the minutes
matters (i) relating to merger negotiations, (ii) associated with Section 5.06,
or (iii) relating to WEST ESSEX's discussions of possible breaches of this
Agreement by Kearny.
SECTION 5.10. UNDERTAKINGS BY THE PARTIES.
(a) From and after the date of this Agreement:
(i) VOTING BY DIRECTORS. Concurrently with the execution of this
Agreement, or within five business days thereof, the Directors of WEST ESSEX
Bank, WEST ESSEX Bancorp and WEST ESSEX MHC shall have entered into the
agreement set forth as Exhibit E to this Agreement;
(ii) PROXY SOLICITOR. If requested to do so by Kearny, WEST ESSEX
Bancorp and/or WEST ESSEX MHC shall retain a proxy solicitor in connection with
the solicitation of stockholders and any necessary WEST ESSEX MHC member
approval of this Agreement and the transaction contemplated hereby;
(iii) OUTSIDE SERVICE BUREAU CONTRACTS. If requested to do so by
Kearny, WEST ESSEX Bank shall use its best efforts to obtain an extension of any
contract with an outside service bureau or other vendor of services to WEST
ESSEX Bank, on terms and conditions mutually acceptable to WEST ESSEX Bank and
Bank;
(iv) BOARD MEETINGS. WEST ESSEX Bank, WEST ESSEX Bancorp and WEST
ESSEX MHC shall provide Kearny advance notice of the meetings of their Board of
Directors and shall permit a representative of Kearny to attend meetings of
their Boards of Directors or the Executive Committees thereof (provided that
they shall not be required to permit the Kearny representative to remain present
during any confidential discussion of the Agreement and the transactions
contemplated thereby);
(v) LIST OF NONPERFORMING ASSETS. WEST ESSEX Bank shall provide
Bank, within ten (10) days of the end of each calendar month, a written list of
nonperforming assets (the term "nonperforming assets," for purposes of this
subsection, means (i) loans that are "troubled debt restructuring" as defined in
Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real
estate owned, (iv) all loans ninety (90) days or more past due as of the end of
such month and (v) and impaired loans; and
(vi) RESERVES AND MERGER-RELATED COSTS. On or before the Merger
Effective Date, and at the request of Kearny, WEST ESSEX shall establish such
additional accruals and reserves as may be necessary to conform the accounting
reserve practices and methods (including credit loss practices and methods) of
WEST ESSEX to those of Kearny (as such practices and methods are to be applied
to Kearny from and after the Closing Date) and Kearny's plans with respect to
the conduct
of the business of WEST ESSEX following the Merger and otherwise to reflect
Merger-related expenses and costs incurred by WEST ESSEX Bancorp, provided,
however, that WEST ESSEX shall not be required to take such action unless Kearny
agrees in writing that all conditions to closing set forth in Section 6.02 have
been satisfied or waived (except for the expiration of any applicable waiting
periods); prior to the delivery by Kearny of the writing referred to in the
preceding clause, WEST ESSEX shall provide Kearny a written statement, certified
without personal liability by the chief executive officer of WEST ESSEX Bancorp,
WEST ESSEX Bank and WEST ESSEX MHC and dated the date of such writing, that the
representations made in Section 3.15 hereof are true as of such date or,
alternatively, setting forth in detail the circumstances that prevent such
representation from being true as of such date; and no accrual or reserve made
by WEST ESSEX or any WEST ESSEX Subsidiary pursuant to this subsection, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach or violation of any representation,
warranty, covenant, condition or other provision of this Agreement or constitute
a termination event within the meaning of Section 7.01(b) hereof. No action
shall be required to be taken by WEST ESSEX pursuant to this Section 5.10(vi)
if, in the opinion of WEST ESSEX's independent auditors, such action would
contravene GAAP.
(vii) STOCKHOLDERS AND MEMBERS MEETING.
(A) WEST ESSEX Bancorp shall submit this Agreement to its
stockholders for approval at a meeting to be held as soon as practicable. The
Board of Directors shall recommend approval of this Agreement to the WEST ESSEX
Bancorp stockholders and the Board of Directors of WEST ESSEX MHC will vote all
of the shares of WEST ESSEX Bancorp owned by WEST ESSEX MHC in favor of the
Agreement; provided that the Board of Directors of WEST ESSEX Bancorp may fail
to make such a recommendation or vote the shares of WEST ESSEX MHC for the
Agreement, or withdraw, modify or change any such recommendation only in
connection with a Superior Proposal, as set forth in Section 5.06 of this
Agreement, and only if such Board of Directors, after having consulted with and
considered the written advice of outside counsel to such Board, has determined
that the making of such recommendation, or the failure so to withdraw, modify or
change its recommendation, would constitute a breach of the fiduciary duties of
such Board. WEST ESSEX Bancorp shall take all steps necessary in order to hold a
meeting of stockholders for the purpose of approving this Agreement as soon as
is practicable. WEST ESSEX MHC shall vote its shares in favor of this Agreement.
(B) If required by Regulatory Authorities, WEST ESSEX MHC
shall submit this Agreement to WEST ESSEX MHC members for approval, and, subject
to its fiduciary duties, WEST ESSEX MHC's Board of Directors shall recommend
approval of this Agreement to the members of WEST ESSEX MHC and shall vote all
member proxies held by WEST ESSEX MHC in favor of such approval at any meeting
of members of WEST ESSEX MHC. WEST ESSEX MHC shall take all steps necessary in
order to hold a meeting of members for the purpose of approving this Agreement
as soon as practicable.
(viii)SYSTEMS CONVERSIONS. WEST ESSEX Bank and Bank shall meet on a
regular basis to discuss and plan for the conversion of WEST ESSEX's data
processing and related electronic informational systems to those used by Bank,
which planning shall include, but not be limited to, discussion of the possible
termination by WEST ESSEX of third-party service provider arrangements
effective at the Closing Date or at a date thereafter, non-renewal of personal
property leases and software licenses used by WEST ESSEX in connection with its
systems operations, retention of outside consultants and additional employees to
assist with the conversion, and outsourcing, as appropriate, of proprietary or
self-provided system services, it being understood that WEST ESSEX shall not be
obligated to take any such action prior to the Closing Date and, unless WEST
ESSEX otherwise agrees, no conversion shall take place prior to the Closing
Date. In the event that WEST ESSEX takes, at the request of Bank, any action
relative to third parties to facilitate the conversion that results in the
imposition of any termination fees, expenses or charges, Kearny shall indemnify
WEST ESSEX for any such fees, expenses and charges, and the costs of reversing
the conversion process, if for any reason the Merger is not consummated in
accordance with the terms of this Agreement.
(b) From and after the date of this Agreement, Kearny and WEST ESSEX shall
each:
(i) FILINGS AND APPROVALS. Cooperate with the other in the
preparation and filing, as soon as practicable, of (1) the Applications, (2) any
Proxy Statement, (3) all other documents necessary to obtain any other approvals
and consents required to effect the completion of the Merger, and the
transactions contemplated by this Agreement, and (4) all other documents
contemplated by this Agreement;
(ii) PUBLIC ANNOUNCEMENTS. Cooperate and cause their respective
officers, directors, employees and agents to cooperate in good faith, consistent
with their respective legal obligations, in the preparation and distribution of,
and agree upon the form and substance of, any press release related to this
Agreement and the transactions contemplated hereby, and any other public
disclosures related thereto, including without limitation communications to
stockholders, internal announcements and customer disclosures, but nothing
contained herein shall prohibit either party from making any disclosure which
its counsel deems necessary, provided that the disclosing party notifies the
other party reasonably in advance of the timing and contents of such disclosure;
(iii) MAINTENANCE OF INSURANCE. Maintain insurance in such amounts
as are reasonable to cover such risks as are customary in relation to the
character and location of its properties and the nature of its business;
(iv) MAINTENANCE OF BOOKS AND RECORDS. Maintain books of account and
records in accordance with GAAP applied on a basis consistent with those
principles used in preparing the financial statements heretofore delivered;
(v) DELIVERY OF SECURITIES DOCUMENTS. Deliver to the other copies of
all Securities Documents simultaneously with the filing thereof; and
(vi) TAXES. File all Federal, state, and local tax returns required
to be filed by them on or before the date such returns are due (including any
extensions) and pay all taxes shown to be due on such returns on or before the
date such payment is due.
SECTION 5.11. EMPLOYEE AND TERMINATION BENEFITS; DIRECTORS AND MANAGEMENT.
(a) EMPLOYEE BENEFITS. Except as otherwise provided in Section 5.11(c) of
this Agreement, as of or after the Merger Effective Date, and at Kearny's
election and subject to the requirements of the IRC and ERISA, the WEST ESSEX
Employee Plans may continue to be maintained separately, consolidated, or
terminated, provided that if any WEST ESSEX Employee Plan is terminated,
Continuing Employees (as defined below) shall participate in any Kearny Employee
Plan of a similar character (to the extent that one exists) as of the first
entry date coincident with or following such termination. WEST ESSEX Continuing
Employees (as defined below) shall participate in the Kearny Thrift Plan
(sponsored by the Financial Institutions Thrift Plan) not later than the first
entry date coincident with or following the Merger Effective Date, with
recognition of prior WEST ESSEX service for purposes of eligibility to
participate and vesting, but not benefits accrual, under such Kearny plan. WEST
ESSEX Continuing Employees (as defined below) shall participate in the Kearny
Pension Plan (sponsored by the Financial Institutions Retirement Fund) not later
than the first entry date coincident with or following the date of termination
of the WEST ESSEX defined benefit pension plan or cessation of benefits accruals
for future service under such WEST ESSEX plan, and with recognition of prior
WEST ESSEX service for purposes of eligibility to participate and vesting, but
not benefits accrual, under such Kearny plan. In the event of a consolidation of
any or all of such plans or in the event of termination of any WEST ESSEX
Employee Plan, WEST ESSEX employees who are participants in the WEST ESSEX
Employee Plans and who continue employment with Kearny ("Continuing Employees")
shall receive credit for service with WEST ESSEX Bank (for purposes of
eligibility and vesting determination but not for benefit accrual purposes)
under any existing Kearny benefit plan, or new Kearny benefit plan in which such
employees or their dependents would be eligible to enroll, subject to any pre-
existing conditions or other exclusions to which such persons were subject under
the WEST ESSEX Employee Plans. Such service shall also apply for purposes of
satisfying any waiting periods, actively-at-work requirements, and evidence of
insurability requirements. Continuing Employees who become covered under a
Kearny health plan shall be required to satisfy the deductible limitations of
the Kearny health plan for the plan year in which coverage commences, without
offset for deductibles satisfied under the WEST ESSEX health plan.
In the event of any termination or consolidation of any WEST ESSEX health
plan with any Kearny health plan, Kearny shall make available to Continuing
Employees and their dependents employer-provided health coverage on the same
basis as it provides such coverage to Kearny employees. In the event of any
termination, or consolidation of any WEST ESSEX health plan with any Kearny
health plan, any pre-existing condition, limitation or exclusion in the Kearny
health plan shall not apply to Continuing Employees or their covered dependents
who have satisfied such pre- existing condition exclusion waiting period under a
WEST ESSEX health plan with respect to such pre-existing condition on the Merger
Effective Date and who then change that coverage to Kearny's health plan at the
time such Continuing Employee is first given the option to enroll in such Kearny
health plan. In the event of a termination of or consolidation of any WEST ESSEX
health plan with any Kearny health plan, Continuing Employees will be required
to seek reimbursement of claims arising prior to the Merger Effective Date from
the WEST ESSEX health plan and shall not be entitled to seek reimbursement of
claims arising prior to the Merger Effective Date from the Kearny health plan.
(b) It is the current intention of WEST ESSEX Bank and Kearny to retain
all current non- officer employees of WEST ESSEX Bank, with the exception of
those persons set forth in the WEST ESSEX Disclosure Schedule or the Kearny
Disclosure Schedule at Section 5.11(b). Except as provided in Section 5.11(i)
hereof, nothing contained in this Agreement shall be construed to grant a
contract of employment to any employee of WEST ESSEX who becomes an employee of
Kearny. Any non-management WEST ESSEX employee whose employment is terminated
involuntarily (other than for cause) within one year of the Merger Effective
Date shall receive severance benefits in accordance with the WEST ESSEX Bank
employee severance compensation plan set forth in the WEST ESSEX Disclosure
Schedule.
(c) At the Merger Effective Date, the West Essex Bank Employee Stock
Ownership Plan ("ESOP") shall be terminated on such terms and conditions as
contained in the ESOP (as of the date of this Agreement). As soon as practicable
after the receipt of a favorable determination letter from the IRS as to the tax
qualified status of the ESOP upon its termination under Section 401(a) of the
IRC (the "Final Determination Letter"), distributions of the benefits under the
ESOP shall be made to the ESOP Participants. From and after the date of this
Agreement, in anticipation of such termination and distribution, WEST ESSEX and
its representatives before the Merger Effective Date, and Kearny and its
representatives after the Merger Effective Date, shall use their best efforts to
apply for and to obtain such favorable Final Determination Letter from the IRS.
If WEST ESSEX and its representatives, before the Merger Effective Date, and
Kearny and its representatives, after the Merger Effective Date, reasonably
determine that the ESOP cannot obtain a favorable Final Determination Letter, or
that the amounts held therein cannot be so applied, allocated or distributed
without causing the ESOP to lose its tax-qualified status, WEST ESSEX before the
Merger Effective Date, and Kearny after the Merger Effective Date, shall take
such action as they may reasonably determine with respect to the distribution of
benefits to the ESOP Participants, provided that the assets of the ESOP shall be
held or paid only for the benefit of the ESOP Participants, as determined on the
Merger Effective Date, and provided further that in no event shall any portion
of the amounts held in the ESOP revert, directly or indirectly, to WEST ESSEX or
to Kearny or any affiliate thereof. At the time distribution of benefits is made
under the ESOP on or after the Merger Effective Date, at the election of the
ESOP Participant, the amount thereof that constitutes an "eligible rollover
distribution" (as defined in Section 402(f)(2)(A) of the IRC) may be rolled over
by such ESOP Participant to any qualified Kearny benefit plan that permits
rollover distributions or to any eligible individual retirement account.
(d) Immediately following the Merger Effective Date, Kearny will take such
steps as are necessary to elect Mr. Leopold Montanaro as a member of the Board
of the Bank in a class of directors who will stand for reelection approximately
three years following the Merger Effective Date.
(e) Prior to WEST ESSEX Bancorp or WEST ESSEX Bank making any payments
pursuant to any employment agreements, severance plans, non-qualified deferred
compensation plans or other arrangements, WEST ESSEX Bancorp or WEST ESSEX Bank
shall furnish Kearny with a certification by WEST ESSEX Bancorp or WEST ESSEX
Bank's tax accountant and related work papers that such payment will not result
in any payments from WEST ESSEX Bancorp or WEST ESSEX Bank to the recipient that
will exceed the amount that is tax deductible to WEST ESSEX Bancorp or WEST
ESSEX Bank under Sections 280G and 162(m) of the IRC. Prior to WEST
ESSEX Bancorp or WEST ESSEX Bank making any payments pursuant to any employment
agreements, severance plans, non-qualified deferred compensation plans or other
arrangements, the chief financial officer of WEST ESSEX Bancorp and WEST ESSEX
Bank shall furnish Kearny with a certification that such payments are consistent
with the WEST ESSEX Disclosure Schedules Sections 2.06, 3.08, 3.12 and 3.19
furnished as of the date of the Agreement, and WEST ESSEX Bancorp and WEST ESSEX
Bank shall furnish Kearny with an acknowledgment and release agreement by each
individual to receive a payment in form and substance satisfactory to Kearny.
(f) Until the Merger Effective Date, WEST ESSEX shall be liable for all
obligations for continued health coverage pursuant to Section 4980B of the IRC
and Sections 601 through 609 of ERISA ("COBRA") with respect to each WEST ESSEX
Bank qualifying beneficiary (as defined in COBRA) who incurs a qualifying event
(as defined in COBRA) before the Merger Effective Date. Kearny shall be liable
for (i) all obligations for continued health coverage under COBRA with respect
to each WEST ESSEX Bank qualified beneficiary (as defined in COBRA) who incurs a
qualifying event (as defined in COBRA) from and after the Merger Effective Date,
and (ii) for continued health coverage under COBRA from and after the Merger
Effective Date for each WEST ESSEX Bank qualified beneficiary who incurs a
qualifying event before the Merger Effective Date.
(g) As of the Merger Effective Date, the WEST ESSEX Supplemental
Retirement Plans and Salary Income Continuation Agreements shall be terminated
and all payments thereunder shall be made thereafter, as set forth in WEST ESSEX
Disclosure Schedule 5.11(g) dated as of the date of the Agreement.
(h) As of the Merger Effective Date, Kearny shall, subject to the exercise
of its fiduciary duty, establish a WEST ESSEX advisory board (the "Advisory
Board"), to be appointed annually, comprised of the directors of the WEST ESSEX
Bank who will not otherwise be serving on the Board of the Bank. Subject to the
exercise of the fiduciary duty of the Kearny Board of Directors, such Advisory
Board will be maintained for at least three years. Members of the Advisory Board
will receive a fee for such services in an amount comparable to that paid for
their service as a director of WEST ESSEX Bank as set forth at WEST ESSEX
Disclosure Schedule 5.11(h). Such fees shall be payable quarterly in arrears.
(i) As of the Merger Effective Date, Kearny will offer to enter into an
employment agreement and/or consulting agreement with Mr. Leopold Montanaro in a
form similar to that detailed at WEST ESSEX Disclosure Schedule 5.11(i)(1) and
consulting agreements with each of Mr. Dennis Petrello and Charles Filippo in a
form similar to that detailed at WEST ESSEX Disclosure Schedule 5.11(i)(2) and
(3), respectively.
(j) As of the Merger Effective Date, Kearny will offer Mr. Craig Montanaro
employment as an officer of the Bank.
SECTION 5.12. DUTY TO ADVISE; DUTY TO UPDATE KEARNY DISCLOSURE SCHEDULE.
Kearny shall promptly advise WEST ESSEX of any change or event having a
Material Adverse Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its representations,
warranties or covenants set forth herein. Kearny shall
update the Kearny' Disclosure Schedule as promptly as practicable after the
occurrence of an event or fact which, if such event or fact had occurred prior
to the date of this Agreement, would have been disclosed in the Kearny
Disclosure Schedule. The delivery of such updated Schedules shall not relieve
Kearny from any breach or violation of this Agreement and shall not have any
effect for the purposes of determining the satisfaction of the condition set
forth in Section 6.01(c) hereof.
SECTION 5.13. TRANSACTION EXPENSES OF WEST ESSEX.
(a) For planning purposes, set forth at WEST ESSEX Disclosure Schedule
5.13(a) hereto, WEST ESSEX has provided Kearny with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by WEST ESSEX
in connection with this Agreement and the transactions contemplated thereunder
based on facts and circumstances then currently known, including the fees and
expenses of counsel, accountants, investment bankers and other professionals.
WEST ESSEX shall use its best efforts to maintain expenses within the budget,
provided that in the event the actual facts and circumstances differ from the
assumptions upon which the budget is based, then the budget shall be adjusted to
reasonably correspond to such change.
(b) Promptly after the execution of this Agreement, WEST ESSEX shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements within thirty (30) days. WEST
ESSEX shall review these invoices and track such expenses against the budget
referenced above, and WEST ESSEX shall advise Kearny of such matters prior to
payment of such invoices.
(c) WEST ESSEX shall cause its professionals to render monthly invoices
within thirty (30) days after the end of each month. WEST ESSEX shall advise
Kearny monthly of such invoices for professional services, disbursements and
reimbursable expenses which WEST ESSEX has incurred in connection with this
Agreement prior to payment of such invoices, and WEST ESSEX shall track such
expenses against the budget referenced above.
(d) WEST ESSEX, in reasonable consultation with Kearny, shall make all
arrangements with respect to the printing and mailing of the Proxy Statement.
ARTICLE VI
CONDITIONS
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF WEST ESSEX UNDER THIS
AGREEMENT.
The obligations of WEST ESSEX under this Agreement shall be subject to
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by WEST ESSEX pursuant to Section 8.03 hereof:
(a) CORPORATE PROCEEDINGS. All action required to be taken by, or on the
part of Kearny to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated by this
Agreement, shall have been duly and validly taken by Kearny
and WEST ESSEX Bancorp shall have received certified copies of the resolutions
evidencing such authorizations;
(b) COVENANTS. The obligations and covenants of Kearny required by this
Agreement to be performed by Kearny at or prior to the Closing Date shall have
been duly performed and complied with in all material respects;
(c) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Kearny in this Agreement which is qualified as to materiality
shall be true and correct, and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date.
(d) APPROVALS OF REGULATORY AUTHORITIES. The Bank Merger, the MHC Merger
and the Mid-Tier Merger shall have received all required approvals of Regulatory
Authorities and all notice and waiting periods required thereunder shall have
expired or been terminated.
(e) NO INJUNCTION. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) OFFICER'S CERTIFICATE. Kearny shall have delivered to WEST ESSEX a
certificate, dated the Closing Date and signed, without personal liability, by
its chairman of the board or president, to the effect that the conditions set
forth in subsections (a) through (f) and (i) of this Section 6.01 have been
satisfied, to the best knowledge of the officer executing the same;
(g) OPINION OF KEARNY'S COUNSEL. WEST ESSEX shall have received an
opinion of Malizia Spidi & Fisch, PC, counsel to Kearny, dated the Closing Date,
to the effect set forth on Exhibit 6.1 attached hereto; and
(h) APPROVAL OF WEST ESSEX BANCORP'S STOCKHOLDERS AND WEST ESSEX MHC
MEMBERS. This Agreement and the transactions contemplated hereby shall have been
approved by:
(i) the stockholders of WEST ESSEX Bancorp by such vote as is
required under applicable laws of the United States and regulations and policy
of the Regulatory Authorities, WEST ESSEX Bancorp's charter and bylaws, and
under Nasdaq requirements applicable to it; and
(ii) to the extent required by the Regulatory Authorities, by the
members of WEST ESSEX MHC by such vote as is required.
(i) FUNDS DEPOSITED WITH THE EXCHANGE AGENT. On or prior to the Closing
Date, Corporation shall have deposited or caused to be deposited, in trust with
the Exchange Agent, an amount of cash equal to the aggregate Merger
Consideration that the WEST ESSEX Bancorp stockholders shall be entitled to
receive on the Merger Effective Date pursuant to Section 2.02 of this Agreement.
SECTION 6.02. CONDITIONS TO THE OBLIGATIONS OF KEARNY UNDER THIS
AGREEMENT.
The obligations of Kearny hereunder shall be subject to satisfaction at or
prior to the Closing Date of each of the following conditions, unless waived by
Kearny pursuant to Section 8.03 hereof:
(a) CORPORATE PROCEEDINGS. All action required to be taken by, or on the
part of, WEST ESSEX MHC, WEST ESSEX Bancorp and WEST ESSEX Bank to authorize the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated by this Agreement, shall have been duly and
validly taken by WEST ESSEX MHC, WEST ESSEX Bancorp and WEST ESSEX Bank; and
Kearny shall have received certified copies of the resolutions evidencing such
authorizations;
(b) COVENANTS. The obligations and covenants of WEST ESSEX required by
this Agreement to be performed at or prior to the Closing Date shall have been
duly performed and complied with in all material respects;
(c) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of WEST ESSEX in this Agreement that is qualified as to materiality
shall be true and correct, and each such representation or warranty that is not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement, and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date.
(d) APPROVALS OF REGULATORY AUTHORITIES. The Merger and the formation of
any required interim savings entities required in connection therewith shall
have received all required approvals of Regulatory Authorities (without the
imposition of any conditions that would cause a Material Adverse Effect on
Kearny, excluding standard conditions that are normally imposed by the
Regulatory Authorities in merger transactions); and all notice and waiting
periods required thereunder shall have expired or been terminated.
(e) NO INJUNCTION. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby;
(f) NO MATERIAL ADVERSE EFFECT. Except as set forth in the WEST ESSEX
Disclosure Schedule 3.07, as of the execution date of the Agreement, since
December 31, 2001, there shall not have occurred any Material Adverse Effect
with respect to WEST ESSEX Bancorp and WEST ESSEX Bank;
(g) OFFICER'S CERTIFICATE. WEST ESSEX MHC, WEST ESSEX Bancorp and WEST
ESSEX Bank shall have delivered to Kearny a certificate, dated the Closing Date
and signed, without personal liability, by the chairman of the board or
president of each, to the effect that the conditions set forth in subsections
(a) through (f) of this Section 6.02 have been satisfied, to the best knowledge
of the officer executing the same; and
(h) OPINIONS OF COUNSEL. Kearny shall have received an opinion of Muldoon
Murphy and Faucette, LLP, counsel to WEST ESSEX Bancorp, WEST ESSEX Bank and
WEST ESSEX MHC, dated the Closing Date, to the effect set forth on Exhibit 6.2
attached hereto.
(i) TRANSACTION EXPENSES. Not later than two business days prior to the
Closing Date, WEST ESSEX shall provide Kearny with an accounting of all
transaction related expenses incurred by it through the Closing Date, including
a good faith estimate of such expenses incurred or to be incurred through the
Closing Date but as to which invoices have not yet been submitted. WEST ESSEX
shall detail any variance of such transaction expenses to the budget set forth
at WEST ESSEX Disclosure Schedule 5.13(a) as of the date of the Agreement.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
SECTION 7.01. TERMINATION.
This Agreement may be terminated on or at any time prior to the Closing
Date:
(a) By the mutual written consent of the parties hereto;
(b) By either Kearny or WEST ESSEX or acting individually:
(i) if there shall have been a material breach of any
representation, warranty, covenant or other obligation of the other party and
the breach cannot be, or shall not have been, remedied within 30 days after
receipt by such other party of notice in writing specifying the nature of such
breach and requesting that it be remedied;
(ii) if the Closing Date shall not have occurred on or before July
31, 2003, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate this Agreement to perform or observe its
obligations set forth in this Agreement required to be performed or observed by
such party on or before the Closing Date; provided, however, the parties shall
in good faith agree to extend such deadline for a period of an additional 120
days thereafter in the event that such parties determine that it is reasonably
likely that such Closing Date will in fact occur during such extension period.
(iii) if either party has been informed in writing by a Regulatory
Authority whose approval or consent has been requested that such approval or
consent is denied, or is granted subject to any material change in the terms of
the Agreement, unless the failure of such occurrence shall be due to the failure
of the party seeking to terminate this Agreement to perform or observe its
agreements set forth herein required to be performed or observed by such party
on or before the Closing Date;
(iv) if the approval of the stockholders of WEST ESSEX Bancorp and
any approval of the members of WEST ESSEX MHC required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or members, as the case may
be, or at any adjournment or postponement thereof; or
(c) By Kearny if (i) as provided in Section 5.10(a)(vii), the Board of
Directors of WEST ESSEX MHC or WEST ESSEX Bancorp withdraws its recommendation
of this Agreement, fails to make such recommendation or modifies or qualifies
its recommendation in a manner adverse to Kearny, or (ii) in reliance on Section
5.06 of this Agreement, WEST ESSEX MHC or WEST ESSEX Bancorp enters into an
agreement to be acquired by, or merge or combine with, a third party in
connection with a Superior Proposal;
(d) By WEST ESSEX Bancorp or WEST ESSEX MHC, upon two days' prior notice
to Kearny, if, as a result of a Superior Proposal, the Board of Directors of
WEST ESSEX Bancorp or WEST ESSEX MHC determines, in good faith and in
consultation with counsel, that its fiduciary duties require that such Superior
Proposal be accepted.
SECTION 7.02. EFFECT OF TERMINATION.
(a) Except as otherwise provided in this Agreement, if this Agreement is
terminated pursuant to Section 7.01 hereof, this Agreement shall forthwith
become void (other than Sections 5.02(a), 7.02 and Section 8.01 hereof, which
shall remain in full force and effect), and there shall be no further liability
on the part of Kearny or WEST ESSEX to the other, except that no party shall be
relieved or released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
(b) As a condition of Kearny's willingness, and in order to induce Kearny
to enter into this Agreement and to reimburse Kearny for incurring the costs and
expenses related to entering into this Agreement and consummating the
transactions contemplated by this Agreement, WEST ESSEX will make an aggregate
cash payment to Kearny of $4.0 million (the "Expense Fee") if Kearny has
terminated this Agreement pursuant to Section 7.01(c) or WEST ESSEX has
terminated this Agreement pursuant to Section 7.01(d), and in such event WEST
ESSEX shall have no further liability to Kearny. Any payment required under this
Section 7.02(b) shall be paid by WEST ESSEX to Kearny (by wire transfer of
immediately available funds to an account designated by Kearny) within five
business days after written demand by Kearny. Each of WEST ESSEX Bank, WEST
ESSEX Bancorp and WEST ESSEX MHC shall be joint and severally liable for any
payment required to be made by WEST ESSEX to Kearny pursuant to this Section
7.02(b).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. EXPENSES.
(a) Except as provided herein, each party hereto shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel.
(b) In the event of any termination of this Agreement pursuant to Section
7.01(b)(i) hereof because of a breach of this Agreement by one of the parties,
in addition to any other damages and remedies that may be available to the
non-breaching party, the non-breaching party shall be entitled to payment of,
and the breaching party shall pay to the non-breaching party, all reasonable
out-of-pocket costs and expenses, including, without limitation, reasonable
legal, accounting and investment banking fees and expenses, incurred by the
non-breaching party in connection with entering into this Agreement and carrying
out of any and all acts contemplated hereunder; provided, however, that this
clause shall not be construed to relieve or release a breaching party from any
additional liabilities or damages arising out of its willful breach of any
provision of this Agreement.
SECTION 8.02. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants, other than those covenants
set forth in Sections 5.05, 5.11, and 7.02 which will survive the Merger, shall
terminate on the Closing Date.
SECTION 8.03. AMENDMENT, EXTENSION AND WAIVER.
Subject to applicable law, at any time prior to the consummation of the
transactions contemplated by this Agreement, the parties may (1) amend this
Agreement, (2) extend the time for the performance of any of the obligations or
other acts of either party hereto, (3) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (4) waive compliance with any of the agreements or
conditions contained in Articles V and VI hereof or otherwise. This Agreement
may not be amended except by an instrument in writing authorized by the
respective Boards of Directors and signed, by duly authorized officers, on
behalf of the parties hereto. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
SECTION 8.04. ENTIRE AGREEMENT.
Except as set forth in this Agreement, this Agreement, including the
documents and other writings referred to herein or delivered pursuant hereto,
contains the entire agreement and understanding of the parties with respect to
its subject matter. Except as set forth in this Agreement, this Agreement
supersedes all prior arrangements and understandings between the parties, both
written or oral with respect to its subject matter. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors; provided, however, that nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors, any rights, remedies, obligations or liabilities
other than pursuant to Sections 2.02(a)(i), 2.03, and 5.05.
SECTION 8.05. NO ASSIGNMENT.
Neither party hereto may assign any of its rights or obligations hereunder
to any other person, without the prior written consent of the other party
hereto.
SECTION 8.06. NOTICES.
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by prepaid registered or
certified mail (return receipt requested), or sent by telecopy, addressed as
follows:
(a) If to Kearny to:
Kearny Federal Savings Bank
614 Kearny Avenue
Kearny, New Jersey 07032
Attn: John N. Hopkins
President and Chief Executive Officer
Fax: (201) 955-1311
with a copy to:
Malizia Spidi & Fisch, PC
1100 New York Avenue, N.W.
Suite 340 West
Washington, DC 20005
Attn: Samuel J. Malizia, Esq.
Richard Fisch, Esq.
Fax: (202) 434-4661
(b) If to WEST ESSEX to:
West Essex Bank
417 Bloomfield Avenue
Caldwell, NJ 07006-4980
Attn: Leopold W. Montanaro
President and Chief Executive Officer
Fax: (973) 226-6764
with a copy to:
Muldoon, Murphy & Faucette, LLP
5101 Wisconsin Avenue, NW
Washington, DC 20016
Attn: Lori Beresford, Esq.
Fax: (202) 226-6764
SECTION 8.07. CAPTIONS.
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
SECTION 8.08. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 8.09. SEVERABILITY.
If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law. If however, any provision of this
Agreement is held invalid by a court of competent jurisdiction, then the parties
hereto shall in good faith amend this Agreement to include an alternative
provision that accomplishes a result that is as substantially similar to the
result originally intended as possible.
SECTION 8.10. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
domestic internal law (including the law of conflicts of law) of the State of
New Jersey, except to the extent that Federal law shall be deemed to preempt
such State law.
SECTION 8.11. SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the event
that the provisions contained in this Agreement were not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
KEARNY FEDERAL SAVINGS BANK
By: /s/ John N. Hopkins
--------------------------------------
John N. Hopkins
President and Chief Executive Officer
KEARNY FINANCIAL CORP.
By: /s/ John N. Hopkins
--------------------------------------
John N. Hopkins
President and Chief Executive Officer
KEARNY MHC
By: /s/ John N. Hopkins
--------------------------------------
John N. Hopkins
President and Chief Executive Officer
WEST ESSEX BANCORP, INC.
By: /s/ Leopold W. Montanaro
--------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
WEST ESSEX BANK
By: /s/ Leopold W. Montanaro
--------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
WEST ESSEX BANCORP, M.H.C.
By: /s/ Leopold W. Montanaro
--------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
Appendix B
[FinPro LETTERHEAD]
January 9, 2003
Board of Directors
West Essex Bancorp, MHC
West Essex Bancorp, Inc.
West Essex Bank, FSB
417 Bloomfield Avenue
Caldwell, NJ 07006
Dear Board Member:
You have requested our updated written opinion, as an independent financial
advisor to West Essex Bancorp, MHC, West Essex Bancorp, Inc. ("WEBK") and West
Essex Bank, (the three entities collectively referred to as "West Essex") as to
the fairness, from a financial point of view to WEBK minority shareholders, of
the cash consideration to be paid for the minority shares as well as to the
equitable treatment of the West Essex depositors as proposed in the Agreement
and Plan of Merger dated September 11, 2002 (the "Agreement"), pursuant to which
Kearny MHC, Kearny Financial Corp. and Kearny Federal Savings Bank (the three
entities collectively referred to as "Kearny") will acquire West Essex.
Pursuant to the Agreement and discussions with management, all of the minority
shares of WEBK common stock will be acquired for cash by Kearny. The cash
consideration will be $35.10 per minority share of WEBK common stock. All of the
majority shares of WEBK will be canceled and the mutual ownership interest of
West Essex depositors will be merged with Kearny mutual ownership interests.
The merger may be taxable to WEBK minority shareholders receiving cash as
consideration.
In general, FinPro, Inc. ("FinPro") provides investment banking services to the
bank and thrift industry, including appraisals and valuations of bank and thrift
institutions and their securities in connection with mergers, acquisitions and
other securities transactions. FinPro has knowledge of and experience with the
New Jersey bank and thrift market and financial institutions operating in that
market. West Essex's Board chose FinPro because of its expertise, experience and
familiarity with the bank and thrift industry.
West Essex retained FinPro to act as an independent financial advisor, to render
general advisory services and also to specifically advise the Board of Directors
of West Essex in connection with its merger and acquisition activities. Pursuant
to its engagement, FinPro will be paid a fee for rendering its fairness opinions
relating to the merger. West Essex will pay FinPro a fee equal to 1.0% of the
Aggregate Purchase Price, as defined in the engagement letter, or approximately
$725,000 for rendering its fairness opinion and for its financial advisory
assistance. A portion of FinPro's fee is contingent upon the consummation of the
proposed acquisition.
Prior to being retained as West Essex's financial advisor for this transaction,
FinPro has provided consulting and financial advisory services to West Essex
including strategic planning and interest rate risk management. FinPro appraised
West Essex as part of West Essex's mutual holding company reorganization and
stock offering. Furthermore, prior to being retained as West Essex's financial
advisor for this transaction, FinPro has provided consulting and financial
advisory services to Kearny including strategic planning, market feasibility,
interest rate risk management and merger and acquisition advisory assistance.
- --------------------------------------------------------------------------------
Confidential
Fairness Opinion at January 9, 2003 Page: 2
- --------------------------------------------------------------------------------
In connection with its opinion, FinPro reviewed and considered, among other
things:
(i) the Agreement and the exhibits thereto;
(ii) changes in the market for bank and thrift stocks;
(iii) the performance of WEBK's common stock;
(iv) trends and changes in the financial condition of WEBK;
(v) the most recent annual report to shareholders of WEBK;
(vi) quarterly reports on Form 10-Q of WEBK;
(vii) the long range strategic plan of WEBK
(viii) quarterly regulatory Thrift Financial Reports of Kearny Federal Savings
Bank and West Essex;
(ix) the most recent audit letter to WEBK and Kearny; and
(x) recent regulatory exam reports of West Essex and Kearny.
We also had discussions with the management of West Essex and Kearny regarding
their respective financial results and have analyzed the most current financial
data available for West Essex and Kearny. In addition, we considered financial
studies, analyses and investigations and economic and market information that we
deemed relevant.
We considered certain financial data of West Essex and compared that data to
other thrift institutions and their holding companies that were recently merged
or acquired. Furthermore, we considered the financial terms of these business
combinations involving these thrift institutions and their holding companies.
FinPro did not independently verify the financial data provided by or on behalf
of West Essex and Kearny, but instead relied upon and assumed the accuracy and
completeness of the data provided.
In reaching our opinion, we took into consideration the financial benefits of
the proposed transaction to WEBK minority shareholders. Based on all factors
deemed relevant and assuming the accuracy and completeness of the information
and data provided by West Essex and Kearny, it is FinPro's opinion as of this
date, that the cash consideration is fair from the financial point of view of
WEBK minority shareholders. Furthermore, the treatment of West Essex depositors
is equitable.
Respectfully Submitted,
/s/ FinPro, Inc.
--------------------------
FinPro, Inc.
Liberty Corner, New Jersey
- --------------------------------------------------------------------------------
Confidential
WEST ESSEX BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
February 13, 2003
10:00 a.m., Local Time
_______________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Leopold W. Montanaro and John J. Burke,
each with full power of substitution, to act as proxies for the undersigned, and
to vote all shares of common stock of West Essex Bancorp, Inc. which the
undersigned is entitled to vote at the special meeting of stockholders, to be
held on February 13, 2003, at 10:00 a.m., local time, at the Radisson Hotel,
Route 46, Fairfield, New Jersey and at any and all adjournments of the meeting
with all of the powers the undersigned would possess if personally present at
such meeting as follows:
The approval of the Agreement and Plan of Merger, dated September 11, 2002,
by and between West Essex Bancorp, Inc., West Essex Bank, West Essex
Bancorp, M.H.C. and Kearny Financial Corp., Kearny Federal Savings Bank and
Kearny MHC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the special meeting or any adjournment or
postponement thereof.
The board of directors recommends a vote "FOR" approval of the agreement and
plan of merger.
This proxy, properly signed and dated, will be voted as directed, but if no
instructions are specified, this proxy will be voted "FOR" the approval of the
Agreement and Plan of Merger. If any other business is presented at the special
meeting, including whether or not to adjourn the meeting, this proxy will be
voted by the proxies in their best judgment. At the present time, the board of
directors knows of no other business to be presented at the special meeting.
Dated:
--------------------------
-------------------------------
SIGNATURE OF STOCKHOLDER
-------------------------------
SIGNATURE OF CO-HOLDER (IF ANY)
The above signed acknowledges receipt from the Company prior to the
execution of this proxy of a notice of special meeting of stockholders and of a
proxy statement for the special meeting of stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
_____________________________
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Dear ESOP Participant:
On behalf of the Board of Directors, I am forwarding to you the attached
GREEN vote authorization form for the purpose of conveying your voting
instructions to RSI Trust Company (the "ESOP Trustee") on the proposal presented
at the Special Meeting of Stockholders of West Essex Bancorp, Inc. (the
"Company") on February 13, 2003. Also enclosed is a Notice and Proxy Statement
for the Company's Special Meeting of Stockholders.
As of the Record Date, December 30, 2002, the West Essex Bank Employee
Stock Ownership Plan (the "ESOP") Trust held 180,034 shares of Common Stock,
69,209 of which had been allocated to participants' accounts. These allocated
shares of Company common stock will be voted as directed by the ESOP
participants; provided timely instructions from the participants are received by
the ESOP Trustee. The unallocated shares of Company common stock in the ESOP
Trust and the allocated shares of Company common stock for which no instructions
are provided, or for which no timely instructions are received by the ESOP
Trustee will be voted by the ESOP Trustee in a manner calculated to most
accurately reflect the instructions the ESOP Trustee has received from
participants regarding the shares of Company common stock allocated to their
accounts, so long as such vote is in accordance with the Employee Retirement
Income Security Act of 1974, as amended.
At this time, in order to direct the voting of the shares allocated to your
account under the ESOP, please complete and sign the enclosed GREEN vote
authorization form and return it in the enclosed postage-paid envelope no later
than FEBRUARY 6, 2003. Your vote will not be revealed, directly or indirectly,
to any officer, employee or director of the Company or West Essex Bank. The
votes will be tallied by the ESOP Trustee and the ESOP Trustee will use the
voting instructions it receives to vote the shares of Company common stock held
in the ESOP Trust.
As an employee of West Essex Bank and participant in several of the West
Essex employee benefit plans you will receive vote authorization forms for each
stock-based plan in which you are a participant. Please vote all of the vote
authorization forms you receive.
Sincerely,
/s/ Leopold W. Montanaro
----------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
Name:
-----------------------------------
Shares:
----------------------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that RSI Trust Company, (the "ESOP Trustee"), is the holder of
record and custodian of all shares of West Essex Bancorp, Inc. (the "Company")
common stock allocated to me under the West Essex Bank Employee Stock Ownership
Plan (the "ESOP"). I understand that my voting instructions are solicited on
behalf of the Company's Board of Directors for the Special Meeting of
Stockholders to be held on February 13, 2003.
Accordingly, you are to vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated September 11, 2002,
by and between West Essex Bancorp, Inc., West Essex Bank, West Essex
Bancorp, M.H.C. and Kearny Financial Corp., Kearny Federal Savings Bank and
Kearny MHC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
The ESOP Trustee is hereby authorized to vote any shares allocated to me
under the ESOP in its trust capacity as indicated above.
- ----------------------- -------------------------------------
Date Signature
Please date, sign and return this form in the enclosed postage-paid envelope no
later than February 6, 2003.
WEST ESSEX BANK LETTERHEAD
Dear 401(k) Plan Participant:
On behalf of the Board of Directors, I am forwarding to you the attached
YELLOW vote authorization form for the purpose of conveying your voting
instructions to RSI Trust Company (the "Employer Stock Fund Trustee") on the
proposal presented at the Special Meeting of Stockholders of West Essex Bancorp,
Inc. (the "Company") on February 13, 2003. Also enclosed is a Notice and Proxy
Statement for the Company's Special Meeting of Stockholders.
As a 401(k) Plan Participant investing in the Employer Stock Fund, you are
entitled to direct the Employer Stock Fund Trustee as to the voting of Company
common stock credited to your account. The Employer Stock Fund Trustee will vote
all shares of Company common stock for which no directions are given or for
which timely instructions were not received in a manner calculated to most
accurately reflect the instructions the Employer Stock Fund Trustee received
from participants regarding shares of Company common stock in their 401(k) Plan
accounts.
At this time, in order to direct the voting of Company common stock
credited to your account in the Employer Stock Fund, you must fill out and sign
the enclosed YELLOW vote authorization form and return it to the Employer Stock
Fund Trustee in the accompanying postage-paid envelope by FEBRUARY 6, 2003. Your
vote will not be revealed, directly or indirectly, to any officer, employee or
director of the Company or West Essex Bank.
As an employee of West Essex Bank and participant in several of the West
Essex employee benefit plans you will receive vote authorization forms for each
stock-based plan in which you are a participant. Please vote all of the vote
authorization forms you receive.
Sincerely,
/s/ Leopold W. Montanaro
----------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
Name:
-------------------------------------
Shares:
-----------------------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that RSI Trust Company, (the "Employer Stock Fund Trustee"),
is the holder of record and custodian of all shares of West Essex Bancorp, Inc.
(the "Company") common stock credited to me under the West Essex Bank 401(k)
Plan. I understand that my voting instructions are solicited on behalf of the
Company's Board of Directors for the Special Meeting of Stockholders to be held
on February 13, 2003.
Accordingly, you are to vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated September 11, 2002,
by and between West Essex Bancorp, Inc., West Essex Bank, West Essex
Bancorp, M.H.C. and Kearny Financial Corp., Kearny Federal Savings Bank and
Kearny MHC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER.
The Employer Stock Fund Trustee is hereby authorized to vote any shares
credited to me under the 401(k) Plan in its trust capacity as indicated above.
- ----------------- ------------------------------------
Date Signature
Please date, sign and return this form in the enclosed postage-paid envelope no
later than February 6, 2003.
WEST ESSEX BANCORP, INC. LETTERHEAD
Dear Stock Award Recipient:
On behalf of the Board of Directors, I am forwarding to you the attached
BLUE vote authorization form for the purpose of conveying your voting
instructions to RSI Trust Company (the "Incentive Plan Trustee") on the proposal
presented at the Special Meeting of Stockholders of West Essex Bancorp, Inc.
(the "Company") on February 13, 2003. Also enclosed is a Notice and Proxy
Statement for the Company's Special Meeting of Stockholders.
As a recipient of a Stock Award under the West Essex Bancorp, Inc. 1999
Stock-Based Incentive Plan, as amended and restated (the "Incentive Plan"), you
are entitled to vote all shares of restricted Company common stock awarded to
you under the Incentive Plan that are unvested as of December 30, 2002. The
Incentive Plan Trustee will vote the shares of Company common stock held in the
Incentive Plan Trust in accordance with instructions it receives from you and
other Stock Award Recipients.
At this time, in order to direct the voting of Company common stock awarded
to you under the Incentive Plan, you must complete and sign the enclosed BLUE
vote authorization form and return it in the accompanying postage-paid envelope
no later than FEBRUARY 6, 2003.
If you are an employee of West Essex Bank and participant in several of the
West Essex employee benefit plans you will receive vote authorization forms for
each stock-based plan in which you are a participant. Please vote all of the
vote authorization forms you receive.
Sincerely,
/s/ Leopold W. Montanaro
---------------------------------------
Leopold W. Montanaro
President and Chief Executive Officer
Name:
------------------------------
Shares:
----------------------------
VOTE AUTHORIZATION FORM
-----------------------
I understand that RSI Trust Company (the "Incentive Plan Trustee") is the
holder of record and custodian of all unvested shares of West Essex Bancorp,
Inc. common stock awarded to me under the Incentive Plan. I understand my voting
instructions are solicited on behalf of the Company's Board of Directors for the
Special Meeting of Stockholders to be held on February 13, 2003.
Accordingly, you are to vote my shares as follows:
The approval of the Agreement and Plan of Merger, dated September 11, 2002,
by and between West Essex Bancorp, Inc., West Essex Bank, West Essex
Bancorp, M.H.C. and Kearny Financial Corp., Kearny Federal Savings Bank and
Kearny MHC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT AND
PLAN OF MERGER.
The Incentive Plan Trustee is hereby authorized to vote any unvested shares
awarded to me under the Incentive Plan in its trust capacity as indicated above.
- ------------------ -------------------------------------
Date Signature
Please date, sign and return this form in the enclosed postage-paid envelope no
later than February 6, 2003.