AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 2004
REGISTRATION NO. 333-116851
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PROVIDENT BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 6712
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
80-0091851
(I.R.S. Employer
Identification Number)
400 RELLA BOULEVARD
MONTEBELLO, NEW YORK 10901
(845) 369-8040
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
GEORGE STRAYTON
400 RELLA BOULEVARD
MONTEBELLO, NEW YORK 10901
(845) 369-8040
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
Copies to:
JOHN J. GORMAN, ESQ. EDWARD D. HERLIHY, ESQ.
NED QUINT, ESQ. WACHTELL, LIPTON, ROSEN & KATZ
LUSE GORMAN POMERENK & SCHICK, P.C. 51 WEST 52ND STREET
5335 WISCONSIN AVENUE, N.W., SUITE 400 NEW YORK, NEW YORK 10019
WASHINGTON, D.C. 20015 PHONE: (212) 403-1000
PHONE: (202) 274-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
CALCULATION OF REGISTRATION FEE
========================================= ================== ==================== ==================== =====================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION FEE
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE
- ----------------------------------------- ------------------ -------------------- -------------------- ---------------------
Common Stock, $0.01 par value per share 7,910,000 shares (1) $157,007,604 (1) $19,893(2)
========================================= ================== ==================== ==================== =====================
(1) Calculated based upon the payment of shares of common stock and cash for the cancellation of shares of common stock
and the cancellation of stock options pursuant to the merger between Provident Bancorp, Inc. and Warwick Community
Bancorp, Inc.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
[Provident Bancorp, Inc. Logo] [Warwick Community Bancorp, Inc. Logo]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of Provident Bancorp, Inc. and Warwick Community
Bancorp, Inc. have both unanimously approved the merger of Warwick Community
Bancorp with and into Provident Bancorp. If the merger is completed, Warwick
Community Bancorp stockholders will have the opportunity to elect to receive in
exchange for each share of Warwick Community Bancorp common stock they own
immediately prior to completion of the merger 2.7810 shares of Provident Bancorp
common stock, a cash payment of $32.26, or a combination of shares of Provident
Bancorp common stock and cash. However, because 50% of the total number of
shares of Warwick Community Bancorp common stock outstanding at the closing will
be converted into Provident Bancorp common stock and the remaining 50% of the
outstanding shares will be converted into cash (subject to a potential
adjustment to preserve the intended federal income tax treatment of the merger),
regardless of your election, you may receive a combination of cash and shares of
Provident Bancorp common stock for your Warwick Community Bancorp shares that is
different than what you elected depending on the elections made by other Warwick
Community Bancorp stockholders.
Based on the closing price of $_____ per share of Provident Bancorp
common stock on __________, 2004, each share of Warwick Community Bancorp common
stock that is exchanged solely for Provident Bancorp common stock would be
converted into 2.7810 shares of Provident Bancorp common stock having an implied
value of $_________. The market price of Provident Bancorp common stock will
fluctuate over time, which will cause the implied value of the stock component
of the merger consideration to fluctuate. You should obtain current market
quotations for the shares of both companies from a newspaper, the internet or
your broker. Provident Bancorp common stock is listed on the Nasdaq National
Market under the symbol "PBCP." Warwick Community Bancorp common stock is listed
on the Nasdaq National Market under the symbol "WSBI." We expect that the merger
will generally be tax-free to you with respect to any Provident Bancorp common
stock that you receive and will generally be taxable to you with respect to any
cash that you receive.
The merger cannot be completed unless the stockholders of Warwick
Community Bancorp approve the merger agreement. Warwick Community Bancorp has
scheduled an annual meeting so its stockholders can vote on the merger
agreement, elect three directors and ratify the appointment of Warwick Community
Bancorp's independent registered public accounting firm for the year ending
December 31, 2004. Warwick Community Bancorp's board of directors unanimously
recommends that its stockholders vote "FOR" the merger agreement, "FOR" Warwick
Community Bancorp's nominees to the Warwick Community Bancorp board of directors
and "FOR" the ratification of KPMG LLP as its independent registered public
accounting firm for the year ending December 31, 2004.
Warwick Community Bancorp will hold its annual meeting of stockholders
on September 22, 2004, at 9:30 a.m., at The Inn at Central Valley, Smith Clove
Road, Central Valley, New York.
This document describes the annual meeting of stockholders, the merger,
the documents related to the merger, and other related matters. WE URGE YOU TO
READ THIS ENTIRE DOCUMENT CAREFULLY. IN PARTICULAR, YOU SHOULD CAREFULLY
CONSIDER THE DISCUSSION IN THE SECTION TITLED "RISKS RELATED TO THE MERGER"
BEGINNING ON PAGE 28. YOU CAN ALSO OBTAIN INFORMATION ABOUT OUR COMPANIES FROM
DOCUMENTS THAT WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the
Warwick Community Bancorp annual meeting of stockholders, please take the time
to vote by completing and mailing the enclosed proxy card to us. If you sign,
date and mail your proxy card without indicating how you want to vote, your
proxy will be counted as a vote "FOR" the merger agreement and the other
proposals being considered at the annual meeting of stockholders. If you do not
return the proxy card, it will have the same effect as a vote against the merger
agreement.
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, NOR ANY OTHER BANK REGULATORY AGENCY, NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Proxy Statement/Prospectus is dated August 16, 2004 and is first
being mailed to stockholders of Warwick Community Bancorp on or about August 18,
2004.
HOW TO GET COPIES OF RELATED DOCUMENTS
This document incorporates important business and financial information
about Provident Bancorp, Inc. and Warwick Community Bancorp, Inc. that is not
included in or delivered with this document. Warwick Community Bancorp
stockholders may receive the information free of charge by writing or calling
the persons listed below. For Provident Bancorp documents, make your request to
Provident Bancorp, Inc., 400 Rella Boulevard, Montebello, New York 10901,
Attention: Roberta Lennett; telephone number (845) 369-8082. For Warwick
Community Bancorp documents, make your request to Barbara A. Rudy-Moore, Senior
Vice President, Shareholder Relations, Warwick Community Bancorp, Inc., P.O. Box
591, Warwick, New York 10990-0591; telephone number (845) 986-2206. We will
respond to your request within one business day by sending the requested
documents by first class mail or other equally prompt means. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF WARWICK COMMUNITY BANCORP'S
ANNUAL MEETING OF STOCKHOLDERS, ANY REQUEST SHOULD BE MADE BY SEPTEMBER 7, 2004.
ALSO SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 137.
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TABLE OF CONTENTS
HOW TO GET COPIES OF RELATED DOCUMENTS.........................................i
SUMMARY........................................................................1
QUESTIONS AND ANSWERS ABOUT THE VOTING PROCEDURES FOR THE ANNUAL MEETING......12
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF PROVIDENT BANCORP, INC.....14
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF WARWICK COMMUNITY
BANCORP, INC..................................................................18
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL DATA......................21
Unaudited Pro Forma Condensed Consolidated Financial Information...........21
Unaudited Pro Forma Condensed Consolidated Balance Sheet...................22
Unaudited Pro Forma Condensed Consolidated Statements of Income............24
Comparative Pro Forma Per Share Data.......................................27
RISKS FACTORS.................................................................28
Risks Related to the Merger................................................28
Risks About Provident Bancorp..............................................30
Risks Related to Prior Independent Registered Public Accounting Firm
of Warwick
Community Bancorp..........................................................36
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................37
THE WARWICK COMMUNITY BANCORP, INC. ANNUAL MEETING............................39
Matters to be Considered...................................................39
Proxies....................................................................39
Solicitation of Proxies....................................................40
Record Date................................................................41
Voting Rights and Vote Required............................................41
Recommendation of the Board of Directors...................................42
Attending the Warwick Community Bancorp Annual Meeting.....................42
Participants in Warwick Community Bancorp's and Warwick Savings'
Benefit Plans..............................................................42
Security Ownership of Certain Beneficial Owners of Warwick Community
Bancorp....................................................................43
Beneficial Stock Ownership of Management...................................44
INFORMATION ABOUT THE COMPANIES...............................................46
PROPOSAL I-- THE PROPOSED MERGER..............................................49
General....................................................................49
Background of the Merger...................................................49
Warwick Community Bancorp's Reasons for the Merger; Recommendation of
Warwick Community Bancorp's Board of Directors.............................52
Opinion of Warwick Community Bancorp's Financial Advisor...................56
Provident Bancorp's Reasons for the Merger.................................68
Merger Consideration; Cash or Stock Election...............................70
Election Procedures; Surrender of Stock Certificates.......................73
Treatment of Warwick Community Bancorp Stock Options.......................75
Employee Matters...........................................................76
Interests of Directors and Officers in the Merger..........................76
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Conduct of Business Pending the Merger.....................................80
Payment of Special Cash Dividend...........................................81
Representations and Warranties.............................................82
Conditions to the Merger...................................................82
Regulatory Approvals Required for the Merger...............................83
No Solicitation............................................................86
Termination; Amendment; Waiver.............................................86
Management and Operations After the Merger.................................88
Effective Date of Merger...................................................88
Public Trading Markets.....................................................89
Warwick Community Bancorp Rights Agreement.................................89
Provident Bancorp Dividends................................................89
Fees and Expenses..........................................................90
Material United States Federal Income Tax Consequences of the Merger.......90
Material United States Federal Income Tax Consequences of the Merger
to Participants in the Warwick Community Bancorp, Inc. Employee Stock
Ownership Plan and the 401(K) Savings Plan.................................95
Resale of Provident Bancorp Common Stock...................................97
Accounting Treatment.......................................................98
Dissenters' Rights of Appraisal............................................98
Warwick Community Bancorp Stock Trading and Dividend Information..........103
Provident Bancorp Stock Trading and Dividend Information..................105
Description of Capital Stock of Provident Bancorp.........................108
Provisions of the Provident Bancorp Certificate of Incorporation
and Bylaws................................................................110
Business Combinations With Interested Stockholders........................112
Business Combination Statutes and Provisions..............................113
PROPOSAL II - ELECTION OF DIRECTORS..........................................113
General...................................................................113
Information as to Nominees and Continuing Directors.......................114
Nominees for Election as Directors........................................115
Continuing Directors......................................................116
Board Meetings, Board Committees and Corporate Governance Matters.........117
Audit Committee Report....................................................121
Relationship With Independent Registered Public Accounting Firm...........122
General...................................................................122
Independent Auditing Firm Fees............................................122
Change in Auditors........................................................123
Directors Compensation....................................................124
Fee Arrangements..........................................................124
Compensation Committee Interlocks and Insider Participation...............124
Compensation Committee Report On Executive Compensation...................125
Performance Graph.........................................................128
Executive Compensation....................................................129
Summary Compensation Table................................................129
Aggregated Option/sar Exercises in Last Fiscal Year and
Fy-end Option/sar Values..................................................130
Other Compensation Plans and Arrangements.................................130
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Pension Plan Table(1).....................................................132
Supplemental Executive Retirement Plan....................................132
Transactions With Certain Related Persons.................................133
Compliance With Section 16(A) of the Exchange Act.........................133
Equity Compensation Plan Information Table................................133
PROPOSAL III - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM...................................................134
ADDITIONAL INFORMATION.......................................................135
EXPERTS......................................................................136
LEGAL OPINIONS...............................................................136
OTHER MATTERS................................................................137
WHERE YOU CAN FIND MORE INFORMATION..........................................137
APPENDICES
A. Agreement and Plan of Merger by and between Provident Bancorp, Inc. and
Warwick Community Bancorp, Inc. dated March 15, 2004......................A-1
B. Opinion of Sandler O'Neill & Partners, L.P................................B-1
C. Section 262 of the Delaware General Corporation Law.......................C-1
D. Warwick Community Bancorp, Inc. Audit Committee Charter...................D-1
E. Warwick Community Bancorp, Inc. Nominating Committee Charter..............E-1
F. Index to Consolidated Financial Statements of E.N.B. Holding
Company, Inc..............................................................F-1
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WARWICK COMMUNITY BANCORP, INC.
18 OAKLAND AVENUE
WARWICK, NEW YORK 10990
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on September 22, 2004
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Warwick Community Bancorp, Inc. will be held at The Inn at Central Valley, Smith
Clove Road, Central Valley, New York, on September 22, 2004 at 9:30 a.m., local
time, for the following purposes:
1. To consider and vote on a proposal to approve the Agreement and
Plan of Merger, by and between Provident Bancorp, Inc. and
Warwick Community Bancorp, Inc., dated as of March 15, 2004, and
all of the matters contemplated in the agreement, pursuant to
which Warwick Community Bancorp will merge with and into
Provident Bancorp, with Provident Bancorp being the surviving
corporation;
2. To elect three persons to serve as directors of Warwick
Community Bancorp until the merger with Provident Bancorp is
consummated or, if the merger is not consummated, for a term of
three years each;
3. To ratify the appointment of KPMG LLP as Warwick Community
Bancorp's independent registered public accounting firm for the
year ending December 31, 2004; and
such other matters as may properly come before the Warwick Community Bancorp
annual meeting of stockholders or any adjournment or postponement of the
meeting, including any proposal to approve the adjournment of the annual
meeting, if necessary, to solicit additional proxies in the event that there are
not sufficient votes at the time of the annual meeting to approve the proposals.
As of the date of this Proxy Statement/Prospectus, management of Warwick
Community Bancorp is not aware of any other business to be considered.
We more fully describe the merger with Provident Bancorp and the other
proposals in the attached Proxy Statement/Prospectus, which you should read
carefully and in its entirety before voting. A copy of the merger agreement is
included as APPENDIX A to the accompanying Proxy Statement/Prospectus.
We have established August 9, 2004 as the record date for determining
the stockholders entitled to notice of and to vote at the annual meeting. Only
record holders of Warwick Community Bancorp common stock as of the close of
business on that date will be entitled to vote at the annual meeting or any
adjournment or postponement of the annual meeting. If there are not sufficient
votes for a quorum or to approve or ratify any of the foregoing proposals at the
time of the annual meeting, the annual meeting may be adjourned in order to
permit further solicitation of proxies by Warwick Community Bancorp. A list of
stockholders entitled to vote at the annual meeting will be available at Warwick
Community Bancorp, Inc., 18 Oakland
Avenue, Warwick, New York, for ten days prior to the annual meeting and also
will be available at the annual meeting.
Our board of directors unanimously recommends that you vote "FOR"
approval of the merger agreement and the transactions contemplated by the merger
agreement, "FOR" each of the nominees for director listed in the Proxy
Statement/Prospectus and "FOR" ratification of the appointment of KPMG LLP as
Warwick Community Bancorp's independent registered public accounting firm for
the year ending December 31, 2004.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. Your vote is important, regardless of the number
of shares that you own. Voting by proxy will not prevent you from voting in
person at Warwick Community Bancorp's annual meeting of stockholders, but will
assure that your vote is counted if you are unable to attend.
By Order of the Board of Directors,
------------------------------
Lois E. Ulatowski
Corporate Secretary
Warwick, New York
August 16, 2004
SUMMARY
This is a summary of certain information regarding the proposed merger
and the annual meeting of stockholders. It does not contain all of the
information that may be important to you. We urge you to carefully read the
entire document, including the Appendices, before deciding how to vote.
WHAT THIS DOCUMENT IS ABOUT
The boards of directors of Warwick Community Bancorp, Inc. and Provident
Bancorp, Inc. have approved the merger agreement between Warwick Community
Bancorp and Provident Bancorp pursuant to which Warwick Community Bancorp will
merge with and into Provident Bancorp. The merger cannot be completed unless the
stockholders of Warwick Community Bancorp approve the merger agreement. Warwick
Community Bancorp's stockholders will vote on the merger agreement at Warwick
Community Bancorp's annual meeting. They will also vote on the election of three
directors and the ratification of KPMG LLP as Warwick Community Bancorp's
independent registered public accounting firm for the year ending December 31,
2004. This document is the Proxy Statement used by your board to solicit proxies
for the annual meeting. It is also the Prospectus of Provident Bancorp regarding
the shares of Provident Bancorp common stock to be issued to Warwick Community
Bancorp stockholders if the merger is completed.
THE WARWICK COMMUNITY BANCORP ANNUAL MEETING
DATE, TIME AND PLACE
Warwick Community Bancorp will hold its annual meeting of stockholders
on September 22, 2004, 9:30 a.m., at The Inn at Central Valley, Smith Clove
Road, Central Valley, New York.
RECORD DATE
The record date for stockholders entitled to vote at the annual meeting
of stockholders is August 9, 2004.
SHARES ENTITLED TO VOTE
4,498,923 shares of Warwick Community Bancorp common stock were
outstanding on the Record Date and entitled to vote at the Warwick Community
Bancorp annual meeting.
PURPOSE OF THE ANNUAL MEETING
The purpose of the annual meeting is to consider and vote on the merger
agreement, the election of three directors and the ratification of KPMG LLP as
Warwick Community Bancorp's independent registered public accounting firm for
the year ending December 31, 2004.
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VOTE REQUIRED
A majority of the outstanding shares of Warwick Community Bancorp common
stock entitled to vote must be cast in favor of the merger agreement for it to
be approved. Directors are elected by a plurality of votes cast, without regard
to either broker non-votes or proxies as to which authority to vote for the
nominees being proposed is withheld. The ratification of KPMG LLP as Warwick
Community Bancorp's independent registered public accounting firm is determined
by a majority of the votes cast, without regard to broker non-votes or proxies
marked "ABSTAIN."
As of the record date, the directors and executive officers of Warwick
Community Bancorp and their affiliates beneficially owned 668,469 shares, or
approximately 14.05% of the outstanding shares of Warwick Community Bancorp
common stock. Pursuant to voting agreements entered into at the time the merger
agreement with Provident Bancorp was signed, each director of Warwick Community
Bancorp has agreed, among other things, to vote or cause to be voted all shares
over which they maintain sole or shared voting power in favor of approval and
adoption of the merger agreement.
THE WARWICK COMMUNITY BANCORP BOARD RECOMMENDS YOU VOTE IN FAVOR OF THE
PROPOSALS.
Warwick Community Bancorp's board of directors has unanimously approved
the merger agreement and unanimously recommends that Warwick Community Bancorp
stockholders vote "FOR" the merger agreement, "FOR" each of the nominees listed
in this Proxy Statement/Prospectus for the Warwick Community Bancorp board of
directors and "FOR" the ratification of KPMG LLP as independent registered
public accounting firm for the year ending December 31, 2004.
THE COMPANIES
PROVIDENT BANCORP
Provident Bancorp, a Delaware corporation, is the savings and loan
holding company for Provident Bank. Provident Bank is a federally-chartered
savings association that operates 27 full-service banking offices in Rockland,
Orange, Ulster and Sullivan Counties in New York. Provident Bank has established
Provident Municipal Bank as a special purpose New York-chartered commercial bank
that accepts deposits from municipalities located in the State of New York. The
Federal Deposit Insurance Corporation insures the deposits of Provident Bank and
Provident Municipal Bank. At June 30, 2004, Provident Bancorp had $1.8 billion
in total consolidated assets. Provident Bancorp's principal executive offices
are located at 400 Rella Boulevard, Montebello, New York 10901. Provident
Bancorp's telephone number is (845) 369-8040.
WARWICK COMMUNITY BANCORP
Warwick Community Bancorp, a Delaware corporation, is the bank holding
company for The Warwick Savings Bank, which we refer to in this document as
"Warwick Savings", a New
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York-chartered savings bank that operates seven full-service banking offices in
Orange and Putnam Counties in New York, and The Towne Center Bank, a New
Jersey-chartered commercial bank with two banking offices in Bergen County, New
Jersey. Warwick Savings has established Warwick Commercial Bank as a special
purpose New York-chartered commercial bank that accepts deposits from
municipalities located in the State of New York. The Federal Deposit Insurance
Corporation insures the deposits of Warwick Savings, The Towne Center Bank and
Warwick Commercial Bank. At June 30, 2004, Warwick Community Bancorp had
approximately $718.0 million in total consolidated assets. Warwick Community
Bancorp's principal executive offices are located at 18 Oakland Avenue, Warwick,
New York 10990. Warwick Community Bancorp's telephone number is (845) 986-2206.
THE MERGER
GENERAL DESCRIPTION (SEE PAGE 49)
Warwick Community Bancorp will merge with and into Provident Bancorp,
with Provident Bancorp as the surviving entity. The merger will be completed
within thirty days after all conditions precedent to closing have been met,
unless Provident Bancorp and Warwick Community Bancorp agree on a different
closing date. In addition, in the event the closing would be required to occur
on or after September 11, 2004 but before October 1, 2004, then, at Provident
Bancorp's sole discretion, the closing may occur on the close of business on
October 1, 2004, provided that all conditions precedent to the closing have been
fulfilled or waived. A copy of the merger agreement is attached as APPENDIX A to
this document and is incorporated by reference.
CONSIDERATION PAYABLE TO WARWICK COMMUNITY BANCORP STOCKHOLDERS (SEE PAGE 70)
Warwick Community Bancorp stockholders will be offered the opportunity
to elect to receive merger consideration in the form of 2.7810 shares of
Provident Bancorp common stock, $32.26 in cash or a combination of Provident
Bancorp common stock and cash in exchange for their shares of Warwick Community
Bancorp common stock. However, because the merger agreement generally provides
that 50% of the total number of shares of Warwick Community Bancorp common stock
outstanding at the closing will be converted into Provident Bancorp common stock
and the remaining 50% of the outstanding shares will be converted into cash,
regardless of a Warwick Community Bancorp stockholder's election, a Warwick
Community Bancorp stockholder may actually receive a combination of cash and
shares of Provident Bancorp common stock for his, her or its Warwick Community
Bancorp shares that is different than what such stockholder elected, depending
on the elections made by other Warwick Community Bancorp stockholders. All
elections will be subject to the allocation and proration procedures described
in the merger agreement.
For federal income tax purposes that are explained on page 71, the
number of shares of Provident Bancorp common stock that will be issued in the
merger to Warwick Community Bancorp stockholders may be increased, and the
aggregate amount of cash that will be issued to Warwick Community Bancorp
stockholders may be decreased. If this tax-related adjustment becomes necessary,
the amount of cash you would have received, after taking into account your
election and any proration, will be reduced and you will receive additional
shares of Provident
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Bancorp common stock instead. Whether the tax-related adjustment will be made,
and the magnitude of the adjustment, if made, will be based on a number of
factors, including the average trading price of Provident Bancorp common stock
prior to the date of the merger.
Warwick Community Bancorp stockholders may also receive a special cash
dividend based on factors relating to the disposition of automobiles contained
in the automobile lease portfolio held by Warwick Savings. Warwick Savings has
disposed of all the automobiles and related lease receivables in the automobile
lease portfolio for total consideration of $7,052,000, of which $7,008,000 was
received by Warwick Savings in cash and $44,000 is being held in escrow. Warwick
Savings realized a loss on this sale of $2,573,000, beyond reserves established
for this portfolio through March 31, 2004, in the second calendar quarter of
2004. While Warwick Savings has disposed of all such automobiles, the ultimate
amount of the dividend (if any) will depend on a number of additional factors
and legal limitations (including the approval of the New York State Banking
Department with respect to any special dividend payment). While there can be no
assurance as to the amount or timing of the dividend, or whether the dividend
will be declared and paid, based upon the amounts received and the applicable
expenses, Warwick Community Bancorp and Provident Bancorp have agreed that the
amount available that may be declared as a special dividend is $4,150,000.
However, the ultimate declaration of that dividend is subject to, among other
things, approval of the New York State Banking Department, and accordingly,
Warwick Community Bancorp cannot give any assurances to the amount or timing of
any special dividend. See page 81.
ELECTION OF CASH OR STOCK CONSIDERATION (SEE PAGE 73)
No more than 40 business days and no less than 20 business days before
the expected date of completion of the merger, Provident Bancorp will send an
election form to Warwick Community Bancorp stockholders that may be used to
indicate whether their preference is to receive cash, shares of Provident
Bancorp common stock or a combination of cash and Provident Bancorp common
stock, or whether they have no preference.
WARWICK COMMUNITY BANCORP STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE INSTRUCTIONS FROM THE PROVIDENT BANCORP EXCHANGE
AGENT.
The merger agreement contains allocation and proration provisions that
are designed to ensure that, subject to a tax-related adjustment, 50% of the
outstanding shares of common stock of Warwick Community Bancorp will be
exchanged for shares of Provident Bancorp common stock and the remaining 50% of
the outstanding shares of common stock of Warwick Community Bancorp will be
exchanged for cash.
Therefore, if the holders of more than 50% of the outstanding Warwick
Community Bancorp common stock elect to receive Provident Bancorp common stock
for such shares, the amount of Provident Bancorp common stock that each such
stockholder would receive from Provident Bancorp will be reduced on a pro rata
basis. As a result, these Warwick Community Bancorp stockholders will receive
cash consideration for any Warwick Community Bancorp shares for which they do
not receive Provident Bancorp common stock.
4
Similarly, if the holders of more than 50% of the outstanding Warwick
Community Bancorp common stock elect to receive cash for such shares, the amount
of cash that each such stockholder would receive from Provident Bancorp will be
reduced on a pro rata basis. As a result, such stockholders will receive
Provident Bancorp common stock for any Warwick Community Bancorp shares for
which they do not receive cash.
THE DEADLINE FOR RETURNING THE ELECTION FORM IS THE CLOSE OF BUSINESS ON
THE TWENTY-FIFTH DAY FOLLOWING THE MAILING DATE OF THE ELECTION FORM, NOT
INCLUDING THE DATE OF MAILING, UNLESS WARWICK COMMUNITY BANCORP AND PROVIDENT
BANCORP MUTUALLY AGREE UPON ANOTHER DEADLINE DATE. IF YOU DO NOT MAKE AN
ELECTION, YOU WILL BE ALLOCATED EITHER CASH OR SHARES OF PROVIDENT BANCORP
COMMON STOCK, OR A COMBINATION OF CASH AND SHARES OF PROVIDENT BANCORP COMMON
STOCK, DEPENDING ON THE ELECTIONS MADE BY OTHER WARWICK COMMUNITY BANCORP
STOCKHOLDERS.
COMPARATIVE MARKET PRICES AND SHARE INFORMATION (SEE PAGE 103)
Provident Bancorp common stock is listed on the Nasdaq National Market
under the symbol "PBCP." Warwick Community Bancorp common stock is listed on the
Nasdaq National Market under the symbol "WSBI." The table below presents the per
share closing prices of Provident Bancorp's and Warwick Community Bancorp's
common stock and the equivalent per share price for Warwick Community Bancorp
common stock on (1) March 15, 2004, the last trading date before public
announcement of the merger agreement and (2) August 13, 2004, the latest
practicable date before printing of this Proxy Statement/Prospectus. The
equivalent price per share column is calculated by assuming half of each share
of Warwick Community Bancorp's common stock is converted into Provident Bancorp
common stock at an exchange ratio of 2.7810 shares per full Warwick Community
Bancorp share and the remaining half is converted into cash at $32.26 per full
Warwick Community Bancorp share. For more information about the exchange ratio,
see "Proposal I - The Proposed Merger - Merger Consideration; Cash or Stock
Election," and for more information about the stock prices and dividends of
Provident Bancorp and Warwick Community Bancorp, see "Proposal I - The Proposed
Merger - Warwick Community Bancorp Stock Trading and Dividend Information" and
"Proposal I - The Proposed Merger - Provident Bancorp Stock Trading and Dividend
Information."
LAST REPORTED SALE PRICE FOR SHARES OF
---------------------------------------------
WARWICK
PROVIDENT COMMUNITY EQUIVALENT
BANCORP BANCORP PER SHARE
COMMON STOCK COMMON STOCK PRICE
------------- ------------ -------------
March 15, 2004 $ 11.85 $ 33.57 $ 32.61
August 13, 2004
The market price of Provident Bancorp's common stock will fluctuate
between the date of this Proxy Statement/Prospectus and the date on which the
merger takes place, as well as after completion of the merger. Warwick Community
Bancorp stockholders are advised to obtain
5
current market quotations for Provident Bancorp's common stock. No assurance can
be given as to the market price of Provident Bancorp's common stock at the time
of the merger or thereafter.
PROVIDENT BANCORP DIVIDENDS (SEE PAGE 105)
During the quarter ended June 30, 2004, Provident Bancorp paid a cash
dividend on its common stock of $0.04 per share. Provident Bancorp currently
expects to continue to pay a quarterly dividend of at least $0.04 per share of
common stock. Although there is no present plan or intention to increase or
decrease this dividend, the Provident Bancorp board of directors may, subject to
applicable law and regulations, change this dividend amount at any time, and
Provident Bancorp's ability to pay dividends on its common stock is subject to
various legal and regulatory limitations.
DISSENTERS' RIGHTS FOR WARWICK COMMUNITY BANCORP STOCKHOLDERS (SEE PAGE 98)
Under the Delaware General Corporation Law, holders of Warwick Community
Bancorp common stock have the right to obtain an appraisal of the value of their
shares of Warwick Community Bancorp common stock in connection with the merger.
To perfect appraisal rights, a Warwick Community Bancorp stockholder must not
vote for the approval of the merger agreement and must strictly comply with all
of the procedures required under Section 262 of the Delaware General Corporation
Law. These procedures are described more fully beginning on page 98.
We have included a copy of the Delaware General Corporation Law -
Section 262 -- Appraisal Rights as APPENDIX C to this document.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 90)
The merger has been structured to qualify as a "reorganization" under
Section 368(a) of the Internal Revenue Code for United States federal income tax
purposes, and it is a condition to the respective obligations of the parties to
complete the merger that Provident Bancorp and Warwick Community Bancorp each
receive a legal opinion to the effect that the merger will so qualify. The
consequences described below assume that, as expected, that the merger will
qualify as a tax-free reorganization for federal income tax purposes. The
federal income tax consequences of the merger to you will depend on the form of
consideration you receive in the merger.
If you receive solely Provident Bancorp common stock in exchange for
your shares of Warwick Community Bancorp common stock, you will generally not
recognize any gain or loss for federal income tax purposes (except with respect
to cash received in lieu of any fractional shares).
If you receive solely cash in exchange for your shares of Warwick
Community Bancorp common stock, you will generally recognize gain or loss in an
amount equal to the difference between the amount of cash received and your tax
basis in your shares of Warwick Community Bancorp common stock exchanged.
6
If you receive a combination of Provident Bancorp common stock and cash
in exchange for your shares of Warwick Community Bancorp common stock, and your
tax basis in your shares of Warwick Community Bancorp common stock is less than
the sum of the amount of cash and the fair market value of the Provident Bancorp
common stock you receive, you generally will recognize gain in an amount equal
to the lesser of:
(1) the sum of the amount of cash and the fair market value of the
Provident Bancorp common stock you receive minus your tax basis in Warwick
Community Bancorp common stock exchanged in the merger; or
(2) the amount of cash that you receive in the merger.
In certain circumstances, such gain or, in the case of recipients of
cash only, the entire amount of cash received, could be taxable as a dividend
rather than as gain from the sale of a capital asset.
However, if you receive a combination of Provident Bancorp common stock
and cash in exchange for your shares of Warwick Community Bancorp and you
realize a loss because your tax basis in your shares of Warwick Community
Bancorp common stock is greater than the sum of the amount of cash and the fair
market value of the Provident Bancorp common stock you receive, the loss will
not currently be allowed.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND
UPON YOUR OWN SITUATION. IN ADDITION, YOU MAY BE SUBJECT TO STATE, LOCAL OR
FOREIGN TAX LAWS THAT ARE NOT DISCUSSED IN THIS DOCUMENT. YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO YOU.
TREATMENT OF WARWICK COMMUNITY BANCORP STOCK OPTIONS (SEE PAGE 75)
In the merger, the outstanding and unexercised options to acquire
Warwick Community Bancorp common stock will be cancelled and all rights under
the options will be extinguished in exchange for a cash payment determined by
multiplying the number of Warwick Community Bancorp common stock underlying the
option by an amount equal to $32.26 less the per share exercise price of the
option.
RESELLING THE STOCK YOU RECEIVE IN THE MERGER (SEE PAGE 97)
The shares of Provident Bancorp common stock to be issued in the merger
will be registered under the Securities Act of 1933, as amended. Except as noted
below, stockholders of Warwick Community Bancorp may freely transfer the shares
of Provident Bancorp common stock after they receive them. Warwick Community
Bancorp has identified certain of its directors, executive officers and others
who may be deemed "affiliates" of Warwick Community Bancorp, and those persons
have entered into agreements with Provident Bancorp restricting their ability to
transfer the shares they will receive in the merger.
7
DIFFERENCES IN STOCKHOLDERS' RIGHTS (SEE PAGE 105)
In the merger, each Warwick Community Bancorp stockholder who receives
Provident Bancorp common stock will become a Provident Bancorp stockholder. The
rights of Warwick Community Bancorp stockholders are currently governed by the
Delaware General Corporation Law and Warwick Community Bancorp's certificate of
incorporation and bylaws. The rights of Provident Bancorp stockholders are
currently governed by Delaware General Corporation Law and Provident Bancorp's
certificate of incorporation and bylaws. There are differences in the rights of
stockholders of Warwick Community Bancorp and Provident Bancorp stockholders
with respect to voting requirements and various other matters.
REASONS FOR THE MERGER (SEE PAGES 52 AND 68)
On January 14, 2004, Provident Bancorp, MHC completed its "second-step"
conversion from the mutual holding company structure to the fully converted
stock form of ownership. As part of the conversion, Provident Bancorp sold
approximately $195.7 million in shares of common stock. Over the last several
years, Provident Bancorp has expanded its operations through the acquisition of
E.N.B. Holding Company, Inc., which was completed on January 14, 2004,
contemporaneous with the completion of the second-step conversion transaction,
and the acquisition of The National Bank of Florida in April 2002. Provident
Bancorp identified Warwick Community Bancorp as a merger candidate that would
add to its franchise by expanding its banking operations in Orange County, New
York, which Provident Bancorp believes is an attractive market area.
Warwick Community Bancorp entered into the merger agreement at the
conclusion of a process in which Warwick Community Bancorp determined that a
merger with Provident Bancorp was in the best interests of its stockholders. The
reasons of the Warwick Community Bancorp board are discussed in more detail in
the body of this document, and include, among others, the expectation that the
combined company would have better future prospects than Warwick Community
Bancorp was likely to achieve on a stand-alone basis. The Warwick Community
Bancorp board of directors believes that the merger is fair to Warwick Community
Bancorp stockholders and urges stockholders to vote "FOR" approval of the merger
agreement.
OPINION OF WARWICK COMMUNITY BANCORP'S FINANCIAL ADVISOR (SEE PAGE 56)
Among other factors considered in deciding to approve the merger
agreement, the board of directors of Warwick Community Bancorp considered the
opinion of Sandler O'Neill & Partners, L.P., its financial advisor, provided to
the Warwick Community Bancorp board of directors on March 15, 2004 that as of
that date, and based on and subject to the assumptions made, matters considered
and qualifications and limitations in its opinion, the merger consideration
provided for in the merger agreement was fair from a financial point of view to
holders of Warwick Community Bancorp common stock. This opinion was subsequently
confirmed in writing as of the date of this Proxy Statement/Prospectus. Holders
of Warwick Community Bancorp common stock should carefully read Sandler
O'Neill's opinion in its entirety. A copy of the full text of Sandler O'Neill's
opinion dated as of the date of this Proxy Statement/Prospectus is included as
APPENDIX B to this Proxy Statement/Prospectus. Sandler O'Neill's opinion is not
intended to be and does not constitute a recommendation to any holder
8
of Warwick Community Bancorp common stock as to how such holder should vote in
connection with the merger transaction.
Pursuant to an engagement letter between Warwick Community Bancorp and
Sandler O'Neill, Warwick Community Bancorp agreed to pay Sandler O'Neill a fee
of approximately $_____ (based upon the closing price of Provident Bancorp
common stock as of August 13, 2004), $384,000 of which has been paid and the
remainder of which is payable upon completion of the merger. Warwick Community
Bancorp has paid Sandler O'Neill a fee of $200,000 in connection with rendering
its opinion, which fee will be credited against the transaction fee payable at
the completion of the merger.
FINANCIAL INTERESTS OF WARWICK COMMUNITY BANCORP'S DIRECTORS AND OFFICERS IN THE
MERGER (SEE PAGE 76)
Some of Warwick Community Bancorp's directors and executive officers
have financial interests in the merger that are in addition to their interests
as stockholders of Warwick Community Bancorp. The Warwick Community Bancorp
board of directors considered these interests in deciding to approve the merger
agreement.
Provident Bancorp has agreed that two current directors of Warwick
Community Bancorp will be appointed as directors of Provident Bancorp and
Provident Bank when the merger is completed.
In addition, Messrs. Fred G. Kowal, Ronald J. Gentile and Arthur W.
Budich will each receive a payment in consideration of the termination of their
existing employment agreements with Warwick Community Bancorp.
Messrs. Kowal and Gentile are also participants in a non-tax-qualified
benefit restoration plan which will be amended in connection with the merger to
require lump sum distributions to be paid to Messrs. Kowal and Gentile within 30
days following the merger. In addition, Mr. Kowal is a participant in a
supplemental executive retirement plan. Mr. Kowal has agreed to a lump sum cash
payment from the supplemental executive retirement plan at the effective time of
the merger in lieu of any further benefits or accruals under the supplemental
executive retirement plan.
Provident Bancorp has agreed to indemnify the directors and officers of
Warwick Community Bancorp against certain liabilities following the merger.
Provident Bancorp has also agreed to provide directors' and officers' liability
insurance for a period of six years following the merger.
On the Record Date, directors and executive officers of Warwick
Community Bancorp and their affiliates owned 668,469 shares or 14.05% of the
Warwick Community Bancorp common stock.
9
CONDITIONS TO THE MERGER (SEE PAGE 82)
Completion of the merger is contingent on a number of customary
conditions, including approval of the merger agreement by Warwick Community
Bancorp stockholders at the annual meeting and receipt of the required
regulatory approvals.
REGULATORY APPROVAL (SEE PAGE 83)
The merger and related transactions are subject to the approval of the
Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the
New York State Banking Department, and the non-objection of the Federal Reserve
Bank of New York. We have filed the applications required to obtain the
necessary regulatory approvals. As of the date of this document, we have not
received all of the required approvals. We filed a waiver notice with the
Federal Reserve Bank of New York. Approval by any of these entities does not
constitute an endorsement of the merger or a determination that the terms of the
merger are fair to Warwick Community Bancorp stockholders.
TERMINATING THE MERGER AGREEMENT (SEE PAGE 86)
Warwick Community Bancorp will be required to pay Provident Bancorp a
termination fee in the amount of $6.5 million if, among other things, in
connection with Warwick Community Bancorp's receipt of a superior proposal (as
defined in the merger agreement), the merger agreement is terminated because
Warwick Community Bancorp (i) enters into an acquisition agreement with respect
to such superior proposal, (ii) terminates the merger agreement or (iii)
withdraws or adversely modifies its recommendation to its stockholders to vote
in favor of the merger agreement.
The merger agreement also may be terminated by mutual consent, by either
Warwick Community Bancorp or Provident Bancorp if the merger has not occurred by
December 31, 2004 and under other limited circumstances described in the merger
agreement.
AMENDING THE MERGER AGREEMENT (SEE PAGE 86)
The merger agreement may be amended by the written consent of Provident
Bancorp and Warwick Community Bancorp at any time prior to the completion of the
merger. However, under applicable law, an amendment that reduces the amount or
value, or changes the form of the merger consideration payable to Warwick
Community Bancorp stockholders, and certain other types of amendments cannot be
made following approval of the merger agreement by Warwick Community Bancorp
stockholders without their approval.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 98)
Provident Bancorp expects to account for the merger as a purchase for
financial reporting purposes. Under the purchase method of accounting, the
tangible and identifiable intangible assets and liabilities of Warwick Community
Bancorp will be recorded, as of completion of the merger, at their respective
fair values. The excess of the purchase price over the net assets acquired will
be recorded as goodwill. Goodwill resulting from the merger will not be
10
amortized, but will be reviewed for impairment at least annually. Core deposit
and other intangibles with finite useful lives recorded in connection with the
merger will be amortized.
WARWICK COMMUNITY BANCORP HAS AGREED NOT TO SOLICIT ALTERNATIVE TRANSACTIONS
(SEE PAGE 86)
In the merger agreement, Warwick Community Bancorp has agreed not to
initiate, solicit or knowingly encourage, negotiate with, or provide any
information to any person other than Provident Bancorp concerning an acquisition
transaction involving Warwick Community Bancorp, Warwick Savings or Towne Center
Bank. This restriction may deter other potential acquirors of control of Warwick
Community Bancorp. However, Warwick Community Bancorp may take certain of these
actions if its board of directors determines that it must do so in order to
properly discharge its fiduciary duties following consultation with its legal
counsel.
11
QUESTIONS AND ANSWERS ABOUT THE VOTING
PROCEDURES FOR THE ANNUAL MEETING
Q: WHAT DO I NEED TO DO NOW? proxy card to ensure that your vote is counted.
A: After you have carefully read this Proxy Q: IF MY SHARES ARE HELD IN "STREET NAME"
Statement/Prospectus, indicate on your proxy BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR
card how you want your shares of Warwick ME?
Community Bancorp common stock to be voted, then
sign and mail it in the enclosed postage-paid A: No. Your broker cannot vote on the
envelope as soon as possible so that your shares merger proposal on your behalf without specific
may be represented and voted at the Warwick instructions from you. Your broker will vote
Community Bancorp annual meeting. If you sign your shares on the merger proposal only if you
and send in your proxy card and do not indicate provide instructions on how to vote. You should
how you want to vote, we will vote your shares follow the directions provided by your broker.
in favor of the merger agreement and the other Your broker can vote your shares on all other
proposals to be voted on at the annual meeting. proposals without your instructions.
Q: WHY IS MY VOTE IMPORTANT? Q. WHAT IF I FAIL TO INSTRUCT MY BROKER?
A. If you do not return your proxy card at A. If you fail to instruct your broker how
or prior to the annual meeting, it will be more to vote your shares and the broker submits an
difficult for Warwick Community Bancorp to unvoted proxy, the resulting broker "non-vote"
obtain the necessary quorum to hold the annual will be counted toward a quorum at the annual
meeting. The merger must be approved by the meeting, but it will have the same effect as a
holders of a majority of the outstanding shares vote against the merger agreement.
of Warwick Community Bancorp common stock
entitled to vote at the Warwick Community Q. CAN I ATTEND THE ANNUAL MEETING AND VOTE
Bancorp annual meeting. Therefore, the failure MY SHARES IN PERSON?
of a Warwick Community Bancorp stockholder to
vote, by proxy or in person, will have the same A. Yes. All stockholders are invited to
effect as a vote against the merger agreement. attend the annual meeting. Stockholders of
record can vote in person at the annual meeting.
Q: HOW DO I VOTE? If a broker holds your shares in street name,
then you are not the stockholder of record and
A: You can vote by mail. For this method you must ask your broker how you can vote at the
you will need to complete, sign, date and return annual meeting in person.
your proxy card in the postage-paid envelope
provided. You can also vote in person at the
annual meeting. Even if you plan to attend the
annual meeting in person, please take the time
to properly return the
12
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO
MY SIGNED PROXY CARD? OBTAIN ADDITIONAL COPIES OF THIS PROXY
STATEMENT/PROSPECTUS?
A: Yes. If you have not voted through your
broker, there are three ways for you to revoke You should contact:
your proxy and change your vote. First, you may
send written notice to the Corporate Secretary Warwick Community Bancorp, Inc.
of Warwick Community Bancorp stating that you 18 Oakland Avenue
would like to revoke your proxy. Second, you may Warwick, New York 10990
complete and submit a new proxy card. Third, you Attention: Barbara A. Rudy-Moore
may vote in person at the annual meeting. If you Senior Vice President, Shareholder Relations
have instructed a broker to vote your shares, Phone Number: (845) 986-2206
you must follow the directions you receive from
your broker to revoke or change your vote. Your
last vote will be the vote that is counted.
Q: I AM A WARWICK COMMUNITY BANCORP
STOCKHOLDER. SHOULD I SEND IN MY WARWICK
COMMUNITY BANCORP STOCK CERTIFICATES NOW?
A: No. You should not send in your stock
certificates at this time. We will separately
send you an election form with instructions for
surrendering your Warwick Community Bancorp
stock certificates.
Q: WHEN DO YOU EXPECT TO MERGE?
A: We are working toward completing the
merger as quickly as possible. We expect to
complete the merger in the fourth quarter of
2004. However, we cannot assure you when or if
the merger will occur. We must first obtain the
approvals of stockholders of Warwick Community
Bancorp and all necessary regulatory approvals.
13
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF
PROVIDENT BANCORP, INC.
The following tables set forth selected consolidated historical
financial and other data of Provident Bancorp for the periods and at the dates
indicated. In January 1999, Provident Bank reorganized from a mutual savings
association into the mutual holding company structure. Prior to that date,
Provident Bancorp had no significant assets, liabilities or operations and,
accordingly, the financial and other data prior to that date represent the
consolidated financial condition and results of operations of Provident Bank.
The information at September 30, 2003 and 2002 and for the years ended September
30, 2003, 2002 and 2001 is derived in part from and should be read together with
the audited consolidated financial statements and notes thereto of Provident
Bancorp, incorporated by reference into this Proxy Statement/Prospectus. The
information at September 30, 2001, 2000 and 1999 and for the years ended
September 30, 2000 and 1999 was derived in part from audited consolidated
financial statements that are not included or incorporated into this Proxy
Statement/Prospectus. The information at June 30, 2004 and for the nine months
ended June 30, 2004 and 2003 is unaudited. However, in the opinion of management
of Provident Bancorp, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
the unaudited periods have been made. The selected operating data presented
below for the nine months ended June 30, 2004, are not necessarily indicative of
the results that may be expected for future periods. You should read this
information in conjunction with Provident Bancorp's consolidated financial
statements and related notes included in Provident Bancorp's Annual Report on
Form 10-K for the year ended September 30, 2003, which is incorporated by
reference in this Proxy Statement/Prospectus and from which certain of this
information is derived. See "Where You Can Find More Information" on page 137.
The information presented below at and for the nine months ended June 30, 2004
reflects the second-step conversion and the acquisition of E.N.B. Holding
Company consummated in January 2004.
14
AT SEPTEMBER 30,
AT JUNE 30 --------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
Total assets........................ $1,782,670 $1,174,305 $1,027,701 $ 881,260 $ 844,303 $ 814,518
Loans, net (1)...................... 971,935 703,184 660,816 606,146 589,822 566,521
Securities available for sale....... 571,962 300,715 206,146 163,928 162,157 148,387
Securities held to maturity......... 70,066 73,544 86,791 71,355 48,586 56,782
Deposits............................ 1,240,827 869,553 799,626 653,100 608,976 586,640
Borrowings.......................... 169,552 164,757 102,968 110,427 127,571 117,753
Equity.............................. 342,644 117,857 110,867 102,620 90,986 90,299
FOR THE
NINE MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED SEPTEMBER 30,
------------------------ --------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
SELECTED OPERATING DATA:
Interest and dividend income... $ 53,387 $ 43,715 $ 57,790 $ 59,951 $ 60,978 $ 58,899 $ 52,267
Interest expense............... 9,401 9,311 12,060 17,201 26,244 26,034 21,589
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income......... 43,986 34,404 45,730 42,750 34,734 32,865 30,678
Provision for loan losses...... 575 800 900 900 1,440 1,710 1,590
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses. 43,411 33,604 44,830 41,850 33,294 31,155 29,088
Non-interest income............ 8,462 7,258 9,555 5,401 4,706 3,391 3,103
Non-interest expense .......... 41,725(11) 27,206 36,790 32,161 26,431 25,808 26,303
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income tax expense 10,148 13,656 17,595 15,090 11,569 8,738 5,888
Income tax expense............. 3,377 4,989 6,344 5,563 4,087 2,866 1,958
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.................. $ 6,771 $ 8,667 $ 11,251 $ 9,527 $ 7,482 $ 5,872 $ 3,930
========== ========== ========== ========== ========== ========== ==========
(FOOTNOTES ON FOLLOWING PAGES)
15
FOR THE
NINE MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED SEPTEMBER 30,
------------------- -----------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
SELECTED FINANCIAL RATIOS AND OTHER DATA:
PERFORMANCE RATIOS:
Return on assets (ratio of net income to
average total assets) (9).......... 0.59% 1.09% 1.04% 0.99% 0.87% 0.70% 0.52%
Return on equity (ratio of net income to
average equity) (9)................ 3.51 10.27 9.92 8.92 7.71 6.58 5.03
Average interest rate spread (2) (9). 3.90 4.38 4.30 4.33 3.56 3.51 3.66
Net interest margin (3) (9)........... 4.22 4.64 4.55 4.71 4.20 4.12 4.24
Efficiency ratio (4).................. 79.55(11) 65.30 66.55 66.79 67.02 71.18 77.86
Non-interest expense to average total
assets (9)......................... 3.61 3.40 3.40 3.36 3.06 3.08 3.47
Ratio of average interest-earning assets
to average interest-bearing
liabilities........................ 134.81 120.65 121.33 120.03 120.20 118.54 119.28
PER SHARE AND RELATED DATA:
Basic earnings per share (5)(10)...... $ 0.19 $ 0.25 $ 0.33 $ 0.28 $ 0.22 $ 0.17 $ 0.09
Diluted earnings per share (10)....... 0.18 0.25 0.32 0.28 0.22 0.17 0.09
Dividends per share (6) (10).......... 0.11 0.09 0.13 0.09 0.05 0.03 0.01
Dividend payout ratio (7) (10)........ 57.89% 36.00% 39.04% 33.06% 22.45% 19.74% 15.00%
Book value per share (8) (10)......... $ 8.64 $ 3.28 $ 3.35 $ 3.13 $ 2.89 $ 2.45 $ 2.46
ASSET QUALITY RATIOS:
Non-performing assets to total assets. 0.31% 0.48% 0.40% 0.49% 0.27% 0.50% 0.62%
Non-performing loans to total loans... 0.55 0.77 0.66 0.74 0.37 0.67 0.81
Allowance for loan losses to
non-performing loans............... 316.43 205.87 235.66 209.59 400.66 189.85 133.78
Allowance for loan losses to total loans 1.75 1.59 1.55 1.55 1.48 1.28 1.08
CAPITAL RATIOS:
Equity to total assets at end of period 19.22% 10.38% 10.04% 10.79% 11.64% 10.78% 11.09%
Average equity to average assets...... 16.74 10.59 10.47 11.15 11.24 10.67 10.29
Tier 1 leverage ratio (bank only)..... 11.86 8.34 8.14 8.45 10.20 9.59 9.56
OTHER DATA:
Number of full service offices........ 27 18 18 17 15 13 12
- ------------------------------------------
(1) Includes loans held for sale.
(2) The average interest rate spread represents the difference between the
weighted-average yield on interest-earning assets and the weighted-
average cost of interest-bearing liabilities for the period.
(3) The net interest margin represents net interest incom as a percent of
average interest-earning assets for the period.
(4) The efficiency ratio represents non-interest expensed divided by the sum
of net interest income and non-interest income.
(5) Basic earnings per share for fiscal 1999 was computedtfor the nine-month
period following the stock offering s based on net income of
approximately $3.2 million for tha period and 35,640,204 average
outstanding common share (as adjusted for the 4.4323 exchange ratio to
reflect thedsecond-step conversion completed January 14, 2004).
(6) The following table sets forth aggregate cash dividenus paid per period,
which is calculated by multiplying the dividend declared per share by
the number of shares o tstanding as of the applicable record date.
FOR THE NINE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED SEPTEMBER 30,
------------------- -----------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
-------- -------- -------- -------- -------- -------- --------
Dividends paid to public stockholders $ 3,422 $ 1,418 $ 1,968 $ 1,435 $ 807 $ 563 $ 235
Dividends paid to Provident Bancorp, MHC -- 453 453 500 -- 486 132
-------- -------- -------- -------- -------- -------- --------
Total dividends paid $ 3,422 $ 1,871 $ 2,421 $ 1,935 $ 807 $ 1,049 $ 367
======== ======== ======== ======== ======== ======== ========
Payments listed above exclude cash dividends waived by Provident
Bancorp, MHC of $662,000, $1.4 million, $2.1 million, $1.3 million,
$972,000, $177,000 and $132,000 for the nine months ended June 30, 2004
and 2003 and for the years ended September 30, 2003, 2002, 2001, 2000
and 1999, respectively. Provident Bancorp, MHC began waiving dividends
in May 1999, and, as of September 30, 2003, had waived dividends
totaling $4.7 million.
(7) The dividend payout ratio represents dividends per share divided by
basic earnings per share. For fiscal 1999, the payout ratio is based on
dividends of $0.06 per share and nine-month earnings of $0.40 per share.
Based on six-month earnings of $0.29 per share for the third and fourth
quarters of fiscal 1999, the dividend payout ratio would have been
20.69%.
(8) Book value per share is based on total stockholders' equity and
39,638,415, 35,250,414, 35,221,365, 35,447,372, 35,565,510, 35,803,232
and 36,699,444 outstanding common shares at June 30, 2004 and 2003, and
September 30, 2003, 2002, 2001, 2000 and 1999, respectively (as
16
adjusted for the 4.4323 exchange ratio to reflect the second-step
conversion completed January 14, 2004). For this purpose, common shares
include unallocated employee stock ownership plan shares but exclude
treasury shares.
(9) Ratios for the nine months ended June 30, 2004 and 2003 are annualized.
(10) Prior period share information has been retroactively adjusted to
reflect the 4.4323 exchange ratio due to the second-step conversion
completed January 14, 2004.
(11) Reflects contribution of $5.0 million in shares of common stock and cash
to the Provident Bank Charitable Foundation.
17
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF
WARWICK COMMUNITY BANCORP, INC.
The following tables set forth selected consolidated historical
financial and other data of Warwick Community Bancorp, Inc. for the periods and
at the dates indicated. The information at December 31, 2003 and 2002 and for
the years ended December 31, 2003, 2002 and 2001 is derived in part from and
should be read together with the audited consolidated financial statements and
notes thereto of Warwick Community Bancorp, incorporated by reference into this
Proxy Statement/Prospectus. The information at December 31, 2001, 2000 and 1999
and for the years ended December 31, 2000 and 1999 is derived in part from
audited consolidated financial statements that are not included or incorporated
in this document. The information at June 30, 2004 and for the six months ended
June 30, 2004 and 2003 is unaudited. However, in the opinion of management of
Warwick Community Bancorp, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
the unaudited periods have been made. The selected operating data presented
below for the six months ended June 30, 2004, are not necessarily indicative of
the results that may be expected for future periods. You should read this
information in conjunction with Warwick Community Bancorp's consolidated
financial statements and related notes included in Warwick Community Bancorp's
Annual Report on Form 10-K for the year ended December 31, 2003, which is
incorporated by reference in this Proxy Statement/Prospectus and from which this
information is derived. See "Where You Can Find More Information" on page 137.
18
AT DECEMBER 31,
AT JUNE --------------------------------------------------------------------
30, 2004 2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
SELECTED FINANCIAL CONDITION DATA:
Total assets..................... $ 717,953 $ 759,996 $ 781,238 $ 806,702 $ 637,799 $ 597,714
Loans receivable, net............ 290,792 320,978 464,273 516,172 432,198 349,321
Investment securities............ 312,395 340,883 211,597 209,572 149,513 186,490
Real estate owned, net........... 96 505 1,145 1,149 1,268 415
Deposits......................... 485,313 487,572 466,676 422,246 348,131 283,072
FHLB-NY advances................. 152,100 183,495 216,495 290,785 188,800 201,675
Securities sold under repurchase
agreements..................... -- -- -- 2,500 16,845 37,375
Stockholders` equity............. 67,966 73,834 81,108 74,003 72,581 66,572
FOR THE
SIX MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
SELECTED OPERATING DATA:
Interest income.................. $ 17,448 $ 20,841 $ 38,872 $ 49,706 $ 52,120 $ 45,630 $ 35,562
Interest expense................. 6,975 9,560 17,331 21,825 27,415 26,226 16,951
Net interest income.............. 10,473 11,281 21,541 27,881 24,705 19,404 18,611
Provision for loan losses........ 6,058 90 90 1,338 979 900 500
Net interest income after provision
for loan losses................ 4,415 11,191 21,451 26,543 23,726 18,504 18,111
Non-interest income:
Service and fee income......... 2,634 2,871 5,946 5,433 4,526 3,540 2,914
Gain (loss) on securities
transactions................... 12 352 405 507 27 (878) 524
Net gain on sale of loans...... 69 265 451 350 687 600 109
Other income................... 326 274 695 1,577 700 2,106 258
Total non-interest income, net. 3,041 3,762 7,497 7,867 5,940 5,368 3,805
Non-interest expense:
Salaries and employee benefits. 5,363 5,139 10,538 10,423 11,642 10,109 9,536
FDIC insurance................. 42 40 84 80 72 62 31
Occupancy and equipment........ 1,134 1,062 2,094 2,136 2,191 1,889 1,452
Data processing................ 732 645 1,382 1,171 1,102 1,063 974
Advertising.................... 87 153 275 304 134 182 500
Professional fees.............. 1,407 452 1,110 1,095 1,394 1,192 1,006
Other operating expenses....... 1,511 1,587 3,276 3,334 3,912 2,908 3,308
Total non-interest expense..... 10,276 9,078 18,759 18,543 20,447 17,405 16,807
Income (loss) before income tax
expense.......................... (2,820) 5,875 10,189 15,867 9,219 6,467 5,109
Income tax expense (benefit)..... (1,009) 2,212 3,729 6,211 3,281 2,057 1,966
Net income (loss).............. $ (1,811) $ 3,663 $ 6,460 $ 9,656 $ 5,938 $ 4,410 $ 3,143
19
AT OR FOR THE SIX
MONTHS ENDED
JUNE 30, AT OR FOR THE YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Per Share Data:
Earnings (loss) per share, Basic....... $ (0.42) $ 0.84 $ 1.50 $ 2.11 $ 1.27 $ 0.91 $ 0.57
Earnings (loss) per share, Diluted..... (0.42) 0.80 1.44 2.02 1.24 0.91 0.57
Dividends declared per share........... 0.30 0.29 0.59 0.31 0.38 0.27 0.19
Book Value(2).......................... 15.11 16.94 16.42 16.78 16.15 14.96 13.18
Performance Ratios:
Return on average assets............... (0.49)% 0.91% 0.82% 1.23% 0.79% 0.70% 0.62%
Return on average equity............... (4.92) 9.30 8.50 12.08 7.97 6.61 4.15
Average equity to average assets....... 9.87 9.77 9.60 10.19 9.86 10.51 14.83
Equity to total assets................. 9.47 9.28 9.72 10.38 9.17 11.38 11.14
Core deposits to total deposits(3)..... 81.12 78.54 79.87 74.87 70.90 64.70 68.48
Net interest spread(4)................. 2.58 2.54 2.48 3.31 2.96 2.71 3.14
Net interest margin(5)................. 2.98 2.96 2.88 3.78 3.48 3.28 3.87
Operating expense to average assets(7). 2.73 2.21 2.34 2.36 2.70 2.73 3.27
Average interest-earning assets to
average interest-bearing liabilities. 120.13 116.78 117.36 116.00 113.62 112.97 120.87
Efficiency ratio(6).................... 75.69 61.84 65.45 51.02 61.68 72.68 76.70
Dividend Payout Ratio.................. n/a 36.25 40.97 15.35 30.65 29.67 33.33
REGULATORY CAPITAL RATIOS(1):
Warwick Savings:
Tier 1 capital to assets............... 7.69% 7.73% 7.77 8.33 7.08 8.68 9.38
Tier 1 capital to risk-weighted assets. 16.27 15.27 15.80 14.88 12.87 16.33 17.60
Total capital to risk-weighted assets.. 17.22 16.50 17.05 15.99 13.70 17.16 18.34
Warwick Commercial:
Tier 1 capital to assets............... 24.02 11.40 17.41 20.60 20.18 N/A N/A
Tier 1 capital to risk-weighted assets. 71.36 71.87 87.78 89.45 93.89 N/A N/A
Total capital to risk-weighted assets.. 71.36 71.87 87.78 89.45 93.89 N/A N/A
Towne Center:
Tier 1 capital to assets............... 19.82 18.64 19.62 20.00 21.58 36.35 87.72
Tier 1 capital to risk-weighted assets. 23.29 24.03 23.21 23.67 28.49 50.83 211.83
Total capital to risk-weighted assets.. 24.52 25.25 24.36 24.82 29.74 51.72 211.83
Warwick Community Bancorp:
Tier 1 capital to assets............... 9.28 8.98 9.41 9.98 8.93 11.76 12.67
Tier 1 capital to risk-weighted assets. 18.61 17.18 18.33 17.29 15.27 20.81 23.94
Total capital to risk-weighted assets.. 19.60 18.42 19.57 18.40 16.13 21.63 24.58
ASSET QUALITY RATIOS(1):
Non-performing loans to total loans...... 0.37% 0.60% 0.68 0.44 0.30 0.28 0.58
Non-performing loans to total assets..... 0.15 0.28 0.29 0.26 0.20 0.19 0.34
Non-performing assets to total assets.... 0.16 0.29 0.36 0.41 0.34 0.39 0.41
Allowance for loan losses to total loans. 1.24 1.29 1.51 1.05 0.71 0.63 0.55
Allowance for loan losses to
non-performing loans................... 337.02 214.85 222.75 241.76 231.45 219.69 95.33
OTHER DATA:
Branch Offices........................... 9 9 9 8 8 7 6
- ------------------------------------------
(1) Regulatory Capital Ratios and Asset Quality Ratios are end of period
ratios. With the exception of period-end ratios, all ratios are based on
average monthly balances during the periods indicated.
(2) Book Value represents total stockholders' equity divided by the shares
outstanding for the period, net of unearned shares held by the Employee
Stock Ownership Plan and Recognition and Retention Plan.
(3) Warwick Community Bancorp considers the following to be core deposits:
checking accounts, passbook accounts, NOW accounts and money market
accounts.
(4) The interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost
of interest-bearing liabilities.
(5) The net interest margin represents net interest income as a percentage
of average interest-earning assets.
(6) The efficiency ratio represents non-interest expense, excluding
non-recurring items and amortization of intangibles, as a percentage of
the sum of net interest income and non-interest income, excluding any
gains or losses on sales of assets.
(7) The operating expense to average assets ratio represents non-interest
expense, excluding amortization of intangibles and expense on other real
estate owned, as a percentage of average assets.
20
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On January 14, 2004, Provident Bancorp completed its stock offering in
conjunction with the second-step conversion of Provident Bancorp, MHC. On that
same date, Provident Bancorp completed its acquisition of E.N.B. Holding Company
and its wholly-owned subsidiary, Ellenville National Bank, located in
Ellenville, New York. This acquisition was accounted for as a purchase,
resulting in the creation of goodwill totaling approximately $52.1 million. At
June 30, 2004, there was no impairment of goodwill resulting from this
transaction.
The following unaudited pro forma condensed consolidated balance sheet
at June 30, 2004 and unaudited pro forma condensed consolidated statements of
income for the nine months ended June 30, 2004 and for the year ended September
30, 2003, give effect to the merger of Provident Bancorp and Warwick Community
Bancorp based on the assumptions set forth below. The unaudited pro forma
consolidated financial information is based on unaudited consolidated financial
information of Provident Bancorp and Warwick Community Bancorp at and for the
nine months ended June 30, 2004, the audited consolidated financial statements
of Provident Bancorp for the year ended September 30, 2003, the audited
consolidated financial statements of E.N.B. Holding Company for the year ended
December 31, 2003 and the audited consolidated financial statements of Warwick
Community Bancorp for the year ended December 31, 2003. The unaudited pro forma
consolidated financial information gives effect to the E.N.B. Holding Company
and Warwick Community Bancorp mergers, using the purchase method of accounting
under accounting principles generally accepted in the United States of America.
However, no pro forma adjustments have been included herein that reflect
potential effects of cost savings or synergies which may be obtained by
combining the operations of Provident Bancorp and Warwick Community Bancorp, or
the costs of combining the companies and their operations.
The unaudited pro forma information is provided for informational
purposes only. The pro forma financial information presented is not necessarily
indicative of the actual results that would have been achieved had the merger
been consummated on the dates or at the beginning of the periods presented, and
is not necessarily indicative of future results. The unaudited pro forma
financial information should be read in conjunction with the audited
consolidated financial statements and the notes thereto of Provident Bancorp
incorporated by reference into this document from Provident Bancorp's Annual
Report on Form 10-K for the year ended September 30, 2003, as amended.
THE UNAUDITED PRO FORMA NET INCOME DERIVED FROM THE ABOVE ASSUMPTIONS IS
QUALIFIED BY THE STATEMENTS SET FORTH ABOVE AND SHOULD NOT BE CONSIDERED
INDICATIVE OF THE MARKET VALUE OF PROVIDENT BANCORP COMMON STOCK OR THE ACTUAL
OR FUTURE RESULTS OF OPERATIONS OF PROVIDENT BANCORP FOR ANY PERIOD.
21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT JUNE 30, 2004 (1)
--------------------------------------------------------------
WARWICK
COMMUNITY
WARWICK BANCORP
PROVIDENT COMMUNITY ACQUISITION
BANCORP BANCORP ADJUSTMENTS COMBINED PRO
HISTORICAL HISTORICAL (2)(3) FORMA
-------------- -------------- -------------- --------------
(IN THOUSANDS)
ASSETS:
Cash and cash equivalents....................... $ 33,686 $ 70,842 $ -- $ 104,528
Securities available for sale................... 571,962 309,998 (97,847) 784,113
Securities held to maturity..................... 70,066 2,397 -- 72,463
Loans, net (4).................................. 971,935 290,792 2,962 1,265,689
Premises and equipment, net..................... 16,259 9,227 -- 25,486
Goodwill........................................ 65,823 2,299 99,139 167,261
Other identifiable intangibles.................. 6,219 -- 7,931 14,150
Other assets.................................... 46,720 32,398 4,101 83,219
----------- ----------- ----------- -----------
Total assets.................................. $ 1,782,670 $ 717,953 $ 16,286 $ 2,516,909
=========== =========== =========== ===========
LIABILITIES:
Deposits........................................ $ 1,240,827 $ 485,313 $ 746 $ 1,726,886
Borrowed funds.................................. 169,552 152,100 9,505 331,157
Other liabilities............................... 29,647 12,574 -- 42,221
----------- ----------- ----------- -----------
Total liabilities............................. 1,440,026 649,987 10,251 2,100,264
STOCKHOLDERS' EQUITY:
Common stock.................................... 396 68 (5) 459
Additional paid-in capital...................... 268,438 68,398 5,540 342,376
Retained earnings............................... 88,713 48,417 (48,417) 88,713
Accumulated other comprehensive income.......... (3,703) (5,046) 5,046 (3,703)
Less: Common stock held by employee stock
ownership plan................................ (11,073) (2,774) 2,774 (11,073)
Less: Common stock acquired by recognition
and retention plan............................ (127) (804) 804 (127)
Treasury stock.................................. -- (40,293) 40,293 --
----------- ----------- ----------- -----------
Total stockholders' equity.................... 342,644 67,966 6,035 416,645
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity.... $ 1,782,670 $ 717,953 $ 16,286 $ 2,516,909
=========== =========== =========== ===========
- --------------------------------------
(1) Assumes that the acquisition of Warwick Community Bancorp was completed
at June 30, 2004.
(2) Assumes purchase accounting adjustments at June 30, 2004.
(3) Assumes a purchase price for Warwick Community Bancorp of $145.1 million
to be paid in equal amounts of common stock (6,256,000 shares at $11.60
per share) and cash ($72.6 million) paid from the sale of securities
available for sale, along with after-tax acquisition expenses of $16.8
million. Excludes estimated integration costs for Warwick Community
Bancorp of $660,000, after tax, in connection with the merger.
Adjustments to reflect the fair value of assets and liabilities for
Warwick Community Bancorp include an increase in value for loans ($3.0
million), an increase in the value of deposits ($746,000) and an
increase in the value of borrowings ($9.5 million). In addition, an
estimated core deposit intangible asset is recorded ($7.9 million). A
net deferred tax asset is reflected at a marginal rate of 40.0% for the
tax effect on the fair market value adjustments and the deductible
portion of the acquisition expenses.
(4) Includes loans held for sale.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
22
(5) A reconciliation of the excess consideration paid by Provident Bancorp
over Warwick Community Bancorp's net assets acquired ("Goodwill") is as
follows (in thousands):
Cost to Acquire Warwick Community Bancorp: Note
Cash 3 $ 72,569
Provident common stock issued 3 72,569
Estimated cash paid for transaction costs, net
of taxes (*) 6,7 16,770
----------
Consideration paid for Warwick Community Bancorp 161,908
Warwick Community Bancorp Net Assets at Fair Value:
Warwick Community Bancorp stockholders' equity
at June 30, 2004 $ (67,966)
Payout of special dividend related to the
liquidation of automobile lease portfolio 8 4,150
Capital adjustments related to elimination of
stock benefit plans 1,432
----------
Subtotal ($62,384)
Fair Value Adjustments:
Loans (2,962)
Deposits 746
Borrowed funds 9,505
----------
Fair Value Adjustments: 7,289
Tax effect of fair value adjustments (*) 2,915
----------
Total adjustments to net assets acquired 4,374
----------
Adjusted net assets acquired (58,010)
----------
Subtotal 103,898
Core deposit intangible (7,931)
Tax effect of core deposit intangible (*) 3,172
----------
Net core deposit intangible (4,759)
----------
Estimated Goodwill Recognized $ 99,139
==========
* Taxes estimated using a 40% marginal tax rate.
(6) Transaction costs associated with the merger are estimated to be $16.8
million, net of taxes. Estimated transaction costs have been recorded as
a component of goodwill (see Note 5), based on Provident Bancorp's and
Warwick Community Bancorp's preliminary estimates. A summary of these
costs is as follows (in thousands):
Merger related compensation and benefits $ 7,650
Cash consideration paid for stock options 6,746
Systems costs 3,500
Professional fees 3,132
Other merger related expenses 100
----------
Estimated pre-tax transaction costs 21,128
Less related tax benefit 4,358
----------
Estimated transaction costs, net of taxes $ 16,770
----------
(7) Deferred tax assets on the cash out of options and taxable transaction
costs amounted to $4.4 million. Deferred tax assets on purchase
accounting adjustments amounted to $2.9 million. Deferred tax assets
related to the core deposit intangible amounted to $3.2 million. All tax
calculations were based on an assumed rate of 40%.
(8) Warwick Community Bancorp stockholders may also receive a special cash
dividend based on factors relating to the disposition of automobiles
contained in an automobile lease portfolio held by Warwick Savings.
Warwick Community Bancorp and Provident Bancorp have agreed that the
amount available that may be declared as a special dividend is
$4,150,000, subject to approval by the New York State Banking Department
and other legal requirements. Warwick Community Bancorp cannot give any
assurances to the amount or timing of any special dividend.
23
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED JUNE 30, 2004 (1)
------------------------------------------------------
WARWICK
COMMUNITY
WARWICK BANCORP
PROVIDENT COMMUNITY ACQUISITION
BANCORP BANCORP ADJUSTMENTS COMBINED
HISTORICAL HISTORICAL (2)(3) PRO FORMA
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income................................. $ 53,387 $ 26,440 $ (3,640) $ 76,187
Interest expense................................ 9,401 10,675 (2,465) 17,611
------------ ------------ ------------ ------------
Net interest income........................ 43,986 15,765 (1,175) 58,576
Provision for loan losses....................... 575 6,058 -- 6,633
------------ ------------ ------------ ------------
Net interest income after provision........ 43,411 9,707 (1,175) 51,943
Non-interest income............................. 8,462 4,810 -- 13,272
Non-interest expense (4)........................ 41,725 15,396 1,813 58,934
------------ ------------ ------------ ------------
Income before income taxes...................... 10,148 (879) (2,988) 6,281
Income taxes.................................... 3,377 (397) (1,076) 2,305
------------ ------------ ------------ ------------
Net income (loss).......................... $ 6,771 $ (482) $ (1,912) $ 3,976
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Basic........................................ $ 0.19 $ (0.11) $ 0.09
Diluted...................................... $ 0.18 $ (0.11) $ 0.09
SHARES USED FOR CALCULATING:
Basic........................................ 36,450,748 4,258,077 1,662,779 42,371,604
Diluted...................................... 37,068,663 4,461,231 1,742,111 43,272,005
- -------------------------------------
(1) Assumes that the acquisition of Warwick Community Bancorp was completed
at the beginning of the periods presented.
(2) Purchase accounting adjustments are amortized using a level yield over
the estimated life of the related assets and liabilities. See note 3 to
the Pro Forma Condensed Consolidated Statement of Income for the Year
Ended September 30, 2003, below. Amortization for the nine months ended
June 30, 2004 approximates three-quarters of the full-year amortization.
(3) Included in interest income is the effect of lost earnings on after-tax
merger-related costs for Warwick Community Bancorp that include 50% of
the purchase price that is to be paid in cash ($72.6 million) and
acquisition expenses ($21.1 million). These funds were applied to a
reinvestment rate of 3.70% for the nine months ended June 30, 2004,
reflecting the average yield on Provident Bancorp's available for sale
portfolio for the three months ended June 30, 2004.
(4) Non-interest expense does not reflect anticipated cost savings.
24
FOR THE YEAR ENDED SEPTEMBER 30, 2003 (1)
-----------------------------------------------------------------------------------------------
E.N.B.
HOLDING E.N.B.
COMPANY HOLDING WARWICK
E.N.B. ACQUISITION COMPANY WARWICK COMMUNITY
HOLDING AND ACQUISITION COMMUNITY BANCORP
PROVIDENT COMPANY CONVERSION AND BANCORP ACQUISITION
BANCORP HISTORICAL ADJUSTMENTS CONVERSION HISTORICAL ADJUSTMENTS COMBINED
HISTORICAL (6) (2)(3) PRO FORMA (6) (3)(4) PRO FORMA
------------ ------------ ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Interest income............... $ 57,790 $ 20,021 $ (878) $ 76,933 $ 38,872 $ (4,796) $ 111,009
Interest expense.............. 12,060 3,889 (468) 15,481 17,331 (3,209) 29,603
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net interest income...... 45,730 16,132 (410) 61,452 21,541 (1,587) 81,406
Provision for loan losses..... 900 620 -- 1,520 90 -- 1,610
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net interest income after
provision................ 44,830 15,512 (410) 59,932 21,451 (1,587) 79,796
Noninterest income............ 9,555 2,434 -- 11,989 7,497 -- 19,486
Noninterest expense (5)....... 36,790 13,353 2,453 52,596 18,759 2,265 73,620
------------ ------------ ------------ ------------ ------------ ------------ -----------
Income before income taxes.... 17,595 4,593 (2,863) 19,325 10,189 (3,852) 25,662
Income taxes.................. 6,344 1,917 (1,145) 7,116 3,729 (1,391) 9,264
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net income............... $ 11,251 $ 2,676 $ (1,718) $ 12,209 $ 6,460 $ (2,461) $ 16,398
============ ============ ============ ============ ============ ============ ===========
EARNINGS PER SHARE:
Basic...................... $ 0.33 $ 175.74 $ 0.32 $ 1.50 $ 0.37
Diluted.................... $ 0.32 $ 175.74 $ 0.31 $ 1.44 $ 0.36
SHARES USED FOR CALCULATING:
Basic...................... 34,186,015 15,227 4,354,449 38,555,691 4,301,633 1,679,788 44,537,112
Diluted.................... 34,663,259 15,227 4,354,449 39,032,935 4,491,471 1,753,919 45,278,325
- ------------------------------------
(1) Assumes that the second-step conversion of Provident Bancorp, MHC and
the acquisitions of E.N.B. Holding Company and Warwick Community Bancorp
were completed at the beginning of the periods presented.
(2) Included in interest income is the effect of lost earnings on after-tax
merger-related costs for E.N.B. Holding Company that include the portion
of the purchase price that was paid in cash ($36.773 million) and
after-tax acquisition expenses ($6.8 million). These funds were applied
to a reinvestment rate of 4.07% for the year ended September 30, 2003,
reflecting the average rate on Provident Bancorp's available for sale
portfolio as of September 30, 2003.
(3) Purchase accounting adjustments are amortized using a level yield over
the estimated life of the related assets and liabilities.
The following table summarizes the estimated full-year impact of the
amortization/(accretion) of the purchase accounting adjustments on the
pro forma statement of income (dollars in thousands).
AMORTIZATION/ 2004
PREMIUMS/ ESTIMATED (ACCRETION) AMORTIZATION/
CATEGORY (DISCOUNTS) LIFE IN YEARS METHOD (ACCRETION)
------------------------- ------------- ------------- ------------- -------------
Core deposit intangibles $ 7,931 10 Level Yield $ 2,471
Deposits (746) 5 Level Yield (420)
Borrowed funds (9,505) 7 Level Yield (2,789)
Loans 2,962 5 Level Yield 1,160
------------- -------------
$ 642 $ 422
============= =============
The following table summarizes the estimated impact of the
amortization/(accretion) of the purchase accounting adjustments made in
connection with the merger on Provident Bancorp's results of operations
for the following years.
NET (INCREASE)/
PROJECTED FUTURE DECREASE IN
AMOUNTS FOR THE YEARS CORE DEPOSIT NET ACCRETION/ INCOME BEFORE
ENDED SEPTEMBER 30, INTANGIBLE (AMORTIZATION) TAXES
--------------------- ------------ -------------- ---------------
2004 $ 2,471 $ (2,049) $ 422
2005 $ 1,568 $ (1,572) $ (4)
2006 $ 1,095 $ (1,105) $ (10)
2007 $ 798 $ (1,064) $ (266)
2008 $ 597 $ (545) $ 52
2009 $ 452 $ (607) $ (155)
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
25
(4) Included in interest income is the effect of lost earnings on after-tax
merger-related costs for Warwick Community Bancorp that include 50% of
the purchase price that is to be paid in cash ($72.6 million) and
acquisition expenses ($21.1 million). These funds were applied to a
reinvestment rate of 4.07% for the year ended September 30, 2003,
reflecting the yield on Provident Bancorp's available-for-sale portfolio
as of September 30, 2003.
(5) Non-interest expense does not reflect anticipated cost savings.
(6) E.N.B. Holding Company and Warwick Community Bancorp historical
financial information is presented for the year ended December 31, 2003.
26
COMPARATIVE PRO FORMA PER SHARE DATA
The table below summarizes selected per share information about
Provident Bancorp and Warwick Community Bancorp. The Provident Bancorp per share
information is presented on a historical basis and then on a pro forma adjusted
basis to reflect the second-step conversion and related stock offering, and the
mergers with E.N.B. Holding Company and Warwick Community Bancorp. The Warwick
Community Bancorp per share information is presented both historically, and on a
pro forma basis to reflect the merger.
The data in the table should be read together with the financial
information and the financial statements of Provident Bancorp and Warwick
Community Bancorp incorporated by reference into this document. The pro forma
per common share data is presented as an illustration only. The data does not
necessarily indicate the combined financial position per share or combined
results of operations per share that would have been reported if the merger had
occurred when indicated, nor is the data a forecast of the combined financial
position or combined results of operations for any future period. No pro forma
adjustments have been included herein which reflect potential effects of cost
savings or synergies which may be obtained by combining the operations of
Provident Bancorp and Warwick Community Bancorp or the costs of combining the
companies and their operations.
PRO FORMA
WARWICK
E.N.B. WARWICK COMMUNITY
PROVIDENT HOLDING COMMUNITY COMBINED PRO BANCORP
BANCORP COMPANY BANCORP FORMA EQUIVALENT
HISTORICAL HISTORICAL HISTORICAL AMOUNTS (1) SHARES (2)
------------ ------------ ------------ ------------ ------------
Book value per share at June 30, 2004(5)....... $ 8.64 $ N/A $ 15.11 $ 8.95 $ 24.88
Book value per share at September 30, 2003(5).. 3.35 1,845.60 16.42 9.20 25.59
Cash dividends paid per share for the nine
months ended June 30, 2004(4)................ 0.11 N/A 0.45 0.12 0.33
Cash dividends paid per share for the year
ended September 30, 2003(3)(4)............... 0.13 76.00 0.59 0.11 0.31
Basic earnings (loss) per share for the nine
months ended June 30, 2004................... 0.19 N/A (0.11) 0.09 0.26
Basic earnings per share for the year ended
September 30, 2003(3)........................ 0.33 175.74 1.50 0.37 1.02
Diluted earnings (loss) per share for the
nine months ended June 30, 2004.............. 0.18 N/A (0.11) 0.09 0.26
Diluted earnings per share for the year
ended September 30, 2003(3).................. 0.32 N/A 1.44 0.36 1.01
- -----------------
(1) Reflects the issuance of shares of common stock and 4.4323-for-one stock
split by Provident Bancorp as part of Provident Bancorp, MHC's
mutual-to-stock conversion, Provident Bancorp's related stock offering
and acquisition of E.N.B. Holding Company, all completed January 14,
2004.
(2) Per equivalent share of Warwick Community Bancorp's common stock is
calculated by taking the product of the relevant combined pro forma
amounts and an exchange ratio of 2.7810.
(3) E.N.B. Holding Company and Warwick Community Bancorp financial
information is presented for the year ended December 31, 2003.
(4) Pro forma cash dividends represent the historical dividends of Provident
Bancorp.
(5) Pro forma book value per share is based on the pro forma stockholders'
equity of the combined entity divided by the total pro forma common
shares of the combined entity, assuming conversion of 50% of the
outstanding shares of Warwick Community Bancorp at an implied exchange
ratio of 2.7810.
27
RISKS FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE MATTERS ADDRESSED
UNDER THE CAPTION "CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS,"
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO
VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
RISKS RELATED TO THE MERGER
YOU MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THAT YOU ELECT.
The merger agreement contains provisions that are generally designed to
ensure that 50% of the outstanding shares of Warwick Community Bancorp common
stock are exchanged for shares of Provident Bancorp common stock and the other
50% of the shares are exchanged for the cash consideration, subject to a
tax-related adjustment. If elections are made by Warwick Community Bancorp
stockholders that would otherwise result in more or less than 50% of such shares
being converted into shares of Provident Bancorp stock, either those electing to
receive all or a portion of their consideration in cash or those electing to
receive all or a portion of their consideration in shares of Provident Bancorp
common stock, will have the consideration of the type they elected, reduced by a
pro rata amount, and will receive a portion of their merger consideration in the
form that they did not elect to receive. Accordingly, there is a risk that you
will not receive a portion of the merger consideration in the form that you
elect, which could result in, among other things, tax consequences that differ
from those that would have resulted had you received the form of consideration
you elected (including the recognition of gain for federal income tax purposes
with respect to any cash received). If you do not make a valid election, you
will receive the merger consideration in such form of cash and/or shares of
common stock as Provident Bancorp shall determine.
PROVIDENT BANCORP MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE
MERGER.
The success of the merger will depend on, among other things, Provident
Bancorp's ability to realize anticipated cost savings of the merger and to
combine the businesses of Provident Bank, Warwick Savings and Towne Center Bank
in a manner that does not materially disrupt the existing customer relationships
of Provident Bank, Warwick Savings or Towne Center Bank or result in decreased
revenues from any loss of customers. If Provident Bancorp is not able to achieve
these objectives, the anticipated benefits of the merger may not be realized
fully or at all or may take longer to realize than expected.
Provident Bancorp and Warwick Community Bancorp have operated and, until
the completion of the merger, will continue to operate, independently. It is
possible that the integration process could result in the loss of key employees,
the disruption of Provident Bancorp's or Warwick Community Bancorp's ongoing
businesses or inconsistencies in standards, controls, procedures and policies
that adversely affect the ability of Provident Bancorp to maintain relationships
with customers and employees or to achieve the anticipated benefits of the
merger.
28
BECAUSE THE MARKET PRICE OF PROVIDENT BANCORP COMMON STOCK MAY
FLUCTUATE, YOU CANNOT BE SURE OF THE VALUE OF THE MERGER CONSIDERATION THAT YOU
WILL RECEIVE.
Upon completion of the merger, each share of Warwick Community Bancorp
common stock will be converted into merger consideration consisting of shares of
Provident Bancorp common stock or cash pursuant to the terms of the merger
agreement. The price of Provident Bancorp common stock may increase or decrease
before or after completion of the merger and, therefore, the implied value of
the stock portion of the merger consideration may be higher or lower than the
implied value of the stock portion of the merger consideration on March 12,
2004, August 13, 2004 or the closing date of the merger, and the market price of
the stock component of the merger consideration may be more or less than the
cash component of the merger consideration.
Stock price changes may result from a variety of factors, including
general market and economic conditions, changes in our respective businesses,
operations and prospects, and regulatory considerations. Many of these factors
are beyond our control.
WARWICK COMMUNITY BANCORP STOCKHOLDERS WHO MAKE ELECTIONS WILL BE UNABLE
TO SELL THEIR SHARES IN THE MARKET AFTER MAKING THEIR ELECTION.
Warwick Community Bancorp stockholders may elect to receive the merger
consideration in the form of cash or stock. To make a valid election,
stockholders must turn in their Warwick Community Bancorp stock certificates
with a properly completed election form. During the time between when the
election is made and when Provident Bancorp stock certificates are received by
former Warwick Community Bancorp stockholders following the completion of the
merger, Warwick Community Bancorp stockholders will be unable to sell their
Warwick Community Bancorp common stock. If the merger is unexpectedly delayed,
this period could extend for a significant period of time. Elections received
after the close of the election period will not be accepted or honored.
WARWICK COMMUNITY BANCORP DIRECTORS AND OFFICERS HAVE INTERESTS IN THE
MERGER BESIDES THOSE OF A STOCKHOLDER.
Some of Warwick Community Bancorp's executive officers participated in
negotiations of the merger agreement with Provident Bancorp, and the board of
directors approved the merger agreement and is recommending that Warwick
Community Bancorp stockholders vote for the merger agreement. In considering
these facts and the other information contained in this Proxy
Statement/Prospectus, you should be aware that Warwick Community Bancorp's
executive officers and directors have financial interests in the merger besides
being Warwick Community Bancorp stockholders. See "Proposal I -- The proposed
Merger -- Interests of Directors and Officers in the Merger." These interests
include:
o the payment of certain benefits in consideration of the
termination of existing employment agreements;
29
o the acceleration of and payment at or within 30 days following
the merger of certain retirement benefits to two officers under
two non tax-qualified retirement plans;
o the appointment of two directors of Warwick Community Bancorp to
the boards of directors of Provident Bancorp and Provident Bank
upon the closing of the merger;
o the payout at the effective time of the merger, of all
outstanding vested and unvested stock options, including options
for up to 306,239 shares of common stock held by Warwick
Community Bancorp's executive officers and directors, in the
form of cash; and
o the agreement by Provident Bancorp to indemnify Warwick
Community Bancorp directors and officers and to provide such
persons with directors' and officers' liability insurance.
PROVIDENT BANCORP MAY NOT RECEIVE REQUIRED REGULATORY APPROVALS. SUCH
APPROVALS, IF RECEIVED, MAY BE SUBJECT TO ADVERSE REGULATORY CONDITIONS.
Before the merger may be completed, various approvals must be obtained
from, or notifications submitted to, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation, the New York State Banking Department and
the Federal Reserve Bank of New York. We cannot guarantee that we will receive
all required regulatory approvals in order to complete the merger. In addition,
some of the governmental authorities from whom those approvals must be obtained
may impose conditions on the completion of the merger or require changes in the
terms of the merger. These conditions or changes could have the effect of
delaying the merger or imposing additional costs or limiting the possible
revenues of the combined company.
RISKS ABOUT PROVIDENT BANCORP
You should consider carefully the following risk factors in evaluating
an investment in the shares of Provident Bancorp common stock.
OUR COMMERCIAL REAL ESTATE, COMMERCIAL BUSINESS AND CONSTRUCTION LOANS
EXPOSE US TO INCREASED CREDIT RISKS.
At June 30, 2004, our portfolio of commercial real estate loans totaled
$334.6 million, or 33.9% of total loans, our portfolio of commercial business
loans totaled $101.4 million, or 10.3% of total loans, and our portfolio of
construction loans totaled $43.6 million, or 4.4% of total loans. We plan to
continue to emphasize the origination of these types of loans. Commercial real
estate, commercial business and construction loans generally have greater credit
risk than one- to four-family residential mortgage loans because repayment of
these loans often depends on the successful business operations of the
borrowers. These loans typically have larger loan balances to single borrowers
or groups of related borrowers compared to one- to four-family residential
mortgage loans. Many of our borrowers also have more than one commercial real
30
estate, commercial business or construction loan outstanding with us.
Consequently, an adverse development with respect to one loan or one credit
relationship may expose us to significantly greater risk of loss, compared to an
adverse development with respect to a one- to four-family residential mortgage
loan.
CHANGES IN THE VALUE OF GOODWILL COULD REDUCE OUR EARNINGS.
On April 23, 2002, we completed our acquisition of The National Bank of
Florida. We recorded the assets acquired and liabilities assumed from The
National Bank of Florida at their fair values at the closing date. The amount we
paid for The National Bank of Florida in excess of the fair value of the net
assets acquired was recorded as goodwill, which is an intangible asset. At
December 31, 2003, the balance of goodwill on our balance sheet was $13.5
million.
On January 14, 2004, we completed our acquisition of E.N.B. Holding
Company. We recorded the assets acquired and liabilities assumed from E.N.B.
Holding Company at their fair values at the closing date. The amount we paid for
E.N.B. Holding Company in excess of the fair value of the net assets acquired
was recorded as goodwill, which is an intangible asset. At March 31, 2004, the
balance of goodwill resulting from the acquisition of E.N.B. Holding Company on
our balance sheet was $52.1 million.
We are required by accounting principles generally accepted in the
United States of America to test goodwill for impairment at least annually.
Testing for impairment of goodwill involves the identification of reporting
units and the estimation of fair values. The estimation of fair values involves
a high degree of judgment and subjectivity in the assumptions used. As of June
30, 2004, if our goodwill were fully impaired and we were required to charge-off
all of our goodwill, the pro forma reduction to our stockholders' equity would
be approximately $1.66 per share.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH, WHICH MAY DIVERT RESOURCES
AND LIMIT OUR ABILITY TO SUCCESSFULLY EXPAND OUR OPERATIONS.
We have grown substantially from $757.9 million of total assets and
$595.1 million of total deposits at December 31, 1998 to $1.8 billion of total
assets and $1.2 billion of total deposits at June 30, 2004. We expect that our
assets, deposits, number of customers and scale of operations will continue to
grow significantly.
Since 1998, we have expanded our branch network by both acquiring
financial institutions and establishing de novo branches. At September 30, 1998,
we had 11 branch offices, compared to 27 branches at June 30, 2004. In addition,
during the next four years, we expect to open one new branch office per year. We
cannot assure you that our ongoing branch expansion strategy will be accretive
to our earnings, or that it will be accretive to earnings within a reasonable
period of time. Numerous factors contribute to the performance of a new branch,
such as a suitable location, qualified personnel and an effective marketing
strategy. Additionally, it takes time for a new branch to generate significant
deposits and make sufficient loans to produce enough income to offset expenses,
some of which, like salaries and occupancy expense, are relatively fixed costs.
31
We have incurred substantial expenses to build our management team and
personnel, develop our delivery systems and establish an infrastructure to
support future growth. Our future success will depend on the ability of our
officers and key employees to continue to implement and improve our operational,
financial and management controls, reporting systems and procedures, and to
manage a growing number of client relationships. We may not be able to
successfully implement improvements to our management information and control
systems in an efficient or timely manner, and we may discover deficiencies in
our existing systems and controls. Thus, we cannot assure you that our growth
strategy will not place a strain on our administrative and operational
infrastructure or require us to incur additional expenditures beyond current
projections to support our future growth. Our future profitability will depend
in part on our continued ability to grow. We cannot assure you that we will be
able to sustain our historical growth rate or continue to grow at all.
PROVIDENT BANCORP'S FINANCIAL SUCCESS DEPENDS ON THE SUCCESSFUL
INTEGRATION OF ITS RECENT ACQUISITIONS.
Provident Bancorp's future growth and profitability depends, in part, on
its ability to successfully complete its acquisition of Warwick Community
Bancorp and manage the combined operations as well as the operations of E.N.B.
Holding Company, which was acquired on January 14, 2004. For the acquisitions to
be successful, Provident Bancorp will have to succeed in combining the personnel
and operations of Provident Bancorp, Warwick Community Bancorp and E.N.B.
Holding Company and in achieving expense savings by eliminating selected
redundant operations. We cannot assure you that our plan to integrate and
operate the combined operations will be timely or efficient, or that we will
successfully retain existing customer relationships of Warwick Savings.
OUR CONTRIBUTION TO THE PROVIDENT BANK CHARITABLE FOUNDATION MAY NOT BE
TAX DEDUCTIBLE, WHICH COULD REDUCE OUR PROFITS.
We believe that the contribution to the Provident Bank Charitable
Foundation, valued at $5.0 million, pre-tax, will be deductible for federal
income tax purposes. If the contribution is not deductible, we would not receive
any tax benefit from the contribution. In addition, even if the contribution is
tax deductible, we may not have sufficient earnings to be able to use the
deduction fully.
OUR CONTINUING CONCENTRATION OF LOANS IN OUR PRIMARY MARKET AREA MAY
INCREASE OUR RISK.
Our success depends primarily on the general economic conditions in the
counties in which we conduct business, and in the New York metropolitan area in
general. Unlike larger banks that are more geographically diversified, we
provide banking and financial services to customers primarily in Rockland and
Orange Counties, New York, as well as Sullivan and Ulster Counties, New York.
Following our acquisition of Warwick Community Bancorp, we will also provide
banking services to customers in Putnam County, New York and Bergen County, New
Jersey. The local economic conditions in our market area have a significant
impact on our loans, the ability of the borrowers to repay these loans and the
value of the collateral securing these loans. A significant decline in general
economic conditions caused by inflation, recession,
32
unemployment or other factors beyond our control would affect these local
economic conditions and could adversely affect our financial condition and
results of operations. Additionally, because we have a significant amount of
commercial real estate loans, decreases in tenant occupancy also may have a
negative effect on the ability of many of our borrowers to make timely
repayments of their loans, which would have an adverse impact on our earnings.
CHANGES IN MARKET INTEREST RATES COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Our financial condition and results of operations are significantly
affected by changes in market interest rates. Our results of operations depend
substantially on our net interest income, which is the difference between the
interest income that we earn on our interest-earning assets and the interest
expense that we pay on our interest-bearing liabilities. Our interest-bearing
assets generally reprice or mature more quickly than our interest-earning
liabilities. However, if rates increase rapidly as a result of an improving
economy, we may have to increase the rates paid on our deposits and borrowed
funds more quickly than loans and investments reprice, resulting in a negative
impact on interest spreads and net interest income. In addition, the impact of
rising rates could be compounded if deposit customers move funds from savings
accounts back to higher-rate certificate of deposit accounts. Conversely, should
market interest rates continue to fall below current levels, our net interest
margin could also be negatively affected, as competitive pressures could keep us
from further reducing rates on our deposits, and prepayments and curtailments on
assets may continue. Such movements may cause a decrease in our interest rate
spread and net interest margin.
We also are subject to reinvestment risk associated with changes in
interest rates. Changes in interest rates may affect the average life of loans
and mortgage-related securities. Decreases in interest rates often result in
increased prepayments of loans and mortgage-related securities, as borrowers
refinance their loans to reduce borrowing costs. Under these circumstances, we
are subject to reinvestment risk to the extent that we are unable to reinvest
the cash received from such prepayments in loans or other investments that have
interest rates that are comparable to the interest rates on existing loans and
securities. Additionally, increases in interest rates may decrease loan demand
and/or may make it more difficult for borrowers to repay adjustable-rate loans.
Changes in interest rates also affect the value of our interest-earning
assets, and in particular our securities portfolio. Generally, the value of
securities fluctuates inversely with changes in interest rates. At June 30,
2004, our investment and mortgage-backed securities available for sale totaled
$572.0 million. Unrealized gains on securities available for sale, net of tax,
amounted to $3.7 million and are reported as a separate component of
stockholders' equity. Decreases in the fair value of securities available for
sale, therefore, could have an adverse effect on stockholders' equity.
THE IMPLEMENTATION OF STOCK-BASED BENEFIT PLANS MAY DILUTE YOUR
OWNERSHIP INTEREST.
We intend to adopt a stock option plan and a recognition and retention
plan, subject to receipt of stockholder approval. These stock-based benefit
plans will be funded either through
33
open market purchases, if permitted, or from the issuance of authorized but
unissued shares of common stock of Provident Bancorp. While our intention is to
fund these plans through open market purchases, stockholders will experience a
reduction or dilution in their ownership interest in the event authorized by
unissued shares are used to fund stock options and stock awards.
In addition, at June 30, 2004, Provident Bancorp had outstanding options
to purchase 1,361,998 shares of its common stock. If any existing options are
exercised for authorized but unissued shares of common stock, stockholders will
experience a reduction or dilution in their ownership interest. Because Office
of Thrift Supervision regulations prohibit us from repurchasing our common stock
during the first year following a second-step conversion unless compelling
business reasons exist for such repurchases, we will be required to issue
authorized but unissued shares to fund option exercises that occur during the
first year following the second-step conversion.
OUR RECOGNITION AND RETENTION PLAN WILL INCREASE OUR COSTS, WHICH WILL
REDUCE OUR PROFITABILITY AND STOCKHOLDERS' EQUITY.
We intend to implement a recognition and retention plan. Under this
plan, our officers and directors may be awarded, at no cost to them, shares of
common stock in an aggregate amount equal to 4% of the shares of common stock
sold in the offering (including shares we issue to the Provident Bank Charitable
Foundation). The shares of common stock awarded under the recognition and
retention plan will be expensed by us over their vesting period at the fair
market value of the shares on the date they are awarded. If the plan is adopted
within 12 months after the completion of the second-step conversion, it is
subject to Office of Thrift Supervision regulations. If the shares of common
stock to be awarded under the plan are repurchased in the open market (rather
than issued directly by Provident Bancorp) and cost the same as the closing
price of $11.40 as of June 30, 2004, the reduction to stockholders' equity from
the plan would be $9.1 million.
WE MAY BE REQUIRED TO CHANGE THE WAY WE RECOGNIZE EXPENSE FOR OUR STOCK
OPTIONS.
We account for our stock option plan in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, we recognize compensation
expense only if the exercise price of an option is less than the fair value of
the underlying stock on the date of the grant. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," encourages the use
of a fair-value-based method of accounting for employee stock compensation
plans, but permits our continued use of the intrinsic-value-based method of
accounting prescribed by APB Opinion No. 25. Under Statement of Financial
Accounting Standards No. 123, the grant-date fair value of options is recognized
as compensation expense over the vesting period. Our net income will decrease if
the Financial Accounting Standards Board requires us to recognize expense, using
the fair-value-based method of accounting for stock options.
34
A BREACH OF INFORMATION SECURITY COULD NEGATIVELY AFFECT OUR EARNINGS.
Increasingly, we depend upon data processing, communication and
information exchange on a variety of computing platforms and networks, and over
the internet. We cannot be certain all our systems are entirely free from
vulnerability to attack, despite safeguards we have instituted. In addition, we
rely on the services of a variety of vendors to meet our data processing and
communication needs. If information security is breached, information can be
lost or misappropriated, resulting in financial loss or costs to us or damages
to others. These costs or losses could materially exceed the amount of insurance
coverage, if any, which would adversely affect our earnings.
VARIOUS FACTORS MAY MAKE TAKEOVER ATTEMPTS MORE DIFFICULT TO ACHIEVE.
Our board of directors has no current intention to sell control of
Provident Bancorp. Provisions of our certificate of incorporation and bylaws,
federal regulations, Delaware law and various other factors may make it more
difficult for companies or persons to acquire control of Provident Bancorp
without the consent of our board of directors. You may want a takeover attempt
to succeed because, for example, a potential acquiror could offer a premium over
the then prevailing market price of our common stock. The factors that may
discourage takeover attempts or make them more difficult include:
o OFFICE OF THRIFT SUPERVISION REGULATIONS. Office of Thrift
Supervision regulations prohibit, for three years following the
completion of a mutual-to-stock conversion, the direct or
indirect acquisition of more than 10% of any class of equity
security of a converted savings institution without the prior
approval of the Office of Thrift Supervision.
o CERTIFICATE OF INCORPORATION AND STATUTORY PROVISIONS.
Provisions of the certificate of incorporation and bylaws of
Provident Bancorp and Delaware law may make it more difficult
and expensive to pursue a takeover attempt that management
opposes. These provisions also would make it more difficult to
remove our current board of directors or management, or to elect
new directors. These provisions include limitations on voting
rights of beneficial owners of more than 10% of our common
stock, supermajority voting requirements for certain business
combinations and the election of directors to staggered terms of
three years. Our bylaws also contain provisions regarding the
timing and content of stockholder proposals and nominations and
qualification for service on the board of directors.
o REQUIRED CHANGE IN CONTROL PAYMENTS AND ISSUANCE OF STOCK
OPTIONS AND RECOGNITION AND RETENTION PLAN SHARES. We have
entered into employment agreements with certain executive
officers, which will require payments to be made to them in the
event their employment is terminated following a change in
control of Provident Bancorp or Provident Bank. We have also
issued, and intend to adopt one or more stock-based benefit
plans to permit additional issuances of, stock options and
recognition and retention plan shares to key employees and
directors that will require payments to them in connection with
a change in
35
control of Provident Bancorp. These payments will have the
effect of increasing the costs of acquiring Provident Bancorp,
thereby discouraging future takeover attempts.
RISKS RELATED TO PRIOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF WARWICK
COMMUNITY BANCORP
Arthur Andersen LLP audited the financial statements of Warwick
Community Bancorp for the year ended December 31, 2001, which financial
statements are incorporated by reference into this Proxy Statement/Prospectus.
Arthur Anderson LLP was convicted on June 15, 2002 of federal obstruction of
justice arising from the government's investigation of Enron Corp. As it has
ceased operations, Arthur Andersen LLP has not consented to the incorporation by
reference into this Proxy Statement/Prospectus of their report on the financial
statements of Warwick Community Bancorp for the year ended December 31, 2001.
Under Section 11 of the Securities Act of 1933, stockholders may have no
effective remedy against Arthur Andersen LLP in connection with a material
misstatement or omission in the 2001 financial statements of Warwick Community
Bancorp incorporated by reference into this Proxy Statement/Prospectus.
36
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference a number of
forward-looking statements regarding the financial condition, results of
operations and business of Provident Bancorp and Warwick Community Bancorp, and
may include statements for the period following the completion of the merger.
You can find many of these statements by looking for words such as "plan,"
"believe," "expect," "intend," "anticipate," "estimate," "project," "potential"
or other similar expressions.
The ability of Provident Bancorp and Warwick Community Bancorp to
predict results or the actual effects of its plans and strategies is inherently
uncertain. Accordingly, actual results may differ materially from anticipated
results. Some of the factors that may cause actual results to differ materially
from those contemplated by the forward-looking statements include, but are not
limited to, the following:
o difficulties in obtaining required stockholder and regulatory
approvals for the merger;
o increases in competitive pressure among financial institutions
or from non-financial institutions;
o changes in the interest rate environment;
o changes in deposit flows, loan demand or real estate values;
o changes in accounting principles, policies or guidelines;
o legislative or regulatory changes;
o changes in general economic conditions, either nationally or in
some or all of the operating areas in which the combined company
will be doing business, or conditions in securities markets or
the banking industry;
o a materially adverse change in the financial condition of
Provident Bancorp and/or Warwick Community Bancorp;
o the level and timeliness of realization, if any, of expected
cost savings from the merger;
o difficulties related to the consummation of the merger and the
integration of the businesses of Provident Bancorp and Warwick
Community Bancorp;
o lower than expected revenues following the merger; and
o other economic, competitive, governmental, regulatory,
geopolitical and technological factors affecting operations,
pricing and services.
37
Because such forward-looking statements are subject to assumptions and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Warwick Community Bancorp
stockholders are cautioned not to place undue reliance on such statements, which
speak only as of the date of this document or the date of any document
incorporated by reference, or such other relevant historical date in this
document or other documents incorporated herein by reference.
All subsequent written and oral forward-looking statements concerning
the merger or other matters addressed in this document and attributable to
Provident Bancorp or Warwick Community Bancorp or any person acting on their
behalf are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Except to the extent required by
applicable law or regulation, Provident Bancorp and Warwick Community Bancorp
undertake no obligation to update such forward-looking statements to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events.
38
THE WARWICK COMMUNITY BANCORP, INC. ANNUAL MEETING
THIS SECTION CONTAINS INFORMATION FOR WARWICK COMMUNITY BANCORP
STOCKHOLDERS ABOUT THE ANNUAL MEETING OF STOCKHOLDERS THAT WARWICK COMMUNITY
BANCORP HAS CALLED TO CONSIDER AND APPROVE THE MERGER AGREEMENT AS WELL AS VOTE
ON THE ELECTION OF THREE DIRECTORS AND RATIFY THE APPOINTMENT OF KPMG LLP AS
WARWICK COMMUNITY BANCORP'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE YEAR ENDING DECEMBER 31, 2004.
Together with this document, Warwick Community Bancorp is also sending
you a notice of the Warwick Community Bancorp annual meeting of stockholders and
a form of proxy that is solicited by its board of directors. The annual meeting
of stockholders will be held on September 22, 2004 at 9:30 a.m., local time, at
The Inn at Central Valley, Smith Clove Road, Central Valley, New York. This
Proxy Statement/Prospectus is first being mailed to stockholders of Warwick
Community Bancorp on or about August 23, 2004.
MATTERS TO BE CONSIDERED
The purpose of the Warwick Community Bancorp annual meeting of
stockholders is to vote on a proposal to approve the merger agreement as well as
vote on the election of three directors and ratify the appointment of KPMG LLP
as Warwick Community Bancorp's independent registered public accounting firm for
the year ending December 31, 2004.
You may be asked to vote upon any other matters that may be properly
submitted to a vote at the Warwick Community Bancorp annual meeting. You also
may be asked to vote upon a proposal to adjourn or postpone the Warwick
Community Bancorp annual meeting. Warwick Community Bancorp could use any
adjournment or postponement for the purpose, among others, of allowing
additional time to solicit proxies.
PROXIES
Each copy of this document mailed to Warwick Community Bancorp
stockholders is accompanied by a proxy card with voting instructions for
submission by mail. You should complete and return the proxy card accompanying
this document to ensure that your vote is counted at the Warwick Community
Bancorp annual meeting, or at any adjournment or postponement of the annual
meeting, regardless of whether you plan to attend the Warwick Community Bancorp
annual meeting. You can revoke your proxy at any time before the vote is taken
at the Warwick Community Bancorp annual meeting. If your shares are held in
"street name," your broker will vote your shares on Proposal I (the merger
agreement) only if you provide instructions to your broker on how to vote. If
you have not voted through your broker, you may revoke your proxy by:
o submitting written notice of revocation to the Corporate
Secretary of Warwick Community Bancorp prior to the voting of
such proxy;
o submitting a properly executed proxy bearing a later date; or
39
o voting in person at the annual meeting; however, simply
attending the annual meeting without voting will not revoke an
earlier proxy.
Written notices of revocation and other communications about revoking
your proxy should be addressed to:
Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990
Attention: Lois E. Ulatowski
Corporate Secretary
If your shares are held in street name, you should follow the
instructions of your broker regarding the revocation of proxies.
All shares represented by valid proxies Warwick Community Bancorp
receives through this solicitation, and not revoked, will be voted in accordance
with your instructions on the proxy card. If you make no specification on your
proxy card as to how you want your shares voted before signing and returning it,
your proxy will be voted "FOR" approval of the merger agreement as well as vote
"FOR" the election of all three directors and the ratification of the
appointment of KPMG LLP as Warwick Community Bancorp's independent registered
public accounting firm for the year ending December 31, 2004. The Warwick
Community Bancorp board of directors is presently unaware of any other matters
that may be presented for action at the annual meeting. If other matters do
properly come before the annual meeting, or at any adjournment or postponement
thereof, Warwick Community Bancorp intends that shares represented by properly
submitted proxies will be voted, or not voted, by and at the discretion of the
persons named as proxies on the proxy card. However, proxies that indicate a
vote against approval of the merger agreement will not be voted in favor of
adjourning or postponing the annual meeting to solicit additional proxies.
WARWICK COMMUNITY BANCORP STOCKHOLDERS SHOULD NOT SEND STOCK
CERTIFICATES WITH THEIR PROXY CARDS. WARWICK COMMUNITY BANCORP STOCKHOLDERS WILL
BE SENT ELECTION FORMS AND INSTRUCTIONS, AT WHICH TIME THEY WILL BE REQUESTED TO
SUBMIT THEIR STOCK CERTIFICATES. IF THE MERGER IS COMPLETED, WARWICK COMMUNITY
BANCORP STOCKHOLDERS WHO DID NOT MAKE A TIMELY OR PROPER ELECTION WILL BE MAILED
A TRANSMITTAL FORM PROMPTLY FOLLOWING THE COMPLETION OF THE MERGER WITH
INSTRUCTIONS ON HOW TO EXCHANGE THEIR WARWICK COMMUNITY BANCORP STOCK
CERTIFICATES FOR THE MERGER CONSIDERATION.
SOLICITATION OF PROXIES
Warwick Community Bancorp will bear the entire cost of soliciting
proxies from its stockholders. In addition to solicitation of proxies by mail,
Warwick Community Bancorp will request that banks, brokers and other record
holders send proxies and proxy material to the beneficial owners of Warwick
Community Bancorp common stock and secure their voting instructions, if
necessary. Warwick Community Bancorp will reimburse the record holders for their
reasonable expenses in taking those actions. Warwick Community Bancorp has also
made arrangements with Georgeson Shareholder Communications Inc. to assist it in
soliciting proxies
40
and has agreed to pay them a fee of $7,500 plus reasonable expenses for these
services. If necessary, Warwick Community Bancorp may use several of its regular
employees, who will not be specially compensated, to solicit proxies from
Warwick Community Bancorp stockholders, either personally or by telephone,
telegram, facsimile or letter.
RECORD DATE
The Warwick Community Bancorp board of directors has fixed the close of
business on August 9, 2004 as the record date for determining the Warwick
Community Bancorp stockholders entitled to receive notice of and to vote at the
Warwick Community Bancorp annual meeting of stockholders. On August 9, 2004,
4,498,923 shares of Warwick Community Bancorp common stock were outstanding.
There were approximately 3,170 holders of record on August 4, 2004, the most
recent date for which this information is available.
VOTING RIGHTS AND VOTE REQUIRED
The presence, in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of Warwick Community Bancorp common stock
is necessary to constitute a quorum at the Warwick Community Bancorp annual
meeting of stockholders. Abstentions and broker non-votes will be counted solely
for the purpose of determining whether a quorum is present at the annual
meeting. An unvoted proxy submitted by a broker is sometimes referred to as a
broker non-vote.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Warwick Community Bancorp
common stock entitled to vote at the Warwick Community Bancorp annual meeting.
Directors are elected by a plurality of votes cast, without regard to either
broker non-votes or proxies as to which the authority to vote the nominees being
proposed is withheld. The ratification of the independent registered public
accounting firm is determined by a majority of the votes cast, without regard to
broker non-votes; however, proxies marked "Abstain" will have the same effect as
a vote against the ratification of the independent registered public accounting
firm. You are entitled to one vote for each share of Warwick Community Bancorp
common stock you held as of the record date. However, Warwick Community
Bancorp's certificate of incorporation provides that stockholders of record who
beneficially own in excess of 10% of the then-outstanding shares of common stock
of Warwick Community Bancorp are not entitled to any vote with respect to the
shares held in excess of the 10% limit.
BECAUSE THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF WARWICK COMMUNITY BANCORP COMMON STOCK ENTITLED TO VOTE AT
THE WARWICK COMMUNITY BANCORP ANNUAL MEETING IS NEEDED FOR US TO PROCEED WITH
THE MERGER, THE FAILURE TO VOTE BY PROXY OR IN PERSON WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER AGREEMENT. ABSTENTIONS AND BROKER NON-VOTES ALSO
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT. ACCORDINGLY,
THE WARWICK COMMUNITY BANCORP BOARD OF DIRECTORS URGES WARWICK COMMUNITY BANCORP
STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
41
As of the record date, directors and executive officers of Warwick
Community Bancorp and their affiliates had the right to vote 668,469 shares of
Warwick Community Bancorp common stock, or 14.05% of the outstanding shares of
Warwick Community Bancorp common stock at that date. As of that date, directors
and executive officers of Provident Bancorp and their affiliates owned no shares
of Warwick Community Bancorp common stock. Warwick Community Bancorp's directors
have agreed to vote their shares of Warwick Community Bancorp common stock in
favor of the merger agreement. It is currently anticipated that Warwick
Community Bancorp's executive officers, and the directors and executive officers
of Provident Bancorp, will vote their shares of Warwick Community Bancorp common
stock in favor of the merger agreement, although none of such persons (other
than executive officers of Warwick Community Bancorp who are also directors of
Warwick Community Bancorp) have entered into any agreements with respect to the
voting of their shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Warwick Community Bancorp board of directors has unanimously
approved the merger agreement and the transactions contemplated in the merger
agreement. The Warwick Community Bancorp board of directors has determined that
the merger agreement and the transactions contemplated in the merger agreement
are advisable and in the best interests of Warwick Community Bancorp and its
stockholders and unanimously recommends that you vote "FOR" approval of the
merger agreement, "FOR" each of the Warwick Community Bancorp nominees for
directors listed in this Proxy Statement/Prospectus and "FOR" the ratification
of the appointment of KPMG LLP as independent registered public accounting firm
for the year ending December 31, 2004.
See "Proposal I--The Proposed Merger-- Warwick Community Bancorp's
Reasons for the Merger; Recommendation of Warwick Community Bancorp's Board of
Directors" on page 52 for a more detailed discussion of the Warwick Community
Bancorp board of directors' recommendation.
ATTENDING THE WARWICK COMMUNITY BANCORP ANNUAL MEETING
If you want to vote your shares of Warwick Community Bancorp common
stock held in "street name" in person at the annual meeting, you will have to
get a written proxy in your name from the broker, bank or other nominee who
holds your shares.
PARTICIPANTS IN WARWICK COMMUNITY BANCORP'S AND WARWICK SAVINGS' BENEFIT PLANS
Participants in the Warwick Community Bancorp's stock-based benefit
plans, such as the Warwick Community Bancorp, Inc. Employee Stock Ownership
Plan, The Warwick Savings Bank 401(k) Savings Plan and the Recognition and
Retention Plan of Warwick Community Bancorp, Inc. have the right to direct the
voting of Warwick Community Bancorp common stock allocated to their plan
accounts but do not have the right to vote these shares personally at Warwick
Community Bancorp's annual meeting. Such participants should refer to the voting
instructions provided to them by the plan trustees for information on how to
direct the voting of these shares.
42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF WARWICK COMMUNITY BANCORP
The following table sets forth certain information as to those persons
that Warwick Community Bancorp believes are beneficial owners of more than 5% of
Warwick Community Bancorp's outstanding common stock as of August 9, 2004.
Persons and groups that beneficially own in excess of 5% of Warwick Community
Bancorp's common stock are required to file certain reports with Warwick
Community Bancorp and with the Securities and Exchange Commission regarding such
beneficial ownership. For purposes of the table below and the table set forth
under "Beneficial Stock Ownership of Management," a person is deemed to be the
beneficial owner of any shares of common stock (1) over which the person has or
shares, directly or indirectly, voting or investment power, or (2) of which the
person has a right to acquire beneficial ownership at any time within 60 days
after August 9, 2004. "Voting Power" is the power to vote or direct the voting
of shares and "investment power" includes the power to dispose or direct the
disposition of shares. As of August 9, 2004, there were 4,498,923 shares of
Warwick Community Bancorp common stock outstanding.
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF OF BENEFICIAL COMMON STOCK
BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- ---------------------------------------------- ----------------------- -----------------------
Warwick Community Bancorp, Inc. 460,370(1) 10.23%
Employee Stock Ownership Plan
18 Oakland Avenue
Warwick, New York 10990-0591
Citigroup Global Markets, Inc. 430,527(2) 9.57%
Citigroup Financial Products, Inc.
Citigroup Global Markets Holdings Inc.
388 Greenwich Street
New York, New York 10013
and
Citigroup Inc.
399 Park Avenue
New York, New York 10043
Kahn Brothers & Co., Inc. 426,326(3) 9.48%
555 Madison Avenue, 22nd Floor
New York, New York 10022
- --------------------------------
(1) The Employee Stock Ownership Plan, referred to as the ESOP, is
administered by the ESOP Committee consisting of the Company's President
and Chief Operating Officer, Ronald J. Gentile, as plan administrator
and a committee established pursuant to the ESOP, consisting of Warwick
Community Bancorp officers. The ESOP trustee, RS Group Trust Co., will
be instructed regarding investment of assets held in the ESOP. The ESOP
generally votes all allocated shares held in the ESOP in accordance with
the instructions of participants. As of December 31, 2003, 190,380 of
the 460,370 shares held in the ESOP were allocated to participants.
Pursuant to the terms of the ESOP, allocated shares for which no
instructions are given and unallocated shares are generally voted by the
ESOP trustee in a manner calculated to most accurately reflect the
voting instructions received from participants regarding the allocated
shares so long as such vote is in accordance with the requirements of
the Employee Retirement Income Security Act of 1974, as amended.
(2) Based on information in a Schedule 13G/A, dated March 4, 2004, filed by
Citigroup Global Markets, Inc. ("CGM"), a New York corporation,
Citigroup Financial Products, Inc. ("CFP"), a Delaware corporation,
Citigroup Global Markets Holdings Inc. ("CGMH"), a New York corporation
and Citigroup Inc. ("Citigroup"), a Delaware corporation. CGM, CFP, CGMH
and Citigroup have reported shared voting and shared dispositive power
over all of the shares shown.
(3) Based on information provided to us as of August 9, 2004, by Mr. Thomas
G. Kahn, President and Director of Kahn Brothers & Co., Inc., a New York
corporation and registered investment advisor. Kahn Brothers & Co., Inc.
has reported shared voting and dispositive power over all of the shares
shown. The reporting person may acquire or dispose of additional
43
shares on behalf of its clients from time to time. Mr. Kahn is also a
Director of Warwick Community Bancorp. See "--Beneficial Stock Ownership
of Management" below for additional shares beneficially owned by Mr.
Kahn.
BENEFICIAL STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the shares of
Warwick Community Bancorp common stock beneficially owned by each director of
Warwick Community Bancorp, by each executive officer of Warwick Community
Bancorp identified in the Summary Compensation Table included on page 129 of
this Proxy Statement/Prospectus and by all directors and executive officers as a
group as of August 9, 2004. Except as otherwise indicated, each person shown in
the table has sole voting and investment power with respect to the shares of
common stock indicated. The titles for the individuals listed in the following
table are Warwick Community Bancorp titles, except as otherwise noted.
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL COMMON STOCK
NAME TITLE OWNERSHIP(1)(2)(3)(4)(5) OUTSTANDING
- ------------------------ -------------------------------------- ---------------------------- ----------------
Fred G. Kowal Chairman of the Board and Chief 77,181 (6) 1.69%
Executive Officer
Ronald J. Gentile President, Chief Operating Officer 134,412 (6) 2.95%
and Director
Arthur W. Budich Senior Vice President, Treasurer and 85,693 1.89%
Chief Financial Officer
Anthony R. Bottini Director 26,827 (7) 0.60%
Thomas G. Kahn Director 60,163 (7)(8) 1.34%
R. Michael Kennedy Director 74,408 1.65%
Fred M. Knipp Director 45,790 1.01%
Emil R. Krahulik Director 35,379 0.78%
David F. McBride Director 11,100 0.25%
John J. McDermott, III Director 34,806 0.77%
John W. Sanford, III Director 35,666 (7) 0.79%
Robert N. Smith Director 47,044 1.04%
All directors and executive officers as a group (12 persons) 668,469 14.05%
- -------------------------
* Represents less than 1.0% of the outstanding common stock.
(1) Includes the following number of shares which individuals have the right
to acquire beneficial ownership of by the exercise of vested stock
options: Mr. Kowal, 44,000 shares; Mr. Gentile, 65,000 shares; Mr.
Budich, 35,000 shares; each of Messrs. Kennedy, Knipp, Sanford and
Smith, 19,819 shares; Mr. Krahulik, 17,319 shares; Mr. McBride, 8,000
shares; Mr. McDermott, 8,000 shares; each of Messrs. Kahn and Bottini,
964 shares; and all directors and executive officers as a group,
258,523shares.
(2) Includes the following number of shares that have been allocated as of
December 31, 2003 to individual accounts of ESOP participants: Mr.
Kowal, 6,373 shares; Mr. Gentile, 9,104 shares; Mr. Budich, 7,908
shares; and all executive officers as a group, 23,385 shares. Such
persons have voting power (subject to the duties of the ESOP trustee)
but no investment power, except in limited circumstances, as to these
shares. The figures shown do not include 190,380 shares of Warwick
Community Bancorp common stock that have not been allocated to any
individual's account and as to which the members of Warwick Community
Bancorp's ESOP Committee and each of the participants identified in the
table may be deemed to share investment power, except in limited
circumstances, thereby causing each such person to be deemed a
beneficial owner of such unallocated shares. Each of the members of the
ESOP Committee and the participants identified in the table
44
disclaims beneficial ownership of such shares and, accordingly, such
shares are not attributed to the members of the ESOP Committee or the
participants identified in the table individually.
(3) Includes the following number of shares held in Warwick Community
Bancorp's 401(k) Savings Plan that have been allocated as of July 28,
2004, the latest practicable date, to individual accounts as follows:
Mr. Kowal, 808 shares; Mr. Gentile, 12,188 shares; Mr. Budich, 6,064
shares; and all executive officers as a group, 19,060 shares. Such
persons have shared voting and investment power as to such shares.
(4) Includes the following number of restricted shares of Company common
stock over which each individual has sole voting but no investment
power: Mr. Kowal, 17,854 shares; Mr. Gentile, 4,439 shares; Mr. Budich,
1,902 shares; each of Messrs. Kennedy, Knipp, Krahulik, Sanford and
Smith, 1,071 shares; and all directors and executive officers as a
group, 29,550 shares.
(5) Includes the following number of shares over which individuals may be
deemed to share voting and investment power (other than as disclosed in
notes 1, 2, 3, and 4): Mr. Gentile, 15,000 shares; Mr. Budich, 8,500
shares; Mr. Kennedy, 1,078 shares; Mr. Knipp, 15,000 shares; Mr.
McDermott, 1,000 shares; Mr. Kahn, 52,600 shares; and all directors and
executive officers as a group, 93,178 shares.
(6) Does not include 4,505 and 3,365 share-equivalent units credited to Mr.
Kowal's and Mr. Gentile's share-unit accounts, respectively, under
Warwick Community Bancorp's Benefit Restoration Plan, or BRP. The value
of these share-equivalent units mirrors the value of Warwick Community
Bancorp common stock. The amounts ultimately realized by these
individuals will reflect changes in the market value of Warwick
Community Bancorp's common stock from the date of accrual until the date
of payout. The share-equivalent units do not have voting rights, but are
credited with dividend equivalent units. Share-equivalent units under
the BRP are payable only in cash.
(7) Includes share-equivalent units, as follows: Messrs Bottini, Kahn and
Sanford, 761 shares, 1,279 shares and 1,260 shares, respectively, in
deferral accounts. The value of these share-equivalent units mirrors the
value of Warwick Community Bancorp common stock. The amounts ultimately
realized by these individuals will reflect changes in the market value
of Warwick Community Bancorp's common stock from the date of deferral
until the date of payout. The share-equivalent units do not have voting
rights, but are credited with dividend equivalent units.
(8) Does not include 366,499 shares held by Kahn Brothers & Co., Inc. of
which Mr. Kahn disclaims beneficial ownership. See footnote 3 under the
"Security Ownership of Certain Beneficial Owners of Warwick Community
Bancorp" table above.
45
INFORMATION ABOUT THE COMPANIES
PROVIDENT BANCORP, INC.
400 RELLA BOULEVARD
MONTEBELLO, NEW YORK 10901
(845) 369-8040
Provident Bancorp, Inc. is a Delaware corporation that, on January 14,
2004, became the savings and loan holding company for Provident Bank, following
the completion of the second-step conversion of Provident Bancorp, MHC to the
stock holding company structure. As part of the conversion, Provident Bancorp
issued an aggregate of 35,240,358 shares of its common stock, par value $0.01
per share, in a subscription offering and an exchange offering. As a result of
the stock offering, Provident Bancorp raised $192.4 million in net proceeds, of
which $140.0 million was contributed to Provident Bank and $52.4 million was
retained by Provident Bancorp. Contemporaneous with the completion of the
second-step conversion, Provident Bancorp acquired E.N.B. Holding Company, Inc.
for a purchase price consisting of 3,969,676 shares of Provident Bancorp common
stock, and $36.8 million in cash. Immediately following the acquisition of
E.N.B. Holding Company, its subsidiary, Ellenville National Bank, was merged
into Provident Bank. As of the completion of the second-step conversion on
January 14, 2004, Provident Bancorp owned all of the outstanding common stock of
Provident Bank. Currently, Provident Bancorp's activities consist solely of
managing Provident Bank and investing the net proceeds it retained in the
second-step conversion. At June 30, 2004, Provident Bancorp had total
consolidated assets of $1.8 billion, net loans of $971.9 million, total deposits
of $1.2 billion, and total stockholders' equity of $342.6 million.
Provident Bank is a full-service, community-oriented savings association
that provides financial services to individuals, families and businesses.
Provident Bank operates through 27 branch offices and 37 ATMs throughout
Rockland, Orange, Ulster and Sullivan Counties, New York.
Originally organized in 1888 as a New York State-chartered mutual
savings and loan association, Provident Bank reorganized into the mutual holding
company structure in January 1999 and became the wholly owned subsidiary of
Provident Bancorp, which was then a federal corporation. As part of the mutual
holding company reorganization, Provident Bancorp, a federal corporation,
conducted an initial public offering and sold 46.7% of its shares of common
stock to depositors. At September 30, 1998, Provident Bank operated 11 branch
offices. Subsequent to the mutual holding company reorganization and initial
stock offering, Provident Bank broadened its market reach through de novo
branching and its acquisition in April 2002 of The National Bank of Florida,
located in Florida, New York. At the time of the acquisition, The National Bank
of Florida had assets of $104.0 million and deposits of $88.2 million.
In April 2002, Provident Bank organized Provident Municipal Bank as a
wholly owned subsidiary. Provident Municipal Bank is a New York State-chartered
limited purpose commercial bank that is engaged in the business of accepting
deposits from municipalities in our market area.
46
Provident Bank's business consists primarily of accepting deposits from
the general public and investing those deposits, together with funds generated
from operations and borrowings, in one- to four-family residential, multi-family
residential and commercial real estate loans, commercial business loans,
consumer loans and in investment securities and mortgage-backed securities.
Provident Bank is subject to regulation and supervision by the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation. Provident
Municipal Bank is regulated by the New York State Banking Department and the
Federal Deposit Insurance Corporation.
Provident Bancorp routinely evaluates opportunities to expand through
mergers or acquisitions. As a result, merger or acquisition discussions and, in
some cases, negotiations may take place in the future, and mergers and
acquisitions involving cash, debt or equity securities may occur. The impact of
a merger or an acquisition would likely be reflected in Provident Bancorp's
financial condition and results of operations.
Additional information about Provident Bancorp and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement/Prospectus. See "Where You Can Find More Information" on page 137.
WARWICK COMMUNITY BANCORP, INC.
18 OAKLAND AVENUE
WARWICK, NEW YORK 10990
(845) 986-2206
Warwick Community Bancorp is a bank holding company incorporated in
September 1997 under the laws of the State of Delaware and is registered under
the Bank Holding Company Act of 1956, as amended. Warwick Community Bancorp
elected to become a financial holding company under the Bank Holding Company Act
in October 2000. Warwick Community Bancorp was organized for the purpose of
acquiring all of the outstanding capital stock of Warwick Savings. Warwick
Community Bancorp's operations consist principally of the operations of Warwick
Savings and, as of October 26, 1999, The Towne Center Bank, a de novo commercial
bank formed by Warwick Community Bancorp under the laws of the State of New
Jersey and headquartered in Lodi, New Jersey. On February 26, 2001, Warwick
Community Bancorp acquired Hardenburgh Abstract Company of Orange County, Inc.,
to engage in the title insurance agency business. On July 24, 2001, The Warwick
Commercial Bank, a limited purpose commercial bank, was formed by Warwick
Savings under the laws of the State of New York to hold deposits from public
entities. Warwick Community Bancorp's subsidiaries' deposits are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation up to the
maximum amounts permitted by law.
Warwick Savings' principal business has been and continues to be
attracting retail deposits from the general public and investing those deposits,
together with funds generated from operations and borrowings, primarily in
commercial business and multi-family and commercial real estate loans and
investing in various mortgage-backed, debt and equity securities. Prior to
47
2002, Warwick Community Bancorp emphasized conventional mortgage lending secured
by one-to four family residences. Warwick Community Bancorp currently emphasizes
originating commercial loans to be retained in its loan portfolio. Warwick
Savings also originates home mortgage and equity loans known as "Good Neighbor
Home Loans" and lines of credit and consumer loans.
Towne Center Bank opened for business on October 26, 1999. Towne Center
Bank's principal business consists of attracting business and consumer deposits
and investing those deposits in consumer and commercial real estate and
commercial business loans. Towne Center Bank also invests in U.S. Treasury and
agency securities, mortgage-backed securities and other investments.
Warwick Community Bancorp's revenues are derived principally from the
interest on its loans and investments and, to a lesser degree, from its loan and
securities sales, servicing fee income, income derived from investment products
offered through WSB Financial Services, Inc. and title insurance fees generated
through Hardenburgh. Warwick Community Bancorp's primary sources of funds are
deposits, borrowings, principal and interest payments on loans and securities
and proceeds from the sale of loans and securities.
48
PROPOSAL I -- THE PROPOSED MERGER
THE DESCRIPTION OF THE MERGER AND THE MERGER AGREEMENT CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS DESCRIBES THE MATERIAL TERMS OF THE MERGER AGREEMENT;
HOWEVER, IT DOES NOT PURPORT TO BE COMPLETE. IT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, WHICH IS ATTACHED HERETO AS APPENDIX A.
WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
Pursuant to the merger agreement, Warwick Community Bancorp will merge
into Provident Bancorp, with Provident Bancorp as the surviving entity.
Outstanding shares of Warwick Community Bancorp common stock will be converted
into the right to receive cash, shares of Provident Bancorp common stock or a
combination of cash and stock. Cash will be paid in lieu of any fractional share
of Provident Bancorp common stock. See "--Merger Consideration; Cash or Stock
Election" below. As a result of the merger, the separate corporate existence of
Warwick Community Bancorp will cease and Provident Bancorp will succeed to all
of the rights and be responsible for all of the obligations of Warwick Community
Bancorp. Following the merger of Warwick Community Bancorp into Provident
Bancorp, Warwick Savings Bank and Towne Center Bank will merge into Provident
Bank and the separate corporate existence of Warwick Savings Bank and Towne
Center Bank shall cease.
BACKGROUND OF THE MERGER
The Warwick Community Bancorp board of directors has periodically
discussed and reviewed with management the business, strategic direction,
performance and prospects of Warwick Community Bancorp in the context of the
current and prospective business environment and financial services landscape.
The Warwick Community Bancorp board of directors has also at times discussed
with management various potential strategic options, including strategies to
grow Warwick Community Bancorp's business through business and marketing
initiatives and through business combinations with other financial institutions.
In this regard, the management of Warwick Community Bancorp has from time to
time communicated informally with representatives of other financial
institutions regarding industry trends and issues, their respective companies'
strategic direction and the potential benefits and issues arising from potential
business combination or other strategic transactions.
In early December 2003, the Warwick Community Bancorp board of directors
held a board meeting at which it reviewed with management the current financial
services environment and the strategic options potentially available to Warwick
Community Bancorp, including strategies for continuing as an independent entity
and strategies for undertaking a strategic business combination with another
financial institution. At the conclusion of this meeting, the board determined
to invite Sandler O'Neill & Partners, L.P. to make a presentation to the board
at its next board meeting later in December to review strategic options.
In mid-December 2003, representatives of Sandler O'Neill met with the
Warwick Community Bancorp board and reviewed with the board financial and other
information relating
49
to Warwick Community Bancorp. Management and Sandler O'Neill also reviewed with
the Warwick Community Bancorp board the current financial services environment,
including continued consolidation, evolving trends in technology and increasing
competition, and the potential impact of that environment on Warwick Community
Bancorp's business, performance, prospects and strategic options. Management and
Sandler O'Neill also discussed with the Warwick Community Bancorp board of
directors the potential risks and benefits of various strategies. Among other
things, the board noted that, as had previously been discussed by the board,
size and diversification beyond a level it believed to be reasonably achievable
by Warwick Community Bancorp on an independent basis was becoming increasingly
important to continued success in the current financial services environment. At
the conclusion of this meeting, the Warwick Community Bancorp board of directors
preliminarily determined that a business combination with another financial
institution was likely to present the best prospect for enhancing stockholder
value, and authorized management to engage Sandler O'Neill as its financial
advisor, and authorized management and Sandler O'Neill to make preliminary
contacts with potential strategic partners.
Beginning in early January, a number of financial institutions were
contacted regarding their interest in a potential business combination
transaction with Warwick Community Bancorp. Some of these institutions entered
into confidentiality agreements with Warwick Community Bancorp, including
Provident Bancorp, and were then provided with information concerning Warwick
Community Bancorp. Beginning in late January, some of these financial
institutions, including Provident Bancorp, indicated that they were interested
in further considering a potential transaction with Warwick Community Bancorp,
subject to due diligence, further discussions regarding the potential terms of a
transaction, negotiation of definitive transaction documentation as appropriate,
and board approval.
Over the next two months, Warwick Community Bancorp's management and its
advisors discussed the possibility of a transaction with the interested
institutions, including matters relating to the potential strategic benefits
that a combination might offer and the possible range of terms for a
transaction. These discussions included discussions among Warwick Community
Bancorp's management and its financial advisor and Provident Bancorp's
management and its financial advisor. During this time, the Warwick Community
Bancorp board held a series of regular and special meetings at which it received
updates on the progress of the discussions and authorized the continued pursuit
of a possible transaction. Also during this time, some of the institutions
contacted, including Provident Bancorp, conducted due diligence investigations
of Warwick Community Bancorp.
During the first two weeks of March 2004, Provident Bancorp finalized
its due diligence investigation of Warwick Community Bancorp. Also during that
period, representatives of Warwick Community Bancorp and its advisors conducted
a due diligence investigation of Provident Bancorp. After further discussion,
senior management of Warwick Community Bancorp and Provident Bancorp determined
that, assuming the finalization of definitive transaction documentation, they
were each prepared to present to their respective boards of directors a proposed
part-cash, part-stock merger transaction. Following further arm's length
negotiations, taking into account, among other things, the contributions of
Warwick Community Bancorp to the business, operations, financial condition and
prospects of the combined company, anticipated cost savings and the impact of
the merger consideration on the combined company's
50
earnings and prospects, management of each company agreed that they were willing
to propose to their respective boards of directors a transaction that would
allow Warwick Community Bancorp stockholders to receive, at their election (but
subject to adjustment in the event that either form of merger consideration was
over-subscribed), either $32.26 in cash or 2.7810 shares of Provident Bancorp
common stock for each share of Warwick Community Bancorp common stock owned as
of the completion of the merger. Also during this time, legal counsel to
Provident Bancorp and Warwick Community Bancorp worked to prepare definitive
documentation with respect to the proposed merger.
On March 15, 2004, the board of directors of Warwick Community Bancorp
held a special meeting. Mr. Kowal and other members of senior management,
together with Warwick Community Bancorp's financial and legal advisors, reviewed
with the board of directors the terms of the proposed merger with Provident
Bancorp. Mr. Kowal and representatives of Sandler O'Neill also reviewed prior
discussions regarding strategic alternatives, solicitations of other indications
of interests in a possible transaction with Warwick Community Bancorp, and the
results and status of prior discussions with other potential merger partners.
Mr. Kowal and other members of senior management, as well as representatives of
Sandler O'Neill, also discussed with the board the results of their due
diligence review of Provident Bancorp.
In addition, representatives of Sandler O'Neill discussed a range of
matters, including the matters set forth in "--Opinion of Warwick Community
Bancorp's Financial Advisors" Representatives of Sandler O'Neill, together with
Warwick Community Bancorp management, also reviewed the special dividend that
Warwick Community Bancorp would be entitled to pay prior to completion of the
merger. Representatives of Sandler O'Neill and management discussed with the
Warwick Community Bancorp board of directors the fact that the amount of the
dividend would depend upon the disposition of automobiles contained in the
automobile lease portfolio held by Warwick Savings Bank, but noted that the
total dividend payout possibility was limited to approximately $7.8 million (or
approximately $1.74 per share), and that the ultimate amount of the dividend (if
any) would depend on a number of factors that prevented any assurance as to the
amount or timing of the potential special dividend. After this discussion,
Sandler O'Neill rendered to the Warwick Community Bancorp board of directors its
oral opinion (subsequently confirmed in writing) that, as of the date of the
board meeting and based upon and subject to the considerations described in its
opinion, the proposed merger consideration was fair, from a financial point of
view, to holders of Warwick Community Bancorp common stock. Representatives of
Wachtell, Lipton, Rosen & Katz then discussed with the Warwick Community Bancorp
board of directors the legal standards applicable to its decisions and actions
with respect to the proposed transactions, and reviewed the legal terms of the
proposed merger and the related agreements.
Following these presentations, the Warwick Community Bancorp board
meeting continued with discussions and questions among the members of the
Warwick Community Bancorp board, management and Warwick Community Bancorp's
legal and financial advisors. The board discussed, among other things, the fact
that the implied value of the merger consideration, based on the exchange ratio
and the closing stock price of Provident Bancorp common stock on the Nasdaq
National Market on the last trading day prior to the board meeting, and the cash
portion of the merger consideration, was less than Warwick Community Bancorp's
closing stock price on the prior day. The board of directors, however, noted its
belief that
51
Warwick Community Bancorp common stock was trading above the levels at which it
would otherwise be trading due in large part to the rumors of a potential
business combination transaction involving Warwick Community Bancorp. The
Warwick Community Bancorp board , among other things, noted that based on the
closing price of Provident Bancorp common stock on the Nasdaq on March 12, 2004
(the last trading day prior to Warwick Community Bancorp's board meeting
approving the merger agreement) and the cash component of the merger
consideration, the implied value of the merger consideration to be received by
Warwick Community Bancorp stockholders in the merger, viewed on a blended basis
($32.75), represented a premium of approximately 8% over the prevailing market
price of Warwick Community Bancorp common stock on the Nasdaq National Market at
the beginning of December 2003 when the Warwick Community Bancorp board first
began to consider a business combination transaction, and a discount of
approximately 4.2% over the closing price of Warwick Community Bancorp common
stock on March 12, 2004 (in each case without considering any additional value
from the potential special dividend).
After further discussion, and taking into consideration the factors
described under "- Warwick Community Bancorp's Reasons for the Merger;
Recommendation of Warwick Community Bancorp's Board of Directors," the Warwick
Community Bancorp board determined that the combined company would have better
future prospects than Warwick Community Bancorp was likely to achieve on a
stand-alone basis and that the proposed merger with Provident Bancorp presented
the best opportunity for enhancing Warwick Community Bancorp stockholder value.
Accordingly, the Warwick Community Bancorp board determined that the Provident
Bancorp transaction was advisable and in the best interests of Warwick Community
Bancorp and its stockholders, and the Warwick Community Bancorp board
unanimously approved the merger with Provident Bancorp.
Following approval of each company's board of directors, the parties
executed the merger agreement. The next day, the parties publicly announced the
transaction by issuing a joint press release.
WARWICK COMMUNITY BANCORP'S REASONS FOR THE MERGER; RECOMMENDATION OF WARWICK
COMMUNITY BANCORP'S BOARD OF DIRECTORS
The Warwick Community Bancorp board of directors reviewed and discussed
the transaction with Warwick Community Bancorp's management and its financial
and legal advisors in determining that the merger is in the best interests of
Warwick Community Bancorp and its stockholders. In reaching its conclusion to
approve the merger agreement, the Warwick Community Bancorp board of directors
considered a number of factors, including the following:
o The fact that, based on the closing price of Provident Bancorp
common stock on the Nasdaq National Market on March 12, 2004
(the last trading day prior to Warwick Community Bancorp's board
meeting approving the merger agreement) and the cash component
of the merger consideration, the implied value of the merger
consideration to be received by Warwick Community Bancorp
stockholders in the merger, viewed on a blended basis ($32.75),
represented a premium of approximately 8% over the prevailing
market price of Warwick Community Bancorp common stock on the
Nasdaq National Market at the beginning of December 2003 when
the Warwick Community Bancorp board first
52
began to consider a business combination transaction, and a
discount of approximately 4.2% over the closing price of Warwick
Community Bancorp common stock on March 12, 2004 (in each case
without considering any additional value from the potential
special dividend).
o The fact that the cash/stock election feature of the merger
consideration offers Warwick Community Bancorp stockholders both
the opportunity to participate in the growth and opportunities
of the combined company through the stock component and the
opportunity to realize cash for the value of their shares
through the cash component, subject in some circumstances to the
allocation procedures in the merger agreement in the event that
either form of merger consideration is over-subscribed.
o Its understanding of the business, operations, financial
condition, earnings and prospects of Warwick Community Bancorp.
o Its understanding of the business, operations, financial
condition, earnings and prospects of Provident Bancorp, taking
into account Warwick Community Bancorp's due diligence
investigation of Provident Bancorp.
o The current and prospective environment in which Warwick
Community Bancorp and Provident Bancorp operate, including
national and local economic conditions, the competitive
environment for financial institutions generally and the trend
toward consolidation in the financial services industry.
o The ability of Warwick Community Bancorp, under the terms of the
merger agreement, to make a special dividend payment to its
stockholders prior to completion of the merger in an amount
reflecting the disposition of automobiles contained in the
automobile lease portfolio held by Warwick Savings Bank.
o The review by the Warwick Community Bancorp board of directors
with its legal and financial advisors of the structure of the
merger and the financial and other terms of the merger
agreement, including the exchange ratio and cash consideration
offered by Provident Bancorp.
o The board structure of the combined company provided for under
the merger agreement, including two board seats reserved for
current Warwick Community Bancorp directors on the Provident
Bancorp board of directors following the completion of the
merger, as discussed in greater detail under "Interests of
Directors and Officer in the Merger--Appointment of Two Warwick
Community Bancorp Board Members to the Boards of Directors of
Provident Bancorp and Provident Bank."
o The complimentary nature of the respective markets, customers
and asset/liability mix of the two companies.
53
o The expectation that the merger will be more than twenty percent
accretive to GAAP and cash earnings of Provident Bancorp in
2005.
o The anticipated cost saving opportunities, estimated to be
approximately $4.5 million (or 25% of Warwick Community
Bancorp's operating expense base) on a pre-tax basis, when fully
phased in during the first year following the merger.
o The reports of Warwick Community Bancorp management and the
financial presentation by Sandler O'Neill to Warwick Community
Bancorp's board of directors concerning the operations,
financial condition and prospects of Provident Bancorp and the
expected financial impact of the merger on the combined company,
including pro forma assets, earnings, deposits and other
financial metrics.
o The likelihood that the regulatory approvals needed to complete
the transaction will be obtained.
o The historical and current market prices of Provident Bancorp
common stock and Warwick Community Bancorp common stock.
o The opinion delivered to the Warwick Community Bancorp board of
directors by Sandler O'Neill that, as of the date of the opinion
and based upon and subject to the considerations in its opinion,
the merger consideration was fair, from a financial point of
view, to holders of Warwick Community Bancorp common stock.
o The benefits of increased liquidity that Warwick Community
Bancorp stockholders would have as stockholders of Provident
Bancorp.
The Warwick Community Bancorp board of directors also considered
potential risks associated with the merger in connection with its deliberations
of the proposed transaction, including:
o The challenges of combining the businesses, assets and
workforces of the two companies, which could impact the
post-merger success of the combined company and the ability to
achieve anticipated cost savings and other potential synergies.
o The after-tax charge of approximately $10 million that is
expected to be taken by Provident Bancorp in connection with the
completion of the merger, reflecting costs and expenses expected
to be incurred as a result of the transaction and integrating
the two companies.
o The possibility that, due to certain factors, including the
performance of the automobile lease portfolio held by Warwick
Savings Bank, legal limitations, costs associated with the
portfolio and contractual restrictions, Warwick Community
54
Bancorp would not be able to pay all or a portion of any special
dividend to its stockholders.
o That the fixed exchange ratio component of the merger
consideration will not adjust to compensate for changes in the
stock price of Provident Bancorp or Warwick Community Bancorp
prior to completion of the merger, and that neither company has
any price-based termination right under the merger agreement.
o The interests of Warwick Community Bancorp executive officers
and directors with respect to the merger apart from their
interests as holders of Warwick Community Bancorp common stock,
and the risk that these interests might influence their decision
with respect to the merger. See "--Financial Interests of
Warwick Community Bancorp's Directors and Officers in the
Merger."
o The risk that the terms of the merger agreement, including
provisions relating to the payment of a termination fee under
specified circumstances, although required by Provident Bancorp
as a condition to its willingness to enter into a merger
agreement, could have the effect of discouraging other parties
that might be interested in a transaction with Warwick Community
Bancorp from proposing such a transaction.
The discussion of the information and factors considered by the Warwick
Community Bancorp board of directors is not exhaustive, but includes all
material factors considered by the Warwick Community Bancorp board of directors.
In view of the wide variety of factors considered by the Warwick Community
Bancorp board of directors in connection with its evaluation of the merger and
the complexity of these matters, the Warwick Community Bancorp board of
directors did not consider it practical to, nor did it attempt to, quantify,
rank or otherwise assign relative weights to the specific factors that it
considered in reaching its decision. The Warwick Community Bancorp board of
directors evaluated the factors described above, including asking questions of
Warwick Community Bancorp management and Warwick Community Bancorp legal and
financial advisors, and reached consensus that the merger was in the best
interests of Warwick Community Bancorp and Warwick Community Bancorp
stockholders. In considering the factors described above, individual members of
the Warwick Community Bancorp board of directors may have given different
weights to different factors. The Warwick Community Bancorp board of directors
considered these factors as a whole, and overall considered them to be favorable
to, and to support its determination. It should be noted that this explanation
of the Warwick Community Bancorp board of directors' reasoning and all other
information presented in this section is forward-looking in nature and,
therefore, should be read in light of the factors discussed under "Cautionary
Statement Regarding Forward-Looking Statements."
The Warwick Community Bancorp board of directors determined that the
merger, the merger agreement and the transactions contemplated thereby are
advisable and in the best interests of Warwick Community Bancorp and its
stockholders. The Warwick Community Bancorp board of directors also determined
that the merger agreement and the transactions contemplated thereby are
consistent with, and in furtherance of, Warwick Community Bancorp's business
strategies. Accordingly, the Warwick Community Bancorp board of directors
55
unanimously approved the merger agreement and unanimously recommends that
Warwick Community Bancorp stockholders vote "FOR" approval of the merger
agreement.
OPINION OF WARWICK COMMUNITY BANCORP'S FINANCIAL ADVISOR
By letter dated December 17, 2003, Warwick Community Bancorp retained
Sandler O'Neill as its independent financial advisor in connection with a
possible business combination with another financial institution. Sandler
O'Neill is a nationally recognized investment banking firm whose principal
business specialty is financial institutions. In the ordinary course of its
investment banking business, Sandler O'Neill is regularly engaged in the
valuation of financial institutions and their securities in connection with
mergers and acquisitions and other corporate transactions.
Sandler O'Neill acted as Warwick Community Bancorp's financial advisor
in connection with the proposed merger and participated in certain of the
negotiations leading to the merger agreement. At the March 15, 2004 meeting at
which Warwick Community Bancorp's board of directors considered and approved the
merger agreement, Sandler O'Neill delivered to the board its oral opinion,
subsequently confirmed in writing, that, as of such date, and based upon and
subject to the assumptions made, matters considered and qualifications and
limitations stated in its opinion, the merger consideration was fair to Warwick
Community Bancorp stockholders from a financial point of view. Sandler O'Neill
has confirmed its March 15, 2004 oral opinion by delivering to the board a
written opinion dated the date of this joint proxy statement/prospectus. In
rendering its updated opinion, Sandler O'Neill confirmed the appropriateness of
its reliance on the analyses used to render its earlier opinion by reviewing the
assumptions upon which its analyses were based, performing procedures to update
certain of its analyses and reviewing the other factors considered in rendering
its opinion. THE FULL TEXT OF SANDLER O'NEILL'S UPDATED OPINION IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS. THE OPINION OUTLINES THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY SANDLER O'NEILL IN RENDERING ITS
OPINION. THE DESCRIPTION OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE OPINION. WE URGE YOU TO READ THE ENTIRE OPINION
CAREFULLY IN CONNECTION WITH YOUR CONSIDERATION OF THE PROPOSED MERGER.
SANDLER O'NEILL'S OPINION SPEAKS ONLY AS OF THE DATE OF THE OPINION. THE
OPINION WAS DIRECTED TO THE WARWICK COMMUNITY BANCORP BOARD AND IS DIRECTED ONLY
TO THE FAIRNESS OF THE MERGER CONSIDERATION TO WARWICK COMMUNITY BANCORP
STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES NOT ADDRESS THE UNDERLYING
BUSINESS DECISION OF WARWICK COMMUNITY BANCORP TO ENGAGE IN THE MERGER OR ANY
OTHER ASPECT OF THE MERGER AND IS NOT A RECOMMENDATION TO ANY WARWICK COMMUNITY
BANCORP STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE ANNUAL MEETING
OF STOCKHOLDERS WITH RESPECT TO THE MERGER, THE FORM OF CONSIDERATION A
STOCKHOLDER SHOULD ELECT IN THE MERGER OR ANY OTHER MATTER.
In connection with rendering its March 15, 2004 opinion, Sandler O'Neill
reviewed and considered, among other things:
1. the merger agreement;
56
2. certain publicly available financial statements and other
historical financial information of Warwick Community Bancorp
that they deemed relevant;
3. certain publicly available financial statements and other
historical financial information of Provident Bancorp that they
deemed relevant;
4. internal financial projections for Warwick Community Bancorp for
the year ending December 31, 2004 prepared by and reviewed with
management of Warwick Community Bancorp;
5. internal financial projections for Provident Bancorp for the
period ending September 30, 2004 prepared by and reviewed with
the management of Provident Bancorp and earnings per share
estimates for Provident Bancorp for the years ending December
31, 2004 and 2005 published by I/B/E/S;
6. the pro forma financial impact of the merger on Provident
Bancorp, based on assumptions relating to transaction expenses,
purchase accounting adjustments and cost savings determined by
the senior management of each of Warwick Community Bancorp and
Provident Bancorp;
7. the publicly reported historical price and trading activity for
Warwick Community Bancorp's and Provident Bancorp's common
stock, including a comparison of certain financial and stock
market information for Warwick Community Bancorp and Provident
Bancorp with similar publicly available information for certain
other companies, the securities of which are publicly traded;
8. the financial terms of certain recent business combinations in
the savings institutions industry, to the extent publicly
available;
9. the current market environment generally and the banking
environment in particular; and
10. such other information, financial studies, analyses and
investigations and financial, economic and market criteria as
they considered relevant.
Sandler O'Neill also discussed the business, financial condition,
results of operations and prospects of Warwick Community Bancorp with certain
members of Warwick Community Bancorp's senior management and held similar
discussions with certain members of Provident Bancorp's senior management
regarding the business, financial condition, results of operations and prospects
of Provident Bancorp.
In performing its reviews and in rendering its opinion, Sandler O'Neill
assumed and relied upon the accuracy and completeness of all the financial and
other information that was publicly available or otherwise furnished to or
reviewed by it and further relied on the assurances of Warwick Community
Bancorp's and Provident Bancorp's managements that they were not aware of any
facts or circumstances that would make such information inaccurate or
misleading. Sandler O'Neill was not asked to and did not independently verify
the accuracy or completeness of any of such information and did not assume any
responsibility or liability for the accuracy or
57
completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the specific assets, the collateral
securing assets or the liabilities (contingent or otherwise) of Warwick
Community Bancorp or Provident Bancorp or any of their respective subsidiaries,
including without limitation, Warwick Savings' automobile lease portfolio, or
the collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation of
allowances for loan losses and it did not make an independent evaluation of the
adequacy of the allowance for loan losses of Warwick Community Bancorp or
Provident Bancorp, nor did it review any individual credit files relating to
Warwick Community Bancorp or Provident Bancorp. With Warwick Community Bancorp's
consent, Sandler O'Neill assumed that the respective allowances for loan losses
for both Warwick Community Bancorp and Provident Bancorp were adequate to cover
such losses and would be adequate on a combined basis for the combined entity.
In addition, Sandler O'Neill did not conduct any physical inspection of the
properties or facilities of Warwick Community Bancorp or Provident Bancorp.
Sandler O'Neill's opinion was necessarily based upon financial,
economic, market and other conditions as they existed on, and could be evaluated
as of, the date of its opinion. Sandler O'Neill assumed, in all respects
material to its analyses, that all of the representations and warranties
contained in the merger agreement and all related agreements were true and
correct, that each party to such agreements would perform all of the covenants
required to be performed by such party under such agreements and that the
conditions precedent in the merger agreement were not waived. Sandler O'Neill
also assumed, with Warwick Community Bancorp's consent, that there had been no
material change in Warwick Community Bancorp's and Provident Bancorp's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements made available to them, that Warwick Community
Bancorp and Provident Bancorp would remain as going concerns for all periods
relevant to its analyses, and that the merger would qualify as a tax-free
reorganization for federal income tax purposes. Finally, with Warwick Community
Bancorp's consent, Sandler O'Neill relied upon the advice Warwick Community
Bancorp received from its legal, accounting and tax advisors as to all legal,
accounting and tax matters relating to the merger and the other transactions
contemplated by the merger agreement.
In rendering its March 15, 2004 opinion, Sandler O'Neill performed a
variety of financial analyses. The following is a summary of the material
analyses performed by Sandler O'Neill, but is not a complete description of all
the analyses underlying Sandler O'Neill's opinion. The summary includes
information presented in tabular format. IN ORDER TO FULLY UNDERSTAND THE
FINANCIAL ANALYSES, THESE TABLES MUST BE READ TOGETHER WITH THE ACCOMPANYING
TEXT. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL
ANALYSES. The preparation of a fairness opinion is a complex process involving
subjective judgments as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances. The process, therefore, is not necessarily susceptible to a
partial analysis or summary description. Sandler O'Neill believes that its
analyses must be considered as a whole and that selecting portions of the
factors and analyses without considering all factors and analyses, or attempting
to ascribe relative weights to some or all such factors and analyses, could
create an incomplete view of the evaluation process underlying its opinion.
Also, no company included in Sandler O'Neill's comparative analyses described
below is identical to Warwick Community Bancorp or Provident Bancorp and no
transaction is identical to the
58
merger. Accordingly, an analysis of comparable companies or transactions
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading values or merger transaction values, as the case
may be, of Warwick Community Bancorp or Provident Bancorp and the companies to
which they are being compared.
The earnings projections for Warwick Community Bancorp and Provident
Bancorp used and relied upon by Sandler O'Neill in its analyses were based upon
internal financial projections provided by the management of each company. With
respect to such financial projections and all projections of transaction costs,
purchase accounting adjustments and expected cost savings relating to the
merger, Warwick Community Bancorp's and Provident Bancorp's managements
confirmed to Sandler O'Neill that they reflected the best currently available
estimates and judgments of the future financial performance of Warwick Community
Bancorp and Provident Bancorp, respectively, and Sandler O'Neill assumed for
purposes of its analyses that such performances would be achieved. Sandler
O'Neill expressed no opinion as to such financial projections or the assumptions
on which they were based. The financial projections for Warwick Community
Bancorp and Provident Bancorp were prepared for internal purposes only and not
with a view towards public disclosure. These projections, as well as the other
estimates used by Sandler O'Neill in its analyses, were based on numerous
variables and assumptions which are inherently uncertain and, accordingly,
actual results could vary materially from those set forth in such projections.
In performing its analyses, Sandler O'Neill also made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which cannot be predicted and are
beyond the control of Warwick Community Bancorp, Provident Bancorp and Sandler
O'Neill. The analyses performed by Sandler O'Neill are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Sandler O'Neill prepared its
analyses solely for purposes of rendering its opinion and provided such analyses
to the Warwick Community Bancorp board at the March 15, 2004 meeting. Estimates
on the values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
Such estimates are inherently subject to uncertainty and actual values may be
materially different. Accordingly, Sandler O'Neill's analyses do not necessarily
reflect the value of Warwick Community Bancorp's common stock or Provident
Bancorp's common stock or the prices at which Warwick Community Bancorp's or
Provident Bancorp's common stock may be sold at any time. Sandler O'Neill
expressed no opinion regarding the payment or amounts, if any, of any special
dividend.
SUMMARY OF PROPOSAL. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based upon the closing price of Provident Bancorp's common
stock on March 12, 2004 of $11.95 and assuming 50% of Warwick Community
Bancorp's shares of common stock are converted into Provident Bancorp common
stock and the remaining 50% are converted into cash at $32.26 per share in the
merger, Sandler O'Neill calculated an implied transaction value of $32.75 per
share. Sandler O'Neill also considered a potential special cash dividend to the
Warwick Community Bancorp stockholders based on the sale or liquidation of
Warwick Savings' automobile lease portfolio. Based upon Warwick Community
Bancorp's December 31, 2003 financial information, Sandler O'Neill calculated
the following ratios:
59
- ------------------------------------------------------------------------------------------------------------------
TRANSACTION RATIOS
- ------------------------------------------------------------------------------------------------------------------
ANNOUNCED GIVING EFFECT TO RANGE OF
VALUE POTENTIAL SPECIAL DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------
Loss on Sale as a % of Residual Value (1) 100% 75% 50% 25% 0%
Potential Special Dividend $0.00 $0.49 $0.98 $1.46 $1.74
Initial Deal Price Per Share Plus Potential Special
Dividend $32.75 $33.23 $33.72 $34.21 $34.49
- ------------------------------------------------------------------------------------------------------------------
Transaction value / LTM Earnings per share 22.7X 23.1x 23.4x 23.8x 23.9x
Transaction value / Estimated 2004 earnings per share (2) 19.7X 20.0x 20.3x 20.6x 20.8x
Transaction value / Stated book value per share 199.4% 202.4% 205.4% 208.3% 210.0%
Transaction value / Tangible book value per share 206.1% 209.2% 212.2% 215.3% 217.0%
Tangible book premium/Core deposits (3) 17.5% 18.0% 18.5% 19.0% 19.3%
- ------------------------------------------------------------------------------------------------------------------
(1) Excluding any costs of disposition.
(2) Based on Warwick Community Bancorp management's estimate of 2004 operating
earnings per share of $1.66.
(3) Core deposits are Warwick Community Bancorp's total deposits of $487.6
million minus non-core deposits (jumbo certificates of deposit and brokered
deposits) of $17.6 million.
For purposes of Sandler O'Neill's analyses, earnings per share were based on
fully diluted shares. Based on Provident Bancorp's stock price as of March 12,
2004 and excluding any special dividends, the aggregate transaction value was
approximately $154 million, based upon 4.5 million shares of Warwick Community
Bancorp common stock outstanding plus the intrinsic value of outstanding options
to purchase 456,542 shares calculated using the implied transaction value less
the weighted average exercise price of the options of $17.48. Sandler O'Neill
noted that the transaction value represented a 4.2% discount to the March 12,
2004 closing price of Warwick Community Bancorp's common stock.
WARWICK COMMUNITY BANCORP, INC.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Warwick Community Bancorp's common stock
and the relationship between the movements in the prices of Warwick Community
Bancorp's common stock to movements in certain stock indices, including the
Standard & Poor's 500 Index, Standard & Poor's Bank Index, the Nasdaq Bank Index
and the weighted average performance (based upon market capitalization) of a
peer group of publicly traded savings institutions for Warwick Community Bancorp
(the Warwick Peer Group) selected by Sandler O'Neill. The composition of the
Warwick Peer Group is discussed under "Comparable Company Analysis" below.
During the one- and three-year periods ended March 12, 2004, Warwick Community
Bancorp's common stock underperformed the Warwick Peer Group, and each of the
indices to which its was compared.
60
- ---------------------------------------------------------------------------------------------
WARWICK COMMUNITY BANCORP'S ONE-YEAR STOCK PERFORMANCE
- ---------------------------------------------------------------------------------------------
BEGINNING INDEX VALUE ENDING INDEX VALUE
MARCH 12, 2003 MARCH 12, 2004
------------------------------ ------------------------------
Warwick Community Bancorp 100.00% 114.09%
Warwick Peer Group 100.00 128.00
Nasdaq Bank Index 100.00 139.03
S&P 500 Index 100.00 139.34
S&P Bank Index 100.00 138.70
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
WARWICK COMMUNITY BANCORP'S THREE-YEAR STOCK PERFORMANCE
- ---------------------------------------------------------------------------------------------
BEGINNING INDEX VALUE ENDING INDEX VALUE
MARCH 12, 2003 MARCH 12, 2004
------------------------------ ------------------------------
Warwick Community Bancorp 100.00% 223.15%
Warwick Peer Group 100.00 207.49
Nasdaq Bank Index 100.00 158.19
S&P 500 Index 100.00 94.95
S&P Bank Index 100.00 126.39
- ---------------------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Warwick Community Bancorp and the following publicly traded savings institutions
(the Warwick Peer Group) that had total assets of between $300 million and $1.8
billion and are located in the Mid-Atlantic region of the United States:
ESB Financial Corporation Pamrapo Bancorp, Inc.
Fidelity Bancorp, Inc. Parkvale Financial Corporation
First Keystone Financial, Inc. PennFed Financial Services, Inc.
FMS Financial Corporation PHSB Financial Corp.
Harleysville Savings Financial Corporation Sound Federal Bancorp, Inc.
Laurel Capital Group, Inc. Willow Grove Bancorp, Inc.
OceanFirst Financial Corp. WVS Financial Corp.
The analysis compared publicly available financial information for Warwick
Community Bancorp and that of the Warwick Peer Group as of or for the
twelve-month period ended December 31, 2003. The table below sets forth the
comparative data for Warwick Community Bancorp and the median data for the
Warwick Peer Group as of or for the twelve-month period ended December 31, 2003,
with pricing data as of March 12, 2004.
61
- ---------------------------------------------------------------------------------------------
WARWICK PEER GROUP ANALYSIS
- ---------------------------------------------------------------------------------------------
WARWICK
COMMUNITY BANCORP WARWICK PEER GROUP
- --------------------------------------------- ----------------------- -----------------------
Total assets (IN MILLIONS) $760.0 $766.5
- --------------------------------------------- ----------------------- -----------------------
Tangible equity/tangible assets 9.43% 6.96%
- --------------------------------------------- ----------------------- -----------------------
Intangible assets/total equity 3.25% 1.49%
- --------------------------------------------- ----------------------- -----------------------
Net loans/total assets 42.23% 52.31%
- --------------------------------------------- ----------------------- -----------------------
Gross loans/total deposits 66.84% 76.02%
- --------------------------------------------- ----------------------- -----------------------
Total borrowings/total assets 24.14% 19.34%
- --------------------------------------------- ----------------------- -----------------------
NPAs/total assets 0.36% 0.22%
- --------------------------------------------- ----------------------- -----------------------
LLR/gross loans 1.51% 1.07%
- --------------------------------------------- ----------------------- -----------------------
Net interest margin 2.86% 2.44%
- --------------------------------------------- ----------------------- -----------------------
Non-interest income/average assets 0.90% 0.41%
- --------------------------------------------- ----------------------- -----------------------
Fees/revenues 24.77% 14.51%
- --------------------------------------------- ----------------------- -----------------------
Non-interest expense/average assets 2.37% 1.85%
- --------------------------------------------- ----------------------- -----------------------
Efficiency ratio 65.52% 65.54%
- --------------------------------------------- ----------------------- -----------------------
LTM Return on average assets 0.82% 0.70%
- --------------------------------------------- ----------------------- -----------------------
LTM Return on average equity 8.50% 9.30%
- --------------------------------------------- ----------------------- -----------------------
Price/book value per share 208.06% 166.07%
- --------------------------------------------- ----------------------- -----------------------
Price/tangible book value per share 215.06% 173.09%
- --------------------------------------------- ----------------------- -----------------------
Price/LTM earnings per share 23.73x 18.82x
- --------------------------------------------- ----------------------- -----------------------
Price/estimated 2004 earnings per share (1) 20.58x 20.47x
- --------------------------------------------- ----------------------- -----------------------
Price/LTM Core EPS 24.76x 19.53x
- --------------------------------------------- ----------------------- -----------------------
Dividend payout ratio 40.97% 43.74%
- --------------------------------------------- ----------------------- -----------------------
Dividend yield 1.73% 2.38%
- --------------------------------------------- ----------------------- -----------------------
Market capitalization (IN MILLIONS) $153.6 $129.1
- --------------------------------------------- ----------------------- -----------------------
(1) For PennFed Financial Services, Inc., OceanFirst Financial Corp.,
Parkvale Financial Corporation, Sound Federal Bancorp, Inc. and Willow
Grove Bancorp, Inc., estimated EPS is the median of 2004 I/B/E/S
estimates. For Warwick Community Bancorp, estimated 2004 operating EPS
of $1.66 provided by management.
PROVIDENT BANCORP, INC.
STOCK TRADING HISTORY. Sandler O'Neill reviewed the history of the
reported trading prices and volume of Provident Bancorp's common stock and the
relationship between the movements in the prices of Provident Bancorp's common
stock to movements in certain stock indices, including the Standard & Poor's 500
Index, Standard & Poor's Bank Index, the Nasdaq Bank Index and the weighted
average performance of (based upon market capitalization) a peer group of
publicly traded savings institutions for Provident Bancorp (the "Provident Peer
Group") selected by Sandler O'Neill. The composition of the Provident Peer Group
is discussed under "Comparable Company Analysis" below. During the one- and
three-year periods ended March 12, 2004, Provident Bancorp's common stock
outperformed the Provident Peer Group, and each of the indices to which it was
compared.
62
- ---------------------------------------------------------------------------------------------
PROVIDENT BANCORP'S ONE-YEAR STOCK PERFORMANCE
- ---------------------------------------------------------------------------------------------
BEGINNING INDEX VALUE ENDING INDEX VALUE
MARCH 12, 2003 MARCH 12, 2004
------------------------------ ------------------------------
Provident Bancorp 100.00% 174.82%
Provident Peer Group 100.00 134.73
Nasdaq Bank Index 100.00 139.03
S&P 500 Index 100.00 139.34
S&P Bank Index 100.00 138.70
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
PROVIDENT BANCORP'S THREE-YEAR STOCK PERFORMANCE
- ---------------------------------------------------------------------------------------------
BEGINNING INDEX VALUE ENDING INDEX VALUE
MARCH 12, 2003 MARCH 12, 2004
------------------------------ ------------------------------
Provident Bancorp 100.00% 304.86%
Provident Peer Group 100.00 244.69
Nasdaq Bank Index 100.00 158.19
S&P 500 Index 100.00 94.95
S&P Bank Index 100.00 126.39
- ---------------------------------------------------------------------------------------------
COMPARABLE COMPANY ANALYSIS. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Provident Bancorp and the following publicly traded savings institutions (the
Provident Peer Group) that had total assets of between $400 million and $3.6
billion and are located in the Mid-Atlantic region of the United States:
Dime Community Bancshares, Inc. Harleysville Savings Financial
ESB Financial Corporation Corporation
Fidelity Bancorp, Inc. Hudson River Bancorp, Inc.
First Keystone Financial, Inc. OceanFirst Financial Corp.
First Niagara Financial Group, Inc. Parkvale Financial Corporation
Flushing Financial Corporation PennFed Financial Services, Inc.
FMS Financial Corporation Willow Grove Bancorp, Inc.
WVS Financial Corp.
The analysis compared publicly available financial information for Provident
Bancorp and the data for the Provident Peer Group as of or for the twelve-month
period ended December 31, 2003 (except that balance sheet data for Provident
Bancorp is as of January 31, 2004 and reflects the completion of Provident
Bancorp, MHC's second-step conversion and Provident Bancorp's acquisition of
E.N.B. Holding Company). The table below sets forth the comparative data for
Provident Bancorp and the median data for the Provident Peer Group as of or for
the twelve-month period ended December 31, 2003 with pricing data as of March
12, 2004.
63
- -------------------------------------------------------------------------------
PROVIDENT PEER GROUP ANALYSIS
- -------------------------------------------------------------------------------
PROVIDENT BANCORP PROVIDENT PEER GROUP
- --------------------------------------- ------------------ --------------------
Total assets (IN MILLIONS) $1,719.5 $1,481.5
- --------------------------------------- ------------------ --------------------
Tangible equity/tangible assets 16.60% 6.96%
- --------------------------------------- ------------------ --------------------
Intangible assets/total equity 20.87% 3.96%
- --------------------------------------- ------------------ --------------------
Net loans/total assets 54.07% 58.21%
- --------------------------------------- ------------------ --------------------
Gross loans/total deposits 80.93% 86.81%
- --------------------------------------- ------------------ --------------------
Total borrowings/total assets 10.60% 24.52%
- --------------------------------------- ------------------ --------------------
NPAs/total assets 0.32% 0.23%
- --------------------------------------- ------------------ --------------------
LLR/gross loans 1.80% 1.10%
- --------------------------------------- ------------------ --------------------
Net interest margin 4.69% 2.66%
- --------------------------------------- ------------------ --------------------
Non-interest income/average assets 0.59% 0.45%
- --------------------------------------- ------------------ --------------------
Fees/revenues 12.15% 18.34%
- --------------------------------------- ------------------ --------------------
Non-interest expense/average assets 3.14% 1.74%
- --------------------------------------- ------------------ --------------------
Efficiency ratio 64.70% 59.41%
- --------------------------------------- ------------------ --------------------
LTM Return on average assets 1.05% 0.70%
- --------------------------------------- ------------------ --------------------
LTM Return on average equity 7.02% 10.31%
- --------------------------------------- ------------------ --------------------
Price/book value per share 137.02% 171.49%
- --------------------------------------- ------------------ --------------------
Price/tangible book value per share 173.16% 179.75%
- --------------------------------------- ------------------ --------------------
Price/estimated 2004 EPS (1)(2) 30.10x 17.16x
- --------------------------------------- ------------------ --------------------
Price/IBES 2004 estimated EPS 29.15x 17.16x
- --------------------------------------- ------------------ --------------------
Price/IBES 2005 estimated EPS 21.73x 15.07x
- --------------------------------------- ------------------ --------------------
Dividend payout ratio (1) 40.29% 33.00%
- --------------------------------------- ------------------ --------------------
Dividend yield (1) 1.34% 1.85%
- --------------------------------------- ------------------ --------------------
Market capitalization (IN MILLIONS) $473.4 $177.3
- --------------------------------------- ------------------ --------------------
1. Provident Bancorp's estimates for the year ended September 30, 2004.
Estimates exclude the charitable foundation expense.
2. Assumes common shares outstanding and options outstanding as of March
12, 2004.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Sandler O'Neill reviewed all
merger transactions announced nationwide from January 1, 2003 through March 12,
2004 involving publicly traded savings institutions as acquired institutions
with transaction values greater than $15 million. Sandler O'Neill separately
reviewed the 20 Mid-Atlantic/New England region transactions involving publicly
traded savings institutions with transaction values greater than $15 million
announced during that same period. Sandler O'Neill reviewed the multiples of
transaction price at announcement to last twelve months' earnings per share,
transaction price to estimated current year earnings per share, transaction
price to book value per share, transaction price to tangible book value per
share, tangible book premium to core deposits and premium to market price and
computed high, low, mean and median multiples and premiums for both groups of
transactions. The median multiples were applied to Warwick Community Bancorp's
financial information as of and for the year ended December 31, 2003. As
illustrated in the following table, Sandler O'Neill derived an imputed range of
values per share of Warwick Community Bancorp's common stock of $28.25 to $35.75
based upon the median multiples for nationwide savings institution transactions
and $32.10 to $41.77 based upon the median multiples for
64
regional savings institution transactions. The implied transaction value of the
merger (excluding any special dividends) as calculated by Sandler O'Neill was
$32.75 per share.
- ----------------------------------------------------------------------------------------------------
NATIONWIDE TRANSACTION MULTIPLES
- ----------------------------------------------------------------------------------------------------
Range of Median Implied
Multiples Multiple Value (1)
------------------------------------------------
Transaction price/LTM EPS 10.6x - 62.1x 19.6x $28.25
Transaction price/estimated 2004 EPS (2) 10.7x - 28.3x 18.5x $30.69
Transaction price/book value 99.7% - 332.5% 183.8% $30.19
Transaction price/tangible book value 99.7% - 396.0% 197.9% $31.44
Tangible book premium/core deposits (3) 1.1% - 42.8% 17.8% $34.44
Premium to market (4) (9.6)% - 64.4% 17.5% $35.75
- ---------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
MID-ATLANTIC/NEW ENGLAND TRANSACTION MULTIPLES
- ----------------------------------------------------------------------------------------------------
Range of Median Implied
Multiples Multiple Value (1)
------------------------------------------------
Transaction price/LTM EPS 10.6x - 58.7x 22.5x $32.32
Transaction price/estimated 2004 EPS (2) 10.7x - 28.3x 19.4x $32.10
Transaction price/book value 124.8% - 301.0% 225.1% $36.97
Transaction price/tangible book value 125.6% - 396.0% 262.9% $41.77
Tangible book premium/core deposits (3) 5.4% - 42.8% 21.8% $38.68
Premium to market (4) (1.6)% - 64.4% 18.4% $36.03
- ----------------------------------------------------------------------------------------------------
(1) Using median multiple.
(2) Based on Warwick Community Bancorp management's estimated 2004 operating
EPS of $1.66.
(3) Assumes that all deposits other than jumbo certificates of deposit and
brokered deposits are core deposits.
(4) Based on Warwick Community Bancorp's December 16, 2003 closing price of
$30.43.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS. Sandler O'Neill
performed an analysis that estimated the future stream of after-tax dividend
flows of Warwick Community Bancorp through December 31, 2007 under various
circumstances, assuming Warwick Community Bancorp's projected dividend stream
and that Warwick Community Bancorp performed in accordance with the earnings
projections reviewed with management. For periods after fiscal 2004, Sandler
O'Neill assumed a growth rate of earnings per share of approximately 7% to 9%
based upon discussions with Warwick Community Bancorp's management. To
approximate the terminal value of Warwick Community Bancorp common stock at
December 31, 2007, Sandler O'Neill applied price/earnings multiples ranging from
12.0x to 22.0x and multiples of tangible book value ranging from 100% to 225%.
The dividend income streams and terminal values were then discounted to present
values using different discount rates ranging from 9% to 15% chosen to reflect
different assumptions regarding required rates of return of holders or
prospective buyers of Warwick Community Bancorp common stock. As illustrated in
the following tables, this analysis indicated an imputed range of values per
share of Warwick Community Bancorp common stock of $15.94 to $34.04 when
applying multiples of earnings per share and $14.24 to $36.38 when applying
multiples of tangible book value.
65
EARNINGS PER SHARE MULTIPLES
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
DISCOUNT RATE 12X 14X 16X 18X 20X 22X
-------------- -------------- -------------- -------------- -------------- --------------
9.0% $19.57 $22.46 $25.36 $28.25 $31.15 $34.04
10.0% 18.89 21.68 24.48 27.27 30.06 32.85
11.0% 18.25 20.94 23.63 26.33 29.02 31.71
12.0% 17.63 20.23 22.83 25.43 28.02 30.62
13.0% 17.04 19.55 22.06 24.56 27.07 29.58
14.0% 16.48 18.90 21.32 23.74 26.16 28.58
15.0% 15.94 18.28 20.61 22.95 25.29 27.62
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
TANGIBLE BOOK VALUE MULTIPLES
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
DISCOUNT RATE 100% 125% 150% 175% 200% 225%
-------------- -------------- -------------- -------------- -------------- --------------
9.0% $17.45 $21.23 $25.02 $28.81 $32.59 $36.38
10.0% 16.85 20.50 24.15 27.80 31.45 35.10
11.0% 16.28 19.80 23.32 26.84 30.36 33.89
12.0% 15.74 19.13 22.53 25.93 29.32 32.72
13.0% 15.22 18.49 21.77 25.05 28.33 31.60
14.0% 14.72 17.88 21.05 24.21 27.37 30.54
15.0% 14.24 17.29 20.35 23.40 26.46 29.52
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
Sandler O'Neill performed a similar analysis that estimated the future
stream of after-tax dividend flows of Provident Bancorp through December 31,
2007 under various circumstances, assuming Provident Bancorp's projected
dividend stream and that Provident Bancorp performed in accordance with the
earnings projections reviewed with management. For periods after 2004, Sandler
O'Neill assumed a growth rate of earnings per share of approximately 13% based
upon discussions with Provident Bancorp's management. To approximate the
terminal value of Provident Bancorp common stock at December 31, 2007, Sandler
O'Neill applied price/earnings multiples ranging from 18x to 33x. The dividend
income streams and terminal values were then discounted to present values using
different discount rates ranging from 9% to 15%, chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of Provident Bancorp common stock. As illustrated in the following tables, this
analysis indicated an imputed range of values per share of Provident Bancorp
common stock of $7.38 to $16.17 when applying multiples of earnings per share
and $5.47 to $14.35 when applying multiples of tangible book value.
66
EARNINGS PER SHARE MULTIPLES
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
DISCOUNT RATE 18X 21X 24X 27X 30X 33X
-------------- -------------- -------------- -------------- -------------- --------------
9.0% $9.09 $10.51 $11.92 $13.34 $14.75 $16.17
10.0% 8.78 10.14 11.50 12.87 14.23 15.59
11.0% 8.47 9.79 11.10 12.42 13.73 15.05
12.0% 8.18 9.45 10.72 11.99 13.25 14.52
13.0% 7.90 9.12 10.35 11.57 12.80 14.02
14.0% 7.63 8.82 10.00 11.18 12.36 13.54
15.0% 7.38 8.52 9.66 10.80 11.94 13.09
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
TANGIBLE BOOK VALUE MULTIPLES
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
DISCOUNT RATE 100% 125% 150% 175% 200% 225%
-------------- -------------- -------------- -------------- -------------- --------------
9.0% $6.73 $8.25 $9.78 $11.30 $12.82 $14.35
10.0% 6.50 7.97 9.43 10.90 12.37 13.84
11.0% 6.27 7.69 9.11 10.52 11.94 13.35
12.0% 6.06 7.43 8.79 10.16 11.52 12.89
13.0% 5.86 7.17 8.49 9.81 11.13 12.45
14.0% 5.66 6.93 8.21 9.48 10.75 12.02
15.0% 5.47 6.70 7.93 9.16 10.39 11.62
- --------------------------- -------------- -------------- -------------- -------------- -------------- --------------
In connection with its analyses, Sandler O'Neill considered and
discussed with Warwick Community Bancorp's board of directors how the present
value analyses would be affected by changes in the underlying assumptions,
including variations with respect to net income. Sandler O'Neill noted that the
discounted dividend stream and terminal value analysis is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or future results.
PRO FORMA MERGER ANALYSIS. Sandler O'Neill analyzed certain potential
pro forma effects of the merger, assuming the following: (1) the merger closes
in the fourth quarter of 2004, (2) 50% of the Warwick Community Bancorp shares
are exchanged for cash at a value of $32.26 per share, (3) 50% of the Warwick
Community Bancorp shares are exchanged for Provident Bancorp common stock at an
exchange ratio of 2.7810, (4) Warwick Community Bancorp's stock options are
cancelled and converted into cash for an amount equal to the excess of $32.26
over the weighted average exercise price of $17.84 multiplied by the number of
Warwick Community Bancorp's stock options, and (5) purchase accounting
adjustments, charges and transaction costs associated with the merger and cost
savings determined by the senior managements of Warwick Community Bancorp and
Provident Bancorp. The analysis indicated that for the year ending December 31,
2005, the merger would be accretive to Provident Bancorp's projected earnings
per share. In addition, the analysis indicated that for the period ending
December 31, 2004 (the assumed closing of the transaction), the merger would be
dilutive to Provident Bancorp's tangible book value per share. The actual
results achieved by the combined company may vary from projected results and the
variations may be material.
67
Warwick Community Bancorp has agreed to pay Sandler O'Neill a
transaction fee in connection with the merger of an amount equal to 1% of the
Aggregate Purchase Price of which $384,000 was paid upon the signing of the
definitive merger agreement and the balance shall be paid on the day of closing
of the merger. Based upon the closing price of Provident Bancorp common stock as
of August 13, 2004, the transaction fee is approximately $______________.
Warwick Community Bancorp has also paid Sandler O'Neill a fee of $200,000 for
rendering its opinion, which will be credited against that portion of the
transaction fee due upon closing of the merger. Warwick Community Bancorp has
also agreed to reimburse certain of Sandler O'Neill's reasonable out-of-pocket
expenses incurred in connection with its engagement and to indemnify Sandler
O'Neill and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
In the past, Sandler O'Neill has provided certain other investment
banking services to Warwick Community Bancorp and has received compensation for
such services, and Sandler O'Neill may provide additional services, and receive
compensation for such services, prior to the closing of the merger. In the
ordinary course of its business as a broker-dealer, Sandler O'Neill may purchase
securities from and sell securities to Warwick Community Bancorp and Provident
Bancorp and their respective affiliates and may actively trade the debt and/or
equity securities of Warwick Community Bancorp and Provident Bancorp and their
respective affiliates for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
PROVIDENT BANCORP'S REASONS FOR THE MERGER
The Provident Bancorp board of directors expects the merger to enhance
Provident Bancorp's banking franchise and competitive position, in particular in
Orange County, New York. The merger also increases Provident Bancorp's operating
and marketing scale. In addition, the merger is consistent with Provident
Bancorp's plans to deploy the capital raised in Provident Bancorp, MHC's recent
second-step conversion transaction.
The Provident Bancorp board of directors consulted with Provident
Bancorp management as well as financial and legal advisors and determined that
the merger is in the best interest of Provident Bancorp and Provident Bancorp's
stockholders. In reaching its conclusion to approve the merger agreement, the
Provident Bancorp board considered the following factors as generally supporting
its decision to enter into the merger agreement:
(i) The effectiveness of the merger as a method of implementing and
accelerating Provident Bancorp's strategies for expanding
Provident Bancorp's franchise in one of the most desirable
banking markets in New York;
(ii) The effectiveness of the merger as a means of deploying a
portion of the capital raised in the second-step conversion
transaction;
(iii) Its understanding of Provident Bancorp's business, operations,
financial condition, earnings and prospects and of Warwick
Community Bancorp's business, operations, financial condition,
earnings and prospects, including
68
Warwick Community Bancorp's strong franchise in the Orange
County, New York market in which it primarily operates;
(iv) The reports of Provident Bancorp management and the financial
presentations by RP Financial, LC. and Ryan Beck & Co., Inc. to
Provident Bancorp's board of directors concerning the
operations, financial condition and prospects of Warwick
Community Bancorp and the expected financial impact of the
merger on the combined company;
(v) The similarity between Provident Bancorp's and Warwick Community
Bancorp's management, philosophies, approaches and commitments
to the communities and customers they serve and their respective
employees;
(vi) The proposed appointment of two Warwick Community Bancorp
directors as directors of Provident Bancorp and Provident Bank,
which would help assure the continuity of management, the
likelihood of successful integration and the successful
operation of the combined companies;
(vii) The opinions delivered to the Provident Bancorp board of
directors by RP Financial, LC. and Ryan Beck & Co., Inc. to the
effect that, as of the dates of the respective opinions and
based upon and subject to the conditions described in the
opinions and other matters as RP Financial, LC. and Ryan Beck &
Co., Inc. considered relevant, the merger consideration to be
paid by Provident Bancorp was fair, from a financial point of
view, to Provident Bancorp.
The Provident Bancorp board of directors also considered potential risks
associated with the merger in connection with its deliberations of the proposed
transaction, including the challenges of integrating Warwick Community Bancorp's
business, operations and workforce with those of Provident Bancorp, the need to
obtain Warwick Community Bancorp stockholder and regulatory approvals in order
to complete the transaction, and the risks associated with achieving the
anticipated cost savings.
The Provident Bancorp board of directors considered all of these factors
as a whole and, on balance, concluded that they supported a favorable
determination to enter into the merger agreement.
The foregoing discussion of the information and factors considered by
the Provident Bancorp board of directors is not exhaustive, but includes the
material factors considered by the Provident Bancorp board of directors. In view
of the wide variety of factors considered by the Provident Bancorp board of
directors in connection with its evaluation of the merger and the complexity of
these matters, the Provident Bancorp board of directors did not consider it
practical to, nor did it attempt to, quantify, rank or otherwise assign relative
weights to the specific factors that it considered in reaching its decision. In
considering the factors described above, individual members of the Provident
Bancorp board of directors may have given different weights to different
factors.
69
On the basis of these considerations, the merger agreement was
unanimously approved by Provident Bancorp's board of directors.
MERGER CONSIDERATION; CASH OR STOCK ELECTION
MERGER CONSIDERATION. Under the terms of the merger agreement, at the
effective time of the merger, each outstanding share of Warwick Community
Bancorp common stock (other than dissenting shares and shares held by Provident
Bancorp and Warwick Community Bancorp) will be converted into the right to
receive, at the election of the holder of such share, either:
o $32.26 in cash (without interest), assuming payment solely of
cash in exchange for Warwick Community Bancorp common stock; or
o 2.7810 shares of Provident Bancorp common stock, assuming
payment solely of Provident Bancorp common stock in exchange for
a share of Warwick Community Bancorp common stock; or
o a combination of cash PLUS Provident Bancorp common stock.
No fractional shares of Provident Bancorp common stock will be issued in
connection with the merger. Instead Warwick Community Bancorp stockholders will
receive, without interest, a cash payment from Provident Bancorp equal to the
fractional share interest they otherwise would have received, multiplied by the
value of Provident Bancorp common stock. For this purpose, Provident Bancorp
common stock will be valued at the average of its daily closing sales prices
during the five consecutive trading days immediately preceding the date of
completion of the merger.
Based on the closing price of $_____ per share of Provident Bancorp
common stock on August 13, 2004, the latest practicable date prior to the
mailing of this Proxy Statement/Prospectus, the value of 2.7810 shares of
Provident Bancorp common stock would be $______. We cannot give you any
assurance as to whether or when the merger will be completed, and you are
advised to obtain current market quotations for Provident Bancorp common stock.
For more information about the stock prices of Provident Bancorp, see "Provident
Bancorp Stock Trading and Dividend Information."
CASH OR STOCK ELECTION. All elections by Warwick Community Bancorp
stockholders are subject to the allocation and proration procedures described in
the merger agreement. These procedures are intended to ensure that, subject to a
tax-related adjustment, 50% of the outstanding shares of Warwick Community
Bancorp common stock will be converted into the right to receive Provident
Bancorp common stock, and the remaining 50% of the outstanding shares of Warwick
Community Bancorp common stock will be converted into the right to receive cash.
It is unlikely that elections will be made in the exact proportions
provided for in the merger agreement. As a result, the merger agreement
describes procedures to be followed if Warwick Community Bancorp stockholders in
the aggregate elect to receive more or less of
70
Provident Bancorp common stock than Provident Bancorp has agreed to issue. These
procedures are summarized below.
o IF PROVIDENT BANCORP COMMON STOCK IS OVERSUBSCRIBED: If Warwick
Community Bancorp stockholders elect to receive more Provident
Bancorp common stock than Provident Bancorp has agreed to issue
in the merger, then all Warwick Community Bancorp stockholders
who have elected to receive cash or who have made no election
will receive cash for their Warwick Community Bancorp shares and
all stockholders who elected to receive Provident Bancorp common
stock will receive a pro rata portion of the available shares of
Provident Bancorp common stock plus cash for those shares not
converted into Provident Bancorp common stock.
o IF PROVIDENT BANCORP COMMON STOCK IS UNDERSUBSCRIBED: If Warwick
Community Bancorp stockholders elect to receive fewer shares of
Provident Bancorp common stock than Provident Bancorp has agreed
to issue in the merger, and
-- the number of shares as to which Warwick Community
Bancorp stockholders have made no election is less than
or equal to this shortfall, then all Warwick Community
Bancorp stockholders who have elected to receive
Provident Bancorp common stock or who have made no
election will receive Provident Bancorp common stock,
and all Warwick Community Bancorp stockholders who have
elected to receive cash will receive a pro rata portion
of the available cash consideration plus shares of
Provident Bancorp common stock for those Warwick
Community Bancorp shares not converted into cash; or if
-- the number of no election shares is greater than the
shortfall, then all Warwick Community Bancorp
stockholders who have elected to receive Provident
Bancorp common stock will receive Provident Bancorp
common stock, all Warwick Community Bancorp stockholders
who have elected to receive cash will receive cash, and
all Warwick Community Bancorp stockholders who made no
election will receive a pro rata portion of the
remaining available cash consideration plus Provident
Bancorp's shares for those Warwick Community Bancorp
shares not converted into cash.
TAX-RELATED ADJUSTMENT. Provident Bancorp and Warwick Community Bancorp
have structured the merger to qualify as a "reorganization" for U.S. federal
income tax purposes. The merger might not qualify as a reorganization, however,
if, on the closing date of the merger, the total value of the Provident Bancorp
shares that Warwick Community Bancorp stockholders receive is less than 42.5% of
the value of the total consideration - including Provident Bancorp common stock,
cash, and any other amounts treated as consideration in connection with the
merger for federal income tax purposes - that Warwick Community Bancorp
stockholders (including stockholders who exercise dissenters' rights) receive in
connection with the merger. To prevent this from happening, if the value of the
Provident Bancorp shares received would
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otherwise be less than 42.5% (subject to upward adjustment to up to 45%,
depending on the number of Warwick Community Bancorp shares with respect to
which dissenters' rights are exercised) of the value of the total consideration,
the number of Warwick Community Bancorp shares that will be converted into
Provident Bancorp shares will be increased, and the number of Warwick Community
Bancorp shares converted into cash will be correspondingly decreased. If this
tax-related adjustment is necessary, the amount of cash you would have received,
after taking into account your election and any proration, will be reduced and
you will receive additional shares of Provident Bancorp common stock. Whether
the tax-related adjustment will be made, and the magnitude of the tax-related
adjustment, if made, will be based on a number of factors, including the trading
price of shares of Provident Bancorp common stock on the date the merger is
completed and the number of shares of Warwick Community Bancorp common stock for
which dissenters' rights are exercised. However, in no event will Provident
Bancorp be obligated to issue more than 7,910,000 shares of common stock as
merger consideration.
Neither Warwick Community Bancorp nor Provident Bancorp is making any
recommendation as to whether Warwick Community Bancorp stockholders should elect
to receive cash, shares of Provident Bancorp common stock or a combination
thereof in the merger. Each Warwick Community Bancorp stockholder must make his
or her own decision with respect to such election.
No guarantee can be made that you will receive the amounts of cash or
shares of Provident Bancorp common stock you elect. As a result of the
allocation and proration procedures and other limitations outlined in this
document and in the merger agreement, you may receive Provident Bancorp common
stock or cash in amounts that vary from the amounts you elect to receive.
Employees who hold allocated shares of Warwick Community Bancorp common
stock in their employee stock ownership plan accounts will be able to direct the
employee stock ownership plan trustee to make an election to receive cash,
Provident Bancorp common stock or a combination of cash and Provident Bancorp
common stock for their allocated shares. For any allocated shares for which no
directions are received, the employee stock ownership plan trustee will make an
election to receive cash or Provident Bancorp common stock, in the same
proportion with respect to which the trustee received elections, unless the
trustee determines that it may not, consistent with its fiduciary duties, make
such election for the allocated shares for which no written instructions have
been given in the same proportion, in which case it will make elections for
shares of Provident Bancorp common stock in the manner as it, in its discretion,
determined to be in the best interests of the participants. The employee stock
ownership plan trustee will make an election to receive cash or Provident
Bancorp common stock for the unallocated shares of Warwick Community Bancorp
common stock held in the employee stock ownership plan. Employees who hold
shares of Warwick Community Bancorp common stock in their accounts in the
Warwick Savings Bank 401(k) Savings Plan will be able to direct the trustee of
such plan to make an election to receive cash, Provident Bancorp common stock or
a combination of cash and Provident Bancorp common stock for their allocated
shares of Provident Bancorp common stock. For any shares for which no directions
are received, the plan trustee will make an election to receive cash or
Provident Bancorp common stock, in the same proportion with respect to which the
trustee received elections, unless the trustee determines that
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it may not, consistent with its fiduciary duties, make the election for the
allocated shares for which no written instructions have been given in the same
proportion, in which case it will make elections for the shares in the manner as
it, in its discretion, determined to be in the best interests of the
participants.
ELECTION PROCEDURES; SURRENDER OF STOCK CERTIFICATES
If you are a record holder of Warwick Community Bancorp common stock, an
election form will be provided to you under separate cover. The election form
will entitle you to elect to receive cash, Provident Bancorp common stock, or a
combination of cash and Provident Bancorp common stock, or to make no election
with respect to the merger consideration that you wish to receive.
To make a valid election, you must submit a properly completed election
form to Registrar and Transfer Company, which will be acting as the exchange
agent. The election form must be received on or before 5:00 p.m., New York time,
on the twenty-fifth day following the mailing of the election form. Registrar
and Transfer Company will act as exchange agent in the merger and in that role
will process the exchange of Warwick Community Bancorp common stock certificates
for cash and/or Provident Bancorp common stock. Shortly after the merger, the
exchange agent will allocate cash and shares of Provident Bancorp common stock
among Warwick Community Bancorp stockholders, consistent with their elections,
the allocation and proration procedures and the tax-related adjustment. If you
do not submit an election form, you will receive instructions from the exchange
agent on how to surrender your Warwick Community Bancorp stock certificates
after the merger is completed. PLEASE DO NOT FORWARD YOUR WARWICK COMMUNITY
BANCORP STOCK CERTIFICATES AND ELECTION FORM WITH YOUR PROXY CARDS. STOCK
CERTIFICATES AND ELECTION FORMS SHOULD BE RETURNED TO THE EXCHANGE AGENT IN
ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN THE ELECTION FORM.
An election form will be deemed properly completed only if accompanied
by stock certificates representing all shares of Warwick Community Bancorp
common stock covered by the election form (or an appropriate guarantee of
delivery). You may change your election at any time prior to the election
deadline by written notice accompanied by a properly completed and signed,
revised election form received by the exchange agent prior to the election
deadline. You may revoke your election by written notice received by the
exchange agent prior to the election deadline. All elections will be revoked,
and Warwick Community Bancorp stock certificates returned, automatically if the
merger agreement is terminated. If you have a preference for receiving either
Provident Bancorp common stock and/or cash for your Warwick Community Bancorp
common stock, you should complete and return the election form. If you do not
have a preference as to the consideration you wish to receive or if you do not
make an election, you will be allocated Provident Bancorp common stock and/or
cash depending on the elections made by other Warwick Community Bancorp
stockholders. You should be aware, however, that if you make an election, you
will not be able to sell or otherwise transfer your shares of Warwick Community
Bancorp common stock unless you properly withdraw your election prior to the
election deadline.
If stock certificates for Warwick Community Bancorp common stock are not
immediately available or time will not permit the election form and other
required documents to
73
reach the exchange agent prior to the election deadline, Warwick Community
Bancorp shares may be properly exchanged provided that:
1. such exchanges are made by or through a member firm of the
National Association of Securities Dealers, Inc., or another
registered national securities exchange, or by a commercial bank
or trust company having an office, branch or agency in the
United States;
2. the exchange agent receives, prior to the election deadline, a
properly completed and duly executed notice of guaranteed
delivery substantially in the form provided with the election
form (delivered by hand, mail, telegram, telex or facsimile
transmission); and
3. the exchange agent receives, prior to the election deadline, the
certificates for all exchanged Warwick Community Bancorp shares,
or confirmation of the delivery of all such certificates into
the exchange agent's account with the Depository Trust Company
in accordance with the proper procedures for such transfer,
together with a properly completed and duly executed election
form and any other documents required by the election form.
Warwick Community Bancorp stockholders who do not submit a properly
completed election form or revoke their election form prior to the election
deadline will have their shares of Warwick Community Bancorp common stock
designated as non-election shares.
Warwick Community Bancorp stockholders who hold their shares of common
stock in "street name" through a bank, broker or other financial institution,
and who wish to make an election, should seek instructions from the institution
holding their shares concerning how to make the election.
Provident Bancorp will deposit with the exchange agent the shares
representing Provident Bancorp common stock and cash to be issued to Warwick
Community Bancorp stockholders in exchange for their shares of Warwick Community
Bancorp common stock. Within five business days after the completion of the
merger, the exchange agent will mail to Warwick Community Bancorp stockholders
who do not submit election forms or who have revoked such forms a letter of
transmittal, together with instructions for the exchange of their Warwick
Community Bancorp stock certificates for the merger consideration. Upon
surrendering his or her certificate(s) representing shares of Warwick Community
Bancorp common stock, together with the signed letter of transmittal, the
Warwick Community Bancorp stockholder shall be entitled to receive, as
applicable: (i) certificate(s) representing a number of whole shares of
Provident Bancorp common stock (if any) determined in accordance with the
exchange ratio or (ii) a check representing the amount of cash (if any) to which
such stockholder shall have become entitled, and (iii) a check representing the
amount of cash in lieu of fractional shares, if any. Until you surrender your
Warwick Community Bancorp stock certificates for exchange after completion of
the merger, you will not be paid dividends or other distributions declared after
the merger with respect to any Provident Bancorp common stock you are entitled
to receive. No interest will be paid or accrued to Warwick Community Bancorp
stockholders on the cash consideration, cash in
74
lieu of fractional shares or unpaid dividends and distributions, if any. After
the completion of the merger, there will be no further transfers of Warwick
Community Bancorp common stock. Warwick Community Bancorp stock certificates
presented for transfer will be canceled and exchanged for the merger
consideration.
If your 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 consideration for your shares. Upon
request, Registrar and Transfer Company will send you instructions on how to
provide evidence of ownership.
If any certificate representing shares of Provident Bancorp's common
stock is to be issued in a name other than that in which the certificate for
shares surrendered in exchange is registered, or cash is to be paid to a person
other than the registered holder, it will be a condition of issuance or payment
that the certificate so surrendered be properly endorsed or otherwise be in
proper form for transfer and that the person requesting the exchange either:
o pay to the exchange agent in advance any transfer or other taxes
required by reason of the issuance of a certificate or payment
to a person other than the registered holder of the certificate
surrendered, or
o establish to the satisfaction of the exchange agent that the tax
has been paid or is not payable.
Any portion of the cash or shares of Provident Bancorp common stock made
available to the exchange agent that remains unclaimed by Warwick Community
Bancorp stockholders for six months after the effective time of the merger will
be returned to Provident Bancorp. After six months after the effective time, any
Warwick Community Bancorp stockholder who has not exchanged shares of Warwick
Community Bancorp common stock for the merger consideration in accordance with
the merger agreement may look only to Provident Bancorp for payment of the
merger consideration for these shares and any unpaid dividends or distributions.
Nonetheless, Provident Bancorp, Warwick Community Bancorp, the exchange agent or
any other person will not be liable to any Warwick Community Bancorp stockholder
for any amount properly delivered to a public official under applicable
abandoned property, escheat or similar laws.
TREATMENT OF WARWICK COMMUNITY BANCORP STOCK OPTIONS
Each option to purchase shares of Warwick Community Bancorp common stock
outstanding and unexercised immediately prior to the effective time of the
merger will be cancelled and all rights under such option will be extinguished
in exchange for a cash payment equal to $32.26 less the exercise price per share
of the stock option, multiplied by the number of shares of Warwick Community
Bancorp common stock subject to the stock option, less any required tax
withholding. Each of Messrs. Kowal, Gentile and Budich entered into agreements
with Warwick Community Bancorp contemporaneously with the execution of the
merger agreement, agreeing not to exercise their outstanding options prior to
the effective time of the merger and to receive, in exchange for such options, a
cash payment equal to the excess of
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$32.26 over the exercise price per share of such options multiplied by the
number of shares of Warwick Community Bancorp subject to such options.
Provident Bancorp will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the merger agreement to any Warwick
Community Bancorp optionholder any amount that Provident Bancorp is required to
deduct and withhold under any provision of federal, state, local or foreign tax
law. Any withheld amounts will be treated for all purposes of the merger
agreement as having been paid to the Warwick Community Bancorp optionholder in
respect of which the deduction and withholding was made by Provident Bancorp.
EMPLOYEE MATTERS
The Warwick Community Bancorp employee stock ownership plan will be
terminated upon consummation of the merger. The employee stock ownership plan
loan will be paid in full and the assets of the employee stock ownership plan
will be allocated and distributed to the employee stock ownership plan
participants in cash or shares of Provident Bancorp common stock. Provident
Bancorp will review all other Warwick Community Bancorp compensation and
employee benefit plans that do not otherwise terminate (whether pursuant to the
terms of any such plan or the merger agreement) to determine whether to
maintain, terminate or continue such plans. In the event employee compensation
or benefits as currently provided by Warwick Community Bancorp, Warwick Savings
or Towne Center Bank are changed or terminated by Provident Bancorp, Provident
Bancorp has agreed to provide compensation and benefits that are, in the
aggregate, substantially similar to the compensation and benefits provided to
similarly situated Provident Bancorp employees.
All Warwick Community Bancorp employees who become employees of
Provident Bancorp at the effective time generally will be given credit for
service at Warwick Community Bancorp or its subsidiaries for eligibility to
participate in and the satisfaction of vesting requirements (but not for pension
benefit accrual purposes) under Provident Bancorp's compensation and benefit
plans (but not for any purpose under the Provident Bancorp employee stock
ownership plan or retiree health plan or to the extent that providing such
credit would result in a duplication of benefits). Provident Bancorp has also
agreed to honor the Change in Control Severance Plan of Warwick Community
Bancorp.
See "--Interests of Directors and Officers In the Merger" below for a
discussion of employment agreements.
See "--Material United States Federal Income Tax Consequences of the
Merger to Participants in the Warwick Community Bancorp, Inc. Employee Stock
Ownership Plan and the 401(k) Savings Plan" below for a discussion of material
U.S. federal income tax treatment of accounts under those plans.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER
EMPLOYMENT AGREEMENTS. Warwick Community Bancorp is party to employment
agreements with each of its Chairman of the Board and Chief Executive Officer,
Fred G. Kowal, its President and Chief Operating Officer, Ronald J. Gentile, and
its Senior Vice-President,
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Treasurer and Chief Financial Officer, Arthur W. Budich. The consummation of the
merger constitutes a change in control under the employment agreements.
In the event of a change in control, the employment agreements provide
that the executives are entitled to (i) their earned but unpaid salary through
the date of the change in control, (ii) the benefits that the executives would
be entitled to as a former employee, (iii) continued group life, health, dental
accident and long-term disability insurance benefits for the remainder of the
unexpired employment period (which, in the event of a change in control is
deemed to be three years), (iv) a lump sum payment within 30 days of termination
of employment equal to the present value of the salary that executive would have
earned if he continued working for the remaining unexpired employment period
(which in the event of a change in control is deemed to be three years), (v) a
lump sum payment within 30 days of termination of employment equal to the
present value of the aggregate payments the executive would be entitled to under
Warwick Savings defined benefit pension plan and defined benefit portion of the
Benefit Restoration Plan of Warwick Savings over the amounts to which he is
actually entitled under such plans, (vi) a lump-sum payment within 30 days of
termination of employment equal to the present value of the additional
contributions to which the executive would have been entitled under the employee
stock ownership plan and Warwick Savings 401(k) Savings Plan and the defined
contribution portion of the Benefit Restoration Plan and any other tax-qualified
or non-qualified defined contribution plans, and (vii) at the election of
Warwick Community Bancorp, a lump sum cash payment equal to the fair market
value of any restricted stock and the difference between the fair market value
of any unexercised options or stock appreciation rights over the exercise price
of such options or rights.
In addition, the employment agreements with Messrs. Kowal, Gentile and
Budich also provide that in the event that any of the executives become subject
to the excise tax on "excess parachute payments" under Section 4999 of the
Internal Revenue Code of 1986, as amended, the executive would become entitled
to an additional payment such that the executive would be placed in the same
after-tax position as if no such excise tax had been imposed.
Contemporaneously with the execution of the merger agreement, each of
Messrs. Kowal, Gentile and Budich entered into agreements with Warwick Community
Bancorp whereby such executive would receive a lump sum cash payment at the
merger effective date of $1,869,385, $896,600 and $540,009, respectively, in
lieu of any payments under their employment agreements, other than the excise
tax gross-up, and indemnification for attorneys' fees incurred to defend or
enforce the surviving terms of the agreements, which will survive in their
entirety.
BENEFIT RESTORATION PLAN. Warwick Community Bancorp sponsors the Benefit
Restoration Plan, which provides benefits to Messrs. Kowal and Gentile that
would be provided under the tax-qualified defined benefit pension plan, the
employee stock ownership plan and 401(k) Savings Plan if such benefits were not
limited by the provisions of the Internal Revenue Code. The Benefit Restoration
Plan also makes up allocations lost by participants in the employee stock
ownership plan who retire prior to the complete repayment of the Employee Stock
Ownership Plan loan. Contemporaneously with the execution of the merger
agreement, Messrs. Kowal and Gentile have each entered into an agreement with
Warwick Community Bancorp whereby such executive would receive, within 30 days
of the effective time of the
77
merger, a lump sum payment of $200,000 and $195,000, respectively (representing
the amount accrued for such executive as of December 31, 2003), and an
additional amount to be determined representing the accrual for the period from
January 1, 2004 through the effective time of the merger.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR FRED G. KOWAL. Warwick
Community Bancorp entered into the Supplemental Executive Retirement Plan
("SERP") in December 2003 for the benefit of Fred Kowal. The SERP and adoption
agreement/letter with Mr. Kowal indicate that for purposes of determining the
"annual benefit" under the SERP, Mr. Kowal will receive 8.33% of his final
average compensation for each year of credited service after December 31, 2002.
Contemporaneously with the execution of the merger agreement, Mr. Kowal has
entered into an agreement whereby he has agreed to accept a lump-sum cash
payment of $1,258,978 on the effective date of the merger, in lieu of any
payments under the SERP.
CHANGE IN CONTROL SEVERANCE PLAN. Warwick Community Bancorp maintains a
Change in Control Severance Plan that provides severance benefits to executive
officer whose employment is terminated (during the period commencing three
months prior to a change in control and ending one year following the change in
control) by Warwick Community Bancorp without "just cause" or by the executive
officer following a forced relocation or reduction in annual base salary. An
executive officer whose employment terminates under the circumstances set forth
in the immediately preceding sentence is entitled to pay continuation for a
number of weeks equal to the executive officer's years of service times two,
subject to a minimum of 52 weeks pay continuation. During the period of pay
continuation, the executive officer is also entitled to continue receiving group
health benefits from Warwick Community Bancorp at no cost to the executive
officer.
STOCK OPTIONS. The merger agreement provides that upon completion of the
merger, each Warwick Community Bancorp compensatory option, including those held
by executive officers and directors of Warwick Community Bancorp, will be
converted into the right to receive the excess, if any, of the merger
consideration over the exercise price of the stock option for each share of
Warwick Community Bancorp common stock subject to the option. Based on Warwick
Community Bancorp stock option holdings as of August 9, 2004, Messrs. Kowal,
Gentile and Budich and the remaining directors as a group, respectively, would
receive a cash payment, as of completion of the merger, in an amount equal to
$1,237,000, $992,000, $534,000 and $1,949,000 with respect to their stock
options.
VOLUNTARY RETAINER STOCK AND DEFERRED COMPENSATION PLAN FOR DIRECTORS.
Warwick Community Bancorp adopted the Voluntary Retainer Stock and Deferred
Compensation Plan for Directors in order to permit the directors of Warwick
Community Bancorp to elect to receive directors' fees otherwise payable in cash,
in the form of Warwick Community Bancorp stock and to defer all or a portion of
such fees. The plan provides for the deferral of the director's (i) cash
compensation in the form of either cash-equivalent units or share-equivalent
units. Cash-equivalent units accrue phantom interest and share-equivalent units
accrue phantom dividends. In connection with a director's termination of
service, the plan provides that cash-equivalent units will be paid in cash and
share-equivalent units will be paid in shares of common stock of Warwick
Community Bancorp. The merger agreement provides that in connection with the
78
merger, the plan will be amended so that each share-equivalent unit will be
converted to a cash-equivalent unit, based on the cash merger consideration, or
$32.26 per stock-equivalent unit. Prior to the effective time, Warwick Community
Bancorp will take such action as is necessary to terminate the plan and
distribute the amounts held thereunder in a lump sum. Based on their respective
number of cumulative deferred shares as of August 9, 2004, Directors Anthony R.
Bottini, Thomas G. Kahn, and John W. Sanford, III would receive a cash payment,
as of completion of the merger, in an amount equal to $24,600, $41,400, and
$43,100, respectively.
INDEMNIFICATION. Pursuant to the merger agreement, Provident Bancorp has
agreed that, after the effective date of the merger, it will indemnify, defend
and hold harmless each present and former officer or director of Warwick
Community Bancorp or any of its subsidiaries against all losses, claims,
damages, costs, expenses (including attorneys' fees), liabilities, judgments and
amounts that are paid in settlement of or in connection with any claim, action,
suit, proceeding or investigation, 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 Warwick Community Bancorp or any of its subsidiaries if such action
or proceeding pertains to any matter of fact arising, existing or occurring
before the closing date of the merger to the fullest extent permitted under
Delaware law (to the extent not prohibited by federal law) and Warwick Community
Bancorp's certificate of incorporation and bylaws. Provident Bancorp will pay
expenses in advance of the final disposition of any such action or proceeding to
the fullest extent permitted under Delaware law (to the extent not prohibited by
federal law), provided that the person to whom such expenses are advanced agrees
to repay such expenses if it is ultimately determined that such person is not
entitled to indemnification.
DIRECTORS' AND OFFICERS' INSURANCE. Provident Bancorp has further
agreed, for a period of six years after the effective date of the merger, to
cause the persons serving as officers and directors of Warwick Community Bancorp
immediately prior to the effective date to continue to be covered by Warwick
Community Bancorp's current directors' and officers' liability insurance
policies (provided that Provident Bancorp may substitute policies of at least
the same coverage and amounts containing terms and conditions which are not
materially less favorable than Warwick Community Bancorp's current policies)
with respect to acts or omissions occurring prior to the effective date which
were committed by such officers and directors in their capacity as such.
Provident Bancorp is not required to spend more than 250% of the annual cost
currently incurred by Warwick Community Bancorp for its insurance coverage.
APPOINTMENT OF TWO WARWICK COMMUNITY BANCORP BOARD MEMBERS TO THE BOARDS
OF DIRECTORS OF PROVIDENT BANCORP AND PROVIDENT BANK. As of the closing of the
merger, two persons designated by Provident Bancorp in consultation with Warwick
Community Bancorp, who are directors of Warwick Community Bancorp as of the date
of the merger agreement, will be appointed and elected to the board of directors
of both Provident Bancorp and Provident Bank. If either or both of the persons
designated by Provident Bancorp declines to serve on the boards of directors of
Provident Bancorp or Provident Bank, Provident Bancorp will appoint a substitute
person or persons from the Warwick Community Bancorp board, provided that
Provident Bancorp is obligated to substitute an alternative person or persons
from the Warwick Community Bancorp board only if one or both of the initial
designees declines to serve.
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CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement contains various restrictions on the operations of
Warwick Community Bancorp and Provident Bancorp before the effective time of the
merger. In general, the merger agreement obligates Warwick Community Bancorp and
Provident Bancorp to conduct their businesses in the usual, regular and ordinary
course of business and to use reasonable efforts to preserve intact their
business organizations and assets and maintain their rights and franchises. In
addition, Warwick Community Bancorp has agreed that, except as expressly
contemplated by the merger agreement, without the prior written consent of
Provident Bancorp, it will not, among other things:
o change or waive any provision of its certificate of
incorporation or bylaws, except as required by law;
o issue any additional shares of capital stock except under
outstanding options, or grant any options, or declare or pay any
dividend other than its regular quarterly dividend or a special
cash dividend as permitted under the merger agreement; and
o enter into, amend in any material respect or terminate any
material contract or agreement;
o open or close any branch or automated banking facility;
o change compensation or benefits, except for merit increases or
bonuses consistent with past practice in the ordinary course of
business;
o purchase or acquire, or sell or dispose of, any assets or incur
indebtedness other than in the ordinary course of business;
o incur any capital expenditures in excess of $50,000 individually
or $100,000 in the aggregate other than pursuant to binding
commitments or necessary to maintain existing assets in good
repair;
o change any accounting method or practice, except as required by
accounting principles generally accepted in the United States of
America;
o except for prior commitments previously disclosed to Provident
Bancorp, make any new loan or other credit facility commitment
to any borrower or group of affiliated borrowers in excess of
$500,000 for unsecured loans and $1,500,000 for secured loans.
Provident Bancorp has also agreed that, without the prior written
consent of Warwick Community Bancorp, it will not, among other things:
o change or waive any provision of its certificate of
incorporation or bylaws, except as required by law; or
80
o change any accounting method or practice, except as required by
accounting principles generally accepted in the United States of
America.
In addition to these covenants, the merger agreement contains various
other customary covenants, including, among other things, access to information,
each party's efforts to cause its representations and warranties to be true and
correct on the closing date, and each party's agreement to use its reasonable
best efforts to cause the merger to qualify as a tax-free reorganization for
federal income tax purposes.
PAYMENT OF SPECIAL CASH DIVIDEND
Pursuant to the merger agreement, Warwick Community Bancorp may
establish and declare a special cash dividend on its common stock not later than
the 10th day prior to the anticipated closing date of the merger. The special
dividend will have a record date prior to the effective time, and shall be paid
by Provident Bancorp as successor to Warwick Community Bancorp to the extent not
paid by Warwick Community Bancorp prior to the closing. The special dividend
will be equal to the aggregate of (1) all net, after tax amounts received by
Warwick Community Bancorp following the date of the merger agreement upon the
sale of automobiles within an automobile lease portfolio held by Warwick
Savings, (2) all net, after tax amounts received by Warwick Community Bancorp
from the automobile lease originator or any applicable insurer in respect of the
difference between (a) the residual value of such automobiles as reflected in
Warwick Community Bancorp's books and records and (b) the actual amount received
by Warwick Community Bancorp upon the sale of such automobiles, (3) all net,
after tax amounts received by Warwick Community Bancorp in respect of
end-of-lease charges applicable to such automobiles, and (4) the net, after tax
proceeds of the sale of the portfolio in accordance with the terms described
below. Net, after tax amounts means an amount (i) net of third party direct
costs, (ii) calculated on a tax-adjusted basis, assuming a zero cost basis and a
tax rate of 40%.
Warwick Savings has completed its disposition of all of the automobiles
and related lease receivables in the automobile lease portfolio for total
consideration of $7,052,000, of which $7,008,000 was received by Warwick Savings
in cash and $44,000 is being held in escrow. Warwick Savings realized a loss on
this sale of $2,573,000, beyond reserves established for this portfolio through
March 31, 2004, in the second calendar quarter of 2004. While Warwick Savings
has disposed of all such automobiles, the ultimate amount of the dividend (if
any) will depend on a number of additional factors and legal limitations
(including the approval of the New York State Banking Department with respect to
any special dividend payment). While there can be no assurance as to the amount
or timing of the dividend, or whether the dividend will be declared and paid,
based upon the amounts received and the applicable expenses, Warwick Community
Bancorp and Provident Bancorp have agreed that the amount available that may be
declared as a special dividend is $4,150,000. However, the ultimate declaration
of that dividend is subject to, among other things, approval of the New York
State Banking Department, and accordingly, Warwick Community Bancorp cannot give
any assurances to the amount or timing of any special dividend.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of representations and warranties
by Provident Bancorp and Warwick Community Bancorp regarding aspects of their
respective businesses, financial condition, structure and other facts pertinent
to the merger that are customary for a transaction of this kind. They include,
among other things, representations as to:
o the organization, existence, corporate power and authority and
capitalization of each of the companies;
o the absence of conflicts with and violations of law and various
documents, contracts and agreements;
o the absence of any event or circumstance which is reasonably
likely to be materially adverse to the companies;
o the absence of materially adverse litigation;
o the accuracy of reports and financial statements filed with the
Securities and Exchange Commission;
o required consents and filings with governmental entities and
other approvals required for the merger;
o the existence, performance and legal effect of certain
contracts;
o compliance with applicable laws;
o the filing of tax returns, payment of taxes and other tax
matters;
o loan and investment portfolio matters;
o labor and employee benefit matters; and
o compliance with applicable environmental laws.
All representations, warranties and covenants of the parties, other than
the covenants in specified sections which relate to continuing matters,
terminate upon the closing of the merger.
CONDITIONS TO THE MERGER
The respective obligations of Provident Bancorp and Warwick Community
Bancorp to complete the merger are subject to various conditions prior to the
merger. The conditions include the following:
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o approval of the merger agreement by the affirmative vote of a
majority of the issued and outstanding shares of Warwick
Community Bancorp;
o the absence of any litigation, statute, law, regulation, order
or decree which would enjoin or prohibit the merger;
o approval of the merger by all applicable federal and state
regulatory authorities and the expiration of all applicable
waiting periods;
o the accuracy of the representations and warranties of the
parties, and the performance by the parties of all agreements
and covenants, subject to the standards set forth in the merger
agreement;
o the receipt of tax opinions delivered by counsel to Provident
Bancorp and Warwick Community Bancorp, respectively, to the
effect that the merger will qualify as a reorganization under
Section 368(a) of the Internal Revenue Code;
o obtaining all material permits, authorizations, consents,
waivers, clearances or approvals required for the lawful
consummation of the merger, the failure of which to obtain would
have a material adverse effect on Provident Bancorp;
o not more than 12.5% of issued and outstanding shares of Warwick
Community Bancorp common stock shall have dissented to the
merger under Delaware law;
o listing with the Nasdaq National Market of the Provident Bancorp
common stock to be issued to Warwick Community Bancorp
stockholders;
o no stop order being issued suspending the effectiveness of the
Registration Statement of which this Proxy Statement/Prospectus
is a part; and
o Provident Bancorp shall have deposited with an exchange agent
cash and shares of Provident Bancorp common stock to be
exchanged for shares of common stock of Warwick Community
Bancorp.
The parties may waive conditions to their obligations unless they are
legally prohibited from doing so. Stockholder and regulatory approvals may not
be legally waived.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
GENERAL. Warwick Community Bancorp and Provident Bancorp have agreed to
use all reasonable efforts to obtain all permits, consents, approvals and
authorizations of all third parties and governmental entities that are necessary
or advisable to consummate the merger. This includes the approval or
non-objection of the Office of Thrift Supervision, the Federal Deposit Insurance
Corporation, the New York State Banking Department, and the Federal Reserve Bank
of New York. Provident Bancorp has filed the application or notice materials
necessary to obtain these regulatory approvals. The merger cannot be completed
without such approvals and non-
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objections. We cannot assure you that we will obtain the required regulatory
approvals and non-objections, when they will be received or whether there will
be conditions in the approvals or any litigation challenging the approvals. We
also cannot assure you that the United States Department of Justice or any state
attorney general will not attempt to challenge the merger on antitrust grounds,
or what the outcome will be if such a challenge is made.
We are not aware of any material governmental approvals or actions that
are required prior to the merger other than those described herein. We presently
contemplate that we will seek any additional governmental approvals or actions
that may be required in addition to those requests for approval currently
pending; however, we cannot assure you that we will obtain any such additional
approvals or actions.
OFFICE OF THRIFT SUPERVISION. The merger is subject to approval by the
Office of Thrift Supervision. We have filed the required application, but we
have not received the Office of Thrift Supervision's approval as of the date of
this Proxy Statement/Prospectus.
The Office of Thrift Supervision may not approve any transaction that
would result in a monopoly or otherwise substantially reduce competition or
restrain trade, unless it finds that the anti-competitive effects of the
transaction are clearly outweighed by the public interest. In addition, the
Office of Thrift Supervision considers the financial and managerial resources of
the companies and their subsidiary institutions, the effectiveness of the
institutions involved in combating money laundering and the convenience and
needs of the communities to be served. Under the Community Reinvestment Act, the
Office of Thrift Supervision must take into account the record of performance of
each company in meeting the credit needs of its entire community, including low-
and moderate-income neighborhoods, served by each company. Provident Bank has an
"outstanding" Community Reinvestment Act rating with the Office of Thrift
Supervision. Warwick Savings has a "satisfactory" Community Reinvestment Act
rating. Towne Center Bank has a "satisfactory" Community Reinvestment Act
rating.
Federal law requires publication of notice of, and the opportunity for
public comment on, the applications submitted by Provident Bancorp and Provident
Bank for approval of the merger, and authorizes the Office of Thrift Supervision
to hold a public hearing in connection with the application if it determines
that such a hearing would be appropriate. Any such hearing or comments provided
by third parties could prolong the period during which the application is
subject to review. In addition, under federal law, a period of 30 days must
expire following approval by the Office of Thrift Supervision within which
period the Department of Justice may file objections to the merger under the
federal antitrust laws. If the Department of Justice were to commence an
antitrust action, that action would stay the effectiveness of Office of Thrift
Supervision approval of the merger unless a court specifically orders otherwise.
In reviewing the merger, the Department of Justice could analyze the merger's
effect on competition differently than the Office of Thrift Supervision, and
thus it is possible that the Department of Justice could reach a different
conclusion than the Office of Thrift Supervision regarding the merger's
competitive effects.
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FEDERAL DEPOSIT INSURANCE CORPORATION. The merger of Warwick Commercial
Bank and Provident Municipal Bank is subject to approval by the Federal Deposit
Insurance Corporation. We have received the Federal Deposit Insurance
Corporation's approval.
The Federal Deposit Insurance Corporation may not approve any
transaction that would result in a monopoly or otherwise substantially lessen
competition or restrain trade, unless it finds that the anti-competitive effects
of the transaction are clearly outweighed by the public interest. In addition,
the Federal Deposit Insurance Corporation considers the financial and managerial
resources of the companies and their subsidiary institutions, the effectiveness
of the institutions involved in combating money laundering and the convenience
and needs of the communities to be served. Warwick Commercial Bank and Provident
Municipal Bank are not subject to review under the Community Reinvestment Act.
Federal law requires publication of notice of, and the opportunity for
public comment on, the application submitted by Provident Municipal Bank and
Warwick Commercial Bank for approval of the merger between these institutions
and authorizes the Federal Deposit Insurance Corporation to hold a public
hearing in connection with the application if it determines that such a hearing
would be appropriate. Any such hearing or comments provided by third parties
could prolong the period during which the application is subject to review. In
addition, under federal law, a period of 30 days must expire following approval
by the Federal Deposit Insurance Corporation, within which period the Department
of Justice may file objections to the merger under the federal antitrust laws.
This waiting period may be reduced to 15 days if the Department of Justice has
not provided any adverse comments relating to the competitive factors of the
transaction. If the Department of Justice were to commence an antitrust action,
that action would stay the effectiveness of the Federal Deposit Insurance
Corporation's approval of the merger unless a court specifically orders
otherwise. In reviewing the merger, the Department of Justice could analyze the
merger's effect on competition differently than the Federal Deposit Insurance
Corporation, and thus it is possible that the Department of Justice could reach
a different conclusion than the Federal Deposit Insurance Corporation regarding
the merger's competitive effects.
NEW YORK STATE BANKING DEPARTMENT. The mergers of (i) Provident Bank and
Warwick Savings and (ii) Warwick Commercial Bank and Provident Municipal Bank
are also subject to the prior approval of the New York State Banking Department
under certain provisions of the New York Banking Act. Provident Bank and
Provident Municipal Bank filed a joint application with the New York State
Banking Department for approval of these mergers. In determining whether to
approve such application, the New York State Banking Department may consider,
among other factors, whether the merger will be in the public interest. The New
York State Banking Department must also approve Provident Bancorp's owning
control of more than one New York-chartered financial institution (Warwick
Savings, Warwick Commercial Bank and Provident Municipal Bank) immediately prior
to the closing of the mergers of the subsidiary banks.
FEDERAL RESERVE BANK OF NEW YORK. Provident Bancorp has requested a
waiver from the requirement to file an application with the Board of Governors
of the Federal Reserve System to be a bank holding company under the Bank
Holding Company Act of 1956, as amended, with
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respect to its temporary ownership of Warwick Savings and Towne Center Bank. The
Federal Reserve Bank of New York has granted this waiver.
NO SOLICITATION
Until the merger is completed or the merger agreement is terminated,
Warwick Community Bancorp has agreed that it, its subsidiaries, its officers and
its directors will not:
o initiate, solicit or knowingly encourage any inquiries or the
making of any proposal to acquire Warwick Community Bancorp,
whether by merger, acquisition of 25% or more of Warwick
Community Bancorp's stock or otherwise;
o enter into, maintain or continue any discussions or negotiations
regarding any such acquisition proposal; or
o agree to or endorse any such other acquisition proposal.
Warwick Community Bancorp may, however, furnish information regarding
Warwick Community Bancorp to, or enter into discussions or negotiations with,
any person or entity in response to an unsolicited acquisition proposal by such
person or entity if:
o Warwick Community Bancorp's board of directors determines in
good faith, after consultation with its financial and legal
advisors, that such proposal, if consummated, is reasonably
likely to result in a transaction more favorable to Warwick
Community Bancorp's stockholders from a financial point of view
than the merger with Provident Bancorp;
o Warwick Community Bancorp's board of directors determines in
good faith, after consultation with its financial and legal
advisors, that the failure to take such actions would likely
cause Warwick Community Bancorp's directors to breach their
fiduciary obligations under applicable law;
o Warwick Community Bancorp promptly notifies Provident Bancorp of
such inquiries, proposals or offers, the material terms of such
inquiries, proposals or offers and the identity of the person
making such inquiry, proposal or offer; and
o The Warwick Community Bancorp annual meeting of stockholders has
not yet occurred.
TERMINATION; AMENDMENT; WAIVER
The merger agreement may be terminated prior to the closing, before or
after approval by Warwick Community Bancorp's stockholders, as follows:
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o by mutual written agreement of Provident Bancorp and Warwick
Community Bancorp;
o by either Provident Bancorp or Warwick Community Bancorp if the
closing of the merger has not occurred on or before December 31,
2004, and such failure to close is not due to the terminating
party's material breach of any representation, warranty,
covenant or other agreement contained in the merger agreement;
o by Provident Bancorp or Warwick Community Bancorp if the
stockholders of Warwick Community Bancorp do not approve the
merger agreement;
o by a non-breaching party if the other party breaches any
covenants, agreements, representations or warranties contained
in the merger agreement such that the terminating party would
not be obligated to complete the merger and such breach has not
been cured within 30 days after notice from the terminating
party;
o by either party if any required regulatory approvals for
consummation of the merger or the bank merger are denied in a
nonappealable action or any court or other governmental
authority issues a final nonappealable order or other action
prohibiting the merger;
o by Provident Bancorp if Warwick Community Bancorp shall have
received a "superior proposal," as defined in the merger
agreement, and the Warwick Community Bancorp board of directors
shall have entered into an acquisition agreement with respect to
the superior proposal and terminates the merger agreement or
fails to recommend that the stockholders of Warwick Community
Bancorp approve the Provident Bancorp merger agreement or
withdraws, modifies or changes such recommendation in a manner
which is adverse to Provident Bancorp; or
o by Warwick Community Bancorp in order to accept a superior
proposal, as defined in the merger agreement, which has been
received and considered by Warwick Community Bancorp in
compliance with the applicable terms of the merger agreement,
provided that Warwick Community Bancorp has notified Provident
Bancorp at least five business days in advance of any such
action and has given Provident Bancorp the opportunity during
such period, if Provident Bancorp elects in its sole discretion,
to negotiate amendments to the merger agreement which would
permit Warwick Community Bancorp to proceed with the proposed
merger with Provident Bancorp.
If the merger agreement is terminated, under either of the latter two
scenarios described above, Warwick Community Bancorp shall pay to Provident
Bancorp a fee of $6.5 million. The fee would also be payable to Provident
Bancorp if Warwick Community Bancorp enters into a merger agreement with a third
party within twelve months of the termination of the merger agreement by
Provident Bancorp, due to a willful breach of a representation, warranty,
covenant or agreement by Warwick Community Bancorp or the failure of the
stockholders of Warwick
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Community Bancorp to approve the merger agreement after Warwick Community
Bancorp's receipt of a third-party acquisition proposal.
The merger agreement may be amended by the parties at any time before or
after approval of the merger agreement by the Warwick Community Bancorp
stockholders. However, after such approval, no amendment may be made without the
approval of Warwick Community Bancorp's stockholders if it reduces the amount or
value, or changes the form of, the merger consideration to be delivered to
Warwick Community Bancorp stockholders pursuant to the merger agreement.
The parties may waive any of their conditions to closing, unless such
conditions may not be waived under law.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Upon closing of the merger between Warwick Community Bancorp and
Provident Bancorp, Warwick Savings will be merged into Provident Bank and the
separate existence of Warwick Savings will cease. The directors and officers of
Provident Bancorp and Provident Bank immediately prior to the merger will
continue as directors and officers of Provident Bancorp and Provident Bank after
the merger. Upon the closing of the merger, two Warwick Community Bancorp
directors will be added to the boards of Provident Bancorp and Provident Bank.
EFFECTIVE DATE OF MERGER
The parties expect that the merger will be effective in the fourth
calendar quarter of 2004 or as soon as possible after the receipt of all
regulatory and stockholder approvals and all regulatory waiting periods expire.
In addition, in the event the closing would be required to occur on or after
September 11, 2004 but before October 1, 2004, then, at Provident Bancorp's sole
discretion, the closing may occur on the close of business on October 1, 2004,
provided that all conditions precedent to the closing have been fulfilled or
waived. The merger will be legally completed by the filing of a certificate of
merger with the Secretary of State of the State of Delaware. If the merger is
not consummated by December 31, 2004, the merger agreement may be terminated by
either Warwick Community Bancorp or Provident Bancorp, unless the failure to
consummate the merger by this date is due to the breach by the party seeking to
terminate the merger agreement of any of its obligations under the merger
agreement. See "--Conditions to the Merger" above.
Under the terms of the merger agreement, the certificate of
incorporation and bylaws of Provident Bancorp will be the certificate of
incorporation and bylaws of the combined entity, which will retain the name of
Provident Bancorp, Inc. Provident Bancorp, as the resulting entity, will
continue to operate under the policies, practices and procedures currently in
place. All assets and property owned by Warwick Community Bancorp shall
immediately become the property of Provident Bancorp. Immediately following
consummation of the merger, (i) Warwick Savings will merge with and into
Provident Bank, with Provident Bank surviving this merger, (ii) Towne Center
Bank will merge with and into Provident Bank, with Provident Bank surviving this
merger and (iii) Warwick Commercial Bank will merge with and into Provident
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Municipal Bank, with Provident Municipal Bank surviving this merger. Provident
Bancorp does not currently anticipate closing any branches of Provident Bank,
Warwick Savings or Towne Center Bank. The net result of the merger will be a
greater number of branches, a stronger presence in existing markets and the
addition of new market areas for Provident Bancorp. Provident Bancorp will also
recognize cost savings through consolidation of back office functions.
PUBLIC TRADING MARKETS
Provident Bancorp common stock is currently traded on the Nasdaq
National Market under the symbol "PBCP." Warwick Community Bancorp common stock
is currently traded on the Nasdaq National Market under the symbol "WSBI." Upon
completion of the merger, Warwick Community Bancorp common stock will be
delisted from the Nasdaq National Market and deregistered under the Securities
Exchange Act of 1934, as amended. The shares of Provident Bancorp common stock
issued pursuant to the merger agreement will be traded on the Nasdaq National
Market.
The shares of Provident Bancorp common stock to be issued in connection
with the merger will be freely transferable under the Securities Act of 1933,
except for shares issued to any stockholder who may be deemed to be an affiliate
of Warwick Community Bancorp, as discussed in "--Resale of Provident Bancorp
Common Stock" on page 97.
Provident Bancorp may from time to time repurchase shares of Provident
Bancorp common stock (subject to Office of Thrift Supervision restrictions,
which include a general prohibition on repurchases of shares by Provident
Bancorp during the first year following completion of the mutual-to-stock
conversion of Provident Bancorp, MHC) and purchase shares of Warwick Community
Bancorp common stock, and, if consented to by Provident Bancorp, Warwick
Community Bancorp may from time to time repurchase shares of Warwick Community
Bancorp common stock and purchase shares of Provident Bancorp common stock.
During the course of the solicitation being made by this Proxy
Statement/Prospectus, either party may bid for and purchase shares of Warwick
Community Bancorp common stock, but neither party may bid for or purchase shares
of Provident Bancorp common stock.
WARWICK COMMUNITY BANCORP RIGHTS AGREEMENT
On October 17, 2000, Warwick Community Bancorp entered into a rights
agreement with Registrar and Transfer Company, as rights agent, pursuant to
which Warwick Community Bancorp's stockholders each received a dividend of one
preferred share purchase right for each outstanding share of Warwick Community
Bancorp common stock. In connection with the execution of the merger agreement,
Warwick Community Bancorp's board of directors determined that Provident Bancorp
will not be an "acquiring person," as defined in the rights agreement, by virtue
of entering into the merger agreement.
PROVIDENT BANCORP DIVIDENDS
Provident Bancorp currently pays a quarterly dividend of $0.04 per
share, which is expected to continue, although the Provident Bancorp board of
directors may change this
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dividend policy at any time. Warwick Community Bancorp currently pays a
quarterly dividend of $0.15 per share, which is expected to continue but may not
be increased without Provident Bancorp's prior approval.
Provident Bancorp stockholders will be entitled to receive dividends
when and if declared by the Provident Bancorp board of directors out of funds
legally available for dividends. The Provident Bancorp board of directors will
periodically consider the payment of dividends, taking into account Provident
Bancorp's financial condition and level of net income, Provident Bancorp's
future prospects, economic conditions, industry practices and other factors,
including applicable banking laws and regulations.
FEES AND EXPENSES
Provident Bancorp and Warwick Community Bancorp will each pay its own
costs and expenses in connection with the merger agreement and the transactions
contemplated thereby except for the payment by Warwick Community Bancorp to
Provident Bancorp of a termination fee in certain circumstances, as described
above.
In addition, if either party willfully breaches the merger agreement,
such party will be liable for all damages, costs and expenses sustained by the
other party as a result of such breach.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
GENERAL. The following discussion sets forth the material United States
federal income tax consequences of the merger to U.S. holders (as defined below)
of Warwick Community Bancorp common stock. This discussion does not address any
tax consequences arising under the laws of any state, locality or foreign
jurisdiction. This discussion is based upon the Internal Revenue Code, the
regulations of the U.S. Treasury Department and court and administrative rulings
and decisions in effect on the date of this document. These laws may change,
possibly retroactively, and any change could affect the continuing validity of
this discussion.
For purposes of this discussion, the term "U.S. holder" means:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized under the laws
of the United States or any of its political subdivisions;
o a trust if it (1) is subject to the primary supervision of a
court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person; or
o an estate that is subject to United States federal income tax on
its income regardless of its source.
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This discussion assumes that you hold your shares of Warwick Community
Bancorp common stock as a capital asset within the meaning of Section 1221 of
the Internal Revenue Code. Further, the discussion does not address all aspects
of U.S. federal income taxation that may be relevant to you in light of your
particular circumstances or that may be applicable to you if you are subject to
special treatment under the United States federal income tax laws, including if
you are:
o a financial institution;
o a tax-exempt organization;
o an S corporation or other pass-through entity;
o an insurance company;
o a mutual fund;
o a dealer in securities or foreign currencies;
o a trader in securities who elects the mark-to-market method of
accounting for your securities;
o a Warwick Community Bancorp stockholder subject to the
alternative minimum tax provisions of the Internal Revenue Code;
o a Warwick Community Bancorp stockholder who received Warwick
Community Bancorp common stock through the exercise of employee
stock options or otherwise as compensation or through a
tax-qualified retirement plan;
o a person that has a functional currency other than the U.S.
dollar;
o a holder of options granted under any Warwick Community Bancorp
benefit plan; or
o a Warwick Community Bancorp stockholder who holds Warwick
Community Bancorp common stock as part of a hedge, straddle or a
constructive sale or conversion transaction.
If a partnership (including an entity treated as a partnership for
United States federal income tax purposes) holds Warwick Community Bancorp
common stock, the tax treatment of a partner in the partnership will generally
depend on the status of such partner and the activities of the partnership.
Provident Bancorp and Warwick Community Bancorp have structured the
merger to qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code.
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It is a condition to the closing of the merger that Provident Bancorp and
Warwick Community Bancorp receive opinions from Luse Gorman Pomerenk & Schick,
P.C. and Wachtell, Lipton, Rosen & Katz, respectively, dated as of the closing
date of the merger, to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Although the merger agreement allows us to waive this condition, we
currently do not anticipate doing so. If either of us does waive this condition
and the tax consequences of the merger are materially different from those
described in this document, we will inform you of this decision and ask you to
vote on the merger, taking this into consideration. In rendering these opinions,
counsel may require and rely upon representations contained in representation
letters to be received from Provident Bancorp and Warwick Community Bancorp.
Neither of these tax opinions will be binding on the Internal Revenue Service.
Provident Bancorp and Warwick Community Bancorp have not and do not intend to
request any ruling from the Internal Revenue Service as to the United States
federal income tax consequences of the merger.
Assuming the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, the material United States federal
income tax consequences of the merger are as follows:
o if you exchange Warwick Community Bancorp common stock solely
for Provident Bancorp common stock, you will not recognize gain
or loss except with respect to any cash received in lieu of a
fractional share of Provident Bancorp common stock;
o if you exchange Warwick Community Bancorp common stock solely
for cash, subject to the discussion under "--Additional
Considerations -- Possible Treatment of Cash as a Dividend"
below, you generally will recognize gain or loss in an amount
equal to the difference between the amount of cash you receive
and your tax basis in your shares of Warwick Community Bancorp
common stock surrendered;
o if you exchange Warwick Community Bancorp common stock for a
combination of Provident Bancorp common stock and cash and your
tax basis in the Warwick Community Bancorp common stock
surrendered is less than the sum of the fair market value of the
Provident Bancorp common stock and the amount of cash received,
subject to the discussion under "--Additional Considerations--
Possible Treatment of Cash as a Dividend" below, you generally
will recognize gain in an amount equal to the lesser of (1) the
sum of the cash (excluding any cash received in lieu of a
fractional share of Provident Bancorp common stock) and the fair
market value of the Provident Bancorp common stock you receive
(including any fractional share of Provident Bancorp common
stock you are deemed to receive and exchange for cash), minus
your tax basis in the Warwick Community Bancorp common stock
surrendered in the merger; and (2) the amount of cash that you
receive in the merger. However, if your tax basis in the Warwick
Community Bancorp common stock surrendered in the merger is
greater than the sum of the amount of cash and the fair market
value of the Provident
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Bancorp common stock received, your loss will not be currently
allowed or recognized for U.S. federal income tax purposes.
o your tax basis in the Provident Bancorp common stock that you
receive in the merger (including any fractional shares you are
deemed to receive and exchange for cash), will equal your tax
basis in the Warwick Community Bancorp common stock you
surrendered, increased by the amount of taxable gain, if any,
you recognize on the exchange (excluding any gain recognized
with respect to any cash received in lieu of a fractional share
of Provident Bancorp common stock) and decreased by the amount
of any cash received by you in the merger (excluding any cash
received in lieu of a fractional share of Provident Bancorp
common stock); and
o your holding period of the Provident Bancorp common stock that
you receive in the merger (including any fractional shares you
are deemed to receive and exchange for cash) will include your
holding period for the shares of Warwick Community Bancorp
common stock that you exchange in the merger.
If you acquired different blocks of Warwick Community Bancorp common
stock at different times or at different prices, any gain or loss you recognize
will be determined separately with respect to each block of Warwick Community
Bancorp common stock, and the cash and Provident Bancorp common stock you
receive will be allocated pro rata to each such block of common stock. In
addition, your tax basis and holding period in your Provident Bancorp common
stock received in the merger may be determined with reference to each block of
Warwick Community Bancorp common stock exchanged.
CASH IN LIEU OF FRACTIONAL SHARES. If you receive cash in lieu of a
fractional share of Provident Bancorp common stock, you will be treated as
having first received such fractional Provident Bancorp share in the merger and
then as having received cash in exchange for the fractional share. Thus, you
generally will recognize gain or loss in an amount equal to the difference
between the amount of cash received and the basis allocated to such fractional
share.
DISSENTING STOCKHOLDERS. Holders of Warwick Community Bancorp common
stock who dissent with respect to the merger as discussed in "--Dissenters'
Rights of Appraisal" beginning on page 98, and who receive cash in respect of
their shares of Warwick Community Bancorp common stock generally will, subject
to the discussion under "Additional Considerations -- Possible Treatment of Cash
as a Dividend" below, recognize gain or loss in an amount equal to the
difference between the amount of cash received and their aggregate tax basis in
their shares of Warwick Community Bancorp common stock.
TAXATION OF CAPITAL GAIN. Subject to the discussion under "--Additional
Considerations -- Possible Treatment of Cash as a Dividend" below, any gain or
loss that you recognize in connection with the merger will generally constitute
capital gain or loss and will constitute long-term capital gain or loss if your
holding period in your Warwick Community Bancorp common stock is greater than
one year as of the date of the merger. The deductibility of capital losses is
subject to limitations.
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ADDITIONAL CONSIDERATIONS -- POSSIBLE TREATMENT OF CASH AS A DIVIDEND.
In some cases, including if you actually own (or under constructive ownership
rules are deemed to own) shares of Provident Bancorp stock, other than those
received as a result of the merger, all or a portion of the cash you receive in
connection with the merger could be taxable as a dividend rather than capital
gain under the tests set forth in Section 302 of the Internal Revenue Code. If
you exchange Warwick Community Bancorp common stock for a combination of
Provident Bancorp common stock and cash, and the cash received has the effect of
the distribution of a dividend, any gain recognized will be treated as a
dividend to the extent of your ratable share of accumulated earnings and profits
of Warwick Community Bancorp. If you exchange Warwick Community Bancorp common
stock solely for cash, the entire amount of cash received could be taxable as a
dividend rather than as gain from the sale of a capital asset.
Because the possibility of dividend treatment depends upon your
particular circumstances, including the application of certain constructive
ownership rules, you should consult your own tax advisor regarding the potential
tax consequences of the merger to you.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Unless an exemption
applies, the exchange agent will be required to withhold, and will withhold, 28%
of any cash payments to which a holder of Warwick Community Bancorp common stock
or other payee is entitled pursuant to the merger, unless the stockholder or
other payee (i) provides his or her taxpayer identification number (social
security number or employer identification number) and certifies that such
stockholder or other payee is not subject to backup withholding on the
substitute Form W-9 that will be included as part of the election form
transmittal letter or (ii) otherwise establishes an exemption from backup
withholding. Any amounts withheld under the backup withholding rules will be
allowed as a refund or credit against your federal income tax liability,
provided you furnish the required information to the Internal Revenue Service.
WARWICK COMMUNITY BANCORP, INC. EMPLOYEE STOCK OWNERSHIP PLAN AND THE
WARWICK SAVINGS BANK 401(K) SAVINGS PLAN. Under the Warwick Community Bancorp
employee stock ownership plan, participant accounts are invested in Warwick
Community Bancorp common stock, and under the 401(k) plan, participant accounts
may be invested in Warwick Community Bancorp common stock. The instruction by a
participant in the 401(k) plan to convert the common stock into cash, into
Provident Bancorp common stock, or partly into cash and partly into Provident
Bancorp common stock pursuant to the merger will not result in a taxable event
for the plan participant at the time of the merger. However, the decision may
have a long-term tax impact on the plan participant. The employee stock
ownership plan will be terminated upon consummation of the merger. Participants
will be able to take a distribution of their employee stock ownership plan
account in cash or shares of Provident Bancorp common stock or a combination of
cash and Provident Bancorp common stock, in accordance with their elections.
Under the terms of the plans, the common stock may be distributed in
kind at the election of the plan participant. In the event that the common stock
is distributed in kind as part of a benefit payment which qualifies as a "lump
sum distribution" to a participant who is over age 59 1/2 or has separated from
employment with the employer sponsoring the plan, and the
94
participant so elects, only the plans' original cost or basis of the common
stock will be taxed at that time to the participant; any unrealized appreciation
will not be taxed until such time as the common stock is disposed of by the
participant in a subsequent taxable transaction. To the extent that gain
recognized from the disposition does not exceed the net unrealized appreciation
at the time of the distribution from the plan, the gain recognized will be taxed
as long-term capital gain, even if the disposition occurs shortly after the
distribution from the plan. Any additional unrealized appreciation, such as
growth in value subsequent to the distribution, will also be taxed as a
long-term capital gain if the stock has been held for more than one year after
the distribution date.
The net unrealized appreciation rules provide a tax planning opportunity
for a plan participant who receives common stock in a lump-sum distribution. For
any participant interested in maximizing the portion of share value that is
attributed to "appreciation" as opposed to "basis" in the common stock, the
instruction to the plan trustee concerning the election to exchange the Warwick
Community Bancorp common stock into cash or Provident Bancorp common stock will
be important. In the case of the 401(k) plan, an exchange into cash and
subsequent investment by the participant in Provident Bancorp common stock will
result in a new, presumably higher, basis and lower future appreciation. An
exchange into Provident Bancorp common stock will result in the transfer in
basis by the plan trustee from the participant's allocable interest in Warwick
Community Bancorp common stock to the participant's allocable interest in
Provident Bancorp common stock.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. IT IS NOT A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX CONSEQUENCES THAT MAY BE
IMPORTANT TO YOU. THUS, WE URGE WARWICK COMMUNITY BANCORP STOCKHOLDERS TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM
RESULTING FROM THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX LAWS
AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO
PARTICIPANTS IN THE WARWICK COMMUNITY BANCORP, INC. EMPLOYEE STOCK OWNERSHIP
PLAN AND THE 401(K) SAVINGS PLAN
GENERAL. The following discussion sets forth the material United States
federal income tax consequences of the merger with respect to the shares of
Warwick common stock held in the accounts of participants under each of the
Warwick Community Bancorp Employee Stock Ownership Plan and the Warwick Savings
Bank 401(k) Savings Plan. This discussion does not address any tax consequences
arising under the laws of any state, locality or foreign jurisdiction. This
discussion is based upon the Internal Revenue Code, the regulations of the U.S.
Treasury Department and court and administrative rulings and decisions in effect
on the date of this document. These laws may change, possibly retroactively, and
any change could affect the continuing validity of this discussion.
The conversion of the common stock held in a participant's account under
each of the employee stock ownership plan and the 401(k) savings plan into cash,
into Provident Bancorp common stock, or partly into cash and partly into
Provident Bancorp common stock pursuant to
95
the merger will not result in a taxable event for the plan participant at the
time of the merger. However, the conversion of the Warwick Community Bancorp
common stock held in a participant's plan account in connection with the merger
may result in different tax consequences for the plan participant upon the
distribution of the participant's account from the plan, depending upon the type
of merger consideration elected to be received by the plan participant.
Following the merger, distributions of all participants' accounts under the
employee stock ownership plan will be made in a single sum, without regard to
whether the participant otherwise satisfies the requirements for a "lump sum
distribution" (generally, a distribution to a participant who is over age 59 1/2
or has separated from employment with the plan sponsor). Participants with
Warwick Community Bancorp common stock accounts under the plans should consult
with their tax advisors as to the ultimate tax consequences associated with
electing cash or Provident Bancorp common stock in the merger and receiving cash
or common stock as part of the plan distribution. Participants also should
understand that all elections are subject to pro-ration and the tax-related
adjustment as described in this Proxy Statement/Prospectus under the heading
"Risk Factor--Risks Related to the Merger--You May Not Receive the Form of
Merger Consideration that You Elect."
Under the terms of the employee stock ownership plan, a participant's
common stock account may be distributed in shares of common stock or cash, at
the election of the plan participant. Under terms of the 401(k) savings plan,
common stock held in the participant's common stock account will be distributed
in shares of common stock, and the balance of the participant's account will be
distributed in cash. Generally, the tax consequences of a distribution of a
participant's common stock account under the employee stock ownership plan or
the 401(k) savings plan vary based on two factors: (1) whether the participant
satisfies the requirements for a lump-sum distribution, and (2) whether the
distribution is made in cash or shares of common stock.
o DISTRIBUTIONS IN COMMON STOCK TO A PARTICIPANT WHO SATISFIES THE
REQUIREMENTS FOR A LUMP-SUM DISTRIBUTION (NET UNREALIZED
APPRECIATION TREATMENT). If a participant's common stock account
under one of the plans is distributed in shares of common stock
as part of a benefit payment that qualifies as a "lump-sum
distribution," and such distribution is not rolled over to an
individual retirement account or other qualified plan, only the
distributing plan's original cost (basis) of the common stock
will be taxable to the participant as ordinary income at the
time of the distribution. Any net unrealized appreciation (I.E.,
the difference between the plan's original cost of the common
stock and the fair market value of the common stock on the date
of distribution) will not be taxed until the common stock is
disposed of by the participant in a subsequent taxable
transaction. Gain recognized from the subsequent disposition of
the common stock up to the amount of net unrealized appreciation
will be taxed as long-term capital gain regardless of how long
the stock is held by the participant. Appreciation above the net
unrealized appreciation amount will be taxed as long-term
capital gain if the stock has been held for more than one year
after the distribution date from the plan, or short-term capital
gain if the stock has been held for one year or less after the
distribution date from the plan. IF A PARTICIPANT WISHES TO
PRESERVE NET UNREALIZED APPRECIATION TREATMENT FOR THE SHARES OF
WARWICK COMMUNITY
96
BANCORP COMMON STOCK HELD IN HIS ACCOUNT UNDER THE EMPLOYEE
STOCK OWNERSHIP PLAN OR 401(K) SAVING PLAN, THEN, IN CONNECTION
WITH THE CONVERSION OF THE WARWICK COMMUNITY BANCORP COMMON
STOCK INTO PROVIDENT BANCORP COMMON STOCK IN THE MERGER, A
PARTICIPANT WOULD NEED TO BOTH ELECT TO RECEIVE PROVIDENT
BANCORP COMMON STOCK IN THE MERGER AND, IN THE CASE OF THE
EMPLOYEE STOCK OWNERSHIP PLAN, ELECT TO HAVE THE DISTRIBUTION
PAID IN THE FORM OF COMMON STOCK.
o DISTRIBUTIONS IN COMMON STOCK TO A PARTICIPANT WHO DOES NOT
SATISFY THE REQUIREMENTS FOR A LUMP-SUM DISTRIBUTION. A
participant who chooses to have his common stock account under
one of the plans distributed in shares of common stock but who
does NOT satisfy the lump-sum distribution requirements (or
elects to have net unrealized appreciation treatment apply) will
not be able to take advantage of net unrealized appreciation
treatment. Unless the participant rolls the distribution over to
an individual retirement account or other qualified plan, the
entire distribution will be taxable to the participant as
ordinary income, based on the fair market value of the shares of
common stock received at the time of the distribution.
o DISTRIBUTIONS IN CASH. If a participant elects to have his
common stock account under one of the plans distributed in cash,
then without regard to whether the participant satisfies the
lump-sum distribution requirements, the participant will not be
able to avail himself of net unrealized appreciation treatment
and, unless the participant rolls the distribution over to an
individual retirement account or other qualified plan, the
entire distribution will be taxable to the participant as
ordinary income in the year of the distribution.
RESALE OF PROVIDENT BANCORP COMMON STOCK
All shares of Provident Bancorp common stock received by Warwick
Community Bancorp stockholders in the merger will be registered under the
Securities Act of 1933 and will be freely transferable, except that shares of
Provident Bancorp common stock received by persons who are deemed to be
"affiliates," as the term is defined under the Securities Act of 1933, of
Provident Bancorp or Warwick Community Bancorp at the time of the annual
meeting, may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act of 1933 or as otherwise
permitted under the Securities Act of 1933. Persons who may be deemed to be
affiliates of Provident Bancorp or Warwick Community Bancorp generally include
individuals or entities that control, are controlled by, or are under common
control with, the party and may include certain officers and directors of such
party as well as principal stockholders of such party. Affiliates of both
parties have previously been notified of their status. The merger agreement
requires Warwick Community Bancorp to use reasonable efforts to receive a letter
agreement from each person who is an affiliate of Warwick Community Bancorp
restricting the transferability of any shares of Provident Bancorp common stock
received in the merger.
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This Proxy Statement/Prospectus does not cover resales of Provident
Bancorp common stock received by any person who may be deemed to be an affiliate
of Warwick Community Bancorp or Provident Bancorp.
ACCOUNTING TREATMENT
In accordance with accounting principles generally accepted in the
United States of America, the merger will be accounted for using the purchase
method. As a result, the recorded assets and liabilities of Provident Bancorp
will be carried forward at their recorded amounts, the historical operating
results will be unchanged for the prior periods being reported on and that the
assets and liabilities from the acquisition of Warwick Community Bancorp will be
adjusted to fair value at the date of the merger. In addition, all identified
intangibles, which presently consists of a core deposit intangible, will be
recorded at fair value and included as part of the net assets acquired. To the
extent that the purchase price, consisting of cash plus the number of shares of
Provident Bancorp common stock to be issued to former Warwick Community Bancorp
stockholders at fair value, exceeds the fair value of the net assets including
identifiable intangibles of Warwick Community Bancorp at the merger date, that
amount will be reported as goodwill. In accordance with Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," goodwill
will not be amortized but will be evaluated for impairment annually. Identified
intangibles will be amortized over their estimated lives.
DISSENTERS' RIGHTS OF APPRAISAL
Under Delaware law, stockholders of Warwick Community Bancorp, including
employee stock ownership plan participants with respect to the shares allocated
to their accounts, have the right to dissent from the merger and to receive
payment in cash for the fair value of their shares of Warwick Community Bancorp
common stock instead of the merger consideration. Warwick Community Bancorp
stockholders electing to do so must comply with the provisions of Section 262 of
the Delaware General Corporation Law in order to perfect their rights of
appraisal. A copy of the applicable Delaware statute is attached as APPENDIX C
of this document.
ENSURING PERFECTION OF APPRAISAL RIGHTS CAN BE COMPLICATED. THE
PROCEDURAL RULES ARE SPECIFIC AND MUST BE FOLLOWED PRECISELY. A WARWICK
COMMUNITY BANCORP STOCKHOLDER'S FAILURE TO COMPLY WITH THESE PROCEDURAL RULES
MAY RESULT IN HIS OR HER BECOMING INELIGIBLE TO PURSUE APPRAISAL RIGHTS.
The following is intended as a brief summary of the material provisions
of the Delaware statutory procedures that a Warwick Community Bancorp
stockholder must follow in order to dissent from the merger and obtain payment
of the fair value of his or her shares of Warwick Community Bancorp common stock
instead of the merger consideration. This summary, however, is not a complete
statement of all applicable requirements and is qualified in its entirety by
reference to Section 262 of the Delaware General Corporation Law, the full text
of which appears in APPENDIX C of this Proxy Statement/Prospectus. Under Section
262 of the Delaware General Corporation Law, not less than 20 days before
Warwick Community Bancorp's annual meeting of stockholders, Warwick Community
Bancorp must notify each of the holders of record of its capital stock as of
August 9, 2004 that appraisal rights are available and include in the
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notice a copy of Section 262 of the Delaware General Corporation Law. Warwick
Community Bancorp intends that this Proxy Statement/Prospectus constitutes this
notice.
If you are a Warwick Community Bancorp stockholder and you wish to
exercise your appraisal rights, you must satisfy the provisions of Section 262
of the Delaware General Corporation Law. Section 262 requires the following:
YOU MUST MAKE A WRITTEN DEMAND FOR APPRAISAL: You must deliver a written
demand for appraisal to Warwick Community Bancorp before the vote on the merger
agreement is taken at the Warwick Community Bancorp annual meeting of
stockholders. This written demand for appraisal must be separate from your proxy
card. A vote against the merger agreement alone will not constitute a demand for
appraisal.
YOU MUST NOT VOTE FOR ADOPTION OF THE MERGER AGREEMENT: You must not
vote for adoption of the merger agreement. If you vote, by proxy or in person,
in favor of the merger agreement, this will terminate your right to appraisal.
You can also terminate your right to appraisal if you return a signed proxy card
and:
o fail to vote against adoption of the merger agreement; or
o fail to note that you are abstaining from voting.
If you do either of these two things, your appraisal rights will terminate even
if you previously filed a written demand for appraisal.
YOU MUST CONTINUOUSLY HOLD YOUR WARWICK COMMUNITY BANCORP COMMON STOCK:
You must continuously hold your shares of Warwick Community Bancorp common stock
from the date you make the demand for appraisal through the effective date of
the merger. If you are the record holder of Warwick Community Bancorp common
stock on the date the written demand for appraisal is made but thereafter
transfer the shares prior to the effective date of the merger, you will lose any
right to appraisal for those shares.
A written demand for appraisal of Warwick Community Bancorp common stock
is only effective if it is signed by, or for, the stockholder of record who owns
such shares at the time the demand is made. The demand must also be signed
precisely as the stockholder's name appears on his or her stock certificate. If
you are the beneficial owner of Warwick Community Bancorp common stock, but not
the stockholder of record, you must have the stockholder of record sign any
demand for appraisal.
If you own Warwick Community Bancorp common stock in a fiduciary
capacity, such as a trustee, guardian or custodian, you must disclose the fact
that you are signing the demand for appraisal in that capacity.
If you own Warwick Community Bancorp common stock with more than one
person, such as in a joint tenancy or tenancy in common, all the owners must
sign, or have signed for them, the demand for appraisal. An authorized agent,
including an agent for one or more of the
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joint owners, may sign the demand for appraisal for a stockholder of record;
however, the agent must expressly disclose who the stockholder of record is and
that the agent is signing the demand as that stockholder's agent.
If you are a record owner, such as a broker, who holds Warwick Community
Bancorp common stock as a nominee for others, you may exercise a right of
appraisal with respect to the shares of Warwick Community Bancorp common stock
held for one or more beneficial owners, while not exercising such right for
other beneficial owners. In such a case, you should specify in the written
demand the number of shares of Warwick Community Bancorp common stock as to
which you wish to demand appraisal. If you do not expressly specify the number
of shares, the demand will be presumed to cover all the shares of Warwick
Community Bancorp common stock that are in your name.
If you are a Warwick Community Bancorp stockholder who elects to
exercise appraisal rights, you should mail or deliver a written demand to:
Warwick Community Bancorp, Inc., 18 Oakland Avenue, Warwick, New York 10990,
Attention: Lois Ulatowski, Corporate Secretary.
It is important that Warwick Community Bancorp receive all written
demands before the vote concerning the merger agreement is taken at the Warwick
Community Bancorp annual meeting of stockholders. As explained above, this
written demand would be signed by, or on behalf of, the stockholder of record.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of common stock owned, and that the
stockholder is demanding appraisal of such stockholder's shares.
If the merger is completed, each holder of Warwick Community Bancorp
common stock who has perfected appraisal rights in accordance with Section 262
of the Delaware General Corporation Law will be entitled to be paid by Provident
Bancorp for such stockholder's shares of Warwick Community Bancorp common stock
the fair value in cash of those shares. The Delaware Court of Chancery will
determine the fair value of the shares, exclusive of any element of value
arising from the completion or expectation of the merger, together with a fair
rate of interest, if any, to be paid upon the amount determined to be the fair
value. In determining such fair value, the court may take into account all
relevant factors and upon such determination will then direct the payment of the
fair value of the shares, together with any interest, to the holders of Warwick
Community Bancorp common stock who have perfected their appraisal rights. The
shares of Warwick Community Bancorp common stock with respect to which holders
have perfected their appraisal rights in accordance with Section 262 and have
not effectively withdrawn or lost their appraisal rights are referred to in this
document as the dissenting shares.
STOCKHOLDERS CONSIDERING SEEKING APPRAISAL FOR THEIR SHARES SHOULD NOTE
THAT THE FAIR VALUE OF THEIR SHARES DETERMINED UNDER SECTION 262 OF DELAWARE LAW
COULD BE MORE, THE SAME, OR LESS THAN THE CONSIDERATION THEY WOULD RECEIVE
PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR SHARES.
The Delaware Court of Chancery may determine the costs of the appraisal
proceeding and allocate them among the parties as the court deems equitable
under the circumstances. Upon application of a stockholder, the court may order
all or a portion of the expenses incurred by any stockholder in connection with
the appraisal proceeding, including reasonable attorneys' fees and the fees and
expenses of experts, to be
100
charged pro rata against the value of all shares entitled to appraisal. In the
absence of such determination or assessment, each stockholder bears its own
expenses.
If you fail to comply with any of these conditions and the merger
becomes effective, you will only be entitled to receive the consideration
provided in the merger agreement for your shares.
Within ten days after the effective date of the merger, Provident
Bancorp must give written notice that the merger has become effective to each
stockholder who has fully complied with the conditions of Section 262 of the
Delaware General Corporation Law.
Within 120 days after the effective date of the merger, either the
surviving corporation of the merger or any stockholder who has complied with the
conditions of Section 262 may file a petition in the Delaware Court of Chancery.
This petition should request that the Delaware Court of Chancery determine the
value of the shares of Warwick Community Bancorp common stock held by all the
stockholders who are entitled to appraisal rights. If you intend to exercise
your appraisal rights, you should file this petition in the Delaware Court of
Chancery. Provident Bancorp has no obligation to file this petition, and if you
do not file this petition within 120 days after the effective date of the
merger, you will lose your rights of appraisal. A dissenting stockholder must
also serve a copy of the petition on Provident Bancorp.
If you change your mind and decide you no longer wish to exercise your
appraisal rights, you may withdraw your demand for appraisal rights at any time
within 60 days after the effective date of the merger. A withdrawal request
received more than 60 days after the effective date of the merger is effective
only with the written consent of Provident Bancorp. If you effectively withdraw
your demand for appraisal rights, you will receive the merger consideration
provided in the merger agreement.
If you have complied with the conditions of Section 262, you are
entitled to receive a statement from Provident Bancorp. This statement will set
forth the number of shares not voted in favor of the merger agreement and that
have demanded appraisal rights and the number of stockholders who own those
shares. In order to receive this statement you must send a written request to
Provident Bancorp within 120 days after the effective date of the merger.
Provident Bancorp must mail this statement within ten days after it receives the
written request or within ten days after the expiration of the period for the
delivery of demands, whichever is later.
If you properly file a petition for appraisal in the Chancery Court and
deliver a copy to Provident Bancorp, Provident Bancorp will then have 20 days to
provide the Chancery Court with a list of the names and addresses of all
stockholders who have demanded appraisal rights and have not reached an
agreement with Provident Bancorp as to the value of their shares. The Registry
in the Court of Chancery, if so ordered by the Court of Chancery, will give
notice of the time and place fixed for the hearing of such petition to the
stockholders on the list. At the hearing, the Chancery Court will determine the
stockholders who have complied with Section 262 and are entitled to appraisal
rights. The Chancery Court may also require you to submit your stock
certificates to the Registry in the Court of Chancery so that it can note on the
certificates
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that an appraisal proceeding is pending. If you do not follow the Chancery
Court's directions, you may be dismissed from the proceeding.
After the Chancery Court determines which stockholders are entitled to
appraisal rights, the Chancery Court will appraise the shares of stock that are
the subject of the demand for appraisal. To determine the fair value of the
shares, the Chancery Court will consider all relevant factors except for any
appreciation or depreciation due to the anticipation or accomplishment of the
merger. After the Chancery Court determines the fair value of the shares, it
will direct the Provident Bancorp to pay that value to the stockholders who have
successfully sought appraisal rights. The Chancery Court can also direct
Provident Bancorp to pay interest, simple or compound, on that value if the
Chancery Court determines that interest is appropriate. In order to receive
payment for your shares under an appraisal procedure, you must surrender your
stock certificates to Provident Bancorp.
If you demand appraisal rights, after the effective date of the merger
you will not be entitled:
o to vote the shares of common stock for which you have demanded
appraisal rights for any purpose;
o to receive payment of dividends or any other distribution with
respect to the shares of common stock for which you have
demanded appraisal, except for dividends or distributions, if
any, that are payable to holders of record as of a record date
prior to the effective date of the merger; or
o to receive the payment of the consideration provided for in the
merger agreement (unless you properly withdraw your demand for
appraisal).
If you do not file a petition for an appraisal within 120 days after the
effective date of the merger, your right to an appraisal will terminate. You may
withdraw your demand for appraisal and accept the merger consideration by
delivering to Provident Bancorp a written withdrawal of your demand, except
that:
o any attempt to withdraw made more than 60 days after the
effective date of the merger will require the written approval
of Provident Bancorp; and
o an appraisal proceeding in the Chancery Court cannot be
dismissed unless the Chancery Court approves.
IF YOU FAIL TO COMPLY STRICTLY WITH THE PROCEDURES DESCRIBED ABOVE YOU
WILL LOSE YOUR APPRAISAL RIGHTS. CONSEQUENTLY, IF YOU WISH TO EXERCISE YOUR
APPRAISAL RIGHTS, WE STRONGLY URGE YOU TO CONSULT A LEGAL ADVISOR BEFORE
ATTEMPTING TO DO SO.
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WARWICK COMMUNITY BANCORP STOCK TRADING AND DIVIDEND INFORMATION
Warwick Community Bancorp common stock is currently listed on the Nasdaq
National Market under the symbol "WSBI." The following table sets forth the high
and low sales prices for a share of Warwick Community Bancorp common stock and
cash dividends paid per share for the periods indicated. As of August 9, 2004,
there were 4,498,923 shares of Warwick Community Bancorp common stock issued and
outstanding. There were approximately 3,170 stockholders of record on August 4,
2004, the most recent date for which this information is available.
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2004 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
September 30, 2004 (through August 13, 2004) $ $ $
June 30, 2004 33.72 30.50 0.15
March 31, 2004 35.30 32.50 0.15
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2003 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
December 31, 2003 $ 34.40 $ 28.37 $ 0.15
September 30, 2003 30.24 28.17 0.15
June 30, 2003 30.75 28.80 0.15
March 31, 2003 30.50 28.20 0.14
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2002 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
December 31, 2002 $ 31.00 $ 26.00 $ 0.11
September 30, 2002 29.99 22.95 0.10
June 30, 2002 33.05 23.20 0.10
March 31, 2002 24.55 20.21 --(1)
- ----------------------------
(1) During the first quarter of 2002, the Board of Directors of Warwick
Community Bancorp changed its policy from declaring quarterly dividends
during the months of March, June September and December to declaring
them in January, April, July and October. This resulted in only three
dividends being paid during 2002.
On March 15, 2004, the business day immediately preceding the public
announcement of the merger, the closing price of Warwick Community Bancorp
common stock as reported on the Nasdaq National Market was $33.57 per share.
Based on the closing price of $11.85 per share of Provident Bancorp common stock
on that date, the equivalent per share market value of each share of Warwick
Community Bancorp common stock to be exchanged solely for Provident Bancorp
common stock would be $32.95, based on the exchange ratio of 2.7810 shares of
Provident Bancorp common stock for each share of Warwick Community Bancorp
common stock, and the equivalent per share market value of each share of Warwick
Community Bancorp
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common stock to be exchanged solely for cash would be $32.26. On August 13,
2004, the closing price of Warwick Community Bancorp was $____ per share. Based
on the closing price of $____ per share of Provident Bancorp common stock on
that date, the equivalent per share market value of each share of Warwick
Community Bancorp common stock to be exchanged solely for Provident Bancorp
common stock would be $_____, based on the exchange ratio of 2.7810 shares of
Provident Bancorp common stock for each share of Warwick Community Bancorp
common stock, and the equivalent per share market value of each share of Warwick
Community Bancorp common stock to be exchanged solely for cash would be $_____.
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PROVIDENT BANCORP STOCK TRADING AND DIVIDEND INFORMATION
Provident Bancorp common stock is currently listed on the Nasdaq
National Market under the symbol "PBCP." The following table sets forth the high
and low trading prices for a share of Provident Bancorp common stock and cash
dividends paid per share for the periods indicated. As of August 9, 2004, there
were 39,646,462 shares of Provident Bancorp common stock issued and outstanding,
and approximately 6,247 stockholders of record. Information prior to January 14,
2004 has been retroactively restated to reflect the second-step conversion
completed January 14, 2004.
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2004 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
September 30, 2004 (through August 13, 2004) $ $ $
June 30, 2004 11.90 10.25 0.040
March 31, 2004 12.15 10.64 0.035
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2003 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
December 31, 2003 $ 10.87 $ 9.33 $ 0.034
September 30, 2003 9.77 7.21 0.034
June 30, 2003 7.46 7.04 0.034
March 31, 2003 7.11 6.77 0.032
YEAR ENDED DIVIDEND PAID
DECEMBER 31, 2002 HIGH LOW PER SHARE
- ------------------------------------------------ -------------- -------------- ---------------
QUARTER ENDED:
December 31, 2002 $ 7.11 $ 6.26 $ 0.029
September 30, 2002 6.58 6.25 0.027
June 30, 2002 6.54 5.98 0.025
March 31, 2002 6.52 5.98 0.023
COMPARISON OF STOCKHOLDERS' RIGHTS FOR EXISTING STOCKHOLDERS OF WARWICK
COMMUNITY BANCORP
As a result of the acquisition of Warwick Community Bancorp, certain
stockholders of Warwick Community Bancorp will receive shares of common stock of
Provident Bancorp as merger consideration and therefore, will become
stockholders of Provident Bancorp. Provident
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Bancorp and Warwick Community Bancorp are both organized under the laws of
Delaware. Any differences, therefore, in the rights of stockholders of Provident
Bancorp and Warwick Community Bancorp arise primarily from differences in their
respective certificates of incorporation and bylaws.
This discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
material differences and similarities affecting the rights of stockholders. The
identification of specific provisions or differences is not meant to indicate
that other equally or more significant differences do not exist. This discussion
is qualified in its entirety by reference to the certificate of incorporation
and bylaws of both Warwick Community Bancorp and Provident Bancorp. See "Where
You Can Find Additional Information" for procedures for obtaining a copy of
Warwick Community Bancorp's or Provident Bancorp's certificate of incorporation
and bylaws.
AUTHORIZED CAPITAL STOCK. The authorized capital stock of Warwick
Community Bancorp consists of 20,000,000 shares, of which 5,000,000 shares are
preferred stock, par value $0.01 per share, and 15,000,000 shares of common
stock, par value $0.01 per share. Warwick Community Bancorp's certificate of
incorporation authorizes the Warwick Community Bancorp board of directors to
issue shares of Warwick Community Bancorp preferred stock in one or more series
and to fix the designations, powers, preferences and rights of the shares of
Warwick Community Bancorp preferred stock in each series. The Warwick Community
Bancorp board of directors has designated 150,000 of the shares of Warwick
Community Bancorp as Senior A Junior Participating Preferred Stock. The
authorized capital stock of Provident Bancorp consists of 85,000,000 shares, of
which 10,000,000 shares are preferred stock, par value $0.01 per share, and
75,000,000 shares of common stock, par value $0.01 per share. Provident
Bancorp's certificate of incorporation authorizes the Provident Bancorp board of
directors to issue shares of Provident Bancorp preferred stock in one or more
series and to fix the designations, powers, preferences and rights of the shares
of Provident Bancorp preferred stock in each series. The Provident Bancorp board
of directors has not designated any of the shares of Provident Bancorp preferred
stock.
PROHIBITIONS RELATING TO BENEFICIAL OWNERSHIP OF VOTING STOCK. The
certificate of incorporation of Warwick Community Bancorp prohibits any person
(other than Warwick Community Bancorp, any subsidiary of Warwick Community
Bancorp, or any pension, profit-sharing, stock bonus or other compensation plan
maintained by Warwick Community Bancorp or by a member of a controlled group of
corporations or trades or businesses of which Warwick Community Bancorp is a
member for the benefit of the employees of Warwick Community Bancorp or any
subsidiary, or any trust or custodial arrangement established in connection with
any such plan) from beneficial ownership of more than 10% of the issued and
outstanding shares of voting stock in Warwick Community Bancorp. If a person
acquires such ownership, the holder may only vote 1/100 of one vote per share
for each share in excess of the 10% limit. Provident Bancorp has no similar
prohibition on owning more than 10% of voting shares. However, Provident
Bancorp's certificate of incorporation provides that no record or beneficial
owner, directly or indirectly, of more than 10% of the outstanding shares of
common stock will be permitted to vote any shares in excess of such 10% limit.
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POWER TO CALL SPECIAL MEETINGS OF STOCKHOLDERS. Under Warwick Community
Bancorp's bylaws, special meetings of stockholders may be called only by
resolution of at least three-fourths of the board of directors or by the
chairman of the board, if one has been elected by the board of directors. Under
Provident Bancorp's certificate of incorporation and bylaws, special meetings of
stockholders may be called by a majority of the board of directors.
AMENDMENTS TO CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Warwick Community Bancorp provides that any modification of the
certificate of incorporation requires approval by the board of directors and the
affirmative vote of the majority of the total votes eligible to be cast by the
holders of the outstanding shares of capital stock entitled to vote. The only
exceptions are for amendments relating to subsequent amendment or legislation
regarding indemnification, limitations on beneficial ownership of stock, the
board of directors, action by stockholders without a meeting, and amendments to
the certificate of incorporation. For these provisions, approval requires either
approval by a majority of the board of directors or the affirmative vote of
two-thirds of the total votes eligible to be cast by the holders of the
outstanding shares of capital stock entitled to vote, and may require the
affirmative vote of a majority of disinterested directors or the affirmative
vote of holders of a majority of the total votes eligible to be cast by the
holders of the outstanding shares of capital stock entitled to vote depending on
the interests of certain directors and stockholders in the amendment.
The certificate of incorporation of Provident Bancorp provides that the
affirmative vote of the holders of at least eighty percent of the outstanding
shares of capital stock of Provident Bancorp entitled to vote in the election of
directors voting together as a single class shall be required to modify
provisions relating to the following articles: amendments, limitation on the
voting rights of stockholders, action of stockholders without a meeting, calling
of special meetings of stockholders, structure of the board of directors and
annual meetings, bylaws, specified business combinations, and indemnification
rights.
AMENDMENTS TO BYLAWS. Under Warwick Community Bancorp's certificate of
incorporation, bylaws may be made, altered, amended, rescinded, or repealed by a
vote of two-thirds of the board of directors, provided that any bylaw made by
the Warwick Community Bancorp board of directors may be altered, amended,
rescinded or repealed in accordance with its terms by holders of shares of
common stock entitled to vote at any annual or special meeting called for that
purpose. If any provision contains a supermajority voting requirement, that
provision can only be altered, amended, rescinded, or repealed by a vote of the
board of directors or holders of shares of capital stock by a supermajority.
Under Provident Bancorp's certificate of incorporation and bylaws, bylaws may be
adopted, amended, or repealed by a majority of the board of directors or by 80
percent of the outstanding shares of capital stock entitled to vote for
directors (in addition to any vote of holders of any class or series of stock
required by law or the certificate of incorporation).
NUMBER OF DIRECTORS. Warwick Community Bancorp's certificate of
incorporation and bylaws provide for between seven and 20 members of the board
of directors (other than directors elected by holders of shares of one or more
series of preferred stock). Provident Bancorp's Bylaws permits Provident
Bancorp's board of directors to designate the number of its members, but in
absence of such a designation, there shall be 12 directors.
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QUALIFICATION OF DIRECTORS. Under Warwick Community Bancorp's bylaws, a
minimum of two directors shall be persons other than officers or employees of
Warwick Community Bancorp or its subsidiaries and shall not have a relationship
which, in the opinion of the board of directors (exclusive of such persons),
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In addition, no more than two directors shall be
officers or directors. A majority of directors shall be persons who are
independent as defined by the Nasdaq stock market listing requirements and each
of whom shall be free from any relationship that would interfere with the
exercise of his or her independent judgment. Each director shall be at least 18
years of age. Under the bylaws of Provident Bancorp, Inc, a director must own at
least 100 shares of common stock of Provident Bancorp and shall reside or work
in a county in which Provident Bank maintains an office or in a county
contiguous to a county in which Provident Bank maintains an office.
LIMITATION ON DIRECTOR LIABILITY. Warwick Community Bancorp's
certificate of incorporation provides for a limitation on a director's liability
for a breach of fiduciary duty except to the extent such exemption from
liability or limitation is expressly prohibited by the Delaware General
Corporation Law. Provident Bancorp's certificate of incorporation provides for a
limitation on a director's liability for a breach of fiduciary duty except for
liability (i) for any breach of the director's duty of loyalty to Provident
Bancorp, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law (regarding unlawful payments of dividends
or redemptions of stock), or (iv) for any transaction from which the director
derived an improper personal benefit.
PROCEDURES FOR NOMINATIONS OF DIRECTORS AND PRESENTATION OF NEW BUSINESS
AT MEETINGS OF STOCKHOLDERS. Under Warwick Community Bancorp's bylaws,
stockholder nominations for directors and proposals for new business must be
made in writing and delivered to Warwick Community Bancorp's secretary at least
60 days before the anniversary of the previous year's annual meeting if the
annual meeting is to be held within 30 days of the anniversary of the previous
year's annual meeting, or if the annual meeting is not held within 30 days of
the anniversary of the previous year's annual meeting or in the case of a
special meeting, within 10 days following the date on which notice of such
meeting is given to the shareholders. Under Provident Bancorp's bylaws,
stockholder nominations and proposals for new business must be submitted to
Provident Bancorp's secretary at least 90 days before the date of Provident
Bancorp's proxy materials for the preceding year's annual meeting to the
Secretary or, if the annual meeting is not held within 30 days of the
anniversary of the prior year's annual meeting, at least 10 days following a
public announcement of the date of the meeting.
DESCRIPTION OF CAPITAL STOCK OF PROVIDENT BANCORP
Provident Bancorp is authorized to issue 75,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.01 per share. At August 9, 2004, there were 39,646,462 shares of
Provident Bancorp common stock issued and outstanding. Provident Bancorp has no
outstanding shares of preferred stock. Each share of Provident Bancorp common
stock has the same relative rights as, and is identical in all respects with,
each other share of common stock.
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COMMON STOCK. The common stock of Provident Bancorp represents
nonwithdrawable capital, is not an account of an insurable type, and is not
insured by the Federal Deposit Insurance Corporation or any other government
agency.
DIVIDENDS. Provident Bancorp may pay dividends out of statutory surplus
or from net earnings if, as and when declared by its board of directors. The
payment of dividends by Provident Bancorp is subject to limitations that are
imposed by law and applicable regulation. The holders of common stock of
Provident Bancorp will be entitled to receive and share equally in dividends as
may be declared by the board of directors of Provident Bancorp out of funds
legally available for the payment of dividends. If Provident Bancorp issues
shares of preferred stock, the holders thereof may have a priority over the
holders of the common stock with respect to dividends.
VOTING RIGHTS. The holders of common stock of Provident Bancorp have
exclusive voting rights in Provident Bancorp. They elect Provident Bancorp's
board of directors and act on other matters as are required to be presented to
them under Delaware law or as are otherwise presented to them by the board of
directors. Generally, each holder of common stock is entitled to one vote per
share and will not have any right to cumulate votes in the election of
directors. If Provident Bancorp issues shares of preferred stock, holders of the
preferred stock may also possess voting rights. Certain matters require an 80%
stockholder vote, which is calculated after giving effect to a provision in
Provident Bancorp's certificate of incorporation limiting voting rights. This
provision provides that stockholders who beneficially own in excess of 10% of
the then outstanding shares of common stock of Provident Bancorp are not
entitled to any vote with respect to the shares held in excess of the 10% limit.
A person or entity is deemed to beneficially own shares that are owned by an
affiliate as well as persons acting in concert with such person or entity.
LIQUIDATION. In the event of any liquidation, dissolution or winding up
of Provident Bank, Provident Bancorp, as the holder of 100% of Provident Bank's
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Provident Bank, including all deposit
accounts and accrued interest thereon, and after distribution of the balance in
the special liquidation account to eligible account holders and supplemental
eligible account holders, all assets of Provident Bank available for
distribution. In the event of liquidation, dissolution or winding up of
Provident Bancorp, the holders of its common stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of Provident Bancorp available for distribution. If preferred stock
is issued, the holders thereof may have a priority over the holders of the
common stock in the event of liquidation or dissolution.
PREEMPTIVE RIGHTS. Holders of the common stock of Provident Bancorp are
not entitled to preemptive rights with respect to any additional shares that may
be issued. The common stock is not subject to redemption.
PREFERRED STOCK. None of the shares of Provident Bancorp's authorized
preferred stock are outstanding. Preferred stock may be issued with preferences
and designations as the board of directors may from time to time determine.
Provident Bancorp's board of directors may, without stockholder approval,
authorize the issuance of shares of preferred stock with voting, dividend,
109
liquidation and conversion rights that could dilute the voting strength of the
holders of the common stock and may assist management in impeding an unfriendly
takeover or attempted change in control.
PROVISIONS OF THE PROVIDENT BANCORP CERTIFICATE OF INCORPORATION AND BYLAWS
The following discussion is a general summary of the material provisions
of Provident Bancorp's certificate of incorporation and bylaws and certain other
regulatory provisions that may be deemed to have an "anti-takeover" effect,
thereby possibly discouraging a third party from seeking control of Provident
Bancorp. The following description of certain of these provisions is necessarily
general and, with respect to provisions contained in Provident Bancorp's
certificate of incorporation and bylaws, reference should be made in each case
to the document in question.
Provident Bancorp's certificate of incorporation and bylaws contain a
number of provisions, relating to corporate governance and rights of
stockholders, which might discourage future takeover attempts. As a result,
stockholders who might desire to participate in such transactions may not have
an opportunity to do so. In addition, these provisions will also render the
removal of the board of directors or management of Provident Bancorp more
difficult.
The following description is a summary of the provisions of the
certificate of incorporation and bylaws. See "Where You Can Find More
Information" as to how to review a copy of these documents.
DIRECTORS. The board of directors is divided into three classes. The
members of each class will be elected for a term of three years and only one
class of directors will be elected annually. Thus, it would take at least two
annual elections to replace a majority of Provident Bancorp's board of
directors. Further, the bylaws impose notice and information requirements in
connection with the nomination by stockholders of candidates for election to the
board of directors or the proposal by stockholders of business to be acted upon
at an annual meeting of stockholders.
RESTRICTIONS ON CALL OF SPECIAL MEETINGS. The certificate of
incorporation and bylaws provide that special meetings of stockholders can be
called only by the board of directors pursuant to a resolution adopted by a
majority of the total number of authorized directorships. Stockholders are not
authorized to call a special meeting of stockholders.
PROHIBITION OF CUMULATIVE VOTING. The certificate of incorporation
prohibits cumulative voting for the election of directors.
LIMITATION OF VOTING RIGHTS. The certificate of incorporation provides
that in no event will any record owner of any outstanding common stock which is
beneficially owned, directly or indirectly, by a person who beneficially owns
more than 10% of the then-outstanding shares of common stock, be entitled or
permitted to vote any of the shares held in excess of the 10% limit.
RESTRICTIONS ON REMOVING DIRECTORS FROM OFFICE. The certificate of
incorporation provides that directors may only be removed for cause, and only by
the affirmative vote of the
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holders of at least 80% of the voting power of all of Provident Bancorp's then
outstanding common stock entitled to vote (after giving effect to the limitation
on voting rights discussed above in "Limitation of Voting Rights").
AUTHORIZED BUT UNISSUED SHARES. Provident Bancorp has authorized but
unissued shares of common and preferred stock. See "Description of Capital Stock
of Provident Bancorp." The certificate of incorporation authorizes 10,000,000
shares of serial preferred stock. Provident Bancorp is authorized to issue
preferred stock from time to time in one or more series subject to applicable
provisions of law, and the board of directors is authorized to fix the
designations, and relative preferences, limitations, voting rights, if any,
including without limitation, offering rights of such shares (which could be
multiple or as a separate class). In the event of a proposed merger, tender
offer or other attempt to gain control of Provident Bancorp that the board of
directors does not approve, it might be possible for the board of directors to
authorize the issuance of a series of preferred stock with rights and
preferences that would impede the completion of the transaction. An effect of
the possible issuance of preferred stock, therefore may be to deter a future
attempt to gain control of Provident Bancorp. The board of directors has no
present plan or understanding to issue any preferred stock.
AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
certificate of incorporation must be approved by Provident Bancorp's board of
directors and also by a majority of the outstanding shares of Provident
Bancorp's voting stock; provided, however, that approval by at least 80% of the
outstanding voting stock is generally required to amend the following
provisions:
(i) The limitation on voting rights of persons who beneficially own,
directly or indirectly more than 10% of the outstanding shares
of common stock;
(ii) The inability of stockholders to act by written consent;
(iii) The inability of stockholders to call special meetings of
stockholders;
(iv) The division of the board of directors into three staggered
classes;
(v) The ability of the board of directors to fill vacancies on the
board;
(vi) The inability to deviate from the manner prescribed in the
bylaws by which stockholders nominate directors and bring other
business before meetings of stockholders;
(vii) The requirement that at least 80% of stockholders must vote to
remove directors, and can only remove directors for cause;
(viii) The ability of the board of directors to amend and repeal the
bylaws; and
(ix) The ability of the board of directors to evaluate a variety of
factors in evaluating offers to purchase or otherwise acquire
Provident Bancorp.
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The bylaws may be amended by the affirmative vote of a majority of the
directors of Provident Bancorp or the affirmative vote of at least 80% of the
total votes eligible to be voted at a duly constituted meeting of stockholders
(after giving effect to the limitation on voting rights discussed under the
caption "Limitation of Voting Rights").
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Provident Bancorp's certificate of incorporation provides that any
"business combination" (as defined below) involving Provident Bancorp and an
interested stockholder must be approved by the holders of at least 80% of the
voting power of the outstanding shares of stock entitled to vote, unless either
two-thirds of the "disinterested directors" (as defined in the certificate) of
Provident Bancorp has approved the business combination or the terms of the
proposed business combination satisfy certain minimum price and other standards.
For purposes of these provisions, an "interested stockholder" includes:
o any person (with certain exceptions) who is the "beneficial
owner" (as defined in the certificate) of more than 10% of
Provident Bancorp outstanding common stock;
o any affiliate of Provident Bancorp which is the beneficial owner
of more than 10% of Provident Bancorp outstanding common stock
during the prior two years; or
o any transferee of any shares of Provident Bancorp common stock
that were beneficially owned by an "interested stockholder"
during the prior two years.
For purposes of these provisions, a "business combination" is defined to
include:
o any merger or consolidation of Provident Bancorp or any
subsidiary with or into an interested stockholder or affiliate
of an interested stockholder;
o the disposition of the assets of Provident Bancorp or any
subsidiary having an aggregate value of 25% or more of the
combined assets of Provident Bancorp and its subsidiaries to or
with any interested stockholder or affiliate of an interested
stockholder;
o the issuance or transfer by Provident Bancorp or any subsidiary
of any of its securities to any Interested Stockholder or
affiliate of an interested stockholder in exchange for cash,
securities or other property having an aggregate value of 25% or
more of the outstanding common stock of Provident Bancorp and
its subsidiaries;
o any reclassification of securities or recapitalization that
would increase the proportionate share of any class of equity or
convertible securities owned by an interested stockholder or
affiliate of an interested stockholder; and
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o the adoption of any plan for the liquidation or dissolution of
Provident Bancorp proposed by, or on behalf of, an interested
stockholder or an affiliate of an interested stockholder.
This provision is intended to deter an acquiring party from utilizing
two-tier pricing and similar coercive tactics in an attempt to acquire control
of Provident Bancorp. However, it is not intended to, and will not, prevent or
deter all tender offers for shares of Provident Bancorp.
BUSINESS COMBINATION STATUTES AND PROVISIONS
Section 203 of the Delaware General Corporation Law prohibits business
combinations, including mergers, sales and leases of assets, issuances of
securities and similar transactions by a corporation or a subsidiary, with an
interested stockholder, which is someone who beneficially owns 15% or more of a
corporation's voting stock, within three years after the person or entity
becomes an interested stockholder, unless:
o the transaction that caused the person to become an interested
stockholder was approved by the board of directors of the target
prior to the transaction;
o after the completion of the transaction in which the person
becomes an interested stockholder, the interested stockholder
holds at least 85% of the voting stock of the corporation, not
including (a) shares held by persons who are both officers and
directors of the issuing corporation and (b) shares held by
specified employee benefit plans;
o the business combination is approved by the board of directors
and holders of at least 66 2/3% of the outstanding voting stock,
excluding shares held by the interested stockholder; or
o the transaction is one of certain business combinations that are
proposed after the corporation had received other acquisition
proposals and that are approved or not opposed by a majority of
certain continuing members of the board of directors, as
specified in the Delaware General Corporation Law.
Neither of Provident Bancorp's certificate of incorporation or bylaws
contains an election, as permitted by Delaware law, to exempt Provident Bancorp
from the requirements of Section 203.
PROPOSAL II - ELECTION OF DIRECTORS
General
Warwick Community Bancorp's Board of Directors is divided into three
classes. The directors of each class serve for a term of three years, with one
class elected each year. In all cases, directors serve until their successors
are duly elected and qualified.
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The Board of Directors has nominated Thomas G. Kahn, Fred G. Kowal and
David F. McBride to be re-elected at the annual meeting, each to serve for a
three-year term expiring at the 2007 annual meeting and until their successors
are otherwise duly elected and qualified. All of the nominees currently serve as
directors of Warwick Community Bancorp. Each nominee has consented to being
named in this proxy statement and to serve if elected. If a nominee is unable to
stand for election, the Board of Directors may either reduce the number of
directors to be elected or select a substitute nominee. If a substitute nominee
is selected, the proxy holders will vote your shares for the substitute nominee,
unless you have withheld authority.
Mr. Fred M. Knipp, whose term expires at this annual meeting, has not
been renominated because he would be unable to serve a full three year term due
to the retirement provisions of Warwick Community Bancorp's bylaws. The Board
appreciates Mr. Knipp's long and dedicated service to Warwick Community Bancorp.
Effective immediately following the annual meeting, the Board has reduced the
total number of Board seats to ten.
Information as to Nominees and Continuing Directors
The following table sets forth certain information with respect to each
nominee for election as a director and each continuing director whose term does
not expire at the annual meeting. There are no arrangements or understandings
between Warwick Community Bancorp and any director or nominee pursuant to which
such person was elected or nominated to be a director of Warwick Community
Bancorp. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" ALL OF THE NOMINEES FOR ELECTION AS DIRECTORS. For information with
respect to security ownership of directors, see "The Warwick Community Bancorp,
Inc. Annual Meeting - Beneficial Stock Ownership of Management."
DIRECTOR TERM
NAME AGE POSITION HELD WITH WARWICK COMMUNITY BANCORP SINCE(1) EXPIRES
- ------------------------------- --------- ---------------------------------------------- ---------- ---------
NOMINEES FOR A THREE-YEAR TERM EXPIRING IN 2007
Thomas G. Kahn 61 Director 2001 2007
Fred G. Kowal 51 Chairman of the Board and Chief Executive Officer 2001 2007
David F. McBride 56 Director 2002 2007
CONTINUING DIRECTORS
Anthony R. Bottini 71 Director 2002 2006
Ronald J. Gentile 54 President, Chief Operating Officer and Director 1990 2005
R. Michael Kennedy 52 Director 1997 2006
Emil R. Krahulik 70 Director 1984 2005
John J. McDermott, III 69 Director 1999 2005
John W. Sanford, III 67 Director 1986 2006
Robert N. Smith 54 Director 1994 2006
(1) Includes terms as directors of Warwick Savings.
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below.
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NOMINEES FOR ELECTION AS DIRECTORS
THOMAS G. KAHN was elected a director of Warwick Savings and Warwick
Community Bancorp in December 2001. Mr. Kahn also serves as a director of
Warwick Commercial Bank ("Warwick Commercial"). Mr. Kahn is President of Kahn
Brothers and Company, Inc., an investment management and advisory firm located
in New York City with over $700 million of institutional and private funds under
management. Mr. Kahn is a graduate of Cornell, and earned an MBA from New York
University. He is a director of Haggar Corporation (Nasdaq:HGGR), a member of
the New York Society of Securities Analysts, and a chartered financial analyst.
He serves as a director of the Jewish Braille Institute of America, and serves
as director and treasurer of both the New York City Job and Career Center and
the Jewish Guild for the Blind.
FRED G. KOWAL joined Warwick Community Bancorp in 1999 and serves as
Chairman of the Board and Chief Executive Officer of Warwick Community Bancorp.
He also serves as Chairman of the Board and Chief Executive Officer of Warwick
Savings and as Chairman of the Board, President and Chief Executive Officer of
The Towne Center Bank ("Towne Center Bank"). He was appointed Chairman of the
Board and Chief Executive Officer of Warwick Community Bancorp and Chairman of
the Board of Warwick Savings in July 2001. He previously served as Vice Chairman
of Warwick Community Bancorp, and as Executive Vice President of Warwick
Community Bancorp prior to 2001. In addition, Mr. Kowal serves as Chairman of
the Board of Warwick Commercial and WSB Funding Corp. ("WSB Funding") and as
President of The Warwick Savings Foundation. He is also a director of Warsave
Development, Inc. ("Warsave"), WSB Financial Services, Inc. ("WSB Financial"),
Hardenburgh Abstract Company of Orange County, Inc. ("Hardenburgh") and The
Warwick Savings Foundation. Prior to joining Warwick Community Bancorp, Mr.
Kowal served as Senior Vice President of PNC Bank and Senior Vice President of
First Union National Bank, where he worked for 16 years. Mr. Kowal serves on the
Board of Regents of Felician College in Lodi, New Jersey, and he is also active
in several banking-related organizations.
DAVID F. MCBRIDE was elected a director of Warwick Savings and Warwick
Community Bancorp in February 2002. Mr. McBride also serves as a director of
Warwick Commercial and Towne Center Bank. He is currently a partner of Harwood
Lloyd, LLC, a Hackensack, New Jersey based law firm. Mr. McBride also serves as
Chairman of the Board of Keystone Property Trust (NYSE: KTR), a real estate
investment trust with interests in over 26 million square feet of commercial
real estate located in New York, New Jersey, Pennsylvania, Florida, Indiana and
South Carolina. He also serves as Chief Executive Officer of McBride
Enterprises, Inc. and affiliated family real estate, construction and brokerage
companies since 1987 and has been a director of McBride Enterprises, Inc. and
such affiliates since 1975. He has been a member of the Georgetown University
Board of Regents since 1990. Mr. McBride served as a director of Midlantic
Corporation, Midlantic National Bank and various subsidiaries for 13 years prior
to its merger with PNC Bank in 1996. Prior to 1987, he was a partner in the law
firm of Murphy, Ellis & McBride from 1977 to 1982, and an associate in the law
firm of Robinson, Wayne & Greenberg from 1973 to 1977, all located in New
Jersey. He is a member of the bars of New Jersey and New York.
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CONTINUING DIRECTORS
ANTHONY R. BOTTINI was elected a director of Warwick Community Bancorp
and Warwick Savings in February 2002. He also serves as a director of Warwick
Commercial. Mr. Bottini is the Chairman and founder of Bottini Fuel Oil Company,
located in Wappingers Falls, New York, which is one of the 20 largest privately
held fuel oil businesses in the United States. In addition, Mr. Bottini is
Chairman of Mid-Hudson Park Management, which invests in manufactured home
communities, and he is also Chairman of South Corporation, a holding company
representing multiple gasoline and convenience store properties located in New
York State. Mr. Bottini has over 30 years prior experience as a bank
director/trustee.
RONALD J. GENTILE serves as President and Chief Operating Officer and a
director of Warwick Community Bancorp and as President and Chief Operating
Officer and a director of Warwick Savings. Mr. Gentile joined Warwick Savings
and has been a director of Warwick Savings since 1990 and President and Chief
Operating Officer and a director of Warwick Community Bancorp since 1997. Mr.
Gentile also serves as a director of Warwick Commercial. In addition, he serves
as President of Warwick Savings' subsidiaries, Warwick Commercial, WSB Funding,
Warsave, WSB Financial and Towne Center Mortgage Co., Inc. ("Towne Center
Mortgage"). He also serves as Executive Vice President of Hardenburgh and
Executive Vice President of The Warwick Savings Foundation. Prior to joining
Warwick Savings, Mr. Gentile served as a senior bank examiner for the Federal
Deposit Insurance Corporation. He is also a member of the board of directors of
Bon Secours Charity Health System (St. Anthony Community Hospital) and Winslow
Therapeutic Riding Unlimited, and a former President and current member of the
Warwick Valley Rotary Club.
R. MICHAEL KENNEDY has served as a director of Warwick Savings and
Warwick Community Bancorp since 1997. Mr. Kennedy also serves as a director of
Warwick Commercial, Towne Center Mortgage and Towne Center Bank, Warsave, WSB
Financial, WSB Funding, Hardenburgh, and The Warwick Savings Foundation. Mr.
Kennedy is a general partner and manager of various real estate companies, all
managed through Kennedy Companies, Inc. He is also the general managing partner
of the Fireplace Restaurant.
EMIL R. KRAHULIK has served as a director of Warwick Savings since 1984
and of Warwick Community Bancorp since 1997. He also serves as a director of
Warwick Commercial, Towne Center Mortgage and Hardenburgh. He is a partner in
the law firm of Bonacic, LoBiondo & Krahulik, LLP, and he served as Warwick
Savings' general counsel until January 2000, when he was succeeded as general
counsel by his son, Robert E. Krahulik.
JOHN J. MCDERMOTT, III has served as a director of Warwick Savings and
Warwick Community Bancorp since 1999. He also serves as a director of Warwick
Commercial, Warsave, WSB Financial, The Warwick Savings Foundation, and Towne
Center Mortgage. Mr. McDermott is a managing partner in J.D. Blake Company and
in Land Investment Group of Newburgh, and he is President of Hudson West Realty
Corp. Mr. McDermott also serves as a director of The Chamber of Commerce of
Orange County, Inc.
JOHN W. SANFORD, III has served as a director of Warwick Savings since
1986 and of Warwick Community Bancorp since 1997. Mr. Sanford also serves as a
director of Warwick
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Commercial, WSB Funding and Towne Center Mortgage. Mr. Sanford also serves as
President of John W. Sanford & Son, Inc., an insurance agency, and is a partner
in Maple Terrace Farms, a dairy and beef business.
ROBERT N. SMITH has served as a director of Warwick Savings since 1994
and of Warwick Community Bancorp since 1997. Mr. Smith also serves as a director
of Warwick Commercial, Towne Center Mortgage, Hardenburgh and The Warwick
Savings Foundation. He is currently President of Lazear-Smith Funeral Homes and
President of Lazear-Smith and Vander-Plaat Memorial Home. Mr. Smith is also sole
proprietor of Smith and Gesell Associates, a bookkeeping and tax accounting
service.
BOARD MEETINGS, BOARD COMMITTEES AND CORPORATE GOVERNANCE MATTERS
The Board of Directors generally meets at least once a month and may
have additional special meetings from time to time. During the year ended
December 31, 2003, the Board of Directors met 16 times. No current director
attended fewer than 75% of the aggregate of (i) the total number of Board
meetings held during the period for which he was a director and (ii) the total
number of meetings held by all committees of the Board on which he served during
the periods that he served. In addition, all of our Board members are expected
to attend Warwick Community Bancorp's annual meeting of shareholders, although
Warwick Community Bancorp does not have any written policy as to Board members'
attendance at the annual meeting of shareholders. Last year's annual meeting of
shareholders was attended by the entire Board of Directors, except for Mr.
Bottini.
The Board of Directors has determined that Messrs. Bottini, Kahn,
Kennedy, McBride, McDermott, Sanford and Smith, constituting a majority of the
Board members, are "independent directors" as that term is defined in the
National Association of Securities' Dealers ("NASD") listing standards.
Shareholders may communicate directly with the Board of Directors by sending
written communications to Warwick Community Bancorp, addressed to the Audit
Committee Chairman.
The Board of Directors' principal standing committees are the Executive,
Compensation, Audit and Nominating Committees. During 2003, the Compensation and
Audit Committees were composed of independent directors. The Board of Directors
was responsible for selecting director nominees. During February 2004, the Board
of Directors appointed a Nominating Committee consisting of solely independent
directors. The Board of Directors also adopted a written charter for the
Compensation, Audit and Nominating committees, as well as a written code of
business conduct and ethics that applies to all of our directors, officers and
employees. You may obtain a copy of these documents free of charge by writing to
our Corporate Secretary at 18 Oakland Avenue, Warwick, New York 10990-0591, or
by calling 845-986-2206.
In addition, our code of business conduct and ethics has been filed with
the Securities Exchange Commission as Exhibit 14 to Warwick Community Bancorp's
Annual Report on Form 10-K for the year ended December 31, 2003. Our Audit
Committee and Nominating Committee charters are attached to this proxy statement
as Appendices A and B, respectively.
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The Board of Directors of Warwick Community Bancorp maintains the
following standing committees:
EXECUTIVE COMMITTEE. The Executive Committee currently consists of
Messrs. Kowal, Gentile, Kennedy, Knipp, Kahn and Smith. To the extent authorized
by the Board of Directors and Warwick Community Bancorp's bylaws, the committee
exercises all of the authority of the Board of Directors between board meetings.
The Executive Committee did not meet during the year ended December 31, 2003.
AUDIT COMMITTEE. The Audit Committee is currently comprised of Messrs.
Bottini, Knipp, Sanford and Smith. The Board of Directors has determined that
although none of its members is an "audit committee financial expert" as defined
in Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934, all of
the Audit Committee members meet the independence and financial literacy
requirements and one member is financially sophisticated as set forth in the
NASD's listing standards. The Board believes the members of the Audit Committee
are qualified to fulfill the responsibilities of this committee. The Board has
in the past and will continue to search for an appropriate new board member who
can also serve as an audit committee financial expert. The Audit Committee met
nine times during fiscal year 2003. The Audit Committee assists the Board in its
oversight responsibility relating to the integrity of Warwick Community
Bancorp's financial statements and the financial reporting process, the systems
of internal accounting and financial controls and compliance with legal and
regulatory requirements. The Audit Committee, among other things:
o oversees the entire audit function for Warwick Community
Bancorp, both internal and independent;
o hires, terminates and/or reappoints the independent registered
public accounting firm;
o ensures the existence of effective accounting and internal
control systems;
o approves non-audit and audit services to be performed by the
independent registered public accounting firm;
o reviews and approves all related party transactions for
potential conflict of interest situations; and
o reviews and assesses the adequacy of the Audit Committee charter
on an annual basis.
COMPENSATION COMMITTEE. The Compensation Committee currently consists of
Messrs. Bottini, Kahn, Kennedy, Knipp, McBride, McDermott, Sanford and Smith.
The Compensation Committee met twice during the year ended December 31, 2003.
The Compensation Committee is responsible for:
o determining compensation to be paid to its executive officers
and directors
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o overseeing the administration of our employee benefit plans
covering employees generally; and
o reviewing our compensation policies and plans.
NOMINATING COMMITTEE. The Nominating Committee currently consists of
Messrs. Kennedy, Bottini and McDermott. The Nominating Committee is responsible
for recommending director candidates to serve on the Board of Directors. The
Board of Directors will also consider director candidates proposed by
shareholders who comply with the procedures set forth in Warwick Community
Bancorp's bylaws. Final approval of director nominees is determined by the full
Board, based on the recommendation of the Nominating Committee. The Nominating
Committee has the following responsibilities:
o recommend to the Board the appropriate size of the Board and
assist in identifying, interviewing and recruiting candidates
for the Board;
o recommend candidates (including incumbents) for election and
appointment to the Board of Directors, based on the following
criteria: business experience, education, integrity and
reputation, independence, conflicts of interest, diversity, age,
number of other directorships and commitments (including
charitable obligations), tenure on the Board, attendance at
Board and committee meetings, stock ownership, specialized
knowledge (such as an understanding of banking, accounting,
marketing, finance, regulation and public policy) and a
commitment to Warwick Community Bancorp's communities and shared
values, as well as overall experience in the context of the
needs of the Board as a whole;
o review nominations submitted by stockholders, which have been
addressed to the Corporate Secretary, and which comply with the
requirements of Warwick Community Bancorp's certificate of
incorporation and bylaws. Nominations from stockholders will be
considered and evaluated using the same criteria as all other
nominations;
o annually recommend to the Board committee assignments and
committee chairs on all committees of the Board, and recommend
committee members to fill vacancies on committees as necessary;
and
o perform any other duties or responsibilities expressly delegated
to the Committee by the Board.
Nominations, other than those made by the Nominating Committee, must be
made pursuant to timely notice in writing to the Corporate Secretary as set
forth in Article II, Section 12 of Warwick Community Bancorp's bylaws. In
general, to be timely, a shareholder's notice must be delivered to the Corporate
Secretary at least 60 days in advance of the anniversary of the previous year's
annual meeting, if the current year's annual meeting is to be held within 30
days prior to, on the anniversary date of, or after the anniversary of the
previous year's annual
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meeting; provided, however, if the current year's annual meeting is not held
within this time period or if the election of directors is to be held at a
special meeting, nominations by shareholders must be delivered to the Corporate
Secretary by the close of business on the 10th day following the date on which
notice of the date of the meeting is first made publicly available to
shareholders. The shareholder's notice must include the information set forth in
Article II, Section 12 of Warwick Community Bancorp's bylaws, which includes the
following:
(i) as to each person whom a shareholder proposes to nominate for
election as a director:
o the name, age, business address and residence address of
the proposed nominee;
o the principal occupation or employment of the proposed
nominee;
o the proposed nominee's written consent to serve as a
director, if elected; and
o all other information relating to the proposed nominee
that is required to be disclosed in the solicitation of
proxies for election as directors or is otherwise
required pursuant to Regulation 14A under the Securities
Exchange Act of 1934.
(ii) as to the shareholder giving the notice:
o name, business address and residence address of the
shareholder;
o number of shares of Warwick Community Bancorp's common
stock owned by the record shareholder and the date(s)
acquired;
o a description of all arrangements or understandings
between the shareholder, the proposed nominee and any
other person or persons (naming such person or persons)
pursuant to which the nomination is to be made by the
shareholder; and
o the identification of any person employed, retained or
to be compensated by the shareholder submitting the
nomination, the proposed nominee, or any person acting
on his or her behalf to make solicitations or
recommendations to shareholders for the purpose of
assisting in the proposed nominee's election, and a
brief description of the terms of such employment,
retainer or arrangement for compensation.
The foregoing description is a summary of Warwick Community Bancorp's
nominating process. Any shareholder wishing to propose a director candidate to
Warwick Community Bancorp should review and must comply in full with the
procedures set forth in Warwick Community Bancorp's certificate of incorporation
and bylaws, and Delaware law.
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As stated above, during fiscal 2003 the Board of Directors was
responsible for selecting director nominees and met one time with respect to the
selection of director nominees.
AUDIT COMMITTEE REPORT
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE INCORPORATED BY REFERENCE
BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO
ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT WARWICK COMMUNITY BANCORP SPECIFICALLY INCORPORATES
THIS REPORT THEREIN, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
Management is responsible for Warwick Community Bancorp's internal
controls, financial reporting process and compliance with laws and regulations.
The independent accountants are responsible for performing an independent audit
of Warwick Community Bancorp's consolidated financial statement in accordance
with generally accepted auditing standards and issuing a report thereon. The
Audit Committee's responsibility is to monitor and oversee these processes.
As required by its charter, the Audit Committee received and reviewed
the report of KPMG LLP regarding the results of their audit, as well as the
written disclosures and the letter from KPMG LLP required by Independence
Standards Board Standard No. 1 (Independence Discussion with Audit Committees).
The Audit Committee reviewed and discussed the audited financial statements with
Company management. A representative of KPMG LLP also discussed with the Audit
Committee the independence of KPMG LLP from Warwick Community Bancorp, as well
as the matters required to be discussed by Statement of Auditing Standards No.
61 (Communication with Audit Committees).
In fulfilling its oversight responsibility of reviewing the services
performed by Warwick Community Bancorp's independent registered public
accounting firm, the Audit Committee carefully reviews the policies and
procedures for the engagement of the independent registered public accounting
firm. The Audit Committee met with the independent registered public accounting
firm to discuss the results of their examinations, the evaluation of Warwick
Community Bancorp's internal controls and the overall quality of Warwick
Community Bancorp's financial reporting. The Audit Committee also reviewed and
discussed with the independent registered public accounting firm the fees paid
to the independent registered public accounting firm; these fees are described
under "Relationship with Independent Registered Public Accounting Firm" below.
Warwick Community Bancorp's Chief Executive Officer and Principal
Financial Officer also reviewed with the Audit Committee the certifications that
each such officer will file with the Securities Exchange Commission pursuant to
the requirements of Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
("Sarbanes"). Management also reviewed with the Audit Committee the policies and
procedures it has adopted to ensure the accuracy of such certifications.
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Based on the Audit Committee's review and discussions noted above, it
recommended to the Board of Directors that the audited financial statements be
included in Warwick Community Bancorp's Annual Report on Form 10-K for the year
ended December 31, 2003, for filing with the Securities Exchange Commission.
Respectfully submitted by the members of the Audit Committee of the
Board of Directors of Warwick Community Bancorp, Inc.
ROBERT N. SMITH, CHAIRMAN ANTHONY R. BOTTINI
FRED M. KNIPP JOHN W. SANFORD, III
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
GENERAL
The Audit Committee has reappointed KPMG LLP as the independent
registered public accounting firm to audit Warwick Community Bancorp's
consolidated financial statements for the year ending December 31, 2004, subject
to the ratification of the appointment by our shareholders. See "Proposal III --
Ratification of Appointment of Independent Registered Public Accounting Firm"
below. In making its determination to reappoint KPMG LLP as Warwick Community
Bancorp's independent registered public accounting firm for the 2004 fiscal
year, the Audit Committee considered the non-audit services that the independent
registered public accounting firm provided during the 2003 fiscal year and
determined that the provision of these services is compatible with and does not
impair the auditors' independence. In compliance with Sarbanes, the Audit
Committee pre-approves all audit and non-audit services performed by the
independent registered public accounting firm.
INDEPENDENT AUDITING FIRM FEES
KPMG LLP was Warwick Community Bancorp's principal auditor for fiscal
2002 and 2003. The aggregate fees billed to Warwick Community Bancorp by KPMG
LLP for the fiscal years ended December 31, 2002 and 2003 were as follows:
Year Ended December 31,
-----------------------------
2002 2003
------------ ------------
Audit Fees ...................... $121,000 148,500
Audit Related Fees (1)........... 30,000 75,000
Tax Fees (2)..................... 55,000 80,000
All Other Fees (3).............. 23,550 --
----------------------------------
(1) Primarily for audit related work pertaining to Warwick Community
Bancorp's employee benefit plans.
(2) Primarily for tax compliance, tax advice and tax return
preparation services. The fees reported for 2002 also include
tax consulting related services in connection with director
retirement.
(3) Primarily for consultations related to Warwick Community
Bancorp's health plan.
Our Audit Committee pre-approves all audit and permissible non-audit
services provided by our independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and
other services. Prior to engaging our independent registered public accounting
firm to render an audit or permissible non-audit service, the Audit Committee
specifically approves the engagement to render that service. Accordingly, we do
not
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engage our independent registered public accounting firm to render audit or
permissible non-audit services pursuant to pre-approval policies or procedures
or otherwise, unless the engagement to provide such services has been approved
by the Audit Committee in advance. The engagement of KPMG LLP to render 100
percent of the services described in the categories above was approved by the
Audit Committee in advance of the rendering of those services.
CHANGE IN AUDITORS
On May 30, 2002, Warwick Community Bancorp dismissed its independent
registered public accounting firm, Arthur Andersen LLP and, on June 3, 2002,
Warwick Community Bancorp retained KPMG LLP as its new independent registered
public accounting firm. The change in auditors was approved by Warwick Community
Bancorp's Board of Directors, upon the recommendation of the Audit Committee of
the Board of Directors. KPMG LLP reviewed Warwick Community Bancorp's financial
statements for its fiscal quarters ended June 30, 2002 and September 30, 2002,
and audited Warwick Community Bancorp's financial statements for the fiscal year
ended December 31, 2002.
During Warwick Community Bancorp's 2000 and 2001 fiscal years, and the
subsequent interim periods through March 31, 2002, there were no disagreements
between Warwick Community Bancorp and Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Arthur Andersen
LLP's satisfaction, would have caused Arthur Andersen LLP to make reference to
the subject matter of the disagreement in connection with its reports on Warwick
Community Bancorp's financial statements for such periods. None of the
reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred
during Warwick Community Bancorp's two fiscal years ended December 31, 2001, or
during any subsequent interim period through March 31, 2002.
The audit reports issued by Arthur Andersen LLP on Warwick Community
Bancorp's consolidated financial statements as of and for the fiscal years ended
December 31, 2000 and December 31, 2001 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. Warwick Community Bancorp provided Arthur
Andersen LLP with a copy of the foregoing disclosures, and a letter from Arthur
Andersen LLP confirming its agreement with these disclosures was filed as an
exhibit to Warwick Community Bancorp's Current Report on Form 8-K/A, filed with
the Securities Exchange Commission on June 3, 2002.
During Warwick Community Bancorp's two fiscal years ended December 31,
2001 and through March 31, 2002, Warwick Community Bancorp did not consult with
KPMG LLP with respect to the application of accounting principles to a specified
transaction or regarding any of the other matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K.
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DIRECTORS COMPENSATION
FEE ARRANGEMENTS
The Boards of Directors of Warwick Community Bancorp and its wholly
owned and principal operating subsidiary, Warwick Savings, have identical
membership. Directors who were employed by Warwick Community Bancorp or its
subsidiaries do not receive fees for their service on these Boards or for any
Board committees on which they serve. Each non-employee director of Warwick
Community Bancorp and Warwick Savings receives the following compensation for
service on these Boards, as follows:
o in the aggregate, a $10,000 annual retainer paid quarterly in
Warwick Community Bancorp common stock for his service as a
director on these Boards; and
o $500 for each board meeting attended, with board meetings of
Warwick Community Bancorp and Warwick Savings occurring on the
same day counting as one meeting for purposes of board fees.
Audit committee members receive a $3,000 annual retainer paid quarterly and a
fee of $300 for each audit committee meeting they attend; no separate fees are
paid for attendance at any other board committee meetings. Messrs. Kennedy,
Knipp and McBride also serve on the Board of Directors of the Towne Center Bank,
an operating subsidiary of Warwick Community Bancorp, and receive a fee of $500
for each Towne Center Bank board meeting attended.
In April 2002, Warwick Community Bancorp's shareholders approved a
Voluntary Retainer Stock and Deferred Compensation Plan For Directors. This plan
allows our directors to elect to receive fees otherwise payable in cash in the
form of Company common stock and to defer all or a portion of their director
fees. The plan provides for the deferral of a director's (i) cash compensation
in the form of either cash-equivalent units or share-equivalent units and (ii)
the annual retainer, which is otherwise payable in Company common stock, in the
form of share-equivalent units. Cash-equivalent unit deferrals accrue phantom
interest at the rate the Compensation Committee of the Board of Director
specifies from time to time, but in no event in excess of the Warwick Savings'
prime rate available to its customers during the applicable quarter.
Share-equivalent units accrue phantom dividends and appreciate (or depreciate)
as would an actual share of Company common stock purchased on the deferral date.
After the participant's service as a director terminates, cash-equivalent units
will be paid in cash and stock-equivalent units will be paid in shares of
Warwick Community Bancorp common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, the Compensation Committee consisted of Anthony R. Bottini,
R. Michael Kennedy, Thomas G. Kahn, Fred M. Knipp, David F. McBride, John J.
McDermott, III, John W. Sanford, III and Robert N. Smith.
Mr. Krahulik is a partner in the law firm of Bonacic, LoBiondo &
Krahulik, LLP, which Warwick Savings retains to provide certain legal services.
During the fiscal year ended December 31, 2003, Warwick Savings paid $127,694 to
such firm for legal services provided
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during such period. Mr. Krahulik's firm also received fees in the amount of
$333,530 from third parties pursuant to its representation of Warwick Savings in
loan closings and other legal matters for the fiscal year ended December 31,
2003. In addition, Mr. McBride is a partner in the law firm of Harwood Lloyd,
LLC, which Warwick Savings and Towne Center Bank retains to provide legal
services from time to time.
From time to time, Warwick Community Bancorp's bank subsidiaries make
loans or extend credit to Warwick Community Bancorp's directors and executive
officers, including members of the Compensation Committee, and to certain
persons related to them, to the extent consistent with applicable laws and
regulations. All such loans are made in the ordinary course of business and on
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and do not involve more
than the normal risk of collectibility or present other unfavorable features.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE FOLLOWING COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE INCORPORATED BY REFERENCE
BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO
ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT WARWICK COMMUNITY BANCORP SPECIFICALLY INCORPORATES
THIS REPORT THEREIN, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
The Compensation Committee of Warwick Community Bancorp's Board of
Directors has furnished the following report on executive compensation:
The Compensation Committee has responsibility for reviewing the
compensation policies and plans for Warwick Community Bancorp and its
affiliates. The policies and plans established are designed to enhance both
short-term and long-term operational performance of Warwick Community Bancorp
and its bank subsidiaries and to build shareholder value through anticipated
appreciation in Warwick Community Bancorp's common stock price.
One of the Committee's primary objectives is to develop and maintain
compensation plans which allow Warwick Community Bancorp to attract and retain
quality executives at competitive compensation levels and which enhance
shareholder value by closely aligning the financial interests of Warwick
Community Bancorp's executives with those of its shareholders. In determining
compensation levels, plans and adjustments, the Committee takes into account,
among other things, compensation reviews made by third parties. These studies
primarily compare the compensation of Warwick Community Bancorp's officers to
officers of other local and regional financial institutions.
Mr. Kowal was elected Vice Chairman of Warwick Community Bancorp in May
2001, and Chairman and Chief Executive Officer of Warwick Community Bancorp in
July 2001. In determining Mr. Kowal's base salary for the fiscal year ended
December 2003, the Committee took into account the salaries of other executive
officers of local and regional financial institutions and their holding
companies, particularly those of comparable size to Warwick Community Bancorp.
Likewise, each executive officer's base salary was determined utilizing
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financial institution compensation surveys. Mr. Kowal's base salary for fiscal
year 2003 was $350,000, in the aggregate, while he was serving as Chairman and
Chief Executive Officer of Warwick Community Bancorp, Chairman and Chief
Executive Officer of The Warwick Savings Bank and Chairman, President and Chief
Executive Officer of Towne Center Bank. Mr. Kowal also received, effective
January 1, 2003, a supplemental retirement plan.
Warwick Community Bancorp also pays discretionary cash bonuses for
executives based on Warwick Community Bancorp's profitability and the
executive's performance during the year. Neither Mr. Kowal nor any other
executive officer received a bonus for the fiscal year ended December 31, 2003.
Warwick Community Bancorp has included stock option and restricted stock
awards as key elements in its total compensation package. Equity based
compensation provides a long-term alignment of interests and results achieved
for shareholders with the compensation rewards provided to executive officers by
providing those executives and others on whom the continued success of Warwick
Community Bancorp most depends with a proprietary interest in Warwick Community
Bancorp. In 1998, the Stock Option Plan and the Recognition and Retention Plan
were adopted by Warwick Community Bancorp's Board of Directors and approved by
Warwick Community Bancorp's Stockholders, providing for the grant of stock
options and restricted stock awards.
Through the compensation programs described above, a significant portion
of Warwick Community Bancorp's executive compensation is linked to corporate
performance. The Committee will continue to review all elements of compensation
to ensure that the compensation objectives and plans meet Warwick Community
Bancorp's business objectives and philosophy of linking executive compensation
to stockholder interests in corporate performance as discussed above.
In 1993, Congress amended the Internal Revenue Code of 1986 to add
Section 162(m) to limit the corporate deduction for compensation paid to a
corporation's five most highly compensated officers to $1.0 million per
executive per year, with certain exemptions. The Committee carefully reviewed
the impact of this legislation on the cost of Warwick Community Bancorp's
current executive compensation plans. Under the legislation and regulations
adopted thereunder, it is not expected that any portion of Warwick Community
Bancorp's employee compensation will be non-deductible in fiscal 2003 or in
future years by reason of compensation paid in 2003. The Committee intends to
review Warwick Community Bancorp's executive compensation policies on an ongoing
basis, and propose appropriate modifications, if the Committee deems them
necessary, to these executive compensation plans with a view toward implementing
Warwick Community Bancorp's compensation policies in a manner that avoids or
minimizes any disallowance of tax deductions under Section 162(m).
126
Respectfully submitted by the members of the Compensation Committee of
the Board of Directors of Warwick Community Bancorp, Inc.
R. MICHAEL KENNEDY, CHAIRMAN ANTHONY R. BOTTINI
THOMAS G. KAHN FRED M. KNIPP
JOHN J. MCDERMOTT, III DAVID F. MCBRIDE
ROBERT N. SMITH JOHN W. SANFORD, III
127
PERFORMANCE GRAPH
THE FOLLOWING STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE
EXTENT WARWICK COMMUNITY BANCORP SPECIFICALLY INCORPORATES THIS GRAPH THEREIN,
AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
The following graph, prepared by SNL Securities, L.C., compares the
performance of Warwick Community Bancorp's common stock with that of the Nasdaq
Composite Index (U.S. Companies) and the Nasdaq Bank Composite Index (banks and
bank holding companies, over 99% of which are based in the United States) over a
five-year period through December 31, 2003. The comparison assumes $100 was
invested on January 1, 1998 in Company common stock and in each of the foregoing
indices and assumes the reinvestment of all dividends. Historical stock price
performance is not necessarily indicative of future stock price performance.
[PERFORMANCE GRAPH]
Index 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Warwick Community Bancorp, Inc. $85.41 $64.00 $79.73 $128.63 $176.41 $255.87
Nasdaq - Total US 140.99 261.48 157.42 124.89 86.33 92.90
Nasdaq Bank Index 99.36 95.51 108.95 117.97 120.61 156.62
128
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning
compensation earned by or paid to Warwick Community Bancorp's Chief Executive
Officer and any other executive officer, whose total salary and bonus exceeded
$100,000, for services rendered to Warwick Community Bancorp and its affiliates
in all capacities during the fiscal year ended December 31, 2003. Each of these
officers received perquisites and other personal benefits in addition to salary
and bonus during the periods stated. The aggregate amount of these perquisites
and other personal benefits, however, did not exceed the lesser of $50,000 or
10% of the total of their annual salary and bonus and, therefore, has been
omitted as permitted by the rules of the Securities Exchange Commission. We will
use the term "named executive officers" from time to time in this proxy
statement to refer to the officers listed in the table below.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- ------------------------
RESTRICTED ALL OTHER
NAME AND SALARY BONUS STOCK AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)
- ------------------------------------- ------ ---------- ----------- ------------ --------- --------------
Fred G. Kowal(2) 2003 $ 350,000 $ --- --- --- $ 119,891(3)
Chairman of the Board and CEO 2002 225,000 100,000 --- --- 84,686
2001 165,000 35,000 $ 528,750 50,000 64,669
Ronald J. Gentile 2003 $ 170,300 $ --- --- --- $ 60,658(3)
President and COO 2002 170,000 --- --- --- 40,265
2001 170,000 --- --- --- 75,327
Arthur W. Budich 2003 $ 125,000 $ --- --- --- $ 40,139(3)
Senior Vice President, Treasurer 2002 120,000 --- --- --- 24,773
and CFO 2001 120,000 --- --- --- 26,394
- --------------------
(1) As of December 31, 2003, the number of shares and the value of
restricted common stock held by the each of the named executive officers
was, as follows: Mr. Kowal, 17,854 shares/$614,178; Mr. Gentile, 8,878
shares/$305,403; and Mr. Budich, 3,804 shares/$130,858. Dividends are
paid on the restricted stock at the rate paid to all shareholders.
(2) Mr. Kowal was appointed Chairman of the Board and Chief Executive
Officer in July 2001.
(3) Includes the Bank's contributions under the 401(k) Plan, ESOP and BRP,
as follows:
401(K) ESOP BRP TOTAL
---------- ----------- ---------- ------------
Fred G. Kowal $4,500 $52,921 $62,470 $119,891
Ronald G. Gentile 4,896 50,292 5,470 60,658
Arthur W. Budich 3,750 36,389 --- 40,139
The following table summarizes for each of the named executive officers
information relating to stock options exercised by him during the fiscal year
ended December 31, 2003, and the number and value of unexercised stock options
held by the named executive officers at year end. The dollar amounts set forth
in the table below under the "Value Realized" column represent the difference
between the fair market value of the underlying stock on the exercise date and
the exercise or base price of the option(s). The dollar amounts set forth in the
table below under the "Value of Unexercised In-the-Money Options/SARs at FY-End"
column represent the difference between the exercise or base price of the named
executive officer's stock
129
option(s) and the $34.40 closing price per share of Warwick Community Bancorp
common stock as quoted on the Nasdaq National Market on December 31, 2003. The
amounts set forth in the column "Value of Unexercised In-the-Money Options at
FY-End," unlike the amounts set forth in the column "Value Realized," have not
been, and may never be, realized. These options have not been, and may not ever
be, exercised. Actual gains, if any, on exercise will depend on the value of
Warwick Community Bancorp common stock on the date of exercise. There can be no
assurance that these values will be realized. Unexercisable options are those
which have not yet vested. No stock options were granted to the named executive
officers during the fiscal year ended December 31, 2003.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
SHARES FY-END FY-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED ---------------------------------- ----------------------------------
NAME # $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------- ---------- ------------- --------------- ------------- ---------------
Fred G. Kowal --- --- 38,000 42,000 $708,750 $699,000
Ronald J. Gentile --- --- 65,000 --- 1,131,000 ---
Arthur W. Budich --- --- 35,000 --- 609,000 ---
OTHER COMPENSATION PLANS AND ARRANGEMENTS
EMPLOYMENT AGREEMENTS. Warwick Community Bancorp has entered into an
employment agreement with each of Mr. Kowal, Mr. Gentile and Mr. Budich. These
employment agreements provide for three-year terms ending on February 15, 2005,
except that Mr. Kowal's provides for a three-year term with automatic daily
extensions such that the remaining term of his employment agreement shall be
three years unless written notice of non-renewal is given by Warwick Community
Bancorp or him, and in any event will terminate on the last day of the month
following his 68th birthday. The employment agreements provide that the
executive's base salary will be reviewed annually and may be increased, but not
decreased, on the basis of such officer's job performance and the overall
performance of Warwick Community Bancorp. The employment agreements also provide
for, among other things, entitlement to participation in stock, retirement and
welfare benefit plans and reimbursement for ordinary and necessary business
expenses. The executives would also be entitled to reimbursement of certain
costs incurred in interpreting or enforcing their employment agreements. The
employment agreements provide for termination by Warwick Community Bancorp at
any time for "cause" as defined in the employment agreements.
In the event that (i) Warwick Community Bancorp terminates an
Executive's employment for reasons other than for cause, (ii) an executive
resigns from Warwick Community Bancorp for certain reasons specified in the
employment agreements or (iii) a change of control, as defined in the employment
agreements, occurs, the executive (or, in the event of the executive's death,
such executive's estate) would be entitled to a lump sum cash payment in an
amount generally equal to (a) the executive's earned but unpaid salary, (b) the
present value of the amount the executive would have earned in salary had he
continued working through the unexpired term of the employment agreement and (c)
the present value of the additional contributions or benefits that the executive
would have earned under the specified
130
employee benefit plans or programs of Warwick Savings or Warwick Community
Bancorp during the remaining term of the employment agreement and payments that
would have been made under any incentive compensation plan during the remaining
term of the employment agreement. The employment agreements also provide for the
cash-out of any stock options, appreciation rights or restricted stock as if the
executive was fully vested. Warwick Savings and Warwick Community Bancorp would
also continue the executive's life, health and any disability insurance or other
benefit plan coverage for the remaining term of the employment agreement.
Reasons specified as grounds for resignation for purposes of the employment
agreements include: failure to elect or re-elect the executive to such officer's
position; failure to vest in the executive the functions, duties or authority
associated with such position; if the executive is a member of the Board of
Directors of Warwick Savings or Warwick Community Bancorp, failure to
re-nominate or re-elect the executive to such Board; any material breach of
contract by Warwick Savings or Warwick Community Bancorp that is not cured
within 30 days after written notice thereof; or a change in the executive's
principal place of employment to a location in excess of 50 miles from Warwick
Savings' principal office in Warwick, New York. In general, for purposes of the
employment agreements and the plans maintained by Warwick Community Bancorp or
Warwick Savings, a change of control will generally be deemed to occur when a
person or group of persons acting in concert acquires beneficial ownership of
25% or more of any class of equity security of Warwick Community Bancorp or
Warwick Savings, upon shareholder approval of certain mergers or consolidations
of Warwick Community Bancorp or Warwick Savings, upon liquidation or sale of
substantially all the assets of Warwick Community Bancorp or Warwick Savings or
upon a contested election of directors which results in a change in the majority
of the Board of Directors.
BENEFIT RESTORATION PLAN. The Benefit Restoration Plan, or the BRP,
adopted by Warwick Community Bancorp provides eligible employees with the
benefits that would be due to the employees under Warwick Community Bancorp's
Pension Plan, 401(k) Savings Plan and the ESOP if such benefits were not limited
under the provisions of the Internal Revenue Code. The BRP also makes up
allocations lost by participants of the ESOP who retire prior to the complete
repayment of the ESOP loan. BRP benefits to be provided with respect to the
pension plan are reflected in the pension table below and BRP benefits to be
provided with respect to the ESOP and the 401(k) plan are reflected in the
Summary Compensation Table above.
PENSION PLAN. All eligible employees of Warwick Community Bancorp, as of
the curtailment date of April 30, 2002, participate in the Warwick Savings'
non-contributory, defined benefit pension plan. All employees, except (i) those
paid on an hourly basis or contract basis, (ii) leased employees or (iii)
employees regularly employed by outside employers for maintenance of properties,
are eligible to participate in the Pension Plan upon the later of (i) the end of
the twelve-month period in which he completes 1,000 hours of service or (ii) the
date he attains age 21. The Pension Plan provides an annual benefit for each
participant equal to 2% of the participant's average annual compensation,
multiplied by the participant's years of credited service, up to a maximum of 30
years.
Average annual compensation is the average of a participant's
compensation (excluding amounts attributable to the vesting of restricted stock
awards and the exercise of stock options) over the three years of employment out
of the participant's last 10-year period of employment
131
during which the participant's compensation is the highest. A participant is
fully vested in his or her pension benefit after five years of service. The
pension plan is funded by Warwick Savings on an actuarial basis, and all assets
are held in trust by the pension plan trustee.
PENSION PLAN TABLE. The following table sets forth the estimated annual
benefits payable under the Pension Plan upon a participant's normal retirement
at age 65, expressed in the form of a single life annuity, and any related
amounts payable under the BRP, for the average annual compensation and years of
credited service specified.
PENSION PLAN TABLE(1)
YEARS OF CREDITED SERVICE AT RETIREMENT
AVERAGE ANNUAL -------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35(2)
- ---------------------- ------------ ------------ ------------ ------------ ------------
$125,000 $37,500 $ 50,000 $ 62,500 $ 75,000 $ 75,000
150,000 45,000 60,000 75,000 90,000 90,000
175,000 52,500 70,000 87,500 105,000 105,000
200,000 60,000 80,000 100,000 120,000 120,000
225,000(3) 67,500 90,000 112,500 135,000 135,000
250,000(3) 75,000 100,000 125,000 150,000 150,000
300,000(3) 90,000 120,000 150,000 180,000(4) 180,000(4)
(1) The annual benefits shown in the table above assume the participant
would receive his or her retirement benefits under the pension plan and
the BRP in the form of a straight life annuity at normal retirement age.
(2) Normal retirement benefits are limited to 60% of average annual
compensation.
(3) For plan years beginning in 2004, the annual compensation for
calculating benefits under the Internal Revenue Code may not exceed
$205,000. The table reflects amounts payable in conjunction with the
BRP.
(4) These are hypothetical benefits based upon the pension plan's normal
retirement benefit formula. The maximum annual benefit permitted under
the Internal Revenue Code in 2003 is $160,000. The BRP will provide the
difference between the amounts appearing in this table and the maximum
amount allowed by the Internal Revenue Code.
The following table sets forth the years of credited service and the
average annual compensation (as defined above), as of the Pension Plan
curtailment date of April 30, 2002, for each of the individuals named in the
Summary Compensation Table.
YEARS OF CREDITED SERVICE AVERAGE
--------------------------- ANNUAL
YEARS MONTHS COMPENSATION
--------- ---------- --------------
Mr. Kowal................... 2 3 $151,231
Mr. Gentile................. 11 11 $166,217
Mr. Budich.................. 16 3 $122,308
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective as of January 1, 2003, Warwick Community Bancorp adopted the
Warwick Community Bancorp, Inc. Supplemental Executive Retirement Plan (the
"SERP") to provide for supplemental retirement benefits for Mr. Kowal. The SERP
is designed to provide monthly benefits over a 10-year period to Mr. Kowal upon
his retirement. The benefit payable to Mr. Kowal upon retirement is a function
of years of service earned after December 31, 2002 and the maximum annual
benefit, $200,000. Generally, reduced early retirement benefit payments under
the SERP can commence upon the later of the date of the termination of Mr.
Kowal's employment or age 60; otherwise, benefit payments generally will
commence at age 62. Mr.
132
Kowal is fully vested under the SERP, however, if he is terminated for cause he
is not entitled to any benefits under the SERP.
If Mr. Kowal dies before receiving any retirement benefits under the
SERP, three additional years of service will be credited in calculating
retirement benefits and his designated beneficiary will receive payment of his
retirement benefits. If he dies after he has begun to receive retirement
benefits under the SERP, the remaining payments will continue to be made to his
designated beneficiary for the rest of the payout period. The committee
administering the SERP may, however, accelerate the payment of Mr. Kowal's
retirement benefits at such time and in such manner as the committee may
determine, in which case the accelerated benefit will consist of a discounted
lump-sum payment of Mr. Kowal's unpaid retirement benefits.
The SERP is an unfunded plan. As of December 31, 2003, the monthly
benefit payments that would be paid under the SERP would be approximately
$7,448.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
From time to time, Warwick Community Bancorp's bank subsidiaries make
loans or extend credit to Warwick Community Bancorp's directors and executive
officers and to certain persons related to them, to the extent consistent with
applicable laws and regulations. All such loans are made in the ordinary course
of business and on the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons, and
do not involve more than the normal risk of collectibility or present other
unfavorable features. In addition, Warwick Savings has committed a line of
credit of $4 million to Warwick Valley Telephone Company, which line of credit
had a zero balance at December 31, 2003. Mr. Knipp is a director and the former
Chief Executive Officer of Warwick Valley Telephone Company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, Warwick Community
Bancorp's directors and executive officers, and any person holding more than ten
percent of Warwick Community Bancorp's common stock, are required to file
initial reports of ownership of Warwick Community Bancorp's common stock and
reports of changes in that ownership with the Securities Exchange Commission.
Specific due dates for these reports have been established, and Warwick
Community Bancorp is required to disclose in this proxy statement any failure to
file by these dates during the fiscal year ended December 31, 2003. All of such
filing requirements of Warwick Community Bancorp's directors and executive
officers were satisfied during the fiscal year ended December 31, 2003, based
upon their written representations and copies of the reports that they have
filed with the Securities Exchange Commission, except for the inadvertent late
filing by Messrs. Bottini and Kahn related to their August 2003 stock option
grants.
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information as of December 31, 2003 with
respect to shares of Warwick Community Bancorp's common stock that may be issued
under our existing equity compensation plans and arrangements, which include
Warwick Community Bancorp's Stock
133
Option Plan, Recognition and Retention Plan and Voluntary Retainer Stock and
Deferred Compensation Plan For Directors. Each of the foregoing plans has been
approved by Warwick Community Bancorp's shareholders and filed with the
Securities and Exchange Commission.
Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options outstanding options future issuance under
Plan Category warrants and rights warrants and rights equity compensation plans
- ------------------------------------ ------------------------- --------------------- ---------------------------
Equity compensation plans
approved by security holders 459,542(1) $17.48 343,195(2)
Equity compensation plans
not approved by security holders --- --- ---
- --------------------------------------
(1) This amount does not include shares available for issuance under Warwick
Community Bancorp's Voluntary Retainer Stock and Deferred Compensation
Plan For Directors. This plan permits the deferral of director
compensation into either an interest-bearing or share-equivalent
account. Deferrals in the share-equivalent account are valued as if each
deferral were invested in Company common stock as of the deferral date,
and are paid out only in shares of Company common stock, on a
one-for-one basis. The share-equivalent units do not have voting rights,
but are credited with dividend equivalent units. As of December 31,
2003, there were 2,638 share-equivalent units outstanding in the
share-equivalent accounts under this plan.
(2) Includes 268,195 shares available for future grants under Warwick
Community Bancorp's Stock Option Plan and 75,000 shares that may be
distributed in settlement of share-equivalent accounts deferred under
Warwick Community Bancorp's Voluntary Retainer Stock and Deferred
Compensation Plan For Directors.
PROPOSAL III - RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has reappointed KPMG LLP as the independent
registered public accounting firm to audit Warwick Community Bancorp's financial
statements for the year ending December 31, 2004. In making its determination to
reappoint KPMG LLP as Warwick Community Bancorp's independent registered public
accounting firm for the 2004 fiscal year, the Audit Committee considered whether
the providing of services (and the aggregate fees billed for those services) by
KPMG LLP, other than audit services, is compatible with maintaining the
independence of the outside accountants. Our shareholders are asked to ratify
this appointment at the annual meeting. If the appointment of KPMG LLP is not
ratified by the shareholders, the Audit Committee may appoint other independent
registered public accounting firm or may decide to maintain its appointment of
KPMG LLP.
A representative of KPMG LLP is expected to attend the meeting to
respond to appropriate questions and will have an opportunity to make a
statement if he or she so desires.
THE BOARD OF DIRECTORS OF WARWICK COMMUNITY BANCORP UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP
AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR WARWICK COMMUNITY BANCORP
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004.
134
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Warwick Community Bancorp will hold a 2005 annual meeting only if the
merger with Provident Bancorp is not consummated before the time of the meeting.
If such a meeting is to be held, a stockholder proposal must be received by the
Corporate Secretary of Warwick Community Bancorp by no later than December 6,
2004 to be included in the proxy statement and form of proxy for the meeting.
Any such proposal will be subject to Rule 14a-8 of the rules and regulations of
the Securities and Exchange Commission. Nothing in this paragraph shall be
deemed to require Warwick Community Bancorp to include in its proxy statement
and proxy card relating to any annual meeting any stockholder proposal or
nomination which does not meet all of the requirements for inclusion established
by the Securities and Exchange Commission in effect at the time such proposal is
received.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
To be considered for presentation at the next annual meeting of
shareholders (if one is held), although not included in the proxy materials, any
shareholder proposal must be delivered to the Corporate Secretary at least 60
days in advance of the anniversary of this year's annual meeting if the next
annual meeting is to be held within 30 days prior to, on the anniversary date
of, or after the anniversary of this year's annual meeting. However, if the next
annual meeting is not held within this time period, the shareholder proposal
must be delivered to the Corporate Secretary by the close of business on the
10th day following the date on which notice of the date of the meeting is first
made publicly available to shareholders. A shareholder's notice shall set forth
such information as required by the bylaws of Warwick Community Bancorp.
HOUSEHOLDING OF PROXY STATEMENTS AND ANNUAL REPORTS
If you share an address with another stockholder, unless you have
provided contrary instructions, you may receive only one Proxy
Statement/Prospectus and Warwick Community Bancorp annual report on Form 10-K.
If you wish to receive a separate set of proxy materials now or in the future,
you may write or call to request a separate copy of these materials from:
Warwick Community Bancorp, Inc.
Attn: Corporate Secretary
18 Oakland Avenue
Warwick, New York 10990
(845) 986-2206
Also, if you share an address with another stockholder and have received
multiple copies of Warwick Community Bancorp's proxy materials, you may write or
call us at the above address and phone number to request delivery of a single
copy of these materials.
AN ADDITIONAL COPY OF WARWICK COMMUNITY BANCORP'S ANNUAL REPORT ON FORM
10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 2003, AS FILED WITH THE
SECURITIES AND EXCHANGE
135
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD
DATE UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, WARWICK COMMUNITY BANCORP,
INC., 18 OAKLAND AVENUE, WARWICK, NEW YORK 10990. THE FORM 10-K IS ALSO
AVAILABLE FREE OF CHARGE ON WARWICK COMMUNITY BANCORP'S WEBSITE AT
WWW.WARWICKSB.COM.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
EXPERTS
The consolidated financial statements of Provident Bancorp, Inc. as of
September 30, 2003 and 2002, and for each of the years in the three-year period
ended September 30, 2003, incorporated by reference into this Proxy
Statement/Prospectus, have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent registered public accounting firm,
which is incorporated by reference herein and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Warwick Community Bancorp, Inc.
as of December 31, 2003 and 2002, and for each of the years in the two-year
period ended December 31, 2003, incorporated by reference into this Proxy
Statement/Prospectus, have been incorporated by reference herein in reliance
upon the report of KPMG LLP, independent registered public accounting firm,
which is incorporated by reference herein and upon the authority of said firm as
experts in accounting and auditing. The 2001 consolidated financial statements
of Warwick Community Bancorp, Inc. were audited by other auditors who have
ceased operations. Those auditors expressed an unqualified opinion on those
financial statements in their report dated January 29, 2002.
The consolidated financial statements of E.N.B. Holding Company, Inc. as
of and for the year December 31, 2003, included in this Proxy
Statement/Prospectus, have been included herein upon the report of KPMG LLP,
independent accountants, which is included herein and upon the authority of said
firm as experts in accounting and auditing.
Warwick Community Bancorp expects representatives of KPMG LLP to attend
Warwick Community Bancorp's annual meeting. These representatives will have an
opportunity to make a statement if they desire to do so, and Warwick Community
Bancorp expects that they will be available to respond to any appropriate
questions you may have.
LEGAL OPINIONS
The validity of the common stock to be issued in the merger will be
passed upon by Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to
Provident Bancorp. Luse Gorman Pomerenk & Schick, P.C. and Wachtell, Lipton,
Rosen & Katz, special counsel to Warwick Community Bancorp, will each deliver
its opinion to Provident Bancorp and Warwick
136
Community Bancorp, respectively, as to material U.S. federal income tax
consequences of the merger.
OTHER MATTERS
As of the date of this document, the Warwick Community Bancorp board of
directors does not know of any matters that will be presented for consideration
at the annual meeting other than as described in this document. However, if any
other matter shall properly come before the annual meeting or any adjournment or
postponement thereof and shall be voted upon, the proposed proxy will be deemed
to confer authority to the individuals named as authorized therein to vote the
shares represented by the proxy as to any matters that fall within the purposes
set forth in the notice of annual meeting. However, no proxy that is voted
against the merger agreement will be voted in favor of any adjournment or
postponement of the annual meeting to solicit additional votes on the merger
agreement.
WHERE YOU CAN FIND MORE INFORMATION
Provident Bancorp has filed with the Securities and Exchange Commission
a registration statement under the Securities Act that registers the
distribution to Warwick Community Bancorp stockholders of the shares of
Provident Bancorp common stock to be issued in connection with the merger. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about Provident Bancorp and Warwick Community
Bancorp's stock. The rules and regulations of the Securities and Exchange
Commission allow us to omit certain information included in the registration
statement from this document.
In addition, Provident Bancorp and Warwick Community Bancorp file
reports, proxy statements and other information with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. You may read and copy this
information at the Public Reference Room of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Securities and Exchange Commission's Public
Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission also maintains an
internet worldwide website that contains reports, proxy and information
statements and other information about issuers, like Provident Bancorp and
Warwick Community Bancorp, that file electronically with the Securities and
Exchange Commission. The address of the site is http://www.sec.gov. The reports
and other information filed by Provident Bancorp with the Securities and
Exchange Commission are also available at Provident Bancorp's internet worldwide
web site. The address is www.providentbanking.com. The reports and other
information filed by Warwick Community Bancorp with the Securities and Exchange
Commission are also available at Warwick Community Bancorp's internet worldwide
web site. The address is http://www.warwicksb.com. We have included the web
addresses of the Securities Exchange Commission, Provident Bancorp and Warwick
Community Bancorp as inactive textual references only. Except as specifically
incorporated by reference into this Proxy Statement/Prospectus, information on
those web sites is not part of this Proxy Statement/Prospectus.
137
You should also be able to inspect reports, proxy statements and other
information about Provident Bancorp and Warwick Community Bancorp at the offices
of the Nasdaq Stock Market, Inc., 33 Whitehall Street, New York, New York 10004.
The Securities and Exchange Commission allows Provident Bancorp and
Warwick Community Bancorp to incorporate certain information into this document
by reference to other information that has been filed with the Securities and
Exchange Commission. The information incorporated by reference is deemed to be
part of this document, except for any information that is superseded by
information in this document. The documents that are incorporated by reference
contain important information about the companies and you should read this
document together with any other documents incorporated by reference in this
document.
This document incorporates by reference the following documents that
have previously been filed with the Securities and Exchange Commission by
Provident Bancorp (File No. 0-25233):
o Annual Report on Form 10-K for the year ended September 30,
2003, as amended by the Annual Report on Form 10K/A;
o Quarterly Report on Form 10-Q for the quarter ended December 31,
2003;
o Quarterly Report on Form 10-Q for the quarter ended March 31,
2004;
o Quarterly Report on Form 10-Q for the quarter ended June 30,
2004;
o Current Reports on Form 8-K dated _________ (other than those
portions furnished under Item 9 or Item 12 of Form 8-K);
o The description of Provident Bancorp common stock set forth in
the registration statement on Form 8-A, as amended, filed on
January 13, 2004 pursuant to Section 12 of the Securities
Exchange Act, including any amendment or report filed with the
Securities and Exchange Commission for the purpose of updating
this description.
This document also incorporates by reference the following documents
that have previously been filed with the Securities and Exchange Commission by
Warwick Community Bancorp (File No. 0-23293):
o Annual Report on Form 10-K for the year ended December 31, 2003,
as amended by the Annual Report on Form 10K/A;
o Quarterly Report on Form 10-Q for the quarter ended March 31,
2004;
o Quarterly Report on Form 10-Q for the quarter ended June 30,
2004;
138
o Current Reports on Form 8-K dated January 21, March 15, April 9,
2004 and July 21, 2004.
In addition, Provident Bancorp and Warwick Community Bancorp are
incorporating by reference any documents they may file under Sections 13(a),
13(c) or 14 of the Securities Exchange Act of 1934, as amended after the date of
this document and prior to the date of the Warwick Community Bancorp annual
meeting.
NEITHER PROVIDENT BANCORP NOR WARWICK COMMUNITY BANCORP HAS AUTHORIZED
ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE MERGER OR
OUR COMPANIES THAT IS DIFFERENT FROM, OR IN ADDITION TO, THAT CONTAINED IN THIS
DOCUMENT OR IN ANY OF THE MATERIALS THAT HAVE BEEN INCORPORATED INTO THIS
DOCUMENT. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION OF THIS SORT, YOU
SHOULD NOT RELY ON IT. IF YOU ARE IN A JURISDICTION WHERE OFFERS TO EXCHANGE OR
SELL, OR SOLICITATIONS OF OFFERS TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED
BY THIS DOCUMENT OR THE SOLICITATION OF PROXIES IS UNLAWFUL, OR IF YOU ARE A
PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE
OFFER PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU. THE INFORMATION
CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE OF THIS DOCUMENT UNLESS
THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
139
AGREEMENT AND PLAN
OF MERGER
BY AND BETWEEN
PROVIDENT BANCORP, INC.
AND
WARWICK COMMUNITY BANCORP, INC.
MARCH 15, 2004
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TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS..................................................6
1.1. CERTAIN DEFINITIONS................................................6
ARTICLE II THE MERGER.........................................................12
2.1. MERGER............................................................12
2.2. CLOSING; EFFECTIVE TIME...........................................13
2.3. CERTIFICATE OF INCORPORATION AND BYLAWS...........................13
2.4. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION...................13
2.5. ADDITIONAL DIRECTORS OF PBI AND PROVIDENT BANK....................13
2.6. EFFECTS OF THE MERGER.............................................13
2.7. TAX CONSEQUENCES..................................................14
2.8. POSSIBLE ALTERNATIVE STRUCTURES...................................14
2.9. ADDITIONAL ACTIONS................................................14
ARTICLE III CONVERSION OF SHARES..............................................15
3.1. CONVERSION OF WCBI COMMON STOCK; MERGER CONSIDERATION.............15
3.2. ELECTION PROCEDURES...............................................16
3.3. PROCEDURES FOR EXCHANGE OF WCBI COMMON STOCK......................20
3.4. TREATMENT OF WCBI OPTIONS.........................................21
3.5. BANK MERGERS......................................................22
3.6. RESERVATION OF SHARES.............................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WCBI.............................22
4.1. STANDARD..........................................................23
4.2. ORGANIZATION......................................................23
4.3. CAPITALIZATION....................................................24
4.4. AUTHORITY; NO VIOLATION...........................................25
4.5. CONSENTS..........................................................26
4.6. FINANCIAL STATEMENTS..............................................26
4.7. TAXES.............................................................27
4.8. NO MATERIAL ADVERSE EFFECT........................................28
4.9. MATERIAL CONTRACTS; LEASES; DEFAULTS..............................28
4.10. OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.........................29
4.11. LEGAL PROCEEDINGS.................................................30
4.12. COMPLIANCE WITH APPLICABLE LAW....................................30
4.13. EMPLOYEE BENEFIT PLANS............................................31
4.14. BROKERS, FINDERS AND FINANCIAL ADVISORS...........................34
4.15. ENVIRONMENTAL MATTERS.............................................35
4.16. LOAN PORTFOLIO....................................................36
4.17. SECURITIES DOCUMENTS..............................................38
4.18. RELATED PARTY TRANSACTIONS........................................38
4.19. DEPOSITS..........................................................38
4.20. ANTITAKEOVER PROVISIONS INAPPLICABLE; REQUIRED VOTE...............38
4.21. REGISTRATION OBLIGATIONS..........................................39
4.22. RISK MANAGEMENT INSTRUMENTS.......................................39
4.23. FAIRNESS OPINION..................................................39
4.24. INTELLECTUAL PROPERTY.............................................39
4.25. TRUST ACCOUNTS....................................................40
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4.26. LABOR MATTERS.....................................................40
4.27. WCBI INFORMATION SUPPLIED.........................................40
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PBI...............................40
5.1. STANDARD..........................................................41
5.2. ORGANIZATION......................................................41
5.3. CAPITALIZATION....................................................42
5.4. AUTHORITY; NO VIOLATION...........................................42
5.5. CONSENTS..........................................................43
5.6. FINANCIAL STATEMENTS..............................................43
5.7. TAXES.............................................................44
5.8. NO MATERIAL ADVERSE EFFECT........................................44
5.9. OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.........................45
5.10. LEGAL PROCEEDINGS.................................................45
5.11. COMPLIANCE WITH APPLICABLE LAW....................................45
5.12. EMPLOYEE BENEFIT PLANS............................................47
5.13. ENVIRONMENTAL MATTERS.............................................48
5.14. LOAN PORTFOLIO....................................................49
5.15. SECURITIES DOCUMENTS..............................................50
5.16. DEPOSITS..........................................................50
5.17. ANTITAKEOVER PROVISIONS INAPPLICABLE..............................50
5.18. RISK MANAGEMENT INSTRUMENTS.......................................50
5.19. BROKERS, FINDERS AND FINANCIAL ADVISORS...........................50
5.20. PBI COMMON STOCK..................................................51
5.21. MATERIAL CONTRACTS; LEASES, DEFAULTS..............................51
5.22. PBI INFORMATION SUPPLIED..........................................51
ARTICLE VI COVENANTS OF WCBI..................................................51
6.1. CONDUCT OF BUSINESS...............................................51
6.2. CURRENT INFORMATION...............................................56
6.3. ACCESS TO PROPERTIES AND RECORDS..................................57
6.4. FINANCIAL AND OTHER STATEMENTS....................................57
6.5. MAINTENANCE OF INSURANCE..........................................58
6.6. DISCLOSURE SUPPLEMENTS............................................58
6.7. CONSENTS AND APPROVALS OF THIRD PARTIES...........................58
6.8. ALL REASONABLE EFFORTS............................................59
6.9. FAILURE TO FULFILL CONDITIONS.....................................59
6.10. NO SOLICITATION...................................................59
6.11. RESERVES AND MERGER-RELATED COSTS.................................60
6.12. BOARD OF DIRECTORS AND COMMITTEE MEETINGS.........................60
ARTICLE VII COVENANTS OF PBI..................................................61
7.1. CONDUCT OF BUSINESS...............................................61
7.2. CURRENT INFORMATION AND CONSULTATION..............................61
7.3. FINANCIAL AND OTHER STATEMENTS....................................61
7.4. DISCLOSURE SUPPLEMENTS............................................62
7.5. CONSENTS AND APPROVALS OF THIRD PARTIES...........................62
7.6. ALL REASONABLE EFFORTS............................................62
7.7. FAILURE TO FULFILL CONDITIONS.....................................62
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7.8. EMPLOYEE BENEFITS.................................................62
7.9. DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE..............65
7.10. STOCK LISTING.....................................................66
7.11. STOCK AND CASH RESERVE............................................66
7.12. SECTION 16(B) EXEMPTION...........................................66
ARTICLE VIII REGULATORY AND OTHER MATTERS.....................................67
8.1. MEETINGS OF STOCKHOLDERS..........................................67
8.2. PROXY STATEMENT-PROSPECTUS; MERGER REGISTRATION STATEMENT.........67
8.3. REGULATORY APPROVALS..............................................68
8.4. AFFILIATES........................................................68
ARTICLE IX CLOSING CONDITIONS.................................................69
9.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT.......69
9.2. CONDITIONS TO THE OBLIGATIONS OF PBI UNDER THIS AGREEMENT.........70
9.3. CONDITIONS TO THE OBLIGATIONS OF WCBI UNDER THIS AGREEMENT........70
ARTICLE X THE CLOSING.........................................................71
10.1. TIME AND PLACE....................................................71
10.2. DELIVERIES AT THE PRE-CLOSING AND THE CLOSING.....................71
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER..................................72
11.1. TERMINATION.......................................................72
11.2. EFFECT OF TERMINATION.............................................73
11.3. AMENDMENT, EXTENSION AND WAIVER...................................74
ARTICLE XII MISCELLANEOUS.....................................................75
12.1. CONFIDENTIALITY...................................................75
12.2. PUBLIC ANNOUNCEMENTS..............................................75
12.3. SURVIVAL..........................................................75
12.4. NOTICES...........................................................75
12.5. PARTIES IN INTEREST...............................................76
12.6. COMPLETE AGREEMENT................................................76
12.7. COUNTERPARTS......................................................77
12.8. SEVERABILITY......................................................77
12.9. GOVERNING LAW.....................................................77
12.10. INTERPRETATION....................................................77
12.11. SPECIFIC PERFORMANCE..............................................77
Exhibit A Form of Plan of Bank Merger
Exhibit B Form of Plan of Bank Merger
Exhibit C Form of Plan of Bank Merger
Exhibit D Form of Voting Agreement
Exhibit E Affiliates Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
March 15, 2004, by and between Provident Bancorp, Inc., a Delaware corporation
("PBI"), and Warwick Community Bancorp, Inc., a Delaware corporation ("WCBI").
WHEREAS, the Board of Directors of each of PBI and WCBI (i) has
determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of their respective
companies and stockholders and (ii) has determined that this Agreement and the
transactions contemplated hereby are consistent with and in furtherance of their
respective business strategies, and (iii) has approved this Agreement at
meetings of each of such Boards of Directors; and
WHEREAS, in accordance with the terms of this Agreement, WCBI will merge
with and into PBI (the "Merger"), and immediately thereafter Warwick Savings and
TCB, each of which is a wholly owned subsidiary of WCBI, will be merged with and
into Provident Bank, a wholly owned subsidiary of PBI, and immediately
thereafter Warwick Commercial Bank, a wholly owned subsidiary of Warwick
Savings, will be merged with and into Provident Municipal Bank, a wholly owned
subsidiary of Provident Bank; and
WHEREAS, as a condition to the willingness of PBI to enter into this
Agreement, each of the directors of WCBI have entered into a Voting Agreement,
substantially in the form of Exhibit D hereto, dated as of the date hereof, with
PBI (the "Voting Agreement"), pursuant to which each such director has agreed,
among other things, to vote all shares of common stock of WCBI owned by such
person in favor of the approval of this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth in
such Voting Agreements;
WHEREAS, the parties intend the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that this Agreement be and is hereby adopted as a
"plan of reorganization" within the meaning of Sections 354 and 361 of the Code;
and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the business transactions described in this
Agreement and to prescribe certain conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
1.1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms have the following
meanings (unless the context otherwise requires, references to Articles and
Sections refer to Articles and Sections of this Agreement).
"Affiliate" means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, 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 hereto.
"Bank Mergers" shall mean the merger of Warwick Savings with and into
Provident Bank, with Provident Bank as the surviving institution, the merger of
TCB with and into Provident Bank, with Provident Bank as the surviving
institution, and the merger of Warwick Commercial Bank with and into Provident
Municipal Bank, with Provident Municipal Bank as the surviving institution,
which mergers shall occur immediately following the Merger.
"Bank Regulator" shall mean any Federal or state banking regulator,
including but not limited to the OTS, FDIC, the New Jersey Department, the New
York Department and the FRB, which regulates Provident Bank, Provident Municipal
Bank, Warwick Savings, TCB or Warwick Commercial Bank, or any of their
respective holding companies or subsidiaries, as the case may be.
"Cash Consideration" shall have the meaning set forth in Section 3.1.3.
"Cash Election" shall have the meaning set forth in Section 3.2.2.
"Cash/Stock Election" shall have the meaning set forth in Section 3.1.3.
"Cash Election Shares" shall have the meaning set forth in Section
3.2.1.
"Certificate" shall mean a certificate evidencing shares of WCBI Common
Stock (together with the associated WCBI Stock Purchase Rights).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" shall mean the confidentiality agreements
referred to in Section 12.1 of this Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
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"Dissenting Shares" shall have the meaning set forth in Section 3.1.4.
"Dissenting Stockholder" shall have the meaning set forth in Section
3.1.4.
"Effective Time" shall mean the date and time specified pursuant to
Section 2.2 hereof as the effective time of the Merger.
"Election Deadline" shall have the meaning set forth in Section 3.2.3.
"Election Form" shall have the meaning set forth in Section 3.2.2.
"Election Form Record Date" shall have the meaning set forth in Section
3.2.2.
"Environmental Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Law includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; and all comparable
state and local laws, and (b) any common law (including without limitation
common law that may impose strict liability) that may impose liability or
obligations for injuries or damages due to the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean Registrar & Transfer Company, or such other
bank or trust company or other agent designated by PBI, and reasonably
acceptable to WCBI, which shall act as agent for PBI in connection with the
exchange procedures for exchanging Certificates for the Merger Consideration.
"Exchange Fund" shall have the meaning set forth in Section 3.3.1.
"Exchange Ratio" shall have the meaning set forth in Section 3.1.3.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of New York.
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"FRB" shall mean the Board of Governors of the Federal Reserve System or
any successor thereto.
"GAAP" shall mean accounting principles generally accepted in the United
States of America.
"Governmental Entity" shall mean any Federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) means those facts that are known
or should have been known by the executive officers and directors of such
Person, and includes any facts, matters or circumstances set forth in any
written notice from any Bank Regulator or any other material written notice
received by an executive officer or director of that Person.
"Material Adverse Effect" shall mean, with respect to PBI or WCBI,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of PBI and its Subsidiaries taken
as a whole, or WCBI and its Subsidiaries taken as a whole, respectively, or (ii)
materially impairs the ability of either WCBI, on the one hand, or PBI, on the
other hand, to perform its obligations under this Agreement or otherwise
materially impedes the consummation of the transactions contemplated by this
Agreement; provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in laws and regulations affecting banks or
thrift institutions and their holding companies generally, or interpretations
thereof by courts or governmental agencies, (b) changes in GAAP or regulatory
accounting principles generally applicable to financial institutions and their
holding companies, (c) actions and omissions of a party hereto (or any of its
Subsidiaries) taken with the prior written consent of the other party, (d) the
impact of the announcement of this Agreement and the transactions contemplated
hereby, and compliance with this Agreement on the business, financial condition
or results of operations of the parties and their respective Subsidiaries,
including the expenses incurred by the parties hereto in consummating the
transactions contemplated by this Agreement (consistent with the information
included in the Disclosure Schedules), (e) changes in national or international
political or social conditions including the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack upon or within the
United States, or any of its territories, possessions or diplomatic or consular
offices or upon any military installation, equipment or personnel of the United
States and (f) any change in the value of the securities or loan portfolio of
PBI or WCBI, respectively, whether held as available for sale or held to
maturity, resulting from a change in interest rates generally.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of WCBI with and into PBI pursuant to the
terms hereof.
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"Merger Consideration" shall mean the cash or PBI Common Stock, or
combination thereof, in an aggregate per share amount to be paid by PBI for each
share of WCBI Common Stock, as set forth in Section 3.1.
"Merger Registration Statement" shall mean the registration statement,
together with all amendments, filed with the SEC under the Securities Act for
the purpose of registering shares of PBI Common Stock to be offered to holders
of WCBI Common Stock in connection with the Merger.
"Mixed Election" shall have the meaning set forth in Section 3.2.2.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq National Market.
"New Jersey Department" shall mean the Department of Banking and
Insurance of the State of New Jersey, and where appropriate shall include the
Commissioner of Banking and Insurance of the State of New Jersey.
"New York Department" shall mean the Banking Department of the State of
New York, and where appropriate shall include the Superintendent of Banks of the
State of New York and the Banking Board of the State of New York.
"Non Election" shall have the meaning set forth in Section 3.2.2.
"Non Election Shares" shall have the meaning set forth in Section 3.2.1.
"Option Payment" shall have the meaning set forth in Section 3.4.
"OTS" shall mean the Office of Thrift Supervision or any successor
thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"PBI" shall mean Provident Bancorp, Inc., a Delaware corporation, with
its principal executive offices located at 400 Rella Boulevard, Montebello, New
York 10901.
"PBI Common Stock" shall mean the common stock, par value $.01 per
share, of PBI.
"PBI DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by PBI to WCBI specifically referring to the appropriate section of
this Agreement.
"PBI Stock Benefit Plans" shall mean Provident Bank 2000 Stock Option
Plan and Provident Bank 2000 Recognition and Retention Plan.
"PBI Financial Statements" shall mean the (i) the audited consolidated
statements of financial condition (including related notes and schedules) of PBI
as of September 30, 2003 and 2002 and the consolidated statements of income,
changes in stockholders' equity and cash flows (including related notes and
schedules, if any) of PBI for each of the three years ended September 30, 2003,
2002 and 2001, as set forth in PBI's annual report on Form 10-K for the
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year ended September 30, 2003, and (ii) the unaudited interim consolidated
financial statements of PBI as of the end of each calendar quarter following
September 30, 2003, and for the periods then ended, as filed by PBI in its
Securities Documents.
"PBI Subsidiary" means any corporation, 50% or more of the capital stock
of which is owned, either directly or indirectly, by PBI or Provident Bank,
except any corporation the stock of which is held in the ordinary course of the
lending activities of Provident Bank.
"Pension Plan" shall have the meaning set forth in Section 4.13.2.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Proxy Statement-Prospectus" shall have the meaning set forth in Section
8.2.1.
"Provident Bank" shall mean Provident Bank, a federally chartered stock
savings association, with its principal offices located at 400 Rella Boulevard,
Montebello, New York 10901, which is a wholly owned subsidiary of PBI.
"Provident Municipal Bank" shall mean Provident Municipal Bank, a New
York chartered limited purpose commercial bank, with its principal offices
located at 400 Rella Boulevard, Montebello, New York 10901, which is a wholly
owned subsidiary of Provident Bank.
"Regulatory Agreement" shall have the meaning set forth in Section
4.12.3.
"Regulatory Approvals" means the approval of any Bank Regulator that is
necessary in connection with the consummation of the Merger, the Bank Mergers
and the related transactions contemplated by this Agreement.
"Representative" shall have the meaning set forth in Section 3.2.2.
"Rights" shall mean warrants, options, rights, convertible securities,
stock appreciation rights and other arrangements or commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation based on the equity appreciation of
its capital stock.
"SBA" shall mean the Small Business Administration or any successor
thereto.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed pursuant to
the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust
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Indenture Act of 1939, as amended, and the rules and regulations of the SEC
promulgated thereunder.
"Shortfall Number" shall have the meaning set forth in Section 3.2.5.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02
of Regulation S-X of the SEC.
"Stock Consideration" shall have the meaning set forth in Section 3.1.3.
"Stock Conversion Number" shall have the meaning set forth in Section
3.2.1.
"Stock Election Shares" shall have the meaning set forth in Section
3.2.1.
"Stock Election Number" shall have the meaning set forth in Section
3.2.1.
"Stock Election" shall have the meaning set forth in Section 3.2.2.
"Surviving Corporation" shall have the meaning set forth in Section 2.1
hereof.
"TCB" shall mean The Towne Center Bank, the New Jersey chartered stock
commercial bank that is a wholly owned subsidiary of WCBI, having its principal
offices located at 2 Arnot Avenue, Lodi, New Jersey 07644.
"Termination Date" shall mean December 31, 2004.
"Treasury Stock" shall have the meaning set forth in Section 3.1.2.
"Warwick Commercial Bank" shall mean Warwick Commercial Bank, a New York
chartered limited purpose commercial bank, with its principal offices located at
18 Oakland Avenue, Warwick, New York 10990, which is a wholly owned subsidiary
of Warwick Savings.
"Warwick Savings" shall mean The Warwick Savings Bank, a New York
chartered stock savings bank, with its principal offices located at 18 Oakland
Avenue, Warwick, New York 10990, which is a wholly owned subsidiary of WCBI.
"Warwick ESOP" shall mean The Warwick Community Bancorp Employee Stock
Ownership Plan.
"WCBI" shall mean Warwick Community Bancorp, Inc., a Delaware
corporation, with its principal offices located at 18 Oakland Avenue, Warwick,
New York 10990.
"WCBI Common Stock" shall mean the common stock, par value $0.01 per
share, of WCBI.
"WCBI DISCLOSURE SCHEDULE" shall mean a written disclosure schedule
delivered by WCBI to PBI specifically referring to the appropriate section of
this Agreement.
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"WCBI Financial Statements" shall mean (i) the audited consolidated
statements of financial condition (including related notes and schedules, if
any) of WCBI as of December 31, 2003 and 2002 and the consolidated statements of
income, changes in stockholders' equity and cash flows (including related notes
and schedules, if any) of WCBI for each of the three years ended December 31,
2003, 2002 and 2001, as set forth in WCBI's annual report on Form 10-K for the
year ended December 31, 2003 and (ii) the unaudited interim consolidated
financial statements of WCBI as of the end of each calendar quarter following
December 31, 2003 and for the periods then ended, as filed by WCBI in its
Securities Documents.
"WCBI Option" shall mean an option to purchase shares of WCBI Common
Stock granted pursuant to the WCBI Stock Option Plan and outstanding as of the
date hereof, as set forth in WCBI DISCLOSURE SCHEDULE 4.3.1.
"WCBI Regulatory Reports" means the Call Reports of Warwick Savings, TCB
and Warwick Commercial Bank, and accompanying schedules (other than such
schedules as are required to be kept confidential pursuant to applicable law or
regulatory requirements), as filed with the FDIC for each calendar quarter
beginning with the quarter ended March 31, 2003, through the Closing Date, and
all Annual Reports on Form FR Y-6, any Current Report on Form FR Y-6A filed with
the FRB by WCBI from December 31, 2002 through the Closing Date.
"WCBI Rights Agreement" means the Rights Agreement between WCBI and
Registrar and Transfer Company, as Rights Agent, dated as of October 17, 2000
relating to WCBI's Series A Junior Participating Preferred Stock.
"WCBI Stockholders Meeting" shall have the meaning set forth in Section
8.1.1.
"WCBI Stock Benefit Plans" shall mean the WCBI Stock Option Plan and the
WCBI Recognition and Retention Plan, and any and all amendments thereto.
"WCBI Stock Purchase Rights" means the rights to purchase WCBI's Series
A Junior Participating Preferred Stock, par value $0.01 per share, in accordance
with the terms of the WCBI Rights Agreement.
"WCBI Subsidiary" means any corporation, 50% or more of the capital
stock of which is owned, either directly or indirectly, by WCBI or Warwick
Savings, except any corporation the stock of which is held in the ordinary
course of the lending activities of Warwick Savings.
"WSB REIT" shall have the meaning set forth in Section 4.12.4.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1. MERGER.
Subject to the terms and conditions of this Agreement, at the Effective
Time: (a) WCBI shall merge with and into PBI, with PBI as the resulting or
surviving corporation (the "Surviving
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Corporation"); and (b) the separate existence of WCBI shall cease and all of the
rights, privileges, powers, franchises, properties, assets, liabilities and
obligations of WCBI shall be vested in and assumed by PBI. As part of the
Merger, each share of WCBI Common Stock will be converted into the right to
receive the Merger Consideration pursuant to the terms of Article III hereof.
2.2. CLOSING; EFFECTIVE TIME.
The Merger shall be effected by the filing of a certificate of merger
with the Delaware Office of the Secretary of State on the day of the Closing
(the "Closing Date"), in accordance with the DGCL. The "Effective Time" means
the date and time upon which the certificate of merger is filed with the
Delaware Office of the Secretary of State, or as otherwise stated in the
certificate of merger, in accordance with the DGCL.
2.3. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Certificate of Incorporation and Bylaws of PBI as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until thereafter amended
as provided therein and by applicable law.
2.4. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
Except as provided in Section 2.5, the directors of PBI immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. Until changed in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, the officers of PBI immediately prior to the Effective Time shall
be the initial officers of Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
2.5. ADDITIONAL DIRECTORS OF PBI AND PROVIDENT BANK.
Effective as of the Effective Time, the number of persons constituting
the Board of Directors of PBI and Provident Bank shall each be increased by two
(2) persons, and two (2) persons who are directors of WCBI as of the date of
this Agreement and who have been designated by the Board of Directors of PBI
shall be appointed and elected to the PBI and Provident Bank Boards (provided
that if either or both of the persons designated by PBI declines to serve on the
PBI or Provident Bank Board, PBI shall appoint a substitute person from the WCBI
board, and provided further that PBI is obligated to substitute an alternative
WCBI director only if one or both of PBI's initial two designees declines to
serve). PBI shall consult with WCBI regarding the WCBI directors to be
designated to serve on the PBI and Provident Bank boards. PBI shall notify in
writing the WCBI directors it has selected to serve on the PBI and Provident
Bank boards at least thirty days prior to the Closing Date.
2.6. EFFECTS OF THE MERGER.
At and after the Effective Time, the Merger shall have the effects as
set forth in the DGCL.
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2.7. TAX CONSEQUENCES.
It is intended that the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" as that term is used in Sections 354 and
361 of the Code. From and after the date of this Agreement and until the
Closing, each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to
be taken, fail to take any action or cause any action to fail to be taken which
action or failure to act would reasonably be expected to prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code. Following the
Closing, neither PBI nor any of its affiliates shall knowingly take any action,
cause any action to be taken, fail to take any action or cause any action to
fail to be taken, which action or failure to act would reasonably be expected to
cause the Merger to fail to qualify as a reorganization under Section 368(a) of
the Code. PBI and WCBI each hereby agrees to deliver certificates substantially
in compliance with IRS published advance ruling guidelines, with customary
exceptions and modifications thereto, to enable counsel to deliver the legal
opinions contemplated by Section 9.1.6, which certificates shall be dated as of
the date of such opinions.
2.8. POSSIBLE ALTERNATIVE STRUCTURES.
Notwithstanding anything to the contrary contained in this Agreement and
subject to the satisfaction of the conditions set forth in Article IX, prior to
the Effective Time PBI shall be entitled to revise the structure for effecting
the Merger described in Section 2.1 hereof or the Bank Mergers including,
without limitation, by substituting a wholly owned subsidiary for PBI or
Provident Bank, as applicable, provided that (i) any such subsidiary shall
become a party to, and shall agree to be bound by, the terms of this Agreement
(ii) there are no adverse Federal or state income tax consequences to WCBI
stockholders as a result of the modification; (iii) the consideration to be paid
to the holders of WCBI Common Stock under this Agreement is not thereby changed
in kind, value or reduced in amount; and (iii) such modification will not delay
materially or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the Merger or otherwise
cause any condition to Closing set forth in Article IX not to be capable of
being fulfilled. The parties hereto agree to appropriately amend this Agreement
and any related documents in order to reflect any such revised structure.
2.9. ADDITIONAL ACTIONS.
If, at any time after the Effective Time, PBI shall consider or be
advised that any further deeds, assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in PBI its right, title or interest in, to or under any of the
rights, properties or assets of WCBI, Warwick Savings, TCB or Warwick Commercial
Bank, or (ii) otherwise carry out the purposes of this Agreement, WCBI and its
officers and directors shall be deemed to have granted to PBI an irrevocable
power of attorney to execute and deliver, in such official corporate capacities,
all such deeds, assignments or assurances in law or any other acts as are
necessary or desirable to (a) vest, perfect or confirm, of record or otherwise,
in PBI its right, title or interest in, to or under any of the rights,
properties or assets of WCBI or
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(b) otherwise carry out the purposes of this Agreement, and the officers and
directors of the PBI are authorized in the name of WCBI or otherwise to take any
and all such action.
ARTICLE III
CONVERSION OF SHARES
3.1. CONVERSION OF WCBI COMMON STOCK; MERGER CONSIDERATION.
At the Effective Time, by virtue of the Merger and without any action on
the part of PBI, WCBI or the holders of any of the shares of WCBI Common Stock,
the Merger shall be effected in accordance with the following terms:
3.1.1. Each share of PBI Common Stock that is issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding following the Effective Time and shall be unchanged by the Merger.
3.1.2. All shares of WCBI Common Stock (together with the
associated WCBI Stock Purchase Rights) held in the treasury of WCBI and each
share of WCBI Common Stock (together with the associated WCBI Stock Purchase
Rights) owned by PBI prior to the Effective Time (other than shares held in a
fiduciary capacity or in connection with debts previously contracted) ("Treasury
Stock"), shall, at the Effective Time, cease to exist, and the certificates for
such shares shall be canceled as promptly as practicable thereafter, and no
payment or distribution shall be made in consideration therefor.
3.1.3. Each share of WCBI Common Stock (together with the
associated WCBI Stock Purchase Rights) issued and outstanding immediately prior
to the Effective Time (other than Treasury Stock and Dissenting Shares) shall
become and be converted into, as provided in and subject to the limitations set
forth in this Agreement, the right to receive at the election of the holder
thereof as provided in Section 3.2 either (i) $32.26 in cash (the "Cash
Consideration"); (ii) 2.7810 shares (the "Exchange Ratio") of PBI Common Stock
(the "Stock Consideration"); or (iii) a combination of the Cash Consideration
and the Stock Consideration, as provided in Section 3.2 (the "Cash/Stock
Consideration"). The Cash Consideration and the Stock Consideration are
sometimes referred to herein collectively as the "Merger Consideration."
3.1.4. Each outstanding share of WCBI Common Stock (together
with the associated WCBI Stock Purchase Rights) the holder of which has
perfected his right to dissent under Section 262 the DGCL and has not
effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration hereunder, and the holder thereof shall be entitled
only to such rights as are granted by Section 262 of the DGCL. WCBI shall give
PBI prompt notice upon receipt by WCBI of any such demands for payment of the
fair value of such shares of WCBI Common Stock and of withdrawals of such notice
and any other instruments provided pursuant to applicable law (any stockholder
duly making such demand being hereinafter called a "Dissenting Stockholder"),
and PBI shall have the right to participate in all negotiations and proceedings
with respect to any such demands. WCBI shall not, except with the prior written
consent of PBI, voluntarily make any payment with respect to, or settle or offer
to settle, any such demand for payment, or waive any failure to timely deliver a
written demand for appraisal
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or the taking of any other action by such Dissenting Stockholder as may be
necessary to perfect appraisal rights under the DGCL. Any payments made in
respect of Dissenting Shares shall be made by the Surviving Company.
3.1.5. If any Dissenting Stockholder shall effectively withdraw
or lose (through failure to perfect or otherwise) his right to such payment at
or prior to the Effective Time, such holder's shares of WCBI Common Stock shall
be converted into a right to receive the Merger Consideration in accordance with
the applicable provisions of this Agreement. If such holder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment after the Effective Time (or the Election Deadline, as defined below),
each share of WCBI Common Stock of such holder shall be treated as a
Non-Election Share.
3.1.6. After the Effective Time, shares of WCBI Common Stock
(together with the associated WCBI Stock Purchase Rights) shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
shall thereafter by operation of this section represent only the right to
receive the Merger Consideration and any dividends or distributions with respect
thereto or any dividends or distributions with a record date prior to the
Effective Time that were declared or made by WCBI on such shares of WCBI Common
Stock in accordance with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the Effective Time.
3.1.7. In the event PBI changes (or establishes a record date
for changing) the number of, or provides for the exchange of, shares of PBI
Common Stock issued and outstanding prior to the Effective Time as a result of a
stock split, stock dividend, recapitalization, reclassification, or similar
transaction with respect to the outstanding PBI Common Stock and the record date
therefor shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately and appropriately adjusted; PROVIDED, THAT for the avoidance of
doubt the parties acknowledge that the foregoing is not intended to result in
any such adjustment as a result of share issuances of PBI Common Stock by PBI
under PBI Compensation and Benefit Plans or where such issuance is pursuant to a
widely distributed stock offering for fair market value cash consideration.
3.2. ELECTION PROCEDURES.
3.2.1. Holders of WCBI Common Stock may elect to receive shares
of PBI Common Stock or cash (in either case without interest) in exchange for
their shares of WCBI Common Stock in accordance with the following procedures,
provided that, in the aggregate, and subject to the provisions of Section 3.2.6,
50% of the total number of shares of WCBI Common Stock issued and outstanding at
the Effective Time, including any Dissenting Shares but excluding any Treasury
Stock (the "Stock Conversion Number"), shall be converted into the Stock
Consideration and the remaining outstanding shares of WCBI Common Stock shall be
converted into the Cash Consideration. Shares of WCBI Common Stock as to which a
Cash Election (including, pursuant to a Mixed Election) has been made are
referred to herein as "Cash Election Shares." Shares of WCBI Common Stock as to
which a Stock Election has been made (including, pursuant to a Mixed Election)
are referred to as "Stock Election Shares." Shares of WCBI Common Stock as to
which no election has been made (or as to which an Election Form is not returned
properly completed) are referred to herein as "Non-Election Shares." The
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aggregate number of shares of WCBI Common Stock with respect to which a Stock
Election has been made is referred to herein as the "Stock Election Number." Any
Dissenting Shares shall be deemed to be Cash Election Shares, and the holders
thereof shall in no event receive consideration comprised of PBI Common Stock
with respect to such shares; provided; however, that for purposes of making the
proration calculations provided for in this Section 3.2, only Dissenting Shares
as existing at the Effective Time shall be deemed Cash Election Shares.
3.2.2. An election form and other appropriate and customary
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of such Certificates to the Exchange Agent), in such form as WCBI and PBI shall
mutually agree ("Election Form"), shall be mailed no more than 40 business days
and no less than 20 business days prior to the anticipated Effective Time or on
such earlier date as PBI and WCBI shall mutually agree (the "Mailing Date") to
each holder of record of WCBI Common Stock as of five business days prior to the
Mailing Date (the "Election Form Record Date"). Each Election Form shall permit
such holder, subject to the allocation and election procedures set forth in this
Section 3.2, (i) to elect to receive the Cash Consideration for all of the
shares of WCBI Common Stock held by such holder (a "Cash Election"), in
accordance with Section 3.1.3, (ii) to elect to receive the Stock Consideration
for all of such shares (a "Stock Election"), in accordance with Section 3.1.3,
(iii) elect to receive the Stock Consideration for a part of such holder's WCBI
Common Stock and the Cash consideration for the remaining part of such holder's
WCBI Common Stock (a "Mixed Election"), or (iv) to indicate that such record
holder has no preference as to the receipt of cash or PBI Common Stock for such
shares (a "Non-Election"). A holder of record of shares of WCBI Common Stock who
holds such shares as nominee, trustee or in another representative capacity (a
"Representative") may submit multiple Election Forms, provided that each such
Election Form covers all the shares of WCBI Common Stock held by such
Representative for a particular beneficial owner. Any shares of WCBI Common
Stock with respect to which the holder thereof shall not, as of the Election
Deadline, have made an election by submission to the Exchange Agent of an
effective, properly completed Election Form shall be deemed Non-Election Shares.
All Dissenting Shares shall be deemed shares subject to a Cash Election, and
with respect to such shares the holders thereof shall in no event receive
consideration comprised of PBI Common Stock, subject to Section 3.1.5 hereof;
provided; however, that for purposes of making the proration calculations
provided for in this Section 3.2, only Dissenting Shares as existing at the
Effective Time shall be deemed Cash Election Shares.
3.2.3. To be effective, a properly completed Election Form
shall be submitted to the Exchange Agent on or before 5:00 p.m., New York City
time, on the 25th day following the Mailing Date (or such other time and date as
PBI and WCBI may mutually agree) (the "Election Deadline"); provided, however,
that the Election Deadline may not occur on or after the Closing Date. WCBI
shall make available up to two separate Election Forms, or such additional
Election Forms as PBI may permit, to all persons who become holders (or
beneficial owners) of WCBI Common Stock between the Election Form Record Date
and the close of business on the business day prior to the Election Deadline.
WCBI shall provide to the Exchange Agent all information reasonably necessary
for it to perform as specified herein. An election shall have been properly made
only if the Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall be deemed
properly completed only if accompanied by one or more Certificates (or customary
affidavits and
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indemnification regarding the loss or destruction of such Certificates or the
guaranteed delivery of such Certificates) representing all shares of WCBI Common
Stock covered by such Election Form, together with duly executed transmittal
materials included with the Election Form. If an WCBI stockholder either (i)
does not submit a properly completed Election Form in a timely fashion or (ii)
revokes its Election Form prior to the Election Deadline (without later
submitting a properly completed Election Form prior to the Election Deadline),
the shares of WCBI Common Stock held by such stockholder shall be designated as
Non-Election Shares. Any Election Form may be revoked or changed by the person
submitting such Election Form to the Exchange Agent by written notice to the
Exchange Agent only if such notice of revocation or change is actually received
by the Exchange Agent at or prior to the Election Deadline. PBI shall cause the
Certificate or Certificates relating to any revoked Election Form to be promptly
returned without charge to the person submitting the Election Form to the
Exchange Agent. Subject to the terms of this Agreement and of the Election Form,
the Exchange Agent shall have discretion to determine when any election,
modification or revocation is received and whether any such election,
modification or revocation has been properly made.
3.2.4. If the Stock Election Number exceeds the Stock
Conversion Number, then all Cash Election Shares and all Non-Election Shares
shall be converted into the right to receive the Cash Consideration, and,
subject to Section 3.2.7 hereof, each holder of Stock Election Shares will be
entitled to receive the Stock Consideration only with respect to that number of
Stock Election Shares held by such holder (rounded to the nearest whole share)
equal to the product obtained by multiplying (x) the number of Stock Election
Shares held by such holder by (y) a fraction, the numerator of which is the
Stock Conversion Number and the denominator of which is the Stock Election
Number, with the remaining number of such holder's Stock Election Shares being
converted into the right to receive the Cash Consideration.
3.2.5. If the Stock Election Number is less than the Stock
Conversion Number (the amount by which the Stock Conversion Number exceeds the
Stock Election Number being referred to herein as the "Shortfall Number"), then
all Stock Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A) if the Shortfall Number is less than or equal to the
number of Non-Election Shares, then all Cash Election Shares shall be
converted into the right to receive the Cash Consideration and, subject
to Section 3.2.7 hereof, each holder of Non-Election Shares shall
receive the Stock Consideration in respect of that number of
Non-Election Shares held by such holder (rounded to the nearest whole
share) equal to the product obtained by multiplying (x) the number of
Non-Election Shares held by such holder by (y) a fraction, the numerator
of which is the Shortfall Number and the denominator of which is the
total number of Non-Election Shares, with the remaining number of such
holder's Non-Election Shares being converted into the right to receive
the Cash Consideration; or
(B) if the Shortfall Number exceeds the number of
Non-Election Shares, then all Non-Election Shares shall be converted
into the right to receive the Stock Consideration, and, subject to
Section 3.2.7 hereof, each holder of Cash Election Shares shall receive
the Stock Consideration in respect of that number of Cash Election
Shares
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held by such holder (rounded to the nearest whole share) equal to the
product obtained by multiplying (x) the number of Cash Election Shares
held by such holder by (y) a fraction, the numerator of which is the
amount by which (1) the Shortfall Number exceeds (2) the total number of
Non-Election Shares and the denominator of which is the total number of
Cash Election Shares, with the remaining number of such holder's Cash
Election Shares being converted into the right to receive the Cash
Consideration.
3.2.6. Notwithstanding anything in this Article III to the
contrary, the number of shares of WCBI Common Stock to be converted into the
right to receive the Stock Consideration in the Merger shall not be less than
that number which would cause the ratio of (i) the average of the high and low
prices of PBI Common Stock on the Closing Date times the aggregate number of
shares of PBI Common Stock to be issued as Stock Consideration pursuant to
Section 3.1.3, to (ii) the sum of (A) the amount set forth in the preceding
clause (i), (B) the Aggregate Cash Consideration to be issued pursuant to
Section 3.1.3, (C) the number of Dissenting Shares times the per share Cash
Consideration and (D) any other amounts received by a holder of WCBI stock prior
to the Merger, either in a redemption of WCBI stock or in a distribution with
respect to WCBI stock (but only to the extent such amount is treated as other
property or money received in the exchange for purposes of Code Section 356, or
would be so treated if the WCBI shareholder also had received stock of PBI in
exchange for stock owned by the shareholder in WCBI) to be 42.5% (if the number
of Dissenting Shares is less than 5% of the outstanding shares of WCBI), 43.5%
(if the number of Dissenting Shares is 5% or greater, but less than 10% of the
outstanding shares of WCBI), or 45% (if the number of Dissenting Shares is 10%
or more of the outstanding shares of WCBI). To the extent the application of
this Section 3.2.6 results in the number of shares of WCBI Common Stock to be
converted into the right to receive the Stock Consideration in the Merger being
increased, the number of such shares to be converted into the right to receive
the Cash Consideration will be decreased by an equal number of shares.
Notwithstanding the foregoing, PBI shall not be obligated to issue more than
7,910,000 shares of PBI Common Stock as Merger Consideration.
3.2.7. NO FRACTIONAL SHARES. Notwithstanding anything to the
contrary contained herein, no certificates or scrip representing fractional
shares of PBI Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to PBI Common Stock shall
be payable on or with respect to any fractional share interest, and such
fractional share interests shall not entitle the owner thereof to vote or to any
other rights of a stockholder of PBI. In lieu of the issuance of any such
fractional share, PBI shall pay to each former holder of WCBI Common Stock who
otherwise would be entitled to receive a fractional share of PBI Common Stock,
an amount in cash, rounded to the nearest cent and without interest, equal to
the product of (i) the fraction of a share to which such holder would otherwise
have been entitled and (ii) the average of the daily closing sales prices of a
share of PBI Common Stock as reported on the Nasdaq for the five consecutive
trading days immediately preceding the Closing Date. For purposes of determining
any fractional share interest, all shares of WCBI Common Stock owned by a WCBI
stockholder shall be combined so as to calculate the maximum number of whole
shares of PBI Common Stock issuable to such WCBI stockholder.
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3.3. PROCEDURES FOR EXCHANGE OF WCBI COMMON STOCK.
3.3.1. PBI TO MAKE MERGER CONSIDERATION AVAILABLE. After the
Election Deadline and no later than the Closing Date, PBI shall deposit, or
shall cause to be deposited, with the Exchange Agent for the benefit of the
holders of WCBI Common Stock, for exchange in accordance with this Section 3.3,
certificates representing the shares of PBI Common Stock and an aggregate amount
of cash sufficient to pay the aggregate amount of cash payable pursuant to this
Article III (including the estimated amount of cash to be paid in lieu of
fractional shares of WCBI Common Stock) (such cash and certificates for shares
of PBI Common Stock, together with any dividends or distributions with respect
thereto (without any interest thereon) being hereinafter referred to as the
"Exchange Fund").
3.3.2. EXCHANGE OF CERTIFICATES. PBI shall take all steps
necessary to cause the Exchange Agent, within five (5) business days after the
Effective Time, to mail to each holder of a Certificate or Certificates who has
not previously surrendered such certificates with an Election Form, a form
letter of transmittal for return to the Exchange Agent and instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration and cash in lieu of fractional shares into which the WCBI Common
Stock represented by such Certificates shall have been converted as a result of
the Merger if any. The letter of transmittal (which shall be subject to the
reasonable approval of WCBI) shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent. Upon proper surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with a properly
completed letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration to
which such holder of WCBI common stock shall have become entitled pursuant to
Section 3.1.3 hereof, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on any Cash Consideration or any
cash payable in lieu of fractional shares or any unpaid dividends and
distributions, if any, payable to holders of Certificates.
3.3.3. RIGHTS OF CERTIFICATE HOLDERS AFTER THE EFFECTIVE TIME.
The holder of a Certificate that prior to the Merger represented issued and
outstanding WCBI Common Stock (together with the associated WCBI Stock Purchase
Rights) shall have no rights, after the Effective Time, with respect to such
WCBI Common Stock except to surrender the Certificate in exchange for the Merger
Consideration as provided in this Agreement. No dividends or other distributions
declared after the Effective Time with respect to PBI Common Stock shall be paid
to the holder of any unsurrendered Certificate until the holder thereof shall
surrender such Certificate in accordance with this Section 3.3. After the
surrender of a Certificate in accordance with this Section 3.3, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of PBI Common Stock represented by such
Certificate.
3.3.4. SURRENDER BY PERSONS OTHER THAN RECORD HOLDERS. If the
Person surrendering a Certificate and signing the accompanying letter of
transmittal is not the record holder thereof, then it shall be a condition of
the payment of the Merger Consideration that: (i) such Certificate is properly
endorsed to such Person or is accompanied by appropriate stock powers, in either
case signed exactly as the name of the record holder appears on such
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Certificate, and is otherwise in proper form for transfer, or is accompanied by
appropriate evidence of the authority of the Person surrendering such
Certificate and signing the letter of transmittal to do so on behalf of the
record holder; and (ii) the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other similar 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.
3.3.5. CLOSING OF TRANSFER BOOKS. From and after the Effective
Time, there shall be no transfers on the stock transfer books of WCBI of the
WCBI Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be exchanged for the
Merger Consideration and canceled as provided in this Section 3.3.
3.3.6. RETURN OF EXCHANGE FUND. At any time following the six
(6) month period after the Effective Time, PBI shall be entitled to require the
Exchange Agent to deliver to it any portions of the Exchange Fund which had been
made available to the Exchange Agent and not disbursed to holders of
Certificates (including, without limitation, all interest and other income
received by the Exchange Agent in respect of all funds made available to it),
and thereafter such holders shall be entitled to look to PBI (subject to
abandoned property, escheat and other similar laws) with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither PBI nor the Exchange Agent shall be
liable to any holder of a Certificate for any Merger Consideration delivered in
respect of such Certificate to a public official pursuant to any abandoned
property, escheat or other similar law.
3.3.7. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and the posting by such person of a bond in such amount as
PBI may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof.
3.3.8. WITHHOLDING. PBI or the Exchange Agent will be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement or the transactions contemplated hereby to any holder of WCBI Common
Stock such amounts as PBI (or any Affiliate thereof) or the Exchange Agent are
required to deduct and withhold with respect to the making of such payment under
the Code, or any applicable provision of U.S. federal, state, local or non-U.S.
tax law. To the extent that such amounts are properly withheld by PBI or the
Exchange Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the WCBI Common Stock in respect
of whom such deduction and withholding were made by PBI or the Exchange Agent.
3.4. TREATMENT OF WCBI OPTIONS.
WCBI DISCLOSURE SCHEDULE 3.4 sets forth all of the outstanding WCBI
Options as of the date hereof. At the Effective Time, and pursuant to the terms
of the WCBI Option Plan,
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each WCBI Option that is unexercised and outstanding, whether or not then
exercisable, immediately prior thereto shall, by reason of the Merger, be
cancelled and converted into the right to receive in cash an amount (subject to
required tax withholdings) equal to (i) the excess of (A) the Cash Consideration
per share over (B) the exercise price per share of each such WCBI Option
MULTIPLIED BY (ii) the number of shares of WCBI Common Stock subject to the WCBI
Option (the "Option Payment"). PBI shall make the Option Payments promptly
following the Effective Time (which Option Payments, at the request of PBI,
shall be made by WCBI on the Closing Date) and WCBI shall, in accordance with
Section 8.3 of the WCBI Option Plan, give written notice to the each holder of a
then outstanding WCBI Option that such holder will receive the payment described
herein in exchange for such holders outstanding Options and WCBI shall use its
reasonable best efforts to obtain the written acknowledgment of each such holder
of the receipt of such notice.. Messrs. Kowal, Gentile and Budich have entered
into an agreement as of the date of this Agreement to accept as of the Effective
Time the Option Payment in exchange for the cancellation of all WCBI Options
held by such persons as of the date hereof.
3.5. BANK MERGERS.
WCBI and PBI shall use their reasonable best efforts to cause the
following transactions to occur as soon as practicable after the Effective Time:
(i) the merger of Warwick Savings with and into Provident Bank, with Provident
Bank as the surviving institution, (ii) the merger of TCB with and into
Provident Bank, with Provident Bank as the surviving institution, and (iii) the
merger of Warwick Commercial Bank with and into Provident Municipal Bank, with
Provident Municipal Bank as the surviving institution. In addition, following
the execution and delivery of this Agreement: (x) PBI will cause Provident Bank,
and WCBI will cause Warwick Savings, to execute and deliver a Plan of Bank
Merger substantially in the form attached to this Agreement as Exhibit A; (y)
PBI will cause Provident Bank, and WCBI will cause TCB, to execute and deliver a
Plan of Bank Merger substantially in the form attached to this Agreement as
Exhibit B; and (z) Provident Bank will cause Provident Municipal Bank, and
Warwick Savings will cause Warwick Commercial Bank, to execute and deliver a
Plan of Bank Merger substantially in the form attached to this Agreement as
Exhibit C.
3.6. RESERVATION OF SHARES.
PBI shall reserve for issuance a sufficient number of shares of the PBI
Common Stock for the purpose of issuing shares of PBI Common Stock to the WCBI
stockholders in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WCBI
WCBI represents and warrants to PBI that the statements contained in
this Article IV are correct as of the date of this Agreement and will be correct
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), subject
to the standard set forth in Section 4.1 and except as set forth in the WCBI
DISCLOSURE SCHEDULE delivered by WCBI to PBI on the date hereof, and except as
to any representation or warranty which specifically relates to an earlier date,
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which only need be so correct as of such earlier date. WCBI has made a good
faith effort to ensure that the disclosure on each schedule of the WCBI
DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for
purposes of the WCBI DISCLOSURE SCHEDULE, 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 as and to the extent that it is reasonably clear
on the face of such schedule that such item applies to such other schedule.
References to the Knowledge of WCBI shall include the Knowledge of Warwick
Savings, TCB and Warwick Community Bank.
4.1. STANDARD.
No representation or warranty of WCBI contained in this Article IV shall
be deemed untrue or incorrect, and WCBI shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Article IV, has had or is reasonably expected to have a
Material Adverse Effect, disregarding for these purposes (x) any qualification
or exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material", "materially", "in all material
respects", "Material Adverse Effect" or similar terms or phrases in any such
representation or warranty. The foregoing standard shall not apply to
representations and warranties contained in Sections 4.2 (other than the last
sentence of Sections 4.2.1, 4.2.2 and 4.2.3, and Sections 4.2.6 and 4.2.7), 4.3
(other than the last two sentences of Section 4.3.3), 4.4, 4.13.4, 4.13.6,
4.13.9 and 4.13.11, which shall be deemed untrue, incorrect and breached if they
are not true and correct in all material respects. Provided further, that as to
the representations contained in Sections 4.13.4, 4.13.6, 4.13.9, and 4.13.11,
if there is a breach that relates to an undisclosed payment, expense accrual or
cost in excess of $500,000, such breach shall be considered material.
4.2. ORGANIZATION.
4.2.1. WCBI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the "BHCA"). WCBI has full corporate power and authority to carry on
its business as now conducted. WCBI 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.
4.2.2. Warwick Savings is a New York chartered savings bank
duly organized, validly existing and in good standing under the laws of the
State of New York. The deposits of Warwick Savings 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 by Warwick Savings when due.
Warwick Savings is a member in good standing of the FHLB and owns the requisite
amount of stock therein.
4.2.3. TCB is a New Jersey chartered commercial bank duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The deposits of TCB
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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 by
TCB when due.
4.2.4. Warwick Commercial Bank is a commercial bank organized,
validly existing and in good standing under the laws of the State of New York.
The deposits of Warwick Commercial 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. The business of Warwick Commercial
Bank is limited to accepting deposits of public monies.
4.2.5. WCBI DISCLOSURE SCHEDULE 4.2.5 sets forth each WCBI
Subsidiary. Each WCBI Subsidiary is a corporation, limited liability company or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization.
4.2.6. The respective minute books of WCBI, Warwick Savings and
each other WCBI Subsidiary accurately records, in all material respects, all
material corporate actions of their respective stockholders and boards of
directors (including committees).
4.2.7. Prior to the date of this Agreement, WCBI has made
available to PBI true and correct copies of the certificate of incorporation or
charter and bylaws of WCBI, Warwick Savings and each other WCBI Subsidiary.
4.3. CAPITALIZATION.
4.3.1. The authorized capital stock of WCBI consists of
15,000,000 shares of WCBI Common Stock, of which 4,498,724 shares are
outstanding, validly issued, fully paid and nonassessable and free of preemptive
rights, and 5,000,000 shares of preferred stock, $0.01 par value ("WCBI
Preferred Stock"), none of which are outstanding. There are 2,243,741 shares of
WCBI Common Stock held by WCBI as treasury stock as of the date hereof. Neither
WCBI nor any WCBI Subsidiary has or is bound by any Rights 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 WCBI Common Stock, or any
other security of WCBI or a WCBI Subsidiary or any securities representing the
right to vote, purchase or otherwise receive any shares of WCBI Common Stock or
any other security of WCBI or any WCBI Subsidiary, other than: (i) shares
issuable under the WCBI Stock Benefit Plans; and (ii) the WCBI Stock Purchase
Rights. WCBI DISCLOSURE SCHEDULE 4.3.1 sets forth: the name of each holder of an
award granted under any WCBI Stock Benefit Plan, identifying the nature of the
award; as to options to purchase WCBI Common Stock, the number of shares each
such individual may acquire pursuant to the exercise of such options, the grant,
vesting and expiration dates, and the exercise price relating to the options
held; and the names of each holder of an outstanding restricted stock award, the
number of shares subject to each award, and the grant and vesting dates.
4.3.2. WCBI owns all of the capital stock of Warwick Savings
and TCB, other than director qualifying shares in TCB, free and clear of any
lien or encumbrance. Warwick Savings owns all of the capital stock of Warwick
Commercial Bank, free and clear of any lien or encumbrance. Except for the WCBI
Subsidiaries and as set forth in WCBI DISCLOSURE
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SCHEDULE 4.3.2, WCBI does not possess, directly or indirectly, any material
equity interest in any corporate entity, except for equity interests held in the
investment portfolios of WCBI or any WCBI Subsidiary (which as to any one
issuer, do not exceed 5% of such issuer's outstanding equity securities), equity
interests held by WCBI Subsidiaries in a fiduciary capacity, and equity
interests held in connection with the lending activities of WCBI Subsidiaries,
including stock in the FHLB. Either WCBI or Warwick Savings owns all of the
outstanding shares of capital stock of each WCBI Subsidiary free and clear of
all liens, security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature, except that, in the case of the WSB REIT,
Warwick Savings owns 100% of the common securities and less than 100% of the
preferred securities.
4.3.3. WCBI owns all of the capital stock of Hardenburgh
Abstract Company ("HAC"), free and clear of any lien or encumbrance. HAC has all
insurance carrier agreements (or group of related agreements - the "Insurance
Agreements") necessary for the conduct of the insurance business as presently
operated by it, and has an errors and omissions insurance policy in an amount
and having such coverage as is reasonably appropriate in connection with the
operation of its business as presently conducted. The errors and omissions
policy is in full force and effect, and HAC is in compliance in all material
respects with the Insurance Agreements.
4.3.4. To WCBI's Knowledge, other than the Warwick ESOP and
except as set forth on WCBI DISCLOSURE SCHEDULE 4.3.4, as of the date hereof no
Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act)
of 5% or more of the outstanding shares of WCBI Common Stock.
4.3.5. No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which WCBI's stockholders may vote has been
issued by WCBI and are outstanding.
4.4. AUTHORITY; NO VIOLATION.
4.4.1. WCBI has full corporate power and authority to execute
and deliver this Agreement and, subject to the receipt of the Regulatory
Approvals described in Section 8.3 and the approval of this Agreement by WCBI's
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by WCBI and the completion by WCBI of the
transactions contemplated hereby, up to and including the Merger, have been duly
and validly approved by the Board of Directors of WCBI. This Agreement has been
duly and validly executed and delivered by WCBI, and subject to approval by the
stockholders of WCBI and receipt of the Regulatory Approvals and due and valid
execution and delivery of this Agreement by PBI, constitutes the valid and
binding obligation of WCBI, enforceable against WCBI in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity.
4.4.2. Subject to compliance by PBI with the terms and conditions of
this Agreement, (A) the execution and delivery of this Agreement by WCBI, (B)
subject to receipt of Regulatory Approvals, and WCBI's and PBI's compliance with
any conditions contained therein, and subject to the receipt of the approval of
the stockholders of WCBI, the
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consummation of the transactions contemplated hereby, and (C) compliance by WCBI
with any of the terms or provisions hereof will not (i) conflict with or result
in a breach of any provision of the Certificate of Incorporation or Bylaws of
WCBI or any WCBI Subsidiary or the Certificate of Incorporation and Bylaws of
Warwick Savings; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to WCBI or any WCBI
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 WCBI or Warwick Savings 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 WCBI or
Warwick Savings is a party, or by which they or any of their respective
properties or assets may be bound or affected, except for such violations,
conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either
individually or in the aggregate, will not have a Material Adverse Effect on
WCBI and the WCBI Subsidiaries taken as a whole.
4.5. CONSENTS.
Except for (a) the receipt of the Regulatory Approvals and compliance
with any conditions contained therein, (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (c) the filing with
the SEC of (i) the Merger Registration Statement and (ii) such reports under
Sections 13(a), 13(d), 13(g) and 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby and the
obtaining from the SEC of such orders as may be required in connection
therewith, (d) approval of the listing of PBI Common Stock to be issued in the
Merger on the Nasdaq, (e) such filings and approvals as are required to be made
or obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of PBI Common Stock pursuant to this
Agreement, and (f) the approval of this Agreement by the requisite vote of the
stockholders of WCBI, no consents, waivers or approvals of, or filings or
registrations with, any Governmental Entity or Bank Regulator are necessary,
and, to WCBI's Knowledge, 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 WCBI, and the completion by
WCBI of the Merger or (b) the execution and delivery of the Plans of Bank Merger
and the completion of the Bank Mergers. WCBI has no reason to believe that (i)
any required Regulatory Approvals or other required consents or approvals will
not be received or will include the imposition of any condition or requirement
that could reasonably be expected to result in a Material Adverse Effect on PBI
and its Subsidiaries, taken as a whole, or that (ii) any public body or
authority having jurisdiction over the affairs of WCBI or its subsidiaries, the
consent or approval of which is not required or to which a filing is not
required, will object to the completion of the transactions contemplated by this
Agreement.
4.6. FINANCIAL STATEMENTS.
4.6.1. WCBI has previously made available to PBI the WCBI
Regulatory Reports filed prior to the date hereof. The WCBI Regulatory Reports
have been prepared in all material respects in accordance with applicable
regulatory accounting principles and practices
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throughout the periods covered by such statements, and fairly present in all
material respects, the consolidated financial position, results of operations
and changes in shareholders' equity of WCBI as of and for the periods ended on
the dates thereof, in accordance with applicable regulatory accounting
principles applied on a consistent basis.
4.6.2. WCBI has previously made available to PBI the WCBI
Financial Statements covering periods ended prior to the date hereof. Except as
disclosed in WCBI DISCLOSURE SCHEDULE 4.6, the WCBI Financial Statements 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 position, results of operations and cash flows of WCBI
and the WCBI Subsidiaries on a consolidated basis as of and for the respective
periods ending on the dates thereof, in accordance with GAAP during the periods
involved, except as indicated in the notes thereto, or in the case of unaudited
statements, as permitted by Form 10-Q.
4.6.3. Except as disclosed in WCBI DISCLOSURE SCHEDULE 4.6, at
the date of each balance sheet included in the WCBI Financial Statements or in
the WCBI Regulatory Reports, WCBI did not have any liabilities, obligations or
loss contingencies of any nature (whether absolute, accrued, contingent or
otherwise) of a type required to be reflected in such WCBI Financial Statements
or in the WCBI Regulatory Reports or in the footnotes thereto which are not
fully reflected or reserved against therein or fully disclosed in a footnote
thereto, except for liabilities, obligations and loss contingencies which are
not material individually or in the aggregate, and except for liabilities,
obligations and loss contingencies which are within the subject matter of a
specific representation and warranty herein and subject, in the case of any
unaudited statements, to normal, recurring audit adjustments and the absence of
footnotes.
4.7. TAXES.
Except as set forth in WCBI DISCLOSURE SCHEDULE 4.7, WCBI and the WCBI
Subsidiaries that are at least 80 percent owned by WCBI are members of the same
affiliated group within the meaning of Code Section 1504(a). WCBI has duly filed
all federal, state and material local tax returns required to be filed by or
with respect to WCBI and each Subsidiary of WCBI, taking into account any
extensions (all such returns, to WCBI's Knowledge, being accurate and correct in
all material respects) and has duly paid or 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 WCBI and any Subsidiary of WCBI by any taxing
authority or pursuant to any written tax sharing agreement 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 WCBI
DISCLOSURE SCHEDULE 4.7, as of the date of this Agreement, WCBI has received no
written notice of, and to WCBI's Knowledge there is no audit examination,
deficiency assessment, tax investigation or refund litigation with respect to
any taxes of WCBI or any of its Subsidiaries, and no claim has been made by any
taxing authority in a jurisdiction where WCBI or any of its Subsidiaries do not
file tax returns that WCBI or any such Subsidiary is subject to taxation in that
jurisdiction. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.7, WCBI and its
Subsidiaries have 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. WCBI and each of its Subsidiaries has timely withheld and
paid all taxes
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required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party, and WCBI and each of its Subsidiaries, to WCBI's Knowledge, has timely
complied with all applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the Code and similar applicable state and local
information reporting requirements.
4.8. NO MATERIAL ADVERSE EFFECT.
WCBI and the WCBI Subsidiaries, taken as a whole, have not suffered any
Material Adverse Effect since December 31, 2003 and no event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on WCBI and the WCBI
Subsidiaries, taken as a whole.
4.9. MATERIAL CONTRACTS; LEASES; DEFAULTS.
4.9.1. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.9.1,
neither WCBI nor any WCBI Subsidiary is a party to or subject to: (i) any
employment, consulting or severance contract with any past or present officer,
director or employee of WCBI or any WCBI Subsidiary, except for "at will"
arrangements; (ii) any plan 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 WCBI or any WCBI Subsidiary; (iii) any collective bargaining
agreement with any labor union relating to employees of WCBI or any WCBI
Subsidiary; (iv) any agreement which by its terms limits or affects the payment
of dividends by WCBI or any WCBI Subsidiary; (v) any instrument evidencing or
related to indebtedness for borrowed money in excess of $100,000, whether
directly or indirectly, by way of purchase money obligation, conditional sale,
lease purchase, guaranty or otherwise, in respect of which WCBI or any WCBI
Subsidiary is an obligor to any person, which instrument evidences or relates to
indebtedness other than deposits, FHLB advances with a term to maturity not in
excess of one year, repurchase agreements, bankers' acceptances, 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
material non-customary 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 PBI or any PBI Subsidiary; (vi) any other agreement, written or
oral, which is not terminable without cause on 60 days' notice or less without
material penalty or payment, or that obligates WCBI or any WCBI Subsidiary for
the payment of more than $50,000 annually or for the payment of more than
$150,000 over its remaining term; or (vii) any agreement (other than this
Agreement), contract, arrangement, commitment or understanding (whether written
or oral) that restricts or limits in any material way the conduct of business by
WCBI or any WCBI Subsidiary (it being understood that any non-compete or similar
provision shall be deemed material).
4.9.2. Each real estate lease that will require the consent of
the lessor or its agent as a result of the Merger or the Bank Mergers by virtue
of the terms of any such lease, is listed in WCBI DISCLOSURE SCHEDULE 4.9.2
identifying the section of the lease that contains such prohibition or
restriction. Subject to any consents that may be required as a result of the
transactions contemplated by this Agreement, to its Knowledge, neither WCBI nor
any WCBI Subsidiary is in default in any material respect under any material
contract, agreement,
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commitment, arrangement, lease, insurance policy or other instrument to which it
is a party, by which its assets, business, or operations may be bound or
affected, or under which it or its assets, business, or operations receive
benefits, and there has not occurred any event that, with the lapse of time or
the giving of notice or both, would constitute such a default.
4.9.3. True and correct copies of agreements, contracts,
arrangements and instruments referred to in Section 4.9.1 and 4.9.2 have been
made available to PBI on or before the date hereof, are listed on WCBI
DISCLOSURE SCHEDULE 4.9.1 and are in full force and effect on the date hereof.
Except as set forth in WCBI DISCLOSURE SCHEDULE 4.9.3, no plan, contract,
employment agreement, termination agreement, or similar agreement or arrangement
to which WCBI or any WCBI Subsidiary is a party or under which WCBI or any WCBI
Subsidiary may be liable contains provisions which permit an employee or
independent contractor to terminate it without cause and continue to accrue
future benefits thereunder. Except as set forth in WCBI DISCLOSURE SCHEDULE
4.9.3, 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 WCBI or any WCBI Subsidiary or
upon the occurrence of a subsequent event; or (y) requires WCBI or any WCBI
Subsidiary to provide a benefit in the form of WCBI Common Stock or determined
by reference to the value of WCBI Common Stock.
4.10. OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.
4.10.1. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.10,
WCBI and each WCBI Subsidiary has good and, as to real property, marketable
title to all material assets and properties owned by WCBI or each WCBI
Subsidiary in the conduct of its businesses, whether such assets and properties
are real or personal, tangible or intangible, including assets and property
reflected in the balance sheet contained in the most recent WCBI Financial
Statements 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 sheet), 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 FHLB, inter-bank credit facilities, reverse
repurchase agreements or any transaction by a WCBI Subsidiary acting in a
fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith. WCBI and the WCBI Subsidiaries, as
lessee, have the right under valid and existing leases of real and personal
properties used by WCBI and the WCBI Subsidiaries in the conduct of their
businesses to occupy or use all such properties as presently occupied and used
by each of them. Such existing leases and commitments to lease constitute or
will 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 all material respects in the notes to
the WCBI Financial Statements.
4.10.2. With respect to all material agreements pursuant to
which WCBI or any WCBI Subsidiary has purchased securities subject to an
agreement to resell, if any, WCBI or such WCBI Subsidiary, as the case may be,
has a lien or security interest (which to WCBI's Knowledge is a valid, perfected
first lien) in the securities or other collateral securing the
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repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
4.10.3. WCBI, Warwick Savings, TCB and Warwick Commercial Bank,
and each other Significant Subsidiary of WCBI currently maintain insurance
considered by each of them to be reasonable for their respective operations.
Neither WCBI, Warwick Savings, TCB nor Warwick Commercial Bank, nor any other
Significant Subsidiary of WCBI, has received notice from any insurance carrier
on or before the date hereof 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 WCBI, Warwick Savings, TCB and Warwick Commercial
Bank, or any other Significant Subsidiary of WCBI under such policies. All such
insurance is valid and enforceable and in full force and effect (other than
insurance that expires in accordance with its terms), and within the last three
years WCBI, Warwick Savings, TCB and Warwick Commercial Bank, and each other
Significant Subsidiary of WCBI 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. WCBI
DISCLOSURE SCHEDULE 4.10.3 identifies all policies of insurance maintained by
WCBI, Warwick Savings, TCB and Warwick Commercial Bank and each other
Significant Subsidiary of WCBI as well as the other matters required to be
disclosed under this Section.
4.11. LEGAL PROCEEDINGS.
Except as set forth in WCBI DISCLOSURE SCHEDULE 4.11, neither WCBI nor
any WCBI Subsidiary is a party to any, and there are no pending or, to WCBI's
Knowledge, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature, (i) against WCBI or any WCBI Subsidiary, (ii) to
which WCBI or any WCBI Subsidiary'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 would reasonably be expected to adversely affect
the ability of WCBI to perform under this Agreement, except for any proceeding,
claim, action, investigation or inquiry which, if adversely determined,
individually or in the aggregate, would not be reasonably expected to have a
Material Adverse Effect.
4.12. COMPLIANCE WITH APPLICABLE LAW.
4.12.1. To WCBI's Knowledge, each of WCBI and each WCBI
Subsidiary is in compliance in all material respects with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable to it, its properties, assets and
deposits, its business, and its conduct of business and its relationship with
its employees, including, without limitation, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (the "USA Patriot Act") of 2001, the Equal Credit Opportunity Act, the
Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer
Credit Protection Act, the Fair Credit Reporting Act, the Fair Debt collections
Act, the Fair Housing Act, the Community Reinvestment Act of 1977 ("CRA"), the
Home Mortgage Disclosure Act, and all other laws regulating the operations a
financial
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institution, and neither WCBI nor any WCBI Subsidiary has received any written
notice to the contrary.
4.12.2. Each of WCBI and each WCBI Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Governmental Entities and Bank
Regulators that are required in order to permit it to own or lease its
properties and to conduct its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to the Knowledge of WCBI, no suspension or cancellation of any such
permit, license, certificate, order or approval is threatened or will result
from the consummation of the transactions contemplated by this Agreement,
subject to obtaining the approvals set forth in Section 8.3.
4.12.3. For the period beginning January 1, 2001, neither WCBI
nor any WCBI Subsidiary has received any written notification or, to WCBI's
Knowledge, any other communication from any Bank Regulator (i) asserting that
WCBI or any WCBI Subsidiary is not in material compliance with any of the
statutes, regulations or ordinances which such Bank Regulator enforces; (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to WCBI or any WCBI Subsidiary; (iii) requiring
or threatening to require WCBI or any WCBI Subsidiary, or indicating that WCBI
or any WCBI Subsidiary 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 WCBI or any WCBI Subsidiary, 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 WCBI or any WCBI Subsidiary (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as a "Regulatory Agreement"). Neither WCBI nor any WCBI Subsidiary
has consented to or entered into any Regulatory Agreement that is currently in
effect. The most recent regulatory rating given to Warwick Savings as to
compliance with the CRA is satisfactory or better.
4.12.4. WSB Funding Corp., (the "WSB REIT") (A) was established
in 1999 as a "real estate investment trust" as defined in Section 856(a) of the
Code, (B) has met at all times since January 1999 the requirements of Section
857(a) of the Code, (C) has not relied at any time since January 1999 on Section
856(c)(6) of the Code, (D) has not had at any time since January 1999 any "net
income derived from prohibited transactions" within the meaning of Section
857(b)(6) of the Code and (E) has not issued any stock or securities as part of
a multiple party financing transaction described in IRS Notice 97-21, 1997-11
I.R.B. 2, or Treasury Regulations Section 1.7701(1)-3.
4.13. EMPLOYEE BENEFIT PLANS.
4.13.1. WCBI DISCLOSURE SCHEDULE 4.13.1 includes a list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock
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appreciation, phantom stock, severance, welfare benefit plans, fringe benefit
plans, employment, severance and change in control agreements and all other
material benefit practices, policies and arrangements maintained by WCBI or any
WCBI Subsidiary in which any employee or former employee, consultant or former
consultant or director or former director of WCBI or any WCBI Subsidiary
participates or to which any such employee, consultant or director is a party or
is otherwise entitled to receive benefits (the "Compensation and Benefit
Plans"). Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.1, neither WCBI
nor any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to materially modify, change or renew any
existing Compensation and Benefit Plan (any modification or change that
increases the cost of such plans would be deemed material), except as required
to maintain the qualified status thereof, WCBI has made available to PBI true
and correct copies of the Compensation and Benefit Plans.
4.13.2. Except as disclosed in WCBI DISCLOSURE SCHEDULE 4.13.2,
each Compensation and Benefit Plan has been operated and administered in all
material respects in accordance with its terms and with applicable law,
including, but not limited to, ERISA, the Code, the Securities Act, the Exchange
Act, the Age Discrimination in Employment Act, COBRA, the Health Insurance
Portability and Accountability Act and any regulations or rules promulgated
thereunder, and all material filings, disclosures and notices required by ERISA,
the Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act and any other applicable law have been timely made or any
interest, fines, penalties or other impositions for late filings have been paid
in full. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") AND
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter or prototype plan letter from the IRS, and WCBI
is not aware of any circumstances which are reasonably likely to result in
revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of WCBI, threatened action, suit or claim relating
to any of the Compensation and Benefit Plans (other than routine claims for
benefits). Neither WCBI nor any WCBI Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit Plan
that would reasonably be expected to subject WCBI or any WCBI Subsidiary to an
unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502
of ERISA.
4.13.3. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.3,
no liability, other than PBGC premiums arising in the ordinary course of
business, has been or is expected by WCBI or any of its Subsidiaries to be
incurred with respect to any WCBI Compensation and Benefit Plan which is a
defined benefit plan subject to Title IV of ERISA ("WCBI Defined Benefit Plan"),
or with respect to any "single-employer plan" (as defined in Section 4001(a) of
ERISA) currently or formerly maintained by WCBI or any entity which is
considered one employer with WCBI under Section 4001(b)(1) of ERISA or Section
414 of the Code (an "ERISA Affiliate") (such plan hereinafter referred to as an
"ERISA Affiliate Plan"). Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.3,
no WCBI Defined Benefit 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. Except as set
forth in WCBI DISCLOSURE SCHEDULE 4.13.3, the fair market value of the assets of
each WCBI Defined Benefit Plan exceeds the present value of the benefits
guaranteed under Section 4022 of ERISA under such WCBI Defined Benefit Plan as
of the end of the most
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recent plan year with respect to the respective WCBI Defined Benefit Plan ending
prior to the date hereof for which WCBI has completed actuarial reports,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such WCBI Defined Benefit Plan as of the date hereof;
there is not currently pending with the PBGC any filings with respect to any
reportable event under Section 4043 of ERISA nor has any reportable event
occurred as to which a filing is required and has not been made (other than as
might be required with respect to this Agreement and transactions contemplated
thereby). Neither WCBI nor any ERISA Affiliate has contributed to any
"multi-employer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.3,
neither WCBI nor any of its Subsidiaries has provided, or is required to
provide, security to any WCBI Defined Benefit Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code or has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA. Except as set forth in WCBI DISCLOSURE
SCHEDULE 4.13.3. neither WCBI nor any ERISA Affiliate nor any WCBI Compensation
and Benefit Plan, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which any
of the aforesaid persons or entities would reasonably be expected to be subject
to either a civil liability or penalty pursuant to Section 409, 502(i) or 502(l)
of ERISA or a tax imposed pursuant to Chapter 43 of the Code. To the Knowledge
of WCBI, and except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.3, there is no
pending investigation or enforcement action by any Bank Regulator with respect
to any Compensation and Benefit Plan or any ERISA Affiliate Plan.
4.13.4. Except as disclosed in WCBI DISCLOSURE SCHEDULE 4.13.4,
there are no stock appreciation or similar rights, earned dividends or dividend
equivalents, or shares of restricted stock, outstanding under any of the
Compensation and Benefit Plans or otherwise as of the date hereof and none will
be granted, awarded, or credited after the date hereof.
4.13.5. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.5,
all material contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements to which WCBI or any WCBI Subsidiary is a party or a sponsor have
been timely made, and all anticipated contributions and funding obligations are
accrued on WCBI's consolidated financial statements to the extent required by
GAAP. WCBI and its Subsidiaries have expensed and accrued as a liability the
present value of future benefits under each applicable Compensation and Benefit
Plan for financial reporting purposes to the extent required by GAAP.
4.13.6. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.6,
neither WCBI nor any WCBI Subsidiary has any obligations to provide retiree
health, life insurance, disability insurance, or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.6, there
has been no communication to employees by WCBI or any WCBI Subsidiary that would
reasonably be expected to preclude WCBI (or PBI as successor to WCBI) from
amending or terminating any obligations to its employees or former employees
with respect to retiree health, life insurance, disability insurance, or other
retiree death benefits.
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4.13.7. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.7,
WCBI and its Subsidiaries do not maintain any Compensation and Benefit Plans
covering employees who are not United States residents.
4.13.8. Except as set forth in WCBI DISCLOSURE SCHEDULE 4.13.8,
with respect to each Compensation and Benefit Plan, if applicable, WCBI has
provided or made available to PBI copies of the: (A) trust instruments and
insurance contracts; (B) two most recent Forms 5500 filed with the IRS; (C) two
most recent actuarial report and financial statement; (D) most recent summary
plan description; (E) most recent determination letter issued by the IRS; (F)
any Form 5310 or Form 5330 filed with the IRS within the last two years; and (G)
most recent nondiscrimination tests performed under ERISA and the Code
(including 401(k) and 401(m) tests), if applicable.
4.13.9. Except as disclosed in WCBI DISCLOSURE SCHEDULE 4.13.9,
the consummation of the Merger will not, directly or indirectly (including,
without limitation, as a result of any termination of employment or service at
any time prior to or following the Effective Time) (A) entitle any employee,
consultant or director to any payment or benefit (including severance pay,
change in control benefit, or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits under
any Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
4.13.10. Except as disclosed in WCBI DISCLOSURE SCHEDULE
4.13.10, neither WCBI nor any WCBI Subsidiary maintains any compensation plans,
programs or arrangements under which any payment is reasonably likely to become
non-deductible, in whole or in part, for tax reporting purposes as a result of
the limitations under Section 162(m) of the Code and the regulations issued
thereunder.
4.13.11. Except as set forth in WCBI DISCLOSURE SCHEDULE
4.13.11, the consummation of the Merger and/or the Bank Mergers will not,
directly or indirectly (including without limitation, as a result of any
termination of employment or service at any time prior to or following the
Effective Time), entitle any current or former employee, director or independent
contractor of WCBI or any WCBI Subsidiary to any actual or deemed payment (or
benefit) which would reasonably be expected to constitute a "parachute payment"
(as such term is defined in Section 280G of the Code).
4.14. BROKERS, FINDERS AND FINANCIAL ADVISORS.
Neither WCBI nor any WCBI Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person in connection with the transactions contemplated by this
Agreement except for the retention of Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") by WCBI and the fee payable pursuant thereto. A true and correct copy
of the engagement agreement with Sandler O'Neill, setting forth the fee payable
to Sandler O'Neill for its services rendered to WCBI in connection with the
Merger and transactions contemplated by this Agreement, is attached to WCBI
DISCLOSURE SCHEDULE 4.14.
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4.15. ENVIRONMENTAL MATTERS.
4.15.1. Except as may be set forth in WCBI DISCLOSURE SCHEDULE
4.15, with respect to WCBI and each WCBI Subsidiary:
(A) Each of WCBI and the WCBI Subsidiaries and, to
WCBI's Knowledge; the Participation Facilities and the Loan Properties are, and
have been, in substantial compliance with, and are not liable under, any
Environmental Laws;
(B) WCBI has received no written notice that there
is any suit, claim, action, demand, executive or administrative order,
directive, investigation or proceeding pending and, to WCBI's Knowledge, no such
action is threatened, before any court, governmental agency or other forum
against it or any of the WCBI Subsidiaries or any Participation Facility (x) for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the presence of or release into the
environment of any Materials of Environmental Concern (as defined herein),
whether or not occurring at or on a site owned, leased or operated by it or any
of the WCBI Subsidiaries or any Participation Facility;
(C) WCBI has received no written notice that there
is any suit, claim, action, demand, executive or administrative order,
directive, investigation or proceeding pending and, to WCBI's Knowledge no such
action is threatened, before any court, governmental agency or other forum
relating to or against any Loan Property (or WCBI or any of the WCBI
Subsidiaries in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the presence of or release into the
environment of any Materials of Environmental Concern, whether or not occurring
at or on a site owned, leased or operated by a Loan Property;
(D) To WCBI's Knowledge, the properties currently
owned or operated by WCBI or any WCBI Subsidiary (including, without limitation,
soil, groundwater or surface water on, or under the properties, and buildings
thereon) are not contaminated with and do not otherwise contain any Materials of
Environmental Concern other than as permitted under applicable Environmental
Law;
(E) Neither WCBI nor any WCBI Subsidiary has
received any written 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 it may be in violation
of, or liable under, any Environmental Law;
(F) To WCBI's Knowledge, there are no underground
storage tanks on, in or under any properties owned or operated by WCBI or any of
the WCBI Subsidiaries or any Participation Facility, and to WCBI's Knowledge, no
underground storage tanks have been closed or removed from any properties owned
or operated by WCBI or any of the WCBI Subsidiaries or any Participation
Facility; and
(G) To WCBI's Knowledge, during the period of (s)
WCBI's or any of the WCBI Subsidiaries' ownership or operation of any of their
respective current properties or (t) WCBI's or any of the WCBI Subsidiaries'
participation in the management of any Participation Facility, there has been no
contamination by or release of Materials of Environmental Concerns
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in, on, under or affecting such properties that could reasonably be expected to
result in material liability under the Environmental Laws. To WCBI's Knowledge,
prior to the period of (x) WCBI's or any of the WCBI Subsidiaries' ownership or
operation of any of their respective current properties or (y) WCBI's or any of
the WCBI Subsidiaries' participation in the management of any Participation
Facility, there was no contamination by or release of Materials of Environmental
Concern in, on, under or affecting such properties that could reasonably be
expected to result in material liability under the Environmental Laws.
(H) Neither WCBI nor any other WCBI Subsidiary has
conducted any environmental studies during the past ten years (other than Phase
I studies which did not indicate any contamination of the environment by
Materials of Environmental Concern) with respect to any properties owned or
leased by it or any of its Subsidiaries, or with respect to any Loan Property or
any Participation Facility.
4.15.2. "Loan Property" means any property in which the
applicable party (or a Subsidiary of it) holds a security interest, and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property. "Participation Facility" means any facility
in which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property.
4.16. LOAN PORTFOLIO.
4.16.1. The allowance for loan losses reflected in the notes to
WCBI's audited consolidated statement of financial condition at December 31,
2002 was, and the allowance for loan losses shown in the notes to the unaudited
consolidated financial statements in WCBI's Securities Documents for periods
ending after December 31, 2002 were, or will be, adequate, as of the dates
thereof, under GAAP.
4.16.2. WCBI DISCLOSURE SCHEDULE 4.16.2 sets forth a listing, as
of February 29, 2004, by account, of: (A) all loans (including loan
participations) of WCBI or any other WCBI Subsidiary that have been accelerated
during the past twelve months; (B) all loan commitments or lines of credit of
WCBI or any other WCBI Subsidiary which have been terminated by WCBI or any
other WCBI Subsidiary during the past twelve months by reason of a default or
adverse developments in the condition of the borrower or other events or
circumstances affecting the credit of the borrower; (C) all loans, lines of
credit and loan commitments as to which WCBI or any other WCBI Subsidiary has
given written notice of its intent to terminate during the past twelve months;
(D) with respect to all commercial loans (including commercial real estate
loans), all notification letters and other written communications from WCBI or
any other WCBI Subsidiary to any of their respective borrowers, customers or
other parties during the past twelve months wherein WCBI or any other WCBI
Subsidiary has requested or demanded that actions be taken to correct existing
defaults or facts or circumstances which may become defaults; (E) each borrower,
customer or other party which has notified Warwick Savings, TCB or any other
WCBI Subsidiary during the past twelve months of, or has asserted against
Warwick Savings, TCB or any other WCBI Subsidiary, in each case in writing, any
"lender liability" or similar claim, and, to the knowledge of WCBI or
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any WCBI Subsidiary, each borrower, customer or other party which has given
Warwick Savings, TCB or any other WCBI Subsidiary any oral notification of, or
orally asserted to or against Warwick Savings, TCB or any other WCBI Subsidiary,
any such claim; and (F) all loans, (1) that are contractually past due 90 days
or more in the payment of principal and/or interest, (2) that are on non-accrual
status, (3) that as of February 29, 2004 are classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Watch list" or words of similar import, together
with the principal amount of and accrued and unpaid interest on each such Loan
and the identity of the obligor thereunder, (4) where a reasonable doubt exists
as to the timely future collectability of principal and/or interest, whether or
not interest is still accruing or the loans are less than 90 days past due, (5)
where the interest rate terms have been reduced and/or the maturity dates have
been extended subsequent to the agreement under which the loan was originally
created due to concerns regarding the borrower's ability to pay in accordance
with such initial terms, or (6) where a specific reserve allocation exists in
connection therewith; and (G) all other assets classified by Warwick Savings,
TCB or any other WCBI Subsidiary as real estate acquired through foreclosure or
in lieu of foreclosure, including in-substance foreclosures, and all other
assets currently held that were acquired through foreclosure or in lieu of
foreclosure. DISCLOSURE SCHEDULE 4.16.2 may exclude any individual loan with a
principal outstanding balance of less than $50,000, provided that DISCLOSURE
SCHEDULE 4.16.2 includes, for each category described, the aggregate amount of
individual loans with a principal outstanding balance of less than $50,000 that
has been excluded.
4.16.3. All loans receivable (including discounts) and accrued
interest entered on the books of WCBI and the WCBI Subsidiaries arose out of
bona fide arm's-length transactions, were made for good and valuable
consideration in the ordinary course of WCBI's or the appropriate WCBI
Subsidiary's respective business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be, except as set forth in WCBI DISCLOSURE
SCHEDULE 4.16.3. To the Knowledge of WCBI, the loans, discounts and the accrued
interest reflected on the books of WCBI and the WCBI Subsidiaries are subject to
no defenses, set-offs or counterclaims (including, without limitation, those
afforded by usury or truth-in-lending laws), except as may be provided by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity. Except as set forth in WCBI DISCLOSURE SCHEDULE
4.16.3, all such loans are owned by WCBI or the appropriate WCBI Subsidiary free
and clear of any liens.
4.16.4. The notes and other evidences of indebtedness evidencing
the loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or security instruments relating thereto are, in all
material respects, valid, true and genuine, and what they purport to be.
4.16.5. Warwick Savings has a valid, properly perfected first
lien on the leases and automobiles securing the automobile loans included in the
consumer loan portfolio as set forth in Note 5 to the financial statements
included in WCBI's annual report on Form 10-K for the year ended December 31,
2003 and as set forth in WCBI DISCLOSURE SCHEDULE 4.16.5 (the "Auto Loan
Portfolio").
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4.17. SECURITIES DOCUMENTS.
WCBI has made available to PBI copies of its (i) annual reports on Form
10-K for the years ended December 31, 2003, 2002 and 2001, (ii) quarterly report
on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2003,
and (iii) proxy materials used or for use in connection with its meetings of
stockholders held in 2003, 2002 and 2001. Such reports and proxy materials
complied, at the time filed with the SEC, in all material respects, with the
Securities Laws.
4.18. RELATED PARTY TRANSACTIONS.
Except as described in WCBI's proxy statement (the "WCBI Proxy
Statement") filed with the SEC on April 4, 2003 and distributed in connection
with its annual meeting of stockholders held on May 6, 2003 (which has
previously been made available to PBI), or as set forth in WCBI DISCLOSURE
SCHEDULE 4.18, neither WCBI nor any WCBI Subsidiary is a party to any
transaction (including any loan or other credit accommodation) with any
Affiliate of WCBI or any WCBI Subsidiary. Except as described in the WCBI Proxy
Statement, 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. No loan or credit
accommodation to any Affiliate of WCBI or any WCBI Subsidiary 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 except for
rate modifications pursuant to Warwick Savings' loan modification policy that is
applicable to all Persons. Neither WCBI nor any WCBI Subsidiary has been
notified that principal or 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 by WCBI is
inappropriate.
4.19. DEPOSITS.
None of the deposits of any WCBI Subsidiary is a "brokered deposit" as
defined in 12 C.F.R. Section 337.6(a)(2).
4.20. ANTITAKEOVER PROVISIONS INAPPLICABLE; REQUIRED VOTE.
The Board of Directors of WCBI has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of WCBI) necessary to exempt PBI, the Merger, this Agreement and the
transactions contemplated hereby from Section 203 of the DGCL. The affirmative
vote of a majority of the issued and outstanding shares of WCBI Common Stock is
required to approve this Agreement and the Merger under WCBI's certificate of
incorporation (and no greater voting requirement is applicable by reason of
Article EIGHT of the Certificate of Incorporation) and the DGCL. The Board of
Directors of WCBI has taken such action as is necessary to render the WCBI Stock
Purchase Rights under the WCBI Rights Agreement inapplicable to the Merger and
the Bank Mergers and other transactions contemplated by this Agreement. In
particular and without limitation, pursuant to Section 29 of
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the WCBI Rights Agreement, the Board of Directors of WCBI has determined that
PBI is not an "Acquiring Person" and will not be an "Acquiring Person" upon
consummation of the Merger.
4.21. REGISTRATION OBLIGATIONS.
Neither WCBI nor any WCBI Subsidiary is under any obligation, contingent
or otherwise, which will survive the Effective Time by reason of any agreement
to register any transaction involving any of its securities under the Securities
Act.
4.22. RISK MANAGEMENT INSTRUMENTS.
All material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for WCBI's own account, or for the account of one or more
of WCBI's Subsidiaries or their customers (all of which are set forth in WCBI
DISCLOSURE SCHEDULE 4.22), were in all material respects entered into in
compliance with all applicable laws, rules, regulations and regulatory policies,
and to the Knowledge of WCBI and each WCBI Subsidiary, with counterparties
believed to be financially responsible at the time; and to WCBI's and each WCBI
Subsidiary's Knowledge each of them constitutes the valid and legally binding
obligation of WCBI or such WCBI Subsidiary, enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither WCBI nor any WCBI
Subsidiary, nor, to the Knowledge of WCBI, any other party thereto, is in breach
of any of its obligations under any such agreement or arrangement in any
material respect.
4.23. FAIRNESS OPINION.
WCBI has received an opinion from Sandler O'Neill to the effect that,
subject to the terms, conditions and qualifications set forth therein, as of the
date hereof, the Merger Consideration to be received by the stockholders of WCBI
pursuant to this Agreement is fair to such stockholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
4.24. INTELLECTUAL PROPERTY.
WCBI and each WCBI Subsidiary owns or, to WCBI's Knowledge, possesses
valid and binding licenses and other rights (subject to expirations in
accordance with their terms) to use all patents, copyrights, trade secrets,
trade names, servicemarks and trademarks used in their business, each without
payment, and neither WCBI nor any WCBI Subsidiary has received any notice of
conflict with respect thereto that asserts the rights of others. WCBI and each
Significant Subsidiary of WCBI have performed all the obligations required to be
performed, and are not in default in any respect, under any contract, agreement,
arrangement or commitment relating to any of the foregoing. To the Knowledge of
WCBI, the conduct of the business of WCBI and each WCBI Subsidiary as currently
conducted or proposed to be conducted does not, in any respect, infringe upon,
dilute, misappropriate or otherwise violate any intellectual property owned or
controlled by any third party.
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4.25. TRUST ACCOUNTS.
Neither WCBI, nor any WCBI Subsidiary conducts any trust business.
4.26. LABOR MATTERS.
There are no labor or collective bargaining agreements to which WCBI or
any WCBI Subsidiary is a party. To the knowledge of WCBI, there is no union
organizing effort pending or threatened against WCBI or any WCBI Subsidiary.
There is no labor strike, labor dispute (other than routine employee grievances
that are not related to union employees), work slowdown, stoppage or lockout
pending or, to the knowledge of WCBI, threatened against WCBI or any WCBI
Subsidiary. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of WCBI, threatened against WCBI or any WCBI
Subsidiary (other than routine employee grievances that are not related to union
employees). WCBI and each WCBI Subsidiary is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice.
4.27. WCBI INFORMATION SUPPLIED
The information relating to WCBI and any WCBI Subsidiary to be contained
in the Merger Registration Statement, or in any other document filed with any
Bank Regulator or other Governmental Entity in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Merger Registration Statement will comply
with the provisions of the Exchange Act and the rules and regulations thereunder
and the provisions of the Securities Act and the rules and regulations
thereunder, except that no representation or warranty is made by WCBI with
respect to statements made or incorporated by reference therein based on
information supplied by PBI specifically for inclusion or incorporation by
reference in the Merger Registration Statement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PBI
PBI represents and warrants to WCBI that the statements contained in
this Article V are correct as of the date of this Agreement and will be correct
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 V), subject
to the standard set forth in Section 5.1 and except as set forth in the PBI
DISCLOSURE SCHEDULE delivered by PBI to WCBI on the date hereof, and except to
any representation of warranty which specifically relates to an earlier date,
which only need be so correct as of such earlier date. PBI has made a good faith
effort to ensure that the disclosure on each schedule of the PBI DISCLOSURE
SCHEDULE corresponds to the section referenced herein. However, for purposes of
the PBI DISCLOSURE SCHEDULE, 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 as and to the extent that it is reasonably clear on the face of
such schedule that such item applies to such other schedule. References to the
Knowledge of PBI shall include the Knowledge of Provident Bank.
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5.1. STANDARD.
No representation or warranty of PBI contained in this Article V shall
be deemed untrue or incorrect, and PBI shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Article V, has had or is reasonably expected to have a Material
Adverse Effect, disregarding for these purposes (x) any qualification or
exception for, or reference to, materiality in any such representation or
warranty and (y) any use of the terms "material", "materially", "in all material
respects", "Material Adverse Effect" or similar terms or phrases in any such
representation or warranty. The foregoing standard shall not apply to
representations and warranties contained in Sections 5.2(other than the last
sentence of Sections 5.2.1 and 5.2.2), 5.3 and 5.4, which shall be deemed
untrue, incorrect and breached if they are not true and correct in all material
respects.
5.2. ORGANIZATION.
5.2.1. PBI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
registered as a savings and loan holding company under the HOLA. PBI has full
corporate 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.
5.2.2. Provident Bank is a savings association duly organized,
validly existing and in good standing under federal law. The deposits of
Provident 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. Provident Bank is a member in good standing of the FHLB
and owns the requisite amount of stock therein.
5.2.3. Provident Municipal Bank is a commercial bank organized,
validly existing and in good standing under the laws of the State of New York.
The deposits of Provident Municipal 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.
5.2.4. PBI DISCLOSURE SCHEDULE 5.2.4 sets forth each PBI
Subsidiary. Each PBI Subsidiary (other than Provident Bank) is a corporation or
limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization.
5.2.5. The respective minute books of PBI and each PBI
Subsidiary accurately records, in all material respects, all material corporate
actions of their respective stockholders and boards of directors (including
committees).
5.2.6. Prior to the date of this Agreement, PBI has made
available to WCBI true and correct copies of the certificate of incorporation or
charter and bylaws of PBI and Provident Bank and the PBI Subsidiaries.
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5.3. CAPITALIZATION.
5.3.1. The authorized capital stock of PBI consists of
75,000,000 shares of PBI Common Stock, of which 39,616,761 shares are
outstanding, validly issued, fully paid and nonassessable and free of preemptive
rights, and 10,000,000 shares of preferred stock, $0.01 par value ("PBI
Preferred Stock"), none of which are outstanding. There are no shares of PBI
Common Stock held by PBI as treasury stock. Neither PBI nor any PBI Subsidiary
has or is bound by any Rights 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 PBI Common Stock, or any other security of PBI or any securities
representing the right to vote, purchase or otherwise receive any shares of PBI
Common Stock or any other security of PBI, other than shares issuable under the
PBI Stock Benefit Plans.
5.3.2. PBI owns all of the capital stock of Provident Bank free
and clear of any lien or encumbrance. Either PBI or Provident Bank owns all of
the outstanding shares of capital stock of each PBI Subsidiary free and clear of
all liens, security interests, pledges, charges, encumbrances, agreements and
restrictions of any kind or nature, except that in the case of Provident REIT,
Inc., Provident Bank owns 100% of the common stock and less than 100% of the
preferred stock.
5.3.3. Except as set forth in PBI DISCLOSURE SCHEDULE 5.3.3, to
the Knowledge of PBI, no Person is the beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of the outstanding shares of PBI Common
Stock.
5.3.4. No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which PBI's stockholders may vote has been
issued by PBI and are outstanding.
5.4. AUTHORITY; NO VIOLATION.
5.4.1. PBI has full corporate power and authority to execute
and deliver this Agreement and, subject to receipt of the required Regulatory
Approvals, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by PBI and the completion by PBI of the transactions
contemplated hereby, up to and including the Merger, have been duly and validly
approved by the Board of Directors of PBI, and no other corporate proceedings on
the part of PBI are necessary to complete the transactions contemplated hereby,
up to and including the Merger. This Agreement has been duly and validly
executed and delivered by PBI, and subject to the receipt of the Regulatory
Approvals described in Section 8.3 hereof and approval by the stockholders of
WCBI and due and valid execution and delivery of this Agreement by WCBI,
constitutes the valid and binding obligations of PBI, enforceable against PBI in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity.
5.4.2. (A) The execution and delivery of this Agreement by PBI,
(B) subject to receipt of the Regulatory Approvals, and compliance by WCBI and
PBI with any conditions contained therein, and subject to the receipt of the
approval of the stockholders of WCBI, the
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consummation of the transactions contemplated hereby, and (C) compliance by PBI
with any of the terms or provisions hereof will not (i) conflict with or result
in a breach of any provision of the certificate of incorporation or bylaws of
PBI or any PBI Subsidiary or the charter and bylaws of Provident Bank; (ii)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to PBI or any PBI 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 PBI,
Provident Bank or any PBI Subsidiary 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 any of them is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or defaults
under clause (ii) or (iii) hereof which, either individually or in the
aggregate, will not have a Material Adverse Effect on PBI and the PBI
Subsidiaries taken as a whole.
5.5. CONSENTS.
Except for the receipt of the Regulatory Approvals and compliance with
any conditions contained therein, and the approval of this Agreement by the
requisite vote of the stockholders of WCBI, no consents, waivers or approvals
of, or filings or registrations with, any Governmental Entity or Bank Regulator
are necessary, and, to the Knowledge of PBI, 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 PBI and the
completion by PBI of the Merger or (b) the execution and delivery of the Plans
of Bank Merger and the completion of the Bank Mergers. PBI has no reason to
believe that (i) any Regulatory Approvals or other required consents or
approvals will not be received or will include the imposition of any condition
or requirement that could reasonably be expected by PBI to result in a Material
Adverse Effect on PBI and its Subsidiaries, taken as a whole, or that (ii) any
public body or authority having jurisdiction over affairs of PBI, the consent or
approval of which is not required or to which a filing is not required, will
object to the completion of the transactions contemplated by this Agreement.
5.6. FINANCIAL STATEMENTS.
5.6.1. PBI has previously made available to WCBI the PBI
Financial Statements covering periods ended prior to the date hereof. The PBI
Financial Statements 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 position, results of operations
and cash flows of PBI and the PBI Subsidiaries on a consolidated basis as of and
for the respective periods ending on the dates thereof, in accordance with GAAP
during the periods involved, except as indicated in the notes thereto, or in the
case of unaudited statements, as permitted by Form 10-Q.
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5.6.2. At the date of each balance sheet included in the PBI
Financial Statements, PBI did not have any liabilities, obligations or loss
contingencies of any nature (whether absolute, accrued, contingent or otherwise)
of a type required to be reflected in such PBI Financial Statements or in the
footnotes thereto which are not fully reflected or reserved against therein or
fully disclosed in a footnote thereto, except for liabilities, obligations and
loss contingencies which are not material individually or in the aggregate or
which are incurred in the ordinary course of business, consistent with past
practice, and except for liabilities, obligations and loss contingencies which
are within the subject matter of a specific representation and warranty herein
and subject, in the case of any unaudited statements, to normal, recurring audit
adjustments and the absence of footnotes.
5.7. TAXES.
PBI and the PBI Subsidiaries that are at least 80 percent owned by PBI
are members of the same affiliated group within the meaning of Code Section
1504(a). PBI has duly filed all federal, state and material local tax returns
required to be filed by or with respect to PBI and each Subsidiary of PBI,
taking into account any extensions (all such returns, to the Knowledge of PBI,
being accurate and correct in all material respects) and has duly paid or 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 PBI and any
Subsidiary of PBI by any taxing authority or pursuant to any written tax sharing
agreement 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.
As of the date of this Agreement, PBI has received no notice of, and to the
Knowledge of PBI, there is no audit examination, deficiency assessment, tax
investigation or refund litigation with respect to any taxes of PBI or any of
its Subsidiaries, and no claim has been made by any taxing authority in a
jurisdiction where PBI or any of its Subsidiaries do not file tax returns that
PBI or any such Subsidiary is subject to taxation in that jurisdiction. Except
as set forth in PBI DISCLOSURE SCHEDULE 5.7, PBI and its Subsidiaries have 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. PBI and each
of its Subsidiaries has timely 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, stockholder or other third party, and PBI and
each of its Subsidiaries, to the Knowledge of PBI, has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the Code and similar applicable state and local information
reporting requirements.
5.8. NO MATERIAL ADVERSE EFFECT.
Except as disclosed in PBI's Securities Documents filed on or prior to
the date hereof, PBI and the PBI Subsidiaries, taken as a whole, have not
suffered any Material Adverse Effect since September 30, 2003 and no event has
occurred or circumstance arisen since that date which, in the aggregate, has had
or is reasonably likely to have a Material Adverse Effect on PBI and the PBI
Subsidiaries, taken as a whole.
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5.9. OWNERSHIP OF PROPERTY; INSURANCE COVERAGE.
5.9.1. PBI and each Significant Subsidiary of PBI has good and,
as to real property, marketable title to all material assets and properties
owned by PBI or each Significant Subsidiary of PBI in the conduct of its
businesses, whether such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance sheets
contained in the PBI Financial Statements 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 FHLB,
inter-bank credit facilities, or any transaction by a Significant Subsidiary of
PBI acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet
delinquent or which are being contested in good faith. PBI and the Significant
Subsidiaries of PBI, as lessee, have the right under valid and subsisting leases
of real and personal properties used by PBI and the Significant Subsidiaries of
PBI in the conduct of their businesses to occupy or use all such properties as
presently occupied and used by each of them.
5.9.2. PBI and each Significant Subsidiary of PBI currently
maintain insurance considered by PBI to be reasonable for their respective
operations. Neither PBI nor any Significant Subsidiary of PBI has received
notice from any insurance carrier on or before the date hereof that such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated. All such insurance is valid and enforceable and in full force and
effect (other than insurance that expires in accordance with its terms), and
within the last three years PBI and each Significant Subsidiary of PBI 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 except as disclosed in PBI
DISCLOSURE SCHEDULE 5.9.2.
5.10. LEGAL PROCEEDINGS.
Except as disclosed in PBI DISCLOSURE SCHEDULE 5.10, neither PBI nor any
PBI Subsidiary is a party to any, and there are no pending or, to the Knowledge
of PBI, threatened legal, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental investigations
or inquiries of any nature (i) against PBI or any PBI Subsidiary, (ii) to which
PBI or any PBI Subsidiary'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 would reasonably be expected to adversely affect the ability of
PBI to perform under this Agreement, except for any proceeding, claim, action,
investigation or inquiry which, if adversely determined, individually or in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
5.11. COMPLIANCE WITH APPLICABLE LAW.
5.11.1. To the Knowledge of PBI, each of PBI and each PBI
Subsidiary is in compliance in all material respects with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable to it, its properties,
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assets and deposits, its business, and its conduct of business and its
relationship with its employees, including, without limitation, the USA Patriot
Act, the Equal Credit Opportunity Act, the Fair Housing Act, the CRA, the Home
Mortgage Disclosure Act, and all other applicable fair lending laws and other
laws relating to discriminatory business practices, and neither PBI nor any PBI
Subsidiary has received any written notice to the contrary.
5.11.2. Each of PBI and each PBI Subsidiary has all material
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all Bank Regulators that are
required in order to permit it to own or lease its properties and to conduct its
business as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Knowledge of PBI, no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from the
consummation of the transactions contemplated by this Agreement, subject to
obtaining the approvals set forth in Section 8.3.
5.11.3. For the period beginning January 1, 2001, and except as
set forth in PBI DISCLOSURE SCHEDULE 5.11.3, neither PBI nor any PBI Subsidiary
has received any written notification or, to the Knowledge of PBI, any other
communication from any Bank Regulator (i) asserting that PBI or any PBI
Subsidiary is not in material compliance with any of the statutes, regulations
or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any
license, franchise, permit or governmental authorization which is material to
PBI or any PBI Subsidiary; (iii) requiring or threatening to require PBI or any
PBI Subsidiary, or indicating that PBI or any PBI Subsidiary 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 PBI or any PBI Subsidiary,
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 manner the operations of PBI or any PBI 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 PBI nor any PBI
Subsidiary has consented to or entered into any currently effective Regulatory
Agreement. The most recent regulatory rating given to Provident Bank as to
compliance with the CRA is satisfactory or better.
5.11.4. Provident REIT, Inc. (the "PBI REIT") (A) was
established in 1999 as a "real estate investment trust" as defined in Section
856(a) of the Code, (B) has met at all times since January 1999 the requirements
of Section 857(a) of the Code, (C) has not relied at any time since January 1999
on Section 856(c)(6) of the Code, (D) has not had at any time since January 1999
any "net income derived from prohibited transactions" within the meaning of
Section 857(b)(6) of the Code and (E) has not issued any stock or securities as
part of a multiple party financing transaction described in IRS Notice 97-21,
1997-11 I.R.B. 2, or Treasury Regulations Section 1.7701(1)-3.
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5.12. EMPLOYEE BENEFIT PLANS.
5.12.1. PBI DISCLOSURE SCHEDULE 5.12.1 includes a list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, stock appreciation, phantom stock,
severance, welfare benefit plans, fringe benefit plans, employment, severance
and change in control agreements and all other benefit practices, policies and
arrangements maintained by PBI or any PBI Subsidiary and in which employees in
general may participate (the "PBI Compensation and Benefit Plans"). Each PBI
Compensation and Benefit Plan has been administered in form and in operation, in
all material respects with its terms and all applicable requirements of law and
no notice has been issued by any Governmental Authority questioning or
challenging such compliance. With respect to each of the PBI Compensation and
Benefit Plans, if applicable, PBI has provided or made available to WCBI copies
of the most recent summary plan description (or other such summary of the terms
of the plan).
5.12.2. To the Knowledge of PBI and except as disclosed in PBI
DISCLOSURE SCHEDULE 5.12.2, each PBI Compensation and Benefit Plan has been
operated and administered in all material respects in accordance with its terms
and with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
COBRA, the Health Insurance Portability and Accountability Act and any
regulations or rules promulgated thereunder, and all material filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other applicable
law have been timely made or any interest, fines, penalties or other impositions
for late filings have been paid in full. Each PBI Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") AND which is intended to be qualified under Section
401(a) of the Code has received or has requested and expects to receive a
favorable determination letter or prototype plan letter from the IRS, and PBI is
not aware of any circumstances which are reasonably likely to result in
revocation of any such favorable determination letter. There is no material
pending or, to the Knowledge of PBI, threatened action, suit or claim relating
to any of the PBI Compensation and Benefit Plans (other than routine claims for
benefits). Neither PBI nor any PBI Subsidiary has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit Plan
that would reasonably be expected to subject PBI or any PBI Subsidiary to an
unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502
of ERISA.
5.12.3. No liability, other than PBGC premiums arising in the
ordinary course of business, has been or is expected by PBI or any of its
Subsidiaries to be incurred with respect to any PBI Compensation and Benefit
Plan which is a defined benefit plan subject to Title IV of ERISA ("PBI Defined
Benefit Plan"), or with respect to any "single-employer plan" (as defined in
Section 4001(a) of ERISA) currently or formerly maintained by PBI or any entity
which is considered one employer with PBI under Section 4001(b)(1) of ERISA or
Section 414 of the Code (an "ERISA Affiliate") (such plan hereinafter referred
to as an "ERISA Affiliate Plan"). No PBI Defined Benefit Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA.
To the Knowledge of PBI, except as set forth in PBI DISCLOSURE SCHEDULE 5.12.3,
no PBI Defined Benefit 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
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of the most recent plan year ending prior to the date hereof. Except as set
forth in PBI DISCLOSURE SCHEDULE 5.12.3, the fair market value of the assets of
each PBI Defined Benefit Plan exceeds the present value of the benefits
guaranteed under Section 4022 of ERISA under such PBI Defined Benefit Plan as of
the end of the most recent plan year with respect to the respective PBI Defined
Benefit Plan ending prior to the date hereof for which PBI has completed
actuarial reports, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such PBI Defined Benefit 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 PBI Defined Benefit Plan within the 12-month
period ending on the date hereof. Neither PBI nor any ERISA Affiliate has
contributed to any "multi-employer plan," as defined in Section 3(37) of ERISA,
on or after September 26, 1980. Neither PBI nor any of its Subsidiaries has
provided, or is required to provide, security to any PBI Defined Benefit Plan or
to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Code or has taken any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result in the imposition of a lien
under Section 412(n) of the Code or pursuant to ERISA. Neither PBI, its
Subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan," as defined in Section 3(37) of ERISA, on or after January 1, 1998. To the
Knowledge of PBI, there is no pending investigation or enforcement action by any
Bank Regulator with respect to any PBI Compensation and Benefit Plan or any
ERISA Affiliate Plan.
5.12.4. All material contributions required to be made under the
terms of any PBI Compensation and Benefit Plan or ERISA Affiliate Plan or any
employee benefit arrangements to which PBI or any PBI Subsidiary is a party or a
sponsor have been timely made, and all anticipated contributions and funding
obligations are accrued on PBI's consolidated financial statements to the extent
required by GAAP. PBI and its Subsidiaries have expensed and accrued as a
liability the present value of future benefits under each applicable PBI
Compensation and Benefit Plan for financial reporting purposes to the extent
required by GAAP.
5.12.5. Except as set forth in PBI DISCLOSURE SCHEDULE 5.12.5,
neither PBI nor any PBI Subsidiary has any obligations to provide retiree
health, life insurance, disability insurance, or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code.
5.13. ENVIRONMENTAL MATTERS.
5.13.1. To the Knowledge of PBI, neither the conduct nor
operation of their business nor any condition of any property currently or
previously owned or operated by any of them (including, without limitation, in a
fiduciary or agency capacity), or on which any of them holds a lien, results or
resulted in a violation of any Environmental Laws that is reasonably likely to
impose a material liability (including a material remediation obligation) upon
PBI or any of PBI Subsidiary. To the Knowledge of PBI, no condition has existed
or event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely to result in
any material liability to PBI or any PBI Subsidiary by reason of any
Environmental Laws. Neither PBI nor any PBI Subsidiary has received any written
notice from any Person that PBI or any PBI Subsidiary or the operation or
condition of any property ever owned, operated, or held as collateral or in a
fiduciary capacity by any of them are currently in
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violation of or otherwise are alleged to have financial exposure under any
Environmental Laws or relating to Materials of Environmental Concern (including,
but not limited to, responsibility (or potential responsibility) for the cleanup
or other remediation of any Materials of Environmental Concern at, on, beneath,
or originating from any such property) for which a material liability is
reasonably likely to be imposed upon PBI or any PBI Subsidiary.
5.13.2. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to the
PBI's Knowledge, threatened, before any court, governmental agency or other
forum against PBI or any PBI Subsidiary (x) for alleged noncompliance (including
by any predecessor) with, or liability under, any Environmental Law or (y)
relating to the presence of or release into the environment of any Materials of
Environmental Concern (as defined herein), whether or not occurring at or on a
site owned, leased or operated by any of the PBI.
5.14. LOAN PORTFOLIO.
5.14.1. The allowance for loan losses reflected in PBI's audited
consolidated statement of condition at September 30, 2003 was, and the allowance
for loan losses shown on the balance sheets in PBI's Securities Documents for
periods ending after September 30, 2003 were or will be, adequate, as of the
dates thereof, under GAAP.
5.14.2. PBI DISCLOSURE SCHEDULE 5.14.2 sets forth a listing, as
of the most recently available date, all loans of PBI and any PBI Subsidiary (1)
that are contractually past due 90 days or more in the payment of principal
and/or interest, (2) that are on non-accrual status, (3) that as of the date of
this Agreement are classified as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Watch
list" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the obligor
thereunder, (4) where a reasonable doubt exists as to the timely future
collectability of principal and/or interest, whether or not interest is still
accruing or the loans are less than 90 days past due, (5) where the interest
rate terms have been reduced and/or the maturity dates have been extended
subsequent to the agreement under which the loan was originally created due to
concerns regarding the borrower's ability to pay in accordance with such initial
terms, or (6) where a specific reserve allocation exists in connection
therewith; and all assets classified by PBI or any PBI Subsidiary as real estate
acquired through foreclosure or in lieu of foreclosure, including in-substance
foreclosures, and all other assets currently held that were acquired through
foreclosure or in lieu of foreclosure. DISCLOSURE SCHEDULE 5.14.2 may exclude
any individual loan with a principal outstanding balance of less than $100,000.
5.14.3. All loans receivable (including discounts) and accrued
interest entered on the books of PBI and each PBI Subsidiary arose out of bona
fide arm's-length transactions, were made for good and valuable consideration in
the ordinary course of business, and the notes or other evidences of
indebtedness with respect to such loans (including discounts) are true and
genuine and are what they purport to be.
5.14.4. The notes and other evidences of indebtedness evidencing
the loans described above, and all pledges, mortgages, deeds of trust and other
collateral documents or
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security instruments relating thereto are, in all material respects, valid, true
and genuine, and what they purport to be.
5.15. SECURITIES DOCUMENTS.
PBI has made available to WCBI copies of its (i) annual report on Form
10-K for the year ended September 30, 2003, (ii) quarterly report on Form 10-Q
for the quarter ended December 31, 2003 and (iii) proxy materials used or for
use in connection with its meeting of stockholders held in 2003. Such reports
and such proxy materials complied, at the time filed with the SEC, in all
material respects, with the Securities Laws.
5.16. DEPOSITS.
None of the deposits of any PBI Subsidiary is a "brokered deposit" as
defined in 12 C.F.R. Section 337.6(a)(2).
5.17. ANTITAKEOVER PROVISIONS INAPPLICABLE.
The transactions contemplated by this Agreement are not subject to the
requirements of any "moratorium," "control share," "fair price," "affiliate
transactions," "business combination" or other antitakeover laws and regulations
of any state, including the provisions of Section 203 of the DGCL applicable to
PBI or any PBI Subsidiary.
5.18. RISK MANAGEMENT INSTRUMENTS.
All material interest rate swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management arrangements,
whether entered into for PBI's own account, or for the account of one or more of
PBI's Subsidiaries or their customers, were in all material respects entered
into in compliance with all applicable laws, rules, regulations and regulatory
policies, and to the Knowledge of PBI and each PBI Subsidiary, with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of PBI or one of its
Subsidiaries, enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles), and is in full
force and effect. Neither PBI nor any PBI Subsidiary, nor to the Knowledge of
PBI any other party thereto, is in breach of any of its obligations under any
such agreement or arrangement in any material respect.
5.19. BROKERS, FINDERS AND FINANCIAL ADVISORS.
Neither PBI nor any PBI Subsidiary, nor any of their respective
officers, directors, employees or agents, has employed any broker, finder or
financial advisor in connection with the transactions contemplated by this
Agreement, or incurred any liability or commitment for any fees or commissions
to any such person in connection with the transactions contemplated by this
Agreement, except for the retention of RP Financial, LC. and Ryan Beck & Co. by
PBI and the fee payable pursuant thereto.
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5.20. PBI COMMON STOCK
The shares of PBI Common Stock to be issued pursuant to this Agreement,
when issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and subject to no
preemptive rights.
5.21. MATERIAL CONTRACTS; LEASES, DEFAULTS.
Neither PBI nor any PBI Subsidiary is a party to or subject to: (i) any
collective bargaining agreement with any labor union relating to employees of
PBI or any PBI Subsidiary; nor (ii) any agreement which by its terms limits the
payment of dividends by PBI or any PBI Subsidiary.
5.22. PBI INFORMATION SUPPLIED.
The information relating to PBI and any PBI Subsidiary to be contained
in the Merger Registration Statement, or in any other document filed with any
Bank Regulator or other Governmental Entity in connection herewith, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. The Merger Registration Statement will comply
with the provisions of the Exchange Act and the rules and regulations thereunder
and the provisions of the Securities Act and the rules and regulations
thereunder, except that no representation or warranty is made by PBI with
respect to statements made or incorporated by reference therein based on
information supplied by WCBI specifically for inclusion or incorporation by
reference in the Merger Registration Statement.
5.23. FAIRNESS OPINION
FNFG has received an opinion from Ryan Beck to the effect that, subject
to the terms, conditions and qualifications set forth therein, as of the date
hereof, the Merger Consideration to be paid by FNFG to the stockholders of HRB
pursuant to this Agreement is fair to FNFG stockholders from a financial point
of view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
ARTICLE VI
COVENANTS OF WCBI
6.1. CONDUCT OF BUSINESS.
6.1.1. AFFIRMATIVE COVENANTS. During the period from the date
of this Agreement to the Effective Time, except with the written consent of PBI,
which consent will not be unreasonably withheld, WCBI will, and it will cause
each WCBI Subsidiary to: operate its business only in the usual, regular and
ordinary course of business; use reasonable efforts to preserve intact its
business organization and assets and maintain its rights and franchises; and
voluntarily take no action which would: (i) adversely affect the ability of the
parties to obtain the Regulatory Approvals or materially increase the period of
time necessary to obtain the Regulatory Approvals, or (ii) adversely affect its
ability to perform its covenants and agreements under this Agreement.
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6.1.2. NEGATIVE COVENANTS. WCBI agrees that from the date of
this Agreement to the Effective Time, except as otherwise specifically permitted
or required by this Agreement, set forth in WCBI DISCLOSURE SCHEDULE 6.1.2, or
consented to by PBI in writing (which consent shall not be unreasonably
withheld), it will not, and it will cause each of the WCBI Subsidiaries not to:
(A) change or waive any provision of its Certificate
of Incorporation, Charter or Bylaws, except as required by law;
(B) change the number of authorized or issued shares
of its capital stock, issue any shares of WCBI Common Stock that are held as
Treasury Shares as of the date of this Agreement, 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, make any grant or award
under the WCBI Stock Benefit Plans, 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 (i) WCBI may issue shares of WCBI Common
Stock upon the valid exercise, in accordance with the information set forth in
WCBI DISCLOSURE SCHEDULE 4.3.1, of presently outstanding WCBI Options issued
under the WCBI Stock Benefit Plans, (ii) in consultation with PBI, and to the
extent practicable prior to the Effective Time and permitted under applicable
law, WCBI shall re-purchase (in the open market) a number of shares of WCBI
Common Stock (x) equal to the number of shares of WCBI Common Stock issued
pursuant to the valid exercise of WCBI Options as permitted in (i) above, and
(y) for the payment of the annual retainer of any non-employee director of WCBI
and Warwick Savings which is required to be paid quarterly in shares of WCBI
Common Stock, (iii) WCBI may continue to pay its regular quarterly cash dividend
of $0.15 per share with payment and record dates consistent with past practice
(provided the declaration of the last quarterly dividend by WCBI prior to the
Effective Time and the payment thereof shall be coordinated with PBI so that
holders of WCBI Common Stock do not receive dividends on both WCBI Common Stock
and PBI Common Stock received in the Merger in respect of such quarter or fail
to receive a dividend on at least one of the WCBI Common Stock or PBI Common
Stock received in the Merger in respect of such quarter), (iv) any WCBI
Subsidiary may pay dividends to its parent company (as permitted under
applicable law or regulations), and the WSB REIT may continue to pay dividends
on the shares of preferred stock and common stock issued and outstanding as of
the date hereof, at the rate in effect as of the date hereof and at such times
consistent with past practice; and (v) a special cash dividend on WCBI Common
Stock in accordance with the terms of Schedule 6.1.2(B).
(C) enter into, amend in any material respect or
terminate any material contract or agreement (including without limitation any
settlement agreement with respect to litigation) except in the ordinary course
of business;
(D) other than as set forth in WCBI DISCLOSURE
SCHEDULE 6.1.2(D), make application for the opening or closing of any, or open
or close any, branch or automated banking facility;
(E) grant or agree to pay any bonus, severance or
termination to, or enter into, renew or amend any employment agreement,
severance agreement and/or
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supplemental executive agreement with, or increase in any manner the
compensation or fringe benefits of, any of its directors, officers or employees,
except (i) as may be required pursuant to commitments existing on the date
hereof and set forth on WCBI DISCLOSURE SCHEDULES 4.9.1 and 4.13.1 or as
required pursuant to Section 7.8 of this Agreement, (ii) as to non-management
employees, merit pay increases in the ordinary course of business consistent
with past practices, (iii) with respect to severance or termination pay or
benefits, pursuant to terminations of employment in the ordinary course of
business consistent with past practice and (iv) as otherwise contemplated by
this Agreement. Neither WCBI nor any WCBI Subsidiary shall hire or promote any
employee to a rank having a title of vice president or other more senior rank or
hire any new employee at an annual rate of compensation in excess of $50,000,
provided that a WCBI Subsidiary may hire at-will, non-officer employees to fill
vacancies that may from time to time arise in the ordinary course of business.
In addition, WCBI may agree to pay employees of WCBI or any WCBI Subsidiary, who
are identified by WCBI and agreed to by PBI, a retention bonus in an individual
amount to be agreed to by the parties and in an aggregate amount not to exceed
$125,000.
(F) enter into or, except as may be required by law,
materially 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, except (i) as may be required by applicable law, (ii) pursuant to
commitments in effect as of the date hereof as set forth in WCBI DISCLOSURE
SCHEDULE 6.12(F) or (iii) as otherwise contemplated by this Agreement;
(G) merge or consolidate WCBI or any WCBI Subsidiary
with any other corporation; sell or lease all or any substantial portion of the
assets or business of WCBI or any WCBI Subsidiary; make any acquisition of all
or any substantial portion of the business or assets of any other Person 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 WCBI, or any WCBI Subsidiary, and any other Person; enter
into a purchase and assumption transaction with respect to deposits and
liabilities; incur deposit liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice; permit the revocation
or surrender by any WCBI Subsidiary 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;
(H) except as permitted by Section 6.12(B) sell or
otherwise dispose of the capital stock of WCBI or sell or otherwise dispose of
any asset of WCBI or of any WCBI Subsidiary other than in the ordinary course of
business consistent with past practice; except for transactions with the FHLB,
subject any asset of WCBI or of any WCBI Subsidiary to a lien, pledge, security
interest or other encumbrance (other than in connection with deposits,
repurchase agreements, bankers acceptances, "treasury tax and loan" accounts
established in the ordinary course of business, including pledges in connection
with acceptance of governmental deposits, 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
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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;
(I) take any action which would be reasonably
expected to result in any of the representations and warranties of WCBI set
forth in this Agreement becoming untrue as of any date after the date hereof or
in any of the conditions set forth in Article IX hereof not being satisfied,
except in each case as may be required by applicable law;
(J) change its 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 Bank Regulator responsible for
regulating WCBI or Warwick Savings or regulatory accounting principles;
(K) 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 WCBI or any WCBI Subsidiary is a
party, other than in the ordinary course of business, consistent with past
practice;
(L) purchase any equity securities, or purchase any
securities other than securities (i) rated "A" or higher by either Standard &
Poor's Ratings Services or Moody's Investors Service, (ii) having a face amount
of not more than $5,000,000, (iii) with a weighted average life of not more than
five years and (iv) otherwise in the ordinary course of business consistent with
past practice;
(M) except as specifically provided below, and
except for commitments issued prior to the date of this Agreement which have not
yet expired and which have been disclosed on the WCBI DISCLOSURE SCHEDULE
6.1.2(M), and the renewal of existing lines of credit, make any new loan or
other credit facility commitment (including without limitation, loan
participations, lines of credit and letters of credit) to any borrower or group
of affiliated borrowers in excess of $500,000 in the aggregate for unsecured
loans and $1,500,000 in the aggregate for secured loans. In addition, the
following require the prior consent of PBI: a residential loan of $400,000 or
greater (except for residential loans sold as to which there is an agreement to
sell on a non-recourse basis); an unsecured loan of $350,000 or greater; a
secured commercial business loan of $750,000 or greater; and a commercial real
estate loan of $2,500,000 or greater; or purchase, invest in or originate any
finance lease or any loan secured by a lease of personal property;
(N) except as set forth on the WCBI DISCLOSURE
SCHEDULE 6.1.2(N), enter into, renew, extend or modify any other transaction
(other than a deposit transaction) with any Affiliate;
(O) enter into any futures contract, option,
interest rate caps, interest rate floors, interest rate exchange agreement or
other agreement or 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;
(P) except for the execution of this Agreement, and
actions taken or which will be taken in accordance with this Agreement and
performance thereunder, take any
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action that would give rise to a right of payment to any individual under any
employment agreement;
(Q) make any change in policies in existence on the
date of this Agreement with regard to: the extension of credit, or the
establishment of reserves with respect to the possible loss thereon or the
charge off of losses incurred thereon; investments; asset/liability management;
or other material banking policies in any material respect except as may be
required by changes in applicable law or regulations, GAAP or regulatory
accounting principles or by a Bank Regulator;
(R) except for the execution of this Agreement, and
the transactions contemplated therein, take any action that would give rise to
an acceleration of the right to payment to any individual under any WCBI
Compensation and Benefit Plan;
(S) except as set forth in WCBI DISCLOSURE SCHEDULE
6.1.2(S), make any capital expenditures in excess of $50,000 individually or
$100,000 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;
(T) except as set forth in WCBI DISCLOSURE SCHEDULE
6.1.2(T), 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;
(U) sell any participation interest in any loan
(other than sales of loans secured by one- to four-family real estate that are
consistent with past practice) unless Provident Bank has been given the first
opportunity and a reasonable time to purchase any loan participation being sold;
(V) undertake or enter into 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 WCBI
or any WCBI Subsidiary of more than $100,000 annually, or containing any
financial commitment extending beyond 12 months from the date hereof;
(W) pay, discharge, settle or compromise any claim,
action, litigation, arbitration or proceeding, other than any such payment,
discharge, settlement or compromise in the ordinary course of business
consistent with past practice that involves solely money damages in the amount
not in excess of $50,000 individually or $100,000 in the aggregate, and that
does not create negative precedent for other pending or potential claims,
actions, litigation, arbitration or proceedings;
(X) foreclose upon or take a deed or title to any
commercial real estate without first conducting a Phase I environmental
assessment of the property or foreclose upon any commercial real estate if such
environmental assessment indicates the presence of a Materials of Environmental
Concern;
(Y) purchase or sell any mortgage loan servicing
rights other than in the ordinary course of business consistent with past
practice;
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(Z) issue any broadly distributed communication of a
general nature to employees (including general communications relating to
benefits and compensation) without prior consultation with PBI and, to the
extent relating to post-Closing employment, benefit or compensation information
without the prior consent of PBI (which shall not be unreasonably withheld) or
issue any broadly distributed communication of a general nature to customers
without the prior approval of PBI (which shall not be unreasonably withheld),
except as required by law or for communications in the ordinary course of
business consistent with past practice that do not relate to the Merger or other
transactions contemplated hereby; or
(AA) agree to do any of the foregoing.
6.2. CURRENT INFORMATION.
6.2.1. During the period from the date of this Agreement to the
Effective Time, WCBI will cause one or more of its representatives to confer
with representatives of PBI and report the general status of its ongoing
operations at such times as PBI may reasonably request. WCBI will promptly
notify PBI of any material change in the normal course of its business or in the
operation of its properties and, to the extent permitted by applicable law, of
any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving WCBI or any WCBI Subsidiary. Without limiting
the foregoing, senior officers of PBI and WCBI shall meet on a reasonably
regular basis (expected to be at least monthly) to review the financial and
operational affairs of WCBI and its Subsidiaries, in accordance with applicable
law, and WCBI shall give due consideration to PBI's input on such matters, with
the understanding that, notwithstanding any other provision contained in this
Agreement, neither PBI nor any PBI Subsidiary shall under any circumstance be
permitted to exercise control of WCBI or any WCBI Subsidiary prior to the
Effective Time.
6.2.2. Warwick Savings and Provident Bank shall meet on a
regular basis to discuss and plan for the conversion of data processing and
related electronic informational systems of Warwick Savings, TCB and Warwick
Commercial Bank to those used by Provident Bank and Provident Municipal Bank,
which planning shall include, but not be limited to, discussion of the possible
termination by Warwick Savings, TCB and Warwick Commercial Bank of third-party
service provider arrangements effective at the Effective Time or at a date
thereafter, non-renewal of personal property leases and software licenses used
by Warwick Savings, TCB and Warwick Commercial Bank 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 neither Warwick Savings,
TCB nor Warwick Commercial Bank shall be obligated to take any such action prior
to the Effective Time and, unless Warwick Savings, TCB and Warwick Commercial
Bank otherwise agrees and provided it is permitted by applicable law, no
conversion shall take place prior to the Effective Time. In the event that
Warwick Savings, TCB and Warwick Commercial Bank take, at the request of
Provident Bank, any action relative to third parties to facilitate the
conversion that results in the imposition of any termination fees or charges,
Provident Bank shall indemnify Warwick Savings, TCB and Warwick Commercial Bank
for any such fees and charges, and the costs of reversing the conversion
process, if for any
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reason the Merger is not consummated for any reason other than a breach of this
Agreement by WCBI, or a termination of this Agreement under Section 11.1.8 or
11.1.9.
6.2.3. WCBI shall provide PBI, within fifteen (15) business
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 (iv) and impaired loans. On a monthly basis, WCBI shall provide PBI with a
schedule of all loan approvals, which schedule shall indicate the loan amount,
loan type and other material features of the loan.
6.2.4. WCBI shall promptly inform PBI upon receiving notice of
any legal, administrative, arbitration or other proceedings, demands, notices,
audits or investigations (by any federal, state or local commission, agency or
board) relating to the alleged liability of WCBI or any WCBI Subsidiary under
any labor or employment law.
6.3. ACCESS TO PROPERTIES AND RECORDS.
Subject to Section 12.1 hereof, WCBI shall permit PBI reasonable access
upon reasonable notice to its properties and those of the WCBI Subsidiaries, and
shall disclose and make available to PBI during normal business hours all of its
books, papers and records relating to the assets, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' (other
than minutes that discuss any of the transactions contemplated by this Agreement
or any other subject matter WCBI reasonably determines should be treated as
confidential) and stockholders' meetings, organizational documents, Bylaws,
material contracts and agreements, filings with any regulatory authority,
litigation files, plans affecting employees, and any other business activities
or prospects in which PBI may have a reasonable interest; provided, however,
that WCBI shall not be required to take any action that would provide access to
or to disclose information where such access or disclosure, in WCBI's reasonable
judgment, would interfere with the normal conduct of WCBI's business or would
violate or prejudice the rights or business interests or confidences of any
customer or other person or would result in the waiver by it of the privilege
protecting communications between it and any of its counsel or contravene any
applicable law. WCBI shall provide and shall request its auditors to provide PBI
with such historical financial information regarding it (and related audit
reports and consents) as PBI may reasonably request for Securities Law
disclosure purposes. PBI shall use commercially reasonable efforts to minimize
any interference with WCBI's regular business operations during any such access
to WCBI's property, books and records. WCBI and each WCBI Subsidiary shall
permit PBI, at its expense, to cause a "phase I environmental audit" and a
"phase II environmental audit" to be performed at any physical location owned
or, to the extent permitted under the applicable lease agreement, occupied by
WCBI or any WCBI Subsidiary.
6.4. FINANCIAL AND OTHER STATEMENTS.
6.4.1. Promptly upon receipt thereof, WCBI will furnish to PBI
copies of each annual, interim or special audit of the books of WCBI and the
WCBI Subsidiaries made by its
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independent accountants and copies of all internal control reports submitted to
WCBI by such accountants in connection with each annual, interim or special
audit of the books of WCBI and the WCBI Subsidiaries made by such accountants.
6.4.2. As soon as reasonably available, but in no event later
than five business days after such documents are filed with the SEC, WCBI will
deliver to PBI the Securities Documents filed by it with the SEC under the
Securities Laws other than those Securities Documents that are available
publicly through the SEC's EDGAR data base. Within 25 days after the end of each
month, WCBI will deliver to PBI a consolidated balance sheet and a consolidated
statement of operations, without related notes, for such month prepared in
accordance with current financial reporting practices, as well as a month-end
and year to date comparison to budget.
6.4.3. With reasonable promptness, WCBI will furnish to PBI
such additional financial data that WCBI possesses and as PBI may reasonably
request, including without limitation, detailed monthly financial statements and
loan reports.
6.5. MAINTENANCE OF INSURANCE.
WCBI shall use commercially reasonable efforts to maintain, and to cause
the WCBI Subsidiaries to 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, with such coverage and in such
amounts not less than that currently maintained by WCBI and the WCBI
Subsidiaries and set forth in WCBI DISCLOSURE SCHEDULE 4.10.3. WCBI will
promptly inform PBI if WCBI or any WCBI Subsidiary receives notice from an
insurance carrier that (i) an insurance policy will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
any policy of insurance will be substantially increased.
6.6. DISCLOSURE SUPPLEMENTS.
From time to time prior to the Effective Time, WCBI will promptly
supplement or amend the WCBI DISCLOSURE SCHEDULE delivered in connection
herewith with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such WCBI DISCLOSURE SCHEDULE or which is necessary to
correct any information in such WCBI DISCLOSURE SCHEDULE which has been rendered
materially inaccurate thereby. No supplement or amendment to such WCBI
DISCLOSURE SCHEDULE shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article IX. Notwithstanding anything
to the contrary contained herein, no failure to provide any such supplement or
amendment to the WCBI DISCLOSURE SCHEDULE shall constitute the failure of any
condition set forth in Article IX to be satisfied unless the underlying breach
or inaccuracy would individually or collectively result in the failure of a
condition set forth in Article IX to be satisfied.
6.7. CONSENTS AND APPROVALS OF THIRD PARTIES.
WCBI and Warwick Savings shall use all commercially reasonable efforts,
and shall cause each WCBI Subsidiary to use all commercially reasonable efforts
to obtain as soon as
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practicable all consents and approvals of any other persons necessary or
desirable for the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, WCBI shall utilize
the services of a professional proxy soliciting firm to provide assistance in
obtaining the stockholder vote required to be obtained by it hereunder.
6.8. ALL REASONABLE EFFORTS.
Subject to the terms and conditions herein provided, WCBI agrees to use,
and agrees to cause Warwick Savings to use, all commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Prior to the Effective Time, the Board of Directors of WCBI will amend the WCBI
Rights Agreement to provide for its termination effective upon the Effective
Time.
6.9. FAILURE TO FULFILL CONDITIONS.
In the event that WCBI or Warwick Savings determines that a condition to
its obligation to complete the Merger cannot be fulfilled and that it will not
waive that condition, it will promptly notify PBI.
6.10. NO SOLICITATION.
From and after the date hereof until the termination of this Agreement,
neither WCBI, nor any WCBI Subsidiary, nor any of their respective officers,
directors, employees, representatives, agents and affiliates (including, without
limitation, any investment banker, attorney or accountant retained by WCBI or
any of the WCBI Subsidiaries), will, directly or indirectly, initiate, solicit
or knowingly encourage (including by way of furnishing non-public information or
assistance) 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
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 WCBI shall notify PBI
orally (within one business day) and in writing (as promptly as practicable) of
all of the relevant details relating to all inquiries and proposals which it or
any of its Subsidiaries or any such officer, director or employee, or, to WCBI's
Knowledge, investment banker, financial advisor, attorney, accountant or other
representative of WCBI may receive relating to any of such matters, PROVIDED,
HOWEVER, that nothing contained in this Section 6.10 shall prohibit the Board of
Directors of WCBI from (i) complying with its disclosure obligations under
federal or state law; or (ii) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
Acquisition Proposal, if, and only to the extent that, (A) the Board of
Directors of WCBI determines in good faith (after consultation with its
financial and legal advisors), taking into account all legal, financial and
regulatory aspects of the proposal and the Person making the proposal, that such
proposal, if consummated, is reasonably likely to result in a transaction more
favorable to WCBI's stockholders from a financial point of view than the Merger;
(B) the Board
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of Directors of WCBI determines in good faith (after consultation with its
financial and legal advisors) that the failure to furnish information to or
enter into discussions with such Person would likely cause the Board of
Directors to breach its fiduciary duties to stockholders under applicable law;
(C) such Acquisition Proposal was not solicited by WCBI and did not otherwise
result from a breach of this Section 6.10 by WCBI (such proposal that satisfies
clauses (A), (B) and (C) being referred to herein as a "Superior Proposal"); (D)
WCBI promptly notifies PBI of such inquiries, proposals or offers received by,
any such information requested from, or any such discussions or negotiations
sought to be initiated or continued with WCBI or any of its representatives
indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any inquiries, proposals or offers, and
receives from such Person an executed confidentiality agreement in form and
substance identical in all material respects to the confidentiality agreements
that WCBI and PBI entered into; and (E) the WCBI Stockholders Meeting has not
occurred. For purposes of this Agreement, "Acquisition Proposal" shall mean any
proposal or offer as to any of the following (other than the transactions
contemplated hereunder) involving WCBI or any of its Subsidiaries: (i) any
merger, consolidation, share exchange, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 25% or more of the assets of WCBI and the WCBI
Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or more of the
outstanding shares of capital stock of WCBI or the filing of a registration
statement under the Securities Act 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.
6.11. RESERVES AND MERGER-RELATED COSTS.
WCBI agrees to consult with PBI with respect to its loan, litigation and
real estate valuation policies and practices (including loan classifications and
levels of reserves). PBI and WCBI shall also consult with respect to the
character, amount and timing of restructuring charges to be taken by each of
them in connection with the transactions contemplated hereby and shall take such
charges as PBI shall reasonably request, provided that no such actions need be
effected until PBI shall have irrevocably certified to WCBI that all conditions
set forth in Article IX to the obligation of any PBI to consummate the
transactions contemplated hereby (other than the delivery of certificates to PBI
by officers of the WCBI) have been satisfied or, where legally permissible,
waived.
6.12. BOARD OF DIRECTORS AND COMMITTEE MEETINGS.
WCBI and the WCBI Subsidiaries shall permit representatives (no more
than two (2)) of PBI to attend any meeting of their Board of Directors and of
the Loan and Executive Committees thereof as an observer (the "Observer"),
provided that neither WCBI nor any WCBI Subsidiary shall be required to permit
the Observer to remain present during any confidential discussion of this
Agreement and the transactions contemplated hereby or any third party proposal
to acquire control of WCBI or during any other matter that the respective Board
of Directors has been advised of by counsel that such attendance by the Observer
may violate a confidentiality obligation or fiduciary duty or any legal,
regulatory or Nasdaq requirements.
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ARTICLE VII
COVENANTS OF PBI
7.1. CONDUCT OF BUSINESS.
During the period from the date of this Agreement to the Effective Time,
except with the written consent of WCBI, which consent will not be unreasonably
withheld, PBI will, and it will cause each PBI Subsidiary to: conduct its
business only in the usual, regular and ordinary course consistent with past
practices; use reasonable efforts to preserve intact its business organization
and assets and maintain its rights and franchises; and voluntarily take no
action that would: (i) adversely affect the ability of the parties to obtain the
Regulatory Approvals or materially increase the period of time necessary to
obtain such approvals; (ii) adversely affect its ability to perform its
covenants and agreements under this Agreement; (iii) result in the
representations and warranties contained in Article V of this Agreement not
being true and correct on the date of this Agreement or at any future date on or
prior to the Closing Date or in any of the conditions set forth in Article IX
hereof not being satisfied; (iv) change or waive any provision of its
Certificate of Incorporation or Charter, except as required by law; (v) 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
Bank Regulator responsible for regulating PBI or Provident Bank or regulatory
accounting principles; or (vi) declare, set aside or pay any extraordinary
dividend or other distribution in respect of its capital stock.
7.2. CURRENT INFORMATION AND CONSULTATION.
During the period from the date of this Agreement to the Effective Time,
PBI will cause one or more of its representatives to confer with representatives
of WCBI and report the general status of its financial condition, operations and
business and matters relating to the completion of the transactions contemplated
hereby, at such times as WCBI may reasonably request. PBI will promptly notify
WCBI, to the extent permitted by applicable law, of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of material litigation involving
PBI and any PBI Subsidiary. PBI will consult with WCBI in advance with respect
to any proposed material change in the business or operations of PBI and with
respect to any material strategic activities of PBI. PBI shall be reasonably
responsive to requests by WCBI for access to such information and personnel
regarding PBI and its Subsidiaries as may be reasonably necessary for WCBI to
confirm that the representations and warranties of PBI contained herein are true
and correct and that the covenants of PBI contained herein have been performed
in all material respects; provided, however, that PBI shall not be required to
take any action that would provide access to or to disclose information where
such access or disclosure, in PBI's reasonable judgment, would interfere with
the normal conduct of PBI's business or would violate or prejudice the rights or
business interests or confidences of any customer or other person or would
result in the waiver by it of the privilege protecting communications between it
and any of its counsel.
7.3. FINANCIAL AND OTHER STATEMENTS.
As soon as reasonably available, but in no event later than the date
such documents are filed with the SEC, PBI will deliver to WCBI the Securities
Documents filed by it with the SEC
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under the Securities Laws other than those Securities Documents that are
available publicly though the SEC's EDGAR data base. PBI will advise WCBI
promptly of the receipt of any examination report of any Bank Regulator with
respect to the condition or activities of PBI or any of the PBI Subsidiaries.
7.4. DISCLOSURE SUPPLEMENTS.
From time to time prior to the Effective Time, PBI will promptly
supplement or amend the PBI DISCLOSURE SCHEDULE delivered in connection herewith
with respect to any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth or
described in such PBI DISCLOSURE SCHEDULE or which is necessary to correct any
information in such PBI DISCLOSURE SCHEDULE which has been rendered inaccurate
thereby. No supplement or amendment to such PBI DISCLOSURE SCHEDULE shall have
any effect for the purpose of determining satisfaction of the conditions set
forth in Article IX. Notwithstanding anything to the contrary contained herein,
no failure to provide any such supplement or amendment to the PBI DISCLOSURE
SCHEDULE shall constitute the failure of any condition set forth in Article IX
to be satisfied unless the underlying breach or inaccuracy would individually or
collectively result in the failure of a condition set forth in Article IX to be
satisfied.
7.5. CONSENTS AND APPROVALS OF THIRD PARTIES.
PBI and Provident Bank shall use all commercially reasonable efforts to
obtain as soon as practicable all consents and approvals of any other Persons
necessary or desirable for the consummation of the transactions contemplated by
this Agreement.
7.6. ALL REASONABLE EFFORTS.
Subject to the terms and conditions herein provided, PBI agrees to use
and agrees to cause Provident Bank to use all commercially reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
7.7. FAILURE TO FULFILL CONDITIONS.
In the event that PBI determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify WCBI.
7.8. EMPLOYEE BENEFITS.
7.8.1. PBI agrees that it will honor all Compensation and
Benefit Plans in accordance with their terms as in effect immediately before the
Effective Time, subject to any amendment or termination thereof that may be
permitted by such terms. Following the Effective Time, PBI shall provide
Continuing Employees (as defined below in Section 7.8.8) with compensation and
benefits that are, in the aggregate, substantially similar to the compensation
and benefits provided to similarly situated PBI employees (as of the date any
such compensation or benefit is provided). All WCBI Employees who become
participants in an PBI Compensation
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and Benefit Plan shall, for purposes of determining eligibility for and for any
applicable vesting periods of such employee benefits only (and not for benefit
accrual purposes) be given credit for service as an employee of WCBI or any WCBI
Subsidiary or any predecessor thereto prior to the Effective Time, provided,
however, that credit for prior service shall not be given under the PBI ESOP,
under the PBI retiree health plan, or to the extent that providing such credit
would result in a duplication of benefits; and provided further, that credit for
prior service with WCBI or a WCBI Subsidiary shall also be given for benefit
accrual purposes under any vacation policy or plan of PBI or under any severance
compensation plan for employees that PBI has or may adopt in the future. This
Agreement shall not be construed to limit the ability of PBI or Provident Bank
to terminate the employment of any employee or to review employee benefits
programs from time to time and to make such changes as they deem appropriate,
subject to the terms and conditions of such programs.
7.8.2. Subject to the occurrence of the Effective Time, the
Warwick ESOP shall be terminated immediately prior to and effective as of the
Effective Time (all shares held by the ESOP shall be converted into the right to
receive the Merger Consideration, as elected by the ESOP participants), all
outstanding Warwick ESOP indebtedness shall be repaid, and the balance of the
shares and any other assets remaining in the Loan Suspense Account (as such term
is defined in the Warwick ESOP) shall be allocated and distributed to Warwick
ESOP participants (subject to the receipt of a favorable determination letter
from the IRS), as provided for in the Warwick ESOP and unless otherwise required
by applicable law. Prior to the Effective Time, WCBI, and following the
Effective Time, PBI shall use their respective best efforts in good faith to
obtain such favorable determination letter (including, but not limited to,
making such changes to the ESOP and the proposed allocations as may be requested
by the IRS as a condition to its issuance of a favorable determination letter).
WCBI and following the Effective Time, PBI, will adopt such amendments to the
Warwick ESOP as may be reasonably required by the IRS as a condition to granting
such favorable determination letter on termination. Prior to or as of the
Effective Time, PBI shall take all action necessary (including the amendment of
PBI's 401(k) Plan) to permit participants in the Warwick ESOP who are Continuing
Employees to roll any eligible rollover distributions from the Warwick ESOP into
PBI's 401(k) Plan. Neither WCBI, nor following the Effective Time, PBI shall
make any distribution from the Warwick ESOP except as may be required by
applicable law until receipt of such favorable determination letter. In the case
of a conflict between the terms of this Section and the terms of the Warwick
ESOP, the terms of the Warwick ESOP shall control, however, in the event of any
such conflict, WCBI before the Merger, and PBI, after the Merger, shall use
their best efforts to cause the ESOP to be amended to conform to the
requirements of this Section.
7.8.3. WCBI shall cause Warwick Savings to amend the Benefit
Restoration Plan of Warwick Savings ("BRP") prior to the Effective Time to cause
the benefits payable to participants (other than former participants who are
receiving distributions under the BRP at the time of execution of this
Agreement) therein (or in the case of the benefits payable under Section 3.1(b),
the actuarial equivalent present value of such benefit as determined in
accordance with the BRP) to be paid in a lump sum distribution immediately prior
to the Effective Time and to cause the BRP to terminate upon the payment of such
amounts, provided, however, that benefits payable to former participants shall
continue to be paid in accordance with the existing distribution schedule). WCBI
shall use its best efforts to cause the participants receiving
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payments thereunder to execute acknowledgments that the amounts paid thereunder
are in full satisfaction of their claims to benefits under the BRP.
7.8.4. .Effective upon the execution of this Agreement, or as
promptly thereafter as is practicable, WCBI shall take such action as is
necessary to cause the WCBI and Warwick Savings Voluntary Retainer Stock and
Deferred Compensation Plan for Directors ("Deferred Compensation Plan") to be
amended so that (i) each Stock Unit credited to a director's Stock Unit Account
under the Deferred Compensation Plan shall be converted, at the Effective Time,
into a number of full and partial Cash Units under the director's Cash Unit
Account equal to the Cash Consideration. Prior to the Effective Time, WCBI and
Warwick Savings shall take such action as is necessary to terminate the Deferred
Compensation Plan and to distribute the amounts held thereunder in a lump sum
payment to the directors participating therein.
7.8.5. Prior to the Effective Time, WCBI shall accelerate the
vesting of any outstanding shares of restricted stock awarded under the WCBI
Recognition and Retention Plan ("WCBI RRP") so that such shares shall vest and
be distributed from the trust established to hold such shares immediately prior
to the Effective Time. Prior to the Effective Time, any shares held by the trust
under the WCBI RRP which were not awarded to eligible employees, eligible
directors or eligible directors emeritus prior to the execution of this
Agreement, shall be cancelled and the WCBI RRP shall be terminated, effective as
of the Effective Time.
7.8.6. In the event of any termination of any WCBI or Warwick
Savings health plan or consolidation of any such plan with any PBI or Provident
Bank health plan or to the extent that an employee of WCBI or any WCBI
Subsidiary who continues employment with PBI or a PBI Subsidiary ("Continuing
Employee" participates in a PBI health plan, PBI shall make available to such
Continuing Employees and their dependents employer-provided health coverage
(including medical, dental, pharmaceutical and/or vision benefits) on the same
basis as it provides such coverage to PBI employees. Unless a Continuing
Employee affirmatively terminates coverage under a WCBI health plan prior to the
time that such Continuing Employee becomes eligible to participate in the PBI
health plan, no coverage of any of the Continuing Employees or their dependents
shall terminate under any of the WCBI health plans prior to the time such
Continuing Employees and their dependents become eligible to participate in the
health plans, programs and benefits common to all employees of PBI and their
dependents. In the event of a termination or consolidation of any WCBI health
plan, terminated WCBI employees and qualified beneficiaries will have the right
to continued coverage under group health plans of PBI in accordance with Code
Section 4980B(f), consistent with the provisions below. In the event of any
termination of any WCBI health plan, or consolidation of any WCBI health plan
with any PBI health plan, any coverage limitation under the PBI health plan due
to any pre-existing condition shall be waived by the PBI health plan to the
degree that such condition was covered by the WCBI health plan and such
condition would otherwise have been covered by the PBI health plan in the
absence of such coverage limitation. All WCBI Employees who cease participating
in an WCBI health plan and become participants in a comparable PBI health plan
shall receive credit for any co-payment and deductibles paid under WCBI's health
plan for purposes of satisfying any applicable deductible or out-of-pocket
requirements under the PBI health plan, upon substantiation, in a form
satisfactory to PBI that such co-payment and/or deductible has been satisfied.
PBI shall assume the retiree health plan of WCBI and each WCBI Subsidiary and
shall have the same rights and obligations thereunder.
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7.9. DIRECTORS AND OFFICERS INDEMNIFICATION AND INSURANCE.
7.9.1. PBI shall maintain, or shall cause Provident Bank to
maintain, in effect for six years following the Effective Time, the current
directors' and officers' liability insurance policies maintained by WCBI
(provided, that PBI 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 Effective Time;
provided, however, that in no event shall PBI be required to expend pursuant to
this Section 7.9.1 more than 250% of the annual cost currently expended by WCBI
with respect to such insurance (the "Maximum Amount"); PROVIDED, FURTHER, that
if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, PBI shall maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount. In connection with the foregoing,
WCBI agrees in order for PBI to fulfill its agreement to provide directors and
officers liability insurance policies for six years to provide such insurer or
substitute insurer with such reasonable and customary representations as such
insurer may request with respect to the reporting of any prior claims.
7.9.2. In addition to Section 7.9.1, PBI shall indemnify,
defend and hold harmless each person who is now, or who has been at any time
before the date hereof or who becomes before the Effective Time, an officer or
director of WCBI or an WCBI Subsidiary (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid in settlement of or in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, or administrative (each a "Claim"), in which an Indemnified
Party is, or is threatened to be made, a party or witness 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, officer or employee of WCBI or a WCBI Subsidiary if such Claim
pertains to any matter of fact arising, existing or occurring before the
Effective Time (including, without limitation, the Merger and the other
transactions contemplated hereby), regardless of whether such Claim is asserted
or claimed before, or after, the Effective Time (the "Indemnified Liabilities"),
to the fullest extent permitted under Delaware (to the extent not prohibited by
federal law), and WCBI's Certificate of Incorporation and Bylaws. PBI shall pay
expenses in advance of the final disposition of any such action or proceeding to
each Indemnified Party to the fullest extent permitted by Delaware (to the
extent not prohibited by federal law) upon receipt of an undertaking to repay
such advance payments if the Indemnified Party shall be adjudicated or
determined to be not entitled to indemnification in the manner set forth below.
Any Indemnified Party wishing to claim indemnification under this Section 7.9.2
upon learning of any Claim, shall notify PBI (but the failure so to notify PBI
shall not relieve it from any liability which it may have under this Section
7.9.2, except to the extent such failure materially prejudices PBI) and shall,
if required by applicable law, deliver to PBI the undertaking referred to in the
previous sentence.
7.9.3. In the event that either PBI or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving bank or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of PBI shall assume the obligations set forth in this
Section 7.9.
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7.9.4. The obligations of PBI provided under this Section 7.9
are intended to be enforceable against PBI directly by the Indemnified Parties
and their heirs and representatives and shall be binding on all respective
successors and permitted assigns of PBI. PBI shall pay all reasonable costs,
including attorneys' fees, that may be incurred by any Indemnified Party in
successfully enforcing the indemnity and other obligations provided for in this
Section 7.9 to the fullest extent permitted under applicable law. The rights of
each Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
7.10. STOCK LISTING.
PBI agrees to list on the Nasdaq (or such other national securities
exchange on which the shares of the PBI Common Stock shall be listed as of the
Closing Date), subject to official notice of issuance, the shares of PBI Common
Stock to be issued in the Merger.
7.11. STOCK AND CASH RESERVE.
PBI agrees at all times from the date of this Agreement until the Merger
Consideration has been paid in full to reserve a sufficient number of shares of
PBI Common Stock and to maintain sufficient liquid accounts or borrowing
capacity to fulfill its obligations under this Agreement.
7.12. SECTION 16(B) EXEMPTION.
PBI and WCBI agree that, in order to most effectively compensate and
retain WCBI Insiders (as defined below) in connection with the Merger, both
prior to and after the Effective Time, it is desirable that WCBI Insiders not be
subject to a risk of liability under Section 16(b) of the Exchange Act to the
fullest extent permitted by applicable law in connection with the conversion of
shares of WCBI Common Stock into shares of PBI in the Merger, and for that
compensatory and retentive purpose agree to the provisions of this Section 7.12.
Assuming that WCBI delivers to PBI the WCBI Section 16 Information (as defined
below) in a timely fashion prior to the Effective Time, the Board of Directors
of PBI, or a committee of non-employee directors thereof (as such term is
defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably
promptly thereafter and in any event prior to the Effective Time adopt a
resolution providing in substance that the receipt by the WCBI Insiders (as
defined below) of PBI Common Stock in exchange for shares of WCBI Common Stock,
pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the WCBI Section 16 Information, are intended to be
exempt from liability pursuant to Section 16(b) under the Exchange Act to the
fullest extent permitted by applicable law. "WCBI Section 16 Information" shall
mean information accurate in all material respects regarding the WCBI Insiders,
the number of shares of WCBI Common Stock held by each such WCBI Insider and
expected to be exchanged for PBI Common Stock in the Merger. "WCBI Insiders"
shall mean those officers and directors of WCBI who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are expected to be
subject to Section 16(a) of the Exchange Act with respect to PBI Common Stock
subsequent to the Effective Time.
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ARTICLE VIII
REGULATORY AND OTHER MATTERS
8.1. MEETINGS OF STOCKHOLDERS.
8.1.1. WCBI will (i) take all steps necessary to duly call, give notice
of, convene and hold a meeting of its stockholders as promptly as practicable
after the Merger Registration Statement is declared effective by the SEC, which
may be an annual meeting, for the purpose of considering this Agreement and the
Merger, and for such other purposes as may be, in WCBI's reasonable judgment,
necessary or desirable (the "WCBI Stockholders Meeting"), (ii) in connection
with the solicitation of proxies with respect to the WCBI Stockholders Meeting,
have its Board of Directors recommend approval of this Agreement to the WCBI
stockholders; and (iii) cooperate and consult with PBI with respect to each of
the foregoing matters. The Board of Directors of WCBI may fail to make such a
recommendation referred to in clause (ii) above, or withdraw, modify or change
any such recommendation only if such Board of Directors, after having consulted
with and considered the advice of its outside financial and legal advisors, 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 directors under applicable law.
8.2. PROXY STATEMENT-PROSPECTUS; MERGER REGISTRATION STATEMENT.
8.2.1. For the purposes (x) of registering PBI Common Stock to
be offered to holders of WCBI Common Stock in connection with the Merger with
the SEC under the Securities Act and (y) of holding the WCBI Stockholders
Meetings, PBI shall draft and prepare, and WCBI shall cooperate in the
preparation of, the Merger Registration Statement, including a proxy statement
and prospectus satisfying all applicable requirements of applicable state
securities and banking laws, and of the Securities Act and the Exchange Act, and
the rules and regulations thereunder (such proxy statement/prospectus in the
form mailed by WCBI to the WCBI stockholders, together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement-Prospectus"). PBI shall provide WCBI and its counsel with appropriate
opportunity to review and comment on the Proxy Statement-Prospectus, and shall
incorporate all appropriate comments thereto, prior to the time it is initially
filed with the SEC or any amendments are filed with the SEC. PBI shall file the
Merger Registration Statement, including the Proxy Statement-Prospectus, with
the SEC. Each of PBI and WCBI shall use their best efforts to have the Merger
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and each of WCBI shall thereafter promptly
mail the Proxy Statement-Prospectus to its stockholders. PBI shall also use its
best efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement, and WCBI shall furnish all information concerning WCBI and the
holders of WCBI Common Stock as may be reasonably requested in connection with
any such action.
8.2.2. PBI shall, as soon practicable following the date
hereof, file the Merger Registration Statement with the SEC under the Securities
Act in connection with the transactions contemplated by this Agreement. PBI will
advise WCBI promptly after PBI receives notice of the time when the Merger
Registration Statement has become effective or any supplement or
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amendment has been filed, of the issuance of any stop order or the suspension of
the qualifications of the shares of PBI Common Stock issuable pursuant to the
Merger Registration Statement, or the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Merger Registration Statement, or for additional information, and PBI
will provide WCBI with as many copies of such Merger Registration Statement and
all amendments thereto promptly upon the filing thereof as WCBI may reasonably
request.
8.2.3. WCBI and PBI shall promptly notify the other party if at
any time it becomes aware that the Proxy Statement-Prospectus or the Merger
Registration Statement contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. In such event, WCBI shall cooperate with PBI in the
preparation of a supplement or amendment to such Proxy Statement-Prospectus that
corrects such misstatement or omission, and PBI shall file an amended Merger
Registration Statement with the SEC, and each of WCBI and PBI shall mail an
amended Proxy Statement-Prospectus to WCBI's stockholders.
8.3. REGULATORY APPROVALS.
Each of WCBI and PBI will cooperate with the other and use all
reasonable efforts to promptly prepare and as soon as practicable following the
date hereof, file all necessary documentation to obtain all necessary permits,
consents, waivers, approvals and authorizations of the OTS, the FRB, FDIC, the
New York Department and the New Jersey Department and any other third parties
(including the SBA) and governmental bodies necessary to consummate the
transactions contemplated by this Agreement. WCBI and PBI will furnish each
other and each other's counsel with all information concerning themselves, their
Subsidiaries, directors, officers and stockholders and such other matters as may
be necessary or advisable in connection with any application, petition or other
statement made by or on behalf of WCBI or PBI to any Bank Regulator or
governmental body in connection with the Merger, Bank Mergers and the other
transactions contemplated by this Agreement. WCBI shall have the right to review
and approve in advance all characterizations of the information relating to WCBI
and any of its Subsidiaries which appear in any filing made in connection with
the transactions contemplated by this Agreement with any governmental body. In
addition, WCBI and PBI shall each furnish to the other for review a copy of each
such filing made in connection with the transactions contemplated by this
Agreement with any governmental body prior to its filing.
8.4. AFFILIATES.
8.4.1. WCBI shall use all reasonable efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act) of WCBI to deliver to PBI, as soon as
practicable after the date of this Agreement, and at least thirty (30) days
prior to the date of the WCBI Stockholders Meeting, a written agreement, in the
form of Exhibit C hereto, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of PBI Common Stock to be received
by such "affiliate" as a result of the Merger otherwise than in compliance with
the applicable provisions of the Securities Act and the rules and regulations
thereunder.
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ARTICLE IX
CLOSING CONDITIONS
9.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT.
The respective obligations of each party under this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, none of which may be waived:
9.1.1. STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved and adopted by the
requisite vote of the stockholders of WCBI.
9.1.2. INJUNCTIONS. None of the parties hereto shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction, and no statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any Governmental
Entity or Bank Regulator, that enjoins or prohibits the consummation of the
transactions contemplated by this Agreement.
9.1.3. REGULATORY APPROVALS. All Regulatory Approvals required
to complete the Merger and the Bank Mergers shall have been obtained and shall
remain in full force and effect and all waiting periods relating thereto shall
have expired; and no such Regulatory Approval shall include any condition or
requirement, excluding standard conditions that are normally imposed by the
regulatory authorities in bank merger transactions, that could reasonably be
expected by PBI to result in a Material Adverse Effect on PBI and its
Subsidiaries, taken as a whole.
9.1.4. EFFECTIVENESS OF MERGER REGISTRATION STATEMENT. The
Merger Registration Statement shall have become effective under the Securities
Act and no stop order suspending the effectiveness of the Merger Registration
Statement shall have been issued, and no proceedings for that purpose shall have
been initiated or threatened by the SEC and, if the offer and sale of PBI Common
Stock in the Merger is subject to the blue sky laws of any state, shall not be
subject to a stop order of any state securities commissioner.
9.1.5. NASDAQ LISTING. The shares of PBI Common Stock to be
issued in the Merger shall have been authorized for listing on the Nasdaq,
subject to official notice of issuance.
9.1.6. TAX OPINIONS. On the basis of facts, representations and
assumptions which shall be consistent with the state of facts existing at the
Closing Date, PBI shall have received an opinion of Luse Gorman Pomerenk &
Schick, P.C. reasonably acceptable in form and substance to PBI, and WCBI shall
have received an opinion of Wachtell, Lipton, Rosen & Katz reasonably acceptable
in form and substance to WCBI, each dated as of the Closing Date, substantially
to the effect that for federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
the tax opinions described in this Section 9.1.6, the law firms may require and
rely upon customary representations contained in certificates of officers of PBI
and WCBI and their respective Subsidiaries.
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9.2. CONDITIONS TO THE OBLIGATIONS OF PBI UNDER THIS AGREEMENT.
The obligations of PBI under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.5 at
or prior to the Closing Date:
9.2.1. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of WCBI set forth in this Agreement shall be true
and correct as of the date of this Agreement and upon the Effective Time with
the same effect as though all such representations and warranties had been made
at the Effective Time (except to the extent such representations and warranties
speak as of an earlier date, which only need be true and correct as of such
earlier date), in any case subject to the standard set forth in Section 4.1; and
WCBI shall have delivered to PBI a certificate to such effect signed by the
Chief Executive Officer and the Chief Financial Officer of WCBI as of the
Effective Time.
9.2.2. AGREEMENTS AND COVENANTS. WCBI shall have performed in
all material respects all obligations and complied in all material respects with
all agreements or covenants to be performed or complied with by each of them at
or prior to the Effective Time, and PBI shall have received a certificate signed
on behalf of WCBI by the Chief Executive Officer and Chief Financial Officer of
WCBI to such effect dated as of the Effective Time.
9.2.3. DISSENTING SHARES. As of immediately prior to the
Effective Time, not more than 12.5% of the issued and outstanding shares of WCBI
Common Stock shall have dissented to the Merger under the DGCL, and preserved,
as of immediately prior to the Effective Time, the right to pursue their right
of appraisal for the fair value of their shares of WCBI Common Stock under the
DGCL.
9.2.4. PERMITS, AUTHORIZATIONS, ETC. WCBI and the WCBI
Subsidiaries shall have obtained any and all material permits, authorizations,
consents, waivers, clearances or approvals required for the lawful consummation
of the Merger and the Bank Merger, the failure of which to obtain would have a
Material Adverse Effect on PBI and its Subsidiaries, taken as a whole.
9.3. CONDITIONS TO THE OBLIGATIONS OF WCBI UNDER THIS AGREEMENT.
The obligations of WCBI under this Agreement shall be further subject to
the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.5 at
or prior to the Closing Date:
9.3.1. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of PBI set forth in this Agreement shall be true
and correct as of the date of this Agreement and upon the Effective Time with
the same effect as though all such representations and warranties had been made
at the Effective Time (except to the extent such representations and warranties
speak as of an earlier date, which only need be true and correct as of such
earlier date), in any case subject to the standard set forth in Section 5.1; and
PBI shall have delivered to WCBI a certificate to such effect signed by the
Chief Executive Officer or Chief Operating Officer and the Chief Financial
Officer of PBI as of the Effective Time.
9.3.2. AGREEMENTS AND COVENANTS. PBI shall have performed in
all material respects all obligations and complied in all material respects with
all agreements or covenants to
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be performed or complied with by each of them at or prior to the Effective Time,
and WCBI shall have received a certificate signed on behalf of PBI by the Chief
Executive Officer or Chief Operating Officer and Chief Financial Officer of PBI
to such effect dated as of the Effective Time.
9.3.3. PERMITS, AUTHORIZATIONS, ETC. PBI and its Subsidiaries
shall have obtained any and all material permits, authorizations, consents,
waivers, clearances or approvals required for the lawful consummation of the
Merger and the Bank Merger, the failure of which to obtain would have a Material
Adverse Effect on PBI and its Subsidiaries, taken as a whole.
9.3.4. PAYMENT OF MERGER CONSIDERATION. PBI shall have
delivered the Exchange Fund to the Exchange Agent on or before the Closing Date
and the Exchange Agent shall provide WCBI with a certificate evidencing such
delivery.
ARTICLE X
THE CLOSING
10.1. TIME AND PLACE.
Subject to the provisions of Articles IX and XI hereof, the Closing of
the transactions contemplated hereby shall take place at the offices of Luse
Gorman Pomerenk & Schick, 5335 Wisconsin Avenue, Suite 400, Washington, D.C. at
10:00 a.m. on the date determined by PBI, in its sole discretion, upon ten (10)
days prior written notice to WCBI, but in no event later than thirty days (30)
after the last condition precedent (other than those conditions that relate to
actions to be taken at the Closing, but subject to the fulfillment or waiver of
those conditions) pursuant to this agreement has been fulfilled or waived
(including the expiration of any applicable waiting period), or at such other
place, date or time upon which PBI and WCBI mutually agree. Notwithstanding the
foregoing, in the event that the Closing would otherwise be required to occur on
or after September 11, 2004 but before October 1, 2004, then at PBI's sole
discretion, such Closing may occur on the close of business on October 1, 2004
(provided that all conditions precedent have been fulfilled or waived, including
the expiration of any applicable waiting period). A pre-closing of the
transactions contemplated hereby (the "Pre-Closing") shall take place at the
offices of Luse Gorman Pomerenk & Schick, 5335 Wisconsin Avenue, Suite 400,
Washington, D.C. at 10:00 a.m. on the day prior to the Closing Date (the
"Pre-Closing Date").
10.2. DELIVERIES AT THE PRE-CLOSING AND THE CLOSING.
At the Pre-Closing there shall be delivered to PBI and WCBI the
opinions, certificates, and other documents and instruments required to be
delivered at the Closing under Article IX hereof. At or prior to the Closing,
PBI shall deliver the Merger Consideration as set forth under Section 9.3.4
hereof.
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ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1. TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval of the Merger by the stockholders of WCBI:
11.1.1. At any time by the mutual written agreement of PBI and
WCBI;
11.1.2. By either party (provided, that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any of
the representations or warranties set forth in this Agreement on the part of the
other party, which breach by its nature cannot be cured prior to the Termination
Date or shall not have been cured within 30 days after written notice of such
breach by the terminating party to the other party provided, however, that
neither party shall have the right to terminate this Agreement pursuant to this
Section 11.1.2 unless the breach of representation or warranty, together with
all other such breaches, would entitle the terminating party not to consummate
the transactions contemplated hereby under Section 9.2.1 (in the case of a
breach of a representation or warranty by WCBI) or Section 9.3.1 (in the case of
a breach of a representation or warranty by PBI);
11.1.3. By either party (provided, that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material failure to
perform or comply with any of the covenants or agreements set forth in this
Agreement on the part of the other party, which failure by its nature cannot be
cured prior to the Termination Date or shall not have been cured within 30 days
after written notice of such failure by the terminating party to the other party
provided, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 11.1.3 unless the breach of covenant or
agreement, together with all other such breaches, would entitle the terminating
party not to consummate the transactions contemplated hereby under Section 9.2.2
(in the case of a breach of covenant by WCBI) or Section 9.3.2 (in the case of a
breach of covenant by PBI);
11.1.4. At the election of either party, if the Closing shall
not have occurred by the Termination Date, or such later date as shall have been
agreed to in writing by PBI and WCBI; provided, that no party may terminate this
Agreement pursuant to this Section 11.1.4 if the failure of the Closing to have
occurred on or before said date was due to such party's material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement;
11.1.5. By either party, if the stockholders of WCBI shall have
voted at the WCBI Stockholders Meeting on the transactions contemplated by this
Agreement and such vote shall not have been sufficient to approve and adopt such
transactions;
11.1.6. By either party if (i) final action has been taken by a
Bank Regulator whose approval is required in order to satisfy the conditions to
the parties' obligations to consummate the transactions contemplated hereby as
set forth in Article IX, which final action
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(x) has become unappealable and (y) does not approve this Agreement or the
transactions contemplated hereby, or (ii) any court of competent jurisdiction or
other governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
unappealable;
11.1.7. By the Board of Directors of PBI if WCBI has received a
Superior Proposal and the Board of Directors of WCBI has entered into an
acquisition agreement with respect to the Superior Proposal, terminated this
Agreement, withdrawn its recommendation of this Agreement, has failed to make
such recommendation or has modified or qualified its recommendation in a manner
adverse to PBI.
11.1.8. By the Board of Directors of WCBI if WCBI has received a
Superior Proposal and the Board of Directors of WCBI has made a determination to
accept such Superior Proposal; PROVIDED THAT WCBI shall not terminate this
Agreement pursuant to this Section 11.1.8 and enter in a definitive agreement
with respect to the Superior Proposal until the expiration of five (5) business
days following PBI's receipt of written notice advising PBI that WCBI has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing) identifying the person making the Superior
Proposal and stating whether WCBI intends to enter into a definitive agreement
with respect to the Superior Proposal. After providing such notice, WCBI shall
provide a reasonable opportunity to PBI during the five-day period to make such
adjustments in the terms and conditions of this Agreement as would enable WCBI
to proceed with the Merger on such adjusted terms.
11.2. EFFECT OF TERMINATION.
11.2.1. In the event of termination of this Agreement pursuant
to any provision of Section 11.1, this Agreement shall forthwith become void and
have no further force, except that (i) the provisions of Sections 11.2, 12.1,
12.2, 12.3, 12.4, 12.5, 12.6, 12.9, 12.10, 12.11, and any other Section which,
by its terms, relates to post-termination rights or obligations, shall survive
such termination of this Agreement and remain in full force and effect.
11.2.2. If this Agreement is terminated, expenses and damages of
the parties hereto shall be determined as follows:
(A) Except as provided below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(B) In the event of a termination of this Agreement
because of a willful breach of any representation, warranty, covenant or
agreement contained in this Agreement, the breaching party shall remain liable
for any and all damages, costs and expenses, including all reasonable attorneys'
fees, sustained or incurred by the non-breaching party as a result thereof or in
connection therewith or with respect to the enforcement of its rights hereunder.
(C) As a condition of PBI's willingness, and in
order to induce PBI to enter into this Agreement, and to reimburse PBI for
incurring the costs and expenses related to
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entering into this Agreement and consummating the transactions contemplated by
this Agreement, WCBI hereby agrees to pay PBI, and PBI shall be entitled to
payment of, a fee of $6,500,000 (the "Fee"), within three business days after
written demand for payment is made by PBI, following the occurrence of any of
the events set forth below:
(i) WCBI terminates this Agreement pursuant to Section
11.1.8 or PBI terminates this Agreement pursuant to Section 11.1.7; or
(ii) The entering into a definitive agreement by WCBI
relating to an Acquisition Proposal or the consummation of an
Acquisition Proposal involving WCBI within twelve months after the
occurrence of any of the following: (i) the termination of the Agreement
by PBI pursuant to Section 11.1.2 or 11.1.3 because of a willful breach
by WCBI or any WCBI Subsidiary after the occurrence of an Acquisition
Proposal has been publicly announced or otherwise made known to WCBI; or
(ii) the termination of the Agreement by PBI or WCBI pursuant to Section
11.1.5 because of the failure of the stockholders of WCBI to approve
this Agreement at the WCBI Stockholders Meeting after the occurrence of
an Acquisition Proposal has been publicly announced or otherwise made
known to the stockholders of WCBI.
(D) If demand for payment of the Fee is made
pursuant to Section 11.2.2(C) and payment is timely made, then PBI will not have
any other rights or claims against WCBI or its Subsidiaries, or their respective
officers and directors, under this Agreement, it being agreed that the
acceptance of the Fee under Section 11.2.2(C) will constitute the sole and
exclusive remedy of PBI against WCBI and its Subsidiaries and their respective
officers and directors.
11.3. AMENDMENT, EXTENSION AND WAIVER.
Subject to applicable law, at any time prior to the Effective Time
(whether before or after approval thereof by the stockholders of WCBI), the
parties hereto by action of their respective Boards of Directors, may (a) amend
this Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (c) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of this
Agreement and the transactions contemplated hereby by the stockholders of WCBI,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or value, or changes the form of, the
Merger Consideration to be delivered to WCBI's stockholders pursuant to this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each 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 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. Any termination of this Agreement pursuant to
Article XI may only be effected upon a vote of a majority of the entire Board of
Directors of the terminating party.
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ARTICLE XII
MISCELLANEOUS
12.1. CONFIDENTIALITY.
Except as specifically set forth herein, PBI and WCBI mutually agree to
be bound by the terms of the confidentiality agreement dated January 16, 2004
(the "Confidentiality Agreement") previously executed by the parties hereto,
which Confidentiality Agreement are hereby incorporated herein by reference, and
all information furnished by either party to the other party or its
representatives pursuant hereto (including pursuant to Sections 6.2 and 6.3)
shall be subject to, and the parties shall hold such information in confidence
in accordance with, the provisions of the Confidentiality Agreement. The parties
hereto agree that such Confidentiality Agreement shall continue in accordance
with their respective terms, notwithstanding the termination of this Agreement.
12.2. PUBLIC ANNOUNCEMENTS.
WCBI and PBI shall cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement, and except as may be otherwise required by law, neither WCBI nor
PBI shall issue any news release, or other public announcement or communication
with respect to this Agreement unless such news release or other public
announcement or communication has been mutually agreed upon by the parties
hereto.
12.3. SURVIVAL.
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto shall expire and be terminated and
extinguished at the Effective Time, except for those covenants and agreements
contained herein which by their terms apply in whole or in part after the
Effective Time.
12.4. NOTICES.
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered by receipted hand delivery or mailed by
prepaid registered or certified mail (return receipt requested) or by recognized
overnight courier addressed as follows:
If to WCBI, to: Fred G. Kowal
Chairman and Chief Executive Officer
Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 010990
Fax: (845) 986-0871
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With required copies to: Edward D. Herlihy, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
If to PBI, to: George Strayton
President and Chief Executive Officer
Provident Bancorp, Inc.
400 Rella Boulevard
Montebello, New York 10901
Fax:
With required copies to: John J. Gorman, Esq.
Ned Quint, Esq.
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Fax: (202) 362-2902
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given: (a) as of the
date delivered by hand; (b) three (3) business days after being delivered to the
U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to
the overnight courier.
12.5. PARTIES IN INTEREST.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party, and that (except as provided in Article III
and Section 7.9 of this Agreement) nothing in this Agreement is intended to
confer upon any other person any rights or remedies under or by reason of this
Agreement.
12.6. COMPLETE AGREEMENT.
This Agreement, including the Exhibits and Disclosure Schedules hereto
and the documents and other writings referred to herein or therein or delivered
pursuant hereto, and the Confidentiality Agreements referred to in Section 12.1,
contains the entire agreement and understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly set
forth herein or therein. This Agreement supersedes all prior agreements and
understandings (other than the Confidentiality Agreements referred to in Section
12.1 hereof) between the parties, both written and oral, with respect to its
subject matter.
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12.7. COUNTERPARTS.
This Agreement may be executed in one or more counterparts all of which
shall be considered one and the same agreement and each of which shall be deemed
an original. A facsimile copy of a signature page shall be deemed to be an
original signature page.
12.8. SEVERABILITY.
In the event that any one or more provisions of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, by any
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and the parties shall
use their reasonable efforts to substitute a valid, legal and enforceable
provision which, insofar as practical, implements the purposes and intents of
this Agreement.
12.9. GOVERNING LAW.
This Agreement shall be governed by the laws of Delaware, without giving
effect to its principles of conflicts of laws.
12.10. INTERPRETATION.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which are part of the related
Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5"
and references to "Section 5.5" would also refer to material contained in the
subsection described as "Section 5.5.1"). The table of contents, index and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrases
"the date of this Agreement", "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to the date set
forth in the Recitals to this Agreement. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
12.11. 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.
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IN WITNESS WHEREOF, PBI and WCBI have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first set
forth above.
PROVIDENT BANCORP, INC.
Dated: March 15, 2004 By: \s\ George Strayton
-------------------------------
Name: George Strayton
Title: President and Chief
Executive Officer
WARWICK COMMUNITY BANCORP, INC.
Dated: March 15, 2004 By: \s\ Fred G. Kowal
-------------------------------
Name: Fred G. Kowal
Title: Chairman and Chief
Executive Officer
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is dated as of the
_____________ day of _________________, 2004, by and between The Warwick Savings
Bank, a New York-chartered savings bank, and Provident Bank, a Federal savings
association.
RECITALS:
1. The Warwick Savings Bank and Provident Bank are wholly-owned
subsidiaries of Provident Bancorp, Inc., a Delaware corporation ("PBI");
2. PBI desires that The Warwick Savings Bank merge with and into
Provident Bank following the consummation of the merger of Warwick Community
Bancorp, Inc., a Delaware corporation ("WCBI"), with and into PBI, or a
subsidiary thereof pursuant to the Agreement and Plan of Merger, dated as of
March ______, 2004, by and between PBI and WCBI (the "Holding Company Merger
Agreement"); and
3. In consideration of the premises and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, The Warwick Savings
Bank and Provident Bank hereby agree as follows:
1. DEFINITIONS
Each of the following terms shall have the meanings set forth below:
1.1 "EFFECTIVE TIME" shall refer to the date and time at which the
Merger becomes effective in accordance with the rules and regulations of the
OTS.
1.2 "MERGER" shall refer to the merger of The Warwick Savings Bank
with and into Provident Bank as provided in Section 2.1 of this Agreement.
1.3 "HOLDING COMPANY MERGER" shall refer to the merger of WCBI with
and into PBI as contemplated by the Holding Company Merger Agreement.
1.4 "MERGING INSTITUTIONS" shall collectively refer to The Warwick
Savings Bank and Provident Bank.
1.5 "OTS" shall refer to the Office of Thrift Supervision.
1.6 "SURVIVING INSTITUTION" shall refer to Provident Bank as the
surviving institution of the Merger.
2. TERMS OF THE MERGER
2.1 THE MERGER.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Effective Time, The Warwick Savings Bank shall be merged with and into
Provident Bank pursuant to applicable
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federal laws and regulations. Provident Bank shall be the Surviving Institution
of the Merger and shall continue as a savings association chartered and
regulated by the OTS. As of a result of the Merger, (i) each share of common
stock, par value $________________ per share, of The Warwick Savings Bank issued
and outstanding immediately prior to the Effective Time shall be canceled and
(ii) each share of common stock, par value $0.10 per share, of Provident Bank
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and shall constitute the only shares of capital stock of
the Surviving Instituion issued and outstanding following consummation of the
Merger.
(b) The consummation of the transactions contemplated by this
Agreement is specifically conditioned upon receipt of all necessary regulatory
approvals, including the approval of the OTS, and the expiration of all
applicable waiting periods with respect to both the Holding Company Merger and
the Merger. The stockholder of The Warwick Savings Bank and Provident Bank shall
have taken appropriate action to vote to approve this Agreement and the Merger.
(c) At the Effective Time, the Surviving Institution shall be
considered the same business and corporate entity as each of the Merging
Institutions and thereupon and thereafter all the property, rights, powers and
franchises of each of the Merging Institutions shall vest in the Surviving
Institution and the Surviving Institution shall be subject to and be deemed to
have assumed all of the debts, liabilities, obligations and duties of each of
the Merging Institutions and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationship had been originally acquired, incurred or entered into
by the Surviving Institution. In addition, any reference to either of the
Merging Institutions in any contract, will or document, whether executed or
taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Institution if not inconsistent with the other
provisions of the contract, will or document; and any pending, action or other
judicial proceeding to which either of the Merging Institutions is a party shall
not be deemed to have abated or to have been discontinued by reason of the
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made or the Surviving Institution may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Merging Institutions if the Merger had not occurred.
(d) All deposit accounts of The Warwick Savings Bank shall be and
become deposit accounts in the Surviving Institution without change in their
respective terms, maturity, minimum required balances or withdrawal value.
Appropriate evidence of the deposit account in the Surviving Institution shall
be provided by the Surviving Institution to each deposit account holder of The
Warwick Savings Bank, as necessary, after consummation of the Merger. Any
liquidation account, as such term is defined in OTS regulations, maintained by
The Warwick Savings Bank shall be assumed by Provident Bank as the Surviving
Institution.
(e) All deposit accounts of Provident Bank prior to consummation of
the Merger shall continue to be deposit accounts in the Surviving Institution
after consummation of the Merger without any change whatsoever in any of the
provisions of such deposit accounts, including, without limitation, their
respective terms, maturity, minimum required balances or withdrawal value.
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(f) The principal office of Provident Bank shall continue to be 400
Rella Boulevard, Montebello, New York 10901 after the Effective Time. The former
offices of The Warwick Savings Bank will be operated as offices of Provident
Bank immediately following the Effective Time.
2.2 EFFECTIVE TIME; CLOSING DATE. A closing in respect of the
transactions contemplated by this Agreement (the "Closing") shall be held at the
offices of Provident Bank, at 4:00 p.m., New York time, on such date as
Provident Bank shall designate, which date shall be the date of the Effective
Time of the Holding Company Merger.
2.3 NAME OF SURVIVING INSTITUTION. The name of the Surviving
Institution shall be "Provident Bank."
2.4 CHARTER. On and after the Effective Time, the Charter of
Provident Bank as a federal savings association shall be the Charter of the
Surviving Institution until amended in accordance with applicable law.
2.5 BYLAWS. On and after the Effective Time, the Bylaws of Provident
Bank as a federal savings association shall be the Bylaws of the Surviving
Institution until amended in accordance with applicable law.
2.6 DIRECTORS. Except as otherwise provided in the Merger Agreement,
on and after the Effective Time, until changed in accordance with the Charter
and Bylaws of the Surviving Institution, the directors of the Surviving
Institution shall be those persons serving as directors of Provident Bank
immediately prior to the Effective Time, subject to the provision of Section 2.5
of the Holding Company Merger Agreement. The directors of the Surviving
Institution shall hold office in accordance with the Charter and Bylaws of the
Surviving Institution.
3. MISCELLANEOUS
3.1 CONDITIONS PRECEDENT. The respective obligations of each party
under this Agreement shall be subject to: (i) the receipt or waiver of all
required regulatory approvals and the expiration of any required waiting periods
specified by applicable federal law; (ii) the completion of the Holding Company
Merger; and (iii) the approval of this Agreement by PBI in its capacity as sole
stockholder of The Warwick Savings Bank and Provident Bank.
3.2 AMENDMENTS. To the extent permitted by the applicable federal
banking law, this Agreement may be amended by a subsequent writing signed by the
parties hereto upon the approval of the board of directors of each of the
parties hereto.
3.3 SUCCESSORS. This Agreement shall be binding on the successors of
The Warwick Savings Bank and Provident Bank.
3.4 GOVERNING LAW. This Agreement shall be governed by the laws of
the United States of America except to the extent New York law governs.
3.5 PARAGRAPH HEADINGS. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
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3.6 MISCELLANEOUS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which constitute one and
the same instrument.
3.7. TERMINATION. This Agreement shall terminate upon the termination
of the Holding Company Merger Agreement in accordance with its terms. This
Agreement also may be terminated at any time prior to the Effective Time by
mutual consent of the parties. In the event of the termination of this Agreement
as provided in this Section 3.7, this Agreement shall forthwith become null and
void and of no further force or effect and there shall be no liability or
obligation under this Agreement on the part of any of the parties hereto or any
of their respective directors, officers or affiliates.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, The Warwick Savings Bank and Provident Bank have
caused this Agreement to be executed by their duly authorized officers as of the
day and year first above written.
ATTEST: THE WARWICK SAVINGS BANK
By:
- --------------------------------- ---------------------------------------
Fred G. Kowal
Secretary Chairman and Chief Executive Officer
ATTEST: PROVIDENT BANK
By:
- --------------------------------- ---------------------------------------
Daniel Rothstein George Strayton
Corporate Secretary President and Chief Executive Officer
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is dated as of the
_____________ day of _________________, 2004, by and between The Towne Center
Bank, a New Jersey-chartered commercial bank, and Provident Bank, a Federal
savings association.
RECITALS:
1. The Towne Center Bank and Provident Bank are wholly-owned
subsidiaries of Provident Bancorp, Inc., a Delaware corporation ("PBI");
2. PBI desires that The Towne Center Bank merge with and into
Provident Bank following the consummation of the merger of Warwick Community
Bancorp, Inc., a Delaware corporation ("WCBI"), with and into PBI, or a
subsidiary thereof pursuant to the Agreement and Plan of Merger, dated as of
March ______, 2004, by and between PBI and WCBI (the "Holding Company Merger
Agreement"); and
3. In consideration of the premises and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, The Towne Center Bank
and Provident Bank hereby agree as follows:
1. DEFINITIONS
Each of the following terms shall have the meanings set forth below:
1.1 "EFFECTIVE TIME" shall refer to the date and time at which the
Merger becomes effective in accordance with the rules and regulations of the
OTS.
1.2 "MERGER" shall refer to the merger of The Towne Center Bank with
and into Provident Bank as provided in Section 2.1 of this Agreement.
1.3 "HOLDING COMPANY MERGER" shall refer to the merger of WCBI with
and into PBI as contemplated by the Holding Company Merger Agreement.
1.4 "MERGING INSTITUTIONS" shall collectively refer to The Towne
Center Bank and Provident Bank.
1.5 "OTS" shall refer to the Office of Thrift Supervision.
1.6 "SURVIVING INSTITUTION" shall refer to Provident Bank as the
surviving institution of the Merger.
2. TERMS OF THE MERGER
2.1 THE MERGER.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Effective Time, The Towne Center Bank shall be merged with and into
Provident Bank pursuant to applicable federal
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laws and regulations. Provident Bank shall be the Surviving Institution of the
Merger and shall continue as a savings association chartered and regulated by
the OTS. As of a result of the Merger, (i) each share of common stock, par value
$________________ per share, of The Towne Center Bank issued and outstanding
immediately prior to the Effective Time that is owned by WCBI shall be canceled;
(ii) each share of common stock, par value $________________ per share, of The
Towne Center Bank issued and outstanding immediately prior to the Effective Time
that is owned by a director of The Towne Center Bank shall be canceled and
converted into the right to receive $10.00 per share; and (iii) each share of
common stock, par value $0.10 per share, of Provident Bank issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall constitute the only shares of capital stock of the
Surviving Instituion issued and outstanding following consummation of the
Merger.
(b) The consummation of the transactions contemplated by this
Agreement is specifically conditioned upon receipt of all necessary regulatory
approvals, including the approval of the OTS, and the expiration of all
applicable waiting periods with respect to both the Holding Company Merger and
the Merger. The stockholder of The Towne Center Bank and Provident Bank shall
have taken appropriate action to vote to approve this Agreement and the Merger.
(c) At the Effective Time, the Surviving Institution shall be
considered the same business and corporate entity as each of the Merging
Institutions and thereupon and thereafter all the property, rights, powers and
franchises of each of the Merging Institutions shall vest in the Surviving
Institution and the Surviving Institution shall be subject to and be deemed to
have assumed all of the debts, liabilities, obligations and duties of each of
the Merging Institutions and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationship had been originally acquired, incurred or entered into
by the Surviving Institution. In addition, any reference to either of the
Merging Institutions in any contract, will or document, whether executed or
taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Institution if not inconsistent with the other
provisions of the contract, will or document; and any pending, action or other
judicial proceeding to which either of the Merging Institutions is a party shall
not be deemed to have abated or to have been discontinued by reason of the
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made or the Surviving Institution may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Merging Institutions if the Merger had not occurred.
(d) All deposit accounts of The Towne Center Bank shall be and
become deposit accounts in the Surviving Institution without change in their
respective terms, maturity, minimum required balances or withdrawal value.
Appropriate evidence of the deposit account in the Surviving Institution shall
be provided by the Surviving Institution to each deposit account holder of The
Towne Center Bank, as necessary, after consummation of the Merger.
(e) All deposit accounts of Provident Bank prior to consummation of
the Merger shall continue to be deposit accounts in the Surviving Institution
after consummation of the Merger without any change whatsoever in any of the
provisions of such deposit accounts, including, without limitation, their
respective terms, maturity, minimum required balances or withdrawal value.
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(f) The principal office of Provident Bank shall continue to be 400
Rella Boulevard, Montebello, New York 10901 after the Effective Time. The former
offices of The Towne Center Bank will be operated as offices of Provident Bank
immediately following the Effective Time.
2.2 EFFECTIVE TIME; CLOSING DATE. A closing in respect of the
transactions contemplated by this Agreement (the "Closing") shall be held at the
offices of Provident Bank, at 4:00 p.m., New York time, on such date as
Provident Bank shall designate, which date shall be the date of the Effective
Time of the Holding Company Merger.
2.3 NAME OF SURVIVING INSTITUTION. The name of the Surviving
Institution shall be "Provident Bank."
2.4 CHARTER. On and after the Effective Time, the Charter of
Provident Bank as a federal savings association shall be the Charter of the
Surviving Institution until amended in accordance with applicable law.
2.5 BYLAWS. On and after the Effective Time, the Bylaws of Provident
Bank as a federal savings association shall be the Bylaws of the Surviving
Institution until amended in accordance with applicable law.
2.6 DIRECTORS. Except as otherwise provided in the Merger Agreement,
on and after the Effective Time, until changed in accordance with the Charter
and Bylaws of the Surviving Institution, the directors of the Surviving
Institution shall be those persons serving as directors of Provident Bank
immediately prior to the Effective Time, subject to the provision of Section 2.5
of the Holding Company Merger Agreement. The directors of the Surviving
Institution shall hold office in accordance with the Charter and Bylaws of the
Surviving Institution.
3. MISCELLANEOUS
3.1 CONDITIONS PRECEDENT. The respective obligations of each party
under this Agreement shall be subject to: (i) the receipt or waiver of all
required regulatory approvals and the expiration of any required waiting periods
specified by applicable federal law; (ii) the completion of the Holding Company
Merger; and (iii) the approval of this Agreement by PBI in its capacity as sole
stockholder of The Towne Center Bank and Provident Bank.
3.2 AMENDMENTS. To the extent permitted by the applicable federal
banking law, this Agreement may be amended by a subsequent writing signed by the
parties hereto upon the approval of the board of directors of each of the
parties hereto.
3.3 SUCCESSORS. This Agreement shall be binding on the successors of
The Towne Center Bank and Provident Bank.
3.4 GOVERNING LAW. This Agreement shall be governed by the laws of
the United States of America except to the extent New York law governs.
3.5 PARAGRAPH HEADINGS. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
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3.6 MISCELLANEOUS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which constitute one and
the same instrument.
3.7. TERMINATION. This Agreement shall terminate upon the termination
of the Holding Company Merger Agreement in accordance with its terms. This
Agreement also may be terminated at any time prior to the Effective Time by
mutual consent of the parties. In the event of the termination of this Agreement
as provided in this Section 3.7, this Agreement shall forthwith become null and
void and of no further force or effect and there shall be no liability or
obligation under this Agreement on the part of any of the parties hereto or any
of their respective directors, officers or affiliates.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, The Towne Center Bank and Provident Bank have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.
ATTEST: THE TOWNE CENTER BANK
By:
- --------------------------------- ---------------------------------------
Secretary President and Chief Executive Officer
ATTEST: PROVIDENT BANK
By:
- --------------------------------- ---------------------------------------
Daniel Rothstein George Strayton
Corporate Secretary President and Chief Executive Officer
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is dated as of the
_____________ day of _________________, 2004, by and between Warwick Commercial
Bank, a New York-chartered commercial bank, and Provident Municipal Bank, a New
York-chartered commercial bank.
RECITALS:
1. Warwick Commercial Bank is a wholly-owned subsidiary of
Provident Municipal Bank;
2. Provident Municipal Bank is a wholly-owned subsidiary of
Provident Bank, a federal savings association;
3. Provident Municipal Bank desires that Warwick Commercial Bank
merge with and into Provident Municipal Bank following the consummation of the
merger of The Warwick Savings Bank, a New York-chartered savings bank, with and
into Provident Bank, pursuant to the Agreement of Bank Merger, dated as of
___________________, 2004, by and between Provident Bank and The Warwick Savings
Bank (the "Bank Merger Agreement"), which merger shall occur following the
consummation of the merger of Warwick Community Bancorp, Inc., a Delaware
corporation ("WCBI"), with and into Provident Bancorp, Inc., a Delaware
corporation ("PBI"), or a subsidiary thereof pursuant to the Agreement and Plan
of Merger, dated as of March ______, 2004, by and between PBI and WCBI (the
"Holding Company Merger Agreement");
4. In consideration of the premises and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Warwick Commercial Bank
and Provident Municipal Bank hereby agree as follows:
1. DEFINITIONS
Each of the following terms shall have the meanings set forth below:
1.1 "BANK MERGER" shall refer to the merger of The Warwick Savings
Bank with and into Provident Bank as contemplated by the Bank Merger Agreement.
1.2 "BANKING LAW" shall mean the banking law of the State of New
York.
1.3 "DEPARTMENT" shall mean the New York State Department of
Banking.
1.4 "EFFECTIVE TIME" shall refer to the date and time at which the
Merger becomes effective in accordance with the rules and regulations of the
Department.
1.5 "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.6 "MERGER" shall refer to the merger of Warwick Commercial Bank
with and into Provident Municipal Bank as provided in Section 2.1 of this
Agreement.
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1.7 "MERGING INSTITUTIONS" shall collectively refer to Warwick
Commercial Bank and Provident Municipal Bank.
1.8 "RECEIVING CORPORATION" shall refer to Provident Municipal Bank
as the receiving corporation of the Merger.
2. TERMS OF THE MERGER
2.1 THE MERGER.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Effective Time, Warwick Commercial Bank shall be merged with and into
Provident Municipal Bank pursuant to the Banking Law and the rules and
regulations thereunder. Provident Municipal Bank shall be the Receiving
Corporation of the Merger and shall continue as a commercial bank chartered by
the State of New York and regulated by the Department. As of a result of the
Merger, (i) each share of common stock, par value $________________ per share,
of Warwick Commercial Bank issued and outstanding immediately prior to the
Effective Time shall be canceled and (ii) each share of common stock, par value
$______________ per share, of Provident Municipal Bank issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall constitute the only shares of capital stock of the Receiving Corporation
issued and outstanding following consummation of the Merger.
(b) The consummation of the transactions contemplated by this
Agreement is specifically conditioned upon receipt of all necessary regulatory
approvals, including the approval of the Department and the FDIC, and the
expiration of all applicable waiting periods with respect to both the Bank
Merger and the Merger. The stockholder of Warwick Commercial Bank and the
stockholder of Provident Municipal Bank shall have taken appropriate action to
vote to approve this Agreement and the Merger.
(c) At the Effective Time, the Receiving Corporation shall be
considered the same business and corporate entity as each of the Merging
Institutions and thereupon and thereafter all the property, rights, powers and
franchises of each of the Merging Institutions shall vest in the Receiving
Corporation and the Receiving Corporation shall be subject to and be deemed to
have assumed all of the debts, liabilities, obligations and duties of each of
the Merging Institutions and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationship had been originally acquired, incurred or entered into
by the Receiving Corporation. In addition, any reference to either of the
Merging Institutions in any contract, will or document, whether executed or
taking effect before or after the Effective Time, shall be considered a
reference to the Receiving Corporation if not inconsistent with the other
provisions of the contract, will or document; and any pending, action or other
judicial proceeding to which either of the Merging Institutions is a party shall
not be deemed to have abated or to have been discontinued by reason of the
Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made or the Receiving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Merging Institutions if the Merger had not occurred.
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(d) All deposit accounts of Warwick Commercial Bank shall be and
become deposit accounts in the Receiving Corporation without change in their
respective terms, maturity, minimum required balances or withdrawal value.
Appropriate evidence of the deposit account in the Receiving Corporation shall
be provided by the Receiving Corporation to each deposit account holder of
Warwick Commercial Bank, as necessary, after consummation of the Merger.
(e) All deposit accounts of Provident Municipal Bank prior to
consummation of the Merger shall continue to be deposit accounts in the
Receiving Corporation after consummation of the Merger without any change
whatsoever in any of the provisions of such deposit accounts, including, without
limitation, their respective terms, maturity, minimum required balances or
withdrawal value.
(f) The principal office of Provident Municipal Bank shall continue
to be 400 Rella Boulevard, Montebello, New York 10901 after the Effective Time.
The former offices of Warwick Commercial Bank will be operated as offices of
Provident Municipal Bank immediately following the Effective Time. Schedule
2.1(f) contains a list of the principal office and each branch office of each of
Provident Municipal Bank and Warwick Commercial Bank.
2.2 EFFECTIVE TIME; CLOSING DATE. A closing in respect of the
transactions contemplated by this Agreement (the "Closing") shall be held at the
offices of Provident Municipal Bank, at 4:00 p.m., New York time, on such date
as Provident Municipal Bank shall designate, which date shall be the date of the
Effective Time of the Bank Merger.
2.3 NAME OF RECEIVING CORPORATION. The name of the Receiving
Corporation shall be "Provident Municipal Bank."
2.4 ORGANIZATION CERTIFICATE. On and after the Effective Time, the
Restated Organization Certificate of Provident Municipal Bank as a New
York-chartered commercial bank shall be the Restated Organization Certificate of
the Receiving Corporation until amended in accordance with applicable law.
2.5 BYLAWS. On and after the Effective Time, the Bylaws of Provident
Municipal Bank as a New York-chartered commercial bank shall be the Bylaws of
the Receiving Corporation until amended in accordance with applicable law.
2.6 DIRECTORS. Except as otherwise provided in the Merger Agreement,
on and after the Effective Time, until changed in accordance with the Restated
Organization Certificate and Bylaws of the Receiving Corporation, the directors
of the Receiving Corporation shall be those persons serving as directors of
Provident Municipal Bank immediately prior to the Effective Time, subject to the
provision of Section 2.5 of the Holding Company Merger Agreement. The directors
of the Receiving Corporation shall hold office in accordance with the Restated
Organization Certificate and Bylaws of the Receiving Corporation.
3. MISCELLANEOUS
3.1 CONDITIONS PRECEDENT. The respective obligations of each party
under this Agreement shall be subject to: (i) the receipt or waiver of all
required regulatory approvals and the expiration of any required waiting periods
specified by applicable federal law; (ii) the completion of the Bank Merger;
(iii) the approval of this Agreement by Provident Bank in its capacity as sole
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stockholder of Warwick Commercial Bank; and (iv) the approval of this Agreement
by Provident Municipal Bank in its capacity as sole stockholder of Warwick
Commercial Bank.
3.2 AMENDMENTS. To the extent permitted by the applicable federal
banking law, this Agreement may be amended by a subsequent writing signed by the
parties hereto upon the approval of the board of directors of each of the
parties hereto.
3.3 SUCCESSORS. This Agreement shall be binding on the successors of
Warwick Commercial Bank and Provident Municipal Bank.
3.4 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
3.5 PARAGRAPH HEADINGS. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
3.6 MISCELLANEOUS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which constitute one and
the same instrument.
3.7. TERMINATION. This Agreement shall terminate upon the termination
of the Holding Company Merger Agreement in accordance with its terms. This
Agreement also may be terminated at any time prior to the Effective Time by
mutual consent of the parties. In the event of the termination of this Agreement
as provided in this Section 3.7, this Agreement shall forthwith become null and
void and of no further force or effect and there shall be no liability or
obligation under this Agreement on the part of any of the parties hereto or any
of their respective directors, officers or affiliates.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Warwick Commercial Bank and Provident Municipal Bank
have caused this Agreement to be executed by their duly authorized officers as
of the day and year first above written.
ATTEST: WARWICK COMMERCIAL BANK
By:
- --------------------------------- ---------------------------------------
Secretary President and Chief Executive Officer
ATTEST: PROVIDENT BANK
By:
- --------------------------------- ---------------------------------------
Daniel Rothstein George Strayton
Corporate Secretary President and Chief Executive Officer
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EXHIBIT D
FORM OF VOTING AGREEMENT
March , 2004
Provident Bancorp, Inc.
400 Rella Boulevard
Montebello, New York 10901
Ladies and Gentlemen:
Provident Bancorp, Inc. ("PBI") and Warwick Community Bancorp, Inc.
("WCBI") have entered into an Agreement and Plan of Merger dated as of March __,
2004 (the "Merger Agreement"), pursuant to which, subject to the terms and
conditions set forth therein, (a) WCBI will merge with and into PBI, with PBI
surviving the merger, to be followed by the mergers of Warwick Savings Bank and
The Towne Center Bank with and into Provident Bank, with Provident Bank as the
surviving institution, and by the merger of Warwick Commercial Bank with and
into Provident Municipal Bank, with Provident Municipal Bank as the surviving
institution (collectively referred to as the "Merger"); and (b) shareholders of
WCBI will receive cash and/or common stock of PBI as stated in the Merger
Agreement.
PBI has requested, as a condition to its execution and delivery to WCBI
of the Merger Agreement, that the undersigned, being a director of WCBI, execute
and deliver to PBI this Letter Agreement.
The undersigned, in order to induce PBI to execute and deliver to WCBI
the Merger Agreement, and intending to be legally bound, hereby irrevocably:
(a) Agrees to be present (in person or by proxy) at all meetings of
shareholders of WCBI called to vote for approval of the Merger so that all
shares of common stock of WCBI over which the undersigned or a member of the
undersigned's immediate family now has sole or shared voting power will be
counted for the purpose of determining the presence of a quorum at such meetings
and to vote, or cause to be voted, all such shares (i) in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby
(including any amendments or modifications of the terms thereof approved by the
Board of Directors of WCBI), and (ii) against approval or adoption of any other
merger, business combination, recapitalization, partial liquidation or similar
transaction involving WCBI, it being understood that as to immediate family
members and shares over which the undersigned has only shared voting power, the
undersigned will use his/her reasonable efforts to cause the shares to be
present and voted in accordance with (i) and (ii) above;
(b) Agrees not to vote or execute any written consent to rescind or
amend in any manner any prior vote or written consent, as a shareholder of WCBI,
to approve or adopt the Merger Agreement;
(c) Agrees not to sell, transfer or otherwise dispose of any common
stock of WCBI
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on or prior to the date of the meeting of WCBI shareholders to vote on the
Merger Agreement or the earlier date of termination of the Merger Agreement in
accordance with its terms, except for transfers to charities, charitable trusts,
or other charitable organizations under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, transfers by will or operation of law,
transfers to any pledgee pursuant to any pledge agreement existing as of the
date hereof, transfers to lineal descendant or a spouse of the undersigned, or
to a trust or other entity for the benefit of one or more of the foregoing
persons, provided that the transferee agrees in writing to be bound by the terms
of this letter agreement to the extent permitted under applicable law, and other
than shares of common stock of WCBI surrendered to WCBI to satisfy tax
obligations arising from the vesting of restricted WCBI common stock or the
exercise of WCBI common stock options in accordance with applicable law and plan
requirements; and
(d) Represents that the undersigned has the capacity to enter into
this Letter Agreement and that it is a valid and binding obligation enforceable
against the undersigned in accordance with its terms, subject to bankruptcy,
insolvency and other laws affecting creditors' rights and general equitable
principles.
The agreements contained herein shall apply to the undersigned solely in
his or her capacity as a stockholder of WCBI, and no agreement contained herein
shall apply to the undersigned in his or her capacity as a director, officer or
employee of WCBI or in any other fiduciary capacity. Nothing contained in this
Agreement shall be deemed to apply to, or limit in any manner, the obligations
of the undersigned to comply with his or her fiduciary duties as a director of
WCBI.
The obligations set forth herein shall terminate concurrently with any
termination of the Merger Agreement.
____________________________
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same Letter Agreement.
____________________________
The undersigned intend to be legally bound hereby.
Sincerely,
------------------------------------------------
Name
------------------------------------------------
Title
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EXHIBIT E
AFFILIATES AGREEMENT
______________
Provident Bancorp, Inc.
400 Rella Boulevard
Montebello, New York 10901
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Warwick Community Bancorp, Inc. ("WCBI"), a Delaware corporation ("WCBI"), for
purposes of paragraphs (c) and (d) of Rule 145 of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
Provident Bancorp, Inc. ("Provident Bancorp") and WCBI have entered into
an Agreement and Plan of Merger, dated as of March _____, 2004 (the
"Agreement"). Upon consummation of the merger contemplated by the Agreement (the
"Merger"), I may receive shares of common stock of Provident Bancorp or any
successor thereto ("Provident Bancorp Common Stock") in exchange for my shares
of common stock, par value $0.01 per share, of WCBI ("WCBI Common Stock"). This
agreement is hereinafter referred to as the "Letter Agreement."
I represent and warrant to, and agree with, Provident Bancorp as
follows:
1. I have read this Letter Agreement and the Agreement and have
discussed their requirements and other applicable limitations upon my ability to
sell, pledge, transfer or otherwise dispose of shares of the Provident Bancorp
Common Stock, to the extent I felt necessary, with my counsel or counsel for
WCBI.
2. I have been advised that any issuance of shares of the Provident
Bancorp Common Stock to me pursuant to the Merger will be registered with the
SEC. I have also been advised, however, that, because I may be an "affiliate" of
WCBI at the time the Merger will be submitted for a vote of the stockholders of
WCBI and my disposition of such shares has not been registered under the
Securities Act, I must hold such shares indefinitely unless (i) such disposition
of such shares is subject to an effective registration statement and to the
availability of a prospectus under the Securities Act, (ii) a sale of such
shares is made in conformity with the provisions of Rule 145(d) under the
Securities Act, (iii) a sale of such shares is made following expiration of the
applicable restrictive period set forth in Rule 145(d) or (iv) in an opinion of
counsel, in form and substance reasonably satisfactory to Provident Bancorp, I
am advised that some other exemption from registration is available with respect
to any such proposed disposition of such shares.
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3. I understand and agree that stop transfer instructions will be
given to the transfer agent of Provident Bancorp with respect to the shares of
Provident Bancorp Common Stock I receive pursuant to the Merger and that there
will be placed on the certificate representing such shares, or any certificates
delivered in substitution therefore, a legend stating in substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act applies. The shares
represented by this certificate may only be transferred in accordance with the
terms of an agreement between the registered holder hereof and Provident
Bancorp, a copy of which agreement is on file at the principal offices of
Provident Bancorp. A copy of such agreement shall be provided to the holder
hereof without charge upon receipt by Provident Bancorp of a written request.
4. Unless a transfer of my shares of the Provident Bancorp Common
Stock is a sale made in conformity with the provisions of Rule 145(d), made
following expiration of the restrictive period set forth in Rule 145(d) or made
pursuant to any effective registration statement under the Securities Act,
Provident Bancorp reserves the right to put an appropriate legend on the
certificate issued to my transferee.
It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Agreement is terminated
in accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect and the stop
transfer instructions set forth above shall be lifted forthwith upon the
delivery by the undersigned to Provident Bancorp of a copy of a letter from the
staff of the SEC, an opinion of counsel in form and substance reasonably
satisfactory to Provident Bancorp, or other evidence reasonably satisfactory to
Provident Bancorp, to the effect that a transfer of my shares of the Provident
Bancorp Common Stock will not violate the Securities Act or any of the rules and
regulations of the SEC thereunder. In addition, it is understood and agreed that
the legend set forth in Paragraph 2 above shall be removed from and the stop
transfer restrictions set forth in Paragraph 3 above shall be lifted with
respect to the certificate or certificates representing my shares of the
Provident Bancorp Common Stock upon expiration of the restrictive period set
forth in Rule 145(d)(2), so long as Provident Bancorp is then in compliance with
SEC Rule 144(c), or 145(d)(3), as applicable, or if Provident Bancorp shall have
received a copy of a letter from the staff of the SEC, an opinion of counsel in
form and substance reasonably satisfactory to Provident Bancorp, or other
evidence satisfactory to Provident Bancorp that a transfer of my shares of the
Provident Bancorp Common Stock represented by such certificate or certificates
will be a sale made in conformity with the provisions of Rule 145(d), or made
pursuant to an effective registration statement under the Securities Act.
5. I recognize and agree that the foregoing provisions also apply
to (i) my spouse, (ii) any relative of mine or my spouse's occupying my home,
(iii) any trust or estate in which I, my spouse or any such relative owns at
least 10% beneficial interest or of which any of us serves as trustee, executor
or in any similar capacity and (iv) any corporation or other organization in
which I, my spouse or any such relative owns at least 10% of any class of equity
securities or of the equity interest.
6. I further recognize that in the event I become a director or
officer of Provident Bancorp upon consummation of the Merger, any sale of
Provident Bancorp stock by me may be
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subject to further restrictions on transferability and additional liability
pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended.
7. Execution of this Letter Agreement should not be construed as an
admission on my part that I am an "affiliate" of WCBI as described in the first
paragraph of this Letter Agreement or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
Letter Agreement.
* * * * *
This Letter Agreement shall be binding on my heirs, legal representative
and successors.
Very truly yours,
Signature
---------------------------------------
Name (Please Print)
Accepted as of the date first above written
PROVIDENT BANCORP, INC.
By:
------------------------------------
Name:
Title:
A-98
APPENDIX B
_________, 2004
Board of Directors
Warwick Community Bancorp, Inc.
18 Oakland Avenue
Warwick, New York 10990
Gentlemen:
Warwick Community Bancorp, Inc. ("Warwick") and Provident Bancorp, Inc.
("Provident") have entered into an Agreement and Plan of Merger, dated as of
March 15, 2004 (the "Agreement"), pursuant to which Warwick will be merged with
and into Provident (the "Merger"). Under the terms of the Agreement, upon
consummation of the Merger, each share of Warwick common stock, par value $0.01
per share, issued and outstanding immediately prior to the Merger (together with
the rights associated therewith under the Rights Agreement, dated as of October
17, 2000, between Warwick and Registrar and Transfer Company, as Rights Agent,
the "Warwick Shares"), other than certain shares specified in the Agreement,
will be converted into the right to receive, at the election of the holder
thereof, either (a) 2.7810 shares of common stock, par value $.01 per share, of
Provident, or (b) $32.26 in cash without interest, subject to the election and
proration procedures set forth in the Agreement which provide generally, among
other things, that 50% of the total number of Warwick Shares shall be converted
into Provident common stock and 50% shall be converted into cash (the "Merger
Consideration"). The percentage of the total number of Warwick Shares to be
converted into Provident common stock may be increased under certain
circumstances as set forth in the Agreement. Subject to approval of the New York
State Banking Department and other legal limitations, holders of Warwick Shares
may also receive a special dividend (the "Special Dividend") relating to the
completed sale of an automobile lease portfolio (the "Auto Lease Portfolio") by
The Warwick Savings Bank, a wholly owned subsidiary of Warwick. Warwick and
Provident have agreed that, subject to the New York State Banking Department
approval and other limitations, the aggregate amount available for the Special
Dividend is $4,150,000. The terms and conditions of the Merger are more fully
set forth in the Agreement. You have requested our opinion as to the fairness,
from a financial point of view, of the Merger Consideration to the holders of
Warwick Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement; (ii) certain publicly available financial statements
and other historical financial information of Warwick that we deemed relevant;
(iii) certain publicly available financial statements and other historical
financial information of Provident that we deemed relevant; (iv) internal
financial projections for Warwick for the year ending December 31, 2004 prepared
by and reviewed with management of Warwick; (v) internal financial projections
for Provident for the year ending September 30, 2004 prepared by and reviewed
with management of Provident and
Board of Directors
Warwick Community Bancorp, Inc.
_____________, 2004
Page 2
earnings per share estimates for Provident for the years ending December 31,
2004 and 2005 published by I/B/E/S; (vi) the pro forma financial impact of the
Merger on Provident, based on assumptions relating to transaction expenses,
purchase accounting adjustments and cost savings determined by the senior
managements of Warwick and Provident; (vii) the publicly reported historical
price and trading activity for Warwick's and Provident's common stock, including
a comparison of certain financial and stock market information for Warwick and
Provident with similar publicly available information for certain other
companies the securities of which are publicly traded; (viii) the financial
terms of certain recent business combinations in the savings institution
industry, to the extent publicly available; (ix) the current market environment
generally and the banking environment in particular; and (x) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant. We also discussed with
certain members of senior management of Warwick the business, financial
condition, results of operations and prospects of Warwick and held similar
discussions with certain members of senior management of Provident regarding the
business, financial condition, results of operations and prospects of Provident.
In performing our review, we have relied upon the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by Warwick or Provident or their
respective representatives or that was otherwise reviewed by us and have assumed
such accuracy and completeness for purposes of rendering this opinion. We have
further relied on the assurances of management of Warwick and Provident that
they are not aware of any facts or circumstances that would make any of such
information inaccurate or misleading. We have not been asked to and have not
undertaken an independent verification of any of such information and we do not
assume any responsibility or liability for the accuracy or completeness thereof.
We did not make an independent evaluation or appraisal of the specific assets,
the collateral securing assets or the liabilities (contingent or otherwise) of
Warwick or Provident or any of their subsidiaries, including, without
limitation, the Auto Lease Portfolio, or the collectibility of any such assets,
nor have we been furnished with any such evaluations or appraisals. We did not
make an independent evaluation of the adequacy of the allowance for loan losses
of Warwick or Provident nor have we reviewed any individual credit files
relating to Warwick or Provident. We have assumed, with your consent, that the
respective allowances for loan losses for both Warwick and Provident are
adequate to cover such losses and will be adequate on a pro forma basis for the
combined entity. With respect to the financial projections for Warwick and
Provident and all projections of transaction costs, purchase accounting
adjustments and expected cost savings prepared by and/or reviewed with the
managements of Warwick and Provident and used by Sandler O'Neill in its
analyses, Warwick's and Provident's managements confirmed to us that they
reflected the best currently available estimates and judgments of the respective
managements of the respective future financial performances of Warwick and
Provident and we assumed that such performances would be achieved. We express no
opinion as to such financial projections or the assumptions on which they are
based. We have also assumed that there has been no material change in Warwick's
or Provident's assets, financial condition, results of operations, business or
prospects since the date of the most recent financial statements made available
to us. We have assumed in all respects material to our analysis that Warwick and
Provident will remain as going concerns for all periods relevant to our
analyses,
Board of Directors
Warwick Community Bancorp, Inc.
_____________, 2004
Page 3
that all of the representations and warranties contained in the Agreement and
all related agreements are true and correct, that each party to the agreements
will perform all of the covenants required to be performed by such party under
the agreements, that the conditions precedent in the agreements are not waived
and that the Merger will not be taxable for federal income tax purposes at the
corporate level. Finally, with your consent, we have relied upon the advice
Warwick has received from its legal, accounting and tax advisors as to all
legal, accounting and tax matters relating to the Merger and the other
transactions contemplated by the Agreement.
Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise, reaffirm or
withdraw this opinion or otherwise comment upon events occurring after the date
hereof. We are expressing no opinion herein as to what the value of Provident's
common stock will be when issued to Warwick's shareholders pursuant to the
Agreement or the prices at which Warwick's or Provident's common stock may trade
at any time. We also express no opinion regarding the payment or amount, if any,
of any Special Dividend.
We have acted as Warwick's financial advisor in connection with the
Merger and will receive a fee for our services, a substantial portion of which
is contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. Warwick has also agreed to indemnify us against certain
liabilities arising out of our engagement. In the past, we have provided certain
other investment banking services for Warwick and have received compensation for
such services, and we may provide additional services, and receive compensation
for such services, prior to the closing of the merger. In the ordinary course of
our business as a broker-dealer, we may purchase securities from and sell
securities to Warwick and Provident and their affiliates. We may also actively
trade the common stock of Warwick and Provident or their affiliates for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Warwick in
connection with its consideration of the Merger and does not constitute a
recommendation to any shareholder of Warwick as to how such shareholder should
vote at any meeting of shareholders called to consider and vote upon the Merger
or the form of consideration such shareholder should elect in the Merger. Our
opinion is directed only to the fairness, from a financial point of view, of the
Merger Consideration to holders of Warwick Shares and does not address the
underlying business decision of Warwick to engage in the Merger, the relative
merits of the Merger as compared to any other alternative business strategies
that might exist for Warwick or the effect of any other transaction in which
Warwick might engage. Our opinion is not to be quoted or referred to, in whole
or in part, in a registration statement, prospectus, proxy statement or in any
other document, nor shall this opinion be used for any other purposes, without
Sandler O'Neill's prior written consent; PROVIDED, HOWEVER, that we hereby
consent to the inclusion of this opinion as an appendix to the Proxy
Statement/Prospectus of Warwick and Provident dated the date hereof and to the
references to this opinion therein.
Board of Directors
Warwick Community Bancorp, Inc.
_____________, 2004
Page 4
Based upon and subject to the foregoing, it is our opinion, as of the
date hereof, that the Merger Consideration to be received by the holders of
Warwick Shares is fair to such shareholders from a financial point of view.
Very truly yours,
APPENDIX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262
SS. 262. APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this
State who holds shares of stocK on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation
surviving a merger if the merger did not require for its approval the
vote of the stockholders of the surviving corporation as provided in
subsection (f) of ss. 251 of thiS title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
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b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock
(or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation
will be either listed on a national securities exchange or
designated as a national market system security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was such
on the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand
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as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
ss. 228 or ss. 253 of this title, thEn either a constituent corporation
before the effective date of the merger or consolidation or the
surviving or resulting corporation within 10 days thereafter shall
notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of
the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following
the sending of the first notice, such second notice need only be sent to
each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such
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stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
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borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX D
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD
OF DIRECTORS OF WARWICK COMMUNITY BANCORP, INC.
I. STATEMENT OF POLICY
The Audit Committee (the "Committee") is appointed by the Board of
Directors (the "Board") of Warwick Community Bancorp, Inc. (the "Corporation")
to represent and provide assistance to the Board in fulfilling its oversight
responsibility relating to the integrity of the Corporation's financial
statements and the financial reporting processes; the systems of internal
accounting and financial controls; the Corporation's compliance with legal and
regulatory requirements; the annual independent audit of the Corporation's
financial statements; the independent auditors' qualifications and independence;
the performance of the Corporation's internal audit function and independent
auditors and any other areas specified by the Board of potential financial risks
to the Corporation. The Committee shall annually prepare a report to
shareholders as required by the Securities and Exchange Commission (the "SEC")
for inclusion in the Corporation's annual proxy statement. In discharging its
duties and responsibilities, the Committee is empowered to investigate any
matter brought to its attention, with full access to all necessary books,
records, facilities and personnel of the Corporation, and has the authority to
retain at the Corporation's expense special legal, accounting or other advisors,
consultants or experts as it deems appropriate.
In fulfilling its responsibilities, it is recognized that members of the
Committee are not employees of the Corporation. The Corporation's management is
responsible for preparing the Corporation's financial statements. The
independent auditors are responsible for auditing the Corporation's annual
financial statements and reviewing the Corporation's quarterly financial
statements prior to the filing of the Corporation's annual and quarterly reports
on Forms 10-K and 10-Q with the SEC. It is not the duty or responsibility of the
Committee or its members to conduct auditing or accounting reviews or procedures
or to determine that the Corporation's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles ("GAAP") and applicable rules and regulations. These are the
responsibilities of management and the independent auditors. Each member of the
Committee shall be entitled to rely on the integrity of those persons and
organizations within and outside the Corporation from whom and from which he or
she receives information and the accuracy of the financial and other information
provided to the Committee by such persons or organizations, absent actual
knowledge to the contrary (which shall be promptly reported to the Board).
II. COMMITTEE COMPOSITION AND MEETINGS
The Committee composition shall be in accordance with the Nasdaq Stock
Market (the "Nasdaq") listing standards. The Committee shall be comprised of
three or more directors (including a chairperson) as appointed annually by the
Board, considering the recommendation of the Nominating Committee, each of whom
shall meet the independence requirements of the Nasdaq and SEC for audit
committee members, and each of whom shall be free from any relationship that
would interfere with the exercise of his or her independent judgment. Each
member of the Committee shall be financially literate, as such qualification is
interpreted by the
D-1
Board in its business judgment. At least one member of the
Committee may be designated annually by the Board as an "audit committee
financial expert," as the SEC defines that term and as the Board interprets such
qualification in its business judgment consistent with such definition. The
Board shall have the power at any time to change the membership of the Committee
and to fill vacancies, subject to the qualification requirements of this
Charter.
The Committee shall meet at least quarterly. The Committee chairperson
shall prepare and/or approve an agenda in advance of each meeting. If the
chairperson is not available for a meeting, the other members of the Committee
may appoint a temporary chairperson for such meeting. The Committee may ask
members of management or others to attend meetings and provide pertinent
information as necessary. The Committee shall meet separately, periodically,
with management, the chief internal auditor and/or other members of the
Corporation's Internal Audit Department and the independent auditors, to discuss
any matters that the Committee or any of these persons believes should be
discussed. The Committee may also meet separately with regulatory examiners.
III. COMMITTEE DUTIES, RESPONSIBILITIES AND PROCESSES
The following shall be the principal duties, responsibilities and
recurring processes of the Committee in carrying out its oversight role. The
processes are set forth as a guide with the understanding that the Committee may
supplement them as appropriate. The Committee will cause to be kept adequate
minutes of all its proceedings, and will report its actions at the next meeting
of the Board. Committee members will be furnished with copies of the minutes of
each meeting and any report of action taken by unanimous consent. The Committee
is governed by the same rules regarding meetings (including meetings by
conference telephone or similar communications equipment), action without
meetings, notice, waiver of notice, and quorum and voting requirements as are
applicable to the Board. The Committee is authorized and empowered to adopt its
own rules of procedure not inconsistent with (a) any provision of this Charter,
(b) any provision of the Bylaws of the Corporation, or (c) the laws of its
jurisdiction of incorporation.
As part of its oversight responsibility, the Committee shall:
REVIEW PROCEDURES
1. Review and discuss the form of presentation and type of
information to be contained in earnings press releases. The
Committee need not discuss in advance each earnings release or
each instance in which the Corporation may provide earnings
guidance.
2. Prior to the filing of quarterly and annual reports on Forms
10-Q and 10-K, review and discuss with management and the
independent auditors: (i) the Corporation's quarterly and annual
consolidated financial statements; (ii) matters that affect the
Corporation's consolidated financial statements, including
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations;" (iii) the
results of the independent auditors' reviews of the quarterly
financial statements, the audit of the annual financial
statements
D-2
and the independent auditors' report, and any other matters
required to be communicated to the Committee by the independent
auditors, as well as discussions regarding qualitative judgments
of the independent auditors about the appropriateness, not just
the acceptability, of the Corporation's accounting principles,
and the clarity of the financial statements; (iv) all critical
accounting policies and practices to be used; (v) any matters
required to be communicated to the Committee by the independent
auditors in accordance with SAS Nos. 61 and 71 or any other SAS;
and (vi) other material written communications between the
independent auditors and management. Prior to the filing of the
Corporation's Annual Report on Form 10-K, recommend to the Board
whether the audited financial statements should be included in
the Form 10-K.
3. Regularly review with the independent auditors any problems or
difficulties encountered in the course of the audit work and
management's response, including any restrictions on the scope
of activities or access to requested information and any
significant disagreements with management.
4. Review: (i) any major issues regarding accounting principles and
financial statement presentations, including any significant
changes in the Company's selection or application of accounting
principles, and any major issues as to the adequacy of the
Corporation's internal controls and any special audit steps
adopted in light of any material control deficiencies; (ii)
analyses prepared by management and/or the independent auditor
setting forth significant financial reporting issues and
judgments made in connection with the preparation of the
financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements; and (iii)
the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the Corporation's financial
statements. In consultation with management, the independent
auditors and the internal auditors, monitor the integrity and
effectiveness of the Corporation's financial reporting processes
and systems of internal controls, including reviewing and
discussing major financial risk exposures and the steps
management has taken to monitor, control and report such
exposures; and review significant findings relating to the
foregoing prepared by the independent auditors or the internal
auditors, together with management's responses and follow-up to
these reports.
5. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting,
internal accounting controls or auditing matters and for the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. Such
procedures have been established by the Committee and are set
forth in the Corporation's Code of Business Conduct and Ethics.
INDEPENDENT AUDITORS AND OTHER EXTERNAL SERVICES
6. The Committee is directly responsible for the appointment,
compensation, retention and oversight of the work of the
independent auditors, including
D-3
resolution of disagreements between management and the
independent auditors regarding financial reporting. The
independent auditors shall report directly to the Committee.
7. Pre-approve the engagement letters and the fees to be paid to
the independent auditors for all audit and permissible non-audit
services to be provided by the independent auditors and consider
the possible effect that any non-audit services could have on
the independence of the auditors. The Committee may establish
pre-approval policies and procedures, as permitted by applicable
law and SEC regulations and consistent with this Charter, for
the engagement of the independent auditors to render permissible
non-audit services to the Corporation, including but not limited
to policies that would allow the delegation of pre-approval
authority to one or more members of the Committee, provided that
any pre-approvals delegated to one or more members of the
Committee are reported to the Committee at its next scheduled
meeting.
8. Evaluate the qualifications, independence and performance of the
independent auditors annually. This evaluation shall include a
review and discussion of the annual communication as to
independence delivered by the independent auditors required by
Independence Standards Board Standard No. 1. Ensure the rotation
of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law and the rotation of
any other audit partner whose rotation is required by the
regulations of the SEC.
9. Review the audit plan of the independent auditors -- discuss
scope, staffing, timing, estimated and actual fees, reliance
upon management and internal audit and general audit approach.
10. Set clear hiring policies for employees or former employees of
the independent auditors.
INTERNAL AUDIT DEPARTMENT
11. Review the budget, program, changes in program, activities,
strategies, organizational structure and qualifications of the
Internal Audit Department, as needed, it being understood that
the Internal Audit Department functionally reports directly to
the Committee. Evaluate whether the Internal Audit Department
operation and structure permits unrestricted access by internal
auditors to records, personnel and physical properties relevant
to the performance of its responsibilities and to top
management, the Committee and the Board. Assess the
appropriateness of the resources allocated to internal auditing.
Evaluate the effectiveness of the internal audit function.
12. Review the appointment, performance and replacement, if
appropriate, of the chief internal auditor. Decisions regarding
hiring or termination of the chief internal auditor require
endorsement by the Committee. The chairperson of the
D-4
Committee will also be involved in performance evaluation and
compensation decisions related to the chief internal auditor.
13. Review significant issues presented by the Internal Audit
Department together with management's response and follow-up to
these reports.
OTHER COMMITTEE RESPONSIBILITIES
14. Review and reassess the adequacy of this Charter at least
annually, and recommend any proposed changes to the Board for
its approval. Ensure the publication of this Charter in
accordance with SEC regulations.
15. Maintain minutes of meetings and report regularly to the Board
on the Committee's activities. Review with the Board any issues
that arise with respect to the quality or integrity of the
Corporation's financial statements, the Corporation's compliance
with legal or regulatory requirements, the performance and
independence of the independent auditors, or the performance of
the internal audit function.
16. Conduct an appropriate review of and approve all related party
transactions on an ongoing basis, as required by the Nasdaq
listing standards. For these purposes, the term "related party
transactions" shall refer to transactions required to be
disclosed pursuant to SEC Regulation S-K, Item 404.
17. Review with the Corporation's chief corporate counsel: (i) any
significant legal matter that could have a material impact on
the Corporation's financial statements; (ii) legal compliance
matters, including corporate securities trading policies and
material notices to or inquiries received from governmental
agencies; and (iii) reports of evidence of a material violation
of securities laws or breaches of fiduciary duty.
18. Review disclosures made to the Committee by the Corporation's
CEO and CFO during their certification process for the Forms
10-K and 10-Q with respect to the financial statements and about
any significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
and any fraud, whether or not material, involving management or
other employees who have a significant role in the Corporation's
internal control over financial reporting.
19. Ensure required certifications are made to Nasdaq: (i) that a
formal written charter has been adopted for the Committee and
that the Committee has reviewed and reassessed the adequacy of
the charter on an annual basis; and (ii) as to the independence
of the members of the Committee.
20. Perform any other activities consistent with this Charter, the
Corporation's bylaws or governing law as the Committee or the
Board deems necessary or appropriate.
D-5
IV. Funding
The Corporation shall provide the Committee with appropriate funding, as
determined by the Committee, in its capacity as a committee of the Board, for
payment of: (i) compensation to the independent auditors and to any advisors
employed by the Committee; and (ii) ordinary administrative expenses of the
Committee that are necessary or appropriate in carrying out its duties.
D-6
APPENDIX E
CHARTER OF THE NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS OF
WARWICK COMMUNITY BANCORP, INC.
I. STATEMENT OF POLICY
The Nominating Committee (the "Committee") shall be appointed by the
Board of Directors (the "Board") of Warwick Community Bancorp, Inc. (the
"Corporation") for the purpose of (i) identifying individuals qualified to serve
as Board members, consistent with criteria approved by the Board; and (ii)
recommending to the Board the director nominees for election or appointment to
the Board of Directors.
II. COMMITTEE COMPOSITION AND MEETINGS
The Committee shall be comprised of three or more directors (including a
chairperson) as appointed annually by the Board, each of whom shall be an
independent director as defined by the Nasdaq Stock Market (the "Nasdaq")
listing standards and each of whom shall be free from any relationship that
would interfere with the exercise of his or her independent judgment. The Board
shall have the power at any time to change the membership of the Committee and
to fill vacancies, subject to the qualification requirements of this Charter.
The Committee shall meet at least two times annually or more frequently as
circumstances require.
III. COMMITTEE DUTIES, RESPONSIBILITIES AND PROCESS
The Committee will cause to be kept adequate minutes of all its
proceedings, and will report its actions at the next meeting of the Board.
Committee members will be furnished with copies of the minutes of each meeting
and any action taken by unanimous consent. The Committee is governed by the same
rules regarding meetings (including meetings by conference telephone or similar
communications equipment), action without meetings, notice, waiver of notice,
and quorum and voting requirements as are applicable to the Board. The Committee
is authorized and empowered to adopt its own rules of procedure not inconsistent
with (a) any provision of this Charter, (b) any provision of the Bylaws of the
Corporation, or (c) the laws of its jurisdiction of incorporation.
The Committee may request that any directors, officers or employees of
the Corporation, or other persons whose advice and counsel are sought by the
Committee, attend any meeting of the Committee to provide such pertinent
information as the Committee requests.
The Committee shall have the following responsibilities:
1. Recommend to the Board the appropriate size of the Board and
assist in identifying, interviewing and recruiting candidates
for the Board.
E-1
2. Recommend candidates (including incumbents) for election and
appointment to the Board of Directors, subject to the provisions
set forth in the Corporation's Articles or Certificate of
Incorporation and Bylaws relating to the nomination or
appointment of directors, based on the following criteria:
business experience, education, integrity and reputation,
independence, conflicts of interest, diversity, age, number of
other directorships and commitments (including charitable
obligations), tenure on the Board, attendance at Board and
committee meetings, stock ownership, specialized knowledge (such
as an understanding of banking, accounting, marketing, finance,
regulation and public policy) and a commitment to the
Corporation's communities and shared values, as well as overall
experience in the context of the needs of the Board as a whole.
3. Review nominations submitted by stockholders, which have been
addressed to the corporate secretary, and which comply with the
requirements of the Articles or Certificate of Incorporation and
the Bylaws. Nominations from stockholders will be considered and
evaluated using the same criteria as all other nominations.
4. Annually recommend to the Board committee assignments and
committee chairs on all committees of the Board, and recommend
committee members to fill vacancies on committees as necessary.
5. Perform any other duties or responsibilities expressly delegated
to the Committee by the Board.
IV. INVESTIGATIONS AND STUDIES; OUTSIDE ADVISERS
The Committee may conduct or authorize studies of or investigations into
matters within the Committee's scope of responsibilities, and may retain, at the
Corporation's expense, such counsel or other advisers as it deems necessary
(which may, if the Committee deems it appropriate, be the Corporation's regular
counsel or advisers). The Committee shall have the authority to retain or
terminate one or more search firms to assist the Committee in carrying out its
responsibilities, including authority to approve the firm's fees and retention
terms, which fees shall be borne by the Corporation.
E-2
APPENDIX F
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-2
Consolidated Statement of Financial Condition as of
December 31, 2003 F-3
Consolidated Statement of Income for the Year Ended
December 31, 2003 F-4
Consolidated Statement of Changes in Stockholders'
Equity for the Year Ended December 31, 2003 F-5
Consolidated Statement of Cash Flows for the Year Ended
December 31, 2003 F-6
Notes to Consolidated Financial Statements F-7
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Provident Bancorp, Inc. (as successor to E.N.B. Holding Company, Inc.):
We have audited the accompanying consolidated statement of financial condition
of E.N.B. Holding Company, Inc. and subsidiaries (the Company) as of December
31, 2003, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As discussed in note 16 to the accompanying consolidated financial statements,
Provident Bancorp, Inc. completed its acquisition of the Company by acquiring
all of the Company's outstanding shares of common stock on January 14, 2004.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of E.N.B. Holding
Company, Inc. and subsidiaries as of December 31, 2003, and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Albany, New York
May 21, 2004
F-2
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statement of Financial Condition
December 31, 2003
(In thousands, except per share data)
ASSETS
Cash and due from banks (note 2) $ 19,005
Securities available for sale, at estimated fair value (note 3) 110,194
Investment securities, at amortized cost (estimated fair value of $5,847) (note 4) 5,528
Loans receivable, net (note 5) 217,118
Accrued interest receivable 1,809
Premises, equipment, and leasehold improvements, net (note 6) 6,258
Other assets 1,299
----------------
Total assets $ 361,211
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 85,452
Regular savings and NOW accounts 114,164
Money market deposit accounts 12,970
Certificates of deposit (note 9) 103,573
Individual retirement accounts (note 9) 9,251
----------------
Total deposits 325,410
Federal funds purchased 5,000
Accrued expenses and other liabilities 2,698
----------------
Total liabilities 333,108
----------------
Commitments and contingencies (note 10)
Stockholders' equity:
Common stock, $20 par value. Authorized 250,000 shares;
issued 20,000 shares; outstanding 15,227 shares 400
Surplus 945
Undivided profits 31,248
Accumulated other comprehensive loss, net of tax (833)
Treasury stock at cost, 4,773 shares (3,657)
----------------
Total stockholders' equity 28,103
----------------
Total liabilities and stockholders' equity $ 361,211
================
See accompanying notes to consolidated financial statements.
F-3
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statement of Income
Year ended December 31, 2003
(In thousands, except per share data)
Interest and dividend income:
Interest and fees on loans $ 14,395
Interest and dividends on securities available for sale and investment securities:
U.S. government and agency obligations 4,550
Obligations of states and political subdivisions 964
Other 48
Interest on federal funds sold 64
---------------
Total interest and dividend income 20,021
---------------
Interest expense:
Regular savings and NOW accounts 1,188
Money market deposit accounts 118
Certificates of deposit 2,340
Individual retirement accounts 241
Borrowings 2
---------------
Total interest expense 3,889
---------------
Net interest income 16,132
Provision for loan losses (note 5) 620
---------------
Net interest income after provision for loan losses 15,512
---------------
Non-interest income:
Service charges on deposit accounts 2,203
Other service charges 73
Gain on securities transactions (note 3) 22
Other 136
---------------
Total non-interest income 2,434
---------------
Non-interest expenses:
Salaries and wages 6,300
Pension and other employee benefits 1,440
Occupancy and equipment expenses 1,748
Office supplies 231
Merger related expenses (note 16) 1,147
Other (note 12) 2,487
---------------
Total non-interest expense 13,353
---------------
Income before income tax expense 4,593
Income tax expense (note 8) 1,917
---------------
Net income $ 2,676
===============
Basic earnings per share $ 175.74
===============
See accompanying notes to consolidated financial statements.
F-4
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
Year ended December 31, 2003
(In thousands, except per share data)
ACCUMULATED
OTHER TOTAL
COMMON UNDIVIDED COMPREHENSIVE TREASURY STOCKHOLDERS' COMPREHENSIVE
STOCK SURPLUS PROFITS INCOME (LOSS) STOCK EQUITY INCOME
----------- --------- ----------- --------------- --------- ------------ --------------
Balance at January 1, 2003 $ 400 945 29,729 765 (3,657) 28,182
Comprehensive income:
Net income -- -- 2,676 -- -- 2,676 2,676
Other comprehensive income, net of tax:
Unrealized net holding loss arising
during the year (pre-tax loss $2,455) -- -- -- (1,498) -- (1,498) (1,498)
Reclassification adjustment for gain
realized in net income during the year
(pre-tax gain $22) -- -- -- (14) -- (14) (14)
Minimum pension liability adjustment
(pre-tax loss $141) -- -- -- (86) -- (86) (86)
--------------
Comprehensive income $ 1,078
==============
Cash dividends declared ($76 per share) -- -- (1,157) -- -- (1,157)
----------- --------- ----------- --------------- --------- ------------
Balance at December 31, 2003 $ 400 945 31,248 (833) (3,657) 28,103
=========== ========= =========== =============== ========= ============
See accompanying notes to consolidated financial statements.
F-5
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year ended December 31, 2003
(In thousands)
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income $ 2,676
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 603
Provision for loan losses 620
Deferred tax benefit (261)
Gain on securities transactions (22)
Increase in accrued interest receivable (208)
Decrease in other assets 20
Decrease in accrued expenses and other liabilities (316)
----------------
Net cash provided by operating activities 3,112
----------------
Cash flows from investing activities:
Proceeds from the sale of securities available for sale 6,022
Proceeds from maturity, calls, and paydowns of securities available for sale 86,418
Proceeds from maturity and calls of investment securities 4,026
Purchase of securities available for sale (112,489)
Purchase of investment securities (2,274)
Net increase in loans to customers (35,440)
Proceeds from sale of other real estate owned 22
Capital expenditures (535)
----------------
Net cash used in investing activities (54,250)
----------------
Cash flows from financing activities:
Net increase in deposits 47,534
Net increase in federal funds purchased 5,000
Dividends paid (1,157)
----------------
Net cash provided by financing activities 51,377
----------------
Net increase in cash and cash equivalents 239
Cash and cash equivalents at beginning of year 18,766
----------------
Cash and cash equivalents at end of year $ 19,005
================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,921
Income taxes 2,401
Supplemental schedule of noncash activities:
Transfer of loans to other real estate owned $ 22
Adjustment of securities available for sale to fair value, net of tax (1,512)
Minimum pension liability adjustment, net of tax (86)
See accompanying notes to consolidated financial statements.
F-6
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
E.N.B. Holding Company, Inc. (Company) was organized as a bank holding
company in 1989. The Company acquired substantially all of the
outstanding stock of the Ellenville National Bank (Bank) in exchange
for 20,000 shares of its own common stock. In March 1994, a subsidiary
was formed, Shawangunk Holding Co., Inc., to hold real estate acquired
through foreclosure or otherwise intended for disposition. The
consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all significant
intercompany transactions. The investments in the subsidiaries are
carried under the equity method of accounting. The consolidated
financial statements have been prepared, in all material respects, in
conformity with accounting principles generally accepted in the United
States of America.
(B) BUSINESS
The Bank's lending activities are conducted principally in Ulster,
Orange, and Sullivan Counties of New York State. The Bank grants
single family and multi-family residential loans, commercial real
estate loans, commercial loans, and a variety of consumer loans. In
addition, the Bank grants loans for the construction of residential
homes, multi-family properties, commercial real estate properties, and
for land development. Most loans granted by the Bank are either
secured by real estate or other collateral or guaranteed by Federal
and/or local government authorities. The ability and willingness of
the single family residential and consumer borrowers to honor their
repayment commitments is generally dependent on the level of overall
economic activity within the borrowers' geographic areas and real
estate values. The ability and willingness of commercial real estate,
commercial, and construction loan borrowers to honor their repayment
commitments is generally dependent on the health of the real estate
economic sector within the borrowers' geographic areas and the general
economy. In addition, the other real estate owned, if any, is also
located in the same market area. Accordingly, the ultimate
collectability of a substantial portion of the Company's loan
portfolio and the recovery of the carrying amount of other real estate
owned are susceptible to changes in market conditions in this area.
The determination of the allowance for loan losses is based on
material estimates that are susceptible to change based on such
factors as economic conditions in the market area serviced by the
Company, financial conditions of individual borrowers, and changes in
underlying collateral values. In connection with the determination of
the allowance for loan losses, management obtains independent
appraisals for significant properties.
Management believes that the allowance for loan losses represents the
amount of probable losses inherent in the loan portfolio. While
management uses available information to estimate losses on loans,
future additions to the allowance may be necessary based on changes in
economic conditions, particularly in Ulster, Orange, and Sullivan
Counties of New York State. In addition, various Federal and State
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses. Such
agencies may require the Company to recognize additions to the
allowance based on their judgments about information available to them
at the time of their examination which may not be currently available
to management.
F-7 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(C) SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES
Management determines the appropriate classification of securities at
the time of purchase. If management has the positive intent and
ability to hold debt securities to maturity, they are classified as
investment securities and are stated at amortized cost. If securities
are purchased for the purpose of selling them in the near term, they
are classified as trading securities and they are reported at fair
value with unrealized holding gains and losses reflected in current
earnings. All other debt and marketable equity securities are
classified as securities available for sale and are reported at fair
value, with net unrealized gains or losses reported, net of income
taxes, in a separate component of stockholders' equity. At December
31, 2003, the Company did not hold any securities considered to be
trading securities.
Nonmarketable equity securities, which include Federal Home Loan Bank
Stock and Federal Reserve Bank Stock, are carried at cost since there
is no readily available market value and are included with securities
available for sale. These investments are required for membership.
Gains and losses on the disposition of all securities are based on the
adjusted cost of the specific security sold. The adjusted cost of each
debt security sold is determined based on the stated cost adjusted for
any amortization of premiums or accretion of discounts to the earlier
of call or maturity date. Unrealized losses on securities that reflect
a decline in value which is other than temporary, if any, are charged
to income.
(D) LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the unpaid principal amount, net of the allowance
for loan losses. Interest on loans is credited to income on an accrual
basis based on the principal amount outstanding.
Nonperforming loans include nonaccrual loans, loans which are
contractually past due 90 days or more and still accruing interest and
troubled debt restructurings. Generally, loans are placed on
nonaccrual status, either due to the delinquency status of principal
and/or interest payments, or a judgment by management that, although
payments of principal and/or interest are current, such action is
prudent. Loans are generally placed on nonaccrual status when
principal and/or interest payments are contractually past due 90 days
or more. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is generally reversed against
current year interest income. Interest income on nonaccrual loans is
recognized only if received, and if considered appropriate by
management. Loans are removed from nonaccrual status when they become
current as to principal and interest payments or when, in the opinion
of management, the loans are expected to be fully collectible as to
principal and interest.
Loans are considered impaired when it is probable that the borrower
will not make principal and interest payments according to the
original contractual terms of the loan agreement. Smaller balance,
homogenous loans which are collectively evaluated such as consumer and
residential mortgage loans, are specifically excluded from the
classification of impaired loans unless such loans are restructured in
a troubled debt restructuring. Impaired loans are generally included
in nonperforming loans, as nonaccrual commercial-type loans.
F-8 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
Impairment is measured based on the present value of the expected
future cash flows, discounted at the loan's effective interest rate,
or on the underlying value of collateral for collateral dependent
loans. The impaired loan's carrying value in excess of expected cash
flows or collateral value is specifically reserved for or is charged
to the allowance for loan losses. The Company's impaired loans are
generally collateral dependent. The Company considers estimated costs
to sell, on a discounted basis, when determining the fair value of
collateral in the measurement of impairment if those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans.
The allowance for loan losses represents the amount of probable losses
inherent in the loan portfolio. Additions are made to the allowance
through periodic provisions, which are charged to expense. All losses
of principal are charged to the allowance when incurred or when a
determination is made that a loss is expected. Subsequent recoveries,
if any, are credited to the allowance.
The adequacy of the allowance for loan losses is determined through a
quarterly review of outstanding loans. The impact of economic
conditions on the creditworthiness of the borrowers is considered, as
well as loan loss experience, changes in the composition and volume of
the loan portfolio, and management's assessment of the risks inherent
in the loan portfolio. These and other factors are considered in
assessing the overall adequacy of the allowance for loan losses and
the related provisions for loan losses.
(E) PREMISES, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
The Company's premises, equipment, and leasehold improvements are
carried at cost less accumulated depreciation and amortization.
Depreciation and amortization are computed on the straight-line method
over the estimated useful lives of the assets. Leasehold improvements
are amortized over the shorter of the terms of the related leases or
the useful lives of the assets.
(F) OTHER REAL ESTATE OWNED
Other real estate owned, representing properties acquired in
settlement of loans, is recorded on an individual asset basis at the
lower of cost or the fair value of the asset acquired less an estimate
of the costs to sell the property. Fair value of other real estate
owned is generally determined through independent appraisals. At the
time of foreclosure, the excess, if any, of the loan value over the
fair value of the asset received is charged to the allowance for loan
losses. Subsequent declines in the fair value of such assets, or
increases in the estimated costs to sell the properties and net
operating expenses of such assets, are charged directly to other
expenses.
(G) INCOME TAXES
Income taxes are provided on income regardless of when such taxes are
payable. Deferred taxes result from the recognition of certain items
of income, expense and other comprehensive income (loss) in different
time periods for financial statement and tax return purposes.
F-9 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income tax
expense in the period that includes the enactment date. Deferred tax
assets are reduced by a valuation reserve if, based on the weight of
available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
(H) CASH AND CASH EQUIVALENTS
The Company includes cash, due from banks and federal funds sold (if
any) as cash and cash equivalents.
(I) FINANCIAL INSTRUMENTS
The Company is a party to certain financial instruments with
off-balance sheet risk such as commitments to extend credit, unused
lines of credit, and standby and commercial letters of credit. The
Company's policy is to record such instruments when funded.
(J) EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number
of common shares outstanding for the year. The Company has a simple
capital structure with no dilutive or potentially dilutive securities
outstanding during the year ended December 31, 2003. The weighted
average number of common shares outstanding in 2003 for the basic
earnings per share calculation was 15,227.
(K) USE OF ESTIMATES
The preparation of the consolidated financial statements, in
conformity with accounting principles generally accepted in the United
States of America, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(L) COMPREHENSIVE INCOME OR LOSS
Comprehensive income or loss represents the sum of net income and
items of other comprehensive income or loss, which are reported
directly in stockholders' equity (net of tax) such as the change in
the net unrealized gain or loss on securities available for sale and
minimum pension liability adjustments. Accumulated other comprehensive
loss, which is a component of stockholders' equity at December 31,
2003, represents the net unrealized loss on securities available for
sale (net of tax) of $187,000 and the minimum pension liability
adjustment (net of tax) of $646,000.
F-10 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(2) CASH AND DUE FROM BANKS
The Bank is required to maintain certain reserves of vault cash and/or
deposits with the Federal Reserve Bank. The amount of this reserve
requirement, included in cash and due from banks (non-interest
bearing), was approximately $7.5 million at December 31, 2003.
(3) SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair value of securities available
for sale at December 31, 2003 are as follows (in thousands):
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------ ------------ ------------ ------------
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 89,221 397 (1,593) 88,025
Mortgage-backed securities 4,734 259 -- 4,993
Obligations of states and political
subdivisions 15,749 645 (21) 16,373
Debt securities issued by foreign
governments 300 6 -- 306
------------ ------------ ------------ ------------
Total debt securities 110,004 1,307 (1,614) 109,697
Nonmarketable equity securities 497 -- -- 497
------------ ------------ ------------ ------------
Total $ 110,501 1,307 (1,614) 110,194
============ ============ ============ ============
Gross unrealized losses on securities available for sale and the
related fair value of those securities, aggregated by investment
category and length of time that individual securities have been in a
continuous unrealized loss position, at December 31, 2003 were as
follows (in thousands):
LESS THAN 12 MONTHS 12 MONTHS OR MORE TOTAL
------------------------- ------------------------- -------------------------
ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED
FAIR VALUE LOSSES FAIR VALUE LOSSES FAIR VALUE LOSSES
------------- ---------- ------------- ---------- ------------- ----------
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 54,265 1,593 -- -- 54,265 1,593
Obligations of states and political
subdivisions 2,217 21 -- -- 2,217 21
------------- ---------- ------------- ---------- ------------- ----------
Total temporarily-impaired
securities $ 56,482 1,614 -- -- 56,482 1,614
============= ========== ============= ========== ============= ==========
F-11 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The unrealized losses on securities available for sale were caused by
increases in market interest rates. The contractual terms of these
investments require the issuer to settle the investments at par upon
maturity of the securities. Therefore, these investments are not
considered other-than-temporarily impaired.
The amortized cost and estimated fair value (in thousands) of debt
securities available for sale at December 31, 2003, by contractual
maturity, are shown below (mortgage-backed securities are included by
final contractual maturity). Expected maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
Due in one year or less $ 902 916
Due after one year through five years 25,083 25,232
Due after five years through ten years 45,056 44,001
Due after ten years 38,963 39,548
------------ ------------
Total $ 110,004 109,697
============ ============
During the year ended December 31, 2003, proceeds from sales of
securities available for sale totaled approximately $6,022,000 with
gross gains of approximately $22,000 and no gross losses.
The amortized cost of securities available for sale pledged to secure
public funds on deposit, as required by law, or for other purposes
amounted to approximately $41.2 million at December 31, 2003.
(4) INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities
at December 31, 2003 are as follows (in thousands):
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------------ ------------ ------------ ------------
Obligations of states and political
subdivisions $ 5,485 315 -- 5,800
Debt securities issued by foreign
governments 43 4 -- 47
------------ ------------ ------------ ------------
Total $ 5,528 319 -- 5,847
============ ============ ============ ============
F-12 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The amortized cost and estimated fair value (in thousands) of debt
securities held to maturity at December 31, 2003, by contractual
maturity, are shown below. Expected maturities may differ from
contractual maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
Due in one year or less $ 2,244 2,270
Due after one year through five years 2,309 2,481
Due after five years through ten years 735 829
Due after ten years 240 267
------------ ------------
Total $ 5,528 5,847
============ ============
The amortized cost of investment securities pledged to secure public
funds on deposit, as required by law, or for other purposes amounted
to approximately $2.3 million at December 31, 2003.
(5) LOANS RECEIVABLE, NET
Loans receivable consisted of the following at December 31, 2003 (in
thousands):
Loans secured by real estate:
Residential $ 22,301
Commercial 111,480
Construction 14,634
----------------
Total real estate loans 148,415
----------------
Commercial business loans 39,092
----------------
Home equity lines of credit 10,153
Other consumer loans 22,215
----------------
Total consumer loans 32,368
----------------
Total gross loans 219,875
Less allowance for loan losses (2,757)
----------------
Net loans $ 217,118
================
F-13 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
A summary of transactions in the allowance for loan losses for the
year ended December 31, 2003 is as follows (in thousands):
Balance, beginning of year $ 2,314
Provision for loan losses 620
Recoveries of previous charge-offs 32
Loans charged-off (209)
--------------
Balance, end of year $ 2,757
==============
Nonperforming loans at December 31, 2003 are as follows (in
thousands):
Loans on nonaccrual status $ 784
Loans past due 90 days or more and still
on an accrual basis 985
--------------
Total nonperforming loans $ 1,769
==============
There are no commitments to extend further credit on the nonperforming
loans. The reduction in interest income from the above nonperforming
loans for the year ended December 31, 2003 is as follows (in
thousands):
Originally contracted interest $ 77
Recorded interest 53
--------------
Reduction in interest income $ 24
==============
The recorded investment in loans that are considered to be impaired
totaled approximately $784,000 at December 31, 2003. The related
allowance for loan losses on impaired loans was approximately $4,000
at December 31, 2003. Included in total impaired loans was
approximately $759,000 of impaired loans that, as a result of
charge-offs or the adequacy of collateral values, did not require an
allowance for loan losses at December 31, 2003. During 2003, the
average balance of impaired loans was approximately $626,000. There
was no interest income collected on impaired loans during 2003.
Certain directors, executive officers, and principal stockholders of
the Bank are also customers and had other transactions with the Bank
in the ordinary course of business. Such loans were made in the
ordinary course of business at the Bank's normal credit terms,
including interest rate, and collateralization, and do not represent
more than a normal risk of collection. The aggregate of such loans to
these persons, their immediate families and the companies in which
they are principal owners totaled approximately $2,026,000 at December
31, 2003. Advances and repayments on these loans amounted to
approximately $1,771,000 and $2,557,000, respectively, for the year
ended December 31, 2003.
F-14 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(6) PREMISES, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Bank premises, equipment, and leasehold improvements at cost less
accumulated depreciation and amortization at December 31, 2003 are as
follows (in thousands):
Land $ 517
Buildings 6,522
Fixtures and equipment 4,971
Leasehold improvements 295
--------------
12,305
Less: Accumulated depreciation and
amortization (6,047)
--------------
$ 6,258
==============
Depreciation and amortization expense on premises, equipment, and
leasehold improvements aggregated approximately $603,000 for the year
ended December 31, 2003.
(7) PENSION AND PROFIT SHARING PLANS
The Company has a contributory defined-benefit pension plan covering
substantially all employees meeting certain eligibility requirements
which provides benefits upon reaching normal retirement age of 65 and
five years of service. The normal retirement benefit is 2.75% of
average monthly earnings multiplied by years of benefit service up to
15 years. Employees who participate contribute 2% of their earnings.
Early retirement is available upon attainment of age 55.
F-15 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The following is a summary of changes in the projected benefit
obligation and plan assets for the pension plan, and a reconciliation
of the plan's funded status to the net amount recognized in the
consolidated statement of financial condition at December 31, 2003 (in
thousands):
Change in projected benefit obligation:
Beginning of year $ 7,484
Service cost 291
Interest cost 476
Participant contributions 70
Actuarial gain (96)
Change in actuarial assumptions 557
Benefits paid (230)
---------------
End of year 8,552
---------------
Change in fair value of plan assets:
Beginning of year 5,179
Actual return on plan assets 537
Employer contributions 599
Participant contributions 70
Benefits paid and plan expenses (250)
---------------
End of year 6,135
---------------
Funding deficiency at end of year (2,417)
Unamortized net transition obligation 24
Unrecognized net actuarial loss 2,531
Unamortized prior service cost 298
---------------
Net amount recognized $ 436
===============
Amounts recognized in the consolidated
statement of financial condition
consist of:
Minimum liability $ (944)
Intangible asset 322
Adjustment included in accumulated
other comprehensive loss, pre-tax 1,058
---------------
Net amount recognized $ 436
===============
The accumulated benefit obligation related to the plan was
approximately $7,079,000 at December 31, 2003.
F-16 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The components of net periodic pension cost for the year ended
December 31, 2003 were as follows (in thousands):
Service cost $ 291
Interest cost 476
Expected return on plan assets (433)
Amortization of prior service cost 36
Amortization of transition obligation 5
Recognized net actuarial loss 94
---------------
Net periodic pension cost $ 469
===============
Weighted average assumptions used to determine the projected benefit
obligation at December 31, 2003 were as follows:
Discount rate 6.0%
Rate of compensation increase 4.0%
Weighted average assumptions used to determine net periodic pension
cost for the year ended December 31, 2003 were as follows:
Discount rate 6.5%
Expected long-term rate of return on plan assets 8.0%
Rate of compensation increase 4.0%
All eligible employees of the Company are also covered by a
noncontributory profit sharing plan. The amount of the contribution is
determined annually at the discretion of the Company's board of
directors. Total profit sharing expense for the year ended December
31, 2003 amounted to approximately $312,000.
(8) INCOME TAXES
The components of income tax expense are as follows for the year ended
December 31, 2003 (in thousands):
Current tax expense:
Federal $ 1,683
State 495
----------------
Total current tax expense 2,178
Deferred tax benefit (261)
----------------
Total income tax expense $ 1,917
================
F-17 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
Total income tax expense differed from the amount computed by applying
the U.S. Federal income tax rate to income before income taxes. The
reasons for these differences for the year ended December 31, 2003
were as follows (dollars in thousands):
AMOUNT % OF PRETAX
------------- -------------
Tax expense at statutory rate $ 1,562 34.0%
Tax-exempt bond income (325) (7.1)
State and local income tax, net of Federal tax benefit 271 5.9
Nondeductible merger related expenses 366 8.0
Other 43 0.9
------------- -------------
Total income tax expense $ 1,917 41.7%
============= =============
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 2003 are presented below (in thousands):
Gross deferred tax asset:
Differences in reporting the provision for
loan losses and loan charge offs $ 902
Accrued donations 8
Deferred directors compensation 150
-------------
Total gross deferred tax asset 1,060
-------------
Gross deferred tax liabilities:
Depreciation 507
Pension 169
Prepaid items 77
-------------
Total gross deferred tax
liabilities 753
-------------
Net deferred tax asset at end of year $ 307
=============
In addition to the deferred tax amounts described above, the Company
had a deferred tax asset of approximately $120,000 related to net
unrealized losses on securities available for sale at December 31,
2003. The Company also had a deferred tax asset of approximately
$412,000 related to the charge to accumulated other comprehensive
income for recognition of a minimum pension liability at December 31,
2003.
In determining whether a deferred tax asset valuation allowance is
necessary, the Company considers the nature and timing of the deferred
tax items, the amount of available open tax carrybacks and estimates
of future taxable income. No valuation allowance was considered
necessary at December 31, 2003.
F-18 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(9) CERTIFICATES OF DEPOSIT AND INDIVIDUAL RETIREMENT ACCOUNTS
The Bank had approximately $50,662,000 of certificates of deposit and
individual retirement accounts of $100,000 or more at December 31,
2003. At December 31, 2003, the scheduled maturities of total
certificates of deposit and individual retirement accounts were as
follows (in thousands):
Within one year $ 104,078
One to three years 8,097
Three to five years 649
------------
$ 112,824
============
Certain executive officers and directors of the Company, as well as
certain affiliates of these officers and directors were customers of,
and had deposit balances with, the Company in the ordinary course of
business. The aggregate of such deposit relationships was
approximately $12.5 million as of December 31, 2003.
(10) COMMITMENTS AND CONTINGENT LIABILITIES
(A) OFF-BALANCE SHEET FINANCING AND CONCENTRATIONS OF CREDIT
The Bank is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments
to extend credit, unused lines of credit, and standby and
commercial letters of credit. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of
the amounts recognized in the consolidated statement of financial
condition. The contract or notional amounts of those instruments
reflect the extent of involvement the Bank has in particular
classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance
by the other party to the commitments to extend credit, unused
lines of credit, and standby and commercial letters of credit is
represented by the contract or notional amount of those
instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance
sheet instruments.
Financial instruments at December 31, 2003 with off-balance sheet
risk are as follow (in thousands):
Financial instruments whose contract
amounts represent credit risk:
Commitments to originate loans $ 21,469
Unused lines of credit 36,134
Standby and commercial letters
of credit 3,746
------------
$ 61,349
============
F-19 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
Commitments to extend credit are agreements to lend to a customer provided
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being fully drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the
borrower.
Standby and commercial letters of credit are conditional commitments issued
by the Bank to guarantee the performance by a customer to a third party.
The credit risk involved in issuing these instruments is essentially the
same as that involved in extending loans to customers. Since a portion of
these instruments will expire unused, the total amounts do not necessarily
represent future cash requirements.
The Bank has available lines of credit with correspondent banks of $32.7
million at December 31, 2003. Advances on these lines are secured by the
Bank's real estate mortgages, investment securities, and securities
available for sale. There were no advances on these lines of credit at
December 31, 2003.
FASB Interpretation No. 45 (FIN No. 45), GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS; AN INTERPRETATION OF FASB STATEMENTS NO. 5, 57, AND
107 AND RESCISSION OF FASB INTERPRETATION NO. 34, requires certain
disclosures and liability-recognition for the fair value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Bank does not
issue any guarantees that would require liability-recognition or
disclosure, other than its standby letters of credit.
The Bank has issued conditional commitments in the form of standby letters
of credit to guarantee payment on behalf of a customer and guarantee the
performance of a customer to a third party. Standby letters of credit
generally arise in connection with lending relationships. The credit risk
involved in issuing these instruments is essentially the same as that
involved in extending loans to customers. Contingent obligations under
standby letters of credit totaled approximately $3,636,000 at December 31,
2003 and represent the maximum potential future payments the Bank could be
required to make. Typically, these instruments have terms of twelve months
or less and expire unused; therefore, the total amounts do not necessarily
represent future cash requirements. Each customer is evaluated individually
for creditworthiness under the same underwriting standards used for
commitments to extend credit and on-balance sheet instruments. Bank
policies governing loan collateral apply to standby letters of credit at
the time of credit extension. Loan-to-value ratios are generally consistent
with loan-to-value requirements for other commercial loans secured by
similar types of collateral. The fair value of the Bank's standby letters
of credit at December 31, 2003 was not significant.
F-20 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(B) LEASES
The Company leases certain branches, office space, and equipment under
leases classified as operating leases. Minimum rental commitments under
noncancelable operating leases with initial or remaining terms of one year
or more are as follows at December 31, 2003 (in thousands):
Due in one year or less $ 122
Due after one year through two years 69
---------------
Total $ 191
===============
Rent expense was approximately $156,000 for the year ended December 31,
2003.
(C) LITIGATION
E.N.B. Holding Company, Inc. and its subsidiaries may, from time to time,
be defendants in legal proceedings relating to the conduct of their
business. In the best judgment of management, the consolidated financial
position of E.N.B. Holding Company, Inc. and its subsidiaries will not be
affected materially by the outcome of any pending legal proceedings or
other contingent liabilities and commitments.
(11) FAIR VALUES
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS
No. 107), requires that the Company disclose estimated fair values for its
financial instruments. Fair value estimates are made at a specific point in
time, based on relevant market information, and information about the
financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no market
exists for a significant portion of the Company's financial instruments,
fair value estimates are based on judgments regarding future expected net
cash flows, current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Significant assets and
liabilities that are not considered financial assets or liabilities include
the deferred tax assets and liabilities and premises, equipment and
leasehold improvements. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in the
estimates of fair value under SFAS No. 107. In addition, there are
significant intangible assets that SFAS No. 107 does not recognize, such as
the value of "core deposits", the Bank's branch network and other items
generally referred to as "goodwill".
F-21 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The following summarizes the estimated fair value of financial instruments
at December 31, 2003 with comparisons to carrying amounts (in thousands):
CARRYING ESTIMATED
AMOUNT FAIR VALUE
------------- -------------
Financial assets:
Cash and due from banks $ 19,005 19,005
Securities available for sale 110,194 110,194
Investment securities 5,528 5,847
Net loans 217,118 222,440
Accrued interest receivable 1,809 1,809
Financial liabilities:
Deposits:
Demand $ 85,452 85,452
Regular savings and NOW accounts 114,164 114,164
Money market deposit accounts 12,970 12,970
Certificates of deposit and individual
retirement accounts 112,824 113,610
------------- -------------
Total deposits 325,410 326,196
Federal funds purchased 5,000 5,000
Accrued interest payable 384 384
The specific estimation methods and assumptions used can have a substantial
impact on the resulting fair values ascribed to financial instruments.
Following is a brief summary of the significant methods and assumptions
used in estimating the fair values shown in the above table.
SECURITIES
The carrying amounts for short-term investment securities and short-term
securities available for sale approximate fair value because they mature or
reprice in 90 days or less. The fair value of longer-term securities is
estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers. The fair value of certain
state and municipal securities is not readily available through market
sources, so fair value estimates are based on quoted market prices of
similar instruments, adjusted for differences between the quoted instrument
and the instruments being valued. See notes 3 and 4 for fair value
information related to securities available for sale and investment
securities, respectively.
F-22 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as real estate,
commercial, and installment. Each loan category is further segregated into
fixed-and adjustable-rate interest terms and by performing and
nonperforming categories. The fair value of performing loans is calculated
by discounting scheduled cash flows through the estimated maturity using
estimated market discount rates that reflect the credit and interest rate
risk inherent in the loan. The estimate of maturity is based on the
contractual term of the loans to maturity and repricing opportunities.
Fair value for nonperforming loans is based on recent external appraisals
or discounting of cash flows. Estimated cash flows are discounted using a
rate commensurate with the risk associated with the estimated cash flows.
Assumptions regarding credit risk, cash flows, and discount rates are
judgmentally determined using available market information and specific
borrower information.
DEPOSIT LIABILITIES
The fair value of deposits with no stated maturity, such as
non-interest-bearing demand deposits, regular savings, NOW accounts, and
money market deposit accounts is estimated to be the amount payable on
demand as of December 31, 2003. The fair value of certificates of deposit
and individual retirement accounts is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities. These fair
value estimates do not include the benefit that results from the low-cost
funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
OTHER FINANCIAL INSTRUMENTS
The fair values of cash and due from banks, accrued interest receivable,
federal funds purchased, and accrued interest payable are estimated to
approximate their carrying amounts at December 31, 2003.
COMMITMENTS TO EXTEND CREDIT, AND STANDBY AND COMMERCIAL LETTERS OF CREDIT
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of the
counterparties. For fixed rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of standby and commercial letters of credit is based
on fees currently charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the
counterparties. Fees such as these are not a major part of the Company's
business and management believes that the carrying amount approximates fair
value.
F-23 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(12) OTHER NON-INTEREST EXPENSES
Other non-interest expenses for the year ended December 31, 2003 are made
up of the following components (in thousands):
Professional and outside service fees $ 796
Advertising and public relations 311
Director fees 334
Other 1,046
-------------
$ 2,487
=============
(13) DIVIDEND RESTRICTIONS
Under the National Bank Act, the approval of the Office of the Comptroller
of the Currency (OCC) is required if dividends declared by the Bank in any
year exceed the net profits of that year as defined, combined with the
retained net profits for the two preceding years. At December 31, 2003, the
Company's subsidiary bank could, without approval of the OCC, declare
dividends aggregating approximately $6.6 million.
(14) REGULATORY CAPITAL REQUIREMENTS
The OCC capital regulations require banks to maintain minimum levels of
regulatory capital. Under the regulations in effect at December 31, 2003,
the Bank was required to maintain (i) a minimum leverage ratio of Tier 1
(core) capital to total adjusted average assets of 4.0%, and (ii) minimum
ratios of Tier 1 capital and total capital to risk-weighted assets of 4.0%
and 8.0%, respectively. The Federal Reserve Board (FRB) has adopted similar
requirements for the consolidated capital of bank holding companies.
Under its prompt corrective action regulations, the OCC is required to take
certain supervisory actions (and may take additional discretionary actions)
with respect to an undercapitalized bank. Such actions could have direct
material effect on an institution's financial statements. The regulations
establish a framework for the classification of banks into five categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, an
institution is considered well capitalized if it has a Tier 1 (core)
capital ratio of at least 5.0% (based on total adjusted average assets); a
Tier 1 risk-based capital ratio of at least 6.0%; and a total risk-based
capital ratio of at least 10.0%.
The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about capital components, risk weightings, and other factors.
Management believes that, as of December 31, 2003, the Company and the Bank
met all capital adequacy requirements to which they are subject. Further,
the most recent OCC notification categorized the Bank as a well-capitalized
institution under the prompt corrective action regulations. There have been
no conditions or events since that notification that management believes
have changed the Bank's capital classification.
F-24 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
The following is a summary of the actual capital amounts and ratios for the
Bank and the company (on a consolidated basis) as of December 31, 2003:
ACTUAL
-------------------------------
AMOUNT RATIO
-------------- --------------
(Dollars in thousands)
Tier 1 (core) Capital:
Ellenville National Bank $ 27,941 7.84%
E.N.B. Holding Company, Inc. 28,290 7.94
Tier 1 Risk-Based Capital:
Ellenville National Bank 27,941 11.33
E.N.B. Holding Company, Inc. 28,290 11.46
Total Risk-Based Capital:
Ellenville National Bank 30,698 12.45
E.N.B. Holding Company, Inc. 31,047 12.57
(15) PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following information presents the financial position of E.N.B. Holding
Company, Inc. (Parent Company) at December 31, 2003 and the results of its
operations and cash flows for the year ended December 31, 2003.
Condensed statement of financial condition (Parent Company only):
Assets:
Cash $ 995
Investment in subsidiaries 27,755
-----------
Total assets $ 28,750
===========
Liabilities and stockholders' equity:
Accrued expenses and other liabilities $ 647
Total stockholders' equity 28,103
-----------
Total liabilities and stockholders' equity $ 28,750
===========
F-25 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
Condensed statement of income (Parent Company only):
Revenues:
Cash dividends from subsidiaries $ 3,022
--------------
Expenses:
Merger related expenses 1,147
Salaries and wages 685
Other expenses 75
--------------
1,907
--------------
Income tax benefit (323)
--------------
Income before equity in undistributed income of subsidiaries 1,438
Equity in undistributed income of subsidiaries 1,238
--------------
Net income $ 2,676
==============
Condensed statement of cash flows (Parent Company only):
Increase (decrease) in cash:
Cash flows from operating activities:
Net income $ 2,676
Adjustments to reconcile net income to net cash provided by operating
activities:
Decrease in accrued expenses and other liabilities (289)
Equity in undistributed income of subsidiaries (1,238)
--------------
Net cash provided by operating activities 1,149
--------------
Cash flows from financing activities:
Dividends paid (1,157)
--------------
Net cash used in financing activities (1,157)
--------------
Net decrease in cash (8)
Cash at beginning of year 1,003
--------------
Cash at end of year $ 995
==============
F-26 (Continued)
E.N.B. HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(16) MERGER
On July 2, 2003, Provident Bancorp, Inc. (Provident) announced that it had
entered into a definitive merger agreement with the Company. During the
year ended December 31, 2003, the Company recorded approximately $1,147,000
of merger related expenses which consisted primarily of legal, accounting
and other professional service fees. On January 14, 2004, Provident
completed its acquisition of the Company by acquiring all of the Company's
outstanding shares of common stock.
F-27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Articles TENTH and ELEVENTH of the Certificate of Incorporation of
Provident Bancorp, Inc. (the "Corporation") sets forth circumstances under which
directors, officers, employees and agents of the Corporation may be insured or
indemnified against liability which they incur in their capacities as such:
TENTH:
A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity while serving as a
Director, Officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director of Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not
paid in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article TENTH or
otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of the
Corporation.
ELEVENTH:
A Director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraphs by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits and financial statements filed as part of this Registration
Statement are as follows:
(a) Exhibits
2 Agreement and Plan of Merger by and between Provident Bancorp, Inc. and
Warwick Community Bancorp, Inc *
3.1 Certificate of Incorporation of Provident Bancorp, Inc.**
3.2 Bylaws of Provident Bancorp, Inc.**
4 Form of Common Stock Certificate of Provident Bancorp, Inc.**
5 Opinion of Luse Gorman Pomerenk & Schick regarding legality of
securities being registered
8.1 Federal Tax Opinion of Luse Gorman Pomerenk & Schick
8.2 Federal Tax Opinion of Wachtell, Lipton, Rosen & Katz
10.1 Employee Stock Ownership Plan***
10.2 Employment Agreement with George Strayton, as amended***
10.3 Form of Employment Agreement***
10.4 Form of Deferred Compensation Agreement, as amended**
10.5 Supplemental Executive Retirement Plan***
10.6 Management Incentive Program***
10.7 1996 Long-Term Incentive Plan for Officers and Directors, as amended***
10.8 Provident Bank 2000 Stock Option Plan****
10.9 Provident Bank 2000 Recognition and Retention Plan****
21 Subsidiaries of Registrant**
23.1 Consent of Luse Gorman Pomerenk & Schick (included in the opinions
filed as Exhibits 5 and 8.1 to this registration statement)
23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in the opinion
filed as Exhibit 8.2 to this registration statement)
23.3 Consent of KPMG LLP relating to Provident Bancorp, Inc.
23.4 Consent of KPMG LLP relating to Warwick Community Bancorp, Inc.
23.5 Consent of KPMG LLP relating to E.N.B. Holding Company, Inc.
24 Power of Attorney (set forth on signature page)
99 Opinion of Sandler O'Neill & Partners, L.P. (included as Appendix B to
the proxy statement/prospectus contained in this registration
statement).
- -------------------------------
* Incorporated by Reference to Exhibit 99 to the Current Report on Form
8-K of Provident Bancorp, Inc. filed with the Commission on March 15,
2004 (File No. 0-25233).
** Incorporated by reference to Provident Bancorp, Inc.'s Registration
Statement on Form S-1 (File No. 333-108795), originally filed with the
Commission on September 15, 2003 and amended on October 31, 2003 and
November 10, 2003.
*** Incorporated by reference to the Registration Statement on Form S-1
(File No. 333-63593), originally filed with the Commission on September
17, 1998 and amended on November 6, 1998 and November 12, 1998.
**** Incorporated by reference from Provident Bancorp, Inc.'s Proxy Statement
for the 2000 Annual Meeting of Stockholders filed with the Commission on
January 18, 2000.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or most recent post-effective amendment
thereof) which individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be a bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c)(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for the purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Village of
Montebello, State of New York, on August 12, 2004
PROVIDENT BANCORP, INC.
By: /s/ George Strayton
------------------------------------
George Strayton
President, Chief Executive Officer
and Director
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of Provident Bancorp, Inc.
(the "Company") severally constitute and appoint George Strayton with full power
of substitution, our true and lawful attorney and agent, to do any and all
things and acts in our names in the capacities indicated below which said George
Strayton may deem necessary or advisable to enable the Company to comply with
the Securities Act of 1933, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the registration
statement on Form S-4 relating to the offering of the Company common stock,
including specifically, but not limited to, power and authority to sign for us
or any of us in our names in the capacities indicated below the registration
statement and any and all amendments (including post-effective amendments)
thereto; and we hereby ratify and confirm all that said George Strayton shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ George Strayton President, Chief Executive August 12, 2004
- ------------------------------ Officer and Director (Principal
George Strayton Executive Officer)
/s/ Paul A. Maisch Senior Vice President and Chief August 12, 2004
- ------------------------------ Financial Officer (Principal
Paul A. Maisch Financial and Accounting Officer)
/s/ William F. Helmer Chairman of the Board August 12, 2004
- ------------------------------
William F. Helmer
/s/ Dennis L. Coyle Vice Chairman of the Board August 12, 2004
- ------------------------------
Dennis L. Coyle
/s/ Judith Hershaft Director August 12, 2004
- ------------------------------
Judith Hershaft
/s/ Thomas F. Jauntig, Jr. Director August 12, 2004
- ------------------------------
Thomas F. Jauntig, Jr.
/s/ Victoria Kossover Director August 12, 2004
- ------------------------------
Victoria Kossover
/s/ Donald T. Mcnelis Director August 12, 2004
- ------------------------------
Donald T. McNelis
/s/ Richard A. Nozell Director August 12, 2004
- ------------------------------
Richard A. Nozell
/s/ Carl J. Rosenstock Director August 12, 2004
- ------------------------------
Carl J. Rosenstock
/s/ William R. Sichol, Jr. Director August 12, 2004
- ------------------------------
William R. Sichol, Jr.
/s/ Burt Steinberg Director August 12, 2004
- ------------------------------
Burt Steinberg
/s/ F. Gary Zeh Director August 12, 2004
- ------------------------------
F. Gary Zeh
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 2004
REGISTRATION NO. 333-116851
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
EXHIBITS
TO THE
REGISTRATION STATEMENT
ON
FORM S-4
-----------------------
PROVIDENT BANCORP, INC.
MONTEBELLO, NEW YORK
EXHIBIT INDEX
2 Agreement and Plan of Merger by and between Provident Bancorp, Inc. and
Warwick Community Bancorp, Inc *
3.1 Certificate of Incorporation of Provident Bancorp, Inc.**
3.2 Bylaws of Provident Bancorp, Inc.**
4 Form of Common Stock Certificate of Provident Bancorp, Inc.**
5 Opinion of Luse Gorman Pomerenk & Schick regarding legality of
securities being registered
8.1 Federal Tax Opinion of Luse Gorman Pomerenk & Schick
8.2 Federal Tax Opinion of Wachtell, Lipton, Rosen & Katz
10.1 Employee Stock Ownership Plan***
10.2 Employment Agreement with George Strayton, as amended***
10.3 Form of Employment Agreement***
10.4 Form of Deferred Compensation Agreement, as amended**
10.5 Supplemental Executive Retirement Plan***
10.6 Management Incentive Program***
10.7 1996 Long-Term Incentive Plan for Officers and Directors, as amended***
10.8 Provident Bank 2000 Stock Option Plan****
10.9 Provident Bank 2000 Recognition and Retention Plan****
21 Subsidiaries of Registrant**
23.1 Consent of Luse Gorman Pomerenk & Schick (included in the opinions
filed as Exhibits 5 and 8.1 to this registration statement)
23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in the opinion
filed as Exhibit 8.2 to this registration statement)
23.3 Consent of KPMG LLP relating to Provident Bancorp, Inc.
23.4 Consent of KPMG LLP relating to Warwick Community Bancorp, Inc.
23.5 Consent of KPMG LLP relating to E.N.B. Holding Company, Inc.
24 Power of Attorney (set forth on signature page)
99 Opinion of Sandler O'Neill & Partners, L.P. (included as Appendix B to
the proxy statement/prospectus contained in this registration
statement).
- ------------------------------
* Incorporated by Reference to Exhibit 99 to the Current Report on Form
8-K of Provident Bancorp, Inc. filed with the Commission on March 15,
2004 (File No. 0-25233).
** Incorporated by reference to Provident Bancorp, Inc.'s Registration
Statement on Form S-1 (File No. 333-108795), originally filed with the
Commission on September 15, 2003 and amended on October 31, 2003 and
November 10, 2003.
*** Incorporated by reference to the Registration Statement on Form S-1
(File No. 333-63593), originally filed with the Commission on September
17, 1998 and amended on November 6, 1998 and November 12, 1998.
**** Incorporated by reference from Provident Bancorp, Inc.'s Proxy Statement
for the 2000 Annual Meeting of Stockholders filed with the Commission on
January 18, 2000.