SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
COMMUNITY PARTNERS BANCORP
(Exact name of registrant as specified in its charter)
New Jersey 6022 20-3700861
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification) Identification Number)
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1250 Highway 35 South
Middletown, New Jersey 07748
(732) 706-9009
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Barry B. Davall
President and Chief Executive Officer
1250 Highway 35 South
Middletown, New Jersey 07748
(732) 706-9009
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
Barry B. Davall Michael W. Zelenty, Esq. Robert W. Dowens, Sr. Douglas R. Brown Esq.
President and Scott W. Goodman, Esq. President and Glenn L. Stein Esq.
Chief Executive Officer Pitney Hardin LLP Chief Executive Officer Norris McLaughlin &
Two River Community Bank 200 Campus Drive The Town Bank Marcus P.A.
1250 Highway 35 South Florham Park, NJ 07932 520 South Avenue P.O. Box 1018
Middletown, NJ 07748 (973) 966-6300 Westfield, NJ 07090 Somerville, NJ 08876-1018
(732) 706-9009 (908) 301-0800 (908) 722-0700
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Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed acquisition described herein have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, or the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
securities to be registered (1) registered (2) price per share (3) offering price (3) registration fee
Common Stock, no par value 7,480,648 Shares Not Applicable $126,392,002.74 $14,876.34
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(1) This registration statement relates to securities of the registrant issuable to holders of common stock of Two River Community Bank and to holders of common stock of The Town Bank in connection with the agreement and plan of acquisition, dated as of August 16, 2005, between the Registrant, Two River and Town Bank.
(2) Represents the maximum number of shares of the Registrant's common stock, no par value per share, to be issued in connection with the agreement and plan of acquisition.
(3) Estimated solely for the purpose of determining the registration fee
required by Section 6(b) of the Securities Act of 1933 and calculated
pursuant to Rule 457(f)(1) promulgated thereunder. Pursuant to Rule
457(f)(1), the registration fee was calculated on the basis of the value
of the shares of common stock of Two River Community Bank and The Town
Bank, computed in accordance with Rule 457(c) to be exchanged for shares
of Community Partners Bancorp common stock, as follows: (a)(i) $16.38, the
average of the bid and asked prices per share of Two River common stock as
reported on the OTC Bulletin Board on November 8, 2005 multiplied by (ii)
4,907,989, the maximum aggregate number of shares of Two River common
stock to be received by Community Partners, and (b)(i) $17.88, the average
of the bid and asked prices per share of Town Bank common stock as
reported on the OTC Bulletin Board on November 8, 2005, multiplied by (ii)
2,572,659, the maximum aggregate number of shares of Town Bank common
stock to be received by Community Partners, based on an exchange ratio of
1.25.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall 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 Commission, acting pursuant to Section 8(a), may determine.
The information in this document is not complete and may be changed. We may not issue the common stock to be issued in connection with the transaction described in this document until the registration statement filed with the Securities and Exchange Commission, of which this document is a part, is declared effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY - SUBJECT TO COMPLETION, DATED NOVEMBER 10, 2005
[Two River Logo] [Town Bank Logo]
Two River Community Bank The Town Bank
1250 Highway 35 South 520 South Avenue
Middletown, New Jersey 07748 Westfield, New Jersey 07090
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[Community Partners Logo] Community Partners Bancorp 1250 Highway 35 South Middletown, New Jersey 07748
OUR BANKS PROPOSE TO JOIN FORCES UNDER A NEW HOLDING COMPANY -- YOUR VOTE IS
VERY IMPORTANT
Two River Community Bank and The Town Bank have agreed to join forces to better position ourselves to compete effectively in the banking marketplace. We have entered into an acquisition agreement by which our two banks will become subsidiaries of a newly-formed holding company, Community Partners Bancorp. In the acquisition, each share of Two River common stock will be converted into one share of Community Partners common stock and Town Bank shareholders will receive 1.25 shares of Community Partners common stock for each share of Town Bank common stock that they hold. The 1.25 exchange ratio is subject to adjustment as described in the attached materials. Cash will be paid in lieu of fractional shares and cash will also be paid to shareholders who exercise and perfect their dissenters' rights. We believe that the acquisition will benefit the shareholders of both banks and we are asking you to vote in favor of this very important transaction at a special meeting to be held on January __, 2006.
We intend that the exchange of bank stock solely for holding company common stock in the acquisition will be tax-free to our shareholders, and it is a condition to closing that Two River and Town Bank receive opinions from Pitney Hardin LLP and Norris, McLaughlin & Marcus, P.A., respectively, that the acquisition will constitute a tax-free transaction. We will not waive this closing condition without resoliciting your vote on the acquisition.
Your vote is very important because the acquisition can be completed only if shareholders of each bank approve it by the affirmative vote of those holding two-thirds (2/3) of the bank's common stock outstanding on the _________, 2005 record date. A failure to vote will have the same effect as voting against the acquisition. The boards of directors of both banks have approved the acquisition and recommend that their shareholders vote FOR its approval as described in the attached materials.
If the acquisition is completed and the exchange ratio remains unadjusted at 1.25 shares of Community Partners common stock for every share of Town Bank common stock, persons holding the outstanding securities (including vested and unvested options and warrants) of Two River and Town Bank immediately prior to the acquisition will then own, on a fully diluted basis, approximately 65.6% and 34.4%, respectively, of the approximately 7,480,648 shares of Community Partners common stock which we anticipate will be issued or reserved for issuance following the acquisition.
The closing prices per share of Two River and Town Bank common stock as reported on the OTC Bulletin Board on ___________, 2005, were $____ and $____, respectively. Community Partners has applied to list its common stock on the NASDAQ SmallCap Market under the symbol "_______."
We urge you to read the attached materials carefully, including the section entitled "Risk Factors" beginning on page 18.
Barry B. Davall Robert W. Dowens, Sr. President and Chief Executive Officer President and Chief Executive Officer Two River Community Bank The Town Bank |
Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued in connection with the acquisition or determined if the attached joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The attached joint proxy statement/prospectus is dated December __, 2005, and is anticipated to first be mailed to shareholders of Two River and Town Bank on or about December __, 2005.
[TWO RIVER LOGO]
Two River Community Bank
1250 Highway 35 South
Middletown, New Jersey 07748
(732) 706-9009
Notice of Special Meeting of Two River Community Bank shareholders January __, 2006, at 5:00 p.m. local time
To the shareholders of Two River Community Bank:
Notice is hereby given that a special meeting of shareholders of Two River Community Bank will be held on January __, 2006 at 5:00 p.m., local time, at Two River Community Bank, 1250 Highway 35 South, Middletown, New Jersey 07748, to consider and vote upon a proposal to approve an acquisition agreement among Two River, The Town Bank and a corporation newly formed to act as a holding company for the two banks, Community Partners Bancorp. The acquisition agreement provides that each bank will become a wholly owned subsidiary of Community Partners, each share of Two River common stock will be exchanged for one share of Community Partners common stock and each share of Town Bank common stock will be exchanged into 1.25 shares of Community Partners common stock, subject to adjustment as described in the attached materials. The 1.25 exchange ratio was calculated to produce, on a fully diluted basis, a 65.6% and 34.4% split of the ownership of Community Partners common stock between Two River and Town Bank shareholders.
We will transact no other business at the special meeting, except for business properly brought before the meeting or any adjournment or postponement thereof.
Approval of the acquisition agreement requires the affirmative vote of the holders of two-thirds (2/3) of the voting power of shares of Two River common stock outstanding as of the record date, which is ___________, 2005. Only holders of record of Two River common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the meeting. Town Bank has called a special meeting of its shareholders to be held the same day as ours, as the approval of its shareholders is also a required condition to the acquisition.
Your vote is very important, regardless of the number of shares you own. Please vote as soon as possible to make sure that your shares are represented at the meeting. To vote your shares, you may complete and return the enclosed proxy card. If you are a holder of record, you may also cast your vote in person at the meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against the acquisition.
Under New Jersey banking law, holders of Two River common stock who timely submit a written notice of dissent and demand for the payment of the fair value of their shares and otherwise comply with the applicable statutory procedures, including not voting in favor of approval of the acquisition agreement, will be entitled to dissenter's rights and to receive payment in cash for the fair value of their shares as determined by the New Jersey Superior Court. A summary of the applicable requirements of New Jersey banking law is contained in the attached joint proxy statement/prospectus under the caption "The Acquisition - Dissenter's Rights," beginning on page 54 and the full text of the applicable provisions of New Jersey banking law is attached as Annex F to the attached joint proxy statement/prospectus.
By order of the Board of Directors of Two River Community Bank
/s/ Michael W. Kostelnik, Jr.
Michael W. Kostelnik, Jr.
Secretary
Middletown, New Jersey
December __, 2005
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[TOWN BANK LOGO]
The Town Bank
520 South Avenue
Westfield, New Jersey 07090
(908) 301-0800
Notice of Special Meeting of Town Bank shareholders January __, 2006. at 10:00 a.m. local time
To the shareholders of Town Bank:
Notice is hereby given that a special meeting of shareholders of The Town Bank will be held on January __, 2006 at 10:00 a.m., local time, at _____________________________, to consider and vote upon a proposal to approve an acquisition agreement among The Town Bank, Two River Community Bank and a corporation newly formed to act as a holding company for the two banks, Community Partners Bancorp. The acquisition agreement provides that each bank will become a wholly owned subsidiary of Community Partners, each share of Two River common stock will be exchanged for one share of Community Partners common stock and each share of Town Bank common stock will be exchanged into 1.25 shares of Community Partners common stock, subject to adjustment as described in the attached materials. The 1.25 exchange ratio was calculated to produce, on a fully diluted basis, a 65.6% / 34.4% split of the ownership of Community Partners common stock between Two River and Town Bank shareholders.
We will transact no other business at the special meeting, except for business properly brought before the meeting or any adjournment or postponement thereof.
Approval of the acquisition agreement requires the affirmative vote of the holders of two-thirds (2/3) of the voting power of shares of Town Bank common stock outstanding as of the record date, which is ___________, 2005. Only holders of record of Town Bank common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the meeting. Two River has called a special meeting of its shareholders to be held the same day as ours, as the approval of its shareholders is also a required condition to the acquisition.
Your vote is very important, regardless of the number of shares you own. Please vote as soon as possible to make sure that your shares are represented at the meeting. To vote your shares, you may complete and return the enclosed proxy card. If you are a holder of record, you may also cast your vote in person at the special meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against the acquisition.
Under New Jersey banking law, holders of Town Bank common stock who timely submit a written notice of dissent and demand for the payment of the fair value of their shares and otherwise comply with the applicable statutory procedures, including not voting in favor of approval of the acquisition agreement, will be entitled to dissenter's rights and to receive payment in cash for the fair value of their shares as determined by the New Jersey Superior Court. A summary of the applicable requirements of New Jersey banking law is contained in the attached joint proxy statement/prospectus under the caption "The Acquisition - Dissenter's Rights," beginning on page 54 and the full text of the applicable provisions of New Jersey banking law is attached as Annex F to the attached joint proxy statement/prospectus.
By order of the Board of Directors of Town Bank
/s/ Angela Bellino
Angela Bellino
Secretary
Westfield, New Jersey
December __, 2005
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TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION....................................................................1
SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS................................................................4
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA............................................................11
Selected Historical Consolidated Financial Data of Two River.........................................11
Selected Historical Financial Data of Town Bank......................................................13
Selected Unaudited Pro Forma Combined Financial Data of Community Partners Bancorp...................15
COMPARATIVE PER SHARE FINANCIAL INFORMATION
OF COMMUNITY PARTNERS BANCORP........................................................................16
COMPARATIVE PER SHARE MARKET INFORMATION......................................................................17
RISK FACTORS..................................................................................................18
THE SPECIAL MEETINGS..........................................................................................22
THE ACQUISITION...............................................................................................24
Background of the Acquisition........................................................................24
Two River's Reasons for the Acquisition..............................................................26
Opinion of Two River's Financial Advisor.............................................................26
Recommendation of Two River's Board of Directors.....................................................34
Town Bank's Reasons for the Acquisition..............................................................34
Opinion of Town Bank's Financial Advisor.............................................................35
Recommendation of Town Bank's Board of Directors.....................................................40
Interests of Certain Two River Directors and Executive Officers in the Acquisition...................41
Interests of Certain Town Bank Directors and Executive Officers in the Acquisition...................44
Voting Agreements....................................................................................47
Governance Structure and Management Positions........................................................47
Completion and Effectiveness of the Acquisition......................................................48
Structure of the Acquisition and Conversion of Two River and Town Bank Stock.........................48
Exchange of Bank Stock Certificates for Community Partners Stock Certificates........................49
Treatment of Stock Options and Warrants..............................................................49
Material United States Federal Income Tax Consequences of the Acquisition............................50
Accounting Treatment of the Acquisition..............................................................53
Regulatory Matters in Connection with the Acquisition................................................53
Restrictions on Sales of Shares by Bank Affiliates...................................................53
NASDAQ SmallCap Market Listing of Community Partners Common Stock to be Issued
in the Acquisition..........................................................................53
Dissenter's Rights...................................................................................54
The Acquisition Agreement............................................................................55
Community Partners Certificate of Incorporation and By-laws..........................................62
Equity Plans.........................................................................................62
COMMUNITY PARTNERS BANCORP UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.................................63
DESCRIPTION OF COMMUNITY PARTNERS CAPITAL STOCK...............................................................70
COMPARISON OF RIGHTS OF COMMUNITY PARTNERS SHAREHOLDERS, TWO RIVER SHAREHOLDERS AND TOWN BANK SHAREHOLDERS....72
BUSINESS OF COMMUNITY PARTNERS................................................................................78
GOVERNMENT REGULATION OF COMMUNITY PARTNERS AND THE BANKS.....................................................80
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
TWO RIVER COMMUNITY BANK.............................................................................87
BUSINESS OF TWO RIVER........................................................................................112
MARKET PRICE OF AND DIVIDENDS ON TWO RIVER COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.....................116
TWO RIVER QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................117
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE TOWN BANK.......118
BUSINESS OF TOWN BANK........................................................................................140
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MARKET PRICE OF AND DIVIDENDS ON TOWN BANK COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.....................144 TOWN BANK QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................145 MANAGEMENT OF COMMUNITY PARTNERS.............................................................................146 COMPENSATION OF EXECUTIVE OFFICERS...........................................................................149 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................................................152 LEGAL MATTERS................................................................................................152 EXPERTS......................................................................................................152 OTHER MATTERS................................................................................................152 STATEMENTS REGARDING FORWARD-LOOKING INFORMATION.............................................................152 WHERE YOU CAN FIND MORE INFORMATION..........................................................................154 INDEX TO FINANCIAL STATEMENTS...............................................................................FS-1 ANNEX A Agreement and Plan of Acquisition..........................................................A-1 ANNEX B Community Partners Amended and Restated Certificate of Incorporation.......................B-1 ANNEX C Community Partners Bylaws..................................................................C-1 ANNEX D Fairness Opinion of Curtis Securities LLC..................................................D-1 ANNEX E Fairness Opinion of Janney Montgomery Scott LLC............................................E-1 ANNEX F Sections 360-369 of the New Jersey Banking Act.............................................F-1 |
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION
Q: Why am I being asked to vote on the acquisition?
A: The boards of directors of Two River Community Bank and The Town Bank have determined that our two independent community banks will be better positioned to compete effectively in the New Jersey banking marketplace if we join forces. We have entered into an acquisition agreement that provides for our banks to become subsidiaries of Community Partners Bancorp, a New Jersey corporation which we created to act as our holding company. We have applied for, and are waiting to obtain, approvals and non-objection from the appropriate bank regulatory agencies, which will not constitute an endorsement of the acquisition or a determination that its terms are fair to the shareholders of either bank. To complete the acquisition, we will also need the shareholders of each bank to approve the acquisition by the affirmative vote of holders of two-thirds (2/3) of the bank's common stock outstanding on _________, 2005, the record date for each bank's special shareholders meeting to vote on the acquisition. This joint proxy statement/prospectus is being used to solicit that shareholder vote.
Q: What will happen if the acquisition is approved and completed?
A: In the acquisition:
o Two River and Town Bank will become wholly-owned subsidiaries of Community Partners.
o Each share of Two River common stock will be exchanged for one share of Community Partners common stock.
o Each share of Town Bank common stock will be exchanged for 1.25 shares of Community Partners common stock, subject to adjustment. Based on the 1.25 exchange ratio, without adjustment, and on a fully diluted basis, shareholders of Two River and Town Bank immediately prior to the acquisition will own 65.6% and 34.4% respectively, of the common stock of Community Partners immediately following the acquisition.
o The 1.25 exchange ratio is subject to adjustment if the Two River Average Price is below $13.20 or above $18.80. If the Two River Average Price is above $18.80, the exchange ratio will be $23.50 divided by the Two River Average Price, with a minimum exchange ratio of 1.1463. If the Two River Average Price is below $13.20, the exchange ratio will be $16.50 divided by the Two River Average Price, with a maximum exchange ratio of 1.5.
Q: How will you determine the "Two River Average Price"?
A: First, we will calculate the volume-weighted average trading price of Two River common stock on each day Two River stock is reported as traded by the OTC Bulletin Board. We will collect these average prices, starting on the third Two River trading day before the acquisition closes and working backwards for 20 consecutive Two River trading days. After discarding the highest and lowest of these 20 volume-weighted average prices, we will calculate the average of the remaining 18. That number is the "Two River Average Price".
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this joint proxy statement/prospectus, please complete, sign and date your proxy card or voting instructions and return it in the enclosed postage paid envelope as soon as possible so that your shares may be represented at your special meeting. If you later desire to revoke your proxy for any reason, you may do so as described elsewhere in this joint proxy statement/prospectus.
Q: What if I do not vote?
A: If you fail to respond, it will have the same effect as voting against the acquisition. If you respond and do not indicate how you want to vote, your proxy will be counted as a vote in favor of the acquisition. If you respond and elect to abstain from voting, your proxy will have the same effect as voting against the acquisition.
Q: If my shares are held in street name by my broker, will my broker vote my shares for me?
Q: Can I change my vote after I have delivered my proxy?
A: Yes. You can change your vote at any time before your proxy is voted at your special meeting. You can do this in one of three ways. First, you can revoke your proxy. Second, you can submit a new proxy. If you choose either of these two methods, you must submit your notice of revocation or your new proxy to the secretary of Two River or Town Bank, as appropriate, before your special meeting. If your shares are held in an account at a brokerage firm or bank, you should contact your brokerage firm or bank to change your vote. Third, if you are a holder of record, you can attend the special meeting, thereby revoking your proxy, and vote in person.
Q: Should I send in my stock certificates now?
A: No. Please do not send in your stock certificates with your proxy. After the acquisition is completed, you will receive written instructions from our exchange agent, Registrar and Transfer Company, on how to exchange your existing stock certificates for shares of Community Partners.
Q: Where will the Community Partners common stock be listed for trading?
A: We have applied to have the Community Partners common stock issued in the acquisition listed on the NASDAQ SmallCap Market with the ticker symbol "_______".
Q: Will the Community Partners common stock issued in the acquisition be freely tradable?
A: The shares will be freely tradable unless you are an affiliate of Two River, Town Bank, or Community Partners. We will be contacting you if we believe you are an affiliate of either bank or will be an affiliate of the holding company. If you are uncertain, you should consult with your legal counsel to determine whether you are an affiliate of any of these entities; however, it is likely that you would know or would have been notified if you were such an affiliate. Generally, persons who are deemed to be affiliates of Two River or Town Bank must comply with Rule 145, and persons who are deemed to be affiliates of Community Partners must comply with Rule 144, under the Securities Act if they wish to sell or otherwise transfer any shares of Community Partners common stock received in connection with the acquisition.
Q: Will I receive a physical stock certificate for the shares that I receive in the acquisition?
A: If you are a registered holder of Two River or Town Bank common stock (i.e., you hold your stock certificate in your own name), you will be issued a physical stock certificate representing your shares of Community Partners common stock in exchange for your Two River or Town Bank shares. A transmittal letter with instructions for the surrender of stock certificates will be mailed to registered holders of Two River or Town Bank common stock as soon as practicable after the effectiveness of the acquisition. If you currently hold your shares in "street name," i.e. through a broker, dealer, bank or other financial institution that serves as your nominee, you will initially hold your shares of Community Partners common stock through that nominee and the nominee will exchange the shares on your behalf.
Q: Will I receive dividends on my Community Partners shares?
A: Community Partners has not yet determined whether or when any dividends will be paid on its common stock or the amount of any such dividends. Neither bank has paid cash dividends since their formation.
Q: When do you expect to complete the acquisition?
A: We are working to complete the acquisition early in 2006. If we obtain the required bank regulatory approvals, as well as approval from the shareholders of both banks, we expect to complete the acquisition during January, 2006.
Q: Who can help answer my questions?
A: If you have any questions about the acquisition or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card or voting instructions, you should contact your bank using the contact information below:
Two River Community Bank The Town Bank 1250 Highway 35 South 520 South Avenue Middletown, New Jersey 07748 Westfield, New Jersey 07090 Attn: Barry B. Davall Attn: Robert W. Dowens, Sr. (732) 706-9009 (908) 301-0800 e-mail: bdavall@tworiverbank.com e-mail: rdowens@townbank.com |
SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS
The Banks and the New Holding Company
Two River Community Bank
1250 Highway 35 South
Middletown, New Jersey 07748
Telephone: (732) 706-9009
Two River Community Bank is a New Jersey chartered commercial bank which engages in the business of commercial and retail banking. As a community bank, Two River offers a wide range of banking services including demand, savings and time deposits and commercial and consumer/installment loans to small and medium-sized businesses, not-for-profit organizations, professionals and individuals principally in the Monmouth County, New Jersey area. Two River also offers its customers numerous banking products such as safe deposit boxes, night depository, wire transfers, money orders, travelers checks, automated teller machines, direct deposit, federal payroll tax deposits, internet banking and merchant card services. Two River's deposits are insured by the Bank Insurance Fund of the FDIC up to the statutory limits.
The Town Bank
520 South Avenue
Westfield, New Jersey 07090
Telephone: (908) 301-0800
The Town Bank was organized in 1998 as a New Jersey state chartered bank in Westfield, New Jersey by a group of prominent local business and community leaders to provide a community banking alternative to larger institutions. Town Bank commenced operations in October, 1998, and conducts business from two banking locations in Westfield. Town Bank provides a wide-range of commercial and consumer banking products and services, including personal and business checking accounts and time deposits, money market accounts and regular savings accounts. Town Bank's deposits are insured by the Bank Insurance Fund of the FDIC up to the statutory limits.
Community Partners Bancorp
1250 Highway 35 South
Middletown, New Jersey 07748
Telephone: (732) 706-9009
Community Partners Bancorp is a newly formed corporation that has not yet conducted any activities other than those incident to its formation, the matters contemplated by the acquisition agreement and the preparation and filing of this joint proxy statement/prospectus. Upon completion of the acquisition, Two River and Town Bank will become wholly-owned subsidiaries of Community Partners. The business of Community Partners will be the combined businesses currently conducted by Two River and Town Bank. Community Partners was originally incorporated under the name Ten Penny-Rialto Holdings, Inc. on August 8, 2005 and the name was changed to Community Partners Bancorp on October 25, 2005.
Reasons for the Acquisition (see pages 26 and 34)
We are proposing the acquisition because we believe that our two independent community banks will be better positioned to compete effectively in the New Jersey banking marketplace by combining under one holding company. The new entity will generate the potential for stronger operating and financial results than either bank could achieve on its own in this highly competitive market. We believe the business combination will enhance value for shareholders of both banks by, among other things, providing the combined entity with opportunities for franchise expansion near each marketplace served and the potential for increased earnings through revenue enhancements and cost savings achievable with the transaction.
Structure of the Acquisition and Conversion of Two River and Town Bank Stock, Options and Warrants (see page 48)
In the acquisition:
o Two River and Town Bank will become wholly-owned subsidiaries of Community Partners.
o Each share of Two River common stock will be exchanged for one share of Community Partners common stock.
o Holders of unexercised options and warrants to acquire shares of Two River common stock will receive options and warrants to acquire the same number of shares of Community Partners common stock at the same exercise price.
o Each share of Town Bank common stock will be exchanged for 1.25 shares of Community Partners common stock. The 1.25 exchange ratio is subject to adjustment if the Two River Average Price is below $13.20 or above $18.80. If the Two River Average Price is above $18.80, the exchange ratio will be $23.50 divided by the Two River Average Price, with a minimum exchange ratio of 1.1463. If the Two River Average Price is below $13.20, the exchange ratio will be $16.50 divided by the Two River Average Price, with a maximum exchange ratio of 1.5.
o The Two River Average Price will be determined by calculating the volume-weighted average trading price of Two River common stock on each day the stock is reported as traded by the OTC Bulletin Board. We will collect these volume-weighted average prices for each day that Two River is traded, starting on the third Two River trading day before the acquisition closes and working backwards for 20 consecutive Two River trading days. After discarding the highest and lowest of these 20 volume-weighted average prices, we will calculate the average of the remaining 18, which is the "Two River Average Price".
o Holders of unexercised options for shares of Town Bank common stock will receive options for shares of Community Partners common stock. The new options will be exercisable for that number of shares of Community Partners common stock derived by multiplying the exchange ratio by the number of shares of Town Bank for which the option was exercisable immediately prior to the acquisition. The exercise price per share of Community Partners common stock will be equal to the per share exercise price of the option immediately prior to the acquisition, divided by the exchange ratio.
Immediately upon completion of the acquisition and as a result of the foregoing exchanges, assuming that the exchange ratio remains unadjusted at 1.25 shares of Community Partners common stock for every share of Town Bank common stock:
o Former Two River shareholders and holders of warrants and vested and unvested options for Two River common stock will hold Community Partners common stock, warrants and options equivalent to approximately 65.6% of the outstanding shares of Community Partners common stock on a fully diluted basis.
o Former Town Bank shareholders and holders of options on Town Bank common stock will hold Community Partners common stock and options equivalent to approximately 34.4% of the outstanding shares of Community Partners common stock on a fully diluted basis.
Determination of the Acquisition Consideration. The ownership split of Community Partners was determined through negotiations between the two banks and reflects the relative assets, earnings, capitalization and the financial, operating and market positions of the banks at the time of such negotiations and other factors that the boards of directors of Two River and Town Bank considered relevant.
Recommendation of the Boards of Directors and Opinions of Financial Advisors
(see pages 26, 34, 35 and 40)
Two River shareholders. The Two River board of directors has determined that the acquisition agreement and the transactions contemplated thereby are advisable and in the best interests of Two River shareholders and unanimously recommends that the Two River shareholders vote FOR the approval of the acquisition agreement. Under the acquisition agreement, if the Two River board changes its recommendation or recommends a competing transaction, Town Bank may terminate the agreement and collect a $2 million termination fee.
Town Bank shareholders. The Town Bank board of directors has determined that the acquisition agreement and the transactions contemplated thereby are advisable and in the best interests of Town Bank shareholders and unanimously recommends that the Town Bank shareholders vote FOR the approval of the acquisition agreement. Under the acquisition agreement, if the Town Bank board changes its recommendation or recommends a competing transaction, Two River may terminate the agreement and collect a $2 million termination fee.
Dissenter's Rights (see page 54)
Under New Jersey banking law, holders of Two River common stock or Town Bank common stock who submit a written notice of dissent and demand for the payment of the fair value of their shares and who comply with the other applicable statutory procedures under New Jersey banking law, including not voting in favor of approval of the acquisition agreement, will be entitled to dissenter's rights and to receive payment in cash for the fair value of their shares as determined by the New Jersey Superior Court.
The Special Meetings (see page 22)
Special Meeting of Two River's shareholders. The Two River special meeting will be held at the bank's headquarters at 1250 Highway 35 South, Middletown, New Jersey 07748, on January __, 2005, starting at 5:00 p.m., local time. At the Two River special meeting, Two River will ask its shareholders to vote upon a proposal to approve the acquisition agreement and to consider any other matters that may properly come before the special meeting.
At the Two River special meeting, you may cast one vote for each share of Two River common stock that you owned at the close of business on ________, 2005. On that date there were ________ shares of Two River
common stock outstanding and entitled to vote. In order for holders of Two River common stock to approve the acquisition agreement, holders of 2/3 of the outstanding shares of Two River common stock entitled to vote as of ________, 2005, must vote in favor of approving the acquisition agreement.
Approximately 20% of the outstanding shares of Two River common stock entitled to vote to approve the acquisition agreement were held by Two River directors and executive officers and their affiliates as of September 30, 2005. We currently expect that Two River's directors and executive officers will vote their shares in favor of the acquisition, although none of them has entered into any agreements obligating them to do so.
Special Meeting of Town Bank's shareholders. The Town Bank special meeting will be held at __________________________, on January __, 2006, starting at 10:00 a.m., local time. At the Town Bank special meeting, Town Bank will ask its shareholders to vote upon a proposal to approve the acquisition agreement and to consider any other matters that may properly come before the special meeting.
At the Town Bank special meeting, you may cast one vote for each share of Town Bank common stock that you owned at the close of business on _______, 2005. On that date there were ________ shares of Town Bank common stock outstanding and entitled to vote. In order for holders of Town Bank common stock to approve the acquisition agreement, holders of 2/3 of the outstanding shares of Town Bank common stock entitled to vote as of _______, 2005 must vote in favor of approving the acquisition agreement.
Approximately 34% of the outstanding shares of Town Bank common stock entitled to vote to approve the acquisition agreement were held by Town Bank directors and executive officers and their affiliates as of September 30, 2005. In connection with the acquisition agreement, the directors of Town Bank, who among them beneficially owned approximately 34% of the outstanding shares of Town Bank common stock, each entered into an agreement with Two River under which the director committed to cause those shares to be voted in favor of the acquisition. We currently expect that Town Bank's executive officers who are not also directors will also vote their shares in favor of the acquisition, although none of them has entered into any agreements obligating them to do so.
Board of Directors and Management of Community Partners (see pages 146 and 148)
As provided in the acquisition agreement, the board of directors of Community Partners consists of eight individuals, five of whom were designated by Two River and three of whom were designated by Town Bank. The directors and executive officers of Community Partners have already been selected and appointed, although Community Partners will not actively engage in any business unless the acquisition is completed. If the acquisition is not completed, Community Partners will be dissolved without having conducted any business other than in connection with the acquisition agreement.
Charles T. Parton, who serves as the Chairman of the Board of Two River, serves in the same capacity for Community Partners. Joseph F.X. O'Sullivan, the Chairman of the Board of Town Bank, is the Vice Chairman of Community Partners. Barry B. Davall serves as the President and Chief Executive Officer of both Two River and Community Partners. Two River's three additional board designees, each of whom is a director of Two River, are Michael W. Kostelnik, Jr., Frank J. Patock, Jr., and John J. Perri, Jr. Town Bank's two additional board designees are Robert B. Cagnassola and Frederick H. Kurtz, each of whom is a director of Town Bank.
Interests of Directors and Executive Officers in the Acquisition (see pages 41 and 44)
Barry B Davall, currently Two River's President and Chief Executive Officer, also serves as the President and Chief Executive Officer of Community Partners. William D. Moss, currently the Executive Vice President and Senior Loan Officer of Two River, also serves as Vice President and Senior Loan Officer of Community Partners. Robert W. Dowens, Sr., currently the President and Chief Executive Officer of Town Bank, also serves as Vice President of Community Partners. Michael J. Gormley, currently Executive Vice President and Chief Financial Officer of Two River, also serves as Vice President, Chief Financial Officer and Treasurer of Community Partners.
Messrs. Kostelnik, Patock, Perri, Cagnassola and Kurtz are directors, but not officers, of Community Partners. Each of these individuals may be
entitled to customary compensation for serving on Community Partners' board of directors, including compensation for service as a board member, grants of options and shares of common stock under Community Partners' equity incentive plan, and additional compensation and reimbursement of expenses for attending meetings and serving on committees. Any such compensation and reimbursement will be determined from time to time by Community Partners' board of directors.
Community Partners will indemnify current and former directors and officers of Two River and Town Bank and their subsidiaries for six years following the acquisition for any matters arising out of their positions with Two River or Town Bank prior to the acquisition. Community Partners is required by the acquisition agreement to maintain insurance coverage for the purpose of indemnifying these directors and officers for such matters and will also pay all reasonable expenses incurred by any such individual in enforcing his or her rights to indemnification and insurance coverage.
Tax Consequences (see page 50)
If you exchange your bank common stock solely in exchange for common stock of Community Partners in the acquisition, we expect that you will not recognize any gain or loss for United States federal income tax purposes. If you receive cash in the acquisition, either in lieu of fractional shares or through the exercise of dissenter's rights, we expect that you will be required to recognize gain or loss in an amount, if any, equal to the difference between the cash received and your adjusted tax basis in the bank common stock which was exchanged for cash. Any taxable gain will generally be treated as capital gain, either long-term or short-term gain, depending on your holding period of the Two River or Town Bank common stock. We expect the tax consequences described above to apply to most shareholders, but tax matters relating to the acquisition are very complicated and the specific tax consequences to you will depend on the facts and circumstances of your own situation. We urge you to consult your own tax advisor for a full understanding of the tax consequences to you of the acquisition.
The obligation of Two River and Town Bank to complete the acquisition is conditioned on their receipt of legal opinions about the United States federal income tax treatment of the acquisition. These opinions will not bind the Internal Revenue Service, which could take a different view.
Overview of the Acquisition Agreement (see page 24)
Conditions to the Completion of the Acquisition. Each bank's obligation to complete the acquisition is subject to the satisfaction or, where permitted, waiver of specified conditions, including these:
o the agreement must be approved by the shareholders of both banks;
o state and federal bank regulatory agencies must have approved or not objected to the acquisition and all regulatory waiting periods must have expired or been terminated;
o the shares of Community Partners common stock to be issued, or to be reserved for issuance, in connection with the acquisition must have been approved for listing on the NASDAQ SmallCap Market or, alternatively, on the NASDAQ National Market System or the American Stock Exchange, subject to official notice of issuance;
o each bank must receive an opinion of its tax counsel dated the closing date of the acquisition to the effect that the acquisition will qualify as an exchange to which Section 351 of the Internal Revenue Code applies;
o completion of the acquisition must not be prohibited by any statute, rule, regulation or injunction; and
o dissenter's rights may not be perfected with respect to shares of bank common stock which, had they been converted in the acquisition, would have exceeded 10% of the total shares issued by Community Partners in the acquisition.
The shareholder approval and bank regulatory approval conditions may not be waived because completing the acquisition absent satisfaction of those conditions would not comply with applicable law. Also, neither bank intends to waive the tax opinion conditions. If either bank does waive this condition, we will inform you of our decision and ask you to vote on the acquisition agreement taking this into consideration.
Waivers and Amendments. Under the terms of the acquisition agreement, after the approval of the agreement by the shareholders of the banks, waivers and amendments to any provisions of the acquisition agreement may not be made without the approval of the banks' shareholders, unless such approval is not required to be obtained under New Jersey banking law.
Termination of the Acquisition Agreement. The banks can jointly agree to terminate the acquisition agreement at any time. Either bank may also terminate the agreement if:
o the acquisition is not completed on or before April 15, 2006;
o any of the conditions to closing specified in the acquisition agreement will not be met;
o the other bank's board of directors changes its recommendation in respect of the acquisition or recommends a competing transaction; or
o the terminating bank exercises its right to terminate the agreement, in order to carry out its fiduciary responsibilities to its shareholders, upon receipt of a superior proposal from another party, pays a termination fee of $2 million to the other bank and enters into a competing transaction.
Town Bank may also terminate the acquisition agreement if the Two River Average Price is less than $11.00 per share.
Termination Fees. The acquisition agreement provides that Two River or Town Bank may be required to pay a $2 million termination fee to the other if the acquisition agreement is terminated under specified circumstances.
"No Solicitation" Provisions. The acquisition agreement contains detailed provisions prohibiting Two River and Town Bank from seeking an alternative transaction. These "no solicitation" provisions prohibit the banks, as well as their officers, directors, subsidiaries and representatives, from taking any action to solicit an acquisition proposal, as described on page 56. The agreement does not, however, prohibit either bank or its board of directors from considering, and potentially recommending, an unsolicited bona fide written superior proposal from a third party, as described on page 56.
Regulatory Matters. The acquisition is subject to the approval of the New Jersey Department of Banking and Insurance, 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 had not received the required approvals. Approval by any regulator does not constitute an endorsement of the acquisition or a determination that the terms of the acquisition are fair to Town Bank shareholders or Two River shareholders.
Accounting Treatment. We intend to account for the acquisition under the purchase method of accounting for business combinations. As the former Two River shareholders will receive a majority of the voting rights of the combined entity, we anticipate that Two River will be the acquiring company for accounting purposes. This means that, upon consummation of the acquisition, Two River's assets and liabilities will be reported by Community Partners at Two River's historical cost and Town Bank's assets and liabilities will be recorded at their respective fair values as of the time of the acquisition. Any excess of the purchase price and costs of acquisition over the fair value
of Town Bank's tangible and identifiable intangible assets and liabilities will be recorded as goodwill. Under generally accepted accounting principles, goodwill is not amortized but is assessed annually for impairment, with any resulting impairment losses included in net income. Earnings or losses relating to the business of Town Bank will be included in Community Partners' financial statements only prospectively from the date of the transaction.
Completion and Effectiveness of the Acquisition. We are working to complete the acquisition early in 2006. If we obtain the required bank regulatory approvals and approval from the shareholders of both banks, we expect to complete the acquisition during January, 2006.
Risk Factors (see page 18)
In considering whether to approve the acquisition agreement, you should consider certain risks of the acquisition. We urge you to read carefully all of the factors described in "Risk Factors" before voting.
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The following tables present (1) selected historical consolidated financial data of Two River, (2) selected historical financial data of Town Bank, and (3) selected unaudited pro forma combined financial data of Community Partners which reflect the acquisition.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TWO RIVER
The following selected consolidated financial data of Two River as of and for the years ended December 31, 2000 through 2004 are derived from the audited financial statements of Two River. The selected consolidated financial data as of June 30, 2005 and for the six months ended June 30, 2005 and 2004 are derived from financial statements that have not been audited by independent accountants. However, in the opinion of management, the selected consolidated financial data for such periods includes all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the data. Operating results for the six months ended June 30, 2005 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2005. The selected consolidated financial data as of December 31, 2004 and 2003 and for the years ended December 31, 2004, 2003 and 2002, and as of June 30, 2005 and for the six months ended June 30, 2005 and 2004, should be read in conjunction with the consolidated financial statements of Two River and the related notes thereto and management's discussion and analysis thereof appearing elsewhere in this joint proxy statement/prospectus.
TWO RIVER COMMUNITY BANK
Summarized Consolidated Balance Sheets
(in thousands)
At December 31,
June 30, ----------------------------------------------------
2005 2004 2003 2002 2001 2000
-------- -------- -------- -------- -------- --------
Assets:
Cash and due from banks $ 10,371 $ 5,225 $ 6,754 $ 4,118 $ 2,847 $ 1,748
Federal funds sold 3,129 5,145 -- 7,355 3,549 5,614
Investment securities available-for-sale 34,959 39,876 27,303 15,543 16,549 12,626
Investment securities held-to-maturity 4,269 3,840 -- -- -- --
Loans, net 198,217 174,073 132,290 103,107 60,500 21,442
Bank-owned life insurance 3,591 3,513 -- -- -- --
Premises and equipment, net 2,250 2,416 1,372 1,550 1,397 1,375
Other assets 1,727 1,382 1,166 551 445 302
-------- -------- -------- -------- -------- --------
Total assets $258,513 $235,470 $168,885 $132,224 $ 85,287 $ 43,107
======== ======== ======== ======== ======== ========
Liabilities and Shareholders' Equity:
Deposits $220,831 $199,955 $141,048 $109,717 $ 68,628 $ 29,283
Securities sold under agreements to
repurchase 8,685 7,761 6,455 9,395 4,742 1,768
Short-term borrowings 5,000 5,000 6,784 -- -- --
Accrued expenses and other liabilities 1,149 945 1,055 586 206 194
-------- -------- -------- -------- -------- --------
Total liabilities 235,665 213,661 155,342 119,698 73,576 31,245
-------- -------- -------- -------- -------- --------
Shareholders' equity 22,848 21,809 13,543 12,526 11,711 11,862
-------- -------- -------- -------- -------- --------
Total liabilities and shareholders' equity $258,513 $235,470 $168,885 $132,224 $ 85,287 $ 43,107
======== ======== ======== ======== ======== ========
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TWO RIVER COMMUNITY BANK
Summarized Consolidated Statements of Income
(in thousands, except per share amounts)
Six Months Ended
June 30, Year Ended December 31,
----------------- ------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
------- ------- ------- ------- ------- ------- -------
Interest income $ 6,926 $ 5,166 $11,256 $ 8,401 $ 6,713 $ 4,373 $ 1,796
Interest expense 1,737 1,210 2,531 1,735 1,602 1,235 363
------- ------- ------- ------- ------- ------- -------
Net interest income 5,189 3,956 8,725 6,666 5,111 3,138 1,433
Provision for loan losses 278 243 458 322 491 396 261
------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for loan losses 4,911 3,713 8,267 6,344 4,620 2,742 1,172
Non-interest income 563 368 820 578 352 193 84
Non-interest expenses 4,009 3,297 6,969 5,244 4,126 3,104 2,088
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes 1,465 784 2,118 1,678 846 (169) (832)
Income tax expense 542 304 793 428 103 -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 923 $ 480 $ 1,325 $ 1,250 $ 743 $ (169) $ (832)
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share (1)
Basic $ 0.23 $ 0.14 $ 0.36 $ 0.36 $ 0.21 $ (0.05) $ (0.27)
Diluted $ 0.22 $ 0.13 $ 0.34 $ 0.34 $ 0.21 $ (0.05) $ (0.27)
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(1) Per share data has been retroactively adjusted to reflect all stock dividends and the 2003 stock split.
SELECTED HISTORICAL FINANCIAL DATA OF
TOWN BANK
The following selected financial data of Town Bank as of and for the years ended December 31, 2000 through 2004 are derived from the audited financial statements of Town Bank. The selected financial data as of June 30, 2005 and for the six months ended June 30, 2005 and 2004 are derived from financial statements that have not been audited by independent accountants. However, in the opinion of management, the selected financial data for such periods includes all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the data. Operating results for the six months ended June 30, 2005 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2005. The selected financial data as of December 31, 2004 and 2003, and for the years ended December 31, 2004, 2003 and 2002, and as of June 30, 2005 and for the six months ended June 30, 2005 and 2004, should be read in conjunction with the financial statements of Town Bank and the related notes thereto and management's discussion and analysis thereof appearing elsewhere in this joint proxy statement/prospectus.
THE TOWN BANK
Summarized Balance Sheets
(in thousands)
At At
June 30, December 31,
--------- -------------------------------------------------------------
2005 2004 2003 2002 2001 2000
--------------------------------------------------------------------------
Assets:
Cash and due from banks $ 2,987 $ 1,376 $ 1,665 $ 1,101 $ 959 $ 1,243
Federal funds sold & short term investments -- -- 3,590 6,834 10,764 5,581
Investment securities available-for-sale 13,917 12,907 17,013 14,135 7,187 11,479
Loans, net of unearned fees/costs 127,958 109,924 79,692 61,004 37,700 22,834
less: Allowance for Loan Losses (1,387) (1,186) (801) (610) (338) (185)
--------------------------------------------------------------------------
Net loans 126,571 108,738 78,891 60,394 37,362 22,649
Premises and equipment, net 1,864 1,924 1,351 1,450 1,602 777
Other assets 1,666 1,131 562 496 363 429
--------------------------------------------------------------------------
Total assets $ 147,005 $ 126,076 $ 103,072 $ 84,410 $ 58,237 $ 42,158
==========================================================================
Liabilities and Shareholders' Equity:
Liabilities:
Deposits $ 130,671 $ 109,635 $ 89,628 $ 77,517 $ 51,312 $ 35,118
Short-term borrowings 250 1,430 171 250 102 100
Accrued expenses and other liabilities 679 528 262 347 586 348
--------------------------------------------------------------------------
Total liabilities 131,600 111,593 90,061 78,114 52,000 35,566
--------------------------------------------------------------------------
Shareholders' equity 15,405 14,483 13,011 6,296 6,237 6,592
--------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 147,005 $ 126,076 $ 103,072 $ 84,410 $ 58,237 $ 42,158
==========================================================================
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THE TOWN BANK
Summarized Statements of Operations
(in thousands, except per share amounts)
Six Months Ended Year Ended
June 30, December 31,
-------- ------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ---- ----
Interest income $ 4,078 $ 2,827 $ 6,317 $ 4,835 $ 3,937 $ 3,140 $ 2,743
Interest expense 1,343 827 1,832 1,570 1,470 1,436 1,222
------- ------- ------- ------- ------- ------- -------
Net interest income 2,735 2,000 4,485 3,265 2,467 1,704 1,521
Provision for loan losses 201 140 385 191 303 153 70
------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
loan losses 2,534 1,860 4,100 3,074 2,164 1,551 1,451
------- ------- ------- ------- ------- ------- -------
Non-interest income 70 62 136 242 255 120 73
Non-interest expense 1,532 1,350 2,788 2,542 2,341 2,162 1,740
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes 1,072 572 1,448 774 78 (491) (216)
Income taxes 245 35 84 76 22 -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 827 $ 537 $ 1,364 $ 698 $ 56 $ (491) $ (216)
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share - basic (1) $ 0.44 $ 0.29 $ 0.74 $ 0.52 $ 0.05 $ (0.45) $ (0.25)
Earnings (loss) per share - diluted (1) $ 0.42 $ 0.28 $ 0.72 $ 0.51 $ 0.05 $ (0.45) $ (0.25)
(1) All per share amounts have been restated for the 5% stock dividend distributed on June 1, 2004
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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
COMMUNITY PARTNERS BANCORP
The selected unaudited pro forma combined financial data of Community Partners has been derived from, and should be read in conjunction with, the unaudited pro forma combined financial information included elsewhere in this joint proxy statement/prospectus. The information is based on historical balance sheets and related historical income statements of Two River and Town Bank, using the purchase method of accounting for business combinations. The pro forma combined income statement and per share data gives effect to the acquisition as if it had been completed on January 1, 2004. The pro forma combined balance sheet as of June 30, 2005 assumes the acquisition was completed on that date. The information is for illustrative purposes only. The banks may have performed differently had they been combined as of the dates for which information is presented. You should not rely on the selected unaudited pro forma combined financial data as being indicative of the historical results that would have been achieved had the banks always been combined or the future results of Community Partners.
At or For the For the
Six Months Ended Year Ended
June 30, 2005 December 31, 2004
----------------- -----------------
Pro forma combined income statement data:
Interest income $ 11,104 $ 17,774
Interest expense 3,141 4,486
----------------- -----------------
Net interest income 7,963 13,288
Provision for loan losses 479 843
----------------- -----------------
Net interest income after provision for loan losses 7,484 12,445
Non-interest income 633 956
Non-interest expense 5,705 10,085
----------------- -----------------
Income before income taxes 2,412 3,316
Income taxes 737 777
----------------- -----------------
Net income $ 1,675 $ 2,539
================= =================
Pro forma per share data:
Basic earnings per share $ 0.27 $ 0.43
Diluted earnings per share $ 0.25 $ 0.40
Pro forma combined balance sheet data:
Total assets $ 431,437
Loans, net 323,542
Deposits 351,256
Total shareholders' equity 63,201
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COMPARATIVE PER SHARE FINANCIAL INFORMATION OF
COMMUNITY PARTNERS BANCORP
We present below information concerning book value, cash dividends and earnings per share for Two River and Town Bank on both an historical and pro forma basis and on a per share equivalent pro forma basis for Town Bank. The pro forma combined earnings and dividend per share information gives effect to the combination as if it had become effective at the beginning of the periods presented. Book value per share data is as of the date presented. We have derived the unaudited pro forma combined per share information from the unaudited pro forma combined financial information presented elsewhere in this joint proxy statement/prospectus which give effect to the exchange of Two River and Town Bank capital stock, and account for the acquisition using the purchase method of accounting. You should read the information below in conjunction with the financial statements and accompanying notes of Two River and Town Bank that are included herein and with the unaudited pro forma combined financial information included under "Unaudited Pro Forma Combined Financial Information."
The Town Bank per share equivalent pro forma data are calculated by multiplying Community Partners pro forma per share amounts by 1.25, the exchange ratio for converting one share of Town Bank common stock into shares of Community Partners common stock, assuming no adjustment. The Two River per share equivalents remain unchanged, as the exchange ratio for converting shares of Two River common stock to Community Partners common stock is one for one.
At or For the At or For the
Six Months Ended Year Ended
June 30, 2005 December 31, 2004
----------------- -----------------
TWO RIVER COMMON STOCK
Book value per share
Historical $ 5.80 $ 5.59
Pro forma combined 10.06 9.79
Cash dividends declared per share
Historical 0.00 0.00
Pro forma combined 0.00 0.00
Basic earnings per share
Historical 0.23 0.36
Pro forma combined 0.27 0.43
Diluted earnings per share
Historical 0.22 0.34
Pro forma combined 0.25 0.40
TOWN BANK COMMON STOCK
Book value per share
Historical $ 8.21 $ 7.75
Pro forma equivalent 12.57 12.24
Cash dividends declared per share
Historical 0.00 0.00
Pro forma equivalent 0.00 0.00
Basic earnings per share
Historical 0.44 0.74
Pro forma equivalent 0.33 0.53
Diluted earnings per share
Historical 0.42 0.72
Pro forma equivalent 0.32 0.51
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COMPARATIVE PER SHARE MARKET INFORMATION
Community Partners common stock has no trading history and will likely reflect the business prospects and financial results of the combined enterprise, including future realization of synergies, tax attributes, and financial performance. Therefore, we do not believe that a pro forma calculation of implied consideration using each of the stock prices of Two River and Town Bank is meaningful as to the future price performance of Community Partners stock.
The following table sets forth the closing prices of Two River and Town Bank common stock as reported on the Over the Counter Bulletin Board (OTCBB) on August 16, 2005, the trading day immediately preceding the announcement of the acquisition, and as of December __, 2005.
Two River Town Bank
Common Stock Common Stock
August 16, 2005 $16.25 $14.00
December __, 2005 $_____ $_____
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Because the value of Community Partners common stock will be based primarily on the value of its two bank subsidiaries, any decrease in the value of shares of Two River or Town Bank common stock prior to the completion of the acquisition may reflect a reduced value of the Community Partners common stock you will receive in the acquisition. We urge you to obtain current market quotations before voting your shares.
RISK FACTORS
In addition to the other information contained in this joint proxy statement/prospectus, you should carefully consider the following risk factors in deciding whether to vote for approval of the acquisition agreement.
COMMUNITY PARTNERS MAY FAIL TO ACHIEVE SUFFICIENT OPERATIONAL INTEGRATION BETWEEN THE TWO BANKS TO MAKE THEIR COMBINATION UNDER A SINGLE HOLDING COMPANY A FINANCIAL SUCCESS.
The success of the acquisition will depend on, among other things, Community Partners' ability to realize anticipated cost savings and to integrate the operations of Two River and Town Bank in a manner that does not materially disrupt the existing customer relationships of either bank or result in decreased revenues from any loss of customers. If Community Partners is not able to successfully achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected.
Two River and Town Bank have operated and, for a period after the completion of the acquisition, will continue to operate, independently. Community Partners will face significant challenges in consolidating Two River and Town Bank functions, integrating their organizations, procedures and operations in a timely and efficient manner and retaining key Two River and Town Bank personnel. The integration of Two River and Town Bank is likely to be costly, complex and time consuming, and management of Community Partners will have to devote substantial resources and efforts to it.
The integration process could result in the disruption of each bank's ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect their ability to maintain relationships with customers, suppliers, employees and others with whom they have business dealings or to achieve the anticipated benefits of the acquisition.
COMMUNITY PARTNERS' BOARD CAN ISSUE PREFERRED STOCK IN ONE OR MORE SERIES, WHICH COULD DECREASE THE AMOUNT OF EARNINGS AND ASSETS AVAILABLE FOR DISTRIBUTION TO ITS COMMON SHAREHOLDERS AND ADVERSELY AFFECT THEIR VOTING RIGHTS.
Neither bank's certificate of incorporation authorizes the issuance of preferred stock.Community Partners' certificate of incorporation authorizes its board of directors to issue from time to time, and without shareholder action, one or more series of preferred stock, and to fix the relative rights and preferences of such preferred stock. The terms of any preferred stock Community Partners issues, such as dividend rights or the right to appoint one or more directors, could reduce the amount of earnings and assets available for distribution to Community Partners' common shareholders or otherwise adversely affect their other rights and powers, including voting rights. Moreover, any such issuance of preferred stock may make it more difficult or may discourage another party from acquiring voting control of Community Partners, even if such an acquisition would be beneficial to Community Partners' common shareholders.
COMMUNITY PARTNERS' COMMON STOCK WILL BE REGISTERED UNDER THE EXCHANGE ACT WHICH WILL REQUIRE SIGNIFICANT COMPLIANCE EXPENSE.
We will be required to register our common stock under the Exchange Act and be subject to the Act's reporting requirements. Moreover, we will be subject to the provisions of the Sarbanes-Oxley Act of 2002 and the regulations issued thereunder. These laws and regulations impose, among other things, significant new responsibilities on officers, auditors, boards of directors and audit committees. Our expenses related to services rendered by our accountants, legal counsel and consultants will increase in order to comply with these laws and regulations.
In 2007, we will be required to conduct a comprehensive review and confirmation of the adequacy of our existing systems and controls under Section 404 of the Sarbanes-Oxley Act. This will result in significant additional expenses. In a Section 404 review, we could discover deficiencies in existing systems and controls. If that is the case, we would have to take the necessary steps to correct any deficiencies, which may be costly and may strain our management resources. We also would be required to disclose any such deficiencies, which could adversely affect
the market price of our common stock. For a discussion of the requirements of the Sarbanes-Oxley Act, see "Government Regulation of Community Partners and the Banks - the Sarbanes-Oxley Act of 2002" on page 85.
YOUR PERCENTAGE OWNERSHIP IN COMMUNITY PARTNERS WILL BE LESS THAN YOUR PERCENTAGE OWNERSHIP INTEREST IN THE BANK OF WHICH YOU ARE NOW A SHAREHOLDER, SO YOU WILL HAVE LESS INFLUENCE AS A SHAREHOLDER IN COMMUNITY PARTNERS THAN YOU DO IN YOUR BANK.
You currently have the right to vote in the election of the board of directors of your bank and on other matters affecting your bank. The acquisition will result in your becoming a shareholder of Community Partners. Your percentage ownership of Community Partners will be smaller than your percentage ownership of the bank whose stock you now own, and much smaller if you are a Town Bank shareholder. If you are a Two River shareholder, your percentage ownership interest in Community Partners will be approximately 37% less on a non-diluted basis (and 34.4% on a fully-diluted basis) than the percentage ownership interest that you have in Two River prior to the acquisition. If you are a Town Bank shareholder, your percentage ownership interest in Community Partners will be approximately 63% less on a non-diluted basis (and 65.6% on a fully-diluted basis) than the percentage ownership interest that you have in Town Bank prior to the acquisition. Because of this, you will have less influence on the management and policies of Community Partners than you now have on the management and policies of your bank.
DIRECTORS AND OFFICERS OF THE BANKS HAVE INTERESTS IN THE ACQUISITION BESIDES THEIR INTERESTS AS SHAREHOLDERS.
Two River's and Town Bank's executive officers negotiated the agreement and plan of acquisition, and the respective board of directors of each bank approved the agreement and plan of acquisition and are recommending that each bank's shareholders vote for the proposal to approve the agreement and plan of acquisition and the transactions contemplated therein. In considering these facts and the other information contained in this joint proxy statement/prospectus, you should be aware that Two River's and Town Bank's executive officers and directors have various interests in the combination besides being Two River shareholders or Town Bank shareholders, as the case may be. See "Interests of Certain Two River Directors and Officers in the Acquisition" on page 41 "Interests of Certain Town Bank Directors and Executive Officers in the Acquisition" on page 44.
COMMUNITY PARTNERS, THROUGH TWO RIVER AND TOWN BANK, WILL INCUR SIGNIFICANT COSTS ASSOCIATED WITH THE ACQUISITION, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS RESULTS OF OPERATIONS.
Community Partners, through Two River and Town Bank, will incur direct costs associated with the acquisition, which are currently estimated to be $1,200,000. Some of these costs, such as legal fees, accounting fees, expenses for financial advisors, regulatory filing fees and other expenses, totaling $500,000, have already been paid or must be paid, even if the acquisition is not completed. In addition, Two River and Town Bank will incur severance expenses in connection with the termination of employment of certain officers and employees of the two banks. Further, following the acquisition, there may be significant costs to Community Partners associated with integrating the operations of Two River and Town Bank. Community Partners will likely incur such costs associated with the acquisition, reflected as additional material expenses in subsequent quarters that could have a material adverse effect on its cash flows and results of operations.
COMMUNITY PARTNERS MAY BE SUBJECT TO ADVERSE REGULATORY CONDITIONS.
Before we can complete the acquisition, we must obtain approval from the New Jersey Department of Banking and Insurance and the Federal Reserve Bank of New York must have no objection. No assurance can be given that we will be able to obtain all necessary governmental approvals or that approvals we obtain will not contain conditions on the completion of the acquisition or require changes in the terms of the acquisition which could delay the acquisition, or impose additional costs or regulatory burdens.
THE FUTURE RESULTS OF COMMUNITY PARTNERS MAY DIFFER SIGNIFICANTLY FROM THE PRO FORMA FINANCIAL STATEMENTS INCLUDED ELSEWHERE HEREIN.
We anticipate that the acquisition will provide Community Partners and our two banks with financial benefits including cost savings and enhanced revenue opportunities. The pro forma information included elsewhere herein, while helpful in illustrating the financial characteristics of the combined organization under one set of assumptions, does not reflect benefits of expected cost savings or revenue opportunities and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of Community Partners would have been had the two banks been operating under a single holding company during the periods presented.
THERE IS CURRENTLY NO TRADING MARKET FOR COMMUNITY PARTNERS COMMON STOCK. IF WE ARE UNABLE TO OBTAIN NASDAQ SMALLCAP MARKET LISTING OR IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP, IT MAY BE DIFFICULT FOR YOU TO SELL OR BUY COMMUNITY PARTNERS STOCK AND THE VALUE OF YOUR SHARES MAY BE MATERIALLY ADVERSELY AFFECTED.
Community Partners was recently formed to serve as the publicly traded parent company of Two River and Town Bank following consummation of the acquisition. Two River and Town Bank chose to form a holding company, in part, so that they could seek listing on the NASDAQ SmallCap Market and increase liquidity for their respective shareholders. There can be no assurance that Community Partners common stock will be approved for listing on the NASDAQ SmallCap Market or, in the alternative, on the NASDAQ National Market or the American Stock Exchange. Even if the stock becomes listed, we cannot predict the extent to which an active trading market for the stock will develop, or how liquid any such trading market might become. As a result, it may be difficult for you to sell or buy shares of Community Partners stock and the value of your shares may be materially adversely affected.
FLUCTUATIONS IN THE MARKET PRICE OF TWO RIVER COMMON STOCK MAY CHANGE THE VALUE OF THE COMMUNITY PARTNERS COMMON STOCK WHICH YOU WILL RECEIVE IN THE ACQUISITION.
The acquisition has been structured to provide Two River shareholders with one share of Community Partners common stock, and Town Bank shareholders with 1.25 shares of Community Partners common stock, for each share of their bank common stock. However, the 1.25 exchange ratio for Town Bank shareholders is subject to adjustment based on the Two River Average Price, which in turn is based on the trading prices of Two River common stock over a period of time near the closing of the acquisition. Because the date the acquisition is completed will be later than the date of the special meeting, you will not know the Two River Average Price at the time you vote on the acquisition. The Two River Average Price will almost certainly be different from the trading price of Two River common stock on the date of this joint proxy statement/prospectus and on the date of the special meetings to vote on the acquisition. Changes in the market price of Two River common stock could affect the exchange ratio and could reflect changes in the market's perception of the value of Two River or Community Partners or both. These changes may result from a variety of factors, including, among other things, changes in Two River's or Town Bank's business, operations and prospects, regulatory considerations and general market and economic conditions.
TOWN BANK'S BOARD OF DIRECTORS MAY BE ABLE TO ABANDON THE ACQUISITION IF THE MARKET PRICE OF TWO RIVER COMMON STOCK DROPS SUBSTANTIALLY.
Town Bank has the right to terminate the merger agreement and abandon the merger before the closing if the Two River Average Price is less than $11.00. The satisfaction of the termination condition creates a right, but not an obligation, for Town Bank to terminate and the decision whether to terminate would be made by the Town Bank board of directors. The opportunity to evaluate this termination provision will take place only after the Two River Average Price can be determined, which will not occur until the anticipated closing date is near.
THE POTENTIAL COST OF SHAREHOLDERS' DISSENTER RIGHTS COULD BE SIGNIFICANT.
Bank shareholders who dissent from the acquisition and satisfy the legal requirements for perfecting their claim have the right to have their shares repurchased by their bank for cash in an amount equal to which is the fair market value of their shares. If shareholders elect to dissent in substantial numbers, the cost of repurchasing their shares, which could include the costs associated with legal proceedings to appraise fair market value, could be substantial and adverse to Community Partners, as the owner of both banks. Either Town Bank or Two River has the right to terminate the acquisition agreement if bank shareholders pursue their dissenters rights with respect to an amount of shares which in the aggregate, is 10% or more of the total amount of shares which otherwise would have been issued in the acquisition.
THE SPECIAL MEETINGS
Joint Proxy Statement/Prospectus
This joint proxy statement/prospectus is being furnished to you in connection with the solicitation of proxies by each of bank's board of directors in connection with the proposed acquisition.
This joint proxy statement/prospectus is first being furnished to shareholders of Two River and Town Bank on or about December __, 2005.
Date, Time and Place of the Special Meetings
The special meetings are scheduled to be held as follows:
For Two River shareholders: For Town Bank shareholders: January __, 2006 January __, 2006 5:00 p.m. 10:00 a.m. Two River Community Bank [To be determined] 1250 Highway 35 South Middletown, New Jersey 07748 |
Vote Required for Approval of the Acquisition Agreement
Two River
A majority of the outstanding shares entitled to vote at the Two River special meeting must be represented, either in person or by proxy, to constitute a quorum at the Two River special meeting. The affirmative vote of the holders of at least two-thirds (2/3) of Two River's common stock outstanding as of the record date is required to approve the acquisition agreement. At the Two River special meeting, each share of Two River common stock is entitled to one vote on all matters properly submitted to the Two River shareholders.
As of the record date, Two River directors and executive officers and their affiliates owned approximately 20% of the outstanding shares of Two River common stock on a non-diluted basis.
Town Bank
A majority of the outstanding shares entitled to vote at the Town Bank special meeting must be represented, either in person or by proxy, to constitute a quorum at the Two River special meeting. The affirmative vote of the holders of at least two-thirds (2/3) of Town Bank's common stock outstanding as of the record date is required to approve the acquisition agreement. At the Town Bank special meeting, each share of Town Bank common stock is entitled to one vote on all matters properly submitted to the Town Bank shareholders.
As of the record date, Town Bank directors and executive officers and their affiliates owned approximately 34% of the outstanding shares of Town Bank common stock on a non-diluted basis.
Proxies
All shares of bank common stock represented by properly executed proxies or voting instructions received before or at the bank's special meeting will, unless the proxies or voting instructions are revoked, be voted in accordance with the instructions indicated on those proxies or voting instructions. If no instructions are indicated on a properly executed proxy card or voting instruction, the shares will be voted FOR approval of the acquisition agreement. You are urged to mark the box on the proxy card to indicate how to vote your shares.
If a properly executed proxy card or voting instruction is returned and the shareholder has abstained from voting on approval of the acquisition agreement, the common stock represented by the proxy or voting instruction
will be considered present at the special meeting for purposes of determining a quorum, but will not be considered to have been voted in favor of approval of the acquisition agreement. If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares. If an executed proxy card is returned by a broker or bank holding shares which indicates that the broker or bank does not have discretionary authority to vote on approval of the acquisition agreement, the shares will be considered present at the meeting for purposes of determining the presence of a quorum, but will not be considered to have been voted in favor of approval of the acquisition agreement. Your broker or bank will vote your shares only if you provide instructions on how to vote by following the information provided to you by your broker.
Because approval of the acquisition agreement requires the affirmative vote of at least two-thirds (2/3) of the shares of each of Two River's common stock and of Town Bank's common stock outstanding on the record date, abstentions, failures to vote and broker non-votes will have the same effect as a vote against approval of the acquisition agreement.
Either or both special meetings may be adjourned or postponed in order to permit further solicitation of proxies. No proxy voted against the proposal to approve the acquisition agreement will be voted on any proposal to adjourn or postpone the special meeting that is submitted to the shareholders for a vote.
Neither bank expects that any matter other than approval of the acquisition agreement will be brought before its special meeting. If, however, other matters are properly presented, the persons named as proxies will vote in accordance with their judgments with respect to those matters, unless authority to do so is withheld on the proxy card.
A shareholder may revoke his or her proxy at any time before it is voted by:
o notifying in writing the Secretary of Two River Community Bank at 1250 Highway 35 South, Middletown, New Jersey 07748, if you are a Two River shareholder, or the Secretary of Town Bank at 520 South Avenue, Westfield, New Jersey 07090, if you are a Town Bank shareholder;
o granting a subsequently dated proxy; or
o appearing in person and voting at the special meeting if you are a holder of record.
Attendance at the special meeting will not by itself constitute revocation of a proxy.
Solicitation of Proxies
Two River and Town Bank will equally share the expenses incurred in connection with the printing and mailing of this joint proxy statement/prospectus. The banks plan to retain the services of Regan & Associates, Inc. to serve as proxy solicitors for both banks for a fee not to exceed an aggregate of $13,000. The banks and their proxy solicitor will also request banks, brokers, and other intermediaries holding shares of common stock beneficially owned by others to send this joint proxy statement/prospectus to, and obtain proxies from, the beneficial owners and will reimburse the holders for their reasonable expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone, telegram and other electronic means, advertisements and personal solicitation by the directors, officers or employees of Two River and Town Bank. No additional compensation will be paid to directors, officers, or employees for such solicitation.
You should not send in any stock certificates with your proxy card. If you are a registered holder of Two River or Town Bank common stock, a transmittal letter with instructions for the surrender of stock certificates will be mailed to you as soon as practicable after the effectiveness of the acquisition.
THE ACQUISITION
This section of the joint proxy statement/prospectus describes material aspects of the proposed acquisition. While we believe that the description covers the material terms of the acquisition, this summary may not contain all of the information that is important to you. You should read carefully this entire joint proxy statement/prospectus and the documents attached to it for a more complete understanding of the acquisition.
Background of the Acquisition
As Town Bank has grown and become more profitable, it has considered from time to time the question of how best to continue its growth. One alternative considered by the Town Bank board has been the potential combination of the bank with another financial institution whose culture and business philosophy matched its own.
During the second half of 2004, Town Bank received and responded to inquiries from another community bank exploring the possibility of a business combination. Town Bank consulted with Janney Montgomery Scott as financial advisor in connection with the inquiry. However, initial discussions between certain members of Town Bank's board and the other party did not progress beyond a preliminary stage.
Since the beginning of 2005, several members of Town Bank's board and management maintained a dialogue with Janney Montgomery Scott regarding the board's strategic options, the current bank market place in New Jersey and its potential implications for Town Bank. On April 6, 2005, the Chairman of Town Bank and another director of Town Bank met with investment bankers from Janney to discuss the prospects of Town Bank and to consider the possibility of pursuing a possible business combination.
In subsequent phone conversations between the Chairman of Town Bank and representatives of Janney, the conversation centered on the possibility of pursuing a combination with Two River.
The performance of Two River from its inception in early 2000 has resulted from its business strategy of providing exceptional service to the consumers and business population in the bank's market area. To ensure Two River's continuing focus on earnings, asset and deposit growth, operational efficiency and product development, the Two River board has been committed to an annual strategic planning process involving a formal planning retreat session. In March 2005, the 2005 planning retreat took place and the subject of continued growth strategy was reviewed at length. As part of the annual discussion, the Two River board reviews possible new branch locations, together with possible business combinations with other community banks with which Two River is familiar. As active participants in community banking organizations in New Jersey, Two River's senior management is aware of the success of similar institutions, their management style and geographic area served. In some instances, there is greater familiarity as the result of loan participations.
Two River, therefore, has enjoyed a good relationship with Town Bank through loan participation activity and general knowledge of Town Bank and its market area, and has been aware of its successful performance in recent years.
One of the conclusions of the 2005 Two River strategic planning session was that the bank's senior management should pursue general, exploratory conversations with other community banks whose performance and market area would fit with Two River's customer service philosophy. The May 24, 2005 meeting held by Two River CEO Barry Davall with Janney, described below, was the type of meeting contemplated and has resulted in the proposed business combination described in this document.
In mid May, 2005, the Chairman of Town Bank authorized Janney to contact the CEO of Two River, Barry Davall, to explore the idea of a possible business combination.
Janney contacted Mr. Davall and arranged for the parties to sign a confidentiality agreement and a meeting was held on May 24, 2005 between Mr. Davall and Janney. At the meeting, the concept of a combination of Town Bank and Two River was discussed, and the participants agreed to report back to their respective banks and determine if more discussions were warranted.
On June 7, 2005, five directors of Two River and representatives of Curtis Securities conferred by telephone to discuss the transaction, its timing, and the steps that would be required in order to reach a definitive agreement. The Two River board members directed Curtis Securities to continue discussions with Town Bank, via its investment bank, toward reaching some conclusions about the possibility of a business combination.
It was separately determined by Town Bank that there was sufficient interest to arrange a meeting of selected directors of the two banks. On June 10, 2005, Messrs. O'Sullivan, Gregory and Kurtz, all directors of Town Bank, met with Messrs. Parton, Patock, Kostelnik and Davall, directors of Two River, to talk about their respective institutions and to discuss the possibility of a business combination. At the end of the meeting, the participants agreed that for confidentiality reasons, the two banks should utilize their respective financial advisors to relay information between the banks regarding the potential business combination. The banks instructed their advisors to meet to explore the financial terms of a possible transaction.
On June 17, 2005 Janney met with Curtis Securities, investment banker to Two River, to discuss the financial parameters of a possible business combination. At the conclusion of the meeting, the range of prices being discussed gave the investment bankers sufficient belief that the small difference in their clients' expectations could be bridged. Over the next few days, the banks, communicating through their investment bankers, tentatively determined that a transaction might be accomplished in which shareholders of Town Bank would receive a value of approximately $20 per share in stock of Two River. The banks also discussed a transaction structure which would allow both banks to continue in existence as subsidiaries of a bank holding company, which would allow the respective banks to help maintain their in-market identities.
On June 22, 2005, the Chairman of Town Bank and two other directors of Town Bank met with representatives of Janney to discuss the potential transaction and the steps that would need to be taken in order to reach a definitive agreement. The representatives from Town Bank directed Janney to negotiate financial terms that would fix the number of shares to be received by its shareholders in an exchange.
On June 27, 2005, the Chairman of Town Bank and a representative of Janney met with the Chairman of Two River and a representative of Curtis Securities to discuss the non-financial aspects of the transaction and to finalize a time line for executing a definitive merger agreement. Over the next several days, the two banks, using Curtis Securities and Janney as their representatives, negotiated a fixed exchange ratio of 1.27, subject to approval of the board of directors of each bank. The exchange ratio would be subject to a "collar" which would allow for the ratio to be adjusted based on increases or decreases in the trading prices of Two River's stock outside of a negotiated range.
On July 6, 2005, the Two River board met for the purpose of discussing the potential transaction with Town Bank. At this meeting, representatives of Curtis Securities provided the Two River directors with financial information and analysis relating to the potential transaction. The Two River board authorized its negotiating group to continue working on a definitive agreement.
On July 6, 2005, the Town Bank board met for the purpose of discussing the potential transaction with Two River and to receive a preliminary analysis from Janney as to the fairness of the transaction to the shareholders of Town Bank. At this meeting, representatives of Janney provided the Town Bank directors with Janney's preliminary analysis that the exchange ratio was fair from a financial point of view to the shareholders of Town Bank. The Town Bank board authorized its negotiating group to continue working on a definitive agreement.
Due diligence was conducted during the week of July 11, 2005 and proceeded through the next several weeks with a number of meetings held between the managements and their consultants to discuss lending policies and procedures, underwriting standards, budget forecasts and potential staffing. At the conclusion of the due diligence investigations, the parties agreed to lower the proposed exchange ratio to 1.25 shares from 1.27 shares.
On August 9, 2005, the Two River board met at a special meeting to consider entering into a definitive agreement with Town Bank. The attorneys for Two River reviewed the preliminary agreement. Curtis Securities provided its preliminary opinion that the exchange ratio was fair from a financial point of view to Two River and its shareholders. The directors were able to discuss and ask questions of their advisors.
On August 16, 2005, the Two River board met at a special meeting to consider entering into a definitive agreement with Two River. The attorneys for Two River reviewed the agreement. Curtis Securities provided a written opinion that the exchange ratio was fair from a financial point of view to Two River and its shareholders. Thereafter, Two River's board voted unanimously to approve the acquisition.
On August 16, 2005, the Town Bank board met at a special meeting to consider entering into a definitive agreement with Two River. The attorneys for Town Bank reviewed the agreement. Janney provided a written opinion that the exchange ratio was fair from a financial point of view to Town Bank and its shareholders. Thereafter, Town Bank's board voted unanimously to approve the acquisition.
Two River's Reasons for the Acquisition
During its discussion and analysis regarding the acquisition, the Two River board considered a number of factors, including, but not limited to, the following:
o Town Bank shares the community oriented banking philosophy of Two River.
o Two River can gain ease of entrance to a marketplace similar to the one it currently serves.
o The presentation of Curtis Securities and the opinion of Curtis Securities that the acquisition is fair to the Two River shareholders.
o The ability of the combined larger organization to more efficiently invest in technology and leverage its fixed costs.
o The potential for increased earnings in light of revenue enhancements and cost savings as a result of the transaction.
o The potential for the successful operation of the combined organization to increase its franchise value.
o The potential for the improved liquidity of Two River's stock.
o The ability of the transaction to be conducted on a tax-free basis.
In addition, the Two River board discussed risk factors associated with the business combination, including but not limited to management's diversion from regular business activities due to concentration on formation of the holding company, and migration to a uniform operations environment among the banks.
This discussion of the information and factors considered by the Two River board is not intended to be exhaustive, but includes the material factors considered in evaluating the transaction. The Two River board did not assign particular weight or rank to the factors it considered in approving the acquisition. In considering the factors described above, individual directors may have given different weight to the various factors.
Opinion of Two River's Financial Advisor
In a letter agreement dated June 29, 2005, Two River retained Curtis Securities, LLC to act as its financial advisor in connection with a possible business combination with Town Bank. Curtis Securities is a regional investment banking firm with particular experience in the financial services industry. Curtis Securities, and its affiliates, as part of its investment banking business, is engaged in the valuation of securities and companies for a variety of purposes and in connection with various types of transactions including mergers and acquisitions. Curtis Securities was selected by Two River because of its knowledge of, expertise with and reputation in the financial services industry. No limitations were imposed by the Two River board of directors upon Curtis Securities with respect to the investigation made or procedures followed by it in arriving at its opinion. In rendering its opinion, Curtis Securities does not admit that it is an expert within the meaning of the term "expert" as used within the Securities Act of 1933 and the rules and regulations promulgated
thereunder, or that its opinion constitutes a report or valuation within the meaning of Section 11 of the Securities Act of 1933 and the rules and regulations promulgated thereunder.
Curtis Securities' opinion was directed to the Two River board of directors and is directed only to the fairness, from a financial point of view, of the two exchange ratios to Two River shareholders as of August 16, 2005. It does not address the underlying business decision of Two River to engage in the acquisition or any other aspect of the acquisition and is not a recommendation to any Two River shareholder as to how that shareholder should vote at the special meeting with respect to the acquisition, or any other matter.
In connection with rendering its opinion, Curtis Securities has, among other things:
(i) reviewed the historical financial performance, recent financial position and general prospects of Two River and Town Bank using publicly available information;
(ii) reviewed certain internal financial statements and other financial and operating data concerning Two River and Town Bank prepared by each bank's management team;
(iii) reviewed certain financial forecasts and other forward looking financial information prepared by each bank's management team;
(iv) held discussions with the senior managements of each bank concerning the business, past and current operations, financial condition and future prospects of Community Partners, Two River and Town Bank;
(v) reviewed the financial terms and conditions set forth in the acquisition agreement;
(vi) compared the financial and stock market performance of Two River and Town Bank with that of certain other publicly traded companies Curtis Securities deemed similar to those banks;
(vii) compared the financial terms of the acquisition with the financial terms, to the extent publicly available, of other transactions that Curtis Securities deemed relevant;
(viii)reviewed the relative contribution of assets, liabilities, equity and earnings of each bank to Community Partners on a pro forma basis and the relative pro forma ownership of the shareholders of each bank in Community Partners;
(ix) prepared discounted dividend analysis of each bank using data and projections supplied by each bank's management;
(x) participated in discussions and negotiations among representatives of Two River and Town Bank and their financial and legal advisors;
(xi) reviewed the acquisition agreement dated August 16, 2005;
(xii) reviewed a draft of this joint proxy statement/prospectus; and
(xiii)made such inquiries and took into account such other matters as Curtis Securities deemed relevant, including Curtis Securities' assessment of general economic, market and monetary conditions.
In its review and analysis, and in arriving at its opinion, Curtis Securities assumed and relied upon the accuracy and completeness of all of the financial and other information provided to it (including information furnished to it orally or otherwise discussed with it by management of the banks as well as information provided by recognized independent sources) or publicly available and neither attempted to verify, nor assumed responsibility for verifying, any of that information. Curtis Securities relied upon the assurances of Two River's and Town Bank's management that they are not aware of any facts that would make such information inaccurate or misleading. Furthermore, Curtis Securities did not obtain or make, or assume any responsibility for obtaining or making, any independent evaluation or appraisal of the properties, assets (including loans) or liabilities (contingent or otherwise) of either bank, nor was Curtis Securities furnished with any such evaluation or appraisal. Curtis Securities did not make any independent evaluation of the adequacy of the allowance for loan losses of either bank nor did it review any individual credit files. Curtis Securities assumed, with Two River's consent, that Two River's and Town Bank's allowances for loan losses are adequate to cover such losses.
With respect to the status of the banks' financial forecasts and projections (and the assumptions and bases therefore) that Curtis Securities reviewed, upon the advice of management of each bank, Curtis Securities assumed that such forecasts and projections have been reasonably prepared in good faith on the basis of reasonable assumptions and reflect the best currently available estimates and judgments as to the future financial condition and performance of Community Partners, Two River and Town Bank, and Curtis Securities has further assumed that those projections and forecasts will be realized in the amounts and in the time periods currently estimated. Curtis Securities assumed that the acquisition will be consummated upon the terms set forth in the acquisition agreement without material alteration thereof and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the acquisition, no delay, limitation, restriction or condition will be imposed that would have a material adverse effect on Community Partners, Two River, Town Bank or the contemplated benefits of the acquisition. Curtis Securities assumed that all of the representations and warranties contained in the acquisition agreement are true and correct and that Two River and Town Bank will each perform the covenants required by the acquisition agreement. In addition, Curtis Securities has assumed that the historical financial statements of Two River and Town Bank reviewed by it have been prepared and fairly presented in accordance with U.S. generally accepted accounting principles consistently applied. Curtis Securities also assumed, with the consent of Two River, that the acquisition will be treated as a tax-free reorganization for federal income tax purposes. Finally, with Two River's consent, Curtis Securities relied upon the advice Two River has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the acquisition and the other transactions contemplated by the acquisition agreement.
In performing its analyses, Curtis Securities 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 Two River, Town Bank and Curtis Securities. The analyses performed by Curtis Securities are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by the analyses. Curtis Securities prepared its analyses solely for purposes of rendering its opinion and provided its analyses to the Two River board at the board of director's meeting on August 9, 2005. Estimates of 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, Curtis Securities' analyses do not necessarily reflect the value of Two River common stock, Town Bank common stock or Community Partners common stock or the prices at which Two River common stock, Town Bank common stock or Community Partners common stock may be sold at any time.
Curtis Securities also relied, without independent verification, upon the estimates and judgments of the management of Two River and Town Bank as to the potential cost savings and other potential synergies (including the amount, timing and achievability thereof) anticipated to result from the acquisition. The financial projections, estimates of transaction costs, purchase accounting adjustments and expected cost savings discussed with Curtis Securities were prepared by the respective management teams of Town Bank and Two River. Senior executives of Town Bank and Two River confirmed to Curtis Securities that such projections, estimates, adjustments and savings reflected the best currently
available estimates and judgments of Town Bank's and Two River's respective management teams. Curtis Securities expressed no opinion as to such projections, estimates, adjustments and savings in its opinion. Town Bank and Two River do not publicly disclose internal management projections of the type discussed with Curtis Securities in connection with the review of the merger. Such projections were not prepared with a view towards public disclosure. The public disclosure of such projections could be misleading since the projections were based on numerous variables and assumptions which are inherently uncertain and accordingly, actual results could vary materially from those set forth in such projections.
In rendering its opinion, Curtis Securities performed a variety of financial analyses. The following is a summary of the material analyses performed by Curtis Securities, but is not a complete description of all the analyses underlying Curtis Securities' 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 numerous subjective judgments relating to the most relevant and / or appropriate methods of corporate and financial analysis and the application of those methods and analysis to the subject circumstances. The process, therefore, is not necessarily susceptible to partial analysis or summary description. Curtis Securities believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses considered 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 Curtis Securities' comparative analyses described below is identical to Two River or Town Bank and no transaction is identical to the acquisition. 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 Two River or Town Bank and the companies to which they are being compared.
Summary of Transaction. Curtis Securities reviewed the financial terms of the proposed transaction. Based upon the August 12, 2005 closing price of Two River of $16.60 and an exchange ratio of 1.25 shares of Community Partners common stock for each share of Town Bank common stock, Curtis Securities calculated an implied transaction value of $20.75 per share of Town Bank common stock. Based upon financial information for Two River as of or for the twelve-month period ended June 30, 2005, Curtis Securities calculated the following ratios with respect to the transaction value per share of Town Bank common stock:
Transaction Ratios Transaction value/Last twelve month's earnings per share 23.2x Transaction value/Book value 265.5% Transaction price/Tangible book value 265.5% |
For purposes of Curtis Securities' analyses, earnings per share were based on fully diluted earnings per share. The aggregate transaction value was approximately $41.2 million based upon 1,877,330 shares of Town Bank common stock outstanding plus the intrinsic value of outstanding options to purchase an aggregate of 180,797 shares of Town Bank common stock having a weighted average exercise price of $8.1561.
Stock Trading History. Curtis Securities reviewed the history of the reported trading prices and volume of Two River common stock and Town Bank common stock for the previous one year period. Curtis Securities also compared the trading price performance of each bank with the SNL Bank Index, a nationally recognized industry information service index.
During the one-year period ending August 12, 2005, Two River common stock generally underperformed the index to which it was compared. During the one-year period ending August 12, 2005, Town Bank common stock generally outperformed the index to which it was compared.
Contribution Analysis. Curtis Securities reviewed the relative contributions to be made by Two River and Town Bank to the combined institution based on financial information of both banks as of or for the one-year period ended June 30, 2005. This analysis indicated that the implied contributions to the combined entity were as follows:
Contribution Analysis (1)
Two River Town Bank
Loans, net 61.0% 39.0%
Total assets 63.7% 36.3%
Deposits 62.8% 37.2%
Total equity 59.5% 40.5%
Last twelve months' net income 49.8% 50.2%
Last twelve months' pre-tax income 58.9% 41.1%
Projected 2005 Net Income 54.0% 46.0%
LTM Net Interest Income 65.6% 34.4%
LTM Non-interest Income 87.3% 12.7%
Pro forma ownership (using 1.25 exchange ratio) (2) 62.7% 37.3%
Directorship 62.5% 37.5%
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(1) Excluding purchase accounting adjustment and potential synergies.
(2) Excludes the effects of stock options.
Comparable Company Analysis. Curtis Securities used publicly available information to compare selected financial, operating and market trading information for Two River and Town Bank and groups of commercial banking institutions selected by Curtis Securities.
The peer group for Town Bank consisted of the following publicly traded commercial banks and bank holding companies headquartered in New Jersey with total assets between $75 million and $250 million:
1st Colonial Bancorp, Inc.
Absecon Bancorp
Advantage Bank
Brunswick Bancorp
Community Bank of Bergen County
Cornerstone Bank
Elmer Bancorp, Inc.
Farnworth Bancorp, Inc.
Harvest Community Bank
Hilltop Community Bancorp Incorporated
Hopewell Valley Community Bank
Liberty Bell Bank
New Millennium Bank
Penn Bancshares, Incorporated
Roebling Financial Corp., Inc.
Rumson-Fair Haven Bank & Trust Co.
Shore Community Bank
Somerset Hills Bancorp
The analysis compared publicly available financial, operating and market trading information for Town Bank and the data for the peer group as of and for the twelve-month period ended June 30, 2005. The table below compares the data for Town Bank and the peer group.
Comparable Group Analysis
Peer Group Peer Group Peer Group
Minimum Median Maximum Town Bank
Total assets (in millions) $99.2 $153.3 $227.7 $147.0
Equity/assets 6.5% 9.5% 24.7% 10.6%
Tangible equity/assets 6.5% 9.5% 24.7% 10.6%
Gross Loans/Total Deposits 33.1% 77.5% 95.9% 97.9%
NCOs/ Avg Loans -0.2% 0.0% 0.2% 0.0%
NPAs+ 90 day past due /Total Assets 0.0% 0.2% 0.7% 0.0%
Loan Loss Reserves/ NPAs+ 90 day past due 67.4% 221.0% 877.2% NM
Three year CAGR in Loans 0% 24% 42% 39%
Three year CAGR in Deposits 2% 25% 42% 36%
Three year CAGR in Assets 3% 24% 42% 36%
LTM Return on average assets .19% .75% 1.74% 1.34%
LTM Return on average equity 1.81% 6.41% 13.64% 12.23%
Net Interest Margin 1.50% 3.94% 7.44% 4.06%
Efficiency Ratio 62.24% 72.80% 89.41% 55.37%
Three year avg - Return on average assets -.56% .64% 1.76% .82%
Three year avg - Return on average equity -5.05% 6.95% 14.62% 8.08%
Three year avg - Net Interest Margin 2.76% 3.89% 6.67% 3.80%
Three year avg - Efficiency Ratio 61.24% 73.28% 110.86% 70.55%
Price/Book Value 90.5% 138.9% 304.5% 171.1%
Price/Tangible book value 90.5% 152.9% 318.3% 171.1%
Price/LTM earnings per share 20.4x 30.6x 37.5x 15.4x
Dividend Yield 0.00% 0.00% 4.56% 0.00%
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NM = not meaningful
The peer group for Two River consisted of the following publicly traded commercial banks and bank holding companies headquartered in New Jersey with total assets between $150 million and $400 million:
1st Colonial Bancorp, Inc.
1st Constitution Bancorp, Inc.
Absecon Bancorp
Advantage Bank
BCB Bancorp, Inc.
Boardwalk Bank
Community Bank of Bergen County
Cornerstone Bank
Elmer Bancorp, Inc.
Hilltop Community Bancorp Incorporated
Hopewell Valley Community Bank
Parke Bancorp, Inc.
Penn Bancshares, Incorporated
Somerset Hills Bancorp
Sterling Bank
Sussex Bancorp, Inc.
The analysis compared publicly available financial, operating and market trading information for Two River and the data for the peer group as of and for the twelve-month period ended June 30, 2005. The table below compares the data for Two River and the peer group.
Comparable Group Analysis
Peer Group Peer Group Peer Group
Minimum Median Maximum Two River
Total assets (in millions) $152.4 $202.4 $390.8 $258.5
Equity/assets 7.0% 9.1% 11.6% 8.8%
Tangible equity/assets 7.0% 9.1% 11.6% 8.8%
Gross Loans/Total Deposits 33.1% 78.2% 101.7% 89.8%
NCOs/ Avg Loans -0.3% 0.0% 0.2% 0.0%
NPAs+ 90 day past due /Total Assets 0.0% 0.2% 0.7% 0.0%
Loan Loss Reserves/ NPAs+ 90 day past due NM 162.1% 439.6% NM
Three year CAGR in Loans 0% 25% 58% 41%
Three year CAGR in Deposits 2% 29% 41% 38%
Three year CAGR in Assets 3% 28% 43% 36%
LTM Return on average assets .29% .78% 1.38% .75%
LTM Return on average equity 3.22% 8.47% 16.33% 8.60%
Net Interest Margin 3.20% 3.97% 4.89% 4.49%
Efficiency Ratio 40.26% 66.83% 89.41% 70.58%
Three year avg - Return on average assets .31% .73% 1.26% .73%
Three year avg - Return on average equity 3.61% 8.11% 14.84% 8.24%
Three year avg - Net Interest Margin 3.24% 3.92% 5.13% 4.63%
Three year avg - Efficiency Ratio 43.39% 67.95% 87.46% 72.96%
Price/Book Value 112.7% 150.6% 256.1% 286.8%
Price/Tangible book value 112.7% 157.8% 256.1% 286.8%
Price/LTM earnings per share 15.4x 26.9x 37.5x 39.3x
Dividend Yield 0.00% .36% 4.56% 0.00%
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NM = not meaningful
Analysis of Selected Merger Transactions. Curtis Securities reviewed two sets of merger transactions it deemed comparable to the proposed acquisition. Importantly, no transaction or group of transactions is the same as the proposed acquisition. The first group of transactions involved target banks which were New Jersey banks with less than $750 million in assets where the transaction was announced since January 1, 2003 (the "NJ transactions", 11 transactions). The second group of transactions involved target banks which were mid-Atlantic region banks with assets between $75 million and $250 million where the transaction was announced since July 1, 2003 (the "Mid-Atlantic transactions", 10 transactions).
Transaction Multiples
NJ Transactions Mid-Atlantic Transactions
-------------------------- -------------------------
Maximum Median Minimum Maximum Median Minimum
-------------------------- -------------------------
Transaction price/LTM EPS 40.3x 25.9x 17.9x 40.3x 27.9% 18.2x
Transaction price/Book value 320.0% 293.9% 145.5% 320.0% 244.6% 72.1%
Transaction price/Tangible book value 322.8% 302.3% 213.2% 320.0% 245.1% 72.1%
Premium to market 70.1% 24.3% -3.5% 68.4% 40.7% 13.2%
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Discounted Dividend Analysis. Curtis Securities performed an analysis that estimated the future stream of after-tax dividend flows of Town Bank through December 31, 2009 under various circumstances, assuming Town Bank performed in accordance with the earnings estimates for 2005 through 2007 provided by its senior management. For periods after 2007, Curtis Securities assumed annual growth rates of earnings per share of 10% to 20%. To approximate the terminal value of Town Bank common stock at December 31, 2009, Curtis Securities applied price/earnings multiples ranging from 18x to 26x. The dividend income streams and terminal values were then discounted to present values using different
discount rates ranging from 9% to 14% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Town Bank common stock.
10% Growth 20% Growth
Discount Rate 18x 20x 22x 24x 26x | 18x 20x 22x 24x 26x
9% $17.72 $19.69 $21.66 $23.63 $25.60 | $21.09 23.43 $25.78 $28.12 $30.46
10% 17.01 18.90 20.79 22.68 24.57 | 20.24 22.49 24.74 26.99 29.24
11% 16.33 18.14 19.96 21.77 23.59 | 19.43 21.59 23.75 25.91 28.07
12% 15.68 17.43 19.17 20.91 22.65 | 18.67 20.74 22.81 24.89 26.96
13% 15.07 16.74 18.42 20.09 21.77 | 17.93 19.93 21.92 23.91 25.90
14% 14.48 16.09 17.70 19.31 20.92 | 17.24 19.15 21.07 22.98 24.90
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Curtis Securities performed a similar analysis that estimated the future stream of after-tax dividend flows of Two River through December 31, 2009 under various circumstances, assuming Two River performed in accordance with the earnings estimates for 2005 and 2006 provided by its senior management. For periods after 2006, Curtis Securities assumed annual growth rates of earnings per share of 10% to 20%. To approximate the terminal value of Two River's common stock at December 31, 2009, Curtis Securities applied price/earnings multiples ranging from 18x to 26x. The dividend income streams and terminal values were then discounted to present values using different discount rates ranging from 9% to 14% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Two River common stock.
10% Growth 20% Growth
Discount Rate 18x 20x 22x 24x 26x | 18x 20x 22x 24x 26x
9% $9.79 $10.87 $11.96 $13.05 $14.14 | $12.71 $14.12 $15.53 $16.94 $18.35
10% 9.39 10.44 11.48 12.52 13.57 | 12.19 13.55 14.90 16.26 17.61
11% 9.02 10.02 11.02 12.02 13.03 | 11.71 13.01 14.31 15.61 16.91
12% 8.66 9.62 10.59 11.55 12.51 | 11.25 12.49 13.74 14.99 16.24
13% 8.32 9.25 10.17 11.10 12.02 | 10.80 12.00 13.21 14.41 15.61
14% 8.00 8.89 9.78 10.66 11.55 | 10.38 11.54 12.69 13.85 15.00
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In connection with its analyses, Curtis Securities considered and discussed with the Two River board of directors how the present value analyses would be affected by changes in the underlying assumptions, including variations with respect to net income. Curtis Securities 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. Curtis Securities analyzed certain potential pro forma effects of the acquisition, using numerous assumptions including the following: (i) 100% of the shares of Town Bank common stock are exchanged for Community Partners common stock at an exchange ratio of 1.25 for 1, (ii) financial projections for Two River and the earnings estimates for Town Bank which were consistent with those discussed with the senior management of Two River for 2005 and 2006, (iii) purchase accounting adjustments, charges and transaction costs associated with the acquisition and estimated cost savings determined by the senior management of Two River and (iv) options to purchase Town Bank shares of common stock are converted into options to purchase shares of Community Partners common stock using the 1.25 for 1 exchange ratio and making corresponding downward adjustments in the exercise price of each option. The analysis indicated that for the year ending December 31, 2005, the acquisition would be accretive to Two River's projected earnings per share. The analyses also indicated that, at June 30, 2005, the acquisition would be dilutive to Two River's tangible book value per share and accretive to its stated book value per share.
Compensation of Two River's Financial Advisor. Two River has agreed to pay Curtis Securities a transaction fee in connection with the acquisition of $250,000, $170,000 of which is contingent, and payable, upon closing of the acquisition. Two River has also agreed to reimburse Curtis Securities for reasonable out-of-pocket expenses incurred in
connection with its engagement and to indemnify Curtis Securities and its affiliates and their respective partners, directors, officers, employees, agents, and controlling persons against certain expenses and liabilities, including liabilities under securities laws.
Curtis Securities has in the past provided certain investment banking services to Two River, and has received compensation for such services, and Curtis Securities may provide additional services to Two River and receive compensation for such services in the future, including during the pendency of the acquisition.
Recommendation of Two River's Board of Directors
At its meeting on August 16, 2005, after due consideration, the Two River board of directors unanimously:
o determined that it was advisable for Two River to enter into the acquisition agreement and that the acquisition agreement and the transactions contemplated by it were advisable, fair to and in the best interests of Two River shareholders;
o approved the acquisition agreement; and
o resolved to recommend that Two River shareholders vote for the approval of the acquisition agreement.
After careful consideration, Two River's board of directors determined that the transaction is fair to, and in the best interests of, Two River and its shareholders. Accordingly, the Two River board of directors unanimously approved the acquisition agreement and unanimously recommends that Two River's shareholders vote FOR approval and adoption of the acquisition agreement.
Certain directors of Two River will receive substantial financial and other benefits in connection with the acquisition. For a discussion of these benefits and the other interests of Two River directors and officers that are different from or in addition to the interests of other Two River shareholders, see "The Acquisition - Interests of Certain Two River Directors and Executive Officers in the Acquisition" beginning on page 41.
Town Bank's Reasons for the Acquisition
In arriving at its determination, the Town Bank board considered material factors concerning the transaction, including the following:
o the financial terms of the transaction, including the implied price of a share of Town Bank's common stock - based upon Two River's market price at the time the acquisition agreement was executed;
o that Two River already serves markets in Central New Jersey, and that Town Bank's trade area was an advantageous fit with Two River's Central New Jersey trade area;
o that Town Bank will continue to operate as a stand-alone subsidiary, thereby providing Town Bank's existing customers the opportunity to continue to bank with personnel and a trade identity with which they are familiar;
o the strength of Two River's management and the similarity of the commitment to the community oriented marketing and operating philosophies of Town Bank;
o the opinion of Janney Montgomery Scott, that the consideration payable in the transaction was fair to Town Bank's shareholders from a financial point of view;
o other terms of the acquisition agreement, including the adjustments of the exchange ratio based on movements in the price of Two River's stock outside of a negotiated range in the period after
agreement was signed and prior to the closing; and the opportunity for Town Bank's shareholders to receive shares of the holding company's common stock in a tax free exchange;
The discussion and factors considered by Town Bank's board of directors are not intended to be exhaustive, but include material factors considered. In approving the acquisition agreement, Town Bank's board did not assign any specific or relative weights to any of the foregoing factors, and individual directors may have weighted factors differently. In addition, there can be no assurances that the benefits of the acquisition perceived by the Town Bank board of directors and described above will be realized or will outweigh the risks and uncertainties.
Opinion of Town Bank's Financial Advisor
Pursuant to the terms of its agreement, Janney Montgomery Scott LLC was retained by Town Bank to act as its financial advisor in connection with a possible business combination with Two River. Town Bank selected Janney because of Janney's knowledge of, experience with, and reputation in the financial services industry. Janney agreed to assist Town Bank in analyzing, structuring, negotiating and effecting a possible merger or similar transaction. Janney, as part of its investment banking business, is engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
Town Bank's board considered and approved the acquisition agreement at the August 16, 2005 board meeting. Janney delivered a preliminary opinion to the board on July 6, 2005 and a written opinion on August 16, 2005, that as of August 16, 2005, the acquisition consideration was fair to Town Bank's shareholders from a financial point of view.
Janney's opinion speaks only as of the date of the opinion. The opinion was directed to the Town Bank board of directors and addresses only the fairness, from a financial point of view, of the consideration offered in the acquisition. It does not address the underlying business decision of Town Bank to proceed with the acquisition or any other aspect of the acquisition and does not constitute a recommendation to any Town Bank shareholder as to how such shareholder should vote at the special meeting on the acquisition or any related matter.
In rendering its opinion, Janney has, among other things:
(a) reviewed the historical financial performances, current financial positions and general prospects of Town Bank and Two River;
(b) considered the proposed financial terms of the acquisition and examined the projected consequences of the acquisition with respect to, among other things, market value, earnings and tangible book value per share of Two River common stock;
(c) to the extent deemed relevant, analyzed selected public information of certain other banks and bank holding companies and compared Town Bank and Two River from a financial point of view to these other banks and bank holding companies;
(d) reviewed the historical market price ranges and trading activity performance of common stock of Town Bank and Two River;
(e) reviewed publicly available information such as annual reports, proxy material and call reports;
(f) compared the terms of the acquisition with the terms of certain other comparable transactions to the extent information concerning such other transactions were publicly available;
(g) discussed with certain members of senior management of Town Bank and Two River the strategic aspects of the acquisition, including estimated cost savings from the acquisition and other matter relevant to the future performance of the new holding company;
(h) reviewed the acquisition agreement; and
(i) performed such other analyses and examinations as Janney deemed necessary.
In performing its review and in rendering its opinion, Janney has relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by Town Bank or Two River or their respective representatives or that was otherwise reviewed by Janney, and has assumed such accuracy and completeness for purposes of rendering its opinion. Janney has further relied on the assurances of management of Town Bank and Two River that they are not aware of any facts or circumstances that would make any of that information inaccurate or misleading. Janney has not been asked to and has not undertaken any independent verification of any of that information and Janney does not assume any responsibility or liability for its accuracy or completeness. Janney did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Town Bank or Two River or any of their subsidiaries, or the collectibility of any such assets, nor was Janney furnished with any such evaluations or appraisals. Janney did not make any independent evaluation of the adequacy of the allowance for loan losses of Town Bank or Two River or any of their subsidiaries nor did Janney review any individual credit files. Janney assumed that the bank's respective allowance for loan losses were adequate to cover such losses and will be adequate on a pro forma basis.
The earnings projections for Town Bank and Two River used by Janney in certain of its analyses were based upon internal financial projections provided by the management teams of Town Bank and Two River. The financial projections provided by management of each bank were prepared for internal purposes only and not with a view towards public disclosure. These projections, as well as other estimates used by Janney in its analyses, were based on numerous variables and assumptions that are inherently uncertain, and accordingly, actual results could vary materially from those set forth in the projections.
In performing its analyses, Janney also made numerous assumptions with respect to industry performance, business, economic and market conditions and various other matters, many of which cannot be predicted and are beyond the control of Town Bank and Two River. The analyses performed by Janney are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. 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. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. Janney prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Town Bank board on August 16, 2005. In addition, the Janney opinion was among several factors taken into consideration by the Town Bank board of directors in making its decision to approve the acquisition agreement and the acquisition.
The following is a summary of the material analyses prepared by Janney for its meeting with the Town Bank board on August 16, 2005. The summary is not a complete description of all the analyses underlying Janney's opinion. 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. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Janney believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses considered 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. The financial analyses summarized below include information presented in a 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.
Summary of Proposal. Janney reviewed the financial terms of the proposed transaction. Based upon the $16.94 average closing price of Two River's common stock for the 20 trading days ending August 15, 2005 and
assuming 100% of the consideration is to be paid in stock, Janney calculated an implied transaction value of $21.18 per share. Based upon Town Bank's financial information as of and for the twelve months ended June 30, 2005, Janney calculated the following ratios:
Transaction Ratios
Transaction price / LTM EPS 23.0x
Transaction price / Est. 2005 EPS 23.6x
Transaction price / Tangible book value per share 256.0%
Transaction price / Stated book value per share 256.0%
Tangible Book Premium / Total Deposits 20.5%
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For purposes of Janney's analyses, earnings per share were based on fully diluted earnings per share, and the aggregate transaction value was approximately $42.3 million, based upon 1.9 million shares of Town Bank common stock outstanding and including the intrinsic value of options to purchase 184,634 shares with a weighted average exercise price of $7.18.
Stock Trading History. Janney reviewed the history of the reported trading prices and volume of Two River common stock and the relationship between the movements in the prices of Two River common stock and Town Bank common stock, respectively, to movements in the America's Community Bankers Index (an index of all NASDAQ-listed banks and thrifts that excludes the top 50 banks and thrifts, as determined by asset size, as well as banks and thrifts with an international or credit card specialization). During the one-year period ended August 11, 2005, Town Bank common stock outperformed the Bankers Index while Two River common stock slightly underperformed the Bankers Index.
One-Year Stock Performance of Town Bank and Two River
Beginning Index Ending Index
Value Value
August 11, 2004 August 11, 2005
--------------- ---------------
Town 100.00% 152.78%
Two River 100.00% 93.06%
American Community Banker's Index 100.00% 117.29%
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Selected Peer Group Analyses. Janney compared the financial performance and market performance of Town Bank and Two River to those of a group of New Jersey community banks and bank holding companies. The companies included in the Town Bank and Two River peer group were:
o 1st Colonial Bancorp
o 1st Constitution Bancorp
o Absecon Bancorp
o Advantage Bank
o BCB Bancorp, Inc.
o Boardwalk Bank
o Brunswick Bancorp
o Central Jersey Bancorp
o Community Bank of Bergen County
o Cornerstone Bank
o Elmer Bancorp
o Harvest Community Bank
o Hilltop Community Bancorp, Inc.
o Hopewell Valley Community Bank
o New Millennium Bank
o Parke Bancorp, Inc.
o Penn Bancshares
o Rumson-Fair Haven BT&C
o Shore Community Bank
o Somerset Hills Bancorp
o Sterling Bank
o Stewardship Financial Corp.
o Sussex Bank
For purposes of this analysis, the financial information used by Janney was as of and for the twelve months ended June 30, 2005. Stock price information was as of August 11, 2005. Certain financial data prepared by Janney, and as referenced in the tables presented below, may not correspond to the data presented in Town Bank's and Two River's historical financial statements, as a result of the different periods, assumptions and methods used by Janney to compute the financial data presented. The results of this analysis are summarized in the following table:
Peer Group
Town Two River Median
--------- --------- ---------
Loans / assets 87.0% 72.9% 67.6%
Borrowings / assets 0.2% 5.2% 4.3%
Non-performing assets for more than 90 days / assets -% 0.04% 0.19%
Loan loss reserve / Non-performing assets for more than 90 days NM NM 184.7%
Return on average total assets 1.34% 0.74% 0.77%
Return on average shareholders' equity 12.2% 8.7% 8.7%
Loan loss provision/ Net chargeoffs NM NM 204.8%
Asset Growth Rate (year over year) 19.6% 25.1% 14.5%
Loan Growth Rate (year over year) 37.1% 30.0% 27.8%
Deposit Growth Rate (year over year) 23.4% 20.1% 15.6%
Net interest margin 4.06% 4.44% 3.98%
Efficiency ratio 55.4% 71.1% 66.9%
Noninterest income / average assets 0.11% 0.40% 0.34%
Noninterest expense / average assets 2.24% 3.29% 2.90%
Price / last twelve months earnings per share 15.8x 38.6x 23.0x
Price / tangible book value per share 175.3% 286.2% 170.1%
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Comparable Transactions Analysis. Janney reviewed certain financial data related to four sets of comparable bank transactions.
The first group of comparable transactions included 87 acquisitions of bank institutions nationwide announced from July 1, 2004 to August 15, 2005, with an asset size between $100 million and $300 million (which we refer to as the Nationwide transactions). The second group of transactions included six acquisitions of bank institutions in New Jersey announced from July 1, 2004 to August 15, 2005 (which we refer to as the New Jersey transactions). The third group of comparable transactions included 21 acquisitions of bank institutions nationwide announced from July 1, 2004 to August 15, 2005, with an asset size between $100 million and $300 million, with the selling institutions having a return on average assets between 0.75% & 1.25% and return on average equity between 8.0% and 12.0% (which we refer to as the Performance-Based transactions). The fourth group of comparable transactions included 28 acquisitions of bank institutions nationwide announced from July 1, 2004 to August 15, 2005, with an asset size between $100 million and $300 million, with the selling institutions having a tangible equity/ assets ratio greater than 10% (which we refer to as Tangible Equity-Based transactions).
Transaction multiples from the acquisition were derived from the $21.18 deal price per share and financial data as of and for the twelve months ended June 30, 2005, for Town Bank. Janney compared these results with announced multiples for the aforementioned transactions. The results of the analysis are summarized in the following table:
Nationwide New Jersey Performance- Tangible
Town/Two Bank Bank Based Bank Equity-Based
River Transactions Transactions Transactions Transactions
Transaction Median Median Median Median
-------------- -------------- ------------ -------------- --------------
Premium / Market Value 46.0% 33.0% 6.8% 23.5% 9.2%
Price / Book 256% 232% 272% 241% 202%
Price / Tangible Book 256% 241% 272% 247% 202%
Price / Last Twelve Months EPS 23.0x 22.8x 23.6x 22.8x 22.8x
Price / Assets 28.8% 21.8% 25.5% 24.1% 24.7%
Tangible book premium / Core deposits 20.4% 17.5% 22.9% 17.4% 17.5%
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No company or transaction used in the Comparable Transaction Analysis is identical to Town Bank, Two River or the acquisition. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning the differences in financial and operating characteristics of the companies involved.
Discounted Cash Flow Analysis. Janney estimated the present value of Town Bank common stock based on a continued independence scenario by estimating the future stream of after-tax cash flows of Town Bank over the period beginning June 2005 and ending in December 2009. Based on discussions with Town Bank's management, an earnings growth rate of 10% - 15% was used to project these streams of cash flows. To approximate the terminal value of Town Bank common stock at December 31, 2009, Janney applied price/earnings multiples ranging from 13.0x to 21.0x and multiples of tangible book value ranging from 125% to 225%. The cash flows and terminal values were then discounted to present values using discount rates ranging from 8.0% to 12.0%. The discount rates were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Town Bank common stock. This analysis indicated an implied range of values from $10.61 to $20.75 when applying the price/earnings multiples and $9.36 to $20.39 when applying multiples of tangible book value.
Janney also estimated the present value of Two River common stock based on a continued independence scenario by estimating the future stream of after-tax cash flows of Two River over the period beginning June 2005 and ending in December 2009. Based on published earnings estimates and discussions with management, an earnings growth rate of 15% - 20% was used to project these streams of cash flows. To approximate the terminal value of Two River common stock at December 31, 2009, Janney applied price/earnings multiples ranging from 15.0x to 23.0x and multiples of tangible book value ranging from 200% to 300%. The cash flows and terminal values were then discounted to present values using discount rates ranging from 8.0% to 12.0%. The discount rates were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Two River common stock. This analysis indicated an implied range of values from $10.50 to $19.49 when applying the price/earnings multiples and $11.21 to $20.36 when applying multiples of tangible book value.
In connection with the discounted cash flow analysis performed, Janney considered and discussed with Town Bank's board how the present value analysis would be affected by changes in the underlying assumptions, including variations with respect to the growth rate of assets, net income and the dividend payout ratio (in other words, the percentage of adjusted earnings per share payable to shareholders). Janney noted that the discounted cash flow analysis is a widely used valuation methodology but noted that it relies on numerous assumptions that must be made, and the results thereof are not necessarily indicative of the actual values or expected values of Town Bank or Two River common stock.
Financial Impact Analysis. Janney performed a pro forma acquisition analysis that combined projected balance sheet and income statement information of Two River and Town Bank. Certain assumptions regarding acquisition adjustments and cost savings were used to calculate the financial impact that the acquisition would have
on certain projected financial results of Two River. This analysis indicated that the acquisition is expected to be accretive to the combined company's projected earnings per share within the first 12 months of combined operations. This analysis was based in part on internal projections provided by Two River's and Town Bank's management teams. The actual results achieved by the combined company may vary from the projected results, and the variation may be material.
Janney has acted as financial advisor to Town Bank in connection with the acquisition and will receive a fee for its services, a portion if which is contingent upon the consummation of the acquisition. Town Bank will pay Janney an advisory fee of approximately $340,000. A portion of the advisory fee was paid at the signing of the definitive acquisition agreement and the balance will be paid at closing. The advisory fee is based on a weighted average of Two River's stock price at a period closer to the closing date of the transaction. In addition, Town Bank has agreed to reimburse certain of Janney's reasonable out-of-pocket expenses incurred in connection with its engagement and has also agreed to indemnify Janney for certain liabilities arising out of rendering this opinion. In addition, in the ordinary course of our business as a broker-dealer, Janney may, from time to time, have a long or short position in, and buy or sell, debt or equity securities of Town Bank or Two River for its own account or for the accounts of its customers.
Recommendation of Town Bank's Board of Directors
At its meeting on August 16, 2005, after careful consideration, the Town Bank board of directors unanimously:
o determined that it was advisable for Town Bank to enter into the acquisition agreement and that the acquisition agreement and the transactions contemplated by it were advisable, fair to and in the best interests of Town Bank shareholders;
o approved the acquisition agreement; and
o resolved to recommend that Town Bank shareholders vote for the approval of the acquisition agreement.
After careful consideration, Town Bank's board of directors determined that the transaction is fair to, and in the best interests of, Town Bank and its shareholders. Accordingly, the Town Bank board of directors unanimously approved the acquisition agreement and unanimously recommends that Town Bank shareholders vote FOR approval and adoption of the acquisition agreement.
Certain directors of Town Bank will receive substantial financial and other benefits in connection with the acquisition. For a discussion of these benefits and the other interests of Town Bank directors and officers that are different from or in addition to the interests of other Town Bank shareholders, see "The Acquisition - Interests of Certain Town Bank Directors and Executive Officers in the Acquisition" beginning on page 44.
Interests of Certain Two River Directors and Executive Officers in the Acquisition
In considering the recommendation of the board of directors of Two River to vote for the proposal to approve the acquisition agreement, shareholders of Two River should be aware that members of the Two River board of directors and members of Two River's management team have agreements or arrangements that provide them with interests in the acquisition that are in addition to the interests of Two River shareholders directly. The Two River board of directors was aware of these agreements and arrangements during its deliberations of the merits of the acquisition and in determining to recommend to the shareholders of Two River that they vote for the proposal to approve the acquisition agreement.
Employment and Severance Arrangements.
Each of Barry B. Davall, the President and Chief Executive Officer of Community Partners and Two River, William D. Moss, Vice President and Senior Loan Officer of Community Partners and Executive Vice President and Senior Loan Officer of Two River, and Michael J. Gormley, Vice President, Chief Financial Officer and Treasurer of Community Partners and Executive Vice President and Chief Financial Officer of Two River, is a party to change in control and supplemental executive retirement agreements with Two River. Two other officers of Two River who are not executive officers of Two River or Community Partners are parties to change of control and supplemental executive retirement agreements with Two River on substantially the same terms as these agreements.
Change in Control Agreements. The change in control agreements cover a period commencing the day immediately preceding a change in control and ending on the earlier of (i) the third anniversary of the change in control, (ii) the date the executive attains the age of 65, or (iii) the death of the executive. This period is referred to as the contract period.
Upon a change in control of Two River, during the contract period, the executive's compensation, including both salary and bonus, would equal the amounts paid to (or accrued for) the executive for the 12 months immediately preceding the change in control, subject to minimum annual increases equal to the annual percentage increase in the Consumer Price Index for Urban Wage Earnings and Clerical Works (New York and Northern New Jersey - All Items) during the preceding 12 months, or such greater increases as are determined by the board.
In the event there is a change in control of Two River and the executive is terminated for cause within the contract period, the executive will receive no further benefits under the change in control agreement. In the event that the executive is terminated without cause or resigns for good reason during the contract period,
o the executive will receive within 20 business days a lump sum equal to two times the highest annual compensation, including only salary and cash bonus, paid to the executive during any of the three calendar years immediately prior to the change in control,
o during the remainder of the contract period, Two River will continue to pay for the executive's medical and hospital insurance, disability insurance and life insurance to the extent that the executive does not receive such benefits from a subsequent employer, and
o Two River will sell to the executive for a purchase price of $1.00 the automobile, if any, used by the executive while employed by the bank.
For the purposes of the change in control agreements, "change in control" includes the approval by Two River's shareholders of a merger, combination, or consolidation of the bank with or into another entity (other than a merger or consolidation in which at least two-thirds of the directors of the surviving or resulting entity immediately after the transaction are pre-transaction directors of Two River).
Because the pre-transaction directors of Two River will constitute less than two-thirds of directors of Community Partners immediately after the transaction, the contract period under each of the change in control agreements will commence immediately preceding the approval of the transaction by the Two River shareholders. Management has no current plan to terminate the employment of any of these executives or to take any other action
that would trigger any change in control payments to be made under these agreements.
Amounts payable to executives under the change in control agreements are subject to reduction to the extent that any such payments are determined to constitute "excess parachute payments" under the Internal Revenue Code. Excess parachute payments exist when "parachute payments" (i.e., all payments and benefits contingent on a change-in-control) exceed three times the employee's average taxable compensation over the last five calendar years. Any such payments will be reduced until the payments are either fully deductible or are reduced to zero.
Supplemental Executive Retirement Agreements. The supplemental executive retirement agreements provide that upon a separation from service with Two River for reasons other than for a leave of absence or because of the executive's death, on or after 65 years of age, Messers. Gormley and Moss will receive an annual benefit of $50,000 payable on a monthly basis, for a period of 15 years commencing on the first day of the month following the executive's 65th birthday, and Mr. Davall will receive an annual benefit of $30,000 payable on a monthly basis, for a period of 15 years commencing on the first day of the month following his 67th birthday.
If the executive has a separation from service before 65 years of age for reasons other than death, termination for cause or following a change in control, then the executive is to receive a reduced annual benefit, increasing incrementally each year, payable monthly for a period of 15 years following the separation from service, based on the age of the executive at the time of such separation from service.
In the event the executive is a full-time employee at the date of a change in control, the executive is to receive the annual benefit following a separation from service (other than a termination for cause) in a reduced amount based upon the age of the executive at the time of the separation from service, increasing incrementally each year, payable monthly for a period of 15 years following the separation from service. For purposes of the supplemental executive retirement agreements, a "change in control" means a change in the ownership or effective control of the bank, or in the ownership of a substantial portion of the assets of the bank, under Section 409A of the Internal Revenue Code (an acquisition of 35% or more of the total voting power pre-transaction or a majority of the members of the board is replaced during any 12 month period by directors whose election was not approved by a majority of the pre-transaction board or in the ownership of a substantial portion of the assets of the bank having a total growth fair market value equal to or exceeding 40% of the pre-transaction assets).
In the event of the death of the executive while in the active service to the bank, the executive's beneficiary will receive a lump sum payment of an amount ranging between approximately $253,000 and $480,000, depending upon the age of the executive at the time of death and the executive's salary. These death benefits are funded by bank owned life insurance.
Amounts payable to executives under the supplemental executive retirement agreements are subject to reduction or delay to the extent that any such payments are determined to constitute "excess parachute payments" under the Internal Revenue Code.
The supplemental executive retirement agreements include non-competition provisions which, other than in the event of a change in control, restrict the executive from competing with the bank within two years after the executive's separation from service.
Two River Stock Options and Warrants.
At the time of the acquisition, each outstanding option and warrant to purchase common stock of Two River will be converted into an option or warrant, as the case may be, to purchase the same number of shares of common stock of Community Partners, at the same exercise price, and on the same terms and conditions as were applicable to such Two River stock options and warrants. Community Partners will continue to administer the Two River plans upon completion of the acquisition on their current terms and conditions, but no additional awards will be made under the plans. See "Structure of the Acquisition and Conversion of Two River and Town Bank Stock - Treatment of Stock Options and Warrants", on page 49.
Stock Options
Two River maintains a 2003 Incentive Stock Option Plan, a 2003 Non-qualified Stock Option Plan, a 2001 Incentive Stock Option Plan and a 2001 Non-qualified Stock Option Plan. Each of the Two River plans is administered by Two River's compensation committee. Under these plans, options may be granted at fair market value on the grant date, as determined in the sole discretion of Two River's compensation committee (but in no event less than par value of Two River common stock), subject to ratification by Two River's board and, in the case of incentive stock options, further subject to any limitations set forth in the Internal Revenue Code, the Treasury Regulations, or any other applicable law.
Authorized but unissued shares of Two River common stock, or shares reacquired by Two River, may be issued under the Two River plans. The following amounts of shares have been reserved for issuance under the plans, as adjusted for stock dividends.
2001 Incentive Stock Option Plan 173,470 shares 2001 Non-Qualified Stock Option Plan 173,470 shares 2003 Incentive Stock Option Plan 169,698 shares 2003 Non-Qualified Stock Option Plan 169,698 shares |
As of October 1, 2005, Two River had an aggregate of 571,394 options outstanding under all of its stock option plans. In addition, 40,607 previously granted options have been exercised.
Under the Two River ISO plans, incentive stock option grants may be made to Two River employees, including officers and directors who are Two River employees. Directors who are not Two River employees and employees who own more than 10% of Two River's total combined voting power are not eligible to receive incentive stock options under the ISO plans.
Under the Two River non-qualified plans, non-qualified stock option grants may be made to Two River employees and directors, including directors who are not Two River employees.
Options granted under the plans vest as determined by the compensation committee, but in the absence of an express statement by the committee, one-third of the shares covered by the grant vest immediately and an additional one-third vests on each of the first two anniversaries of the grant date.
Pursuant to these plans, at the time of the acquisition, outstanding options to acquire shares of Two River common stock will be converted into options to acquire shares of Community Partners common stock.
Warrants
Two River has outstanding warrants to purchase an aggregate of 400,000 shares of Two River Common Stock at an exercise price of $20.50 per share. The warrants may only be exercised between May 1, 2006 and June 30, 2006, inclusive, and expire on June 30, 2006, subject to extension by the Two River board. Upon consummation of the acquisition, each outstanding warrant to purchase Two River common stock will be converted into a warrant to purchase the same number of shares of Community Partners common stock at the same exercise price, and on the same terms and conditions, as were applicable to the purchase of Two River common stock prior to the consummation of the acquisition, and any extension of the warrants will be subject to the determination of the Community Partners board.
Governance Structure and Management Positions
Pursuant to the terms of the acquisition agreement, the board of directors of Community Partners will be initially comprised of eight directors including five persons designated by Two River and three designated by Town Bank. The five Two River designees are Charles T. Parton, Barry B. Davall, Michael W. Kostelnik, Jr., Frank J. Patock, Jr., and John J. Perri, Jr.
The acquisition agreement does not specify who is to initially serve in management positions at Community Partners. However, Community Partners' current eight-member board of directors has appointed Barry B. Davall, William D. Moss, and Michael J. Gormley, each of whom currently serves an executive officer of Two River, to serve as executive officers of Community Partners.
Indemnification and Insurance
The acquisition agreement provides that Community Partners and Two River will, jointly and severally, honor existing indemnification agreements of current and former directors and officers of Two River and its subsidiaries and, for six years following the acquisition, indemnify all current and former officers and directors of Two River and its subsidiaries in accordance with indemnification provisions of the Community Partners or Two River certificate of incorporation, and that the terms of the indemnification provisions of the certificates of incorporation will not be amended, repealed, or otherwise modified during the six-year period after the acquisition. In addition, for six years after the acquisition, Community Partners will cause to be maintained liability insurance coverage with respect to matters arising at or prior to the acquisition for each current or former officer or director of Two River or any of its subsidiaries, in amounts and on terms not materially less advantageous than the coverage provided prior to the acquisition. Community Partners or Two River will also pay all reasonable expenses incurred by any individual in enforcing his or her rights to indemnification and insurance coverage under the terms of the acquisition agreement.
Interests of Certain Town Bank Directors and Executive Officers in the Acquisition
In considering the recommendation of the Town Bank board to vote for the proposal to approve the acquisition agreement, shareholders of Town Bank should be aware that certain members of the Town Bank's board and members of Town Bank's executive management team have agreements that provide them with potential interests in the acquisition that are in addition to the interests of Town Bank shareholders directly. The Town Bank board was aware of these agreements and arrangements during its deliberations of the merits of the acquisition and in determining to recommend to the shareholders of Town Bank that they vote for the proposal to approve the acquisition agreement.
Severance Agreements. Messrs. Robert W. Dowens, Sr., President and Chief Executive Officer of Town Bank and Vice President of Community Partners, Nicholas A. Frungillo, Jr., Executive Vice President, Chief Operating Officer and Chief Financial Officer of Town Bank, and Ed Wojtaszek, Executive Vice President and Senior Loan Officer of Town Bank, are parties to severance agreements with Town Bank which expire December 31, 2005. These agreements provide that (a) upon the termination of their employment by Town Bank without cause, (b) upon the termination of their employment without cause by Town Bank or any successor in anticipation of or within a year after a change in control of Town Bank, or (c) if the officer's employment is constructively terminated, the officer will receive his base compensation for a period of six months after the termination, payable in a lump sum payment. Base compensation is defined to include the regular base salary at the rate in effect prior to termination, plus the last full calendar year's bonus and fringe benefits.
In addition to six months base compensation, the officers would receive upon such termination all base compensation through the termination date, accrued vacation pay, COBRA benefits with premiums paid by Town Bank for 12 months following termination, allocations of benefits under Town Bank retirement programs in accordance with the provisions of applicable retirement plan documents; and continuation or termination of group term life insurance, long-term disability, short-term disability, and other welfare benefits in accordance with the provisions of applicable plans.
Such officers are not entitled to severance benefits or change in control benefits if they voluntarily terminate their employment with Town Bank, unless the circumstances amount to constructive termination of their employment.
A change in control includes acquisition of Town Bank stock by any person, if the acquired stock represents more than 50% of the total voting power of all outstanding stock of Town Bank. Because Community Partners will acquire substantially all the outstanding stock of Town Bank in the acquisition, a change-in-control shall be deemed to have occurred.
Treatment of Town Bank Stock Options.
At the time of the acquisition, outstanding options to purchase common stock of Town Bank will be converted into options to purchase the same number of shares of common stock of Community Partners on the same terms and conditions as were applicable to such Town Bank stock options. See "The Acquisition - Treatment of Stock Options and Warrants", on page 49.
Description of Stock Option Plans
Employee Stock Option Plans
Town Bank has adopted four employee stock option plans, the 1999, the 2000, the 2001 and the 2002 Employee Stock Option Plans. The terms and conditions of each plan are substantially the same except for the number of shares of Town Bank common stock reserved for issuance upon the exercise of options under the plan. What follows is a summary of the essential terms common to all of the Town Bank employee stock option plans.
The plans are intended to attract and retain the best available employees and officers and to encourage their highest level of performance by providing long-term incentives and rewards to employees who are in a position to contribute to the long- term success and growth of Town Bank, and associating the interests of such employees more closely with those of the bank's shareholders.
All options granted under the plans are intended to qualify as incentive stock options, or ISOs, with the attendant income tax benefits, provided for under Sections 421 and 422 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
Authorized but unissued shares of Town Bank common stock, or shares reacquired by Town Bank may be issued under the plans. The following amounts of shares have been reserved for issuance under the plans, as adjusted for stock dividends:
1999 Employee Stock Option Plan 39,273 shares 2000 Employee Stock Option Plan 39,273 shares 2001 Employee Stock Option Plan 29,888 shares 2002 Employee Stock Option Plan 78,750 shares |
As of October 1, 2005 Town Bank had 120,713 options outstanding under all of its employee stock option plans, in the aggregate. In addition, 28,286 previously granted options have been exercised.
The exercise price per share cannot be less than 100% of the "fair market value" per share of Town Bank common stock on the date of the grant, determined by the board of directors after taking into consideration all factors which it deemed appropriate. If the proposed optionee owns at least 10% of the total combined voting power of all classes of outstanding stock of Town Bank, the option price may not be less than 110% of the fair market value per share.
Each ISO may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable. However, not more than 25% of the ISOs may be exercised prior to the second anniversary of the date of grant of the applicable ISO, not more than 50% may be exercised prior to the third anniversary of the date of grant; and not more than 75% may be exercised prior to the fourth anniversary of the date of grant.
If the holder of an ISO ceases to be employed by Town Bank (other than by reason or death or disability) no further installments of his or her ISO become exercisable and his or her vested ISOs terminate unless exercised after the passage of 90 days from the date of termination of employment. If the person is terminated for cause or voluntarily resigns, the ISOs terminate immediately upon termination of employment, to the extent not previously exercised. If a holder dies or becomes disabled, his or her ISOs generally may be exercised by the holder's personal representatives within 180 days after the death or disability.
The employee stock option plans contain detailed provisions concerning adjustment to ISOs in the case of certain corporate events - specifically, stock dividends and stock splits; consolidation or mergers; recapitalization or reorganization. All holders of ISOs are required, at the time of the ISO grant, to execute an incentive stock option agreement in a form prescribed by Town Bank.
No ISOs may be granted after the 10th anniversary of the approval of the plan under which they are to be granted.
Each plan is administered either by the board of directors as a whole, or by a committee consisting of one or more directors of Town Bank each of whom is a disinterested person with respect to the plan. The Board or such committee determines the recipients of ISOs, the amount of shares, the term of the ISOs, conditions to vesting, and other terms and conditions of all the ISOs granted.
Director Stock Option Plans
Town Bank has adopted three director stock option plans, the 1999, the 2000 and the 2001 Director Stock Option Plans. The terms and conditions of each plan are substantially the same except for the number of shares of Town Bank common stock reserved for issuance upon the exercise of options under the plan. What follows is a summary of the essential terms common to all of the director stock option plans.
The plans are intended to attract and retain the best available directors and to encourage their regular attendance at Board and committee meetings, and to obtain the highest level of performance by providing long-term incentives and rewards to directors.
Authorized but unissued shares of Town Bank common stock, or shares reacquired by the Bank, may be issued under the plans. The following amounts of shares have been reserved for issuance under the respective plans, adjusted for stock dividends:
1999 Director Stock Option Plan 39,273 shares;
2000 Director Stock Option Plan 39,273 shares;
2001 Director Stock Option Plan shares amounting to 5% of the issued
and outstanding common stock of
Town Bank.
|
As of October 1, 2005 Town Bank had 59,181 options outstanding under all of the director stock option plans, in the aggregate. In addition, 48,162 previously granted options have been exercised.
The exercise price per share of options granted under director stock option plans cannot be less than the greater of: (i) the par value of the Town Bank common stock; or (ii) in the case of options granted under the 1999 or 2000 plan, 85% of the "fair market value" per share of the common stock on the date of the grant; or (iii) in the case of options granted under the 2001 plan, 100% of the "fair market value" per share of common stock on the date of the grant. Fair market value is to be determined by the board of directors after taking into consideration all factors which it deems appropriate.
Each option may be exercised at any time or from time to time until 10 years after the date the option was granted, in whole or in part, for up to the total number of shares with respect to which it is then exercisable. Options granted in lieu of a director's annual fee for services were intended to vest and become exercisable at the end of the year for which they were granted.
If an option holder ceases to be a director of Town Bank (other than by reason or death or disability) no further installments of his or her options become exercisable and the vested options terminate unless exercised within 90 days after the person ceases to be a director. The options of holders who die or becomes disabled generally may be exercised by the holder's personal representatives within 180 days after the death or disability.
The director stock option plans contain detailed provisions concerning adjustment to options in the case of certain corporate events - specifically, stock dividends and stock splits; consolidation or mergers; recapitalization or reorganization.
No options may be granted after the 10th anniversary of the approval of the plan under which they are to be granted.
Each plan is administered either by the board of directors as a whole, or by a committee consisting of one or more directors of Town Bank. The Board or such committee determines the recipients of options, the amount of shares, the term of the options, conditions to vesting, and other terms and conditions of all the options granted.
Voting Agreements
Joseph F. X. O'Sullivan, Nicholas J. Bouras, Robert B. Cagnassola, Allen Chin, Anthony DeChellis, Robert W. Dowens, Sr., Richard L. Frigerio, Ronald J. Frigerio, Nicholas A. Frungillo, Jr., Robert E. Gregory, Frederick H. Kurtz, Frederick Picut, and Germaine B. Trabert, each of whom is a director of Town Bank, in their capacities as shareholders of Town Bank have separately entered into agreements with Two River, each dated as of August 16, 2005, in which they have agreed to vote all shares of Town Bank common stock that they owned as of that date, and any shares of Town Bank common stock that they subsequently acquire, in favor of the acquisition agreement and the transactions contemplated therein. As of the record date, these shareholders beneficially owned, in the aggregate, 643,603 shares of the outstanding common stock Town Bank, allowing them to exercise approximately 34% of the voting power of Town Bank common stock.
Governance Structure and Management Positions
Pursuant to the terms of the acquisition agreement, the board of directors of Community Partners will be initially comprised of eight directors including five persons designated by Two River and three designated by Town Bank. The three Town Bank designees are Messrs. O'Sullivan, Cagnassola and Kurtz.
The acquisition agreement does not specify who is to initially serve in management positions at Community Partners. However, Community Partners' current eight-member board of directors has appointed the Robert W. Dowens, Sr., who currently serves an executive officer of Town Bank, to serve as an executive officer of Community Partners.
Indemnification. The acquisition agreement provides that Community Partners and Town Bank will, jointly and severally, honor existing indemnification agreements of current and former directors and officers of Town Bank and its subsidiaries and, for six years following the acquisition, indemnify all current and former officers and directors of Town Bank and its subsidiaries in accordance with indemnification provisions of the Community Partners or Town Bank certificate of incorporation, and that the terms of the indemnification provisions of the certificates of incorporation will not be amended, repealed, or otherwise modified during the six-year period after the acquisition. In addition, for six years after the acquisition, Community Partners will cause to be maintained liability insurance coverage with respect to matters arising at or prior to the acquisition for each current or former officer or director of Town Bank or any of its subsidiaries, in amounts and on terms not materially less advantageous than the coverage provided prior to the acquisition. Community Partners or Town Bank will also pay all reasonable expenses incurred by any individual in enforcing his or her rights to indemnification and insurance coverage under the terms of the acquisition agreement.
Completion and Effectiveness of the Acquisition
We will complete the acquisition when all of the conditions to completion of the acquisition contained in the acquisition agreement are satisfied or waived, including the approval of the acquisition agreement by the shareholders of Two River and Town Bank.
We are working to complete the acquisition as early as possible during 2006. Because completion of the acquisition is subject to governmental and regulatory approvals and other conditions, however, we cannot predict the exact timing.
Structure of the Acquisition and Conversion of Two River and Town Bank Stock
Structure
To accomplish the acquisition, we formed Community Partners to serve as the holding company for the banks. Community Partners will not conduct business (other than in connection with the acquisition agreement) or issue securities until the acquisition is completed, at which time it will acquire all of the issued and outstanding stock of Two River and Town Bank, causing the banks to become its wholly owned subsidiaries.
Conversion of Two River and Town Bank Stock
Upon completion of the acquisition:
o Each share of Two River common stock outstanding immediately prior to the acquisition will be automatically converted into the right to receive one share of Community Partners common stock upon surrender of the certificate representing Two River stock.
o Each share of Town Bank common stock outstanding immediately prior
to the acquisition will be automatically converted into the right to
receive 1.25 shares of Community Partners common stock upon
surrender of the certificate representing Town Bank stock. The 1.25
exchange ratio is subject to adjustment if the Two River Average
Price is below $13.20 or above $18.80. If the Two River Average
Price is above $18.80, the exchange ratio will be $23.50 divided by
the Two River Average Price, with a minimum exchange ratio of
1.1463. If the Two River Average Price is below $13.20, the exchange
ratio will be $16.50 divided by the Two River Average Price, with a
maximum exchange ratio of 1.5.
The Two River Average Price will be determined by calculating the volume-weighted average trading price of Two River common stock on each day the stock is reported as traded by the OTC Bulletin Board. We will collect these volume-weighted average prices for each day that Two River is traded, starting on the third Two River trading day before the acquisition closes and working backwards for 20 consecutive Two River trading days. After discarding the highest and lowest of these 20 volume-weighted average prices, we will calculate the average of the remaining 18, which is the "Two River Average Price".
All shares of Two River or Town Bank common stock owned by either bank or a bank subsidiary immediately prior to the acquisition will be canceled and cease to exist.
The number of shares of Community Partners common stock to be issued in the acquisition will be proportionately adjusted for any stock split, reverse stock split, stock dividend, extraordinary cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other similar change with respect to common stock of Two River or Town Bank effected between the date of the acquisition agreement and the date the acquisition is completed.
Exchange of Bank Stock Certificates for Community Partners Stock Certificates
Registrar and Transfer Company will serve as the exchange agent in connection with the acquisition. Community Partners will deposit with the exchange agent certificates representing common stock of Community Partners and cash sufficient to make all deliveries and payments of cash in lieu of fractional shares required under the acquisition agreement.
The exchange agent will be instructed to mail, as soon as practicable after the acquisition, to each registered holder of shares of bank common stock immediately prior to the acquisition a letter of transmittal and instructions for use in effecting the surrender of stock certificates. Each holder of certificates representing shares of bank common stock may thereafter surrender those certificates to the exchange agent for a period ending one year after the acquisition. Upon the valid surrender of certificates representing shares of Two River or Town Bank common stock accompanied by a duly executed and completed letter of transmittal and any other documents as may reasonably be required by the exchange agent, the holder of those certificates will be entitled to receive certificates representing the shares of Community Partners common stock into which those certificates were converted in the acquisition and, in the case of Town Bank shareholders, a check representing the value of any fraction of a single share of Community Partners common stock that results from the conversion of the holder's shares of Town Bank common stock after all whole shares have been converted. The amount of cash in lieu of a fractional share will be determined by multiplying the fraction by the Two River Average Price. Until properly tendered, each certificate of Two River or Town Bank common stock will represent only the right to receive the applicable acquisition consideration.
If payment of the acquisition consideration is to be made to a person other than the person in whose name a surrendered certificate is registered, the surrendered certificate must be properly endorsed or otherwise in proper form for transfer, and all transfer and other taxes due upon transfer must have been paid and such payment must be evidenced to the satisfaction of Community Partners or the exchange agent. The cash amount received in lieu of fractional shares will be net to the holder, without interest, and will be subject to reduction only for any applicable U.S. federal or other back-up withholding or stock transfer taxes payable to the holder. Neither Community Partners nor the exchange agent will be liable to any holder of shares for any cash or securities delivered to a public official pursuant to any abandoned property, escheat or similar law, rule, regulation, statute, order, judgment, or decree.
In the event any certificate representing shares of Two River or Town Bank common stock has been lost, stolen, or destroyed, the exchange agent will deliver the acquisition consideration in exchange for such lost, stolen, or destroyed certificate upon the making of an affidavit of this fact by the holder. In addition, the exchange agent may require the holder to deliver a bond to protect Community Partners in the event that a claim is made against Community Partners with respect to the exchanged certificate.
Treatment of Stock Options and Warrants
Each outstanding option and warrant to purchase Two River common stock outstanding and unexercised immediately prior to the acquisition will be converted in the acquisition into an option or warrant, as the case may be, to purchase the same number of shares of Community Partners common stock at the same per share exercise price.
Each outstanding option to purchase common stock of Town Bank will be converted into an option to purchase the number of shares of common stock of Community Partners determined by multiplying the number of shares subject to the original option by the 1.25 exchange ratio, at an exercise price determined by dividing the exercise price of the original option by the 1.25 exchange ratio, and otherwise on the same terms and conditions as were applicable to such Town Bank stock options. The 1.25 exchange ratio is subject to adjustment if the Two River Average Price is below $13.20 or above $18.80. See "The Acquisition - Structure of the Acquisition and Conversion of Two River and Town Bank Stock," on page 48.
Following conversion, the Community Partners stock options and warrants will be subject to the same terms and conditions (including expiration date, vesting and exercise provisions) that applied to the bank options and warrants prior to the acquisition, but taking into account any changes, including acceleration, if any, that may apply by reason of the acquisition.
Community Partners will be entitled to deduct and withhold from the consideration otherwise payable pursuant to the acquisition agreement to any holder of bank stock options any amount that Community Partners 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 acquisition agreement as having been paid to the option holder from whom the amount was withheld by Community Partners.
As soon as reasonably practicable after the acquisition, Community Partners will file with the SEC a registration statement with respect to the shares of Community Partners common stock subject to options granted in the acquisition, to the extent required in order for those shares to be sold without restriction. Community Partners will also use its best efforts to maintain the effectiveness of the registration statement for so long as the applicable benefits and grants remain payable and the options remain outstanding.
Material United States Federal Income Tax Consequences of the Acquisition
The following is a discussion of the material federal income tax consequences of the acquisition. This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed federal income tax regulations, and administrative and judicial interpretations of the Code and those regulations, all as in effect as of the date of this joint proxy statement/prospectus and all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of United States federal income taxation that may be applicable to Two River or Town Bank shareholders in light of their particular circumstances or to Two River or Town Bank shareholders subject to special treatment under United States federal income tax law. Accordingly, this discussion does not address the United States federal income tax treatment of the following types of Two River and Town Bank shareholders:
o Partnerships and other pass-through entities,
o Foreign persons who may be subject to tax under the provisions of
the Foreign Investment in Real Property Tax Act of 1980,
o Certain financial institutions,
o Insurance companies,
o Tax-exempt entities,
o Dealers in securities or foreign currencies,
o Traders in securities that elect to apply a mark-to-market method of
accounting,
o Certain United States expatriates,
o Persons who hold their Two River or Town Bank common stock as part
of a straddle, hedge, conversion transaction, or other integrated
investment,
o Persons whose functional currency is not the United States dollar,
o Persons who acquired their Two River or Town Bank common stock upon
the exercise of employee stock options or otherwise as compensation,
and
o Persons who receive Community Partners common stock upon the
exercise of employee stock options or otherwise as compensation.
This discussion does not address any aspect of state, local, or foreign taxation, or any aspect of United States federal tax laws other than the United States federal income tax. Because this discussion does not
address tax consequences which may vary with individual circumstances, we strongly urge each Two River and Town Bank shareholder to consult their own tax advisor as to the specific United States federal, state, local or foreign income or other tax consequences of the acquisition and exchange to that particular shareholder.
This discussion is limited to Two River and Town Bank shareholders who hold their Two River common stock or Town Bank common stock as capital assets. A shareholder holds common stock as a capital asset unless the shareholder holds the common stock as stock in trade or other property of a kind which would be included in the shareholder's inventory if on hand at the close of the taxable year, or primarily for sale to customers in the ordinary course of the shareholder's trade or business.
The consummation of the acquisition is conditioned, in part, upon: (i) the receipt by Two River of an opinion from Pitney Hardin LLP that the acquisition will constitute a tax-free capital contribution by the shareholders of Two River to Community Partners within the meaning of Section 351 of the Code; and (ii) the receipt by Town Bank of an opinion from Norris, McLaughlin & Marcus, P.A. that the acquisition will constitute a tax-free capital contribution by the shareholders of Town Bank to Community Partners within the meaning of Section 351 of the Code. These closing conditions will not be waived by Two River or Town Bank without resoliciting the vote of their respective shareholders. The tax opinions will be based upon law existing on the date of the opinion and upon certain facts, assumptions, limitations, representations and covenants including those contained in representation letters executed by officers of Two River and Town Bank that, if incorrect in certain material respects, would jeopardize the conclusions reached by Pitney Hardin LLP and Norris, McLaughlin & Marcus, P.A. in their opinions. The tax opinions will not bind the Internal Revenue Service or prevent the Internal Revenue Service from successfully asserting a contrary opinion. No ruling will be requested from the Internal Revenue Service in connection with the acquisition.
The United States federal income tax consequences of the acquisition are as follows:
o Classification as a Capital Contribution. The acquisition will be treated as a "capital contribution" by the shareholders of Two River and Town Bank to Community Partners qualifying under the provisions of Section 351 of the Code.
o Federal Income Tax Consequences to Two River, Town Bank and Community Partners. No taxable gain or loss will be recognized by Two River, Town Bank, or Community Partners as a result of the acquisition. The basis of the Two River common stock and the Town Bank common stock received by Community Partners will be the same in the hands of Community Partners as it was in the hands of the shareholder transferring that Two River or Town Bank common stock. The holding period of the Two River common stock and the Town Bank common stock received by Community Partners will include, in each instance, the period during which that common stock was held by the Two River shareholder or the Town Bank shareholder transferring it to Community Partners.
o Federal Income Tax Consequences to the Shareholders of Two River and Town Bank. The United States federal income tax consequences of the acquisition to a Two River shareholder and to a Town Bank shareholder, generally, are different for the common stock to be received and for the cash to be received for a fractional share or for dissenters' rights.
o Exchange Solely for Community Partners Common Stock. No gain or loss will be recognized by any Two River or Town Bank shareholder in connection with the shareholder's exchange of Two River or Town Bank common stock solely for Community Partners common stock (except in respect of cash received instead of a fractional share of Community Partners common stock (as discussed in the next paragraph)).
o Receipt of Cash in Lieu of Fractional Share. A shareholder who receives cash instead of a fractional share of Community Partners common stock in the acquisition will generally be treated
as having received the fractional share and then having received cash in redemption of the fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received instead of the fractional share and the portion of the shareholder's aggregate adjusted tax basis of the bank shares exchanged in the acquisition which is allocable to the fractional share of Community Partners common stock. Such gain or loss generally will be long-term capital gain or loss if the holding period for the bank common stock is more than one year at the effective time of the acquisition.
o Shareholders who Exercise Dissenter's Rights. A Two River or Town Bank shareholder who exercises and perfects dissenter's rights generally will recognize gain or loss in an amount, if any, equal to the difference between the cash received and the holder's adjusted tax basis in the shares of Two River or Town Bank common stock surrendered by the holder. Any taxable gain to that shareholder on the exchange of Two River or Town Bank common stock will generally be treated as capital gain, either long-term or short-term capital gain, depending on the shareholder's holding period for the Two River or Town Bank common stock. The deductibility of capital losses is subject to limitations.
o Tax Basis of Community Partners Common Stock Received in the Acquisition. The tax basis of any Community Partners common stock (including fractional shares deemed received and redeemed as described above) exchanged for Two River common stock or Town Bank common stock in the acquisition will equal the tax basis of the Two River or Town Bank common stock surrendered in the acquisition, increased by the amount of gain recognized, if any, in the exchange.
o Holding Period of Community Partners Common Stock Received in the Acquisition. The holding period for any Community Partners common stock exchanged for Two River or Town Bank common stock in the acquisition will include the period during which the Two River or Town Bank common stock surrendered in the acquisition was held.
o Backup Withholding. Certain non-corporate Two River or Town Bank shareholders may be subject to backup withholding at a 28% rate on cash payments received as a consequence of the exercise of dissenter's rights or receipt of fractional shares of Community Partners common stock. Backup withholding will not apply to Two River or Town Bank shareholders who:
o furnish a correct taxpayer identification number and certify that they are not subject to backup withholding on the substitute Form W-9, or a successor form, included in the letter of transmittal to be delivered to Two River and Town Bank shareholders following the completion of the acquisition;
o provide a certification of foreign status on Form W-8(BEN) or successor form; or
o are otherwise exempt from backup withholding.
o Reporting Requirements. Each Two River or Town Bank shareholder who receives Community Partners common stock in the acquisition will be required to retain records and file with such shareholder's federal income tax return a statement setting forth certain facts relating to the acquisition.
Accounting Treatment of the Acquisition
We intend to account for the acquisition under the purchase method of accounting for business combinations. As the former Two River shareholders will receive a majority of the voting rights of the combined entity, we anticipate that Two River will be the acquiring company for accounting purposes. This means that, upon consummation of the acquisition, Two River's assets and liabilities will be reported by Community Partners at Two River's historical cost and Town Bank's assets and liabilities will be recorded at their respective fair values as of the time of the acquisition. Any excess of the purchase price and costs of acquisition over the fair value of Town Bank's tangible and identifiable intangible assets and liabilities will be recorded as goodwill. Under generally accepted accounting principles, goodwill is not amortized but is assessed annually for impairment, with any resulting impairment losses included in net income. Earnings or losses relating to the business of Town Bank will be included in Community Partners' financial statements only prospectively from the date of the transaction. See "Community Partners Bancorp Unaudited Pro Forma Combined Financial Information" beginning on page 63.
Regulatory Matters in Connection with the Acquisition
The acquisition is subject to the approval of the New Jersey Department of Banking and Insurance, and the non-objection of the Federal Reserve Bank of New York. We have filed the applications required to obtain the necessary regulatory approvals and as of the date of this document, we had not received them. Approval by any regulator does not constitute an endorsement of the acquisition or a determination that the terms of the acquisition are fair to the shareholders of either bank.
Restrictions on Sales of Shares by Bank Affiliates
The shares of Community Partners common stock to be issued in connection with the acquisition will be registered under the Securities Act of 1933 and will be freely transferable under the Securities Act, except for shares issued to any person who is deemed to be an "affiliate" of Two River or Town Bank at the time of their respective special meetings and any person who is deemed to be an "affiliate" of Community Partners after the acquisition. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under the common control of either Two River, Town Bank or Community Partners and include executive officers, directors, as well as shareholders beneficially owning 10% or more of the shares of the applicable bank. Affiliates may not sell their shares of Community Partners common stock acquired in connection with the acquisition except pursuant to:
o an effective registration statement under the Securities Act covering the resale of those shares;
o an exemption under paragraph (d) of Rule 145 under the Securities Act (or under Rule 144 of the Securities Act for Community Partners affiliates); or
o any other applicable exemption under the Securities Act.
Community Partners' registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, does not cover the resale of shares of Community Partners common stock to be received by affiliates of Two River or Town Bank in the acquisition.
Two River and Town Bank have agreed to use reasonable best efforts to cause their respective affiliates to agree to comply with the restrictions described above and to take actions to allow such individuals to dispose of these shares pursuant to an exemption under the Securities Act.
NASDAQ SmallCap Market Listing of Community Partners Common Stock to be Issued in the Acquisition
Community Partners has applied to have the common stock to be issued in the acquisition or to be reserved for issuance in respect of rights existing prior to the acquisition, including Two River options and warrants and Town Bank options, to be listed on the NASDAQ SmallCap Market under the symbol "______." Two River and
Town Bank have each agreed to use reasonable best efforts to cause the listing to occur, and neither bank is required to complete the acquisition if NASDAQ does not authorize the listing.
Dissenter's Rights
Written Notice of Dissent. To be eligible to exercise your dissenter's rights, you must file a written notice of dissent with the Secretary of the bank in which you are a shareholder and as to which you are exercising dissenter's rights. Your written notice of dissent must state that you intend to demand payment for your shares if the acquisition becomes effective. If you are dissenting with respect to shares of Two River, your notice of dissent must be filed before the vote of Two River shareholders on the acquisition proposal. If you are dissenting with respect to shares of Town Bank, your notice of dissent must be filed before the vote of Town Bank shareholders on the acquisition proposal. Voting against the acquisition does not constitute the valid exercise of your dissenter's rights. However, if you vote in favor of the acquisition, you will have waived your dissenter's rights. Two River shareholders should deliver their notice of dissent to: Two River Community Bank, 1250 Highway 35 South, Middletown, New Jersey 07748, Attention: Secretary. Town Bank shareholders should deliver their notice of dissent to: The Town Bank, 520 South Avenue, Westfield, New Jersey 07090, Attention: Corporate Secretary.
Written Demand. If you file a notice of dissent and the shareholders of your bank subsequently approve the acquisition by the necessary vote, then the bank will notify you of that shareholder approval by certified mail within 10 days after it occurs. Within 20 days after the bank's notice is mailed, you must file with the bank a written demand for the payment of the fair value of your shares. That written demand should be delivered to the address for your bank set forth in the preceding paragraph. Once you send that demand notice to the bank in which you hold shares, you cease to be a shareholder of that bank and you forfeit all rights as a shareholder of the bank except to obtain the fair value of your shares.
Valuation Date of Fair Value. The fair value of the shares are determined as of the day before the day on which the vote of shareholders of the bank was taken.
Delivery of Shares for Notation. Within 20 days after making your written demand for payment, you must submit the certificates evidencing your shares to the Secretary of the bank whose stock certificates they are - Two River or Town Bank, as the case may be. The bank will make a notation on the certificates that you have made a demand to be paid the fair value of your shares and thereafter the certificates will merely represent the rights of a dissenting shareholder, and will not represent shares of Two River common stock, Town Bank common stock or Community Partners common stock.
Demand that the Bank Institute Lawsuit. Within 10 days after the later of
(i) the expiration of the period within which shareholders may make a written
demand, or (ii) the effective date of the acquisition, each bank will mail its
dissenting shareholders its latest available 12-month profit-and-loss statement
and a balance sheet as of the close of the 12-month period. The close of the
profit-and-loss statement and the balance sheet will be as of a date within 12
months prior to the mailing.
Your bank may, but is not required to, accompany these financial statements with a written offer to pay a specified price for your shares. You will have a 30-day period following mailing of the bank's financial statements to agree upon a price with the bank. If you and the bank are unable to agree upon a price within that 30-day period, you must serve a written demand on the bank to commence an action in the New Jersey Superior Court for the determination of the fair value of your shares. Your demand to commence an action must be served not later than 30 days after the expiration of the 30-day period you have in which to agree upon a price with the bank.
Commencement of Lawsuit by Dissenting Shareholder. The bank will have 30 days after receipt of your demand for it to commence a proceeding in the New Jersey Superior Court to commence that proceeding. If the bank fails to institute the proceeding, you may institute the proceeding in the name of the bank during the 60-day period after expiration of the bank's 30-day period.
Determination and Payment of Fair Value. In the New Jersey Superior Court proceeding, the court will have jurisdiction over all dissenting shareholders who have not agreed upon a price with their bank and may proceed in a summary fashion to determine the fair value of their shares. The court's judgment must include interest from the date of the bank's special shareholders meeting approving the acquisition to the date of payment unless the court finds that the refusal of any dissenting shareholder to accept the bank's offered price was arbitrary, vexatious or otherwise not in good faith. The costs of the action (excluding the fees and expenses of each party's attorneys and experts) and of any court-appointed appraiser will be apportioned equitably by the court. The court may in its discretion award a dissenting shareholder reasonable fees and expenses of the dissenting shareholder's counsel and of any experts employed by the dissenting shareholder if the court finds that the price offered by the bank was not offered in good faith or if no such offer was made.
Written notices and demands should be signed by or on behalf of the shareholder exactly as the shareholder's name appears on the shareholder's stock certificates. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, the demand should be executed in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one or more joint owners, may execute a demand for payment of fair value on behalf of a record holder; however, in the demand, the agent must identify the record owner or owners and expressly disclose that the agent is executing the demand as an agent for the record owner or owners. A record holder such as a broker who holds shares as nominee for several beneficial owners may exercise dissenter's rights for the shares held for one or more beneficial owners and not exercise rights for the shares held for other beneficial owners. You may only dissent as to the entire amount of your shares.
Loss of Dissenter's Rights. If you fail to perfect, withdraw or lose the right to dissent under Sections 360-369 of the New Jersey Banking Act, you will be entitled to receive the consideration with respect to your shares in accordance with the acquisition agreement. In view of the complexity of the provisions of Sections 360-369 of the New Jersey Banking Act, shareholders of Two River or Town Bank who are considering objecting to the acquisition should consult their own legal advisors.
Neither Two River nor Town Bank will notify any dissenting shareholder of the beginning or end of any statutory period except as required by law. If you are considering dissenting from the plan of acquisition we urge you to consult your own legal counsel.
The Acquisition Agreement
Conditions to the Acquisition. Each bank's obligations to complete the acquisition are subject to the satisfaction or waiver of specified conditions before completion of the acquisition, including the following:
o the acquisition agreement must be approved by the shareholders of both banks;
o the appropriate bank regulatory agencies must have approved or not objected to the acquisition and all required regulatory waiting periods must have expired or been terminated;
o the shares of Community Partners common stock to be issued, or to be reserved for issuance, in connection with the acquisition must have been approved for listing on the NASDAQ National Market System or, in the alternative, the NASDAQ SmallCap Market or the American Stock Exchange, subject to official notice of issuance;
o each bank must receive an opinion of its respective tax counsel dated the closing date of the acquisition to the effect that the acquisition will qualify as an exchange to which Section 351 of the Internal Revenue Code applies;
o completion of the acquisition must not be prohibited by any statute, rule, regulation or injunction; and
o dissenter's rights may not be perfected with respect to shares of bank stock which, had they been converted in the acquisition, would have exceeded 10% of the total shares issued by Community Partners in the acquisition.
The shareholder approval and bank regulatory approval conditions may not be waived because completing the acquisition absent satisfaction of any of those conditions would not comply with applicable law. Also, neither bank intends to waive the tax opinion conditions noted above. If either bank does waive this condition, we will inform you of our decision and ask you to vote on the acquisition agreement taking this into consideration.
Each bank's obligations to complete the proposed acquisition are subject to the satisfaction or waiver of the following additional conditions:
o the other bank must have performed in all material respects the obligations required to be performed by it under the acquisition agreement;
o the other bank's representations and warranties must be true and correct as of the date of the acquisition agreement and as of the date the acquisition is completed, except as would not reasonably be expected to have a material adverse effect; and
o there shall not have been any material adverse effect as to the other bank between the signing of the acquisition agreement and the completion of the acquisition.
The term "material adverse effect," as used above in reference to either bank, means a material adverse effect on the business, results of operations or financial condition of the bank and its subsidiaries taken as a whole, or a material adverse effect on the bank's ability to complete the acquisition on a timely basis.
However, in determining whether a material adverse effect has occurred, the banks will exclude any effect which is caused by:
o a change after the date of the acquisition agreement in laws, rules or regulations or their interpretation; generally accepted accounting principles; or regulatory accounting requirements, in each case applicable to banks or their holding companies generally;
o the announcement of the acquisition agreement;
o actions taken in compliance with the acquisition agreement or with the other bank's permission;
o changes in general economic or capital market conditions affecting banks or their holding companies generally; or
o changes or events affecting the financial services industry generally.
No Solicitation by Either Bank; Window Shopping. The acquisition agreement contains detailed provisions prohibiting either bank from soliciting an alternative transaction, but permits consideration of unsolicited bids consistent with the fiduciary duties of the bank's board of directors. Under these provisions, each bank has agreed that it will not directly or indirectly solicit, initiate or knowingly encourage or facilitate any inquires or the making of a "competing transaction." A "competing transaction" is: (i) any transaction by which a third party would acquire more than 10% of the outstanding common stock of the bank, (ii) any merger or other business combination
involving the bank, (iii) any transaction pursuant by which a third party would acquire control of more than 10% (in value) of the assets, net revenues or net income of the bank and its subsidiaries, taken as a whole, or (iv) any other consolidation, business combination, recapitalization or similar transaction which would result in the bank's shareholders not owning , in the aggregate, at least 90% of the outstanding common stock and outstanding voting power of the surviving or resulting entity in the transaction in substantially the same proportion as before it occurred.
If an unsolicited bid is made by a third party to either bank prior to that bank receiving shareholder approval for the acquisition, and that bank's board of directors determines that the offer
(i) was not received as a result of violation of the no-solicitation provision,
(ii) if completed, would be a competing transaction,
(iii) is not conditioned on financing unless such financing is highly likely to be obtained in the board's opinion, and
(iv) would provide greater value to the bank's shareholders than the acquisition, taking the breakup fee payable to the other party under the acquisition agreement into consideration,
then the board of that bank would be able to consider and negotiate such competing offer consistent with its fiduciary duties. The bank considering the competing offer is required to notify the other bank about the competing offer and wait at least five business days before entering into any agreement relating to the competing offer. If a counter offer is made by the other bank which addresses the terms of the competing transaction, the recipient would then be required by the acquisition agreement to try to negotiate such proposal with the other bank in good faith during that five business day period.
Termination. The acquisition agreement may be terminated at any time before the acquisition is completed, whether before or after the shareholder approvals have been obtained:
o by mutual written consent of the two banks authorized by their respective boards of directors;
o by either bank if the acquisition is not completed on or before April 15, 2006, also referred to as the "drop-dead date," except that this right to terminate the acquisition agreement will not be available to any bank whose failure to fulfill any obligation under the acquisition agreement has been the cause of, or has resulted in, the failure of the acquisition to be completed by the drop-dead date;
o by either bank if any injunction, order or decree of any governmental entity shall have been entered and have become final and nonappealable restraining, enjoining or otherwise prohibiting the acquisition, provided that the party seeking to terminate must have used its commercially reasonable efforts to prevent the entry of and to remove such injunction, order or decree;
o by Town Bank, if prior to Two River shareholders' approval of the acquisition, the Two River board shall have changed its recommendation of the acquisition or shall have recommended a competing transaction;
o by Two River, if prior to Town Bank shareholders' approval of the acquisition, the Town Bank board shall have changed its recommendation of the acquisition or shall have recommended a competing transaction;
o by either bank if the acquisition shall fail to receive either Two River shareholders' approval or Town Bank shareholders' approval;
o by Town Bank, upon a breach of any representation, warranty, covenant or agreement on the part of Two River or if any representation or warranty of Two River shall have become untrue, and all such breaches would result, in the case of breaches of representations and warranties, in a material adverse effect as to Two River and, in the case of a breach of a covenant or failure to comply with the covenants, a failure by Two River to perform in all material respects its obligations under the acquisition agreement, provided that Two River will have 30 days or, if earlier, until the drop-dead date, after receiving notice of such breach to cure;
o by Two River, upon a breach of any representation, warranty, covenant or agreement on the part of Town Bank or if any representation or warranty of Town Bank shall have become untrue, and all such breaches would result, in the case of breaches of representations and warranties, in a material adverse effect, as defined in the acquisition agreement, with respect to Town Bank and, in the case of a breach of a covenant or failure to comply with the covenants, a failure by Town Bank to perform in all material respects its obligations under the acquisition agreement, provided that Town Bank will have 30 days or, if earlier, until the drop-dead date, after receiving notice of such breach to cure;
o by Two River, if prior to Two River shareholders' approval of the acquisition, the Two River board shall have decided to approve a competing transaction, provided that Town Bank is given at least five business days notice of that decision and is provided an opportunity to negotiate a more favorable transaction and after such negotiations, if any, the Two River board determines that the competing transaction is more favorable, from a financial point of view, to Two River shareholders than the proposed acquisition with Town Bank;
o by Town Bank, if prior to Town Bank shareholders' approval of the acquisition, the Town Bank board shall have decided to approve a competing transaction, provided that Two River is given at least five business days notice of that decision and is provided an opportunity to negotiate a more favorable transaction and after such negotiations, if any, the Town Bank board determines that the competing transaction is more favorable, from a financial point of view, to Town Bank shareholders than the proposed acquisition with Two River; or
o by Town Bank, if the Two River Average Price is less than $11.00 per share.
Termination Fee. The acquisition agreement requires Two River to pay a termination fee of $2 million in cash to Town Bank:
o if the acquisition agreement is terminated by either party because of Two River's failure to get the Two River shareholders' approval and there is a competing Two River transaction at the time of such termination that is consummated, or with respect to which there is a definitive agreement, within a year,
o if Town Bank terminates the acquisition agreement after the Two River board changes its recommendation of the acquisition to Two River shareholders or recommends a competing transaction to Two River shareholders, or
o if the Two River board approves a competing transaction.
The acquisition agreement requires Town Bank to pay a termination fee of $2 million in cash to Two River:
o if the acquisition agreement is terminated by either party because of Town Bank's failure to get the Town Bank shareholders' approval and there is a competing Town Bank transaction at the time of such termination that is consummated, or with respect to which there is a definitive agreement, within a year,
o if Two River terminates the acquisition agreement after the Town Bank board changes its recommendation of the acquisition to Town Bank shareholders or recommends a competing transaction to Town Bank shareholders, or
o if the Town Bank board approves a competing transaction.
Conduct of Business Pending the Acquisition. Each bank has agreed that, during the period before completion of the acquisition, except as expressly contemplated or permitted by the acquisition agreement, or unless the other bank consents in writing, it will carry on its business in the ordinary and usual course consistent with prudent banking practice, and will use all commercially reasonable efforts to preserve intact its business organization and goodwill, keep available the services of its present officers and employees and its relationships with third parties, and take no action which would reasonably be expected to delay past the drop-dead date or materially adversely affect the receipt of regulatory approvals necessary to close the acquisition.
In addition to these agreements regarding the conduct of business generally, each bank has agreed to specific restrictions relating to the following:
o alteration of its capital stock, including stock splits or combinations;
o declaring or paying dividends;
o issuing or selling capital stock, options or warrants;
o entering into a new line of business;
o materially changing its policies and practices with respect to loans, investment securities portfolio, or any other material banking or operating policies;
o acquiring assets or other entities;
o disposing of assets;
o incurring indebtedness for borrowed money;
o performing environmental assessments before foreclosing on certain types of real estate;
o entering into certain types of agreements, arrangements or transactions with its officers or directors, their immediate family members, or certain related parties;
o compromising any material claims, litigation or arbitration;
o amending its certificate of incorporation or by-laws;
o taking action that would be expected to result in any condition to the acquisition not being satisfied;
o making changes in accounting or tax accounting methods, except as required by law, rule, regulation or generally accepted accounting principles;
o entering into loan securitizations or creating special purpose funding or variable interest entities; or
o making or revoking any material tax elections or making a settlement with any taxing authority.
In addition, Town Bank has agreed to specific additional restrictions relating to the following:
o entering into or amending material contracts, including contracts which limit its freedom to compete, require referrals of business on a priority or exclusive basis, or require the use of any product or service on an exclusive basis;
o increasing compensation or fringe benefits for any director, officer
or employee, except that specific provision is made in the
acquisition agreement to permit (i) the base salaries of Town Bank's
CEO, CFO and senior lending officer to be increased effective
January 1, 2006 by not more than $30,000 for all three combined,
(ii) the base compensation of each other officer or employee to be
increased on the anniversary date of that person's employment, with
no individual increase resulting in an annual adjustment of more
than 5%, and (iii) the payment of bonuses for 2005 to officers and
employees in an aggregate amount not more than 5% of Town Bank's
2005 net income;
o granting any severance or termination pay to a director, officer or employee except as required pursuant to the terms of the existing Town severance plan or as consistent with past practice in connection with employment terminations in the ordinary course;
o adopting a new benefit plan, increasing the funding obligation or contribution rate under an existing plan, or amending an existing plan without Two River's consent;
o increasing the size of its board of directors;
o making capital expenditures in excess of $50,000 in the aggregate;
o opening, relocating or closing any branch office or other facility or making an application to do so; or
o making or acquiring any new loans or loan commitments except in the ordinary course of business and with a principal balance of $1,000,000 or less.
Additional Agreements. Each bank has agreed to cooperate with each other
and to use its commercially reasonable efforts to take all actions and do all
things necessary, including obtaining all necessary consents and required
approvals, proper and advisable under the acquisition agreement and applicable
laws to complete the acquisition. However, neither bank is required to agree to:
divest any business or assets, the imposition of any conditions, or the payment
of material amounts to obtain any consents or approvals required to complete the
acquisition from any governmental authority or third parties. Consistent with
applicable legal and regulatory requirements, the banks have further agreed that
neither of them will control the operations of the other prior to completion of
the acquisition.
The banks have agreed to negotiate in good faith to restructure the acquisition to be tax-free in whole or in part under the Internal Revenue Code if the acquisition does not qualify as an exchange to which Section 351 of the Code applies.
Each bank has agreed:
o that if any litigation is commenced relating to the acquisition, the other party will have the right, at its own expense, to participate and neither party will be permitted to settle any litigation without the consent of the other;
o to provide current and former directors and officers of each bank customary directors' and officers' indemnification and insurance for six years after closing, and to honor existing directors' and officers' indemnification agreements in accordance with their terms; and
o that the parties shall be entitled to specific performance upon nonperformance of any of the provisions of the acquisition agreement.
Amendment, Extension and Waiver. The acquisition agreement may be amended by the banks at any time. However, after approval of the acquisition by the shareholders of Two River and Town Bank has been obtained, no
amendment may be made except such amendments that have received the requisite approval of the shareholders of the banks and such amendments that are permitted to be made without shareholder approval under the New Jersey Banking Act.
At any time before the acquisition is completed, the banks may, to the extent legally allowed:
o extend the time for the performance of any of the obligations or other acts of the other bank;
o waive any inaccuracies in the representations and warranties contained in the acquisition agreement or in any document delivered pursuant to the acquisition agreement; and
o waive compliance with any of the agreements or conditions to completion of the acquisition contained in the acquisition agreement.
Expenses. Whether or not the acquisition is completed, all expenses and fees incurred in connection with the acquisition agreement and the acquisition will be paid by the party incurring them, other than the costs and expenses (including filing fees) involved in obtaining SEC, banking and any other necessary regulatory approval, and the costs and expenses involved in the printing and mailing of this joint proxy statement/prospectus, which will be shared equally by Two River and Town Bank. Expenses incurred by Two River related to the acquisition will be capitalized as part of goodwill and expenses incurred by Town Bank will be expensed as incurred.
Representations and Warranties. The acquisition agreement contains representations and warranties that are customary for financial institutions and substantially identical as to both Two River and Town Bank relating to, among other things:
o corporate organization and qualification;
o capital structure;
o authorization, approvals and absence of conflicts;
o financial statements;
o absence of material changes since March 31, 2005;
o litigation;
o tax matters;
o employee matters;
o reports filed with bank regulators;
o compliance with applicable laws generally;
o material contracts;
o properties and insurance;
o environmental compliance;
o reserves for loan and lease losses;
o agreements with bank regulators;
o outstanding loans, including loans to insiders;
o disclosure controls and procedures; and
o the opinion of the bank's financial advisor.
Community Partners Certificate of Incorporation and By-laws
The certificate of incorporation and bylaws of Community Partners are set forth as Annex B and Annex C, respectively, to this joint proxy statement/prospectus. For a summary of the material provisions of the certificate of incorporation and bylaws of Community Partners, and the rights of shareholders of Community Partners under the certificate of incorporation and bylaws, see the section entitled "Description of Community Partners Capital Stock," beginning on page 70.
Equity Plans
Two River Stock Options and Warrants
At the time of the acquisition, each outstanding option and warrant to purchase common stock of Two River will be converted into an option or warrant, as the case may be, to purchase the same number of shares of common stock of Community Partners, at the same exercise price, and on the same terms and conditions as were applicable to such Two River stock options and warrants. See "The Acquisition - Treatment of Stock Options and Warrants", on page 49.
Town Bank Stock Options
Each outstanding option to purchase common stock of Town Bank will be converted into an option to purchase the number of shares of common stock of Community Partners determined by multiplying the number of shares subject to the original option by the 1.25 exchange ratio, at an exercise price determined by dividing the exercise price of the original option by the 1.25 exchange ratio, and otherwise on the same terms and conditions as were applicable to such Town Bank stock options. The 1.25 exchange ratio is subject to adjustment if the Two River Average Price is below $13.20 or above $18.80. See "The Acquisition - Structure of the Acquisition and Conversion of Two River and Town Bank Stock," on page 48.
Community Partners Equity Plans
At the time of the acquisition or promptly thereafter, we intend to establish an equity incentive plan for members of the Community Partners board of directors and officers and employees of Community Partners and its subsidiaries. We expect to reserve a number of shares of Community Partners common stock, for issuance in respect of the plan, not to exceed ____% of the issued and outstanding shares of Community Partners common stock as of the time of the acquisition (not counting Two River and Town Bank options, stock rights, and warrants that are exchanged in the acquisition for corresponding rights with respect to Community Partners common stock). The interests granted under the equity incentive plan may be in the form of stock options, restricted stock grants, or otherwise, and the terms, conditions, eligibility, and allocations to eligible participants with respect to the plan will be as determined by Community Partners' board or its compensation committee. We expect to seek shareholder approval of the equity incentive plan.
COMMUNITY PARTNERS BANCORP
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information is presented for illustrative purposes only and does not purport to be indicative of the financial position and results of operations for future periods or the results that actually would have been realized had Two River and Town Bank been a combined company during the specified periods. The unaudited pro forma combined condensed balance sheet at June 30, 2005 assumes the acquisition was completed on that date. The unaudited pro forma combined condensed statements of income for the year ended December 31, 2004 and the six months ended June 30, 2005 gives effect to the acquisition as if it had been completed on January 1, 2004. The unaudited pro forma combined financial information shows the impact of the acquisition on Two River's and Town Bank's combined financial position and results of operations under the purchase method of accounting with Two River treated as the acquiror. Under this method of accounting, the assets and liabilities of Town Bank will be recorded at their estimated fair values as of the date the acquisition is completed. Two River's assets and liabilities will be reported by Community Partners at Two River's historical cost. At the time of acquisition, each of the two banks will become wholly-owned subsidiaries of a newly formed holding company, Community Partners. Separate financial information for the holding company is not included in the pro forma financial information as it currently has no activity.
The unaudited pro forma combined financial information has been derived from and should be read in conjunction with the historical financial statements and the related notes of both Two River and Town Bank that are included elsewhere in this document.
The pro forma adjustments were based upon available information and upon certain assumptions as described in the notes to the unaudited pro forma combined financial information. The fair value adjustments contained in the pro forma financial information are preliminary estimates based on data as of June 30, 2005. Final fair value adjustments will be determined as of the closing date of the acquisition and could differ significantly.
Furthermore, the information does not include the impact of possible revenue enhancements, expense efficiencies, asset dispositions and share repurchases, among other factors. Community Partners and the banks also expect to incur certain reorganization and integration expenses.
COMMUNITY PARTNERS BANCORP
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
June 30, 2005
(in thousands)
Two River/
Town Bank
Two River Town Bank Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ----------- ----------- -----------
Assets:
Cash and due from banks $ 10,371 $ 2,987 $ (585) (1) $ 12,773
Federal funds sold 3,129 -- -- 3,129
Securities available for sale 34,959 13,917 -- 48,876
Securities held to maturity 4,269 -- -- 4,269
--
Loans 200,422 127,958 (1,246) (4) 327,134
Less: Allowance for loan losses (2,205) (1,387) -- (3,592)
----------- ----------- ----------- -----------
Net loans 198,217 126,571 (1,246) 323,542
----------- ----------- ----------- -----------
Goodwill -- -- 24,833 (2) 24,833
Identifiable intangibles -- -- 2,417 (3) 2,417
Bank-owned life insurance 3,591 -- -- 3,591
Premises and equipment, net 2,250 1,864 500 (5) 4,614
Other assets 1,727 1,666 -- 3,393
----------- ----------- ----------- -----------
Total assets $ 258,513 $ 147,005 $ 25,919 $ 431,437
=========== =========== =========== ===========
Liabilities and Stockholders' Equity:
Deposits:
Non-interest bearing $ 47,884 $ 20,906 $ -- $ 68,790
Interest bearing 172,947 109,765 (246) (4) 282,466
----------- ----------- ----------- -----------
Total deposits 220,831 130,671 (246) 351,256
----------- ----------- ----------- -----------
Securities sold under agreements to
repurchase 8,685 -- -- 8,685
Short-term borrowings 5,000 250 -- 5,250
Accrues expenses and other liabilities 1,149 679 750 (6) 2,578
Deferred taxes 467 (7) 467
----------- ----------- ----------- -----------
Total liabilities 235,665 131,600 971 368,236
----------- ----------- ----------- -----------
Shareholders' equity:
Common stock 7,873 9,387 4,693 (9) 12,566
(9,387)(8)
Additional paid-in capital 14,177 5,547 35,660 (9) 49,837
(5,547)(8)
Retained earnings 984 519 (519)(8) 984
Accumulated other comprehensive loss (186) (48) 48 (8) (186)
----------- ----------- ----------- -----------
Total shareholders' equity 22,848 15,405 24,948 63,201
----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 258,513 $ 147,005 $ 25,919 $ 431,437
=========== =========== =========== ===========
|
See "Notes to the Unaudited Pro Forma Combined Financial Information"
COMMUNITY PARTNERS BANCORP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
For the Six Months Ended June 30, 2005
(Dollars in thousands, except for per share amounts)
Two River/
Town Bank
Two River Town Bank Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------ ------------ ------------ ------------
Interest Income:
Loans $ 6,053 $ 3,864 $ 78 (12) $ 9,995
Investment securities 842 154 40 (15) 1,036
Federal funds sold 31 60 (18)(10) 73
------------ ------------ ------------ ------------
Total interest income 6,926 4,078 100 11,104
------------ ------------ ------------ ------------
Interest Expense:
Savings, NOW & money market deposits 1,037 380 -- 1,417
Time deposits 531 948 61 (13) 1,540
Federal funds purchased & short-term
borrowings 95 15 -- 110
Securities sold under agreements to
repurchase 74 -- -- 74
------------ ------------ ------------ ------------
Total interest expense 1,737 1,343 61 3,141
------------ ------------ ------------ ------------
Net interest income 5,189 2,735 39 7,963
Provision for loan losses 278 201 -- 479
------------ ------------ ------------ ------------
Net interest income after provision
for loan losses 4,911 2,534 39 7,484
------------ ------------ ------------ ------------
Non-Interest Income:
Service charges on deposit accounts 186 30 -- 216
Other loan servicing fees 192 -- -- 192
Gain on sale of loans held for sale -- 8 -- 8
Other 185 32 -- 217
------------ ------------ ------------ ------------
Total non-interest income 563 70 -- 633
------------ ------------ ------------ ------------
Non-Interest Expenses:
Salaries and employee benefits 2,178 763 -- 2,941
Occupancy and equipment expenses 661 360 13 (14) 1,034
Other operating expenses 1,170 409 -- 1,579
Amortization of identifiable intangibles -- -- 151 (11) 151
------------ ------------ ------------ ------------
Total non-interest expense 4,009 1,532 164 5,705
------------ ------------ ------------ ------------
Income before income taxes 1,465 1,072 (125) 2,412
Provision for income taxes 542 245 (50)(16) 737
------------ ------------ ------------ ------------
Net income $ 923 $ 827 $ (75) $ 1,675
============ ============ ============ ============
Earnings Per Share on:
Basic $ 0.23 $ 0.44 $ -- $ 0.27
Diluted $ 0.22 $ 0.42 $ -- $ 0.25
Weighted Average Shares Outstanding:
Basic 3,931,311 1,876,000 (1,876,000)(17) 6,276,311
2,345,000 (17)
Diluted 4,144,671 1,948,000 (1,948,000)(17) 6,579,671
2,435,000 (17)
|
See "Notes to the Unaudited Pro Forma Combined Financial Information"
COMMUNITY PARTNERS BANCORP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
For the Year Ended December 31, 2004
(Dollars in thousands, except for per share amounts)
Two River/
Town Town Bank
Two River Bank Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------ ------------ ------------ ------------
Interest Income:
Loans $ 9,705 $ 5,959 $ 156 (12) $ 15,820
Investment securities 1,443 287 80 (15) 1,810
Federal funds sold 108 71 (35)(10) 144
------------ ------------ ------------ ------------
Total interest income 11,256 6,317 201 17,774
------------ ------------ ------------ ------------
Interest Expense:
Savings, NOW & money market deposits 1,963 632 -- 2,595
Time deposits 447 1,197 123 (13) 1,767
Federal funds purchased & short-term
borrowings 5 3 -- 8
Securities sold under agreements to
repurchase 116 -- -- 116
------------ ------------ ------------ ------------
Total interest expense 2,531 1,832 123 4,486
------------ ------------ ------------ ------------
Net interest income 8,725 4,485 78 13,288
Provision for loan losses 458 385 -- 843
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 8,267 4,100 78 12,445
------------ ------------ ------------ ------------
Non-Interest Income:
Service charges on deposit accounts 313 104 -- 417
Other loan servicing fees 317 -- -- 317
Gain on sale of loans held for sale -- 32 -- 32
Other 190 -- -- 190
------------ ------------ ------------ ------------
Total non-interest income 820 136 -- 956
------------ ------------ ------------ ------------
Non-Interest Expenses:
Salaries and employee benefits 3,773 1,376 -- 5,149
Occupancy and equipment expenses 1,367 649 26 (14) 2,042
Other operating expenses 1,829 763 -- 2,592
Amortization of identifiable intangibles -- -- 302 (11) 302
------------ ------------ ------------ ------------
Total non-interest expense 6,969 2,788 328 10,085
------------ ------------ ------------ ------------
Income before income taxes 2,118 1,448 (250) 3,316
Provision for income taxes 793 84 (100)(16) 777
------------ ------------ ------------ ------------
Net income $ 1,325 $ 1,364 $ (150) $ 2,539
============ ============ ============ ============
Earnings Per Share on:
Basic $ 0.36 $ 0.74 $ -- $ 0.43
Diluted $ 0.34 $ 0.72 $ -- $ 0.40
Weighted Average Shares Outstanding:
Basic 3,631,000 1,852,000 (1,852,000)(17) 5,946,000
2,315,000 (17)
Diluted 3,903,000 1,905,000 (1,905,000)(17) 6,284,250
2,381,250 (17)
|
See "Notes to the Unaudited Pro Forma Combined Financial Information"
COMMUNITY PARTNERS BANCORP
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Note 1--Basis of Pro Forma Presentation
The unaudited pro forma combined financial information relating to the acquisition is presented as of June 30, 2005, for the six months ended June 30, 2005 and for year ended December 31, 2004.
The pro forma adjustments consist entirely of the expected purchase price adjustments necessary to combine the businesses of Two River and Town Bank, including the conversion of each bank's common stock into shares of Community Partners. Each share of Two River common stock will be exchanged for one share of Community Partners common stock. Each share of Town Bank common stock will be exchanged for 1.25 shares of Community Partners common stock, subject to adjustment. The exchange ratio of 1.25 applied to 1,877,330 shares of Town Bank common stock issued and outstanding at June 30, 2005, multiplied by the share price of $16.25 per share of Two River common stock equated to $38.1 million. The share price of $16.25 was the closing price of Two River common stock on August 16, 2005, the day the merger was announced. Included in the purchase price is the estimated fair value of $2.2 million representing approximately 182,000 vested employee stock options of Town Bank that will be converted into options for Community Partners common stock upon consummation of the acquisition.
Consideration has been given to providing an estimate of the anticipated transaction costs to be incurred in connection with the acquisition. Such costs are expected to approximate $585,000 on a pre-tax basis and have been reflected in the pro forma adjustments to the unaudited pro forma combined balance sheet. Under current accounting rules, certain other costs will not be accruable at the closing of the acquisition and will be recognized in periods both before and after the date of the acquisition. The detailed plans for all of the restructuring initiatives have not been fully formulated and, as such, no consideration was given to recognition of these expenses in the unaudited pro forma combined balance sheet or in the unaudited pro forma combined income statement.
The total estimated purchase price for Town Bank for the purpose of this pro forma financial information is $40.9 million.
The acquisition will be accounted for using the purchase method of accounting for business combinations which requires that the assets and liabilities of Town Bank be adjusted to fair value as of the date of the acquisition.
The unaudited pro forma combined financial information has been prepared to include the estimated adjustments necessary to record the assets and liabilities of Town Bank at their respective fair values and represents managements' best estimates based upon the information available at this time. These pro forma adjustments are expected to be revised as additional information becomes available and additional detailed analysis is performed. Furthermore, the final allocation of the purchase price will be determined after the acquisition is completed and after completion of a final analysis to determine the fair values of Town Bank's tangible and identifiable intangible assets and liabilities as of the closing date of the transaction. The final purchase accounting adjustments may be materially different from the pro forma adjustments presented herein. Increases or decreases in the fair value of certain balance sheet amounts including loans, securities, deposits and related intangibles will result in adjustments to both the balance sheet and income statement. Such adjustments, when compared to the information shown in this document, may change the amount of the purchase price allocated to goodwill while changes to other assets and liabilities may impact the statement of income due to adjustments in the yield and/or amortization/accretion of the adjusted assets and liabilities.
The unaudited pro forma combined financial information presented herein does not necessarily provide an indication of the combined results of operations or the combined financial position that would have resulted had the acquisition actually been completed as of the assumed consummation date, nor is it indicative of the results of operations in future periods or the future financial position of Community Partners.
In the presentation provided, no significant reclasses were made to Two River or Town Bank to conform to the other's presentation.
Note 2--Calculation and Preliminary Allocation of Purchase Price
The unaudited pro forma combined financial information reflects the issuance of 2,346,663 shares of Community Partners common stock with an aggregate value of $38.1 million in exchange for 1,877,330 shares of Town Bank common stock and the conversion of approximately 181,000 Town Bank vested employee stock options with a fair value of $2.2 million at June 30, 2005, assuming the exchange ratio of 1.25 shares of Community Partners common stock or options for each outstanding common share or option of Town Bank. The fair value of Community Partners options that will be issued in exchange for the Town Bank options was estimated using a Black-Scholes option pricing model. Option pricing models require the use of highly subjective assumptions including expected stock price and volatility that, when changed, can materially affect fair value estimates. The more significant assumptions used in the estimation of fair value of Community Partners stock options to be issued in the exchange for the Town Bank stock options include a risk-free interest rate of 3.77%, a dividend yield of 0%, a weighted average expected life of five years and volatility of 31.49%.
The preliminary allocation of the cost to acquire Town Bank is described the table below:
June 30,
2005
-----------
(Dollars in thousands except per share data)
Purchase Price
Town Bank common stock outstanding 1,877,330
Exchange ratio 1.25
-----------
Holding company common stock to be issued 2,346,663
Average purchase price per Two River common share $ 16.25
(closing price on August 16, 2005) -----------
$ 38,133
Estimated Transaction costs 585
Estimated Fair Value of vested employee stock options 2,220
-----------
Total purchase price 40,938
Net Assets Acquired:
Town Bank shareholders' equity at June 30, 2005 $ 15,405
Estimated adjustments to reflect assets acquired at fair value:
Loans (1,246)
Premises and equipment 500
Identifiable intangibles - core deposit premium 2,417
Estimated amount allocated to liabilities assumed at fair value:
Time deposits 246
Other liabilities (750)
Deferred taxes (467)
-----------
Net assets acquired 16,105
-----------
Goodwill $ 24,833
===========
|
Note 3--Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma financial information are as follows:
(1) Cash outlay for costs associated with the acquisition
(2) To record goodwill arising from the excess of the purchase price
over the fair value of the net assets acquired
(3) To record $2.4 million core deposit intangible as result of the
acquisition. The amount of core deposit intangible is estimated to
be 1.85% of total deposits based on data from previously completed
business combinations. A core deposit intangible valuation will be
completed at the closing date of the acquisition and this estimate
will be adjusted based on the results of that valuation.
(4) To record fair value adjustments for loans and non-core deposits
(time deposits) based on discounted cash flows and current rates for
similar maturities
(5) To record fair value adjustments for premises and equipment. This
adjustment is expected to be almost entirely related to real estate
of Town Bank
(6) To record estimated contract termination costs and severance
obligations due to the acquisition
(7) To record net deferred tax effect related to fair value adjustments
of Town Bank's assets and liabilities and tax benefit of costs of
the acquisition, using an effective federal and state blended tax
rate of 40%
(8) To eliminate Town Bank's historical shareholders' equity
(9) To record issuance of Community Partners common stock in exchange
for Town Bank common stock
(10) Reduction of interest income on assets used to fund transaction
costs assuming an annualized pre-tax yield of 6.02%, the bank's
current long-term investment rate
(11) Amortization of the core deposit intangible created as a result of
the acquisition over eight years on a straight-line basis for the
purpose of this presentation
(12) Amortization of the fair value adjustment to loans over an average
life of eight years
(13) Amortization of the fair value adjustment to non-core deposits (time
deposits) over two years, the assumed average life of such deposits
(14) To record additional depreciation expense due to fair value
adjustment for premises and equipment with an assumed average life
of 20 years
(15) Adjustment to reflect accretion of the fair value adjustment
necessary to reflect investments at fair value. Under SFAS No. 115,
such adjustments are reflected in historical amounts but have been
included on a net of tax basis as an adjustment to equity. Such
amounts were eliminated in item (8) and therefore will require
prospective accretion of the discount to properly record earnings
under the purchase method of accounting. This discount is accreted
over two years.
(16) Adjustment to record the tax effect of the pro forma adjustments
using an incremental blended tax rate of 40%
(17) To record the elimination of Town Bank's shares and the issuance of
Community Partner's shares at an exchange rate of 1.25 shares for
one Town Bank share. Earnings per share data have been computed
based upon the pro forma combined net income of Two River and Town
Bank and the pro forma basic and diluted shares of Community
Partners
DESCRIPTION OF COMMUNITY PARTNERS CAPITAL STOCK
Authorized Capital Stock
Total Shares. Community Partners initially will have authority to issue a total of 31,500,000 shares of capital stock consisting of:
o 25,000,000 shares of common stock, no par value per share; and
o 6,500,000 shares of preferred stock, no par value per share.
Common Stock. Following completion of the acquisition, we anticipate that approximately 7,480,648 shares of Community Partners common stock will be issued and outstanding or reserved for issuance to holders of outstanding options and warrants or under the equity incentive compensation plans.
Preferred Stock. Following completion of the acquisition, we anticipate that there will be no shares of Community Partners preferred stock outstanding. The Community Partners board of directors is expressly authorized to provide for the classification and reclassification of any unissued shares of preferred stock and the issuance thereof in one or more classes or series without the approval of the shareholders of Community Partners.
Warrants. Upon consummation of the acquisition, outstanding warrants to purchase an aggregate of 400,000 shares of Two River Common Stock at an exercise price of $20.50 per share will be converted into warrants to purchase the same number of shares of Community Partners common stock at the same exercise price, and on the same terms and conditions, as were applicable to the purchase of Two River common stock prior to the consummation of the acquisition. See "The Acquisition - Treatment of Two River Stock Options and Warrants", on page 49.
Listing. Community Partners has applied to list its common stock and warrants on the NASDAQ SmallCap Market under the symbol "_______." No other capital stock of Community Partners will be listed.
Preemptive Rights. The holders of Community Partners common stock or preferred stock will not have preemptive rights to purchase or subscribe for any stock or other securities of Community Partners.
Community Partners Common Stock
Voting Rights. Each outstanding share of Community Partners common stock will be entitled to one vote per share.
Dividends. The record holders of Community Partners common stock will be entitled to receive dividends, when, as, and if declared by the Community Partners board of directors, out of any assets legally available for the payment of dividends thereon.
Liquidation Rights. In the event of the dissolution, liquidation or winding up of Community Partners, subject to the rights, if any, of the holders of any outstanding shares of Community Partners preferred stock, record holders of Community Partners common stock will be entitled to receive the assets of Community Partners available for distribution to its shareholders ratably in proportion to the number of shares held by them.
Community Partners Preferred Stock
The Community Partners board of directors expressly is authorized, subject to limitations prescribed by New Jersey corporate law and the provisions of Community Partner's certificate of incorporation, to provide, by resolution and by filing an amendment to the certificate of incorporation pursuant to New Jersey corporate law, for the issuance from time to time of shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions on such shares, including:
o the number of shares constituting that series and the distinctive designation of that series;
o the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
o whether or not that series shall have voting rights, in addition to the voting rights provided by law, and the terms of such voting rights;
o whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the board of directors of Community Partners shall determine;
o whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
o whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
o the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of Community Partners, and the relative rights of priority, if any, of payment of shares of that series; and
o any other relative powers, preferences, and rights of that series, and qualifications, limitations or restrictions on that series.
Transfer Agent
Registrar and Transfer Company serves as the transfer agent and registrar for the capital stock of Two River and Town Bank, and will serve as the transfer agent and registrar for Community Partners capital stock.
Anti-Takeover Considerations - New Jersey Shareholders' Protection Act
New Jersey corporate law and Community Partners' certificate of incorporation and by-laws contain a number of provisions which may have the effect of discouraging transactions that involve an actual or threatened change of control of Community Partners. For a description of the provisions, see "-- "Comparison of Rights of Community Partners shareholders, Two River shareholders and Town Bank shareholders - State Anti-takeover Statute."
COMPARISON OF RIGHTS OF COMMUNITY PARTNERS SHAREHOLDERS,
TWO RIVER SHAREHOLDERS AND TOWN BANK SHAREHOLDERS
General. The following discussion describes certain material rights of holders of Two River capital stock and Town Bank capital stock and certain material rights that you will have as a shareholder of Community Partners following completion of the acquisition, although in some cases the Community Partners board retains the discretion to alter those rights without your consent.
This section notes the material differences among your rights which arise primarily because the New Jersey Business Corporation Act, which governs Community Partners, provides you with different rights than the rights provided for under the New Jersey Banking Act, which governs Two River and Town Bank. This section also describes material differences in your rights attributable to dissimilarities in the certificate of incorporation and by-laws of each of the banks and Community Partners.
This section does not include a complete description of all differences among the rights of these shareholders, nor does it include a complete description of the specific rights of these shareholders. The identification of some of the differences in the rights of these shareholders as material is not intended to indicate that other differences that are equally important do not exist.
Upon completion of the acquisition, you will become a Community Partners shareholder and your rights will be governed by New Jersey corporate law and the Community Partners certificate of incorporation and by-laws. While the following discussion summarizes certain provisions of Community Partners' certificate of incorporation and by-laws, any statements concerning the certificate of incorporation and by-laws are qualified in their entirety by reference to those documents, which are attached to this joint proxy statement/prospectus as Annex B and Annex C. You are urged to read carefully the relevant provisions of New Jersey corporate law, as well as the certificate of incorporation and by-laws of your bank and of Community Partners.
Copies of the certificate of incorporation and by-laws of Two River and Town Bank will be sent to Two River shareholders and Town Bank shareholders, as applicable, upon request. See "Where You Can Find More Information" beginning on page 154.
Capitalization
Two River and Town Bank Community Partners
--------------------------------------------- ---------------------------
The authorized capital stock of Two River For a description of the
consists of 10,000,000 shares of Two River authorized capital stock of
common stock, par value $2.00 per share, and Community Partners, see
no preferred stock. As of September 30, "Description of Community
2005, there were 3,936,595 shares of Two Partners Capital Stock --
River common stock outstanding. Authorized Capital Stock."
The authorized capital stock of Town Bank
consists of 3,000,000 shares of Town Bank
common stock, par value $5.00 per share, and
no preferred stock. As of September 30,
2005, there were 1,878,233 shares of Town
Bank common stock outstanding.
|
Voting Rights
Two River and Town Bank Community Partners
--------------------------------------------- ----------------------------
Under the New Jersey Banking Act and the Under New Jersey corporate
certificate of incorporation and by-laws of law and the certificate of
the banks, each share of common stock is incorporation and by-laws,
entitled to one vote per share each share of common stock
is entitled to one vote per
share.
Under the New Jersey Banking Act, the affirmative Shares of preferred
vote of two-thirds of the outstanding shares of stock can be authorized and
common stock is required to approve a merger or issued by the board of
consolidation or a stock option plan. directors without the
approval of holders of
common stock. Common
shareholders will retain
their voting rights but the
relative value of those
rights may be diluted by
whatever voting rights the
board assigns to the
various classes of
preferred stock.
Under New Jersey corporate
law, the affirmative vote
of a majority of the votes
cast is required to approve
a merger, consolidation or
disposition of substantially
all of Community Partners'
assets or a stock option
plan.
Dividends
Two River and Town Bank Community Partners
--------------------------------------------- ----------------------------
The New Jersey Banking Act provides that Subject to any restrictions
a New Jersey state chartered bank may in its certificate of
declare and pay dividends on its incorporation (and Community
outstanding stock so long as, following Partners' certificate of
the payment of such dividend, the capital incorporation presently has
stock of the bank will be unimpaired and none), a New Jersey
the bank will have a surplus of not less corporation is generally
than 50% of its capital stock or, if not, permitted under New Jersey
the payment of such dividend will not corporate law to declare and
reduce the surplus of the bank. pay dividends on its
outstanding stock so long as
For each bank, the certificate of the corporation is not
incorporation authorizes the board to insolvent and would not
pay dividends from time to time, in become insolvent as a
whole or in part in stock, without consequence of the dividend
approval or ratification of the payment. Because funds for
shareholders, in accordance with, and the payment of dividends by
subject to the limitations set forth Community Partners will come
in, Section 2 of the New Jersey primarily from the earnings
Banking Act. of its bank subsidiaries, as
a practical matter, any
restrictions on the ability
of Two River or Town Bank to
pay dividends will restrict
the amount of funds
available for the payment of
dividends by Community
Partners.
The by-laws of Community
Partners provide that
dividends may be declared by
the board and paid by the
corporation at the times
determined by the board
pursuant to New Jersey
corporate law. Before
payment of any dividend or
making of any distribution
of net profits, the by-laws
require that the board set
aside out of the net profits
of the corporation amounts
determined by the board from
time to time to be proper
and for the purposes
determined by the board to
be conducive to the
interests of the
corporation.
|
Composition of Board of Directors; Number and Election of Directors
Two River and Town Bank Community Partners
---------------------------------- ----------------------------------------
Two River currently has 11 The board of directors of Community
directors and Town Bank currently Partners currently consists of eight
has 13 directors. members. In accordance with the
acquisition agreement, five of the
current directors were designated by Two
River and three were designated by Town
Bank. Neither bank has any continuing
right to designate directors or director
nominees.
Under the New Jersey Banking Act New Jersey corporate law provides that
and the certificate of the business and affairs of a corporation
incorporation and by-laws of each is to be managed by or under the
bank, the board of directors of direction of the board of directors
each bank must have a minimum of consisting of one or more members, but
five directors and a maximum of 25 does not limit or otherwise restrict the
directors. number of directors that may serve on the
board. Board members are not required to
own shares of the corporation.
Under the New Jersey Banking Act, The Community Partners by-laws provide
directors are required to own that the number of directors to be fixed
shares of the bank. from time to time by the board, but will
not be less than one nor more than 20.
|
Vacancies on the Board of Directors and Removal of Directors
The New Jersey Banking Act provides that if the certificate of incorporation of a bank so provides, the directors may, between annual meetings, increase the number of directors by not more than two (not to exceed a total of 25 directors) and may appoint persons to fill the vacancies so created. Any other vacancies may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the board.
New Jersey corporate law provides that unless otherwise provided in the certificate of incorporation or by-laws, any directorship not filled at the annual meeting, any vacancy, however caused, occurring in the board, and newly created directorships resulting from an increase in the authorized number of directors may be filled by the affirmative vote of a majority of the remaining directors even though less than a quorum of the board, or by a sole remaining director. A director so elected will hold office until the next succeeding annual meeting of shareholders and until his successor is elected and qualified.
Community Partners' certificate of incorporation provides that a director can only be removed from office for cause and only:
o by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, or
o by the affirmative vote of a majority of the members of the board in office where, in the judgment of such majority, the continuation of the director in office would be harmful to the corporation.
Amendments to Certificate of Incorporation
Both banks are subject to the New Jersey Banking Act, which requires shares with at least two-thirds of the total voting power to approve an amendment to the certificate of incorporation of a New Jersey state chartered bank. The New Jersey Banking Act does not provide for class voting on amendments.
Community Partners is subject to New Jersey corporate law, which requires that, unless otherwise provided in the certificate of incorporation, the affirmative vote of a majority of the votes cast by shareholders of the corporation entitled to vote thereon is required to approve an amendment to the certificate of incorporation that requires shareholder approval. The Certificate of Incorporation of Community Partners does not have any provisions requiring a supermajority vote to amend the Certificate of Incorporation.
Under New Jersey corporate law, the holders of a class or series of shares of a New Jersey corporation are entitled to vote as a class upon certain proposed amendments to the corporation's certificate of incorporation which would have an adverse effect on their rights.
Under New Jersey corporate law and the certificate of incorporation of Community Partners, the board of directors of Community Partners can amend the certificate of incorporation in the following respects without obtaining shareholder approval:
o to change the corporation's registered office or its registered agent or both;
o to increase the authorized shares of the corporation after shareholders approve the issue of convertible shares or bonds and authorize the board upon such issue to increase the authorized shares of any class or series;
o to effect a share dividend, division or combination; or
o to reduce the authorized number of shares following a cancellation of reacquired shares or because of the conversion of convertible shares.
Voting Rights
Two River and Town Bank Community Partners
------------------------------------- -------------------------------------
Under the New Jersey Banking Act, a Under New Jersey corporate law, the
bank's board of directors has the board of directors of a New Jersey
power to adopt, amend, or repeal the corporation has the power to adopt,
by-laws of a bank, subject to amend, or repeal the corporation's
alteration or repeal by the by-laws, unless such powers are
shareholders at any meeting. reserved in the certificate of
incorporation to the shareholders.
The by-laws of each bank provide that Community Partners' by-laws provide
the board has the power to adopt, that they may be amended by the board
amend, or repeal its by-laws, by the by the affirmative vote of a majority
affirmative vote of a majority of the of the entire board or by the
full board, subject to alteration or shareholders, by a majority of the
repeal by the shareholders at any votes cast at a meeting of the
meeting. shareholders called for such purpose.
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Action by Written Consent
Except as otherwise provided by the certificate of incorporation (and Community Partners' certificate of incorporation presently is silent on this issue), New Jersey corporate law permits any action required or permitted to be taken at a meeting of shareholders, other than the annual election of directors, to be taken without a meeting upon the written consent of shareholders who would have been entitled to cast the minimum number of votes necessary to authorize such action at a meeting of shareholders at which all shareholders entitled to vote were present and voting. The annual election of directors, if not conducted at a shareholders' meeting, may only be effected by unanimous written consent. Under New Jersey corporate law, a shareholder vote on a plan of merger or consolidation, if not conducted at a shareholders' meeting, may only be effected by either:
o unanimous written consent of all shareholders entitled to vote on the issue with advance notice to any other shareholders, or
o written consent of shareholders who would have been entitled to cast the minimum number of votes necessary to authorize such action at a meeting, together with advance notice to all other shareholders.
Community Partners' by-laws provide that any shareholder entitled to vote seeking to have the shareholders authorize or take any action by written consent must first, by written notice to the Secretary, request the board to fix a record date. The board is then required to adopt a resolution fixing the record date within 10 days after the date on which the request is received. If the board does not comply, the record date, when no prior action by the board is required by applicable law, is the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Secretary. If no record date is set by the board and prior action by the board is required by applicable law, the record date will be at the close of business on the date on which the board adopts the resolution taking such prior action. The board is then required to set a tabulation date upon which the written consents are to be tabulated.
The New Jersey Banking Act provides that any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if the shareholders unanimously consent in writing. Neither bank's certificate of incorporation contains any restriction on shareholders' rights to act by written consent under New Jersey law.
Ability to Call Special Meetings of Shareholders
Two River and Town Bank Community Partners
------------------------------------- --------------------------------------
For each bank, special meetings of For Community Partners, special
the shareholders may be called at any meetings of shareholders may be called
time by the board of directors, by at any time by the board, by the
the chairman of the board, by the chairman of the board, or by the
president, or by holders of at least president and special meetings shall
20% of all outstanding shares be called by the chairman of the
entitled to vote at the meeting. board, the president or the secretary
at the request of a majority of the
board or at the request of the holders
of at least 10% of the total number of
votes represented by the entire amount
of capital stock of the corporation
issued and outstanding and entitled to
vote at the meeting.
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Indemnification and Limitation of Personal Liability of Directors and Officers
Community Partners' certificate of incorporation eliminates the personal liability of directors and officers to the corporation and to its shareholders for monetary damages for breach of fiduciary duty, except to the extent such limitation is not permitted by New Jersey corporate law. New Jersey corporate law does not permit limitation of liability for:
o a breach of the duty of loyalty;
o an act or omission that is not in good faith;
o a knowing violation of law; or
o receipt of an improper personal benefit.
Under New Jersey corporate law, to be entitled to indemnification, it must be determined that, in general terms, the person acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of Community Partners and, with respect to a criminal action, had no reasonable cause to believe his or her conduct was unlawful.
The New Jersey Banking Act contains almost identical provisions to New Jersey corporate law relating to limitation of liability and indemnification of directors, officers and employees. Each bank's certificate of incorporation reflects the statutory formulation limiting the liability of its officers and directors, and the by-laws of each bank contain provisions for the indemnification of its officers and directors, which reflect the statutory formulation. Each bank's certificate of incorporation provides that officers (for the duration permitted by the New Jersey Banking Act) and directors of the bank shall not be personally liable to the bank or its shareholders for damages for breach of any duty owed to the bank or its shareholders, except damages for breaches of duty based upon an act or omission (a) in breach of such person's duty of loyalty, (b) not in good faith or involving a knowing violation of law, or (c) resulting in receipt by such person of an improper personal benefit.
State Anti-Takeover Statute
A party seeking control of Two River or Town Bank is required to file applications with the FDIC pursuant to the Federal Deposit Insurance Act (the "Bank Merger Act") and with the commissioner of the New Jersey Department of Banking and Insurance pursuant to the New Jersey Banking Act. When Community Partners becomes a registered bank holding company, a party seeking control of Community Partners will be required to file applications with the Federal Reserve Bank of New York under the Federal Bank Holding Company Act.
Unlike the banks, Community Partners will be subject to the New Jersey Shareholders' Protection Act, which prohibits certain business combinations between an interested shareholder and certain New Jersey corporations for a period of five years after the date the interested shareholder acquired the shares, unless the transaction was approved by the corporation's board of directors prior to the time the interested shareholder acquired the shares. An "interested shareholder" is generally defined as one who is the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding stock of the corporation. After the five year period expires, the prohibition on business combinations with an interested shareholder continues unless certain conditions are met. The conditions include:
o the approval of the business combination by the board of the target corporation;
o the approval of the business combination by a vote of two-thirds of the voting stock not owned by the interested shareholder; and
o the receipt by the shareholders of the corporation of a price determined in accordance with a fair price formula set forth in the statute.
A business combination generally includes:
o acquisitions, consolidations and sales or other dispositions of 10% or more of the assets of a corporation to or with an interested shareholder;
o specified transactions resulting in the issuance or transfer to an interested shareholder of any capital stock of the corporation or its subsidiaries; and
o other transactions resulting in a disproportionate financial benefit to an interested shareholder.
The New Jersey Shareholders' Protection Act applies only to New Jersey business corporations that have a class of voting stock registered or traded on a national securities exchange or registered with the Securities and Exchange Commission pursuant to section 12(g) of the Exchange Act, which Community Partners expects to have when the acquisition is completed. A corporation can "opt out" of the Act by means of a provision in its certificate of incorporation or by-laws. Community Partners currently has no "opt out" provision.
Dissenter's Rights
Under the New Jersey Banking Act, stockholders of Two River and Town Bank have the right to dissent upon a merger or certain other business combinations. See "The Acquisition - Dissenters' Rights" on page 54.
Under New Jersey corporate law, shareholders of Community Partners will have dissenters' rights (subject to the broad exception set forth in the next sentence) upon certain mergers and other business combinations. Shareholders of a New Jersey business corporation do not have dissenters' rights if the corporation's shares are listed for trading on a national securities exchange or held of record by more than 1,000 holders. We expect that these exceptions will not apply to Community Partners shares because it is anticipated that Community Partners shares will initially be held by fewer than 1,000 record holders. In addition, corporate shareholders do not have dissenters' rights in a transaction if their shares are exchanged in the transaction, for (i) cash; (ii) any securities listed on national securities exchange or held of record by more than 1,000 holders; or (iii) any combination of these. New Jersey corporate law provides that a corporation may voluntarily grant dissenters' rights in its certificate of incorporation. Community Partners' certificate of incorporation does not provide dissenters' rights beyond those called for under New Jersey corporate law.
BUSINESS OF COMMUNITY PARTNERS
General
Community Partners is a business corporation organized under the laws of the State of New Jersey in August 2005. The principal place of business of Community Partners is located at 1250 Highway 35 South, Middletown, New Jersey 07748 and its telephone number is (732) 706-9009.
Community Partners was organized to effect the acquisition and become the holding company of Two River and Town Bank. At the effective time of the acquisition, each bank will become a wholly-owned subsidiary of Community Partners, which will become a bank holding company, and each bank shareholder who does not exercise and perfect dissenters' rights will become a Community Partners shareholder.
Community Partners has not undertaken any operating business activities and will not do so at any time before the acquisition is completed. At any time after the acquisition, Community Partners may become an operating company or acquire other commercial banks, thrift institutions or bank holding companies, or engage in or acquire such other activities or businesses as may be permitted by applicable law, although it has no present plans or intentions to do so.
Subject to regulatory approval and/or consent, it is expected that Community Partners will receive an initial cash infusion from Two River in the amount of $50,000 for working capital and other purposes. Additional financial resources may be available to Community Partners in the future through borrowings, debt or equity financings, or dividends from the banks or from acquired entities or new businesses. Dividends from either bank to Community
Partners will be subject to regulatory limitations, and other actions by which Community Partners may acquire cash or assets may also be subject to compliance with regulatory restrictions.
Because Community Partners is a newly formed corporation with no operating history, it has no meaningful historical information to disclose regarding legal proceedings, dividends, management's discussion of operations, financial data or accountants. Community Partners does not currently have any outstanding common stock or other securities; it has applied to have its common stock and warrants listed on the NASDAQ SmallCap Market as of the effective time of the acquisition.
Property
Initially, Community Partners will neither own nor lease any real or personal property but will utilize Two River's and Town Bank's premises and property without the payment of any rental fees.
Competition
It is expected that for the near future Community Partners' primary business will be the ownership of the banks. Therefore, the competitive conditions to be faced by Community Partners will be those faced by the banks. In addition, many banks and other financial institutions have formed, or are in the process of forming, holding companies. It is likely that these holding companies will attempt to acquire commercial banks, thrift institutions or companies engaged in bank-related activities. Thus, Community Partners will face competition in undertaking any such acquisitions and in operating subsequent to any such acquisitions. See "Business of the Two River - Market Area and Competitive Position" on page 112 and "Business of Town Bank - Competition" on page 143.
Employees
At the present time, Community Partners does not intend to have any employees other than its management. Community Partners expects to utilize support from the banks from time to time without the payment of any fees or with the payment of only nominal fees. If Community Partners acquires other financial institutions or pursues other lines of business, it may at such time hire additional employees. See "Management of Community Partners" on page 146.
GOVERNMENT REGULATION OF COMMUNITY PARTNERS AND THE BANKS
Overview
Two River and Town Bank operate, and Community Partners will operate, within a system of banking laws and regulations intended to protect bank customers and depositors. These laws and regulations govern the permissible operations and management, activities, reserves, loans and investments of Community Partners, Two River and Town Bank. In addition, Community Partners is subject to general federal laws and regulations and the corporate laws and regulations of the state of its incorporation, New Jersey. Two River and Town Bank, New Jersey state chartered banks, are also subject to The New Jersey Banking Act. The following descriptions summarize the key banking and other laws and regulations to which Two River and Town Bank are subject, and to which Community Partners will be subject as a registered bank holding company. These descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations. Future changes in these laws and regulations, or in the interpretation and application thereof by their administering agencies, cannot be predicted, but could have a material effect on the business and results of Community Partners, Two River and Town Bank.
Upon completion of the acquisition, Community Partners will be a bank holding company under the Federal Bank Holding Company Act of 1956, as amended by the 1999 financial modernization legislation known as the Gramm-Leach-Bliley Act, and will be subject to the supervision of the Board of Governors of the Federal Reserve System. In general, the Bank Holding Company Act limits the business of bank holding companies to banking, managing or controlling banks, and performing certain servicing activities for subsidiaries and, as a result of the Gramm-Leach-Bliley Act amendments, would permit bank holding companies that are also financial holding companies to engage in any activity, or acquire and retain the shares of any company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity or (2) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. In order for a bank holding company to engage in the broader range of activities that are permitted by the Bank Holding Company Act for bank holding companies that are also financial holding companies, upon satisfaction of certain regulatory criteria, the bank holding company must file a declaration with the Federal Reserve Board that it elects to be a "financial holding company." Community Partners does not intend to seek a "financial holding company" designation at this time, and does not believe that the current decision not to seek a financial holding company designation will adversely affect its ability to compete in its chosen markets. Community Partners does not believe that seeking such a designation would position it to compete more effectively in the offering of products and services currently offered by the banks.
Two River and Town Bank are each commercial banks chartered under the laws of the State of New Jersey. As such, they are subject to regulation, supervision and examination by the New Jersey Department of Banking and Insurance, or NJDOBI, and by the Federal Deposit Insurance Corporation, or FDIC. Each of these agencies regulates aspects of activities conducted by the banks, and will regulate aspects of activities conducted by Community Partners, as discussed below.
Dividend Restrictions
Following the acquisition, Community Partners, Two River and Town Bank will be separate legal entities whose finances are in some ways interconnected. Community Partners' principal source of funds to pay cash dividends on its common stock will be from cash dividends paid to it by the banks. Dividend payments by the banks to their stockholders are subject to The New Jersey Banking Act and the Federal Deposit Insurance Act. Under the New Jersey Banking Act, no dividends may be paid if after such payment the bank's surplus (generally, additional paid-in capital less the accumulated deficit) would be less than 50% of its capital stock. Pursuant to the Federal Deposit Insurance Act, as amended, no dividends may be paid by an insured depository institution if it is in arrears in the payment of any insurance assessment due to the FDIC. In addition, under the Federal Deposit Insurance Act, an insured depository institution may not pay any dividend if the institution is undercapitalized or if the payment of the dividend would cause the institution to become undercapitalized, as further discussed below. A payment of dividends that would have the effect of depleting a depository institution's capital base to an inadequate level could constitute an unsafe and unsound practice subject to a cease and desist order.
The Federal Reserve Board has issued policy statements which provide that insured banks should generally only pay cash dividends out of current operating earnings, and the Federal Reserve Board may prevent the payment of a dividend if it determines that the payment would be an unsafe and unsound banking practice. Moreover, Community Partners will be expected to act as a source of financial strength to Two River and Town Bank and to commit resources that support the banks in circumstances where Community Partners might not do so absent such a policy. This policy could have the effect of reducing the amount of dividends Community Partners is allowed to declare.
Neither Two River nor Town Bank has ever declared any cash dividends and neither entity contemplates the payment of such dividends in 2006, except to fund expenses of Community Partners. Community Partners does not contemplate the payment of cash dividends to shareholders in 2006.
Transactions with Affiliates
Banking laws and regulations impose certain restrictions on the ability of bank holding companies to borrow from and engage in other transactions with their subsidiary banks. Generally, these restrictions require that any extensions of credit must be secured by designated amounts of specified collateral and are limited to (i) 10% of the bank's capital stock and surplus per non-bank affiliated borrower, and (ii) 20% of the bank's capital stock and surplus aggregated as to all non-bank affiliated borrowers. In addition, certain transactions with affiliates must be on terms and conditions, including credit standards, at least as favorable to the institution as those prevailing for arms-length transactions.
Liability of Commonly Controlled Institutions and "Source of Strength" Doctrine
The Federal Deposit Insurance Act contains a "cross-guarantee" provision that could result in any insured depository institution owned by Community Partners being assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other insured depository institution owned by Community Partners. Also, under the Bank Holding Company Act and Federal Reserve Board policy, bank holding companies are expected to represent a source of financial and managerial strength to their bank subsidiaries, and to commit resources to support bank subsidiaries in circumstances where banks may not be in a financial position to support themselves. Capital loans by a bank holding company to a bank subsidiary are subordinate in right of repayment to deposits and other bank indebtedness. If a bank holding company declares bankruptcy, its bankruptcy trustee must fulfill any commitment made by the bank holding company to sustain the capital of its subsidiary banks.
Deposit Insurance
The Bank Insurance Fund of the FDIC insures substantially all of the deposits of Two River and Town Bank, respectively, subject to coverage limits. Insurance of deposits by the FDIC subjects the banks to comprehensive regulation, supervision and examination by the FDIC. Each bank is required, among other things, to pay premium charges to the FDIC for insurance and maintain a reserve account and liquid assets at levels fixed, from time to time, by the FDIC.
The FDIC utilizes a risk-based assessment system (discussed below) which imposes premiums based on a bank's capital level and supervisory rating. Depository institutions that the FDIC regards as healthier will pay lower premiums than relatively weaker institutions. The FDIC periodically examines insured depository institutions to determine whether premium increases or other measures are appropriate. Under the Federal Deposit Insurance Act, as amended, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition, or has violated any applicable banking law, rule, order or regulatory condition imposed by a bank's federal regulatory agency.
Capital Adequacy
The Federal Reserve Board and the FDIC have substantially similar risk-based capital and leverage ratio guidelines for banking organizations. These guidelines are intended to ensure that banking organizations have adequate capital given the risk levels of their assets and off-balance sheet financial instruments. Under the risk-based
capital and leverage ratio guidelines, assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. These risk-based capital requirements identify concentration of credit risk, and facilitate management of those risks.
To derive total risk-weighted assets, bank assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are converted to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans are assigned to the 100% risk category, except for performing first mortgage loans fully secured by residential property, which carry a 50% risk-weighting. Most investment securities (including, primarily, general obligation claims of states or other political subdivisions of the United States) are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the United States government, which have a 0% risk-weight. In converting off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% risk-weighting. Transaction-related contingencies such as bid bonds, standby letters of credit backing nonfinancial obligations, and undrawn commitments (including commercial credit lines with an initial maturity or more than one year) have a 50% risk-weighting. Short-term commercial letters of credit have a 20% risk-weighting, and certain short-term unconditionally cancelable commitments have a 0% risk-weighting.
Under the capital guidelines, a banking organization's total capital is divided into tiers. "Tier I Capital" consists of common shareholders' equity and qualifying preferred stock, less certain goodwill items and other intangible assets. Not more than 25% of qualifying Tier I capital may consist of trust preferred securities. "Tier II Capital" consists of hybrid capital instruments, perpetual debt, mandatory convertible debt securities, a limited amount of subordinated debt, and preferred stock that does not qualify as Tier I Capital, plus a limited amount of loan and lease loss allowances and a limited amount of unrealized holding gains on equity securities. "Tier III Capital" consists of qualifying unsecured subordinated debt. "Total Capital" is the sum of Tier I, Tier II and Tier III Capital. The sum of Tier II and Tier III Capital may not exceed the amount of Tier I Capital.
Under the Federal Reserve Board's risk-based capital guidelines for bank holding companies, the required minimum ratio of Total Capital (the sum of Tier I, Tier II and Tier III capital) to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. The required minimum ratio of Tier I Capital to risk-weighted assets is 4%. At June 30, 2005, on a pro forma basis, Community Partners' ratios of Total Capital and Tier 1 Capital to risk-weighted assets were 11.50% and 10.46%, respectively.
The Federal Reserve Board also requires bank holding companies to comply with minimum leverage ratio guidelines. The leverage ratio is the ratio of a bank holding company's Tier I Capital (excluding intangibles) to its total assets (excluding intangibles). Bank holding companies normally must maintain a minimum leverage ratio of 4%, unless the bank holding company has the highest supervisory rating or has implemented the Federal Reserve Board's risk-adjusted measure for market risk, in which case its minimum leverage ratio must be 3%. Banking organizations undergoing significant growth or undertaking acquisitions must maintain even higher capital positions. On a pro forma basis at June 30, 2005, Community Partners' leverage ratio was 9.16%.
The primary federal regulator for each of the banks, the FDIC, also has implemented risk-based capital guidelines for insured depository institutions. Like the Federal Reserve Board's requirements, the FDIC's required minimum ratio of total capital to risk-weighted assets is 8.0%. At least half of the total capital is required to be Tier I Capital. The required minimum ratio of Tier I Capital to risk-weighted assets is 4%. At June 30, 2005, Two River's ratios of Total Capital and Tier 1 Capital to risk-weighted assets were 11.53% and 10.52%, respectively. At June 30, 2005, Town Bank's ratios of Total Capital and Tier 1 Capital to risk-weighted assets were 13.22% and 12.20%, respectively.
Prompt Corrective Action
The Federal Deposit Insurance Act requires federal banking regulators to take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. Failure to meet minimum requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on Community Partners' financial condition. Under the Prompt
Corrective Action Regulations, Two River and Town Bank must meet specific capital guidelines that involve quantitative measures of their respective assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.
The Prompt Corrective Action Regulations define specific capital categories based on an institution's capital ratios. The capital categories, in declining order, are "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." The Federal Deposit Insurance Act imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category by which the institution is classified. Institutions categorized as "undercapitalized" or worse may be subject to requirements to file a capital plan with their primary federal regulator, prohibitions on the payment of dividends and management fees, restrictions on asset growth and executive compensation, and increased supervisory monitoring, among other things. Other restrictions may be imposed on the institution by the regulatory agencies, including requirements to raise additional capital, sell assets or sell the entire institution. Once an institution becomes "critically undercapitalized," it generally must be placed in receivership or conservatorship within 90 days.
The Prompt Corrective Action Regulations provide that an institution is "well capitalized" if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier I risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater. The institution also may not be subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. An institution is "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or greater, a Tier I risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater (or a leverage ratio of 3.0% or greater if the institution is rated composite 1 in its most recent report of examination, subject to appropriate federal banking agency guidelines), and the institution does not meet the definition of a well-capitalized institution. An institution is deemed "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio of less than 4.0%, or a leverage ratio of less than 4.0% (or a leverage ratio of 3.0% or greater if the institution is rated composite 1 in its most recent report of examination, subject to appropriate federal banking agency guidelines), and the institution does not meet the definition of a significantly undercapitalized or critically undercapitalized institution. An institution is "significantly undercapitalized" if the institution has a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio of less than 3.0%, or a leverage ratio less than 3.0% and the institution does not meet the definition of a critically undercapitalized institution, and is "critically undercapitalized" if the institution has a ratio of tangible equity to total assets that is equal to or less than 2.0%.
The appropriate federal banking agency may, under certain circumstances, reclassify a well capitalized insured depository institution as adequately capitalized. The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institution were in the next lower category (but not to treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than an institution's capital levels.
At June 30, 2005, Two River and Town Bank were each "well capitalized" based on the ratios and guidelines noted above. However, the capital categories of these banks are determined solely for the purpose of applying the Prompt Corrective Action Regulations and may not constitute an accurate representation of their overall financial condition or prospects.
Unsafe and Unsound Practices
Notwithstanding its Prompt Corrective Action category dictated by risk-based capital ratios, the Federal Deposit Insurance Act permits the appropriate bank regulatory agency to reclassify an institution if it determines, after notice and a hearing, that the condition of the institution is unsafe or unsound, or if it deems the institution to be engaging in an unsafe or unsound practice. Also, if a federal regulatory agency with jurisdiction over a depository institution believes that the depository institution will engage, is engaging, or has engaged in an unsafe or unsound practice, the regulator may require that the bank cease and desist from such practice, following notice and a hearing on the matter.
The USA PATRIOT Act
On October 26, 2001, the President of the United States signed into law certain comprehensive anti-terrorism legislation known as the USA PATRIOT Act of 2001. Title III of the USA PATRIOT Act substantially broadened the scope of the U.S. anti-money-laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued a number of implementing regulations which apply various requirements of the USA PATRIOT Act to financial institutions such as Two River and Town Bank. Those regulations impose new obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.
Failure of a financial institution to comply with the USA PATRIOT Act's requirements could have serious legal consequences for an institution and adversely affect its reputation. The banks have adopted and Community Partners plans to adopt appropriate policies, procedures and controls to address compliance with the requirements of the USA PATRIOT Act under the existing regulations and each of them will continue to revise and update its policies, procedures and controls to reflect changes required by the Act and by the Treasury Department regulations.
Community Reinvestment Act
The Federal Community Reinvestment Act requires banks to respond to the full range of credit and banking needs within their communities, including the needs of low and moderate-income individuals and areas. A bank's failure to address the credit and banking needs of all socio-economic levels within its markets may result in restrictions on growth and expansion opportunities for the bank, including restrictions on new branch openings, relocation, formation of subsidiaries, mergers and acquisitions. In the latest CRA examination report with respect to Two River, dated February 27, 2002, Two River received a rating of Satisfactory. In the latest CRA examination report with respect to Town Bank, dated November 17, 2000, Town Bank received a rating of Satisfactory.
Consumer Privacy
In addition to fostering the development of "financial holding companies," the Gramm-Leach-Bliley Act modified laws relating to financial privacy. The new financial privacy provisions generally prohibit financial institutions, including both banks and, following the acquisition, Community Partners, from disclosing or sharing nonpublic personal financial information to third parties for marketing or other purposes not related to transactions, unless customers have an opportunity to "opt out" of authorizing such disclosure, and have not elected to do so. It has never been the policy of either bank, and it is not expected to be the policy of Community Partners, to release such information except as may be required by law.
Loans to One Borrower
Federal banking laws limit the amount a bank may lend to a single borrower to 15% of the bank's capital base, unless the entire amount of the loan is secured by adequate amounts of readily marketable collateral. However, no loan to one borrower may exceed 25% of a bank's statutory capital, notwithstanding collateral pledged to secure it.
New Jersey banking law limits the total loans and extensions of credit by a bank to one borrower at one time to 15% of the capital funds of the bank when the loan is not fully secured by collateral having a market value at least equal to the amount of the loans and extensions of credit. Such loans and extensions of credit are limited to 10% of the capital funds of the bank when the total loans and extensions of credit by a bank to one borrower at one time are fully secured by readily available marketable collateral having a market value (as determined by reliable and continuously available price quotations) at least equal to the amount of funds outstanding. If a bank's lending limit is less than $500,000, the bank may nevertheless have total loans and extensions of credit outstanding to one borrower at one time not to exceed $500,000.
Depositor Preference Statute
Under federal law, depositors, certain claims for administrative expenses and employee compensation against an insured depository institution are afforded a priority over other general unsecured claims against the institution, in the event of a "liquidation or other resolution" of the institution by a receiver.
Sarbanes-Oxley Act of 2002
On July 30, 2002, the President of the United States signed into law the Sarbanes-Oxley Act of 2002. The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies, both domestic and foreign, that file or are required to file periodic reports with the Securities and Exchange Commission or, in the case of banks, with the FDIC, under the Securities Exchange Act of 1934, as amended. While neither bank is subject to the Sarbanes-Oxley Act, Community Partners will be subject to the Act. Compliance with the Sarbanes-Oxley Act will cause Community Partners to incur substantial expense and management time that was not incurred by either of the banks prior to the acquisition.
Section 404 of the Sarbanes-Oxley Act requires management's annual review and evaluation of internal controls over financial reporting and attestations of the effectiveness of these systems by management and by the independent registered public accounting firm. Community Partners' management intends to conduct a comprehensive review and confirmation of the adequacy of Community Partners' systems and controls after the completion of the acquisition.
The Sarbanes-Oxley Act of 2002 includes very specific disclosure requirements and corporate governance rules, requires the Securities and Exchange Commission and self regulatory organizations to adopt extensive additional disclosure, corporate governance and other related rules. Sarbanes-Oxley represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.
The Sarbanes-Oxley Act addresses, among other matters:
o audit committees for all reporting companies;
o certification of financial statements by the chief executive officer and the chief financial officer;
o the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer's securities by directors and senior officers under certain circumstances;
o a prohibition on insider trading during pension plan black out periods;
o disclosure of off-balance sheet transactions;
o expedited filing requirements for certain periodic and current reports;
o disclosure of a code of ethics;
o "real time" filing of periodic reports;
o the formation of a public accounting oversight board;
o auditor independence; and
o various increased criminal penalties for violations of securities laws.
Overall Impact of New Legislation and Regulations
Various legislative initiatives are from time to time introduced in Congress and in the New Jersey State Legislature. It cannot be predicted whether or to what extent the business and condition of Community Partners, Two River and Town Bank will be affected by new legislation or regulations, and legislation or regulations as yet to be proposed or enacted.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF TWO RIVER COMMUNITY BANK
Two River Community Bank's management's discussion and analysis of financial condition and results of operations is intended to provide a better understanding of the significant changes and trends relating to the financial condition, results of operations, capital resources, liquidity and interest rate sensitivity of Two River as of June 30, 2005 and for the six months ended June 30, 2005 and 2004 and as of December 31, 2004 and 2003 and for each of the years in the three year period ended December 31, 2004. The following information should be read in conjunction with the unaudited financial statements as of and for the period ended June 30, 2005 and 2004 and the audited financial statements as of and for the period ended December 31, 2004, including the related notes thereto, which begin on page FS-1 of this joint proxy statement/prospectus.
Critical Accounting Policies and Estimates
The following discussion is based upon Two River's financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires Two River to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses.
Note 1 to Two River's unaudited financial statements for June 30, 2005
along with Note 1 to Two River's audited financial statements for December 31,
2004 contain a summary of Two River's significant accounting policies.
Management believes the following critical accounting policies encompass the
more significant judgments and estimates used in the preparation of our
financial statements.
Allowance for Loan Losses. Management believes Two River's policy with respect to the methodology for the determination of the allowance for loan losses involves a high degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact the results of operations. This critical policy and its application are periodically reviewed with Two River's audit committee and board of directors.
The allowance for loan losses is based upon management's evaluation of the adequacy of the allowance account, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectibility may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although management utilizes the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short term change. Various regulatory agencies may require Two River to make additional provisions for loan losses based upon information available to them at the time of their examination. Furthermore, the majority of Two River's loans are secured by real estate in New Jersey, primarily in Monmouth County. Accordingly, the collectibility of a substantial portion of the carrying value of Two River's loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or the New Jersey and/or Two River's local market areas experience economic shock. Future adjustments to the allowance for loan losses account may be necessary due to economic, operating, regulatory and other conditions beyond Two River's control.
Stock Based Compensation. As permitted by SFAS No. 123, Two River accounts for stock based compensation in accordance with Accounting Principals Board Opinion (APB) No. 25. Under APB No. 25, no compensation expense is recognized in the income statement related to any option grant under our stock option plans. The pro forma impact to net income and earnings per share that would occur if compensation expense was recognized, based on the estimated fair value of the options on the date of the grant, is disclosed in the notes to our financial statements.
On December 16, 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), Share-based Payment, which eliminates the ability to account for share-based compensation transactions using APB Opinion No.
25, and generally would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement at their grant-date fair values. Two River will be required to adopt this new accounting standard on January 1, 2006.
Investment Securities Impairment Valuation. Management evaluates securities for other-than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Two River to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Deferred Tax Assets and Liabilities. Two River recognizes deferred tax assets and liabilities for future tax effects of temporary differences, net operating loss carry forwards and tax credits. Deferred tax assets are subject to management's judgment based upon available evidence that future realization is more likely than not. If management determines that the Bank may be unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.
Overview
For the six months ended June 30, 2005, net interest income increased $1.2 million, or 30.0% to $5.2 million, as compared to $4.0 million for the same period in 2004. Net income rose from $480 thousand for the six months ended June 30, 2004 to $923 thousand for the six months ended June 30, 2005, an increase of $443 thousand or 92.3%. Basic earnings per share were $0.23 for the six months ended June 30, 2005 compared to $0.14 per share for the same period in 2004. Diluted earnings per share for the six months ended June 30, 2005 amounted to $0.22 compared to $0.13 per diluted share for the six months ended June 30, 2004.
For the year ended December 31, 2004, net interest income increased $2.0 million or 29.9% to $8.7 million from $6.7 million recorded for the year ended December 31, 2003. Net income totaled $1.3 million for the year ended December 31, 2004 compared to $1.3 million for the year ended December 31, 2003. Basic earnings per share were $0.36 for the year ended December 31, 2004 compared to $0.36 per share for the same period in 2003. Diluted earnings per share for the year ended December 31, 2004 amounted to $0.34 compared to $0.34 per diluted share for the year ended December 31, 2003. Our 2003 results were positively affected by our ability to use federal net operating loss (NOL) carry-forwards to partially offset our tax expenses. Without the benefit realized by utilizing our NOLs, we would have reported additional income tax expense of approximately $249 thousand. At December 31, 2003, we had no federal NOL carry-forwards remaining and our operations in 2004 were fully taxable at the federal level.
All per share amounts have been retroactively adjusted to reflect all stock dividends and the 2003 5-for-2 stock split.
For the year ended December 31, 2003, net interest income increased $1.7 million, or 34.0% to $6.7 million from $5.0 million recorded for the year ended December 31, 2002. Net income totaled $1.3 million for the year ended December 31, 2003 compared to $743 thousand for the year ended December 31, 2002, an increase of $507 thousand, or 68.2%. Basic earnings per share were $0.36 for the year ended December 31, 2003 compared to $0.21 per share for the same period in 2002. Diluted earnings per share for the year ended December 31, 2003 amounted to $0.34 compared to $0.21 per diluted share for the year ended December 31, 2002.
Total assets increased to $258.5 million at June 30, 2005, compared to $235.5 million at December 31, 2004, an increase of $23.0 million, or 9.8%. Total assets increased by $66.6 million, or 39.4 % to $235.5 million at December 31, 2004 from $168.9 million December 31, 2003. The increase in total assets consisted primarily in loans outstanding.
Loans, net of the allowance for loan losses, totaled $198.2 million at June 30, 2005, an increase of $24.1 million, or 13.8% compared to $174.1 million at year- end December 31, 2004. The loan portfolio, net of the allowance for loan losses, grew to $174.1 million at December 31, 2004, an increase of $41.8 million, or 31.6% from the December 31, 2003 level of $132.3 million. The allowance for loan losses, which totaled $2.2 million, or
1.10% of total loans at June 30, 2005, compared to $1.9 million at December 31, 2004 or 1.10% of total loans versus $1.5 million, or 1.10% of loans outstanding at December 31, 2003. Two River had a non-accrual loan amounting to $94 thousand for the periods discussed above.
Deposits increased by $20.8 million or 10.4% to $220.8 million at June 30, 2005 compared to December 31, 2004. Deposits rose to $200.0 million at December 31, 2004 from $141.0 million at December 31, 2003, an increase of $59.0 million, or 41.8%. These increases are primarily the result of gaining market share in our trade area.
The following table provides information on our performance ratios for the dates indicated.
(Annualized)
At or For the
Six Months ended At or For the
June 30, Year ended December 31,
------------------------------------------
Performance Ratios: 2005 2004 2003 2002
--------------- ------------ ---------- ------------
Return on average assets 0.75% 0.64% 0.84% 0.68%
Return on average shareholders' equity 8.37% 8.08% 9.52% 6.15%
Average equity to average assets 9.04% 7.88% 8.80% 11.06%
Dividend payout 0.00% 0.00% 0.00% 0.00%
|
Results of Operations
Two River's principal source of revenue is net interest income, the difference between interest income on earning assets and interest expense on deposits and borrowings. Interest earning assets consist primarily of loans, investment securities and federal funds sold. Sources to fund interest earning assets consist primarily of deposits and borrowed funds. Two River's net income is also affected by its provision for loan losses, other income and other expenses. Other income consists primarily of service charges, commissions and fees, while other expenses are comprised of salaries and employee benefits, occupancy costs and other operating expenses.
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
Net Interest Income
Interest income for the six months ended June 30, 2005, increased by $1.7 million, or 32.7% from the same 2004 period. Interest and fees on loans increased by $1.6 million or 35.6% to $6.1 million for the six months ended June 30, 2005 compared to $4.5 for the same 2004 period. This increase was primarily due to the growth experienced in our loan portfolio as new loan originations exceeded principal repayments. The average balance of the loan portfolio for the six months ended June 30, 2005, increased to $187.8 million compared to $144.0 million for the same 2004 period. The average annualized yield on the portfolio was 6.50% for the six months ended June 30, 2005 compared to 6.27% for the same period one year ago.
Interest income on federal funds sold and other short term investments decreased by $11 thousand or 26.2% from $42 thousand recorded for the six months ended June 30, 2004, to $31 thousand for the six months ended June 30, 2005. For the six months ended June 30, 2005, federal funds sold and other short term investments had an average interest earning balance of $2.3 million with an average annualized yield of 2.77%. For the six months ended June 30, 2004, this category had average interest earning balances of $8.7 million with an average annualized yield of 0.97%. The increase in interest rates throughout 2005 accounted for the improvement in yield.
Interest income on investment securities totaled $842 thousand for the six months ended June 30, 2005 compared to $635 thousand for the same period one year ago. For the six months ended June 30, 2005 investment securities had an average balance of $42.0 million with an average annualized yield of 4.05% compared to an average balance of $32.2 million with an average annualized yield of 3.97% for the six months ended June 30, 2004. The new purchases made during 2005 had higher yields than those securities existing in the portfolio. The new purchases accounted for the increase in the average yield in the portfolio.
Interest expense on interest bearing liabilities amounted to $1.7 million for the six months ended June 30, 2005 compared to $1.2 million for the same 2004 period, an increase of $527 thousand, or 43.6%. During 2005 management employed several programs to attract new funds to Two River in order to fund the growth in the loan portfolio. These programs included interest bearing demand, savings deposits and certificates of deposits. The average balance of these accounts was $127.5 million for the six months ended June 30, 2005 compared to $104.9 million for the six months ended June 30, 2004, or an increase of $22.6 million or 21.5%. For the six months ended June 30, 2005, the average interest cost for all interest bearing liabilities was 2.00% compared to 1.70% for the six months ended June 30, 2004. The overall higher level of interest rates during 2005 along with management's strategy to increase the deposits accounted for this increase.
The average balance of short term borrowings was $6.7 million with an average rate paid of 2.86% for the six months ended June 30, 2005 compared to an average balance of $663 thousand with an average rate paid of 0.91% for the comparable 2004 period. Management utilized its borrowing lines to fund the growth in the loan portfolio pending deposit inflows during 2005. The higher interest rate paid during 2005 resulted from overall market conditions.
Net interest income increased $1.2 million, or 30.0% to $5.2 million for the six months ended June 30, 2005 compared to $4.0 million for the same 2004 period.
This increase was due to changes in interest income and interest expense described previously. The net interest margin increased to 4.51% for the six months ended June 30, 2005 from 4.30% for the six months ended June 30, 2004. This increase is also attributed to the changes in interest income and interest expense previously discussed.
The following table reflects, for the periods presented, the components of our net interest income, setting forth: (1) average assets, liabilities, and shareholders' equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities), and (5) our yield on interest-earning assets.
Six Months Ended June 30,2005 Six Months Ended June 30, 2004
----------------------------------- -----------------------------------
(dollars in thousands) Interest Interest
Average Income/ Average Average Income/ Average
Balance Expense Rate Balance Expense Rate
--------- --------- --------- --------- --------- ---------
(Dollars in thousands, except percentages)
ASSETS
Interest Earning Assets:
Federal funds sold $ 2,254 $ 31 2.77% $ 8,741 $ 42 0.97%
Investment securities 41,972 842 4.05% 32,201 635 3.97%
Loans (net of unearned income) (1) (2) 187,837 6,053 6.50% 143,968 4,489 6.27%
--------- --------- --------- ---------
Total Interest Earning Assets 232,063 6,926 6.02% 184,910 5,166 5.62%
--------- --------- --------- ---------
Non-Interest Earning Assets:
Allowance for loan losses (2,046) (1,550)
All other assets 16,122 9,736
--------- ---------
Total Assets $ 246,139 $ 193,096
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW deposits $ 26,414 131 1.00% $ 22,710 68 0.60%
Savings deposits 62,008 662 2.15% 58,059 603 2.09%
Money market deposits 32,510 244 1.51% 30,322 219 1.45%
Time deposits 39,079 531 2.74% 24,150 264 2.20%
Repurchase agreements 8,313 74 1.80% 7,021 53 1.52%
Short-term borrowings 6,690 95 2.86% 663 3 0.91%
--------- --------- --------- ---------
Total Interest Bearing Liabilities 175,014 1,737 2.00% 142,925 1,210 1.70%
--------- --------- --------- ---------
Non-Interest Bearing Liabilities:
Demand deposits 47,619 35,380
Other liabilities 1,257 866
--------- ---------
Total Non-Interest Bearing
Liabilities 48,876 36,246
--------- ---------
Shareholders' Equity 22,249 13,925
--------- ---------
Total Liabilities and Shareholders'
Equity $ 246,139 $ 193,096
========= =========
NET INTEREST INCOME $ 5,189 $ 3,956
========= =========
NET INTEREST SPREAD (3) 4.02% 3.92%
NET INTEREST MARGIN(4) 4.51% 4.30%
|
(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average
yield on average interest earning assets and the weighted average cost of
average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest
income by average interest earning assets.
Analysis of Changes in Net Interest Income
The following table sets forth for the periods indicated a summary of changes in interest earned and interest paid resulting from changes in volume and changes in rates (in thousands):
Six Months Ended June 30, 2005
Compared to Six Months Ended
June 30, 2004
----------------------------------
Increase (Decrease) Due To
----------------------------------
Volume Rate Net
------- ------- -------
(Dollars in thousands)
Interest Earned On:
Federal funds sold $ (31) $ 20 $ (11)
Investment securities 192 15 207
Loans (net of unearned income) 1,360 204 1,564
------- ------- -------
Total Interest Income 1,521 239 1,760
------- ------- -------
Interest Paid On:
NOW deposits 11 52 63
Savings deposits 41 18 59
Money market deposits 16 9 25
Time deposits 162 105 267
Repurchase agreement 10 11 21
Short-term borrowings 27 65 92
------- ------- -------
Total Interest Expense 267 260 527
------- ------- -------
Net Interest Income $ 1,254 $ (21) $ 1,233
======= ======= =======
|
The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.
Provision for Loan Losses
The provision for loan losses for the six months ended June 30, 2005, increased by $35 thousand or 14.4% to $278 thousand as compared to the same 2004 period. In management's opinion, the allowance for loan losses, totaling $2.2 million at June 30, 2005 is adequate to cover losses inherent in the portfolio. The amount of the provision is based upon management's evaluation of risk inherent in the loan portfolio. At June 30, 2005, Two River had a non-accrual loan for $94 thousand. Management will continue to review the need for additions to its allowance for loans based upon its monthly review of the loan portfolio, the level of delinquencies and general market and economic conditions.
Non-Interest Income
For the six months ended June 30, 2005, non-interest income amounted to $563 thousand compared to $368 thousand for the same period one year ago. This increase of $195 thousand, or 53.0%, is primarily attributable to a higher level of new product service charges and a higher level of loan servicing fees attributable to the growth of Two River.
Non-Interest Expense
The following table provides a summary of non-interest expense by category.
Six months ended
June 30, %
----------------------- Increase Increase
(dollars in thousands) 2005 2004 (Decrease) (Decrease)
---------- ---------- ---------- ----------
Salaries and employee benefits $ 2,178 $ 1,782 $ 396 22.2%
Occupancy and equipment expenses 661 587 74 12.6%
Data processing fees 125 112 13 11.6%
Outside service fees 141 128 13 10.2%
Advertising and marketing expenses 132 92 40 43.5%
Printing, stationery, and supplies 50 46 4 8.7%
Audit and tax fees 48 36 12 33.3%
Legal fees and expenses 30 25 5 20.0%
Other operating expenses 644 489 155 31.7%
---------- ---------- ----------
Total non-interest expense $ 4,009 $ 3,297 $ 712 21.6%
========== ========== ==========
|
Non-interest expense for the six months ended June 30, 2005 increased $712 thousand or 21.6% to $4.0 million compared to $3.3 million for the same period one year ago. Salary and employee benefits increased $396 thousand or 22.2% as a result of additions to staff to support the growth of Two River along with higher salaries. Occupancy and equipment expense rose by $74 thousand, or 12.6%, primarily due to the opening of our eighth branch in November, 2004. Other operating expenses increased by $242 thousand, or 26.1% due to the opening of the new branch office and the general growth of our business. We anticipate continued significant increases in non-interest expense for the second half of 2005 and beyond, as we incur costs related to the expansion of our branch system and our lending activities, and ongoing efforts to penetrate our target markets.
Income Taxes
Two River recorded income tax expense of $542 thousand for the six month period ended June 30, 2005 compared to $304 thousand for the six months ended June 30, 2004. The effective tax rate for the six months ended June 30, 2005 was 37.0% compared to 38.8% for the same 2004 period.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Net Income
For the year ended December 31, 2004, net income increased to $1.3 million, or $0.36 per share for basic and $0.34 per share for diluted shares, compared to net income of $1.3 million, or $0.36 per share for basic and $0.34 per share for diluted shares in 2003.
Our net income was primarily due to a $2.0 million, or 30.3%, increase in net interest income and a $242 thousand, or 41.9%, increase in non-interest income. The improvement in net interest income and non-interest income is attributable to our continued strong growth, which is made possible by establishing a sound foundation through the strategic utilization of our resources. During 2004, non-interest expenses increased to $7.0 million from $5.2 million, or 32.9%, as we opened two new offices, increased support staff and deployed other resources in order to continue our strategic plan. The results for the year ended December 31, 2004 were also fully taxable, as we had utilized the last of our remaining federal net operating loss carry-forwards during 2003.
Net Interest Income
For the year ended December 31, 2004, we recognized net interest income of $8.7 million, as compared to $6.7 million for the year ended December 31, 2003. We achieved this increase by increasing our average balance of interest earning assets from $142.8 million to $198.9 million (a $56.1 million, or 39.3%, increase), while keeping our net interest spread and net interest margin relatively stable during a year of increasing interest rates.
During 2004, our total interest income increased to $11.3 million from $8.4 million. This $2.9 million, or 34.0%, increase was driven entirely by increased volume, as volume-related increases in interest income of $3.0 million were partially offset by rate-related decreases of $200,000. Most of the volume-related increases came from our loan portfolio, which accounted for $2.4 million of the $3.0 million increase, as our average loans outstanding increased by $37.2 million, or 31.8%, from $117.0 million during 2003 to $154.2 million during 2004. Volume-related increases of $604,000 in investment securities interest income resulted from increased average balances amounting to $16.0 million, or an increase of 79.3%, during 2004. The average yield on our interest-earning assets decreased by 22 basis points to 5.66% for the year ended December 31, 2004 from 5.88% for the prior year.
Total interest expense increased to $2.5 million for the 2004 period from $1.7 million for the 2003 period. This 45.9% increase in interest expense is primarily due to a $46.7 million increase in our average balance of interest-bearing liabilities, which increased to $151.4 million in 2004 from $104.6 million in 2003. Faced with steadily increasing interest rates during 2004, we priced and marketed our deposit products in a manner designed to obtain the increased funds we needed for loan growth without significantly shrinking our net interest margin. These efforts proved successful, as the average rate on our interest-bearing liabilities remained steady at 1.67% in 2004, compared to 1.66% in the prior year. Our need to pursue higher costing sources of funds, such as certificates of deposit, was diminished by our ability to grow non-interest bearing demand deposits and savings deposits, and the addition of $7.0 million in net proceeds resulting from our secondary capital offering.
The following table reflects, for the periods presented, the components of our net interest income, setting forth: (1) average assets, liabilities, and shareholders' equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities), and (5) our yield on interest-earning assets.
Years ended December 31,
2004 2003
----------------------------------- -----------------------------------
Average Average
Interest rates Interest rates
Average income/ earned/ Average income/ earned/
balance expense paid balance expense paid
--------- --------- --------- --------- --------- ---------
(In thousands, except percentages)
ASSETS
Interest Earning Assets:
Federal Funds Sold $ 8,429 $ 108 1.28% $ 5,615 $ 65 1.16%
Investment Securities 36,292 1,443 3.98% 20,247 762 3.76%
Loans (net of unearned income) (1) (2) 154,195 9,705 6.29% 116,975 7,574 6.47%
--------- --------- --------- ---------
Total Interest Earning Assets 198,916 11,256 5.66% 142,837 8,401 5.88%
--------- --------- --------- ---------
Non-Interest Earning Assets:
Allowance for Loan Loss (1,675) (1,279)
All Other Assets 10,972 7,828
--------- ---------
Total Assets $ 208,213 $ 149,386
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW Deposits $ 24,507 147 0.60% $ 21,488 132 0.61%
Savings Deposits 62,637 1,314 2.10% 21,252 418 1.97%
Money Market Deposits 34,554 503 1.46% 25,104 381 1.52%
Time Deposits 21,680 446 2.06% 26,341 649 2.46%
Securities sold under agreements to
repurchase 7,581 116 1.53% 9,357 143 1.53%
Short-term Borrowings 398 5 1.26% 1,090 12 1.10%
--------- --------- --------- ---------
Total Interest Bearing Liabilities 151,357 2,531 1.67% 104,632 1,735 1.66%
--------- --------- --------- ---------
Non-Interest Bearing Liabilities:
Demand Deposits 39,522 30,872
Other Liabilities 928 750
--------- ---------
Total Non-Interest Bearing Liabilities 40,450 31,622
--------- ---------
Shareholders' Equity 16,406 13,132
--------- ---------
Total Liabilities and Shareholders'
Equity $ 208,213 $ 149,386
========= =========
NET INTEREST INCOME $ 8,725 $ 6,666
========= =========
NET INTEREST SPREAD (3) 3.99% 4.22%
NET INTEREST MARGIN (4) 4.39% 4.67%
|
(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average
yield on average interest earning assets and the weighted average cost of
average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest
income by average interest earning assets.
Year ended December 31,
2002
---------------------------------
Average
Interest rates
Average income/ earned/
balance expense paid
---------------------------------
(In thousands, except percentages)
ASSETS
Interest Earning Assets:
Federal Funds Sold $ 6,755 $ 110 1.63%
Investment Securities 17,220 916 5.32%
Loans (net of unearned income) (1) (2) 80,211 5,565 6.94%
--------- ---------
Total Interest Earning Assets 104,186 6,591 6.33%
--------- ---------
Non-Interest Earning Assets:
Allowance for Loan Loss (864)
All Other Assets 5,932
---------
Total Assets $ 109,254
=========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW Deposits $ 14,343 134 0.93%
Savings Deposits 17,046 441 2.59%
Money Market Deposits 18,893 370 1.96%
Time Deposits 17,332 510 2.94%
Securities sold under agreements to
repurchase 7,310 147 2.01%
Short-term Borrowings -- -- --
--------- ---------
Total Interest Bearing Liabilities 74,924 1,602 2.14%
--------- ---------
Non-Interest Bearing Liabilities:
Demand Deposits 21,774
Other Liabilities 477
---------
Total Non-Interest Bearing Liabilities 22,251
---------
Shareholders' Equity 12,079
---------
Total Liabilities and Shareholders'
Equity $ 109,254
=========
NET INTEREST INCOME $ 4,989
=========
NET INTEREST SPREAD (3) 4.19%
NET INTEREST MARGIN (4) 4.79%
|
(1) Included in interest income on loans are loan fees.
(2) Includes non-performing loans.
(3) The interest rate spread is the difference between the weighted average
yield on average interest earning assets and the weighted average cost of
average interest bearing liabilities.
(4) The interest rate margin is calculated by dividing annualized net interest
income by average interest earning assets.
Analysis of Changes in Net Interest Income
The following table sets forth for the periods indicated the amounts of the total change in net interest income that can be attributed to changes in the volume of interest-bearing assets and liabilities and the amount of the change that can be attributed to changes in interest rates.
Years ended December 31, 2004 Years ended December 31, 2003
vs. December 31, 2003 vs. December 31, 2002
-------------------------------- --------------------------------
Increase (decrease) due to change in
--------------------------------------------------------------------
Average Average Average Average
volume rate Net volume rate Net
-------- -------- -------- -------- -------- --------
(In thousands) (In thousands)
Interest Earned On:
Federal Funds Sold $ 33 $ 10 $ 43 (19) $ (26) $ (45)
Investment Securities 604 77 681 161 (315) (154)
Loans (net of unearned fees) 2,410 (279) 2,131 2,551 (542) 2,009
-------- -------- -------- -------- -------- --------
Total Interest Income 3,047 (192) 2,855 2,693 (883) 1,810
-------- -------- -------- -------- -------- --------
Interest Paid On:
NOW Deposits 19 (4) 15 67 (69) (2)
Savings Deposits 814 82 896 109 (132) (23)
Money Market Deposits 143 (21) 122 122 (111) 11
Time Deposits (115) (88) (203) 265 (126) 139
Securities sold under
agreements to repurchase (27) -- (27) 41 (45) (4)
Short-term Borrowing (8) 1 (7) 12 -- 12
-------- -------- -------- -------- -------- --------
Total Interest Expense 826 (30) 796 616 (483) 133
-------- -------- -------- -------- -------- --------
Net Interest Income $ 2,221 $ (162) $ 2,059 $ 2,077 $ (400) $ 1,677
======== ======== ======== ======== ======== ========
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Provision for Loan Losses
The provision we recorded for the year ended December 31, 2004 was $458,000, compared to $322,000 for the year ended December 31, 2003. The increase in the provision for 2004 was primarily due to higher loan growth in 2004 compared to 2003. Loan growth in 2004 was approximately $42 million compared to $30 million in 2003. In addition, the provision reflects management's assessment of economic conditions, credit quality and other risk factors inherent in the loan portfolio. The allowance for loan losses totaled $1.9 million, or 1.10% of total loans at December 31, 2004, compared to $1.5 million, or 1.10% of total loans, at December 31, 2003.
Non-Interest Income
Non-interest income amounted to $820,000 for the year ended December 31, 2004, compared to $578,000 for the year ended December 31, 2003, an increase of $242,000, or 41.9%. The increase was primarily attributable to an increase in service fees on deposits and other loan servicing fees of $191,000, or 43.5%. The growth in service fees on deposits and other loan servicing fees reflects the growth in transaction account deposits and activity and increases in non-interest related loan fees resulting from strong loan demand in our market area.
Non-Interest Expense
The following table provides a summary of non-interest expense by category for the years ended December 31, 2004 and 2003.
Year ended
December 31, %
----------------------- Increase Increase
(dollars in thousands) 2004 2003 (Decrease) (Decrease)
---------- ---------- ---------- ----------
Salaries and employee benefits $ 3,773 $ 2,637 $ 1,136 43.1%
Occupancy and equipment expenses 1,367 1,117 250 22.4%
Data processing fees 235 236 (1) -0.4%
Outside service fees 264 226 38 16.8%
Advertising and marketing expenses 236 156 80 51.3%
Printing, stationery, and supplies 96 70 26 37.1%
Audit and tax fees 72 77 (5) -6.5%
Legal fees and expenses 52 30 22 73.3%
Other operating expenses 874 695 179 25.8%
---------- ---------- ----------
Total non-interest expense $ 6,969 $ 5,244 $ 1,725 32.9%
========== ========== ==========
|
Non-interest expense was $7.0 million in 2004, compared to $5.2 million during 2003, an increase of $1.7 million, or 32.9%. The increase was generally attributable to our growth, and included a $1.2 million, or 43.1%, increase in salaries and employee benefits and a $250,000, or 22.4%, increase in occupancy and equipment expenses. The number of our full-time equivalent employees increased from 45 at December 31, 2002 to 60 at December 31, 2003 to 73 at December 31, 2004, as we added support personnel necessary to handle our growth in business and our branch expansion. Our 2004 employee expenses include the full year expense associated with the opening of two new branch offices, and the addition of employees late in the year as we prepared for the opening of another branch during the fourth quarter of 2004. Occupancy and equipment expenses and other operating expenses increased due to the opening of the new branch offices and the general growth of our business.
We anticipate continued significant increases in non-interest expense in 2005 and beyond, as we incur costs related to the expansion of our branch system and our lending activities, and ongoing efforts to penetrate our target markets.
Income Tax Expenses
For the year ended December 31, 2004, we recorded $793,000 in income tax expense, compared to $428,000 for the year ended December 31, 2003. The effective tax rate for 2004 was 37.4%, compared to 25.5% for 2003. During the year ended December 31, 2003 we utilized the last of our remaining federal net operating loss carry-forwards that originated during our Bank's start-up period.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Net Income
For the year ended December 31, 2003, net income increased to $1.3 million or $0.36 per share for basic and $0.34 per share for diluted earnings, compared to net income of $743,000 or $0.21 per share for both basic and diluted shares for the same period in 2002.
The increase in net income was primarily due to a $1.7 million, or 34.0% increase in net interest income. The improvement in net interest income is attributable to our continued strong growth.
Net Interest Income
For the year ended December 31, 2003, we recognized net interest income of $6.7 million as compared to $5.0 million for the year ended December 31, 2002. The increase in net interest income for the year ended December 31, 2003, as compared to the year ended December 31, 2002, was largely due to an increase in the average balance of interest earning assets, which increased $38.6 million, or 37.0%, to $142.8 million from $104.2 million. The increase reflects an increase in average loans outstanding of $36.8 million, or 45.9% and an increase in average investment securities of $3.0 million, or 17.4% over the 2002 period, and was partially offset by a decrease of $1.2 million, or 17.6% in average federal funds sold.
Primarily as a result of the increase in the average balance of interest earning assets, our interest income increased to $8.4 million for the year ended December 31, 2003, from $6.6 million for the year ended December 31, 2002. The improvement in interest income was primarily due to volume-related increases in income from the loan portfolio of $2.6 million and volume-related increases in income of $161,000 in the investment securities portfolio, partially offset by volume-related decreases in income of $19,000 in federal funds sold. In addition to the net volume-related increases, rate-related decreases amounting to $883,000 resulted as the average yield on our interest-earning assets decreased to 5.88% for the year ended December 31, 2003 from 6.33% for the prior year.
Total interest expense increased 8.3% to $1.7 million for the 2003 period from $1.6 million for the 2002 period. The increase in interest expense is primarily related to the increase in the average balance of interest-bearing liabilities, which increased $29.7 million to $104.6 million for the 2003 period compared to $74.9 million for the 2002 period. Volume-related increases in interest expense accounted for $616,000 of increased expense and was partially offset by $483,000 attributable to net rate-related decreases in interest expense. The volume related increases in interest-bearing liabilities were the result of marketing and pricing decisions made by management in response to the need for cost effective sources of funds, primarily to fund loan growth. These decisions, along with market rate decreases on deposits in 2003 over 2002, resulted in the decrease in the cost of interest-bearing liabilities to 1.66% for the 2003 period from 2.14% for the 2002 period.
Please refer to the Average Balance Sheet on pages 94 and 95 and the Rate/Volume Analysis on page 96 comparing the years ended December 31, 2003 and 2002.
Provision for Loan Losses
The provision we recorded for the year ended December 31, 2003 was $322,000 compared to $491,000 for the year ended December 31, 2002. The provision is the result of our review of several factors. Two River had no loan charge-offs during the period ended December 31, 2003 compared to $1,000 for the same prior year period. The decrease in the provision for 2003 was primarily due to less loan growth in 2003 compared to 2002. Loan growth in 2003 was approximately $30 million compared to $42 million in 2002. The provision also reflects management's assessment of economic conditions, credit quality and other risk factors inherent in the loan portfolio. The allowance for loan losses totaled $1.5 million, or 1.10% of total loans at December 31, 2003, compared to $1.1 million, or 1.10% of total loans, at December 31, 2002.
Non-Interest Income
Non-interest income amounted to $578,000 for the year ended December 31, 2003, compared to $474,000 for the year ended December 31, 2002, an increase of $104,000, or 21.9%. The increase was primarily attributable to an increase in service fees on deposits and other fees and commissions of $123,000, or 27.0%. The growth in service fees on deposits and other fees and commissions reflects the growth in transaction account deposits and activity and increases in non-interest related loan fees.
Non-Interest Expense
The following table provides a summary of non-interest expense by category for the two years ended December 31, 2003 and 2002.
Year ended
December 31, %
----------------------- Increase Increase
(dollars in thousands) 2003 2002 (Decrease) (Decrease)
---------- ---------- ---------- ----------
Salaries and employee benefits $ 2,637 $ 2,008 $ 629 31.3%
Occupancy and equipment expenses 1,117 866 251 29.0%
Data processing fees 236 223 13 5.8%
Outside service fees 226 185 41 22.2%
Advertising and marketing expenses 156 142 14 9.9%
Printing, stationery, and supplies 70 107 (37) -34.6%
Audit and tax fees 77 81 (4) -4.9%
Legal fees and expenses 30 21 9 42.9%
Other operating expenses 695 493 202 41.0%
---------- ---------- ----------
Total non-interest expense $ 5,244 $ 4,126 $ 1,118 27.1%
========== ========== ==========
|
Non-interest expense amounted to $5.2 million for the year ended December 31, 2003, compared to $4.1 million for the year ended December 31, 2002, an increase of $1.1 million, or 26.8%. The increase was due primarily to increases in employment expenses as well as increases in occupancy expenses, equipment expenses and other costs generally attributable to our growth. Of this increase, employment costs increased $629,000, or 31.3%, and reflected increases in the number of employees from 45 full-time equivalents at December 31, 2002 to 60 full-time equivalents at December 31, 2003. The increase in personnel is attributable to the acquisition of support personnel required due to our growth and preparations for the opening of two new branch offices at the end of 2003 and early 2004 and the full year expenses associated with the opening of two new branch offices during the second half of 2002.
Occupancy and equipment expenses increased $251,000, or 29.0%, to $1.1 million for the year ended December 31, 2003. The increase was attributable to the opening of two new branch offices and a new Operations Department location since the second half of 2002, which resulted in increased lease expense and increased maintenance costs.
All other operating expenses increased $238,000, or 18.3% to $1.5 million for the year ended December 31, 2003 from $1.3 million for the year ended December 31, 2002.
We anticipate that the expense of our expanding branch system, combined with increased expenses associated with our expanding lending activities, as well as increased costs associated with our ongoing efforts to penetrate our target markets, will continue to increase non-interest expense next year.
Income Tax Expenses
For the year ended December 31, 2003, we recorded $428,000 in income tax expense compared to $103,000 for the year ended December 31, 2002. The effective tax rate for 2003 was 25.5% compared to 12.2% in 2002. In 2003, we utilized the last of our remaining federal net operating loss carryforwards that originated during Two River's start up period. In 2002, such benefits were greater.
Financial Condition
June 30, 2005 Compared to December 31, 2004 December 31, 2004 Compared to December 31, 2003
General
Total assets increased to $258.5 million at June 30, 2005, compared to $235.5 million at December 31, 2004, an increase of $23.0 million, or 9.8%. This growth is primarily attributable to an increase in loans outstanding of $24.4 million, or 13.9% from $176.0 million recorded at December 31, 2004 to $200.4 million for June 30, 2005. For the same periods, investment securities decreased by $4.4 million, or 10.1%. Maturing securities were used to help fund the growth in the loan portfolio over the first six months of 2005.
At December 31, 2004, our total assets were $235.5 million, an increase of $66.6 million, or 39.4%, over total 2003 year-end assets of $168.9 million. At December 31, 2004, our total loans were $176.0 million, an increase of $42.2 million, or 31.5%, from the $133.8 million reported at December 31, 2003. Investment securities increased to $43.7 million at December 31, 2004, from $27.3 million at December 31, 2003, an increase of $16.4 million, or 60.1%. At December 31, 2004 we had $5.1 million of federal funds sold compared to no Fed funds sold at December 31, 2003. Our fixed assets increased by $1.0 million, or 71.4%, to $2.4 million at December 31, 2004 from $1.4 million at December 31, 2003 as a result of our branch expansion. In the last quarter of 2004, we invested $3.5 million in Bank Owned Life Insurance.
Liabilities
Deposits are the primary source of funds used by Two River in lending and for general corporate purposes. In addition to deposits, Two River may derive funds from principal repayments on loans, the sale of loans and securities designated as available for sale, maturing investment securities and borrowing from financial intermediaries. The level of deposit liabilities may vary significantly and are dependent upon prevailing interest rates, money market conditions, general economic conditions and competition. Two River's deposits consist of checking, savings and money market accounts along with certificates of deposit and individual retirement accounts. Deposits are obtained from individuals, partnerships, corporations, unincorporated businesses and non-profit organizations throughout our market area. We attempt to control the flow of deposits primarily by pricing our deposit offerings to be competitive with other financial institutions in our market area but not necessarily offering the highest rate.
At June 30, 2005, total deposits amounted to $220.8 million reflecting an increase of $20.8 million or 10.4% from December 31, 2004. We had total deposits of $200.0 million at December 31, 2004, an increase of $59.0 million, or 41.8%, over total deposits of $141.0 million at December 31, 2003. Deposits are our primary source of funds. The deposit growth during 2004 was primarily due to the expansion and maturation of our branch system. We also generated a significant increase in savings account deposits through promotional activities at our branches, which were targeted to gain market penetration as we expanded our branch office network. Savings deposits represented 34.7% of our total deposits at December 31, 2004, up from 23.7% at December 31, 2003. Banks generally prefer to increase non-interest bearing deposits, as this lowers the institution's costs of funds. We increased our non-interest bearing deposits from $33.4 million at December 31, 2003 to $49.0 million at December 31, 2004, and our non-interest bearing deposits represented 24.5% of our total deposits at year-end 2004, up from 23.7% at year-end 2003.
Two River's short-term borrowing position was $5.0 million at June 30, 2005, the same level recorded at December 31, 2004. Short-term borrowings at December 31, 2004 were $5.0 million compared to $6.8 million at the year-ended December 31, 2003.
Securities Portfolio
We maintain an investment portfolio to fund increased loans or decreased deposits and other liquidity needs and to provide an additional source of interest income. The portfolio is composed of obligations of the U.S. government and agencies, government-sponsored entities, and a limited amount of corporate debt securities.
Two River accounts for its investment securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. This standard requires, among other things, that debt and equity securities be classified as available-for-sale or held-to-maturity. Management determines the appropriate classification at the time of purchase. Based on an evaluation of the probability of the occurrence of future events, Two River determines if it has the ability and intent to hold the investment securities to maturity, in which case it classifies them as held-to-maturity. All other investments are classified as available-for-sale.
Securities classified as available-for-sale must be reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component, net of taxes. Gains or losses on the sales of securities available-for-sale are recognized upon realization utilizing the specific identification method. The net effect of unrealized gains or losses, caused by marking an available-for-sale portfolio to market, could cause fluctuations in the level of undivided profits and equity-related financial ratios as market interest rates cause the fair value of fixed-rate securities to fluctuate.
Securities classified as held-to-maturity are carried at cost, adjusted for amortization of premium and accretion of discount over the terms of the maturity in a manner that approximates the interest method.
Investments totaled $39.2 million at June 30, 2005 compared to $43.7 million at December 31, 2004, a decrease of $4.5 million, or 10.3%. Maturing securities were used to help fund the growth in the loan portfolio over the first six months of 2005. During 2004, investments securities increased by $16.4 million, or 60.1% from the December 31, 2003 level of $27.3 million. The increase in investment securities resulted from deposit growth in excess of our loan growth. For the six months ended June 30, 2005 and the years ended December 31, 2004 and 2003, no gains from the sales of securities were recorded. At June 30, 2005 and December 31, 2004, Two River had no federal funds sold as deposit growth was used to fund the loan portfolio.
The following table sets forth the carrying value of the securities portfolio as of June 30, 2005 and December 31, 2004, 2003 and 2002 (in thousands).
Carrying value
-------------------------------------
December 31,
June 30, ---------------------------
2005 2004 2003 2002
------- ------- ------- -------
Investment securities
available-for-sale:
U.S. Government treasury securities $ -- $ -- $ 501 $ 509
U.S. Government agency securities 17,154 19,347 8,512 527
Municipal securities 1,086 1,074 1,565 --
Mortgage backed securities 15,348 18,083 15,415 13,614
Corporate debt securities and other 1,371 1,372 1,310 893
------- ------- ------- -------
$34,959 $39,876 $27,303 $15,543
======= ======= ======= =======
Investment securities
held-to-maturity:
U.S. Government agency securities $ 1,000 $ 1,000 $ -- $ --
Municipal securities 3,269 2,840 -- --
------- ------- ------- -------
$ 4,269 $ 3,840 $ -- $ --
======= ======= ======= =======
|
The contractual maturity distribution and weighted average yield's, calculated on the basis of the stated yields to maturity, taking into account applicable premiums or discounts, of the securities portfolio at June 30, 2005 and December 31, 2004 is as follows. Securities available-for-sale are carried at amortized cost in the table for purposes of calculating the weighted average yield.
(dollars in thousands) June 30, 2005
------------------------------------------------------------
Available-for-sale Held-to-maturity
----------------------------- -------------------------------
Amortized Fair Weighted Amortized Fair Weighted
cost value avg yield cost value avg yield
------- ------- --------- ------- ------- ---------
Investment securities:
Due in one year or less $ 4,959 $ 4,919 3.79% $ -- $ -- --
Due after one year through 5 years 18,381 18,214 3.88% 1,000 987 3.12%
Due after 5 years through 10 years 9,341 9,268 4.69% 656 655 3.72%
Due after 10 years 2,560 2,558 4.82% 2,613 2,643 4.32%
------- ------- ------- -------
$35,241 $34,959 4.15% $ 4,269 $ 4,285 3.95%
======= ======= ======= =======
(dollars in thousands) December 31, 2004
------------------------------------------------------------
Available-for-sale Held-to-maturity
----------------------------- -------------------------------
Amortized Fair Weighted Amortized Fair Weighted
cost value avg yield cost value avg yield
------- ------- --------- ------- ------- ---------
Investment securities:
Due in one year or less $ 5,512 $ 5,474 3.84% $ -- $ -- --
Due after one year through 5 years 20,423 20,307 3.92% 1,610 1,603 3.47%
Due after 5 years through 10 years 9,841 9,744 4.53% 531 528 3.51%
Due after 10 years 4,368 4,351 4.70% 1,699 1,706 4.39%
------- ------- ------- -------
$40,144 $39,876 4.15% $ 3,840 $ 3,837 3.88%
======= ======= ======= =======
|
Loan Portfolio
The following table summarizes total loans outstanding by loan category and amount on the dates indicated.
December 31,
June 30, ------------------------------------------
2005 2004 2003
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
-------- -------- -------- -------- -------- --------
(in thousands, except for percentages)
Commercial and industrial $ 48,495 24.2% $ 44,128 25.1% $ 37,628 28.1%
Real estate - construction 41,071 20.5% 27,631 15.7% 17,849 13.4%
Real estate - commercial 94,702 47.2% 90,168 51.2% 66,818 49.9%
Real estate - residential 1,905 1.0% 318 0.2% 325 0.3%
Consumer 14,192 7.1% 13,673 7.7% 11,154 8.3%
Other 57 0.0% 150 0.1% 36 0.0%
-------- -------- -------- -------- -------- --------
Total loans $200,422 100.0% $176,068 100.0% $133,810 100.0%
======== ======== ======== ======== ======== ========
|
December 31,
-----------------------------------------------------------------
2002 2001 2000
------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent
-------- -------- -------- -------- -------- --------
(in thousands, except for percentages)
Commercial and industrial $ 27,599 26.5% $ 17,930 29.3% $ 9,871 45.5%
Real estate - construction 12,439 11.9% 3,736 6.1% 210 1.0%
Real estate - commercial 51,940 49.8% 30,087 49.2% 7,992 36.8%
Real estate - residential 919 0.9% 1,294 2.1% 748 3.4%
Consumer 11,269 10.8% 8,042 13.1% 2,857 13.2%
Other 120 0.1% 103 0.2% 25 0.1%
-------- -------- -------- -------- -------- --------
Total loans $104,286 100.0% $ 61,192 100.0% $ 21,703 100.0%
======== ======== ======== ======== ======== ========
|
For the six months ended June 30, 2005, net loans increased by $24.1 million or 13.8% to $198.2 million from their December 31, 2004 level of $174.1 million. This growth was primarily recorded in the real estate construction portfolio which increased by $13.5 million, or 48.9% from $27.6 million to $41.1 million. Commercial and industrial loans rose by $4.4 million, or 10.0% from $44.1 million recorded at December 31, 2004 compared to $48.5 at June 30, 2005.
For the year ended December 31, 2004, net loans increased by $41.8 million, or 31.6% from $132.3 million recorded at December 31, 2003 compared to $174.1 million at December 31, 2004. The growth was primarily recorded in commercial real estate loans and real estate construction loans. These categories rose by $23.3 million, or 34.9% and $9.8 million, or 55.1%, respectively, from their December 31, 2003 levels of $66.8 million and $17.8 million, respectively.
The increase in the commercial real estate and real estate construction loan portfolios is largely the result of the relatively low rate environment on the local business market and our loan marketing efforts.
The following table sets forth the aggregate maturities of loans net of unearned discounts and deferred loan fees, in specified categories and the amount of such loans which have fixed and variable rates as of June 30, 2005 and December 31, 2004.
(in thousands)
Within 1 1 to 5 After 5
As of June 30, 2005 year years years Total
-------- -------- -------- --------
Commercial and industrial $ 36,918 $ 8,593 $ 2,984 $ 48,495
Construction 36,387 1,856 2,828 41,071
-------- -------- -------- --------
Total $ 73,305 $ 10,449 $ 5,812 $ 89,566
======== ======== ======== ========
Fixed rate loans $ 23,048
Variable rate loans 66,518
--------
Total $ 89,566
========
103
|
(in thousands)
Within 1 1 to 5 After 5
As of December 31, 2004 year years years Total
-------- -------- -------- --------
Commercial and industrial $ 30,832 $ 10,232 $ 3,064 $ 44,128
Construction 24,955 2,525 151 27,631
-------- -------- -------- --------
Total $ 55,787 $ 12,757 $ 3,215 $ 71,759
======== ======== ======== ========
Fixed rate loans $ 18,304
Variable rate loans 53,455
--------
Total $ 71,759
========
|
Asset Quality
Non-Performing Loans
Loans are considered to be non-performing if they are on a non-accrual basis, past due 90 days or more, or have been renegotiated to provide a reduction of or deferral of interest or principal because of a weakening in the financial positions of the borrowers. Loans are placed on non-accrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Any unpaid interest previously accrued on those loans is reversed from income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other non-accrual loans is recognized only to the extent of interest payments received. At June 30, 2005 and December 31, 2004, Two River had a $94 thousand non-accrual loan.
Potential Problem Loans ("Watch List")
In addition to non-performing loans and loans past due 90 days or more and still accruing interest, Two River maintains a list of loans where management has identified problems which potentially could cause such loans to be placed on non-accrual status in future periods. Loans on this watch list are subject to heightened scrutiny and more frequent review by management. The balance of potential problem loans at June 30, 2005 and December 31, 2004 totaled approximately $1.1 million and 1.7 million, respectively.
Allowance for Loan Losses
The following table summarizes our allowance for loan losses for the six months ended June 30, 2005 and for each of the five years ended December 31, 2004.
Year ended
June 30, December 31,
-------- -------------------
2005 2004 2003
-------- -------- --------
(in thousands, except percentages)
Balance at beginning of period $ 1,927 $ 1,469 $ 1,147
Provision charged to expense 278 458 322
Charge-offs -- -- --
-------- -------- --------
Balance of allowance at end of year $ 2,205 $ 1,927 $ 1,469
======== ======== ========
104
|
Ratio of net charge-offs to average
loans outstanding 0.00% 0.00% 0.00%
Balance of allowance at year-end as
a percent of loans at year-end 1.10% 1.10% 1.10%
Years ended December 31,
---------------------------------
2002 2001 2000
-------- -------- --------
(in thousands, except percentages)
Balance at beginning of period $ 657 $ 261 $ --
Provision charged to expense 491 396 261
Charge-offs (1) -- --
-------- -------- --------
Balance of allowance at end of year $ 1,147 $ 657 $ 261
======== ======== ========
Ratio of net charge-offs to average
loans outstanding 0.00% 0.00% 0.00%
Balance of allowance at year-end as a
percent of loans at year-end 1.10% 1.07% 1.20%
|
The allowance for loan losses is a valuation reserve available for losses incurred or expected on extensions of credit. Credit losses primarily arise from Two River's loan portfolio, but may also be derived from other credit related sources including commitments to extend credit. 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.
We attempt to maintain an allowance for loan losses at a sufficient level to provide for probable losses in the loan portfolio. Loan losses are charged directly to the allowance when they occur and any recovery is credited to the allowance. Risks within the loan portfolio are analyzed on a continuous basis by our officers, by outside independent loan review auditors, by our Directors Loan Committee, and by the board of directors. A risk system, consisting of multiple grading categories, is utilized as an analytical tool to assess risk and set appropriate reserves. Along with the risk system, management further evaluates risk characteristics of the loan portfolio under current economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors management feels deserve recognition in establishing an appropriate reserve. Additions to the allowance are made by provisions charged to expense and the allowance is reduced by net charge-offs (i.e., loans judged to be un-collectible and charged against the reserve, less any recoveries on such loans). Although management attempts to maintain the allowance at a level deemed adequate, future additions to the allowance may be necessary based upon changes in market conditions, either generally or specific to our area, or changes in the circumstances of particular borrowers. In addition, various regulatory agencies periodically review Two River's allowance for loan losses. These agencies may require Two River to take additional provisions based on their judgments about information available to them at the time of their examination.
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for loan losses by category of loans and the percentage of loans in each category to total loans at June 30, 2005 and December 31, 2004, 2003, 2002, 2001 and 2000 (dollars in thousands).
December 31,
------------------------------------------
June 30, 2005 2004 2003
------------------- ------------------- -------------------
Percent Percent Percent
of of of
Loans Loans Loans
to total to total to total
Amount loans Amount loans Amount loans
-------- -------- -------- -------- -------- --------
Balance applicable to:
----------------------
Commercial and
industrial $ 629 24.2% $ 569 25.1% $ 484 28.1%
Real estate -
construction 449 20.5% 300 15.7% 194 13.4%
Real estate -
commercial 988 47.2% 938 51.2% 693 49.9%
Real estate -
residential 16 1.0% 3 0.2% 3 0.3%
Consumer 123 7.1% 117 7.7% 95 8.3%
Other -- 0.0% -- 0.1% -- 0.0%
-------- -------- -------- -------- -------- --------
Total $ 2,205 100.0% $ 1,927 100.0% $ 1,469 100.0%
======== ======== ======== ======== ======== ========
December 31,
-----------------------------------------------------------------
2002 2001 2000
------------------- ------------------- -------------------
Percent Percent Percent
of of of
Loans Loans Loans
to total to total to total
Amount loans Amount loans Amount loans
-------- -------- -------- -------- -------- --------
Balance applicable to:
----------------------
Commercial and
industrial $ 360 26.5% $ 229 29.3% $ 137 45.5%
Real estate -
construction 137 11.9% 40 6.1% 2 1.0%
Real estate -
commercial 545 49.8% 310 49.2% 89 36.8%
Real estate -
residential 8 0.9% 10 2.1% 7 3.4%
Consumer 97 10.8% 68 13.1% 26 13.2%
Other -- 0.1% -- 0.2% -- 0.1%
-------- -------- -------- -------- -------- --------
Total $ 1,147 100.0% $ 657 100.0% $ 261 100.0%
======== ======== ======== ======== ======== ========
|
Bank-Owned Life Insurance
During 2004, Two River invested in $3.5 million of bank-owned life insurance. Two River invests in bank-owned life insurance as a source of funding for employee benefit expenses. Bank-owned life insurance involves purchasing of life insurance by the bank on a chosen group of officers. The bank is owner and beneficiary of the policies. Increases in the cash surrender value of this investment is recorded in other income in the statements of income.
Premises and Equipment
Premises and equipment totaled $2.3 million, and $2.4 million and $1.4 million at June 30, 2005, and December 31, 2004 and 2003, respectively. The $1 million increase in the bank's investment in premises and equipment in 2004 over 2003 was due to two new branch facilities opened in 2004.
Deposits
Deposits are our primary source of funds. The deposit growth experienced since our inception was primarily due to the expansion and maturation of our branch system. We also generated significant increases in our deposit and customer base through promotional activities at our branches, which were targeted to gain market
penetration as we expanded our branch office network.
One of our primary strategies is the accumulation and retention of core deposits. Core deposits consist of all deposits, except certificates of deposits in excess of $100,000. Total deposits increased $20.8 million, or 10.4% from December 31, 2004, to their June 30, 2005 level of $220.8 million. Total deposits rose $59.0 million, or 41.8% to $200.0 million at December 31, 2004 from $141.0 million at December 31, 2003.
Core deposits at June 30, 2005 accounted for 87.0% of total deposits compared to 94.2% at December 31, 2004. During 2005, we marketed a certificate of deposit program in our local market area for the purpose of increasing deposits to fund the loan portfolio. This program accounted for the decline in the core deposit ratio. At December 31, 2003, core deposits totaled 88.4% of total deposits.
The following table reflects the average balances and average rates paid on deposits for the six months ended June 30, 2005 and for the years ended December 31, 2004, 2003 and 2002.
Years ended December 31,
June 30, -----------------------------------------------------------------
2005 2004 2003 2002
------------------- ------------------- ------------------- -------------------
Average Average Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands, except percentages)
Non-interest bearing
demand $ 47,619 0.00% $ 39,522 0.00% $ 30,872 0.00% $ 21,774 0.00%
Interest-bearing
demand (NOW) 26,414 1.00% 24,507 0.60% 21,488 0.61% 14,343 0.93%
Savings deposits 62,008 2.15% 62,637 2.10% 21,252 1.97% 17,046 2.59%
Money Market Deposits 32,510 1.51% 34,554 1.46% 25,104 1.52% 18,893 1.96%
Time deposits 39,079 2.74% 21,680 2.06% 26,341 2.46% 17,332 2.94%
-------- -------- -------- --------
Total $207,630 1.52% $182,900 1.32% $125,057 1.26% $ 89,388 1.63%
======== ======== ======== ========
|
The following table sets forth a summary of the maturities of certificates of deposit $100,000 and over at June 30, 2005 and December 31, 2004 (in thousands).
June 30, 2005 December 31, 2004
----------------- -----------------
Due in three months or less $ 12,589 $ 5,839
Due over three months through twelve
months 13,707 4,375
----------------- -----------------
Due over one year through three years 2,400 1,335
----------------- -----------------
Total certificates of deposit $ 28,696 $ 11,549
================= =================
|
Short-Term Borrowings
Two River utilizes its membership with Atlantic Central Bankers Bank borrow funds through its federal funds borrowing line in an amount up to $5.0 million. These borrowings are priced on a daily basis. We also maintain a secured borrowing line with the Federal Home Loan Bank of New York in an amount of up to $11.1 million.
Borrowings are summarized as following:
Year ended December 31,
June 30, ----------------------
2005 2004 2003
-------- -------- --------
Federal funds purchased and short-term advances
Balance at end of period $ 5,000 $ 5,000 $ 6,784
Average during the year 6,690 398 1,090
Maximum month-end balance 8,000 8,078 6,784
Weighted average rate during the year 2.86% 1.29% 1.10%
Weighted average rate at end of period 3.18% 2.44% 1.07%
|
Two River had no federal funds purchased or short-term advances for the year ended December 31, 2002.
Repurchase Agreements
Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected as the amount of cash received in connection with the transaction. Two River may be required to provide additional collateral based on the fair value of the underlying securities.
June 30, Year ended December 31,
(dollars in thousands) 2005 2004 2003 2002
------- ------- ------- -------
Balance at end of period $ 8,685 $ 7,761 $ 6,455 $ 9,396
Average during the year 8,313 7,581 9,357 7,310
Maximum month-end balance 9,801 9,549 11,810 9,429
Weighted average rate during the year 1.80% 1.53% 1.53% 2.01%
Weighted average rate at end of period 1.82% 1.54% 1.53% 1.59%
|
Liquidity
Liquidity defines the ability of Two River to generate funds to support asset growth, meet deposit withdrawals, maintain reserve requirements and otherwise operate on an ongoing basis. An important component of a bank's asset and liability management structure is the level of liquidity which is available to meet the needs of its customers and requirements of creditors. The liquidity needs of Two River are primarily met by cash on hand; Two River's federal funds sold position, maturing investment securities and short-term borrowings on a temporary basis. Two River invests the funds not needed to meet its cash requirements in overnight federal funds sold. With adequate deposit inflows over the past six months coupled with the above mentioned cash resources, management is maintaining short-term assets which is believed to be adequate.
Contractual Obligations
In the normal course of business we become party to various outstanding contractual obligations that will require future cash outflows. The following table sets forth our contractual obligations outstanding as of June 30, 2005 and December 31, 2004:
(in thousands)
Less than One to Four to After five
Total one year three years five years years
----------- ----------- ----------- ----------- -----------
As of June 30, 2005
----------------------------------------
Minimum annual rentals on
noncancellable operating leases $ 2,072 $ 462 $ 867 $ 593 $ 150
Remaining contractual maturities of time
deposits 52,624 43,480 8,928 216 --
----------- ----------- ----------- ----------- -----------
$ 54,696 $ 43,942 $ 9,795 $ 809 $ 150
=========== =========== =========== =========== ===========
As of December 31, 2004
----------------------------------------
Minimum annual rentals on noncancellable $ 2,098 $ 432 $ 849 586 $ 231
operating leases
Remaining contractual maturities of time
deposits 18,997 14,241 4,492 264 --
----------- ----------- ----------- ----------- -----------
$ 21,095 $ 14,673 $ 5,341 $ 850 231
=========== =========== =========== =========== ===========
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Off-Balance Sheet Arrangements
Two River's financial statements do not reflect off-balance sheet arrangements that are made in the normal course of business. These off-balance sheet arrangements consist of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. These instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to Two River.
Management believes that any amounts actually drawn upon these commitments can be funded in the normal course of operations. The following table sets forth our off-balance sheet arrangements as of June 30, 2005 and December 31, 2004:
June 30, December 31,
2005 2004
------------ ------------
Commercial lines of credit $ 34,125 $ 26,709
One-to-four family residential lines of credit 6,941 8,001
Commitments to grant commercial and construction
loans secured by real-estate 21,934 33,219
Commercial letters of credit 1,967 1,895
------------ ------------
$ 64,967 $ 69,824
============ ============
|
Capital
Two River's shareholders' equity increased by $1.0 million or 4.6% to $22.8 million at June 30, 2005 compared to $21.8 million at December 31, 2004. The primary reason for this increase was $923 thousand of net income recorded for the six months ended June 30, 2005. Also contributing was $125 thousand attributable to the issuance of 33,601 shares of stock for exercised options.
Capital Resources
Two River is subject to various regulatory and capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on Two River's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Two River must meet specific capital guidelines that involve quantitative measures of Two River's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Two River's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require Two River to maintain minimum amounts and ratios, set forth in the following tables of total capital and Tier 1 capital to risk weighted assets, and of Tier 1 Capital to average assets leverage ratio. At June 30, 2005, management believes that it has met all capital adequacy requirements that it is subject to.
As of June 30, 2005, the most recent notifications from the State of New Jersey Department of Banking and the Federal Deposit Insurance Corporation categorized Two River as "well capitalized" under the regulatory framework for prompt corrective action. To be considered well capitalized, Two River must maintain minimum total risked based, Tier 1 risk based and leverage ratios as set forth in the following tables.
(dollars in thousands) To be well capitalized
For capital under prompt corrective
Actual adequacy purposes action provisions
-------------------- ------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
-------- -------- -------- -------- -------- --------
June 30, 2005
-------------
Total capital (to risk-weighted assets) $ 25,239 11.53% $ 17,511 >8.00% $ 21,889 >10.00%
- -
Tier I capital (to risk-weighted assets) 23,034 10.52% 8,758 >4.00% 13,137 > 6.00%
- -
Tier I capital (to average assets) 23,034 9.18% 7,527 >3.00% 12,545 > 5.00%
- -
December 31, 2004
-----------------
Total capital (to risk-weighted assets) $ 23,913 12.24% $ 15,628 >8.00% $ 19,534 >10.00%
- -
Tier I capital (to risk-weighted assets) 21,986 11.25% 7,814 >4.00% 11,721 > 6.00%
- -
Tier I capital (to average assets) 21,986 9.61% 6,866 >3.00% 11,443 > 5.00%
- -
December 31, 2003
-----------------
Total capital (to risk-weighted assets) $ 15,073 10.49% $ 11,496 >8.00% $ 14,371 >10.00%
- -
Tier I capital (to risk-weighted assets) 13,604 9.47% 5,748 >4.00% 8,622 > 6.00%
- -
Tier I capital (to average assets) 13,604 8.39% 4,863 >3.00% 8,105 > 5.00%
- -
|
The prompt corrective action regulations define specific capital categories based upon an institution's capital ratios. The capital categories in descending order are "well capitalized", "adequately capitalized", "under capitalized", "significantly undercapitalized", and "critically undercapitalized." Institutions categorized as "undercapitalized" or lower are subject to certain restrictions, not able to pay dividends and management fees, restricted on asset growth and executive compensation and also are subject to increased supervisory monitoring, among other matters. The regulators may impose other restrictions. Once an institution becomes "critically undercapitalized" it must be placed in receivership or conservatorship within 90 days. To be considered "adequately capitalized." An institution must generally have Tier 1 capital to total asset ratio of at least 4%, a Tier 1 risk-based capital ratio of at least 4%, and a total risked based capital ratio of at least 8%. An institution is deemed to be "critically undercapitalized" if it has a tangible equity ratio, Tier 1 capital, net of all intangibles, to tangible capital of 2% or less.
Under the risk based capital guideline regulations, a banking organization's assets and certain off balance sheet items are classified into categories, with the least capital required for the category deemed to have the least risk, and the most capital required for the category deemed to have the most risk. Under current regulations, banking organizations are required to maintain total capital of 8.00% of risk weighted assets, of which 4.00% must be in core or Tier 1 capital.
Interest Rate Sensitivity
Interest rate risk management involves managing the extent to which interest-sensitive assets and interest-sensitive liabilities are matched. Interest rate sensitivity is the relationship between market interest rates and earnings volatility due to the re-pricing characteristics of assets and liabilities. Our net income is affected by changes in the level of market interest rates. In order to maintain consistent earnings performance, we seek to manage, to the extent possible, the re-pricing characteristics of our assets and liabilities. The ratio between assets and liabilities re-pricing in specific time intervals is referred to as an interest rate sensitivity gap. Interest rate sensitivity gaps can be managed to take advantage of the slope of the yield curve as well as forecasted changes in the level of interest rate changes.
One of our major objectives when managing the rate sensitivity of our assets and liabilities is to stabilize net interest income. The management of and authority to assume interest rate risk is the responsibility of the Asset/Liability Committee (ALCO), which is comprised of senior management and Board members. We have instituted policies and practices of measuring and reporting interest rate risk exposure, particularly regarding the treatment of non-contractual assets and liabilities. In addition, we annually review our interest rate risk policy, which includes limits on the impact to earnings from shifts in interest rates.
To manage our interest sensitivity position, an asset/liability model called "gap analysis" is used to monitor the difference in the volume of our interest-sensitive assets and liabilities that mature or re-price within given periods. A positive gap (asset-sensitive) indicates that more assets re-price during a given period compared to liabilities, while a negative gap (liability-sensitive) has the opposite effect. During a period of falling interest rates, a positive gap would tend to adversely affect net interest income, while a negative gap would tend to result in an increase in net interest income. During a period of rising interest rates, a positive gap would tend to result in an increase in net interest income, while a negative gap would tend to affect net interest income adversely. We employ net interest income simulation modeling to assist in quantifying interest rate risk exposure. This process measures and quantifies the impact on net interest income through varying interest rate changes and balance sheet compositions. The use of this model assists the ALCO to gauge the effects of the interest rate changes on interest-sensitive assets and liabilities in order to determine what impact these rate changes will have upon the net interest spread.
At December 31, 2004, we maintained a one-year negative cumulative gap of 5.68% of total assets, or $13.4 million, which is within the Two River board of directors' approved guidelines.
The method used to analyze interest rate sensitivity has a number of limitations. Certain assets and liabilities may react differently to changes in interest rates even though they re-price or mature in the same or similar time periods. The interest rates on certain assets and liabilities may change at different times than changes in market interest rates, with some changing in advance of provisions which may limit changes in interest rates each time the interest rate changes and on a cumulative basis over the life of the loan. Additionally, the actual prepayments and withdrawals we experience in the event of a change in interest rates may differ significantly from the maturity dates of the loans. Finally, the ability of borrowers to service their debts may decrease in the event of an interest rate increase.
Two River's Asset Liability Committee policy has established that interest rate sensitivity will be considered acceptable if the change in net interest income is within 10.00% of net interest income from the unchanged interest rate scenario over a twelve month time horizon.
At June 30, 2005, Two River's income simulation model indicates the level of interest rate risk as presented below.
(dollars in thousands) Gradual change in interest rates
---------------------------------------------------
200 basis point increase 200 basis point decrease
------------------------ ------------------------
Percent of Percent of
Dollar risk risk Dollar risk risk
----------- ---------- ----------- ----------
Twelve month horizon:
Net interest income $ 660 6.12% $ (662) -6.13%
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BUSINESS OF TWO RIVER
General
Two River Community Bank is a New Jersey chartered commercial bank which engages in the business of commercial and retail banking. As a community bank, Two River offers a wide range of banking services including demand, savings and time deposits and commercial and consumer/installment loans to small and medium-sized businesses, not-for-profit organizations, professionals and individuals principally in the Monmouth County, New Jersey area. Two River also offers its customers numerous banking products such as safety deposit boxes, a night depository, wire transfers, money orders, travelers checks, automated teller machines, direct deposit, federal payroll tax deposits, telephone and internet banking and merchant card services.
Two River:
o Opened for business in February 2000.
o Is licensed by the New Jersey Department of Banking and Insurance and its deposits are insured by the FDIC up to legal limits.
o Offers a full array of retail and commercial banking services through its main office at 1250 Highway 35 South in Middletown, New Jersey, and eight branches in Atlantic Highlands, Cliffwood, Port Monmouth, Middletown Township, Red Bank, Tinton Falls, Wall Township, and West Long Branch, New Jersey.
o Has received a four star "excellent" rating from Bauer Financial, Inc., a company that analyzes and reports on the financial condition of the nation's banks, thrifts and credit unions.
Two River believes that customers still want to do business with a banker and that they want to feel that they are important to that banker. To accomplish this objective, Two River emphasizes to its employees the importance of delivering exemplary customer service and seeking out opportunities to build further relationships with the bank's customers.
Two River's website address is www.tworiverbank.com. Information on the Two River website should not be considered a part of this proxy statement/prospectus.
Products and Services
The range of retail and commercial banking services Two River provides to its customers includes a wide variety of loan products; checking, savings, and money market accounts; certificates of deposit; individual retirement accounts; safe deposit boxes; electronic funds transfer; ATM services; and check deposit pick-up. Two River offers traveler's checks, money orders, treasurer's checks, and direct deposit facilities. Two River also offers customers the convenience of a full complement of round-the-clock online banking services which allow them to check account balances, view account activity, transfer funds, place stop-payment orders, and pay their bills any time of the day or night. Deposits are insured up to applicable legal limits.
Market Area and Competitive Position
Two River operates nine offices in Monmouth County, New Jersey. Two River's principal office is located on the west side of Route 35 South, just to the north of its intersection with New Monmouth Road in Middletown, Monmouth County, New Jersey. Branch offices are located in Atlantic Highlands, Cliffwood, Middletown Township, Navesink, Port Monmouth, Red Bank, Tinton Falls, Wall Township, and West Long Branch, New Jersey.
Two River faces substantial competition for deposits and creditworthy borrowers. Two River competes with both New Jersey and regionally-based commercial banks, savings banks and savings and loan associations,
most of which have assets, capital and lending limits greater than Two River. Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities.
Lending
Two River engages in a variety of lending activities which are primarily categorized as commercial, residential real estate and consumer/installment lending. Two River's strategy is to focus its lending activities on small/medium business customers and retain customers by offering them a wide range of products and personalized service. Commercial and real estate mortgage lending (consisting of commercial real estate, commercial business, construction and other commercial lending) are currently Two River's main lending focus. Sources to fund Two River's loans are derived primarily from deposits, although Two River does occasionally borrow on a short-term basis to fund loan growth or meet deposit outflows. See "Management's Discussion and Analysis of Financial Condition and Results of Operations of Two River Community Bank" on page 87.
Two River presently generates all of its loans in the State of New Jersey, with a significant portion in Monmouth County. Loans are generated through Two River's marketing efforts, its present customers, walk-in customers, referrals, the directors and advisory board of Two River and Two River's staff. Two River has been able to maintain a high overall credit quality through the establishment and adherence to prudent lending policies and practices and sound management. Two River has established a written loan policy for each of its categories of loans. These loan policies have been adopted by the Two River board of directors and are reviewed annually. Any loan to directors or their affiliates must be approved by the Two River board of directors in accordance with Two River's policy for such loans as well as applicable state and federal law.
In managing the growth and quality of its loan portfolio, Two River has
focused on: (i) the application of prudent underwriting criteria; (ii) the
active involvement by senior management and the board of directors in the loan
approval process; (iii) the active monitoring of loans to ensure that repayments
are made in a timely manner and early detection of potential problem loans; and
(iv) a loan review process by an independent loan review firm, which conducts
in-depth reviews of portions of the loan portfolio on a quarterly basis.
Commercial and Construction Loans
Two River's commercial loan portfolio consists primarily of commercial business loans to small and medium sized businesses and individuals for business purposes and commercial real estate loans.
Commercial business loans are usually made to finance the purchase of inventory and new or used equipment or for short-term working capital. Generally, these loans are secured, but these loans are sometimes granted on an unsecured basis. To further enhance its security position, Two River generally requires personal guarantees of principal owners. These loans are made on both a line of credit basis and on a fixed-term basis ranging from one to five years in duration.
Commercial real estate loans are made for the acquisition of new property or the refinancing of existing property. These loans are typically related to commercial businesses and secured by the underlying real estate used in these businesses or real property of the principals. These loans are offered by Two River generally on a fixed or variable rate basis with a 5 to 20 year maturity, subject to rate re-adjustments every five years, and a 10 to 20 year amortization schedule.
Construction loans are made by Two River on a short-term basis for both residential and non-residential properties and are secured by land and property. Construction loans are usually for a term of 6 to 12 months. Funds for construction loans are disbursed as phases of construction are completed.
Commercial loans that exceed established lending limits are accomplished through participation with other commercial banks. At June 30, 2005 and December 31, 2004, Two River had participated loans to other financial institutions amounting to $11.6 million and $14.2 million, respectively, including loans participated with Town Bank amounting to $3.2 million and $3.1 million, respectively.
Two River has established written underwriting guidelines for commercial loans. In granting commercial loans, Two River looks primarily to the borrower's cash flow as the principal source of loan repayment. Collateral and personal guarantees of the principals of the entities to which Two River lends is consistent with its loan policy.
Commercial loans are often larger and may involve greater risks than other types of lending. Since payments on such loans are often dependent on the successful operation of the business involved, repayment of such loans may be more sensitive than other types of loans to adverse conditions in the real estate market or the economy. Construction loans involve the additional risk of non-completion by the borrower. Two River also is involved with off-balance sheet financial instruments which include commercial and standby letters of credit meeting the financial needs of their customers. Two River seeks to minimize these risks through its underwriting and monitoring guidelines. There can be no assurances, however, that Two River will be successful in its efforts to minimize these risks.
Installment and Consumer Loans
Two River offers a full range of consumer/installment loans. Consumer loans consist of automobile loans, residential mortgages, personal loans, home equity lines of credit and loans, and overdraft protection. Two River offers home equity revolving lines of credit at a floating interest rate tied to the prime rate with a maximum ratio of loan to value of 80%. Lines of credit are available to qualified applicants in amounts up to $250,000 for up to 15 years. Two River also offers fixed rate home equity loans in amounts up to $250,000 for a term of up to 15 years.
Investment Portfolio
Two River's investment portfolio consists primarily of obligations of U.S. Government sponsored agencies as well as municipal and government authority bonds, with high grade corporate bonds accounting for less than 5% of the portfolio. Government regulations limit the type and quality of instruments in which Two River may invest its funds.
Two River has established a written investment policy which is reviewed annually. The investment policy identifies investment criteria and states specific objectives in terms of risk, interest rate sensitivity and liquidity. Two River emphasizes the quality, term and marketability of the securities acquired for its investment portfolio.
Two River conducts its asset/liability management through consultation with members of the board of directors, senior management and an outside financial advisor. Two River has an asset/liability investment committee, commonly known as an ALCO committee, which is comprised of Two River's president, chief financial officer and certain members of the board of directors. The ALCO committee, in consultation with the board of directors, is responsible for the review of interest rate risk and evaluates future liquidity needs over various time periods. In this capacity, the ALCO committee is responsible for monitoring Two River's investment portfolio and ensuring that investments comply with Two River's investment policy. The ALCO committee may from time to time consult with investment advisors. Two River's president and its chief financial officer may purchase or sell securities in accordance with the guidelines of the ALCO committee. The board of directors reviews Two River's investment portfolio on a monthly basis.
Deposits and Other Sources of Funds
Deposits are the primary source of funds used by Two River in lending and other general business purposes. In addition to deposits, Two River may derive additional funds from principal repayments on loans, the sale of investment securities and borrowing from other financial institutions. Loan amortization payments have historically been a relatively predictable source of funds. The level of deposit liabilities can vary significantly and is influenced by prevailing interest rates, money market conditions, general economic conditions and competition. As another means of funding its growth, Two River sold units comprised of one share of common stock and one warrant to purchase an additional share of common stock in an offering which closed on August 10, 2004 and which resulted in net additional capital of $7,032,000 to the bank.
Two River's deposits consist of checking accounts, savings accounts, money market accounts and certificates of deposit. Deposits are obtained from individuals, partnerships, corporations and unincorporated businesses in Two River's market area. Two River attempts to control the flow of deposits primarily by pricing its accounts to remain generally competitive with other financial institutions in its market area.
Regulation
See "Government Regulation of Community Partners and the Banks" on page 80.
Employees
As of September 30, 2005, Two River had 72 full-time equivalent employees. Two River employees are not members of any collective bargaining group, and Two River considers its relations with its employees to be good.
Legal Proceedings
Two River is not a party to any legal proceeding other than routine litigation incidental to its business. We believe that none of these proceedings would, if adversely determined, have a material effect on Two River's financial condition or results of operations.
Available Information
Two River does not, and is not required to, file reports or other documents or materials with the U.S. Securities and Exchange Commission. Two River files Call Reports with the FDIC, which are available from Two River or via the internet at www.fdic.gov.
Two River Annual Meeting of Shareholders
Two River will hold an annual meeting of shareholders in the year 2006 only if the acquisition has not already been completed.
Description of Property
The following table provides certain information with respect to Two River's properties:
-------------------------------------------------------------------------------------------------------------------------
Locations Description Opened Lease Expires
-------------------------------------------------------------------------------------------------------------------------
Main Office: 1250 Highway 35 South 5,300 sq. ft. first-floor 06/99 12/09, with three
Middletown, NJ stand-alone building five-year renewal options
Monthly Rent: $8,475.38
-------------------------------------------------------------------------------------------------------------------------
Allaire: Monmouth Executive Airport 3,800 sq. ft. building 09/03 11/08, with three
229 Airport Road, Bldg 13 Monthly Rent: $2,500.00 five-year renewal options
Farmingdale, NJ
-------------------------------------------------------------------------------------------------------------------------
Atlantic Highlands: 84 First Avenue 700 sq. ft. ground floor 03/02 03/07, with three
Atlantic Highlands, NJ of downtown space five-year renewal options
Monthly Rent: $1,098.44
-------------------------------------------------------------------------------------------------------------------------
Cliffwood: Angel Street & Route 35 Land lease, approved for 06/02 06/07, with two
Aberdeen, NJ 2,500 sq. ft. building five-year options
Monthly Rent: $4,150.00
-------------------------------------------------------------------------------------------------------------------------
Navesink: East Pointe Shopping Center 2,080 sq. ft in strip 09/05 09/10, with three
2345 Route 36 shopping center five-year options
Atlantic Highlands, NJ Monthly Rent: $3,445.00
-------------------------------------------------------------------------------------------------------------------------
Port Monmouth: 357 Highway 36 2,180 sq. ft. stand-alone 04/01 08/07
Port Monmouth, NJ building
Monthly Rent: $4,351.68
-------------------------------------------------------------------------------------------------------------------------
Red City Centre Plaza 512 sq. ft. in strip 04/02 04/07, with two three-year
Bank: 100 Water Street shopping center renewal options
Red Bank, NJ Monthly Rent: $2,228.04
-------------------------------------------------------------------------------------------------------------------------
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-------------------------------------------------------------------------------------------------------------------------
Locations Description Opened Lease Expires
-------------------------------------------------------------------------------------------------------------------------
Tinton 656 Shrewsbury Avenue 3,650 sq. ft. stand-alone 08/00 08/10, with two five-year
Falls: Tinton Falls, NJ building renewal options
Monthly Rent: $10,936.35
-------------------------------------------------------------------------------------------------------------------------
West Long Branch: West Long Branch Plaza 3,100 sq. ft. in strip 11/03 11/08, with three
359 Monmouth Road shopping center five-year renewal options
West Long Branch, NJ Monthly Rent: $5,486.77
-------------------------------------------------------------------------------------------------------------------------
Operations Dept: 178 Office Max Plaza 3,000 sq. ft. office space 06/02 06/07
Suite 3-A Monthly Rent: $3,811.81
Eatontown, NJ
-------------------------------------------------------------------------------------------------------------------------
Tinton Falls Asbury Avenue Approved for 3,400 sq. expected to 15 year term commencing on
(Not Yet Opened): Tinton Falls, NJ ft. stand-alone building open 08/06 branch opening
Monthly Rent: $7,398.35
-------------------------------------------------------------------------------------------------------------------------
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MARKET PRICE OF AND DIVIDENDS ON TWO RIVER COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Two River common stock is traded on the OTC Bulletin Board under the symbol "TWRV.OB." The following table shows the high and low bid prices for Two River common stock as reported on the OTC Bulletin Board during 2003 and 2004, the first three quarters of 2005, and the period since the beginning of the fourth quarter. While Two River common stock has been traded on the OTC Bulletin Board since May 12, 2000, trading has been very limited and there have been many days for which no trades have been reported. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
2005
HIGH LOW
---- ---
4th qtr. through _______ $ $
September 30 (3rd qtr.) $ 18.25 $ 15.05
June 30 (2nd qtr.) $ 17.00 $ 15.20
March 31 (1st qtr.) $ 17.00 $ 15.00
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2004
HIGH LOW
---- ---
December 31 (4th qtr.) $ 18.25 $ 15.20
September 30 (3rd qtr.) $ 19.30 $ 17.00
June 30 (2nd qtr.) $ 21.85 $ 18.50
March 31 (1st qtr.) $ 23.98 $ 17.25
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2003
HIGH LOW
---- ---
December 31 (4th qtr.) $ 23.00 $ 14.00
September 30 (3rd qtr.) $ 16.00 $ 12.00
June 30 (2nd qtr.) $ 20.00 $ 9.90
March 31 (1st qtr.) $ 10.40 $ 8.80
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On December __, 2005, the closing sale price for Two River common stock was reported by OTC Bulletin Board as $_.__ per share. As of such date, the approximate number of holders of record of Two River common stock was ____ and the approximate number of beneficial holders of Two River common stock was ____.
In January, 2003, Two River declared a 3% stock dividend paid to shareholders of record on February 7, 2003. On November 3, 2003, the Two River board declared a five-for-two stock split, which was paid on December 29, 2003 to shareholders of record on December 10, 2003. All prices have been restated to reflect these stock dividends and stock splits.
Each share of Two River common stock is entitled to participate equally in dividends, which are payable when and as declared by the board of directors out of funds legally available for that purpose. Two River's ability to pay dividends is regulated by state law and by the FDIC. As provided by New Jersey statues, dividends may not be paid unless Two River's capital will remain unimpaired following the dividend and unless either (i) Two River will have a surplus of not less than 50% of its capital stock, or (ii) the dividend will not reduce Two River's surplus. Additionally, under certain circumstances, approval of the Commissioner of the New Jersey Department of Banking and Insurance may be required with respect to the issuance of dividends.
Historically, Two River's policy has been to retain earnings for the purpose of increasing its net worth and reserves during its early years of operation. The future dividend policy is subject to the discretion of the board of directors and will depend upon a number of factors, including future earnings, financial condition, cash needs, and general business conditions. If the acquisition is completed, any Two River dividends will be paid to Community Partners, and Two River's dividend policy will be based primarily on the needs of its parent holding company.
TWO RIVER QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of Operations of Two River - Interest Rate Sensitivity" on page 110.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE TOWN BANK
The Town Bank management's discussion and analysis of financial condition and results of operations is intended to provide a better understanding of the significant changes and trends relating to the financial condition, results of operations, capital resources, liquidity and interest rate sensitivity of Town Bank as of June 30, 2005 and for the six months ended June 30, 2005 and 2004 and as of December 31, 2004 and 2003 and for each of the years in the three year period ended December 31, 2004. The following information should be read in conjunction with the unaudited financial statements for June 30, 2005 and the audited financial statements for December 31, 2004 and 2003, including the related notes thereto, which begin on page FS-35 of this joint proxy statement/prospectus.
Critical Accounting Policies and Estimates
The following discussion is based upon Town Bank's financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires Town Bank to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Note 1 to Town Bank's unaudited financial statements for June 30, 2005 along with Note 1 to Town Bank's audited financial statements for December 31, 2004 contain a summary of Town Bank's significant accounting policies. Management believes the following critical accounting policies encompass the more significant judgments and estimates used in the preparation of Town Bank's financial statements.
Allowance for Loan Losses. Management believes Town Bank's policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact the results of operations. This critical policy and its application are periodically reviewed with Town Bank's audit committee and board of directors.
The allowance for loan losses is based upon management's evaluation of its adequacy, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectibility may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions. Although management utilizes the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short term change. Various regulatory agencies may require Town Bank to make additional provisions for loan losses based upon information available to them at the time of their examination. Furthermore, the majority of Town Bank's loans are secured by real estate in New Jersey, primarily the Westfield and greater Westfield area. Accordingly, the collectibility of a substantial portion of the carrying value of Town Bank's loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or the New Jersey and/or Town Bank's local market areas experience economic shock. Future adjustments to the allowance for loan losses account may be necessary due to economic, operating, regulatory and other conditions beyond Town Bank's control.
Stock Based Compensation. As permitted by SFAS No. 123, Town Bank accounts for stock based compensation in accordance with Accounting Principals Board Opinion (APB) No. 25. Under APB No.25, no compensation expense is recognized in the income statement related to any option granted under our stock option plans. The pro forma impact to net income and earnings per share that would occur if compensation expense was recognized, based on the estimated fair value of the options on the date of the grant, is disclosed in the notes to our financial statements.
On December 16, 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), Share-based Payment, which eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, and generally would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement at their grant-date fair values. Town Bank will be required to adopt this new accounting standard on January 1, 2006.
Investment Securities Impairment Valuation. Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Town Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Deferred Tax Assets and Liabilities. Town Bank recognizes deferred tax assets and liabilities for future tax effects of temporary differences, net operating loss carry forwards and tax credits. Deferred tax assets are subject to management's judgment based upon available evidence that future realization is more likely than not. If management determines that the Bank may be unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.
Overview
For the six months ended June 30, 2005, net interest income increased $735 thousand or 36.8% to $2.7 million, as compared to $2.0 million for the same period in 2004. Net income rose from $537 thousand for the six months ended June 30, 2004 to $827 thousand for the six months ended June 30, 2005, an increase of $290 thousand or 54.0%. Basic earnings per share were $0.44 for the six months ended June 30, 2005 compared to $0.29 per share for the same period in 2004. Diluted earnings per share for the six months ended June 30, 2005 amounted to $0.42 compared to $0.28 per diluted share for the six months ended June 30, 2004.
For the year ended December 31, 2004, net interest income increased $1.2 million or 36.4% to $4.5 million from $3.3 million recorded for the year ended December 31, 2003. Net income totaled $1.4 million for the year ended December 31, 2004 compared to $698 thousand for the year ended December 31, 2003, an increase of $666 thousand or 95.4%. Basic earnings per share were $0.74 for the year ended December 31, 2004 compared to $0.52 per share for the same period in 2003. Diluted earnings per share for the year ended December 31, 2004 amounted to $0.72 compared to $0.51 per diluted share for the year ended December 31, 2003.
For the year ended December 31, 2003, net interest income increased $798 thousand or 32.3% to $3.3 million from $2.5 million recorded for the year ended December 31, 2002. Net income totaled $698 thousand for the year ended December 31, 2003 compared to $56 thousand for the year ended December 31, 2002, an increase of $642 thousand or over 100.0%. Basic earnings per share were $0.52 for the year ended December 31, 2003 compared to $0.05 per share for the same period in 2002. Diluted earnings per share for the year ended December 31, 2003 amounted to $0.51 compared to $0.05 per diluted share for the year ended December 31, 2002.
All per share amounts and number of shares outstanding set forth herein have been adjusted to reflect the 5.00% stock distribution paid on June 1, 2004.
Total assets increased to $147.0 million at June 30, 2005, compared to $126.1 million at December 31, 2004, an increase of $20.9 million or 16.6%. Total assets increased by $23.0 million or 22.3 % to $126.1 million at December 31, 2004 from December 31, 2003. The increase in total assets consisted primarily in loans outstanding.
Loans, net of the allowance for loan losses, totaled $126.6 million at June 30, 2005, an increase of $17.9 million or 16.5% compared to $108.7 million at year end December 31, 2004. The loan portfolio, net of the allowance for loan losses, grew to $108.7 million at December 31, 2004, an increase of $29.8 million or 37.8% from the December 31, 2003 level of $78.9 million. The allowance for loan losses, which totaled $1.4 million or 1.08% of total loans at June 30, 2005, compared to $1.20 million at December 31, 2004 or 1.08% of total loans versus $801 thousand or 1.01% of loans outstanding at December 31, 2003. Town Bank had no non accrual loans for the periods discussed above.
Deposits increased by $21.1 million or 19.3% to $130.7 million at June 30, 2005 compared to December 31, 2004. Deposits rose to $109.6 million at December 31, 2004 from $89.7 million at December 31, 2003, an increase of $19.9 million or 22.2%. These increases are primarily the result of gaining market share in our trade area.
At or for At or for the
the Year ended
Six months December 31,
ended ---------------------------------------
June 30, 2005 2004 2003 2002
------------- ---------- ---------- ----------
Return on average assets 1.19% 1.15% 0.76% 0.08%
Return on average shareholders equity 11.03% 10.00% 8.03% 0.89%
Average equity to average assets 10.80% 11.53% 9.41% 7.46%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00%
|
Results of Operations
Town Bank's principal source of revenue is net interest income, the difference between interest income on earning assets and interest expense on deposits and borrowings. Interest earning assets consist primarily of loans, investment securities and federal funds sold. Sources to fund interest earning assets consist primarily of deposits. Town Bank's net income is also affected by its provision for loan losses, other income and other expenses. Other income consists primarily of service, charges, commission and fees, while other expenses are comprised of salaries and employee benefits, occupancy costs and other operating expenses.
Six months ended June 30, 2005 compared to six months ended June 30, 2004
Interest Income and Expense
Interest income for the six months ended June 30, 2005, increased by $1.3 million or 44.3% from the same 2004 period. Interest and fees on loans increased by $1.3 million or 50.0% to $3.9 million for the six months ended June 30, 2005 compared to $2.6 for the same 2004 period. This increase was primarily due to the growth experienced in our loan portfolio as new loan originations, exceeded principal repayments. The average balance of the loan portfolio for the six months ended June 30, 2005, increased to $117.7 million compared to $84.7 million for the same 2004 period. The average annualized yield on the portfolio was 6.66% for the six months ended June 30, 2005 compared to 6.30% for the same period one year ago.
Interest income on federal funds sold and other short term investments increased by $21 thousand or 53.8% from $39 thousand recorded for the six months ended June 30, 2004, to $60 thousand for the six months ended June 30, 2005. For the six months ended June 30, 2005, federal funds sold and other short term investments had an average interest earning balance of $4.5 million with an average annualized yield of 2.68%. For the six months ended June 30, 2004, this category had average interest earning balances of $8.1 million with an average annualized yield of 0.98%. The increase in interest rates throughout 2005 accounted for the improvement in interest earned.
Interest income on securities available for sale totaled $154 thousand for the six months ended June 30, 2005 compared to $141 thousand for the same period one year ago. For the six months ended June 30, 2005 investment securities available for sale had an average balance of $13.2 million with an average annualized yield of 2.34% compared to an average balance of $15.1 million with an average annualized yield of 1.86% for the six months ended June 30, 2004. The new purchases made during 2005 had significantly higher yields than those securities existing in the portfolio. The new purchases accounted for the increase in the average yield in the portfolio.
Interest expense on deposits amounted to $1.3 million for the six months ended June 30, 2005 compared to $826 thousand for the same 2004 period, an increase of $502 thousand or 60.8%. During 2005 management employed several programs to attract new funds to Town Bank to fund the growth in the loan portfolio. These programs included interest bearing demand, money market accounts and certificates of deposits. The average balance of these accounts was $72.8 million for the six months ended June 30, 2005 compared to $61.9 million for the six months ended June 30, 2004, or an increase of $10.9 million or 17.6%. For the six months ended June 30, 2005, the average interest cost for all interest bearing deposits was 2.58% compared to 2.07% for the six months ended June 30, 2004. The overall higher level of interest rates during 2005 along with management's strategy to increase the deposits accounted for this increase.
Interest expense on short term borrowings was $15 thousand for the six months ended June 30, 2005 compared to $1 thousand for the same period one year ago. The average balance of short term borrowings was $1.2 million with an average rate paid of 2.63% for the six months ended June 30, 2005 compared to an average balance of $167 thousand with an average rate paid of 1.21% for the comparable 2004 period. Management utilized its borrowing lines to fund the growth in the loan portfolio pending deposit inflows during 2005. The higher interest rate paid during 2005 was as a result of overall market conditions.
The following table reflects, for the periods presented, the components of our net interest income, setting forth: (1) average assets, liabilities, and shareholders' equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities), and (5) our yield on interest-earning assets. Rates are computed on a taxable equivalent basis.
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
----------------------------------- ------------------------------------
(dollars in thousands) Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense (1) Rate Balance Expense (1) Rate
----------------------------------- ------------------------------------
Interest earning assets:
Federal funds sold and short term
investments $ 4,540 $ 60 2.68% $ 8,076 $ 39 0.98%
Securities available for sale 13,174 154 2.34% 15,091 141 1.87%
Loans (4) 117,748 3,886 6.66% 84,738 2,647 6.30%
---------------------- ----------------------
Total interest earning assets 135,462 4,100 6.10% 107,905 2,827 5.28%
Cash and due from banks 2,470 1,971
Allowance for loan losses (1,258) (853)
Other assets 3,291 2,024
--------- ---------
Total assets $ 139,965 $ 111,047
========= =========
Interest Bearing Liabilities:
Interest bearing demand $ 8,050 $ 40 1.00% $ 6,431 $ 15 0.47%
Money market 9,382 56 1.20% 11,945 56 0.95%
Savings 31,039 284 1.85% 18,690 165 1.78%
Certificates of deposits 55,404 948 3.45% 43,505 590 2.73%
---------------------- ----------------------
Total deposits 103,875 1,328 2.58% 80,571 826 2.07%
Short term borrowings 1,152 15 2.63% 167 1 1.21%
---------------------- ----------------------
Total interest bearing liabilities 105,027 1,343 2.58% 80,738 827 2.07%
---------------------- ----------------------
Non- interest bearing demand 19,255 16,663
Other liabilities 567 347
Stockholders' equity 15,116 13,299
--------- ---------
Total liabilities & stockholders'
equity $ 139,965 $ 111,047
========= =========
Net interest income (tax equivalent
basis) $ 2,757 $ 2,000
========= =========
Net interest rate spread (2) 3.52% 3.22%
--------- ---------
Net interest margin (3) 4.10% 3.74%
--------- ---------
Tax-equivalent Adjustment (4) (22) --
--------- ---------
Net interest income $ 2,735 $ 2,000
========= =========
|
(1) Includes loan fee income
(2) Net interest rate spread represents the difference between the yield on
interest earning assets and the cost of interest bearing liabilities.
(3) Net interest margin represents net interest income divided interest
earning assets.
(4) On a fully taxable equivalent basis, using a 34.00% effective tax rate.
Net Interest Income
Net interest income increased $735 thousand or 36.8% to $2.7 million for the six months ended June 30, 2005 compared to $2.0 million for the same 2004 period. This increase was due to changes in interest income and interest expense described previously. The net interest margin increased to 4.10% for the six months ended June 30, 2005 from 3.74% for the six months ended June 30, 2004. This increase is also attributed to the changes in interest income and interest expense previously discussed.
Analysis of Changes in Net Interest Income
The following table presents the effects of changing rates and volumes on our net interest income (on a tax equivalent basis) for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns (in thousands):
Six Months Ended June 30, 2005 Compared with 2004
------------------------------------------------
Increase (Decrease)
Due to Change in: Total
---------------------------- Increase
Volume Rate (Decrease)
------------ ------------ ------------
Interest Income:
Loans $ 1,082 $ 157 $ 1,239
Securities (19) 32 13
Federal funds sold (23) 44 21
------------ ------------ ------------
Total Interest Earning Assets 1,040 233 1,273
------------ ------------ ------------
Interest Expense:
Interest bearing demand,
money market and savings 82 66 148
Short term borrowings 1 1 2
Time deposits 183 183 366
------------ ------------ ------------
Total Interest Bearing
Liabilities 266 250 516
------------ ------------ ------------
Net interest income $ 774 $ (17) $ 757
============ ============ ============
|
The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.
Provision for Loan Losses
The provision for loan losses for the six months ended June 30, 2005, increased by $61 thousand or 43.6% to $201 thousand as compared to the same 2004 period. In management's opinion, the allowance for loan losses, totaling $1.4 million at June 30, 2005 is adequate to cover losses inherent in the portfolio. The amount of the provision is based upon management's evaluation of risk inherent in the loan portfolio. At June 30, 2005, Town Bank had no non-accrual loans. Management will continue to review the need for additions to its allowance for loan losses based upon its quarterly review of the loan portfolio, the level of delinquencies and general market and economic conditions.
Non-Interest Income
For the six months ended June 30, 2005, non-interest income amounted to $70 thousand compared to $62 thousand for the same period one year ago. This increase of $8 thousand or 12.9% is primarily attributable to a higher level of other service charges related to letters of credit. Offsetting this in part was lower gains from sales of residential mortgages due to the lower level of mortgages being refinanced. Town Bank had no loans held for sale at June 30, 2005 or December 31, 2004.
Non-Interest Expense
Non-interest expense for the six months ended June 30, 2005 increased $182 thousand or 13.5% to $1.5 million compared to $1.4 million for the same period one year ago. Salary and employee benefits increased $89
thousand or 13.2% as a result of additions to staff to support the growth of Town Bank along with higher salaries. Occupancy expense rose by $9 thousand or 5.7% primarily due to a higher level of real estate taxes paid associated with Town Bank's facilities. Data processing fees rose by $31 thousand or 29.8% due to a higher level of customers and expenses associated with the introduction of internet banking. Advertising and promotions expense rose by $26 thousand or 60.5% due to increased advertising. All other expenses increased by $51 thousand or 40.2% and are attributable to costs incurred due to the growth of Town Bank along with an increase in Directors' fees. During 2005, the outside Directors of Town Bank started to receive cash compensation for their services; this amounted to $24 thousand of this increase.
The following table provides detail of our non-interest expense comparing the six months ended June 30, 2005 with the six months ended June 30, 2004.
(dollars in thousands)
Six months ended
June 30, Dollar Percentage
2005 2004 Increase (Decrease)
---- ---- -------------------
Salaries and employee benefits $ 763 $ 674 $ 89 13.2%
Occupancy expense 168 159 9 5.7%
Data processing fees 135 104 31 29.8%
Other equipment expenses 57 54 3 5.6%
Advertising and promotions 69 43 26 60.5%
Professional fees 70 74 (4) -5.4%
Printing and forms 13 43 (30) -69.8%
Insurance 24 21 3 14.3%
Telephone, communications and messenger 34 33 1 3.0%
ATM processing fees 21 18 3 16.7%
All other 178 127 51 40.2%
---------- ---------- ----------
Total non-interest expense $ 1,532 $ 1,350 $ 182 13.5%
========== ========== ==========
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Income Taxes
Town Bank recorded income tax expense of $245 thousand for the six month period ended June 30, 2005 compared to $35 thousand for the six months ended June 30, 2004. The effective tax rate for the six months ended June 30, 2005 was 22.9% compared to 6.1% for the same 2004 period. During 2004, Town Bank was utilizing its net operating loss carryforwards as permitted by regulation to offset federal income tax expense. These federal net operating losses were fully utilized in 2004. The effective tax rate for the six months ended June 30, 2005 is less than the statutory rate due to the 2005 reversal of the remainder of the deferred tax valuation allowance outstanding at December 31, 2004 of $252,000. Due to the continued profitability of Town Bank, a valuation allowance on deferred tax assets is no longer necessary.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Net Interest Income
Net interest income increased $1.2 million or 37.4% to $4.5 million in 2004 from $3.3 million in 2003. This increase is largely attributable to a growth of $25.5 million or 28.6% in average interest earning assets. Management utilized deposit cash inflows to fund the loan demand of Town Bank and to increase its investment securities portfolio for incremental yield compared to those available in overnight investments while maintaining liquidity. This strategy caused federal funds sold and other short term investments to decline. The loan portfolio represented 82.2% of average interest earning assets for 2004 compared to 76.4% for 2003. Average investment securities amounted to 12.6% of average interest earning assets compared to 13.8% for 2003. Average federal funds sold and short term investments accounted for 5.2% of average interest earning assets for 2004 compared to 9.8% for 2003. The increase in loans outstanding reflects the increased efforts to obtain market share.
For 2004, average interest earning assets rose by $25.5 million or 28.6% over 2003. During 2004 the average yield on interest earning assets increased by 8 basis points or 1.5% to 5.50% from 5.42% recorded for 2003. These factors caused interest income to grow to $6.3 million for 2004 compared to $4.8 million for 2003, an increase of $1.5 million or 31.3%. The increase in the yield on interest earning assets was attributed to the growth of the loan portfolio and a better mix of interest earning assets. Deposit inflows were utilized to fund the growth in interest earning assets.
Town Bank continually monitors the interest rates paid for all of its categories of interest bearing liabilities to reflect market conditions. Average interest bearing deposits rose by $17.6 million or 25.8% to $86.0 million during 2004. The average cost of interest bearing deposits decreased by 17 basis points to 2.13% during 2004 from 2.30% recorded during 2003. This decline is primarily the result of lower cost of funds attributed to certificates of deposits due to a lower level of interest rates.
The net interest margin, which represents net interest income as a percentage of average interest earning assets, was 3.91% for the year ended December 31, 2004 compared to 3.66% for the year ended December 31, 2003, an improvement of 25 basis points or 6.8%. The improvement in the net interest margin is attributable to the factors discussed above.
The following table reflects, for the periods presented, the components of our net interest income, setting forth: (1) average assets, liabilities, and shareholders' equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) our net interest spread (i.e., the average yield on interest-earning assets less the average rate on interest-bearing liabilities), and (5) our yield on interest-earning assets. Town Bank had no tax-exempt assets in 2004, 2003 and 2002.
Year ended December 31, 2004 Year ended December 31, 2003
------------------------------------------ -----------------------------------------
(dollars in thousands) Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense (1) Rate Balance Expense (1) Rate
------------------------------------------ -----------------------------------------
Interest earning assets:
Federal funds sold and short term
investments $ 5,986 $ 71 1.19% $ 8,724 $ 89 1.02%
Securities available for sale 14,469 287 1.98% 12,361 291 2.35%
Loans 94,330 5,959 6.32% 68,191 4,455 6.53%
-------------------------- --------------------------
Total interest earning assets 114,785 6,317 5.50% 89,276 4,835 5.42%
Cash and due from banks 1,993 1,700
Allowance for loan losses (958) (686)
Other assets 2,431 2,157
----------- -----------
Total assets $ 118,251 $ 92,447
=========== ===========
Interest Bearing Liabilities:
Interest bearing demand $ 5,889 $ 31 0.53% $ 6,810 $ 39 0.57%
Money market 11,086 106 0.96% 12,696 156 1.23%
Savings 27,022 495 1.83% 6,037 77 1.28%
Certificates of deposits 41,986 1,197 2.85% 42,802 1,297 3.03%
-------------------------- --------------------------
Total deposits 85,983 1,829 2.13% 68,345 1,569 2.30%
Short term borrowings 185 3 1.62% 119 1 0.84%
-------------------------- --------------------------
Total interest bearing liabilities 86,168 1,832 2.13% 68,464 1,570 2.29%
-------------------------- --------------------------
Non- interest bearing demand 18,030 14,940
Other liabilities 416 343
Stockholders' equity 13,637 8,700
----------- -----------
Total liabilities & stockholders'
equity $ 118,251 $ 92,447
=========== ===========
Net interest income $ 4,485 $ 3,265
=========== ===========
Net interest rate spread (2) 3.37% 3.13%
----------- -----------
Net interest margin (3) 3.91% 3.66%
----------- -----------
|
Year ended December 31, 2002
-----------------------------------------
(dollars in thousands) Interest Average
Average Income/ Yield/
Balance Expense (1) Rate
-----------------------------------------
Interest earning assets:
Federal funds sold and short term
investments $ 9,812 $ 152 1.55%
Securities available for sale 8,268 345 4.17%
Loans 48,944 3,440 7.03%
--------------------------
Total interest earning assets 67,024 3,937 5.87%
Cash and due from banks 1,459
Allowance for loan losses (458)
Other assets 2,381
-----------
Total assets $ 70,406
===========
Interest Bearing Liabilities:
Interest bearing demand $ 5,849 $ 62 1.06%
Money market 14,081 259 1.84%
Savings 3,258 49 1.50%
Certificates of deposits 29,442 1,098 3.73%
--------------------------
Total deposits 52,630 1,468 2.79%
Short term borrowings 125 2 1.60%
--------------------------
Total interest bearing liabilities 52,755 1,470 2.79%
--------------------------
Non- interest bearing demand 11,071
Other liabilities 292
Stockholders' equity 6,288
-----------
Total liabilities & stockholders' equity $ 70,406
===========
Net interest income $ 2,467
===========
Net interest rate spread (2) 3.08%
-----------
Net interest margin (3) 3.68%
-----------
|
(1) Includes loan fee income
(2) Net interest rate spread represents the difference between the yield on
interest earning assets and the cost of interest bearing liabilities.
(3) Net interest margin represents net interest income divided interest
earning assets.
Analysis of Changes in Net Interest Income
The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns (in thousands):
For the Year Ended December 31,
--------------------------------------------------------------------------------
2004 Compared with 2003 2003 Compared with 2002
-------------------------------------- ---------------------------------------
Increase(Decrease) Total Increase(Decrease) Total
------------------------ ------------------------
Due to Change in: Increase Due to Change in: Increase
------------------------ -------------------------
(in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
-------------------------------------- ---------------------------------------
Interest Income:
Loans $ 1,656 $ (152) $ 1,504 $ 1,272 $ (257) $ 1,015
Securities 46 (50) (4) 131 (185) (54)
Federal Funds Sold (31) 13 (18) (16) (47) (63)
-------------------------------------- ---------------------------------------
Total Interest Earning Assets 1,671 (189) 1,482 1,387 (489) 898
Interest Expense:
Interest bearing demand,
money market and savings 243 117 360 35 (133) (98)
Short Term Borrowings 1 1 2 - (1) (1)
Time Deposits (25) (75) (100) 432 (233) 199
-------------------------------------- ---------------------------------------
Total Interest Bearing Liabilities 219 43 262 467 (367) 100
-------------------------------------- ---------------------------------------
Net interest income $ 1,452 $ (232) $ 1,220 $ 920 $ (122) $ 798
====================================== ======================================
|
The change in interest due to both volume and rate has been allocated proportionally to both, based upon their relative absolute values.
Provision for Loan Losses
Town Bank's provision for loan losses is established quarterly at levels determined by management to be necessary to maintain the allowance for loan losses at an adequate level. During 2004, Town Bank recorded a provision for loan losses of $385 thousand, an increase of $194 thousand from the provision recorded for 2003. The increase in the provision is due to a higher level of loans originated and outstanding.
The allowance for loan losses totaling $1.2 million or 1.08% of loans outstanding was deemed adequate at December 31, 2004. At December 31, 2004, Town Bank had no loans on non-accrual or past due more than ninety days and still accruing. See additional discussion under "Asset Quality' on page 132.
Non-Interest Income
For 2004, Town Bank recorded non-interest income of $136 thousand compared to $242 thousand for 2003, a decline of $106 thousand or 43.8%. This decline is primarily attributed to a $74 thousand decrease in gains from sales of residential mortgages due to lower refinancing opportunities as well as a decrease in gains from the sales of securities available for sale, which amounted to $34 thousand during 2003 as compared to zero in 2004.
Non-Interest Expense
The following table provides a summary of non-interest expense by category for the years ended December 31, 2004 and 2003 (dollars in thousands).
Year ended Dollar Percentage
December 31,
---------------
2004 2003 Increase (Decrease)
------------------
Salaries and employee benefits $1,376 $1,209 $ 167 13.8%
Occupancy expense 315 293 22 7.5%
Data processing fees 224 294 (70) -23.8%
Other equipment expenses 110 144 (34) -23.6%
Advertising and promotions 116 69 47 68.1%
Professional fees 201 138 63 45.7%
Printing and forms 61 24 37 154.2%
Insurance 44 39 5 12.8%
Telephone, communications and messenger 89 80 9 11.3%
ATM processing fees 36 40 (4) -10.0%
All other 216 212 4 1.9%
-----------------------
Total non-interest expense $2,788 $2,542 $ 246 9.7%
========================
|
Non-interest expense increased $246 thousand or 9.7% to $2.8 million compared to $2.5 million recorded for 2003. Salaries and employee benefits rose by $167 thousand or 13.8% due to higher staff levels to support the growth of Town Bank along with higher salary levels. Occupancy expense rose $22 thousand or 7.5% due to higher real estate taxes and rent expense. Data processing fess were lower by $70 thousand or 23.8%. During the third quarter of 2003, Town Bank changed data processing vendors which accounted for the decline in this expense. Advertising and promotional expenses rose by $47 thousand or 68.1% due to increased advertising. Other professional fees rose by $63 thousand or 45.7% as a result of higher audit fees and fees paid for strategic consulting. Printing and forms costs rose by $37 thousand or 154.2% due to costs associated with the changing of the name of Town Bank.
Income Taxes
Town Bank recorded an income tax provision of $84 thousand for 2004 compared to $76 thousand for 2003. The effective tax rate for 2004 and 2003 was 5.8% and 9.8%, respectively. The effective rate differs from the statutory rate in 2004 and 2003 because Town Bank was utilizing its net operating loss carryforwards as permitted by regulation to offset all federal income tax expense. The only expense recorded was current state tax due to the partial suspension of New Jersey loss carry forward utilization in 2004 and full suspension of New Jersey loss carry forward utilization in 2003.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Net Interest Income
Net interest income increased $798 thousand or 32.3% to $3.3 million in 2003 from $2.5 million in 2002. This increase is largely attributable to a growth of $22.3 million or 33.3% in average interest earning assets. Management utilized deposit cash inflows to fund the loan demand of Town Bank and to increase its investment securities portfolio for incremental yield compared to those available in overnight investments while maintaining liquidity. This strategy caused federal funds sold and other short term investments to decline. The loan portfolio represented 76.4% of average interest earning assets for 2003 compared to 73.0% for 2002. Average investment securities amounted to 13.8% of average interest earning assets for 2003 compared to 12.4% for 2002. Average federal funds sold and short term investments accounted for 9.8% of average interest earning assets for 2003 compared to 14.6% for 2002. The increase in loans outstanding reflects the increased efforts to obtain market share.
For 2003, average interest earning assets rose by $22.3 million or 33.3% over 2002. During 2003 the average yield on interest earning assets decreased by 45 basis points or 7.7% to 5.42% from 5.87% recorded for 2002. The net effect of these factors caused interest income to grow to $4.8 million for 2003 compared to $3.9
million for 2002, an increase of $900 thousand or 22.9%. The decline in the yield on interest earning assets was attributed to the lower interest rate environment that prevailed during 2003. Deposit inflows were utilized to fund the growth in interest earning assets.
Town Bank continually monitors the interest rates paid for all of its categories of interest bearing liabilities to reflect market conditions. Average interest bearing deposits rose by $15.7 million or 29.8% to $68.3 million during 2003. The average cost of interest bearing deposits decreased by 50 basis points to 2.29% during 2003 from 2.79% recorded during 2002. This decline is primarily the result of lower cost of funds attributed to lower levels of interest rates during the year.
The net interest margin, which represents net interest income as a percentage of average interest earning assets, was 3.66% for the year ended December 31, 2003 compared to 3.68% for the year ended December 31, 2002, a modest decline of 2 basis points. The change in the net interest margin is attributable to the factors discussed above.
Please refer to the Average Balance Sheet on pages 124 and 125 and the Rate Volume Analysis on page 126 comparing the years ended December 31, 2003 and 2002.
Non-Interest Income
For the year ended December 31, 2003, Town Bank recorded non-interest income of $242 thousand compared to $255 thousand for the year ended December 31, 2002, a decline of $13 thousand or 5.1%. This decline is largely attributable to a $12 thousand decrease in service charges on deposit accounts as Town Bank introduced free checking coupled with a $43 thousand decrease in gains on securities available for sale. Offsetting this in part was higher gains of $42 thousand from the sales of residential mortgages due to refinancing which was attributable to the lower interest rate environment.
Non-Interest Expense
The following table provides a summary of non-interest expense by category for the two years ended December 31, 2003 and 2002 (dollars in thousands).
Year ended
December 31, Dollar Percentage
2003 2002 Increase (Decrease)
---- ---- -------------------
Salaries and employee benefits $ 1,209 $ 1,134 $ 75 6.6%
Occupancy expense 293 268 25 9.3%
Data processing fees 294 254 40 15.7%
Other equipment expenses 144 124 20 16.1%
Advertising and promotions 69 35 34 97.1%
Professional fees 138 189 (51) -27.0%
Printing and forms 24 21 3 14.3%
Insurance 39 37 2 5.4%
Telephone, communications and messenger 80 62 18 29.0%
ATM processing fees 40 39 1 2.6%
All other 212 178 34 19.1%
------------------------------
Total non-interest expense $ 2,542 $ 2,341 $ 201 8.6%
==============================
|
For the year ended December 31, 2003, non-interest expense increased $201 thousand or 8.6% compared to the year ended December 31, 2002.
Salary and employee benefits rose by $75 thousand or 6.6% due to additions to staff. Occupancy expense grew by $25 thousand or 9.3% as a result of higher rent and real estate taxes, data processing fees increased by $40 thousand or 15.7% due to the growth of Town Bank, advertising and promotional costs increased $34 thousand or 97.1% due to increased levels of advertising, professional fees fell by $51 thousand or 27.0% as a result of a strategic planning consultant being utilized during 2002. All other expenses rose by $34 thousand or 19.1% due to the growth of Town Bank.
Income Taxes
Town Bank recorded an income tax provision of $76 thousand for 2003 compared to $22 thousand for 2002. The effective tax rate for 2003 and 2002 was 9.8% and 28.2%, respectively. The effective tax rate differs from the statutory rate in 2004 and 2003 because during these years, Town Bank utilized its net operating loss carryforwards as permitted by regulation to offset federal income tax expense. The only expense recorded was current state tax due to the full suspension of New Jersey loss carry forward utilization and a minimum tax imposed by New Jersey legislation.
Financial Condition - June 30, 2005 Compared to December 31, 2004 December 31, 2004 Compared to December 31, 2003
General
Total assets increased to $147.0 million at June 30, 2005 from $126.1 million at December 31, 2004, an increase of $20.9 million or 16.6%. This growth is primarily attributable to an increase in loans outstanding of $18.1 million or 16.5% from $109.9 million recorded at December 31, 2004 to $128.0 million for June 30, 2005. For the same periods, securities available for sale grew by $1.0 million or 7.80% from $12.9 million to $13.9 million.
Total assets grew to $126.1 million at December 31, 2004 from $103.1 million at December 31, 2003, an increase of $23.0 million or 22.3%. This increase is largely the result of loans outstanding growing by $30.2 million or 37.9% from $79.7 million recorded at December 31, 2003 to $109.9 million at December 31, 2004. Securities available for sale declined to $12.9 million at December 31, 2004 from $17.0 million at December 31, 2003, a decrease of $4.1 million or 24.1% as the maturing funds from this category were reinvested into the loan portfolio. Federal funds sold and other short term investments were zero at December 31, 2004 compared to $3.6 million at December 31, 2003. These funds were also redirected to the loan portfolio.
Liabilities
Deposits are the primary source of funds used by Town Bank in lending and for general corporate purposes. In addition to deposits, Town Bank may derive funds from principal repayments on loans, the sale of loans and securities designated as available for sale, maturing investment securities and borrowings from financial intermediaries. The level of deposit liabilities may vary significantly and are dependent upon prevailing interest rates, money market conditions, general economic conditions and competition. Town Bank's deposits consist of checking, savings and money market accounts along with certificates of deposit and individual retirement accounts. Deposits are obtained from individuals, partnerships, corporations, unincorporated businesses and non profit organizations throughout our market area. We attempt to control the flow of deposits primarily by pricing our deposit offerings to be competitive with other financial institutions in our market area but not necessarily offering the highest rate.
At June 30, 2005, total deposits amounted to $130.7 million reflecting an increase of $21.1 million or 19.3% from December 31, 2004. Total deposits grew from $89.6 million at December 31, 2003 to $109.6 million at December 31, 2004 an increase of $20.0 million or 22.3%. These increases are attributable to the growth in our market area along with marketing and advertising efforts.
Short term borrowings fell to $250 thousand at June 30, 2005 from $1.4 million recorded at December 31, 2004, a decline of $1.2 million or 82.5%. This decrease was the result of utilizing deposit inflows to pay down the borrowings.
Short term borrowings rose to $1.4 million at December 31, 2004 from $171 thousand at December 31, 2003. Town Bank borrowed funds against its federal funds line in order to fund the loan portfolio and the general operations of Town Bank.
Capital
Town Bank's shareholders' equity increased by $900 thousand or 6.2% to $15.4 million at June 30, 2005 compared to $14.5 million at December 31, 2004. The primary reason for this increase was net income recorded for the six months ended June 30, 2005. Also contributing was a $13 thousand decline in other comprehensive loss and the issuance of eight thousand shares of common stock through options being exercised. The issuance of the shares accounted for shareholders' equity increasing by $82 thousand.
For the year ended December 31, 2004, shareholders' equity amounted to $14.5 million growing by $1.5 million or 11.5% from December 31, 2003 level of $13.0 million. This growth is attributable to net income recorded for the year and the issuance of shares amounting to $182 thousand. Offsetting these items was an increase of accumulated other comprehensive loss of $74 thousand that is related to the change in value of Town Bank securities available for sale portfolio, net of tax.
Securities Portfolio
Investments totaled $13.9 million at June 30, 2005 compared to $12.9 million at December 31, 2004, an increase of $1.0 million or 7.8%. At December 31, 2003, investment securities amounted to $17.0 million. During 2004, investments securities declined by $4.1 million or 24.1% from the December 31, 2003 level of $17.0 million. The maturing securities were used to fund the growth in the loan portfolio. For the six months ended June 30, 2005 and the year ended December 31, 2004 no gains from the sales of securities were recorded.
At June 30, 2005 and December 31, 2004, Town Bank had no federal funds sold as deposit growth was used to fund the loan portfolio. At December 31, 2003, federal funds sold and other short term investments amounted to $3.6 million and represented excess funds invested overnight.
The following table sets forth the carrying value of the securities available for sale portfolio as of June 30, 2005 and December 31, 2004, 2003 and 2002 (in thousands).
December 31,
------------
June 30, 2005 2004 2003 2002
---------------------------------------------------
Obligations of United States Government sponsored
agencies $ 13,917 $ 12,907 $ 17,013 $ 14,135
===================================================
|
The following table presents the maturities and average weighted yields of the securities portfolio at June 30, 2005 and December 31, 2004. Securities available for sale are carried at amortized cost in the table for purposes of calculating the weighted average yield. Weighted average yield is calculated by dividing income within each maturity range by the outstanding amount of the related investment.
United States Government Sponsored Agency Obligations
Carrying Weighted
-------- Average
Amortized Cost Value Yield
-------------- ----- -----
Within 1 year $ 11,000 $ 10,920 2.23%
Over 1 to 5 years 2,996 2,997 3.94%
----------------------
Total $ 13,996 $ 13,917 2.60%
======================
|
United States Government Sponsored Agency Obligations
Carrying Weighted
-------- Average
Amortized Cost Value Yield
-------------- ----- -----
Within 1 year $ 8,000 $ 7,947 1.87%
Over 1 to 5 years 5,000 4,960 2.49%
----------------------
Total $ 13,000 $ 12,907 2.10%
======================
|
Loan Portfolio
The following table summarizes total loans outstanding by loan category and amount on the dates indicated (dollars in thousands).
December 31,
June 30, ----------------------------------------------------------------
2005 % 2004 % 2003 %
---- - ---- - ---- -
Real estate loans - commercial $ 37,835 29.57% $ 36,102 32.84% $ 26,988 33.87%
Home equity loans and second
mortgages 18,984 14.84% 18,681 16.99% 18,387 23.07%
Commercial and industrial 26,359 20.60% 22,240 20.23% 19,123 24.00%
Construction and land
development 44,600 34.86% 32,740 29.78% 15,044 18.88%
Consumer 180 0.14% 161 0.15% 150 0.19%
---------------------------------------------------------------------------
Total $ 127,958 100.00% $ 109,924 100.00% $ 79,692 100.00%
========= ========= =========
Less: allowance for loan losses (1,387) (1,186) (801)
--------- --------- ---------
Net loans $ 126,571 $ 108,738 $ 78,891
========= ========= =========
December 31,
----------------------------------------------------------------------------
2002 2001 2000 %
---- ---- ---- -
Real estate loans - commercial $ 22,856 37.47% $ 11,821 31.53% $ 6,700 29.34%
Home equity loans and second
mortgages 17,039 27.93% 12,384 33.03% 8,828 38.66%
Commercial and industrial 16,752 27.46% 12,878 34.35% 6,354 27.83%
Construction and land
development 4,082 6.69% -- 0.00% 265 1.16%
Consumer 275 0.45% 411 1.10% 687 3.01%
---------------------------------------------------------------------------
Total $ 61,004 100.00% $ 37,494 100.00% $ 22,834 100.00%
========= ========= =========
Less: allowance for loan losses (610) (338) (185)
--------- --------- ---------
Net loans $ 60,394 $ 37,156 $ 22,649
========= ========= =========
Loans held for sale $ -- $ 206 5.49% $ --
========= ====================================
|
For the six months ended June 30, 2005, net loans increased by $17.9 million or 16.5% to $126.6 million from their December 31, 2004 level of $108.7 million. This growth was primarily recorded in the construction and land development portfolio which grew by $11.9 million or 36.4%. Commercial and industrial loans rose by $4.2 million or 18.9% from $22.2 million recorded at December 31, 2004 compared to $26.4 at June 30, 2005.
For the year ended December 31, 2004, net loans increased by $29.8 million or 37.8% from $78.9 million recorded at December 31, 2003. The growth was primarily recorded in commercial real estate loans and construction and land development. These categories rose by $9.1 million or 33.7% and $17.7 million or more than 100.0% respectively from their December 31, 2003 levels of $27.0 and $15.0 million.
The increase in the construction and land development portfolio is largely the result of the local housing market while the increase in the commercial real estate portfolio is due to refinancing opportunities and marketing efforts.
For the periods presented, home equity loans and second mortgages and other consumer loans remained essentially the same.
The following tables show the maturity of all loans and segregates loans with fixed interest rates from those with floating or variable interest rates due after one year as of June 30, 2005 and December 31, 2004 (in thousands).
After one After
Within but within five
June 30, 2005 one Year five years years Total
------------- --------------- ---------------- ------------ --------------
Total loans $ 42,433 $ 23,745 $ 61,780 $ 127,958
=============== ================ ============ ==============
Amount of loans due after one year based
upon:
Fixed interest rates $ 1,981 $ 9,736
Variable interest rates 21,764 52,044
---------------- ------------
Total $ 23,745 $ 61,780
================ ============
After one
but within After five
December 31, 2004 Within one Year five years years Total
----------------- --------------- ---------------- ------------ --------------
Total loans $ 32,502 $ 18,542 $ 58,880 $ 109,924
=============== ================ ============ ==============
Amount of loans due after one year based upon:
Fixed interest rates $ 1,738 $ 8,833
Variable interest rates 16,804 50,047
---------------- ------------
Total $ 18,542 $ 58,880
================ ============
|
Asset Quality
Non-Performing Loans
Loans are considered to be non-performing if they are on a non-accrual basis, past due 90 days or more and still accruing interest or have been renegotiated to provide a reduction of or deferral of interest or principal because of a weakening in the financial positions of the borrowers. A loan which is past due 90 days or more and still accruing interest remains on accrual status only when it is both adequately secured as to principal and is in the process of collection. Town Bank had no non-performing loans at or for the six months ended June 30, 2005 and at or for the years ended December 31, 2004, 2003, 2002, 2001, and 2000.
Potential Problem Loans
In addition to non-performing loans and loans past due 90 days or more and still accruing interest, Town Bank maintains a list of loans where management has identified problems which potentially could cause such loans to be placed on non-accrual status in future periods. Loans on this list are subject to heightened scrutiny and more
frequent review by management. The Bank had a potential problem loan at June 30, 2005 and December 31, 2004 with a balance of approximately $1.8 million. At December 31, 2003, Town Bank had no potential problem loans.
Allowance for Loan Losses
The following tables summarize Town Bank's allowance for loan losses for the six months ended June 30, 2005 and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000 (dollars in thousands).
December 31,
June 30, ------------------------
2005 2004 2003
---------- ---------- ----------
Balance, beginning of year $ 1,186 $ 801 $ 610
Provision charged to expense 201 385 191
Recoveries of loans charged off - commercial
and industrial -- -- --
Loans charged off - commercial and industrial -- -- --
---------- ---------- ----------
Balance, end of year $ 1,387 $ 1,186 $ 801
========== ========== ==========
Ratio of allowance for loan losses to total
loans 1.08% 1.08% 1.01%
Ratio of net charges to average loans
outstanding 0.00% 0.00% 0.00%
December 31,
---------------------------------------
2002 2001 2000
---------- ---------- ----------
Balance, beginning of year $ 338 $ 185 $ 115
Provision charged to expense 303 153 70
Recoveries of loans charged off - commercial
and industrial 109 -- --
Loans charged off - commercial and industrial (140) -- --
---------- ---------- ----------
Balance, end of year $ 610 $ 338 $ 185
========== ========== ==========
Ratio of allowance for loan losses to total 1.00% 0.90% 0.81%
loans
Ratio of net charges to average loans
outstanding 0.06% 0.00% 0.00%
|
The allowance for loan losses is a valuation reserve available for loan losses inherent in the loan portfolio. Credit losses primarily arise from Town Bank's loan portfolio, but may also be derived from other credit related sources. 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.
Allocation of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance for loan losses by category of loans and the percentage of loans in each category to total loans at June 30, 2005 and December 31, 2004, 2003, 2002, 2001 and 2000. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories (dollars in thousands).
June 30, 2005 December 31, 2004 December 31, 2003
------------------- ------------------- -------------------
Percent of Percent of Percent of
loans to loans to loans to
total total total
Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ -----
Real estate loans -
commercial $ 289 29.57% $ 234 32.84% $ 144 33.87%
Home equity loans and
second mortgages 151 14.84% 151 16.99% 136 23.07%
Commercial and
industrial 345 20.60% 267 20.23% 214 24.00%
Construction and land
development 405 34.86% 345 29.78% 177 18.88%
Consumer 2 0.14% 1 0.15% 1 0.19%
Unallocated 195 0.00% 188 0.00% 129 0.00%
------------------- ------------------- -------------------
Total $ 1,387 100.00% $ 1,186 100.00% $ 801 100.00%
=================== =================== ===================
December 31, 2002 December 31, 2001 December 31, 2000
------------------- ------------------- -------------------
Percent of Percent of Percent of
loans to loans to loans to
total total total
Amount loans Amount loans Amount loans
------ ----- ------ ----- ------ -----
Real estate loans -
commercial $ 92 37.47% $ 41 31.53% $ 26 29.34%
Home equity loans and
second mortgages 108 27.93% 80 33.03% 51 38.66%
Commercial and
industrial 158 27.46% 184 34.35% 96 27.83%
Construction and land
development 75 6.69% -- 0.00% 10 1.16%
Consumer 2 0.45% 2 1.10% 2 3.01%
Unallocated 175 0.00% 31 0.00% -- 0.00%
------------------- ------------------- -------------------
Total $ 610 100.00% $ 338 100.00% $ 185 100.00%
=================== =================== ===================
|
Deposits
One of Town Bank's primary strategies is the accumulation and retention of core deposits. Core deposits consist of all deposits, except certificates of deposits in excess of $100,000. Total deposits increased $21.1 million or 19.3% from December 31, 2004, to their June 30, 2005 level of $130.7 million. Total deposits rose $20.0 million or 22.3% to $109.6 million at December 31, 2004 from $89.6 million at December 31, 2003.
Core deposits at June 30, 2005 accounted for 76.8% of total deposits compared to 82.4% at December 31, 2004. During 2005, Town Bank marketed a certificate of deposit program in its local market area to increase deposits to fund the loan portfolio. This program accounted for the decline in the core deposit ratio. At December 31, 2003, core deposits totaled 74.3% of total deposits.
The following table reflects the average balances and average rates paid on deposits for the six months ended June 30, 2005 and for the years ended December 31, 2004, 2003, and 2002.
(dollars in thousands) June 30, 2005 December 31, 2004 December 31, 2003 December 31, 2002
------------- ----------------- ----------------- -----------------
Average Average Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ---- ------- ----
Non interest bearing
demand deposits $ 19,255 0.00% $ 18,030 0.00% $ 14,940 0.00% $ 11,071 0.00%
Interest bearing
demand 8,050 1.00% 5,889 0.53% 6,810 0.57% 5,849 1.06%
Savings 31,039 1.85% 27,022 1.83% 6,037 1.28% 3,258 1.84%
Money market accounts 9,382 1.20% 11,086 0.96% 12,696 1.23% 14,081 1.50%
Certificates of
deposit less than
$100,000 30,702 3.51% 22,987 3.18% 22,655 3.37% 15,380 4.02%
Certificates of
deposit of $100,000
or more 24,702 3.31% 18,999 2.45% 20,147 2.65% 14,062 3.41%
-------- -------- -------- --------
Total deposits $123,130 2.16% $104,013 1.76% $ 83,285 1.88% $ 63,701 2.30%
======== ======== ======== ========
|
The following table sets forth a summary of the maturities of certificates of deposit $100,000 and over at June 30, 2005 and December 31, 2004 (in thousands).
Three months Over three Over 1 year Over 3
June 30, 2005 or less to 12 months to 3 years years Total
------------- ------- ------------ ---------- ----- -----
Less than $100,000 $ 20,724 $ 5,821 $ 5,720 $ 1,366 $ 33,631
$100,000 and over 22,144 3,424 2,836 1,905 30,309
--------------------------------------------------------------
Total $ 42,868 $ 9,245 $ 8,556 $ 3,271 $ 63,940
==============================================================
Three months Over three Over 1 year Over 3
December 31, 2004 or less to 12 months to 3 years years Total
----------------- ------- ------------ ---------- ----- -----
Less than $100,000 $ 3,356 $ 9,446 $ 6,775 $ 1,518 $ 21,095
$100,000 and over 4,384 8,786 4,222 1,907 19,299
--------------------------------------------------------------
Total $ 7,740 $ 18,232 $ 10,997 $ 3,425 $ 40,394
==============================================================
|
Other Borrowings
Town Bank's short term borrowing position declined to $250 thousand at June 30, 2005 from $1.4 million at December 31, 2004. The decrease was primarily due to the growth in deposits enabling Town Bank to pay down its short term borrowings.
Town Bank currently is a member of Atlantic Central Bankers Bank and utilizes this Bank to borrow funds through its federal funds borrowing line in an amount up to $3.6 million. These borrowings are priced on a daily basis. Town Bank also maintains a secured repurchase agreement line in an amount up to $10 million with Citigroup Smith Barney. The borrowings can be priced at intervals from one day up to one year. Town Bank also maintains treasury, tax and loan notes (TT&L) due on demand with the United States Treasury. Interest on TT&L is computed at a rate equal to 25 basis points below the weekly average federal funds rate.
Borrowings are summarized as following (dollars in thousands).
At or For the At or For the
Six Months Ended Year ended
June 30, 2005 December 31, 2004
--------------------------------------------------------------------------------------
Federal
Federal Funds Repurchase Funds Repurchase
Purchased Agreements TT&L Purchased Agreements TT&L
--------- ---------- ---- --------- ---------- ----
Balance at end of period $ -- $ -- $ 250 $ 1,180 $ -- $ 250
Average balance during the
period 132 889 131 33 -- 152
Maximum month end balance
during the period -- 4,600 250 1,180 -- 250
Weighted average rate
during the period 2.75% 2.50% 1.93% 2.53% -- 1.11%
Rate at end of period -- -- 2.91% 2.78% -- 1.87%
|
For the years ended December 31, 2003 and 2002, short term borrowings are not considered material.
Liquidity
Liquidity defines the ability of Town Bank to generate funds to support asset growth, meet deposit withdrawals, maintain reserve requirements and otherwise operate on an ongoing basis. An important component of a bank's asset and liability management structure is the level of liquidity which is available to meet the needs of its customers and requirements of creditors. The liquidity needs of Town Bank are primarily met by cash on hand; Town Bank's federal funds sold position, maturing investment securities and short-term borrowings on a temporary basis. Town Bank invests the funds not needed to meet its cash requirements in overnight federal funds sold. With adequate deposit inflows over the past six months and coupled with the above mentioned cash resources, management is maintaining a level of short-term assets which are believed to be adequate.
Contractual Obligations
In the normal course of business, Town Bank becomes party to various outstanding contractual obligations that will require future cash outflows.
The following table sets forth the contractual obligations of Town Bank by expected payment period as of June 30, 2005 and December 31, 2004, respectively (in thousands).
Payments due by period at June 30, 2005
---------------------------------------
Less than After
one year 1 to 3 years 3 to 5 years 5 years Total
-------- ------------ ------------ ------- -----
Operating lease obligations $ 96 $ 176 $ -- $ -- $ 272
Certificates of deposits 52,113 8,556 3,271 -- 63,940
--------------------------------------------------------------
Total $ 52,209 $ 8,732 $ 3,271 $ -- $ 64,212
==============================================================
Payments due by period at December 31, 2004
-------------------------------------------
Less than After
one year 1 to 3 years 3 to 5 years 5 years Total
-------- ------------ ------------ ------- -----
Operating lease obligations $ 96 $ 192 $ 32 $ -- $ 320
Certificates of deposits 25,972 10,997 3,425 -- 40,394
--------------------------------------------------------------
Total $ 26,068 $ 11,189 $ 3,457 $ -- $ 40,714
==============================================================
|
Off-Balance Sheet Arrangements
Town Bank's financial statements do not reflect off-balance sheet arrangements that are made in the normal course of business. These off-balance sheet arrangements consist of unfunded loans and letters of credit made under the same standards as on-balance sheet instruments. These instruments have fixed maturity dates, and because many of them will expire without being drawn upon, they do not generally present any significant liquidity risk to Town Bank.
Management believes that any amounts drawn upon these commitments can be funded in the normal course of operations.
The following table sets forth the off-balance sheet arrangements of Town Bank at June 30, 2005 and December 31, 2004.
June 30, 2005 December 31, 2004
----------------- -----------------
Commitments to extend loans $ 49,744 $ 34,270
Standby letters of credit 1,474 1,399
----------------- -----------------
Total off balance sheet arrangements $ 51,218 $ 35,669
================= =================
|
Capital Resources
Town Bank is subject to various regulatory and capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on Town Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Town Bank must meet specific capital guidelines that involve quantitative measures of Town Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Town Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require Town Bank to maintain minimum amounts and ratios, set forth in the following tables of total capital and Tier 1 capital to risk weighted assets, and of Tier 1 Capital to average assets, leverage ratio. At June 30, 2005, management believes that it has met all capital adequacy requirements that it is subject to.
As of December 31, 2004, the most recent notification from the State of New Jersey Department of Banking categorized Town Bank as "well capitalized" under the regulatory framework for prompt corrective action. The most recent notification from Town Bank's federal regulator, the FDIC was as of June 30, 2003 and it also classified Town Bank as "well capitalized." To be considered well capitalized, Town Bank must maintain minimum total risked based, Tier 1 risk based and leverage ratios as set forth in the following tables.
FDIC Requirements
June 30, 2005
Actual Adequately Capitalized Well Capitalized
------ ---------------------- ----------------
Capital Ratio Capital Ratio Capital Ratio
------- ----- ------- ----- ------- -----
Leverage $ 15,543,000 10.72% $ 5,797,000 4.00% $ 7,247,000 5.00%
Risk Based:
Tier 1 $ 15,543,000 12.20% $ 5,095,000 4.00% $ 7,643,000 6.00%
Total $ 16,840,000 13.22% $10,190,000 8.00% $12,738,000 10.00%
137
|
December 31, 2004
Leverage $ 14,544,000 11.44% $ 5,083,000 4.00% $ 6,354,000 5.00%
Risk Based:
Tier 1 $ 14,544,000 13.06% $ 4,455,000 4.00% $ 6,683,000 6.00%
Total $ 15,730,000 14.12% $ 8,910,000 8.00% $11,138,000 10.00%
December 31, 2003
Leverage $ 12,998,000 12.58% $ 4,132,000 4.00% $ 5,165,000 5.00%
Risk Based:
Tier 1 $ 12,998,000 15.21% $ 3,419,000 4.00% $ 5,128,000 6.00%
Total $ 13,799,000 16.15% $ 6,838,000 8.00% $ 8,546,000 10.00%
|
The prompt corrective action regulations define specific capital categories based upon an institution's capital ratios. The capital categories in descending order are "well capitalized", "adequately capitalized", "under capitalized", "significantly undercapitalized", and "critically undercapitalized." Institutions categorized as "undercapitalized" or lower are subject to certain restrictions, not able to pay dividends and management fees, restricted on asset growth and executive compensation and also are subject to increased supervisory monitoring, among other matters. The regulators may impose other restrictions. Once an institution becomes "critically undercapitalized" it must be placed in receivership or conservatorship within 90 days. To be considered "adequately capitalized." An institution must generally have Tier 1 capital to total asset ratio of at least 4%, a Tier 1 risk-based capital ratio of at least 4%, and a total risked based capital ratio of at least 8%. An institution is deemed to be "critically undercapitalized" if it has a tangible equity ratio, Tier 1 capital, net of all intangibles, to tangible capital of 2% or less.
Under the risk based capital guideline regulations, a banking organization's assets and certain off balance sheet items are classified into categories, with the least capital required for the category deemed to have the least risk, and the most capital required for the category deemed to have the most risk. Under current regulations, banking organizations are required to maintain total capital of 8.00% of risk weighted assets, of which 4.00% must be in core or Tier 1 capital.
Interest Rate Sensitivity
Interest rate sensitivity is a measure of the relationship between earning assets and supporting funds that tend to be sensitive to changes in interest rates during comparable time periods.
The Asset Liability Committee of Town Bank is responsible for managing Town Bank's interest rate sensitivity to optimize net interest income while maintaining an asset and liability mix that balances the liquidity needs of Town Bank and its interest rate risk. Interest rate risk arises when an asset matures or its corresponding interest rate changes, during a time period different from that of the supporting liability and vice versa.
The most common method of estimating interest rate risk is to measure the maturity and repricing relationship between interest-earning assets and interest-bearing liabilities at specific points in time, typically one year. Under this method, an asset-sensitive gap means an excess of interest sensitive assets over interest sensitive liabilities, while a liability sensitive gap means an excess of interest sensitive liabilities compared to interest sensitive assets.
The Asset and Liability Committee of Town Bank monitors and manages interest rate sensitivity through simulation and market value of equity analyses in order to avoid unacceptable fluctuations in Town Bank's net interest income and earnings due to interest rate changes. Town Bank's model includes certain management assumptions based upon historical experience and the expected behavior of customers during different interest rate scenarios. These assumptions include principal repayments for our loans and investment securities and the projected reaction of non-maturity deposits by the degree of interest rate sensitivity.
Assets and liabilities with similar repricing characteristics may not reprice at the same time or to the same extent. As a result, Town Bank's model may not necessarily predict the impact of changes in general levels of interest rates on net interest income.
Management believes that the simulation of net interest income in different interest rate environments provides a more meaningful and dynamic measure of interest rate risk. Income simulation analysis captures not only the potential of all assets and liabilities to mature or reprice, but the probability that such would occur. Income simulation also permits management to assess the probable effects on the balance sheet of interest rate changes but also provides the ability to measure proposed strategies and to respond to changes in the balance sheet and interest rates.
Town Bank's income simulation model analyzes interest rate sensitivity by projecting net interest income over the next twelve months in an interest rate scenario that remains flat compared to alternative scenarios. Management reviews and adjusts its interest rate risk management process in response to changes in the economy. The model incorporates assumptions regarding the level of interest rate or changes in balances of non maturity deposit offerings such as non-interest and interest bearing demand deposits, savings accounts and money market deposits. The assumptions incorporate historical trends and the anticipated customer behavior. Interest rate ceilings and floors are also incorporated as applicable. The anticipated change in prepayments on commercial and consumer mortgages in each rate environment are also included in the analysis. Federal Agency securities with call features, which management believes would be called, are reported at the earlier of the next call date or maturity date. Additionally, the impact of planned growth and anticipated new business activities are incorporated into the model. Non-maturity deposits are incorporated with an average duration of approximately 36 months. Interest rate shocks and call dates are instantaneous and held constant.
Town Bank's Asset Liability Committee policy has established limits for interest rate risk based on the percentage change in net interest income we would incur in differing interest rate scenarios over a twelve-month time horizon. Our policies provide for a variance of no more than 10% of net interest income at a 100 and 200 basis point increase or decrease.
At June 30, 2005, Town Bank's income simulation model indicates the level of interest rate risk as presented below (dollars in thousands).
Gradual Change in Interest Rates
---------------------------------------------------------
200 basis point increase 200 basis point decrease
------------------------ ------------------------
Twelve Month Horizon:
Net Interest Income $ 825 13.53% $ (618) -10.14%
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The table set forth above indicates at June 20, 2005, in the event of a 200 basis point increase in interest rates, Town Bank would be expected to experience an increase of $825 thousand or 13.5% in net interest income. In the event of a 200 basis point decline in interest rates, Town Bank would be expected to experience a decrease of $618 thousand or 10.1% in net interest income. This data does not reflect any future actions we may take in response to changes in interest rates, such as changing the mix of our assets and liabilities, which could change the results of the net interest income calculations. While the percentage changes are outside of our policy guidelines, our board of directors is aware of this situation and management is currently evaluating different strategies to bring the expected change within our policy guidelines.
At December 31, 2004, Town Bank's income simulation model indicates the level of interest rate risk as presented below.
Gradual Change in Interest Rates
---------------------------------------------------------
200 basis point increase 200 basis point decrease
------------------------ ------------------------
December 31, 2004
Twelve Month Horizon:
Net Interest Income $ 947 19.56% $ (834) -17.22%
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BUSINESS OF TOWN BANK
Town Bank was organized in 1998 as a New Jersey state chartered bank in Westfield, New Jersey by a group of prominent local business and community leaders to provide a community banking alternative to larger institutions. Town Bank commenced operations in October, 1998, and conducts business from two banking locations in Westfield. Town Bank provides a wide-range of commercial and consumer banking products and services, including personal and business checking accounts and time deposits, money market accounts and regular savings accounts. Town Bank's deposits are insured by the Bank Insurance Fund of the FDIC up to the statutory limits.
Town Bank services the following market segments within the surrounding Union County, New Jersey target market:
o small and medium-sized businesses, and the owners and managers of these entities;
o professionals and managers of locally based companies; and
o individual consumers.
Town Bank believes that these segments are the most underserved by local branches of regional and super-regional financial institutions. In order to serve this market, Town Bank offers a variety of banking products and its executive officers are available to meet with customers during nontraditional banking hours. Town Bank is an authorized SBAExpress lender under the U.S. Small Business Administration loan program. In addition, to further serve Town Bank target markets, Town Bank has extended business hours. Town Bank's customer service representatives are available during Saturday. Town Bank also provides the convenience of 24 hour banking through participation in a world-wide ATM network.
Market Opportunity and Strategy
Town Bank's primary trade area includes the town of Westfield as well as the immediately contiguous portions of Clark, Cranford, Fanwood, Garwood, Mountainside and Scotch Plains in Union County, New Jersey. The Westfield area is a bedroom community for New York City, approximately 25 miles to the east, and is easily accessible by major highways or rail. There are several factors that Town Bank believes contribute to the economic vitality of the market area, including (i) an affluent population; (ii) the retail and service sectors servicing the affluent; (iii) the manufacturing, light industrial and warehouse sectors that utilize the regional rail and road networks; and (iv) the area's large labor pool.
Town Bank's market strategy is focused on delivering to individuals and small and medium-sized businesses exceptional client service and effective financial advice through friendly and personal banking professionals who understand and care about the broad financial needs and objectives of its clients. Town Bank's strategy is to enhance its regional presence and deliver shareholder value by:
o increasing deposit and loan market share in the Westfield area;
o delivering higher levels of personalized service than its competitors, particularly large banking institutions;
o focusing on its core client base - small and medium sized businesses, the owners and managers of these entities, professional and middle managers of locally based companies, and individual consumers; and
o growing in a safe and sound manner and enhancing the Bank's profitability.
Loan Portfolio
Town Bank's loan portfolio consists primarily of loans secured by real estate, and commercial and consumer loans. Town Bank's loans are primarily to businesses and individuals located in the greater Union County, New Jersey area. Town Bank believes that customer service, competitive rate structures and selective marketing have enabled it to gain and maintain a share of the local market for loans. Bank mergers have also contributed to its efforts to attract borrowers.
The following is a summary description of the components of Town Bank's loan portfolio:
Town Bank currently sells all fixed rate residential mortgages it originates on the secondary market and records fee income on the sale. Town Bank does not retain the servicing rights for such loans.
Town Bank generates loan applications through solicitation in its primary market area, through referrals from past or current customers and directors of the bank, and through its network of attorneys, accountants and other professionals. Town Bank advertises in newspapers and with local organizations and has established a website on the Internet at www.townbank.com.
Asset Quality
As Town Bank continues to invest and leverage its capital, Town Bank intends that loans will be its principal earning assets. An inherent risk in lending is the borrower's ability to repay the loan under its existing
terms. Risk elements in a loan portfolio include non-accrual loans (as defined below), past due and restructured loans, potential problem loans, loan concentrations and other real estate owned, acquired through foreclosure or a deed in lieu of foreclosure.
Non-performing assets include loans that are not accruing interest (non-accruing loans) as a result of principal or interest being in default for a period of 90 days or more and other real estate owned. When a loan is classified as non-accruing, interest accruals cease and all past due interest is reversed and charged against current income. Until the loan becomes current, any payments received from the borrower are applied to outstanding principal unless Town Bank determines that the financial condition of the borrower and other factors merit recognition of such payments as interest.
Town Bank maintains a risk rating system for grading all non-consumer loans. The purpose of the system is to detect changes in loan quality for individual credits and for homogenous pools of loans in the portfolio. All such credits are assigned a numerical rating in accordance with criteria established in eight categories ranging from #1-Excellent to #8-Loss. The initial rating is assigned at inception and reviewed annually when financial statements are received and at other times when the rating of the loan may be in question based upon certain factors. An independent loan review is conducted to test these ratings in its normal course and resolve any rating differences. Any loan, including unrated consumer credits, may be assigned to a watch list of credits, identified by management as credits warranting special attention for a variety of reasons which might bear on ultimate collectibility.
In addition to Town Bank's internal rating system, the FDIC has a classification system for problem loans and other lower quality assets, classifying them as "substandard," "doubtful" or "loss." A loan is classified as "substandard" when it is inadequately protected by the current value and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that some loss may occur if the deficiencies are not corrected.
A loan is classified "doubtful" when it has all the weaknesses inherent in one classified as substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions, and values, highly questionable and improbable. A loan is classified as "loss" when it is considered uncollectible and of such little value that the asset's continuance as an asset on the balance sheet is not warranted.
Allowance for Loan Losses
Town Bank maintains an allowance for loan losses at a level that it believes is adequate to provide for probable losses inherent in the loan portfolio. Loan losses are charged directly to the allowance when they occur and any recovery is credited to the allowance when realized. Risks from the loan portfolio are analyzed on a continuous basis by Town Bank's officers, and periodically by its outside independent loan review auditors, its directors on the Loan Committee and its board of directors as a whole.
A risk system, consisting of multiple grading categories, is utilized as an analytical tool to assess risk and set appropriate reserves. Along with the risk system, management further evaluates risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors management feels deserve recognition in establishing an appropriate reserve. These estimates are reviewed at least quarterly, and as adjustments become necessary, they are realized in the periods in which they become known. Additions to the allowance are made by provisions charged to expense and the allowance is reduced by net charge-offs (i.e., loans judged to be uncollectible and charged against the reserve, less any recoveries on such loans).
Although management attempts to maintain the allowance at a level deemed sufficient to cover any losses, future additions to the allowance may be necessary based upon any changes in market conditions. In addition, various regulatory agencies periodically review Town Bank's allowance for loan losses, and may require it to take additional provisions based on their judgments about information available to them at the time of their examination.
Investment Securities
Town Bank maintains an investment portfolio to fund loans, possible deposit outflows and other liquidity needs. The investment portfolio also provides interest income from excess liquidity pending deployment in new loans. The portfolio is composed primarily of obligations of United States government sponsored agencies. The weighted average life of the portfolio is approximately 20 months.
Deposits
Deposits are Town Bank's primary source of funds.
Town Bank emphasizes relationships with commercial and individual customers and seek to obtain transaction accounts, which are frequently non-interest bearing deposits or lower cost interest bearing checking and money market deposit accounts.
Employees
As of September 30, 2005, Town Bank had 25 employees. Town Bank employees are not members of any collective bargaining group, and Town Bank believes that its relationship with its employees is good.
Competition
Town Bank faces substantial competition for deposits and creditworthy borrowers, from both New Jersey and regionally-based commercial banks, savings banks and savings and loan associations, most of which have assets, capital and lending limits greater than Town Bank. Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities. Many of these institutions have larger lending limits and, in certain cases, lower funding costs (the price a bank must pay for deposits and other borrowed monies used to make loans to customers) than does Town Bank.
In addition to having established deposit bases and loan portfolios, other larger regional commercial and savings institutions have the ability to support larger marketing efforts and to allocate a greater amount of resources to locations and products perceived as profitable. Town Bank believes that it is able to compete with these larger institutions primarily upon the basis of high quality, personal service to customers, customer access to decision makers, and competitive interest rates and fees. In addition, Town Bank enters into loan participations with other financial institutions, enabling it to meet the credit needs of customers with larger borrowing requirements.
Legal Proceedings
At this time, Town Bank is not a party to any legal proceeding.
Description of Property
Town Bank conducts business from two banking locations in Westfield, New Jersey, and has obtained banking approvals to open a third branch location in Cranford, New Jersey.
Town Bank owns its 3,000 square foot branch facility located at 44 Elm Street in Westfield, opened in 2001. Town Bank leases its headquarters facility, a 3,000 square foot building located at 520 South Avenue, Westfield, New Jersey. With respect to the leased property, Town Bank entered into a lease agreement which commenced in 1998 providing for an initial term of five years, with options to renew for three successive terms of five years each. The landlord disputes Town Bank's contention that Town Bank properly exercised the first renewal option when the initial term expired in 2003. The landlord and Town Bank are in discussions towards resolution of any and all issues relating to the exercise of the renewal option. Although the discussions have not been concluded, a resolution would likely involve modification of the lease terms.
Town Bank has acquired a parcel of vacant land at 245-249 North Avenue in Cranford, New Jersey and has obtained approvals from New Jersey state and federal banking authorities to open a bank branch there. Town Bank is pursuing municipal site plan and other approvals to construct the facility and anticipate opening the location for business in late 2006. Town Bank also leases vacant land in Fanwood, New Jersey for a potential branch location. The lease agreement, dated September 13, 2005, provides for a term of 15 years beginning October 1, 2006, with three five-year tenant options, at a monthly rental fee of $8,650 (subject to annual adjustments beginning January 1, 2009). The landlord is seeking municipal approvals to construct a building of approximately 3,000 square feet, and Town Bank is seeking banking approvals to operate a branch location there.
MARKET PRICE OF AND DIVIDENDS ON TOWN BANK COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Town Bank common stock is traded on the OTC Bulletin Board under the symbol "TBWN.OB." The following table shows the high and low bid prices for Town Bank common stock as reported on the OTC Bulletin Board during 2003 and 2004, the first three quarters of 2005, and the period since the beginning of the fourth quarter. While Town Bank common stock has been traded on the OTC Bulletin Board since December 2000, trading has been very limited and there have been many days for which no trades have been reported. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
2005
HIGH LOW
---- ---
4th qtr. through _______ $ $
September 30 (3rd qtr.) $19.00 $13.00
June 30 (2nd qtr.) $13.75 $12.00
March 31 (1st qtr.) $15.50 $13.25
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2004
HIGH LOW
---- ---
December 31 (4th qtr.) $15.00 $11.75
September 30 (3rd qtr.) $11.99 $8.50
June 30 (2nd qtr.) $10.55 $9.10
March 31 (1st qtr.) $10.00 $8.48
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2003
HIGH LOW
---- ---
December 31 (4th qtr.) $9.29 $7.30
September 30 (3rd qtr.) $7.86 $6.67
June 30 (2nd qtr.) $8.10 $6.90
March 31 (1st qtr.) $8.10 $7.62
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On December __, 2005, the closing sale price for Town Bank common stock was reported by OTC Bulletin Board as $_.__ per share. As of such date, the approximate number of holders of record of Town Bank common stock was ____ and the approximate number of beneficial holders of Town Bank common stock was ____.
On June 1, 2005, Town Bank distributed a 5% stock dividend. All prices have been restated to reflect this stock dividend.
Each share of Town Bank common stock is entitled to participate equally in dividends, which are payable when and as declared by the board of directors out of funds legally available for that purpose. Town Bank's ability to pay dividends is regulated by state law and by the FDIC. As provided by New Jersey statues, dividends may not be paid unless Town Bank's capital will remain unimpaired following the dividend and unless either (i) Town Bank will have a surplus of not less than 50% of its capital stock, or (ii) the dividend will not reduce Town Bank's surplus. Additionally, under certain circumstances, approval of the Commissioner of the New Jersey Department of Banking and Insurance may be required with respect to the issuance of dividends.
Historically, Town Bank has not paid cash dividends. If the acquisition is completed, any Town Bank dividends will be paid to Community Partners, and Town Bank's dividend policy will be based primarily on the needs of its parent holding company.
TOWN BANK QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and Results of Operations of Town Bank - Interest Rate Sensitivity" on page 138.
MANAGEMENT OF COMMUNITY PARTNERS
Board of Directors of Community Partners
Members of Community Partners Board of Directors. The board of directors of Community Partners is comprised of eight individuals, five of whom were designated by Two River and three of whom were designated by Town Bank. The affirmative vote of a majority of the members of the board of directors of Community Partners will be required to change the size of Community Partners board of directors. Following completion of the acquisition, neither bank will have any continuing right to designate directors to the holding company board.
The individuals named below are the directors of Community Partners:
Name Age Title
-------------------------------- --------- --------------------------------------------------
Charles T. Parton 64 Chairman of the Board of each of Community
Partners and Two River
Joseph F.X. O'Sullivan 50 Vice Chairman of the Board of Community
Partners; Chairman of the Board of Town Bank
Barry B. Davall 63 President, Chief Executive Officer and director
of each of Community Partners and Two River
Robert B. Cagnassola 64 Director of Community Partners and Town Bank
Michael W. Kostelnik, Jr. 63 Director and Corporate Secretary of Community
Partners and Two River
Frederick H. Kurtz 70 Director of Community Partners and Town Bank
Frank J. Patock, Jr. 61 Director of Community Partners and Two River
John J. Perri, Jr. 57 Director of Community Partners and Two River
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Hightstown, New Jersey, which was subsequently acquired by New Jersey National Bank. Mr. Davall has served as President and CEO of New Jersey National Bank of Princeton, in various executive-level positions at Fidelity Trust Company, including President and Chief Operating Officer of its successor, Shawmut Fidelity Bank, President of Tinton Falls State Bank, and Senior Regional Vice President of Commerce Shore Bank. Mr. Davall is a former director and chairman of the Red Bank Community YMCA, treasurer and trustee of Monmouth Conservation Foundation, director and treasurer of the Friends of the Monmouth County parks, and secretary and trustee of CPC Behavioral Healthcare. Mr. Davall is a member and past president of the Community Bankers Association of New Jersey, and a trustee of the New Jersey Bankers Association. Mr. Davall attended Rider University, and is a 1978 graduate of the Stonier Graduate School of Banking.
Committees of Community Partners Board of Directors
The Community Partners board has determined that there will be an audit committee, a compensation committee and a nominating and governance committee but has not yet appointed the committee members.
The Community Partners board has adopted charters for each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The affirmative vote of a majority of the members of the board of Community Partners will be required to modify the powers and authority of any committee of Community Partners' board of directors. In addition, Community Partners' board may remove a director from any committee, change the size of any committee or terminate any committee (subject to applicable regulatory requirements) or change the chair of a committee only with the affirmative vote of not less than a majority of the members of Community Partners' board.
Compensation of Directors
In accordance with existing practice of Two River and Town Bank, it is expected that directors of Community Partners who are also full-time employees of Community Partners or of either of the banks will receive no additional compensation for their services as directors. Each non-employee director will receive compensation for service on the Community Partners board of directors in the amount of $500 per board meeting attended. The Community Partners board may, from time to time, determine additional compensation payable to directors for participation in board committees and/or attendance at board committee meetings.
Executive Officers of Community Partners
The principal executive officers of Community Partners who do not also serve as directors of Community Partners are as follows:
Name Age Title
-------------------------------- --------- ---------------------------------------------------------
Robert W. Dowens, Sr. 55 Vice President of Community Partners and President and
Chief Executive Officer of Town Bank
William D. Moss 48 Vice President and Senior Loan Officer of Community
Partners and Executive Vice President and Senior Loan
Officer of Two River
Michael J. Gormley 49 Vice President, Chief Financial Officer and Treasurer
of Community Partners and Executive Vice President and
Chief Financial Officer of Two River
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COMPENSATION OF EXECUTIVE OFFICERS
General
Community Partners has not yet paid any compensation to its executive officers or other managers. The form and amount of the compensation to be paid to each of Community Partners' executive officers and other managers will be determined by the Community Partners board of directors as soon as practicable immediately prior to or following the completion of the acquisition.
Executive Compensation of current Two River and Town Bank named executive officers who will be named executive officers of Community Partners
Barry B Davall, currently Two River's President and Chief Executive Officer, also serves as the President and Chief Executive Officer of Community Partners. William D. Moss, currently the Executive Vice President and Senior Loan Officer of Two River, also serves as Vice President and Senior Loan Officer of Community Partners. Robert W. Dowens, Sr., currently the President and Chief Executive Officer of Town Bank, also serves as Vice President of Community Partners. Michael J. Gormley, currently Executive Vice President and Chief Financial Officer of Two River, also serves as Vice President, Chief Financial Officer and Treasurer of Community Partners.
The following table sets forth information concerning the annual and long-term compensation for services in all capacities to Community Partners executive officers for the years ended December 31, 2004, 2003 and 2002 of each of the Two River and Town Bank named executive officers who will serve as named executive officers of Community Partners for the years ended December 31, 2004, 2003 and 2002 of each of the Town Bank named executive officers who will serve as named executive officers of Community Partners.
SUMMARY COMPENSATION TABLE
Securities
Underlying
Stock Option All Other
Name/Title with Community Partners Year Salary Bonus Grants Compensation
-------------------------------------------------------------------------------------------------------------------------
Barry B. Davall, 2004 $175,000 $25,200 10,000 $17,862
President & 2003 168,000 25,000 22,500 14,043
Chief Executive Officer (1)(2) 2002 160,000 12,000 13,658 14,597
Michael J. Gormley, 2004 $120,000 $20,000 10,000 $9,160
Chief Financial Officer (1)(3) 2003 115,000 17,250 17,500 8,432
2002 100,000 7,500 9,561 8,173
William D. Moss, 2004 $120,000 $20,000 10,000 $6,227
Chief Lending Officer (1)(4) 2003 115,000 17,250 17,500 5,260
2002 100,000 7,500 9,561 4,977
Robert W. Dowens, Sr., 2004 $165,000 $10,000 3,000(6) $7,542
Vice President (1)(5) 2003 150,000 4,194 -- 7,439
2002 136,000 -- 15,750(6) 7,309
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(1) The compensation in the column under the heading "All Other Compensation" represents company contributions to the officer's 401(k) plan, automobile allowances or personal use of a company automobile and country club dues for Mr. Davall.
(2) Mr. Davall also serves as President and Chief Executive Officer of Two River.
(3) Mr. Gormley also serves as Executive Vice President and Chief Financial Officer of Two River.
(4) Mr. Moss also serves as Executive Vice President and Senior Loan Officer of Two River.
(5) Mr. Dowens also serves as President and Chief Executive Officer of Town Bank.
(6) Represents shares of Town Bank. Assuming an exchange ratio of 1.25, these shares would represent 3,750 shares of Community Partners Bancorp in 2004 and 19,688 shares of Community Partners Bancorp in 2002.
Stock Option Grants in 2004
The following table shows all stock option grants during 2004 to each of the Two River and Town Bank named executive officers who will be named executive officers of Community Partners and the potential value of options granted during 2004. Neither Two River nor Town Bank used SARs as compensation in 2004.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------------------------------------
Number of Percent of Potential Realizable Value At
Securities Total Options Assumed Annual Rates of
Underlying Granted To Exercise Stock Price Appreciation For
Options Employees In Price per Expiration Option Term
Name Granted Fiscal Year (1) Share Date 5% 10%
--------------------------------------------------------------------------------------------------------------------------------
Barry B. Davall 10,000 17.1% $17.25 08/30/14 $108,500 $275,200
Michael J. Gormley 10,000 17.1% 17.25 08/30/14 108,500 275,200
William D. Moss 10,000 17.1% 17.25 08/30/14 108,500 275,200
Robert W. Dowens Sr. (2) 3,000 17.4% 15.00 12/15/14 28,290 71,730
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(1) Represents a percentage of the employees of the particular bank of which
such person is currently an executive officer.
(2) Assuming an exchange ratio of 1.25, the options to acquire 3,000 shares of
Town Bank common stock at an exercise price of $15.00 per share would
represent options to acquire 3,750 shares of Community Partners Bancorp
common stock at an exercise price of $12.00 per share.
Aggregated Option Exercises in 2004 and Year-End Option Value
The following table shows options exercised, if any, during 2004, and the value of unexercised options held at year-end 2004, by the Two River and Town Bank named executive officers who will serve as named executive officers of Community Partners. Neither Two River nor Town Bank used SARs as compensation in 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
Number Of Securities Value Of Unexercised
Shares Underlying Unexercised In-The-Money Options At
Acquired on Value Options At Fiscal Year-End Fiscal Year-End
Name Exercise (#) Realized ($) Exercisable/Unexercisable (#) Exercisable/Unexercisable
------------------------------------------------------------------------------------------------------------------------
Barry B. Davall 0 0 65,973 / 7,500 $ 520,619 / $ 15,750
Michael J. Gormley 0 0 50,351 / 5,833 366,890 / 12,249
William D. Moss 0 0 50,351 / 5,833 366,890 / 12,249
Robert W. Dowens, Sr. (1) 0 0 25,410 / 13,500 203,218 / 93,135
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(1) Assuming an exchange ratio of 1.25, the 25,410 shares of Town Bank common stock underlying exercisable options and 13,500 shares of Town Bank common stock underlying unexercisable options represent 31,763 shares of Community Partners common stock underlying exercisable options and 16,250 shares of Community Partners Bancorp common stock underlying unexercisable options.
Employment Contracts and Termination of Employment and Change of Control Arrangements
At the time of the execution of the acquisition agreement though the date hereof, Messrs Davall, Moss and Gormley, each of whom is an executive officer of Two River and of Community Partners, are parties to change of control agreements supplemental executive retirement agreements with Two River. See "The Acquisition - Interests of Certain Two River Directors and Executive Officers in the Acquisition" on page 41.
At the time of the execution of the acquisition agreement though the date hereof, Robert W. Dowens, Sr., an executive officer of Town Bank and Community Partners, has a severance agreement with Town Bank. See "The Acquisition - Interests of Certain Town Bank Directors and Executive Officers in the Acquisition" on page 43.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Each of Two River and Town Bank has made in the past and, assuming continued satisfaction of generally applicable credit standards, expects to continue to make, loans to directors, executive officers and their associates (i.e., corporations or organizations for which they serve as officers or directors or in which they have beneficial ownership interests of 10% or more). These loans have been made in the ordinary course of each bank's banking business on substantially 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 other unfavorable features. As of December 31, 2004, Two River had aggregate direct and indirect loans to Two River directors and executive officers totaling approximately $7.7 million. As of December 31, 2004, Town Bank had aggregate direct and indirect loans to Town Bank directors and executive officers totaling approximately $4.4 million.
Frank J. Patock, Jr., Vice Chairman of the Board of Two River and a director of Community Partners, is president of Patock Construction, a company that performs services related to branch office leasehold improvements. Two River paid $741,000, $202,000 and $228,000 for these services for the years ended December 31, 2004, 2003 and 2002, respectively. We believe that the terms and conditions of Patock Construction's services are comparable to those that would have been offered by other unaffiliated third parties in an arms-length transaction.
LEGAL MATTERS
Certain legal matters in connection with this acquisition have been passed upon for Community Partners by Pitney Hardin LLP, Morristown, New Jersey.
EXPERTS
The financial statements of Two River Community Bank as of December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004 included in this prospectus and in the registration statement have been audited by Grant Thornton LLP, independent registered public accounting firm, as indicated in their reports with respect thereto, and are included therein in reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements of The Town Bank as of December 31, 2004 and 2003, and for each of the years in the three-year period ended December 31, 2004, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
OTHER MATTERS
Neither Two River nor Town Bank presently intends to bring any matters other than those described in this joint proxy statement/prospectus before its special meeting. Further, neither Two River nor Town Bank has any knowledge of any other matters that may be introduced by other persons. If any other matters do properly come before either bank's special meeting, the person named in the enclosed proxy forms of Two River or Town Bank, as applicable, will vote the proxies in keeping with their judgments on such matters.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Because none of Community Partners, Two River or Town Bank is subject to the reporting requirements of Exchange Act Sections 13(a) or Section 15(d), the safe harbor for forward-looking statements provided by Section 21E of the Exchange Act is unavailable to us. However, the SEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions, and you should be aware that this document contains a number of forward-looking statements regarding the financial condition, results of operations and business of Community Partners, Two River and Town Bank, and may include such statements relating to the period following the completion of the acquisition. In some cases, you
can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology. Those statements could be affected by known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.
The ability of Community Partners, Two River and Town Bank to predict results or the actual effects of their 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 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 Community Partners and its subsidiary banks will be doing business, or conditions in securities markets or the banking industry;
o The level and timeliness of realization, if any, of expected cost savings from the acquisition;
o Difficulties related to the integration of the operations of Community Partners, Two River and Town Bank;
o Lower than expected revenues following the acquisition; and
o Other economic, competitive, governmental, regulatory, geopolitical and technological factors affecting operations, pricing and services.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except to the extent required by applicable law or regulation, we are under no duty to update any of the forward-looking statements after the date of this joint proxy statement/prospectus.
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information contained in this joint proxy statement/prospectus. Two River and Town Bank have not authorized anyone to provide you with any additional information.
Community Partners has filed a registration statement on Form S-4 under the Securities Act with the SEC with respect to Community Partners' shares to be issued in the acquisition. This joint proxy statement/prospectus constitutes the prospectus of Community Partners filed as part of the registration statement. This joint proxy statement/prospectus does not contain all of the information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement and its exhibits are available for inspection and copying as set forth above.
If you have any questions about the acquisition or would like to inspect or copy the registration statement or any of its exhibits, please call either:
Two River Community Bank or The Town Bank 1250 Highway 35 South 520 South Avenue Middletown, New Jersey 07748 Westfield, New Jersey 07090 Attn: Barry B. Davall Attn: Robert W. Dowens, Sr. (732) 706-9009 (908) 301-0800 |
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this joint proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction. Neither the delivery of this joint proxy statement/prospectus nor any distribution of securities pursuant to this joint proxy statement/prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this joint proxy statement/prospectus by reference or in Two River's or Town Bank's affairs since the date of the joint proxy statement/prospectus. The information contained in this joint proxy statement/prospectus with respect to Two River was provided by Two River and the information contained in this joint proxy statement/prospectus with respect to Town Bank was provided by Town Bank.
TWO RIVER COMMUNITY BANK
Consolidated Financial Statements
December 31, 2004
Report of Independent Registered Public Accounting Firm............................................................FS-2
Consolidated Balance Sheets at December 31, 2004 and 2003..........................................................FS-3
Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002.............................FS-4
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 2004, 2003 and 2002........................................................................FS-5
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002.........................FS-6
Notes to Consolidated Financial Statements.........................................................................FS-7
June 30, 2005
Consolidated Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004.....................................FS-28
Consolidated Statements of Income (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-29
Consolidated Statements of Changes in Shareholders' Equity (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-30
Consolidated Statements of Cash Flows (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-31
Notes to Unaudited Consolidated Financial Statements...............................................................FS-32
THE TOWN BANK
Financial Statements
December 31, 2004
Report of Independent Registered Public Accounting Firm............................................................FS-35
Balance Sheets at December 31, 2004, and 2003......................................................................FS-36
Statements of Income for the years ended December 31, 2004, 2003 and 2002..........................................FS-37
Statements of Changes in Shareholders' Equity for the years
ended December 31, 2004, 2003 and 2002.......................................................................FS-38
Statements of Comprehensive Income for the years ended December 31, 2004, 2003, and 2002...........................FS-39
Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002......................................FS-40
Notes to Financial Statements......................................................................................FS-41
June 30, 2005
Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004..................................................FS-58
Statements of Income (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-59
Statements of Changes in Shareholders' Equity (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-60
Statements of Comprehensive Income (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-61
Statements of Cash Flows (unaudited) for the six months
ended June 30, 2005 and 2004..................................................................................FS-62
Notes to Financial Statements (unaudited)..........................................................................FS-63
|
FS-1
We have audited the accompanying consolidated balance sheets of Two River Community Bank (the Bank) as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Bank is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Two River Community Bank as of December 31, 2004 and 2003, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
January 21, 2005
|
FS-2
TWO RIVER COMMUNITY BANK
Consolidated Balance Sheets
(In thousands, except per share data)
December 31,
-------------------------------
ASSETS 2004 2003
------------ ------------
Cash and due from banks $ 5,225 $ 6,754
Federal funds sold 5,145 --
------------ ------------
Total cash and cash equivalents 10,370 6,754
Investment securities available-for-sale 39,876 27,303
Investment securities held-to-maturity (fair value of
$3,838 at December 31, 2004) 3,840 --
Loans 176,000 133,759
Less allowance for loan losses (1,927) (1,469)
------------ ------------
Net loans 174,073 132,290
Bank-owned life insurance 3,513 --
Premises and equipment, net 2,416 1,372
Accrued interest receivable 824 541
Other assets 558 625
------------ ------------
$ 235,470 $ 168,885
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing - demand $ 49,022 $ 33,434
Interest bearing - NOW, money market and savings 131,936 81,219
Certificates of deposit, under $100,000 7,448 10,066
Certificates of deposit, $100,000 and over 11,549 16,329
------------ ------------
Total deposits 199,955 141,048
Securities sold under agreements to repurchase 7,761 6,455
Short-term borrowings 5,000 6,784
Accrued interest payable 21 53
Other liabilities 924 1,002
------------ ------------
Total liabilities 213,661 155,342
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - authorized, 10,000,000 shares of $2.00 par value; issued
and outstanding, 3,902,994 and 3,495,989 shares at December 31, 2004
and 2003, respectively 7,806 6,992
Additional paid-in capital 14,119 7,875
Accumulated earnings (deficit) 61 (1,264)
Accumulated other comprehensive loss (177) (60)
------------ ------------
Total shareholders' equity 21,809 13,543
------------ ------------
Total liabilities and shareholders' equity $ 235,470 $ 168,885
============ ============
|
The accompanying notes are an integral part of these statements.
FS-3
TWO RIVER COMMUNITY BANK
Consolidated Statements of Income
(In thousands, except per share data)
Year ended December 31,
-----------------------
2004 2003 2002
---- ---- ----
INTEREST INCOME
Loans, including fees $ 9,705 $ 7,574 5,565
Federal funds sold 108 65 110
Investment securities 1,443 762 916
---------- ---------- ----------
Total interest income 11,256 8,401 6,591
INTEREST EXPENSE
Deposits 2,410 1,580 1,455
Short-term borrowings 5 12 --
Securities sold under agreements to repurchase 116 143 147
---------- ---------- ----------
Total interest expense 2,531 1,735 1,602
---------- ---------- ----------
Net interest income 8,725 6,666 4,989
PROVISION FOR LOAN LOSSES 458 322 491
---------- ---------- ----------
Net interest income after provision for loan losses 8,267 6,344 4,498
NON-INTEREST INCOME
Service fees on deposit accounts 313 244 219
Gains on sales of investment securities -- -- 19
Other loan servicing fees 317 195 123
Other income 190 139 113
---------- ---------- ----------
Total non-interest income 820 578 474
---------- ---------- ----------
NON-INTEREST EXPENSE
Salaries and employee benefits 3,773 2,637 2,008
Occupancy and equipment 1,367 1,117 866
Professional 188 170 165
Advertising 236 156 142
Other operating 1,405 1,164 945
---------- ---------- ----------
Total non-interest expense 6,969 5,244 4,126
---------- ---------- ----------
Income before income taxes 2,118 1,678 846
Income tax expense 793 428 103
---------- ---------- ----------
Net income $ 1,325 $ 1,250 $ 743
========== ========== ==========
Net income per share - basic $ 0.36 $ 0.36 $ 0.21
========== ========== ==========
Net income per share - diluted $ 0.34 $ 0.34 $ 0.21
========== ========== ==========
|
The accompanying notes are an integral part of these statements.
FS-4
TWO RIVER COMMUNITY BANK
Consolidated Statements of Changes in Shareholders' Equity Years ended December 31, 2004, 2003 and 2002
(In thousands, except per share data)
Accumulated
Additional other Total
Common paid-in Accumulated comprehensive shareholders' Comprehensive
stock capital deficit income equity income
--------- --------- ----------- ------------- -------------- --------------
Balance, January 1, 2002 $ 6,398 $ 6,304 $ (1,092) $ 101 $ 11,711
Two stock dividends - 3% each 390 848 (1,238) -- --
Net income -- -- 743 -- 743 743
Other comprehensive income, net
of reclassification adjustments and tax -- -- -- 72 72 72
--------- --------- --------- --------- --------- ---------
Total comprehensive income $ 815
=========
Balance, December 31, 2002 6,788 7,152 (1,587) 173 12,526
Stock dividend - 3% 204 723 (927) -- --
Net income -- -- 1,250 -- 1,250 1,250
Other comprehensive loss, net of
reclassification adjustments and tax -- -- -- (233) (233) (233)
--------- --------- --------- --------- --------- ---------
Total comprehensive income $ 1,017
=========
Balance, December 31, 2003 6,992 7,875 (1,264) (60) 13,543
Issuance of common stock, net of
offering expenses (400,000 shares) 800 6,232 -- -- 7,032
Options exercised (7,005 shares) 14 12 -- -- 26
Net income -- -- 1,325 -- 1,325 1,325
Other comprehensive loss, net of
reclassification adjustments and tax -- -- -- (117) (117) (117)
--------- --------- --------- --------- --------- ---------
Total comprehensive income $ 1,208
=========
Balance, December 31, 2004 $ 7,806 $ 14,119 $ 61 $ (177) $ 21,809
========= ========= ========= ========= =========
|
The accompanying notes are an integral part of these statements.
FS-5
TWO RIVER COMMUNITY BANK
Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
------------------------
2004 2003 2002
---- ---- ----
OPERATING ACTIVITIES
Net income $ 1,325 $ 1,250 $ 743
Adjustments to reconcile net income to cash provided
by operating activities
Depreciation and amortization 621 506 403
Provision for loan losses 459 322 491
Gain on sale of securities -- -- (19)
Net amortization of premiums and discounts 72 191 100
Increase in accrued interest receivable (283) (132) (85)
Decrease (increase) in other assets 109 (309) (21)
Decrease in accrued interest payable (32) (15) 29
(Decrease) increase in other liabilities (78) 446 312
---------- ---------- ----------
Net cash provided by operating activities 2,193 2,259 1,953
---------- ---------- ----------
INVESTING ACTIVITIES
Purchase of investment securities held-to-maturity (3,825) -- --
Purchase of investment securities available-for-sale (19,147) (24,508) (12,274)
Proceeds from sale of investment securities available-for-sale -- -- 5,784
Proceeds from repayments and maturities of investment securities 6,313 12,189 7,524
Net increase in loans (42,241) (29,505) (43,097)
Purchase of Bank Owned Life Insurance (3,500) -- --
Purchases of premises and equipment (1,664) (328) (556)
---------- ---------- ----------
Net cash used in investing activities (64,064) (42,152) (42,619)
---------- ---------- ----------
FINANCING ACTIVITIES
Net increase (decrease) in securities sold under agreements to
repurchase 1,306 (2,941) 4,653
Net advances (repayments) of short-term borrowings (1,784) 6,784 --
Net increase in demand deposits and interest bearing accounts 66,305 29,572 26,774
Net (decrease) increase in certificates of deposit (7,398) 1,759 14,316
Net proceeds from capital stock issued 7,032 -- --
Proceeds from exercise of stock options 26 -- --
---------- ---------- ----------
Net cash provided by financing activities 65,487 35,174 45,743
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 3,616 (4,719) 5,077
Cash and cash equivalents, beginning of year 6,754 11,473 6,396
---------- ---------- ----------
Cash and cash equivalents, end of year $ 10,370 $ 6,754 $ 11,473
========== ========== ==========
|
The accompanying notes are an integral part of these statements.
FS-6
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements
December 31, 2004, 2003, and 2002
NOTE A - ORGANIZATION
Two River Community Bank (the Bank) is a New Jersey state chartered bank that commenced operations on February 29, 2000. The Bank provides banking services to small and medium-sized businesses, professionals and individual consumers primarily in Monmouth County, New Jersey. The Bank competes with other banking and financial institutions in its market communities.
The Bank is subject to regulations of certain state and federal agencies and, accordingly, it is periodically examined by those regulatory authorities. As a consequence of the extensive regulation of commercial banking activities, the Bank's business is susceptible to being affected by state and federal legislation and regulations.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Bank conform to accounting principles generally accepted in the United States of America (US GAAP) and predominant practices within the banking industry. The accompanying consolidated financial statements include the accounts of the Bank and its wholly owned subsidiary, TRCB Investment Corporation and wholly owned trust, Two River Community Bank Employer's Trust. All intercompany balances and transactions have been eliminated.
In preparing the financial statements, management is required 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 balance sheet and the reported amounts of revenues and expenses during the reporting periods. Therefore, actual results could differ from those estimates.
The principal estimate that is particularly susceptible to significant change in the near term relates to the allowance for loan losses. The evaluation of the adequacy of the allowance for loan losses includes an analysis of the individual loans and overall risk characteristics and size of the different loan portfolios, and takes into consideration current economic and market conditions, the capability of specific borrowers to pay specific loan obligations, and current loan collateral values. However, actual losses on specific loans, which also are encompassed in the analysis, may vary from estimated losses.
(Continued)
FS-7
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Investment and mortgage-backed securities, which the Bank has the ability and intent to hold to maturity, are held for investment purposes and carried at cost, adjusted for amortization of premium and accretion of discount over the terms of the maturity in a manner which approximates the interest method. At the time of purchase, the Bank makes a determination as to whether or not it will hold the investment securities to maturity based upon an evaluation of the probability of the occurrence of future events. Gains or losses on the sales of securities available for sale are recognized upon realization utilizing the specific identification method.
The Bank adopted EITF 03-1, The Meaning of Other than Temporary Impairment and Its Application to Certain Investments, as of December 31, 2003. EITF 03-1 includes certain disclosures regarding quantitative and qualitative disclosures for investment securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, that are impaired at the balance sheet date, but an other-than-temporary impairment has not been recognized. In March 2004, the EITF issued a consensus on Issue 03-1 requiring that the provisions of EITF 03-1 be applied for reporting periods beginning after June 15, 2004 to investments accounted for under SFAS Nos. 115 and 124. EITF 03-1 establishes a three-step approach for determining whether an investment is considered impaired, whether that impairment is other-than-temporary and the measurement of an impairment loss. In September 2004, the FASB issued a proposed Staff Position, EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF 03-1 (EITF 03-1-a). EITF 03-1-a would provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of EITF 03-1. In September 2004, the FASB issued a Staff Position, EITF Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1 (EITF 03-1-1). FSP EITF Issue No. 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," delays the effective date of certain provisions of EITF Issue 03-1, including steps two and three of the Issue's three-step approach for determining whether an investment is other-than-temporarily impaired. However, step one of that approach must still be initially applied for impairment evaluations in reporting periods beginning after June 15, 2004. The delay of the effective date for paragraphs 10-20 of EITF Issue 03-1 will be superseded with the final issuance of proposed FSP EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." The disclosures under EITF 03-1 are included in these financial statements.
(Continued)
FS-8
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions or any of the other factors used in management's determination. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for losses on loans. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
Interest on loans is accrued and credited to operations based upon the principal amounts outstanding. Loans are placed on non-accrual when a loan is specifically determined to be impaired or when principal or interest is delinquent for 90 days or more. Any unpaid interest previously accrued on those loans is reversed from income. Interest income generally is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other non-accrual loans is recognized only to the extent of interest payments received.
The Bank accounts for its impaired loans in accordance with SFAS No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures. This standard requires that a creditor measure impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate, except that as a practical expedient, a creditor may measure impairment based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Regardless of the measurement method, a creditor must measure impairment based on the fair value of the collateral when the creditor determines that foreclosure is probable. At December 31, 2004 and 2003, the Bank did not have any loans that would be defined as impaired.
The Bank accounts for its transfers and servicing of financial assets in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140 established accounting and reporting standards for sales and servicing of financial assets, securitization transactions and the extinguishment of liabilities.
The Bank adopted FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others, on January 1, 2003. FIN 45 requires a guarantor entity, at the inception of a guarantee covered by the measurement provisions of the interpretation, to record a liability for the fair value of the obligation undertaken in issuing the guarantee. The Bank has financial and performance letters of credit. Financial letters of credit require the Bank to make payment if the customer's financial condition deteriorates, as defined in the agreements. The Bank previously did not record an initial liability, except to the extent fees were paid by the customer, when guaranteeing obligations unless it became probable that the Bank would have to perform under the guarantee.
In October 2003, the AICPA issued SOP 03-3, Accounting for Loans or Certain Debt Securities Acquired in a Transfer. SOP 03-3 applies to a loan with the evidence of deterioration of credit quality since origination acquired by completion of a transfer for which it is probable, at acquisition, that the Bank will be unable to collect all contractually required payments receivable. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 31, 2004. Management is currently evaluating the provisions of SOP 03-3 and does not anticipate its adoption to have a material effect on the Bank's financial position or results of operations.
(Continued)
FS-9
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
(Continued)
FS-10
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
At December 31, 2004, the Bank had four stock-based employee and director compensation plans, which are more fully described in note N. The Bank accounts for those plans under the recognition and measurement principles of APB Opinion 25, Accounting for Stock Issued to Employees, and related interpretations. Stock-based employee compensation costs are not reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share had the Bank applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Years ended December 31,
---------------------------------
2004 2003 2002
------- ------ ------
(in thousands)
Net income, as reported $ 1,325 $1,250 $ 743
Less share-based compensation costs under
fair value-based methods for all awards (1,107) (257) (131)
------- ------ ------
Pro forma net income $ 218 $ 993 $ 612
======= ====== ======
2004 2003 2002
------- ------ ------
Earnings per share - basic As reported $ 0.36 $ 0.36 $ 0.21
Pro forma 0.06 0.27 0.17
Earnings per share - diluted As reported $ 0.34 $ 0.34 $ 0.21
Pro forma 0.06 0.27 0.17
|
For purposes of SFAS No. 123, the fair value of each option grant was estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants in 2004, 2003, and 2002: dividend yield of -0-% for 2004, 2003, and 2002; 4.19%, 3.82%, and 5.37% risk-free interest rate for 2004, 2003, and 2002, respectively, and expected lives of ten years.
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123R). SFAS No. 123R replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services and addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. Under SFAS No. 123R, all forms of share-based payments to employees, including employee stock options, would be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would
(Continued)
FS-11
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
generally be measured at fair value at the grant date. Current accounting guidance requires that the expense relating to the so-called fixed plan employee stock options only be disclosed in the footnotes to the financial statements. SFAS No. 123R would eliminate the ability to account for share-based compensation transactions using APB Opinion No. 25. Public entities (other than those filing as small business issuers) are required to apply the provisions of SFAS No. 123R as of the first interim or annual reporting period that begins after June 15, 2005. The Bank is currently evaluating this proposed statement and its effects on its results of operations.
December 31, 2004 December 31, 2003 December 31, 2002
----------------------------- ------------------------------ -----------------------------
Before Net of Before Net of Before Net of
tax Tax tax tax Tax tax Tax Tax tax
amount expense amount amount expense amount amount expense amount
------- ------- ------- ------- ------- ------- ------- ------- -------
Unrealized (losses) gains
on securities
Unrealized holding
(losses) gains
arising during period $ (161) $ 44 $ (117) $ (368) $ 135 $ (233) $ 129 $ (45) $ 84
Less reclassification
adjustment for gains
realized in net income -- -- -- -- -- -- 19 (7) 12
------- ------- ------- ------- ------- ------- ------- ------- -------
Other comprehensive
income, net $ (161) $ 44 $ (117) $ (368) $ 135 $ (233) $ 110 $ (38) $ 72
======= ======= ======= ======= ======= ======= ======= ======= =======
|
FS-12
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE C - INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses, and fair values of the Bank's investment securities are summarized as follows (in thousands):
December 31, 2004
------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------- ---------- ---------- ----------
Investment securities available-for-sale
U.S. Government agency securities $ 19,483 $ 5 $ (141) $ 19,347
Municipal securities 1,064 11 (1) 1,074
Mortgage backed securities 18,215 108 (240) 18,083
Corporate debt securities and others 1,382 1 (11) 1,372
---------- ---------- ---------- ----------
$ 40,144 $ 125 $ (393) $ 39,876
========== ========== ========== ==========
Investment securities held-to-maturity
U.S. Government agency securities $ 1,000 $ -- $ (8) $ 992
Municipal securities 2,840 8 (2) 2,846
---------- ---------- ---------- ----------
$ 3,840 $ 8 $ (10) $ 3,838
========== ========== ========== ==========
December 31, 2003
------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------- ---------- ---------- ----------
U.S. Government treasury securities $ 500 $ 1 $ -- $ 501
U.S. Government agency securities 8,490 30 (8) 8,512
Corporate bonds 1,012 8 (40) 980
Municipal securities 1,563 7 (5) 1,565
Mortgage backed securities 15,515 149 (249) 15,415
Atlantic Central Bankers Bank stock 30 -- -- 30
Federal Home Loan Bank stock 300 -- -- 300
---------- ---------- ---------- ----------
$ 27,410 $ 195 $ (302) $ 27,303
========== ========== ========== ==========
|
(Continued)
FS-13
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE C - INVESTMENT SECURITIES - Continued
The amortized cost and fair value of the Bank's investment securities available for sale at December 31, 2004, by contractual maturity, are shown. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands).
Available-for-sale Held-to-maturity
-------------------------- --------------------------
Amortized Fair Amortized Fair
cost value cost value
---------- ---------- ---------- ----------
Investment securities available for sale
Due in one year or less $ 5,512 $ 5,474 $ -- $ --
Due after one year through 5 years 20,423 20,308 1,610 1,603
Due after 5 years through 10 years 9,841 9,744 531 528
Due after 10 years 4,368 4,350 1,699 1,706
---------- ---------- ---------- ----------
$ 40,144 $ 39,876 $ 3,840 $ 3,837
========== ========== ========== ==========
|
Certain of the Bank's investment securities, totaling $8,160,000 and $10,529,000 at December 31, 2004 and 2003, respectively, were pledged as collateral to secure deposits as required or permitted by law.
The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2004 (in thousands):
Less than 12 months 12 months or longer Total
Number --------------------- --------------------- ----------------------
Description of of Fair Unrealized Fair Unrealized Fair Unrealized
Securities securities value losses value losses value losses
------------------- ---------- ------- ---------- ------- ---------- ------- ----------
U.S. Government
agency securities 18 $17,334 $ (149) $ -- $ -- $17,334 $ (149)
Corporate bonds 1 -- -- 479 (11) 479 (11)
Municipal securities 4 1,260 (4) -- -- 1,260 (4)
Mortgage backed
securities 19 8,059 (84) 3,364 (155) 11,423 (239)
------- ------- ------- ------- ------- ------- -------
Total temporarily
impaired investment
securities 42 $26,653 $ (237) $ 3,843 $ (166) $30,496 $ (403)
======= ======= ======= ======= ======= ======= =======
|
Management has considered factors regarding other than temporarily impaired securities and determined that there are no securities that are impaired as of December 31, 2004.
FS-14
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE D - LOANS
The components of the loan portfolio are as follows:
December 31,
-----------------------------
2004 2003
----------- -----------
(in thousands)
Commercial and industrial $ 44,128 $ 37,628
Real estate - construction 27,631 17,849
Real estate - commercial 90,168 66,818
Real estate - residential 318 325
Consumer 13,673 11,154
Other 150 36
----------- -----------
176,068 133,810
Allowance for loan losses (1,927) (1,469)
Unearned fees (68) (51)
----------- -----------
$ 174,073 $ 132,290
=========== ===========
|
The Bank had a non-accrual loan of $94,000 at December 31, 2004 and 2003 and no non-accrual loans at December 31, 2002. If interest on this $94,000 loan had been accrued, interest income would have increased approximately $7,000 and $3,000 for the years ended December 31, 2004 and 2003, respectively. The Bank did not have any loans past due 90 days or more or any other real estate owned as of December 31, 2004, 2003 and 2002.
The Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons on the same terms as those prevailing for comparable transactions with other borrowers. These loans at December 31, 2004, were current as to principal and interest payments, and did not involve more than normal risk of collectibility. At December 31, 2004, loans to related parties amounted to $7,683,000. New loans to related parties totaled $4,240,000 during 2004 and repayments totaled $2,256,000.
Changes in the allowance for loan losses are as follows:
Years ended December 31,
--------------------------------------
2004 2003 2002
---------- ---------- ----------
(in thousands)
Balance, beginning of year $ 1,469 $ 1,147 $ 657
Provision charged to expenses 458 322 491
Charge-offs -- -- (1)
---------- ---------- ----------
Balance, end of year $ 1,927 $ 1,469 $ 1,147
========== ========== ==========
|
FS-15
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE E - PREMISES AND EQUIPMENT
Premises and equipment are as follows:
Estimated
useful lives 2004 2003
------------ ------------ ------------
(in thousands)
Leasehold improvements 10 years $ 1,953 $ 940
Furniture, fixtures and equipment 5 years 1,731 1,200
Computer equipment and software 2 - 5 years 873 752
------------ ------------
4,557 2,892
Less accumulated depreciation and amortization (2,141) (1,520)
------------ ------------
$ 2,416 $ 1,372
============ ============
|
Depreciation and amortization charged to operations amounted to $621,000, $506,000, and $403,000 for the years ended December 31, 2004, 2003, and 2002, respectively.
A director of the Bank is the principal of a company that performs services related to leasehold improvements. The Bank paid $741,000, $202,000, and $228,000 for these services for the years ended December 31, 2004, 2003, and 2002, respectively.
NOTE F - CERTIFICATES OF DEPOSIT
At December 31, 2004, the approximate scheduled maturities of certificates of deposit are summarized as follows (in thousands):
2005 $ 14,241
2006 4,022
2007 470
2008 118
2009 146
------------
$ 18,997
============
|
FS-16
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE G - SHORT-TERM BORROWINGS
2004 2003
------- -------
Short-term borrowings
Balance at year-end $ 5,000 $ 6,784
Average during the year 398 1,090
Maximum month-end balance 8,078 6,784
Weighted average rate during the year 1.29% 1.10%
Weighted average rate at December 31 2.44% 1.07%
|
The Bank did not have any federal funds purchased or short-term advances at or for the year ended December 31, 2002.
NOTE H - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected as the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities.
Years ended December 31,
-----------------------------
2004 2003 2002
------- ------- -------
(in thousands)
Repurchase agreements:
Balance at year-end $ 7,761 $ 6,455 $ 9,396
Average during the year 7,581 9,357 7,310
Maximum month-end balance 9,549 11,810 9,429
Weighted average rate during the year 1.53% 1.53% 2.01%
Weighted average rate at December 31 1.54% 1.53% 1.59%
|
FS-17
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE I - COMMON SHARE AND EQUITY TRANSACTIONS
On August 10, 2004, the Bank completed a common stock offering of 400,000 units of its common stock and warrants at $18.00 per unit for $7,200,000. Each unit consisted of one share of common stock, par value $2.00, and one warrant to purchase one share of common stock at an exercise price of $20.50. The warrants are exercisable during the period from May 1, 2006 through June 30, 2006. Gross proceeds of the offering were reduced by offering costs of $168,000.
In September 2003, the Bank amended its Articles of Incorporation whereby the number of authorized common shares was increased from 2,500,000 shares to 10,000,000 shares. In December 2003, the Bank amended its Articles of Incorporation whereby the par value was reduced to $2.00 from $5.00. In conjunction with this amendment, the Bank declared a 5-for-2 stock split where three additional shares of stock were issued for every two common shares owned.
In January 2003, the Bank declared a 3% stock dividend payable February 21, 2003 for shareholders of record on February 7, 2003. All share and pre-share data has been retroactively adjusted to reflect this dividend.
In August 2002, the Bank declared a 3% stock dividend and in January 2002, the Bank declared a 3% stock dividend.
NOTE J - EMPLOYEE BENEFIT PLANS
The Bank has a 401(k) plan. Under the plan, all employees are eligible to contribute from 3% to a maximum of 20% of their annual salary. Annually the Bank matches 100% of employee contributions up to 3% and 50% of the next 2% of employee contribution. The Bank contributed $66,000, $48,000, and $37,000 for the years ended December 31, 2004, 2003, and 2002, respectively. Each year, the Bank may at its discretion elect to contribute profit sharing amounts into the Plan. As of December 31, 2004, 2003, and 2002, the Bank has not contributed any profit sharing amounts.
The Bank has a Salary Continuation Plan (the Plan) for certain directors and executive officers that provides for payments upon retirement, death or disability. The annual benefit is based on annual salary (as defined) and adjusted for earnings, if applicable. Expenses related to this Plan included in the consolidated statements of income are approximately $23,000, $-0-, and $-0- for the years ended December 31, 2004, 2003, and 2002, respectively.
NOTE K - INCOME TAXES
The components of the income tax expense included in the statements of operations are as follows:
Years ended December 31,
---------------------------------
2004 2003 2002
------- ------- -------
(in thousands)
Income tax expense
Current $ 975 $ 557 $ 103
Deferred (182) (129) --
------- ------- -------
Applicable income tax expense $ 793 $ 428 $ 103
======= ======= =======
(Continued)
|
FS-18
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE K - INCOME TAXES - Continued
A reconciliation of the difference between the effective rate and statutory rate is as follows:
Years ended December 31,
-----------------------------------
2004 2003 2002
------- ------- -------
(in thousands)
Federal income tax at statutory rate $ 720 $ 570 $ 288
Tax exempt interest (25) -- --
Change in valuation allowance -- (232) (8)
State income taxes, net of federal income tax benefit 92 89 44
Utilization of net operating loss carryforwards -- -- (221)
Other 6 1 --
------- ------- -------
Applicable income tax expense $ 793 $ 428 $ 103
======= ======= =======
|
Deferred income taxes are provided for the temporary difference between the financial reporting basis and the tax basis of the Bank's assets and liabilities. Net deferred tax assets and liabilities consist of the following:
2004 2003
----------- -----------
(in thousands)
Accrual to cash conversion $ (2) $ 2
Allowance for loan loss 192 25
Depreciation and amortization 108 35
Net operating loss carryforwards 10 38
Unrealized loss on investment securities available for sale 90 46
Other 3 29
----------- -----------
Net deferred tax asset $ 401 $ 175
=========== ===========
|
At December 31, 2004, the Bank had net operating loss carryforwards for state purposes of approximately $403,000, expiring in 2021, available to reduce future taxable income.
FS-19
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE L - EARNINGS PER SHARE
Year ended December 31, 2004
---------------------------------------------
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- -----------
(in thousands)
Basic earnings per share
Net income available to common stockholders $ 1,325 3,631 $ 0.36
Effect of dilutive securities
Options -- 272 (0.02)
----------- ----------- -----------
Diluted earnings per share
Net income available to common stockholders
plus assumed conversions $ 1,325 3,903 $ 0.34
=========== =========== ===========
|
Options to purchase 158,500 shares of common stock with exercise prices of $17.25 per share were not included in the computation of 2004 diluted EPS because the exercise price was greater than the average market price of the common stock.
Year ended December 31, 2003
---------------------------------------------
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- -----------
(in thousands)
Basic earnings per share
Net income available to common stockholders $ 1,250 3,496 $ 0.36
Effect of dilutive securities
Options -- 201 (0.02)
----------- ----------- -----------
Diluted earnings per share
Net income available to common stockholders
plus assumed conversions $ 1,250 3,697 $ 0.34
=========== =========== ===========
Year ended December 31, 2002
---------------------------------------------
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- -----------
(in thousands)
Basic earnings per share
Net income available to common shareholders $ 743 3,496 $ 0.21
Effect of dilutive securities
Options -- 114 --
----------- ----------- -----------
Diluted earnings per share
Net income available to common stockholders
plus assumed conversions $ 743 3,610 $ 0.21
=========== =========== ===========
|
FS-20
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE M - COMMITMENTS
The approximate minimum rental commitments under operating leases at December 31, 2004, are as follows (in thousands):
2005 $ 432
2006 439
2007 410
2008 322
2009 264
Thereafter 231
-----------
$ 2,098
===========
2. Litigation
-----------
|
In the normal course of business, the Bank has been named as a defendant in a lawsuit. Although the ultimate outcome of this suit cannot be ascertained at this time, it is the opinion of management that the resolution of the suit will not have a material adverse effect on the financial position or results of operations of the Bank.
NOTE N - STOCK OPTIONS
The Bank maintains a 2003 Incentive Stock Option Plan (2003 ISO Plan) and 2003 Non-qualified Stock Option Plan (2003 Non-qualified Plan). Under the 2003 ISO Plan and 2003 Non-qualified Plan, a total of 169,698 shares of common stock have been made available for each plan to grant to directors, officers or employees of the Bank. If a stock option expires, is terminated or otherwise canceled, the related shares of common stock are not applied towards this total.
The Bank maintains a 2001 Incentive Stock Option Plan (2001 ISO Plan) and 2001 Non-qualified Stock Option Plan (2001 Non-qualified Plan). Under the 2001 ISO Plan and 2001 Non-qualified Plan, a total of 173,470 shares of common stock have been made available for each plan to grant to directors, officers or employees of the Bank. If a stock option expires, is terminated or otherwise canceled, the related shares of common stock are not applied towards this total.
(Continued)
FS-21
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE N - STOCK OPTIONS - Continued
The following table summarizes information about outstanding options from all plans at and for the years ended December 31, 2004, 2003, and 2002:
2004 2003
---------------------------- ----------------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
----------- ------------ ----------- -----------
Outstanding, beginning of year 454,003 $ 7.31 247,503 $ 3.75
Granted 158,500 17.25 206,500 11.58
Exercised (7,006) 3.74 -- --
----------- -----------
Outstanding, end of year 605,497 10.00 454,003 7.31
=========== ===========
Exercisable, end of year 452,123 300,628 ~
=========== ===========
Weighted average fair value of options granted
during the year $ 5.78 $ 3.64
=========== ===========
2002
----------------------------
Weighted
average
exercise
Shares price
----------- -----------
Outstanding, beginning of year 201,062 $ 3.70
Granted 46,441 3.97
Exercised -- --
----------- -----------
Outstanding, end of year 247,503 3.75
===========
Exercisable, end of year 165,001
===========
Weighted average fair value of options granted
during the year $ 1.67
===========
|
(Continued)
FS-22
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE N - STOCK OPTIONS - Continued
Options outstanding Options exercisable
------------------------------------------ ------------------------------
Weighted
Number average Weighted Number Weighted
outstanding at remaining average outstanding at average
Range of December 31, contractual exercise December 31, exercise
exercise prices 2004 life price 2004 price
--------------- -------------- ----------- --------- -------------- ----------
$ 3.66 - $ 3.97 240,497 6.5 years $ 3.76 224,789 $ 3.74
$ 9.90 - $12.14 206,500 8.0 years 11.58 66,834 11.58
$ 17.25 158,500 8.0 years 17.25 158,500 17.25
------------ ------------
605,497 452,123
============ ============
|
FS-23
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE O - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
The Bank is a 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 and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. The Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual 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. The Bank had commitments to extend credit of approximately $67,929,000 and $54,577,000 at December 31, 2004 and 2003, respectively.
Commitments to extend credit are agreements to lend to a customer so long as 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 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 customer. Collateral held varies but may include guarantees, personal or commercial real estate, accounts receivable, inventory or equipment.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the financial performance of a customer to a third party. Those guarantees are primarily issued to support contracts entered into by customers. Most guarantees extend for one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank defines the fair value of these letters of credit as the fees paid by the customer or similar fees collected on similar instruments. The Bank amortizes the fees collected over the life of the instrument. Management, based upon their analysis, has determined that an SFAS No. 5, Accounting for Contingencies, reserve is not necessary at December 31, 2004. The Bank generally obtains collateral, such as real estate or liens on customer assets for these types of commitments. The Bank's potential liability would be reduced by any proceeds obtained in liquidation of the collateral held. The Bank had standby letters of credit for customers aggregating $1,895,000 and $1,353,000 at December 31, 2004 and 2003, respectively.
The Bank grants commercial loans to customers primarily in Monmouth County, New Jersey. Although the Bank actively manages the diversification of its loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent upon the strength of the local economy. The loan portfolio includes commercial real estate, which is comprised of owner occupied and investment real estate, including general office, medical, manufacturing and retail space. Construction loans, short-term in nature, comprise another portion of the portfolio, along with commercial and industrial loans. The latter includes lines of credit and equipment loans. From time to time, the Bank may purchase or sell an interest in a loan from or to another lender (participation loan) in order to manage its portfolio risk. Loans purchased by the Bank are typically located in central New Jersey and meet the Bank's own independent underwriting guidelines.
FS-24
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure of the estimated fair value of an entity's assets and liabilities considered to be financial instruments. For the Bank, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments. However, many such instruments lack an available trading market, as characterized by a willing buyer and seller engaging in an exchange transaction. Also, it is the Bank's general practice and intent to hold its financial instruments to maturity and not to engage in trading or sales activities. Therefore, the Bank had to use significant estimations and present value calculations to prepare this disclosure.
Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Also, management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.
Estimated fair values have been determined by the Bank using the best available data and an estimation methodology suitable for each category of financial instruments. The estimation methodologies used, the estimated fair values, and recorded book balances at December 31, 2004 and 2003, are outlined below.
For cash and cash equivalents, including cash and due from banks and federal funds sold and interest bearing deposits, the recorded book values of approximately $10,370,000 and $6,754,000, as of December 31, 2004 and 2003, respectively, approximate fair values. The estimated fair values of investment securities are based on quoted market prices, if available. Estimated fair values are based on quoted market prices of comparable instruments if quoted market prices are not available.
The net loan portfolio at December 31, 2004 and 2003, has been valued using a present value discounted cash flow where market prices were not available. The discount rate used in these calculations is the estimated current market rate adjusted for credit risk. The carrying value of accrued interest approximates fair value.
The estimated fair values of demand deposits (i.e., interest and non interest-bearing checking accounts, savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values of certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly time deposit maturities. The carrying amount of accrued interest payable approximates its fair value.
2004 2003
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ------------ ------------ ------------
(in thousands)
Investment securities $ 43,716 $ 43,714 $ 27,303 $ 27,303
Loans receivable, net of deferred fees 176,000 178,102 133,759 135,962
Certificates of deposits 18,997 18,637 26,395 26,552
|
(Continued)
FS-25
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE P - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
The fair values of the short-term borrowings and securities sold under agreements to repurchase totaling $5,000,000 and $7,761,000 and $6,784,000 and $6,455,000 are estimated to approximate their recorded book balances at December 31, 2004 and 2003, respectively.
The fair value of commitments to extend credit is estimated based on the amount of unamortized deferred loan commitment fees. The fair value of letters of credit is based on the amount of unearned fees plus the estimated cost to terminate the letters of credit. Fair values of unrecognized financial instruments including commitments to extend credit and the fair value of letters of credit are considered immaterial.
NOTE Q - REGULATORY MATTERS
State banking statutes restrict the amount of dividends on capital stock. Accordingly, no dividends shall be paid by the Bank on its capital stock unless, following the payment of such dividends, the capital stock of the Bank will be unimpaired, and (1) the Bank will have a surplus of not less than 50% of its capital, or, if not, (2) the payment of such dividend will not reduce the surplus of the Bank.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulations to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). As of December 31, 2004, management believes that the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 2004, the most recent notification from the Bank's regulatory authority categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as adequately-capitalized, the Bank must maintain minimum total risk-based; Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.
(Continued)
FS-26
TWO RIVER COMMUNITY BANK
Notes to Consolidated Financial Statements - Continued
December 31, 2004, 2003, and 2002
NOTE Q - REGULATORY MATTERS - Continued
The Bank's actual capital amounts and ratios are presented in the following table.
To be well-
capitalized under
For capital prompt corrective
Actual adequacy purposes action provisions
------------------ ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- -----
(in thousands)
December 31, 2004
-----------------
Total capital (to risk-weighted assets) $23,913 12.24% $15,628 =>8.00% $19,534 =>10.00%
Tier I capital (to risk-weighted assets) 21,986 11.25 7,814 =>4.00 11,721 => 6.00
Tier I capital (to average assets) 21,986 9.61 6,866 =>3.00 11,443 => 5.00
December 31, 2003
-----------------
Total capital (to risk-weighted assets) $15,073 10.49% $11,496 =>8.00% $14,371 =>10.00%
Tier I capital (to risk-weighted assets) 13,604 9.47 5,748 =>4.00 8,622 => 6.00
Tier I capital (to average assets) 13,604 8.39 4,863 =>3.00 8,105 => 5.00
|
FS-27
TWO RIVER COMMUNITY BANK
CONSOLIDATED BALANCE SHEETS
June 30, 2005 (Unaudited) and December 31, 2004
(Dollars in thousands, except per share data)
ASSETS (Unaudited)
June 30, December 31,
2005 2004
----------- ------------
Cash and due from banks $ 10,371 $ 5,225
Federal funds sold 3,129 5,145
----------- -----------
Total cash and cash equivalents 13,500 10,370
Investment securities available-for-sale 34,959 39,876
Investment securities held-to-maturity (fair value of $4,285 and
$3,837 at June 30, 2005 and December 31, 2004,
respectively) 4,269 3,840
Loans receivable 200,422 176,000
Less allowance for loan losses (2,205) (1,927)
----------- -----------
Net loans receivable 198,217 174,073
Bank-owned life insurance 3,591 3,513
Premises and equipment, net 2,250 2,416
Accrued interest receivable 902 824
Other assets 825 558
----------- -----------
Total assets $ 258,513 $ 235,470
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Non-interest bearing - demand $ 47,884 $ 49,022
Interest bearing - NOW, money market and savings 120,321 131,936
Certificates of deposit, under $100,000 23,930 7,448
Certificates of deposit, $100,000 and over 28,696 11,549
----------- -----------
Total deposits 220,831 199,955
Securities sold under agreements to repurchase 8,685 7,761
Short-term borrowings 5,000 5,000
Accrued interest payable 36 21
Other liabilities 1,113 924
----------- -----------
Total liabilities 235,665 213,661
----------- -----------
SHAREHOLDERS' EQUITY
Common stock - authorized, 10,000,000 shares of $2.00 par value;
issued and outstanding, 3,936,595 and 3,902,994 shares
at June 30, 2005 and December 31, 2004, respectively 7,873 7,806
Additional paid-in capital 14,177 14,119
Accumulated earnings 984 61
Accumulated other comprehensive loss (186) (177)
----------- -----------
Total shareholders' equity 22,848 21,809
----------- -----------
Total liabilities and shareholders' equity $ 258,513 $ 235,470
=========== ===========
|
The accompanying notes are an integral part of these statements.
FS-28
TWO RIVER COMMUNITY BANK
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Six Months Ended June 30, 2005 and 2004
(Dollars in thousands, except for per share amounts)
Six Months Ended
June 30,
------------------------------
2005 2004
------------ ------------
Interest Income:
Loans, including fees $ 6,053 $ 4,489
Investment securities 842 635
Federal funds sold 31 42
------------ ------------
Total interest income 6,926 5,166
------------ ------------
Interest Expense:
Savings, NOW & money market deposits 1,037 890
Time deposits 531 264
Short-term borrowings 95 3
Securities sold under agreements to repurchase 74 53
------------ ------------
Total interest expense 1,737 1,210
------------ ------------
Net interest income 5,189 3,956
Provision for loan losses 278 243
------------ ------------
Net interest income after provision
for loan losses 4,911 3,713
------------ ------------
Non-Interest Income:
Service charges on deposit accounts 186 176
Other loan servicing fees 192 129
Other 185 63
------------ ------------
Total non-interest income 563 368
------------ ------------
Non-Interest Expenses:
Salaries and employee benefits 2,178 1,782
Occupancy and equipment 661 587
Other operating 1,170 928
------------ ------------
Total non-interest expense 4,009 3,297
------------ ------------
Income before income taxes 1,465 784
Provision for income taxes 542 304
------------ ------------
Net income $ 923 $ 480
============ ============
Earnings Per Share:
Basic $ 0.23 $ 0.14
Diluted $ 0.22 $ 0.13
Weighted Average Shares Outstanding:
Basic 3,931,311 3,497,571
Diluted 4,144,671 3,780,050
|
The accompanying notes are an integral part of these statements.
FS-29
TWO RIVER COMMUNITY BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
For the Six Months Ended June 30, 2005 and 2004
Accumulated
Additional (1) Accumulated other Total
Common paid-in (deficit)/ comprehensive shareholders' Comprehensive
Stock capital earnings loss equity income
-------- ---------- -------------- ------------- ------------- -------------
(Dollars in thousands)
Balance December 31, 2003 $ 6,992 $ 7,875 $ (1,264) $ (60) $ 13,543
Options exercised (4,000 shares) 8 7 -- -- 15
Net income -- -- 480 -- 480 480
Other comprehensive loss, net of
reclassification adjustments and taxes -- -- -- (622) (622) (622)
-------- -------- -------- -------- -------- --------
Total comprehensive income $ (142)
========
Balance, June 30, 2004 $ 7,000 $ 7,882 $ (784) $ (682) $ 13,416
======== ======== ======== ======== ========
Balance December 31, 2004 $ 7,806 $ 14,119 $ 61 $ (177) $ 21,809
Options exercised (33,601 shares) 67 58 -- -- 125
Net income -- -- 923 -- 923 923
Other comprehensive loss, net of
reclassification adjustments and taxes -- -- -- (9) (9) (9)
-------- -------- -------- -------- -------- --------
Total comprehensive income $ 914
========
Balance, June 30, 2005 $ 7,873 $ 14,177 $ 984 $ (186) $ 22,848
======== ======== ======== ======== ========
|
(1) Includes accumulated charges for stock dividends of $2,165 at June 30, 2005 and June 30, 2004.
The accompanying notes are an integral part of these statements.
FS-30
TWO RIVER COMMUNITY BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30, 2005 and 2004
Six Months Ended June 30,
--------------------------
2005 2004
----------- -----------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 923 $ 480
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 333 301
Provision for loan losses 278 243
Net amortization (accretion) of premiums and discounts 29 42
Earnings on bank-owned life insurance (78) --
Increase in accrued interest receivable (78) (149)
Increase in other assets (262) (304)
Increase (decrease) in accrued interest payable 15 (40)
Increase (decrease) in other liabilities 189 (293)
----------- -----------
Net cash provided by operating activities 1,349 280
----------- -----------
Cash flows from investing activities:
Purchases of investment securities held-to-maturity (431) --
Purchases of investment securities available-for-sale (535) (16,875)
Proceeds from principal repayments, maturities and calls of
investment securities 5,411 4,413
Net increase in loans (24,422) (24,383)
Purchases of premises and equipment (167) (639)
----------- -----------
Net cash used in investing activities (20,144) (37,484)
----------- -----------
Cash flows from financing activities:
Net increase in securities sold under agreements to repurchase 924 280
Net repayments of short-term borrowings -- (6,784)
Net (decrease) increase in demand deposits and savings accounts (12,753) 60,002
Net increase (decrease) in certificates of deposit 33,629 (3,895)
Proceeds from exercise of stock options 125 15
----------- -----------
Net cash provided by financing activities 21,925 49,618
----------- -----------
Net increase in cash and cash equivalents 3,130 12,414
Cash and cash equivalents, beginning of year 10,370 6,754
----------- -----------
Cash and cash equivalents, end of period $ 13,500 $ 19,168
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,722 $ 1,250
Cash for income taxes $ 581 $ 152
|
The accompanying notes are an integral part of these statements.
FS-31
TWO RIVER COMMUNITY BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for full year financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for the six month period ended June 30, 2005, are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2004.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued relating to outstanding stock options. Potential common shares related to stock options are determined using the treasury stock method.
The following table sets forth the computations of basic and diluted earnings per share:
Six Months Ended
June 30,
--------------------------
2005 2004
---------- ----------
(Dollars in thousands,
except per share data)
Net income applicable to common stock $ 923 $ 480
========== ==========
Weighted average common shares outstanding 3,931,311 3,497,571
Effect of dilutive securities, stock options 213,360 282,479
---------- ----------
Weighted average common shares outstanding used to calculate
diluted earnings per share 4,144,671 3,780,050
========== ==========
Basic earnings per share $ 0.23 $ 0.14
Diluted earnings per share $ 0.22 $ 0.13
|
NOTE 3 - COMPREHENSIVE INCOME
The components of other comprehensive income for the six months ended June 30, 2005 and 2004 are as follows:
Six Months Ended
June 30,
2005 2004
---------- ----------
(Dollars in thousands)
Unrealized holding losses on available-for-sale securities $ (14) $ (875)
Less: Reclassification adjustments for gains (losses) included
in net income -- --
---------- ----------
(14) (875)
Tax effect (5) (254)
---------- ----------
Net unrealized losses $ (9) $ (622)
========== ==========
|
FS-32
NOTE 4 - STOCK BASED COMPENSATION
The Bank accounts for stock option plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under Two River's plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if Two River had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based compensation for the periods presented:
Six Months Ended
June 30,
---------------------------
2005 2004
---------- ----------
(Dollars in thousands,
except per share data)
Net income, as reported $ 923 $ 480
Total stock-based compensation expense determined under fair
value based method for all awards, net of related tax effects (126) (194)
---------- ----------
Pro forma net income $ 797 $ 286
========== ==========
Basic earnings per share:
As reported $ 0.23 $ 0.14
Pro forma $ 0.20 $ 0.08
Diluted earnings per share:
As reported $ 0.22 $ 0.13
Pro forma $ 0.19 $ 0.08
|
NOTE 5 - GUARANTEES
The Bank does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit are conditional commitments issued by Two River to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank, generally, holds collateral and/or personal guarantees supporting these commitments. The Bank had $1,967,000 of commercial and similar letters of credit as of June 30, 2005. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of June 30, 2005 for guarantees under standby letters of credit issued is not material.
NOTE 6 - MATERIAL TRANSACTION
On August 17, 2005, Two River Community Bank and The Town Bank announced the signing of a definitive agreement and plan of acquisition where Two River Bank would acquire The Town Bank. The agreement calls for an all-stock transaction in which the two banks will become independently operated, wholly-owned subsidiaries of a newly formed bank holding company, with each bank's board of directors and management team remaining in place.
FS-33
Under the terms of the acquisition agreement, each share of Two River Community Bank common stock will be converted into one share of common stock of the newly formed holding company and each share of Town Bank common stock will be converted into 1.25 shares of common stock of the holding company. The closing price of Two River common stock on August 16, 2005 was $16.25. Based on a 1.25 exchange ratio, shareholders of Two River will hold approximately 65.6% of the post-transaction shares of the newly formed holding company.
The 1.25 exchange ratio is subject to adjustment if the average price of Two River common stock over a defined period prior to the closing is below $13.20 or above $18.80. If the Two River average price is above $18.80, the exchange ratio will be $23.50 divided by the Two River average price, with a minimum exchange ratio of 1.1463. If Two River's average price is below $13.20, the exchange ratio will be $16.50 divided by the Two River average price, with a maximum exchange ratio of 1.5. If the average price is $11.00 or less, Town Bank will have the right to terminate the deal.
The transaction has been approved by the board of directors of each bank, and must be approved by holders of shares representing 2/3 of the outstanding stock of each bank before it can be completed. The acquisition is subject to other customary closing conditions, including receipt of bank regulatory approval. The transaction is expected to close early in the first quarter of 2006.
FS-34
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
The Town Bank
We have audited the accompanying balance sheets of The Town Bank (The Bank) as of December 31, 2004 and 2003, and the related statements of income, changes in shareholders' equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004. These financial statements are the responsibility of The Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Town Bank as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Short Hills, New Jersey
February 7, 2005
|
FS-35
The Town Bank Balance Sheets
(in thousands, except share amounts)
December 31,
2004 2003
----------- -----------
ASSETS
Cash and due from banks $ 1,376 $ 1,665
Federal funds sold and other short term investments -- 3,590
Investment securities available for sale 12,907 17,013
Loans, net of unearned fees/costs 109,924 79,692
Less: Allowance for loan losses (1,186) (801)
----------- -----------
Net loans 108,738 78,891
Premises and equipment, net 1,924 1,351
Other assets 1,131 562
----------- -----------
Total Assets $ 126,076 $ 103,072
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 17,827 $ 15,193
Interest bearing 91,808 74,435
----------- -----------
Total deposits 109,635 89,628
Short term borrowings 1,430 171
Accrued expenses and other liabilities 528 262
----------- -----------
Total Liabilities 111,593 90,061
----------- -----------
Shareholders' Equity
Common stock ($5.00 par value per
share, authorized 3,000,000 shares at
December 31, 2004 and 2003;
1,869,302 shares issued and outstanding at
December 31, 2004 and 1,851,012 issued and
outstanding at December 31, 2003) 9,346 9,255
Additional paid-in capital 5,506 5,415
Accumulated deficit (308) (1,672)
Accumulated other comprehensive (loss) income (61) 13
----------- -----------
Total Shareholders' Equity 14,483 13,011
----------- -----------
Total Liabilities and Shareholders' Equity $ 126,076 $ 103,072
=========== ===========
|
See accompanying notes to the financial statements.
FS-36
The Town Bank Income Statements
(in thousands, except share amounts)
Year Ended December 31,
2004 2003 2002
---------- ---------- ----------
Interest Income
Interest and fees on loans $ 5,959 $ 4,455 $ 3,440
Interest on federal funds sold
and other short term investments 71 89 152
Interest on securities available for sale 287 291 345
---------- ---------- ----------
Total interest income 6,317 4,835 3,937
Interest Expense
Interest on checking, savings
and money market deposits 632 272 370
Interest on certificates of deposits 1,197 1,297 1,098
Interest on short term borrowings 3 1 2
---------- ---------- ----------
Total interest expense 1,832 1,570 1,470
---------- ---------- ----------
Net interest income 4,485 3,265 2,467
Provision for loan losses 385 191 303
---------- ---------- ----------
Net interest income after provision for
loan losses 4,100 3,074 2,164
---------- ---------- ----------
Non-Interest Income
Service charges on deposit accounts, other
service charges and miscellaneous income 104 105 117
Gains on sales of residential mortgages 32 103 61
Gains on sales/calls of investment securities -- 34 77
---------- ---------- ----------
Total non-interest income 136 242 255
---------- ---------- ----------
Non-Interest Expense
Salaries and employee benefits 1,376 1,209 1,134
Occupancy expense 315 293 268
Equipment expense 334 438 378
Other operating expense 763 602 561
---------- ---------- ----------
Total non-interest expense 2,788 2,542 2,341
---------- ---------- ----------
Income before income taxes 1,448 774 78
Income taxes 84 76 22
---------- ---------- ----------
Net income $ 1,364 $ 698 $ 56
========== ========== ==========
Net income per share-basic $ 0.74 $ 0.52 $ 0.05
========== ========== ==========
Net income per share-diluted $ 0.72 $ 0.51 $ 0.05
========== ========== ==========
Average shares outstanding - basic 1,852,000 1,348,000 1,086,000
========== ========== ==========
Average shares outstanding - diluted 1,905,000 1,367,000 1,091,000
========== ========== ==========
|
See accompanying notes to the financial statements.
FS-37
The Town Bank Statements of Changes in Shareholders' Equity
(in thousands, except share amounts)
Years Ended December 31, 2004, 2003 and 2002
Accumulated
Additional other
Common paid-in Accumulated comprehensive
stock capital deficit (loss) income Total
---------- ---------- ----------- ------------- ----------
Balance at December 31, 2001 $ 5,427 $ 3,124 $ (2,426) $ 112 $ 6,237
Net income -- -- 56 -- 56
Net change in unrealized gain
on securities available for sale -- -- -- 3 3
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2002 5,427 3,124 (2,370) 115 6,296
Net income -- -- 698 -- 698
Net change in unrealized gain
on securities available for sale -- -- -- (102) (102)
Issuance of 51,038 common shares
through stock options exercised 255 93 -- -- 348
Issuance of 714,320 common
shares, net of issuance costs of $182 3,573 2,198 -- -- 5,771
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2003 9,255 5,415 (1,672) 13 13,011
Net income -- -- 1,364 -- 1,364
Net change in unrealized gain
on securities available for sale -- -- -- (74) (74)
Issuance of 18,290 common shares
through stock options exercised
and related tax benefits 91 91 -- -- 182
---------- ---------- ---------- ---------- ----------
Balance at December 31, 2004 $ 9,346 $ 5,506 $ (308) $ (61) $ 14,483
========== ========== ========== ========== ==========
|
FS-38
The Town Bank Statements of Comprehensive Income
(in thousands)
Years Ended December 31,
2004 2003 2002
------- ------- -------
Net income $ 1,364 $ 698 $ 56
Other comprehensive income (loss):
Reclassification adjustment for gain in net income -- (34) (42)
Net unrealized gain (loss) on securities
available for sale, during the period (74) (68) 45
------- ------- -------
Comprehensive income $ 1,290 $ 596 $ 59
======= ======= =======
|
See accompanying notes to the financial statements.
FS-39
The Town Bank Statements of Cash Flows
(in thousands)
Years Ended December 31,
2004 2003 2002
---------- ---------- ----------
Cash flows from operating activities:
Net income $ 1,364 $ 698 $ 56
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 385 191 303
Origination of residential mortgage loans held for sale (7,652) (8,944) (4,824)
Proceeds from sales of residential mortgages held for sale 7,684 9,047 5,091
Gains on sales of residential mortgages held for sale (32) (103) (61)
Gross gains on sales/calls of investment securities
available for sale -- (34) (77)
Depreciation and amortization 151 186 197
Increase in other assets (569) (66) (133)
Increase (decrease) in accrued expenses
and other liabilities 266 (85) (239)
---------- ---------- ----------
Net cash provided by operating activities 1,597 890 313
---------- ---------- ----------
Cash flows from investing activities:
Net decrease in federal funds sold and
short term investments 3,590 3,244 3,930
Purchase of securities available for sale (14,968) (37,065) (14,764)
Proceeds from calls/maturities of securities available for sale 19,000 30,025 6,700
Proceeds from sales of securities available for sale -- 4,094 1,166
Net increase in loans (30,232) (18,688) (23,541)
Purchase of premises and equipment (724) (87) (15)
---------- ---------- ----------
Net cash used in investing activities (23,334) (18,477) (26,524)
---------- ---------- ----------
Cash flows from financing activities:
Net increase in non-interest bearing deposits 2,634 1,710 3,989
Net increase in interest bearing deposits 17,373 10,401 22,216
Net increase (decrease) in short term borrowings 1,259 (79) 148
Issuance of common stock, net 182 6,119 --
---------- ---------- ----------
Net cash provided by financing activities 21,448 18,151 26,353
---------- ---------- ----------
(Decrease) increase in cash and due from banks (289) 564 142
Cash and due from banks at beginning of year 1,665 1,101 959
---------- ---------- ----------
Cash and due from banks at end of year $ 1,376 $ 1,665 $ 1,101
========== ========== ==========
Cash paid during the year for:
Interest $ 1,822 $ 1,665 $ 1,418
========== ========== ==========
Income taxes $ 280 $ 84 $ 8
========== ========== ==========
|
See accompanying notes to the financial statements.
FS-40
The Town Bank Notes to Financial Statements
Note 1 - Nature of Operations and Significant Accounting Policies
General
The Town Bank (The Bank), a New Jersey State chartered commercial bank commenced operations on October 5, 1998 as The Town Bank of Westfield, and subsequently changed its name to The Town Bank on June 11, 2004. The Bank provides community-banking services to a broad range of customers, including corporations, individuals, partnerships and other community bodies in the greater Westfield area. Currently, The Bank operates from two offices. The Bank is subject to federal and New Jersey statutes applicable to banks chartered under the New Jersey banking laws. The Federal Deposit Insurance Corporation (FDIC) insures The Bank's deposits. Accordingly, The Bank is subject to regulation, supervision, and examination by the New Jersey State Department of Banking and Insurance and the FDIC.
On August 29, 2003, The Bank completed its private placement of common stock and issued 714,320 shares at $8.33 per share and received net proceeds of $5,771,000. In conjunction with the private placement, certain directors and officers exercised 51,038 stock options, and The Bank received net proceeds of $348,000.
On June 1, 2004, The Bank paid a 5.00% stock distribution. All share and related amounts presented have been restated to reflect this distribution.
The Bank purchased land on June 22, 2004 to operate a branch facility located at 245-249 North Avenue, Cranford, New Jersey. For the year ended December 31, 2004, The Bank incurred carrying costs for the facility of $7,000.
Basis of Financial Statement Presentation
The financial statements of The Bank are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of the financial statements 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 financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are subject to changes in the near term relate to the determination of the allowance for loan losses.
While management uses available information to recognize estimated losses on loans, future additions might be necessary based upon changes in economic conditions. In addition, various regulatory agencies, as part of their examination process, periodically review The Bank's allowance for loan losses account. Such agencies may require The Bank to recognize additions to the allowance based upon judgments of information available to them at the time of their examination.
FS-41
The Town Bank Notes to Financial Statements
Investment Securities
Investment securities, at the time of purchase, are classified into one of three categories: held to maturity, available for sale, or trading account securities.
Securities that The Bank has the ability and intent to hold until maturity are classified as "held to maturity." These Securities are stated at cost, adjusted for amortization of premiums and accretion of discounts, using the interest method over the estimated life of the securities. At December 31, 2004 and 2003, The Bank did not have any held to maturity securities.
Securities that may be held for indefinite periods of time which management intends to use as part of its asset/liability management strategy and sold in response to changes in interest rates, loan demand, liquidity needs or other factors are classified as "available for sale" and reported at estimated fair market value. Unrealized holding gains and losses, on these securities are not included in earnings, but reported as a separate component of shareholders' equity. Gains or losses, upon realization, are included in earnings using the specific identification method. Unrealized losses that are determined to be other than temporary are charged against earnings in the period that such impairment occurred.
Trading account securities are carried at market value. Gains and losses resulting from "marking to market" these securities as well as securities sold are reported in non-interest income utilizing the trade date method. This category includes securities purchased specifically for short-term appreciation. The Bank does not have any trading account securities.
Interest on investment securities is included in interest income when earned.
Loans
Loans are stated at the principal amount outstanding, net of deferred loan origination fees/costs and unearned discounts. Interest on substantially all loans is accrued and credited to interest income based upon the principal amount outstanding. Loan fees and certain costs associated with originating loans are deferred and amortized over the expected life of the respective loans as an adjustment to the yield utilizing the level yield method.
Generally, interest income is not accrued on loans, including impaired loans, where principal or interest is 90 days or more past due, unless they are well secured and in the process of collection. A loan less than 90 days past due may be placed on non-accrual if management believes there is sufficient doubt as to the ultimate collection of the loan balance outstanding. When a loan, including an impaired loan, is classified as non-accrual, uncollected past due interest is reversed and charged against current income. Interest income is not recognized until the financial condition of the borrower improves, payments are brought current and a consistent payment history is established. Payments received on non-accrual loans, including impaired loans, are first applied to all principal amounts owed. Once the remaining principal balance is deemed fully collectible, payments are then applied to interest income and fees.
FS-42
The Town Bank Notes to Financial Statements
A loan is considered impaired when, based upon current information and events, it is probable that The Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based upon the present value of expected future cash flows, or as a practical expedient, at the loan's observable market value, or the fair value of the underlying collateral, if the loan is collateral dependent. Smaller balance homogeneous loans, such as residential mortgages and loans to individuals are collectively evaluated for impairment and excluded from the definition of impaired loans.
Loans Held for Sale
Loans held for sale are carried at the lower of cost or market using the aggregate method. Gains or losses resulting from sales of loans are recognized when the proceeds are received from investors and are included in the non-interest income section of the income statement. At December 31, 2004 and 2003, The Bank did not have any loans held for sale.
Allowance for Loan Losses The allowance for loan losses account is maintained at a level considered to be adequate to provide for probable loan losses inherent in the portfolio. The |
allowance account is increased by provisions charged to expense and reduced by net charge-offs. The level of the allowance account is based upon management's evaluation of probable losses in the loan portfolio, after consideration of appraised collateral values, financial condition of the borrower, delinquency and charge-off trends, as well as prevailing economic conditions. Management evaluates the adequacy of the account on a quarterly basis throughout the year. While management uses available information to recognize losses on loans, future additions to the allowance account may be necessary based upon changes in economic conditions and other factors.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to forty years. Leasehold improvements are amortized utilizing the straight-line method over the life of the lease or improvement whichever is shorter. Maintenance and repairs are charged to expense as incurred.
Other Real Estate Owned
Other real estate owned consists of property acquired through foreclosure or acceptance of a deed-in-lieu of foreclosure. Only collateral of which The Bank has taken physical possession is classified, as other real estate owned.
Other real estate owned is carried at the lower of fair market value of the related property, as determined by current appraisals less estimated costs to sell the property, or the recorded investment of the property. Write-downs on these properties, which occur after the initial transfer from the loan portfolio, are recorded as an operating expense. Costs of holding these properties are charged to expense in the current period. Gains, to the extent allowable, and losses on the disposition of these properties are accounted for in current operations. At December 31, 2004 and 2003, The Bank had no other real estate owned.
FS-43
The Town Bank Notes to Financial Statements
Stock-Based compensation
At December 31, 2004, the Bank has seven stock-based compensation plans, which are described more fully in Note 13. The Bank accounts for these plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and net income per share if The Bank had applied the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation, to stock-based compensation.
Years Ended December 31,
------------------------------------------
2004 2003 2002
---------- ---------- ----------
Net income (loss), as reported $1,364,000 $ 698,000 $ 56,000
Deduct: Total stock-based
compensation expense determined under fair
value based method for all awards, net of
related tax effects (97,000) (106,000) (90,000)
---------- ---------- ----------
Pro forma net income (loss) $1,267,000 $ 592,000 $ (34,000)
========== ========== ==========
Net income (loss) per share:
Basic-as reported $ 0.74 $ 0.52 $ 0.05
========== ========== ==========
Basic-pro forma $ 0.68 $ 0.44 $ (0.03)
========== ========== ==========
Diluted-as reported $ 0.72 $ 0.51 $ 0.05
========== ========== ==========
Diluted-pro forma $ 0.67 $ 0.43 $ (0.03)
========== ========== ==========
|
Income Taxes
Income taxes are accounted for under the asset and liability method. 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 and operating losses and tax credit carry-forwards. 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 settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in the period that includes the enactment date. The recoverability of The Bank's net deferred tax asset is evaluated on a quarterly basis.
FS-44
The Town Bank Notes to Financial Statements
Net Income Per Share and Common Share Amounts
Net income per basic share is calculated by dividing net income by the weighted average number of shares outstanding for the period. Net income per diluted share is calculated by dividing net income by the weighted number of shares outstanding plus the assumption of the exercise of stock options granted utilizing the treasury stock method. Under these assumptions the shares outstanding for 2004, 2003, and 2002 would have increased by 53,000, 19,000 and 5,000 respectively.
Comprehensive Income
Comprehensive income consists of net income and the change in net unrealized gains (losses) on securities available for sale.
Recent Accounting Pronouncements
1 FASB Statement No. 123 (revised 2004), Share-Based Payment.
2 Statement 123(R) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. Statement 123(R) requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees and directors in the income statement. The revised Statement generally requires that an entity account for those transactions using the fair-value-based method, and eliminates an entity's ability to account for share-based compensation transactions using the intrinsic value method of accounting in APB Opinion No. 25, Accounting for Stock Issued to Employees, which was permitted under Statement 123, as originally issued. The revised Statement requires entities to disclose information about the nature of the share-based payment transactions and the effects of those transactions on the financial statements. Statement 123(R) is effective for The Bank beginning July 1, 2005. The Bank must use either the modified prospective or the modified retrospective transition method. Early adoption of this Statement for interim or annual periods for which financial statements or interim reports have not been issued is permitted. The Bank currently has a stock option plan with 37,134 options available for issuance to employees and 54,819 options available for issuance to directors. We do not anticipate that the initial adoption of Statement 123(R) will have a significant impact on the financial statements.
EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments."
The guidance in EITF 03-1 was effective for other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. However, the guidance contained in paragraphs 10-20 of the Issue has been delayed by FSP EITF Issue 03-1-1, "The Effective Date
FS-45
The Town Bank Notes to Financial Statements
of Paragraphs 10-20 of EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," released on September 30, 2004. The disclosure requirements continue to be effective in annual financial statements for fiscal years ending after December 15, 2003. The Bank will evaluate the impact on its consolidated financial statements, if any, when the recognition and measurement requirements for other-than temporary impairment are finalized.
Note 2 - Cash and Due from Banks
The Bank is required to maintain average reserve balances with the Federal Reserve Bank. The Bank's average balance requirement was $118,000 for 2004 and $48,000 for 2003.
Note 3 - Investment Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated market value of investment securities available for sale at December 31, 2004 and 2003, are as follows (in thousands):
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------
December 31, 2004
United States Government Sponsored
Enterprise Obligations $ 13,000 $ -- $ (93) $ 12,907
========== ========== ========== ==========
December 31, 2003
United States Government Sponsored
Enterprise Obligations $ 17,000 $ 20 $ (7) $ 17,013
========== ========== ========== ==========
|
The amortized cost and estimated market value of investment securities available for sale at December 31, 2004, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
---------- ----------
Due within one year $ 8,000 $ 7,947
Due after one year through five years 5,000 4,960
---------- ----------
Total $ 13,000 $ 12,907
========== ==========
|
The gross unrealized losses of $93,000 within the investment portfolio have been for a period of less than one year and are due to changes in general interest rates. Management has the intent and ability to hold the securities until the market value recovers and believe that the losses are temporary in nature.
Securities available for sale with an estimated fair market value of $5,457,000 at December 31, 2004, were pledged to secure public funds and for other purposes required by law.
FS-46
The Town Bank Notes to Financial Statements
Note 4 - Loans
Loans outstanding at December 31, 2004 and 2003, by classification are as follows (in thousands):
2004 2003
---------- ----------
Real estate loans - commercial $ 36,102 $ 26,988
Home equity loans and second mortgages 18,681 18,387
Commercial and industrial 22,240 19,123
Construction and land development 32,740 15,044
Consumer 161 150
---------- ----------
Total loans, net of unearned fees/costs $ 109,924 $ 79,692
========== ==========
A substantial portion of The Bank's loans are secured by real estate located in
New Jersey, primarily the greater Westfield area. Accordingly, the ultimate
|
collection of these loans is susceptible to changes in this market area.
At December 31, 2004 and 2003, The Bank had no non-accrual or impaired loans. At December 31, 2004 and 2003, The Bank had loans to Officers, Directors, and their affiliates of $4,404,000 and $3,413,000 respectively. During 2004 the Bank originated loans of $2,931,000 and received principal repayments of $1,940,000.
The Bank is party to financial instruments with off-balance-sheet risk incurred in the normal course of business to meet the financial needs of its customers. These financial instruments include commercial and standby letters of credit and unused lines of credit, to varying degrees, which include elements of credit risk in excess of the amount recognized in the financial statements. The contract or notional amounts of these instruments express the extent of involvement The Bank has in each category of financial instruments.
The Bank's exposure to credit loss from nonperformance by the other party to the above-mentioned financial instruments is represented by the contractual 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.
The contract or notional amount of financial instruments whose contract amounts represent credit risk at December 31, 2004, is as follows (in thousands):
Standby letters of credit $ 1,399
=======
Outstanding loan and credit line commitments $34,270
=======
|
FS-47
The Town Bank Notes to Financial Statements
Standby letters of credit are commitments issued by The Bank guaranteeing performance by a customer to a third party. The fair value of standby letters of credit is represented by fees charged to enter into these agreements and are not significant to the financial statements of The Bank. Outstanding loan commitments represent the unused portion of loan commitments available to individuals and companies as long as there is no violation of any condition established in the contract. Outstanding loan commitments generally have a fixed expiration date of one year or less, except for home equity lines of credit commitments, which generally have an expiration date of up to five years. The Bank evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by The Bank upon extension of credit is based upon Management's credit evaluation of the customer. Various types of collateral may be held, including property and marketable securities. The credit risk involved in these financial instruments is essentially the same as that involved in extending loan facilities to customers.
Note 5 - Allowance for Loan Losses
A summary of the allowance for loan losses for the years ended December 31, 2004, 2003 and 2002, is as follows (in thousands):
2004 2003 2002
--------- --------- ---------
Balance, beginning of the year $ 801 $ 610 $ 338
Provision charged to expense 385 191 303
Recoveries of loans charged off -- -- 109
Loans charged off -- -- (140)
--------- --------- ---------
Balance, end of the year $ 1,186 $ 801 $ 610
========= ========= =========
|
Note 6 - Premises and Equipment, Net
Premises and equipment at December 31, 2004 and 2003, is summarized as follows (in thousands):
2004 2003
---------- ----------
Land $ 942 $ 250
Bank buildings 547 536
Leasehold improvements 834 829
Equipment 414 398
---------- ----------
2,737 2,013
Less: accumulated depreciation
and amortization (813) (662)
---------- ----------
Premises and equipment, net $ 1,924 $ 1,351
========== ==========
|
Depreciation and amortization expense for 2004, 2003 and 2002 totaled $151,000, $186,000 and $197,000 respectively.
FS-48
The Town Bank Notes to Financial Statements
Notes 7 - Deposits
Interest bearing deposits at December 31, 2004 and 2003 are detailed as follows (in thousands):
2004 2003
---------- ----------
Interest bearing checking accounts $ 6,398 $ 6,306
Money market accounts 8,867 12,244
Savings accounts 36,149 10,667
Certificates of deposit of less than $100,000 21,095 22,172
Certificates of deposit of $100,000 or more 19,299 23,046
---------- ----------
Total interest bearing deposits $ 91,808 $ 74,435
========== ==========
|
At December 31, 2004, certificates of deposit mature as follows:
Certificates of
Deposit Certificates of Deposit
Less than $100,000 $100,000 or More
-------------------- -----------------------
During 2005 $ 12,802 $ 13,170
During 2006 3,346 1,966
During 2007 3,429 2,256
During 2008 1,152 1,806
During 2009 366 101
---------- ----------
Total $ 21,095 $ 19,299
========== ==========
|
Note 8 - Short Term Borrowings
Short-term borrowings consist of treasury, tax and loan notes (TT&L) due on demand, and federal funds purchased. Interest on TT&L is computed at a rate equal to 25 basis points below the weekly average federal funds rate. Interest on federal funds purchased is based upon market conditions. Balances and rates at, or for the years ended December 31, 2004, 2003, and 2002 were as follows (in thousands):
2004 2003 2002
----------------- ---- ----
Federal
Funds
Purchased TT&L TT&L TT&L
--------- ---- ---- ----
Balance at end of year $1,180 $250 $171 $250
Average during year 33 152 119 125
Maximum month-end balance during year 1,180 250 250 250
Average rate during year 2.53% 1.11% 0.89% 1.41%
Rate at end of year 2.78% 1.87% 0.73% 0.99%
|
The Bank has an unsecured federal funds borrowing line with a correspondent bank in the amount of $3,650,000. The Bank also has a secured repurchase agreement line with a brokerage firm in the amount of up to $10,000,000. At December 31, 2004, there were no borrowings outstanding under the repurchase agreement facility.
FS-49
The Town Bank Notes to Financial Statements
Note 9 - Other Operating Expenses
Other operating expenses for the year ended December 31, 2004, 2003, and 2002 are as follows (in thousands):
2004 2003 2002
----- ----- -----
Advertising and promotions $ 116 $ 69 $ 35
Professional fees 201 138 189
Printing and forms 61 24 21
Insurance 44 39 37
Telephone, communications, postage and messenger 89 80 62
ATM 36 40 39
All other 216 212 178
----- ----- -----
Total other operating expenses $ 763 $ 602 $ 561
===== ===== =====
|
Note 10 - Income taxes
The current and deferred amounts of income tax expense for the years ended December 31, 2004, 2003 and 2002, respectively, are as follows (in thousands):
2004 2003 2002
----- ----- -----
Current:
Federal $ 329 $ -- $ --
State 84 76 22
----- ----- -----
413 76 22
----- ----- -----
Deferred (benefit) expense:
Federal (329) -- --
State -- -- --
----- ----- -----
(329) -- --
Income tax expense $ 84 $ 76 $ 22
===== ===== =====
|
Reconciliation between the amount of reported income tax expense and the amount computed by applying the statutory federal income tax rate of 34% is as follows (in thousands):
2004 2003 2002
----- ----- -----
Compute "expected" Federal income tax expense $ 492 $ 263 $ 27
State tax net of Federal tax benefit 51 51 5
Decrease in valuation allowance (466) (236) (10)
Other, net 7 (2) --
----- ----- -----
Income tax expense $ 84 $ 76 $ 22
===== ===== =====
|
FS-50
The Town Bank Notes to Financial Statements
The tax effects of existing temporary differences that give rise to significant portions of the deferred tax assets are as follows (in thousands):
2004 2003
------- -------
Deferred tax assets:
Net operating loss carryforward $ 55 $ 368
Depreciation 117 104
Allowance for loan losses 474 320
Unrealized loss on securities available for sale 32 --
Charitable contributions -- 5
------- -------
Gross deferred tax assets 678 797
Less: Valuation allowance 252 742
------- -------
Deferred tax assets, net 426 55
Deferred tax liabilities:
Deferred loan costs (66) (50)
Unrealized gain on securities available for sale -- (5)
------- -------
Total deferred tax liabilities (66) (55)
------- -------
Net deferred tax asset $ 360 $ --
======= =======
|
At December 31, 2004, The Bank had utilized all of its federal income tax loss carryforwards.
At December 31, 2004, The Bank has state income tax loss carryforwards of approximately $926,000, which expire though 2010. The State of New Jersey passed legislation in 2004 which effects New Jersey net operating losses carried forward from 2003. These losses may be utilized up to 50% of The Bank's current year taxable income as defined. Under current law, the state has extended the use and expiration of these net operating losses.
The Bank has established a valuation allowance of $252,000 and $742,000 against its deferred tax assets at December 31, 2004 and 2003, respectively. The Bank has concluded that based upon taxes paid in the carry back period that it is more likely than not that the net deferred tax asset will be realized. During 2004, the valuation allowance decreased $495,000. The decrease related to the recognition of a $466,000 federal tax benefit and a $29,000 state tax benefit, included as a component of current state tax expense.
FS-51
The Town Bank Notes to Financial Statements
Note 11 - Commitments and Contingencies
At December 31, 2004, The Bank was obligated under a non-cancelable lease for its facility located at 520 South Avenue, Westfield. The lease calls for scheduled increased rent and payments for real estate tax adjustments.
Minimum rental payments under the terms of the lease are as follows (in thousands):
2005 $ 96
2006 96
2007 96
2008 32
Total rent expense for 2004, 2003, and 2002 amounted to $95,000, $90,000 and
$81,000 respectively.
|
Note 12 - Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial condition of The Bank. Under capital adequacy guidelines, and the regulatory framework for prompt corrective action, The Bank must meet specific capital guidelines that involve quantitative measures of The Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
The prompt corrective action regulations define specific capital categories based upon the institution's capital ratios. The capital categories are "well capitalized," "adequately capitalized," "under capitalized," "significantly undercapitalized," and "critically undercapitalized." Quantitative measures established by regulation to ensure capital adequacy require The Bank to maintain minimum amounts and ratios of Total and Tier 1 capital as defined in the regulations to risk weighted assets as defined, and of Tier 1 capital to average assets as defined. Management believes, as of December 31, 2004, that The Bank meets all capital adequacy requirements to which it is subject. To be categorized as adequately capitalized The Bank must maintain minimum total risk-based; Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the accompanying table. As of December 31, 2004 and based upon the most recent notification from The Bank's primary regulator, The Bank is well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed The Bank's category.
To be considered "well capitalized," an institution must generally have a leverage ratio, Tier 1 capital to assets, of at least 5%, a Tier 1 risk based capital ratio of at least 6%, and a total risk based capital of 10%.
FS-52
The Town Bank Notes to Financial Statements
The following is a summary of The Bank's actual regulatory capital and ratios as of December 31, 2004 and 2003, along with the FDIC's requirements for minimum capital adequacy and "well capitalized" institutions (dollars in thousand):
2004
Minimum Well
Actual Capital Adequacy Capitalized
Capital Amount Ratio Amount Ratio Amount Ratio
--------------- ---------------------- ------------------- ---------------------
Leverage $14,544 11.44% $5,083 4.00% $ 6,354 5.00%
Risk based:
Tier 1 14,544 13.06 4,455 4.00 6,683 6.00
Total 15,730 14.12 8,910 8.00 11,138 10.00
2003
Minimum Well
Actual Capital Adequacy Capitalized
Capital Amount Ratio Amount Ratio Amount Ratio
--------------- ---------------------- ------------------- ---------------------
Leverage $12,998 12.58% $4,132 4.00% $5,165 5.00%
Risk based:
Tier 1 12,998 15.21 3,419 4.00 5,128 6.00
Total 13,799 16.15 6,838 8.00 8,546 10.00
|
The board of directors of The Bank may provide for the payment of dividends, subject to applicable law. New Jersey law provides that no dividend may be paid unless, after the payment of such dividend the capital stock of The Bank will not be impaired and either The Bank will have a statutory surplus of not less than 50% of its capital stock or the payment of such dividend will not reduce the statutory surplus of The Bank.
Note 13 - Stock Compensation
The Bank has four stock option plans for employees of The Bank which provide for the granting of up to 187,182 shares of The Bank's common stock.
The Employee Stock Option Plans provide for discretionary granting of incentive stock options with the exercise price of each option equaling the market price of The Bank's stock on the date of the grant. The options have a ten-year term and vest over a five-year period.
The Bank also maintains three stock option plans for its non-employee Directors. The Director Stock Option Plans provide for the granting of up to 10% of the then outstanding shares of The Bank's common stock under certain plan provisions. Currently, the Director Stock Option Plans provide for the granting of 171,093 shares.
The Director Stock Option Plans call for option grants as retainers for serving as a Director, which vest ratable over a twelve-month period. The plans also call for option grants for attendance at Board of Director meetings and a certain number of Committee meetings. These grants vest immediately. The option price equals the market price of The Bank's stock on the date of the grant and the options have a ten-year term.
FS-53
The Town Bank Notes to Financial Statements
A summary of the status of the Employee Stock Option Plans as of December 31, 2004, 2003, and 2002, and for the years then ended is as follows.
2004 2003
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------- -------- -------- --------
Outstanding at beginning of the year 108,525 $ 6.78 139,808 $ 6.89
Granted 18,325 15.00 -- --
Exercised (3,408) 7.19 (24,878) 7.21
Forfeited (1,679) 6.18 (6,405) 7.30
-------- -------- -------- --------
Outstanding at end of year 121,763 $ 8.02 108,525 $ 6.78
======== ======== ======== ========
Options exercisable at year end 68,435 $ 7.10 44,030 $ 7.36
======== ======== ======== ========
Weighted average fair value of options
granted during the year $ 4.37 --
2002
Weighted
Average
Shares Exercise Price
-------- --------
Outstanding at beginning of the year 89,534 $ 7.46
Granted 53,708 5.95
Exercised -- --
Forfeited (3,434) 7.38
-------- --------
Outstanding at end of year 139,808 $ 6.89
======== ========
Options exercisable at year end 44,363 $ 7.83
======== ========
Weighted average fair value of options
granted during the year $2.14
|
The following table summarizes information about the Employee Stock Options outstanding at December 31, 2004.
Options Outstanding Options Exercisable
-------------------------------------------------- -------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life in Years Price Exercisable Price
---------- ----------- ------------- --------- ----------- ----------
$ 7.93 10,080 5.0 $ 7.93 10,080 $7.93
7.93 10,799 6.0 7.93 10,799 7.93
9.05 7,299 6.0 9.05 7,299 9.05
6.67 30,320 7.5 6.67 20,935 6.67
5.95 44,940 8.5 5.95 19,322 5.95
15.00 18,325 9.9 15.00 -- --
|
FS-54
The Town Bank Notes to Financial Statements
A summary of the status of the Director Stock Option Plans as of December 31, 2004, 2003, and 2002 and for the years then ended is as follows.
2004
Weighted 2003
Average Weighted
Exercise Average
Shares Price Shares Exercise Price
------ --------- ------ --------------
Outstanding at beginning of the year 72,183 $ 7.88 75,146 $ 7.45
Granted 19,354 10.75 23,197 7.67
Exercised (14,882) 7.51 (26,160) 6.45
Forfeited (8,543) 7.59 -- --
------- ------ ------- ------
Outstanding at end of year 68,112 $ 8.50 72,183 $ 7.88
======= ====== ======= ======
Options exercisable at year end 63,445 $ 8.32 66,583 $ 7.88
======= ====== ======= ======
Weighted average fair value of options
granted during the year $ 3.14 $ 2.16
2002
Weighted Average
Shares Exercise Price
--------- ---------
Outstanding at beginning of the year 57,057 $ 7.98
Granted 21,987 6.17
Exercised -- --
Forfeited (3,898) 8.09
--------- ---------
Outstanding at end of year 75,146 $ 7.45
Options exercisable at year end 69,896 $ 7.54
========= =========
Weighted average fair value of options
granted during the year $ 2.14
|
The following table summarizes information about the Director Stock Options outstanding at December 31, 2004.
Options Outstanding Options Exercisable
----------------------------------------------------- ----------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life in Years Price Exercisable Price
---------------- ------------- ----------------- ---------- ------------ ----------
$7.93 - $ 9.05 15,876 5.5 $8.51 15,876 $8.51
5.95 - 9.05 7,869 6.5 7.05 7,869 7.05
5.48 - 6.90 9,305 7.5 6.58 9,305 6.58
6.90 - 8.81 16,895 8.5 7.73 16,895 7.73
8.50 - 15.00 18,167 9.5 10.82 13,500 10.75
|
FS-55
The Town Bank Notes to Financial Statements
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2004, 2003, and 2002: dividend yield of 0%, expected volatility of 25%; risk free interest rates of 3.48% for the Employee Plan and 3.43% for the Director Plan for 2004, 3.00% in 2003 and 2002 for both plans, and expected lives of five years.
Note 14 - Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of the estimated fair value of an entity's assets and liabilities considered to be financial instruments as defined. For the Bank, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments. The Bank's general practice and intent is to hold its financial instruments to maturity and not to engage in trading or sales activity except for certain loans and securities classified as available for sale.
The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced liquidation. Fair value estimates are made at a specific point in time based on the type of financial instrument and relevant market information.
Because no quoted market price exists for a significant portion of The Bank's financial instruments, the fair values of such financial instruments are derived based on the amount and timing of future cash flows, estimated discount rates, as well as management's best judgment with respect to current economic conditions. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision.
The fair value information provided is indicative of the estimated fair values of those financial instruments and should not be interpreted as an estimate of the fair market value of The Bank taken as a whole. The disclosures do not address the value of recognized and unrecognized non-financial assets and liabilities or the value of future anticipated business. In addition, tax implications related to the realization of the unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into any of the estimates.
The following methods and assumptions were used to estimate the fair value of significant financial instruments at December 31, 2004 and 2003.
Cash and short-term investments
These financial instruments have relatively short maturities or no defined maturities but are payable on demand, with little or no credit risk. For these instruments, the carrying amounts represent a reasonable estimate of fair value.
Investment securities
Investment securities are reported at their fair values based on quoted market prices.
FS-56
The Town Bank Notes to Financial Statements
Loans
Fair values were estimated for loans by discounting the future cash flows using market discount rates that reflect the credit and interest-rate risk inherent in the loans.
Deposit Liabilities
The fair values of demand deposits, savings deposit and money market accounts were the amounts payable on demand. The fair value of time deposits was based on the discounted value of contractual cash flows. The discount rate was estimated utilizing the rates currently offered of deposits for similar remaining maturities.
Short term borrowings
For such short term borrowings, the carrying amount was considered to be a reasonable estimate of fair value.
Commitments to extend credit and letters of credit
The estimated fair value of financial instruments with off-balance sheet risk is not significant at December 31, 2004 and 2003.
The following table presents the carrying amounts and fair values of financial instruments at December 31, 2004 and 2003 (in thousands):
2004 2003
----------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------
Financial assets
Cash and other short term investments $ 1,376 $ 1,376 $ 5,255 $ 5,255
Investment securities available for sale 12,907 12,907 17,013 17,013
Loans 108,738 107,669 78,891 78,854
Financial liabilities
Non-maturity deposits 69,241 69,241 44,410 44,410
Certificates of deposit 40,394 40,227 45,218 45,192
Short term borrowings 1,430 1,430 171 171
|
FS-57
The Town Bank Balance Sheets June 30, 2005 (unaudited) and December 31, 2004
(in thousands, except share amounts)
June 30, December 31,
2005 2004
---- ----
(unaudited)
---------
ASSETS
Cash and due from banks $ 2,987 $ 1,376
Investment securities available for sale 13,917 12,907
Loans, net of unearned fees/costs 127,958 109,924
less: Allowance for loan losses (1,387) (1,186)
-------------------------
Net loans 126,571 108,738
Premises and equipment, net 1,864 1,924
Other assets 1,666 1,131
-------------------------
Total assets $ 147,005 $ 126,076
=========================
Liabilities And Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing $ 20,906 $ 17,827
Interest bearing 109,765 91,808
-------------------------
Total deposits 130,671 109,635
Short term borrowings 250 1,430
Accrued expenses and other liabilities 679 528
-------------------------
Total liabilities 131,600 111,593
-------------------------
Shareholders' equity
Common Stock ($5.00 par value per share, 3,000,000
shares authorized at June 30, 2005
and December 31, 2004; 1,877,330 shares
issued and outstanding at June 30, 2005 and 1,869,302
issued and outstanding at December 31, 2004) 9,387 9,346
Additional paid-in capital 5,547 5,506
Retained earnings (accumulated deficit) 519 (308)
Accumulated other comprehensive income (loss) (48) (61)
-------------------------
Total shareholders' equity 15,405 14,483
-------------------------
Total liabilities and shareholders' equity $ 147,005 $ 126,076
=========================
|
See accompanying notes to the financial statements
FS-58
The Town Bank Income Statements For the six months ended June 30, 2005 and 2004
(in thousands, except share amounts)
June 30,
2005 2004
---- ----
(unaudited)
---------
Interest income
Interest and fees on loans $ 3,864 $ 2,647
Interest on federal funds sold and other short term investments 60 39
Interest on securities available for sale 154 141
--------------------------
Total interest income 4,078 2,827
Interest expense
Interest on checking, savings and money market deposits 380 236
Interest on certificates of deposit 948 590
Interest on short term borrowings 15 1
--------------------------
Total interest expense 1,343 827
--------------------------
Net interest income 2,735 2,000
Provision for loan losses 201 140
--------------------------
Net interest income after provision for loan losses 2,534 1,860
--------------------------
Non-interest income
Service charges on deposit accounts 30 30
Other service charges and miscellaneous income 32 21
Gains on sales of residential mortgages 8 11
--------------------------
Total non-interest income 70 62
Non-interest expense
Salaries and employee benefits 763 674
Occupancy expense 168 159
Equipment expense 192 158
Other operating expenses 409 359
--------------------------
Total non-interest expense 1,532 1,350
--------------------------
Income before income taxes 1,072 572
Income taxes 245 35
--------------------------
Net income $ 827 $ 537
==========================
Earnings per share - basic $ 0.44 $ 0.29
==========================
Earnings per share - diluted $ 0.42 $ 0.28
==========================
Average shares outstanding - basic 1,876,000 1,851,000
==========================
Average shares outstanding - diluted 1,948,000 1,894,000
==========================
|
See accompanying notes to the financial statements
FS-59
The Town Bank Statements of Changes in Shareholders' Equity For the six months ended June 30, 2005 and 2004
(in thousands, except share amounts)
(Unaudited)
Retained Accumulated
Additional earnings other
Common paid-in (accumulated comprehensive
stock capital deficit) income (loss) Total
----- ------- -------- ------------- -----
Balance at December 31, 2003 $ 9,255 $ 5,415 $ (1,672) $ 13 $ 13,011
Net income -- -- 537 -- 537
Net change in unrealized losses
on securities available
for sale, net of taxes -- -- -- (106) (106)
----------------------------------------------------------------------
Balance at June 30, 2004 $ 9,255 $ 5,415 $ (1,135) $ (93) $ 13,442
======================================================================
Balance at December 31, 2004 $ 9,346 $ 5,506 $ (308) $ (61) $ 14,483
Net income -- -- 827 -- 827
Net change in unrealized gains on
securities available for sale,
net of taxes -- -- -- 13 13
Issuance of 8,028 common shares
through stock options exercised
and related tax benefits 41 41 -- -- 82
----------------------------------------------------------------------
Balance at June 30, 2005 $ 9,387 $ 5,547 $ 519 $ (48) $ 15,405
======================================================================
|
See accompanying notes to the financial statements
FS-60
The Town Bank Statements of Comprehensive Income For the six months ended June 30, 2005 and 2004
(in thousands)
Six months ended June 30,
-------------------------
2005 2004
--------- ---------
Net Income $ 827 $ 537
Other comprehensive income (loss):
Reclassification adjustment for gain/losses in net income -- --
Net unrealized gain (loss) on securities available for sale
during the period, net of tax 13 (106)
--------- ---------
Comprehensive income $ 840 $ 431
========= =========
|
See accompanying notes to the financial statements.
FS-61
The Town Bank Statements of Cash Flows For the Six Months Ended June 30, 2005 and 2004
(in thousands)
Six months ended
June 30,
---------------------------
2005 2004
---------- ----------
Cash flows from operating activities:
Net income $ 827 $ 537
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 201 140
Origination of residential mortgage loans held for sale (1,600) (2,200)
Proceeds from sales of residential mortgages held for sale 1,608 2,211
Gains on sales of residential mortgages held for sale (8) (11)
Depreciation and amortization 75 75
Increase in other assets (535) (119)
Increase in accrued expenses and other liabilities 151 3,062
---------- ----------
Net cash provided by operating activities 719 3,695
---------- ----------
Cash flows from investing activities:
Net increase in federal funds sold and other
short term investments -- (3,063)
Purchase of securities available for sale (3,997) (14,999)
Proceeds from calls/maturities of securities available for sale 3,000 13,000
Net increase in loans (18,034) (13,655)
Purchase of premises and equipment (15) (691)
---------- ----------
Net cash provided by investing activities (19,046) (19,408)
---------- ----------
Cash flows from financing activities:
Net increase in non-interest bearing deposits 3,079 2,991
Net increase in interest bearing deposits 17,957 13,298
Net (decrease) increase in short term borrowings (1,180) 46
Issuance of common stock, net 82 --
---------- ----------
Net cash provided by financing activities 19,938 16,335
---------- ----------
Increase in cash and due from banks 1,611 622
Cash and due from banks at beginning of year 1,376 1,665
---------- ----------
Cash and due from banks at end of period $ 2,987 $ 2,287
========== ==========
Cash paid during the year for:
Interest $ 1,151 $ 860
========== ==========
Income taxes $ 514 $ 11
========== ==========
|
See accompanying notes to the financial statements
FS-62
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for full year financial statements.
In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial condition, results of operations, and changes in cash flows have been made at and for the six months ended June 30, 2005 and 2004. The results of operations for the six months ended June 30, 2005 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2005. These interim financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2004.
2. Earnings Per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed similarly to that of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potential dilutive common shares were issued utilizing the treasury stock method.
The following table sets forth the computation of weighted average diluted shares outstanding.
Six months ended
June 30,
------------------------
2005 2004
--------- ---------
Weighted common shares outstanding 1,876,000 1,851,000
Add: Effect of dilutive securities
Stock options 72,000 43,000
--------- ---------
Weighted average diluted shares outstanding 1,948,000 1,894,000
========= =========
3. Guarantees
Town Bank does not issue any guarantees that would require liability
|
recognition or disclosure, other than its standby letters of credit. Standby letters of credit are conditional commitments issued by Town Bank to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Bank, generally, holds collateral and/or personal guarantees supporting these commitments. The Bank had $1,474,000 of commercial and standby letters of credit as of June 30, 2005. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of June 30, 2005 for guarantees under standby letters of credit issued is not material.
FS-63
4. Stock Based Compensation
At June 30, 2005, Town Bank maintained stock based compensation plans for its Employees and Directors. Town Bank accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock based compensation cost related to stock options is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. The following table illustrates the effect on net income and earnings per share if Town Bank had applied the fair value recognition provisions of FASB Statement No. 123 Accounting for Stock Based Compensation, to our stock option plans.
(in thousands, except per share data) Six months ended
June 30,
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2005 2004
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Net income as reported $ 827 $ 537
Deduct: Total stock-based
compensation expense determined under fair value based method for
all awards, net of related tax effects (22) (70)
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Pro forma net income $ 805 $ 467
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Earnings per share:
Basic - as reported $ 0.44 $ 0.29
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Basic - pro forma $ 0.43 $ 0.25
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Diluted - as reported $ 0.42 $ 0.28
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Diluted - pro forma $ 0.41 $ 0.25
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5. Material Transaction
On August 17, 2005, Two River Community Bank and The Town Bank announced the signing of a definitive agreement and plan of acquisition where Two River Community Bank would acquire The Town Bank. The agreement calls for an all-stock transaction in which the two banks will become independently operated, wholly-owned subsidiaries of a newly formed bank holding company, with each bank's board of directors and management team remaining in place.
Under the terms of the acquisition agreement, each share of Two River Community Bank common stock will be converted into one share of the newly formed holding company and each share of The Town Bank common stock will be converted into 1.25 shares of common stock of the holding company. The closing price of Two River common stock on August 16, 2005 was $16.25. Based upon a 1.25 exchange ratio, shareholders of Two River will hold approximately 65.6% of the post-transaction shares of the newly formed holding company.
The 1.25 exchange ratio is subject to adjustment if the average price of Two River common stock over a defined period prior to the closing is below $13.20 or above $18.80. If the Two River average price is above $18.80, the exchange ratio will be $23.50 divided by the Two River average price, with a minimum exchange ratio of 1.1463. If Two River's average stock price is below $13.20, the exchange ratio will be $16.50 divided by the Two River average price, with a maximum exchange ratio of 1.50. If the average price is $11.00 or less, The Town Bank will have the right to terminate the deal.
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The transaction has been approved by the board of directors of each bank, and must be approved by holders of shares representing 2/3 of the outstanding stock of each bank before it can be completed. The acquisition is subject to other customary closing conditions, including receipt of bank regulatory approval. The transaction is expected to close early in the first quarter of 2006.
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Annex A
AGREEMENT AND PLAN OF ACQUISITION
AGREEMENT AND PLAN OF ACQUISITION, dated as of August 16, 2005 (this "Agreement"), by and among Ten Penny-Rialto Holdings, Inc., a New Jersey corporation ("Parent"), Two River Community Bank, a commercial bank chartered under the laws of the State of New Jersey ("Two River"), and The Town Bank, a commercial bank chartered under the laws of the State of New Jersey ("Town"). Two River and Town are sometimes together referred to collectively as the "Banks" and individually as a "Bank." Two River, Town and Parent are sometimes together referred to collectively as the "Parties" and individually as a "Party"
WITNESSETH:
WHEREAS, the respective Boards of Directors of Two River (the "Two River Board"), Town (the "Town Board") and Parent (the "Parent Board") have approved this Agreement and have deemed it in the best interests of their respective shareholders that the Parties engage in a business combination under the terms and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, the Parties intend that the Acquisition shall be treated as a capital contribution pursuant to Section 351 of the Internal Revenue Code of 1986, as amended (the "Code"), and the treasury regulations promulgated thereunder;
WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, the Parties hereby agree as follows:
ARTICLE I
THE ACQUISITION
Section 1.2 Closing; Effective Time.
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early as reasonably practicable in 2006. "Business Day" means any day on which the principal offices of the United States Securities and Exchange Commission (the "SEC") in Washington, D.C. are open to accept filings, other than any such day on which the Banks are required by law to be closed.
(b) At the Closing, the Banks shall complete, execute and attach to the Plan of Acquisition certificates of the president or vice-president of each Bank, certifying that the Plan of Acquisition was approved by the shareholders of such Bank holding at least two-thirds (2/3) of the capital stock entitled to vote, in accordance with Section 17:9A-358 of the Banking Act. Promptly thereafter, the Parties shall file with the Commissioner of the Department of Banking (the "Commissioner"), pursuant to Section 17:9A-359(2) of the Banking Act, the Plan of Acquisition and certificates attached thereto, which shall specify that the Acquisition is to become effective upon filing or at such other time and date as shall have been mutually agreed upon in writing by the Parties. The date and time at which the Acquisition becomes effective is referred to herein as the "Effective Time".
Section 1.3 Governing Documents. The certificate of incorporation and bylaws (such documents or similar governing documents for an entity are referred to herein as the entity's "Governing Documents") of each Party after the Effective Time shall be the Governing Documents of such Party in effect immediately prior to the Effective Time, subject to amendment in accordance with their respective terms and the applicable provisions of the New Jersey Business Corporation Act (the "NJBCA"), or the Banking Act, as the case may be.
Section 1.4 Directors. The directors of each Party after the Effective Time shall be the directors of such Party in office immediately prior to the Effective Time, until their successors are elected or appointed and qualified or until their resignation or removal.
Section 1.5 Officers. The officers of each Party after the Effective Time shall be the officers of such Party in office immediately prior to the Effective Time, subject to change in accordance with the Governing Documents of such Party and applicable law.
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1 Effect on Capital Stock.
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(i) The "Exchange Ratio" shall be determined as follows:
(A) if the Two River Average Price is equal to or greater than $13.20 and less than or equal to $18.80, then the Exchange Ratio will be 1.2500;
(B) if the Two River Average Price is greater than $18.80 and less than $20.50, then the Exchange Ratio will be $23.50 divided by the Two River Average Price;
(C) if the Two River Average Price is $20.50 or more, then the Exchange Ratio will be 1.1463;
(D) if the Two River Average Price is greater than $11.00 and less than $13.20, then the Exchange Ratio will be $16.50 divided by the Two River Stock Price; and
(E) if the Two River Average Price is $11.00 or less, then the Exchange Ratio will be 1.5000.
(ii) "Two River Average Price" means the average of the Volume Weighted Average Prices of Two River Common Stock for each of the 20 consecutive Trading Days immediately preceding the second Trading Day prior to the Closing Date, disregarding the highest and lowest Volume Weighted Average Prices during such period. A "Trading Day" is any calendar day on which financial markets are open for trading and shares of Two River Common Stock have been reported as traded by the OTC Bulletin Board. The date that is the second Trading Day prior to the Closing Date is referred to herein as the "Determination Date". "Volume Weighted Average Price" means, for any Trading Day, the quotient obtained by dividing: (x) the aggregate purchase price for all of the shares of Two River Common Stock traded, by (y) the total number of shares of Two River Common Stock traded; determined with reference to the OTC Bulletin Board (as reported on the Yahoo Finance website at http://finance.yahoo.com, or if not reported thereby or if any of the Parties demonstrates that the information reported on such website is incorrect with respect to any particular day or days, as reported by any other authoritative source agreed upon by the Parties).
(iii) The Exchange Ratio and the formulae used to determine the Exchange Ratio shall be further adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Two River Common Stock or Town Common Stock), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Two River Common Stock or Town Common Stock occurring on or after the date hereof and prior to the Effective Time.
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2.1(b), as the case may be. A "Person" is an
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Annex A-3
individual, group of individuals, corporation, partnership, limited liability company, trust or other entity, including, without limitation, any Governmental Entity. "Governmental Entity" means any (A) Federal, state, local, municipal or foreign government, (B) governmental, quasi-governmental authority (including any governmental agency, commission, branch, department or official, and any court or other tribunal) or body exercising, or entitled to exercise, any governmentally-derived administrative, executive, judicial, legislative, police, regulatory or taxing authority, or (C) any self-regulatory organization, administrative or regulatory agency, commission or authority.
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references to Town in the Town Plans and the applicable Town Stock Option agreements shall be deemed to refer to Parent, which shall have assumed the Town Plans as of the Effective Time by virtue of this Agreement and without any further action on the part of Parent or Town. Each Town Stock Option so assumed by Parent under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the Town Plans and the applicable Town Stock Option as in effect immediately prior to the Effective Time. Parent shall use all commercially reasonable efforts to ensure that Town Stock Options intended to qualify as incentive stock options under Section 422 of the Code prior to the Effective Time continue to so qualify after the Effective Time. Prior to the Effective Time, the Town Board shall take, or shall cause its committees to take, all action necessary to effectuate the foregoing.
(ii) As soon as practicable after the Effective Time, Parent shall cause to be delivered to all holders of Two River Stock Options and Town Stock Options (together, "Bank Stock Options") appropriate notices setting forth such holders' rights pursuant to the Assumed Plans and agreements evidencing the grants of such Bank Stock Options. To the extent permitted by law, Parent shall comply with the terms of each Assumed Plan and shall take such reasonable steps as are necessary or required by, and subject to the provisions of, the Assumed Plan, to have the Bank Stock Options which qualified as incentive stock options prior to the Effective Time continue to qualify as incentive stock options of Parent after the Effective Time. As soon as practicable after the Effective Time, Parent shall cause to be delivered to all holders of Warrants appropriate notices setting forth such holders' rights pursuant thereto.
Annex A-5
Section 2.4 Right to Receive Acquisition Consideration.
Section 2.5 Stock Transfer Books. As of the Effective Time, there shall be no further registration of transfers of shares of Bank Common Stock that were outstanding prior to the Effective Time. After the Effective
Annex A-6
Section 2.10 Required Withholding. Each of the Exchange Agent and Parent shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of Bank Common Stock such amounts as may be required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign Tax law or under any other applicable laws. To the extent such amounts are so deducted or withheld, the amount of such consideration shall be treated for all purposes under this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid.
Section 2.11 Taking of Necessary Action; Further Action. If any further action is necessary or desirable to carry out the purposes of this Agreement and to vest Parent, Two River or Town with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Parent, Two River and Town to the
Annex A-7
extent contemplated by this Agreement, the officers and directors of Parent, Two River and Town immediately prior to the Effective Time will take all such lawful and necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TOWN
Except as set forth in the disclosure schedule delivered by Town to Two River prior to the execution of this Agreement (the "Town Disclosure Schedule"), Town represents and warrants to Two River as follows:
Section 3.1 Organization.
(a) Town is a commercial bank organized under the laws of the State of New Jersey the deposits of which are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent permitted by law. Town is duly organized, validly existing and in good standing under the laws of the State of New Jersey. Town has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. True and complete copies of the Governing Documents of Town as in effect on the date hereof have been delivered to Two River.
(b) Except as set forth on Schedule 3.1(b) of the Town Disclosure
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Schedule, Town does not have any Subsidiaries. "Subsidiary", when used with
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Section 3.3 Authority; No Violation.
Annex A-8
obligation of Town, enforceable against Town in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or similar laws affecting the rights of creditors generally and to general principals of equity.
Section 3.4 Financial Statements.
(a) Town has delivered to Two River true and correct copies of the consolidated statements of condition of Town as of December 31, 2004, 2003 and 2002, and the related consolidated statements of income, shareholders' equity and cash flows for the periods ended December 31 in each of the three years 2002 through 2004 (the "Town Audited Statements"), in each case accompanied by the audit report of KPMG LLP, independent public accountants with respect to Town, and the unaudited consolidated statement of condition as of March 31, 2005 and the related consolidated unaudited statement of income of Town for the three-month period ended March 31, 2005 (the "Town Unaudited Statements" and, collectively with the Town Audited Statements, the "Town Financial Statements"). The Town Financial Statements (including the related notes) have been prepared in accordance with GAAP consistently applied during the periods involved except as indicated in the notes thereto. The Town Financial Statements fairly present in all material respects the consolidated financial condition of Town as of the respective dates set forth therein and the related consolidated statements of income, shareholders' equity and cash flows fairly present in all material respects the results of the consolidated operations of Town for the respective periods set forth therein.
(c) Except as set forth on Schedule 3.4(c) of the Town Disclosure
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Schedule and as to the extent reflected, disclosed or reserved against in the
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Annex A-9
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determining whether a Material Adverse Effect has occurred, there shall be |
excluded any effect on the referenced Party the cause of which is (i) any change after the date of this Agreement in (x) laws, rules or regulations of general applicability or published interpretations thereof by Governmental Entities, (y) accounting principles generally accepted in the United States of America ("GAAP"), or (z) regulatory accounting requirements, in any such case applicable to banks or their holding companies generally, (ii) the announcement of this Agreement or any action or omission of any Party or any Subsidiary thereof required under this Agreement or taken or omitted to be taken with the express written permission of the other Party or Parties, (iii) any changes after the date of this Agreement in general economic or capital market conditions affecting banks or their holding companies generally, or (iv) changes or events, after the date hereof, affecting the financial services industry generally and not specifically relating to any Party or its Subsidiaries, provided, that a decrease in the trading or market prices of a Party's capital stock shall not be considered, by itself, to constitute a Material Adverse Effect.
Section 3.5 Financial Advisor; Broker's and Other Fees. Neither Town nor any of its directors or officers has employed any broker or finder or incurred any finder's fees or commissions in connection with any of the transactions contemplated by this Agreement other than Janney Montgomery Scott LLC, Financial Advisor to Town ("Town Financial Advisor"). Except such fees as are payable to Town Financial Advisor in connection with the Acquisition, there are no fees (other than time charges billed at usual and customary rates) payable to any brokers, finders or consultants in connection with the transactions contemplated by this Agreement or which would be triggered by consummation of the transactions contemplated by this Agreement.
Section 3.6 Absence of Certain Changes or Events.
Section 3.7 Legal Proceedings.
(a) Except as disclosed on Schedule 3.7 of the Town Disclosure
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Schedule, (i) neither Town nor any of its Subsidiaries is a party to any, and
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there are no pending or, to Town's Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature against Town or any of its Subsidiaries (including under or in respect of the Sarbanes-Oxley Act, the USA Patriot Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices or the Bank Secrecy Act or challenging the validity or propriety of this Agreement or the transactions contemplated hereby as to which there is a reasonable possibility of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Town, and (ii) neither Town nor any of its Subsidiaries is a party to any order, judgment or decree entered against Town or any Subsidiary in any lawsuit or proceeding.
(b) The "Sarbanes-Oxley Act" means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder. The "USA Patriot Act" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001. The "Equal Credit Opportunity Act"
Annex A-10
means the Equal Credit Opportunity Act, as amended, and the rules and regulations thereunder. The "Fair Housing Act" means the Fair Housing Act, as amended, and the rules and regulations thereunder. The "Home Mortgage Disclosure Act" means the Home Mortgage Disclosure Act of 1975, as amended, and the rules and regulations thereunder. The "Bank Secrecy Act" means the Bank Secrecy Act of 1970, as amended.
Section 3.8 Taxes and Tax Returns.
(a) Town and each Subsidiary have timely filed (and until the Effective Time will so file) all Returns required to be filed by them in respect of any Taxes (which such Returns which have already been filed were and continue to be, true, correct and complete in all material respects and which such Returns which will be filed will be true, correct and complete in all material respects when filed) and, except as set forth on Schedule 3.8(a) of the Town
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Disclosure Schedule, each has duly paid (and until the Effective Time will so
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(b) Except as set forth on Schedule 3.8(b) of the Town Disclosure
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Schedule, neither Town nor any of the Subsidiaries: (i) has requested any
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extension of time within which to file any Tax Return which Return has not since
been filed; (ii) is a party to any agreement providing for the allocation or
sharing of Taxes; (iii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code, by reason of a voluntary change in accounting
method initiated by Town or any Subsidiary (nor does Town have any Knowledge
that the IRS has proposed any such adjustment or change of accounting method);
(iv) has been included in any "consolidated," "unitary" or "combined" Return
(other than the Returns which include only Town and any of Subsidiaries)
provided for under the laws of the United States, any foreign jurisdiction or
any state or locality; (v) has participated in or otherwise engaged in any
transaction described in Treasury Regulations Section 301.6111-2(b)(2) or any
"Reportable Transaction" within the meaning of Treasury Regulations Section
1.6011-4(b) (a "Reportable Transaction"); (vi) is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the actual or
deemed payment by Town or any of its Subsidiaries of any "excess parachute
payments" within the meaning of Section 280G of the Code; and/or (vii) has
received any claim by a Governmental Entity in a jurisdiction where it does not
file Returns that it is or may be subject to taxation by that jurisdiction.
(c) Except as set forth on Schedule 3.8(c) of the Town Disclosure
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Schedule, (i) Town and each of the Subsidiaries has complied in all material
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respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes and has, within the time and in the manner provided by law, withheld and paid over to the proper Governmental Entities all material amounts required to be so withheld and paid over under applicable laws; and (ii) Town and each of its Subsidiaries has maintained such records in respect to each transaction, event and item (including as required to support otherwise allowable deductions and losses) as are required under applicable Tax law.
(d) Town has made available to Two River correct and complete copies of: (i) all material Returns filed within the past three years by Town and each of its Subsidiaries; (ii) all audit reports, letter rulings, technical advice memoranda and similar documents issued by a Governmental Entity within the past three years relating to Taxes due from or with respect to Town or any of its Subsidiaries; and (iii) any closing letters or
Annex A-11
agreements entered into by Town or any of its Subsidiaries with any Governmental Entities within the past five years with respect to Taxes.
(e) "Tax" or "Taxes" means: (A) any and all taxes, customs, duties, tariffs, imposts, charges, deficiencies, assessments, levies or other like governmental charges, including, without limitation, income, gross receipts, excise, real or personal property, ad valorem, value added, estimated, alternative minimum, stamp, sales, withholding, social security, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and other recording taxes and charges, imposed by the IRS or any other taxing authority (whether domestic or foreign, including, without limitation, any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a separate, consolidated, unitary, combined or any other basis and such term shall include any interest, fines penalties or additional amounts attributable to, or imposed upon, or with respect to, any such amounts, (B) any liability for the payment of any amounts described in (A) as a result of being a member of an affiliated, consolidated, combined, unitary, or similar group or as a result of transferor or successor liability, and (C) any liability for the payment of any amounts as a result of being a party to any tax sharing agreement or as a result of any obligation to indemnify any other person with respect to the payment of any amounts of the type described in (A) or (B). "Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, which is required to be filed with a Governmental Entity.
Section 3.9 Employee Benefit Plans.
(b) Town has delivered to Two River complete and accurate copies of each of the following with respect to each of the Town Pension Plans and Town Welfare Plans: (i) plan document, summary plan description, and summary of material modifications (if not available, a detailed description of the foregoing); (ii) trust agreement or insurance contract, if any; (iii) most recent IRS determination letter, if any; (iv) most recent actuarial report, if any; and (v) most recent annual report on Form 5500, if any.
(c) The present value of all accrued benefits both vested and non-vested under each of the Town Pension Plans subject to Title IV of ERISA, based upon the actuarial assumptions used for purposes of the most recent actuarial valuation prepared by such Town Pension Plan's actuary, did not exceed the then current value of the assets of such plans allocable to such accrued benefits. To Town's Knowledge, the actuarial assumptions then utilized for such plans were reasonable and appropriate as of the last valuation date and reflect then current market conditions.
(d) During the last six years, the Pension Benefit Guaranty Corporation (the "PBGC") has not asserted any claim for liability against Town or any of its Subsidiaries which has not been paid in full.
(e) All premiums (and interest charges and penalties for late payment, if applicable) due to the PBGC with respect to each Town Pension Plan have been paid. All contributions required to be made to each Town Pension Plan under the terms thereof, ERISA or other applicable law have been timely made, and all amounts properly accrued to date as liabilities of Town and its Subsidiaries which have not been paid have been properly recorded on the books of Town and its Subsidiaries.
(f) Except as disclosed on Schedule 3.9(f) of the Town Disclosure
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Schedule each of the Town Pension Plans, the Town Welfare Plans and each other
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plan and arrangement identified in the Town Disclosure Schedule has been
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operated in compliance in all material respects with the provisions of ERISA, the Code, all regulations, rulings and announcements promulgated or issued thereunder, and all other applicable governmental laws and regulations. Furthermore, the IRS has issued a favorable determination
Annex A-12
letter, which takes into account the Tax Reform Act of 1986 and (to the extent it mandates currently applicable requirements) subsequent legislation, with respect to each of the Town Pension Plans and Town is not aware of any fact or circumstance which would disqualify any such plan, that could not be retroactively corrected (in accordance with the procedures of the IRS).
(g) To Town's Knowledge, no non-exempt prohibited transaction, within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any of the Town Welfare Plans or Town Pension Plans.
(h) No Town Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events", within the meaning of
Section 4043(b) of ERISA, with respect to any of the Town Pension Plans.
(i) No "accumulated funding deficiency", within the meaning of
Section 412 of the Code, has been incurred with respect to any of the Town
Pension Plans.
(m) With respect to each Town Pension and Welfare Plan that is funded wholly or partially through an insurance policy, there will be no liability of Town or any Subsidiary as of the Effective Time under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to or at the Effective Time.
Annex A-13
assignment of such policy. To Town's Knowledge, neither Town nor any Town Pension Plan or Town Welfare Plan owns any individual or group insurance policies issued by an insurer which has been found to be insolvent or is in rehabilitation pursuant to a state proceeding.
(q) Neither Town nor any of its Subsidiaries maintains any retirement plan for directors.
Section 3.11 Compliance with Applicable Law.
(a) Except as set forth on Schedule 3.11(a) of the Town Disclosure
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Schedule, Town and each of its Subsidiaries holds all material licenses,
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franchises, permits and authorizations necessary for the lawful conduct of its respective business, and has complied with and is not in default in any respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any federal, state or local Governmental Entity relating to it (including, without limitation, the Sarbanes-Oxley Act, the USA Patriot Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices) and neither Town nor any of its Subsidiaries has received notice of violation of, nor do any of them know of any material violations of, any of the above.
Section 3.12 Certain Contracts.
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Section 3.13 Properties and Insurance.
(a) Town and its Subsidiaries have good and, as to owned real
property, if any, marketable title to all material assets and properties,
whether real or personal, tangible or intangible, reflected in Town's
consolidated balance sheet as of December 31, 2004, or owned and acquired
subsequent thereto (except to the extent that such assets and properties have
been disposed of for fair value in the ordinary course of business since
December 31, 2004), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure liabilities that are
reflected in such balance sheet or the notes thereto or incurred in the ordinary
course of business after the date of such balance sheet, (ii) statutory liens
for amounts not yet delinquent or which are being contested in good faith, and
(iii) with respect to owned real property, if any, title imperfections noted in
title reports delivered to Two River prior to the date hereof. Town and its
Subsidiaries, as lessee, has the right under valid and subsisting leases to
occupy, use, possess and control, in all material respects, all real property
leased by it, as presently occupied, used, possessed and controlled by it.
(b) Town has no Knowledge that any of the Town Properties has been operated in any manner since the date Town owned, leased or controlled such property that violated any applicable federal, state or
Annex A-15
local law or regulation governing or pertaining to any Hazardous Substance, the violation of which would have a Material Adverse Effect on Town.
(c) To the Knowledge of Town, there are no underground storage tanks on, in or under any of the Town Properties and no underground storage tanks have been closed or removed from any of the Town Properties while the property was owned, operated or controlled by Town.
Section 3.16 Reserves. As of the date hereof, the reserve for loan and lease losses set forth in the Town Financial Statements is adequate at the time based upon Town's past loan loss experiences and reasonably anticipated potential losses in the portfolio at the time to cover all known or reasonably anticipated loan losses.
Section 3.18 Town Loan Matters.
(a) Each outstanding Loan (including Loans held for resale to investors) held by Town or its Subsidiaries (the "Town Loans") has been solicited and originated and is administered and, where applicable, serviced, and the relevant Town Loan files are being maintained, in all material respects in accordance with the relevant Loan documents, Town's underwriting standards (and, in the case of Town Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable requirements of federal, state and local laws, regulations and rules. "Loan" means any loan, loan agreement, note or borrowing arrangement, including, without limitation, leases, credit enhancements, guarantees and similar interest-bearing assets, as well as commitments to extend any of the same.
(b) Each Town Loan (i) is evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine and what they purport to be,
(ii) to the extent secured, has been secured by valid Liens which have been
perfected and (iii) to Town's Knowledge, is a legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. The Loan documents with respect to each Town Loan
were in compliance with applicable laws and regulations at the time of
origination or purchase by Town or its Subsidiaries and are complete and correct
in all material respects.
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such Town Loan and the identity of the borrower thereunder, and (B) each asset of Town or any of its Subsidiaries that as of May 31, 2005 was classified as OREO and the book value thereof as of such date.
(e) Except as set forth in Schedule 3.18(e) of the Town Disclosure
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Schedule, none of the agreements pursuant to which Town or any of its
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Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
Section 3.19 Disclosure Controls and Procedures. Except as set forth on Schedule 3.19 of the Town Disclosure Schedule, since December 31, 2002, Town and
------------- ------------------------ each of its Subsidiaries has had in place disclosure controls and procedures reasonably designed and maintained to ensure that all information (both |
financial and non-financial) required to be disclosed by Town in the reports that it files or submits to either the FDIC or the Department of Banking recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms of the FDIC or the Department of Banking, as the case may be, and that such information is accumulated and communicated to Town's management as appropriate to allow timely decisions regarding required disclosure. Town maintains internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as set forth on Schedule 3.19 of the Town
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Disclosure Schedule, none of Town's or its Subsidiaries' records, systems,
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controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of Town or its Subsidiaries or accountants.
Section 3.20 Opinion of Financial Advisor. Town Financial Advisor has rendered an opinion to the Town Board to the effect that, as of the date hereof, the Acquisition Consideration is fair to the holders of Town Common Stock from a financial point of view; it being understood and acknowledged by Two River that such opinion has been rendered for the benefit of the Town Board and is not intended to, and may not, be relied upon by Two River, its affiliates or their respective Subsidiaries. Town Financial Advisor has authorized the inclusion of its opinion in the Joint Proxy Statement/Prospectus.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TWO RIVER
Except as set forth in the disclosure schedule delivered by Two River to Town prior to the execution of this Agreement (the "Two River Disclosure Schedule"), Two River represents and warrants to Town as follows:
Section 4.1 Organization.
(a) Two River is a commercial bank organized under the laws of the State of New Jersey the deposits of which are insured by the BIF of the FDIC to the fullest extent permitted by law. Two River is duly organized, validly existing and in good standing under the laws of the State of New Jersey. Two River has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. True and complete copies of the Governing Documents of Two River as in effect on the date hereof have been delivered to Town.
(b) Except as set forth on Schedule 4.1(b) of the Two River
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Disclosure Schedule, Two River does not have any Subsidiaries. Each Subsidiary
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listed on Schedule 4.1(b) of the Two River Disclosure Schedule (i) is duly
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organized, validly existing and in good standing under the laws of their
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respective jurisdictions and (ii) has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.
Section 4.3 Authority; No Violation.
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Section 4.4 Financial Statements.
(a) Two River has delivered to Town true and correct copies of the consolidated statements of condition of Two River as of December 31, 2004, 2003 and 2002, and the related consolidated statements of income, shareholders' equity and cash flows for the periods ended December 31 in each of the three years 2002 through 2004 (the "Two River Audited Statements"), in each case accompanied by the audit report of Grant Thornton, LLP, independent public accountants with respect to Two River, and the unaudited consolidated statement of condition as of March 31, 2005 and the related consolidated unaudited statement of income of Two River for the three-month period ended March 31, 2005 (the "Two River Unaudited Statements" and, collectively with the Two River Audited Statements, the "Two River Financial Statements"). The Two River Financial Statements (including the related notes) have been prepared in accordance with GAAP consistently applied during the periods involved except as indicated in the notes thereto. The Two River Financial Statements fairly present in all material respects the consolidated financial condition of Two River as of the respective dates set forth therein and the related consolidated statements of income, shareholders' equity and cash flows fairly present in all material respects the results of the consolidated operations of Two River for the respective periods set forth therein.
(b) The books and records of Two River and each of its Subsidiaries have been and are being maintained in compliance with applicable legal and accounting requirements, and reflect only actual transactions.
(c) Except as to the extent reflected, disclosed or reserved against in the Two River Audited Statements (including the notes thereto), as of December 31, 2004, neither Two River nor any of its Subsidiaries had any liabilities, whether absolute, accrued, contingent or otherwise, which are material to the business, operations, assets or financial condition of Two River and its Subsidiaries, taken as a whole, and which are required by GAAP to be disclosed in the Two River Audited Statements. Except as and to the extent reflected, disclosed or reserved against in the Two River Unaudited Statements (including the notes thereto), as of March 31, 2005, neither Two River nor any of its Subsidiaries had any liabilities, whether absolute, accrued, contingent or otherwise, which are material to the business, operations, assets or financial condition of Two River or its Subsidiaries taken as a whole. Since March 31, 2005 and to the date hereof, neither Two River nor any of its Subsidiaries have incurred any liabilities except (i) in the ordinary course of business and consistent with prudent banking practice, (ii) except as specifically contemplated by this Agreement, or (iii) except as would not have a Material Adverse Effect on Two River.
Section 4.5 Financial Advisor; Broker's and Other Fees. Neither Two River nor any of its directors or officers has employed any broker or finder or incurred any finder's fees or commissions in connection with any of the
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transactions contemplated by this Agreement other than Curtis Securities LLC, Financial Advisor to Two River ("Two River Financial Advisor"). Except such fees as are payable to Two River Financial Advisor in connection with the Acquisition, there are no fees (other than time charges billed at usual and customary rates) payable to any brokers, finders or consultants in connection with the transactions contemplated by this Agreement or which would be triggered by consummation of the transactions contemplated by this Agreement.
Section 4.6 Absence of Certain Changes or Events.
(a) There has not been any Material Adverse Effect on Two River since March 31, 2005 and to Two River's Knowledge, no facts or conditions exist which will cause or is reasonably likely to cause such a Material Adverse Effect in the future.
(b) Neither Two River nor any of its Subsidiaries has taken or permitted any of the actions set forth in Section 5.3 between March 31, 2005 and the date hereof and Two River and the Two River Subsidiaries have conducted their business only in the ordinary course, consistent with past practice.
Section 4.7 Legal Proceedings. (i) Neither Two River nor any of its Subsidiaries is a party to any, and there are no pending or, to Two River's Knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature against Two River or any of its Subsidiaries (including under or in respect of the Sarbanes-Oxley Act, the USA Patriot Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices or the Bank Secrecy Act) or challenging the validity or propriety of this Agreement or the transactions contemplated hereby as to which there is a reasonable possibility of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Two River, and (ii) neither Two River nor any of its Subsidiaries is a party to any order, judgment or decree entered against Two River or any Subsidiary in any lawsuit or proceeding.
Section 4.8 Taxes and Tax Returns.
(a) Two River and each Subsidiary have timely filed (and until the Effective Time will so file) all Returns required to be filed by them in respect of any Taxes (which such Returns which have already been filed were and continue to be, true, correct and complete in all material respects and which such Returns which will be filed will be true, correct and complete in all material respects when filed) and each has duly paid (and until the Effective Time will so pay) all such Taxes shown as due on such Returns, other than Taxes or other charges which are being contested in good faith (and disclosed to Town in writing). Two River and each Subsidiary have established (and until the Effective Time will establish) on their books and records reserves for the payment of all Taxes not yet due and payable, but incurred in respect of Two River or any Subsidiary through such date, which reserves are adequate for such purposes. The federal income Tax Returns of Two River and each Subsidiary have been examined by the IRS (or are closed to examination due to the expiration of the applicable statute of limitations) and no deficiencies were asserted as a result of such examinations which have not been resolved and paid in full. The applicable state income and local Tax returns of Two River and each Subsidiary have been examined by the applicable authorities (or are closed to examination due to the expiration of the statute of limitations) and no deficiencies were asserted as a result of such examinations which have not been resolved and paid in full. To Two River's Knowledge, there are no audits or other administrative or court proceedings presently pending nor any other disputes pending, or claims asserted for, Taxes or assessments upon Two River or any of Subsidiaries, nor has Two River or any of Subsidiaries given any currently outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Returns.
(b) Neither Two River nor any of the Subsidiaries: (i) has requested any extension of time within which to file any Tax Return which Return has not since been filed; (ii) is a party to any agreement providing for the allocation or sharing of Taxes; (iii) is required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by Two River or any Subsidiary (nor does Two River have any Knowledge that the IRS has proposed any such adjustment or change of accounting method); (iv) has been included in any "consolidated," "unitary" or "combined" Return (other than the Returns which include only Two River and any of Subsidiaries) provided for under the laws of the United States, any foreign jurisdiction or any state or locality; (v) has participated in or otherwise engaged in any transaction described in
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Treasury Regulations Section 301.6111-2(b)(2) or any Reportable Transaction;
(vi) is a party to any agreement or arrangement that would result, separately or
in the aggregate, in the actual or deemed payment by Two River or any of its
Subsidiaries of any "excess parachute payments" within the meaning of Section
280G of the Code; and/or (vii) has received any claim by a Governmental Entity
in a jurisdiction where it does not file Returns that it is or may be subject to
taxation by that jurisdiction.
(c) (i) Two River and each of the Subsidiaries has complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes and has, within the time and in the manner provided bylaw, withheld and paid over to the proper Governmental Entities all material amounts required to be so withheld and paid over under applicable laws; and (ii) Two River and each of its Subsidiaries has maintained such records in respect to each transaction, event and item (including as required to support otherwise allowable deductions and losses) as are required under applicable Tax law.
(d) Two River has made available to Town correct and complete copies of: (i) all material Returns filed within the past three years by Two River and each of its Subsidiaries; (ii) all audit reports, letter rulings, technical advice memoranda and similar documents issued by a Governmental Entity within the past three years relating to Taxes due from or with respect to Two River or any of its Subsidiaries; and (iii) any closing letters or agreements entered into by Two River or any of its Subsidiaries with any Governmental Entities within the past five years with respect to Taxes.
Section 4.9 Employee Benefit Plans.
(b) Two River has delivered to Town complete and accurate copies of each of the following with respect to each of the Two River Pension Plans and Two River Welfare Plans: (i) plan document, summary plan description, and summary of material modifications (if not available, a detailed description of the foregoing); (ii) trust agreement or insurance contract, if any; (iii) most recent IRS determination letter, if any; (iv) most recent actuarial report, if any; and (v) most recent annual report on Form 5500, if any.
(c) The present value of all accrued benefits both vested and non-vested under each of the Two River Pension Plans subject to Title IV of ERISA, based upon the actuarial assumptions used for purposes of the most recent actuarial valuation prepared by such Two River Pension Plan's actuary, did not exceed the then current value of the assets of such plans allocable to such accrued benefits. To Two River's Knowledge, the actuarial assumptions then utilized for such plans were reasonable and appropriate as of the last valuation date and reflect then current market conditions.
(d) During the last six years, the PBGC has not asserted any claim for liability against Two River or any of its Subsidiaries which has not been paid in full.
(e) All premiums (and interest charges and penalties for late payment, if applicable) due to the PBGC with respect to each Two River Pension Plan have been paid. All contributions required to be made to each Two River Pension Plan under the terms thereof, ERISA or other applicable law have been timely made, and all amounts properly accrued to date as liabilities of Two River and its Subsidiaries which have not been paid have been properly recorded on the books of Two River and its Subsidiaries.
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thereunder, and all other applicable governmental laws and regulations. Furthermore, the IRS has issued a favorable determination letter, which takes into account the Tax Reform Act of 1986 and (to the extent it mandates currently applicable requirements) subsequent legislation, with respect to each of the Two River Pension Plans and Two River is not aware of any fact or circumstance which would disqualify any such plan, that could not be retroactively corrected (in accordance with the procedures of the IRS).
(g) To Two River's Knowledge, no non-exempt prohibited transaction, within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any of the Two River Welfare Plans or Two River Pension Plans.
(h) No Two River Pension Plan or any trust created thereunder has been terminated, nor have there been any "reportable events", within the meaning of Section 4043(b) of ERISA, with respect to any of the Two River Pension Plans.
(i) No "accumulated funding deficiency", within the meaning of
Section 412 of the Code, has been incurred with respect to any of the Two River
Pension Plans.
(k) Except as disclosed on Schedule 4.9(k) of the Two River
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Disclosure Schedule, no Two River Pension or Welfare Plan provides medical or
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death benefits (whether or not insured) beyond an employee's retirement or other termination of service, other than (i) coverage mandated by law, or (ii) death benefits under any Two River Pension Plan.
(l) Except with respect to customary health, life and disability benefits, there are no unfunded benefits obligations which are not accounted for by reserves shown on the Two River Financial Statements and established under GAAP, or otherwise noted on such financial statements.
(m) With respect to each Two River Pension and Welfare Plan that is funded wholly or partially through an insurance policy, there will be no liability of Two River or any Subsidiary as of the Effective Time under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to or at the Effective Time.
(o) Except for the Two River Pension Plans and the Two River Welfare Plans, neither Two River nor any of its Subsidiaries has any deferred compensation agreements, understandings or obligations for payments or benefits to any current or former director, officer or employee of Two River or any Subsidiary or any predecessor of any of them. Schedule 4.9(n) of the Two River
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Disclosure Schedule lists the deferred compensation agreements, understandings
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or obligations with respect to each such current or former director, officer or employee. A true, correct and complete copy of the most recent actuarial or other calculation of the present value of such payments or benefits has been delivered to Town.
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(q) Neither Two River nor any of its Subsidiaries maintains any retirement plan for directors.
Section 4.10 Reports. Two River has, since January 1, 2001, duly filed with the Department of Banking and the FDIC in correct form all documentation required to be filed under applicable laws and regulations, and Two River promptly will deliver or make available to Town accurate and complete copies of such documentation. A true, correct and complete list of all examinations of Two River conducted by the Department of Banking and the FDIC since January 1, 2002 and the dates of any responses thereto submitted by Two River.
Section 4.11 Compliance with Applicable Law.
(a) Except as set forth on Schedule 4.11(a) of the Two River
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Disclosure Schedule, Two River and each of its Subsidiaries holds all material
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licenses, franchises, permits and authorizations necessary for the lawful
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conduct of its respective business, and has complied with and is not in default in any respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any federal, state or local Governmental Entity relating to it (including, without limitation, the Sarbanes-Oxley Act, the USA Patriot Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices) and neither Two River nor any of its Subsidiaries has received notice of violation of, nor do any of them know of any material violations of, any of the above.
(b) Without limiting the foregoing, to Two River's Knowledge, Two River has complied in all material respects with the CRA (the Community Reinvestment Act). Two River received a CRA rating of "satisfactory" from the FDIC in its most recently completed exam. No person or group has adversely commented upon Two River's CRA performance.
Section 4.12 Certain Contracts.
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Disclosure Schedule sets forth true and correct copies of all such employment
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agreements or termination agreements with officers, employees, directors, or consultants to which Two River or any Subsidiary is a party.
Section 4.13 Properties and Insurance.
(a) Two River and its Subsidiaries have good and, as to owned real property, if any, marketable title to all material assets and properties, whether real or personal, tangible or intangible, reflected in Two River's consolidated balance sheet as of December 31, 2004, or owned and acquired subsequent thereto (except to the extent that
Annex A-23
such assets and properties have been disposed of for fair value in the ordinary course of business since December 31, 2004), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items that secure liabilities that are reflected in such balance sheet or the notes thereto or incurred in the ordinary course of business after the date of such balance sheet, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith, and (iii) with respect to owned real property, if any, title imperfections noted in title reports delivered to Town prior to the date hereof. Two River and its Subsidiaries, as lessee, has the right under valid and subsisting leases to occupy, use, possess and control, in all material respects, all real property leased by it, as presently occupied, used, possessed and controlled by it.
Section 4.14 Minute Books. Except as set forth on Schedule 4.14 of the Two
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River Disclosure Schedule, the minute books of Two River and its Subsidiaries
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contain records that are accurate in all material respects of all meetings and
other corporate action held of their respective shareholders and Boards of
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Directors (including committees of their respective Boards of Directors).
(a) Neither Two River nor its Subsidiaries have received any written notice, citation, claim, assessment, proposed assessment or demand for abatement alleging that Two River or its Subsidiaries (either directly or as a trustee or fiduciary, or as a successor-in-interest in connection with the enforcement of remedies to realize the value of properties serving as collateral for outstanding Loans) is responsible for the correction or cleanup of any condition resulting from the violation of any law, ordinance or other governmental regulation regarding environmental matters, which correction or cleanup would be material to the business, operations, assets or financial condition of Two River or its Subsidiaries. Neither Two River nor its Subsidiaries has Knowledge that any Hazardous Substance or materials have been emitted, generated, disposed of or stored on any real property owned or leased by Two River or its Subsidiaries, as OREO or otherwise, or owned or controlled by Two River or its Subsidiaries as a trustee or fiduciary but excluding any property which serves as collateral for any Loan or other obligation which is not in default or have not been realized on by Two River (collectively, "Two River Properties"), in any manner that violates or, after the lapse of time and failure to take appropriate action would violate, any presently existing federal, state or local law or regulation governing or pertaining to such substances and materials.
(b) Two River has no Knowledge that any of the Two River Properties has been operated in any manner since the date Two River owned, leased or controlled such property that violated any applicable federal, state or local law or regulation governing or pertaining to any Hazardous Substance, the violation of which would have a Material Adverse Effect on Two River.
(c) To the Knowledge of Two River, there are no underground storage tanks on, in or under any of the Two River Properties and no underground storage tanks have been closed or removed from any of the Two River Properties while the property was owned, operated or controlled by Two River.
Section 4.16 Reserves. As of the date hereof, the reserve for loan and lease losses set forth in the Two River Financial Statements is adequate at the time based upon Two River's past loan loss experiences and reasonably anticipated potential losses in the portfolio at the time to cover all known or reasonably anticipated loan losses.
Section 4.17 Agreements with Bank Regulators. Two River is not a party to any agreement or memorandum of understanding with, or a party to any commitment letter, board resolution submitted to a regulatory authority or similar undertaking to, and is not subject to any order or directive by, and is not in receipt of any
Annex A-24
extraordinary supervisory letter from, any Governmental Entity which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies or its management, nor has Two River been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission.
Section 4.18 Two River Loan Matters.
(a) Each outstanding Loan (including Loans held for resale to investors) held by Two River or its Subsidiaries (the "Two River Loans") has been solicited and originated and is administered and, where applicable, serviced, and the relevant Two River Loan files are being maintained, in all material respects in accordance with the relevant Loan documents, Two River's underwriting standards (and, in the case of Two River Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable requirements of federal, state and local laws, regulations and rules.
(b) Each Two River Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected, and (iii) to Two River's Knowledge, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. The Loan documents with respect to each Two River Loan were in compliance with applicable laws and regulations at the time of origination or purchase by Two River or its Subsidiaries and are complete and correct in all material respects.
Section 4.19 Disclosure Controls and Procedures. Since December 31, 2002, Two River and each of its Subsidiaries has had in place disclosure controls and procedures reasonably designed and maintained to ensure that all information (both financial and non-financial) required to be disclosed by Two River in the reports that it files or submits to either the FDIC or the Department of Banking recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms of the FDIC or the Department of Banking, as the case may be, and that such information is accumulated and communicated to Two River's management as appropriate to allow timely decisions regarding required disclosure. Two River maintains internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in
Annex A-25
conformity with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. None of Two River's or its Subsidiaries' records, systems, controls, data or information are recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of Two River or its Subsidiaries or accountants.
Section 4.20 Opinion of Financial Advisor. Two River Financial Advisor has rendered an opinion to the Two River Board to the effect that, as of the date hereof, the Acquisition Consideration is fair to the holders of Two River Common Stock from a financial point of view; it being understood and acknowledged by Town that such opinion has been rendered for the benefit of the Two River Board and is not intended to, and may not, be relied upon by Town, its affiliates or their respective Subsidiaries. Two River Financial Advisor has authorized the inclusion of its opinion in the Joint Proxy Statement/Prospectus.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE ACQUISITION
Section 5.1 Conduct of Business by the Parties During the Contract Period. During the period from the date of this Agreement to the earlier of the Effective Time or any termination of this Agreement (the "Contract Period"), except as expressly contemplated or permitted by this Agreement or with the prior written consent of the other Parties, each Party shall conduct its business and engage in transactions permitted hereunder only in the ordinary course and consistent with prudent banking practice. Each Party also shall use all commercially reasonable efforts to (i) maintain and preserve intact its business organization and its rights, authorizations, franchises and other authorizations issued by Governmental Entities, (ii) preserve for itself and the other Parties its advantageous business relationships with customers, vendors and others doing business with it and the goodwill of its customers and others with whom business relationships exist, and retain the services of its officers and key employees, and (iii) take no action which would reasonably be expected to materially adversely affect the receipt of any approvals of any Governmental Entity required to consummate the transactions contemplated hereby or to consummate the transactions contemplated hereby or delay the receipt of such approvals subsequent to the date set forth in Section 8.1(b), in each case provided that no Party shall be required to take any unreasonable or extraordinary act or any action which would conflict with any other term of this Agreement. With respect to each covenant, agreement or other obligation of Parent set forth in this Agreement, each of the Banks shall cause Parent to comply with such covenant, agreement or obligation.
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indebtedness have right to vote on any matter on which a Person's shareholders
may vote;
(b) enter into any new line of business or change its lending,
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investment, risk and asset-liability management and other material banking or operating policies in any material respect, except as required by law or by policies imposed by a Governmental Entity;
Annex A-26
(c) sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of, or abandon or fail to maintain, any of its material assets, properties or other rights or agreements, provided that in no event shall Town or any of its Subsidiaries sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of any Subsidiary, business division, branch or other operating business without, in any such case, receiving the prior written consent of Two River;
(e) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse or otherwise become responsible for the obligations of any Person, except in the ordinary course of business consistent with past practice;
(f) create, renew, amend or terminate, fail to perform any obligations under, waive or release any rights under or give notice of a proposed renewal, amendment, waiver, release or termination of, any material contract, agreement or lease to which Town or any of its Subsidiaries is a party or by which Town or any of its Subsidiaries or their respective properties is bound, including any contract which (A) limits the freedom of Town or any of its Subsidiaries to compete in any line of business, in any geographic area or with any person, (B) requires referrals of business or requires Town or any of its Subsidiaries to make available investment opportunities to any person on a priority or exclusive basis, or (C) requires Town or any of its Subsidiaries to use any product or service of another person on an exclusive basis, other than any of the foregoing arising in the ordinary course of business consistent with past practice;
(g) foreclose on or take a deed or title to any multi-family residential or commercial real estate without first conducting a Phase I environmental assessment of the property, or foreclose on or take a deed or title to any multi-family residential or commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance;
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(i) make any capital expenditures in excess of $50,000 in the aggregate;
(j) make application for the opening, relocation or closing of any, or open, relocate or close any, branch office or loan production or servicing facility;
(k) except for Loans or commitments for Loans that have previously been approved by Town prior to the date of this Agreement, make or acquire any Loan or issue a commitment for any Loan except for Loans and commitments that are made in the ordinary course of business consistent with past practice and with a principal balance of $1,000,000 or less;
(m) pay, discharge, settle, compromise or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), including taking any action to settle or compromise any litigation, in each case, (i) relating to this Agreement or the transactions contemplated hereby, or (ii) that is otherwise material to Town and its Subsidiaries, other than, in the case of matters covered by clause (ii), the payment, discharge, settlement, compromise or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent Town Financial Statements (or the notes thereto) or incurred since December 31, 2004 in the ordinary course of business consistent with past practice;
(n) amend any of its Governing Documents or similar governing documents, or enter into a plan of consolidation, merger, share exchange, reorganization or complete or partial liquidation with any Person (other than consolidations, mergers or reorganizations solely among wholly-owned subsidiaries of Town), or a letter of intent or agreement in principle with respect thereto;
(o) materially change its investment securities portfolio policy or the manner in which the portfolio is classified or reported; or invest in any mortgage-backed or mortgage related securities which would be considered "high-risk" securities under applicable regulatory pronouncements;
(p) make any material change in its policies and practices with respect to Loans, including without limitation policies relating to underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service, Loans;
(r) make any changes in its accounting methods or method of Tax accounting, practices or policies, except as may be required under law, rule, regulation or GAAP, in each case as concurred in by Town's independent public accountants;
(s) enter into any securitizations of any Loans or create any special purpose funding or variable interest entity;
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(t) make or change any Tax election (unless required by applicable law), file any amended Tax Returns, settle or compromise any Tax liability of Town or any of its Subsidiaries or surrender any right to claim a Tax refund, in each case other than in the ordinary course of business consistent with past practice; or
(b) enter into any new line of business or change its lending, investment, risk and asset-liability management and other material banking or operating policies in any material respect, except as required by law or by policies imposed by a Governmental Entity;
(c) sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of, or abandon or fail to maintain, any of its material assets, properties or other rights or agreements, provided that in no event shall Two River or any of its Subsidiaries sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of any Subsidiary, business division, branch or other operating business without, in any such case, receiving the prior written consent of Town;
(d) make any acquisition of or investment in any other person, by purchase or other acquisition of stock or other equity interests (other than in a fiduciary capacity in the ordinary course of business), by merger, consolidation, asset purchase or other business combination, or by formation of any joint venture or other business organization or by contributions to capital; or make any purchases or other acquisitions of any debt securities, property or assets (including any investments or commitments to invest in real estate or any real estate development project) in or from any other individual, corporation, joint venture or other entity other than a wholly-owned Subsidiary of Two River, except for (i) foreclosures, settlements in lieu of foreclosures, troubled debt or loan restructurings and other similar acquisitions in connection with securing or collecting debts previously contracted in the ordinary course of business, (ii) purchases of investment securities in the ordinary course of business consistent with past practice and (iii) Loans not prohibited by this Agreement;
(e) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse or otherwise become responsible for the obligations of any Person, except in the ordinary course of business consistent with past practice;
(f) foreclose on or take a deed or title to any multi-family residential or commercial real estate without first conducting a Phase I environmental assessment of the property, or foreclose on or take a deed or title to any multi-family residential or commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance;
(g) except pursuant to agreements or arrangements in effect on the date hereof, pay to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement (other than a Loan agreement or arrangement not otherwise prohibited by this Agreement) with, any of its officers or directors or any of their immediate family members or any affiliates or
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associates (as such terms are defined under the Exchange Act) of any of the officers or directors of their affiliates or associates, other than in the ordinary course of business consistent with past practice of Two River and its Subsidiaries, and, in the case of any such agreements or arrangements relating to compensation, fringe benefits, severance or termination pay or related matters, only as otherwise permitted pursuant to this Section 5.3;
(h) pay, discharge, settle, compromise or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), including taking any action to settle or compromise any litigation, in each case, (i) relating to this Agreement or the transactions contemplated hereby, or (ii) that is otherwise material to Two River and its Subsidiaries, other than, in the case of matters covered by clause (ii), the payment, discharge, settlement, compromise or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent Two River Financial Statements (or the notes thereto) or incurred since December 31, 2004 in the ordinary course of business consistent with past practice;
(i) amend any of its Governing Documents or similar governing documents, or enter into a plan of consolidation, merger, share exchange, reorganization or complete or partial liquidation with any Person (other than consolidations, mergers or reorganizations solely among wholly-owned subsidiaries of Two River), or a letter of intent or agreement in principle with respect thereto;
(j) materially change its investment securities portfolio policy or the manner in which the portfolio is classified or reported; or invest in any mortgage-backed or mortgage related securities which would be considered "high-risk" securities under applicable regulatory pronouncements;
(k) make any material change in its policies and practices with respect to Loans, including without limitation policies relating to underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service, Loans;
(m) make any changes in its accounting methods or method of Tax accounting, practices or policies, except as may be required under law, rule, regulation or GAAP, in each case as concurred in by Two River's independent public accountants;
(n) enter into any securitizations of any Loans or create any special purpose funding or variable interest entity;
(o) make or change any Tax election (unless required by applicable law), file any amended Tax Returns, settle or compromise any Tax liability of Two River or any of its Subsidiaries or surrender any right to claim a Tax refund, in each case other than in the ordinary course of business consistent with past practice; or
Section 5.4 No Solicitation; Competing Transaction
(a) Except as provided below, during the Contract Period, each Bank shall not, directly or indirectly, and shall instruct its officers, directors, employees, Subsidiaries, agents and advisors and other representatives (including any investment banker, attorney or accountant retained by it), not to, directly or indirectly, solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information), or take any other action knowingly to facilitate, any inquiries or the making of any proposal or offer (including any proposal or offer to its shareholders) that constitutes, or may reasonably be expected to lead to, any Competing Transaction, or enter into or maintain or continue discussions or negotiate with any Person in furtherance of such inquiries, or agree to or endorse any Competing Transaction, or authorize or permit any of the officers, directors or employees of a Bank or
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any Subsidiary thereof, or any investment banker, financial advisor, attorney, accountant or other representative retained by a Bank or any Subsidiary thereof, to take any such action.
(b) "Competing Transaction" means any of (i) a transaction pursuant to which any person (or group of persons) that is not a Party, directly or indirectly, acquires or would acquire more than 10% of the outstanding shares of Common Stock of a Party or outstanding voting power or of any new series or new class of capital stock that would be entitled to a class or series vote with respect to the Acquisition, whether pursuant to a tender offer or exchange offer or otherwise, (ii) a merger, share exchange, consolidation or other business combination involving a Party (other than the Acquisition), (iii) any transaction pursuant to which any person (or group of persons) that is not a Party acquires or would acquire control of assets of a Party, or any of its Subsidiaries representing more than 10% of the fair market value of all the assets, net revenues or net income of such Party to be acquired and its Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving a Party or any of its Subsidiaries, other than the transactions contemplated by this Agreement, as a result of which the holders of shares of such Party's Common Stock immediately prior to such transaction do not, in the aggregate, own at least 90% of each of the outstanding shares of common stock and the outstanding voting power of the surviving or resulting entity in such transaction immediately after the consummation thereof in substantially the same proportion as such holders held the shares of such Party's Common Stock immediately prior to the consummation thereof.
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Competing Transaction. Furthermore, during such period, a Bank receiving the offer for the Competing Transaction shall negotiate with the other Bank in good faith any proposal submitted to such Bank by the other Bank which addresses the terms of the Competing Transaction.
Section 5.5 Current Information. During the Contract Period, Town will, at the request of Two River, cause one or more of its designated agents or representatives (such persons including, without limitation, officers, directors, employees, attorneys, accountants and financial advisors of a Party, collectively, its "Representatives") to confer on a monthly or more frequent basis with Representatives of Two River regarding Town's business, operations, properties, assets and financial condition and matters relating to the completion of the Acquisition. Without limiting the foregoing, promptly after granting any new Loan or extension of credit, or any renewal of an existing Loan or extension of credit, in excess of $100,000, Town will send to Two River a description thereof, and thereafter will promptly send to Two River copies of such documents relating thereto as Two River shall reasonably request. As soon as reasonably available, but in no event more than 45 days after the end of each fiscal quarter (other than the last fiscal quarter of each fiscal year) ending after the date of this Agreement, Town will deliver to Two River any financial documentation filed with the Department of Banking or the FDIC.
Section 5.6 Access to Properties and Records; Confidentiality.
(a) During the Contract Period, Town shall permit Two River and its Representatives, and Two River shall permit Town and its Representatives, reasonable access upon reasonable notice during regular business hours to their respective properties, and Town shall disclose and shall make available to Two River and its Representatives, and Two River shall disclose and shall make available to Town and its Representatives, all books, papers and records relating to their respective assets, stock ownership, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' and shareholders' meetings, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, independent auditors' work papers (subject to the receipt by such auditors of a standard access representation letter), litigation files, plans affecting employees, and any other business activities or prospects in which Two River and its Representatives or Town and its Representatives may have a reasonable interest. No Bank shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of any customer or would contravene any law fiduciary duty, binding agreement, rule, regulation, regulatory policy, order or judgment or, in the case of a document which is subject to an attorney-client privilege, would compromise the right of the disclosing party to claim that privilege. The Banks will use all commercially reasonable efforts to make appropriate substitute disclosure arrangements, to the fullest extent practicable, under circumstances in which the restrictions of the preceding sentence apply.
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regulatory or examination requirement or in accordance with an order of a court of competent jurisdiction, provided that in the event of any disclosure required by this clause (ii), the disclosing party will, to the extent practicable, give reasonable prior written notice of such disclosure to the other parties and shall not disclose any such information without an opinion of counsel supporting its position that such information must be disclosed.
Section 5.7 Appropriate Actions; Regulatory Matters; Consents.
(c) Two River and Town each shall consult with and keep the other Party apprised of the status of matters relating to completion of the Acquisition, including, without limitation, promptly furnishing the other party with copies of notices or other communications received by Two River or Town, as the case may be, or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to the Acquisition.
(d) Each of Two River and Town shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, their commercially reasonable efforts to obtain any third party consents (A) necessary, proper or advisable to consummate the Acquisition, (B) otherwise required under any contracts, licenses, leases or other agreements in connection with the consummation of the Acquisition, or (C) required to prevent a Two River Material Adverse Effect or Town Material Adverse Effect from occurring prior to the Effective Time or any like Material Adverse Effect with respect to Parent from occurring after the Effective Time. In the event that any party shall fail to obtain any such third Person consent, such party shall use its commercially reasonable efforts, and shall take any such actions reasonably requested by the other parties, to limit the adverse effect upon Two River, Town and Parent, their respective Subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the Effective Time, from the failure to obtain such consent.
(e) Nothing in this Agreement shall require Two River or Town to agree to the imposition of conditions, the payment of any material amounts (other than filing fees and Expenses incurred by the Parties in connection with obtaining such consents or approvals) or any requirement of divestiture to obtain any consents or approvals from third parties, including Governmental Entities, required to consummate the Acquisition, and in no event shall any party take, or be required to take, any action that would have a Two River Material Adverse Effect or an Town Material Adverse Effect.
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(f) Two River and Town agree to cooperate with respect to, and shall cause each of their respective Subsidiaries to cooperate with respect to, and agree to use their commercially reasonable efforts to contest and resist, any action, including legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) of any Governmental Entity that is in effect and that restricts, prevents or prohibits the consummation of the Acquisition.
(g) In the event any litigation is commenced by any Person relating to the Acquisition, each Bank shall have the right, at its own expense, to reasonably participate therein, and neither Bank will settle any such litigation without the consent of the other, which consent will not be unreasonably withheld.
(h) In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of Two River, Town and Parent shall take all such necessary action.
(i) To the extent reasonably practicable, neither Bank shall agree to participate in any meeting or discussion with any Governmental Entity in respect of any filings, investigation or other inquiry concerning this Agreement or the Acquisition unless it consults with the other party in advance and, to the extent permitted by such Governmental Entity, gives the other party the opportunity to attend and participate in such meeting or discussion.
(j) Two River and Town expect that their respective executive officers and other members of senior management will continue to perform their respective duties and obligations and intend that any such officers' failure or refusal to cooperate and to take all actions and to do all things reasonably necessary, proper or advisable to consummate and make effective the Acquisition, including participating in any proxy solicitation activities with respect to the Acquisition or otherwise fully cooperate shall constitute grounds for dismissal of such officer with cause.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Registration Statement and Proxy Statement.
(a) Two River and Town shall promptly prepare and file with the SEC a Joint Proxy Statement/Prospectus (a "Joint Proxy Statement/Prospectus"), and Two River, Town and Parent shall prepare and file with the SEC a Registration Statement registering the Acquisition Consideration (in which the Joint Proxy Statement/Prospectus shall be included as a Prospectus) (a "Registration Statement") as promptly as practicable. Each Party shall use its commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable (including by responding promptly to any comments made by the SEC with respect thereto) and shall mail the Joint Proxy Statement/Prospectus to the respective shareholders of Two River and Town promptly thereafter and, pursuant to Section 17:9A-359(1) of the Banking Act, in no event later than 120 days after the date of the approval of the Plan of Acquisition by the Commissioner.
(b) Each Party shall use its commercially reasonable efforts to obtain prior to the effective date of the Registration Statement all necessary state securities law or "blue sky" permits and approvals required in connection with the Acquisition.
(c) Each Party shall notify the other Parties of the receipt of the comments of the SEC and of any requests by the SEC for amendments or supplements to the Joint Proxy Statement/Prospectus or the Registration Statement or for additional information and shall promptly supply one another with copies of all correspondence between any of them (or their representatives) and the SEC (or its staff) with respect thereto.
(d) Each Party shall provide the other Parties with a reasonable opportunity to review and comment on any amendment or supplement to the Registration Statement and the Joint Proxy Statement/Prospectus prior to filing such with the SEC. If, at any time prior to the Two River Shareholder Meeting or the Town Shareholder Meeting, any event shall occur relating to or affecting any of the Parties or their respective officers or
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directors, which event should be described in an amendment or supplement to the Joint Proxy Statement/Prospectus or the Registration Statement, the Parties shall promptly inform one another and shall cooperate in promptly preparing, filing and clearing with the SEC and, if required by applicable securities laws, mailing to the shareholders of Two River or Town, as the case may be, such amendment or supplement. Each Party shall take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or filing a general consent to service of process) required to be taken under any applicable federal or state securities laws in connection with the issuance of the Parent Common Stock pursuant to the Acquisition.
(e) Each Party shall, upon request by another Party, furnish the other Party with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement/Prospectus, the Registration Statement or any other statement, filing, notice or application to be made by, or on behalf of, any Party or any of its Subsidiaries to any third party and/or any Governmental Entity in connection with the Acquisition.
(f) Prior to the date of approval of the Acquisition by the shareholders of the Banks, each Party shall correct promptly any information provided by it to be used specifically in the Joint Proxy Statement/Prospectus and Registration Statement that shall have become false or misleading in any material respect and shall take all steps necessary to file with the SEC and have declared effective or cleared by the SEC any amendment or supplement to the Joint Proxy Statement/Prospectus or the Registration Statement so as to correct the same and to cause the Joint Proxy Statement/Prospectus as so corrected to be disseminated to the shareholders of the Banks, in each case to the extent required by applicable law.
(g) With respect to audited financial statements, pro-forma financial statements or other financial statements or other reports provided by any auditor or other expert for inclusion in any report filed or to be filed by Parent with the SEC (each a "Parent SEC Report"), each Bank shall use its commercially reasonable efforts to obtain a consent letter from such auditor or expert addressed to Parent to use such auditor's or expert's name and include such statements or reports in any Parent SEC Report.
(h) Each Party will advise the other Parties promptly after it receives notice or otherwise becomes aware thereof, of the time when the Registration Statement has become effective, the issuance of any stop order, or the suspension of the qualification of the Parent Common Stock issuable in connection with the Acquisitions for offering or sale in any jurisdiction.
respect to the transactions contemplated by this Agreement, (ii) a statement of the reasons of the Board of Directors of the Bank for making the change in its recommendation, and (iii) additional information reasonably related to the foregoing. |
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Section 6.2 Shareholder Approvals.
Section 6.3 Compliance with the Securities Act. Each of Two River and Town shall use its commercially reasonable efforts to cause each officer, each director and each other Person who is an "affiliate" of it (each a "Rule 145 Affiliate") for purposes of Rule 145 under the Securities Act ("Rule 145") at the time of the Town Shareholder Meeting or the Two River Shareholder Meetings, as the case may be, each of whom shall be listed on Schedule 6.3(a) of the Town
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Disclosure Schedule or Schedule 6.3(b) of the Two River Disclosure Schedule, as
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Section 6.4 Expenses. Expenses incurred in connection with this Agreement and the Acquisition shall be paid by the party incurring such Expenses, except that those Expenses incurred in connection with the filing, printing and mailing of the Registration Statement and the Joint Proxy Statement/Prospectus, and any filings fees under any governmental regulations and any filing fees in connection with obtaining approvals under the Banking
Annex A-36
Act, as well as Expenses incurred in connection with presentations made to Governmental Entities in connection with the foregoing filings, shall be shared equally by Two River and Town. "Expenses" means, with respect to any Party hereto, all reasonable out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates, but excluding any allocation of overhead) incurred by such party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of its obligations pursuant to this Agreement and the consummation of the Acquisition, the preparation, printing, filing and mailing of the Registration Statement, and the Joint Proxy Statement/Prospectus, the solicitation of shareholder approvals and all other matters related to consummating the Acquisition and the Closing.
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6.6 shall not limit or otherwise affect the rights or remedies available
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hereunder to the Party receiving such notice.
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Section 6.7 Directors' and Officers' Indemnification.
(a) The indemnification provisions of the respective Governing Documents of Parent, Two River and Town and their respective Subsidiaries as in effect at the Effective Time shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who at the Effective Time were current or former directors, officers, employees or agents of Town or Two River or their respective Subsidiaries. From and after the Effective Time, Parent, Two River and Town shall, and shall cause their respective Subsidiaries to, jointly and severally (provided that each Bank and its Subsidiaries shall only be liable with respect to current and former directors and officers of such Bank and its Subsidiaries) fulfill and honor in all respects the obligations, including with respect to advancing expenses, of Parent, Two River and Town, and their respective Subsidiaries, pursuant to any indemnification agreements between Town or Two River, or any of their respective Subsidiaries, and their respective current and former directors and officers in effect immediately prior to the Effective Time and any indemnification provisions under the Town Governing Documents or Two River Governing Documents, or the Governing Documents of any such Subsidiaries, respectively, as in effect on the date hereof.
(c) For a period of six years after the Effective Time, Parent shall cause to be maintained in effect for each current and former director and officer of Town and Two River as of the Effective Time, liability insurance coverage with respect to matters arising at or prior to the Effective Time, in such amounts and containing such terms and conditions that are not materially less advantageous to such parties than the coverage applicable to such individuals immediately prior to the Effective Time. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if prepaid policies have been obtained on or prior to the Effective Time to the extent such policies provide such current and former directors with coverage for the period and on the terms and conditions described in the preceding sentence.
Section 6.8 Listing. The Parties shall use their commercially reasonable efforts to effect, at or before the Effective Time, authorization for listing on the Nasdaq National Market System, the Nasdaq SmallCap Market or the American Stock Exchange, upon official notice of issuance, of the shares of Parent Common Stock to be issued pursuant to the Acquisition or to be reserved for issuance upon the exercise of Town Stock Options, Two River Stock Options or Warrants.
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considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of Town or its management with any such adjustments.
Section 6.10 Tax-Free Transaction.
(a) The Acquisition is intended to constitute an exchange described in Section 351 of the Code. From and after the date of this Agreement, each Party shall use all commercially reasonable efforts to cause the Acquisition to qualify, and shall not, without the prior written consent of the other parties hereto, knowingly take any actions or cause any actions to be taken which could reasonably be expected to prevent the Acquisition from qualifying as an exchange described in Section 351 of the Code. If the Acquisition shall fail to qualify as an exchange described in Section 351 of the Code, then the parties hereto agree to negotiate in good faith to restructure the Acquisition in order that it shall otherwise qualify as a transaction that is in whole or in part tax-free under the Code. Following the Effective Time, and consistent with any such consent, none of the Parties nor any of their respective affiliates knowingly and voluntarily shall take any action or cause any action to be taken which could reasonably be expected to cause the Acquisition to fail to qualify as an exchange described in Section 351 of the Code or otherwise as a transaction that is in whole or in part tax-free under the Code.
(b) Following the Effective Time, Parent shall conduct its business and shall cause each of the Banks to conduct its business, in a manner which would not jeopardize the characterization of the Acquisition as an exchange described in Section 351 of the Code or otherwise as a transaction that is whole or in part tax-free under the Code. Parent will provide certain factual representations as reasonably requested by Town or Two River as necessary to confirm that Parent will not take any action on or after the Effective Time that would jeopardize the tax free nature of the Acquisition as an exchange described in Section 351 of the Code or otherwise as a transaction that is in whole or in part tax-free under the Code.
Section 6.11 Exemption From Liability Under Section 16(b). Provided that Town and Two River deliver to Parent the Section 16 Information with respect to Town and Two River, respectively, prior to the Effective Time, the Parent Board, 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 adopt a resolution in advance of the Effective Time providing that the receipt by the Insiders of Parent Common Stock in exchange for shares of Bank Common Stock, and of options on Parent Common Stock upon assumption and conversion by Parent of Bank Stock Options, in each case pursuant to the Acquisition and to the extent that such securities are listed in the Section 16 Information, are intended to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act. "Section 16 Information" means information accurate in all respects regarding the Insiders, the number of shares of Bank Common Stock, or other equity securities thereof deemed to be beneficially owned by each Insider and expected to be exchanged for Parent Common Stock in connection with the Acquisition. "Insiders" means those officers and directors of Town and Two River who are subject to the reporting requirements of Section 16(a) of the Exchange Act.
Section 6.12 Parent Governing Documents; Directors and Officers of Parent.
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Section 6.14 Control of Other Party's Business. Nothing contained in this Agreement shall give any party, directly or indirectly, the right to control or direct the operations of any other party prior to the consummation of the Acquisitions. Prior to the consummation of the Acquisitions, each party shall independently exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.
Section 6.15 Legal Counsel to Parent. The Parties acknowledge and agree that legal counsel to Two River also serves as legal counsel to Parent and the Parties shall waive any and all conflicts created thereby to the maximum extent allowable by law.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Acquisition. The respective obligations of each Party to effect the Acquisition shall be subject to the fulfillment at or prior to the Closing Date of the following conditions:
(a) the Commissioner shall have approved the Plan of Acquisition pursuant to 17:9A-358 of the Banking Act and the Federal Reserve Board shall not have objected to the Acquisition pursuant to Section 3(a)(C) of the BHC Act;
(b) the Town Shareholder Approval and the Two River Shareholder Approval shall have been obtained;
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(c) the Registration Statement shall have been declared effective by the SEC in accordance with the provisions of the Securities Act, and no stop order suspending such effectiveness shall have been issued and remain in effect and no proceeding for that purpose shall have been instituted by the SEC or any state regulatory authorities;
(d) the shares of Parent Common Stock issuable in the Acquisition and those to be reserved for issuance upon exercise of stock options shall have been authorized for listing on the Nasdaq National Market System, the Nasdaq SmallCap Market or the American Stock Exchange upon official notice of issuance;
(e) no preliminary or permanent injunction or other order or decree by any federal or state court which prevents, prohibits or makes illegal the consummation of the Acquisition shall have been issued and remain in effect (each party agreeing to use its commercially reasonable efforts to have any such injunction, order or decree lifted);
(f) no statute, rule or regulation shall have been enacted by any Governmental Entity in the United States which would prevent or prohibit the consummation of the Acquisition or make the Acquisition illegal;
(g) any waiting period applicable to consummation of the Acquisition under the Banking Act shall have expired or been terminated;
(h) all other required regulatory approvals of the Acquisition shall have been obtained;
(i) Parent and each Bank shall have received a written opinion of
its counsel, in form and substance reasonably acceptable to it, dated as of the
Closing Date to the effect that, on the basis of the facts, representations and
assumptions set forth or referred to in such opinion, for U.S. federal income
tax purposes: (i) no gain or loss will be recognized by the shareholders of the
Banks in connection with their exchange of their Bank Common Stock solely for
all of the Parent Common Stock or for an amount of Parent Common Stock
constituting "control" (as defined in Section 368(c) of the Code) of the Parent;
(ii) no gain or loss will be recognized by the Parent in connection with the
Acquisition; (iii) the basis of the Parent Common Stock to be received by the
shareholders of the Banks in the Acquisition will be the same as the basis of
the Bank Common Stock transferred by them to the Parent; (iv) the basis of the
Bank Common Stock received by the Parent will be the same, in each instance, in
the hands of the Parent, as the basis of such Bank Common Stock in the hands of
the Bank shareholders immediately prior to the transfer; (v) the holding period
of the Parent Common Stock to be received by the shareholders of the Banks will
include the period during which such shareholders held their respective Bank
Common Stock which is transferred to the Parent, provided that the transferred
shares were capital assets on the date of the exchange; (vi) the holding period
of the Bank Common Stock transferred to the Parent in the transaction will
include the period during which the Bank Common Stock transferred were held by
the shareholders of the Banks; and (vii) dissenting shareholders of either Bank
who receive solely cash for their Bank Common Stock will be treated as having
received such cash as distributions in redemption of their Bank Common Stock
subject to the provisions and limitations of Section 302 of the Code. In
rendering such opinion, counsel shall be entitled to rely upon assumptions and
representations reasonably satisfactory to such counsel, including
representations set forth in certificates of officers of Parent, Town and Two
River; and
(j) the number of shares of Parent Common Stock into which all Dissenter's Shares (including both those of Town and Two River shareholders) would have been converted in the Merger (had they not been Dissenter's Shares) would not have exceeded 10% of the total number of shares of Parent Common Stock which would have been issued in the Merger.
Section 7.2 Additional Conditions to Obligation of Town to Effect the Acquisition. Unless waived by Town, the obligation of Town to effect the Acquisition shall be subject to the fulfillment at the Closing Date of the following additional conditions:
(a) (i) Two River shall have performed in all material respects its obligations contained in this Agreement required to be performed on or prior to the Closing Date, (ii) the representations and warranties of Two River contained in this Agreement (x) that are qualified as to Two River Material Adverse Effect shall be true
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and correct on and as of the date made and (except to the extent that such representations and warranties speak as of an earlier date, in which case on and as of that date) on and as of the Closing Date as if made at and as of such date, and (y) that are not qualified as to Two River Material Adverse Effect shall be true and correct (without regard to any materiality qualifier in any such representations or warranties) on and as of the date made and (except to the extent that such representations and warranties speak as of an earlier date, in which case on and as of the date) on and as of the Closing Date as if made at and as of such date, except for failures of the representations and warranties referred to in this clause (ii) to be true and correct as would not reasonably be expected to have, individually or in the aggregate, a Two River Material Adverse Effect, and (iii) Town shall have received a certificate of the Chief Executive Officer of Two River to that effect; and
(b) Between the date hereof and the Effective Time, there shall not have occurred any Two River Material Adverse Effect.
Section 7.3 Additional Conditions to Obligation of Two River to Effect the Acquisition. Unless waived by Two River, the obligation of Two River to effect the Acquisition shall be subject to the fulfillment at the Closing Date of the following additional conditions:
(a) (i) Town shall have performed in all material respects its obligations contained in this Agreement required to be performed on or prior to the Closing Date, (ii) the representations and warranties of Town contained in this Agreement (x) that are qualified as to Town Material Adverse Effect shall be true and correct on and as of the date made and (except to the extent that such representations and warranties speak as of an earlier date, which case on and as of that date) on and as of the Closing Date as if made at and as of such date and (y) that are not qualified as to Town Material Adverse Effect shall be true and correct (without regard to any materiality qualifier in any such representations or warranties) on and as of the date made and (except to the extent that such representations and warranties speak as of an earlier date, in which case on and as of the date) on and as of the Closing Date as if made at and as of such date, except for failures of the representations and warranties referred to in this clause (ii) to be true and correct as would not reasonably be expected to have, individually or in the aggregate, an Town Material Adverse Effect, and (iii) Two River shall have received a certificate of the Chief Executive Officer of Town to that effect; and
(b) Between the date hereof and the Effective Time, there shall not have occurred any Town Material Adverse Effect.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the Acquisition may be abandoned at any time prior to the Effective Time, notwithstanding any requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent of the Banks duly authorized by the Two River Board and the Town Board;
(b) by either Bank, if the Effective Time shall not have occurred on or before April 15, 2006; provided, however, that the right to terminate this
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Agreement under this Section 8.1(b) shall not be available to any Bank whose
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failure to fulfill any obligation under this Agreement shall have caused, or resulted in, the failure of the Effective Time to occur on or before such date;
(d) by Town, if prior to the Two River Shareholder Approval, (i) the Two River Board withdraws or in any materially adverse respect modifies or changes its recommendation of this Agreement or the
Annex A-42
Acquisition or shall have resolved to do so; or (ii) the Two River Board shall have recommended to the shareholders of Two River a Competing Transaction or shall have resolved to do so;
(e) by Two River if, prior to the Town Shareholder Approval, (i) the Town Board withdraws or in any materially adverse respect modifies or changes its recommendation of this Agreement or the Acquisition or shall have resolved to do so, or (ii) the Town Board shall have recommended to the shareholders of Town a Competing Transaction or shall have resolved to do so;
(f) by either Bank if
(i) this Agreement and the Acquisition shall fail to receive the requisite votes for the Two River Shareholder Approval at the Two River Shareholder Meeting (assuming the existence of a quorum where a vote was taken, and including any adjournment of such meeting) or
(ii) this Agreement and the Acquisition shall fail to receive the requisite votes for the Town Shareholder Approval at the Town Shareholder Meeting (assuming the existence of a quorum where a vote was taken, and including any adjournment of such meeting);
would not be satisfied (a "Terminating Two River Breach"); provided, however,
-------- -------
that Two River shall have 30 days after written notice of such default,
|
Annex A-43
(k) by Town in the event that the Two River Average Price is less than $11.00 per share.
--- -----------
this Section 8.2, and Section 8.3 (Termination Fee), and Article IX (General
----------- ----------- ----------
|
Section 8.3 Termination Fee.
Annex A-44
Bank shall pay the other Bank its costs and expenses (including attorney's fees and expenses) in connection with such suit, together with interest on the applicable amounts at the prime rate as set forth in The Wall Street Journal (Northeastern Edition), in effect on the date such payment was originally required to be made. |
ARTICLE IX
GENERAL PROVISIONS
----- -------------
Stock Options, Stock Rights and Warrants), Section 2.3 (Exchange Procedures),
-----------
Section 5.6 (Access to Properties and Records; Confidentiality), Subsections (f)
----------- --------------
and (g) of Section 5.7 (Appropriate Actions; Regulatory Matters; Consents),
----------------------
Section 6.4 (Expenses), Section 6.7 (Directors' and Officers' Indemnification),
----------- -----------
|
Section 9.2 Amendments and Waivers; Delays and Omissions.
(b) Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any Party, upon any breach of default of another Party under this Agreement, shall impair any such right, power or remedy of such Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver of compliance with the performance of any obligation or other act of any other Party hereto shall be valid only if set forth in an instrument in writing signed by the Party or Parties to be bound thereby.
Section 9.3 Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, facsimile, any nationally recognized courier guaranteeing overnight delivery, or first class registered or certified mail, return receipt requested, postage prepaid, addressed to the applicable Party at the address set forth below or such other address as may hereafter be designated by such Party to the other Parties in accordance with the provisions of this Section:
(a) If to Two River, to:
Two River Community Bank 1250 Highway 35 South Middletown, New Jersey 07748 Attention: Barry B. Davall, President & CEO Facsimile: (732) 706-1340
Annex A-45
With a copy to:
Pitney Hardin LLP
Delivery:
200 Campus Drive
Florham Park, NJ 07932-0950
Mail:
P.O. Box 1945
Morristown, NJ 07962-1945
Attn.: Michael W. Zelenty, Esq.
Facsimile: (973) 966-1015
(b) If to Town, to:
The Town Bank
520 South Avenue,
Westfield, New Jersey 07090
Attention: Robert W. Dowens, Sr., President & CEO
Facsimile: (908) 301-0894
With a copy to:
Norris, McLaughlin & Marcus, P.A.
721 Route 202-206
PO Box 1018
Somerville, New Jersey 08876-1018
Attention: G. Robert Marcus, Esq.
Facsimile: (908) 722-0755
All such notices and communications shall be deemed to have been duly given: at the time delivered, if delivered by hand; when noted on a confirmation report (or if such delivery date is not a Business Day, on the next Business Day), if sent by facsimile; on the next Business Day, if timely delivered to a nationally recognized courier guaranteeing overnight delivery; if and when received, if deposited in the United States mail, postage prepaid, certified or registered, return receipt requested.
Section 9.5 Counterparts. This Agreement may be executed in counterparts (including by facsimile), each of which, when so executed and delivered, shall be deemed to be an original and enforceable, but all of which, taken together, shall constitute one and the same instrument.
Section 9.6 Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; (iii) the words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement; (iv) the word "including" and words of similar import when used in this Agreement means "including, without limitation," unless otherwise specified; (v) "or" is not exclusive; and (vi) provisions apply to successive events and transactions.
Annex A-46
Section 9.8 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey (without giving effect to the conflict of laws principles thereof).
Section 9.9 Entire Agreement.
(b) The Exhibits and Schedules, including the Disclosure Schedules, identified in this Agreement are incorporated herein by reference and made a part hereof.
Section 9.10 Consent to Jurisdiction. Each Party hereby (i) irrevocably submits to the jurisdiction of the state courts of, and the federal courts located in, the State of New Jersey in any action or proceeding arising out of or relating to, this Agreement, and (ii) waives, and agrees to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court.
Section 9.11 Further Assurances. Each Party shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other Party reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the Acquisition. Any out-of-pocket costs associated with complying with this Section shall be borne by the requesting Party.
Section 9.12 Construction. The Parties acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the Parties.
Section 9.13 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING, WHETHER AT LAW OR
EQUITY, BROUGHT BY ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.14 Specific Performance. The Parties agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the
Annex A-47
parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity.
[Signatures on following page]
Annex A-48
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed and delivered by their respective officers as of the date first written above.
TEN PENNY-RIALTO HOLDINGS, INC.
By: /s/ Barry B. Davall
------------------------------
Barry B. Davall
President and CEO
|
TWO RIVER COMMUNITY BANK
By: /s/ Charles T. Parton
------------------------------
Charles T. Parton
Chairman
|
and
By: /s/ Barry B. Davall
------------------------------
Barry B. Davall
President and CEO
|
THE TOWN BANK
By: /s/ Robert W. Dowens, Sr.
------------------------------
Robert W. Dowens, Sr.
President and CEO
|
Annex A-49
Exhibit A to Agreement and Plan of Acquisition
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated as of August 16, 2005, by and between Two River Community Bank, a commercial bank chartered under the laws of the State of New Jersey ("Two River") and _______________________________ ("Shareholder"), a shareholder of The Town Bank, a commercial bank chartered under the laws of the State of New Jersey ("Town").
WHEREAS, Two River, Town and Ten Penny-Town Holdings, Inc., a New Jersey corporation ("Parent") are simultaneously herewith entering into an Agreement and Plan of Acquisition, dated as of the date hereof (as may be amended from time to time pursuant to its terms, the "Acquisition Agreement") (capitalized terms used herein and not otherwise defined have the meanings given to them in the Acquisition Agreement); and
WHEREAS, Shareholder owns the shares of Town Common Stock identified on Annex I hereto (such shares, together with all shares of Town Common Stock subsequently acquired by Shareholder during the term of this Agreement, being referred to as the "Shares"); and
WHEREAS, in order to induce Two River to enter into the Acquisition Agreement, Shareholder, solely in such person's capacity as a shareholder of Town and not in any other capacity, has agreed to enter into and perform this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
(a) appear at each such meeting or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum; and
(b) vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, (x) in favor of adoption and approval of the Acquisition Agreement and the Acquisition; (y) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Town contained in the Acquisition Agreement or of Shareholder contained in this Agreement; and (z) against any Competing Transaction or any other action, agreement or transaction that is intended, or could reasonably be expected, to materially impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the Acquisition or this Agreement.
Annex A-50
Annex A-51
to or shall confer upon any other person or entity, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.
TWO RIVER COMMUNITY BANK
SHAREHOLDER:
Annex A-52
ANNEX I
SHAREHOLDER AGREEMENT
Shares of Town
Common Stock
Beneficially Owned
Name and Address of (exclusive of unexercised Options on Town Common
Shareholder stock options) Stock
------------------------- ------------------------ ----------------------
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Annex A-53
Exhibit B to Agreement and Plan of Acquisition
AFFILIATE AGREEMENT
RECITALS:
WHEREAS, the execution and delivery of this Agreement by the Affiliate is a material inducement to, and in consideration of, the Company's willingness to enter into the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, the parties hereto hereby agree as follows:
(b) the Shares are not subject to any claim, lien, pledge, charge, security interest or other encumbrance or to any rights of first refusal of any kind;
(c) there are no options, warrants, calls, rights, commitments or agreements of any kind or character, written or oral, to which the Affiliate is party or by which the Affiliate is bound obligating the Affiliate to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any Shares, or obligating the Affiliate to grant or enter into any such option, warrant, call, right, commitment or agreement;
Annex A-54
(d) the Affiliate has the sole right to transfer the Shares;
(e) as of the date hereof, the Shares constitute all shares of Bank Common Stock owned, beneficially or of record, by the Affiliate;
(f) the Shares are not subject to preemptive rights created by any agreement to which the Affiliate is party or by which the Affiliate is bound; and
(g) the Affiliate has not engaged in any sale or other transfer of the Shares in contemplation of the Acquisition.
(b) The Affiliate understands and hereby acknowledges that the Company will give stop transfer instructions to its transfer agent with respect to any Company Common Stock issued to the Affiliate pursuant to the Acquisition, and there shall be placed on the certificates representing such Company Common Stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute certificate without such legend), and the Company shall so instruct its transfer agent, if the Affiliate delivers to the Company (i) satisfactory written evidence that the Shares have been sold in compliance with Rule 145 (in which case, the substitute certificate shall be issued in the name of the transferee); or (ii) an opinion of counsel, in form and substance reasonably satisfactory to the
Annex A-55
Company, to the effect that public sale of the Shares by the holder thereof is no longer subject to Rule 145.
(a) Waiver. No waiver by any party hereto of any condition or any breach of any term or provision set forth in this Agreement shall be effective unless in writing and signed by each party hereto. The waiver of a condition or any breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other previous or subsequent breach of any term or provision of this Agreement.
(b) Severability. In the event that any term, provision, covenant or restriction set forth in this Agreement, or the application of any such term, provision, covenant or restriction to any person, entity or set of circumstances, shall be determined by a court of competent jurisdiction to be invalid, unlawful, void or unenforceable to any extent, the remainder of the terms, provisions, covenants and restrictions set forth in this Agreement, and the application of such terms, provisions, covenants and restrictions to persons, entities or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall remain in full force and effect, shall not be impaired, invalidated or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by applicable law.
(c) Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns, but, except as otherwise specifically provided herein, neither this Agreement nor any of the rights, interests or obligations of the Affiliate may be assigned to any other person without prior written consent of the Company.
(d) Amendments. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by each of the parties hereto.
(e) Specific Performance; Injunctive Relief. Each of the parties hereto hereby acknowledge that (i) the representations, warranties, covenants and restrictions set forth in this Agreement are necessary, fundamental and required for the protection of the each of the Banks and the Company and to preserve for the Company the benefits of the Acquisition; (ii) such covenants relate to matters which are of a special, unique, and extraordinary character that gives each such representation, warranty, covenant and restriction a special, unique, and extraordinary value; and (iii) a breach of any such representation, warranty, covenant or restriction, or any other term or provision of this Agreement, will result in irreparable harm and damages to the Banks and the Company that cannot be adequately compensated by a monetary award. Accordingly, the Company and the Affiliate hereby expressly agree that in addition to all other remedies available at law or in equity, each of the Banks and the Company shall be entitled to the immediate remedy of specific performance, a temporary and/or permanent restraining order, preliminary injunction, or such other form of injunctive or equitable relief as may be used by any court of competent jurisdiction to restrain or enjoin any of the parties hereto from breaching any representations, warranties, covenants or restrictions set forth in this Agreement, or to specifically enforce the terms and provisions hereof. Except for fraud or willful misconduct, the parties to this Agreement hereby expressly waive and forego any right to recover punitive, exemplary, lost profits, consequential or similar damages in any legal action or other proceeding arising out of or resulting from any controversy, claim or dispute arising out of or relating to this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed, interpreted and enforced in accordance with the internal laws of the State of New Jersey without giving effect to any choice or conflict of law provision, rule or principle (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey.
Annex A-56
(g) Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in the state or federal court of the State of New Jersey, and each of the parties hereby consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in herein shall be deemed effective service of process on such party.
(h) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, facsimile, any nationally recognized courier guaranteeing overnight delivery, or first class registered or certified mail, return receipt requested, postage prepaid, addressed to the applicable party at the address set forth below or such other address as may hereafter be designated by such party to the other party in accordance with the provisions of this section:
(i) If to the Company, to:
Ten Penny-Rialto Holdings, Inc. 1250 Highway 35 South Middletown, New Jersey 07748 Attention: Barry B. Davall, President & CEO Facsimile: (732) 706-1340
With a copy to:
Pitney Hardin LLP
Delivery:
200 Campus Drive
Florham Park, NJ 07932-0950
Mail:
P.O. Box 1945
Morristown, NJ 07962-1945
Attn.: Michael W. Zelenty, Esq.
Facsimile: (973) 966-1015
(ii) If to the Affiliate:
To the address for notice set forth on the signature page hereof.
All such notices and communications shall be deemed to have been duly given: at the time delivered, if delivered by hand; when noted on a confirmation report (or if such delivery date is not a Business Day, on the next Business Day), if sent by facsimile; on the next Business Day, if timely delivered to a nationally recognized courier guaranteeing overnight delivery; if and when received, if deposited in the United States mail, postage prepaid, certified or registered, return receipt requested. "Business Day" means any day on which the principal offices of the Commission in Washington, D.C. are open to accept filings, other than any such day on which the Banks are required by law to be closed.
(i) Entire Agreement. This Agreement, the Acquisition Agreement and the other agreements referred to in the Acquisition Agreement set forth the entire agreement and understanding of the Company and the Affiliate with respect to the subject matter hereof and thereof, and supersede all prior discussions, agreements and understandings between the Company and the Affiliate with respect to the subject matter hereof and
Annex A-57
thereof.
(j) Further Assurances. The Affiliate shall execute and deliver any additional certificate, instruments and other documents, and take any additional actions, as the Company may deem necessary or desirable, in the reasonable opinion of the Company, to carry out and effectuate the purpose and intent of this Agreement and the transactions contemplated hereby.
(k) Attorneys' Fees. In the event of any legal actions or proceeding to enforce or interpret the terms and provisions hereof, the prevailing party shall be entitled to reasonable attorneys' fees, whether or not the proceeding results in a final judgment.
(l) Third Party Reliance. Legal counsel to each of the Banks and the Company shall be entitled to rely upon this Agreement.
(m) Survival. The representations, warranties, covenants and other terms and provisions set forth in this Agreement shall survive the consummation of the Acquisition.
(n) Remedies Not Exclusive. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity will be cumulative and not alternative, and the exercise of any thereof by either party will not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.
(o) Waiver of Jury Trial. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(p) Counterparts. This Agreement shall be executed in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
[Signatures on following page]
Annex A-58
IN WITNESS WHEREOF, the undersigned have caused this Affiliate Agreement to be duly executed as of the date first written above.
TEN PENNY RIALTO HOLDINGS, INC. AFFILIATE
By: ---------------------------- ----------------------------
Barry B. Davall (Signature)
President and CEO
-----------------------------
(Print Name)
Affiliate's Address for Notice:
----------------------------
----------------------------
|
Shares beneficially owned:
shares of Bank Common Stock
-----
shares of Bank Common Stock
----- issuable upon the exercise
of outstanding options,
warrants and other rights
|
Annex A-59
Exhibit C-1 to Agreement and Plan of Acquisition
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TEN PENNY-RIALTO HOLDINGS, INC.
Pursuant to Section 14A:9-5
of the New Jersey Business Corporation Act
Ten Penny-Rialto Holdings, Inc., a corporation organized and existing under the laws of the State of New Jersey (the "Corporation"), hereby restates and integrates its Certificate of Incorporation, and also substantively amends such Certificate of Incorporation (as amended and restated, this "Certificate of Incorporation"), to read in full as herein set forth.
(a) To engage in the business of a bank holding company; and
(b) Without in any way being limited by the foregoing specifically enumerated purposes, to engage in any activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act.
B. The Board of Directors of the Corporation (the "Board of Directors") shall have authority at any time or from time to time (i) to divide any or all of the Preferred Stock into series; (ii) to determine for any such series its designation, number of shares, relative rights, preferences and limitations; (iii) to increase the number of shares of any such series previously determined by it and to decrease such previously determined number of shares to a number not less than that of the shares of such series then outstanding; (iv) to change the designation or number of shares, or the relative rights, preferences and limitations of the shares, of any theretofore established series no shares of which have been issued; and (v) to cause to be executed and filed without further approval of the shareholders such amendment or amendments to the Certificate of Incorporation as may be required in order to accomplish any of the foregoing. In particular, but without limiting the generality of the foregoing, the Board of Directors shall have authority to determine with respect to any such series of Preferred Stock:
(1) The dividend rate or rates on shares of such series and any restrictions, limitations, or conditions upon the payment of such dividends, and whether dividends shall be cumulative and, if so, the date or dates from which dividends shall cumulate, and the dates on which dividends, if declared, shall be payable;
(2) Whether the shares of such series shall be redeemable and, if so, the time or times and the price or prices at which and the other terms and conditions on which the shares may be redeemed;
(3) The rights of the holders of shares of such series in the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or any other distribution of its assets;
Annex A-60
(4) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund and, if so, the terms and conditions thereof;
(5) Whether the shares of such series shall be convertible into shares of any other class or classes or of any series of the same or any other class or classes, and if so convertible, the price or prices or the rate or rates of conversion and the method, if any, of adjusting the same, and the other terms and conditions, if any, on which shares shall be so convertible; and
(6) The extent of voting powers, if any, of the shares of such series.
C. Each share of Common Stock shall be equal to every other share of Common Stock, and, subject to the prior rights of the Preferred Stock, shall be entitled to share equally upon all distributions of earnings and assets of the Corporation. After all accrued dividends on all Preferred Stock having cumulative dividend rights have been declared and paid, or funds set apart for the payment thereof, the holders of Common Stock shall be entitled to receive dividends, at such rates and at such times as may be determined by the Board of Directors. Upon the dissolution, liquidation or winding up of the Corporation, or upon any distribution of its capital assets, subject to the prior rights of the Preferred Stock, all the remaining assets of the Corporation shall be distributed ratably among the holders of Common Stock.
D. Except as otherwise provided in this Certificate of Incorporation, as from time to time amended, or as otherwise required by law, the holders of Common Stock of the Corporation shall be entitled at all meeting of shareholders to one vote for each share of such stock held by them respectively and shall vote together with the holders of the Preferred Stock as one class.
Annex A-61
NAME ADDRESS
--------------------------------- --------------------------------------------
The number of directors at any time may be increased or diminished
by vote of the Board of Directors, and in case of any such increase, the Board
|
of Directors shall have power to elect each such additional director to hold office until the next succeeding annual meeting of shareholders and until such director's successor shall have been elected and qualified.
Any director may be removed from office as a director but only for cause (i) by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, or (ii) by the affirmative vote of a majority of the members of the Board of Directors in office where, in the judgment of such majority, the continuation of the director in office would be harmful to the Corporation, and the Board of Directors may suspend the director for a reasonable period pending final determination that cause exists for such removal.
The Board of Directors from time to time shall determine whether and to what extent, and at what times and places, and under what conditions and regulations , the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders; and no shareholder shall have any right to inspecting any account or book or document of the Corporation, except as conferred by statute or authorized by the Board of Directors, or by a resolution of the shareholders of the Corporation.
The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an executive committee which shall have an may exercise all the authority of the Board of Directors except as otherwise expressly provided by law, and one or more other committees which shall have such authority as may be delegated by the Board of Directors.
Annex A-62
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute this Certificate of Incorporation this ____ day of _____, 200_.
TEN PENNY-RIALTO HOLDINGS, INC.
Title:
Annex A-63
Exhibit C-2 to Agreement and Plan of Acquisition
TEN PENNY-RIALTO HOLDINGS, INC.
A New Jersey Corporation
BY-LAWS
Dated _____________ __, 2005
Article I
SHAREHOLDERS
Section 1. Annual Meetings of Shareholders.
An annual meeting of the shareholders of the corporation, for the election of directors and for the transaction of other business properly before the meeting, shall be held in each year, on the date and at the time and place, as shall be fixed from time to time by the Board of Directors (the "Board").
Section 2. Special Meetings of Shareholders.
Section 3. Notices of Meetings of Shareholders.
Notice of annual and special meetings of shareholders shall be given, not less than 10 nor more than 60 days before the meeting, to each shareholder of record entitled to vote at the meeting, setting forth the date, time, place, and purpose or purposes of the meeting. The notice shall be given by mail or any other method permitted by law to each shareholder of record entitled to vote at the meeting, directed to the shareholder at the shareholder's address as it appears on the stock books of the corporation.
Section 4. Quorum.
Unless otherwise provided by law or the Certificate of Incorporation, the holders of shares entitled to cast a majority of the votes at a meeting of shareholders shall constitute a quorum at the meeting. Any action, other than the election of directors, shall be authorized by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon, unless a greater plurality is required by law or the Certificate of Incorporation. Less than a quorum may adjourn the meeting. No notice of an adjournment of the meeting shall be necessary if the Board does
Annex A-64
not fix a new record date for the adjourned meeting and if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and if at the adjourned meeting only such business is transacted as might have been transacted at the original meeting.
Section 5. Qualifications of Voters.
At each meeting of the shareholders, each holder of record of each outstanding share of common stock of the corporation shall be entitled to one vote on each matter submitted to a vote. The Board may fix in advance a date not less than 10 nor more than 60 days preceding the date of any meeting of shareholders and not exceeding 60 days preceding the date for the payment of any dividend, or for the allotment of any rights, or for the purpose of any other action, as a record date for the determination of shareholders entitled to notice of and to vote at the meeting or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or allotment of any right, or for the purpose of any other action. In each case only shareholders of record at the close of business on the date so fixed shall be entitled to notice of and to vote at such meeting or to consent to or dissent from any proposal without a meeting, or to receive payment of a dividend or allotment of rights or take any other action, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.
Section 6. Voting.
The vote for the election of directors and the vote on any question before the meeting may be taken by ballot and shall be taken by ballot if requested at the meeting by a shareholder entitled to vote at the meeting. Each ballot shall state the name of the shareholder voting, if the shareholder is voting in person, or if voting by proxy, then the name of the proxy and the number of votes cast by the ballot. A shareholder may vote either in person or by proxy.
Section 7. Selection of Inspectors.
The Board may, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, or if any inspector fails to qualify, appear or act and the vacancy is not filled by the Board in advance of the meeting, the person presiding at the meeting may, and on the request at the meeting of any shareholder entitled to vote at the meeting shall, make such appointment. No person shall be elected a director at a meeting at which the person has served as an inspector.
Section 8. Duties of Inspectors.
The inspectors shall determine the number and voting power of shares outstanding, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies. The inspectors shall receive votes or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do any acts proper to conduct the election or vote with fairness to all shareholders. In determining the number of shares outstanding, the inspectors may rely on reports of the Treasurer or transfer agent. In determining the voting power of each share, the inspectors may rely on reports of the Secretary. In determining the results of any voting, the inspectors may rely on the reports of the Secretary as to the vote required to take any action or the vote required in an election.
Section 9. Advance Notice of Shareholder Nominees for Director and Other Shareholder Proposals.
(b) For any matter to be properly brought before any meeting of shareholders, the matter must be specified in the notice of meeting given by the corporation.
(c) A shareholder desiring to bring a proposal before an annual meeting of shareholders (other than to nominate a director of the corporation) shall deliver to the Secretary, the following: (i) a request for inclusion of the proposal in the notice of meeting, (ii) the text of the proposal(s) the shareholder intends to present at the meeting
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and, at the option of the shareholder, a brief explanation of why the
shareholder favors the proposal(s), (iii) the shareholder's name and address,
(iv) the number and class of all shares of each class of stock of the
corporation owned of record and beneficially (pursuant to Rules 13d-3 and 13d-5
under the Exchange Act) by the shareholder and (v) any material interest of the
shareholder (other than as a shareholder) in the proposal.
(d) A shareholder desiring to nominate a person(s) for election as
director of the corporation at an annual meeting shall deliver to the Secretary,
the following: (i) the name of the person(s) to be nominated, (ii) the number
and class of all shares of each class of stock of the corporation owned of
record and beneficially by each nominee, as reported to the shareholder by the
nominee(s), (iii) the information regarding each nominee required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
corporation), (iv) each nominee's signed consent to serve as a director, (v) the
proposing shareholder's name and address and (vi) the number and class of all
shares of each class of stock of the corporation owned of record and
beneficially (pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
shareholder. In addition, the proposing shareholder shall furnish the
corporation with all other information the corporation may reasonably request to
determine whether the nominee would be considered "independent" under the rules
and standards applicable to the corporation.
(j) The Chairman or, in the absence of the Chairman, the Chief Executive Officer, or in the absence of the Chairman and the Chief Executive Officer, the President, or in the absence of the Chairman, Chief Executive
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Section 10. Procedure for Action by Written Consent; Inspectors and Effectiveness.
(a) In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board shall fix a record date, which record date shall not precede the date upon which it adopts the resolution fixing the record date. Any shareholder entitled to vote on an action required or permitted to be taken at a meeting of shareholders who is seeking to have the shareholders authorize or take any such action by written consent shall, by written notice to the Secretary, request the Board to fix a record date. The Board shall promptly, but in no event more than 10 days after the date on which the request is received, adopt a resolution fixing the record date. If no record date has been fixed within the time set forth above, the record date, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Secretary. If no record date has been fixed by the Board and prior action by the Board is required by applicable law, the record date shall be at the close of business on the date on which the Board adopts the resolution taking such prior action.
(b) The Board shall fix a date on which written consents are to be tabulated (the "Tabulation Date").
(c) Every written consent shall bear the date of signature of each shareholder or person acting by proxy who signs the consent, and in the case of a consent executed by a person acting by proxy, a copy of the proxy shall be attached. No action by written consent shall be effective unless by the Tabulation Date (or in the event the Board fails to set a Tabulation Date, by the date required under applicable law) a written consent or consents (after taking into account any consent revocations) signed by a sufficient number of shareholders to take such action are delivered to the corporation.
(d) Promptly following the receipt of any consents with respect to a proposed corporate action, after taking into account any consent revocations, the corporation shall promptly engage independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations, counting and tabulating the valid consents, making a written report certifying the results thereof promptly following the Tabulation Date, and performing other proper incident duties. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board or any shareholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
Article II
DIRECTORS
Section 1. Directors and Term of Office.
The business and affairs of the corporation shall be managed by its board of directors consisting of not less than one nor more than 20 members, as may from time to time be determined by the Board, who shall hold office until the next annual meeting and until their successors shall have been elected and qualified. If at any time, except at the annual meeting, the number of directors shall be increased, the additional director or directors may be elected by the board, to hold office until the next annual meeting and until their successors shall have been elected and qualified.
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Section 2. Election of Directors.
Directors shall be elected at each annual meeting of shareholders. The term of office of each director shall be from the time of election and qualification until the annual meeting of shareholders next succeeding such election and until a successor shall have been elected and shall have qualified, or until the earlier death, resignation or removal of the director.
Section 3. Vacancies.
Section 4. Compensation.
Directors may receive from the corporation reasonable compensation for their services, including a fixed sum and expenses for attendance at meetings of the Board and at meetings of committees of the Board as shall be determined from time to time by the Board.
Section 5. Regular Meetings of Directors.
The Board shall by resolution schedule regular Board meetings.
Section 6. Notice of Regular Meetings of Directors.
No notice shall be required to be given of any regular meeting of the Board except as the Board may require.
Section 7. Special Meetings of Directors.
Special meetings of the Board may be called at any time by the Chairman or any two directors and may be held at any time and place within or without the State of New Jersey.
Section 8. Notice of Special Meetings of Directors.
Notice of each special meeting of the Board, stating the day, time, place, and purpose or purposes thereof, shall be given by the Chairman of the Board, the Secretary or any two directors to each director not less than two days by mail or one day by facsimile, telephone (including voice mail) or, electronic mail, prior to the date specified for the meeting. Special meetings of the Board may also be held at any place and time, without notice, if all the directors are either present at the meeting or sign a waiver of notice, either before or after the meeting.
Section 9. Quorum.
At any meeting of the Board a quorum shall consist of a majority of the total number of directors and, except as otherwise provided by law or these by-laws, a majority of directors at a meeting at which a quorum is present shall decide any question that may come before the meeting. A majority of the directors present at any regular or special meeting, although less than a quorum, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At the adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting.
Section 10. Action of Directors or Committees Without a Meeting or When Directors are in Separate Places.
Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board or any Board committee may be taken without a meeting if, prior or subsequent to the action, all directors or members of the committee, as the case may be, consent thereto in writing and the written consents are filed with the minutes of the
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proceedings of the Board or committee. Any or all directors may participate in a meeting of the Board or committee by means of a conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other.
Section 11. Common Directorship and Director's Personal Interest.
No contract or other transaction between the corporation and one or more of its directors, or between the corporation and any other corporation, firm or association of any type or kind in which one or more of this corporation's directors are directors or are otherwise interested, shall be void or voidable solely by reason of such common directorship or interest, or solely because such director or directors are present at the meeting of the Board or a committee thereof which authorizes or approves the contract or transaction, or solely because the votes of such director or directors are counted for such purpose, if, any one of the following is true: (1) the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; or (2) the fact of the common directorship or interest is disclosed or known to the Board or committee and the Board or committee authorizes, approves or ratifies the contract or transaction by unanimous written consent, providing that at least one director so consenting is disinterested, or by a majority of the directors present at the meeting and also by a majority of the disinterested directors, even though the number of the disinterested directors is less than a quorum; or (3) the fact of the common directorship or interest is disclosed or known to the shareholders and they authorize, approve, or ratify the contract or transaction. Common or interested directors may be counted in determining the presence of a quorum at a Board or committee meeting at which a contract or transaction described in this by-law is authorized, approved or ratified.
Article III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 1. Establishment of Executive Committee and Other Committees.
There may be an Executive Committee, consisting of three or more directors, one of whom shall act as the Chair of the Executive Committee, appointed by the Board and such other committees, consisting of one or more directors, as from time to time established by a majority of the total number of directors the corporation would have if there were no vacancies (the "Entire Board"). All committee members shall be appointed for the term of one year but shall hold office until their successors are elected and have qualified. Any member of any committee, however, may be removed by the affirmative vote of a majority of the Entire Board. The Board may determine whether any committee shall be composed in part or entirely of directors who are independent of the corporation. The Board shall make all determinations of whether a director is independent.
Section 2. Vacancies. In the event of a vacancy occurring in any committee, the Board, by resolution adopted by a majority of the Entire Board, may fill the vacancy for the unexpired term. |
Section 3. Powers of Committees.
Subject to the limitations and regulations prescribed by law, including the New Jersey Business Corporation Act, or these by-laws or by the Board, the committees established by the Board shall have and may exercise all the authority of the Board, subject to their respective charters, except that no committee may make, alter, or repeal any by-laws, elect any director, remove any director or officer, submit to shareholders any action that requires shareholder approval, or amend or repeal any resolution of the Board establishing such committee or any other resolution of the Board which by its terms may be amended or repealed only by the Board.
Section 4. Regular Meetings.
The members of the Committee may by resolution schedule regular committee meetings.
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Section 5. Notice of Regular Meetings.
No notice shall be required to be given of any regular meeting of any committee.
Section 6. Special Meetings.
Special meetings of the Executive Committee may be called at any time by the Chairman, the Chair of the committee, or by any two members of the committee and may be held at any place within or without the State of New Jersey and at any time. Special meetings of any other committee may be called as the committee may determine.
Section 7. Notice of Special Meetings.
Notice of each special meeting of any committee, stating the meeting time, place, and purpose or purposes, shall be given by the Chair of the committee or by any two members of the committee, or, with respect to the Executive Committee, the Chairman or the Secretary or by any two members of the Executive Committee, to each member of the committee not less than two days by mail or one day by facsimile or telephone (including voice mail) or by electronic mail, prior to the meeting date. Special meetings of any committee may also be held at any place and time, without notice, by unanimous consent of all the committee members or if all the committee members are present at the meeting.
Section 8. Quorum.
At any committee meeting a majority of the committee members shall constitute a quorum and, except where otherwise provided by law or these by-laws, a majority of committee members at a committee meeting at which a quorum is present shall decide any question that may come before the committee meeting. A majority of the committee members present at any regular or special committee meeting, although less than a quorum, may adjourn the committee meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At such adjourned committee meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original committee meeting.
Section 9. Committee Charters.
Each committee may and, if directed by the Board, shall establish a charter reflecting its function, charge, and responsibilities. The charter shall be prepared by the committee and shall be subject to approval by the Board.
Section 10. Committee Reports.
Each committee shall report its actions taken at committee meetings to the Board at the next meeting of the Board following the committee meeting unless the committee meeting occurred fewer than two days before the Board Meeting, in which case, the committee report may be made at the second regular Board after the committee meeting.
Article IV
OFFICERS
Section 1. Officers Enumerated.
The officers of the corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and may include one or more Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers, all of whom shall be elected by the Board. The Chairman shall be a director of the corporation. One person may hold more than one office. The Board may designate the officers who shall be the chief operating officer, the chief financial officer, and the chief legal officer of the corporation.
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Section 2. Other Officers.
The Board may by resolution elect other officers, managers, agents, employees, or committees it deems necessary, who shall hold their offices for the terms and shall have the powers and perform the duties as shall be prescribed by the Board or the by-laws. One person may hold more than one office.
Section 3. Term of Office.
All officers elected by the Board shall be elected for one year terms, but shall hold office until their successors are elected and have qualified. Any officer elected by the Board may be removed at any time by the affirmative vote of majority of the Entire Board.
Section 4. Vacancies.
If any officer vacancy shall occur, the Board may fill it for the unexpired term.
Section 5. The Chairman of the Board.
The Chairman shall preside at all meetings of the Board and at all meetings of the shareholders and shall perform other duties as directed by the Board.
Section 6. The Chief Executive Officer.
The Chief Executive Officer shall have the general powers and duties of supervision and managements of the property and affairs of the corporation which usually pertain to the office, and shall perform all other duties as directed by the Board. In the absence of the Chairman, the Chief Executive Officer shall preside at shareholder meetings and, if a director, Board meetings. In the absence or disability of the Chairman, the Chief Executive Officer, if a director, shall perform the duties and exercise the power of the Chairman.
Section 7. The President.
The President shall have the powers and perform the duties which usually pertain to the office, and shall perform all other duties as directed by the Board or the Chief Executive Officer. In the absence of the Chairman and the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer and, if a director, the Chairman.
Section 8. The Vice-Presidents.
Each Vice-President shall have the powers and perform the duties which usually pertain to the office or as the Board, the Chairman, Chief Executive Officer or the President may direct. In the absence or disability of the Chairman, Chief Executive Officer and President, the Vice-President designated by the Board shall perform the duties and exercise the powers of the Chief Executive Officer, President and, if a director, the Chairman.
Section 9. The Secretary.
The Secretary shall issue notices of all meetings of shareholders and of the directors and of the Executive Committee where notices of such meetings are required by law or these by-laws. The Secretary shall keep the minutes of meetings of shareholders and of the Board and of the Executive Committee and shall sign instruments requiring the Secretary's signature, and shall perform other duties usually pertaining to the office and as the Board or the Chairman may direct.
Section 10. The Treasurer.
The Treasurer shall have the care and custody of all the moneys and securities of the corporation. The Treasurer shall cause to be entered in books of the corporation, full and accurate accounts of all moneys received and paid,
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shall sign instruments requiring the signature of the Treasurer, and shall perform other duties usually pertaining to the office and as the Board or the Chairman shall direct.
Section 11. The Controller.
The Controller shall have the custody and operation of the accounting books and records of the corporation and shall establish and maintain adequate systems of internal control, disclosure control, and audit to safeguard the assets of the corporation and shall perform other duties usually pertaining to the office and as the Board and the Chairman may direct.
Section 12. Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller.
The duties of any Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller shall be those usually pertaining to their respective offices and as may be properly required of them by the Board or by the officers to whom they report.
Article V
CAPITAL STOCK
Section 1. Stock Certificates.
Certificates of stock shall be issued only in numerical order with or without an alphabetic prefix or suffix. Certificates shall be signed by or bear the facsimile signatures of the Chairman, the President, or one of the Vice-Presidents and the Secretary, the Treasurer, Assistant Secretary or Assistant Treasurer. Certificates shall also be signed by or bear the facsimile signature of one of the transfer agents and of one of the registrars of the corporation as permitted or required by law. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before the certificate is issued, it may be issued by the corporation with the same effect as if the signatory had not ceased to be such at the date of its issue.
Section 2. Transfer of Shares.
Transfers of shares, except where otherwise provided by law or these by-laws, shall be made on the books of the corporation pursuant to authority granted by power of attorney duly executed and filed by the holder thereof with one of the transfer agents, upon surrender of the certificate or certificates of the shares and in accordance with the provisions of the Uniform Commercial Code as adopted in New Jersey and as amended from time to time.
Section 3. Transfer Agents and Registrars.
The Board may at any time appoint one or more transfer agents and/or registrars for the transfer and/or registration of shares of stock, and may from time to time by resolution fix and determine the manner in which shares of stock of the corporation shall be transferred and/or registered.
Section 4. Lost, Stolen or Destroyed Certificates.
Where a certificate for shares has been lost, apparently destroyed, or wrongfully taken and its owner fails to so notify the corporation or the transfer agent within a reasonable time after having notice of the fact and the transfer agent or the corporation registers a transfer of the shares before receiving notification, the owner shall be precluded from asserting against the corporation any claim for registering the transfer of the shares or any claim to a new certificate.
Subject to the foregoing, where the owner of shares claims that the certificate representing the shares has been lost, destroyed, or wrongfully taken, the corporation shall issue a new certificate in place of the original certificate if the registered owner thereof, or the owner's legal representative, (a) requests the issue of a new certificate before the
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corporation has notice that the certificate has been acquired by a bona fide
purchaser; (b) makes proof, in the form as the corporation prescribes, of
ownership and that the certificate has been lost, destroyed or wrongfully taken;
(c) files either (i) an assumption of liability by a surety approved by the
corporation under a blanket lost instrument indemnity bond, substantially in the
form approved by the corporation, or (ii) an indemnity bond in the form and with
the surety and in the amount (open or specified) as may be approved by the
corporation, indemnifying the corporation and its transfer agents and registrars
against all loss, cost and damage which may arise from issuance of a new
certificate in place of the original certificate; and (d) satisfies any other
reasonable requirements imposed by the corporation. Approvals or any
requirements pursuant to this section by the corporation may be granted or
imposed by the Chairman, the President, any Vice-President, the Secretary, any
Assistant Secretary, or any other officer as authorized by the Board.
Article VI
DIVIDENDS AND FINANCES
Section 1. Dividends.
Dividends may be declared by the Board and paid by the corporation at the times determined by the Board, pursuant to the provisions of the New Jersey Business Corporation Act. Before payment of any dividend or making of any distribution of net profits there may be set aside out of the net profits of the corporation the sums determined by the Board from time to time, in its absolute discretion, to be proper and for the purposes determined by the Board to be conducive to the interests of the corporation.
Section 2. Finances.
All funds of the corporation not otherwise employed shall be deposited in its name in, and shall be subject to application or withdrawal from, banks, trust companies or other depositories to be selected in accordance with and in the manner and under the conditions authorized by, or pursuant to the authority of, resolutions of the Board. All checks, notes, drafts and other negotiable instruments of the corporation shall be signed by the officer, officers, agent, agents, employee or employees authorized by, or pursuant to the authority of, resolutions of the Board. No officers, agents, or employees, either singly or together, shall have power to make any check, note, draft, or other negotiable instrument in the name of the corporation or to bind the corporation thereby, except as may be authorized in accordance with the provisions of this section.
Article VII
GENERAL
Section 1. Form of Seal.
The seal of the corporation shall be in such form as shall be approved from time to time by the Board. The seal may be an impression, a drawing or a facsimile thereof as determined from time to time by the Board. The corporation may use the seal by causing it or a facsimile to be affixed, impressed or reproduced in any manner.
Section 2. Indemnification of Directors, Officers and Employees.
(a) The corporation shall indemnify and hold harmless against all liabilities any person who is or was a director or officer, including the director's or officer's estate (an "Indemnitee"), who is or was a party to or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise in respect of any past, present or future matter, including any action suit or proceeding by or in the right of the corporation (an "Action"), by reason of the fact that the Indemnitee is or was serving as a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, trustee, employee or agent of any other enterprise; provided, however, that the corporation shall not indemnify an Indemnitee if a judgment or other final adjudication adverse to the Indemnitee establishes that the Indemnitee's acts
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or omissions (i) were acts or omissions that the Indemnitee knew or believed to be contrary to the best interests of the corporation or shareholders in connection with a matter to which he had a material conflict of interest, (ii) were not in good faith or involved a knowing violation of law, or (iii) resulted in receipt by such person of an improper personal benefit.
Section 3. Non-Exclusivity of Indemnification Rights.
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Article VIII
AMENDMENTS
Except as may otherwise be required by law or by the Certificate of Incorporation, these by-laws may be amended, altered, or repealed, in whole or in part, by the affirmative vote of a majority of the Entire Board at any regular or special Board meeting. The shareholders, by a majority of the votes cast at a meeting of the shareholders called for the purpose, may adopt, alter, amend or repeal the by-laws whether made by the Board or otherwise.
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Annex B
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TEN PENNY-RIALTO HOLDINGS, INC.
Pursuant to Section 14A:9-5
of the New Jersey Business Corporation Act
Community Partners Bancorp, a corporation organized and existing under the laws of the State of New Jersey (the "Corporation"), hereby restates and integrates its Certificate of Incorporation, and also substantively amends such Certificate of Incorporation (as amended and restated, this "Certificate of Incorporation"), to read in full as herein set forth.
(a) To engage in the business of a bank holding company; and
(b) Without in any way being limited by the foregoing specifically enumerated purposes, to engage in any activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act.
B. The Board of Directors of the Corporation (the "Board of Directors") shall have authority at any time or from time to time (i) to divide any or all of the Preferred Stock into series; (ii) to determine for any such series its designation, number of shares, relative rights, preferences and limitations; (iii) to increase the number of shares of any such series previously determined by it and to decrease such previously determined number of shares to a number not less than that of the shares of such series then outstanding; (iv) to change the designation or number of shares, or the relative rights, preferences and limitations of the shares, of any theretofore established series no shares of which have been issued; and (v) to cause to be executed and filed without further approval of the shareholders such amendment or amendments to the Certificate of Incorporation as may be required in order to accomplish any of the foregoing. In particular, but without limiting the generality of the foregoing, the Board of Directors shall have authority to determine with respect to any such series of Preferred Stock:
(1) The dividend rate or rates on shares of such series and any restrictions, limitations, or conditions upon the payment of such dividends, and whether dividends shall be cumulative and, if so, the date or dates from which dividends shall cumulate, and the dates on which dividends, if declared, shall be payable;
(2) Whether the shares of such series shall be redeemable and, if so, the time or times and the price or prices at which and the other terms and conditions on which the shares may be redeemed;
(3) The rights of the holders of shares of such series in the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or any other distribution of its assets;
(4) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund and, if so, the terms and conditions thereof;
(5) Whether the shares of such series shall be convertible into shares of any other class or classes or of any series of the same or any other class or classes, and if so convertible, the price or
Annex B-1
prices or the rate or rates of conversion and the method, if any, of adjusting the same, and the other terms and conditions, if any, on which shares shall be so convertible; and
(6) The extent of voting powers, if any, of the shares of such series.
C. Each share of Common Stock shall be equal to every other share of Common Stock, and, subject to the prior rights of the Preferred Stock, shall be entitled to share equally upon all distributions of earnings and assets of the Corporation. After all accrued dividends on all Preferred Stock having cumulative dividend rights have been declared and paid, or funds set apart for the payment thereof, the holders of Common Stock shall be entitled to receive dividends, at such rates and at such times as may be determined by the Board of Directors. Upon the dissolution, liquidation or winding up of the Corporation, or upon any distribution of its capital assets, subject to the prior rights of the Preferred Stock, all the remaining assets of the Corporation shall be distributed ratably among the holders of Common Stock.
D. Except as otherwise provided in this Certificate of Incorporation, as from time to time amended, or as otherwise required by law, the holders of Common Stock of the Corporation shall be entitled at all meeting of shareholders to one vote for each share of such stock held by them respectively and shall vote together with the holders of the Preferred Stock as one class.
NAME ADDRESS
------------------------------ -----------------------------------------
Charles T. Parton 1250 Highway 35 South
Middletown, New Jersey 07748
Joseph F.X. O'Sullivan 1250 Highway 35 South
Middletown, New Jersey 07748
Barry B. Davall 1250 Highway 35 South
Middletown, New Jersey 07748
Michael W. Kostelnik, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
Frank J. Patock, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
Robert B. Cagnassola 1250 Highway 35 South
Middletown, New Jersey 07748
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Frederick H. Kurtz 1250 Highway 35 South
Middletown, New Jersey 07748
John J. Perri, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
The number of directors at any time may be increased or diminished
by vote of the Board of Directors, and in case of any such increase, the Board
|
of Directors shall have power to elect each such additional director to hold office until the next succeeding annual meeting of shareholders and until such director's successor shall have been elected and qualified.
Any director may be removed from office as a director but only for cause (i) by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, or (ii) by the affirmative vote of a majority of the members of the Board of Directors in office where, in the judgment of such majority, the continuation of the director in office would be harmful to the Corporation, and the Board of Directors may suspend the director for a reasonable period pending final determination that cause exists for such removal.
The Board of Directors from time to time shall determine whether and to what extent, and at what times and places, and under what conditions and regulations , the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders; and no shareholder shall have any right to inspecting any account or book or document of the Corporation, except as conferred by statute or authorized by the Board of Directors, or by a resolution of the shareholders of the Corporation.
The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an executive committee which shall have an may exercise all the authority of the Board of Directors except as otherwise expressly provided by law, and one or more other committees which shall have such authority as may be delegated by the Board of Directors.
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute this Amended and Restated Certificate of Incorporation this 25th day of October 2005.
COMMUNITY PARTNERS BANCORP
Annex B-3
Annex C
FORM OF
COMMUNITY PARTNERS BANCORP
A New Jersey Corporation
BY-LAWS
Dated October 25, 2005
Article I
SHAREHOLDERS
Section 1. Annual Meetings of Shareholders.
An annual meeting of the shareholders of the corporation, for the election of directors and for the transaction of other business properly before the meeting, shall be held in each year, on the date and at the time and place, as shall be fixed from time to time by the Board of Directors (the "Board").
Section 2. Special Meetings of Shareholders.
Special meetings of the shareholders, except where otherwise provided by law or these by-laws, may be called to be held on the date and at the time and place fixed by the Board, the Chairman of the Board (the "Chairman") or the President and shall be held at such times and at such places either within or without the State of New Jersey as fixed by the Board, the Chairman or the President.
Section 3. Notices of Meetings of Shareholders.
Notice of annual and special meetings of shareholders shall be given, not less than 10 nor more than 60 days before the meeting, to each shareholder of record entitled to vote at the meeting, setting forth the date, time, place, and purpose or purposes of the meeting. The notice shall be given by mail or any other method permitted by law to each shareholder of record entitled to vote at the meeting, directed to the shareholder at the shareholder's address as it appears on the stock books of the corporation. No business may be transacted at an annual or special meeting of shareholders other than business that is specified in the notice thereof.
Section 4. Quorum.
Unless otherwise provided by law or the Certificate of Incorporation, the holders of shares entitled to cast a majority of the votes at a meeting of shareholders shall constitute a quorum at the meeting. Any action, other than the election of directors, shall be authorized by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon, unless a greater plurality is required by law or the Certificate of Incorporation. Less than a quorum may adjourn the meeting. No notice of an adjournment of the meeting shall be necessary if the Board does not fix a new record date for the adjourned meeting and if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and if at the adjourned meeting only such business is transacted as might have been transacted at the original meeting.
Section 5. Qualifications of Voters.
At each meeting of the shareholders, each holder of record of each outstanding share of common stock of the corporation shall be entitled to one vote on each matter submitted to a vote. The Board may fix in advance a date not less than 10 nor more than 60 days preceding the date of any meeting of shareholders and not exceeding 60 days preceding the date for the payment of any dividend, or for the allotment of any rights, or for the purpose of any other action, as a record date for the determination of shareholders entitled to notice of and to vote at the meeting or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or allotment of any right, or for the purpose of any other action. In each case only shareholders of record at the close of business on the date so fixed shall be entitled to notice of and to vote at such meeting or to consent to or dissent from any proposal without a meeting, or to receive payment of a dividend
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or allotment of rights or take any other action, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.
Section 6. Voting.
The vote for the election of directors and the vote on any question before the meeting may be taken by ballot and shall be taken by ballot if requested at the meeting by a shareholder entitled to vote at the meeting. Each ballot shall state the name of the shareholder voting, if the shareholder is voting in person, or if voting by proxy, then the name of the proxy and the number of votes cast by the ballot. A shareholder may vote either in person or by proxy.
Section 7. Selection of Inspectors.
The Board may, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, or if any inspector fails to qualify, appear or act and the vacancy is not filled by the Board in advance of the meeting, the person presiding at the meeting may, and on the request at the meeting of any shareholder entitled to vote at the meeting shall, make such appointment. No person shall be elected a director at a meeting at which the person has served as an inspector.
Section 8. Duties of Inspectors.
The inspectors shall determine the number and voting power of shares outstanding, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies. The inspectors shall receive votes or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do any acts proper to conduct the election or vote with fairness to all shareholders. In determining the number of shares outstanding, the inspectors may rely on reports of the Treasurer or transfer agent. In determining the voting power of each share, the inspectors may rely on reports of the Secretary. In determining the results of any voting, the inspectors may rely on the reports of the Secretary as to the vote required to take any action or the vote required in an election.
Section 9. Advance Notice of Shareholder Nominees for Director and Other Shareholder Proposals.
(b) For any matter to be properly brought before any meeting of shareholders, the matter must be specified in the notice of meeting given by the corporation.
(c) A shareholder desiring to bring a proposal before an annual meeting of
shareholders (other than to nominate a director of the corporation) shall
deliver to the Secretary, the following: (i) a request for inclusion of the
proposal in the notice of meeting, (ii) the text of the proposal(s) the
shareholder intends to present at the meeting and, at the option of the
shareholder, a brief explanation of why the shareholder favors the proposal(s),
(iii) the shareholder's name and address, (iv) the number and class of all
shares of each class of stock of the corporation owned of record and
beneficially (pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
shareholder and (v) any material interest of the shareholder (other than as a
shareholder) in the proposal.
(d) A shareholder desiring to nominate a person(s) for election as
director of the corporation at an annual meeting shall deliver to the Secretary,
the following: (i) the name of the person(s) to be nominated, (ii) the number
and class of all shares of each class of stock of the corporation owned of
record and beneficially by each nominee, as reported to the shareholder by the
nominee(s), (iii) the information regarding each nominee required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
corporation), (iv) each nominee's signed consent to serve as a director, (v) the
proposing shareholder's name and address and (vi) the number and class of all
shares of each class of stock of the corporation owned of record and
beneficially (pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
shareholder. In addition, the proposing shareholder shall furnish the
corporation with all other information the corporation may
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reasonably request to determine whether the nominee would be considered "independent" under the rules and standards applicable to the corporation.
Section 10. Procedure for Action by Written Consent; Inspectors and Effectiveness.
(a) In order that the corporation may determine the shareholders entitled to consent to corporate action in writing without a meeting, the Board shall fix a record date, which record date shall not precede the date upon which it adopts the resolution fixing the record date. Any shareholder entitled to vote on an action required or permitted to be taken at a meeting of shareholders who is seeking to have the shareholders authorize or take any such action by written consent shall, by written notice to the Secretary, request the Board to fix a record date. The
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Board shall promptly, but in no event more than 60 days after the date on which the request is received, adopt a resolution fixing the record date. If no record date has been fixed within the time set forth above, the record date, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Secretary. If no record date has been fixed by the Board and prior action by the Board is required by applicable law, the record date shall be at the close of business on the date on which the Board adopts the resolution taking such prior action. No action by the shareholders with respect to the election of directors (including the filling of any vacancy) may be taken in writing without a meeting.
(b) The Board shall fix a date no more than 60 days after the record date on which written consents are to be tabulated (the "Tabulation Date").
(c) Every written consent shall bear the date of signature of each shareholder or person acting by proxy who signs the consent, and in the case of a consent executed by a person acting by proxy, a copy of the proxy shall be attached. No action by written consent shall be effective unless by the Tabulation Date (or in the event the Board fails to set a Tabulation Date, by the date required under applicable law) a written consent or consents (after taking into account any consent revocations) signed by a sufficient number of shareholders to take such action are delivered to the corporation.
(d) Promptly following the receipt of any consents with respect to a proposed corporate action, after taking into account any consent revocations, the corporation shall promptly engage independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations, counting and tabulating the valid consents, making a written report certifying the results thereof promptly following the Tabulation Date, and performing other proper incident duties. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board or any shareholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
Article II
DIRECTORS
Section 1. Directors and Term of Office.
The business and affairs of the corporation shall be managed by its board of directors consisting of not less than one nor more than 15 members, who shall hold office until the next annual meeting and until their successors shall have been elected and qualified, unless sooner deceased, resigned or removed. The number of directors shall be determined by a resolution adopted by a majority of the directors then in office. If at any time, except at the annual meeting, the number of directors shall be increased, the additional director or directors may be elected by the board, to hold office until the next annual meeting and until their successors shall have been elected and qualified, unless sooner deceased, resigned or removed.
Section 2. Election of Directors.
Directors shall be elected at each annual meeting of shareholders. The term of office of each director shall be from the time of election and qualification until the annual meeting of shareholders next succeeding such election and until a successor shall have been elected and shall have qualified, or until the earlier death, resignation or removal of the director.
Section 3. Vacancies.
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Section 4. Compensation.
Directors may receive from the corporation reasonable compensation for their services, including a fixed sum and expenses for attendance at meetings of the Board and at meetings of committees of the Board and/or a fixed annual fee or other type or manner of compensation, as shall be determined from time to time by the Board. A director serving as a Chairman or Vice Chairman of the Board, or of any Committee of the Board, may receive additional compensation for service in such capacity, as shall be determined from time to time by the Board.
Section 5. Regular Meetings of Directors.
The Board shall by resolution schedule regular Board meetings.
Section 6. Notice of Regular Meetings of Directors.
No notice shall be required to be given of any regular meeting of the Board except as the Board may require.
Section 7. Special Meetings of Directors.
Special meetings of the Board may be called at any time by the Chairman or any two directors and may be held at any time and place within or without the State of New Jersey.
Section 8. Notice of Special Meetings of Directors.
Notice of each special meeting of the Board, stating the day, time, place, and purpose or purposes thereof, shall be given by the Chairman of the Board, the Secretary or any two directors to each director not less than two days by mail or one day by facsimile, telephone (including voice mail) or, electronic mail, prior to the date specified for the meeting. Special meetings of the Board may also be held at any place and time, without notice, if all the directors are either present at the meeting or sign a waiver of notice, either before or after the meeting.
Section 9. Quorum.
At any meeting of the Board a quorum shall consist of a majority of the total number of directors and, except as otherwise provided by law or these by-laws, a majority of directors at a meeting at which a quorum is present shall decide any question that may come before the meeting. A majority of the directors present at any regular or special meeting, although less than a quorum, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At the adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting.
Section 10. Action of Directors or Committees Without a Meeting or When Directors are in Separate Places.
Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board or any Board committee may be taken without a meeting if, prior or subsequent to the action, all directors or members of the committee, as the case may be, consent thereto in writing and the written consents are filed with the minutes of the proceedings of the Board or committee. Any or all directors may participate in a meeting of the Board or committee by means of a conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other.
Section 11. Common Directorship and Director's Personal Interest.
No contract or other transaction between the corporation and one or more of its directors, or between the corporation and any other corporation, firm or association of any type or kind in which one or more of this corporation's directors are directors or are otherwise interested, shall be void or voidable solely by reason of such common directorship or interest, or solely because such director or directors are present at the meeting of the Board or a committee thereof which authorizes or approves the contract or transaction, or solely because the votes of such director or directors are counted for such purpose, if, any one of the following is true: (1) the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; or (2) the fact
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of the common directorship or interest is disclosed or known to the Board or
committee and the Board or committee authorizes, approves or ratifies the
contract or transaction by unanimous written consent, providing that at least
one director so consenting is disinterested, or by a majority of the directors
present at the meeting and also by a majority of the disinterested directors,
even though the number of the disinterested directors is less than a quorum; or
(3) the fact of the common directorship or interest is disclosed or known to the
shareholders and they authorize, approve, or ratify the contract or transaction.
Common or interested directors may be counted in determining the presence of a
quorum at a Board or committee meeting at which a contract or transaction
described in this by-law is authorized, approved or ratified.
Article III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 1. Establishment of Executive Committee and Other Committees.
There may be an Executive Committee, consisting of three or more directors, one of whom shall act as the Chair of the Executive Committee, appointed by the Board and such other committees, consisting of one or more directors, as from time to time established by a majority of the total number of directors the corporation would have if there were no vacancies (the "Entire Board"). All committee members shall be appointed for the term of one year but shall hold office until their successors are elected and have qualified. Any member of any committee, however, may be removed by the affirmative vote of a majority of the Entire Board. The Board may determine whether any committee shall be composed in part or entirely of directors who are independent of the corporation. The Board shall make all determinations of whether a director is independent.
Section 2. Vacancies. In the event of a vacancy occurring in any committee, the Board, by resolution adopted by a majority of the Entire Board, may fill the vacancy for the unexpired term. |
Section 3. Powers of Committees.
Subject to the limitations and regulations prescribed by law, including the New Jersey Business Corporation Act, or these by-laws or by the Board, the committees established by the Board shall have and may exercise all the authority of the Board, subject to their respective charters, except that no committee may make, alter, or repeal any by-laws, elect any director, remove any director or officer, submit to shareholders any action that requires shareholder approval, or amend or repeal any resolution of the Board establishing such committee or any other resolution of the Board which by its terms may be amended or repealed only by the Board.
Section 4. Regular Meetings.
The members of the Committee may by resolution schedule regular committee meetings.
Section 5. Notice of Regular Meetings.
No notice shall be required to be given of any regular meeting of any committee.
Section 6. Special Meetings.
Special meetings of the Executive Committee may be called at any time by the Chairman, the Chair of the committee, or by any two members of the committee and may be held at any place within or without the State of New Jersey and at any time. Special meetings of any other committee may be called as the committee may determine.
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Section 7. Notice of Special Meetings.
Notice of each special meeting of any committee, stating the meeting time, place, and purpose or purposes, shall be given by the Chair of the committee or by any two members of the committee, or, with respect to the Executive Committee, the Chairman or the Secretary or by any two members of the Executive Committee, to each member of the committee not less than four days by mail or two days by facsimile or telephone (including voice mail) or by electronic mail, prior to the meeting date. Special meetings of any committee may also be held at any place and time, without notice, by unanimous consent of all the committee members or if all the committee members are present at the meeting.
Section 8. Quorum.
At any committee meeting a majority of the committee members shall constitute a quorum and, except where otherwise provided by law or these by-laws, a majority of committee members at a committee meeting at which a quorum is present shall decide any question that may come before the committee meeting. A majority of the committee members present at any regular or special committee meeting, although less than a quorum, may adjourn the committee meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At such adjourned committee meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original committee meeting.
Section 9. Committee Charters.
Each committee may and, if directed by the Board, shall establish a charter reflecting its function, charge, and responsibilities. The charter shall be prepared by the committee and shall be subject to approval by the Board.
Section 10. Committee Reports.
Each committee shall report its actions taken at committee meetings to the Board at the next meeting of the Board following the committee meeting unless the committee meeting occurred fewer than two days before the Board Meeting, in which case, the committee report may be made at the second regular Board after the committee meeting.
Article IV
OFFICERS
Section 1. Officers Enumerated.
The officers of the corporation shall be a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and may include one or more Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers, all of whom shall be elected by the Board. One person may hold more than one office. The Board may designate the officers who shall be the chief operating officer, the chief financial officer, and the chief legal officer of the corporation.
Section 2. Other Officers.
The Board may by resolution elect other officers, managers, agents, employees, or committees it deems necessary, who shall hold their offices for the terms and shall have the powers and perform the duties as shall be prescribed by the Board or the by-laws. One person may hold more than one office.
Section 3. Term of Office.
All officers elected by the Board shall be elected for one year terms, but shall hold office until their successors are elected and have qualified. Any officer elected by the Board may be removed at any time by the affirmative vote of majority of the Entire Board.
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Section 4. Vacancies.
If any officer vacancy shall occur, the Board may fill it for the unexpired term.
Section 5. Chairman and Vice Chairman of the Board.
The Board of Directors shall appoint a Chairman and, if desired a Vice Chairman of the Board. The Chairman or, in his or her absence, the Vice Chairman shall preside at all meetings of the Board and at all meetings of the shareholders and shall perform other duties as directed by the Board. A director's service as Chairman or Vice Chairman of the Board shall not by itself constitute a director as an officer or employee of the Corporation except as, and solely to the extent, required by applicable law.
Section 6. The Chief Executive Officer.
The Chief Executive Officer shall have the general powers and duties of supervision and managements of the property and affairs of the corporation which usually pertain to the office, and shall perform all other duties as directed by the Board. In the absence of the Chairman and Vice Chairman, the Chief Executive Officer shall preside at shareholder meetings and, if a director, Board meetings. In the absence or disability of the Chairman and Vice Chairman, the Chief Executive Officer, if a director, shall perform the duties and exercise the power of the Chairman.
Section 7. The President.
The President shall have the powers and perform the duties which usually pertain to the office, and shall perform all other duties as directed by the Board or the Chief Executive Officer. In the absence of the Chairman and Vice Chairman and the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer and, if a director, the Chairman.
Section 8. The Vice-Presidents.
Each Vice-President shall have the powers and perform the duties which usually pertain to the office or as the Board, the Chairman, Chief Executive Officer or the President may direct. In the absence or disability of the Chairman and Vice Chairman, Chief Executive Officer and President, the Vice-President designated by the Board shall perform the duties and exercise the powers of the Chief Executive Officer, President and, if a director, the Chairman.
Section 9. The Secretary.
The Secretary shall issue notices of all meetings of shareholders and of the directors and of the Executive Committee where notices of such meetings are required by law or these by-laws. The Secretary shall keep the minutes of meetings of shareholders and of the Board and of the Executive Committee and shall sign instruments requiring the Secretary's signature, and shall perform other duties usually pertaining to the office and as the Board or the Chairman or Vice Chairman may direct.
Section 10. The Treasurer.
The Treasurer shall have the care and custody of all the moneys and securities of the corporation. The Treasurer shall cause to be entered in books of the corporation, full and accurate accounts of all moneys received and paid, shall sign instruments requiring the signature of the Treasurer, and shall perform other duties usually pertaining to the office and as the Board or the Chairman or Vice Chairman shall direct.
Section 11. The Controller.
The Controller shall have the custody and operation of the accounting books and records of the corporation and shall establish and maintain adequate systems of internal control, disclosure control, and audit to safeguard the assets of the corporation and shall perform other duties usually pertaining to the office and as the Board and the Chairman or Vice Chairman may direct.
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Section 12. Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller.
The duties of any Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller shall be those usually pertaining to their respective offices and as may be properly required of them by the Board or by the officers to whom they report.
Article V
CAPITAL STOCK
Section 1. Stock Certificates.
Certificates of stock shall be issued only in numerical order with or without an alphabetic prefix or suffix. Certificates shall be signed by or bear the facsimile signatures of the Chairman, the President, or one of the Vice-Presidents and the Secretary, the Treasurer, Assistant Secretary or Assistant Treasurer. Certificates shall also be signed by or bear the facsimile signature of one of the transfer agents and of one of the registrars of the corporation as permitted or required by law. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before the certificate is issued, it may be issued by the corporation with the same effect as if the signatory had not ceased to be such at the date of its issue.
Section 2. Transfer of Shares.
Transfers of shares, except where otherwise provided by law or these by-laws, shall be made on the books of the corporation pursuant to authority granted by power of attorney duly executed and filed by the holder thereof with one of the transfer agents, upon surrender of the certificate or certificates of the shares and in accordance with the provisions of the Uniform Commercial Code as adopted in New Jersey and as amended from time to time.
Section 3. Transfer Agents and Registrars.
The Board may at any time appoint one or more transfer agents and/or registrars for the transfer and/or registration of shares, and may from time to time by resolution fix and determine the manner in which shares of the corporation shall be transferred and/or registered.
Section 4. Lost, Stolen or Destroyed Certificates.
Where a certificate for shares has been lost, apparently destroyed, or wrongfully taken and its owner fails to so notify the corporation or the transfer agent within a reasonable time after having notice of the fact and the transfer agent or the corporation registers a transfer of the shares before receiving notification, the owner shall be precluded from asserting against the corporation any claim for registering the transfer of the shares or any claim to a new certificate.
Subject to the foregoing, where the owner of shares claims that the certificate representing the shares has been lost, destroyed, or wrongfully taken, the corporation shall issue a new certificate in place of the original certificate if the registered owner thereof, or the owner's legal representative, (a) requests the issue of a new certificate before the corporation has notice that the certificate has been acquired by a bona fide purchaser; (b) makes proof, in the form as the corporation prescribes, of ownership and that the certificate has been lost, destroyed or wrongfully taken; (c) files either (i) an assumption of liability by a surety approved by the corporation under a blanket lost instrument indemnity bond, substantially in the form approved by the corporation, or (ii) an indemnity bond in the form and with the surety and in the amount (open or specified) as may be approved by the corporation, indemnifying the corporation and its transfer agents and registrars against all loss, cost and damage which may arise from issuance of a new certificate in place of the original certificate; and (d) satisfies any other reasonable requirements imposed by the corporation. Approvals or any requirements pursuant to this section by the corporation may be granted or imposed by the Chairman, the President, any Vice-President, the Secretary, any Assistant Secretary, or any other officer as authorized by the Board.
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Article VI
DIVIDENDS AND FINANCES
Section 1. Dividends.
Dividends may be declared by the Board and paid by the corporation at the times determined by the Board, pursuant to the provisions of the New Jersey Business Corporation Act. Before payment of any dividend or making of any distribution of net profits there may be set aside out of the net profits of the corporation the sums determined by the Board from time to time, in its absolute discretion, to be proper and for the purposes determined by the Board to be conducive to the interests of the corporation.
Section 2. Finances.
All funds of the corporation not otherwise employed shall be deposited in its name in, and shall be subject to application or withdrawal from, banks, trust companies or other depositories to be selected in accordance with and in the manner and under the conditions authorized by, or pursuant to the authority of, resolutions of the Board. All checks, notes, drafts and other negotiable instruments of the corporation shall be signed by the officer, officers, agent, agents, employee or employees authorized by, or pursuant to the authority of, resolutions of the Board. No officers, agents, or employees, either singly or together, shall have power to make any check, note, draft, or other negotiable instrument in the name of the corporation or to bind the corporation thereby, except as may be authorized in accordance with the provisions of this section.
Article VII
GENERAL
Section 1. Form of Seal.
The seal of the corporation shall be in such form as shall be approved from time to time by the Board. The seal may be an impression, a drawing or a facsimile thereof as determined from time to time by the Board. The corporation may use the seal by causing it or a facsimile to be affixed, impressed or reproduced in any manner.
Section 2. Indemnification of Directors, Officers and Employees.
(a) The corporation shall indemnify and hold harmless against all
liabilities any person who is or was a director or officer, including the
director's or officer's estate (an "Indemnitee"), who is or was a party to or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise in respect of any past,
present or future matter, including any action suit or proceeding by or in the
right of the corporation (an "Action"), by reason of the fact that the
Indemnitee is or was serving as a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, trustee, employee or agent of any other enterprise; provided,
however, that the corporation shall not indemnify an Indemnitee if a judgment or
other final adjudication adverse to the Indemnitee establishes that the
Indemnitee's acts or omissions (i) were acts or omissions that the Indemnitee
knew or believed to be contrary to the best interests of the corporation or
shareholders in connection with a matter to which he had a material conflict of
interest, (ii) were not in good faith or involved a knowing violation of law, or
(iii) resulted in receipt by such person of an improper personal benefit.
Subject to the receipt by the corporation of an undertaking by the Indemnitee to repay Expenses if there shall be a judgment or other final adjudication that the Indemnitee is not entitled to receive reimbursement of Expenses from the corporation, the corporation shall pay or reimburse within 20 days following the later of (A) the receipt of such undertaking, and (B) receipt of a demand from the Indemnitee for payment or reimbursement of Expenses, in advance of final disposition or otherwise, to the full extent authorized or permitted by law, Expenses as incurred by the Indemnitee in defending any actual or threatened Action by reason of the fact that the Indemnitee is or was serving as a director, officer, employee or agent of the corporation or is or was serving at the request of the
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corporation as a director, officer, trustee, employee or agent of any other enterprise; provided, however, the corporation shall not be required hereunder to further pay or reimburse Expenses and, if requested by the corporation, shall be entitled to repayment of Expenses from the Indemnitee following any plea formally entered by or formal written admission by the Indemnitee in the Action for which the Indemnitee has sought payment or reimbursement of Expenses or indemnification that the Indemnitee has committed such acts or omissions establishing that the Indemnitee is not entitled to indemnification pursuant to this Section 2(a).
Section 3. Non-Exclusivity of Indemnification Rights.
Article VIII
AMENDMENTS
Except as may otherwise be required by law or by the Certificate of Incorporation, these by-laws may be amended, altered, or repealed, in whole or in part, by the affirmative vote of a majority of the directors then in office.
Any proposal to amend or repeal these by-laws or to adopt new by-laws shall be stated in the notice of the meeting of the Board or of the shareholders, as the case may be, unless, in the case of amendment by the Board, all of the directors then in office are present at such meeting.
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Annex D
[Curtis Securities LLC Letterhead]
August 16, 2005
Board of Directors
Two River Community Bank
1250 Highway 35
Middletown, NJ 07748-2013
Members of the Board:
Two River Community Bank (the "Company") and The Town Bank (the "Target") are proposing to enter into an Agreement and Plan of Acquisition (the "Agreement") with a newly-formed holding company ("Parent") that will provide, among other things, for Parent to acquire (the "Acquisition") all of the capital stock of each of the Company and Target. Under the terms set forth in a draft of the Agreement dated August 16, 2005, at the effective time of the Acquisition, (i) each outstanding share of the Company's common stock, par value $2.00 per share ("Company Common Stock"), shall be converted into one share (the "Two River Exchange Ratio") of the common stock of Parent ("Parent Common Stock") and (ii) each outstanding share of Target common stock, par value $5.00 per share, shall be converted into the right to receive such number of shares of Parent Common Stock as is equal to the Exchange Ratio as defined in the Agreement, with cash in lieu of fractional shares of Parent Common stock. The Exchange Ratio will vary depending upon the market value of the Company Common Stock during a defined period prior to consummation of the Acquisition, with the Exchange Ratio fixed within certain ranges of value of the Company Common Stock and variable with certain other ranges of value of the Company Stock. The terms and conditions of the Acquisition are set out more fully in the Agreement.
You have asked us, as of the date hereof, whether, in our opinion, the Two River Exchange Ratio and the Exchange Ratio are fair, from a financial point of view, to the "Owners of Company Common Stock". For purposes of this letter, the "Owners of Company Common Stock" shall be defined as all holders of Company Common Stock other than Target, any affiliates of Target, or any holders of Dissenting Shares.
Curtis Securities LLC and affiliates, as part of its investment banking business, is engaged in the valuation of securities and companies for a variety of purposes and in connection with various types of transactions including mergers and acquisitions.
For purposes of this opinion we have, among other things:
(i) reviewed the historical financial performance, recent financial position and general prospects of the Company and Target using publicly available information;
(ii) reviewed certain internal financial statements and other financial and operating data concerning the Company and Target prepared by the Company's and Target's management teams;
(iii) reviewed certain financial forecasts and other forward looking financial information prepared by the Company's and Target's management teams;
(iv) held discussions with the senior managements of the Company and Target concerning the business, past and current operations, financial condition and future prospects of Parent, the Company and Target;
(v) reviewed the financial terms and conditions set forth in the Agreement;
Annex D-1
Board of Directors
Two River Community Bank
August 16, 2005
(vi) compared the financial and stock market performance of the Company and Target with that of certain other publicly traded companies we deemed similar to the Company and Target;
(vii) compared the financial terms of the Acquisition with the financial terms, to the extent publicly available, of other transactions that we deemed relevant;
(viii)reviewed the relative contribution of assets, liabilities, equity and earnings of the Company and Target to Parent on a proforma basis and the relative pro forma ownership of the shareholders of Company and Target in Parent;
(ix) prepared discounted dividend analysis of the Company and Target using data and projections supplied by Company and Target management;
(x) participated in discussions and negotiations among representatives of the Company and Target and their financial and legal advisors; and
(xi) made such inquiries and took into account such other matters as we deemed relevant, including our assessment of general economic, market and monetary conditions.
In our review and analysis, and in arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information provided to us (including information furnished to us orally or |
otherwise discussed with us by the Company's and Target's management as well as information provided by recognized independent sources) or publicly available and have neither attempted to verify, nor assumed responsibility for verifying, any of such information. We have relied upon the assurances of the Company's and Target's management that they are not aware of any facts that would make such information inaccurate or misleading. Furthermore, we did not obtain or make, or assume any responsibility for obtaining or making, any independent evaluation or appraisal of the properties, assets (including loans) or liabilities (contingent or otherwise) of the Company or Target, nor were we furnished with any such evaluation or appraisal. We did not make any independent evaluation of the adequacy of the allowance for loan losses of Company or Target nor have we reviewed any individual credit files. We have assumed, with your consent, that the Company's and Target's allowances for loan losses are adequate to cover such losses.
With respect to the status of the Company's and Target's financial forecasts and projections (and the assumptions and bases therefore) that we have reviewed, upon the advice of the Company's and Target's management, we have assumed that such forecasts and projections have been reasonably prepared in good faith on the basis of reasonable assumptions and reflect the best currently available estimates and judgments as to the future financial condition and performance of Parent, the Company and Target, and we have further assumed that such projections and forecasts will be realized in the amounts and in the time periods currently estimated. We have also relied, without independent verification, upon the estimates and judgments of the management of the Company and Target as to the potential cost savings and other potential synergies (including the amount, timing and achievability thereof) anticipated to result from the Acquisition. We have assumed that the Acquisition will be consummated upon the terms set forth in the Agreement without material alteration thereof and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Acquisition, no delay, limitation, restriction or condition will be imposed that would have a material adverse effect on Parent, the Company, Target or the contemplated benefits of the Acquisition. We have assumed that all of the representations and warranties contained in the Agreement are true and correct and that Company and Target will each perform the covenants required by the Agreement. In addition, we have assumed that the historical financial statements of the Company and Target reviewed by us have been prepared and fairly presented in accordance with U.S. generally accepted accounting principles consistently applied. We have also assumed, with your consent, that the Acquisition will be treated as a tax-free reorganization for federal income tax purposes.
This opinion is necessarily based upon market, economic and other conditions in effect on, and information made available to us as of, the date hereof. We have also assumed for purposes of this opinion that there has been no material
Annex D-2
Board of Directors
Two River Community Bank
August 16, 2005
change in the financial condition or results of operation of the Company or Target from those reflected in their respective financial statements at and for the period ended June 30, 2005. It should be understood that subsequent developments may affect the conclusion expressed in this opinion and that we disclaim any undertaking or obligation to advise any person of any change in any matter affecting this opinion which may come or be brought to our attention after the date of this opinion. Our opinion is limited to the fairness, from a financial point of view and as to the date hereof, to the Owners of Company Common Stock of the Two River Exchange Ratio. We do not express any opinion as to (i) the value of any employee agreement or other arrangement entered into in connection with the Acquisition or (ii) any tax, accounting, legal or other consequences that might result from the Acquisition. Our opinion does not address the relative merits of the Acquisition and the other business strategies that the Company's Board of Directors has considered or may be considering, nor does it address the decision of the Company's Board of Directors to proceed with the Acquisition. We are expressing no opinion as to what the value of the Parent Common Stock will be when issued to the Company's shareholders pursuant to the Agreement or the prices at which Parent's, the Company's or Target's common stock may trade at any time.
We are acting as financial advisor to the Company in connection with the Acquisition and will receive a fee contingent upon the consummation of the Acquisition. We understand and consent that this opinion will be included in proxy materials mailed to shareholders of the Company. Any other use or publication of all or part of this opinion may be made only with our advance written consent. In addition, the Company has agreed to indemnify us for certain liabilities that may arise out of our engagement.
Our opinion expressed herein is provided for the information of the Board of Directors of the Company in connection with its evaluation of the Acquisition. Our opinion is not intended to be and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote, or take any other action, with respect to the Acquisition. This opinion may not be summarized, described or referred to or furnished to any party except with our expressed, prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion that, as of the date hereof, the Two River Exchange Ratio and the Exchange Ratio are fair to the Owners of Company Common Stock from a financial point of view.
Sincerely,
/s/ CURTIS SECURITIES, LLC CURTIS SECURITIES, LLC |
Annex D-3
Annex E
[Janney Montgomery Scott LLC Letterhead]
The Board of Directors
The Town Bank
August 16, 2005
The Board of Directors
The Town Bank
520 South Avenue
Westfield, NJ 07090
Members of the Board:
The Town Bank ("Town") and Two River Community Bank ("Two River") have entered into an Agreement and Plan of Acquisition ("Acquisition Agreement") dated as of August 16, 2005 among Town, Two River and NewCo Bancorp, a newly organized holding company ("NewCo"), providing for the simultaneous acquisition of all the outstanding shares of capital stock of both Town and Two River by NewCo. The acquisition of Town's shares in the transaction is referred to herein as the "Acquisition". The proposed consideration to be received by Town's shareholders for the acquisition of their shares ("Acquisition Consideration") is set forth in the Acquisition Agreement. You have asked our opinion, as of the date hereof, whether the Acquisition Consideration pursuant to the Acquisition Agreement is fair, from a financial point of view, to the shareholders of Town. Pursuant to the Acquisition Agreement, each share of Town will be exchanged for 1.25 shares of NewCo common stock ("Common Stock"), subject to adjustments up or down based on movements in the market price of Two River's common stock prior to the closing as set forth and defined in Section 2.1 (b) (i) of the Acquisition Agreement ("Exchange Ratio").
Janney Montgomery Scott LLC, as part of its investment banking business, is engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions. We have acted as financial advisor to Town in connection with the Acquisition and will receive a fee for our services, a portion of which is contingent upon the consummation of the Acquisition. Town has agreed to indemnify us for certain liabilities arising out of rendering this opinion. In addition, in the ordinary course of our business as a broker-dealer, we may, from time to time, have a long or short position in, and buy or sell, debt or equity securities of Town or Two River for our own account or for the accounts of our customers.
In rendering our opinion, we have, among other things:
(a) reviewed the historical financial performances, current financial positions and general prospects of Town and Two River;
(b) considered the proposed financial terms of the Acquisition and have examined the projected consequences of the Acquisition with respect to, among other things, market value, earnings and tangible book value per share of NewCo Common Stock;
(c) to the extent deemed relevant, analyzed selected public information of certain other banks and bank
Annex E-1
The Board of Directors The Town Bank
holding companies and compared Town and Two River from a financial point of view to these other banks and bank holding companies;
(d) reviewed the historical market price ranges and trading activity performance of the common stock of Town and Two River;
(e) reviewed publicly - available information such as annual reports, quarterly reports and SEC filings;
(f) compared the terms of the Acquisition with the terms of certain other comparable merger and acquisition transactions to the extent information concerning such acquisitions was publicly available;
(g) discussed with certain members of senior management of Town and Two River the strategic aspects of the Acquisition, including estimated cost savings from the Acquisition;
(h) reviewed the Acquisition Agreement; and
(i) performed such other analyses and examinations as we deemed necessary.
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 Town or Two River 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 Town and Two River 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 any 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 Town or Two River or any of their subsidiaries, or the collectibility of any such assets, nor have we been furnished with any such evaluations or appraisals. We did not make any independent evaluation of the adequacy of the allowance for loan losses of Town or Two River or any of their subsidiaries nor have we reviewed any individual credit files and have assumed that their respective allowance for loan losses are adequate to cover such losses. With respect to the financial projections, Town's and Two River's management have confirmed that they reflect the best currently available estimates and judgments of such management of the future financial performance of Town and Two River respectively, and we have assumed that such performance will 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 change in Town's or Two River'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 Town and Two River will remain as going concerns for all periods relevant to our analysis, that all of the representations and warranties contained in the Acquisition Agreement and all related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent to the Acquisition Agreement are not waived.
Our conclusion is rendered on the basis of market, economic and other conditions prevailing as of the date
Annex E-2
The Board of Directors The Town Bank
hereof and on the conditions and prospects, financial and otherwise, of Town and Two River as they exist and are known to us on the date hereof. Furthermore, this opinion does not represent our opinion as to what the value of NewCo necessarily will be when the NewCo Common Stock is issued to Town shareholders upon consummation of the Acquisition. In addition, we express no recommendation as to how the shareholders of Town should vote at the shareholders meeting to be held in connection with the Acquisition.
On the basis of and subject to the foregoing, we are of the opinion that as of the date hereof, the Acquisition Consideration pursuant to the Acquisition Agreement is fair, from a financial point of view, to the shareholders of Town.
Very truly yours,
/s/ JANNEY MONTGOMERY SCOTT LLC JANNEY MONTGOMERY SCOTT LLC |
Annex E-3
Annex F
SECTIONS 17:9A-360 THROUGH 17:9A-369 OF THE
NEW JERSEY BANKING ACT OF 1948, AS AMENDED
"RIGHTS OF DISSENTING BANK STOCKHOLDERS"
17:9A-360. Notice of dissent; "dissenting stockholder" defined
(1) Any stockholder of a participating bank electing to dissent from the plan of acquisition may do so by filing with the participating bank of which he is a stockholder, a written notice of such dissent, stating that he intends to demand payment for his shares if the plan of acquisition becomes effective. Such dissent shall be filed before the taking of the vote of the stockholders on the plan of acquisition pursuant to section 5 [N.J.S.A. ss. 17:9A-359].
(2) Within 10 days after the date on which the plan of acquisition is
approved by stockholders of a participating bank as provided in section 5 hereof
[N.J.S.A. ss. 17:9A-359], such bank shall give notice of such approval by
certified mail to each stockholder who has filed written notice of dissent
pursuant to subsection (1) of this section [N.J.S.A. ss. 17:9A-360(1)], except
any who voted for or consented in writing to such plan of acquisition.
(3) Within 20 days after the mailing of such notice, any stockholder to whom the participating bank was required to give such notice, may make written demand on the participating bank for the payment of the fair value of his shares. A stockholder who makes a demand pursuant to this subsection (3) is hereafter in this act referred to as a "dissenting stockholder." Upon making such demand, the dissenting stockholder shall cease to have any rights of a stockholder except the right to be paid the fair value of his shares and any other rights of a dissenting stockholder under this act.
(4) Not later than 20 days after demanding payment for his shares pursuant to this section, the stockholder shall submit the certificate or certificates representing such shares to the participating bank of which he is a stockholder for notation thereon that such demand has been made, whereupon such certificate or certificates shall be returned to him. If shares represented by a certificate on which such notation has been made shall be transferred, each new certificate issued therefor shall bear similar notation, together with the name of the original dissenting holder of such shares, and a transferee of such shares shall acquire by such transfer no rights other than those which the original dissenting stockholder had after making a demand for payment of the fair value thereof.
(5) A stockholder may not dissent as to less than all of the shares owned beneficially by him. A nominee or fiduciary may not dissent on behalf of any beneficial owner as to less than all of the shares of such owner.
17:9A-361. Valuation date of fair value
For the purposes of this act, fair value of the shares of a participating bank shall be determined as of the day before the day on which the vote of stockholders of such bank was taken as provided in section 5 [N.J.S.A. ss. 17:9A-359]. In determining fair value, there shall be excluded any appreciation or depreciation in value resulting from the consummation of the plan of acquisition.
17:9A-362. Termination of right of stockholder to be paid the fair value of his shares
(1) The right of a dissenting stockholder to be paid the fair value of his shares shall cease if:
(a) He has failed to present his certificates for notation as provided by subsection (4) of section 6 [N.J.S.A. ss. 17:9A-360(4)], unless a court having jurisdiction, for good and sufficient cause shown, shall otherwise direct;
Annex F-1
(b) His demand for payment is withdrawn with the written consent of the participating bank;
(c) The fair value of the shares is not agreed upon as provided in this act, and no action for the determination of fair value by the Superior Court is commenced within the time provided in this act;
(d) The Superior Court determines that the stockholder is not entitled to payment for his shares;
(e) The plan of acquisition of shares is abandoned, rescinded, or otherwise terminated in respect to the participating bank of which he is a stockholder; or
(f) A court having jurisdiction permanently enjoins or sets aside the acquisition of shares.
(2) In any case provided for in subsection (1) of this section the rights of the dissenting stockholder as a stockholder shall be reinstated as of the date of the making of a demand for payment pursuant to section 6 [N.J.S.A. ss. 17:9A-360] without prejudice to any corporate action which has taken place during the interim period. In such event, he shall be entitled to any intervening pre-emptive rights and the right to payment of any intervening dividend or other distribution, or if any such rights have expired or any such dividend or distribution other than in cash has been completed, in lieu thereof, at the election of the participating bank, the fair value thereof in cash as of the time of such expiration or completion.
17:9A-363. Rights of dissenting stockholder
(1) A dissenting stockholder may not withdraw his demand for payment of the fair value of his shares without the written consent of the participating bank.
(2) The enforcement by a dissenting stockholder of his right to receive payment for his shares shall exclude the enforcement by such dissenting stockholder of any other right to which he might otherwise be entitled by virtue of share ownership, except as provided in subsection (2) of section 8 [N.J.S.A. ss. 17:9A-362(2)] and except that this subsection shall not exclude the right of such dissenting stockholder to bring or maintain an appropriate action to obtain relief on the ground that consummation of the plan of acquisition will be or is ultra vires, unlawful or fraudulent as to such dissenting stockholder.
17:9A-364. Determination of fair value by agreement
(1) Within 10 days after the expiration of the period within which stockholders may make written demand to be paid the fair value of their shares, or within 10 days after the plan of acquisition becomes effective, whichever is later, the participating bank shall mail to each dissenting stockholder the balance sheet and the surplus statement of the participating bank as of the latest available date, which shall not be earlier than 12 months prior to the making of the offer of payment hereinafter referred to in this subsection, and a profit and loss statement or statements for not less than a 12-month period ended on the date of such balance sheet or, if the participating bank was not in existence for such 12-month period, for the portion thereof during which it was in existence. The participating bank may accompany such mailing with a written offer to pay each dissenting stockholder for his shares at a specified price deemed by such bank to be the fair value thereof. Such offer shall be made at the same price per share to all dissenting stockholders of the same class, or, if divided into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period limited by subsection (1) of this section, the fair value of the shares is agreed upon between any dissenting stockholder and the participating bank, payment therefor shall be made upon surrender of the certificate or certificates representing such shares.
Annex F-2
17:9A-365. Procedure on failure to agree upon fair value; commencement of action to determine fair value
(1) If the fair value of the shares in not agreed upon within the 30-day period limited by subsection (2) of section 10 [N.J.S.A. ss. 17:9A-364(2)], the dissenting stockholder may serve upon the participating bank a written demand that it commence an action in the Superior Court for the determination of such fair value. Such demand shall be served not later than 30 days after the expiration of the 30-day period so limited and such action shall be commenced by the participating bank not later than 30 days after receipt by such bank of such demand, but nothing herein shall prevent such bank from commencing such action at any earlier time.
(2) If a participating bank fails to commence the action as provided in subsection (1) of this section [N.J.S.A. ss. 17:9A-365(1)]a dissenting stockholder may do so in the name of such bank, not later than 60 days after the expiration of the time limited by subsection (1) [N.J.S.A. ss. 17:9A-365(1)], of this section in which such bank may commence such an action.
17:9A-366. Action to determine fair value; jurisdiction of court; appointment of appraiser
In any action to determine the fair value of shares pursuant to this act:
(a) The Superior Court shall have jurisdiction and may proceed in the action in a summary manner or otherwise;
(b) All dissenting stockholders, wherever residing, except those who have agreed with the participating bank upon the price to be paid for their shares, shall be made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive evidence and report to the court on the question of fair value, who shall have such power and authority as shall be specified in the order of his appointment; and
(d) The court shall render judgment against the participating bank and in favor of each stockholder who is a party to the action for the amount of the fair value of his shares.
17:9A-367. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be payable upon surrender to the participating bank of the certificate or certificates representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the day of the meeting of stockholders of
the participating bank at which the plan of acquisition was approved to the day
of payment. If the court finds that the refusal of any dissenting stockholder to
accept any offer of payment made by the participating bank under section 10
[N.J.S.A. ss. 17:9A-364] was arbitrary, vexatious or otherwise not in good
faith, no interest shall be allowed to him.
17:9A-368. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section 11
[N.J.S.A. ss. 17:9A-365(11)] shall be determined by the court and shall be
apportioned and assessed as the court may find equitable upon the parties or any
of them. Such expenses shall include reasonable compensation for and reasonable
expenses of the appraiser, if any, but shall exclude the fees and expenses of
counsel for and experts employed by any party; but if the court finds that the
offer of payment made by the participating bank under section 10 [N.J.S.A. ss.
17:9A-364] was not made in good faith, or if no such offer was made, the court
in its discretion may award to any dissenting stockholder who is a party to the
action reasonable fees and expenses of his counsel and of any experts employed
by the dissenting stockholder.
Annex F-3
17:9A-369. Disposition of shares
Upon payment for shares pursuant to subsection (2) of section 10 [N.J.S.A. ss. 17:9A- 364(2)] , or upon payment of a judgment pursuant to subsection (1) of section 13 [N.J.S.A. ss. 17:9A-367(1)], the participating bank making such payment shall acquire all the right, title and interest in and to such shares, notwithstanding any other provision of law. Shares so acquired by the participating bank shall be disposed of as a stock dividend as provided by section 212 of the Banking Act of 1948, P.L.1948, chapter 67 [N.J.S.A. ss. 17:9A-212].
Annex F-4
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Indemnification. Article FOURTH of the certificate of incorporation of Community Partners Bancorp provides that the corporation shall indemnify to the full extent from time to time permitted by law any person made, or threatened to be made, a party to, or a witness or other participant in, any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, legislative, investigative or of any other kind, by reason of the fact that such person is or was a director, officer, employee or other agent of the corporation or any subsidiary of the corporation or serves or served any other enterprise at the request of the corporation (including service as a fiduciary with respect to any employee benefit plan) against expenses, judgments, fines, penalties and amounts paid in settlement (including amounts paid pursuant to judgments or settlements in derivative actions), actually and reasonably incurred by such person in connection with such action, suit or proceeding, or any appeal therein. The Article also provides that the rights afforded to such person extend to such person's legal representative.
The New Jersey Business Corporation Act empowers a corporation to indemnify a corporate agent against his expenses and liabilities incurred in connection with any proceeding (other than a derivative lawsuit) involving the corporate agent by reason of his being or having been a corporate agent if (a) the agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and (b) with respect to any criminal proceeding, the corporate agent had no reasonable cause to believe his conduct was unlawful. For purposes of the Act, the term "corporate agent" includes any present or former director, officer, employee or agent of the corporation, and a person serving as a "corporate agent" at the request of the corporation for any other enterprise.
With respect to any derivative action, the corporation is empowered to indemnify a corporate agent against his expenses (but not his liabilities) incurred in connection with any proceeding involving the corporate agent by reason of his being or having been a corporate agent if the agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation. However, only the court in which the proceeding was brought can empower a corporation to indemnify a corporate agent against expenses with respect to any claim, issue or matter as to which the agent was adjudged liable for negligence or misconduct.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the board of directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel, if there is not a quorum of disinterested directors
or if the disinterested quorum empowers counsel to make the determination; or
(iii) by the shareholders.
A corporate agent is entitled to mandatory indemnification to the extent that the agent is successful on the merits or otherwise in any proceeding, or in defense of any claim, issue or matter in the proceeding. If a corporation fails or refuses to indemnify a corporate agent, whether the indemnification is permissive or mandatory, the agent may apply to a court to grant him the requested indemnification. In advance of the final disposition of a proceeding, the corporation may pay an agent's expenses if the agent agrees to repay the expenses unless it is ultimately determined he is entitled to indemnification.
Exculpation. Article SEVENTH of the certificate of incorporation of Community Partners Bancorp provides:
To the full extent permitted by the laws of the State of New Jersey, as they exist or may hereafter be amended, directors and officers of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders, except that the provisions of this Article SEVENTH shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation or its shareholders, (b) not in good faith or involving a knowing violation of law, or (c) resulting in receipt by such persons of an improper personal benefit. Neither the amendment or repeal of this Article SEVENTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article
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SEVENTH, shall eliminate or reduce the protection afforded by this Article SEVENTH to a director or officer of the Corporation in respect to any matter which occurred, or any cause of action, suit or claim which but for this Article SEVENTH would have accrued or arisen, prior to such amendment, repeal or adoption.
Item 21. Exhibits and Financial Statement Schedules
Exhibit No. Description
----------- --------------------------------------------------------------
2 * Agreement and Plan of Acquisition, dated as of August 16,
2005, among the Registrant (f/k/a Ten Penny-Rialto Holdings,
Inc.), Two River Community Bank, and The Town Bank (attached
as Annex A to the Joint Proxy Statement-Prospectus)
3.1 * Amended and Restated Certificate of Incorporation of the
Registrant
3.2 * By-laws of the Registrant
4.1 ** Specimen certificate representing the Registrant's common
stock, no par value per share
4.2 * Warrant Agreement, dated as of June 28, 2004, by and between
Two River Community Bank and Registrar and Transfer Company,
as warrant agent
5 * Opinion of Pitney Hardin LLP as to the legality of the
securities to be registered
8 * Opinion of Pitney Hardin LLP as to the tax consequences of the
Acquisition
10.1 * Form of Shareholder Agreement, dated as of August 16, 2005, by
and between Two River Community Bank and each director of Town
Bank, in their capacities as shareholders of The Town Bank
(attached as Exhibit A to Annex A to the Joint Proxy
Statement-Prospectus)
10.2 * Form of Affiliate Agreement, dated as of August 16, 2005, by
and between the Registrant and certain affiliates of each of
Two River Community Bank and of The Town Bank (attached as
Exhibit B to Annex A to the Joint Proxy Statement-Prospectus)
10.3 * Form of Change in Control Agreement between Two River
Community Bank and each of Barry B. Davall, William D. Moss,
Michael J. Gormley, Antha J. Stephens, and Alan B. Turner
10.4 * Supplemental Executive Retirement Agreement between Two River
Community Bank and Barry B. Davall
10.5 * Supplemental Executive Retirement Agreement between Two River
Community Bank and William D. Moss
10.6 * Supplemental Executive Retirement Agreement between Two River
Community Bank and Michael J. Gormley
10.7 * Supplemental Executive Retirement Agreement between Two River
Community Bank and Antha J. Stephens
10.8 * Supplemental Executive Retirement Agreement between Two River
Community Bank and Alan B. Turner
10.9 * Two River Community Bank 2003 Incentive Stock Option Plan
10.10 * Two River Community Bank 2003 Non-qualified Stock Option Plan
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10.11 * Two River Community Bank 2001 Incentive Stock Option Plan
10.12 * Two River Community Bank 2001 Non-qualified Stock Option Plan
10.13 * Lease agreement between Two River Community Bank, as tenant,
and Seth Beller Trust, as landlord, dated June 22, 1999, for
the premises located at 1250 Highway 35 South, Middletown, New
Jersey
10.14 * Lease agreement between Two River Community Bank, as tenant,
and Stavola Leasing, LLC, as landlord, dated April 2000, for
the premises located at 656 Shrewsbury Avenue, Tinton Falls,
New Jersey
10.15 * Lease agreement between Two River Community Bank, as
sub-tenant, and First States Realty, LP, as sub-landlord,
dated April 11, 2001, for the premises located at 357 Highway
36, Port Monmouth, New Jersey
10.16 * Lease agreement between Two River Community Bank, as tenant,
and Bay Operating Company, LLC, as landlord, dated February
19, 2002, for the premises located at 84 First Avenue,
Atlantic Highlands, New Jersey
10.17 * Lease agreement between Two River Community Bank, as tenant,
and City Centre Plaza, LLC, as landlord, dated April 18,
2002, for the premises located at 100 Water Street, Red Bank,
New Jersey
10.18 * Lease agreement between Two River Community Bank, as tenant,
and Wall Herald Corporation, as landlord, dated September 3,
2003, for the premises located at 229 N. Airport Road, Wall
Township, New Jersey
10.19 * Lease agreement between Two River Community Bank, as tenant,
and My Ben Company, LLC, as landlord, dated October 28, 2003,
for the premises located at West Long Branch Plaza, 359
Monmouth Road, West Long Branch, New Jersey
10.20 * Lease agreement between Two River Community Bank, as tenant,
and Future Land Investments, Inc., as landlord, dated January
28, 2003, for the premises located at 501-502 Angel Street and
Highway 35, Aberdeen, New Jersey
10.21 * Lease agreement between Two River Community Bank, as tenant,
and Circle Plaza Associates, as landlord, dated June 7, 2002,
for the premises located at 178 South Street, Suite 3-A.,
Eatontown, New Jersey
10.22 * Lease agreement between Two River Community Bank, as tenant,
and CRL Realty Associates, LP, as landlord, dated March 11,
2005, for the premises located at 2345 Highway 36, Atlantic
Highlands, New Jersey
10.23 * Lease agreement between Two River Community Bank, as tenant,
and Asbury Avenue East, LLC, as landlord, dated March 8, 2002,
for the premises to be located at Block 128.03, Lots 23, 24,
25, 26, 39.01, and 40, Asbury Avenue, Tinton Falls, New Jersey
10.24 * Services agreement between Two River Community Bank and
Phoenix International Ltd., Inc. dated November 18, 1999, and
Amendment No. 1 thereto, dated February 1, 2005
10.25 * Services agreement between Two River Community Bank and Online
Resources Corporation/Quotien, dated March 17, 2003
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10.26 * The Town Bank 1999 Employee Stock Option Plan
10.27 * The Town Bank 2000 Employee Stock Option Plan
10.28 * The Town Bank 2001 Employee Stock Option Plan
10.29 * The Town Bank 2002 Employee Stock Option Plan
10.30 * The Town Bank 1999 Director Stock Option Plan
10.31 * The Town Bank 2000 Director Stock Option Plan
10.32 * The Town Bank 2001 Director Stock Option Plan
10.33 * Severance Agreement between The Town Bank and Edwin Wojtaszek,
made as of December 4, 2002 (as amended December 20, 2004)
10.34 * Severance Agreement between The Town Bank and Robert W.
Dowens, Sr., made as of December 4, 2002 (as amended December
20, 2004)
10.35 * Severance Agreement between The Town Bank and Nicholas A.
Frungillo, Jr., made as December 4, 2002 (as amended December
20, 2004)
10.36 * Internet Master Services Agreement dated as of June 11, 2003
by and between The Town Bank and Aurum Technology Inc.
10.37 * Information Technology Services Agreement effective as of June
18, 2003 by and between The Town Bank and Aurum Technology
Inc. d/b/a Fidelity integrated Financial Solutions
10.38 * MAC(R) Network Participation Agreement dated as of September
20, 2000 by and between The Town Bank and Money Access Service
Inc. (predecessor in interest to Star Networks Inc.)
10.39 * Agreement of Lease, between Conjoe Realty Co., Inc. and The
Town Bank, dated as of September 17, 1997, for the entire
property located at 520 South Avenue West, Westfield, New
Jersey
10.40 * Business Lease dated as of September 13, 2005 between The Town
Bank and Fanwood Plaza Partners, LLC for the lease of 828
South Avenue Fanwood, NJ 07023
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21.1 * Subsidiaries of the Registrant
23.1 * Consent of Grant Thornton LLP
23.2 * Consent of KPMG LLP
23.3 * Consent of Pitney Hardin LLP (included in Exhibit 5 hereto)
23.4 * Consent of Curtis Securities LLC
23.5 * Consent of Janney Montgomery Scott LLC
24.1 * Powers of Attorney
99.1 ** Form of Proxy Card to be utilized by the board of directors of
Two River Community Bank
99.2 ** Form of Proxy Card to be utilized by the board of directors of
The Town Bank
---------------------
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* Filed herewith ** To be filed by amendment
B. Financial Schedules
All financial statement schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto or contained in the Joint Proxy Statement/Prospectus.
C. Report, Opinion or Appraisals
The form of Fairness Opinion of Curtis Securities LLC is included as Annex D to the Joint Proxy Statement/Prospectus and the form of Fairness Opinion of Janney Montgomery Scott LLC is included as Annex E to the Joint Proxy Statement/Prospectus.
Item 22. Undertakings
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 2 immediately preceding, or (ii) that purports to meet the requirements of Section 10(a) (3) of the Securities 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 purposes of determining any liability under the Securities Act, each such post effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is
II-5
against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
4. 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.
5. Subject to appropriate interpretation, 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 becomes effective.
II-6
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 Township of Middletown, State of New Jersey, on the 10th day of November, 2005.
COMMUNITY PARTNERS BANCORP
By: /s/ Barry B. Davall
-------------------------------------
Barry B. Davall
President and Chief Executive Officer
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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.
Signature Title Date
--------- ----- ----
/s/ Barry B. Davall President, Chief Executive Officer and November 10, 2005
-------------------------------------------- Director
Barry B. Davall
/s/ Michael J. Gormley Vice President, Chief Financial Officer November 10, 2005
-------------------------------------------- and Treasurer
Michael J. Gormley (Principal Financial Officer)
/s/ Michael Bis Controller and Chief Accounting Officer November 10, 2005
-------------------------------------------- (Principal Accounting Officer)
Michael Bis
/s/ Charles T. Parton Chairman of the Board November 10, 2005
--------------------------------------------
Charles T. Parton
/s/ Joseph F.X. O'Sullivan Vice Chairman of the Board November 10, 2005
--------------------------------------------
Joseph F.X. O'Sullivan
/s/ Michael W. Kostelnik, Jr. Director November 10, 2005
--------------------------------------------
Michael W. Kostelnik, Jr.
/s/ Frank J. Patock, Jr. Director November 10, 2005
--------------------------------------------
Frank J. Patock, Jr.
/s/ Robert B. Cagnassola Director November 10, 2005
--------------------------------------------
Robert B. Cagnassola
/s/ Frederick H. Kurtz Director November 10, 2005
--------------------------------------------
Frederick H. Kurtz
/s/ John J. Perri, Jr. Director November 10, 2005
--------------------------------------------
John J. Perri, Jr.
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II-7
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TEN PENNY-RIALTO HOLDINGS, INC.
Pursuant to Section 14A:9-5
of the New Jersey Business Corporation Act
Community Partners Bancorp, a corporation organized and existing under the laws of the State of New Jersey (the "Corporation"), hereby restates and integrates its Certificate of Incorporation, and also substantively amends such Certificate of Incorporation (as amended and restated, this "Certificate of Incorporation"), to read in full as herein set forth.
(a) To engage in the business of a bank holding company; and
(b) Without in any way being limited by the foregoing specifically enumerated purposes, to engage in any activity within the purposes for which corporations may be organized under the New Jersey Business Corporation Act.
B. The Board of Directors of the Corporation (the "Board of Directors") shall have authority at any time or from time to time (i) to divide any or all of the Preferred Stock into series; (ii) to determine for any such series its designation, number of shares, relative rights, preferences and limitations; (iii) to increase the number of shares of any such series previously determined by it and to decrease such previously determined number of shares to a number not less than that of the shares of such series then outstanding; (iv) to change the designation or number of shares, or the relative rights, preferences and limitations of the shares, of any theretofore established series no shares of which have been issued; and (v) to cause to be executed and filed without further approval of the shareholders such amendment or amendments to the Certificate of Incorporation as may be required in order to accomplish any of the foregoing. In particular, but without limiting the generality of the foregoing, the Board of Directors shall have authority to determine with respect to any such series of Preferred Stock:
(1) The dividend rate or rates on shares of such series and any restrictions, limitations, or conditions upon the payment of such dividends, and whether dividends shall be cumulative and, if so, the date or dates from which dividends shall cumulate, and the dates on which dividends, if declared, shall be payable;
(2) Whether the shares of such series shall be redeemable and, if so, the time or times and the price or prices at which and the other terms and conditions on
which the shares may be redeemed;
(3) The rights of the holders of shares of such series in the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or any other distribution of its assets;
(4) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund and, if so, the terms and conditions thereof;
(5) Whether the shares of such series shall be convertible into shares of any other class or classes or of any series of the same or any other class or classes, and if so convertible, the price or prices or the rate or rates of conversion and the method, if any, of adjusting the same, and the other terms and conditions, if any, on which shares shall be so convertible; and
(6) The extent of voting powers, if any, of the shares of such series.
C. Each share of Common Stock shall be equal to every other share of Common Stock, and, subject to the prior rights of the Preferred Stock, shall be entitled to share equally upon all distributions of earnings and assets of the Corporation. After all accrued dividends on all Preferred Stock having cumulative dividend rights have been declared and paid, or funds set apart for the payment thereof, the holders of Common Stock shall be entitled to receive dividends, at such rates and at such times as may be determined by the Board of Directors. Upon the dissolution, liquidation or winding up of the Corporation, or upon any distribution of its capital assets, subject to the prior rights of the Preferred Stock, all the remaining assets of the Corporation shall be distributed ratably among the holders of Common Stock.
D. Except as otherwise provided in this Certificate of Incorporation, as from time to time amended, or as otherwise required by law, the holders of Common Stock of the Corporation shall be entitled at all meeting of shareholders to one vote for each share of such stock held by them respectively and shall vote together with the holders of the Preferred Stock as one class.
any provision of this Certificate of Incorporation inconsistent with this Article FOURTH, shall deprive any person of rights hereunder arising out of any matter which occurred prior to such amendment, repeal or adoption.
NAME ADDRESS
--------------------------------- -------------------------------------------
Charles T. Parton 1250 Highway 35 South
Middletown, New Jersey 07748
Joseph F.X. O'Sullivan 1250 Highway 35 South
Middletown, New Jersey 07748
Barry B. Davall 1250 Highway 35 South
Middletown, New Jersey 07748
Michael W. Kostelnik, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
Frank J. Patock, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
Robert B. Cagnassola 1250 Highway 35 South
Middletown, New Jersey 07748
Frederick H. Kurtz 1250 Highway 35 South
Middletown, New Jersey 07748
John J. Perri, Jr. 1250 Highway 35 South
Middletown, New Jersey 07748
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The number of directors at any time may be increased or diminished by vote of the Board of Directors, and in case of any such increase, the Board of Directors shall have power to elect each such additional director to hold office until the next succeeding annual meeting of shareholders and until such director's successor shall have been elected and qualified.
Any director may be removed from office as a director but only for cause (i) by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, or (ii) by the affirmative vote of a majority of the members of the Board of Directors in office where, in the judgment of such majority, the
continuation of the director in office would be harmful to the Corporation, and the Board of Directors may suspend the director for a reasonable period pending final determination that cause exists for such removal.
The Board of Directors from time to time shall determine whether and to what extent, and at what times and places, and under what conditions and regulations , the accounts and books of the Corporation, or any of them, shall be open to the inspection of the shareholders; and no shareholder shall have any right to inspecting any account or book or document of the Corporation, except as conferred by statute or authorized by the Board of Directors, or by a resolution of the shareholders of the Corporation.
The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members an executive committee which shall have an may exercise all the authority of the Board of Directors except as otherwise expressly provided by law, and one or more other committees which shall have such authority as may be delegated by the Board of Directors.
IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer to execute this Amended and Restated Certificate of Incorporation this 25th day of October 2005.
COMMUNITY PARTNERS BANCORP
By /s/ Barry B. Davall
------------------------
Name: Barry B. Davall
Title: President
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Exhibit 3.2
COMMUNITY PARTNERS BANCORP
A New Jersey Corporation
BY-LAWS
Dated October 25, 2005
Article I
SHAREHOLDERS
Section 1. Annual Meetings of Shareholders.
An annual meeting of the shareholders of the corporation, for the election of directors and for the transaction of other business properly before the meeting, shall be held in each year, on the date and at the time and place, as shall be fixed from time to time by the Board of Directors (the "Board").
Section 2. Special Meetings of Shareholders.
Special meetings of the shareholders, except where otherwise provided by law or these by-laws, may be called to be held on the date and at the time and place fixed by the Board, the Chairman of the Board (the "Chairman") or the President and shall be held at such times and at such places either within or without the State of New Jersey as fixed by the Board, the Chairman or the President.
Section 3. Notices of Meetings of Shareholders.
Notice of annual and special meetings of shareholders shall be given, not less than 10 nor more than 60 days before the meeting, to each shareholder of record entitled to vote at the meeting, setting forth the date, time, place, and purpose or purposes of the meeting. The notice shall be given by mail or any other method permitted by law to each shareholder of record entitled to vote at the meeting, directed to the shareholder at the shareholder's address as it appears on the stock books of the corporation. No business may be transacted at an annual or special meeting of shareholders other than business that is specified in the notice thereof.
Section 4. Quorum.
Unless otherwise provided by law or the Certificate of Incorporation, the holders of shares entitled to cast a majority of the votes at a meeting of shareholders shall constitute a quorum at the meeting. Any action, other than the election of directors, shall be authorized by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon, unless a greater plurality is required by law or the Certificate of Incorporation. Less than a quorum may adjourn the meeting. No notice of an adjournment of the meeting shall be necessary if the Board does not fix a new record date for the adjourned meeting and if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is taken and if at the adjourned meeting only such business is transacted as might have been transacted at the original meeting.
Section 5. Qualifications of Voters.
At each meeting of the shareholders, each holder of record of each outstanding share of common stock of the corporation shall be entitled to one vote on each matter submitted to a vote. The Board may fix in advance a date not less than 10 nor more than 60 days preceding the date of any meeting of shareholders and not exceeding 60 days preceding the date for the payment of any dividend, or for the allotment of any rights, or for the purpose of any other action, as a record date for the determination of shareholders entitled to notice of and to vote at the meeting or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or allotment of any right, or for the purpose of any other action. In each case only shareholders of record at the close of business on the date so fixed shall be entitled to notice of and to vote at such meeting or to consent to or dissent from any proposal without a meeting, or to receive payment of a dividend or allotment of rights or take any other action, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.
Section 6. Voting.
The vote for the election of directors and the vote on any question before the meeting may be taken by ballot and shall be taken by ballot if requested at the meeting by a shareholder entitled to vote at the meeting. Each ballot shall state the name of the shareholder voting, if the shareholder is voting in person, or if voting by proxy, then the name of the proxy and the number of votes cast by the ballot. A shareholder may vote either in person or by proxy.
Section 7. Selection of Inspectors.
The Board may, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, or if any inspector fails to qualify, appear or act and the vacancy is not filled by the Board in advance of the meeting, the person presiding at the meeting may, and on the request at the meeting of any shareholder entitled to vote at the meeting shall, make such appointment. No person shall be elected a director at a meeting at which the person has served as an inspector.
Section 8. Duties of Inspectors.
The inspectors shall determine the number and voting power of shares outstanding, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies. The inspectors shall receive votes or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do any acts proper to conduct the election or vote with fairness to all shareholders. In determining the number of shares outstanding, the inspectors may rely on reports of the Treasurer or transfer agent. In determining the voting power of each share, the
inspectors may rely on reports of the Secretary. In determining the results of any voting, the inspectors may rely on the reports of the Secretary as to the vote required to take any action or the vote required in an election.
Section 9. Advance Notice of Shareholder Nominees for Director and Other Shareholder Proposals.
(b) For any matter to be properly brought before any meeting of shareholders, the matter must be specified in the notice of meeting given by the corporation.
(c) A shareholder desiring to bring a proposal before an annual meeting of
shareholders (other than to nominate a director of the corporation) shall
deliver to the Secretary, the following: (i) a request for inclusion of the
proposal in the notice of meeting, (ii) the text of the proposal(s) the
shareholder intends to present at the meeting and, at the option of the
shareholder, a brief explanation of why the shareholder favors the proposal(s),
(iii) the shareholder's name and address, (iv) the number and class of all
shares of each class of stock of the corporation owned of record and
beneficially (pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
shareholder and (v) any material interest of the shareholder (other than as a
shareholder) in the proposal.
(d) A shareholder desiring to nominate a person(s) for election as
director of the corporation at an annual meeting shall deliver to the Secretary,
the following: (i) the name of the person(s) to be nominated, (ii) the number
and class of all shares of each class of stock of the corporation owned of
record and beneficially by each nominee, as reported to the shareholder by the
nominee(s), (iii) the information regarding each nominee required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
corporation), (iv) each nominee's signed consent to serve as a director, (v) the
proposing shareholder's name and address and (vi) the number and class of all
shares of each class of stock of the corporation owned of record and
beneficially (pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
shareholder. In addition, the proposing shareholder shall furnish the
corporation with all other information the corporation may reasonably request to
determine whether the nominee would be considered "independent" under the rules
and standards applicable to the corporation.
by the later of the close of business on (i) the ninetieth day prior the annual meeting date or (ii) the tenth day following the date that the annual meeting date is first publicly disclosed.
The Board may adopt by resolution the rules, regulations and procedures for the conduct of shareholders' meetings it shall deem appropriate.
Section 10. Procedure for Action by Written Consent; Inspectors and Effectiveness.
(a) In order that the corporation may determine the shareholders entitled to consent to corporate action in writing without a meeting, the Board shall fix a record date, which record date shall not precede the date upon which it adopts the resolution fixing the record date. Any shareholder entitled to vote on an action required or permitted to be taken at a meeting of shareholders who is seeking to have the shareholders authorize or take any such action by written consent shall, by written notice to the Secretary, request the Board to fix a record date. The Board shall promptly, but in no event more than 60 days after the date on which the request is received, adopt a resolution fixing the record date. If no record date has been fixed within the time set forth above, the record date, when no prior action by the Board is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Secretary. If no record date has been fixed by the Board and prior action by the Board is required by applicable law, the record date shall be at the close of business on the date on which the Board adopts the resolution taking such prior action. No action by the shareholders with respect to the election of directors (including the filling of any vacancy) may be taken in writing without a meeting.
(b) The Board shall fix a date no more than 60 days after the record date on which written consents are to be tabulated (the "Tabulation Date").
(c) Every written consent shall bear the date of signature of each shareholder or person acting by proxy who signs the consent, and in the case of a consent executed by a person acting by proxy, a copy of the proxy shall be attached. No action by written consent shall be effective unless by the Tabulation Date (or in the event the Board fails to set a Tabulation Date, by the date required under applicable law) a written consent or consents (after taking into account any consent revocations) signed by a sufficient number of shareholders to take such action are delivered to the corporation.
(d) Promptly following the receipt of any consents with respect to a proposed corporate action, after taking into account any consent revocations, the corporation shall promptly engage independent inspectors of elections for the purpose of promptly performing a ministerial review of the validity of the consents and revocations, counting and tabulating the valid consents, making a written report certifying the results thereof promptly following the Tabulation Date, and performing other proper incident duties. Nothing contained in this paragraph shall in any way be construed to suggest or imply that the Board or any shareholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
Article II
DIRECTORS
Section 1. Directors and Term of Office.
The business and affairs of the corporation shall be managed by its board of directors consisting of not less than one nor more than 15 members, who shall hold office until the next annual meeting and until their successors shall have been elected and qualified, unless sooner deceased, resigned or removed. The number of directors shall be determined by a resolution adopted by a majority of the directors then in office. If at any time, except at the annual meeting, the number of directors shall be increased, the additional director or directors may be elected by the board, to hold office until the next annual meeting and until their successors shall have been elected and qualified, unless sooner deceased, resigned or removed.
Section 2. Election of Directors.
Directors shall be elected at each annual meeting of shareholders. The term of office of each director shall be from the time of election and qualification until the annual meeting of shareholders next succeeding such election and until a successor shall have been elected and shall have qualified, or until the earlier death, resignation or removal of the director.
Section 3. Vacancies.
Section 4. Compensation.
Directors may receive from the corporation reasonable compensation for their services, including a fixed sum and expenses for attendance at meetings of the Board and at meetings of committees of the Board and/or a fixed annual fee or other type or manner of compensation, as shall be determined from time to time by the Board. A director serving as a Chairman or Vice Chairman of the Board, or of any Committee of the Board, may receive additional compensation for service in such capacity, as shall be determined from time to time by the Board.
Section 5. Regular Meetings of Directors.
The Board shall by resolution schedule regular Board meetings.
Section 6. Notice of Regular Meetings of Directors.
No notice shall be required to be given of any regular meeting of the Board except as the Board may require.
Section 7. Special Meetings of Directors.
Special meetings of the Board may be called at any time by the Chairman or any two directors and may be held at any time and place within or without the State of New Jersey.
Section 8. Notice of Special Meetings of Directors.
Notice of each special meeting of the Board, stating the day, time, place, and purpose or purposes thereof, shall be given by the Chairman of the Board, the Secretary or any two directors to each director not less than two days by mail or one day by facsimile, telephone (including voice mail) or, electronic mail, prior to the date specified for the meeting. Special meetings of the Board may also be held at any place and time, without notice, if all the directors are either present at the meeting or sign a waiver of notice, either before or after the meeting.
Section 9. Quorum.
At any meeting of the Board a quorum shall consist of a majority of the total number of directors and, except as otherwise provided by law or these by-laws, a majority of directors at a meeting at which a quorum is present shall decide any question that may come before the meeting. A majority of the directors present at any regular or special meeting, although less than a quorum, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At the adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting.
Section 10. Action of Directors or Committees Without a Meeting or When Directors are in Separate Places.
Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board or any Board committee may be taken without a meeting if, prior or subsequent to the action, all directors or members of the committee, as the case may be, consent thereto in writing and the written consents are filed with the minutes of the proceedings of the Board or committee. Any or all directors may participate in a meeting of the Board or committee by means of a conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other.
Section 11. Common Directorship and Director's Personal Interest.
No contract or other transaction between the corporation and one or more of its directors, or between the corporation and any other corporation, firm or association of any type or kind in which one or more of this corporation's directors are directors or are otherwise interested, shall
be void or voidable solely by reason of such common directorship or interest, or solely because such director or directors are present at the meeting of the Board or a committee thereof which authorizes or approves the contract or transaction, or solely because the votes of such director or directors are counted for such purpose, if, any one of the following is true: (1) the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized, approved or ratified; or (2) the fact of the common directorship or interest is disclosed or known to the Board or committee and the Board or committee authorizes, approves or ratifies the contract or transaction by unanimous written consent, providing that at least one director so consenting is disinterested, or by a majority of the directors present at the meeting and also by a majority of the disinterested directors, even though the number of the disinterested directors is less than a quorum; or (3) the fact of the common directorship or interest is disclosed or known to the shareholders and they authorize, approve, or ratify the contract or transaction. Common or interested directors may be counted in determining the presence of a quorum at a Board or committee meeting at which a contract or transaction described in this by-law is authorized, approved or ratified.
Article III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 1. Establishment of Executive Committee and Other Committees.
There may be an Executive Committee, consisting of three or more directors, one of whom shall act as the Chair of the Executive Committee, appointed by the Board and such other committees, consisting of one or more directors, as from time to time established by a majority of the total number of directors the corporation would have if there were no vacancies (the "Entire Board"). All committee members shall be appointed for the term of one year but shall hold office until their successors are elected and have qualified. Any member of any committee, however, may be removed by the affirmative vote of a majority of the Entire Board. The Board may determine whether any committee shall be composed in part or entirely of directors who are independent of the corporation. The Board shall make all determinations of whether a director is independent.
Section 2. Vacancies.
In the event of a vacancy occurring in any committee, the Board, by resolution adopted by a majority of the Entire Board, may fill the vacancy for the unexpired term.
Section 3. Powers of Committees.
Subject to the limitations and regulations prescribed by law, including the New Jersey Business Corporation Act, or these by-laws or by the Board, the committees established by the Board shall have and may exercise all the authority of the Board, subject to their respective charters, except that no committee may make, alter, or repeal any by-laws, elect any director, remove any director or officer, submit to shareholders any action that requires shareholder approval, or
amend or repeal any resolution of the Board establishing such committee or any other resolution of the Board which by its terms may be amended or repealed only by the Board.
Section 4. Regular Meetings.
The members of the Committee may by resolution schedule regular committee meetings.
Section 5. Notice of Regular Meetings.
No notice shall be required to be given of any regular meeting of any committee.
Section 6. Special Meetings.
Special meetings of the Executive Committee may be called at any time by the Chairman, the Chair of the committee, or by any two members of the committee and may be held at any place within or without the State of New Jersey and at any time. Special meetings of any other committee may be called as the committee may determine.
Section 7. Notice of Special Meetings.
Notice of each special meeting of any committee, stating the meeting time, place, and purpose or purposes, shall be given by the Chair of the committee or by any two members of the committee, or, with respect to the Executive Committee, the Chairman or the Secretary or by any two members of the Executive Committee, to each member of the committee not less than four days by mail or two days by facsimile or telephone (including voice mail) or by electronic mail, prior to the meeting date. Special meetings of any committee may also be held at any place and time, without notice, by unanimous consent of all the committee members or if all the committee members are present at the meeting.
Section 8. Quorum.
At any committee meeting a majority of the committee members shall constitute a quorum and, except where otherwise provided by law or these by-laws, a majority of committee members at a committee meeting at which a quorum is present shall decide any question that may come before the committee meeting. A majority of the committee members present at any regular or special committee meeting, although less than a quorum, may adjourn the committee meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. At such adjourned committee meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original committee meeting.
Section 9. Committee Charters.
Each committee may and, if directed by the Board, shall establish a charter reflecting its function, charge, and responsibilities. The charter shall be prepared by the committee and shall be subject to approval by the Board.
Section 10. Committee Reports.
Each committee shall report its actions taken at committee meetings to the Board at the next meeting of the Board following the committee meeting unless the committee meeting occurred fewer than two days before the Board Meeting, in which case, the committee report may be made at the second regular Board after the committee meeting.
Article IV
OFFICERS
Section 1. Officers Enumerated.
The officers of the corporation shall be a Chief Executive Officer, a President, one or more Vice-Presidents, a Secretary, a Treasurer, a Controller, and may include one or more Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and Assistant Controllers, all of whom shall be elected by the Board. One person may hold more than one office. The Board may designate the officers who shall be the chief operating officer, the chief financial officer, and the chief legal officer of the corporation.
Section 2. Other Officers.
The Board may by resolution elect other officers, managers, agents, employees, or committees it deems necessary, who shall hold their offices for the terms and shall have the powers and perform the duties as shall be prescribed by the Board or the by-laws. One person may hold more than one office.
Section 3. Term of Office.
All officers elected by the Board shall be elected for one year terms, but shall hold office until their successors are elected and have qualified. Any officer elected by the Board may be removed at any time by the affirmative vote of majority of the Entire Board.
Section 4. Vacancies.
If any officer vacancy shall occur, the Board may fill it for the unexpired term.
Section 5. Chairman and Vice Chairman of the Board.
The Board of Directors shall appoint a Chairman and, if desired a Vice Chairman of the Board. The Chairman or, in his or her absence, the Vice Chairman shall preside at all meetings of the Board and at all meetings of the shareholders and shall perform other duties as directed by the Board. A director's service as Chairman or Vice Chairman of the Board shall not by itself constitute a director as an officer or employee of the Corporation except as, and solely to the extent, required by applicable law.
Section 6. The Chief Executive Officer.
The Chief Executive Officer shall have the general powers and duties of supervision and managements of the property and affairs of the corporation which usually pertain to the office, and shall perform all other duties as directed by the Board. In the absence of the Chairman and Vice Chairman, the Chief Executive Officer shall preside at shareholder meetings and, if a director, Board meetings. In the absence or disability of the Chairman and Vice Chairman, the Chief Executive Officer, if a director, shall perform the duties and exercise the power of the Chairman.
Section 7. The President.
The President shall have the powers and perform the duties which usually pertain to the office, and shall perform all other duties as directed by the Board or the Chief Executive Officer. In the absence of the Chairman and Vice Chairman and the Chief Executive Officer, the President shall perform the duties and exercise the powers of the Chief Executive Officer and, if a director, the Chairman.
Section 8. The Vice-Presidents.
Each Vice-President shall have the powers and perform the duties which usually pertain to the office or as the Board, the Chairman, Chief Executive Officer or the President may direct. In the absence or disability of the Chairman and Vice Chairman, Chief Executive Officer and President, the Vice-President designated by the Board shall perform the duties and exercise the powers of the Chief Executive Officer, President and, if a director, the Chairman.
Section 9. The Secretary.
The Secretary shall issue notices of all meetings of shareholders and of the directors and of the Executive Committee where notices of such meetings are required by law or these by-laws. The Secretary shall keep the minutes of meetings of shareholders and of the Board and of the Executive Committee and shall sign instruments requiring the Secretary's signature, and shall perform other duties usually pertaining to the office and as the Board or the Chairman or Vice Chairman may direct.
Section 10. The Treasurer.
The Treasurer shall have the care and custody of all the moneys and securities of the corporation. The Treasurer shall cause to be entered in books of the corporation, full and accurate accounts of all moneys received and paid, shall sign instruments requiring the signature of the Treasurer, and shall perform other duties usually pertaining to the office and as the Board or the Chairman or Vice Chairman shall direct.
Section 11. The Controller.
The Controller shall have the custody and operation of the accounting books and records of the corporation and shall establish and maintain adequate systems of internal control, disclosure control, and audit to safeguard the assets of the corporation and shall perform other duties usually pertaining to the office and as the Board and the Chairman or Vice Chairman may direct.
Section 12. Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller.
The duties of any Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controller shall be those usually pertaining to their respective offices and as may be properly required of them by the Board or by the officers to whom they report.
Article V
CAPITAL STOCK
Section 1. Stock Certificates.
Certificates of stock shall be issued only in numerical order with or without an alphabetic prefix or suffix. Certificates shall be signed by or bear the facsimile signatures of the Chairman, the President, or one of the Vice-Presidents and the Secretary, the Treasurer, Assistant Secretary or Assistant Treasurer. Certificates shall also be signed by or bear the facsimile signature of one of the transfer agents and of one of the registrars of the corporation as permitted or required by law. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before the certificate is issued, it may be issued by the corporation with the same effect as if the signatory had not ceased to be such at the date of its issue.
Section 2. Transfer of Shares.
Transfers of shares, except where otherwise provided by law or these by-laws, shall be made on the books of the corporation pursuant to authority granted by power of attorney duly executed and filed by the holder thereof with one of the transfer agents, upon surrender of the certificate or certificates of the shares and in accordance with the provisions of the Uniform Commercial Code as adopted in New Jersey and as amended from time to time.
Section 3. Transfer Agents and Registrars.
The Board may at any time appoint one or more transfer agents and/or registrars for the transfer and/or registration of shares, and may from time to time by resolution fix and determine the manner in which shares of the corporation shall be transferred and/or registered.
Section 4. Lost, Stolen or Destroyed Certificates.
Where a certificate for shares has been lost, apparently destroyed, or wrongfully taken and its owner fails to so notify the corporation or the transfer agent within a reasonable time after having notice of the fact and the transfer agent or the corporation registers a transfer of the shares before receiving notification, the owner shall be precluded from asserting against the corporation any claim for registering the transfer of the shares or any claim to a new certificate.
Subject to the foregoing, where the owner of shares claims that the certificate representing the shares has been lost, destroyed, or wrongfully taken, the corporation shall issue a new certificate in place of the original certificate if the registered owner thereof, or the owner's legal representative, (a) requests the issue of a new certificate before the corporation has notice that the certificate has been acquired by a bona fide purchaser; (b) makes proof, in the form as the corporation prescribes, of ownership and that the certificate has been lost, destroyed or wrongfully taken; (c) files either (i) an assumption of liability by a surety approved by the corporation under a blanket lost instrument indemnity bond, substantially in the form approved by the corporation, or (ii) an indemnity bond in the form and with the surety and in the amount (open or specified) as may be approved by the corporation, indemnifying the corporation and its transfer agents and registrars against all loss, cost and damage which may arise from issuance of a new certificate in place of the original certificate; and (d) satisfies any other reasonable requirements imposed by the corporation. Approvals or any requirements pursuant to this section by the corporation may be granted or imposed by the Chairman, the President, any Vice-President, the Secretary, any Assistant Secretary, or any other officer as authorized by the Board.
Article VI
DIVIDENDS AND FINANCES
Section 1. Dividends.
Dividends may be declared by the Board and paid by the corporation at the times determined by the Board, pursuant to the provisions of the New Jersey Business Corporation Act. Before payment of any dividend or making of any distribution of net profits there may be set aside out of the net profits of the corporation the sums determined by the Board from time to time, in its absolute discretion, to be proper and for the purposes determined by the Board to be conducive to the interests of the corporation.
Section 2. Finances.
All funds of the corporation not otherwise employed shall be deposited in its name in, and shall be subject to application or withdrawal from, banks, trust companies or other depositories to be selected in accordance with and in the manner and under the conditions authorized by, or pursuant to the authority of, resolutions of the Board. All checks, notes, drafts and other negotiable instruments of the corporation shall be signed by the officer, officers, agent, agents, employee or employees authorized by, or pursuant to the authority of, resolutions of the Board.
No officers, agents, or employees, either singly or together, shall have power to make any check, note, draft, or other negotiable instrument in the name of the corporation or to bind the corporation thereby, except as may be authorized in accordance with the provisions of this section.
Article VII
GENERAL
Section 1. Form of Seal.
The seal of the corporation shall be in such form as shall be approved from time to time by the Board. The seal may be an impression, a drawing or a facsimile thereof as determined from time to time by the Board. The corporation may use the seal by causing it or a facsimile to be affixed, impressed or reproduced in any manner.
Section 2. Indemnification of Directors, Officers and Employees.
(a) The corporation shall indemnify and hold harmless against all
liabilities any person who is or was a director or officer, including the
director's or officer's estate (an "Indemnitee"), who is or was a party to or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise in respect of any past,
present or future matter, including any action suit or proceeding by or in the
right of the corporation (an "Action"), by reason of the fact that the
Indemnitee is or was serving as a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, trustee, employee or agent of any other enterprise; provided,
however, that the corporation shall not indemnify an Indemnitee if a judgment or
other final adjudication adverse to the Indemnitee establishes that the
Indemnitee's acts or omissions (i) were acts or omissions that the Indemnitee
knew or believed to be contrary to the best interests of the corporation or
shareholders in connection with a matter to which he had a material conflict of
interest, (ii) were not in good faith or involved a knowing violation of law, or
(iii) resulted in receipt by such person of an improper personal benefit.
Section 3. Non-Exclusivity of Indemnification Rights.
Article VIII
AMENDMENTS
Except as may otherwise be required by law or by the Certificate of Incorporation, these by-laws may be amended, altered, or repealed, in whole or in part, by the affirmative vote of a majority of the directors then in office.
Any proposal to amend or repeal these by-laws or to adopt new by-laws shall be stated in the notice of the meeting of the Board or of the shareholders, as the case may be, unless, in the case of amendment by the Board, all of the directors then in office are present at such meeting.
Exhibit 4.2
THIS AGREEMENT, dated as of this 28th day of June, 2004, is by and between Two River Community Bank, a New Jersey state chartered bank (the "Bank") and Registrar and Transfer Company, as warrant agent, (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, the Bank is making an offering (the "Offering") of units, each consisting of one share of its common stock, par value $2.00 (the "Common Stock") and one warrant to purchase the Bank's Common Stock (the "Warrants").
WHEREAS, the Bank desires to appoint the Warrant Agent to act on its behalf in connection with the (i) issuance, transfer and exchange of the certificates representing the Warrants (the "Warrant Certificates"), (ii) the exercise of the Warrants by the holders thereof (together with any successors or assigns, the "Holders") and (iii) the adjustment of the Warrants in certain events as contained herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) If during the period between the date a Warrant is issued and
the date Common Stock (or other securities) is issued upon exercise of the
Warrant (the "Outstanding Period" for such Warrant), the Bank shall declare any
dividend or other distribution upon its outstanding shares of Common Stock in
Common Stock or shall subdivide its outstanding shares of Common Stock into a
greater number of shares, then the number of shares of Common Stock which may
thereafter be purchased upon the exercise of the Warrant shall be increased in
proportion to the increase in the number of shares of Common Stock outstanding
through such dividend or subdivision and the Warrant Price per share shall be
decreased in such proportion. If the Bank shall at any time during the
Outstanding Period combine the outstanding shares of its Common Stock into a
smaller number of shares, the number of shares of Common Stock which may
thereafter be purchased upon the exercise of the Warrant shall be decreased in
proportion to the decrease in the number of shares of Common Stock outstanding
through such combination and the Warrant Price per share shall be increased in
such proportion. The Bank shall cause a notice to be mailed to each Holder at
least 20 days prior to the applicable record date for the activity covered by
this Section 5.1(a). The Bank's failure to give the notice required by this
Section 5.1(a) or any defect therein shall not affect the validity of the
activity covered by this Section 5.1(a).
(b) If the Bank shall at any time during the Outstanding Period (i) distribute any rights, options or warrants to all holders of shares of Common Stock, (ii) issue other securities to all holders of shares of Common Stock by reclassification of its shares of Common Stock, or (iii) issue by means of a capital reorganization other securities of the Bank in lieu of the Common Stock or in addition to the Common Stock, then the number of shares purchasable upon exercise of the Warrant immediately prior thereto shall be adjusted so that the Holder of the Warrant shall be entitled to receive the kind and number of shares or other securities of the Bank which the Holder would have owned or have been entitled to receive after the happening of the event described above, had the Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. The Bank shall cause a notice to be mailed to each Holder at least 20 days prior to the applicable record date for the activity covered by this Section 5.1(b). The Bank's failure to give the notice required by this Section 5.1(b) or any defect therein shall not affect the validity of the activity covered by this Section 5.1(b).
(c) An adjustment made pursuant to this Section 5.1 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
(d) For the purpose of this Section 5.1, the term "shares of Common
Stock" shall mean (x) the class of stock designated as the Common Stock at the
date of this Warrant, or (y) any other class of stock resulting from successive
changes or reclassifications of such shares consisting solely of changes in par
value, from no par value to par value or from par value to no par value. In the
event that at any time, as a result of an adjustment made pursuant to this
Section 5.1, the Holder shall become entitled to purchase any shares of the Bank
other than shares of Common Stock, thereafter the number of such other shares so
purchasable upon
exercise of each Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 5.1.
(a) In case of any consolidation with or merger of the Bank into
another bank or sale or conveyance of all or substantially all of its assets
outside of the ordinary course of business (such consolidation, merger, sale or
conveyance, a "Change") then, as a condition of such Change, lawful and adequate
provisions shall be made whereby the Holders shall thereafter have the right to
receive upon payment of the Warrant Price in effect immediately prior to such
Change, upon the basis and upon the terms and conditions specified in this
Agreement (including but not limited to all provisions contained in this Section
5), and in lieu of the shares of the Bank's Common Stock purchasable upon the
exercise of the Warrants, such shares of stock, securities, cash or assets which
such Holder would have been entitled to receive after the happening of such
Change had such Warrant been exercised immediately prior to such Change. The
provisions of this Section 5.3 shall similarly apply to successive Changes. The
Bank shall cause a notice to be mailed to each Holder at least 20 days prior to
the applicable record date for the Change covered by this Section 5.3(a) and
shall provide notice of the Change and shall set forth the first and last date
on which the Holder may exercise outstanding Warrants. The Bank's failure to
give the notice required by this Section 5.3(a) or any defect therein shall not
affect the validity of the Change covered by this Section 5.3(a).
(b) Notwithstanding the foregoing, if as a result of such Change, holders of the Bank Common Stock shall receive consideration other than solely in shares of stock or other securities in exchange for their Bank Common Stock, the Bank may, at its option, fulfill its obligation hereunder by causing the Notice required by Section 5.3(a) hereof to include notice to Holders of the opportunity to exercise their Warrants before the applicable record date for the Change, and thereby receive consideration in the Change, on the same basis as other previously outstanding shares of the same class as the shares acquired upon exercise. Delivery of
the notice specified in the preceding sentence to Holders shall constitute an amendment of the Exercise Period. If such notice is provided to Holders, Warrants not exercised in accordance with this Section 5.3(b) before consummation of the Change shall be cancelled and become null and void on the effective date of the Change. The notice provided by the Warrant Agent pursuant to this Section 5.3(b) shall include a description of the terms of this Agreement providing for cancellation of the Warrants in the event that Warrants are not exercised by the prescribed date. The Bank's failure to give any notice required by this Section 5.3(b) or any defect therein shall not affect the validity of any such Change, provided that such Change is described in the proxy materials delivered to shareholders of the Bank, describing and seeking a vote on the Change.
6.1. That all shares of Common Stock (or other securities) which may be issued upon the exercise of the rights represented by the Warrant Certificates will, upon issue
and payment of the aggregate Warrant Price therefor, be duly authorized, validly issued, fully paid and non-assessable and free and clear of all liens and encumbrances, with no personal liability attaching to the ownership thereof.
6.2. That during the Outstanding Period of each Warrant, the Bank will at all times have authorized and reserved for the purpose of issue upon exercise of the rights evidenced by the Warrant Certificates, a sufficient number of shares of Common Stock (or other securities) to provide for the exercise of the rights represented by the Warrant Certificate.
6.3. That the Bank will take all such action as may be necessary to ensure that the shares of Common Stock (or other securities) issuable upon the exercise of the Warrants may be so issued without violation of any applicable federal or state law or regulation.
6.4. That the Bank qualifies for an exemption from the registration requirements of the Securities Act of 1933 and has made all appropriate filings with and received approvals from, state and federal banking regulatory authorities with respect to Warrants and the Common Stock issuable thereunder.
(a) the Bank shall declare any cash dividend upon its shares of Common Stock payable at a rate more than 50% in excess of the rate of the last cash dividend theretofore paid; or
(b) the Bank shall declare any dividend payable in any securities upon its shares of Common Stock or make any distribution (other than a regular cash dividend out of undistributed net income) to the holders of its shares of Common Stock; or
(c) the Bank shall distribute any rights, options or warrants to the holders of shares of Common Stock; or
(d) a capital reorganization or reclassification of the Bank's capital stock shall be proposed;
then in any one or more of said events, the Bank shall give to the Holders at least 20 days prior written notice of the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to receive such dividend or distribution. Any such notice shall also specify, in the case of any such dividend or distribution, the date on which holders of shares of Common Stock are entitled thereto. Failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of any action taken in connection with such dividend or distribution.
The Warrant Agent shall not at any time be under any duty or responsibility to any Holder of Warrant Certificates to make or cause to be made any adjustment of the Warrant Price provided in this Agreement, or to determine whether any fact exists which may require any such adjustments, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same. It shall not (i) be liable for any recital or statement of facts contained herein or for any action taken, suffered or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Bank to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it (who may be counsel for the Bank) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of the Bank shall be sufficiently evidenced by an instrument signed by the Chairman, the President, any Vice President, its Secretary, or Assistant Secretary, (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order or demand believed by it to be genuine.
The Bank agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses and further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses and liabilities arising as a result of the Warrant Agent's gross negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own gross
negligence or willful misconduct), after giving 30 days' prior written notice to the Bank. At least 15 days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Holder of each Warrant Certificate at the Bank's expense. Upon such resignation, or any inability of the Warrant Agent to act as such hereunder, the Bank shall appoint a new warrant agent in writing. The Bank shall have complete discretion in the naming of a new warrant agent, who may be an affiliate, subsidiary or department of the Bank, or any person used by the Bank as transfer agent for the Common Stock. If the Bank shall fail to make such appointment within a period of 15 days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new warrant agent.
The Bank may, upon notice to the Holders, remove and replace the Warrant Agent if the Warrant Agent is the transfer agent for the Bank's Common Stock and the Warrant Agent ceases to be the transfer agent for the Bank Common Stock for any reason.
After acceptance in writing of an appointment by a new warrant agent is received by the Bank, such new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the warrant agent, without any further assurance, conveyance, act or deed. Any former Warrant Agent hereby agrees to cooperate with and deliver all records and Warrant Certificates to the new warrant agent at the direction of the new agent and the Bank.
Not later than the effective date of an appointment of a new warrant agent by the Bank, the Bank shall file notice with the resigning or terminated Warrant Agent and shall forthwith cause a copy of such notice to be mailed to each Holder.
Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any corporation succeeding to the trust business of the Warrant Agent shall be a successor warrant agent under this Agreement without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Bank and to each Holder.
Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Bank.
made without the consent in writing of each and every Holder (but no consent shall be required for such changes as are specifically prescribed by this Agreement as originally executed, including, without limitation, Section 5.3(b)).
IN WITNESS WHEREOF, the Bank and the Warrant Agent have executed this Agreement by their duly authorized officers as of the date first set forth above.
TWO RIVER COMMUNITY BANK
By: /s/ Barry B. Davall
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REGISTRAR AND TRANSFER COMPANY, as warrant agent
By: /s/ William P. Tatler
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William P. Tatler
Vice President
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Warrant Certificate
Certificate Number
Initial Issuance
Dated: Warrants
--------------- ---------------
VOID AFTER June 30, 2006
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May Be Exercised Between May 1, 2006 and June 30, 2006
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
TWO RIVER COMMUNITY BANK
1250 STATE HIGHWAY 35
MIDDLETOWN, NEW JERSEY 07748
This certifies that FOR VALUE RECEIVED ____________________________, or his assigns (the "Holder") is the owner of _____________________ Warrants ("Warrants") issued by Two River Community Bank, a New Jersey state chartered bank (the "Bank"). The Warrants are subject to the terms and conditions set forth in this certificate and the Warrant Agreement (as hereinafter defined). Each Warrant entitles the Holder to purchase one share of common stock, $2.00 par value ("Common Stock"), of the Bank, at any time from May 1, 2006 until the Expiration Date (as hereinafter defined), upon the presentation and surrender of this Warrant Certificate with the Exercise Form on the reverse side hereof duly executed, at the corporate office of the Warrant Agent (as hereafter defined), accompanied by payment of $20.50 (the "Warrant Price") per Warrant, in cash, by official bank or certified check made payable to the Bank or its successor.
This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated June _____, 2004 by and between the Bank and Registrar and Transfer Company (the "Warrant Agent"), a copy of which may be obtained from the Bank by a written request from the Holder hereof or which may be inspected by any Holder or his agent at the principal office of the Bank.
As provided in Section 5 of the Warrant Agreement, in certain circumstances: (i) the Warrant Price and the number of shares of Common Stock the Holder is entitled to receive upon the exercise of any Warrants shall be adjusted; (ii) the Warrants shall automatically
represent the right to receive upon exercise consideration which is different from or in addition to the consideration specified on the face of this Certificate; and (iii) the Warrants, at the option of the Bank under specifically defined circumstances, may expire prior to the Expiration Date.
No fractional shares of Common Stock will be issued upon exercise of the Warrant. In the case of the exercise of less than all the Warrants represented hereby, the Bank shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (Eastern time) on June 30, 2006.
The Warrant Certificate and the Warrants represented hereby shall not be
transferable, assigned, pledged or hypothecated except as provided for in
Section 7 of the Warrant Agreement. In the event the terms of this paragraph are
not complied with by the Holder, the Warrants shall immediately become null and
void.
Prior to the exercise of any Warrant represented hereby, the Holder shall not be entitled to any rights of a stockholder of the Bank, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Bank, except as provided in the Warrant Agreement.
The Bank and the Warrant Agent shall treat the Holder as the absolute owner hereof and of each Warrant represented hereby for all purposes and shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New Jersey.
This Warrant Certificate is not valid unless countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Bank has caused this Warrant Certificate to be duly executed, manually or in facsimile by two of its officers thereunto duly authorized and a facsimile of its corporate seal to be imprinted thereon.
[SEAL] TWO RIVER COMMUNITY BANK
Dated: By:
----------------------------- -----------------------------
Chairman or President
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Secretary or Treasurer
REGISTRAR AND TRANSFER COMPANY,
as Warrant Agent
EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing ____________ shares of Common Stock and hereby makes payment of _________________ in payment of the Warrant Price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
ASSIGNMENT FORM
______Warrants and does hereby irrevocably constitute and appoint ______________________ Attorney, to transfer the same on the books of the Bank with full power of substitution in the premises.
Date _____________, ______
INSTRUCTIONS FOR REGISTRATION OF STOCK
PITNEY HARDIN LLP
(MAIL TO)
P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
(DELIVERY TO) (212) 297-5800
FACSIMILE (212) 916-2940
200 CAMPUS DRIVE
FLORHAM PARK, NEW JERSEY 07932-0950 BRUSSELS, BELGIUM
32-02-514-54-19
(973) 966-6300 FACSIMILE 32-02-514-16-59
|
FACSIMILE (973) 966-1015
November 10, 2005
Community Partners Bancorp
1250 Highway 35 South
Middletown, New Jersey 07748
We have acted as counsel to Community Partners Bancorp (the "Company") in connection with its proposed issuance of its no par value common stock (the "Common Stock") pursuant to the Agreement and Plan of Acquisition, dated as of August 16, 2005, by and among the Company, Two River Community Bank, and The Town Bank. The Common Stock is being registered pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "SEC") on November 10, 2005 (the "Registration Statement").
We have examined originals, or copies certified or otherwise identified to our satisfaction, of the Amended and Restated Certificate of Incorporation and By-laws of the Company currently in effect, relevant resolutions of the Board of Directors of the Company, and such other documents as we deemed necessary in order to express the opinion hereinafter set forth.
Based on the foregoing and assuming that the Registration Statement has been declared effective under the Securities Act of 1933, as amended (the "Securities Act"), we are of the opinion that when issued as described in the Registration Statement, including the Prospectus relating to the Common Stock (the "Prospectus"), the Common Stock will be legally issued, fully paid, and non-assessable.
We consent to use of this opinion as an Exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Matters" in the Prospectus. In giving such consent, we do not hereby concede that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ PITNEY HARDIN LLP PITNEY HARDIN LLP |
PITNEY HARDIN LLP
(MAIL TO)
P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
--------
(DELIVERY TO) NEW YORK, NEW YORK
(212) 297-5800
200 CAMPUS DRIVE FACSIMILE (212) 916-2940
FLORHAM PARK, NEW JERSEY 07932-0950
BRUSSELS, BELGIUM
(973) 966-6300
32-02-514-54-19
FACSIMILE 32-02-514-16-59
FACSIMILE (973) 966-1015
|
November 10, 2005
Community Partners Bancorp
1250 Highway 35 South
Middletown, New Jersey 07748
In rendering this opinion, we have relied on certificates which Two River and Town Bank have delivered to us in which Two River and Town Bank have made factual representations regarding the Acquisition and on which Two River and Town Bank have authorized us to rely in expressing the within opinions. We have examined those certificates, the Acquisition Agreement, and copies of ancillary agreements, certificates, instruments and documents pertaining to the transactions contemplated by the Acquisition Agreement delivered by the parties thereto. In our examination, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us. As to any facts material to our opinions expressed herein, we have relied on representations of the parties to the Acquisition Agreement without undertaking to verify the same by independent investigation. Our opinions are based on
PITNEY HARDIN LLP
November 10, 2005
our analysis of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, and relevant interpretative authorities as in effect on the date hereof.
Based upon the foregoing, the statements set forth in the Registration Statement under the heading "Material United States Federal Income Tax Consequences of the Acquisition," insofar as they discuss matters of U.S. federal tax law and regulations or legal conclusions with respect thereto, and except to the extent stated otherwise therein, constitute our opinion, subject to the assumptions, qualifications and limitations stated herein and therein.
This letter is issued as of the date hereof and is necessarily limited to laws, regulations, rulings and judicial decisions now in effect and facts and circumstances currently brought to our attention. We are under no obligation to advise you or anyone else as to any changes in such laws, regulations, rulings and judicial decisions or of any facts or circumstances that occur or come to our attention after the date hereof.
This opinion is furnished to you solely for use in connection with the Registration Statement. We hereby consent to the filing of this opinion as Exhibit 8 to the Registration Statement and to the reference to our firm in the Registration Statement. In giving such consent, we do not thereby concede that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ PITNEY HARDIN LLP PITNEY HARDIN LLP |
Exhibit 10.3
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is made this ___ day of __________, 200_, between Two River Community Bank (the "Bank"), a banking corporation organized under the laws of New Jersey with its principal office at 1250 Highway 35 South, Middletown, New Jersey 07748 and _________________ (the "Executive"), residing at _____________________________________________.
BACKGROUND
WHEREAS, the Executive is employed by the Bank;
WHEREAS, the Executive has worked diligently in his position in pursuing the business objectives of the Bank;
WHEREAS, The Board of Directors of the Bank believes that the future services of the Executive are of great value to the Bank, and that it is important for the growth and development of the Bank that the Executive continue in his position;
WHEREAS, if the Bank receives any proposal from a third person concerning a possible business combination with, or acquisition of equities securities to the Bank, the Board of Directors of the Bank (the "Board") believes it is imperative that the Bank and the Board be able to rely upon the Executive to continue in his position, and that they be able to receive and rely upon his advice, if they request it, as to the best interests of the Bank and its shareholders, without concern that the Executive might be distracted by the personal uncertainties and any risks created by such a proposal;
WHEREAS, to achieve that goal, and to retain the Executive's services prior to any such activity, the Board and the Executive have agreed to enter into this Agreement to govern the Executive's termination benefits in the event of a Change in Control of the Bank, as hereinafter defined.
NOW THEREFORE, to assure the Bank that it will have the continued dedication of the Executive and the availability of his advice and counsel notwithstanding the possibility, threat or occurrence of a bid to take over control of the Bank, and to induce the Executive to remain in the employ of the Bank, and for other good and valuable consideration, the Bank and the Executive, each intending to be legally bound hereby agree as follows:
Agreement, which causes material injury to the Bank, as specified in a written notice to the Executive from the Board; or (iii) the Executive's conviction of a crime (other than a traffic violation), habitual drunkenness, drug abuse, or excessive absenteeism (other than for illness), after a warning (with respect to drunkenness or absenteeism only) in writing from the Board to refrain from such behavior. No act or failure to act on the part of the Executive shall be considered willful unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interest of the Bank.
i. The Bank acquires actual knowledge that any person, as such term is used in Sections 13 (d) and 14 (d) (2) of the Securities and Exchange Act of 1934 (the "Exchange Act"), other than an affiliate of the Bank or an employee benefit plan established or maintained by the Bank or any of its affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of securities of the Bank representing more than twenty-five percent (25%) of the combined voting power of the Bank's then outstanding securities (a "Control Person"); provided that no person shall be considered a Control Person for purposes of this paragraph (1) if such person acquires in excess of twenty-five percent (25%) of the combined voting power of the Bank's then outstanding voting securities in violation of law and, by order of a court of competent jurisdiction, settlement or otherwise, subsequently disposes or is required to dispose of all Bank securities acquired in violation of law.
ii. Upon the first purchase of the Bank's common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Bank or an employee benefit plan established or maintained by the Bank or any of its affiliates).
iii. Upon the approval by the Bank's shareholders of (A) a merger, combination, or consolidation of the Bank with or into another entity (other than a merger or consolidation the definitive agreement for which provides that at least two-thirds of the directors of the surviving or resulting entity immediately after the transaction arc Continuing Directors (as hereinafter defined) (a "Non-Control Transaction"), (B) a sale or disposition of all or substantially all of the Bank's assets or (C) a plan of liquidation or dissolution of the Bank.
iv. If during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the board of directors of
the Bank (the "Continuing Directors") cease for any reason to constitute at least two-thirds thereof or, following a Non-Control Transaction, two-thirds of the board of directors of the surviving or resulting entity; provided that any individual whose election or nomination for election as a member of the board of directors of the Bank (or, following a Non-Control Transaction, the board of directors of the surviving or resulting entity) was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director.
v. Upon a sale of (A) common stock of the Bank if after such sale any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than an employee benefit plan established or maintained by the Bank or an affiliate of the Bank, owns a majority of the Bank's common stock or (B) all or substantially all of the Bank's assets (other than in the ordinary course of business).
i. The assignment to the Executive of any duties inconsistent with, or the reduction of powers or functions associated with, the Executive's position, title, duties, responsibilities and status with the Bank immediately prior to a Change in Control; or any removal of the Executive from, or any failure to re-elect the Executive to, any position(s) or office(s) the Executive held immediately prior to such Change in Control. A change in position, title, duties, responsibilities and status or position(s) or office(s) resulting merely from a merger of the Batik into or with another bank or company shall not meet the requirements of this paragraph if, and only if, the Executive's new title and responsibilities are accepted in writing by the Executive, in the sole discretion of the Executive.
ii. A reduction by the Bank in the Executive's annual base compensation as in effect immediately prior to a Change in Control or the failure to award the Executive annual increases in accordance herewith.
iii. A failure by the Bank to continue any bonus plan in which the Executive participated immediately prior to the Change in Control
or a failure by the Bank to continue the Executive as a participant in such plan on at least the same basis as the Executive participate in such plan prior to the Change in Control.
iv. The Bank's transfer of the Executive to another geographic location outside of New Jersey or more than 25 miles from his present office location, except for required travel on the Bank's business to an extent substantially consistent with the Executive's business travel obligations immediately prior to such Change in Control.
v. The failure by the Bank to continue in effect any employee benefit plan, program or arrangement (including, without limitation any 401(k) plan, stock option plan, life insurance plan, health and accident plan, or disability plan) in which the Executive is participating immediately prior to a Change in Control (except that the Bank may institute or continue plans, programs or arrangements providing the Executive with substantially similar benefits); the taking of any action by the Bank which would adversely affect the Executive's participation in or materially reduce the Executive's benefits under any of such plans, programs or arrangements; the failure to continue, or the taking of any action which would deprive the Executive of any material fringe benefit enjoyed by the Executive immediately prior to such Change in Control; or the failure by the Bank to provide the Executive with the number of paid vacation days to which the Executive was entitled immediately prior to such Change in Control.
vi. The failure by the Bank to obtain an enforceable assumption in writing by (i) any entity which is the acquiring entity or successor to the Bank in a Change in Control or, (ii) if the acquiring entity or successor to the Bank is a bank, the holding company parent of the acquiring entity or successor, of this Agreement and the obligations of the Bank to perform this Agreement, and to provide such assumption to the Executive prior to any Change in Control.
vii. Any purported termination of the Executive's employment by the Bank during the term of this Agreement which is not effected pursuant to all of the requirements of this Agreement; and, for purposes of this Agreement, no such purported termination shall be effective.
This paragraph shall not be construed as preventing the Executive from managing any investments of his which do not require any service on his part in the operation of such investments.
practices and procedures of the Bank, as such existed immediately prior to the Change in Control. During the Contract Period the Executive also shall be entitled to hospital, health, medical and life insurance, and any other benefits enjoyed, from time to time, by executive officers of the Bank, all upon terms as favorable as those enjoyed by other executive officers of the Bank. Notwithstanding anything in this section to the contrary, if the Bank adopts any change in the expenses allowed to, or fringe benefits provided for, executive officers of the Bank, and such policy is uniformly applied to all executive officers of the Bank, and any successor or acquirer of the Bank, if any, including the chief executive officer of such entities, then no such change in policy shall be deemed to be a violation of this provision.
obligation to provide such insurance benefits to the extent such benefits are duplicative of what is provided to the Executive by the Executive's new employer. The Bank shall also sell to the Executive for a purchase price of $1.00 the automobile, if any, used by the Executive while employed by the Bank.
The Executive shall not have a duty to mitigate the damages suffered by him in connection with the termination by the Bank of his employment without Cause or a resignation for Good Reason during the Contract Period. If the Bank fails to pay the Executive the Lump Sum Payment or to provide him with the benefits due under this section, the Executive, after giving ten (10) days' written notice to the Bank identifying the Bank's failure, shall be entitled to recover from the Bank all of his reasonable legal fees and expenses incurred in connection with his enforcement against the Bank of the terms of this Agreement. The Bank agrees to pay such legal fees and expenses to the Executive on demand. The Executive shall be denied payment of his legal fees and expenses only if a court finds that the Executive sought payment of such fees without reasonable cause and in bad faith.
a. Anything in this Agreement to the contrary notwithstanding,
prior to the payment of any compensation or benefits payable
under Section 9 hereof, the certified public accountants of
the Bank immediately prior to a Change in Control (the
"Certified Public Accountants") shall determine as promptly as
practicable and in any event within 20 business days following
the termination of employment of the Executive, whether any
payment or distribution by the Bank to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would more likely than not be
nondeductible by the Bank for Federal income purposes because
of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and if it is then the aggregate present
value of amounts payable or distributable to or for the
benefit of the Executive pursuant to this Agreement (such
payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the reduced Amount. For
purposes of this paragraph, the "Reduced Amount" shall be an
amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing
any Payment to be nondeductible by the Bank because of said
Section 280G of the Code.
b. If under paragraph (a) of this section the Certified Public Accountants determine that any Payment would more likely than not be nondeductible by the Bank because of Section 280G of the Code, the Bank shall promptly
give the Executive notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and the Executive may then elect, in his sole discretion, which and how much of the Agreement Payments shall be eliminate or reduced (as long as after such election the aggregate present value of the Agreement Payments equals the Reduced Amount), and shall advise the Bank in writing of his election within 20 business days of his receipt of notice. If no such election is made by the Executive within such 20-day period, the Bank may elect which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the Aggregate present Value of the Agreement Payments equals the Reduced Amount) and shall notify the Executive promptly of such election. For purposes of this paragraph, the present Value shall be determined in accordance with Section 280G(d)(4) of the Code. All determinations made by the Certified Public Accountants shall be binding upon the Bank and the Executive shall be made within 20 days of a termination of employment of the Executive. The Bank may suspend for a period of up to 30 days after termination of employment the Lump Sum Payment and any other payments or benefits due to the Executive under Section 9 hereof until the Certified Public Accountants finish the determination and the Executive (or the Bank, as the case may he) elect how to reduce the Agreement Payments, if necessary. As promptly as practicable following such determination and the elections hereunder, the Bank shall pay to or distribute to or for the benefit of the Executive such amounts as are then due to the Executive under this Agreement and shall promptly pay to or distribute for the benefit of the Executive in the future such amounts as become due to the Executive under this Agreement.
c. As a result of the uncertainty in the application of Section 280G of the Code, it is possible that Agreement Payments may be made by the Bank which should not have been made ("Overpayment"), or that additional Agreement Payments which will have not been made by the Bank could have been made ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Certified Public Accountants, based upon the assertion of a deficiency by the Internal Revenue Service against the Bank or the Executive which said Certified Public Accountants believe has a high probability of success, determine that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to the Executive which Executive shall repay to the Bank together with interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code; provided that no amount shall be payable by the Executive to the Bank in and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Certified Public Accountants, based upon controlling precedent, determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Bank to or from the benefit of the Executive together with
interest at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Code.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be signed by their duly authorized representative pursuant to the authority of the Board or Directors, and the Executive has personally executed this Agreement, all as of the day and year first written above.
WITNESS:
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, individually
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ATTEST: TWO RIVER COMMUNITY BANK
By:
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Exhibit 10.4
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is adopted this 1st day of January, 2005, by and between TWO RIVER COMMUNITY BANK, a New Jersey-chartered commercial bank located in Middletown, New Jersey ("Bank") and BARRY DAVALL (the "Executive"). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.
Article I Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 "Beneficiary" means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.
1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.
1.3 "Board" means the Board of Directors of the Bank as from time to time constituted.
1.4 "Change in Control" means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Disability" means Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an
accident and health plan covering
employees of the Executive's employer. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Executive's employer. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration's or the provider's determination.
1.7 "Early Termination" means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control.
1.8 "Effective Date" means November 1, 2004.
1.9 "Normal Retirement Age" means the Executive attaining age sixty-five (65).
1.10 "Plan Administrator" means the plan administrator described in Article 6.
1.11 "Plan Year" means each twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31, 2005.
1.12 "Schedule A" means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.
1.13 "Separation from Service" means that the Executive's service, as an employee and independent contractor, to the Bank and any member of a controlled group as defined in Section 414 of the Code to which the Bank belongs, has terminated for any reason, other than by reason of a leave of absence approved by the Bank or the death of the Executive.
1.14 "Termination for Cause" has that meaning set forth in Article 5.
Article 2 Distributions During Lifetime
2.1 Normal Retirement Benefit. If the Executive has a Separation from Service on or after Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Thirty Thousand Dollars ($30,000).
2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive's 67th birthday. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.2 Early Termination Benefit. Upon the Executive's Early Termination, the
Bank shall distribute to the Executive the benefit described in this
Section 2.2 in lieu of any other benefit under this Article.
2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.2.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.3 Disability Benefit. If the Executive's Disability results in Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article
2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service due to Disability occurs.
2.3.2 Distribution of Benefit. The Bank shall distribute the annual
benefit to the Executive in twelve (12) equal monthly installments
commencing within thirty (30) days following Normal Retirement Age.
The annual benefit shall be distributed to the Executive for fifteen
(15) years.
2.4 Change in Control Benefit. If a Change in Control occurs while the
Executive is a full time employee and prior to his Normal Retirement Age,
the Bank shall distribute to the Executive the benefit described in this
Section 2.4 in lieu of any other benefit under this Article.
2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.4.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.4.3 Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, to the extent any distribution(s), if made, under this Section 2.4 would be treated as an "excess parachute payment" under Section 280G of the Code, the Bank shall reduce or delay the distribution(s) to the extent it would not be an excess parachute payment.
2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a "specified employee" under Section 409A of the Code and regulations thereunder, benefit distributions that qualify as a "separation from service" under Section 409A of the Code and regulations thereunder may not commence earlier than six (6) months after the date of such separation from service.
Article 3 Distribution at Death
3.1 Death During Active Service. If the Executive dies while in the active service to the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.
3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the death benefit set forth on Schedule A for the Plan Year that ended immediately prior to the Executive's date of death.
3.1.2 Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum within ninety (90) days following receipt by the Bank of the Executive's death certificate.
3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Executive had the Executive survived.
3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive's death certificate.
Article 4 Beneficiaries
4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.
4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive's death.
4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive's spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive's estate.
4.5. Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
Article 5 General Limitations
5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive's service is terminated by the Board for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's service with the Bank;
or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive's service and resulting in a material adverse effect on the Bank.
5.2 Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason; provided, however that the Bank shall evaluate the reason for the denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial.
5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act ("FDIA").
5.4 Non-compete Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if during the term of this Agreement and for within twenty-four (24) months following a Separation from Service, the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3 %) or less in the stock of a publicly-traded company):
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive's responsibilities will include providing banking or other financial services within the twenty-five (25) miles of any office maintained by the Bank as of the date of the Executive's Separation from Service;
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was in the service of the Bank as of the date of the Executive's Separation from Service;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other
financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as "Services"), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the Executive's Separation from Service;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
5.4.1 Judicial Remedies. In the event of a breach or threatened breach by
the Executive of any provision of these restrictions, the Executive
recognizes the substantial and immediate harm that a breach or
threatened breach will impose upon the Bank, and further recognizes
that in such event monetary damages may be inadequate to fully
protect the Bank. Accordingly, in the event of a breach or
threatened breach of these restrictions, the Executive consents to
the Bank's entitlement to such ex parte preliminary, interlocutory,
temporary or permanent injunctive, or any other equitable relief,
protecting and fully enforcing the Bank's rights hereunder and
preventing the Executive from further breaching any of his
obligations set forth herein. Nothing herein shall be construed as
prohibiting the Bank from pursuing any other remedies available to
the Bank at law or in equity for such breach or threatened breach,
including the recovery of damages from the Executive. The Executive
expressly acknowledges and agrees that: (i) the restrictions set
forth in Section 5.4 hereof are reasonable, in terms of scope,
duration, geographic area, and otherwise, (ii) the protections
afforded the Bank in Section 5.4 hereof are necessary to protect its
legitimate business interest, (iii) the restrictions set forth in
Section 5.4 hereof will not be materially adverse to the Executive's
service with the Bank, and (iv) his agreement to observe such
restrictions forms a material part of the consideration for this
Agreement
5.4.2 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, breadth and duration.
5.4.3 Change in Control. The non-compete provision detailed in Section 5.4 hereof shall not be enforceable following a Change in Control.
Article 6 Administration of Agreement
6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement
6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.
6.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.
6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
Article 7 Claim and Review Procedures
7.1 Claims Procedure. An Executive or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.
7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures; and
(e) A statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator's notice of denial, must file with the Plan Administrator a written request for review.
7.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.
7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and
(d) A statement of the claimant's right to bring a civil action under ERISA Section 502(a).
Article 8 Amendments and Termination
8.1 Amendment. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. Provided, however, that the Bank may amend this Agreement to conform with legislative requirements or written directives to the Bank from its banking regulators.
8.2 Termination. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Upon such termination, the applicable benefits under this Agreement shall be paid to the Executive in the form and at the
earliest possible time as specified in this Agreement and permitted under
Section 409A of the Code and any applicable subsequent authority.
Article 9 Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executives right to separate from service at any time.
9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding. The Bank shall withhold any taxes that arc required to be withheld, under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).
9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of New Jersey, except to the extent preempted by the laws of the United States of America.
9.6 Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.
9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
EXECUTIVE: BANK:
TWO RIVER COMMUNITY BANK
/s/ Barry B. Davall By: /s/ Charles T. Parton
-------------------------------- ------------------------------
Barry Davall
Title: Chairman, Board of Directors
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SCHEDULE A
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
Barry Davall
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Pre-
Early Change in Retirement
Termination Control Lump Sum
Annual Disability Annual Death
Date Age Benefit(1) Benefit(2) Benefit(1) Benefit
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12/31/2005 64 $ 11,356 $ 12,382 $ 28,471 $273,844
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12/31/2006 65 $ 21,798 $ 22,274 $ 29,610 $284,798
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5/10/2007(3) 65 $ 26,352 $ 26,352 $ 30,000 $288,546
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(1) Payments are made in 180 equal monthly installments commencing within 30 days following Separation from Service. Refer to Section 2.2 for Early Termination and Section 2.4 for Change in Control.
(2) Payments are made in 180 equal monthly installments commencing at Normal Retirement Agent. Refer to Section 2.3 for Disability.
(3) This is the date when the Executive is fully vested. Benefit payments commence at age 67.
Exhibit 10.5
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is adopted this 7th day of July, 2005, by and between TWO RIVER COMMUNITY BANK, a New Jersey-chartered commercial bank located in Middletown, New Jersey ("Bank") and WILLIAM MOSS (the "Executive"). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.
Article I Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 "Beneficiary" means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.
1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.
1.3 "Board" means the Board of Directors of the Bank as from time to time constituted.
1.4 "Change in Control" means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Disability" means Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Executive's employer.
Medical determination of Disability may be made by either the Social
Security Administration or by the provider of an accident or health plan
covering
employees of the Executive's employer. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration's or the provider's determination.
1.7 "Early Termination" means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control.
1.8 "Effective Date" means November 1, 2004.
1.9 "Normal Retirement Age" means the Executive attaining age sixty-five (65).
1.10 "Plan Administrator" means the plan administrator described in Article 6.
1.11 "Plan Year" means each twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31, 2005.
1.12 "Schedule A" means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.
1.13 "Separation from Service" means that the Executive's service, as an employee and independent contractor, to the Bank and any member of a controlled group as defined in Section 414 of the Code to which the Bank belongs, has terminated for any reason, other than by reason of a leave of absence approved by the Bank or the death of the Executive.
1.14 "Termination for Cause" has that meaning set forth in Article 5.
Article 2 Distributions During Lifetime
2.1 Normal Retirement Benefit. If the Executive has a Separation from Service on or after Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Fifty Thousand Dollars ($50,000).
2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive's 65 birthday. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.2 Early Termination Benefit. Upon the Executive's Early Termination, the
Bank shall distribute to the Executive the benefit described in this
Section 2.2 in lieu of any other benefit under this Article.
2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.2.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.3 Disability Benefit. If the Executive's Disability results in Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article
2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service due to Disability occurs.
2.3.2 Distribution of Benefit. The Bank shall distribute the annual
benefit to the Executive in twelve (12) equal monthly installments
commencing within thirty (30) days following Normal Retirement Age.
The annual benefit shall be distributed to the Executive for fifteen
(15) years.
2.4 Change in Control Benefit. If the Executive is a full time employee at the date a Change in Control occurs, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.
2.4.1 Amount of Benefit The annual benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.4.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.4.3 Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, to the extent any distribution(s), if made, under this Section 2.4 would be treated as an "excess parachute payment" under Section 280G of the Code, the Bank shall reduce or delay the distribution(s) to the extent it would not be an excess parachute payment.
2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a "specified employee" under Section 409A of the Code and regulations thereunder, benefit distributions that qualify as a "separation from service" under Section 409A of the Code and regulations thereunder may not commence earlier than six (6) months after the date of such separation from service.
Article 3 Distribution at Death
3.1 Death During Active Service. If the Executive dies while in the active service to the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.
3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the death benefit set forth on Schedule A for the Plan Year that ended immediately prior to the Executive's date of death.
3.1.2 Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum within ninety (90) days following receipt by the Bank of the Executive's death certificate.
3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Executive had the Executive survived.
3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive's death certificate.
Article 4 Beneficiaries
4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.
4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive's death.
4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then die Executive's spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive's estate.
4.5. Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
Article 5 General Limitations
5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive's service is terminated by the Board for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's service with the Bank;
or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive's service and resulting in a material adverse effect on the Bank.
5.2 Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason; provided, however that the Bank shall evaluate the reason for the denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial.
5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act ("FDIA").
5.4 Non-compete Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if during the term of this Agreement and for within twenty-four (24) months following a Separation from Service, the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3 %) or less in the stock of a publicly-traded company):
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive's responsibilities will include providing banking or other financial services within the twenty-five (25) miles of any office maintained by the Bank as of the date of the Executive's Separation from Service;
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was in the service of the Bank as of the date of the Executive's Separation from Service;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other
financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as "Services"), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the Executive's Separation from Service;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
5.4.1 Judicial Remedies. In the event of a breach or threatened breach by
the Executive of any provision of these restrictions, the Executive
recognizes the substantial and immediate harm that a breach or
threatened breach will impose upon the Bank, and further recognizes
that in such event monetary damages may be inadequate to fully
protect the Bank. Accordingly, in the event of a breach or
threatened breach of these restrictions, the Executive consents to
the Bank's entitlement to such ex parte preliminary, interlocutory,
temporary or permanent injunctive, or any other equitable relief,
protecting and fully enforcing the Bank's rights hereunder and
preventing the Executive from further breaching any of his
obligations set forth herein. Nothing herein shall be construed as
prohibiting the Bank from pursuing any other remedies available to
the Bank at law or in equity for such breach or threatened breach,
including the recovery of damages from the Executive. The Executive
expressly acknowledges and agrees that: (i) the restrictions set
forth in Section 5.4 hereof are reasonable, in terms of scope,
duration, geographic area, and otherwise, (ii) the protections
afforded the Bank in Section 5.4 hereof are necessary to protect its
legitimate business interest, (iii) the restrictions set forth in
Section 5.4 hereof will not be materially adverse to the Executive's
service with the Bank, and (iv) his agreement to observe such
restrictions forms a material part of the consideration for this
Agreement
5.4.2 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, breadth and duration.
5.4.3 Change in Control. The non-compete provision detailed in Section 5.4 hereof shall not be enforceable following a Change in Control.
Article 6 Administration of Agreement
6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement
6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.
6.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.
6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
Article 7 Claim and Review Procedures
7.1 Claims Procedure. An Executive or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.
7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim, if the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which (the Plan Administrator expects to render its decision.
7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures; and
(e) A statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator's notice of denial, must file with the Plan Administrator a written request for review.
7.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.
7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and
(d) A statement of the claimant's right to bring a civil action under ERISA Section 502(a).
Article 8 Amendments and Termination
8.1 Amendment. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. Provided, however, that the Bank may amend this Agreement to conform with legislative requirements or written directives to the Bank from its banking regulators.
8.2 Termination. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Upon such termination, the applicable benefits under this Agreement shall be paid to the Executive in the form and at the
earliest possible time as specified in this Agreement and permitted under
Section 409A of the Code and any applicable subsequent authority.
Article 9 Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executives right to separate from service at any time.
9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding. The Bank shall withhold any taxes that arc required to be withheld, under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).
9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of New Jersey, except to the extent preempted by the laws of the United States of America.
9.6 Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.
9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
EXECUTIVE: BANK:
TWO RIVER COMMUNITY BANK
/s/ William D. Moss By: /s/ Charles T. Parton
-------------------------------- ------------------------------
William Moss
Title: Chairman, Board of Directors
----------------------------
|
SCHEDULE A
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
William Moss
------------------------------------------------------------------------------
Pre-
Early Change in Retirement
Termination Control Lump Sum
Annual Disability Annual Death
Date Age Benefit (1) Benefit (2) Benefit (1) Benefit
------------------------------------------------------------------------------
12/31/2005 48 $ 1,847 $ 5,326 $26,349 $253,426
------------------------------------------------------------------------------
12/31/2006 49 $ 3,546 $ 9,581 $27,403 $263,564
------------------------------------------------------------------------------
12/31/2007 50 $ 5,358 $13,569 $28,499 $274,106
------------------------------------------------------------------------------
12/31/2008 51 $ 7,292 $17,307 $29,639 $285,070
------------------------------------------------------------------------------
12/31/2009 52 $ 9,355 $20,810 $30,824 $296,473
------------------------------------------------------------------------------
12/31/2010 53 $11,557 $24,094 $32,057 $308,332
------------------------------------------------------------------------------
12/31/2011 54 $13,906 $27,171 $33,339 $320,665
------------------------------------------------------------------------------
12/31/2012 55 $16,412 $30,055 $34,673 $333,492
------------------------------------------------------------------------------
12/31/2013 56 $19,086 $32,758 $36,060 $346,832
------------------------------------------------------------------------------
12/31/2014 57 $21,939 $35,292 $37,502 $360,705
------------------------------------------------------------------------------
12/31/2015 58 $24,983 $37,666 $39,002 $375,133
------------------------------------------------------------------------------
12/31/2016 59 $28,231 $39,891 $40,563 $390,138
------------------------------------------------------------------------------
12/31/2017 60 $31,697 $41,977 $42,185 $405,744
------------------------------------------------------------------------------
12/31/2018 61 $35,395 $43,932 $43,872 $421,974
------------------------------------------------------------------------------
12/31/2019 62 $39,340 $45,764 $45,627 $438,853
------------------------------------------------------------------------------
12/31/2020 63 $43,549 $47,481 $47,452 $456,407
------------------------------------------------------------------------------
12/31/2021 64 $48,041 $49,090 $49,351 $474,663
------------------------------------------------------------------------------
5/2/2022(3) 65 $50,000 $50,000 $50,000 $480,909
------------------------------------------------------------------------------
|
(1) Payments are made in 180 equal monthly installments commencing within 30 days following Separation from Service. Refer to Section 2.2 for Early Termination and Section 2.4 for Change in Control.
(2) Payments are made in 180 equal monthly installments commencing at Normal Retirement Age. Refer to Section 2.3 for Disability.
(3) This is the date when the Executive reaches Normal Retirement Age.
Exhibit 10.6
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is adopted this 1st day of January, 2005, by and between TWO RIVER COMMUNITY BANK, a New Jersey-chartered commercial bank located in Middletown, New Jersey ("Bank") and MICHAEL GORMLEY (the `Executive"). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.
Article I Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
employees of the Executive's employer. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Executive's employer. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration's or the provider's determination.
Article 2 Distributions During Lifetime
Article 3 Distribution at Death
Article 4 Beneficiaries
Article 5 General Limitations
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral
turpitude in connection with the Executive's service with the Bank;
or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive's service and resulting in a material adverse effect on the Bank.
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive's responsibilities will include providing banking or other financial services within the twenty-five (25) miles of any office maintained by the Bank as of the date of the Executive's Separation from Service;
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was in the service of the Bank as of the date of the Executive's Separation from Service;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other
financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as "Services"), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the Executive's Separation from Service;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
Article 6 Administration of Agreement
Article 7 Claim and Review Procedures
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on
which the denial is based;
(c) A description of any additional information or material
necessary for the claimant to perfect the claim and an
explanation of why it is needed;
(d) An explanation of the Agreement's review procedures and the
time limits applicable to such procedures; and
(e) A statement of the claimant's right to bring a civil action
under ERISA Section 502(a) following an adverse benefit
determination on review.
information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on
which the denial is based;
(c) A statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to, and copies
of, all documents, records and other information relevant (as
defined in applicable ERISA regulations) to the claimant's
claim for benefits; and
(d) A statement of the claimant's right to bring a civil action
under ERISA Section 502(a).
Article 8 Amendments and Termination
earliest possible time as specified in this Agreement and permitted under
Section 409A of the Code and any applicable subsequent authority.
Article 9 Miscellaneous
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
EXECUTIVE: BANK:
TWO RIVER COMMUNITY BANK
/s/ Michael Gormley By: /s/ Charles T. Parton
------------------------------------ -------------------------------
Michael Gormley
Title: Chairman, Board of Directors
|
SCHEDULE A
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
Mike Gormley
----------------------------------------------------------------------------------------------------------
Date Age Early Termination Disability Change in Pre-Retirement
Annual Benefit(1) Benefit(2) Control Annual Lump Sum Death
Benefit(1) Benefit
----------------------------------------------------------------------------------------------------------
12/31/2005 49 $2,086 $5,546 $27,673 $266,161
----------------------------------------------------------------------------------------------------------
12/31/2006 50 $4,004 $9,977 $28,780 $276,807
----------------------------------------------------------------------------------------------------------
12/31/2007 51 $6,051 $14,130 $29,931 $287,879
----------------------------------------------------------------------------------------------------------
12/31/2008 52 $8,235 $18,023 $31,128 $299,394
----------------------------------------------------------------------------------------------------------
12/31/2009 53 $10,564 $21,671 $32,373 $311,370
----------------------------------------------------------------------------------------------------------
12/31/2010 54 $13,050 $25,090 $33,668 $323,825
----------------------------------------------------------------------------------------------------------
12/31/2011 55 $15,703 $28,294 $35,015 $336,778
----------------------------------------------------------------------------------------------------------
12/31/2012 56 $18,533 $31,298 $36,415 $350,249
----------------------------------------------------------------------------------------------------------
12/31/2013 57 $21,552 $34,112 $37,872 $364,259
----------------------------------------------------------------------------------------------------------
12/31/2014 58 $24,774 $36,751 $39,387 $378,829
----------------------------------------------------------------------------------------------------------
12/31/2015 59 $28,212 $39,223 $40,962 $393,983
----------------------------------------------------------------------------------------------------------
12/31/2016 60 $31,880 $41,540 $42,601 $409,742
----------------------------------------------------------------------------------------------------------
12/31/2017 61 $35,793 $43,712 $44,305 $426,132
----------------------------------------------------------------------------------------------------------
12/31/2018 62 $39,969 $45,748 $46,077 $443,177
----------------------------------------------------------------------------------------------------------
12/31/2019 63 $44,424 $47,656 $47,920 $460,904
----------------------------------------------------------------------------------------------------------
12/31/2020 64 $49,177 $49,444 $49,837 $479,340
----------------------------------------------------------------------------------------------------------
2/20/2021(3) 65 $50,000 $50,000 $50,000 $480,909
----------------------------------------------------------------------------------------------------------
|
(1) Payments are made in 180 equal monthly installments commencing within 30 days following Separation from Service. Refer to Section 2.2 for Early Termination and Section 2.4 for Change in Control.
(2) Payments are made in 180 equal monthly installments commencing at Normal Retirement Age. Refer to Section 2.3 for Disability.
(3) This is the date when the Executive reached Normal Retirement Age.
Exhibit 10.7
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is adopted this 1st day of January, 2005 by and between TWO RIVER COMMUNITY BANK, a New Jersey-chartered commercial bank located in Middletown, New Jersey ("Bank") and ANTHA STEPHENS (the "Executive"). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.
Article 1 Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 "Beneficiary" means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.
1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.
1.3 "Board" means the Board of Directors of the Bank as from time to time constituted.
1.4 "Change in Control" means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Disability" means Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Executive employer.
Medical determination of Disability may be made by either the Social
Security Administration or by the provider of an accident or health plan
covering employees of the Executive's employer. Upon the request of the
Plan Administrator, the Executive must submit proof to the Plan
Administrator of Social Security Administration's or the provider's
determination.
1.7 "Early Termination" means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control.
1.11 "Plan Year" means each twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31, 2005.
1.12 "Schedule A" means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.
1.13 "Separation from Service" means that the Executive's service, as an employee and independent contractor, to the Bank and any member of a controlled group as defined in Section 414 of the Code to which the Bank belongs, has terminated for any reason, other than by reason of a leave of absence approved by the Bank or the death of the Executive.
1.14 "Termination for Cause" has that meaning set forth in Article 5.
Article 2 Distributions During Lifetime
2.1 Normal Retirement Benefit. If the Executive has a Separation from Service on or after Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Twenty-Five Thousand Dollars ($25,000).
2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive's 65th birthday. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.2 Early Termination Benefit. Upon the Executive's Early Termination, the
Bank shall distribute to the Executive the benefit described in this
Section 2.2 in lieu of any other benefit under this Article.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.2.2 Distribution of Benefit. The Bank shall distribute the benefit to the Executive in one hundred eighty (180) consecutive equal monthly installments commencing within thirty (30) days following Separation from Service. During the applicable installment period, the Bank shall credit interest at an annual rate equal to six and one-half percent (6.5%), compounded monthly.
2.3 Disability Benefit. If the Executive's Disability results in Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service due to Disability occurs.
2.3.2 Distribution of Benefit. The Bank shall distribute the benefit to the Executive in one hundred eighty (180) consecutive equal monthly installments commencing within thirty (30) days following Normal Retirement Age. During the applicable installment period, the Bank shall credit interest at an annual rate equal to six and one-half percent (6.5%), compounded monthly.
2.4 Change in Control Benefit. If the Executive is a full time employee at the date a Change in Control occurs, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.
2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.4.2 Distribution of Benefit. The Bank shall distribute the benefit to the Executive in one hundred eighty (180) consecutive equal monthly installments commencing within thirty (30) days following Separation from Service. During the applicable installment period, the Bank shall credit interest at an annual rate equal to six and one-half percent (6.5%), compounded monthly.
2.4.3 Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, to the extent any distribution(s), if made, under this Section 2.4 would be treated as an "excess parachute payment" under Section 280G of the Code, the Bank shall reduce or delay the distribution(s) to the extent it would not be an excess parachute payment.
2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a "specified employee" under Section 409A of the Code and regulations thereunder, benefit distributions that qualify as a "separation from service" under Section 409A of the Code and regulations thereunder may not commence earlier than six (6) months after the date of such separation from service.
Article 3 Distribution at Death
3.1 Death During Active Service. If the Executive dies while in the active service to the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.
3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the death benefit set forth on Schedule A for the Plan Year that ended immediately prior to the Executive's date of death.
3.1.2 Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum within ninety (90) days following receipt by the Bank of the Executive's death certificate.
3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Executive had the Executive survived.
3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive's death certificate.
Article 4 Beneficiaries
4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.
4.2 Beneficiary Designation Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing arid otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive's death.
4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive's spouse shall be the designated Beneficiary. If the Executive has no
surviving spouse, the benefits shall be made to the personal representative of the Executive's estate.
4.5 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
Article 5 General Limitations
5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the con the Bank shall not distribute any benefit under this Agreement if Executive's service is terminated by the Board for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's service with the Bank; or
(c) Fraud, disloyalty, dishonesty or willful violation of any Jaw or significant Bank policy committed in connection with the Executive's service and resulting in a material adverse effect on the Bank.
5.2 Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason; provided, however that the Bank shall evaluate the reason for the denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial.
5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act ("FDIA").
5.4 Non-Compete Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if during the term of this Agreement and for within twenty-four (24) months following a Separation from Service, the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual,
partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive's responsibilities will include providing banking or other financial services within the twenty-five (25) miles of any office maintained by the Bank as of the date of the Executive's Separation from Service;
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part- time or permanent basis, any individual who was in the service of the Bank as of the date of the Executive's Separation from Service;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as "Services"), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the Executive's Separation from Service;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
5.4.1 Judicial Remedies. In the event of a breach or threatened breach by the Executive of any provision of these restrictions, the Executive recognizes
the substantial and immediate harm that a breach or threatened
breach will impose upon the Bank, and further recognizes that in
such event monetary damages may be inadequate to fully protect the
Bank. Accordingly, in the event of a breach or threatened breach of
these restrictions, the Executive consents to the Bank's entitlement
to such preliminary, interlocutory, temporary or permanent
injunctive, or any other equitable relief, protecting and fully
enforcing the Bank's rights hereunder and preventing the Executive
from further breaching any of his obligations set forth herein.
Nothing herein shall be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank at law or in
equity for such breach or threatened breach, including the recovery
of damages from the Executive. The Executive expressly acknowledges
and agrees that: (i) the restrictions set forth in Section 5.4
hereof are reasonable, in terms of scope, duration, geographic area,
and otherwise, (ii) the protections afforded the Bank in Section 5.4
hereof are necessary to protect its legitimate business interest,
(iii) the restrictions set forth in Section 5.4 hereof will not be
materially adverse to the Executive's service with the Bank, and
(iv) his agreement to observe such restrictions forms a material
part of the consideration for this Agreement.
5.4.2 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, breadth and duration.
5.4.3 Change in Control. The non-compete provision detailed in Section 5.4 hereof shall not be enforceable following a Change in Control.
Article 6 Administration of Agreement
6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.
6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or Failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.
6.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.
6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
Article 7 Claim and Review Procedures
7.1 Claims Procedure. An Executive or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.
7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim, if the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which (the Plan Administrator expects to render its decision.
7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures; and
(e) A statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator's notice of denial, must file with the Plan Administrator a written request for review.
7.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.
7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and
(d) A statement of the claimant's right to bring a civil action under ERISA Section 502(a).
Article 8 Amendments and Termination
8.1 Amendment. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. Provided, however, that the Bank may amend this Agreement to conform with legislative requirements or written directives to the Bank from its banking regulators.
8.2 Termination. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Upon such termination, the applicable benefits under this Agreement shall be paid to the Executive in the form and at the earliest possible time as specified in this Agreement and permitted under Section 409A of the Code and any applicable subsequent authority.
Article 9 Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executives right to separate from service at any time.
9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding. The Bank shall withhold any taxes that arc required to be withheld, under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).
9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of New Jersey, except to the extent preempted by the laws of the United States of America.
9.6 Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.
9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
EXECUTIVE: BANK:
TWO RIVER COMMUNITY BANK
/s/ Antha Stephens By: /s/ Charles T. Parton
------------------------- --------------------------------
Antha Stephens
Title: Chairman, Board of Directors
-----------------------------
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SCHEDULE A
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
Antha Stephens
---------------------------------------------------------------------------------------------------------
Pre-
Change in Retirement
Control Lump Sum
Early Termination Disability Annual Death
Date Age Annual Benefit(1) Benefit(2) Benefit(1) Benefit
---------------------------------------------------------------------------------------------------------
12/31/2005 48 $902 $2,643 $13,046 $125,477
---------------------------------------------------------------------------------------------------------
12/31/2006 49 $1,731 $4,755 $13,568 $130,496
---------------------------------------------------------------------------------------------------------
12/31/2007 50 $2,616 $6,734 $14,110 $135,716
---------------------------------------------------------------------------------------------------------
12/31/2008 51 $3,561 $8,589 $14,675 $141,144
---------------------------------------------------------------------------------------------------------
12/31/2009 52 $4,568 $10,327 $15,262 $146,790
---------------------------------------------------------------------------------------------------------
12/31/2010 53 $5,643 $11,956 $15,872 $152,662
---------------------------------------------------------------------------------------------------------
12/31/2011 54 $6,790 $13,484 $16,507 $158,768
---------------------------------------------------------------------------------------------------------
12/31/2012 55 $8,013 $14,915 $17,167 $165,119
---------------------------------------------------------------------------------------------------------
12/31/2013 56 $9,319 $16,256 $17,854 $171,724
---------------------------------------------------------------------------------------------------------
12/31/2014 57 $10,712 $17,513 $18,568 $178,593
---------------------------------------------------------------------------------------------------------
12/31/2015 58 $12,199 $18,692 $19,311 $185,736
---------------------------------------------------------------------------------------------------------
12/31/2016 59 $13,785 $19,796 $20,083 $193,166
---------------------------------------------------------------------------------------------------------
12/31/2017 60 $15,477 $20,831 $20,887 $200,892
---------------------------------------------------------------------------------------------------------
12/31/2018 61 $17,282 $21,801 $21,722 $208,928
---------------------------------------------------------------------------------------------------------
12/31/2019 62 $19,209 $22,710 $22,591 $217,285
---------------------------------------------------------------------------------------------------------
12/31/2020 63 $21,264 $23,562 $23,495 $225,977
---------------------------------------------------------------------------------------------------------
12/31/2021 64 $23,457 $24,361 $24,435 $235,016
---------------------------------------------------------------------------------------------------------
12/31/2022(3) 65 $25,000 $25,000 $25,000 $240,455
---------------------------------------------------------------------------------------------------------
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(2) Payments are made in 180 equal monthly installments commencing at Normal Retirement Age. Refer to Section 2.3 for Disability.
(3) This is the date when the Executive reached Normal Retirement Age.
Exhibit 10.8
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is adopted this 1st day of January, 2005, by and between TWO RIVER COMMUNITY BANK, a New Jersey-chartered commercial bank located in Middletown, New Jersey ("Bank") and ALAN TURNER (the "Executive"). The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended from time to time.
Article I Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
1.1 "Beneficiary" means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.
1.2 "Beneficiary Designation Form" means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.
1.3 "Board" means the Board of Directors of the Bank as from time to time constituted.
1.4 "Change in Control" means a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as such change is defined in Section 409A of the Code and regulations thereunder.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Disability" means Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than 3 months under an
accident and health plan covering employees of the Executive's employer.
Medical determination of Disability may be made by either the Social
Security Administration or by the provider of an accident or health plan
covering
employees of the Executive's employer. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration's or the provider's determination.
1.7 "Early Termination" means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause, or following a Change in Control.
1.8 "Effective Date" means November 1, 2004.
1.9 "Normal Retirement Age" means the Executive attaining age sixty-five (65).
1.10 "Plan Administrator" means the plan administrator described in Article 6.
1.11 "Plan Year" means each twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31, 2005.
1.12 "Schedule A" means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.
1.13 "Separation from Service" means that the Executive's service, as an employee and independent contractor, to the Bank and any member of a controlled group as defined in Section 414 of the Code to which the Bank belongs, has terminated for any reason, other than by reason of a leave of absence approved by the Bank or the death of the Executive.
1.14 "Termination for Cause" has that meaning set forth in Article 5.
Article 2 Distributions During Lifetime
2.1 Normal Retirement Benefit. If the Executive has a Separation from Service on or after Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.
2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Fifty Thousand Dollars ($50,000).
2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive's 65 birthday. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.2 Early Termination Benefit. Upon the Executive's Early Termination, the
Bank shall distribute to the Executive the benefit described in this
Section 2.2 in lieu of any other benefit under this Article.
2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.2.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.3 Disability Benefit. If the Executive's Disability results in Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article
2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service due to Disability occurs.
2.3.2 Distribution of Benefit. The Bank shall distribute the annual
benefit to the Executive in twelve (12) equal monthly installments
commencing within thirty (30) days following Normal Retirement Age.
The annual benefit shall be distributed to the Executive for fifteen
(15) years.
2.4 Change in Control Benefit. If the Executive is a full time employee at the date a Change in Control occurs, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.
2.4.1 Amount of Benefit The annual benefit under this Section 2.4 is the Change in Control benefit set forth on Schedule A for the Plan Year that ended immediately prior to the date on which Separation from Service occurs.
2.4.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing within thirty (30) days following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years.
2.4.3 Parachute Payments. Notwithstanding any provision of this Agreement to the contrary, to the extent any distribution(s), if made, under this Section 2.4 would be treated as an "excess parachute payment" under Section 280G of the Code, the Bank shall reduce or delay the distribution(s) to the extent it would not be an excess parachute payment.
2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a "specified employee" under Section 409A of the Code and regulations thereunder, benefit distributions that qualify as a "separation from service" under Section 409A of the Code and regulations thereunder may not commence earlier than six (6) months after the date of such separation from service.
Article 3 Distribution at Death
3.1 Death During Active Service. If the Executive dies while in the active service to the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.
3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the death benefit set forth on Schedule A for the Plan Year that ended immediately prior to the Executive's date of death.
3.1.2 Distribution of Benefit. The Bank shall distribute the benefit to the Beneficiary in a lump sum within ninety (90) days following receipt by the Bank of the Executive's death certificate.
3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts they would have been distributed to the Executive had the Executive survived.
3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive's death certificate.
Article 4 Beneficiaries
4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement to a Beneficiary upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.
4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive's beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator's rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive's death.
4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then die Executive's spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive's estate.
4.5. Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person's property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive's Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.
Article 5 General Limitations
5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive's service is terminated by the Board for:
(a) Gross negligence or gross neglect of duties to the Bank; or
(b) Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive's service with the Bank;
or
(c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive's service and resulting in a material adverse effect on the Bank.
5.2 Suicide or Misstatement. No benefits shall be distributed if the Executive commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason; provided, however that the Bank shall evaluate the reason for the denial, and upon advice of legal counsel and in its sole discretion, consider judicially challenging any denial.
5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act ("FDIA").
5.4 Non-compete Provision. The Executive shall forfeit any non-distributed benefits under this Agreement if during the term of this Agreement and for within twenty-four (24) months following a Separation from Service, the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3 %) or less in the stock of a publicly-traded company):
(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive's responsibilities will include providing banking or other financial services within the twenty-five (25) miles of any office maintained by the Bank as of the date of the Executive's Separation from Service;
(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was in the service of the Bank as of the date of the Executive's Separation from Service;
(iii) assists, advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking or other financial services, assists any other person in selling or providing banking or other
financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as "Services"), to or from any person or entity from whom the Executive or the Bank, to the knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the three (3) year period immediately prior to the Executive's Separation from Service;
(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.
5.4.1 Judicial Remedies. In the event of a breach or threatened breach by
the Executive of any provision of these restrictions, the Executive
recognizes the substantial and immediate harm that a breach or
threatened breach will impose upon the Bank, and further recognizes
that in such event monetary damages may be inadequate to fully
protect the Bank. Accordingly, in the event of a breach or
threatened breach of these restrictions, the Executive consents to
the Bank's entitlement to such ex parte preliminary, interlocutory,
temporary or permanent injunctive, or any other equitable relief,
protecting and fully enforcing the Bank's rights hereunder and
preventing the Executive from further breaching any of his
obligations set forth herein. Nothing herein shall be construed as
prohibiting the Bank from pursuing any other remedies available to
the Bank at law or in equity for such breach or threatened breach,
including the recovery of damages from the Executive. The Executive
expressly acknowledges and agrees that: (i) the restrictions set
forth in Section 5.4 hereof are reasonable, in terms of scope,
duration, geographic area, and otherwise, (ii) the protections
afforded the Bank in Section 5.4 hereof are necessary to protect its
legitimate business interest, (iii) the restrictions set forth in
Section 5.4 hereof will not be materially adverse to the Executive's
service with the Bank, and (iv) his agreement to observe such
restrictions forms a material part of the consideration for this
Agreement
5.4.2 Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to area, breadth and duration.
5.4.3 Change in Control. The non-compete provision detailed in Section 5.4 hereof shall not be enforceable following a Change in Control.
Article 6 Administration of Agreement
6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement
6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.
6.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.
6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
Article 7 Claim and Review Procedures
7.1 Claims Procedure. An Executive or Beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.
7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim, if the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which (the Plan Administrator expects to render its decision.
7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
(d) An explanation of the Agreement's review procedures and the time limits applicable to such procedures; and
(e) A statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:
7.2.1 Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator's notice of denial, must file with the Plan Administrator a written request for review.
7.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other
information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits.
7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.
7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
(a) The specific reasons for the denial;
(b) A reference to the specific provisions of the Agreement on which the denial is based;
(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits; and
(d) A statement of the claimant's right to bring a civil action under ERISA Section 502(a).
Article 8 Amendments and Termination
8.1 Amendment. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. Provided, however, that the Bank may amend this Agreement to conform with legislative requirements or written directives to the Bank from its banking regulators.
8.2 Termination. This Agreement may be terminated only by a written agreement signed by the Bank and the Executive. Upon such termination, the applicable benefits under this Agreement shall be paid to the Executive in the form and at the
earliest possible time as specified in this Agreement and permitted under
Section 409A of the Code and any applicable subsequent authority.
Article 9 Miscellaneous
9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.
9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executives right to separate from service at any time.
9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
9.4 Tax Withholding. The Bank shall withhold any taxes that arc required to be withheld, under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank's sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).
9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of New Jersey, except to the extent preempted by the laws of the United States of America.
9.6 Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.
9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term "Bank" as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.
IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
EXECUTIVE: BANK:
TWO RIVER COMMUNITY BANK
/s/ Alan B. Turner By: /s/ Charles T. Parton
-------------------------------- ------------------------------
Alan Turner
Title: Chairman, Board of Directors
----------------------------
|
SCHEDULE A
TWO RIVER COMMUNITY BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
Alan Turner
-------------------------------------------------------------------------------
Pre-
Early Change in Retirement
Termination Control Lump Sum
Annual Disability Annual Death
Date Age Benefit (1) Benefit (2) Benefit (1) Benefit
-------------------------------------------------------------------------------
12/31/2005 42 $ 1,065 $ 4,605 $20,621 $198,332
-------------------------------------------------------------------------------
12/31/2006 43 $ 2,044 $ 8,283 $21,445 $206,266
-------------------------------------------------------------------------------
12/31/2007 44 $ 3,089 $11,731 $22,303 $214,516
-------------------------------------------------------------------------------
12/31/2008 45 $ 4,204 $14,963 $23,195 $223,097
-------------------------------------------------------------------------------
12/31/2009 46 $ 5,394 $17,992 $24,123 $232,021
-------------------------------------------------------------------------------
12/31/2010 47 $ 6,663 $20,830 $25,088 $241,302
-------------------------------------------------------------------------------
12/31/2011 48 $ 8,017 $23,491 $26,092 $250,954
-------------------------------------------------------------------------------
12/31/2012 49 $ 9,462 $25,984 $27,135 $260,992
-------------------------------------------------------------------------------
12/31/2013 50 $11,004 $28,321 $28,221 $271,432
-------------------------------------------------------------------------------
12/31/2014 51 $12,649 $30,511 $29,349 $282,289
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12/31/2015 52 $14,404 $32,564 $30,523 $293,580
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12/31/2016 53 $16,277 $34,488 $31,744 $305,324
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12/31/2017 54 $18,275 $36,291 $33,014 $317,536
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12/31/2018 55 $20,407 $37,981 $34,335 $330,238
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12/31/2019 56 $22,681 $39,565 $35,708 $343,447
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12/31/2020 57 $25,108 $41,050 $37,136 $357,185
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12/31/2021 58 $27,698 $42,441 $38,622 $371,473
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12/31/2022 59 $30,461 $43,745 $40,167 $386,332
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12/31/2023 60 $33,409 $44,967 $41,773 $401,785
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12/31/2024 61 $36,554 $46,112 $43,444 $417,856
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12/31/2025 62 $39,910 $47,186 $45,182 $434,571
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12/31/2026 63 $43,491 $48,192 $46,989 $451,953
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12/31/2027 64 $47,312 $49,135 $48,869 $470,032
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8/29/2028(3) 65 $50,000 $50,000 $50,000 $480,909
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(1) Payments are made in 180 equal monthly installments commencing within 30 days following Separation from Service. Refer to Section 2.2 for Early Termination and Section 2.4 for Change in Control.
(2) Payments are made in 180 equal monthly installments commencing at Normal Retirement Age. Refer to Section 2.3 for Disability.
(3) This is the date when the Executive reaches Normal Retirement Age.
Exhibit 10.9
TWO RIVER COMMUNITY BANK 2003 INCENTIVE STOCK OPTION PLAN
The name of this plan is the Two River Community Bank 2003 Incentive Stock Option Plan (the "Plan"). The purpose of the Plan is to enable Two River Community Bank (the "Bank") to continue to attract, retain and motivate employees who contribute, or who are expected to contribute, to the ongoing success of the Bank by their skill, experience, ability, diligence and industry, and to provide such individuals with the meaningful opportunity to participate in the long-term success and growth of the Bank by giving them a proprietary interest in the Bank. The Plan is intended to qualify as an incentive stock option plan within the meaning of Section 422 of the Internal Revenue Code (the "Code"), and all of its terms shall be interpreted in a manner which is entirely consistent with that intention and the applicable provisions of the Code and the Treasury Regulations.
As used in this Plan, the following terms have the meanings set forth below. The singular includes the plural, the masculine gender includes the feminine gender, and vice versa, as the context may require. The word "person" includes any natural person and any corporation, firm, partnership, or other form of association.
"Board" means the Board of Directors of the Bank.
"Change of Control" means any of the following:
(i) The acquisition of nominal or beneficial ownership of at least twenty five percent (25%) of the Stock, or all or substantially all of the assets of the Bank, by a single person, a single entity or a group of persons or entities acting in concert, in a single transaction or a series of transactions
the intention or effect of which is to culminate in an acquisition of Stock or assets which comes within the description of this sentence;
(ii) The merger, consolidation or combination of the Bank with an unaffiliated corporation in which the Directors immediately prior to such transaction constitute less than a majority of the board of directors of the surviving new or combined entity in such transaction;
(iii) The transfer of all or substantially all of the Bank's assets to an unaffiliated corporation;
(iv) The election to the Board during any consecutive three-year period of a group of individuals constituting a majority of the Board who were not serving as directors immediately prior to such consecutive three-year period; provided that any new director whose election was approved by a majority of the Board prior to his or her election shall be disregarded for this purpose.
"Code" means the Internal Revenue Code of 1986, as it may be amended from lime to time.
"Committee" means the Compensation Committee of the Board, to which the Board has expressly delegated the authority to administer the Plan.
"Common Stock" means the common stock, $5.00 par value, of the Bank.
"Disability" means the permanent disability of a Participant or the continuous failure of a Participant to perform substantially all of the services to the Bank performed by the Participant prior to such failure for a period of six months commencing with the first date of such failure, for reasons other than termination as an Employee of the Bank, death, or approved retirement.
"Employee" means any officer or other common law employee of the Bank, with such term being defined as broadly as possible in, but only in, that manner which is consistent with Section 422 of the Code.
"Fair Market Value" has the meaning which is set forth in Section 8.12.
"Grant Date" means the date on which an Option is awarded to an eligible Participant under this Plan, notwithstanding any initial prohibition against exercise.
"Incentive Stock Option" or "Option" means a stock option granted under this Plan, which is intended to qualify in every respect as an incentive stock option under Section 422 of the Code.
"Misconduct" means the willful and continued failure by the Participant to perform the Participant's duties for the Bank after a warning in writing from the Committee specifically identifying any such failure; the willful participation by the Participant in an act which causes material injury to the Bank, as specified in a written notice from the Committee; conviction of a felony or other crime (other than a traffic violation); or excessive absenteeism (other than for illness), after a warning in writing from the Committee. No act or failure to act on the part of a Participant shall be considered to be willful unless done, or omitted to be done, without good faith and without the reasonable belief that the action or omission was in the best interest of the Bank.
"Participant" means an Employee to whom an Option has been awarded under the Plan.
"Qualified Person" means a living Participant's legal guardian or legal representative, or a deceased Participant's legal representative, heir or legatee, as the case may be, who has a legal right to or in respect of an Option held by that Participant.
"Share" means a share of Common Stock.
"Stated Expiration Date" means the date set forth in the Incentive Stock Option agreement on which the related Incentive Stock Option expires, absent the Participant's termination of service to the Bank.
3.01 The Committee. The Plan shall be administered by the Compensation Committee, which shall consist of those members of the Board who are, from time to time, duly appointed to the Committee by the Board from among the Directors.
The Committee shall have the full, final and preemptive power and authority, exercisable in its sole discretion, to grant Incentive Stock Options to eligible Employees, pursuant to the terms of the Plan.
In particular, but not by way of limitation, the Committee shall have the authority:
(i) to select those Employees to whom Options may from time to time be granted under the Plan;
(ii) to determine whether and to what extent Options are to be granted hereunder; and
(iii) to determine the terms and conditions under which Options granted under the Plan are to be held, exercised and forfeited, including those terms and conditions which relate to vesting and expiration, all of which shall be subject to ratification by the Board and shall be entirely consistent with both the terms of the Plan and the applicable provisions of the Code and the Treasury Regulations.
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, determine to be advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan, PROVIDED, HOWEVER, that any rule, guideline and practice adopted by the Committee shall be entirely consistent in its terms and application with those provisions of the Code and the
Treasury Regulations which relate to the continuing qualification of the Plan as a qualified incentive stock option plan under Section 422 of the Code.
All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Bank and Participants. No member of the Committee shall be liable for any action or determination made in good faith.
4.01 Designation of Employees. All Employees of the Bank, including officers and those Directors who are employees, are eligible to receive Incentive Stock Options under the Plan. No Director or other person who is not an employee of the Bank may receive Incentive Stock Options under the Plan.
4.02 Participants. The Committee may consider any legally permissible factor in selecting Participants and in determining the type and amount of their incentive Stock Options, including, but not limited to, (a) the current or anticipated financial condition of the Bank, (b) the actual or anticipated contribution by the Participant to the Bank and its customers, and (c) the other compensation provided to the Participant. The Committee's award of an incentive Stock Option to an Employee in any year shall not require the Committee to award, or preclude the Committee from awarding, any Incentive Stock Option to that Employee in any other year.
5.01 Number of Shares. Subject to Section 8.07, the aggregate number of Shares which may be issued under the Plan shall not exceed 67,879 Shares.
5.02 Expiration and Cancellation. If an Option granted under the Plan expires, is terminated, or is otherwise canceled before its exercise, that Option and the related shares of Common Stock shall
not apply toward the limits established under Section 5.01. If Shares issued or awarded under this Plan are forfeited, canceled, terminated, or reacquired by the Bank, those forfeited, canceled, terminated, or reacquired Shares shall not apply toward the limits established under Section 5.01 and shall be available again for the grant of Options.
5.03 Maintenance of Stock. Shares issued under the Plan shall be authorized and unissued shares or shares of treasury stock. The Bank shall always maintain such Shares in a number which is at least equal to the number of Shares for which Options have been granted and remain outstanding and unexercised under the Plan and any other stock option plan or arrangement established by the Bank.
Each Incentive Stock Option granted under this Plan must be granted within ten (10) years from the date on which the Plan was adopted by the Board, and shall be subject to the following terms and conditions:
6.01 Price. The option price per share shall be equal to the Fair Market Value of the Common Stock on the Grant Date of the Incentive Stock Option.
6.02 Number. The number of Shares covered by each Incentive Stock Option awarded to each Participant shall be determined by the Committee, consistent with any limitations which are set forth in the Code, the Treasury Regulations, or any other applicable provision of law, subject to ratification by the Board. The aggregate Fair Market Value on the Grant Date of those Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Bank) shall not exceed One Hundred Thousand Dollars ($100,000).
6.03 Exercise. An Incentive Stock Option may be exercised, in whole or in part, by giving written notice to the Bank (Attention: Chief Financial Officer) at its principal office or to such transfer agent as the Bank may designate. The notice shall identify the Incentive Stock Option being exercised and shall contain such other information and terms as the Committee may require. The notice shall be accompanied by full payment of the purchase price for the Shares, in such form as the Committee shall determine to be consistent with the requirements of the Code and any other applicable legal authority. As soon as practicable after receipt of the written notice and full payment of the purchase price, the Bank shall deliver to the person exercising the Stock Option one or more certificates for the Shares. Unless exercised sooner, each Incentive Stock Option shall have a Stated Expiration Date no later than ten (10) years after the Grant Date for that Incentive Stock Option.
6.04 Limitation on Participation. No Incentive Stock Options shall be granted to any Employee who, at the time at which such option would otherwise be granted, owns (within the meaning of Section 422 of the Code) stock having more than 10% of the total combined voting power of all classes of stock of the Bank.
6.05 Vesting. The vesting of Incentive Stock Options shall be determined by the Committee and shall be a date and/or event(s) specified by the Committee with respect to each Incentive Stock Option, provided that such date or event is not before the Grant Date for that Incentive Stock Option. In the absence of an express statement by the Committee as to the vesting of any particular Incentive Stock Option, such Option shall vest immediately on the Grant Date with respect to one third (1/3) of the Stock covered by the Option, and vest with respect to an additional one third (1/3) on each anniversary date of the Grant Date of such Option. Except as described in this provision, no other vesting schedule has been established and any future vesting
of Incentive Stock Options, or any particular Incentive Stock Option, shall be determined in the sole discretion of the Committee.
6.06 Incorporation by Reference of Applicable Provisions of the Code. Each Incentive Stock Option agreement referred to in Section 8.05 and those provisions of this Plan which relate to the terms and conditions under which the Incentive Stock Options are issued, held and exercised shall contain or shall be deemed to contain by incorporation all provisions required in order to qualify the Incentive Stock Options as incentive stock options under Section 422 of the Code, and the provisions of this Plan shall be interpreted and construed to continuously effect such treatment under that Section.
Notwithstanding the Stated Expiration Date of a particular Incentive Stock Option or those terms which relate to its exercise or vesting, all as set forth in an Incentive Stock Option agreement, the related Option shall expire and be subject to forfeiture in accordance with the terms of this Section 7 upon the occurrence of any of the following events:
If the Participant is terminated by the Bank as an Employee by reason of Misconduct, all incentive Stock Options held by the Participant shall terminate ipso facto and shall be immediately forfeited in their entirety as to their vested and unvested portions;
If the Participant's service as an Employee of the Bank terminates by reason of the Participant's death, Disability, or retirement with the prior approval of the Bank, all Options held by the Participant shall become fully exercisable, vested and non-forfeitable, and shall expire on a date which is the earlier of (i) the Stated Expiration Date of such Options or (ii) (a) in the case of such a termination other than by reason of the Participant's death, ninety (90) days from the
Participant's termination as an Employee of the Bank or (b) in the case of the Participant's death, one year from the date of death;
If the Participant's service as an Employee of the Bank terminates other
than for any of the reasons set forth in the previous two paragraphs of this
Section 7, the unvested portion of all Incentive Stock Options held by the
Participant on the date of such Voluntary Termination shall be forfeited, and
the vested portion shall become fully exercisable and shall expire on a date
which is the earlier of the stated expiration date of such Options or ninety
(90) days from the Participant's termination as an Employee of the Bank;
Notwithstanding the foregoing terms, if the Participant's service as an Employee of the Bank or any successor to the Bank terminates within two (2) years after any Change in Control for any reason other than Misconduct, all Incentive Stock Options held by the Participant shall become fully vested and non-forfeitable upon such termination of employment, and shall expire on the earlier of (i) the Stated Expiration Date of such Options or (ii) ninety (90) days from the Participant's termination as an Employee of the Bank or its successor.
No Stock Option granted under the Plan shall provide for the payment of cash to any Director or Employee upon its cancellation.
8.01 Effective Date. This Plan shall be effective as of the date of its approval by the shareholders of the Bank in accordance with the applicable provisions of the Banking Act of 1948, N.J.S. 17:9A-1 et seq., and the regulations promulgated under the Act. If shareholder approval is not obtained within one year following the date the Plan is adopted by the Board, the Plan and any award of Options by the Committee in anticipation of its adoption shall be void ab initio.
8.02 Duration. Unless the Plan is terminated earlier by the Board of Directors of the Bank, the Plan shall expire ten (10) years from the date on which the Plan is approved by shareholders of the Bank. No Incentive Stock Option or other rights under this Plan shall be granted thereafter. The Board, without further approval of the Bank's shareholders, may at any time before that date terminate the Plan. After the termination of the Plan under the foregoing sentence, no further Incentive Stock Options may be granted under the Plan. Options granted before any such termination shall continue to be exercisable, but only in accordance with the terms of the Option as such terms are set forth in any agreement with respect to the Option or this Plan.
8.03 Non-Transferability of Incentive Stock Options: Exercise by Participant. No Option may be sold, pledged, assigned, encumbered, disposed of or otherwise transferred other than by will or the laws of descent and distribution. The Bank shall not be required to recognize any attempted disposition by any Participant or Qualified Person. During a Participant's lifetime, such Participant's Options are exercisable only by such Participant.
8.04 Change of Control. Notwithstanding anything to the contrary set forth in the Plan in the event that (i) the Bank experiences a Change of Control, or (ii) the Bank adopts a plan of complete liquidation, then (A) all Incentive Stock Options granted hereunder shall be fully exercisable upon the consummation of such event and (B) the Bank may, in the exercise of its sole discretion, give a Participant written notice thereof requiring such Participant either (1) to exercise his or her Options within thirty days after receipt of such notice, including all installments whether or not they would otherwise be exercisable at that date, (2) in the event of a merger or consolidation in which shareholders of the Bank will receive shares of another corporation, to agree to convert his or her Options into comparable options to acquire such shares, (3) in the event of a merger or consolidation in which shareholders of the Bank will
receive cash or other property (other than capital stock), to agree to convert his or her Options into such consideration (in an amount representing the appreciation over the exercise price of such Options) or (4) to surrender such Options or any unexercised portion thereof. Any Options as to which the Bank does not issue a notice of the type described in the foregoing sentence shall remain subject to all of the terms and conditions of this Plan and the Incentive Stock Option agreement, including, but not limited to, the terms and conditions of Section 7 of this Plan.
8.05 Incentive Stock Option Agreements. The terms of each Incentive Stock Option shall be stated in an agreement between the Bank and the Participant in a form approved by the Committee. The Participant must execute and deliver the agreement to the Bank as a condition to the effectiveness of the Option. All such agreements may contain all such terms and condition as the Committee considers to be advisable which are not inconsistent with the Plan and the applicable provisions of the Code, including, but not limited to, provisions which relate to vesting, exercise, expiration and transfer restrictions on those Incentive Stock Options which are subject to the Incentive Stock agreement.
8.06 Compliance with Law. The Bank may determine, in its sole discretion, that it is necessary or desirable to list, register or qualify (or to update any listing, registration or qualification of) any Option or the Shares issuable or issued under any Option granted under this Plan on any securities exchange or under any federal or state securities law, or to obtain consent or approval of any governmental body as a condition to, or in connection with, the award of any Option, the issuance of Shares under any Option or this Plan, or the removal of any restrictions imposed on such Shares. If the Bank makes such a determination, the Option shall not be awarded or the Shares shall not be issued or the restrictions shall not be removed, as the case may be, in whole or in part, unless and until the listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Bank. The Bank's obligation to sell or issue Shares under any Option is subject to the compliance with all applicable laws and regulations. The Committee, in its sole discretion, shall determine whether the sale and issue of Shares is in compliance with all applicable laws and regulations.
8.07 Adjustment. If the outstanding Shares of Common Stock are increased or decreased or changed into or exchanged for a different number or kind of securities of the Bank or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of securities or dividend payable in corporate securities, then an appropriate adjustment shall be made by the Board in the number, kind and/or price of Shares with respect to which Options may be granted under the Plan. In addition, the Board shall make appropriate adjustment in the number, kind and/or price of Shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable. In the event of any such adjustment, the exercise price of any Option, the performance objectives, restrictions or other terms and conditions of any Option and the Shares issuable under any Option shall be adjusted as and to the extent appropriate, in the sole and absolute discretion of the Board, to provide each Participant with substantially the same relative rights before and after such adjustment to the extent practical.
8.08 Withholding. The Bank shall have the right to withhold from any payments made under the Plan or to collect as a condition to any award, payment or issuance of Shares under the Plan any taxes required to be withheld by Federal, state or local law, with such withholding being effected in the manner determined by the Committee.
8.09 No Right to Continued Employment. No Participant under the Plan shall have any implicit right to continue in the employ of the Bank for any period of time because of his or her participation in the Plan.
8.10 No Right as Shareholder. No Participant or Qualified Person shall have the rights of a shareholder with respect to the Shares covered by an Option unless and until such time as a stock certificate is issued to that person for the Shares. No adjustment shall be made for cash dividends or similar rights for which the record date is before the date on which such stock certificate is issued.
8.11 Amendment of the Plan. In accordance with all applicable law, the Board may amend the Plan from time to time in such respects as the Board deems advisable. No such amendment, however, shall (a) change or impair an Option without the consent of the Participant or Qualified Person holding that Option, or (b) without the prior approval of the Bank shareholders: (i) increase the limits provided in Section 5.01 (except by adjustment under Section 7.07); (ii) change the class of person eligible to receive Options under the Plan; or (iii) make any other change that requires approval of the Bank shareholders either under applicable law or to preserve the treatment of the Incentive Stock Options as such under Section 422 of the Code.
8.12 Definition of Fair Market Value. Whenever "Fair Market Value" of the Common Stock is to be determined for purposes of this Plan, it shall be conclusively determined by the Committee, which may use all or any combination of the bid price last quoted by a reputable brokerage firm on such Grant Date; an independent third party assessment of the fair market value of the Common Stock; and the prices at which the most recent transactions in the Common Stock have been effected. In no event shall any Option be granted for less than par value of the Common Stock.
8.13 Investment Letter. If required by the Committee, each Participant shall agree to execute a statement directed to the Bank, upon each and every exercise by such Participant of any Stock Options, that shares of Common Stock issued thereby are being acquired for investment purposes only and not with a view to the distribution thereof, and containing an agreement that such Shares will not be sold or transferred unless either (1) registered under the Securities Act of 1933 and all applicable state securities laws, or (2) exempt from such registration in the opinion of Bank counsel. If required by the Committee, certificates representing shares of Common Stock issued upon exercise of Stock Options shall bear a restrictive legend summarizing the restrictions on transferability applicable thereto.
8.14 Fractional and Minimum Shares. In no event shall a fraction of a share of Common Stock be purchased or issued under the Plan without Board approval. The Committee may specify a minimum number of Shares for which each Stock Option must be exercised.
8.15 Application of Funds. The proceeds received by the Bank from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
8.16 Other Incentives and Plans. Nothing in this Plan shall prohibit the Bank from establishing other employee incentives and plans.
8.17 Governing Law. The validity and construction of the Plan and of each agreement evidencing Incentive Stock Options shall be governed by the laws of the State of New Jersey, excluding the conflict-of-laws principles thereof.
Exhibit 10.10
TWO RIVER COMMUNITY BANK 2003 NON-QUALIFIED STOCK OPTION PLAN
The name of this plan is the Two River Community Bank 2003 Non-qualified Stock Option Plan (the "Plan"). The purpose of the Plan is to enable Two River Community Bank (the "Bank") to continue to attract, retain and motivate directors and employees who contribute, or who are expected to contribute, to the ongoing success of the Bank by their skill, experience, ability, diligence and industry, and to provide such individuals with the meaningful opportunity to participate in the long-term success and growth of the Bank by giving them a proprietary interest in the Bank.
As used in this Plan, the following terms have the meanings set forth below. The singular includes the plural, the masculine gender includes the feminine gender, and vice versa, as the context may require. The word "person" includes any natural person and any corporation, firm, partnership, or other form of association.
(a) "Board" means the Bank's Board of Directors.
(b) "Change of Control" means any of the following:
(i) The acquisition of nominal or beneficial ownership of at least twenty five percent (25%) of the Stock, or all or substantially all of the assets of the Bank, by a single person, a single entity or a group of persons or entities acting in concert, in a single transaction or a series of transactions the intention or effect of which is to culminate in an acquisition of Stock or assets which comes within the description of this sentence;
(ii) The merger, consolidation or combination of the Bank with an unaffiliated corporation in which the Directors immediately prior to such transaction constitute less than a majority of the board of directors of the surviving new or combined entity in such transaction;
(iii) The transfer of all or substantially all of the Bank's assets to an unaffiliated corporation;
(iv) The election to the Board during any consecutive three-year period of a group of individuals constituting a majority of the Board who were not serving as directors immediately prior to such consecutive three-year period; provided that any new director whose election was approved by a majority of the Board prior to his or her election shall be disregarded for this purpose.
(c) "Committee" means the Compensation Committee of the Board, to which the Board has expressly delegated the authority to administer the Plan.
(d) "Director" means an individual who has been duly elected to serve as a member of the Board.
(e) "Disability" means the permanent disability of a Participant or the continuous failure of a Participant to perform substantially all of the services to the Bank performed by the Participant prior to such failure for a period of six months commencing with the first date of such failure, for reasons other than Voluntary or Involuntary Termination, Termination for Misconduct, death, or approved retirement.
(f) "Employee" means a person in the employ, under common law, of the Bank.
(g) "Grant" means the award of a Stock Option to a Participant.
(h) "Grant Date" means the date on which an option is awarded to an eligible Participant under this Plan notwithstanding any initial prohibition against exercise.
(i) "Involuntary Termination" means separation from service as an Employee or Director at the request or demand of the Bank for any reason other than Misconduct, but shall not include a separation from service by reason of retirement, death or Disability.
(j) "Misconduct" means the willful and continued failure by the Participant to perform the Participant's duties for the Bank after a warning in writing from the Committee specifically identifying any such failure; the willful participation by the Participant in an act which causes material injury to the Bank as specified in a written notice from the Committee; conviction of a felony or other crime (other than a traffic violation); or excessive absenteeism (other than for illness), after a warning in writing from the Committee. No act or failure to act on the part of a Participant shall be considered to be willful unless done, or omitted to be done, without good faith and without the reasonable belief that the action or omission was in the best interest of the Bank.
(k) "Participant" means a Director or Employee who has received a Grant under this plan.
(1) "Stated Expiration Date" means the date set forth in a Stock Option Agreement on which the related Stock Option expires absent the Participant's termination of service to the Bank.
(m) "Stock" means the Common Stock of the Bank, par value $5.00.
(n) "Stock Option' means a right to purchase Stock.
(o) "Stock Option Price" means the purchase price for a share of Stock subject to a particular Stock Option.
(p) "Qualified Person" means a living Participant's legal guardian or legal representative, or a deceased Participant's legal representative, heir or legatee, as the case may be, who has a legal right to or in respect of an Option held by that Participant.
(q) "Share" means a share of Common Stock.
(r) "Voluntary Termination" means a termination of service as an Employee or Director which is not an Involuntary Termination, a termination for Misconduct, a termination by reason of death, a termination by reason of retirement approved by the Bank (but shall include a termination by reason of retirement. which is not approved by the Bank), or a termination by reason of Disability.
3.01 The Committee. The Plan shall be administered by the Committee.
3.02 Committee Authority. Except as otherwise specifically provided in the Plan, the Committee shall have full and final authority in its sole discretion to grant Stock Options to eligible Participants pursuant to the terms of the Plan. The Committee shall also have the conclusive authority to:
(i) interpret provisions of the Plan and decide all questions of fact arising in its application;
(ii) make all other determinations necessary or advisable for the administration of the Plan;
(iii) authorize any of its members to execute and deliver documents on behalf of the Committee;
(iv) make all determinations with respect to those Directors and Employees to whom Stock Options are to be granted, the number of Shares with respect to which Stock Options are to be granted to each such Director and Employee, and the particular terms of such Stock Options, all of which shall be subject to approval and ratification by the Board of Directors. However, the Committee shall not have authority to take action inconsistent with other provisions of the Plan. No member of the Committee shall be liable for any action or determination made in good faith.
4.01 Number of Shares. The aggregate number of Shares which may be issued under the Plan shall not exceed 67,879 Shares.
4.02 Expiration and Cancellation. If a Stock Option granted under the Plan
expires, is terminated, or is otherwise canceled before exercise, the related
shares of Common Stock shall not apply toward the limits provided in Section
4.01. If the Shares issued or granted under this Plan are forfeited, canceled,
terminated, or reacquired by the Bank, those forfeited, canceled, terminated or
reacquired Shares shall not apply toward the limits provided in Section 4.01 and
shall be available again for grants hereunder.
5.01 Agreement. Each Grant shall be evidenced by a written Stock Option agreement which shall specify the number of shares of Stock available for purchase, the Stock Option Price pertaining to such Grant, the Stated Expiration Date of the Stock Option, that the Stock Option is not transferable except pursuant to the laws of descent and distribution on the death of the Participant, that during the Participant's lifetime the Stock Option is exercisable only by the Participant or, in the event of the Participant's Disability, for the Participant by the Participant's Qualified Person. The agreement shall contain such other provisions as the Committee deems to be necessary or appropriate.
5.02 Exercise. A Stock Option may be exercised, in whole or in part, by giving written notice to the Bank (Attention: Chief Financial Officer) at its principal office or to such transfer agent as the Bank may designate. The notice shall identify the number of Stock Options being exercised and shall contain such other information and terms as the Committee may require. The notice
shall be accompanied by full payment of the purchase price for the Shares (a) in
United States dollars in cash or by check, (b) at the discretion of the
Committee, by delivery of previously acquired Shares having a Fair Market Value
equal on the date of exercise to the cash exercise price of the Stock Option, or
(c) at the discretion of the Committee, by a combination of (a) and (b) above.
As soon as practicable after receipt of the written notice, the Bank shall
deliver to the person exercising the Stock Option one or more certificates for
the Shares.
The Stock Option Price shall be equal to the Fair Market Value of a share of Stock on the Grant Date. Whenever "Fair Market Value" of the Common Stock is to be determined for purposes of this Plan, it shall be conclusively determined by the Committee, which may use all or any combination of the bid price last quoted by a reputable brokerage firm on such Grant Date; an independent third party assessment of the fair market value of the Stock; and the prices at which the most recent transactions in the Common Stock have been effected. In no event shall any Option be granted for less than the par value of the Bank's Stock.
7.01 General. Grants may be made from time to time by the Committee to Directors and Employees in the exercise of its discretion in all respects, subject to approval and ratification by the Board of Directors.
The vesting of Stock Options shall be determined by the Committee and shall be a date and/or event(s) specified by the Committee with respect to each Stock Option, provided that such date or event is not before the Grant Date for that Stock Option. In the absence of an express
statement by the Committee as to the vesting of any particular Stock Option, such Option shall vest immediately on the Grant Date with respect to one third (1/3) of the Stock covered by the Option, and an additional one third (1/3) on each anniversary date of the Grant Date of such Option. Except as described in this provision, no other vesting schedule has been established and any future vesting of Stock Options, or any particular Stock Option shall be determined in the sole discretion of the Committee.
The Grant Date of a Stock Option shall be the date specified by the Committee, provided that such date shall not be before the date on which the Stock Option is actually granted. The term of each Stock Option shall be determined by the Committee, as memorialized in the Stock Option agreement, but shall not exceed ten (10) years from the date of grant. Each Stock Option shall become exercisable at such time or times in such amount or amounts during its term as shall be determined by the Committee at the time of grant, as memorialized in the Stock Option agreement. The Committee may accelerate the date on which any Stock Option can be exercised. Unless otherwise specified by the Committee, once a Stock Option becomes exercisable, whether in full or in part, it shall remain so exercisable until its expiration, forfeiture, termination or cancellation.
Notwithstanding the Stated Expiration Date of a particular Stock Option or those terms which relate to its exercise or vesting, all as set forth in a Stock Option agreement, the related Stock Option shall expire and be subject to forfeiture in accordance with the terms of this Section 10 upon the occurrence of any of the following events:
If the Participant is terminated by the Bank as a Director or Officer by reason of Misconduct, all Stock Options held by the Participant shall terminate ipso facto and shall be immediately forfeited in their entirety as to their vested and unvested portions;
If the Participant's service as a Director or Employee of the Bank terminates by reason of the Participant's death, Disability, or retirement with the prior approval of the Bank, all Stock Options held by the Participant or the Participant's Qualified Person shall become fully exercisable, vested and non-forfeitable, and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or one hundred eighty (180) days from the Participant's termination of service with the Bank;
If the Participant's service as a Director or Employee of the Bank terminates in a Voluntary Termination, the unvested portion of all Stock Options held by the Participant on the date of such Voluntary Termination shall be forfeited, and the vested portion shall become fully exercisable and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or one hundred eighty (180) days from the Participant's termination of service with the Bank;
If the Participant's service as a Director or Employee of the Bank terminates in an Involuntary Termination, the unvested portion of all Stock Options held by the Participant on the date of such Involuntary Termination shall be forfeited, and the vested portion shall become fully exercisable and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or ninety (90) days from the Participant's termination of service with the Bank;
Notwithstanding the foregoing terms, if the Participant's service as a Director or Employee of the Bank or any successor to the Bank terminates within two (2) years after any Change in Control for any reason other than Misconduct, all Stock Options held by the
Participant or the Participant's Qualified Person shall become fully vested and non-forfeitable upon such termination of service, and shall expire on the stated expiration date of such Stock Options.
No Stock Option granted under the Plan shall provide for the payment of cash to any Director or Employee upon its cancellation.
The aggregate number of shares of Stock with respect to which Stock Options may be granted, the aggregate number of shares of Stock subject to each outstanding Stock Option, and the Stock Option Price of each outstanding Stock Option shall be appropriately adjusted for any increase or decrease in the number of shares of issued Stock resulting from a division or consolidation of shares, whether through a reorganization, recapitalization, stock split, stock distribution or combination of shares outstanding effected without receipt of consideration by the Bank to the extent practical.
To the extent consistent with applicable law, the Board may amend this Plan from time to time (including amendment to terminate the Plan) at is discretion. However, no amendment shall adversely affect any outstanding Stock Option without the consent of the Participant.
13.01 Effective Date. This Plan shall be effective as of the date of its approval by the shareholders of the Bank, in accordance with any applicable laws. If shareholder approval is not obtained within one year following the date the Plan is approved by the Board, the plan and any
Stock Options awarded by the Committee in anticipation of its adoption shall be null and void, ab initio.
13.02 Duration. Unless the Plan is terminated earlier, the Plan shall expire ten
(10) years from the date on which the Plan is duly approved by the shareholders
of the Bank. No Stock Option rights under the Plan shall be granted thereafter.
The Board, without further approval of the Bank's shareholders, may at any time
before that date terminate the Plan. After termination of the Plan, no further
Stock Options may be granted under the Plan. Stock Options granted before any
such termination shall continue to be exercisable in accordance with the terms
of the Option.
13.03 Non-Transferability of Stock Options; Exercise by Participant No Stock Option may be sold, pledged, assigned, encumbered, disposed of or otherwise transferred other than by will or the laws of descent and distribution. The Bank shall not be required to recognize any attempted disposition by any Participant. During a Participant's lifetime, such Participant's Stock Options are only exercisable by such Participant or, in the event of the Participant's incapacity, the Participant's Qualified Person.
13.04 Compliance with Law. The Bank may determine, in its sole discretion, that it is necessary or desirable to list, register or qualify (or to update any listing, registration or qualification of) any Shares issuable or issued under any Stock Option or this Plan on any securities exchange or under any federal or state law, or to obtain consent or approval of any governmental body as a condition to or in connection with, the award of any incentive, the issuance of Shares under this Plan, or the removal of any restrictions imposed on such Shares. If the Bank makes such a determination, the Stock Option shall not be awarded and the Shares shall not be issued or the restrictions shall not be removed, as applicable, in whole or in part, unless and until the listing, registration, qualification, consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Bank. The Bank's obligation to sell or issue Shares under this Plan is subject to the compliance with all applicable laws and regulations. The Committee, in its sole discretion, shall determine whether the sale and issue of Shares is in compliance with all applicable laws and regulations.
13.05 Withholding. Bank shall have the right to withhold from any payments made under the Plan or to collect as a condition to any award, payment or issuance of Shares under the Plan any taxes required to be withheld by Federal, state or local law.
13.06 No Right to Continued Employment. No Participant under the Plan shall have any implied right to continue as a Director or Employee of the Bank for any period of time because of his or her participation in the Plan.
13.07 No Right as Shareholder. No Participant or Qualified Person shall have the rights of a shareholder with respect to the Shares covered by a Stock Option unless a stock certificate is issued to that person for the Shares. No adjustment shall be made for cash dividends or similar rights for which the record date is before the date on which such stock certificate is issued.
13.08 Acceleration; Exercise. Notwithstanding anything to the contrary set forth
in the Plan, in the event that (i) the Bank experiences a Change of Control, or
(ii) the Bank adopts a plan of complete liquidation, then (A) all Stock Options
granted hereunder shall be fully exercisable upon the consummation of such event
and (B) the Bank may, in the exercise of its sole discretion, give a Participant
written notice thereof requiring such Participant either (1) to exercise his or
her Stock Options within thirty days after receipt of such notice, including all
installments whether or not they would otherwise be exercisable at that date,
(2) in the event of a merger or consolidation in which shareholders of the Bank
will receive shares of another corporation, to agree to convert his or her Stock
Options into comparable options to acquire such
shares, (3) in the event of a merger or consolidation in which shareholders of
the Bank will receive cash or other property (other than capital stock), to
agree to convert his or her Stock Options into such consideration (in an amount
representing the appreciation over the exercise price of such Stock Options) or
(4) to surrender such Stock Options or any unexercised portion thereof. Any
Stock Options as to which the Bank does not issue a notice of the type described
in the foregoing sentence shall remain subject to all of the terms and
conditions of this Plan and the Option Agreement, including, but not limited to,
the terms and conditions of Section 10 of this Plan.
13.09 Fractional and Minimum Shares. In no event shall a fraction of a Share be purchased or issued under the Plan without Board approval. The Committee may specify a minimum number of Shares for which each Stock Option must be exercised.
13.10 Application of Funds. The proceeds received by the Bank from the sale of Shares under the Plan shall be used for general corporate purposes.
13.11 Other Incentives and Plans. Nothing in this Plan shall prohibit any member of the Board from establishing other employee incentives and plans.
13.12 Investment Letter. If required by the Committee, each Participant shall agree to execute a statement directed to the Bank, upon each and every exercise by such Participant of any Stock Options, that shares issued thereby are being acquired for investment purposes only and not with a view to the distribution thereof, and containing an agreement that such shares will not be sold or transferred unless either (1) registered under the Securities Act of 1933 and all applicable state securities laws, or (2) exempt from such registration in the opinion of Bank counsel. If required by the Committee, certificates representing share of Common Stock issued upon exercise of
Stock Options shall bear a restrictive legend summarizing the restrictions on transferability applicable thereto.
13.13 Governing Law. The validity and construction of the Plan and of each agreement evidencing Incentives shall be governed by the laws of the State of New Jersey, excluding the conflict-of-laws principles thereof.
Exhibit 10.11
TWO RIVER COMMUNITY BANK INCENTIVE STOCK OPTION PLAN
The name of this plan is the Two River Community Bank Incentive Stock Option Plan (the "Plan"). The purpose of the Plan is to enable Two River Community Bank (the "Bank") to attract, retain and motivate employees who contribute to the success of the Bank by their skill, experience, ability, diligence and industry, and to provide such individuals with the meaningful opportunity to participate in the long-term success and growth of the Bank by giving them a proprietary interest in the Bank. The Plan is intended to qualify as a qualified incentive stock option plan within the meaning of Section 422 of the Internal Revenue Code, and all of its terms shall be interpreted in a manner consistent with that intention and the applicable provisions of the Code.
As used in this Plan, the following terms have the meanings set forth below. The singular includes the plural, and the masculine gender includes the feminine gender, and vice versa, as the context may require. The word "person" includes any natural person and any corporation, firm, partnership, or other form of association.
(i) The acquisition of nominal or beneficial ownership of at least twenty-five percent (25%) of the Stock, or all or substantially all of the assets of the Bank, by a single person, a single entity or a group of persons or entities acting in concert, in a single transaction or a series of transactions the intention or effect of which is to culminate in an acquisition of Stock or assets which comes within the description of this sentence;
(ii) The merger, consolidation or combination of the Bank with an unaffiliated corporation in which the Directors immediately prior to such transaction constitute less than a majority of the board of directors of the surviving new or combined entity in such transaction;
(iii) The transfer of all or substantially all of the Bank's assets to an unaffiliated corporation;
(iv) The election to the Board during any consecutive three-year period of a group of individuals constituting a majority of the Board who were not serving as directors immediately prior to such consecutive three-year period; provided that any new director whose election was approved by a majority of the Board prior to his or her election shall be disregarded for this purpose.
"Code" means the Internal Revenue Code of 1986, as it may be amended from time to time.
"Committee" means the Compensation Committee of the Board, to which the Board has delegated the authority to administer the Plan.
"Disability" shall mean the permanent disability of a Participant or the continuous failure of a Participant to perform substantially all of the services to the Bank performed by the Participant prior to such failure for a period of six months commencing with the first date of such failure, for reasons other than termination as an Employee of the Bank, death, or approved retirement.
"Employee" means any officer or other common law employee of the Bank, with such term being defined as broadly as possible in a manner consistent with Section 422 of the Code.
"Grant Date" shall mean the date on which an Option is awarded to an eligible Participant under this Plan notwithstanding any initial prohibition against exercise.
"Incentive Stock Option" or "Option" means a stock option granted under this Plan, which is intended to qualify as an incentive stock option under Section 422 of the Code.
"Misconduct" shall mean the willful and continued failure by the Participant to perform the Participant's duties for the Bank after a warning in writing from the Committee specifically identifying any such failure; the willful participation by the Participant in an act which causes material injury to the Bank, as specified in a written notice from the Committee; conviction of a felony or other crime (other than a traffic violation); or excessive absenteeism (other than for illness), after a warning in writing from the Committee. No act or failure to act on the part of a Participant shall be considered to be willful unless done, or omitted to be done, without good faith and without the reasonable belief that the action or omission was in the best interest of the Bank.
"Participant" means an Employee to whom an Option has been awarded under the Plan.
"Qualified Person" means a living Participant's legal guardian or legal representative, or a deceased Participant's heir or legatee; as the case may be, who has a legal right to or in respect of an Option held by that Participant.
"Share" means a share of Common Stock.
"Stated Expiration Date" shall mean the date set forth in the Incentive Stock Option agreement on which the related Incentive Stock Option expires, absent the Participant's termination of service to the Bank.
3.01 The Committee. The Plan shall be administered by the Compensation Committee, which shall consist of those members of the Board who are, from time to time, duly appointed to the Committee by the Board from among the Directors.
The Committee shall have the full and final power and authority, exercisable in its sole discretion, to grant Incentive Stock Options to eligible Employees, pursuant to the terms of the Plan.
In particular, but not by way of limitation, the Committee shall have the authority:
(i) to select those Employees to whom Options may from time to time be granted under the Plan;
(ii) to determine whether and to what extent Options are to be granted hereunder and
(iii) to determine the terms and conditions under which Options granted under the Plan are to be held, exercised and forfeited, including those terms and conditions which relate to vesting and expiration, all of which shall be subject to ratification by the Board and shall be entirely consistent with both the terms of the Plan and the applicable provisions of the Code.
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, determine to be advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan, PROVIDED, HOWEVER, that any rule, guideline and practice adopted by the Committee shall be entirely consistent in its terms and application with those provisions of the Code which relate to the continuing qualification of the Plan as a qualified incentive stock option plan.
All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Bank and Participants. No member of the Committee shall be liable for any action or determination made in good faith.
4.01 Designation of Employees. All Employees of the Bank, including officers and those Directors who are employees, are eligible to receive Incentive Stock Options under the Plan. No Director or other person who is not an employee of the Bank may receive Incentive Stock Options under the Plan.
4.02 Participants. The Committee may consider any legally permissible factor in selecting Participants and in determining the type and amount of their Incentive Stock Options, including, but not limited to, (a) the current or anticipated financial condition of the Bank, (b) the contribution by the Participant to the Bank and its customers, and (c) the other compensation provided to the Participant. The Committee's award of an Incentive Stock Option to an Employee in any year shall not require the Committee to award any Incentive Stock Option to that Employee in any other year.
5.01 Number of Shares. Subject to Section 8.07, the aggregate number of Shares which may be issued under the Plan shall not exceed 63,500 Shares.
5.02 Expiration and Cancellation. If an Option granted under the Plan expires, is terminated, or is otherwise canceled before exercise, that Option and the related shares of Common Stock shall not apply toward the limits established under Section 5.01. If Shares issued or awarded under this Plan are forfeited, canceled, terminated, or reacquired by the Bank, those forfeited, canceled, terminated, or reacquired Shares shall not apply toward the limits established under Section 5.01 and shall be available again for the grant of Options.
5.03 Maintenance of Stock. Shares issued under the Plan shall be authorized and unissued shares or shares of treasury stock. The Bank shall always maintain such Shares in a number which is at least equal to the number of Shares for which Options have been granted and remain outstanding and unexercised under the Plan and any other stock option plan or arrangement established by the Bank.
Each Incentive Stock Option granted under this Plan must be granted within ten (10) years from the date on which the Plan was adopted by the Board, and shall be subject to the following terms and conditions:
6.01 Price. The option price per share shall be equal to the Fair Market Value of the Common Stock on the Grant Date of the Incentive Stock Option.
6.02 Number. The number of Shares covered by each incentive Stock Option awarded to each Participant shall be determined by the Committee, consistent with any limitations which are set forth in the Code, the Treasury regulations, or any other applicable provision of law, subject to ratification by the Board. The aggregate Fair Market Value on the Grant Date of those Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Bank) shall not exceed One Hundred Thousand Dollars ($100,000).
6.03 Exercise. An Incentive Stock Option may be exercised, in whole or in part, by giving written notice to the Bank (Attention: Chief Financial Officer) at its principal office or to such transfer agent as the Bank may designate. The notice shall identify the Incentive Stock Option being exercised and shall contain such other information and terms as the Committee may require. The notice shall be accompanied by full payment of the purchase price for the Shares, in such form as the Committee shall determine consistent with the requirements of the Code and any other applicable legal authority. As soon as practicable after receipt of the written notice and full payment of the purchase price, the Bank shall deliver to the person exercising the Stock Option one or more certificates for the Shares. Unless exercised sooner, each Incentive Stock Option shall have a Stated Expiration Date no later than ten (10) years after the Grant Date for that Incentive Stock Option.
6.04 Limitation on Participation. No Incentive Stock Options shall be granted to any Employee who, at the time at which such option would otherwise be granted, owns (within the meaning of Section 422 of the Code) stock having more than 10% of the total combined voting power of all classes of stock of the Bank.
6.05 Vesting. The vesting of Incentive Stock Options shall be determined by the Committee and shall be a date and/or event(s) specified by the Committee with respect to each Incentive Stock Option, provided that such date or event is not before the Grant Date for that Incentive Stock Option. In the absence of an express statement by the Committee as to the vesting of any particular Incentive Stock Option, such Option shall vest immediately on the Grant Date with respect to one third (1/3) of the Stock covered by the Option, and an additional one third (1/3) on each anniversary date of the Grant Date of such Option. Except as described in this provision, no other vesting schedule has been established and any future vesting of Incentive Stock Options, or any particular Incentive Stock Option, shall be determined in the sole discretion of the Committee.
6.06 Incorporation by Reference of Applicable Provisions of the Code. Each Incentive Stock Option agreement referred to in Section 8.05 and those provisions of this Plan which relate to the terms and conditions under which the Incentive Stock Options are issued, held and exercised shall contain or shall be deemed to contain all provisions required in order to qualify the Incentive Stock Options as incentive stock options under Section 422 of the Code, and the provisions of this Plan shall be interpreted and construed to effect such treatment under that Section.
Notwithstanding the Stated Expiration Date of a particular Incentive Stock Option or those terms which relate to its exercise or vesting, all as set forth in an Incentive Stock Option agreement, the related Option shall expire and be subject to forfeiture in accordance with the terms of this Section 7 upon the occurrence of any of the following events:
If the Participant is terminated by the Bank as an Employee by reason of Misconduct, all Incentive Stock Options held by the Participant shall terminate ipso facto and shall be immediately forfeited in their entirety as to their vested and unvested portions;
If the Participant's service as an Employee of the Bank terminates by reason of the Participant's death, Disability, or retirement with the prior approval of the Bank, all Options held by the Participant shall become fully exercisable, vested and non-forfeitable, and shall expire on a date which is the earlier of (i) the Stated Expiration Date of such Options or (ii) (a) in the case of such a termination other than by reason of the Participant's death, ninety (90) days from the Participant's termination as an Employee of the Bank or (b) in the case of the Participant's death, one year from the date of death;
If the Participant's service as an Employee of the Bank terminates other
than for any of the reasons set forth in the previous two paragraphs of this
Section 7, the unvested portion of all Incentive Stock Options held by the
Participant on the date of such Voluntary Termination shall be forfeited, and
the vested portion shall become fully exercisable and shall expire on a date
which is the earlier of the stated expiration date of such Options or ninety
(90) days from the Participant's termination as an Employee of the Bank;
Notwithstanding the foregoing terms, if the Participant's service as an Employee of the Bank or any successor to the Bank terminates within two (2) years after any Change in Control
for any reason other than Misconduct, all Incentive Stock Options held by the Participant shall become fully vested and non-forfeitable upon such termination of employment, and shall expire on the earlier of (i) the Stated Expiration Date of such Options or (ii) ninety (90) days from the Participant's termination as an Employee of the Bank or its successor.
No Stock Option granted under the Plan shall provide for the payment of cash to any Director or Employee upon its cancellation.
8.01 Effective Date. This Plan shall be effective as of the date of its approval by the shareholders of the Bank in accordance with the applicable provisions of the Banking Act of 1948, N.J.S. 17:9A-1 et seq., and the regulations promulgated under the Act. If shareholder approval is not obtained within one year following the date the Plan is adopted by the Board, the plan and any award of Options by the Committee in anticipation of its adoption shall be void ab initio.
8.02 Duration. Unless the Plan is terminated earlier by the Board of Directors of the Bank, the Plan shall expire ten (10) years from the date on which the Plan is approved by shareholders of the Bank. No Incentive Stock Option or other rights under the Plan shall be granted thereafter. The Board, without further approval of the Bank's shareholders, may at any time before that date terminate the Plan. After the termination of the Plan under the foregoing sentence, no further Incentive Stock Options may be granted under the Plan. Options granted before any such termination shall continue to be exercisable, but only in accordance with the terms of the Option as such terms are set forth in any agreement with respect to the Option or this Plan.
8.03 Non- Transferability of Incentive Stock Options; Exercise by Participant. No Option may be sold, pledged, assigned, encumbered, disposed of or otherwise transferred other than by will or the laws of descent and distribution. The Bank shall not be required to recognize any attempted disposition by any Participant or Qualified Person. During a Participant's lifetime, such Participant's Options are exercisable only by such Participant.
8.04 Change of Control. Notwithstanding anything to the contrary set forth in
the Plan, in the event that (i) the Bank experiences a Change of Control, or
(ii) the Bank adopts a plan of complete liquidation, then (A) all Incentive
Stock Options granted hereunder shall be fully exercisable upon the consummation
of such event and (B) the Bank may, in the exercise of its sole discretion, give
a Participant written notice thereof requiring such Participant either (i) to
exercise his or her Options within thirty days after receipt of such notice,
including all installments whether or not they would otherwise be exercisable at
that date, (2) in the event of a merger or consolidation in which shareholders
of the Bank will receive shares of another corporation, to agree to convert his
or her Options into comparable options to acquire such shares, (3) in the event
of a merger or consolidation in which shareholders of the Bank will receive cash
or other property (other than capital stock), to agree to convert his or her
Options into such consideration (in an amount representing the appreciation over
the exercise price of such Options) or (4) to surrender such Options or any
unexercised portion thereof. Any Options as to which the Bank does not issue a
notice of the type described in the foregoing sentence shall remain subject to
all of the terms and conditions of this Plan and the Incentive Stock Option
agreement, including, but not limited to, the terms and conditions of Section 7
of this Plan.
8.05 Incentive Stock Option Agreements. The terms of each Incentive Stock Option shall be stated in an agreement between the Bank and the Participant in a form approved by the Committee. The Participant must execute and deliver the agreement to the Bank as a condition to the effectiveness of the Option. All such agreements may contain all such terms and condition as the Committee considers to be advisable which are not inconsistent with the Plan and the applicable provisions of the Code, including, but not limited to, provisions which relate to vesting, exercise, expiration and transfer restrictions on those Incentive Stock Options which are subject to the Incentive Stock agreement.
8.06 Compliance with Law. The Bank may determine, in its sole discretion, that it is necessary or desirable to list, register or qualify (or to update any listing, registration or qualification of) any Option or the Shares issuable or issued under any Option granted under this Plan on any securities exchange or under any federal or state securities law, or to obtain consent or approval of any governmental body as a condition to, or in connection with, the award of any Option, the issuance of Shares under any Option or this Plan, or the removal of any restrictions imposed on such Shares. If the Bank makes such a determination, the Option shall not be awarded or the Shares shall not be issued or the restrictions shall not be removed, as the case may be, in whole or in part, unless and until the listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Bank. The Bank's obligation to sell or issue Shares under any Option is subject to the compliance with all applicable laws and regulations. The Committee, in its sole discretion, shall determine whether the sale and issue of Shares is in compliance with all applicable laws and regulations.
8.07 Adjustment. If the outstanding Shares of Common Stock are increased or decreased or changed into or exchanged for a different number or kind of securities of the Bank or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of securities or dividend payable in corporate securities, then an appropriate adjustment shall be made by the Board in the number, kind and/or price of Shares with respect to which Options may be granted under the Plan. In addition, the Board shall make appropriate adjustment in the number, kind and/or price of Shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable. In the event of any such adjustment, the exercise price of any Option, the performance objectives, restrictions or other terms and conditions of any Option and the Shares issuable under any Option shall be adjusted as and to the extent appropriate, in the sole and absolute discretion of the Board, to provide each Participant with substantially the same relative rights before and after such adjustment to the extent practical.
8.08 Withholding. The Bank shall have the right to withhold from any payments made under the Plan or to collect as a condition to any award, payment or issuance of Shares under the Plan any taxes required to be withheld by Federal, state or local law, with such withholding being effected in the manner determined by the Committee.
8.09 No Right to Continued Employment. No Participant under the Plan shall have any implicit right to continue in the employ of the Bank for any period of time because of his or her participation in the Plan.
8.10 No Right as Shareholder. No Participant or Qualified Person shall have the rights of a shareholder with respect to the Shares covered by an Option unless and until such time as a stock certificate is issued to that person for the Shares. No adjustment shall be made for cash dividends or similar rights for which the record date is before the date on which such stock certificate is issued.
8.11 Amendment of the Plan. In accordance with all applicable law, the Board may amend the Plan from time to time in such respects as the Board deems advisable. No such amendment, however, shall (a) change or impair an Option without the consent of the Participant or Qualified Person holding that Option, or (b) without the prior approval of the Bank shareholders: (i) increase the limits provided in Section 5.01 (except by adjustment under Section 7.07); (ii) change the class of person eligible to receive Options under the Plan; or (iii) make any other change that requires approval of the Bank shareholders either under applicable law or to preserve the treatment of the Incentive Stock Options as such under Section 422 of the Code.
8.12 Definition of Fair Market Value. Whenever "Fair Market Value" of the Common Stock is to be determined for purposes of this Plan, it shall be conclusively determined by the Committee, which may use all or any combination of the bid price last quoted by a reputable brokerage firm on such Grant Date; an independent third party assessment of the fair market value of the Common Stock; and the prices at which the most recent transactions in the Common Stock have been effected. In no event shall any Option be granted for less than par value of the Common Stock.
8.13 Investment Letter. If required by the Committee, each Participant shall agree to execute a statement directed to the Bank, upon each and every exercise by such Participant of any Stock Options, that shares of Common Stock issued thereby are being acquired for investment purposes only and not with a view to the distribution thereof, and containing an agreement that such Shares will not be sold or transferred unless either (1) registered under the Securities Act of 1933 and all applicable state securities laws, or (2) exempt from such registration in the opinion of Bank counsel. If required by the Committee, certificates representing shares of Common Stock issued upon exercise of Stock Options shall bear a restrictive legend summarizing the restrictions on transferability applicable thereto.
8.14 Fractional and Minimum Shares. In no event shall a fraction of a share of Common Stock be purchased or issued under the Plan without Board approval. The Committee may specify a minimum number of Shares for which each Stock Option must be exercised.
8.15 Application of Funds. The proceeds received by the Bank from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
8.16 Other Incentives and Plans. Nothing in this Plan shall prohibit the Bank from establishing other employee incentives and plans.
8.17 Governing Law. The validity and construction of the Plan and of each agreement evidencing Incentive Stock Options shall be governed by the laws of the State of New Jersey, excluding the conflict-of-laws principles thereof.
Exhibit 10.12
TWO RIVER COMMUNITY BANK NON-QUALIFIED STOCK OPTION PLAN
SECTION 1. General Purpose of Plan
The name of this plan is the Two River Community Bank Non-qualified Stock Option Plan (the "Plan"). The purpose of the Plan is to enable Two River Community Bank (the "Bank") to attract, retain and motivate directors and employees who contribute to the success of the Bank by their skill, experience, ability, diligence and industry, and to provide such individuals with the meaningful opportunity to participate in the long-term success and growth of the Bank by giving them a proprietary interest in the Bank.
SECTION 2. Definitions
As used in this Plan, the following terms have the meanings set forth below. The singular includes the plural, and the masculine gender includes the feminine gender, and vice versa, as the context may require. The word "person" includes any natural person and any corporation, firm, partnership, or other form of association.
(i) The acquisition of nominal or beneficial ownership of at least twenty five percent (25%) of the Stock, or all or substantially all of the assets of the Bank, by a single person, a single entity or a group of persons or entities acting in concert, in a single transaction or a series of transactions the intention or effect of which is to culminate in an acquisition of Stock or assets which comes within the description of this sentence;
(ii) The merger, consolidation or combination of the Bank with an unaffiliated corporation in which the Directors immediately prior to such transaction constitute less than a majority of the board of directors of the surviving new or combined entity in such transaction;
(iii) The transfer of all or substantially all of the Bank's assets to an unaffiliated corporation;
(iv) The election to the Board during any consecutive three-year period of a group of individuals constituting a majority of the Board who were not serving as directors immediately prior to such consecutive three-year period; provided that any new director whose election was approved by a majority of the Board prior to his or her election shall be disregarded for this purpose.
(c) "Committee" means the Compensation Committee of the Board, to which the Board has delegated the authority to administer the Plan.
(d) "Director" shall mean an individual duly elected to serve as a member of the Board.
(e) "Disability" shall mean the permanent disability of a Participant or the failure of a Participant to perform substantially all of the services to the Bank performed by the Participant prior to such failure for a period of six months commencing with the first date of such failure for reasons other
than Voluntary or Involuntary Termination, Termination for Misconduct, death, or approved retirement.
(f) "Employee" shall mean a person in the employ, under common law, of the Bank.
(g) "Grant" shall mean the award of a Stock Option to a Participant.
(h) "Grant Date" shall mean the date on which an option is awarded to an eligible Participant under this Plan notwithstanding any initial prohibition against exercise.
(i) "Involuntary Termination" shall mean separation from service as an Employee or Director at the request or demand of the Bank for any reason other than Misconduct, and shall not include a separation from service by reason of retirement, death or Disability.
(j) "Misconduct" shall mean the willful and continued failure by the Participant to perform the Participant's duties for the Bank after a warning in writing from the Committee specifically identifying any such failure; the willful participation by the Participant in an act which causes material injury to the Bank as specified in a written notice from the Committee; conviction of a felony or other crime (other than a traffic violation); or excessive absenteeism (other than for illness), after a warning in writing from the Committee. No act or failure to act on the part of a Participant shall be considered to be willful unless done, or omitted to be done, without good faith and without the reasonable belief that the action or omission was in the best interest of the Bank.
(k) "Participant" shall mean a Director or Employee who has received a Grant under this plan.
(1) "Stated Expiration Date" shall mean the date set forth in a Stock Option Agreement on which the related Stock Option expires absent the Participant's termination of service to the Bank.
(o) "Stock Option Price" shall mean the purchase price for a share of Stock subject to a particular Stock Option.
(p) "Qualified Person" means a living Participant's legal guardian or legal representative, or a deceased Participant's heir or legatee, as the case may be, who has a legal right to or in respect of an Option held by that Participant
(r) "Voluntary Termination" shall mean a termination of service as an Employee or Director which is not an Involuntary Termination, a termination for Misconduct, a termination by reason of death, a termination by reason of retirement approved by the Bank (but shall include a termination by reason of retirement which is not approved by the Bank), or a termination by reason of Disability.
3.02 Committee Authority. Except as otherwise specifically provided in the Plan, the Committee shall have full and final authority in its sole discretion to grant Stock Options to eligible Participants pursuant to the terms of the Plan. The Committee shall also have the conclusive authority to:
(i) interpret provisions of the Plan and decide all questions of fact arising in its application;
(ii) make all other determinations necessary or advisable for the administration of the Plan;
(iii) authorize any of its members to execute and deliver documents on behalf of the Committee;
(iv) make all determinations with respect to those Directors and Employees to whom Stock Options are to be granted, the number of Shares with respect to which Stock Options are to be granted to each such Director and Employee, and the particular terms of such Stock Options, all of which shall be subject to approval and ratification by the Board of Directors. However, the Committee shall not have authority to take action inconsistent with other provisions of the Plan. No member of the Committee shall be liable for any action or determination made in good faith.
4.01 Number of Shares. The aggregate number of Shares which may be issued under the Plan shall not exceed 63,500 Shares.
4.02 Expiration and Cancellation. If a Stock Option granted under the Plan
expires, is terminated, or is otherwise canceled before exercise, the related
shares of Common Stock shall not apply toward the limits provided in Section
4.01. If the Shares issued or granted under this Plan are forfeited, canceled,
terminated, or reacquired by the Bank, those forfeited, canceled, terminated or
reacquired Shares shall not apply toward the limits provided in Section 4.01 and
shall be available again for grants hereunder.
5.01 Agreement. Each Grant shall be evidenced by a written Stock Option agreement which shall specify the number of shares of Stock available for purchase, the Stock Option Price pertaining to such Grant, the Stated Expiration Date of the Stock Option, that the Stock Option is not transferable except pursuant to the laws of descent and distribution on the death of the Participant, that during the Participant's lifetime the Stock Option is exercisable only by the Participant or, in the event of the Participant's Disability, for the Participant by the Participant's Qualified Person. The agreement shall contain such other provisions as the Committee deems to be necessary or appropriate.
5.02 Exercise. A Stock Option may be exercised, in whole or in part, by giving written notice to the Bank (Attention: Chief Financial Officer) at its principal office or to such transfer agent as the Bank may designate. The notice shall identify the number of Stock Options being exercised and shall contain such other information and terms as the Committee may require. The notice shall be accompanied by full payment of the purchase price for the Shares (a) in United States dollars in cash or by check, (b) at the discretion of the Committee, by delivery of previously acquired Shares having a Fair Market Value equal on the date of exercise to the cash exercise price of the Stock Option, or (c) at the discretion of the Committee, by a combination of (a) and (b) above. As soon as practicable after receipt of the written notice, the Bank shall deliver to the person exercising the Stock Option one or more certificates for the Shares.
The Stock Option Price shall be equal to the Fair Market Value of a share of Stock on the Grant Date. Whenever "Fair Market Value" of the Common Stock is to be determined for purposes of this Plan, it shall be conclusively determined by the Committee, which may use all or any combination of the bid price last quoted by a reputable brokerage firm on such Grant Date; an independent third party assessment of the fair market value of the Stock; and the prices at which the most recent transactions in the Common Stock have been effected. In no event shall any Option be granted for less than the par value of the Bank's Stock
7.01 General. Grants may be made from time to time by the Committee to Directors and Employees in the exercise of its discretion in all respects, subject to approval and ratification by the Board of Directors.
The vesting of Stock Options shall be determined by the Committee and shall be a date and/or event(s) specified by the Committee with respect to each Stock Option, provided that such date or event is not before the Grant Date for that Stock Option. In the absence of an express statement by the Committee as to the vesting of any particular Stock Option, such Option shall vest immediately on the Grant Date with respect to one third (1/3) of the Stock covered by the Option, and an additional one third (1/3) on each anniversary date of the Grant Date of such Option. Except as described in this provision, no other vesting schedule has been established and any future vesting of Stock Options, or any particular Stock Option shall be determined in the sole discretion of the Committee.
The Grant Date of a Stock Option shall be the date specified by the Committee, provided that such date shall not be before the date on which the Stock Option is actually granted. The term of each Stock Option shall be determined by the Committee, as memorialized in the Stock Option agreement, but shall not exceed ten (10) years from the date of grant. Each Stock Option shall become exercisable at such time or times in such amount or amounts during its term as shall be determined by the Committee at the time of grant, as memorialized in the Stock Option agreement. The Committee may accelerate the date on which any Stock Option can be exercised. Unless otherwise specified by the Committee, once a Stock Option becomes exercisable, whether in full or in part, it shall remain so exercisable until its expiration, forfeiture, termination or cancellation.
Notwithstanding the Stated Expiration Date of a particular Stock Option or those terms which relate to its exercise or vesting, all as set forth in a Stock Option agreement, the related Stock Option shall expire and be subject to forfeiture in accordance with the terms of this Section 10 upon the occurrence of any of the following events:
If the Participant is terminated by the Bank as a Director or Officer by reason of Misconduct, all Stock Options held by the Participant shall terminate ipso facto, and shall be immediately forfeited in their entirety as to their vested and unvested portions;
If the Participant's service as a Director or Employee of the Bank terminates by reason of the Participant's death, Disability, or retirement with the prior approval of the Bank, all Stock Options held by the Participant or the Participant's Qualified Person shall become fully exercisable, vested and non-forfeitable, and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or one hundred eighty (180) days from the Participant's termination of service with the Bank;
If the Participant's service as a Director or Employee of the Bank terminates in a Voluntary Termination, the unvested portion of all Stock Options held by the Participant on the date of such Voluntary Termination shall be forfeited, and the vested portion shall become fully exercisable and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or one hundred eighty (180) days from the Participant's termination of service with the Bank;
If the Participant's service as a Director or Employee of the Bank terminates in an Involuntary Termination, the unvested portion of all Stock Options held by the Participant on the date of such Involuntary Termination shall be forfeited, and the vested portion shall become fully exercisable and shall expire on a date which is the earlier of the stated expiration date of such Stock Options or ninety (90) days from the Participant's termination of service with the Bank;
Notwithstanding the foregoing terms, if the Participant's service as a Director or Employee of the Bank or any successor to the Bank terminates within two (2) years after any Change in Control for any reason other than Misconduct, all Stock Options held by the Participant or the Participant's Qualified Person shall become fully vested and non-forfeitable upon such termination of service, and shall expire on the stated expiration date of such Stock Options.
No Stock Option granted under the Plan shall provide for the payment of cash to any Director or Employee upon its cancellation.
The aggregate number of shares of Stock with respect to which Stock Options may be granted, the aggregate number of shares of Stock subject to each outstanding Stock Option, and the Stock Option Price of each outstanding Stock Option shall be appropriately adjusted for any increase or decrease in the number of shares of issued Stock resulting from a division or consolidation of shares, whether through a reorganization, recapitalization, stock split, stock distribution or combination of shares outstanding effected without receipt of consideration by the Bank to the extent practical.
To the extent consistent with applicable law, the Board may amend this Plan from time to time (including amendment to terminate the Plan) at is discretion. However, no amendment shall adversely affect any outstanding Stock Option without the consent of the Participant.
13.01 Effective Date. This Plan shall be effective as of the date of its approval by the shareholders of the Bank, in accordance with any applicable laws. If shareholder approval is not obtained within one year following the date the Plan is approved by the Board, the plan and any
13.02 Duration. Unless the Plan is terminated earlier, the Plan shall expire ten
(10) years from the date on which the Plan is duly approved by the shareholders
of the Bank. No Stock Option rights under the Plan shall be granted thereafter.
The Board, without further approval of the Bank's shareholders, may at any time
before that date terminate the Plan. After termination of the Plan, no further
Stock Options may be granted under the Plan. Stock Options granted before any
such termination shall continue to be exercisable in accordance with the terms
of the Option.
13.03 Non-Transferability of Stock Options; Exercise by Participant. No Stock Option may be sold, pledged, assigned, encumbered, disposed of or otherwise transferred other than by will or the laws of descent and distribution. The Bank shall not be required to recognize any attempted disposition by any Participant. During a Participant's lifetime, such Participant's Stock Options are only exercisable by such Participant or, in the event of the Participant's incapacity, the Participant's Qualified Person.
13.04 Compliance with Law. The Bank may determine, in its sole discretion, that it is necessary or desirable to list, register or qualify (or to update any listing, registration or qualification of) any Shares issuable or issued under any Stock Option or this Plan on any securities exchange or under any federal or state securities law, or to obtain consent or approval of any governmental body as a condition to or in connection with, the award of any incentive, the issuance of Shares under this Plan, or the removal of any restrictions imposed on such Shares. If the Bank makes such a determination, the Stock Option shall not be awarded and the Shares shall not be issued or the restrictions shall not be removed, as applicable, in whole or in part, unless and until the listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Bank. The Bank's obligation to sell or issue Shares under this Plan is subject to the compliance with all applicable laws and regulations. The Committee, in its sole discretion, shall determine whether the sale and issue of Shares is in compliance with all applicable laws and regulations.
13.05 Withholding. The Bank shall have the right to withhold from any payments made under the Plan or to collect as a condition to any award, payment or issuance of Shares under the Plan any taxes required to be withheld by Federal, state or local law.
13.06 No Right to Continued Employment. No Participant under the Plan shall have any implied right to continue as a Director or Employee of the Bank for any period of time because of his or her participation in the Plan.
13.07 No Right as Shareholder. No Participant or Qualified Person shall have the rights of a shareholder with respect to the Shares covered by a Stock Option unless a stock certificate is issued to that person for the Shares. No adjustment shall be made for cash dividends or similar rights for which the record date is before the date on which such stock certificate is issued.
13.08 Acceleration; Exercise. Notwithstanding anything to the contrary set forth
in the Plan, in the event that (i) the Bank experiences a Change of Control, or
(ii) the Bank adopts a plan of complete liquidation, then (A) all Stock Options
granted hereunder shall be fully exercisable upon the consummation of such event
and (B) the Bank may, in the exercise of its sole discretion, give a Participant
written notice thereof requiring such Participant either (1) to
exercise his or her Stock Options within thirty days after receipt of such
notice, including all installments whether or not they would otherwise be
exercisable at that date, (2) in the event of a merger or consolidation in which
shareholders of the Bank will receive shares of another corporation, to agree to
convert his or her Stock Options into comparable options to acquire such shares,
(3) in the event of a merger or consolidation in which shareholders of the Bank
will receive cash or other property (other than capital stock), to agree to
convert his or her Stock Options into such consideration (in an amount
representing the appreciation over the exercise price of such Stock Options) or
(4) to surrender such Stock Options or any unexercised portion thereof. Any
Stock Options as to which the Bank does not issue a notice of the type described
in the foregoing sentence shall remain subject to all of the terms and
conditions of this Plan and the Option Agreement, including, but not limited to,
the terms and conditions of Section 10 of this Plan.
13.09 Fractional and Minimum Shares. In no event shall a fraction of a Share be purchased or issued under the Plan without Board approval. The Committee may specify a minimum number of Shares for which each Stock Option must be exercised.
13.10 Application of Funds. The proceeds received by the Bank from the sale of Shares under the Plan shall be used for general corporate purposes.
13.11 Other Incentives and Plans. Nothing in this Plan shall prohibit any member of the Board from establishing other employee incentives and plans.
13.12 Investment Letter. If required by the Committee, each Participant shall agree to execute a statement directed to the Bank, upon each and every exercise by such Participant of any Stock Options, that shares issued thereby are being acquired for investment purposes only and not with a view to the distribution thereof, and containing an agreement that such shares will not be sold or transferred unless either (1) registered under the Securities Act of 1933 and all applicable state securities laws, or (2) exempt from such registration in the opinion of Bank counsel. If required by the Committee, certificates representing share of Common Stock issued upon exercise of Stock Options shall bear a restrictive legend summarizing the restrictions on transferability applicable thereto.
13.13 Governing Law. The validity and construction of the Plan and of each agreement evidencing Incentives shall be governed by the laws of the State of New Jersey, excluding the conflict-of-laws principles thereof.
Exhibit 10.13
THIS LEASE AGREEMENT, made the 22nd day of June 1999,
Between
SETH BELLER TRUST
residing or located at c/o Mr. Robert Beller, 1005 Dickinson Circle in the City of Raleigh in the County of Wake and State of North Carolina, herein designated as the Landlord,
And
TRB, LLC,
residing or located at 43 Gilbert Street North in the Borough of Tinton Falls in the County of Monmouth and State of New Jersey, herein designated as the Tenant;
Witnesseth that, the Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises:
Tract B as set forth on Exhibit "A" on the first floor of a (building) comprising of approximately 5,300 square feet located in a shopping center (Shopping Center) at 1184 Route 35 and New Monmouth Road, Middletown, N.J. 07748,
for a term of Ten (10) years and seven (7) months commencing on June 1, 1999, and ending on December 31, 2009, to be used and occupied only and for no other purpose than a retail bank
Upon the following Conditions and Covenants:
1st: The tenant covenants and agrees to pay to the Landlord, as rent for and during the term hereof, the sum of $ **See Rider** in the following manner:
2nd: The Tenant has examined the premises and has entered into this lease without any representation on the part of the Landlord as to the condition thereof. The Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make all repairs,* including painting and decorating,** and shall maintain the premises in good condition and state of repair, and at the end or other expiration of the term hereof, shall deliver up the rented premises in good order and condition, wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the sidewalks, driveways, yards, entrances, hallways and stairs but shall keep and maintain the same in a clean condition, free from debris, trash, refuse, snow and ice.
*but not limited to **Plumbing and HVAC
3rd: In case of the destruction of or any damage to the glass in the leased premises, or the destruction of or damage of any kind whatsoever to the said premises, caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, the Tenant shall repair the said damage or replace or restore any destroyed parts of the premises, as speedily as possible, at the Tenant's own cost and expense.
4th: No alterations, additions or improvements shall be made, and no climate regulating, air conditioning, cooling, heating or sprinkler systems, television or radio antennas, heavy equipment, apparatus and fixtures, shall be installed in or attached to the leased premises, without the written consent of the Landlord. Unless otherwise provided herein, all such alterations, additions or improvements and systems, when made, installed in or attached to the said premises, shall belong to and become the property of the Landlord and shall be surrendered with the premises and as part thereof upon the expiration or sooner termination of this lease, without hindrance, molestation or injury.
5th: The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the said premises or any part thereof, except of a design and structure and in or at such places as may be indicated and consented to by the Landlord in writing. In case the Landlord or the Landlord's agents, employees or representatives shall deem it necessary to remove any such signs in order to paint or make any repairs, alterations or improvements in or upon said premises or any part thereof, they may be so removed, but shall be replaced at the Landlord's expense when the aid repairs, alterations or improvements shall have been completed. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto. **see rider**
6th: The Tenant shall pay when due all the rents or charges for water or other utilities used by the Tenant, which are or may be assessed or imposed upon the leased premises or which are or may be charged to the Landlord by the suppliers thereof during the term hereof, and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due or within 30 days of demand therefore, whichever occurs sooner.
7th: The Tenant shall promptly comply with all laws, ordinances, rules, regulations, requirements and directives of the Federal, State and Municipal Governments or Public Authorities and of all their departments, bureaus and subdivisions, applicable to and affecting the said premises, their use and occupancy, for the correction, prevention and abatement of nuisances, violations or other grievances in, upon or connected with the said premises during the term hereof; and shall promptly comply with all orders, regulations, requirements and directives of the Board of Fire Underwriters or similar authority and of any insurance companies which have issued or are about to issue policies of insurance covering the said premises and its contents for the prevention of fire or other casualty, damage or injury, at the Tenant's own cost and expense.
8th: The Tenant, at Tenant's own cost and expense, shall obtain or provide and keep in full force for the benefit of the Landlord, during the term hereof, general public liability insurance, insuring the Landlord against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the leased premises for injuries to any person or persons, for limits of not less than $2,000,000.00 for injuries to one person and $3,000,000.00 for injuries to more than one person in any one accident or occurrence, and for loss or damage to the property of any person or persons, or not less than $50,000.00. The policy or policies of insurance shall be of a company or companies authorized to do business in this State and shall be delivered to the Landlord, together with evidence of the payment of the premiums therefore, not less than fifteen days prior to the commencement of the term hereof or of the date when the Tenants shall enter into possession, whichever occurs sooner. At lest fifteen days prior to the expiration or termination date of ay policy, the Tenant shall deliver a renewal or replacement policy with proof of the payment of the premium therefore. The Tenant also agrees to and shall save, hold and keep harmless and indemnify the Landlord from and for any and all payments, expenses, costs, attorney fees and from and for any and all claims and liability for losses or damage to property or injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, or for any cause or reason whatsoever arising out of or by reason of the occupancy by the Tenant and the conduct of the Tenant's business.
9th: The Tenant shall not, without consent of the Landlord, assign, mortgage or hypothecate this lease, nor sublet or sublease the premises or any part thereof. See Rider Paragraph 47.
10th: The Tenant shall not occupy or use the leased premises or any part thereof, nor permit or suffer the same to be occupied or used for any purposes other than as herein limited, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or other casualty.
11th: This lease shall not be a lien against the said premises in respect to any mortgages that may hereafter be placed upon said premises. The recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien to this lease, irrespective of the date of recording and the Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to further effect the subordination of his lease to any such mortgage or mortgages. A refusal by the Tenant to execute such instruments shall entitle the
Landlord to the option of canceling this lease and the term hereof is hereby expressly limited accordingly.
12th. If the land and premises leased herein, or of which the leased premises are a part, or any portion thereof, shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey the said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said land and premises or any portion thereof, then this lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as the Landlord shall fix by notice in writing; and the Tenant shall have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings; and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises or any portion thereof. The Tenant covenants and agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord in the aforementioned notice. Failure by the Tenant to comply with any provisions in this clause shall subject the Tenant to such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
13th: In case of fire or other casualty, the Tenant shall give immediate notice to the Landlord. If the premises shall be partially damaged by fire, the elements or other casualty, the Landlord shall repair the same as speedily as practicable, but the Tenant's obligation to pay the rent hereunder shall not cease. If, in the opinion of the Landlord, the premises be so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the premises shall be made tenantable by the Landlord. However, if, in the opinion of the Landlord, the premises be totally destroyed or so extensively and substantially damaged as to require practically a rebuilding thereof, then the rent shall be paid up to the time an of such destruction and then and from thenceforth this lease shall come to an end. In no event however, shall the provisions of this clause become effective or be applicable, if the fire or other casualty and damage shall be the result of the carelessness, negligence, or improper conduct of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors. In such case, the Tenant's liability for the payment of the rent and the performance of all the covenants, conditions and terms hereof on the Tenant's part to be performed shall continue and the Tenant shall be liable to the Landlord for the damage and loss suffered by the Landlord. If the Tenant shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to the Landlord to the extent of the Landlord's costs and expenses to make the repairs hereunder, and such insurance carriers shall have no recourse against the Landlord for reimbursement.
14th: If the Tenant shall fail or refuse to comply with and perform any conditions and covenants of the within lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord shall be added to the installment of rent due immediately thereafter but in no case later than one month after such demand, whichever occurs sooner, and shall be due and payable as such. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant of any of the covenants and conditions in this lease contained.
15th: The Tenant agrees that the Landlord and the Landlord's agents, employees or other representatives, shall have the right to enter into and upon the said premises or any part thereof, at all reasonable hours, for the purpose of examining the same or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. This clause shall not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs.
16th: The Tenant agrees to permit the Landlord and the Landlord's agents, employees or other representatives to show the premises to persons wishing to rent or purchase the same, and Tenant agrees that on and after twelve months next preceding the expiration of the term hereof, the Landlord or the Landlord's agents, employees or other representatives shall have the right to place notices on the front of said premises or any part thereof, offering the premises for rent or for sale; and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. **See Rider**
17th: If for any reason it shall be impossible to obtain fire and other hazard insurance on the buildings and improvements on the leased premises, in an amount and in the form and in insurance companies acceptable to the Landlord, the Landlord may, if the Landlord so elects at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant fifteen days notice in writing of the Landlord's intention so to do, and upon the giving of such notice, this lease and the term thereof shall terminate. If by reason of the use to which the premises are put by the Tenant or character of or the manner in which the Tenant's business is carried on, the insurance rates for fire and other hazards shall be increased, the Tenant shall upon demand, pay to the Landlord, as rent, the amounts by which the premiums for such insurance are increased. Such payment shall be paid with the next installment of rent but in no case later than one month after such demand, whichever occurs sooner.
18th: Any equipment, fixtures, goods or other property of the Tenant, not removed by the Tenant upon the termination of this lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and the Landlord shall have the right, without any notice to the Tenant, to sell or otherwise dispose of the same, at the expense of the Tenant, and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any.
19th: If there should occur any default on the part of the Tenant in the performance of any conditions and covenants herein contained, or if during the term hereof the premises or any part thereof shall be or become abandoned or deserted, vacated or vacant, or should the Tenant be evicted by summary proceedings or otherwise, the Landlord, in addition to any other remedies herein contained or as may be permitted by law, may either by force or otherwise, without being liable for prosecution therefor, or for damages, re-enter the said premises and the same have and again possess and enjoy; and as agent for the Tenant or otherwise, re-let the premises and receive the rents therefor and apply the same, first to the payment of such expenses, reasonable attorney fees and costs, as the Landlord may have been put to in re-entering and repossessing the same and in making such repairs and alterations as may be necessary; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the re-entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.
20th: Upon the occurrence of any of the contingencies set forth in the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or placed in receivership, or should proceedings be instituted by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors, or if this lease or the estate of the Tenant hereunder shall pass to another by virtue of any court proceedings, writ of execution, levy, sale, or by operation of law, the Landlord may, if the Landlord so elects, at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant or to any trustee, receiver, assignee or other person in charge of or acting as custodian of the assets or property of the Tenant, five days notice in writing, of the Landlord's intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures and chattels therefrom, by force or otherwise, without liability for damages.
21st: The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, conveyor, refrigeration, sprinkler, airconditioning or heating systems, elevators or hoisting equipment; or by reason of
the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or of the Landlord or the Landlord's or this or any other Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with, interruption of or failure, beyond the control of the landlord, of any services to be furnished or supplied by the Landlord.
22nd: The various rights, remedies, options and elections of the Landlord, expressed herein, are cumulative, and the failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this lease or to exercise any election or option. or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect.
23rd: This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord's inability to supply any service or material called for herein, by reason of any rule, order, regulation or preemption by any governmental entity, authority, department, agency or subdivision or for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or for any cause beyond the control of the Landlord.
24th: The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect.
25th: All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner.
26th: The Landlord covenants and represents that the Landlord is the owner of the premises herein leased and has the right and authority to enter into, execute and deliver this lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the leased premises for the term aforementioned.
27th: This lease contains the entire contract between the parties. No representative, agent or employee of the Landlord has been authorized to make any representations or promises with reference to the within letting or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant.
28th: See Rider
29th: If any mechanics' or other liens shall be created or filed against the leased premises by reason of labor performed or materials furnished for the Tenant in the erection, construction, completion, alteration, repair or addition to any building or improvement, the Tenant shall upon demand, at the Tenant's own cost and expense, cause such lien or liens to be satisfied and discharged of record together with any Notices of Intention that may have been filed. Failure so to do, shall entitle the Landlord to resort to such remedies as are provided herein in the case of any default of this lease, in addition to such as are permitted by law.
30th: The Tenant waives all rights of recovery against the Landlord or Landlord's agents, employees or other representatives, for any loss, damages or injury of any nature whatsoever to property or persons for which the Tenant is insured. The Tenant shall obtain from Tenant's insurance carriers and will deliver to the Landlord, waivers of the subrogation rights under the respective policies.
31st: The Tenant has this day deposited with the Landlord the sum of $12,366.00 as security for the payment of the rent hereunder and the full and faithful performance by the Tenant of the covenants and conditions on the part of the Tenant to be performed. Said sum shall be returned to the Tenant, without interest, after the expiration of the term hereof, provided that the Tenant has fully and faithfully performed all such covenants and conditions and is not in arrears in rent. During the term hereof, the Landlord may, if the Landlord so elects, have recourse to such security, to make good any default by the Tenant, in which event the Tenant shall, on demand, promptly restore said security to its original amount. Liability to repay said security to the Tenant shall run with the reversion and title to said premises, whether any change in ownership thereof be by voluntary alienation or as the result of judicial sale, foreclosure or other proceedings, or the exercise of a right of taking or entry by any mortgagee. The Landlord shall assign or transfer said security, for the benefit of the Tenant, to any subsequent owner or holder of the reversion or title to said premises, in which case the assignee shall become liable for the repayment thereof as herein provided, and the assignor shall be deemed to be released by the Tenant from all liability to return such security. This provision shall be applicable to every alienation or change in title and shall in no wise be deemed to permit the Landlord to retain the security after termination of the Landlord's ownership of the reversion or title. The Tenant shall not mortgage, encumber or assign said security without the written consent of the Landlord.
A Rider is attached and made a part hereof.
The Landlord may pursue the relief or remedy sought in any invalid clause, by conforming the said clause with the provisions of the statutes or the regulations of any governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.
In all references herein to any parties, persons, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of the within instrument may require. All the terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, or caused these presents to be signed by their proper corporate officers and their proper corporate seal to be hereto affixed, the day and year first above written.
Signed, Sealed and Delivered SETH BELLER TRUST
in the presence of
or Attested by
By: /s/ Beller, Co-Trustee
--------------------------------
By: /s/ Beller Co-Trustee
--------------------------------
/s/ [Tenant]
------------------------------------ --------------------------------
Tenant
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STATE OF NEW JERSEY, COUNTY OF ss.:
I Certify that on _______________, 19___, ________________________________ personally came before me and acknowledged under oath, to my satisfaction, that this person (or if more than one, each person):
(a) is named in and personally signed this document; and
(b) signed, sealed and delivered this document as his or her act and deed.
STATE OF NEW JERSEY, COUNTY OF ss.:
I Certify that on _______________, 19___, ________________________________ personally came before me, and this person acknowledged under oath, to my satisfaction, that:
(a) this person is the _____________________ secretary of ________________ the corporation named in this document;
(b) this person is the attesting witness to the signing of this document by the proper corporate officer who is ___________________________________ the ___________________ President of the corporation;
(c) this document was signed and delivered by the corporation as its voluntary act duly authorized by a proper resolution of its Board of Directors;
(d) this person knows the proper seal of the corporation which was affixed to this document; and
(e) this person signed this proof to attest to the truth of these facts.
Signed and sworn to before me on ______________________________________
_________________, 19__. (Print name of attesting witness below
signature)
_______________________________
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LEASE
TO
Expires,
Rent, $
Prepared by:
ASSIGNMENT OF LEASE
For one dollar and other good and valuable consideration, the Tenant as Assignor, assigns this Lease and all the Assignor's rights and privileges therein, including any and all monies deposited with the Landlord as security, subject to all the terms, covenants and conditions contained therein; and the Assignee accepts this Assignment of Lease and assumes and agrees to comply with and be bound by the terms, covenants and conditions in said Lease contained. The signature of the Landlord hereto is evidence of the Landlord's consent to and acceptance of this Assignment of Lease.
_________________________________ ____________________________________
Assignee Assignor
____________________________________
Landlord
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RIDER TO LEASE
BETWEEN
SETH BELLER TRUST AS LANDLORD
AND
TRB, LLC. AS TENANT
DATED June 14, 1999
The term of the Lease shall be for a term of ten (10) years and seven (7) months beginning June 1, 1999 and terminating December 31, 2009. If the Commencement Date is not the first day of a calendar montht 6 0 , Tenant shall pay to Landlord a prorated amount of the Monthly Basic Rent.
The Landlord acknowledges that the Tenant has been formed by its members for the specific purpose of creating a new, state chartered, non-member community bank (the "Bank"), and that the successful incorporation of the Bank is entirely subject to the discretionary approval of those regulatory authorities with jurisdiction, including, but not limited to, the Federal Deposit Insurance Corporation (the "FDIC") and the New Jersey Department of Banking and Insurance ("NJDBI"). The Landlord agrees that this Lease may be terminated by the Tenant at any time on or before May 31, 2000, but only if a Certificate of Authority, within the meaning of N.J.S. 17:9A-14, has not been issued by NJBDI for the Bank when the Tenant takes the actions required by the following sentence to terminate the lease under this provision. Tenant agrees to diligently pursue all regulatory applications and approvals. This Lease can be terminated by the Tenant under this provision only upon (i) the issuance by the Tenant to the Landlord of written notice of termination under this provision, which notice shall state that NJDBI has not issued a certificate of Authority for the Bank as of the date of the issuance of the notice, and (ii) the delivery by the Tenant to the Landlord, directly or by disbursement from any segregated account, of thirty (30) days' rent at the rate in effect when the written notice of termination is issued by the Tenant. In the event that the Tenant terminates this Lease under the terms of this provision, the termination shall be effective immediately upon the satisfaction of the conditions set forth in the preceding sentence, and shall be without further force and effect from that point forward.
The Basic Rent shall commence upon the Commencement Date and shall be paid without setoff or deduction for any reason as follows: Tenant covenants and agrees to pay Basic Rent as follows:
MONTHLY MINIMUM
TERM RENT EXTENDED
---- ---- --------
6/1/99-9/30/99 $3,100.00 $12,400.00
10/1/99-12/31/99 $4,100.00 $12,300.00
1/1/00-12/31/00 $6,183.00 $74,196.00
1/1/00-12/31/01 $6,183.00 $74,196.00
1/1/00-12/31/02 $6,183.00 $74,196.00
1/1/00-12/31/03 $6,183.00 $74,196.00
1/1/00-12/31/04 $6,183.00 $74,196.00
1/1/05-12/31/05 $7,111.00 $85,332.00
1/1/06-12/31/06 $7,111.00 $85,332.00
1/1/07-12/31/07 $7,111.00 $85,332.00
1/1/08-12/31/08 $7,111.00 $85,332.00
1/1/09-12/31/09 $7,111.00 $85.332.00
----------
TOTAL $822,340.00
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In the event any payment is not received within ten (10) days of due date or if a payment is received but is returned for insufficient funds or otherwise nonpayment of the check, Tenant shall pay a five percent (5%) late charge for each and every such event. If the Commencement Date is not the first day of a month, the first month's rent will be due upon commencement and will be adjusted on a pro-rata basis to the end of that month.
In the event Tenant receives its charter prior to December 31, 1999, Tenant will pay the full monthly rent of $6,183.00 effective on the first of the month following the receipt of the charter.
Tenant agrees to prepay the first ten (10) months of rent in the amount of $41,079 to an escrow account at Wilentz Goldman and Spitzer to be used to pay Landlord the monthly rent as due.
Provided Tenant is not in default of any part of the terms of this Agreement and further provided that Tenant should continue to occupy the Premises, Landlord does hereby grant to Tenant the right, privilege and option to extend this Lease for two (2) successive periods of five (5) years each under the same terms and conditions of this Lease in effect at the expiration of the original term or extended term hereof and the rental paid for any option period shall be the amount indicated below. Tenant, if it elects to exercise any option, shall do so by giving Landlord written notice at least twelve (12) months prior to the expiration of the original term or each extended term, as the case may be.
During each respective five (5) year option term, annual fixed rent shall equal the "Fair Market Rental" for the Premises which sum shall be determined as follows:
(a) Within three hundred sixty (360) days prior to the end of the initial term or first option term, as the case may be, but not less than one hundred eighty (180) days before the end of the initial term or first option term, as the case may be, Tenant shall provide Landlord with notice that it intends to negotiate the fixed rent for such option term. Following Tenant's notice, but prior to Tenant's exercising its respective option, Landlord and Tenant shall meet and seek to determine the annual fixed rent for the respective option term
(b) In the event Landlord and Tenant have not agreed upon the fixed rent for the option term as of the date that Tenant is required to exercise any option, then within a fifteen (15) day period, commencing upon Tenant exercising its option, Landlord and Tenant shall jointly designate a licensed MAI appraiser who is fit, impartial with respect to the Landlord and Tenant and has at least ten (10) years experience appraising retail space in Monmouth County, New Jersey to determine the Fair Market Rental.
(c) In the event the parties are unable to jointly agree upon an appraiser, Landlord and Tenant agree to jointly request that the President or other presiding officer of the local chapter of the American Institute of Real Estate Appraisers or such successor or similar organization located in or closest to Monmouth County appoint an appraiser with the qualifications described above within thirty (30) days of such request. The parties shall be bound by such appointment.
(d) Within forty-five (45) days from the date the parties select or have an appraiser appointed, the appraiser shall present Landlord and Tenant with its current appraisal. The decision of the appraiser will be in writing and counterpart copies will be delivered to each of the parties. In rendering its decision, the appraiser will not add to or subtract from, or otherwise modify the provisions of this Lease. Such decision of the appraiser shall be final and binding upon Landlord and Tenant. Fees and expenses of the appraiser and all other expenses of the appraisal will be borne by the parties equally. Notwithstanding the Fair Market Rental determination, within fifteen (15) days of receipt of such final determination, Tenant may rescind the exercise of its option, in which event the Lease shall terminate at the expiration of the then current term, and Tenant shall reimburse Landlord for Landlord's reasonable expenses in obtaining the appraisal.
(e) The Fair Market Rental shall be determined by taking into consideration the fact that the building is a two-story building containing approximately 10,600 square feet. The Premises shall be appraised as if the building were in its current location with its then current zoning and being used for its then current retail use.
(f) If the option term shall have commenced prior to the determination of the Fair Market Rental, fixed rent shall be one hundred fifteen percent (115%) of the then
current fixed rent until such time as Fair Market Rental is established as provided by the terms of this paragraph. Upon the determination of the Fair Market Rental, Tenant shall be credited on its next monthly payment for the fixed rent it has paid in excess of the fixed rent due and payable or Tenant shall reimburse Landlord for the fixed rent currently due and payable within ten (10) business days.
(g) In no event shall the Fair Market Rental during the option terms be less than the fixed rent for last Lease Year of the preceding term.
Landlord's sole obligation to repairs and care of the subject Premises is specifically limited to the building structure and roof, which Landlord agrees to maintain in good, safe and sanitary condition except for acts caused by the neglect or fault of the Tenant. At the beginning of the lease, Landlord shall provide the HVAC in proper operating condition. Tenant acknowledges that all subsequent repair and maintenance of the HVAC system is tenant's sole responsibility. With respect to all other obligations pertaining to repairs and care, Tenant covenants and agrees to maintain, repair, replace and keep the Premises and all improvements, fixtures and personal property thereon, in good, safe and sanitary condition, order and repair and in accordance with all applicable laws, ordinances, order, rules and regulations (including, without limitation, the Americans with Disabilities Act "ADA") of governmental authorities having jurisdiction, now existing or hereafter enacted; to pay all costs and expenses in connection therewith; and to contract for the same in Tenant's own name. Tenant shall be responsible for fifty (50%) of all costs and expenses of replacement, maintenance and repair of the rear easement that is adjacent to the Leased Premises (Tenant acknowledges that the rear easement area extends the entire length of Landlord's property but that this Tenant is responsible solely for that portion which abuts and attaches to the Leased Premises). All maintenance and repairs by Tenant shall be done promptly, in a good and workmanlike fashion, and without diminishing the original quality of the Premises or the property. Tenant shall not be responsible for and shall not bear the costs and expenses of replacement of, or extraordinary maintenance and repairs to, roofs, exterior walls, and structural elements of the Building and improvements.
Tenant may not make any structural or interior alterations which changes the Premises from the condition that existed at the time Tenant takes possession thereof. If Tenant desires to have alterations made, Tenant shall provide Landlord's managing agent with two (2) complete sets of construction drawings, and such agent shall then determine the cost of the work to be done pursuant to such drawings and submit the cost to Tenant. Tenant may then either agree to pay Landlord the cost, in which event Landlord shall cause the work pertaining to structural alterations to be done, or Tenant may withdraw its request for alterations. With respect to non- structural changes, such work may be done by the Tenant with the consent of the Landlord, such consent not to be unreasonably withheld. If requested by Landlord at the termination of this Lease or vacation of the Premises by Tenant, Tenant shall restore (at Tenant's sole cost and expense) the Premises to the same condition as existed at the commencement of the term,
ordinary wear and tear and damage by insured casualty only excepted. However, Landlord may elect to require Tenant to leave alterations performed for it unless at the time of such alterations Landlord agreed in writing that Tenant could remove them on expiration or termination of this Lease and if Tenant does so remove, Tenant shall repair any damage occasioned by such removal and restore the Premises to a standard "vanilla box" condition at Tenant's cost. Tenant may paint the exterior of the building at Tenant's own cost and expense provided the color is white or beige. Any other color must be approved by Landlord in writing prior to the change.
Tenant may at its own cost reconstruct entirely or redesign the face of the existing sign in front of its demised space. Tenant will be provided priority positioning on said sign, but Tenant may use only up to fifty (50%) percent of said sign. The cost to maintain and repair said signage shall be prorated among the Tenants occupying the sign. In addition, Tenant may at its own cost erect additional signs both on the facade and on the premises provided same does not result in lessening the available signage to other Tenants of the complex or building. All signs are subject to prior municipal and Landlord written approval, which approval shall not be unreasonably withheld. In the event Tenant wishes to erect a new sign on the New Monmouth Road side of the Premises and said sign will be used for the benefit of all Tenants in the entire complex (on a pro-rata basis), then in such event and subject to Tenant obtaining zoning approvals, Tenant may erect such a sign.
Tenant shall pay all electric, water and gas charges directly to the utility. In the event any utility is not separately metered, Tenant shall pay its pro-rata share of charges to Landlord.
The liability policy required to be obtained by Tenant shall name Landlord as an additional insured. In the event that Landlord shall mortgage the property and Landlord's mortgagee shall request that it be named as an additional insured, then, in such event, Tenant shall have its insurance company name Landlord's mortgagee as an additional insured.
Upon request by Landlord to Tenant, not made more frequently than every five (5) years, Tenant shall increase the amount of liability insurance to such sum which reflects the percentage increase in the CPI in place at the first of the month at the commencement of this Lease. For purposes of clarification, the rate to be used is that which is issued by the U.S. Department of Labor, Bureau of Labor Statistics and further identified as New York-Northern New Jersey, All Urban Consumers, and which is certified to be 172.7 as of February 1998. By way of example, if the CPI increases by five percent (5%) over the five-year period, then all coverages set forth in this provision shall be required to be increased by five percent (5%).
Tenant shall maintain fire and extended coverage, vandalism, malicious mischief and special extended coverage insurance in an amount which is adequate to cover the cost of replacement of all personal property, decorations, trade fixtures, furnishings, equipment and all
contents in the Premises. Tenant also shall maintain workers compensation insurance covering all persons employed by Tenant and as otherwise required by law.
All of the aforesaid insurance shall be written by one or more A-Rated or comparable insurance companies authorized to do business in the State of New Jersey and satisfactory to Landlord; all such insurance shall contain endorsements that:
such insurance may not be canceled or amended with respect to Landlord (or its designees) except upon ten (10) days written notice for non-payment of premium, and thirty (30) days written notice for all other reasons, by certified mail, return receipt requested to Landlord (and any designees) by the insurance company.
Tenant covenants and agrees that nothing shall be done or kept on the Premises which might make unavailable or increase the cost of insurance maintained with respect to the Premises or property which might increase the insured risks or which might result in cancellation of any such insurance.
Tenant covenants and agrees to protect, indemnify and save Landlord (except for acts caused by Landlord or Landlord's gross negligence) harmless from and against all obligations, claims, damages, penalties, causes of action, costs and expenses, including attorneys' fees at all tribunal levels, imposed upon, incurred by or asserted against Landlord by reason of (a) any accident, injury to or death of any person or loss of or damage to any property occurring on or about the Premises; (b) any act or omission of Tenant or Tenant's officers, employees, agents, guests or invitees or of anyone claiming, by, through or under Tenant; (c) any use which may be made of, or condition existing upon, the Premises; (d) any improvements, fixtures or equipment upon the Premises; (e) any failure on the part of Tenant to perform or comply with any of the provisions, covenants or agreements of Tenant contained in this Lease; (f) any violation of any law, ordinance, order, rule or regulation of governmental authorities having jurisdiction by Tenant or Tenant's officers, employees, agents, guests or invitees or by anyone claiming by, through or under Tenant; and (g) any repairs, maintenance or changes to the Premises by, through or under Tenant. Tenant further covenants and agrees that, in case any action, suit or proceeding, is brought against Landlord by reason of any of the foregoing, Tenant will, at Tenant's sole cost and expense, defend Landlord in any such action, suit or proceeding, with counsel acceptable to Landlord, as provided by Tenant's insurance carrier.
Assuming reasonable premiums, the Tenant shall, throughout the term of this Lease and renewal term, if any, pay its pro rata share of the cost and expense, to obtain and maintain fire and extended coverage insurance on the building on the leased Premises, and appurtances thereto, for the benefit of and payable to the Landlord and Landlord's mortgagee, as their interests may appear, to the extent of no less than one hundred (100%) of the replacement cost thereto. Such replacement cost shall be determined from time to time (but not more frequently than once in any thirty-six month period) at the request of the Landlord. All insurance shall be
written by an A-Rated or comparable insurance company authorized to do business in the State of new Jersey and satisfactory to the Landlord and delivered to the Landlord, together with evidence of payment of the premiums therefor, not less than fifteen days prior to the commencement of the term hereof. The tenant At least fifteen days prior to the expiration or termination date of any policy, the tenant shall deliver a renewal or replacement policy with proof of the payment of the premium thereof.
If all or any part of the Premises or the property of which the Premises is a part shall be damaged or destroyed by fire or other casualty by more than twenty-five percent (25%) of the total of the building and there is more than five (5) years remaining on the current term, Landlord may elect to repair and/or rebuild the same with reasonable diligence, but Landlord's obligation hereunder should be limited to restoration of the Premises to the condition as of the date of commencement of the term. Nothing herein contained shall impose upon Landlord any liability or responsibility to repair, rebuild or replace any property belonging to Tenant. If there should be a substantial interference with the operation of Tenant's business in the Premises as a result of such damage or destruction which requires Tenant to temporarily close its business to the public or in the event Tenant shall be requested to cease operation so Landlord may repair, rebuild or replace, the rent shall abate during such period of closure. Unless this Lease is terminated by Landlord, as hereinafter provided, Tenant shall repair, redecorate and refixture the Premises and restock the contents thereof in a manner to at least the condition equal to that existing prior to its destruction or casualty and the proceeds of all insurance carried by Tenant on its personal property, decorations, trade fixtures, furnishings, equipment and contents in the Premises shall be held in trust by Tenant for such purposes. Landlord shall notify Tenant within ninety (90) days of the date of the fire or other casualty if Landlord shall elect to repair and/or rebuild. If Landlord elects to repair and/or rebuild, then the Lease shall not be terminated by Tenant except as provided herein. If there is less than five (5) years remaining, then the parties agree to bargain in good faith with respect to the extension of the term of Lease for a minimum of ten (10) years at the Fair Market Value (as defined in Paragraph entitled Rider to Rent clause above). Failure of both parties to agree to new terms within sixty (60) days of the damage shall entitle either party to elect to terminate the Lease at the end of the sixty-day period.
Tenant may elect to terminate the Lease in the event that the Premises shall be destroyed by fire or other casualty and same cannot be restored to tenantable condition within one hundred eighty (180) days from the date of such destruction or damage. In such case Tenant shall give written notice to Landlord not later than thirty (30) days subsequent to the date of such destruction or damage. If there be a dispute concerning the reasonable probability of completion or restoration within one hundred eighty (180) day period, such dispute shall be subject to arbitration by a single arbitrator under the rules of the American Arbitration Association in New Jersey. The parties shall share equally the cost of the arbitrator and any fees of the arbitrator or of the American Arbitration Association.
It is agreed that the provision as set forth in the base Lease shall be applicable only with respect to the last renewable term of the Lease. With respect to all other terms other than the last renewable term, Landlord shall have the right to show the Premises after six (6) months preceding the expiration of the last term.
Each of the following acts shall be deemed to be a default by Tenant which, if uncured, shall give rise to the right of Landlord to proceed at its option to terminate this Lease upon written notice to Tenant and to pursue its other remedies as provided herein:
(a) Failure by Tenant to pay any installment of Basic Rent or Additional
Rent or other charge when due (however, Tenant shall be entitled to
one time each year to receive a notice of default giving Tenant ten
(10) days within which to cure such default).
(b) Failure by Tenant to cure any default in the observance or performance of any of Tenant's covenants, agreements or obligations hereunder within thirty (30) days after notice of such non-observance or non-performance given by Landlord in accordance with the notice provisions hereof and further provided that if Tenant is proceeding diligently to cure such non- monetary default, the cure period will be extended for a reasonable period of time beyond the thirty (30) days, such period not to exceed fifteen (15) additional days.
(c) Bankruptcy or insolvency proceedings by or against Tenant which proceedings are not set aside within sixty (60) days after the institution of such proceedings by or against Tenant.
(d) The adjudication of Tenant as a bankrupt or insolvent or the appointment of a receiver or trustee for any portion of Tenant's assets or property which adjudication and/or appointment is not set aside within sixty (60) days from the entry thereof.
(e) The voluntary assignment by Tenant for the benefit of creditors.
(f) The abandonment or vacation of the Premises by Tenant.
Upon any termination of this Lease as aforesaid, Tenant shall quit and peacefully surrender the Premises to Landlord, and Landlord, upon and at any time after such termination may, without notice, re-enter and repossess the Premises and remove all persons and property therefrom, either by force, summary proceedings or otherwise, without being liable for any damages, or being subject to prosecution or other liability therefor. No such re-entry by Landlord shall be deemed or construed as a waiver of any of Landlord's rights against Tenant pursuant hereto or otherwise, nor shall such re-entry be deemed an acceptance of a surrender of this Lease unless Landlord so elects.
At any time, from time to time, after any such termination of this Lease, Landlord may, either in their own names or as agent for Tenant, relet the Premises, or any part thereof, for such term or terms (which, at Landlord's option, may be longer or shorter than the remainder of the
Term), for such use or purpose, and on such other terms and conditions as Landlord, in its discretion shall deem advisable including agreements to make such repairs, alterations, renovations and/or re-decorations as shall be necessary or appropriate in order to prepare the Premises for such reletting and the making and performing of any of such repairs, alterations, renovation and/or redecoration shall not operate or be construed to release Tenant from any of Tenant's liability or obligations under this Lease. Any such reletting shall not release Tenant from any of Tenant's liability to Landlord as set forth in this Lease and Tenant shall have no claim to the Base Rent and Additional Rent or other sums which may be paid in connection with any such reletting over and above the sums therefor payable by Tenant to Landlord under this Lease.
In the event of any such termination of this Lease as aforesaid, whether or not the Premises, or any part thereof, shall have been relet, Tenant shall pay to Landlord the Basic Rent and the Additional Rent and other charges required to be paid by Tenant up to the time of such termination, and thereafter Tenant, until the expiration of what would have been the Term in the absence of such termination, shall be liable to Landlord for, and shall pay to Landlord, as and for liquidated and agreed damages, for Tenant's default, the following:
(a) Landlord's costs and expenses incurred in performing any obligations of Tenant hereunder;
(b) Landlord's costs and expenses incurred in connection with any reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, repair and/or alteration costs, costs for renovation, redecoration and other preparation of the Premises for reletting; and
(c) The equivalent of the amount of Basic Rent and Additional Rent which would be payable under this Lease by the Tenant for the balance of the Term if this Lease were still in effect, less the rentals received pursuant to any reletting of the Premises as above provided.
Tenant shall pay to Landlord the damages set forth above under subparagraphs (a) and (b) immediately upon demand therefor by Landlord. Tenant shall pay to Landlord the damages set forth under subparagraph (c) above immediately upon demand therefor, or, at Landlord's option, monthly on the days on which the Basic Rent and Additional Rent would have been payable under this Lease if this Lease were still in effect, and Landlord shall be entitled to recover from Tenant each monthly Deficiency as such Deficiency shall arise. Nothing contained herein shall limit or prejudice the right of the Landlord to prove, and obtain as liquidated damages, by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount referred to above.
In the event of termination of this Lease as provided hereinabove, Tenant hereby expressly waives any right of redemption or re-entry or repossession or right to reinstate the operation of this Lease.
The specific remedies to which Landlord may resort under the terms hereof are cumulative and are not intended to be exclusive of any or all other remedies or means of redress to which Landlord may be lawfully entitled in case of any breach or threatened breach by Tenant of any provision of this Lease. Without limiting the generality of the foregoing, Landlord shall have the right to institute summary dispossess proceedings against Tenant under all circumstances from time to time permitted by law. In the event judgment for possession shall be entered in favor of Landlord and against Tenant in any such proceedings, Tenant shall thereafter remain liable to Landlord as provided above as if Landlord had terminated this Lease by reason of any of Tenant's defaults recited above.
Notwithstanding the foregoing provisions hereof, in the event that any amounts of Basic Rent or Additional Rent are not paid within ten (10) days of the due date thereof, a late charge of five percent (5%) of the Basic Rent and/or the Additional Rent shall then be due and owing. Said late charge shall also constitute Additional Rent hereunder.
(g) Landlord shall have the right to accelerate all Base Rent and any other sums due hereunder and otherwise payable in installments over the remainder of the Term.
Notwithstanding any other provisions contained in this Lease and only if the Tenant is the Bank or any successor to the Bank, in the event that (a) the Tenant or its successors or assignees shall become insolvent or bankrupt, or if its or their interests under this Lease shall be levied upon or sold under execution or other legal process, and (b) the depositary institution then operating on the Premises is closed, or taken over by any depositary institution supervisory authority ("Authority"), Landlord may, in such event, terminate this lease as a result of such bankruptcy, insolvency, levy or sale prior to the expiration of its term only with the concurrence of any Receiver or Liquidator appointed by such Authority; provided, that in the event that this lease is terminated by any such Receiver or Liquidator, the maximum claim of Landlord for rent, damages or indemnity resulting from the termination, rejection or abandonment of the unexpired term of this Lease by such receiver or Liquidator shall, by law, in no event be greater than an amount equal to all accrued and unpaid rent to the date of such termination.
In each lease year Tenant shall pay as additional rent a sum based upon all real estate taxes attributable and levied or assessed against the Leased Premises, throughout the term as extended. It is understood that the taxing authorities have never issued a separate assessment for the land and building comprising the Leased Premises. Reference is made to Exhibit "A" which depicts the subject Premises as Unit B and that there are three (3) other units which comprise the entire Premises which Landlord owns at this site. On the attached map, there are four (4) tracts which are identified A, B, C and E. Tract A is occupied by this Tenant Crest of Middletown, a New Jersey Corporation. Tract B is the leased premises. Tract C is occupied by Friendly Ice Cream. Tract E is the vacant land retained by Landlord. Because Landlord has not been able to obtain a separate assessment for each tract, the tax bill encompasses all four tracts, and it is agreed that Tenant shall pay its pro-rata share of such tax bill which is deemed to be 13.4%. If any of the buildings are modified, then the percentage owed by this Tenant shall be adjusted on
the same proportion as was used at the time of the making of this Lease. In the event that Landlord develops the land identified as Unit E on the attached schedule, Tenant's proportionate share of tax obligation for land shall be reduced to reflect the additional use.
Landlord shall estimate Tenant's proportionate share of Real Estate Taxes and one-twelfth of the amount so estimated shall be paid by Tenant to Landlord on the first day of each calendar month in advance. Within ninety (90) days after the end of each tax year Landlord shall furnish a statement to the Tenant of the actual Real Estate Taxes and there shall be an adjustment between Landlord and Tenant, with payment to or repayment by Landlord as the case may require, to the end that Landlord shall receive the entire amount of Tenant's annual pro rata share of Real Estate Taxes for each lease year. The obligations under this Paragraph 10 of the Tenant to pay the above mentioned Real Estate Taxes incurred in each lease year shall survive the expiration or termination of the Lease so that such sums as may still be due and owing after the expiration or termination of the Lease shall be paid if incurred during the term of the Lease.
Tenant's obligation to pay pro rata share of taxes and assessments shall include any taxes and assessments of a nature not presently in effect but may hereafter be levied, assessed or imposed upon Landlord or upon the Property if such tax shall be based upon or arise out of the ownership, use or operation of, or the rents received from the Property, other than income taxes of the Landlord.
The Tenant agrees to replace at the Tenant's expense any and all glass which may become broken in or on the Premises. Plate glass and mirrors, if any, shall be insured by the Tenant at their full and insurable value with a company satisfactory to the Landlord.
Tenant is responsible for the disposing of its own garbage at its cost and expense. Tenant shall obey such rules as Landlord may issue for disposition of garbage, including any recycling laws. Tenant is also responsible for its own janitorial service within the Demised Premises.
Tenant covenants, warrants and represents to Landlord that, during the term of this Lease, the buildings, improvements, soil, groundwater and surface water at, on or a part of or under the Premises shall not become contaminated with hazardous materials, substances or wastes (as those terms are defined in the federal Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., the federal Solid Waste Disposal Act, 42 U.S.C. 6901 et seq., the federal Water Pollution Control Act, 33 U.S.C. 1251 et seq., the New Jersey Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq., the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq., the New Jersey Water Pollution Control Act, N.J.S.A. 58:10A-1 et seq., the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., all regulations promulgated pursuant to the foregoing, and any other environmental statutes, ordinances, rules and regulations of the federal, state or local governments) as a result of the actions or inactions of Tenant, its employees, agents, representatives, contractors, licensees,
invitees, assignees or sublessees. In the event such contamination occurs, notwithstanding Landlord's exercise of any of its rights under or any of the remedies provided by this Lease for the breach of the foregoing covenant, warranty and representation, Tenant shall, at its sole cost and expense, immediately and fully comply with all federal, state and local statutes, ordinances, rules and regulations applicable to such contamination and Tenant shall, at its sole cost and expense, clean up, remove and/or remediate such contamination consistent with all such statutes, ordinances, rules, or regulations.
(b) Tenant shall indemnify and save Landlord harmless of, from and against any and all claims, demands, liabilities, damages, suits, actions, judgments, fines, penalties, loss, cost and expense, including, without limitation, attorney's fees, directly or indirectly arising out of or resulting from the breach of subparagraph (a) above inclusive of the entire period during which Tenant has occupied the Premises, specifically for those periods prior to the term of the subject Lease.
(c) Landlord acknowledges and agrees that Tenant may use such household cleaners and chemicals to maintain the Premises in such limited quantities as is needed for normal use in the Premises only. Storage of such chemicals is also permitted. Landlord and Tenant acknowledge that any and all of the cleaners and chemicals described in this paragraph may constitute hazardous materials, substances or wastes. However, Tenant may use, store and dispose of same as herein set forth, provided that in doing so, Tenant complies with all applicable laws.
(d) All of the provisions of this Paragraph 34 shall survive the expiration or earlier termination of this Lease until such time as Tenant fulfills and completes its obligations under this Paragraph 34, provided, however, that nothing in this Lease shall make Tenant liable for any contamination, spill, discharge, or release of hazardous substances or materials or wastes which occur (i) after the expiration or earlier termination of this Lease, or (ii) Tenant's vacation of the Premises, whichever occurs later. Tenant shall have the right to provide at Tenant's own cost and expense a certified report by a licensed environmental inspection firm certifying that such firm has completed an inspection of the Premises and that Tenant's responsibilities as defined herein have been complied with and that the Premises has no contamination or violations.
Tenant shall look solely to Landlord's equity in the Shopping Center for the satisfaction of the remedies of Tenant in the event of a breach by Landlord of any of the terms, covenants and conditions of the Lease to be performed by Landlord.
If the Landlord, or any subsequent owner of the Shopping Center, sells the Shopping Center, its liability for the performance of its agreements in this lease shall end on the date of the sale of the Premises, and the Tenant shall look solely to the purchaser for the performance of those agreements. The Tenant will attorn to any subsequent owners of the Premises.
Tenant shall obtain and deliver to Landlord a waiver of subrogation rights under the casualty and liability policies maintained by Tenant.
During the last six months of the Initial Term or any renewal term, Landlord shall have the right to place signs on the Premises indicating the Premises is for rent, and at any time during the Lease, the Landlord may place signs on the Premises indicating the Premises is for sale.
Any real estate taxes, insurance premiums or other sums or charges which the Tenant is obligated to pay under the terms of this Lease other than the Base Rent shall be treated as Additional Rent. The failure of Tenant to pay any such Additional Rent shall give rise to the same rights as the failure of Tenant to pay any Base Rent.
Tenant hereby waives trial by jury as to any and all issues arising in any action or proceeding between the parties.
This Lease and any lien thereof upon the Shopping Center and/or the Premises therein and all rights of Tenant hereunder are hereby subordinated and subjected to the lien of any one or more mortgages that now are or hereafter become a lien upon the Shopping Center and/or the Premises therein, or any part thereof, and any extensions or renewals thereof. This subordination provision is intended to be self-executing and shall not require the execution of any further or subsequent instrument.
Tenant shall, upon demand, at any time or times, execute, acknowledge and deliver to Landlord, without expense to Landlord, any and all instruments that may be necessary or appropriate to subordinate this Lease, and all rights hereunder, to the lien of any such mortgage or mortgages. If Tenant shall fail at any time to execute and deliver any such subordination instrument, Landlord, in addition to any other remedies available to them, in consequence thereof, may execute, acknowledge and deliver the same as the attorney-in-fact of Tenant, and in Tenant's name, place and stead, and Tenant hereby makes, irrevocably constitutes and appoints Landlord such attorney-in-fact for that purpose.
If any holder of any mortgage, indenture, deed of trust, or other similar instrument succeeds to Landlord's interest in the Premises, Tenant will pay to it all rents subsequently payable under this Lease. Tenant will, upon request of any one so succeeding to the interest of Landlord, automatically become the Tenant of, and attorn to, such successor in interest without change in this Lease. Such successor in interest will not be bound by (i) any payment of rent for more than one month in advance, or (ii) any amendment or modification of this Lease made without its written consent, or (iii) any claim against Landlord arising prior to the date on which such successor succeeded to Landlord's interest, or (iv) any claim or offset of rent against the Landlord. Landlord agrees to execute a nondisturbance agreement in a form similar to that which is set forth in attached Schedule "B". Landlord further agrees to cooperate with Tenant with
respect to the obtaining of any mortgagee's consent to such nondisturbance agreement. With respect to future mortgagees, it is agreed that such language will be included in the mortgage document or loan agreement.
Tenant shall not be entitled to record this Lease nor a memorandum or short form of this Lease. If Tenant violates this provision by recording or attempting to record such Lease or a memorandum or short form thereof, Landlord shall have the right to terminate Tenant's interest hereunder and to exercise any and all of Landlord's rights and remedies as in the case of any other Tenant default hereunder.
Tenant acknowledges the rights of Friendly Ice Cream Corporation, the occupant of Tract C as set forth on Schedule "A", to use in common parking spaces, entrances, exits, driveways and right of ways located on the Leased Premises.
Additionally, Tenant acknowledges that Landlord intends to develop Tract E at some time in the future or in the alternative to sell it for development purposes. In such event, Tenant acknowledges that the ingress and egress rights mentioned above, afforded to occupant of Tract B, shall also apply to the occupant of Tract E. Additionally, Tenant agrees to execute any reasonably required documents to memorialize a special easement for ingress and egress to be located at Landlord's discretion on the Premises.
In the event Landlord elects to build on Tract E and establishes an easement over part of the parking lot of Tenant's Premises, then Landlord shall provide Tenant with replacement parking at the nearest available location to Tenant's existing Premises, the number of which to be the same as those which were displaced by the easement.
The occupants of Tract E shall also have the right to erect a sign at the northeasterly end of Tenant's Premises, the sign to be subject to municipal and Landlord approvals.
With respect to both the sign and the access easements, Tenant shall not be responsible for any costs in relation thereto.
Reference is made to the rights of Friendly Ice Cream Corporation, the tenant occupying Tract C, for the use of Tenant's parking, in common with other tenants on the Premises. Tenant confirms Friendly's right to use Tenant's parking facilities, in common with Tenant.
Tenant agrees, at any time and from time to time upon not less than fifteen (15) days prior written notice by Landlord to Tenant requesting same, to execute, acknowledge and deliver to Landlord a written Estoppel Certificate certifying that this Lease is unmodified and in full force and effect (or if there shall have been modifications that this Lease is in full force and effect as modified and stating the modifications) and the dates to which the basic rent and additional rent have been paid in advance, if any, and stating whether or not Landlord or Tenant is in default in the performance of any covenant, agreement or condition contained in this Lease,
and, if so, specifying each such default of which Tenant may have knowledge, it
being intended that any such Estoppel Certificate delivered pursuant to this
Section may be relied upon by any prospective acquirer of the Shopping Center
and/or of Landlord's interest in this Lease or any mortgagee of the Shopping
Center or any assignee of any mortgage upon the Shopping Center. Upon written
notice and not more than once in a twelve month period, Landlord will provide
tenant with notice that that this Lease is unmodified and in full force and
effect (or if there shall have been modifications that this Lease is in full
force and effect as modified and stating the modifications).
This Lease and any disputes arising out of this Lease shall be governed and determined by the laws of the State of New Jersey.
Anything in this Lease to the contrary notwithstanding, Landlord shall not be deemed in default with respect to the performance of any of the terms, covenants and conditions of this Lease if same shall be due to any strike, lockout, civil commotion, war-like operation, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or controls, inability to obtain any material or service, Act of God or any other cause whatsoever reasonably beyond the control of Landlord.
The Tenant may use the Premises as a retail bank/financial institution and for no other use. Tenant may not sell furniture, alcohol, ice cream products on the premises, or operate as a restaurant. These restrictions shall be binding on all assignees and successors of Tenant. Likewise, Landlord agrees that it will not lease to any "any organization that is in the business of providing banking or financial services, including, but not limited to, banks the deposits in which are insured by the FDIC, trust companies, credit unions, consumer finance businesses, insurance agents and brokerages, and organizations that are engaged in the trade or business of promoting, selling or trading equity securities, debt securities, commodities, or interests in mutual funds or investment pools of any type." Specifically, Landlord's obligation is with respect to future tenants and excludes tenants who are in place at the time of this Agreement.
Tenant further agrees not to allow the use of the Premises for the purposes of a restaurant, Health Maintenance Organizations, or furniture store or any other use that may conflict with Landlord's other Tenants within the shopping center. Tenant further agrees that throughout the term of the Lease it will not allow any space to be used for the following purposes: a pinball, video game, or any form of entertainment arcade; a gambling or betting office, a massage parlor, a cinema, video store, bookstore selling, renting or exhibiting primarily materials of pornographic or adult nature; an adult entertainment bar or club; a bowling alley, roller skating or ice skating rink, billiards parlor or pool hall; fire arms shooting range or any other use which creates or causes excessive noise; theater, health club/exercise salon; any type of educational/vocational institution; flea market, warehouse; or an office except as incidental to the permitted retail use. Tenant agrees that it shall not sell or rent videos of any type at the Premises.
Tenant may not assign or sublet this Lease without the written approval of the Landlord, which approval will not be unreasonably withheld, provided that Tenant under this Lease will remain liable under the terms of the lease notwithstanding any such assignment or sublease and further provided that such user conducts a use which is permitted under the Lease and does not violate any use restriction set forth herein. Tenant shall provide Landlord with notice at least thirty (30) days prior to the effective date of the assignment or sublease, and Landlord shall have fifteen (15) days within which to perform creditworthiness tests on the proposed user. It is agreed that Landlord has the right to reject any proposed user on the basis of poor credit or inadequate quality which would otherwise devalue or harm the overall stature of the shopping center. Upon any subleasing or assignment, Tenant will provide the Landlord with a true copy of the sublease or assignment immediately upon the execution thereof. Not withstanding the above, Tenant may assign this lease to the new banking entity once a charter has been issued or to the FDIC as legally required.
Notwithstanding the express terms or possible applicability of any other term or provision of this Lease:
(a) This Lease shall be assigned, in its entirety, to the Bank, ipso facto upon the issuance by NJDBI of a Certificate of Authority for the Bank, pursuant to N.J.S. 17:9A-14. Upon the assignment of this Lease by the Tenant to the Bank by operation of the preceding sentence, the Bank shall assume all of the rights, duties, liabilities and obligations of the Tenant under this Lease, and the Tenant shall relinquish and be relieved of all of its rights, duties, liabilities and obligations under this Lease. The Tenant or the Bank shall provide the Landlord with notice of the issuance by NJDBI of a Certificate of Authority for the Bank within a reasonable time of its issuance, but the failure of the Tenant and the Bank to provide such notice shall not, in any respect, void or otherwise impede the automatic assignment of this Lease by the Tenant to the Bank; and
(b) The Tenant or the Bank, as the case may be, may, in the exercise of its discretion and upon the issuance of written notice to the Landlord, assign this Lease in its entirety to another bank or financial institution with equity, as shown on its most recent audited balance sheet and determined under generally accepted accounting principles, which is in an amount greater than the lesser of (i) Seven Million Dollars ($7,000,000.00), or, if the Tenant is the Bank, (ii) the amount shown as equity on the most recent audited balance sheet for the Bank, determined in accordance with generally accepted accounting principles. If the tenant assigns this Lease to another bank or financial institution under subparagraph (b) of this paragraph, the terms and conditions of this Lease will remain in effect except for the minimum rent which shall be adjusted to the then fair market rent which shall be determined by the same methodology as in the option to extend clause as defined in the RIDER TO RENT CLAUSE herein.
Notwithstanding the provision of paragraph 12 of the printed form of the Lease, Tenant shall be entitled to make a claim for moving expenses and for any trade fixtures which are taken in any condemnation or eminent domain proceeding provided the award to Tenant does not diminish the award that the Landlord would otherwise receive from the condemning authority.
The preprinted Lease together with this Rider contains the entire agreement of the parties and superseded any prior written or oral understandings or agreements between the parties. This agreement may only be modified by a writing signed by the parties. In the event of any inconsistency between the provisions contained in the preprinted Lease and this Rider, the provisions of this Rider shall govern.
Any notice or document required to be delivered hereunder shall be deemed to be delivered (a) as and when actually received or (b) whether or not received, (i) five (5) business days after deposit in the United States mail, postage prepaid, certified or registered mail, (with return receipt requested) or (ii) one (1) business day after sent by Federal Express, or other nationally recognized overnight courier providing delivery confirmation, for next-day delivery addressed to the party at the address set forth at the head of this Lease and to such other addresses as either of said parties shall have specified by written notice delivered in accordance herewith provided, however, that notice of change of address shall be effective only upon actual receipt by the party to whom notice is addressed.
Tenant may operate its business during any hours it chooses provided the same comply with municipal, county, state and federal laws.
At the end, expiration or other termination of the term, the Tenant shall surrender the Premises to the Landlord in as good order and condition as they were at the commencement of the term or may be put in thereafter, reasonable wear and tear excepted. All alterations, additions and improvements in or upon the Premises made by the Tenant (except Tenant's furniture, trade fixtures, equipment and shelving) shall at Landlord's election either become the property of the Landlord and remain upon and be surrendered with the Premises as a part thereof at the termination or other expiration of the term, or be removed at Tenant's expense. Tenant agrees to repair any and all damage caused by such removal.
Provided Tenant is not then in default of any provisions of this Lease, Landlord agrees to provide Tenant a Right Of First Offer on the second floor of the demised premises consisting of approximately 5,300 square feet. The premises will we delivered "as is" and under the same terms and conditions as this Lease except for "RENT" which shall be determined by using the
same methodology as in the option to extend clause as defined in the RIDER TO RENT CLAUSE herein. Tenant shall have ten (10) days to determine if it wants the space. Tenant will be required to lease the entirety of the space for the full unexpired term remaining on the original premises or at a minimum for a minimum term of five years.
Landlord agrees to, at its sole cost, apply a 1" overlay to the existing pavement and address the existing potholes on the western side of the property, bring the existing 4" PVC pipe underground, cut back the trees on the northeast corner of the property to allow visibility from route 35 and to clear away the brush along the northern and western sides of the paved area, re-seed in the front area by the common sign. Landlord will commence with its work on or about June 1, 2000 or upon written notice from the Tenant that it has received its charter. Tenant agrees to contribute at least $52,980 to upgrading the facade for the entire building for the mutual benefit of each Tenant in the building. The architectural drawings and construction costs shall be approved in writing by Landlord and Tenant. Should the cost of said facade upgrade be less than $52,980, Tenant agrees to increase the minimum rent by 50% of the difference between $52,980 and the actual cost of the facade. This amount will be divided equally over the first five years of the Lease.
Tenant shall pay Landlord as Additional Rent for the premises Tenant's Proportionate Share of the operating expenses which is 50%. Operating Expenses shall mean all expenses, costs and disbursements (but not specific costs specifically billed to and paid by specific Tenants) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with ownership, operation and maintenance of the "Building, and/or Tract B" not leases or available for lease to tenants, including but not limited to, the following:
- wages and salaries of all employees serving in operation and maintenance or security of the "Building, and/or Tract B" (including taxes, insurance and benefits relating thereto and the costs of uniforms, if any, and equipment.
- all supplies and materials used in operation, maintenance and repair of the "Building, and/or Tract B".
- cost of all utilities and any surcharges for the "Building, and/or Tract B", including the cost of water, sewer, power, heat, light, air conditioning, and ventilation for the "Building and the Tract B" (but not limited to Tenant's utility charges paid by Tenant pursuant to this Lease or such of the foregoing charges as are directly consumed by and paid for by other occupants in the Complex by direct metering or a pro-rata share of utility charges that are paid by Tenant by direct metering).
- cost of all maintenance and services for the "Building and/or Tract B", including but not limited to, private roads, parking lot cleaning, and maintenance, removal of snow, ice and debris, traffic regulation and landscaping.
- cost of all insurance relating to the "Building and/or Tract B", including but not limited to the cost of casualty and liability insurance applicable to the "Building and/or Tract B".
- cost of repairs and general maintenance excluding repairs and general maintenance paid by the proceeds of insurance or by Tenant or by other occupants or tenants in the "Building and/or Tract B" other than Tenant and excluding the net proceeds received by the Landlord as the result of any claim that may be successfully asserted and recovered by the Landlord against any third parties.
- a reasonable management fee competitive with fees charged for similar projects in Monmouth County for the management of the "Building and/or Tract B", not to exceed five percent (5%) of rent payable hereunder.
- cost of operating and maintaining the Common Areas and facilities in the "Building and/or Tract B".
- cost of any grass cutting and maintenance and the sprinkler system servicing the "Building and/or Tract B".
- cost of services, if any, furnished by Landlord for non-exclusive use of all tenants without complete recovery of all costs from other tenants at the "Building and/or Tract B".
- the cost of any additional services not provided to the "Building and/or Tract B" at the commencement of the Term but thereafter provided by Landlord in the reasonable and prudent management of the "Building, and/or Tract B".
- the cost of any capital improvements which are not specifically billed to and paid by specific tenants made to the "Building, and/or Tract B" after the commencement of the term that reduce other operating expenses or are required under governmental law or regulation due to Tenant's operations in the premises that was not applicable to the Building at the time it was constructed, such cost thereof to be amortized over a reasonable period together with interest on the unamortized balance at a rate paid by Landlord on funds borrowed for the purposes of constructing said capital improvements.
- Tenant shall pay in each calendar year to the Landlord as additional rent its proportionate share of the operating expenses. Landlord shall estimate Tenant's annual proportionate share of the operating expenses and 1/12th of the amount so estimated shall be paid on the first day of each month in advance.
- If during the course of any calendar year, Landlord shall have reason to believe that the Operating Expenses shall be higher than projections (as provided above), Landlord shall be entitled, but not required, to adjust the amount by a lump sum invoice for the proceeding months of that calendar year and to advise Tenant of the adjustment of future monthly amounts so that Operating Expenses shall be on a reasonably current basis each calendar year. Such adjusted projection shall not be made more frequently than twice a year.
- Within ninety (90) days or as soon thereafter as possible, following the end of each calendar year, Landlord shall provide Tenant with a statement of such calendar year's actual Operating Expenses. If such statement shows that the Tenant's monthly payments exceeded Tenant's
Proportionate Share of the actual Operating Expenses for the applicable calendar year, Landlord shall credit such overpayments to Tenant's future monthly Operating Expense payments. If such statement shows that Tenant's Proportionate Share of Landlord's actual operating Expenses exceeded Tenant's monthly payments for the applicable calendar year, then Tenant shall within fifteen (15) days of being sent such statement pay the total amount of such deficiency to Landlord as Additional Rent.
- The Operating Expenses whether requiring lump sum payments or constituting estimated monthly amounts in addition to base rent shall for all purposes be treated and considered additional rent. The failure of Tenant to pay such additional rent as and when due in advance without demand shall have the same effect as failure to pay ant installment of basic rent and shall afford Landlord all remedies provided in the lease therefore.
- Tenant's obligation for payment of additional rent shall survive any expiration or termination of the Lease by the lapse of time or otherwise.
- Should this lease commence (or terminate) at any time other than the first (or last) day of the calendar year, additional rent referred to in this section shall be calculated on a pro-rata adjustment based on the number of days the lease was in effect for each calendar year.
Tenant and Tenant's agents, employees, and invitees will comply fully with all requirements of the rules and regulations of the Building, the Complex and /or related facilities. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such manner as maybe deemed advisable for safety, care, or cleanliness of the building, the Complex and/or related facilities or premises and for the preservation of good order therein, all of which rules and regulations and /or Building services, changes and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by the employees, servants, agents, visitors and invitees of Tenant.
If Tenant does not vacate at the end of the Term, Tenant shall become a Tenant-at-will and the Base Rent shall automatically become two hundred (200%) percent of the Base Rent during the last month of the Term. This should not be construed as Landlord's consent to hold over.
Miscellaneous.
(a) The terms, covenants, agreements and conditions herein contained, shall apply to and bind the heirs, successors, executors, administrators, assigns, and subtenants of the parties hereto, unless otherwise provided herein;
(b) The language in all parts of this Lease and Rider shall in all cases be construed as a whole according to its fair meaning and not strictly for or against either the Landlord or the Tenant;
(c) If any term, covenant or condition of this Lease and Rider shall be invalid or unenforceable, the remainder of this Lease and Rider shall be valid and enforceable to the fullest extent permitted by law;
(d) No failure or delay of either party to exercise any right or power given it herein or to insist upon strict compliance by the other party of any obligation imposed upon it herein and no course of dealing or custom or practice of either party hereto at variance with any term hereof shall constitute a waiver or modification of the terms hereof by such party or its right to demand strict compliance with the terms hereof by the other party;
(e) This Lease and Rider may be amended and modified only in writing by an instrument signed by all parties, and may not be amended or modified orally.
(f) The Landlord shall consent to any non-monetary and reasonable amendments to the terms of this Lease which are either (a) required by those regulatory authorities with jurisdiction as a condition to the issuance of a Certificate of Authority for the Bank, or (b) necessary for the continuing compliance by the Bank with the applicable provisions of federal and state law governing the establishment and operation of regulated financial institutions so long as such alterations will not interfere with the other tenant or tenants or users of the premises. The Tenant shall provide the Landlord with written notice of any such alterations and amendments, which notice shall include the specific terms of the alteration or amendment, the regulatory authority that demanded such alteration or amendment, and the statute, regulation or legal principle under which the requirement for such alteration or amendment arose.
RIDER TO LEASE
BETWEEN
SETH BELLER TRUST AS LANDLORD
AND
TRB, LLC AS TENANT
Dated June 22, 1999
(There are two additional changes to the above-referenced Lease which must be made. Due to circumstances, the same signatories for the Tenant are not present to initial these changes. In their stead, Robin Zager will initial for the Tenant using the authority that she is a Member of TRB, LLC. This temporary page will be replaced by actual initials by the original signatories, Frank J. Patock, Jr. and Charles T. Parton.)
The address on the front page of the Lease Agreement has been changed by the Township of Middletown. The old address was 1250 Route 35 and the new ad- dress is 1184 Route 35.
The Landlord has agreed to credit the Tenant with $18,549 towards exterior renovations of the building. This credit will be in the form of a waiver of the basic rent for months 58, 59, and 60. Therefore, for the months of October 2004, November 2004, and December 2004, the basic rent payment of $6183 shall not be due. (This changes the extensions of rent, on page 2 of the Rider, to be collected so year 2004 becomes $55,647 and the TOTAL becomes 803,791.) During those three months, any additional rents under the Agreement above shall be paid as required. Beginning, in January 2005, basic rent shall again be due, in the amount of $7111 as per the Lease Agreement.
SETH BELLER TRUST
BY: /s/ Robert Beller
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ROBERT BELLER, Co-Trustee
BY: /s/ Francis V. Bonello
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FRANCIS V. BONELLO, Co-Trustee
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TRB, LLC
BY: /s/ Robin Zager
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ROBIN ZAGER, Member
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(not scannable)
THIS AGREEMENT, made as of this _____ day of _____________, ______, by and between _________________________________________________________________ having offices at _____________________________________________________________________ (hereinafter referred to as "Mortgagee") and____________________________________ _____________________________________________________________, having offices at ____________________________________________________ (hereinafter referred to as "Lessee");
WHEREAS, Lessee has entered into a certain Lease, dated __________________ ("Lease") between ____________________________________________________ as Lessor and _______________________________________ as Lessee, covering certain land and improvements ("Demised Premises"), situated in the ___________ of______________, County of ________________, and State of New Jersey, as further described in the Lease; and
WHEREAS, Mortgagee is the holder of a certain Mortgage given by Lessor as Mortgagor thereunder, dated __________________ and about to be recorded in the Office of the Clerk of _________ County, encumbering the Demised Premises (hereinafter the "Mortgage"); and
WHEREAS, Mortgagee requires that the Lease be subordinate in priority to the lien of the Mortgage and Mortgagee has agreed not to disturb Lessee's possessory rights in the Demised Premises provided that Lessee is not in default under the Lease and provided that Lessee attorns to Mortgagee or the purchaser at any foreclosure sale; and
WHEREAS, Mortgagee is willing to so agree on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the premises, the mutual covenants contained herein and ONE ($1.00) DOLLAR and other good and valuable consideration each to the other in hand paid, receipt of which is hereby acknowledged, Mortgagee and Lessee hereby agree as follows:
1. The Lease is and shall be subject and subordinate in all respects to the Mortgage and to any renewal, modification, replacement or extension of the same and to any subsequent mortgage with which the Mortgage may be spread and consolidated.
2. Provided Lessee complies with this Agreement and is not in default under the terms of the Lease in the payment of rent or additional rent or the performance of any of the terms, conditions, covenants, clauses or agreements on its part to be performed under the Lease, then, as of the date Mortgagee files a lis pendens in or otherwise commences foreclosure proceedings, the Mortgagee will not disturb Lessee's possession under said Lease and the Lease will not be affected or cut off by such proceeding (except to the extent that Lessee's right to receive or set off any monies or obligations owed or to be performed by the then Lessor shall not be enforceable thereafter against Mortgagee or any subsequent owner). Notwithstanding any foreclosure or other acquisition of the Demised Premises by Mortgagee, the Lease will be recognized as a direct Lease between Lessee and Mortgagee or any other party acquiring the Demised Premises upon the foreclosure sale or from Mortgagee, except that the Mortgagee, or any subsequent owner, shall not (a) be liable for any previous act or omission of Lessor under the Lease, (b) be subject to any offset which shall theretofore have accrued to Lessee against Lessor, (c) have any obligation with respect to any security deposited under the Lease unless such security has been physically delivered to Mortgagee, or (d) be bound by any modification of the Lease or by any previous prepayment of fixed rent for a period greater than one (1) month, unless such modification or prepayment shall have been expressly approved in writing by the Mortgagee.
3. Any provision of this Agreement to the contrary notwithstanding, Mortgagee shall have no obligation, nor incur any liability, with respect to completion of the Demised Premises or any improvements for Lessee's use and occupancy. Lessee certifies that as of this date, Lessee
has no charge, lien or claim of off-set under the Lease, or otherwise, against the rents or other charges due or to become due thereunder.
4. If Mortgagee elects to accept from the then Mortgagor a deed in lieu of foreclosure, lessee's right to receive or set off any monies or obligations owed or to be performed by the then Landlord shall not be enforceable thereafter against Mortgagee or any subsequent owner.
5. Lessee will, upon request by Mortgagee or any subsequent owner, execute a written agreement whereunder Lessee does attorn to Mortgagee or any such subsequent owner and affirms Lessee's obligations under the Lease and agrees to pay all rentals and charges then due or to become due as they become due to Mortgagee or such subsequent owner.
6. Lessee, from and after the date hereof, shall send a copy of any notice or statement under the Lease to Mortgagee at the same time such notice or statement is sent to the Lessor under the Lease.
7. Lessee hereby agrees that, from and after the date hereof, in the event of any act or omission by Lessor under the Lease (other than any such act or omission which is not capable of being remedied by Lessor under the Lease within a reasonable period) which would give the Lessee the right, either immediately or after the lapse of a period of time, to terminate the Lease, or to claim a partial or total eviction, Lessee will not exercise any such right (a) until it has given written notice of such act or omission to Mortgagee by delivering such notice of such act or omission, by certified mail, return receipt requested, addressed to Mortgagee at the Mortgagee's address as given herein, or at the last address of Mortgagee, furnished to Lessee in writing, and (b) until a reasonable period for remedying such act or omission shall have elapsed following such giving of notice and following the time when Mortgagee shall have become entitled under the Mortgage to remedy the same; provided, Mortgagee, at its option, shall, following the giving of such notice, have elected to commence and continue to remedy such act or omission or to cause the same to be remedied.
8. Lessee will neither offer nor make pre-payment of rent (for a period in excess of one (1) month) nor further change the terms, covenants, conditions and agreements of the Lease in any manner without the express consent in writing of the Mortgagee.
9. Nothing contained in this Agreement shall in any way impair or affect the lien created by the Mortgage, except as specifically set forth herein.
10. No modification, amendment, waiver or release of any provision of this Agreement or of any right, obligation, claim or cause of action arising hereunder shall be valid or binding for any purpose whatsoever unless in writing and duly executed by the party against whom the same is sought to be asserted.
11. This Agreement shall inure to the benefit of the parties hereto, their successors and assigns; provided, however, that in the event of the assignment or transfer of the interest of Mortgagee, all obligations and liabilities of Mortgagee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Mortgagee's interest is assigned or transferred; and provided, further, that the interest of Lessee under the Agreement may not be assigned or transferred.
IN WITNESS WHEREOF, Mortgages and Lessee have respectively signed and sealed this Agreement as of the day and year first above written.
WITNESS/ATTEST: ___________________________, Mortgagee __________________________________ By: __________________________________ WITNESS/ATTEST: ______________________________, Lessee __________________________________ By: __________________________________ |
The Mortgagor agrees for its heirs, successors and assigns that (1) the within Agreement does not (a) constitute a waiver by Mortgagee of any of its rights under the Mortgage, and/or (b) in any way release the Mortgagor from its obligation to comply with the terms, provisions, conditions, covenants, agreements and clauses of the Mortgage; and (2) the provisions of the Mortgage remain in full force and effect and must be complied with by the Mortgagor.
WITNESS/ATTEST: ____________________, Lessor/Mortgagor
__________________________________ By: __________________________________
Exhibit 10.14
LEASE AGREEMENT
BY AND BETWEEN
STAVOLA LEASING, LLC
656 SHREWSBURY AVE.
TINTON FALLS
AND
TWO RIVER COMMUNITY BANK
APRIL , 2000
TABLE OF CONTENTS
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Demised Premises 1
Article One Term 1
Article Two Payment Of Rent 2
Article Three Repairs And Care 3
Article Four Landlord's Responsibility For Repair & Care 4
Article Five Glass, etc. Damage Repairs 4
Article Six Alternations, Improvements 4
Article Seven Signs 5
Article Eight Compliance With Laws 6
Article Nine Liability Insurance 6
Article Ten Assignment 7
Article Eleven Restriction of Use 9
Article Twelve Mortgage Priority 9
Article Thirteen Condemnation, Eminent Domain 10
Article Fourteen Fire & Other Casualty 10
Article Fifteen Reimbursement of Landlord 11
Article Sixteen Inspection & Repair 11
Article Seventeen Right to Exhibit 12
Article Eighteen Increase of Insurance Rates 12
Article Nineteen Removal of Tenant's Property 13
Article Twenty Remedies Upon Tenant's Default 13
Article Twenty-One Termination on Default 14
Article Twenty-Two Non-Liability of Landlord 15
Article Twenty-Three Non-Waiver of Landlord 16
Article Twenty-Four Non-Performance by Landlord 16
Article Twenty-Five Validity of Lease 16
Article Twenty-Six Notices 16
Article Twenty-Seven Title & Quiet Enjoyment 17
Article Twenty-Eight Entire Contract 17
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Article Twenty-Nine Mechanic's Liens 17
Article Thirty Security 17
Article Thirty-One Due Date for Payment 18
Article Thirty-Two Habitual Late Payment Clause 18
Article Thirty-Three Non-Sufficient Funds Clause 18
Article Thirty-Four Late Fee 18
Article Thirty-Five Application of Minimum Rent 19
Article Thirty-Six Interest 19
Article Thirty-Seven Attorney's Fees 19
Article Thirty-Eight Refuse Removal 19
Article Thirty-Nine Operating Expenses (CAM Charges) 20
Article Forty H.V.A.C. 20
Article Forty-One Holdover 20
Article Forty-Two Parking of Business Use Vehicles 21
Article Forty-Three Liability 21
Article Forty-Four Surrender of Premises 21
Article Forty-Five Tenant's Compliance With Environmental, Health and
Safety Requirements 21
Article Forty-Six Conformity with Laws & Regulations 24
Article Forty-Seven Waiver of Trial by Jury 24
Article Forty-Eight Estoppel Certificate 24
Article Forty-Nine General Provisions 25
Article Fifty Broker 26
Signatures 26
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THIS LEASE, dated this -- day of April, 2000, by and between STAVOLA LEASING, LLC, a New Jersey limited liability company, having an office at 175 Drift Road, Tinton Falls, New Jersey, 07724, (mailing address, P.O. Box #482, Red Bank, New Jersey 07701), hereinafter referred to as "Landlord", and TWO RIVER COMMUNITY BANK, a New Jersey banking corporation, with office located at 1250 Highway 35 South, Middletown, New Jersey 07748 hereinafter referred to as "Tenant".
DEMISED PREMISES
In consideration of the rents and covenants herein set forth herein, Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, the premises containing approximately 3650 square feet, actual square footage to be determined located at the 656 Shrewsbury Avenue, Tinton Falls, New Jersey, as depicted on Schedule A (hereinafter called "Leased Premises" or "Demised Premises") and other improvements thereon, hereinafter collectively called "Building". This Lease shall be for the Term set forth below and subject to the terms and conditions set forth in this Lease and the Schedules attached hereto.
It is understood and agreed that the architectural design, aesthetic appeal and use of the Building is and shall remain always in the sole control of Landlord. Notwithstanding anything to the contrary contained herein, Landlord does hereby reserve the right from time to time or at any time to make changes and additions, without restrictions, to the Building, improvements or other areas, including without limitation, eliminating land, adding other lands, decreasing or changing the Building, except the Demised Premises, which are deemed desirable by Landlord, and the making of such changes or additions shall not invalidate or affect this Lease or any rights hereunder nor constitute an eviction of Tenant or a breach of this Lease, nor give rise to any claim for damages.
ARTICLE ONE
TERM
The Term of this Lease shall commence August 1, 2000 ("Term Commencement Date") and, except as may otherwise be provided herein, the Term shall expire at the end of ten (10) years from the Term Commencement Date. The Demised Premises shall be used and occupied only for and for no other purposes than a retail bank and bank administrative offices to conduct any banking activities permitted under the laws of the State of New Jersey and any other use is a violation of this restriction. Rent shall commence thirty (30) days from the Term Commencement Date (Rent Commencement Date). Landlord and Tenant agree to execute a writing setting forth the Term Commencement Date, the Expiration Date and Rent Commencement Date.
ARTICLE TWO
PAYMENT OF RENT
2.01 Minimum Rent. Tenant covenants to pay to Landlord without notice, demand, setoff, deduction or abatement at Landlord's address first above set forth, or at such other place as may hereafter be designated in writing by Landlord, on the days and in the manner herein prescribed for the payment thereof, guaranteed minimum rent and additional rent for the Demised Premises as set forth in this Article.
Tenant covenants to pay a fixed guaranteed minimum annual rent, herein called "Minimum Rent", as follows:
YEAR 1: $26.00/SF $94,900.00/YEAR $7,908.33/MONTH YEAR 2: $27.04/SF $98,700.00/YEAR $8,225.00/MONTH YEAR 3: $28.12/SF $102,638.00/YEAR $8,553.17/MONTH YEAR 4: $29.24/SF $106,725.00/YEAR $8,893.75/MONTH YEAR 5: $30.41/SF $111,000.00/YEAR $9,250.00/MONTH YEAR 6: $31.68/SF $115,440.00/YEAR $9,620.00/MONTH YEAR 7: $32.90/SF $120,084.00/YEAR $10,007.00/MONTH YEAR 8: $34.22/SF $125,000.00/YEAR $10,416.67/MONTH YEAR 9: $35.59/SF $129,900.00/YEAR $10,825.00/MONTH YEAR 10: $37.00/SF $135,050.04/YEAR $11,254.17/MONTH |
The Minimum Rent shall be payable in the monthly amounts in advance on the first day of each month throughout the Term of this Lease, however, the first month's Minimum Rent shall be payable in advance upon execution of this Lease, and the second month's Minimum Rent payable in advance on the first day of the month following the Term Commencement Date. The Minimum Rent for a period of less than one calendar month shall be prorated.
2.02 Additional Rent. In addition to the Minimum Rent stipulated herein, Tenant covenants and agrees to pay to Landlord as additional rent, hereafter "Additional Rent", all other sums and charges which are, pursuant to the terms of this Lease, to be paid as Additional Rent by the Tenant. Except as otherwise provided in this Lease, Additional Rent shall be due and payable on the first day of the month following the date on which Tenant is given notice of Additional Rent due.
2.03 Late Payment. In the event Tenant shall fail to pay any part of Minimum Rent and/or Additional Rent when due in accordance with terms of this Lease, and such default shall continue for 10 days then, in addition to the Landlord's rights as contained in Article 20, interest shall at Landlord's option accrue thereon at the rate of fifteen (15%) percent per annum from the tenth day after the due date to the date of payment.
2.04 Option to Extend Term. So long as Tenant has not been in default during the Term of this Lease or any previous option period, Tenant shall have the option to renew the within Lease for two (2), five (5) year periods. The First Option Period shall commence the day after the expiration of the original Lease Term and end five years thereafter. The Second Option Period shall commence the day after the expiration of the First Option Period and end five (5) years thereafter. Tenant covenants to pay a fixed guaranteed Minimum Rent for the First and Second Option Periods as follows:
FIRST, FIVE (5) YEAR OPTION
YEAR 11: $38.48/SF $140,448.00/YEAR $11,704.00/MONTH YEAR 12: $40.02/SF $146,073.00/YEAR $12,172.75/MONTH YEAR 13: $41.62/SF $151,920.00/YEAR $12,660.00/MONTH YEAR 14: $43.28/SF $157,980.00/YEAR $13,165,00/MONTH YEAR 15: $45.00/SF $164,250.00/YEAR $13,687.50/MONTH |
SECOND, FIVE (5) YEAR OPTION
YEAR 16 $46.80/SF $170,820.00/YEAR $14,235.00/MONTH YEAR 17 $48.67/SF $177,648.00/YEAR $14,804.00/MONTH YEAR 18: $50.62/SF $184,764.00/YEAR $15,397.00/MONTH YEAR 19: $52.64/SF $192,132.00/YEAR $16,011.00/MONTH YEAR 20: $54.75 SF $199,821.00/YEAR $16,651.80/MONTH |
Tenant must exercise each renewal option in writing, by certified mail, return receipt requested, to Landlord, no later than one hundred eighty (180) days prior to the expiration date of original Lease Term or prior renewal term, as applicable. Time is "of the essence" with respect to the exercising all renewal options.
2.05 Utilities. Tenant shall pay when due all the rents or charges for all utilities used by the Tenant, which are or may be assessed or imposed upon the Leased Premises, or which are or may be charged to the Landlord by the suppliers thereof during the Term hereof, and if not paid, such rents or charges shall be added to and become payable as Additional Rent with the installment of rent next due or within thirty (30) days of demand therefor, whichever occurs sooner. If separately metered, Tenant shall register all utility accounts in its own name.
ARTICLE THREE
REPAIRS AND CARE
Tenant has examined the Leased Premises and has entered into this Lease without any representation on the part of the Landlord as to the condition thereof. Landlord shall deliver Leased Premises to Tenant in "as-is" clean condition, with all walls, partitions, lighting and other fit up, excluding existing bank counters and bank equipment. Landlord shall make every effort to provide the bank vault that is currently located in the Leased Premises, provided however, in the event that the bank vault is removed, Landlord and Tenant shall adjust the Minimum Rent to provide for the cost of a suitable vault of the same standard and specification as the existing vault. The Tenant shall take good care of the Leased Premises and shall, at the Tenant's own cost and expense, make all repairs, including painting and decorating, and shall maintain the Leased Premises in good condition and state of repair, and at the end or other expiration of the Term hereof, shall deliver the Leased Premises in good order and condition, wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and maintain the same in a clean condition, free from debris, trash, refuse, snow and ice.
ARTICLE FOUR
LANDLORD'S RESPONSIBILITY FOR REPAIR & CARE
Tenant stipulates and agrees that the only duty of Landlord for repair and care of the Leased Premises is the duty to repair, care for and maintain the structural elements of the Building housing the Leased Premises. Interior and exterior doors provide access to or through the Leased Premises are non-structural elements and any and all damage to such doors, no matter what the cause may be, shall be the repair, replacement and maintenance responsibility of the Tenant. Landlord shall maintain all other doors in the Common Areas of the Building. Tenant is advised to protect all non-structural elements with proper insurance. Any and all requests to Landlord from Tenant for repair must be sent to Landlord by certified mail.
ARTICLE FIVE
GLASS, ETC. DAMAGE REPAIRS
In case of the destruction of, or any damage to, the glass in the Leased Premises, or the destruction or damage of any kind whatsoever to the Leased Premises, the Tenant shall repair the said damage or replace or restore any destroyed parts of the Leased Premises, as speedily as possible, at the Tenant's own cost and expense.
ARTICLE SIX
ALTERATIONS, IMPROVEMENTS
6.01 Tenant shall make no alterations, decorations, installations, additions or improvements (hereinafter "Tenant Changes") in or to the Demised Premises without in each instance obtaining the Landlord's prior written consent, and then only by contractors or mechanics subject to Landlord's approval, which shall not be unreasonably withheld and in conformance with detailed plans and specifications previously submitted to the Landlord and subject to the Landlord's prior written approval. All Tenant Changes shall be done at Tenant's sole cost and expense and at such times and in such manner as Landlord may from time to time designate. All Tenant Changes upon the Demised Premises, made by either party (excepting only Tenant's movable trade fixtures) shall, unless Landlord shall elect otherwise (which election may be made at any time prior to expiration or other termination of this Lease), become the property of Landlord, and shall remain upon, and be surrendered with, the Demised Premises as a part thereof at the end of the Term. In the event Landlord shall elect otherwise as to any Tenant Changes upon the Demised Premises, the same shall be removed by Tenant and Tenant shall restore the Demised Premises to the condition existing immediately prior to such Tenant Changes and such removal and restoration shall be at Tenant's own cost and expense, which covenant shall survive the termination of this Lease.
6.02 Tenant agrees that any Tenant Changes shall be done in a good and workmanlike manner, in conformity with the plans and specifications approved by Landlord, and shall comply with all laws, ordinances and regulations of all public authorities having jurisdiction over the Tenant Changes. All salvage in connection therewith shall be properly disposed of by the Tenant.
6.03 Tenant agrees that it will also procure all necessary permits before making any Tenant Changes. Landlord agrees that, without cost or expense to Landlord, it will cooperate
with Tenant in obtaining such permits. Tenant agrees to pay when due the entire cost of any work done by or for Tenant upon the Demised Premises so that the Demised Premises shall at all times be free of liens for labor or materials. Tenant agrees to require all contractors and materialmen to waive any and all rights they may have to any mechanics notices of intention and mechanics liens. Tenant also agrees to indemnify and save Landlord harmless from any and all liens, and any and all injury, loss, claims, or damages to any person or property occasioned by or in connection with any Tenant Changes.
6.04 Prior to the commencement of any Tenant Changes that involve any structural elements of the Demised Premises, Tenant shall also, if requested, furnish and deliver to the Landlord, at Tenant's sole cost and expense, performance and payment bonds from a recognized surety licensed to do business in the State of New Jersey for the performance and payment of Tenant's Changes. Such bonds are subject to the Landlord's approval as to form and amount. Tenant shall not be required to post bonds for nonstructural Tenant Changes.
6.05 All Tenant Changes shall be performed in such manner as not to interfere with the occupancy of any other tenant in the Building nor delay or impose any additional expense upon Landlord in the construction, maintenance or operation of the Building. Throughout the performance of Tenant Changes, Tenant, at its expense, shall carry or cause to be carried, and duly maintained, worker's compensation and employers liability insurance in statutory limits, and general public liability insurance insuring the Landlord against any an all liability or claims of liability arising out of the performance of the Tenant Changes, occasioned by or resulting from any accident or otherwise in or about the Leased Premises for injuries to any person or persons for limits not less than $1,000,000.00 for injuries to one person and $3,000,000.00 for injuries to more than one person, in any one accident or occurrence, and for loss or damage to the property of any persons, for not less than $1,000,000.00, for any occurrence in or about the Building, on which Landlord and its managing agent, if any, shall be named as parties insured, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with evidence satisfactory to Landlord that such insurance is in effect before the commencement of Tenant Changes and, on request, at reasonable intervals thereafter during the construction of Tenant's Changes.
ARTICLE SEVEN
SIGNS
Tenant shall not place nor allow to be placed any flashing lights, sound devices, advertisements or signs of any kind whatsoever upon, in or about the Leased Premises or any part thereof, except for a design and structure and in or at such places as may be indicated and consented to by Landlord in writing. In the case the Landlord or the Landlord's agents, employees or representatives shall deem it necessary to remove any such signs in order to paint or make any repairs, alterations or improvements in or upon the Leased Premises, or any part thereof, they may be so removed. Any signs permitted by the Landlord shall, at all times, conform with all municipal ordinances or other laws and regulations applicable thereto. Tenant recognizes and stipulates that a violation of this covenant is a material and substantial breach of the terms and grounds for termination and eviction, for which Landlord may institute summary dispossess action in a court of competent jurisdiction. Tenant shall have the right to seek
approval of a time and temperature sign to be placed at a location to be approved by Landlord. Tenant shall secure all necessary governmental approvals for such signage.
If Tenant's sign is in undesirable condition and/or disrepair, Landlord may require Tenant to repair/replace sign immediately upon written notice from Landlord, which notice will state the conditions found to be in disrepair. If Tenant does not repair or replace such sign, Landlord may remove sign at Tenant's expense.
ARTICLE EIGHT
COMPLIANCE WITH LAWS
Tenant shall promptly comply with all laws, ordinances, rules, regulations, requirements and directives of the federal, state and municipal governments or public authorities and of all their departments, bureaus and subdivisions applicable to and affecting the Demised Premises, their use and occupancy, the correction, prevention and abatement or nuisances, violations or other grievances in, upon or connected with the Demised Premises, during the Term hereof, and shall promptly comply with all orders, regulations, requirements and directives of the Board of Fire Underwriters or similar authority and of any insurance companies which have issued or are about to issue policies of insurance covering the Demised Premises and its contents, for the prevention of fire or other casualty, damage or injury, at the Tenant's own cost and expense.
ARTICLE NINE
LIABILITY INSURANCE
9.01 Tenant, at Tenant's own cost and expense, shall obtain or provide and keep in full force for the benefit of the Landlord, during the Term hereof, general public liability insurance insuring the Landlord against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the Leased Premises for injuries to any person or persons for limits not less than $1,000,000.00 for injuries to one person and $3,000,000.00 for injuries to more than one person, in any one accident or occurrence, and for loss or damage to the property of any persons, for not less than $1,000,000.00. The policy or policies of insurance shall be of a company or companies authorized to do business in New Jersey and shall be delivered to the Landlord, together with evidence of the payment of the premiums therefor, not less than fifteen days prior to the commencement of the Term hereof or of the date when the Tenant shall enter into possession, whichever occurs sooner. At least thirty (30) days prior to the expiration or termination date of any policy, the Tenant shall deliver a renewal or replacement policy with proof of the payment of the premium therefor. The Tenant also agrees to and shall save, hold and keep harmless and indemnify Landlord from and for any and all payments, expenses, costs, attorney fees and from and for any and all claims and liability for losses or damage to the property or injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, or for any cause or reason whatsoever arising out of or by reason of the occupancy by the Tenant and the conduct of Tenant's business.
In the event that at any time during the Term or any Renewal Term of this Lease, Landlord shall be advised by its insurance representatives that increases in one or more insurance
coverages are reasonably necessary to comply with insurance company recommendations, Tenant shall secure such increases in coverage to the extent that such coverages are available.
9.02 All of the aforesaid insurance and any other insurance policies of the Tenant shall be considered primary insurance, and except for workers compensation, shall be issued in the name of Tenant and Landlord and any designees and/or mortgagees of Landlord, as additional insureds, and shall be written by one or more qualified, licensed insurance companies satisfactory to Landlord and in form satisfactory to Landlord, which approval shall not be unreasonably withheld; all such insurance policies shall contain endorsements providing for at least thirty (30) days prior written notice to Landlord of any material change in or cancellation of such policy or coverage.
9.03 Tenant shall be solely responsible for payment of premiums and Landlord (or its designee) shall not be required to pay any premium for such insurance. Tenant shall deliver to Landlord at least thirty (30) days prior to the time such insurance is first required to be carried by Tenant, and thereafter at least forty-five (45) days prior to the expiration of such policy, either a duplicate original or certificate of insurance and true copy of all policies procured by Tenant in compliance with obligations hereunder, together with satisfactory evidence of the payment of the premiums therefor, it being the intention of the parties hereto that the insurance required under the terms hereof shall be continuous during the entire term of this lease and renewal, if any, and any other period of time during which, pursuant to the term hereof, said insurance is required.
9.04 With respect to the Demised Premises and the contents, improvements, and betterments therein, Landlord shall not be liable for any damage by fire or other peril includable in the coverage afforded by the standard form of all risk property coverage insurance policy (whether or not such coverage is in effect), no matter how caused, it being understood that the Tenant will look solely to Tenant's insurer for reimbursement.
9.05 If as a result of the failure of Tenant to comply with the foregoing provisions, Landlord is adjudged a co-insurer by its insurance carrier, then any loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant and shall be immediately paid by Tenant upon demand as Additional Rent.
ARTICLE TEN
ASSIGNMENT
10.01 Tenant shall not assign, mortgage, hypothecate, pledge, or in any manner, transfer this Lease or any estate or interest hereunder whether by operation of law or otherwise (collectively "assign") and shall not sublet the Demised Premises or any part or parts thereof ("sublet") without the previous written consent of Landlord in each instance. If Tenant violates the provisions of this Article 10, Landlord may, in addition to any remedies it has under this Lease, accept from any assignee, licensee, concessionaire or anyone who claims a right to any part of the interest of Tenant under this Lease (collectively "assignee"), or anyone who occupies any part or the whole of the Demised Premises ("sublessee"), the payment of Minimum Rent and Additional Rent and/or the performance of any of the other obligations of Tenant under this Lease, but acceptance shall not be deemed to be a waiver by Landlord of the breach by Tenant of the provisions of this Article 10, nor a recognition by Landlord that any such assignee or
sublessee has succeeded to the rights of Tenant hereunder, nor a release by Landlord of Tenant from further performance by Tenant of the covenants on Tenant's part to be performed under this Lease; provided, however, that the net amount of rent actually collected from any such assignee or sublessee shall be applied by Landlord to the rent to be paid hereunder. Any consent by Landlord to any such assignment, transfer, mortgage license or concession or other matter or thing contained in this Article 10 (collectively "assignment") or subletting shall not in any way be construed to relieve Tenant from obtaining the prior written consent of Landlord to any other or future assignment or subletting.
10.02 In the event of a merger or consolidation, or if at any time
during the Term of this Lease, (i) if the Tenant is a corporation and there
shall occur any change in the ownership of, or power to vote, the majority of
the outstanding capital stock of Tenant, or (ii) if the Tenant is a partnership
and/or joint venture and the partners and/or joint venturers, owners, or members
of any such partnership and/or joint venture change in any manner, the Landlord
shall thereafter have the right, at its option, to terminate this Lease by
notice to Tenant. If such option is exercised, the Term of this Lease shall in
no event be earlier than the end of the calendar month in which occurs the
thirtieth (30th) day after the giving of such notice. In any such event, the
collection of rent and/or acceptance by Landlord of the performance of any of
the obligations of Tenant under this Lease shall not be deemed to be a waiver by
Landlord of any of its rights under the provisions of this Section 10.02. This
Section 10.02 shall not be applicable to any corporation in which all of the
outstanding voting stock is, on the date of this Lease, listed on a national
securities exchange (as defined in the Securities Exchange Act of 1934, as
amended), or if sixty percent (60%) or more of the outstanding shares of such
voting stock is on such date owned by any fifty (50) or more shareholders.
10.03 If Landlord consents in writing to an assignment or subletting, then such consent to an assignment or subletting shall (unless expressed clearly to the contrary in said consent) be deemed conditioned upon Tenant's further compliance with the following provisions:
(a) At Landlord's option, the assignment and/or subletting must be, respectively, of all of Tenant's leasehold interest and of the entire Demised Premises and, in the case of assignment, shall also transfer to the assignee all of the Tenant's rights in, and interest under, this Lease including the security, if any, deposited hereunder. However, notwithstanding anything to the contrary in this Lease, Tenant, and the guarantor, if any, shall continue to remain liable, jointly and severally, with any such assignee or subtenant for all of the obligations of "Tenant" under this Lease.
(b) At the time of such assignment and/or subletting, this Lease must be in full force and effect without any breach or default thereunder on the part of the Tenant.
(c) The assignee or sublessee shall assume, by written recordable instrument, in form and content satisfactory to Landlord, the due performance of all of Tenant's obligations under this Lease, including any accrued obligations at the time of the assignment or subletting.
(d) A copy of the assignment or sublease and the original assumption agreement (both in form and content satisfactory to the Landlord) fully executed and acknowledged by the assignee and/or sublessee together with a certified copy of properly executed corporate resolutions authorizing such documents, shall be delivered to the Landlord within five (5) days from the effective date of such assignment or subletting.
(e) Any permitted sublease or assignment shall be on similar terms as this Lease insofar as compliance with laws and regulations and permitted uses are concerned.
(f) Tenant shall reimburse Landlord's reasonable attorney's fees for examination of and/or preparation of any documents in connection with such assignment and/or subletting.
(g) Landlord may, as a condition of consenting to any assignment or subletting, require Tenant and any assignee or sublessee of Tenant to pay to Landlord as Additional Rent any and all consideration payable to Tenant in excess of the Minimum Rent required hereunder for the area involved for any assignment or subletting, as and when such consideration is payable pursuant to the assignment or sublease. Said consideration to be computed on the basis of average square foot rent for the gross square footage Tenant has assigned or sublet.
If this Lease is assigned or if the Demised Premises or any part thereof be subleased or occupied by anybody other than Tenant, whether with or without Landlord's consent, Landlord may collect from the assignee, sublessee, occupant, licensee or concessionaire, any rental or other charges payable by Tenant under this Lease, and apply the amount collected to the rental and other charges herein reserved, but such collection by Landlord shall not be deemed an acceptance of the assignee, sublessee, occupant, licensee or concessionaire as tenant nor a release of Tenant from the performance by Tenant of this Lease.
ARTICLE ELEVEN
RESTRICTION OF USE
The Tenant shall not occupy or use the Leased Premises or any part thereof, nor permit or suffer the same to be occupied or used for any purposes other than as herein limited, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or other casualty.
ARTICLE TWELVE
MORTGAGE PRIORITY
This Lease shall not be a lien against the Leased Premises in respect to any first mortgage that may hereafter be placed upon said Leased Premises. The recording of such mortgage shall have preference and precedence and be superior and prior in lien to this Lease, irrespective of the date of recording and the Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to further effect the subordination of this Lease to any such mortgage. A refusal by the Tenant to execute such instruments shall entitle the Landlord to the option of canceling this Lease, and the term hereof is hereby expressly limited accordingly.
ARTICLE THIRTEEN
CONDEMNATION, EMINENT DOMAIN
If the land and premises leased herein or of which the Leased Premises are a part or any portion thereof, shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said land and premises or any portion thereof, then this Lease, at the option of the Landlord, shall terminate, and the Term hereof shall end as of such date as the Landlord shall fix by notice in writing and the Tenant shall have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises or any portion thereof the Tenant covenants and agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord in the aforementioned notice. Failure of the Tenant to comply with any provisions in this Article 13 shall subject the Tenant to such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
ARTICLE FOURTEEN
FIRE & OTHER CASUALTY
In the event of fire or other casualty, Tenant shall give immediate notice thereof to Landlord.
In the event that the fire or other casualty and damage shall be the result of the carelessness, negligence or improper conduct of Tenant, or Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; Tenant's liability for the payment of rent and the performance of all other covenants, conditions and terms to be performed by Tenant shall continue; and Tenant shall be liable to Landlord for the damage and loss suffered by Landlord; If the Demised Premises are only partially damaged, but remain tenantable, so that Tenant can reasonably continue its operations, Landlord shall repair the damage as rapidly as practicable.
In the event that the fire or other casualty and damage shall result from a cause other than that specified above and if the Demised Premises are only partially damaged, but remain tenantable, so that Tenant can reasonably continue its operations, Landlord shall repair the damage as rapidly as practicable. Tenant's obligation to pay the rent shall not cease but shall be pro-rated as to Tenant's usable portion of the Demised Premises, until such time as Landlord restores the damaged portion of the Demised Premises to its original condition. At that time, Tenant shall resume payment of the full rent.
In the event that the Demised Premises are so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the Demised Premises shall be made tenantable by Landlord. However, if the Demised Premises are totally destroyed, or, in Landlord's opinion, so damaged as to require practically a rebuilding thereof, then the rent shall be paid up to the time of such destruction and from thenceforth this Lease shall terminate.
In every case, if Tenant was insured against any of the risks herein described, then the proceeds of such insurance shall be paid over to Landlord to the extent of Landlord's actual costs and expenses to make the repairs hereunder, and such insurance carriers shall have no recourse against Landlord for reimbursement.
ARTICLE FIFTEEN
REIMBURSEMENT OF LANDLORD
In the event that the Tenant shall fail or refuse to comply with and perform any of the conditions and covenants of the Lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord, shall be added to the installment of Minimum Rent due immediately thereafter but in no case later than one month after such demand, whichever occurs sooner, and shall be due and payable as Additional Rent. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant of any of the covenants and conditions in this Lease contained.
ARTICLE SIXTEEN
INSPECTION AND REPAIR
Landlord, by its duly authorized employees and agents, upon reasonable notice and accompanied by a Tenant employee may enter the Demised Premises at reasonable hours (i) to inspect the same, (ii) to determine whether Tenant is complying with all its obligations hereunder, (iii) to supply any other service to be provided by Landlord to Tenant under the terms and conditions of this Lease, (iv) to make repairs to any adjoining space or utility services, or to make repairs, alterations or improvements to any other portion of the Shopping Center and (v) to perform any work therein that may be necessary to comply with any laws, statutes, ordinances, regulations, orders or requirements of any governmental authorities having jurisdiction over the Demised Premises, or to prevent waste or deterioration of the Demised Premises; provided, however, that all such work shall be done as promptly as reasonably possible and so as to cause as little interference to Tenant as reasonably possible. Landlord may, during the progress of any work in the Demised Premises, keep and store upon the Demised Premises, all necessary materials, tools and equipment required for said work. Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Demised Premises, and any entry to the Demised Premises obtained by Landlord by any of said means or otherwise shall not under any circumstances be construed or deemed to be forcible or unlawful entry into or a detainer of the Demised Premises or any portion thereof. Notwithstanding anything contained in this Article 16, Landlord shall not be
required to incur overtime or additional expense in order to minimize interference with Tenant's use and occupancy of the Demised Premises.
ARTICLE SEVENTEEN
RIGHT TO EXHIBIT
The Tenant agrees to permit the Landlord and the Landlord's agents, employees or other representatives to show the Demised Premises to persons wishing to rent or purchase same, and Tenant agrees that on or after one hundred twenty (120) days next preceding the expiration of the Term or any option period, the Landlord or the Landlord's agents, employees or other representatives shall have the right to place notices on the front of the Demised Premises or any part thereof, offering the Demised Premises for rent or for sale and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation.
ARTICLE EIGHTEEN
INCREASE OF INSURANCE RATES
Increases in Fire Insurance Premiums Attributable to Tenant. Tenant shall not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by the standard form of fire insurance policy. Tenant agrees to pay one hundred percent (100%) of any increase in premiums for fire and extended coverage insurance that may be charged during the Term on the amount of such insurance which may be carried by Landlord on Landlord's Building, resulting from the type of merchandise sold by Tenant in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule, issued by the organization making the insurance rate on the Premises, showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up the fire insurance rate on the premises.
In the event Tenant's occupancy causes any increase of premium for the fire, and/or casualty rates on Landlord's Building, Tenant shall pay the additional premium on the fire and/or casualty insurance policies by reason thereof. The Tenant also shall pay, in such event, any additional premium on the rent insurance policy that may be carried by the Landlord for its protection against rent loss through fire. Bills for such additional premiums shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, Additional Rent.
ARTICLE NINETEEN
REMOVAL OF TENANT'S PROPERTY
Any equipment, fixtures, goods or other property of the Tenant, not removed by the Tenant upon termination of this Lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and the Landlord shall have the right, without any notice to the Tenant, to sell or otherwise dispose of the same, at the expense of the Tenant, and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any.
ARTICLE TWENTY REMEDIES UPON TENANT'S DEFAULT
20.01 Tenant shall, without any previous demand therefor, pay to Landlord the Minimum Rent and Additional Rent at the times and in the manner herein provided.
In the event:
(a) of default after fifteen (15) days written notice in the payment of said rents or of any installment or part thereof, or in the payment of any other sum or any part thereof which may become due from Tenant to Landlord hereunder, at the times and in the manner provided herein, or
(b) the Demised Premises shall be deserted, abandoned or vacated, or
(c) of the violation by Tenant of any of the covenants, agreements and conditions herein provided or of any of the Rules and Regulations now or hereafter established by Landlord, and the failure to cure such violation within thirty (30) days after notice in writing of such violation by Landlord to Tenant;
then upon the happening of any such event, Landlord may, at its option, elect to terminate this Lease and/or enter the Demised Premises, either by force or otherwise, without being liable for any prosecution or damage therefor, and relet the Demised Premises, and receive the rent therefor, upon such terms as shall be satisfactory to Landlord, and all rights of Tenant to repossess the Demised Premises under this Lease shall cease and end upon such termination or entry. Such termination or entry for reletting by Landlord shall not operate to release Tenant from any Additional Rent to be paid or covenants to be performed hereunder during the full term of this Lease. For the purpose of reletting, Landlord shall be authorized to make such repairs or alterations in or to the Demised Premises as may be necessary to place the same in good order and condition. Tenant shall be liable for and hereby agrees to pay to Landlord the cost of such repairs or alterations and all expenses of such reletting. If the sum realized or to be realized from the reletting is insufficient to satisfy the rent provided in this Lease, Landlord, at its option may require Tenant to pay such deficiency in advance month by month (or at any greater intervals), or may require Tenant to pay in advance the entire deficiency resulting from such reletting. Landlord is hereby granted a lien, in addition to any statutory lien or right to distrain that may exist, on all personal property of Tenant in or upon the Demised Premises, including without limitation, furniture, fixtures (including trade fixtures) and merchandise of Tenant, to assure payment of the rent and performance of the covenants and conditions of this Lease. Landlord shall have the right, as agent of Tenant, to take possession of all personal property of Tenant found in or about the Demised Premises, including without limitation, furniture, fixtures, and merchandise of Tenant, and sell the same at public or private sale and to apply the proceeds thereof to the payment of any monies becoming due under this Lease, or remove all such effects and store the same in a public warehouse or elsewhere at the cost of and for the account of Tenant, or any other occupant, Tenant hereby waiving the benefit of all laws exempting property from execution, levy and sale on distress or judgment. Landlord, however, shall not be responsible or liable for any failure to relet the Demised Premises, or for any failure to collect any rent due upon any such reletting.
20.02 In the event of any breach or threatened breach by Tenant of any of the agreements, terms, covenants or conditions contained in this Lease, Landlord shall have the right to invoke any right and remedy allowed at law or in equity regardless of whether such remedy is specifically provided for in this Lease.
20.03 Each right and remedy of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Landlord of any one or more of the rights or remedies provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies provided for in this Lease now or hereafter existing at law or in equity or by statute or otherwise.
20.04 If the Term of this Lease shall be terminated due to default by the Tenant of any of the terms or covenants herein contained, this Lease and the Term and estate hereby granted, whether or not the Term shall heretofore have commenced, shall terminate with the same effect as if that day were the expiration date of the Term of this Lease, except that Tenant shall remain liable for all damages as are provided for herein, including but not limited to the Minimum Rent for the full Term of this Lease as originally provided for hereunder.
ARTICLE TWENTY-ONE
TERMINATION ON DEFAULT
21.01 At any time prior to or during the Term of this Lease, if Tenant shall make an assignment for the benefit of its creditors; or if Tenant shall file a voluntary petition in bankruptcy; or if Tenant shall be adjudicated a bankrupt or insolvent; or if the affairs of Tenant shall be taken over by or pursuant to an order of any court or of any other officer or governmental authority pursuant to any federal, state or other statute or law; or if Tenant shall admit in writing its inability to pay debts generally as they become due; or if Tenant shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law; or if Tenant shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any substantial part of its property; or if, within sixty (60) days after the commencement of any proceeding against Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or future federal, state or other statute or law, such proceedings shall have not been dismissed; or if, within sixty (60) days after the appointment, without the consent or acquiescence of Tenant, of any trustee, receiver, or liquidator of Tenant or of all or any substantial part of its property, such appointment shall not have been vacated or stayed on appeal or otherwise, or if, within sixty (60) days after the expiration of any such stay, such appointment shall not have been vacated; or in the event action shall be taken by Tenant in furtherance of any of the aforesaid purposes, then and in any such event Landlord may, in such event, terminate this Lease as a result of such bankruptcy, insolvency, levy or sale prior to the expiration of its term only with the concurrence of any Receiver or Liquidator appointed by such Authority, provided, that in the event that this Lease is terminated by any such Receiver or Liquidator, the maximum claim of Landlord for rent, damages or indemnity resulting from the termination, rejection or abandonment of the unexpired
term of this Lease by such Receiver or Liquidator shall, by law, in no event be greater that an amount equal to all accrued and unpaid rent to the date of such termination.
Such causes for the termination of this Lease as set forth in this Article 21 shall constitute a default by Tenant and all rights and remedies stated or otherwise shall be available to Landlord. The word "Tenant" in this Article 21 shall be construed to include any surety or guarantor of this Lease.
21.02 It is stipulated and agreed that in the event of the termination of this Lease pursuant to this Article 21, Landlord shall forthwith, notwithstanding any other provisions of this Lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the Minimum Rent reserved hereunder for the unexpired portion of the Term and the then fair and reasonable rental value of the Demised Premises for the same period. If the Demised Premises or any part thereof be relet by Landlord for the unexpired Term of said Lease, or any part thereof, before presentation of proof of such liquidated damages to any court commission or tribunal, the amount of rent reserved upon such reletting shall be prima facia evidence as to the fair and reasonable rental value for the part or the whole of the Demised Premises so relet during the Term of the reletting. Nothing herein contained shall limit or prejudice the right of the Landlord to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any statute or rule of law in such damages are to be provided, whether or not such amount be greater than, equal to or less than the amount of the difference referred to above.
ARTICLE TWENTY-TWO
NON-LIABILITY OF LANDLORD
The Landlord shall not be liable for any damage or injury, except that caused by its own negligence, which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste of sod pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, conveyer, refrigeration, sprinkler, air conditioning or heating systems, elevators or hoisting equipment; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or this or any other Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with, interruption of or failure, beyond the control of the Landlord, of any services to be furnished or supplied by the Landlord.
ARTICLE TWENTY-THREE
NON-WAIVER OF LANDLORD
The various rights, remedies, options and elections of the Landlord, expressed herein are cumulative, and the failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this Lease or to exercise any election or option or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any
such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect.
ARTICLE TWENTY-FOUR
NON-PERFORMANCE BY LANDLORD
This Lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord's inability to supply any service or material called for herein, by reason of any rule, order, regulation or preemption by any governmental entity, authority, department, agency or subdivision of for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or for any cause beyond the control of the Landlord.
ARTICLE TWENTY-FIVE
VALIDITY OF LEASE
The terms, conditions, covenants and provisions of this Lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect.
ARTICLE TWENTY-SIX
NOTICES
All notices required under the terms of this Lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested or receipted overnight courier, to the address of the parties as shown on the first page of this Lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner.
ARTICLE TWENTY-SEVEN
TITLE & QUIET ENJOYMENT
The Landlord covenants and represents that the Landlord is the owner of the Leased Premises and has the right and authority to enter into, execute and deliver this Lease; and does further covenant that the Tenant on paying the Minimum Rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the Leased Premises for the Term.
ARTICLE TWENTY-EIGHT
ENTIRE CONTRACT
This Lease contains the entire contract between the parties. No representative, agent or employee of the Landlord has been authorized to make any representations or promises with reference to the Leased Premises or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant.
ARTICLE TWENTY-NINE
MECHANIC'S LIENS
If any mechanics' or other liens shall be created or filed against the Leased Premises by reason of labor performed or materials finished for the Tenant in the erection, construction, completion, alteration, repair or addition to any building or improvement, the Tenant shall upon demand, at the Tenant's sole cost and expense, cause such lien or liens to be satisfied and discharged of record together with any Notices of Intention that may have been filed. Failure to do so shall entitle the Landlord to resort to such remedies as are provided herein in the case of any default of this Lease, in addition to such as are permitted by law.
ARTICLE THIRTY
SECURITY
The Tenant has deposited with the Landlord the sum of Fifteen
Thousand Eight Hundred Sixteen 66/100 ($15,816.66) Dollars which represents two
(2) months Minimum Rent as security for the payment of the rent hereunder and
the full and faithful performance by the Tenant of the covenants and conditions
on the part of the Tenant to be performed. On the first year anniversary of this
Lease and on each anniversary date thereafter, the Tenant shall deposit the
additional money due to maintain the security deposit in an amount equal to two
(2) months Minimum Rent. Thereafter, the security deposit will always be equal
to two (2) months Minimum Rent. Said sum shall be refunded to the Tenant,
without interest, after the expiration of the term hereof, provided that the
Tenant has fully and faithfully performed all such covenants and conditions and
is not in arrears in any Minimum Rent or Additional Rent. During the Term
hereof, the Landlord may, if the Landlord so elects, have recourse to such
security, to make good any default by the Tenant, in which event the Tenant
shall on demand, promptly restore said security to its original amount. If
Tenant shall be in default by non-payment of rent, Landlord may apply such
security deposit to Minimum Rent, or Additional Rents due, and the Lease shall
be declared terminated and Tenant shall become a month to month Tenant, and not
otherwise. Liability to repay said security to the Tenant shall run with the
reversion of title to said premises, whether any change in ownership thereof be
by voluntary alienation or as the result of judicial sale, foreclosure or other
proceedings, or the exercise of a right of taking or entry by any mortgagee. The
Landlord shall assign or transfer said security, for the benefit of Tenant, to
any subsequent owner or holder of the reversion of title to said premises, in
which case the assignee shall become liable for the repayment thereof as herein
provided, and the assignor shall be deemed to be released by the Tenant from all
liability to return such security. This provision shall be applicable to every
alienation or change in title and shall in no way be deemed to permit
the Landlord to retain the security after termination of the Landlord's ownership of the reversion of title. The Tenant shall not mortgage, encumber or assign said security without consent of the Landlord.
ARTICLE THIRTY-ONE
DUE DATE FOR PAYMENT
The Minimum Rent shall be payable on the first day of each month, and in the event this Lease commences on a day other than the first day of any month, the rent shall be pro-rated for that time and shall be payable on the first day of the next succeeding month.
ARTICLE THIRTY-TWO
HABITUAL LATE PAYMENT CLAUSE
Landlord and Tenant specifically agree that, at the option of the Landlord, this Lease shall terminate without notice the third time Tenant pays its Minimum Rent fifteen (15) days subsequent to the due date of such Minimum Rent during any consecutive twelve (12) month period. In the event this Lease terminates by reason of the late payment of Minimum Rent, as provided herein, Tenant's occupancy thereafter shall be on a month-to-month basis and not otherwise.
ARTICLE THIRTY-THREE
NON-SUFFICIENT FUNDS CLAUSE
Tenant understands and agrees that upon the return of any one check for non-sufficient funds in Tenant's account, Tenant will then be placed on a "Cash, Certified Check, or Money Order Only" basis and Landlord will not accept any personal checks from Tenant as payment for Minimum Rent or for any other charges which may be due or become due until further notice by Landlord.
ARTICLE THIRTY-FOUR
LATE FEE
Tenant agrees to pay a late charge of One Hundred 00/100 ($100.00) Dollars for each installment of Minimum Rent which is received by Landlord later than five (5) days subsequent to its due date. An additional One Hundred 00/100 ($100.00) Dollars late fee will accrue for each subsequent thirty (30) days of delinquency. Such late charge shall be payable as Additional Rent.
ARTICLE THIRTY-FIVE
APPLICATION OF MINIMUM RENT
Monies received from Tenant will be applied to an outstanding account in an order determined at Landlord's discretion. Where the amount paid does not satisfy all charges due, the Landlord may apportion the proceeds to Minimum Rent, taxes, common area
maintenance, utilities, or any other charges billed to Tenant, without regard to age or nature of the charge. Tenant shall not have the right to designate how a payment shall be applied.
ARTICLE THIRTY-SIX
INTEREST
Amounts overdue by more than thirty (30) days shall incur an interest charge of fifteen (15%) percent per annum. This interest charge is in addition to, and not as a substitute for, any late charge otherwise provided for herein. Interest charges billed to Tenant shall be considered as Additional Rent.
ARTICLE THIRTY-SEVEN
ATTORNEY'S FEES
In the event Landlord employs an attorney to enforce the provisions of this Lease to recover damages, rents or otherwise, or, for any dispossess action or other court action, Tenant agrees to pay in addition all reasonable filing fees, costs and legal fees incurred. All such costs, fees and legal fees shall be payable as Additional Rent.
ARTICLE THIRTY-EIGHT
REFUSE REMOVAL
In the event that municipal refuse removal shall cease being provided to the Demised Premises, Tenant agrees to provide, at its own expense, a garbage or refuse dumpster at a location to be designated by Landlord. Tenant further agrees to separate all garbage or refuse as per county, state or local authority rules, regulations or ordinances and Tenant is responsible for the removal of such separated garbage, refuse or debris. Tenant further agrees that if spillovers, refuse and debris (recyclable garbage and debris included) of Tenant is cleaned up by Landlord, Landlord's cost of labor and equipment is to be computed at a rate of Seventy-Five ($75.00) Dollars per hour or any part thereof and that cost is to be paid by Tenant to Landlord upon presentation of an itemized statement. All monies due Landlord under the provisions of this Article shall be considered as Additional Rent, and for the nonpayment of which Landlord shall be entitled to institute a summary dispossess action in a court of competent jurisdiction. Tenant further agrees to discontinue the use of any such dumpster facility upon notification by Landlord to Tenant that the Landlord has installed and/or procured a common compactor disposal unit or other common disposal facility for the use of all tenants, and Tenant agrees to participate, on a pro-rata basis, in the cost and maintenance of such common unit which cost is to be included in the common area maintenance billings generated by Landlord under the provisions of Article 39 entitled "Operating Expenses."
ARTICLE THIRTY-NINE
OPERATING EXPENSES (CAM CHARGES)
During the term of this Lease, or any extension thereof, the Tenant is required to pay, as Additional Rent and in addition to the base rent, his pro-rata share of the direct operating
cost of the Building. This cost to the Tenant shall be pro-rated based upon the number of square feet leased by the Tenant as related to the whole square footage of leasable space. Operating costs include, but is not limited to, real estate taxes, assessments, janitorial, guard and maintenance services, labor, reasonable managerial expenses, insurance, electricity, water and sewerage (if any), payroll expenses, materials and supplies, and all other direct costs of operating and maintaining the building. Landlord agrees to keep books and records reflecting direct operating costs of the premises in accordance with the standard method of accounting. This determination shall be conclusive between all parties as to operating costs. All such charges shall be due and payable upon presentation of an invoice. However, Landlord may later require that the Tenant pay an estimated monthly or quarterly Common Area Maintenance (CAM) charge during the term of this Lease, to be applied to the annual operating expenses (CAM), attributable to Tenant. Upon execution of this Lease, Tenant agrees that its pro-rata share of CAM charges is equal to 21.13% and its estimated 2000 real estate taxes are currently Two and 45/100 ($2.45/sq. ft) Dollars or Seven Hundred Forty-Five and 21/100 ($745.21) Dollars per month. In the event the Tenant remains open on a twenty four (24) hour a day basis, Tenant shall be solely liable for all additional CAM charges incurred and will cooperate with Landlord's contractors as needed to provide necessary services to the Leased Premises and Building.
ARTICLE FORTY
H.V.A.C.
In the event this is an original Lease, Landlord will guarantee the air conditioning and heating unit for one (1) year and after one (1) year Tenant must provide Landlord with proof of a service contract for the air conditioning and heating unit for the duration of this Lease.
ARTICLE FORTY-ONE
HOLDOVER
If Tenant holds possession of the Demised Premises after the termination of the Lease or any extension or renewal thereof, Tenant shall become a Tenant from month-to-month at two (2) times the Minimum Rent and upon all other terms of this Lease, and shall continue to be a tenant from month-to-month until such tenancy shall be terminated by Landlord, or, until Tenant shall have given to Landlord a written notice of at least one month of intention to terminate such tenancy. Nothing contained in this Lease shall be construed as a consent by Landlord to the occupancy or possession of the Demised Premises by Tenant after the termination of the Lease or any extension or renewal thereof, and Landlord, upon said termination, shall be entitled to the benefit of all public general or public local laws relating to the speedy recovery of the possession of lands and tenements held over by tenants that now may be in force or thereafter may be enacted.
ARTICLE FORTY-TWO
PARKING OF BUSINESS USE VEHICLES
Upon notice from the Landlord, Tenant covenants and agrees that (a) any and all motor vehicles owned and/or used by Tenant in the conduct or operation of Tenant's business or operation will be parked in an area designated by Landlord, and/or, (b) Tenant shall not permit
itself or its agent's, employees or invitees to have vehicles displaying "for sale" signs nor shall Tenant, its agents, employees or invitees conduct the sale of such vehicle(s) in the common areas of Building. Tenant recognizes and stipulates that a violation of this covenant is a material and substantial breach of the terms and provisions of this Lease and that any such violation is grounds for termination and eviction, for which the Landlord may institute summary dispossess action in a court of competent jurisdiction.
ARTICLE FORTY-THREE
LIABILITY
Tenant and Landlord each for themselves, their heirs and assigns and subrogees, hereby releases the other, to the extent of each other's insurance coverage.
ARTICLE FORTY-FOUR
SURRENDER OF PREMISES
Tenant shall, upon the expiration or sooner termination of the term of this Lease, (i) surrender to Landlord the Leased Premises, together with all alterations (unless Landlord shall elect to require Tenant to remove same) and replacements thereof then on the Leased Premises, in good order, condition and repair, except for reasonable wear and tear and (ii) remove all of Tenant's signs from the Building and all directory signs and replace each such sign with a blank white panel. The Leased Premises shall not be deemed to have been surrendered by Tenant, and all rental and other payment obligations under this Lease shall continue, until Landlord has received all keys to the Leased Premises from Tenant.
ARTICLE FORTY-FIVE
TENANT'S COMPLIANCE WITH ENVIRONMENTAL, HEALTH
AND SAFETY REQUIREMENTS
45.01 Tenant shall comply with all federal, state and local environmental, health and safety laws, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, the New Jersey Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 et seq. the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11b, et seq. all successor laws and amendments to each of the foregoing and all rules, regulations, orders, directives, notices and requirements of governmental agencies or bodies or insurance companies issued or promulgated under or relating to such laws (collectively, "Environmental Laws").
Tenant agrees not to cause or permit the generation, storage, handling, manufacture, refinement, transportation, treatment, disposal, or release of Hazardous Substances on or about the Premises other than de minimis amounts of Hazardous Substances customarily used for normal business operations and in strict compliance with all Environmental Laws. As used herein "Hazardous Substance" means any substance that is toxic, ignitable, reactive, or corrosive or that is regulated by any local, state or federal government. "Hazardous Substance" includes but is not limited to, any and all materials or substances that are defined as "hazardous waste," "extremely hazardous waste," "hazardous substance", "contaminants" or "pollutants"
pursuant to Environmental Laws. "Hazardous Substance" includes, but is not limited to, asbestos, polychlorinated biphenyls ("PCBs"), petroleum and petroleum products.
45.02 Tenant represents to Landlord that: (1) during the term of the Lease, Tenant will use the Premises for a retail bank and bank administrative offices to conduct any banking activities permitted under the laws of the State of New Jersey; and (2) Tenant's operations, and its use of the Premises, is not and will not become subject to ISRA, unless Landlord's consent is first obtained. Within ten (10) business days following the execution of this Lease, Tenant shall notify Landlord of Tenant's Standard Industrial Classification (SIC) code as designated in the Standard Industrial Classification Manual prepared by the Office of Management and Budget, in the Executive Office of the President of the United States. Tenant must provide its SIC code as a condition precedent to taking possession of the premises. If the SIC code provided is subject to ISRA, or Tenant is otherwise subject to ISRA, prior to Tenant taking possession of the leasehold, Landlord may at its sole discretion terminate this Lease.
45.03 After Tenant takes possession of the leasehold, any change in use of the premises by Tenant or any change of operations by Tenant which results in the Tenant being subject to ISRA, shall require Landlord's written consent. The request for consent to this change shall be sent in writing to Landlord sixty (60) days prior to the proposed change or Landlord, at its sole option, may deny consent. In the event that Landlord denies consent to the change, the Lease shall be deemed terminated as of thirty (30) days from the date of Landlord's written denial of the request.
In the event that Tenant now is, or hereafter becomes subject to ISRA, including under any amendment to or successor law to ISRA, Tenant agrees that it shall, at its sole cost and expense, fulfill, observe and comply with all of the terms and provisions of ISRA and all rules, regulations, ordinances, opinions, orders and directives issued or promulgated pursuant to or in connection with ISRA by the Department of Environmental Protection ("DEP"), or any subdivision or bureau thereof or any other governmental or quasi-governmental agency, authority or body having jurisdiction thereof.
45.04 Without limiting the foregoing, upon Landlord's request therefor, and in all events prior to the earlier of the termination of its leasehold, or its "closing operations or transferring ownership or operations" (as said terms are defined in ISRA) Tenant shall, at its sole cost and expense, provide the Landlord with a true copy of documentation from DEP (or such other agency or body which shall then have jurisdiction over matters) in a form satisfactory to Landlord stating that ISRA does not apply to Tenant and Tenant's use and occupancy of the Premises. If the premises is subject to ISRA, then Tenant shall provide Landlord with a negative declaration, as that term is used in ISRA, or another document demonstrating, to Landlord's satisfaction, that Tenant has complied with ISRA. Nothing in this paragraph shall be construed as limiting Tenant's obligation to otherwise comply with ISRA and Environmental Laws.
45.05 Tenant agrees that it shall, at its sole cost and expense: (i) post any financial guarantee or other bond required to secure implementation and completion of all investigations, remedial action plans and cleanup plans required by any Environmental Laws; (ii) promptly implement and diligently prosecute to completion said work; and (iii) bear all costs and expenses resulting from, arising out of or connected with Tenant's use or occupancy of the Premises including, but not limited to, state agency oversight fees, environmental consulting and engineering fees, investigation, sampling, analysis and remedial/cleanup costs, filing fees,
attorneys' fees, court costs, and financial assurance and suretyship expenses (collectively, "Environmental Costs"). Tenant expressly understands, acknowledges and agrees that Tenant's compliance with the provisions of this section may require Tenant to expend funds or do acts after the expiration or termination of the Lease Term and Tenant shall not be excused therefrom.
The Tenant shall immediately copy the Landlord on all correspondence, reports, notices, orders, findings, declarations and other materials pertinent to the Tenant's compliance with Environmental Laws, including, but not limited to ISRA. Tenant agrees to execute such documents as Landlord reasonably deems necessary to make such applications as Landlord reasonably requires to assure the Tenant's, the Landlord's or the Premises' compliance with ISRA and/or any other Environmental Laws.
Tenant, at its sole cost and expense, shall promptly discharge and remove any lien or encumbrance against the Premises, the building, or the complex imposed due to Tenant's use or occupancy of the Premises or its failure to comply with Environmental Laws.
45.06 Prior to the termination of the Lease, Tenant shall remove all Hazardous Substances from the premises in accordance with Environmental Laws.
Tenant agrees to indemnify and hold harmless the Landlord and each mortgagee of the Premises from and against any and all Environmental Costs and all liabilities, damages, claims, investigations, proceedings, settlements, fines, penalties, losses, judgments, causes of action, costs and expenses (including the reasonable fees and expenses of counsel) which may be incurred by or on behalf of the Landlord or any mortgagee, or which may be threatened against the Landlord or any mortgagee, relating to or arising out of: any breach by Tenant of the undertakings set forth in this section; Tenant's use or occupancy of the Premises; and any potential application of ISRA or other Environmental Laws to Tenant.
The foregoing representations, covenants, undertakings and indemnifications shall survive the expiration or sooner termination of the Lease and surrender of the Premises and shall also survive sale, lease or assignment of the Premises by Landlord.
ARTICLE FORTY-SIX
CONFORMITY WITH LAWS & REGULATIONS
46.01 The Landlord may pursue the relief or remedy sought in any clause that may be declared invalid by a court of competent jurisdiction, by conforming the said clause with the provisions of the statutes or the regulations of any governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.
46.02 In all references herein to any parties, persons, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of the within instrument may require. All the terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the respective parties hereto, their heirs, executors, administrators, personal or legal representatives, successors and assigns.
ARTICLE FORTY-SEVEN
WAIVER OF TRIAL BY JURY
To the extent permitted by applicable law, Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant and Tenant's use or occupancy of the Demised Premises including any claim of injury or damage, or any emergency or other statutory remedy with respect thereto.
ARTICLE FORTY-EIGHT
ESTOPPEL CERTIFICATE
48.01 Tenant agrees, at any time and from time to time, as requested
by Landlord, upon not less than ten (10) days prior written notice, to execute
and deliver without cost or expense to the Landlord or its nominee a statement
in form satisfactory to Landlord certifying that, (i) this Lease is unmodified
and in full force and effect (or if there have been approved modifications),
(ii) certifying the dates to which the Minimum Rent and Additional Rent have
been paid, (iii) stating whether or not, to the best knowledge of Tenant,
Landlord is in default in performance of any of its obligations under this
Lease, and, if so, specifying each such default of which Tenant may have
knowledge, (iv) certifying that the Tenant has made no advancements for or on
behalf of the Landlord for which it has the right to deduct from or offset
against future rentals as of the day of the certificate and has not paid rent
for more than the current month during which the certification is made and (v)
such other provisions as may be requested by any mortgagees having a mortgage
upon the leasehold or fee of the Demised Premises.
48.02 It is intended that any such statement delivered to the Landlord or its nominee pursuant to this Article 48 may be relied upon by any prospective purchaser of the fee or any mortgagee thereof or any assignee of any mortgage upon the leasehold or fee of the Demised Premises or any proposed lessee of all or part of the Building.
ARTICLE FORTY-NINE
GENERAL PROVISIONS
49.01 This Lease does not create the relationship of principal and agent or of partnership or joint venture or of any association between Landlord and Tenant, the sole relationship between Landlord and Tenant, being that of landlord and tenant.
49.02 The consent to or approval by Landlord of any act by Tenant requiring Landlord's consent or approval, including but not limited to permission to assign this Lease or sublet the Demised Premises or any portion thereof, shall not waive or render unnecessary Landlord's consent to or approval of any subsequent similar act by Tenant.
49.03 Each term and each provision of this lease performable by Tenant shall be construed to be both a covenant and a condition.
49.04 Unless expressly so provided, no action required or permitted to be taken by or on behalf of Landlord under the terms or provisions of this Lease shall be deemed to constitute an eviction or disturbance of Tenant's possession of the Demised Premises.
49.05 The Tenant, whenever the weather shall require, shall heat or cool the Demised Premises to a level satisfactory to the Landlord.
49.06 Space outside the Demised Premises or space not within the Demised Premised which Tenant may be permitted to use and/or occupy shall be deemed to be used and/or occupied under a revocable license and if any such license shall be revoked or if the amount of such be diminished, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent nor shall such revocation or diminution be deemed constructive or actual eviction.
49.07 The submission of this Lease for examination or as solicitation for an offer does not constitute a reservation of or option for the Demised Premises, or an offer to lease.
49.08 The marginal and topical headings of the Articles are not a part of this Lease, but are for convenience only and do not define, enlarge, limit or construe any of the provisions hereof.
49.09 All preliminary negotiations are merged into and incorporated in this Lease.
49.10 The laws of the State of New Jersey shall govern the validity, performance and enforcement of this Lease.
49.11 Tenant shall not record this Lease, but if Landlord should desire to record a short form Memorandum of Lease setting forth only the parties, the Demised Premises, and the Term, such Memorandum of Lease as prepared or approved by Landlord shall be executed, acknowledged and delivered to Landlord by Tenant.
ARTICLE FIFTY
BROKER
Tenant and Landlord covenant and agree that neither has dealt with any broker or brokers concerning this Lease transaction. Tenant and Landlord agree to indemnify, defend and hold the other harmless from and against any claims for brokerage Commission or finders fee arising out of or based on any alleged actions of Tenant or Landlord with any other broker or brokers.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals, or caused these presents to be signed by their proper corporate officers and their proper corporate seal to be hereto affixed, the day and year first above written.
WITNESS: STAVOLA LEASING, LLC,
a New Jersey Limited Liability Company
BY: /s/ James J. Stavola, Jr.
------------------------ -----------------------------------
JAMES J. STAVOLA, JR., Member
ATTEST: TWO RIVER COMMUNITY BANK,
a New Jersey Banking Corporation
/s/ Bernice E. Kotza BY: /s/ Frank J. Patock
------------------------------ -----------------------------------
ASST. SECRETARY Print Name: Frank J. Patock
---------------------------
Its: Chairman
----------------------------------
/s/ Michael J. Gormley
---------------------------------------
SENIOR VICE PRESIDENT
|
Exhibit 10.15
FSR2-POMO (Port Monmouth)
SUBLEASE AGREEMENT
BY AND BETWEEN
FIRST STATES REALTY, L.P., AS SUBLANDLORD
AND
TWO RIVER COMMUNITY BANK., AS SUBTENANT
PREMISES:
357 Highway 36
Port Monmouth, New Jersey
ARTICLE I DEMISE, PREMISES, TERM, COVENANTS
1.01 Demise and Premises
1.02 Term
1.03 Renewal Option
1.04 Sublandlord's Covenants
1.05 Subtenant's Covenants, Rights and Privileges
1.06 Termination Right
ARTICLE II RENT
2.01 Basic Subrent
2.02 Annual Increases in Basic Subrent
2.03 Additional Subrent
2.04 Interest on Subrent; Late Charges
2.05 Method of Payment
ARTICLE III - SECURITY DEPOSIT
ARTICLE IV - USE
4.01 Use
4.02 Continuous Operations
ARTICLE V - TAXES; UTILITIES
5.01 Taxes Payable by Subtenant
5.02 Proration
5.03 Contests
5.04 Evidence of Payment
5.05 Forwarding of Bills
5.06 Utility Charges
ARTICLE VI - ALTERATIONS
6.01 Changes, Alterations and Additional Construction
6.02 Manner of Construction
6.03 Title to Alterations
ARTICLE VII - SURRENDER
7.01 Delivery of Possession
7.02 Removal of Personal Property
7.03 Retention of Personal Property
ARTICLE VIII - INSURANCE
8.01 Sublandlord's Insurance
8.02 Subtenant's Insurance
8.03 General Requirements
8.04 Notifications
8.05 Mutual Waiver of Subrogation
ARTICLE IX - PERFORMANCE OF SUBTENANT'S AGREEMENTS
ARTICLE X - REPAIRS AND MAINTENANCE
10.01 Repair of Premises 10.02 No Obligation of Sublandlord to Make Repairs 10.03 Water/Sewer Line Maintenance 10.04 Commission of Waste |
ARTICLE XI - COMPLIANCE WITH LAWS, ORDINANCES, ETC
11.01 Compliance with Laws 11.02 Compliance with Insurance Requirements 11.03 Contest by Subtenant 11.04 Permits |
ARTICLE XII - MECHANICS' LIENS
ARTICLE XIII - INSPECTION OF PREMISES BY SUBLANDLORD
ARTICLE XIV - INDEMNIFICATION OF LANDLORDS
ARTICLE XV - SUBTENANT'S ACCEPTANCE OF CONDITION OF PREMISES
ARTICLE XVI - DEFAULT BY SUBTENANT
16.01 Event of Default 16.02 Multiple Defaults 16.03 Sublandlord's Remedies for Subtenant's Default 16.04 Miscellaneous Default Provisions |
ARTICLE XVII - DAMAGE AND DESTRUCTION; CONDEMNATION
17.01 Abatement of Subrent 17.02 Termination Upon Casualty or Condemnation 17.03 Notices To Subtenant |
ARTICLE XVIII - INTENTIONALLY OMITTED
ARTICLE XIX - ASSIGNMENT, SUBLETTING AND MORTGAGING
19.01 Voluntary Assignment or Other Transfer of Sublease 19.02 Subletting 19.03 Transactions with Affiliates; Sublandlord's Recapture Rights 19.04 Subtenant Remains Responsible |
ARTICLE XX - NOTICES
ARTICLE XXI - QUIET ENJOYMENT
ARTICLE XXII - ESTOPPEL CERTIFICATES
22.01 Subtenant's Estoppel
22.02 Sublandlord's Estoppel
ARTICLE XXIII - SUBLEASE NOT SUBJECT TO TERMINATION
ARTICLE XXIV - ENVIRONMENTAL OBLIGATIONS
24.01 No Hazardous Materials 24.02 Definition of Hazardous Materials 24.03 Notification of Hazardous Materials 24.04 Sublandlord Access 24.05 Subtenant Not Liable for Existing Conditions |
ARTICLE XXV - MISCELLANEOUS PROVISIONS
25.01 Subordination, Attornment and Mortgagee Protection 25.02 Integration 25.03 No Recording 25.04 Time of the Essence 25.05 No Partnership 25.06 Severability 25.07 Authority 25.08 Governing Law 25.09 Counterparts 25.10 Plans 25.11 Headings; Pronouns 25.12 Binding Effect; Successors and Assigns 25.13 Limitation of Sublandlord's Liability 25.14 Survival 25.15 Brokers 25.16 Insolvency or Bankruptcy of Subtenant |
EXHIBIT "A" - DESCRIPTION OF PREMISES
EXHIBIT "B" - COPY OF MASTER LEASE
PROPERTY: Port Monmouth
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease") is entered into this April 11, 2001, by and between FIRST STATES REALTY, L.P., a Pennsylvania partnership, with an address at 1725 The Fairway, Jenkintown, Pennsylvania 19046 ("Sublandlord"), and TWO RIVER COMMUNITY BANK with an address at 1250 Highway 35, Middletown, New Jersey 07748 ("Subtenant").
BACKGROUND
A. This Sublease pertains to (a) all that certain tract or parcel of land situated at 357 Highway 36, Port Monmouth, New Jersey, known as Block 244, Lot 5 on the tax map of the Borough of Middletown, and more particularly described in Exhibit "A" attached hereto and made a part hereof ("Land"), (b) the existing, approximately 2,180 sf. building ("Building"), and all parking lots, driveways, walkways, utility facilities, structures and other improvements located on the Land (the Building and all items referred to in this clause (b) are sometimes herein collectively called the "Improvements"), (c) all those fixtures and building machinery and equipment which are now located in or on the Improvements, and which are necessary or useful for the supply of heat, air conditioning, ventilation, electricity, telephone and other utility facilities to the Improvements, in the quantities and capacities now being supplied to the Improvements (collectively, "Fixtures"), (d) trade fixtures and other personal property now located on or in the Land or the Improvements, including any drive-through bank equipment, vaults, and security systems, but excluding security system cameras and "smart" control panels, all equipment or systems that have been leased by the prior user of the Premises, automated teller machines, computer terminals, adding machines and removable furniture (collectively, "Personalty"), and (e) all the appurtenances, rights, privileges and easements unto the Land or Improvements belonging or in anywise appertaining (the Land, Improvements, Fixtures, Personalty and said appurtenances, rights, privileges and easements are sometimes herein collectively called the "Premises").
B. By Lease dated June 20, 1997 ("Original Lease"), the Estate of Carl Casriel (together with its successors and assigns, the "Master Landlord") leased the Premises to FIRST UNION NATIONAL BANK, as successor in interest to Corestates Bank, N.A. ("Original Tenant").
C. The Original Lease has not been amended or modified ("Master Lease"). A redacted copy of the Master Lease is attached as Exhibit "B" hereto.
D. By Assignment and Assumption Agreement dated August 6, 1999, Original Tenant assigned all of its right, title and interest in and to the Master Lease and the Premises to Sublandlord.
E. Subtenant desires to sublease the entire Premises from Sublandlord upon the terms and conditions hereinafter set forth.
Now, therefore, Sublandlord and Subtenant, each intending to be legally bound, hereby mutually covenant and agree as follows:
1.01 Demise and Premises. Sublandlord hereby demises and sublets unto Subtenant, and Subtenant hereby subleases and takes from Sublandlord, the Premises for the Term (as hereinafter defined) and upon the covenants, terms and conditions hereinafter set forth.
1.02 Term. The term of this Sublease (including any extensions or renewals, the "Term") shall commence on May 1, 2001 ("Commencement Date"), and shall end on August 31, 2007 ("Expiration Date"), unless extended or sooner terminated as herein provided. Notwithstanding the foregoing, Subtenant may occupy the Premises prior to the Commencement Date for the limited purpose of making the same ready for Subtenant's use and occupancy, in which event all of the terms and conditions of this Sublease shall apply, except for Subtenant's obligation to pay Subrent (defined below).
1.04 Sublandlord's Covenants. Any provision of this Sublease to the contrary notwithstanding, so long as Subtenant is not in default under this Sublease beyond any applicable notice and cure periods, Sublandlord shall pay to Master Landlord promptly when due all basic rent, additional rent and all other charges reserved and covenanted to be paid by the "Tenant" under the Master Lease, and any failure by Sublandlord to pay such amounts to Master Landlord when due (and the continuation of such failure beyond any applicable notice and cure periods expressed in the Master Lease) shall constitute a default by Sublandlord of its obligations under this Sublease. Where in the Master Lease there are duties and obligations owed by Master Landlord to Sublandlord that are necessary for the proper use and enjoyment of the Premises by Subtenant under this Sublease, Sublandlord shall use Sublandlord's best efforts to obtain the performance of such duties and obligations by the Master Landlord in favor of Subtenant, but Sublandlord shall not be liable to Subtenant for the failure of the Master Landlord to perform said duties and obligations or for the result of such failure. The only services or rights to which Subtenant is entitled hereunder are those to which Sublandlord is entitled under the Master Lease, and for all such services and rights Sublessee shall look to Master Landlord under the Master Lease.
1.05 Subtenant's Covenants, Rights and Privileges. Subtenant shall observe and perform when due all covenants, agreements and obligations of the "Tenant" under the Master Lease, except for "Tenant's" obligation to pay rent under the Lease. During the Term hereof, Subtenant shall have all the rights and privileges of "Tenant" under the Master Lease, except that Subtenant shall not have the right to (i) exercise any renewal or other option rights of "Tenant" under the Master Lease or (ii) modify, amend or terminate the Master Lease or waive any agreement or obligation of or right or remedy of "Tenant" thereunder against Master Landlord. Subtenant's failure to perform "Tenant's" obligations under the Master Lease shall also be a
breach of this Sublease and Sublandlord shall have all the rights against Subtenant as would be available to the Master Landlord under the Master Lease if such breach were by "Tenant" thereunder. The rights of Master Landlord under the Master Lease may be enforced by, and are for the benefit of, both the Sublandlord herein and the Master Landlord. Subtenant shall neither do nor permit anything to be done which would cause the Master Lease to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in the Master Landlord under the Master Lease. In the event that any term or provision of the Master Lease is inconsistent or conflicts with any term or provision of this Sublease, the terms and provisions of this Sublease shall control to the extent provided.
1.06 Termination Right. As expeditiously as possible following the execution of this Sublease, Subtenant shall apply to the State of New Jersey Department of Banking and Insurance or any other necessary federal or state regulatory authorities for approval with respect to the establishment of a branch bank of Subtenant within the Premises ("Regulatory Approval") and shall pursue same in good faith and with due diligence. Subtenant shall immediately give written notice to Sublandlord of Subtenant's receipt of Regulatory Approval or knowledge of the denial of same. In such connection, if Subtenant has not received Regulatory Approval and provided Sublandlord with satisfactory evidence of same by June 30, 2001, this Lease, at the option of the Subtenant, may be terminated by written notice to Sublandlord at any time thereafter (but prior to actual receipt of Regulatory Approval and notice to Sublandlord thereof).
2.01 Basic Subrent. Beginning on the Commencement Date and continuing throughout the first Sublease Year, Subtenant shall pay to Sublandlord annual basic rent ("Basic Subrent") of $34,880.00, payable in equal monthly installments of $2,906.66. During the second and subsequent Sublease Years throughout the Term, including any renewal or extensions thereof, the Basic Subrent payable by Subtenant shall be increased as expressed in Section 2.02 below. As used herein, "Sublease Year" means each consecutive twelve calendar month period beginning with the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then the first Sublease Year shall also include the days during the Term occurring before the first day of the first calendar month following the Commencement Date. Each monthly installment of Basic Subrent shall be payable in advance on the first day of each month during the Term, the first such installment to be paid on the Commencement Date, provided, however, if the Commencement Date is not the first day of a calendar month, then the Basic Subrent for the calendar month in which the Commencement Date occurs shall be prorated on the basis of the portion of such month which occurs during the Term, which prorated amount shall be paid on the Commencement Date.
2.02 Annual Increases in Basic Subrent. On the first day of the second and each subsequent Sublease Year throughout the Term, the Basic Subrent payable by Subtenant shall be increased by an amount determined by multiplying the Basic Subrent payable during the then current Sublease Year by the greater of the (i) the CPI Increase or (ii) 3%. The term "CPI Increase" shall mean a fraction, expressed as a decimal, the numerator of which is the Current CPI minus the Prior CPI and the denominator of which is the Prior CPI. The "Current CPI" is the CPI for the calendar month that is three months prior to the first calendar month of the Sublease Year for which the Basic Subrent increase is being calculated and the "Prior CPI" is the
CPI for the calendar month that is fifteen months prior to the first calendar month of the Sublease Year for which the Basic Subrent increase is being calculated. The term "CPI" shall mean the "Consumer Price Index for All Urban Consumers (CPI-U)" published by the Bureau of Labor Statistics of the United States Department of Labor, All Items (1982-84=100), U.S. City Average, or any successor index thereto, appropriately adjusted. If the CPI ceases to be published and there is no successor thereto, such other government or non-partisan index or computation shall be used which would obtain a substantially similar result as if the CPI has not been discontinued.
2.03 Additional Subrent. From and after the Commencement Date, and throughout the Term of this Sublease, Subtenant shall pay as additional rent ("Additional Subrent", the Basic Subrent and Additional Subrent, and each installment and increment thereof, are sometimes herein collectively called "Subrent") all costs and expenses attributable to the Premises during the Term as if Subtenant owned the Premises during the Term, including, without limitation, all real estate taxes, special and general assessments, and Sublandlord's insurance premiums. It is intended that (a) Sublandlord shall incur no cost or expense with respect to the Premises during the Term and (b) the Basic Subrent shall be an absolute net return to Sublandlord throughout the Term of this Sublease, without offset or deduction and free of all expenses, charges, diminution and other deductions whatsoever. In the event of any non-payment thereof, Sublandlord shall have all the rights and remedies provided for herein or at law in the case of non-payment of rent.
2.04. Interest on Subrent; Late Charges. On any Subrent not paid within ten days following the due date therefor, Subtenant shall pay Sublandlord as Additional Subrent hereunder, a late charge equal to 5% of the amount of such Subrent. In addition, any Subrent not paid within thirty (30) days following the due date therefor shall bear interest at the annual rate of 12% (the "Default Rate") from its due date until the date Sublandlord receives payment.
2.05. Method of Payment. All Subrent shall be payable to Sublandlord at 1725 The Fairway, Jenkintown, Pennsylvania 19046, or to such other person and/or at such other place as shall be designated in writing by Sublandlord to Subtenant. All Subrent shall be paid by Subtenant without offset, deduction or, except as otherwise expressly provided for herein, demand.
ARTICLE III - SECURITY DEPOSIT Subtenant shall pay on execution hereof a security deposit in the sum of $2,906.66 to be retained by Sublandlord, without interest, and not in trust or a separate account, as security for the faithful performance and observance by Subtenant of all the covenants and conditions of this Sublease. In the event Subtenant defaults in any of its obligations under this Sublease, Sublandlord may apply the whole or any part of said security deposit on account of unpaid rent hereunder and any expenditures made by Sublandlord by reason of Subtenant's default. Unless and to the extent the security deposit shall be so applied by Sublandlord, it shall be paid to Subtenant within 30 days following the end of the term of this Sublease.
4.01 Use. The Premises shall be used solely as a bank branch office, and for no other purpose without the prior written consent of Sublandlord, which consent Sublandlord shall not unreasonably withhold or delay.
4.02 Continuous Operations. From and after the Commencement Date and continuing throughout the Term of this Sublease and any renewals thereof, Subtenant covenants and agrees with Sublandlord to operate a bank branch within the Premises in a manner consistent with the operations of the majority of Subtenant's other insurance offices. At a minimum, Subtenant shall be open for business within the Premises weekdays (excluding holidays) for at least six (6) hours per day. Notwithstanding the foregoing, Subtenant may from time to time cease or suspend operations within the Premises for not more than six months during any consecutive twenty-four month period, but no such cessation or suspension of operations shall release Subtenant from performance of its other obligations hereunder, including, without limitation, Subtenant's obligation to pay Subrent and to maintain and repair the Premises as set forth herein.
5.01 Taxes Payable by Subtenant. Subtenant shall pay all taxes, general and special assessments, excises, levies, license and permit fees and other governmental charges, general or special, ordinary or extraordinary, unforeseen or foreseen, of any kind and nature whatsoever (including without limitation all penalties and interest thereon) which at any time during the Term may be assessed, levied, imposed upon, or grow or become due and payable out of or in respect of, the Premises or any part thereof, or the use or occupancy thereof, or which at any time during the Term hereof may become a lien on the Premises or any part thereof (all of the foregoing are sometimes herein collectively called "Taxes"). Taxes shall not include any transfer tax imposed on Sublandlord in connection with a sale of the Premises, net income taxes, excess profit taxes, gross receipts taxes, excise taxes, business privilege taxes or fees, inheritance taxes or any capital stock or franchise taxes.
5.02 Proration. Any Tax assessed on the basis of a fiscal or tax period of the relevant taxing authority, a part of which period is included within the Term and a part of which falls before the Term or after the Term, shall be prorated between Sublandlord and Subtenant so that Subtenant shall pay such proportion of said Tax as applies to the Term, and Sublandlord shall pay the remainder thereof. If Subtenant is permitted to pay, and elects to pay, any Tax for which Subtenant is responsible in installments, Subtenant may pay such Tax in the maximum number of installments permitted.
5.03 Contests. Subtenant shall have the right to contest, at Subtenant's sole cost and expense, the amount or validity, in whole or in part, of any Tax, by appropriate proceedings diligently conducted by Subtenant in good faith, but only after payment of such Tax.
5.04 Evidence of Payment. Subtenant shall furnish to Sublandlord for inspection within ten days of demand of Sublandlord, a photocopy of the official receipt of the appropriate taxing authority, or, in lieu thereof, other proof satisfactory to Sublandlord evidencing payment of such Tax.
5.05 Forwarding of Bills. Sublandlord shall, promptly upon receipt of a bill for any Tax, or notice of assessment, or notice of increase, or other change therein, forward the same to Subtenant, but Subtenant's nonreceipt thereof shall not excuse Subtenant from the timely payment of any Tax which Subtenant is obligated to pay hereunder or otherwise relieve Subtenant of Subtenant's liabilities and duties hereunder. Subtenant may make arrangements with the taxing authorities for the transmission of bills and notices simultaneously to Sublandlord and Subtenant.
5.06 Utility Charges. Subtenant shall pay, before any interest or penalty shall accrue thereon, all water and sewer rentals and charges and all charges for gas, electricity, telephone and communication services and other utility services used, rendered or consumed upon the Premises during the Term hereof.
6.01 Changes, Alterations and Additional Construction. Subtenant shall not construct any (a) additional building or improvement on the Premises (i.e., in addition to the Improvements existing on the date hereof), or (b) change, alteration or addition in or to the Improvements that would reduce the value thereof or that would affect the structural elements of the Improvements or the use of the Premises use as a bank branch, or (c) driveway, roadway or parking area on the Premises (any and all of the foregoing being herein collectively called an "Alteration"), unless and until, in each instance, Subtenant shall have and submitted to Sublandlord and Master Landlord plans, specifications and other materials as Sublandlord or Master Landlord may request, and Sublandlord or Master Landlord shall have approved same (which approval Sublandlord shall not unreasonably withhold or delay). Subtenant may, without Sublandlord's consent, but only to the extent permitted by the Master Lease and applicable law, place, erect or maintain signs on or about the Premises, provided Subtenant shall remove the same at the expiration or sooner termination of the Term.
6.02 Manner of Construction. (A) All Alterations shall be constructed by Subtenant, without expense to Sublandlord, in a good, first class and workmanlike manner, employing new materials of first class quality, and in compliance with the Sublandlord-approved and, to the extent required under the Master Lease, Master Landlord-approved plans and specifications therefor and all applicable permits, laws, ordinances and regulations and orders, rules and regulations of the Board of Fire Insurance Underwriters or any other body exercising similar functions, and in compliance with the terms and conditions of this Sublease and the Master Lease.
(B) Prior to the commencement of construction of any Alteration, Subtenant shall deliver to Sublandlord a duly filed waiver of mechanics' liens, in form acceptable to Sublandlord, covering all contractors, subcontractors, materialmen and other persons who might be entitled to file a mechanics' lien.
(C) Promptly upon the completion of construction of each Alteration, Subtenant shall deliver to Sublandlord one complete set of "as built" drawings thereof.
6.03 Title to Alterations. Except to the extent otherwise expressly provided herein or in the Master Lease, upon the completion of construction of each Alteration, such Alteration shall automatically be deemed part of the Improvements and Premises for purposes of this Sublease and, upon any termination of this Sublease or Subtenant's right of possession of the Premises, title to such Alterations automatically shall pass to, vest in and belong to Sublandlord without further action on the part of either party and without cost or charge to Sublandlord. Notwithstanding the foregoing, Sublandlord may condition Sublandlord's approval of Subtenant's construction of an Alteration on Subtenant's agreement to remove all or a portion of such Alteration at the end of the Term hereof and, in such event, upon any termination of this Sublease or Subtenant's right of possession of the Premises, all such Alterations, or any part or parts thereof so designated by Sublandlord at the time of Sublandlord's approval thereof, shall be removed from the Premises and the Premises restored substantially to their condition immediately prior to the construction thereof, all at Subtenant's expense.
7.01 Delivery of Possession. Subtenant shall, on the Expiration Date of the Term, or upon any earlier termination of this Sublease, or upon any termination of Subtenant's right to possess the Premises pursuant to the provisions of this Sublease, well and truly surrender and deliver up the Premises into the possession and use of Sublandlord without fraud or delay and in the condition in which Subtenant has herein and in the Master Lease agreed to maintain them, broom clean and free and clear of all lettings, occupancies, liens and encumbrances, other than those existing immediately prior to the commencement of the Term. If Subtenant holds over in the Premises after the expiration of the Term or any earlier termination of this Sublease or of Subtenant's right to possess the Premises, then, at Sublandlord's option, and without limitation to any right or remedy of Sublandlord or Master Landlord with respect to such holding over, such holding over shall create a tenancy at sufferance only, subject to Subtenant's obligation to pay rental equal to 200% of the Subrent (prorated on a daily basis) in effect immediately prior to such expiration or termination, and subject to all the provisions and conditions of this Sublease, other than provisions relating to length of Term, which tenancy may be terminated at any time by Sublandlord giving notice thereof to Subtenant. Sublandlord's acceptance of any such rental during the period of Subtenant's holding over shall not waive or otherwise affect any claim, right or remedy which Sublandlord or Master Landlord may have with respect to such holding over.
7.02 Removal of Personal Property. Any and all fixtures, machinery, equipment, furniture, furnishings and other personal property furnished or installed by or at the expense of Subtenant which does not constitute part of the Premises, shall be removed by Subtenant and all damage to the Premises caused by such removal repaired by Subtenant, prior to the expiration or earlier termination of the Term or the termination of Subtenant's right to possess the Premises.
7.03 Retention of Personal Property. Any personal property which shall remain on the Premises after the expiration of the Term or earlier termination of this Sublease or Subtenant's right to possess the Premises may, at the option of Sublandlord, be deemed to have been abandoned by Subtenant and may be retained by Sublandlord as Sublandlord's property or be disposed of, without liability of Sublandlord, in such manner as Sublandlord may see fit, or Sublandlord, at its option, may require Subtenant to remove the same at Subtenant's expense. In case of such removal, all costs of removal and of repairing any damage to the Premises arising
from such removal shall be paid by Subtenant upon Sublandlord's demand. Subtenant shall pay to Sublandlord on demand (a) a reasonable fee for storing and disposing of any such personal property, and (b) all costs and expenses incurred by Sublandlord in storing and disposing of any such personal property (including, without limitation, counsel fees relating to claims against Sublandlord by any and all parties claiming interests in such personal property).
8.01 Sublandlord's Insurance. Sublandlord shall at all times during the Term keep the Premises insured, at Subtenant's sole cost and expense, chargeable by Sublandlord as Additional Subrent, against such risks, and with such coverages, as Sublandlord shall from time to time require, including, without limitation, broad form fire and extended coverage insurance, in an amount not less than the full replacement value (as from time to time designated by Sublandlord) of all Improvements, with coverage (in addition to the standard coverage afforded by such insurance) for theft, vandalism, malicious mischief, boiler explosion, and Subrent insurance with respect to the Subrent payable for the one year period following the occurrence of any casualty.
All insurance policies required by this Section shall contain (a) a noncontributory mortgagee clause in favor of all holders of mortgages affecting the Premises, (b) a waiver of subrogation as to Sublandlord and Master Landlord, and (c) a waiver of co-insurance as to Sublandlord, Master Landlord and all holders of mortgages on the Premises.
8.02 Subtenant's Insurance. Subtenant, at Subtenant's sole cost and expense, shall maintain (i) commercial general liability insurance against any claims for bodily injury, death or property damage, occurring on, in or about the Premises, and against contractual liability for any such claims, such insurance to afford minimum protection in the amount of $2,000,000 or in such higher amount as Sublandlord may deem reasonably necessary and (ii) "all risk" property insurance on Subtenant's personal property, fixtures and improvements or alterations to the Premises made by Subtenant. Sublandlord has no obligation to insure Subtenant's property or to repair, restore, or replace any of Subtenant's furniture, furnishings, equipment or other personal property or the value of any improvements made to the Premises by Subtenant. Sublandlord, and any mortgagee of the Premises designated by Sublandlord, shall be named as additional insured under all such policies.
8.03 General Requirements. Without limitation to the foregoing, the following provisions shall apply to each and every policy of insurance which Subtenant is hereby required to carry: (a) the form, amount and coverage of each policy and the insurer under each policy, shall be subject to Sublandlord's and Master Landlord's approval, (b) Subtenant shall cause each carrier to deliver its certificate of insurance to Sublandlord, Master Landlord and any holder of a mortgage on the Premises designated by Sublandlord or Master Landlord, certifying the applicable insurance provisions herein required, (c) within fifteen days after Sublandlord's or Master Landlord's request, Subtenant shall deliver to Sublandlord, Master Landlord and any holder of a mortgage on the Premises designated by Sublandlord an original copy of each policy, (d) each certificate shall state that the applicable policy has been prepaid by Subtenant for a minimum period of one year (or in lieu of such statement, Subtenant shall provide Sublandlord with evidence of such prepayment), and shall require 30 days written notice by the carrier to Sublandlord and any holder of a mortgage on the Premises designated by Sublandlord prior to
any cancellation, expiration, amendment or lapse thereof, (e) no policy shall
name a loss payee or beneficiary other than Subtenant, Sublandlord, Master
Landlord and any holder of a mortgage on the Premises designated by Sublandlord
and Master Landlord, (f) at least 30 days prior to the expiration of each
policy, Subtenant shall provide Sublandlord, Master Landlord and any holder of a
mortgage on the Premises designated by Sublandlord or Master Landlord with
certificates (or copies of policies, if required by Sublandlord as aforesaid) of
renewal or replacement policies, (g) each policy shall be issued by a carrier
duly licensed in the state in which the Premises are located, (h) Subtenant
shall not permit any condition to exist on the Premises, and shall not commit
any act or omission, which would wholly or partially invalidate any insurance,
(i) jf any insurance shall expire, be withdrawn, lapse, become void or unsecure
by reason of Subtenant's breach of any condition thereof or by reason of the
failure or impairment of the capital of any carrier thereof, or if for any
reason whatsoever the insurance shall be unsatisfactory to Sublandlord,
Subtenant shall place new insurance on the Premises which conforms to the
insurance requirements herein set forth, and (j) in the event of any default by
Subtenant with respect to its obligations pertaining to insurance, Sublandlord,
at its option but without being obliged to do so, and in addition to any other
rights and remedies Sublandlord may have on account of such default, shall have
the right to cure such default (including, without limitation, the right to
purchase single interest coverage protecting only the interest of Sublandlord,
the right to make premium payments and the right to cause changes to be made to
policies then carried by Subtenant), whereupon all costs and expenses incurred
by Sublandlord in curing such default together with interest at the Default Rate
from the respective dates of expenditures by Sublandlord, shall be paid by
Subtenant on demand. Subtenant may maintain any or all of the foregoing
insurance coverages under blanket insurance policies covering other premises and
property owned or leased by Subtenant so long as the coverages afforded with
respect to the Premises under such blanket policies are at least equal to the
required limits hereunder and coverage is not reduced below such limits by
reason of occurrences elsewhere. Prior to the Effective Date of this Sublease,
Subtenant shall deliver insurance certificates evidencing Subtenant's compliance
with this Article VIII.
8.04 Notifications. Upon the occurrence of any accident, injury or personal property casualty in or about the Premises, Subtenant shall give immediate notice thereof to Sublandlord, and shall provide Sublandlord with evidence that such liability of Sublandlord relating thereto is covered by the insurance which Subtenant is required by this Sublease to carry. If the Improvements, or any part thereof, are destroyed or damaged by any cause, Subtenant shall give immediate notice thereof to Sublandlord.
8.05 Mutual Waiver of Subrogation. Any provision of this Sublease to the contrary notwithstanding, Sublandlord and Subtenant each hereby release the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise from any and all liability for any loss or damage to the property of the releasing party to the extent that the releasing party's loss or damage is insured under commercially available "all risk" property insurance policies, even if such loss or damage or legal liability shall be caused by or result from the fault or negligence of the other party or anyone for whom such party may be responsible and even if the releasing party is self-insured or the amount of the releasing party's insurance is inadequate to cover the loss or damage or legal liability. It is the intention of the parties that Sublandlord and Subtenant shall look solely to their
respective insurance carriers for recovery against any such loss or damage or legal liability, without such insurance carriers having any rights of subrogation against the other party.
ARTICLE IX - PERFORMANCE OF SUBTENANT'S AGREEMENTS If Subtenant shall at any time fail to observe or perform any of its agreements or obligations under this Sublease, and such failure shall continue beyond any default cure period specified herein, then Sublandlord shall have the right, but not the obligation, in addition to all its other rights and remedies, to observe or perform all or part (as Sublandlord may elect) of such agreements or obligations on behalf of Subtenant, in which event Sublandlord shall have the right to enter the Premises for such purposes. All costs and expenses (including without limitation counsel fees) incurred by Sublandlord in exercising any of its rights under this Article, together with interest thereon at the Default Rate from the respective dates of Sublandlord's incurring of such costs or expenses until the date of payment, shall constitute Additional Subrent and shall be paid by Subtenant to Sublandlord on demand.
10.01 Repair of Premises . Throughout the Term of this Sublease, Subtenant, at Subtenant's sole cost and expense, shall take good care of the Premises, including the roof, all interior and exterior structural elements, and the parking lots, sidewalks and curbs (if any) adjoining the Premises, and shall keep the same in good order and condition, and, to the extent that the same are not the obligation of Master Landlord under the Master Lease, make all necessary repairs thereto, ordinary and extraordinary, interior and exterior. When used in this Article, the term "repairs" shall include all necessary replacements and alterations as well as the correction of construction defects in the Improvements. All repairs made by Subtenant shall be in conformity with the requirements of the Master Lease and substantially equivalent in quality and class to the original work.
10.02 No Obligation of Sublandlord to Make Repairs. Sublandlord shall not be required to furnish any services or facilities or to make any repairs in or to the Premises. Subtenant hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Premises.
10.03 Water/Sewer Line Maintenance. Notwithstanding anything to the contrary contained herein, Sublandlord, at Sublandlord's sole cost and expense, shall be responsible for all necessary repair, replacement and maintenance to the water/sewer line serving the Premises. Upon notice by the Subtenant of a sanitary sewer line back-up or failure causing sewerage to come in to the Premises, the Sublandlord shall take immediate action to remedy the condition and clean up any sanitary sewerage. The word "immediate" shall be defined for purposes, herein as within two hours of Subtenant's notice to Sublandlord of such a condition.
Should the sanitary sewerage line back up or fail, causing sewerage to come to the Building and should such an occurrence occur more than two (2) times in a lease year (May 1 through April 30th) the Sublandlord shall replace at its own costs and expense, the sanitary sewerage lateral from the building premises to the sanitary sewerage main.
Failure of the replacement of the sanitary sewerage lateral to resolve the aforementioned problem, shall entitle the Subtenant to terminate this Sublease upon thirty (30) days written notice to Sublandlord.
10.04 Commission of Waste. Subtenant shall not cause or permit any waste or damage, disfigurement or injury to any of the Premises or any part or parts thereof.
11.01 Compliance with Laws. Throughout the Term of this Sublease, Subtenant, at Subtenant's sole cost and expense, shall conform to, comply with and take any and all action necessary to avoid or eliminate any violation of all present and future laws, statutes, ordinances, orders, rules, regulations or requirements of any federal, state or municipal government, agency, department, commission, board or officer having jurisdiction, foreseen or unforeseen, ordinary or extraordinary, which shall be applicable to the Premises, or any part thereof, or to the use or manner of use thereof by any of the occupants thereof, whether or not such law, ordinance, order, rule, regulation or requirement necessitates structural changes or improvements or interferes with the use and enjoyment of the Premises.
11.02 Compliance with Insurance Requirements. Subtenant shall observe and comply with the requirements of all policies of insurance which Subtenant is required hereby to maintain from time to time with respect to the Premises, and all orders, rules and regulations of the Board of Fire Insurance Underwriters (or any other body exercising similar functions) applicable thereto, or any use, manner of use or condition thereof.
11.03 Contest by Subtenant. To the extent permitted under the Master Lease, Subtenant shall have the right to contest, by appropriate proceedings diligently conducted in good faith, without cost or expense to Sublandlord, the validity or application of any law, ordinance, order, rule, regulation or requirement of the nature referred to in this Article, provided that the delay in conformance to or compliance with the same, attendant upon and pending the prosecution of such proceedings, shall not subject Sublandlord to any fine, penalty or criminal liability or render the Premises, or any part thereof, liable to lien, forfeiture or loss. In the event of the termination of this Sublease prior to the conclusion of such contest, Subtenant shall immediately comply with any such contested law, ordinance, order, rule, regulation or requirement. Subtenant shall, within 10 days after Sublandlord's demand, reimburse Sublandlord for all costs and expenses (including, without limitation, counsel fees) incurred by Sublandlord in connection with any such contest. Subtenant shall defend, indemnify and save harmless Sublandlord from all other liability, costs and expenses incurred in connection with any such contest.
11.04 Permits. Throughout the Term of this Sublease, Subtenant, at Subtenant's sole cost and expense, shall procure and maintain all permits, licenses and authorizations required for the Premises and each part thereof, and any use of the Premises permitted hereby, and for the lawful and proper operation and maintenance thereof.
ARTICLE XII - MECHANICS' LIENS Subtenant shall not suffer or permit any mechanic's lien to be filed against the interest of Sublandlord or Subtenant in the Premises by reason of work, services or materials supplied to Subtenant, the Premises, or any part thereof. If any such
lien shall be filed at any time, Subtenant shall promptly, and in any event within 30 days after the filing thereof (or such shorter period specified in the Master Lease), cause the same to be discharged of record, provided, if Subtenant shall promptly bond such lien with a responsible surety company, Subtenant may contest the amount or validity of any such lien by appropriate proceedings, diligently prosecuted, and such contest shall defer for its duration Subtenant's duty hereunder to discharge the same.
ARTICLE XIII - INSPECTION OF PREMISES BY SUBLANDLORD Upon reasonable notice to Subtenant, Subtenant shall permit Sublandlord, Master Landlord and the duly authorized representatives of Sublandlord and Master Landlord to enter the Premises, including without limitation the interior of the Improvements, at all reasonable times during usual business hours for the purpose of inspecting the same and for all other purposes reserved unto Master Landlord under the Master Lease.
ARTICLE XIV - INDEMNIFICATION OF LANDLORDS Subtenant agrees to defend with counsel reasonably satisfactory to Sublandlord and Master Landlord, indemnify and save harmless Sublandlord and Master Landlord from and against any and all claims, damages, losses, costs and expenses, including without limitation counsel fees, suffered or incurred by Sublandlord or Master Landlord with respect to: (a) the conduct, operation or management of, or any work, act or thing whatsoever done in, on or about the Premises by or at the direction of Subtenant or those for whom Subtenant is legally liable, (b) the condition of the Premises, (c) any breach or default on the part of Subtenant in the observance or performance of any of its agreements or obligations hereunder or under the Master Lease, (d) any act or forbearance of Subtenant or any sublessee or concessionaire of Subtenant or any of Subtenant's or such sublessee's or concessionaire's agents, contractors, servants, employees, business invitees, licensees, visitors or guests with respect to the Premises, and (e) any accident, injury to or death of any person or damage to any property howsoever caused in or on the Premises, except to the extent that any of the foregoing arise from the negligence or intentional misconduct of Sublandlord or Master Landlord.
ARTICLE XV - SUBTENANT'S ACCEPTANCE OF CONDITION OF PREMISES Sublandlord has made the Premises available for Subtenant's inspection and testing, and Subtenant has heretofore inspected and tested same to the extent and as often as Subtenant deemed necessary. Subtenant hereby leases the Premises, and accepts them "as is" in their present condition, as a result of whatever inspecting and testing Subtenant deemed necessary, and not as a result of or in reliance upon any representation or warranty of any nature whatsoever by Sublandlord, or any employee or agent of Sublandlord. Sublandlord shall not be liable for any latent or patent defect in the Premises, including, without limitation, any building or improvement constituting part thereof.
16.01 Event of Default. Subtenant shall not be deemed to be in default hereunder unless one or more of the following events ("Event of Default") shall have occurred:
(A) Failure on the part of Subtenant to pay the Subrent or any other sum of money called for herein when due and the continuation of such default for five days after notice from Sublandlord;
(B) Failure on the part of Subtenant to observe or perform any other covenant, agreement or undertaking of the Subtenant contained in this Sublease or the Master Lease, and the continuation of such failure for twenty days after notice from Sublandlord (or such shorter period specified in the Master Lease), provided that, to the extent permitted under the Master Lease, if such default cannot reasonably be cured within such twenty day (or shorter) period, Subtenant shall not be in default hereunder if Subtenant commences to cure within such twenty day (or shorter) period and prosecutes the cure to completion in good faith and with due diligence;
(C) If Subtenant abandons or ceases business operations within the Premises (beyond any applicable grace periods) at any time during the Term of this Sublease or any renewal thereof;
(D) If Subtenant shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or in any action or proceeding shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state bankruptcy, reorganization or debt reduction law, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Subtenant or of all or substantially all of Subtenant's property or of the Premises; and
(E) If within 60 days after the commencement of any proceeding against Subtenant seeking any reorganization, arrangement, composition, readjustment, liquidation, debt adjustment, dissolution or similar relief under any present or future federal or state law, such proceeding shall not have been dismissed; or if, within 60 days after the appointment, without consent or acquiescence of Subtenant, of any trustee, receiver or liquidator of Subtenant or of all or substantially all of Subtenant's property or of the Premises, such appointment shall not have been vacated; or if, within 60 days after the expiration of any such stay, such appointment shall not have been vacated.
16.02 Multiple Defaults. Notwithstanding any contrary provision hereof, Sublandlord shall not be required to give any notice of default to Subtenant (and the foregoing provisions of this Article determining Events of Default shall be deemed to exclude all provisions regarding notice of default) if the Master Lease does not require Master Landlord to give notice of default to Sublandlord or if, on two or more occasions during any period of not more than twelve months, Subtenant shall have defaulted in the observance or performance of any of its agreements or obligations hereunder, and Sublandlord shall have given Subtenant notice of default with respect thereto.
16.03 Sublandlord's Remedies for Subtenant's Default. If any Event of Default shall have occurred and then be continuing, then in addition to all rights and remedies provided by law or equity, or provided for elsewhere in this Sublease, Sublandlord shall have all of the rights and remedies specified in the following paragraphs of this Section and, in addition, any further rights
and remedies afforded Master Landlord following a default by "Tenant" of its obligations under the Master Lease.
(A) Sublandlord may, but shall not be obligated to, cure such Event of Default, and by written notice to Subtenant, charge Subtenant, as Additional Subrent hereunder, all actual costs and expenses (including but not limited to, reasonable attorneys' fees) incurred in curing such Event of Default, plus administrative costs of Sublandlord in a sum equal to twenty percent (20%) of such costs and/or expenses. Such Additional Subrent, if not paid on the date specified in Sublandlord's notice to Subtenant, shall be subject to the late charge provided in Section 16.03(B) hereof, and such late charge shall bear interest until paid, as provided in Section 16.03(B) hereof. Sublandlord and Subtenant agree that Sublandlord shall have the right to injunctive or other equitable relief in the event of a breach or threatened breach by Subtenant of any of the agreements, conditions, covenants or terms hereof. All rights and remedies of Sublandlord shall be cumulative, and the exercise of any one or more of such rights or remedies shall not impair Sublandlord's right to exercise any other right or remedy, either concurrently or at any later time.
(B) If Subtenant fails to make any payment hereunder on or before the date such payment is due and payable (without regard to any notice periods specified herein), Subtenant shall pay to Sublandlord, as Additional Subrent hereunder, a late charge equal to five percent (5%) of the amount of such late payment. In addition, such payment shall bear interest at an interest rate equal to two (2) whole percentage points above the prime rate published in the Money Rates section of the Wall Street Journal from the date such payment or late charge, respectively, became due through the date of payment thereof by Subtenant; provided, however, that nothing contained herein shall be construed as permitting Sublandlord to charge or receive interest in excess of the maximum rate then allowed by law.
(C) At any time following the occurrence of an Event of Default or the expiration or sooner termination of the Term, Sublandlord immediately shall have the right, whether or not Sublandlord elects to terminate this Sublease, to recover possession of the Premises by all lawful means. Subtenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Subtenant being evicted or dispossessed of the Premises for any cause, or in the event of Sublandlord obtaining possession of the Premises, by reason of Subtenant committing an Event of Default or otherwise.
(D) If, at any time following the occurrence of an Event of Default, Sublandlord, without terminating this Sublease, shall recover or be entitled to recover possession of the Premises, then: (i) Sublandlord may, but shall not be obliged to, relet the Premises, or any part or parts thereof, and/or, at Sublandlord's election, renovate the Improvements and relet the remaining Premises, or any part or parts thereof, on such terms as Sublandlord may deem desirable, and (ii) Subtenant shall continue to be obliged to pay the full Subrent reserved by this Sublease and to observe and perform all its agreements and obligations hereunder. The failure or inability of Sublandlord to relet the Premises or any part or parts thereof shall not release or affect Subtenant's liability for such Subrent. If Sublandlord so relets the Premises, then Sublandlord shall credit against Subtenant's continuing obligation to pay Subrent, the net rentals actually received by Sublandlord for such reletting, after first deducting expenses as Sublandlord may incur in connection with such reletting, including, without limitation, reasonable counsel
fees and expenses, brokerage fees and commissions (to the extent recoverable under applicable law), reasonable advertising expenses and all reasonable costs and expenses of possessing and maintaining the Premises, of demolishing or renovating the Improvements (if, and to the extent, Sublandlord elects to do so) and of preparing the Premises for reletting. Sublandlord, in putting the Premises, or any part or parts thereof as Sublandlord may elect, in good order, or in preparing the same for rerental, may, at Sublandlord's option, make such alterations, repairs, replacements, and decorations therein as Sublandlord, in Sublandlord's sole judgment, considers advisable, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Subtenant from any liability hereunder. Sublandlord shall in no event be liable in any way whatsoever for failure to relet the Premises, or, in the event that the Premises are relet, for failure to collect the rent under such reletting, and in no event shall Subtenant be entitled to receive any excess of such net rents, if any, over the Subrent payable by Subtenant to Sublandlord hereunder. No re-entry or reletting of the Premises by Sublandlord following Subtenant's default, and no payment by Subtenant of the Subrent thereafter, shall constitute a release of any of Subtenant's liability hereunder (except to the extent of such payment of Subrent) or shall prejudice Sublandlord's claim for and right to collect from Subtenant other sums payable by Subtenant hereunder, or Sublandlord's actual damages with respect to any Event of Default occurring hereunder.
(E) At any time following the occurrence of an Event of Default, which is continuing beyond any applicable notice and cure periods, Sublandlord shall give Subtenant written notice of Sublandlord's intention to terminate this Sublease on a date specified in such notice, and upon such date, the Term hereof and the estate hereby granted with respect to the Premises shall terminate, without any right of Subtenant to redeem same or to prevent such forfeiture, and Subtenant shall surrender possession of the Premises to Sublandlord (except to the extent Subtenant shall be obliged to remove Alterations pursuant to Article VI hereof). Upon such termination, Sublandlord shall be entitled to recover from Subtenant in addition to all accrued rental and other sums due from Subtenant as of such termination date, any and all damages in an amount equal to: (i) the costs and expenses incurred by Sublandlord in doing any and all of the following, to the extent Sublandlord elects to do so: securing possession of the Premises from Subtenant, disposing of any personalty located in the Premises, restoring the Premises to the condition in which Subtenant is herein obliged to surrender same to Sublandlord, preparing and attempting to relet the Premises, maintaining and safeguarding the Premises, demolishing the Premises, renovating the Premises, and recovering said damages from Subtenant and (ii) any and all other damages which Sublandlord may recover on account of an Event of Default under this Sublease, at law or in equity. Such costs and expenses shall include, without limitation, attorneys' fees and expenses, brokerage fees and expenses, watchmen's wages and insurance premiums. No act or proceeding done or undertaken by Sublandlord with respect to an Event of Default shall constitute a termination of this Sublease by Sublandlord unless and until Sublandlord shall give to Subtenant the termination notice provided for above.
(F) If proceedings shall be commenced to recover possession of the Premises and Improvements either at the end of the Term or upon sooner termination of this Sublease or of Subtenant's right to possess the Premises, or for nonpayment of Subrent or for any other reason, agrees that, any custom or statute to the contrary notwithstanding, the notice and cure rights expressly set forth herein shall be sufficient in either or any such case.
16.04 Miscellaneous Default Provisions. (A) The right to enforce all of the provisions of this Sublease may, at the option of any assignee of Sublandlord's rights in this Sublease, be exercised by any such assignee.
(B) Any notation or statement by Subtenant on any draft, check or other method of payment of any obligation hereunder, or in any writing accompanying or accomplishing such payment, which notation, or statement purports to impose conditions on such payment or to invoke the doctrine of accord and satisfaction, shall be absolutely void and of no effect, and may be ignored by Sublandlord.
(C) No right or remedy herein conferred upon or reserved to Sublandlord is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Sublandlord shall be entitled to injunctive relief in case of the violation, or attempted or threatened violation, of any covenant, agreement, condition or provision of this Sublease and to a decree compelling performance of any covenant, agreement, condition or provision of this Sublease, or to any other remedy allowed by law or in equity.
(D) No failure by Sublandlord to insist upon the strict performance of any covenant, agreement, term or condition of this Sublease on the part of Subtenant to be performed, or to exercise any permitted right or remedy consequent upon a default therein, and no acceptance of Subtenant's performance or of Subtenant's payment of full or partial Subrent after such default, shall constitute a waiver by Sublandlord of such default or of such covenant, agreement, term or condition, or any right or remedy of Sublandlord with respect thereto.
17.01 Abatement of Subrent. In the event of any casualty damage to or a condemnation of the Premises, Subtenant shall immediately notify Sublandlord and there shall be no abatement of the Basic Subrent or the Additional Subrent or any other charges payable by Subtenant under this Sublease, except to the extent that the rent and other charges payable by Sublandlord, as tenant under the Master Lease, are abated. Notwithstanding anything contained herein to the contrary, if any damage or destruction to the Premises is caused by or as a result of any act of negligence of Subtenant or its employees, then to the extent Sublandlord is not relieved of its obligation to pay its rent under the Master Lease, Subtenant shall not be relieved of Subtenant's obligation to pay Basic Subrent and Additional Subrent under this Sublease and Sublandlord shall retain all rights and remedies available at law to collect damages including lost of rentals.
17.02 Termination Upon Casualty or Condemnation. In the event Master Landlord or Sublandlord has the right to terminate the Master Lease pursuant to Sections 17 or 18 thereof, and either party elects to do so, this Sublease shall automatically terminate upon such termination of the Master Lease.
17.03 Notices To Subtenant. Sublandlord agrees that it will provide Subtenant with any notice it provides to Prime Landlord regarding its election to terminate the Master Lease pursuant to Sections 17 or 18 of the Prime Lease.
19.01 Voluntary Assignment or Other Transfer of Sublease. (A) Except as otherwise provided in this Section, Subtenant shall not mortgage, pledge, hypothecate, assign or transfer this Sublease, or any part or portion of the Term hereby created, or any interest therein, without, in each instance, having first obtained the prior written consent of Sublandlord (which consent Sublandlord shall not unreasonably withhold or delay) and to the extent required under the Master Lease, Master Landlord. In case any such consent is given, no subsequent similar transaction shall be entered into by Subtenant or Subtenant's assignee or transferee without again obtaining the consent of Master Landlord and Sublandlord thereto, which consent Sublandlord shall not unreasonably withhold or delay. Notwithstanding Sublandlord's or Master Landlord's consent, no such assignment or transfer shall be valid unless there shall be delivered to Sublandlord, within 30 days after the date of the assignment or transfer: (i) a duplicate original of the instrument of assignment or transfer; (ii) an instrument of assumption by the assignee or transferee of all of Subtenant's obligations under this Sublease in form satisfactory to Sublandlord and (iii) any further documents or information required by Master Landlord under the Master Lease.
(B) Subject to the foregoing provisions of this Section, the obligations of this Sublease shall bind and benefit the assignees and transferees of Subtenant, and any such assignee or transferee, by accepting such assignment or transfer, shall be deemed to have assumed all such obligations.
(C) Except as otherwise provided in this Section, neither this Sublease, nor the leasehold estate of Subtenant, nor any interest of Subtenant hereunder in the Premises shall be subject to involuntary assignment, transfer or sale, or to assignment, transfer or sale by operation of law in any manner whatsoever, and any such attempted involuntary assignment, transfer or sale shall be void and of no effect.
19.02 Subletting. Except as otherwise provided in this Section, Subtenant shall not sublease the Premises, or any portion thereof, or grant licenses and concessions thereat, without, in each instance, the prior written consent of Sublandlord, which consent Sublandlord shall not unreasonably withhold or delay and, to the extent required under the Master Lease, Master Landlord. Notwithstanding Sublandlord's or Master Landlord's consent, no such subletting, license or concession shall be valid, unless Subtenant, prior to the effective date of such transaction, shall deliver to Sublandlord copies of each instrument evidencing the sublease, license agreement or concession agreement entered into by Subtenant any further documents or information required by Master Landlord under the Master Lease.
19.03 Transactions with Affiliates; Sublandlord's Recapture Rights. Any provision of this Article to the contrary notwithstanding, but subject nevertheless to the provisions of Section 19.04 hereof and any contrary provisions of the Master Lease, Subtenant shall be permitted to assign this Sublease or sublet all or a portion of the Premises to any entity that (i) controls, is controlled by or under common control with Subtenant, (ii) is the surviving entity of a merger or other corporate combination with or into Subtenant or (iii) acquires all or substantially all of the assets and liabilities of Subtenant (any such entity, an "Affiliate"), all upon prior notice to Sublandlord, but without the need to obtain Sublandlord's consent or approval. In the event that
Subtenant desires to assign this Sublease or to sublet more than 50% of the Premises other than to an Affiliate of Subtenant, Subtenant shall first give Sublandlord written notice of such proposed assignment or subletting, which notice shall specify the terms and conditions of the proposed assignment or subletting. In such event, Sublandlord shall have the right, exercisable by written notice to Subtenant within 30 days following the date of Subtenant's notice to Sublandlord, either (a) in the case of a proposed assignment of this Sublease, to terminate this Sublease, effective as of the date set forth in Subtenant's notice to Sublandlord as the proposed effective date for the assignment of this Sublease by Subtenant or (b) in the case of a subletting of more than 50% of the Premises, to recapture and delete from the Premises for the term of the proposed subletting those portions of the Premises proposed to be sublet in Subtenant's notice to Sublandlord, effective as of the date set forth in Subtenant's notice to Sublandlord as the proposed effective date for the subletting. In the event Sublandlord exercises such termination and recapture right, all of Subtenant's rights and obligations with respect to the Premises or, in the case of a subletting, those portions of the Premises covered by the proposed subletting and only for the term of the proposed subletting, including, without limitation, Subtenant's obligation to pay Subrent with respect thereto, shall cease and terminate as of the effective date for the Sublease termination or Premises recapture as described above. In the event that Sublandlord fails to timely exercise its termination and recapture rights by written notice to Subtenant within the 30 day period, such right shall be deemed waived by Sublandlord and of no further force and effect with respect to the proposed assignment or subletting transactions described in Subtenant's notice.
19.04 Subtenant Remains Responsible. Notwithstanding any assignment or subletting, whether or not consented to or required to be consented to by Sublandlord, Subtenant and any person who may in the future become a successor to or guarantor of Subtenant's obligations under this Sublease shall at all times remain fully responsible and liable for the payment of the Subrent herein specified and for compliance with all of Subtenant's other obligations under this Sublease.
ARTICLE XX - NOTICES All notices, demands, requests, consents and other communications required or relating to this Sublease shall be effective only if in writing, and shall be personally delivered (by courier, overnight delivery service or otherwise), or shall be mailed United States registered or certified mail, return receipt requested, postage prepaid, to the other respective party at its address set forth below, or at such other address as such other party shall designate by notice. Any official courier or delivery service receipt or U. S. Postal Service delivery receipt shall constitute conclusive proof of such delivery.
If to Sublandlord: First States Realty, L.P.
1725 The Fairway
Jenkintown, Pennsylvania 19046
If to Subtenant: Two River Community Bank
1250 Highway 35
Middletown, NJ 07748
If to Master Landlord: Estate of Carl Casriel
Casriel & Casriel
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290 Norwood Avenue Deal, New Jersey 07723-0368
ARTICLE XXI - QUIET ENJOYMENT. Subtenant, upon observing and keeping all covenants, agreements and conditions of this Sublease on Subtenant's part to be kept and observed, shall quietly have and enjoy the Premises throughout the Term without hindrance or molestation by Sublandlord or by anyone claiming by, from, through or under Sublandlord, subject, however, to the exceptions, reservations and conditions of this Sublease and the Master Lease. Notwithstanding the foregoing, or anything to the contrary contained herein, the rights and obligations of Subtenant and Sublandlord hereunder are contingent upon Sublandlord obtaining Master Landlord's written consent to this Sublease. The Sublandlord represents to the Subtenant that it is not in default under the terms and conditions of the Prime Lease with the Master Landlord and that the lease is in full force and effect. The Sublandlord shall obtain the Master Landlord's written consent to this Sublease no later than May 1, 2001. The Subtenant herein is under no obligation to pay rent to the Sublandlord until such time as the Sublandlord has obtained the Master Landlord's written consent to this Sublease. In the event the Sublandlord fails to obtain the Master Landlord's written consent to this Sublease, the Subtenant herein may void this agreement without penalty at any time prior to the Sublandlord's obtaining the Master Landlord's written consent.
22.01 Subtenant's Estoppel. Subtenant agrees, at any time and from time to time, upon not less than ten days' prior written notice by Sublandlord, to execute, acknowledge and deliver to Sublandlord a statement in writing certifying (a) that this Sublease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), (b) whether there are then existing any offsets or defenses against the enforcement of any of the terms, covenants or conditions hereof upon the part of Sublandlord or Subtenant to be performed (and if so, specifying the same), (c) the dates to which the Subrent and other charges have been paid in advance, if any, (d) stating whether, to the best knowledge of Subtenant, Sublandlord is in default in Sublandlord's performance of any covenant, agreement or condition contained in this Sublease and, if so, specifying each such default of which Subtenant may have knowledge and also stating whether any notice of default has been given under this Sublease which has not been remedied and, if so, stating the date of the giving of said notice and (e) such other matters as may be reasonably requested by Sublandlord or required under the terms of the Master Lease, it being intended that any such statement delivered pursuant to this Section may be relied upon by any prospective purchaser or mortgagee of the Premises.
22.02 Sublandlord's Estoppel. Sublandlord agrees, at any time and from
time to time, upon not less than ten days' prior written notice by Subtenant, to
execute, acknowledge and deliver to Subtenant a statement in writing certifying
(a) that this Sublease is unmodified and in full force and effect (or if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications), (b) the dates to which the Subrent and other
charges have been paid in advance, if any, and (c) stating whether, to the best
knowledge of Sublandlord, Subtenant is in default in Subtenant's performance of
any covenant, agreement or condition contained in this Sublease and, if so,
specifying each such default of which Sublandlord may
have knowledge and also stating whether any notice of default has been given under this Sublease which has not been remedied and, if so, stating the date of the giving of said notice, it being intended that any such statement delivered pursuant to this Section may be relied upon by any prospective assignee or mortgagee of this Sublease or prospective sublessee of the whole or any part of the Premises.
ARTICLE XXIII - SUBLEASE NOT SUBJECT TO TERMINATION. Except as otherwise expressly provided herein or in the Master Lease, this Sublease shall not be deemed terminated, nor shall Subtenant be entitled to any abatement of Subrent, nor shall the respective obligations of Sublandlord and Subtenant hereunder be affected, by reason of any damage to or destruction of all or any portion of the Improvements, any condemnation of a portion thereof, any prohibition of Subtenant's use of the Premises, any interference with such use by any person, any eviction by paramount title, Subtenant's acquisition of fee title to the Premises, any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Sublandlord or any assignee of Sublandlord, any action by any trustee or receiver of Sublandlord or any assignee of Sublandlord or by any court, or for any other cause whether similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, it being the intention of the parties hereto that the entire Subrent shall continue to be payable in all events unless the obligation to pay the same shall be terminated pursuant to the express provisions of this Sublease.
24.01 No Hazardous Materials. Subtenant covenants that no Hazardous Materials (as hereinafter defined) shall be brought onto, or stored, disposed of or used at the Premises by Subtenant or any of its employees, agents, independent contractors, licensees, subtenants or invitees, except for Hazardous Materials that are typically found, brought into, stored or used at comparable general-purpose office complexes similar to the Premises to the extent that the same is permitted under the Master Lease. Except for Hazardous Materials that are typically used in the maintenance and/or operation of plumbing or waste treatment systems of office buildings, no Hazardous Materials shall be placed into the plumbing or waste treatment systems of the Premises.
24.02 Definition of Hazardous Materials. "Hazardous Materials" means any hazardous or toxic substance, material or waste (including constituents thereof) which is or becomes regulated by one or more applicable governmental or other authority. The words "Hazardous Material" include any material or substance which is (a) listed or defined as a "hazardous waste", "extremely hazardous waste", "restricted hazardous waste", "hazardous substance" or "toxic substance" under any applicable law, rule, regulation or order, (b) petroleum and its by-products, (c) asbestos, radon gas, urea formaldehyde foam insulation, (d) polychorinated biphenyl, or (e) designated as a pollutant, contaminant, hazardous or toxic waste or substance or words of similar import pursuant to the Federal Water Pollution Control Act (33 U.S.C. 1317), the Federal Resource Conservation and Recovery Act (42 U.S.C. 6903), the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. 9601 et seq.), the Toxic Substances control Act (15 U.S.C. et seq.), or the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.).
24.03 Notification of Hazardous Materials. Subtenant shall promptly (but in any case within 14 days of the occurrence of any of the following events) notify Sublandlord when Subtenant becomes aware of (i) the presence of Hazardous Materials in violation of this Section, (ii) the release or suspected release on or from the Premises and areas immediately adjoining the Premises or in the air of Hazardous Materials, whether or not caused or permitted by Subtenant or any subtenant, (iii) the issuance to Subtenant, any subtenant or any sub-subtenant of space in, or any other user of, the Premises or any assignee of Subtenant of any written communication, notice, complaint or order of violation or non-compliance or liability, of any nature whatsoever, with regard to the Premises or the use thereof with respect to any law, rule regulation or order applicable thereto, and (iv) any written notice of any applicable governmental or other authority of a pending or threatened investigation as to whether Subtenant's (or Subtenant's permitted subtenant's or assignee's) operation on the Premises are not in compliance with any such laws applicable thereto. Such notice shall include as much detail as reasonably possible, including identity of the location, type and quantity, circumstance, date and time of release and Subtenant's response or proposed response to such release. Subtenant, at its sole expense, shall promptly (but in any case within 14 days of the occurrence of any of the following events) give any notices to any applicable governmental or other authorities with respect to such release or suspected release, and shall promptly take all actions to remediate the Premises, in accordance with the laws, rules, orders and regulations applicable thereto, and return the Premises to the condition existing prior to the events which resulted in any such release and shall provide to Sublandlord a detailed description of all such actions, along with copies of communications with or from applicable governmental or other authorities or other third parties, and any reports, opinions and data developed from those actions. Subtenant has not and will not, and will not permit any of its employees, agents, independent contractors, licensees, subtenants, affiliates or invitees to, engage in any activity at or on the Premises that will result in liability or potential liability under any environmental or other law, rule, order or regulation.
24.04 Sublandlord Access. Upon reasonable notice to Subtenant, Subtenant shall allow Sublandlord and Master Landlord access to the Premises from time to time during the Term for the purpose of conducting such environmental assessments, investigations or tests as Sublandlord deems necessary or desirable to assess compliance with the terms of this Section. Subtenant shall reimburse Sublandlord for the cost of such environmental assessment, investigation or test if it reveals the existence of Hazardous Materials in violation of this Article.
24.05 Subtenant Not Liable for Existing Conditions. Any provision of this Article to the contrary notwithstanding, Subtenant shall not be obligated to remediate any Hazardous Materials that are present on or about the Premises on the Commencement Date.
25.01 Subordination, Attornment and Mortgagee Protection. This Sublease is subject and subordinate to the Master Lease and all rights and remedies of Master Landlord thereunder and to all mortgages, deeds of trust, encumbrances and any renewals, modifications, replacements or extensions thereof ("Mortgages") now or hereafter placed upon the Premises and all other encumbrances and matters of public record applicable to the Property, provided, however, with respect to any such Mortgage hereafter placed upon the Premises, Subtenant shall subordinate and attorn to the holder of such Mortgage ("Holder") provided such Holder agrees
not to disturb Subtenant's possession hereof as long as Subtenant is not in default hereunder and has failed to cure within the time periods provided for herein. If any foreclosure proceedings are initiated by any Holder or a deed in lieu is granted (or if any ground lease is terminated), Subtenant agrees, upon written request of any such Holder or any purchaser at foreclosure sale, to attorn and pay Subrent to such party and to execute and deliver any instruments necessary or appropriate to evidence or effectuate such attornment (provided such Holder or purchaser shall agree to accept this Sublease and not disturb Subtenant's occupancy, so long as Subtenant does not default and fail to cure within the time permitted hereunder. However, in the event of attornment, no Holder shall be: (i) liable for any act or omission of Sublandlord, or subject to any offsets or defenses which Subtenant might have against Sublandlord (prior to such Holder becoming Sublandlord under such attornment), (ii) liable for any security deposit or bound by any prepaid Subrent not actually received by such Holder, or (iii) bound by any future modification of this Sublease not consented to by such Holder. Any Holder may elect to make this Sublease prior to the lien of its Mortgage, by written notice to Subtenant, and if the Holder of any prior Mortgage shall require, this Sublease shall be prior to any subordinate Mortgage. Subtenant agrees to give any Holder by certified mail, return receipt requested, a copy of any notice of default served by Subtenant upon Sublandlord, provided that prior to such notice Subtenant has been notified in writing of the address of such Holder. Subtenant further agrees that if Sublandlord shall have failed to cure such default any Holder whose address has been provided to Subtenant shall have an additional period of thirty (30) days in which to cure (or such additional time as may be required due to causes beyond such Holder's control, including time to obtain possession of the Property by power of sale or judicial action). Subtenant shall execute such documentation as Sublandlord may reasonably request from time to time, in order to confirm the matters set forth in this Section in recordable form.
25.02 Integration. This Sublease and the documents referred to herein set forth all the promises, agreements, conditions and understandings between Sublandlord and Subtenant relative to the leasing of the Premises, and there are no promises, agreements, conditions or understandings, either oral or written, between them other than as are herein set forth. No subsequent alteration, amendment, supplement, change or addition to this Sublease shall be binding upon Sublandlord or Subtenant unless reduced to writing and signed by them.
25.03 No Recording. This Sublease shall not be recorded or otherwise filed or made a matter of public record, and any attempt to record or file same by Subtenant shall be deemed a default by it hereunder.
25.04 Time of the Essence. Time wherever specified herein for satisfaction of conditions or performance of obligations by the parties is of the essence of this Sublease.
25.05 No Partnership. The parties do not intend to create hereby any partnership or joint venture between themselves with respect to the Premises or any other matter.
25.06 Severability. Any provision of this Sublease that shall be prohibited or unenforceable in any jurisdiction or with respect to any person shall, as to such jurisdiction or person, be ineffective only to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction or, as the case
may be, with respect to any other person. To the extent permitted by applicable law, the parties hereto hereby waive any law that renders any provision hereof prohibited or unenforceable in any respect.
25.07 Authority. Each party warrants that it has full power, authority and legal right to execute and deliver this Sublease, and to keep and observe all of the terms and provisions of this Sublease on such party's part to be observed and performed. Each party warrants that this Sublease is its valid and enforceable obligation, subject to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of rights of creditors generally and subject to the application of equitable principles.
25.08 Governing Law. This Sublease and all issues arising hereunder shall be governed by the laws of the State in which the Premises are located.
25.09 Counterparts. This Sublease may be executed by the parties hereto in separate counterparts, all of which, when delivered, shall together constitute one and the same instrument.
25.10 Plans. Nothing shown on any recorded subdivision plan with respect to the Premises, or on any plan referred to in this Sublease, or on any other plan, shall create or constitute an additional covenant, representation or agreement of Subtenant or grant to Sublandlord any easement or right.
25.11. Headings; Pronouns. The headings of the sections of this Sublease
are for convenience only and have no meaning with respect to this Sublease or
the rights or obligations of the parties hereto. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein:
"person", as used herein, includes an individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, or other
entity; "Premises" includes each portion of the Premises and each estate or
interest therein; "hereof", "herein", and "hereunder" and other words of similar
import refer to this Sublease as a whole; "Master Lease" includes the Master
Lease as supplemented or amended from time to time by written instrument(s)
entered into by Master Landlord, Sublandlord and, to the extent that the same
adversely affect the rights and remedies or increase the duties and obligations
of Subtenant hereunder, Subtenant; "Master Landlord" includes Master Landlord's
successors and assigns; "Sublease" includes these presents as supplemented or
amended from time to time by written instrument(s) entered into by Subtenant and
Sublandlord; "Sublandlord" includes Sublandlord's successors and assigns;
"Subtenant" includes Subtenant's successors and permitted assigns; and "parties"
means Sublandlord and Subtenant. Whenever the context may require, any pronoun
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of pronouns or nouns shall include the plural and vice
versa.
25.12 Binding Effect; Successors and Assigns. Subject to all provisions hereof dealing with assignments, the terms and provisions of this Sublease, and the respective rights and obligations hereunder of the parties hereto, shall be binding upon, and inure to the benefit of, the parties and their respective successors and assigns.
25.13 Limitation of Sublandlord's Liability. The obligations of Sublandlord under this Sublease do not constitute personal obligations of the individual partners, directors, officers, or
shareholders of Sublandlord, and Subtenant shall look solely to the real estate that is the subject of this Sublease and to no other assets or property of the Sublandlord for satisfaction of any liability in respect of this Sublease and shall not seek recourse against any other property of Sublandlord, or against the individual partners, directors, officers or shareholders of Sublandlord or any of their personal assets for such satisfaction.
25.14 Survival. All agreements and obligations of Subtenant hereunder which require observance or performance after the expiration or termination of this Sublease, or which can not reasonably be ascertained as having been observed or performed at the time of such expiration or termination, shall survive, and be enforceable against Subtenant following, such expiration or termination.
25.15 Brokers. Subtenant represents that it has not engaged any broker, finder or other person who may be entitled to a commission or fee in connection with the transactions contemplated by this Sublease and covenants and agrees that Subtenant shall indemnify and hold Sublandlord harmless from and against any such claim. Sublandlord shall be responsible for and pay all broker's commissions and fees due persons engaged by Sublandlord and shall indemnify and hold Subtenant harmless from and against any failure to do so.
25.16 Insolvency or Bankruptcy of Subtenant. Notwithstanding any other provisions contained in this lease, in the event (a) Subtenant or its successors or assignees shall become insolvent or bankrupt, or if it or their interests under this Sublease shall be levied upon or sold under execution or other legal process, or (b) the depository institution then operating on the Premises is closed, or is taken over by any depository institution supervisory authority ("Authority"), Sublandlord may, in either such event, terminate this Lease only with the concurrence of any Receiver or Liquidator appointed by such Authority, to the extent that such Receiver's or Liquidator's consent is required by applicable law. In the event this Sublease is terminated by the Receiver or Liquidator, the maximum claim of Sublandlord for rent, damages, or indemnity for injury resulting from the termination, rejection, or abandonment of the unexpired Sublease shall not exceed the maximum amount permitted under applicable law.
IN WITNESS WHEREOF, Sublandlord and Subtenant have caused this Sublease Agreement to be duly executed, all as of the day and year first above written.
Witness: FIRST STATES REALTY, L.P.
/s/ Jeanette Talese By: /s/ Glenn Blumenthal
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Jeanette Talese Name: Glenn Blumenthal
Title: Vice President
Witness: TWO RIVER COMMUNITY BANK
By: /s/ Barry B. Davall
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Name: Barry B Davall,
President & CEO
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EXHIBIT "A"
EXHIBIT "B"
COPY OF MASTER LEASE
ESTATE OF CARL CASRIEL, Landlord
and
CORESTATES BANK, N.A., Tenant
Premises: CoreStates Bank Branch Building
Port Monmouth Shopping Center
Highway 36 and Bray Avenue
Port Monmouth, Middletown, New Jersey
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June 20, 1997
LEASE
TABLE OF CONTENTS
Article 1 Premises...........................................................1
Article 2 Use................................................................1
Article 3 Term...............................................................1
Article 4 Base Rent..........................................................1
Article 5 Option Term........................................................2
Article 6 Additional Rent ...................................................3
Article 7 Repairs and Care ..................................................4
Article 8 Glass. etc ........................................................4
Article 9 Alterations; Improvements .........................................4
Article 10 Signs..............................................................5
Article 11 Utilities .........................................................5
Article 12 Compliance with Laws, etc..........................................5
Article 13 Indemnification ...................................................5
Article 14 A. Assignment .....................................................6
Article 15 Restriction of Use; Environmental Responsibility...................6
Article 16 Mortgage Priority..................................................6
Article 17 Condemnation; Eminent Domain ......................................6
Article 18 Fire and other Casualty ...........................................7
Article 19 Reimbursement of Landlord..........................................7
Article 20 Inspection and Repair .............................................7
Article 21 Right to Exhibit ..................................................7
Article 22 ...................................................................8
Article 23 Removal of Tenant's Property.......................................8
2
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Article 25 Remedies upon Tenant's Default ....................................8 Article 26 Non-Liability of Landlord .........................................9 Article 27 Non-Waiver by Landlord ............................................9 Article 28 Non-Performance by Landlord .......................................9 Article 29 Validity of Lease .................................................9 Article 30 Notices ...........................................................9 Article 31 Title and Quiet Enjoyment .........................................9 Article 32 Entire Contract ...................................................9 Article 33 Mechanics' Liens ..................................................9 Article 34 Waiver of Subrogation Rights......................................10 Article 35 Miscellaneous ....................................................10 |
THIS LEASE AGREEMENT, dated as of June 20, 1997,
c/o Casriel & Casriel
Attorneys At Law
290 Norwood Avenue
P.O. Box 368
Deal, New Jersey, 07723-0368
and CORESTATES BANK, NA, a National Banking Association (the "Tenant"), located
at
Attention: Corporate Real Estate Department
FC-1-1-18-2
Philadelphia, PA 19101
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Article 1. Premises. The Landlord leases to the Tenant and the Tenant from the Landlord, the following described premises (referred to as the "Premises"), the bank branch building of approximately 2,180 square feet, together with drive-through and stacking lanes, currently leased by the Tenant; at the shopping center known as Pomon Shopping Center or Port Monmouth Shopping Center (the "Shopping Center"), located at 357 - 375 Highway 36, Port Monmouth, Middletown, New Jersey, known as Block 244, Lot 5 the tax map of the Borough of Middletown. The Shopping Center is shown on Schedule A, attached.
Article 2. Use. The Premises are to be used and occupied solely for the following purpose: bank branch office (except as set forth in Article 14). The Premises must be so used and occupied by the Tenant during normal business hours during the term of this Lease, except as set forth in Article 14. The use and occupation by the Tenant of the Premises shall include the use in common with others entitled thereto of the common areas, employees' parking areas, loading area, sidewalks and car parking areas, in the Shopping Center, subject, however, to the terms and conditions of this Lease.
Article 3. Term. This Lease shall be for a term of ten years commencing on September 1, 1997, and ending on August 31, 2007.
Article 4. Base Rent. The Tenant covenants and agrees to pay to the Landlord, without setoff, deduction or demand, at the address set out above or as the Landlord may designate in writing, as base rent for and during the term hereof, the following payments:
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Period ("lease year") Rent Per Annum Rent per month
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September 1, 1997 to
August 31, 1998
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September 1, 1998 to
August 31, 1999
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September 1, 1999 to
August 31, 2000
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September 1, 2000 to
August 31, 2001
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September 1, 2001 to
August 31, 2002
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September 1, 2002 to The prior lease year's rent, increased by the
August 31, 2003 CPI increase during the 12 month period
ending July 31, 2002.
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September 1, 2003 to The prior lease year's rent, increased by the
August 31, 2004 CPI increase during the 12 month period
ending July 31, 2003.
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September 1, 2004 to The prior lease year's rent, increased by the
August 31, 2005 CPI increase during the 12 month period
ending July 31, 2004
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September 1, 2005 to The prior lease year's rent, increased by the
August 31, 2006 CPI increase during the 12 month period
ending July 31, 2005
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September 1, 2006 to The prior lease year's rent, increased by the
August 31, 2007 CPI increase during the 12 month period
ending July 31, 2006
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Rent shall be paid each month in advance, on the first of each month. In the event that the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for New York, NY - Northeastern New Jersey is not available, Landlord shall use its reasonable discretion to select a comparable, substitute index.
Net Lease. It is the intentions of the parties that the rent payable hereunder shall be net to Landlord, so that this Lease shall yield to landlord the net monthly rent specified herein during the term of this Lease, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Premises (except with respect to mortgages on the fee, which shall be and remain the sole obligation of the Landlord), shall be paid by Tenant.
Article 5. Option Term. The Tenant shall have the option to lease the Premises for one additional term of five (5) years. The option term is from September 1, 2007 to August 31, 2012. During the option term, the tenancy shall be on all the terms and conditions of the Lease, except that base rent shall be increased each lease year to an amount equal to the preceding lease year rent, increased by the CPI increase for each preceding twelve month period ending July 31st Base rent shall be paid each month, in advance, on the first of each month. In order to exercise the option term, Tenant must deliver written notice received on or before February 28, 2007, and Tenant must be good standing at the time such notice is delivered. Otherwise this option shall be void.
A. Tenant shall pay Tenants proportionate share of all Operating Costs relating to, arising out of or in connection with the Shopping Center of which the Premises forms a part. Tenant shall pay to Landlord, monthly in advance, at the same time and in the same manner as the Minimum Rent is due, the amount reasonably estimated by Landlord based on prior years expenses at the Shopping Center as to be Tenant's proportionate share of such Operating Costs in anticipation of actual Operating Costs for the then current calendar year. Annually, on a calendar year basis, on or about February 28th of each year, there shall be an adjustment between Landlord and Tenant, with regard to payment to or repayment or credit by, Landlord, as the case may require. Landlord shall provide Tenant with supporting documentation reasonably required to verify Landlord's calculations.
B. Landlord's "Operating Costs" shall mean and refer to all expenses of any kind or nature incurred or sustained by Landlord in the operation and maintenance of the Shopping Center in a manner reasonable and appropriate for shopping centers of a similar calibre and locale, and in the best interests of the Shopping Center, including, without limitation by reason of specification, the following:
C. (i) All costs and expenses directly related to the Shopping Center of operation, repair, maintenance, alteration, lighting, cleaning, insurance, removal of snow, ice, waste and debris, policing and regulating traffic in the Shopping Center;
(ii) All costs and expenses of replacing (capitalized over the useful life of the replacement), repairing, restriping and maintaining paving, curbs, walkways, roofs, landscaping (including replanting and replacing flowers and other plants), sewer lines, drainage and lighting facilities in the Shopping Center and adjacent areas thereto;
(iii) Electricity used in lighting the Shopping Center, except as respects the electricity serving only the Premises for which the Tenant is directly liable and obligated;
(iv) Maintenance and repair of parking areas and other so-called common areas of the Shopping Center;
(v) Painting arid decoration of all such common areas in the Shopping Center and the areas adjacent thereto;
(vi) Real estate taxes and assessments, on land only at the Shopping Center, ordinary or extraordinary, for the Shopping Center, of any kind or nature, ordinary or extraordinary, for the Shopping Center, as well as any tax imposed by any governmental authority in lieu of the foregoing to the extent the same are in lieu of real estate taxes, assessments for improvements or similar governmental impositions;
(vii) Management fees, commissions, wages and salaries of all persons engaged in the maintenance, leasing and operation of the Shopping Center (not to exceed 5% of the aggregate other Operating Costs); and
(viii) All other expenses of any kind or nature which may reasonably be considered and expenses regarding or incidental to the maintenance, operation or repair of the Shopping Center.
D. Tenant's Share. The "Proportionate Share" to be paid by Tenant of such Operating Costs shall be computed on the ratio that the total square footage of the floor area of the Premises bears to the total square footage of the store space in the Shopping Center. Tenant's square footage is 2,180. Tenant's Proportionate Share is 7.423% percent.
E. Records. Landlord shall keep accurate records showing in reasonable detail all expenses Incurred for Operating Costs described in and for which Tenant shall be charged pursuant to this Article. Such records shall be made available on reasonably advance notice by Tenant to Landlord at any time within 30 days following the date Landlord shall have sent any invoice to Tenant with respect to such Operating Costs. Such availability and review of the records shall take place at Landlord's office during normal business hours. Tenant shall not be required to pay any such Operating Costs so invoiced until the earlier of the date on which Tenant shall review the records so made available by Landlord or the 31st day following the sending of an invoice pertaining to Operating Costs by Landlord to Tenant.
F. Additional Rent/Tax on Premises Building. As part of the Proportionate Share/Operating Costs payments made to Landlord, Tenant shall reimburse Landlord for all real estate taxes attributable to the Premises building, as follows: the Tenant shall pay to Landlord each month a payment equal to one-twelfth of 100% of the Middletown Township Tax Assessor's valuation of the Premises building, multiplied by the tax rate applicable to the year in question. These payments shall be subject to the year end adjustment set forth in this Article 6.
Article 7. Repairs and Care
A. The Premises are leased "as is". The Tenant has examined the Premises and has entered into this Lease without any representation on the part of the Landlord as to the condition thereof. The Tenant shall neither encumber nor obstruct the sidewalks, driveways,
yards, entrances, hallways and stairs, but shall keep and maintain the same in a dean condition, free from debris, trash, refuse, snow and ice.
B. The Tenant shall take good care of the Premises and shall at the Tenant's own cost and expense, make all repairs, including but not limited to structural and non structural repairs, HVAC and electrical systems, water heater, plumbing, roof, ceiling tiles, redecoration, painting and renovations of the premises as may be necessary to keep them in good repair and good appearance, and at the end and other expiration of the term shall deliver up the premises in good order and condition, damages by the elements, ordinary wear and tear, fire and other hazards excepted.
C. Tenant shall repair, repave and restripe as necessary the parking spaces, driveways and drive-through lanes, and maintain the landscaping, immediately contiguous to the building Premises, which are primarily for the use of the Tenant, its employees and customers. This repair, landscaping and repaving area is marked in Schedule C, attached.
Article 8. Glass. etc. Damage Repairs. In case of the destruction of or any damage to the glass in the Premises, or in the case of the destruction of or damage of any lend whatsoever to the Premises caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, the Tenant shall repair the said damage or replace or restore any destroyed parts of the Premises, as speedily as possible, at the Tenant's own cost and expense. In addition to the foregoing obligations, the Tenant must maintain and repair the Premises as set forth in Article 7.
Article 9. Alterations: Improvements. (A) Tenant may effect alterations, additions or Improvements to the Premises, upon the written consent of the Landlord. All such alterations, additions, improvements and/or building systems shall be completed in a good and workmanlike manner and when made, installed in or attached to the Premises (with the exception, at the option of the Tenant, of a bank vault), shall belong to and become the property of the Landlord and shall be surrendered with the Premises and as part thereof upon the expiration or sooner termination of this lease, without hindrance, molestation or injury. In the case of expiration of the Lease, or termination of the Lease by the Tenant, Tenant shall be deemed to have elected to abandon those trade fixtures not removed by the Tenant prior to the Lease termination/expiration. In the case of default by the Tenant as set forth in Articles 24 and 25, Tenant shall be deemed to have elected to abandon those trade fixtures not removed by the Tenant prior to ten (10) days after the date Landlord re-enters the Premises or obtains a Judgment for Possession of the Premises, whichever is first to occur.
(B) Landlord reserves the right to expand, renovate and remodel the Shopping Center, provided however that Landlord shall construct no buildings in the area delineated in Schedule C. Landlord shall use their best efforts to minimize any such expansion/renovation's impact on the existing traffic flow and stacking at the Premises. In the event that the Shopping Center store space is expanded or reduced, the Tenant's Proportionate Share shall be adjusted accordingly by the Landlord.
Article 10. Signs. The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the Premises or any part thereof, except of a design and
structure and in or at such places as may be indicated and consented to by the Landlord in writing, such consent not to be unreasonably withheld. In case the Landlord or the Landlord's agents, employees or representatives shall deem it necessary to remove any such signs in order to paint or make any repairs, alterations or improvements in or upon the Premises or any part thereof, they may be so removed, but shall be replaced at the Landlord's expense when the said repairs, alterations or improvements shall have been completed. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto. The Landlord consents to the existing signs of the Tenant at the Premises. Tenant's presently existing signage is hereby approved.
Article 11. Utilities. The Tenant shall pay when due all the rents or charges for water or other utilities used by the Tenant, which are or may be assessed or imposed upon the Premises or which are or may be charged to the Landlord with respect to the Premises by the suppliers thereof during the term hereof, and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due or within 30 days of demand therefor, whichever occurs sooner.
Article 12. Compliance with Laws etc. The Tenant shall promptly comply
with all laws, ordinances, rules, regulations, requirements and directives of
the Federal, State and Municipal Governments or Public Authorities and of all
their departments, bureaus and subdivisions, applicable to and affecting the
Premises, their use and occupancy, for the correction, prevention and abatement
of nuisances, violations or other grievances in, upon or connected with the
Premises, during the term hereof; and shall promptly comply with all orders,
regulations, requirements and directives of the Board of Fire Underwriters or
similar authority and of any insurance companies which have issued or are about
to issue policies of insurance covering the Premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own cost
and expense. In the alternative, Tenant need not comply if the cost of
compliance exceeds $2,500 and Tenant ceases business at the Premises. (Such
ceasing of business shall not effect the Tenant's obligation to pay rent and
perform other covenants contained in this Lease.) If Tenant does not make such
corrections (or commence a cure in the case described below) within a thirty
(30) day period, (or cease business at the Premises within a 180 day period) or
a lesser period if required by law, then the Landlord or the Landlord's agents
may enter the Premises and comply with any and all of the said statutes,
ordinances, rules, orders, regulations or requirements, at the cost and expense
of the Tenant and in case of the Tenant's failure to pay therefor, the said cost
and expense shall be added to the next month's rent and be due and payable as
such, or the Landlord may deduct the same from the balance of any sum remaining
in the Landlord's hands. If the nature of such violation or order is such that
it cannot be cured or implemented within the applicable time period, then the
Tenant shall commence and diligently pursue compliance within the applicable
time period. Each party will give prompt notice to the other of notices of
violations received by such party relating to the Premises. Tenant shall be
responsible for any and all fines assessed by reason of failure to comply with
law at the Premises.
Article 13. Indemnification. The Tenant agrees to and shall save, hold and keep harmless and indemnify the Landlord from and for any and all payments, expenses, costs, attorney fees and from and for any and all claims and liability for losses or damage to property or Injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the
Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, or for any cause or reason whatsoever arising out of or by reason of the occupancy of the Premises by the Tenant and the conduct of the Tenant business.
Article 14.
A. Assignment. The Tenant shall not, without the written consent of the Landlord, assign, mortgage, or hypothecate this lease, nor sublet or sublease the Premises or any part thereof, except through a merger or consolidation of Tenant, or a sale of not fewer than three bank branches. Such consent shall not be unreasonably withheld or delayed. If Tenant assigns this lease or sublets, Tenant shall remain liable as a surety to Landlord for full performance of Tenant's obligations.
B. Use Following Assignment. Provided Tenant makes an assignment or enters into a sublease, pursuant to this Article, use of the Premises for other than bank use may be any lawful, retail or office use except for any use which materially competes with any tenant at the Shopping Center at such time, and except for the prohibited uses set forth in Schedule B.
C. Tenant's Right to Cease Business/Landlord's Right to Cancel Lease. Notwithstanding Article 2 (Use), Tenant may, at any time during the Lease term or the option term, cease business operations at the Premises. However, should Tenant cease business at the Premises for 90 days or more, Landlord may, at Landlord's discretion, cancel the Lease upon ten days written notice to Tenant.
Article 15. Restriction of Use; Environmental Responsibility. The Tenant shall not occupy or use the Premises or any part thereof, nor permit or suffer the same to be occupied or used for any purposes other than as herein limited, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or other casualty. The Tenant shall not store any hazardous materials on the Premises. The Tenant shall indemnify the Landlord for any environmental expenses or legal liability incurred by the Landlord, relating to the Premises and caused by the use of the Premises by the Tenant, its guests and invitees. The foregoing indemnification shall apply to normal ECRA reporting if required in connection with termination of this tenancy.
Article 16. Mortgage Priority. This lease shall not be a lien against the Premises in respect to any mortgages that may hereafter be placed upon the Premises. The recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien to this lease, irrespective of the date of recording and the Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to further effect the subordination of this lease to any such mortgage or mortgages. A refusal by the Tenant to execute such instruments shall entitle the Landlord to the option of canceling this lease, and the term hereof is hereby expressly limited accordingly. Landlord shall use its best efforts to obtain a non-disturbance agreement from any present or future mortgagee, in form and content satisfactory to Tenant.
Article 17. Condemnation: Eminent Domain
A. If any portion of the Premises, or any material portion of Tenant's Drive Thru lanes or the supporting stacking or traffic lanes, shall be taken under eminent domain or
condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to, and or shall sell and convey the Premises or any material portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said Premises or any material portion thereof, then this Lease, at the option of the Tenant, shall terminate, and the term hereof shall end as of such date such property is surrendered to the condemning authority.
B. [INTENTIONALLY OMITTED]
C. In the event that the Lease is terminated by Tenant, pursuant to this Article, the Tenant shall have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings. All rights of the Tenant to damages, if any, are hereby assigned to the Landlord, except for an award made to Tenant for Tenant's moving expenses or for the loss of Tenant's trade fixtures and tangible personal property if a separate award for such items is made to the Tenant. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises or any portion thereof. If given notice to quit from the Landlord, the Tenant agrees to vacate the Premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord in the aforementioned notice. Failure by the Tenant to comply with any provisions in this clause shall subject the Tenant to such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
Article 18. Fire and other Casualty
A. In case of fire or other casualty, the Tenant shall give immediate notice to the Landlord. If the Premises shall be partially damaged by fire, the elements or other casualty, the Landlord shall repair the same as speedily as practicable, but the Tenant's obligation to pay the rent hereunder shall not cease. If the Premises be so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the Premises shall be made tenantable by the Landlord. However, if, in the reasonable opinion of the Landlord, the Premises building is more than one-half destroyed, then at the option of either party the rent shall be paid up to the time of such destruction and then and from thenceforth this lease shall come to an end. The parties option to cancel the Lease under this Article 18 shall be deemed waived if not exercised within 60 days of such casualty. The Premises shall be deemed to be more than one-half destroyed if, in the opinion of the Landlord's licensed architect, the cost of necessary repairs to the Premises building would exceed one-half the replacement cost of the entire Premises building.
B. In any case under this Article 18, if the Tenant shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to the Landlord to the extent of the Landlord's costs and expenses to make the repairs hereunder, or
to the extent of the assessed value of the Premises building if the Lease is terminated, and such insurance carriers shall have no recourse against the Landlord for reimbursement.
C. In the event that a casualty loss occurs and neither party cancels the Lease, then Tenant may continue to operate out of a temporary structure, such as a trailer, located on the Premises, provided that (i) Tenant obtains all necessary government approvals, and (ii) rent not be abated.
Article 19. Reimbursement of Landlord. If the Tenant shall fail or refuse to comply with and perform any conditions and covenants of the Lease after notice and reasonable opportunity to cure, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord shall be added to the installment of rent due immediately thereafter but in no case later than one month after such demand, whichever occurs sooner, and shall be due and payable as such. This remedy shall be in addition to such other remedies as the Landlord may have hereunder or at law by reason of the breach by the Tenant of any of the covenants and conditions in this lease contained.
Article 20. Inspection and Repair. The Tenant agrees that the Landlord and the Landlord's agents, employees or other representatives, shall have the right to enter into and upon the Premises or any part thereof, at all reasonable hours, for the purpose of examining the same or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. This clause shall not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs.
Article 21. Right to Exhibit. The Tenant agrees to permit the Landlord and the Landlord's agents, employees or other representatives to show the Premises to persons wishing to rent or purchase the same, at reasonable times co-ordinated with Tenant which may be after regular business hours.
Article 22. [INTENTIONALLY OMITTED]
Article 23. Removal of Tenant's Property. Any equipment, fixtures, goods or other property of the Tenant; not removed by the Tenant upon the termination of this Lease, or upon the Tenant's eviction, whichever shall occur first, shall be considered as abandoned and the Landlord shall have the right; without any notice to the Tenant; to sell or otherwise dispose of the same, at the expense of the Tenant; and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any. Upon the occurrence of an Event of Default of the Tenant, Landlord shall have the additional rights set forth in Article 25.
Article 24. Default by Tenant. Each of the following events shall be deemed an Event of Default by the Tenant under this Lease:
(i) Tenant shall fail to pay any installment of base rent or additional rent within 10 days after receipt of written notice of non-payment;
(ii) Tenant shall fail to comply with, perform or observe any other term, condition or covenant of the Lease applying to Tenant and Tenant shall not cure such failure or
default within 30 days after Landlord's written notice of said failure or default, or such longer time as necessary to cure such failure or default; provided that Tenant has promptly and diligently commenced cure of such failure or default; or
(iii) Proceedings be commenced by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition, or Tenant shall make an assignment for the benefit of creditors.
Article 25. Remedies upon Tenant's Default
If there should occur any Event of Default on the part of the Tenant; the Landlord, in addition to any other remedies herein contained or as may be permitted by law, may either terminate this Lease or re-enter the Premises as agent for the Tenant, by appropriate judicial remedy, without being liable for prosecution therefor, or for damages, and all rights of Tenant under this Lease to possess the Premises shall cease. In all cases, the Tenant's obligation to pay all rent shall continue. Landlord, as agent for the Tenant or otherwise, may re-let the Premises and receive the rents therefor and apply the same, first to the payment of such expenses, realtor commissions, reasonable attorney fees and costs, as the Landlord may have incurred in (1) re-entering and repossessing the same, (2) in making such repairs and alterations as may be necessary and (3) in re-letting the Premises; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the re-entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, commissions, fees and costs. The Landlord at its option may require the Tenant to pay such deficiencies as they arise and are ascertained each month, or may hold Tenant in advance for a sum equal to the Landlord's reasonable protection of the entire deficiency resulting from such reletting. Tenant shall not be entitled to any surplus accruing as a result of the reletting. Landlord hereby waives any lien, statutory lien or right to distrain that may exist; on all personal property of Tenant in or upon the Premises, including without limitation, furniture, fixtures (including trade fixtures) and merchandise of Tenant. No waiver by Landlord of any such breach, violation or default by Tenant shall constitute or be construed as a waiver of any other such breach, violation or default, nor shall lapse of time after such breach, violation or default by Tenant before Landlord shall exercise any right with respect thereto operate to defeat or adversely affect the rights of Landlord. Landlord shall make its best efforts to mitigate damages, consistent with the tenor of the Shopping Center. If Landlord or Tenant commences litigation to enforce their rights under this Lease, the prevailing party shall be entitled to reasonable attorneys fees as part of its damage award.
Article 26. Non-Liability of Landlord. The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, conveyor, refrigeration, sprinkler, air conditioning or heating systems, elevators or hoisting equipment; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or this or any other Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of the landlord, or any services to be furnished or supplied by the Landlord.
Article 27. Non-Waiver by Landlord. The various rights, remedies, options and elections of the Landlord, expressed herein, are cumulative, and the failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this lease or to exercise any election or option, or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect.
Article 28. Non-Performance by Landlord. This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord's inability to supply any service or material called for herein, by reason of any rule, order, regulation or preemption by any governmental entity, authority, department, agency or subdivision or for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or for any cause beyond the control of the Landlord.
Article 29. Validity of Lease. The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect. The Landlord may pursue the relief or remedy sought in any invalid clause, by conforming the said clause with the provisions of the statutes or the regulations of any governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.
Article 30. Notices. All notices required under the terms of this lease shall be given by mailing such notices by certified or registered mail, return receipt requested, or delivered by overnight courier (Federal Express, United Parcel Service, etc.) providing proof of delivery to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner. Notices shall be effective when received. In the event of an emergency, any reasonable method of notification shall be acceptable.
Article 31. Title and Quiet Environment. The Landlord covenants and represents that the Landlord is the owner of the Premises herein leased and has the right and authority to enter into, execute and deliver this lease, and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the Premises for the term aforementioned.
Article 32. Entire Contract. This lease contains the entire contract between the parties. No representative, agent or employee of the Landlord has been authorized to make any representations or promises with reference to the within letting or to vary, alter or modify the
terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant.
Article 33. Mechanics' Liens. If any mechanics' or other liens shall be created or filed against the Premises by reason of labor performed or materials furnished for the Tenant in the erection, construction, completion, alteration, repair or addition to any building or improvement, the Tenant shall upon demand, at the Tenant's own cost and expense, cause such lien or liens to be satisfied and discharged of record together with any Notices of Intention that may have been filed. Failure so to do, shall entitle the Landlord to resort to such remedies as are provided herein in the case of any default of this lease, in addition to such as are permitted by law.
Article 34. Waiver of Subrogation Rights. The Tenant waives all rights of recovery against the Landlord or Landlord's agents, employees or other representatives, for any loss, damages or injury of any nature whatsoever to property or persons for which the Tenant is insured. The Tenant shall obtain from Tenant's insurance carriers and will deliver to the Landlord, waivers of the subrogation rights under the respective policies.
Article 35. Miscellaneous
A. The Tenant shall not install, construct or allow any vending machines or storage containers outside the store.
B. [Intentionally omitted.]
C. Should any rent remain unpaid for ten days after notice that rent has not been received, Tenant shall pay a late charge of 5%, such late charge to be deemed Additional Rent.
D. Additional Rules. The Landlord at any time or times and from time to time may make such reasonable rules and regulations as in the judgment of the Landlord may from time to time be reasonably necessary for the safety, care and cleanliness of the Premises and Shopping Center, and for the preservation of the good order therein. Such rules and/or regulations shall, when communicated in writing to the Tenant; form a part of this lease.
E This Lease Agreement may be executed by facsimile and/or by counterpart and each counterpart when taken together shall constitute one and the same instrument. This Lease Agreement shall be governed by the laws of New Jersey. In all references herein to any parties, persons, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of the within instrument may require.
F. All the terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives, successors and assigns.
SIGNED:
Witnessed as to Landlord: ESTATE OF CARL CASRIEL, Landlord
By: /s/ Eric Casriel
-------------------------------- -------------------------------
Eric Casriel, Executor
Attest as to Tenant: CORESTATES BANK, N.A., Tenant
/s/ Carl L. Grossman By: /s/ Dan G. Griffith
-------------------------------- -------------------------------
CARL L. GROSSMAN DAN G. GRIFFITH
ASSISTANT SECRETARY VICE PRESIDENT
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Schedule A Port Monmouth Shopping Center
MAP
Schedule B Restrictions on Use
1. Grocery/Drug Restrictions. The types of uses permitted in the
Premises shall be of a retail, office and/or commercial nature. The Premises
(nor any part thereof) shall not be (i) used or occupied as a retail
supermarket, drug store or combination thereof, nor (ii) used for the sale of
any of the following: (1) fish or meat; (2) liquor or other alcoholic beverages
in package form, including, but not limited to, beer, wine and ale; (3) produce;
(4) baked goods; (5) floral items; (6) any combination of food items sufficient
to be commonly known as a convenience food store or department; (7) greeting
cards; (8) photo processing; (9) health and beauty aids; and (10) items
requiring dispensation by or through a pharmacy or requiring dispensation by or
through a registered or licensed pharmacist.
2. General Restrictions. In addition, none of the following uses shall be conducted at the Premises: (a) funeral homes; (b) any production, manufacturing, industrial or storage use of any kind or nature, except for storage and/or production of products incidental to the retail sale thereof from the Premises; (c) entertainment or recreational facilities ("entertainment or recreational facilities" include but are not limited to, a bowling alley, skating rink, electronic or mechanical games arcade (except as an incidental use to a retail or commercial business, in which case such use shall be restricted to less than five percent (5%) of the floor area occupied by such business), theater, billiard room or pool hall, health spa or studio or fitness center, massage parlor, discotheque, dance hall, banquet hall, night club, bar or tavern, "head shop", pornographic or "adult" store, racquetball court or gymnasium, or other place of public amusement); (d) training or educational facilities ("training or educational facilities" include, but are not limited to, a beauty school, barber college, library, reading room, church, school, place of instruction, or any other operation catering primarily to students or trainees rather than to customers); (e) restaurants; (f) car washes, gasoline or service stations, or the displaying, repairing, renting, leasing, or sale of any motor vehicle, boat or trailer; (g) dry cleaner with on-premises cleaning; (h) any use which creates a nuisance or materially increases noise or the emission of dust, odor, smoke, gases, or materially increases fire, explosion or radioactive hazards in the Shopping Center beyond that created by any restaurant business; (i) second-hand or thrift stores, or flea markets; and (j) any use involving Hazardous Material, except as may be customary in first class neighborhood shopping centers in the metropolitan area where the Shopping Center is located. It is the Parties' intent that the parking and other common facilities shall not be burdened by either large scale or protracted use by persons other than customers of occupants of the Shopping Center.
Exhibit 10.16
THIS LEASE AGREEMENT, made the 19th day of Feb., 2002
between Bay Operating Company LLC (Leonard Edwards and Frederick J. Rast III),
of PO Box 269, Atlantic Highlands, New Jersey in the County of Monmouth, herein designated as the Landlord,
and Two River Community Bank, 1250 Highway 35, S., Middletown, NJ 07748,
herein designated as Tenant;
Witnesseth that, the Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises: First floor "retail space" entire right side suite (south side) (Highway 36 side) for a lease period of 60 months commencing as of 1 March, 2002, with three (3) renewal terms of five (5) years each. Address Blk. 97, Lt. 7, 84 First Avenue, Atlantic Highlands, NJ 07716.
Upon the following Conditions and Covenants:
1st : The Tenant covenants and agrees to pay the Landlord, as rent for and during the term hereof, as follows: To start at $1,000 per month for the entire right side suite. The rent for the term of this lease will be a minimum of $60,000 plus any rent increases pursuant to this lease agreement. (See addendum)
2nd: The Tenant has examined the premises and has entered into this lease without any representation on the part of the Landlord as to the condition thereof. The Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make any repairs, alterations, interior wall changes, including painting, decorating, additional air conditioning, additional plumbing, electrical equipment, or alterations and shall maintain the premises in good condition and state of repair, and at the end or other expiration of the term hereof, shall deliver up the rented premises in good order and condition. Wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and maintain the same in a clean condition, free from debris, trash, refuse, snow and ice.
3rd: The Tenant shall promptly comply with all laws, ordinances, rules, regulations, requirements and directives of the Federal, State and Municipal Governments or Public Authorities and of all their departments, bureaus and subdivisions, applicable to and affecting the said premises, their use and occupancy, for the correction, prevention and abatement of nuisances, violations or other grievances in, upon or connected with the said premises, during the term hereof; and shall promptly comply with all orders, regulations, requirements and directives of the Board of Fire Underwriters or similar authority and of any insurance companies which have issued or are about to issue policies of insurance covering the said premises and its contents, for the prevention of fire or other casualty, damage or injury, at the Tenant's own cost and expense.
4th: The Tenant shall not assign, mortgage or hypothecate this lease, nor sublet or sublease the premises or any part thereof; nor occupy or use the leased premises or any part thereof, nor permit or suffer the same to be occupied or used for any purposes other than as herein limited, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on
account of fire or other casualty, without consent of the Landlord. Consent will not be unreasonably withheld.
5th: No alterations, additions or improvements shall be made, and no climate regulating, air conditioning, cooling, heating or sprinkler systems, television or radio antennas, heavy equipment, apparatus and fixtures, shall be installed in or attached to the leased premises, without the consent of the Landlord. Unless otherwise provided herein, all such alterations, additions or improvements and systems, when made, installed in or attached to the said premises, shall belong to and become the property of the Landlord and shall be surrendered with the premises and as part thereof upon the expiration or sooner termination of this lease, without hindrance, molestation or injury. Consent will not be unreasonably withheld. Landlord agrees that the Tenant will be allowed to install interior walls, change the flooring, add plumbing and wall structures within their rented area, at their own expense with the understanding that all renovations will be performed by licensed individuals who are licensed in compliance with the various laws of both Federal and State agencies, where appropriate.
7th: The Tenant agrees that the Landlord and the Landlord's agents, employees or other representatives, shall have the right to enter into and upon the said premises or any part thereof, at all reasonable hours to include off hours of normal business, for the purpose of examining the same or making such repairs or alterations therein as may he necessary for the safety and preservation thereof. This clause shall not be deemed to be a covenant by the Landlord nor he construed to create an obligation on the part of the Landlord to make such inspection or repairs.
8th : In case of the destruction of or any damage to the glass in the leased premises, or the destruction of or damage of any kind whatsoever to the said premises, caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant's agents, employees, guests, licensees, invites, assignees or successors, the tenant shall repair the said
damage or replace or restore any destroyed parts of the premises, as speedily as possible, at the Tenant's own cost and expense.
9th: The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the said premises or any part thereof, except of a design and structure and in or at such places as may be indicated and consented to by the Landlord. Consent will not be unreasonably withheld. In case the Landlord or the Landlord's agents, employees or representatives shall deem it necessary to remove any such signs in order to paint or make unit repairs. alterations or improvements in or upon said premises or any part thereof, they may be so removed, but shall he replaced at the Landlord's expense when the said repairs, alterations or improvements shall have been completed. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto. The tenant will agree to relocate the current signage of the current tenant Montanti's Deli, so as to allow for the tenant to place their sign above their space.
10th: The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person. as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing. steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical, gas, power, conveyor, refrigeration, sprinkler, air conditioning or heating systems, elevators or hoisting equipment: or by reason of the elements: or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or of the Landlord or the Landlord's or this or any other Tenant's agents, employees, guests, licensees, invites, assignees or successors: or attributable to any interference with, interruption of or failure, beyond the control of the Landlord, of any services to be furnished or supplied by the Landlord.
11th : This lease shall not be a lien against the said premises in respect to any mortgages that nay hereafter he placed upon said premises. The recording of such mortgage or mortgages shall have preference and precedence and he superior and prior in lien to this lease, irrespective of the date of recording and the Tenant agrees to execute an instruments, without costs, which may be deemed necessary or desirable, to further effect the subordination of the lease.
to any such mortgage or mortgages. A refusal by the Tenant to execute such instruments shall entitle the Landlord to the option of canceling this lease, and the term hereof is hereby expressly limited accordingly.
12th: The Tenant must this day agree to pay the Landlord one and one half month's rent at the S 1,000 per month rate, $1,500.00 as security deposit for the payment of the rent hereunder and the full and faithful performance h the Tenant of the covenants and conditions on the part of the Tenant to be performed.
13th: If for any reason it shall be impossible to obtain fire and other hazard insurance on the buildings and improvements on the leased premises, in an amount and in the form and in insurance companies acceptable to the Landlord, the Landlord may, if the Landlord so elects at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant fifteen days notice in writing of the Landlords intention so to do, and upon the giving of such notice, this lease and the term thereof shall terminate. If by reason of the use to which the premises are put by the `tenant or character of or the manner in which the Tenants business is carried on, the insurance rates for fire and other hazards shall be increased, the Tenant shall upon demand, pay to the Landlord, as rent, the amounts by which the premiums for such insurance are increased.
Such payment shall be paid with the next installment of rent but in no case later than one month after such demand, whichever occurs sooner.
14th: The Tenant shall pay when due all the rents or charges for water or other utilities used by the Tenant, which are or may be assessed or imposed upon the leased premises or which are or may be charged to the Landlord by the suppliers thereof during the term hereof and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due or within 30 days of demand therefore, whichever occurs sooner.
15th: If the land and premises leased herein, or of which the leased premises are a part, or any part of thereof, shall he taken under eminent domain or condemnation proceedings, or it's suit or other action shall be instituted or the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey the said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said land and premises or any portion thereof, then this lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as the Landlord shall fix by notice in writing; and the Tenant shall have no claim or right to claim or be entitled to any portion ninny amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings; and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency. body or public utility seeking to take or acquire the said lands and premises or any portion thereof. The Tenant covenants and agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord in the aforementioned notice. Failure by the Tenant to comply with any provisions in this clause shall subject the Tenant to such costs, expenses. damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
16th: Upon the occurrence of any of the contingencies set forth in the preceding clause, or should the Tenant he adjudicated a bankrupt. insolvent or placed in receivership, or should proceedings be instituted by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors or ii this lease or the estate of the Tenant hereunder shall pass to another by virtue of any court proceedings, writ of execution, levy, sale or by operation of law, the Landlord may, if the Landlord so elects, at any time thereafter, terminate this lease and the term liereot upon giving to the Tenant or to any trustee, receiver, assignee or other person in charge of or acting as custodian of the assets or property of the Tenant, five days notice in writing, of the Landlord's intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures and chattels therefrom, by force or otherwise, without liability for damages.
17th: Any equipment, fixtures, goods or other property of the Tenant, not removed by the Tenant upon the termination of this lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and the Landlord shall have the right, without any notice to the Tenant, to sell or otherwise dispose of
the same, at the expense of the Tenant, and shall not be accountable to the Tenant lot any part of the proceeds of such sale, if any.
18th: If the Tenant shall fail or refuse to comply with and perform any conditions and covenants of the within lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord shall be added to the installment of rent due immediately thereafter but in no case later than one month after such demand, whichever occurs sooner, and shall be due and payable as such. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant of any of the covenants and conditions in this lease contained.
19th: This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, shall not be affected, curtailed, impaired or excused because of the Landlord's inability to supply any service or material called for herein, by reason of any rule, order, regulation or preemption by any governmental entity, authority, department, agency or subdivision or for any delay which may arise by reason of negotiations for the adjustment of any fire or other casualty loss or because of strikes or other labor trouble or for any cause beyond the control of the Landlord.
20th: The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein. hut such other clause or provision shall remain in full force and effect.
21st: The various rights, remedies, options and elections of the Landlord, expressed herein, are cumulative, and the failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this lease at to exercise any election or option or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conclusion and covenants, options, elections or remedies, but the same shall continue in full force and effect.
22nd: All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner.
23rd: The Landlord covenants and represents that the Landlord is the owner of the premises herein leased and has the right and authority to enter into, execute and deliver this lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the leased premises of the term aforementioned.
24th: This lease contains the entire contract between the parties. No representative, agent or employee of tile Landlord has been authorized to make any representations or promises with reference to the within letting or to vary, alter or modify the terms hereof. No additions,
changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and Tenant.
25th: Any increase of Landlord's insurance costs above the cost presently paid by Landlord for fire and liability coverage on the property which is directly attributable to the Tenant's business conducted on the property shall be paid to the Landlord as additional rent upon presentation of a bill to Tenant from Landlord.
26th: All repairs required during the term of this lease shall be the responsibility of the Tenant in tenants identified areas. Landlord shall however, be responsible for the roof, furnace, building facilities, aild air conditioning ss thin the commonly shared areas of the building, unless the Tenant or tile Tenant's representatives. agents or clients are directly responsible for a negligent act which causes damage thereto. In addition, if the Tenant so desires to change any of the plumbing facilities within their designated area, they are to do so at their own cost, such as renovation or expansion of tile bathroom facilities, or specialized equipment.
27th: No structural changes shall be made to the property without the Landlord's specific prior written consent.
28th: Tenant shall not allow the heat to go below 60 degrees at any time within the rented space regardless if the Tenant continues to occupy the rented space or not during the terms of this lease agreement. Also, the Tenant agrees that regardless of whether they occupy the rented space or not, they are responsible to maintain electricity on within the rented space.
29th: A 5% late charge will be due for each monthly payment which is not received by the Landlord within 7 days of its due date. Rent is due on the 1st day of every month.
30th: No hazardous substances shall be kept on the premises and no hazardous or illegal activities shall he allowed to take place on the premises.
31st: By entering into the terms of this lease agreement, Bay Operating Co., LLC and Two River Community Bank agree to the following stipulations:
a. Tenant will be responsible to pay all utilities in their leased area, to include but not limited to. electric, gas. water, and phone expenses. All utilities will be separately metered and will be the responsibility of the Tenant to maintain, except for the water meter which meters water and sewer use for the entire first floor. The exact percentage to be paid by Tenant will be determined.
b. No utility service work electric or plumbing, etc., will be done within the building unless the service personnel are licensed by the appropriate state and/or federal licensing agencies (i.e., licensed electricians, licensed plumbers). All such repair work will be reported to the Landlord immediately.
c. The Tenant will be fully responsible for all Tenant telephone costs within Tenant's designated area.
d. The Tenant will be responsible for timely payment for their separately metered water consumption and sewage bill for their portion of their designated area. Landlord will submit the bill to tenant based on a predetermined formula to be determined.
e. The Tenant agrees to utilize and maintain the fire alarm systems. The Tenant agrees that during all off-hours, they will activate their own alarm systems and to maintain the alarm system.
f. Tenant, at their own expense, must clean and keep clean, all of their leased areas to include the front sidewalk area, windows, displays, any exterior table they may install on the sidewalk, to include snow removal, if necessary. and general tidiness and cleanliness of the front portion of the exterior of the building as it relates to the rented space. The snow removal is a requirement for the Tenant to remove snow from the total sidewalk area in the immediate front of their rented space. In addition to snow removal, they will take whatever steps is necessary to prevent against icing conditions on the sidewalk directly in front of their total leased space.
g. During the term of this lease agreement on the anniversary date of each 12 month segment, the Landlord has the option to increase the rent to the Tenant based on the increased operational costs for the rented by the Tenant specifically increases in taxes, possibly increases in insurance. A 2.5% per year automatic rent increase, at a minimum, will be imposed. The formula for "additional rent" as it relates to tax increases, is that when the Landlord receives tax increases with regard to the structure, said tax increases will then be divided by the total square footage of the building. The Tenant will pay a rent increase based upon the square footage occupied within the building.
h. Tenant, in consideration of the current Tenant (Montanti's) vacating a portion of their leased space. agrees to pay half of Montanti's rent $600 to the Landlord for the month of February 2002 only.
Also, this Tenant agrees, at their expense, to not only do the construction required to isolate their space from the Montanti's space, but to provide any electric work needed to provide Montanti's with wall outlets in areas identified by them for them to move some of their equipment to the smaller left side suite. All electrical outlets will be tied exclusively into Montanti's one or two electric meters of which they are customers of record. Thereafter, all electrical fees will be totally separated between the two first floor suites. Each Tenant will be responsible for their electric consumption.
32nd: The Tenant hereby agrees to obtain and maintain adequate renters and fire insurance to protect the interest of the Landlord, with regard to potential property damage and/or liability which may be encumbered as a result of the Tenant's business operations to include invited guests, agents and employees of the Tenant. Pursuant to a requirement for insurance and proof of insurance in order to satisfy the lease agreement, a minimum of one million dollars of general liability insurance policy must be provided by Tenant. Also, a fire insurance in an amount to he identified to protect tile rented space area reconstruction must be maintained and proof must be provided to tile Landlord. The Landlords as a separate entity, as well as the individuals Frederick J. Rast III and Leonard Edwards must also be held harmless and identified as covered by the Tenant's required insurance policies.
The Landlord may pursue the relief or remedy sought in any invalid clause, by conforming the said clause with the provisions of the statutes or tile regulations of any
governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.
In all references herein to any parties, persons, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of the within ilstrunlcnt mar require. All the terms, covenants and conditions herein contained shall be for and shall inure to the benefit of and shall bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives. successors and assignees.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and agree to all of the terms of this lease agreement.
Signed, Sealed and Delivered
in the presence of
or Attested by
/s/ Jean Nelson Crosby 2/22/02
--------------------------------
Jean Nelson Crosby /s/ Frederick J. Rast III
----------------------------------
Frederick J. Rast III Landlord
/s/ Michael J. Gormley Bay Operating Co., LLC
--------------------------------
Witness
/s/ Barry B. Davall, President /s/ Leonard Edwards
-------------------------------- ----------------------------------
Witness Leonard Edwards Landlord
Bay Operating Co., LLC
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ADDENDUM
On the first day of the second and each subsequent Lease Year throughout the Term, the basic rent payable by Tenant shall be increased by an amount determined by multiplying the Basic Rent payable during the then current Lease Year by the greater of the (i) CPI Increase or (ii) 2.5% but at no time shall the annual Basic Rent increase be greater than 5%. The term CPI Increase shall mean a fraction, expressed as a decimal, the numerator of which is the Current CPI minus the Prior CPI and the denominator of which is the Prior CPI. The "Current CPI" is the CPJ for the calendar month that is three months prior to the first calendar month of the Lease Year for which the Basic Rent increase is being calculated and the "Prior CPI" is the CPI for the calendar month that is fifteen months prior to the first calendar month of the Lease Year for which the Basic Rent increase is being calculated. The term "CPI" shall mean the "Consumer Price Index for All Urban Consumers (CPI-U)" published by the Bureau of Labor Statistics of the United States Department of Labor, All Items (19 100), U.S. City Average, or any successor index thereto, appropriately adjusted. If the CPI ceases to be published and there is no successor thereto, such other government or non-partisan index or computation shall be used which would obtain a substantially similar result as if the CPI has not been discontinued.
Exhibit 10.17
Lease Between
CITY CENTRE PLAZA, LLC
and
TWO RIVER COMMUNITY BANK
for
512 square feet
100 Water Street
Red Bank, NJ 07701
April 18, 2002
I. TERM, RENT AND USE
II. REPAIRS/MAINTENANCE OF THE DEMISED PREMISES
III. OPERATING COSTS, IMPOSITIONS & ADDITIONAL RENT
IV. COMPLIANCE WITH LAWS, GOVERNMENTAL REGULATIONS
V. LIENS AND ENCUMBRANCES
VI. INSURANCE
VII. DAMAGE OR DESTRUCTION
VIII. CONDEMNATION
IX. CHANGES, ALTERATIONS AND SIGNS
X. DEFAULT
XI. EXPIRATION OF TERM; HAZARDOUS MATERIALS; ENVIRONMENTAL LAWS
XII. ESTOPPEL CERTIFICATES
XIII. NO WAIVER; ENTIRE AGREEMENT
XIV. NOTICES
XV. INSPECTION OF PREMISES BY LANDLORD
XVI. MISCELLANEOUS
XVII. ASSIGNMENT, SUBLETTING, MORTGAGING
XVIII.SUBORDINATION AND ATTORNMENT
XIX. QUIET ENJOYMENT
XX. REAL ESTATE BROKER
XX SECURITY DEPOSIT
XXII. HOLDOVER TENANCY
XXIII.MANNER OF USE
XXIV. SNOW AND ICE ON SIDEWALKS
XXV. MAINTENANCE AND TRASH
XXVI. SIDEWALK SALES
XXVII.SEASONAL MUSIC
XXVIII.RENEWAL OPTION
RULES AND REGULATIONS
SCHEDULE A -- DEMISED PREMISES
SCHEDULE B -- LAND
SCHEDULE C -- ADDITIONAL RESTRICTIONS ON TENANT'S USE
SCHEDULE D -- LANDLORD'S WORK
Lease, made this 18TH day of April, 2002, by and between CITY CENTRE PLAZA, LLC, having its principal place of business at Suite 201, Two Hartford Drive, Tinton Falls, New Jersey 07701, P.O. Box 757, Red Bank, New Jersey 07701, hereinafter referred to as "Landlord" and TWO RIVER COMMUNITY BANK having its principal place of business at 1250 Highway 35 South, Middletown, New Jersey 07748 hereinafter referred to as "Tenant".
WITNESSETH:
Landlord does hereby let unto Tenant, and Tenant does hereby hire from Landlord:
(a) approximately 512 square feet of space located at, 100 Water Street, Red Bank, New Jersey, comprised of: (i) retail floor space as shown on the floor plan annexed hereto as Schedule A ("Demised Premises") and (ii) Tenant's undivided, proportionate share of public entrances, public stairways, public parking facilities, and other public areas of the land and building ("Common Areas"), for use in common with other persons. The Demised Premises is located in a building ("Building") located on a parcel of land in the Borough of Red Bank, County of Monmouth, and State of New Jersey (the "Land"), more particularly described in Schedule "B" attached hereto and made a part hereof. Tenant shall have the right to use the parking lot in common with other Tenants. Landlord shall have no responsibility to police or supervise the parking lot. The parking lot and front side walk thereon depicted shall remain free of all structures and obstructions, including temporary and mobile kiosks except for temporary mobile kiosks that do not materially affect tenant's access, visibility or parking.
(b) This Lease is subject to all present liens, encumbrances, conditions, rights, easements, restrictions, rights of way, covenants, other matters of record, and zoning and building laws, ordinances, regulations and codes affecting or governing the Demised Premises or which may hereafter affect the Demised Premises, and such matters as may be disclosed by inspection or survey, provided the same do not prevent the use and enjoyment of all of the Demised Premises by Tenant for the purpose hereinafter stated, and the Rules and Regulations annexed hereto or hereafter promulgated and modified by Landlord.
ARTICLE I
together with additional rent payable hereunder. Rent shall be payable in equal monthly installments in advance on the first day of each calendar month, without abatement or set-off except as otherwise provided in this Lease. If any payment is not received within ten (10) days of the date when due, Tenant shall pay a late charge of six (6%) percent of the monthly installment of rent. If the Commencement Date is other than the first day of the month then Tenant shall pay rent on the Commencement Date for the fractional portion of the month on a per diem basis from the Commencement Date until the first day of the next succeeding month.
Landlord and Tenant agree that should there be substantial damage to the interior of the 100 Water Street location, the Two River Community Bank will have three (3) months free rent for the first lease year only. Landlord will make best efforts to assure that the interior space is left in an "as is" condition.
ARTICLE II
ARTICLE III
ARTICLE IV
extraordinary ("Legal Requirements"). It shall be the responsibility of the Tenant of the Demised Premises to replace, as necessary, all lamps and bulbs for the fire exits and emergency lights. Tenant shall be responsible for the purchase and installation of a fire extinguisher(s) for the Demised Premises. Tenant will have an annual inspection of all fire extinguishers and pay the annual fire inspection fee as required by the Borough.
ARTICLE V
ARTICLE VI
ARTICLE VII
ARTICLE VIII
For the purposes of this Article VIII, "substantially all of the Building or Land" shall be deemed to have been taken if either 15% or more in the area of the Demised Premises are taken, or if Landlord shall reasonably determine that the portion of the Building or Land not taken cannot be so restored or repaired as to be suitable for the conduct of Tenant's business.
ARTICLE IX
ARTICLE X
(a) Failure to pay rent or additional rent after the same shall become due and payable in accordance with the terms, covenants and agreements of this Lease.
(b) Failure to observe or perform or cause to be observed or performed any
other term, covenant or agreement of Tenant to be observed or performed
under this Lease, and continuation of such failure for a period of thirty
(30) days after written notice from Landlord to Tenant specifying the
nature thereof; provided, however, in the event of such failure is curable
but cannot with reasonable diligence be remedied by Tenant within a period
of thirty (30) days, if Tenant shall diligently commence curing such
failure within such thirty day period, and thereafter and so long as
Tenant with reasonable diligence and in good faith shall proceed to cure
the same, such failure shall not constitute an Event of Default.
(c) Abandonment of the Demised Premises by Tenant.
(d) If at the date fixed as the commencement of the term of this Lease or if at any time during the term hereby demised there shall be filed by or against Tenant in any court pursuant to any statute either of the United States or of any state, a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of Tenant's property, and within 60 days thereof Tenant fails to secure a dismissal thereof, or if Tenant makes an assignment for the benefit of creditors or petition for or enter into an arrangement, this Lease, at the option of Landlord, exercised within a reasonable time after notice of the happening of any one or more of such events, may be cancelled and terminated by written notice to the Tenant (but if any of such events occur prior to the commencement date, this Lease shall be ipso facto cancelled and terminated) and whether such cancellation and termination occur prior to or during the term, neither Tenant nor any person claiming through or under Tenant by virtue of any statute or of any order of any court, shall be entitled to possession or to remain in possession of the Premises Demised but shall forthwith quit and surrender the premises, and Landlord, in addition to other rights and remedies Landlord has by virtue of any other provision herein or elsewhere contained or by virtue of any statute or rule of law, may retain as liquidated damages, any rent, security deposit or moneys received by him from Tenant or others in behalf of Tenant.
ARTICLE XI
Date, provided that Tenant or such subtenant shall promptly repair, or cause to be repaired, any damage resulting to the buildings, structures or other improvements on the Demised Premises by reason of such removal. Any trade fixtures, equipment or articles of personal property of Tenant or such subtenant which shall remain at or on the Demised Premises after the Expiration Date shall be deemed to have been abandoned by Tenant or such subtenant and may either be retained by Landlord as its property or disposed of in such manner as Landlord may see fit without accountability to Tenant or such subtenant for the value of such trade fixtures, equipment or articles of personal property or any proceeds derived from the sale thereof.
Lease to the contrary:
(a) Tenant will not store, treat, dispose of, release or discharge on, under or about the Demised Premises any Hazardous Materials or allow any other person or entity to do so. In addition, Tenant shall not use, generate, manufacture or produce on, under or about the Demised Premises or transport to or from the Demised Premises any Hazardous Materials or allow any other person to do so. Tenant shall remove Hazardous Materials found in, on or about the Demised Premises which were placed or Released thereon by Tenant, its agents, servants, employees, licensees or invitees, at its sole cost and in accordance with all Environmental Laws.
(b) Tenant warrants and represents that it is not an Industrial Establishment as defined in ISRA and covenants not to become an Industrial Establishment. Tenant hereby agrees to execute such documents as Landlord reasonably deems necessary and to make such applications as Landlord reasonably requires to assure compliance with ISRA by Tenants. If ISRA compliance is triggered by Tenant, or Tenant has become an Industrial Establishment as defined in ISRA, Tenant shall bear all costs and expenses incurred by Landlord associated with any required ISRA compliance resulting from Tenant's use of the Demised Premises, including but not limited to state agency fees, engineering fees, clean up costs to the extent Hazardous Materials have been Released by Tenant, its agents, servants, employees, licensees or invitees, filing fees and suretyship expenses. If ISRA compliance is triggered but not by Tenant and Tenant has not become and Industrial Establishment, Tenant shall bear cleanup costs only to the extent Hazardous Materials have been Released by Tenant. As used in this Lease, ISRA compliance shall include applications for determinations of non-applicability by the appropriate governmental authority. The foregoing undertaking shall survive the termination or sooner expiration of the Lease and surrender of the Demised Premises and shall also survive sale, or lease or assignment of the Demised Premises by Landlord.
(c) At no expense to Landlord, from time to time upon request of Landlord, Tenant shall provide proof that ISRA is not applicable with regard to the Demised Premises. Such proof may include, but shall not be limited to, executing of an Affidavit of Non-Applicability and procuring a Letter of Non-Applicability from DEP.
(d) If Tenant fails or refuses for ten (10) days after notice from Landlord to comply with the requirements of this Section 11.03, Landlord shall have the right, in addition to any other rights or remedies it may have pursuant to this Lease or at law, to comply for and on behalf of Tenant at the cost and expense of Tenant and, for that purpose, to enter into the Demised Premises for the purpose of making tests, obtaining samples and surveys and performing any other acts as may be necessary or desirable in the discretion of Landlord, for the forgoing purposes. Tenant hereby designates Landlord as its Attorney-in-Fact for purposes of signing and filing such applications and other documents as may be necessary or desirable for the foregoing purposes, which Power-of-Attorney shall be deemed to be coupled with an interest. All costs and expenses of Landlord in connection with Landlord's performance of Tenant's obligation shall be reimbursed by Tenant to Landlord promptly upon receipt of a bill therefore and shall be Additional Rent.
(e) For purposes of this Section 11.03, the following terms shall have the following meaning:
"Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the indoor or outdoor environment, including the movement of any Hazardous Materials or other substance through or in the air, soil, surface water, groundwater, or property; the term "Released" has a corresponding meaning.
"Hazardous Materials" means any petroleum, petroleum products, fuel oil, derivatives of or additives to petroleum products or fuel oil, explosives reactive materials, ignitable materials, corrosive materials, hazardous chemical, hazardous wastes, hazardous substances, hazardous air pollutants, air pollutants, extremely hazardous substances, toxic substances, toxic chemicals, radioactive materials, medical waste, biomedical waste, asbestos, any mixture of sewage or other waste material that passes through a sewer system to a treatment premises, any industrial waste water discharges subject to regulation and any infectious materials, as such foregoing terms may be defined in the Environmental Laws, and any other element, compound, mixture, solution or substance which may pose a present or potential hazard to human health or the environment.
ARTICLE XII
ARTICLE XIII
in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise.
ARTICLE XIV
ARTICLE XV
ARTICLE XVI
unreasonably interfere with the use of the parking areas and driveways or with Tenant's business.
ARTICLE XVII
ARTICLE XVIII
(a) that, except as hereinafter provided, this Lease is, and all of Tenant's rights hereunder are and shall always be, subject and subordinate to any mortgage, to leases of Landlord's property (in a sale-leaseback) pursuant to which Landlord has or shall retain the right of possession of the Demised Premises or to any security instruments (collectively called "Mortgage") that now or hereafter may exist, and to all advances made or to be made thereunder and to the interest thereon, and all renewals, replacements, modifications, consolidations, or extensions thereof; and
(b) that if the holder of any such Mortgage ("Mortgagee") or if the purchaser at any foreclosure sale or at any sale under a power of sale contained in any Mortgage shall at its sole option request, Tenant will attorn to, and recognize such Mortgage or purchaser, as the case may be, as Landlord under this Lease for the balance then remaining of the term of this Lease, subject to all terms of this Lease, and
(c) that the aforesaid provisions shall be self operative and no further instrument or document shall be necessary unless required by any such Mortgagee or purchaser. Notwithstanding anything to the contrary set forth above, any Mortgagee may at any time subordinate its Mortgage to this Lease without Tenant's consent.
ARTICLE XIX
ARTICLE XX
ARTICLE XXI
ARTICLE XXII
ARTICLE XXIII
ARTICLE XXIV
ARTICLE XXV
ARTICLE XXVI
ARTICLE XXVII
ARTICLE XXIII
as long as Tenant is not in default. Exercise of these options to renew the term of the Lease shall be by written notice from Tenant to Landlord sent no later than six (6) months prior to the end of the immediate preceding term of the Lease. The options to renew shall be deemed waived if such notices are not sent.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and sealed this Lease or have caused these presents to be executed and their proper corporate seals have been affixed as of the date and year first above written.
AGREED AND ACCEPTED BY:
CITY CENTRE PLAZA, LLC, LANDLORD
/s/ John Bowers, Jr. 4/18/02 ------------------------------------------------------------ John Bowers, Jr., Managing Partner Date |
TWO RIVER COMMUNITY BANK, TENANT
/s/ Barry B. Davall, 4/18/02 ------------------------------------------------------------ Name: Barry B. Davall Title: President & CEO Date: April 18, 2002 |
RULES AND REGULATIONS
Tenant covenants and agrees:
1. To keep the inside and outside of all glass in the doors and windows of the Demised Premises clean.
2. To keep all exterior store front surfaces clean.
3. Tenant agrees to replace promptly at its own expense, with glass of like kind and quality, any plate glass or window glass of the Demised Premises which may become cracked or broken unless by fire.
4. To keep clean and free from snow, ice, dirt and rubbish the front and rear outside areas immediately adjoining the Demised Premises, including but not limited to sidewalks and Tenant's dumpster area.
5. It will not, without the consent in writing of Landlord, place or maintain any merchandise or other articles in any vestibule or entry of the premises, on the footwalks adjacent thereto or elsewhere on the exterior thereof.
6. If the Premises Demised to any Tenant becomes infested with vermin or insects, Tenant, at its sole cost and expense, shall cause its premises to be exterminated, from time to time, to the satisfaction of Landlord, and shall employ such exterminators thereof as shall be approved by Landlord.
7. It will not permit undue accumulations of garbage, trash, rubbish and other refuse, but will remove the same at its expense and will keep such refuse in rat-proof container, within the interior of the premises until removed. All such garbage, trash or rubbish removal shall be removed by such persons or companies as mutually determined by Landlord and Tenant between the hours of 10:00 p.m. and 9:00 a.m. If the Landlord provides such service directly to the Shopping Center, Tenant agrees to pay such charges fixed by the Landlord as part of Tenant's operating expenses.
8. It will not use or permit the use of any objectionable advertising medium, such as loudspeakers, phonographs, public address systems, sound amplifiers, radio or broadcasts within the Shopping Center, and in any manner audible or visible outside the Demised Premises.
9. To keep all mechanical apparatus free of vibration and noise which may be transmitted beyond the confines of the premises.
10. It will not cause or permit objectionable odors to emanate or be dispelled from the premises.
11. It will not solicit business in the parking or other common areas, nor distribute any handbills or other advertising matter to, in or upon any automobiles parked in the parking area or in any other common areas.
12. To comply with all laws and ordinances and all valid rules and regulations of governmental authorities and all recommendations of the Fire Underwriters Rating Bureau, now or hereafter enacted, promulgated or adopted, with respect to the use or occupancy of the premises by Tenant, provided, however, that Tenant shall not be required to install a sprinkler system.
13. It will not receive or ship articles of any kind except through the service facilities provided for that purpose by Landlord, will not permit the parking or occupancy of space by delivery of vehicles under Tenant's control to interfere with the use of access-way, any driveway, walk, parking area, mall or other common area in the Shopping Center, directly in front of Tenant's premises or any portion of the common area, unless such delivery is made between the hours of 10:00 p.m. and 8:00 a.m. and that no delivery vehicle under Tenant's control shall be permitted to park for longer than one-half hour under any conditions.
14. It and its employees shall park their cars in those portions of the parking area designated for that purpose by Landlord. Tenant shall furnish Landlord with State automobile license numbers assigned to Tenant's car or cars and cars of its employees within ten (10) days after notice from Landlord, and shall thereafter notify Landlord of any changes. At Landlord's option, Landlord can require that Tenant and Tenant's employees not park in the parking lot. Landlord will exercise its rights in accordance with the foregoing sentence in order to assure adequate and convenient parking is available to customers of all tenants in the Shopping Center. If Landlord elects to restrict employees as above provided, Tenant shall enforce Landlord's requirements with respect to Tenant's employees. In the even that the Tenant or its employees fail to park their
cars in designated parking areas as aforesaid, then Landlord shall have the right to charge Tenant ten dollars ($10.00) per day per car parked in any other areas other than those designated, after receipt of notice from Landlord of such parking and Tenant's failure to cure within said ten (10) days.
15. To give prompt written notice of any accident, fire or damage occurring on or to the Demised Premises.
16. Tenant has the right to install antennas on the roof of the premises, subject to all governmental approvals and these antennas are not to interfere with any other tenants of the Landlord.
17. Tenant shall, at all times, maintain an interior temperature in the Demised Premises which shall never be below 55 degrees Fahrenheit, including but not limited to, vacations, shutdowns and times when operations cease for any reason.
18. It shall be the Tenant's responsibility to keep the sidewalk in the front of the premises clean from any and all debris, as is required so that the premises and the environs of the premises will always be in a clean condition. The Tenant will provide a dumpster if required and is responsible for having the dumpster emptied on a timely fashion and is responsible for the maintenance of said dumpster. Tenant shall comply with mandatory Recycling Ordinance of the Borough of Red Bank and State of New Jersey.
19. Merchandise may be displayed outside the store only on organized Borough-wide or City Centre promotions in which the majority of other merchants participate.
20. Tenant may play seasonal music as long as there are no complaints from the other stores and offices located at City Centre Plaza.
21. Tenant shall not obstruct sidewalk, entrances and passages, in and about the building.
22. Tenant assumes full responsibility for protecting its space from theft, robbery and pilferage which includes keeping doors locked and other means of entry to the Demised Premises closed.
23. Tenant shall not cook in the Demised Premises or otherwise create any obnoxious odors therein or in the Building or so as to violate any federal, state or municipal fire or zoning laws, regulations or ordinances, in the Building, nor shall Tenant use any space in the Demised Premises for living quarters, whether temporary or permanent. Cooking, from time to time in the normal course of store promotions, serving coffee and hot cider and use of a microwave is permitted.
24. Plumbing facilities shall not be used for any purpose other than those for which they were constructed; and no sweeping, rubbish, ashes, newspaper or other substances of any kind shall be thrown into them.
25. At Landlord's option, Landlord can require that employees of Tenant (a) park in designated spaces located in the parking lot and not in any other area of the parking lot or (b) not park in the parking lot. Landlord will exercise its right in accordance with the foregoing sentence in order to assure that adequate and convenient parking is available to customers of all tenants in the Shopping Center. If Landlord elects to restrict employees as above provided, Tenant shall enforce Landlord's requirements with respect to Tenant's employees.
SCHEDULE A
[MAP]
SCHEDULE C
ADDITIONAL RESTRICTIONS ON TENANT'S USE
Tenant is prohibited from providing the following services or selling/leasing the following merchandise:
1. Operate a health and/or beauty aid store or pharmacy or authorize or permit the sale of health and/or beauty aids and prescription drugs; provided, however, as to health and beauty aid only, this exclusive shall not restrict the minor, incidental sale of same by other tenant sin the Shopping Center.
2. Sale of donuts, pastry or coffee, or operation of donut store or store whose primary business is sale of coffee.
3. Operation of a bagel store.
4. Operation of a sandwich shop.
5. Operation of a beauty shop.
6. Operation of a Chinese restaurant.
7. Operation of a Chicken and Ribs restaurant
8. Operation of a print shop.
SCHEDULE D
LANDLORD'S WORK
Tenant agrees to take the premises in an "as is" condition
[MAP]
Exhibit 10.18
COMMERCIAL LEASE
THIS LEASE is made between WALL HERALD CORP., hereinafter called "Lessor," and TWO RIVER COMMUNITY BANK, hereinafter called "Lessee."
Lessor hereby agrees to lease to Lessee the premises situated in the Township of Wall, County of Monmouth, State of New Jersey, described as Building No. 13, located on Block 917, Lot 13.01, which is also known as 229 North Airport Road, along with certain appurtenant open space and vehicular parking, hereinafter called, in its entirety, the "Premises", as more particularly depicted on the sketch which is attached to this Lease as Exhibit "A".
Lessor and Lessee further agree to the Lease of the Premises upon the following TERMS and CONDITIONS:
Lessee shall have the option to renew the Lease for three (3) additional terms of five (5) years each. The option to renew the Lease shall expire unless Lessee notifies Lessor in writing of its intent to renew the Lease not less than six (6) months prior to the end of each five-year term. The annual rent for each five-year term shall be increased by a percentage amount equal to the combined increase in the Consumer Price Index for the Northeast Region for the five calendar years next preceding the commencement of each renewal period.
Lessee may, in the exercise of its discretion, terminate this Lease in the event that the New Jersey Department of Banking and Insurance does not, on or before December 30, 2003, issue final approval to the Lessee for the establishment and operation of a branch office by the
Lessee at the Premises. In the event that Lessee terminates this Lease under the preceding sentence, Lessee shall pay to Lessor (i) that rent in the amount determined under this Lease which would otherwise have been paid by Lessee for the period through and including February 28, 2004, and (ii) all amounts which have been paid or incurred by Lessor, or which Lessor is, as of the date of such termination, contractually obligated to pay, for those improvements to the Premises which have, as of the date of the termination, actually been made by Lessor at the specific request of Lessee or with respect to which the Lessor has entered into binding contracts. In addition, upon any such termination of this Lease by Lessee, at Lessor's sole option, Lessee shall remove, at Lessee's own cost, such improvements and changes made pursuant to Paragraph 4 of the Lease as Lessor shall specify, and restore the condition of those parts of the Premises to the condition that existed prior to the said improvement or change.
Lessor acknowledges that access to the Premises from New Jersey Highway 34 is indispensable to the operation of the Premises by Lessee as a full service bank branch, and agrees that it will not allow any future development activities on Block 917, Lot 13.01 or any contiguous tract which is owned by Lessor or any affiliate of Lessor to block the flow of traffic on the access roads from New Jersey Highway 34 to the Premises.
changes to which the Lessor has not consented at the end of the Lease Term. The Lessee shall promptly pay for any changes or additions, and shall not allow any mechanic's lien or other claim to be filed against the Premises. If any lien or claim is filed against the Premises, the Lessee shall have it promptly removed.
Lessee may, subsequent to the effective date of this Lease but prior to fully occupying the Premises, submit to Lessor a written description of those improvements and alterations to the Premises which Lessee believes to be necessary to the successful operation of the full service bank branch office contemplated by this Lease. Lessor shall, within a reasonable time after its receipt of the written description of such improvements and alterations, commence and complete such improvements and alterations in accordance with the specifications of Lessee. Lessee shall reimburse Lessor for Lessor's direct cost of all such improvements and alterations against copies of third party invoices which are provided to Lessee by Lessor. Lessee shall tender reimbursement payments to Lessor within thirty (30) days of Lessor's submission of copies of third party invoices to Lessee. In the event that Lessee terminates this Lease under Paragraph 2 hereof, Lessor shall immediately suspend the process of improving and altering the Premises. Reimbursement payments owed by Lessee pursuant to this provision shall be deemed to constitute payments of additional rent.
open for business for the purposes of inspecting the same, and will permit Lessor at any time within sixty (60) days prior to the expiration of the Lease, to place upon the Premises any usual "To Let" or "For Lease" signs, and permit persons desiring to Lease the same to inspect the Premises thereafter.
Lessee may terminate this Lease if possession is not delivered, subject only to the month-to-month tenancy of the existing tenant, by September 30, 2003. If Lessee does not terminate this Lease on or before September 30, 2003, Lessee accepts the Premises 'as is' on that date, and waives any right to demand that the Premises be delivered in any condition other than the condition then existing.
the award for such taking or any payment in lieu thereof, but Lessee may file a claim for any taking of fixtures and improvements owned by Lessee, and for moving expenses.
the property taxes levied on Block 917, Lot 13.01 for the 2003 calendar year. Lessee acknowledges and understands that Lessor is planning to subdivide a portion of Block 917, Lot 13.01 in connection with the sale of the property relating to the Airport Lounge. Lessor and Lessee agree that the percentage of 7.4% described above will be modified for the calendar year following the subdivision to reflect the smaller denominator that will result from that anticipated subdivision.
Lessor and Lessee further agree that, notwithstanding the terms of the preceding paragraph of this Paragraph 16, Lessee shall not be responsible for any portion of any increase in property taxes on Block 917, Lot 13.01 which is in any respect attributable to, or the result of, improvements which are made by Lessor or any successor to Lessor to that portion of Block 917, Lot 13.01 other than the Premises, it being the specific intention of the parties to this Lease that Lessee shall be responsible for only those allocable increases in property taxes on Block 917, Lot 13.01 which directly result from (i) increases in the tax rate which is applicable to Block 917, Lot 13.01, or (ii) increases in the assessed value of Block 917, Lot 13.01 which do not in any respect result from improvements to that portion of Block 917, Lot 13.01 other than the Premises.
The Lessor:
Wall Herald Corp.
c/o Edward I. Brown
P.O. Box 2535
Farmingdale, New Jersey 07727
With a copy to:
Kenneth E. Pringle, Esquire
Pringle Quinn Anzano, P.C.
P.O. Box 420
Belmar, New Jersey 07719
The Lessee:
Two River Community Bank
1250 State Highway 35 South
Middletown, NJ 07748
Attn: Michael Gormley, Executive Vice President
With a copy to:
Robert Linkin, Esq.
215 Blair Road CN907
Avenel, NJ 07001-2026
LESSOR:
WALL HERALD CORP.
Attest: /s/ Barbara McAuley By: /s/ Edward I. Brown
------------------------------ -------------------------------
Edward I. Brown, President
|
LESSEE
TWO RIVER COMMUNITY BANK.
Attest: /s/ Bernice E. Kotza By: /s/ Michael Gormley
------------------------------ -------------------------------
Michael Gormley
Executive Vice President
|
Non-Competition, Signage and Non-interference Agreement of Edward I. Brown with respect to Block 917, Lot 13 on the Tax Map of the Township Wall
As a further inducement on the part of the Lessor, Edward I. Brown (hereinafter "Mr. Brown") agrees in his individual capacity that, at all times that the Lease is in effect and that Lessee is in compliance with the terms thereof, (i) Mr. Brown will not lease any portion of the adjoining property that he owns, which property is known as Block 917, Lot 13 on the Tax Map of the Township of Wall, to any other organization that is in the business of providing banking and financial services, which shall be defined to include banks the deposits of which are insured by the FDIC, savings banks, stock brokerage companies, trust companies, credit unions or consumer finance businesses; (ii) Lessee may, without independent or additional consideration erect a lighted sign depicting its name and logo on the brick wall facing New Jersey Route 34 which is located on the parcel which Mr. Brown owns designated as Block 917, Lot 13 on the tax map of the Township of Wall. The sign which is allowed under the preceding sentence shall conform with all local and state laws and regulations governing such signage, and shall be subject to the prior approval of Edward Brown as to the size, type and appearance of the sign; and (iii) Mr. Brown will comply with the provisions of the last paragraph of Paragraph 2 of this Lease.
/s/ Edward I. Brown ---------------------------- Edward I. Brown Individually |
Exhibit 10.19
LEASE
THIS RETAIL SPACE LEASE is entered into by Landlord and Tenant as described in the following Basic Lease Information on the Date of execution.
Landlord and Tenant agree:
ARTICLE 1.00 BASIC LEASE INFORMATION
In addition to the terms, which are defined elsewhere in this Lease, the following defined terms are an integral part of this Lease:
DATE: October 28, 2003
TENANT: TWO RIVER COMMUNITY BANK
TENANT'S ADDRESS: Two River Community Bank
1250 State Hwy No 35
Middletown, New Jersey 07748
after occupancy: Two River Community Bank
West Long Branch Plaza
Monmouth Road
West Long Branch, New Jersey 07764
LANDLORD: MY BEN COMPANY, LLC
A Limited Liability Company of
the State of New Jersey
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LANDLORD' S ADDRESS:
P.O. BOX 549
Oakhurst, New Jersey 07755
With a copy at the
same time to: Kathleen Thomas
1500 Allaire Avenue
2 Floor
Ocean, New Jersey 07712
BUILDING ADDRESS: West Long Branch Plaza
Monmouth Road
West Long Branch, New Jersey 07764
COMMENCEMENT DATE: Upon delivery of the premises to the tenant. Rent
payment to commence Dec. 1, 2003.
EXPIRATION DATE: (5) years after commencement
TERM: (5) years plus three five-year options.
BASE MONTHLY RENT: During the first through the fifth year of the term,
|
the rent shall be $3,875.00 per month ($46,500.00 per annum) $232,500.00 for the term, based on $15.00 per square foot multiplied by 3,100 square feet.
RENT: The Base Monthly Rental plus the applicable common area maintenance charges (Additional Rent).
LATE CHARGES: In the event that the tenant does not make any payment of the Basic Monthly Rent or additional rent within 10 days after payment is due as provided in this lease, the tenant shall pay to the landlord a late charge equal to 5% of the overdue rent payment, which late charge shall be paid with the overdue payment.
RENT COMMENCEMENT DATE: Shall be upon delivery of the premises to the tenant. December 1, 2003.
ACTUAL SQUARE FOOTAGE: 3,100 square feet which consists of 2,500 square feet of office space plus 600 square feet of canopy area over drive-in lanes and windows.
PRO RATA SHARE: Tenant's pro rata share of the expenses shall be $4.17 per square foot multiplied by 3,100 square feet. The expenses shall mean the total annual costs and expenses incurred by landlord in operating and maintaining the common areas including, but not limited to: costs of gardening and landscaping, costs of insurance premiums including, but not limited to general comprehensive liability insurance (including, without limitation, umbrella coverage), fire and casualty insurance, rent insurance, sign insurance and any other insurance carried by the landlord with respect to the common areas or shopping center; costs of repair, painting, maintenance and replacement and rental of signs and sign equipment; which are not part of the demised premises or of any other tenant at the Shopping Center; costs of repair, maintenance and replacement of lighting; costs of removal or relocation of snow, ice, trash, rubbish, garbage and other refuse; recycling, costs of utilities, such as electricity and water; costs of repair, maintenance of on-site sewerage facilities; the cost of personnel, including management services engaged to manage the Shopping Center, but excluding any such services to the extent applicable to other premises owned or operated by Landlord; costs of holiday and other decorations. Common Area Costs shall also include any amounts specifically designated for inclusion therein elsewhere in this Lease, including, but not limited to taxes, utilities and insurance.
CAM charges will be $ 4.17 per square foot multiplied by 3,100 square feet
SECURITY DEPOSIT: Two month's rent based upon the rent due upon execution of this lease.
PREMISES: That certain area consisting of approximately 3,100, located on the site plan of Community Esplanadade of West Long Branch, also known as West Long Branch Plaza, and located in Block 60, Lots 71 and 74, prepared by Louis A. Scheidt, P.E., P.P., Innovative Engineering, dated August 17, 1994, entitled "1 Final - Major Site Plan Proposed Retail /Office Complex, lots 71 and 74, block 60" which shows the 2,500 square feet plus or minus bank
branch building and two drive-through windows totaling 600 square feet for a total leasable area of 3,100 square feet (or as determined as set forth above).
COMMON AREAS: Those areas consisting of parking areas, walkways, landscaped areas, roadways, entrances, stairs and all other areas and facilities now or hereafter at the Shopping Center and intended for common use.
AGREEMENT: Landlord leases the Premises to Tenant, and Tenant leases the Premises from Landlord, according to the terms of this Lease.
EXCLUSIVITY: Upon execution of this Lease by both parties, landlord agrees not to rent to any future tenants who will operate as a bank. The tenant herein, its successors or assigns, or any subtenant of the tenant herein, are specifically prohibited from conducting a restaurant of any nature whatsoever, or engaging in the sale of milk, packaged bread and cakes, groceries, deli, sandwiches, coffee, cigarettes (except for a vending machine in a restaurant, newspapers, and lottery tickets.
General. The duration of this Lease will be the Term. The Term will commence on the Commencement Date, and will expire on the Expiration Date.
Delivery of Possession. Landlord will deliver possession to the Tenant as soon as possible. The premises are being delivered in "As Is" condition and Tenant shall be responsible at its own cost and expense for any Tenant fitups, changes or alterations to the interior of the premises that it may wish to make. The Tenant will obtain a Certificate of Occupancy (if required by the municipality) and any other governmental approvals necessary to permit Tenant to commence its interior fitups for the use and enjoyment of the premises by tenant and also for the commencement of Tenant's business.
Condition of the Premises. Landlord's work will be deemed complete upon delivery of premises to the Tenant in As Is condition.
SUMMARY OF LEASES
LEASE - MY BEN COMPANY/TWO RIVER COMMUNITY BANK
WEST LONG BRANCH PLAZA
1. Date of Lease: October 13, 2003
2. Tenant: Two River Community Bank
3. Tenant's Address: 1250 State Hwy No 35
Middletown, New Jersey 07748
4. Landlord: My Ben Associates, a Partnership
of the State of New Jersey
5. Landlord's Address: P.O. Box 549
Oakhurst, New Jersey 07755
6. Building Address: West Long Branch Plaza
Monmouth Road
West Long Branch, New Jersey 07764
7. Commencement Date: Upon delivery of possession of the premises by
landlord to tenant.
8. Expiration Date: Five (5) years after commencement date.
9. Term: Five (5) years plus three (3) five (5) year options.
10. Base Monthly Rent: The term of rent shall be $3,875.00 per month
($46,500.00) per annum. During the option years the
rent will be increased by a minimum of three (3%)
percent or a maximum of six (6%) percent depending
on the CPI Index. The rent shall be the increase in
the CPI, but in no event less than 3% nor more than
6%. Rent per square foot must be multiplied by 3,100
square feet to come up with the annual rent and then
divide by twelve (12).
11. Additional Rent: Four dollars and seventeen cents ($4.17) per square
foot or $1,077.25 per month($12,927.00)per annum,
for tenant's share of the common area expenses. This
amount changes annually, plus or minus.
12. Security Deposit: Two (2) month's rent due upon execution of this
lease.
13. Premises: 3,100 square feet comprised of 2,500 square feet of
office space plus 600 square feet of canopy area.
14. Common Areas: Those areas consisting of parking areas, walkways,
landscape areas, roadways, entrance to stairs and
all other
4
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areas and facilities now or hereafter at the Shopping
Center intended for common use.
Two River Community Bank My Ben Company, LLC
/s/ Michael J. Gormley /s/ Al Gold
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EVP/CFO
THIS ADDENDUM is entered into on and as of this _____ day of October, 2003, by and between My Ben Company, L.L.C. ("Landlord"), P.O. Box 549, Oakhurst, NJ 07755 and Two River Community Bank ("Tenant"), 1250 State Highway 35 South, Middletown, NJ 07748.
WHEREAS, Landlord and Tenant have entered into a Lease and Summary of Lease for the lease of certain premises in the West Long Branch Plaza, Monmouth Road, West Long Branch, NJ 07764; and
WHEREAS, Landlord and Tenant wish to enter into this Addendum to Lease and Summary of Lease to incorporate certain provisions into the Lease and Summary of Lease.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth in this Addendum, that sufficiency of which as consideration are hereby acknowledged, Landlord and Tenant agree that the following provision shall be deemed to have been included in the Lease and shall be deemed to have been included in the Summary of Lease as Paragraph 15, with respect to each as though fully set forth:
"Notwithstanding any other provisions contained in this Lease and Summary of Lease and only if the Tenant is an institution the deposits of which are insured by the Federal Deposit Insurance Corporation, in the event that (a) the Tenant or its successors or assignees shall become insolvent or bankrupt, or if its or their interests under this Lease and Summary of Lease shall be levied upon or sold under execution or other legal process and (b) the depositary institution then operating on the Premises is closed, or taken over by any depositary institution supervisory authority ("Authority"), Landlord may, in such event, terminate this Lease and Summary of Lease as a result of such bankruptcy, insolvency, levy or sale prior to the expiration of its term only with the concurrence of any receiver or liquidator appointed by such Authority; provided that, in the event that this Lease and Summary of Lease is terminated by any such receiver or liquidator, the maximum claim of Landlord for rent, damages or indemnity resulting from the termination, rejection or abandonment of the unexpired term of this Lease and Summary of Lease by such receiver or liquidator shall, by law, in no event be greater than an amount equal to all accrued and unpaid rent to the date of such termination."
IN WITNESS WHEREOF, Landlord and Tenant, intending to be fully bound, have entered into this Addendum on and as of the date set forth above.
My Ben Company, L.L.C.
By: /s/ Al Gold
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Two River Community Bank
By: /s/ Michael J. Gormley
----------------------
Michael Gormley
Executive Vice President
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Exhibit 10.20
LEASE AGREEMENT
BUSINESS AND COMMERCIAL USE
THIS LEASE AGREEMENT, made the 28th day of January 2003,
BETWEEN Future Land Investments, Inc. referred to as the "Landlord", whose address is 149 Durham Road, South Plainfield, NJ
AND Two River Community Bank referred to as the "Tenant", whose address is 1250 Highway 35 South, Middletown, NJ
1. Premises. The Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises:
500-502 Angel Street and Highway 35
Aberdeen, New Jersey
Lot 1.01 on the attached survey(Excluding lot 1.02)
2. Term. This Lease is for a term of Ten (10) Years commencing on April 1, 2003, and ending on March 31, 2013, with two renewal options of Five (5) year terms. Each renewal shall be under the terms and conditions as the primary lease. The option to renew shall be given in writing with in six (6) months preceding the lease termination.
3. Use. The premises are to be used and occupied only and for no other purchase than Banking . The Tenant will not, and will not allow others to occupy or use the Premises or any part thereof for any purpose other than as specified in this Paragraph 3, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or other casualty.
4. Rent. The Tenant agrees to pay $3,900 a month as rent, to be paid as follows: $3,900.00 per month, due on the 1st day of each month. The first payment of rent and security deposit is due of $7,850.00 upon the signing of this Lease by the Tenant. The Tenant must pay a late charge of $ 100.00 as additional rent for each payment that is more than 10 days late. This late charge is due with the monthly rent payment. The Tenant must also pay a fee of $25.00 as additional rent for any dishonored check. From January 1, 2003 through March 31, 2003 no rent is due and tenant shall be permitted to occupy the premises and prepare for the construction. From April 1, 2003 to September 30, 2003 the rent shall be $2000.00 a month. Starting from October 1, 2003 on rent will be the full amount of $3,900.00.
5. Repairs and Care. The Tenant has examined the Premises and has entered into this Lease without any representation on the part of the Landlord as to the condition thereof. The Tenant will take good care of the Premises and will, at the Tenant's own cost and expense, make all repairs, including painting, decorating, and will maintain the Premises in good condition and state of repair, and at the end or other expiration of the term hereof, will deliver up the Premises
in good order and condition, wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted. The Tenant will neither encumber nor obstruct the sidewalks, driveways, yards, entrances, hallways and stairs, but will keep and maintain the same in a clean condition, free from debris, trash, refuse, snow and ice
6. Alterations and Improvements. No alterations, additions or improvements may be made, and no climate regulating, air conditioning, cooling, heating or sprinkler systems, television or radio antennas, heavy equipment, apparatus and fixtures, may be installed in or attached to the Premises, without the written consent of the Landlord. Unless otherwise provided herein, such alterations, etc., when made, installed in or attached to the Premises, will belong to and become the property of the Landlord and will be surrendered with the Premises and as part thereof upon the expiration or sooner termination of this Lease, without hindrance, molestation or injury. Consents from Landlord shall not be unreasonably withheld.
7. Signs. The Tenant may not place nor allow to be placed any signs upon, in or about the Premises, except as may be consented to by the Landlord in writing. The Landlord or the Landlord's agents, employees or representatives may remove any such signs in order to paint or make any repairs, alterations or improvements in or upon the Premises or any part thereof, but such signs will be replaced at the Landlord's expense when such repairs, alterations or improvements are completed. Any signs permitted by the Landlord will at all times conform with all municipal ordinances or other laws and regulations applicable thereto. Consents from Landlord shall not be unreasonably withheld.
8. Utilities. The Tenant will pay when due all rents or charges for water or other utilities used by the Tenant, which are or may be assessed or imposed upon the Premises or charged to the Landlord by the suppliers thereof during the term hereof, and if not paid, such rents or charges will be added to and become payable as additional rent with the installment of rent next due or within 30 days of demand therefor, whichever occurs sooner.
9.1 Compliance with Laws, etc. The Tenant will promptly comply with all laws, ordinances, rules, regulations, requirements and directives of all Governmental or Public Authorities and of all their subdivisions, applicable to and affecting the Premises, or the use and occupancy of the Premises, and will promptly comply with all orders, regulations, requirements and directives of the Board of Fire Underwriters or similar authority and of any insurance companies which have issued or are about to issue policies of insurance covering the Premises and its contents, for the prevention of fire or other casualty, damage or injury, at the Tenant's own cost and expense.
9.2 Regulatory Approval. The obligation of TENANT to comply with the terms and conditions of this Lease are subject to the receipt by Tenant of appropriate federal and state regulatory approvals for the operation of a branch of its bank in the Demised Premises within ninety (90) days of date hereof. The Tenant shall use its best efforts to immediately apply for said federal and state approvals and to diligently prosecute its approval applications. In the event that the TENANT has not obtained said approvals within ninety (90) day period, then the LANDLORD OR THE TENANT shall have the right to terminate this Lease, in which event neither party shall have any further obligation. Tenant will forfeit security deposit and all rents paid is terminated by the tenant.
10. Assignment. The Tenant will not, without the written consent of the Landlord, assign, mortgage or hypothecate this Lease, nor sublet or sublease the Premises or any part thereof. The restrictions on assignment and subletting will also apply to: (a) any assignment or subletting that occurs by operation of law (including by reason of the death of the Tenant, if the Tenant is an individual, or, if the Tenant is an entity, by merger, consolidation, reorganization, transfer or other change in or of the Tenant's structure); (b) any assignment or subletting to or by a receiver or trustee in any federal or state bankruptcy, insolvency or other proceedings; (c) the sale, assignment or transfer of all or substantially all of the assets of the Tenant outside of the ordinary course of the Tenant's business, with or without specific assignment of this Lease, or (d) if the Tenant is an entity, the direct or indirect sale, redemption or other transfer of fifty percent (50%) or more of the voting equity interests in the Tenant or the acquisition of a fifty percent (50%) or more voting equity interest in the Tenant. Consent of the Landlord will not be unreasonably withheld or delayed.
11. Liability Insurance. The Tenant, at Tenant's own cost and expense, will obtain or provide and keep in full force for the benefit of the Landlord, during the term hereof, general public liability insurance, insuring the Landlord against any and all liability or claims of liability arising out of, occasioned by or resulting from any accident or otherwise in or about the Premises for injuries to any persons, for limits of not less than $300,000.00 for property damage, $1,000,000.00 for injuries to more than one person, in any one accident or occurrence. The insurance policies will be with companies authorized to do business in this State and will be delivered to the Landlord, together with proof of payment, not less than fifteen (15) days prior to the commencement of the term hereof or of the date when the Tenant enters in possession, whichever occurs sooner. At least fifteen days prior to the expiration or termination date of any policy, the Tenant will deliver a renewal or replacement policy with proof of the payment of the premium therefor.
12. Indemnification. The Tenant will hold harmless and indemnify the Landlord from and for any and all payments, expenses, costs, reasonable attorney fees (including attorney fees incurred in enforcing the Tenant's obligations under this Paragraph 12) and from and for any and all claims and liability for losses or damage to property or injuries to persons occasioned wholly or in part by or resulting from any acts or omissions by the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, or for any cause or reason whatsoever arising out of or by reason of the occupancy of the Premises by the Tenant or business of the Tenant.
13. Mortgage Priority. This Lease will not be a lien against the Premises with respect to any mortgages that are currently or may hereafter be placed upon the Premises. Such mortgages will have preference and be superior and prior in lien to this Lease, irrespective of the date of recording of such mortgages. The Tenant will execute any instruments, without cost, which may be deemed necessary to further effect the subordination of this Lease to any such mortgages. A refusal by the Tenant to execute such instruments is a default under this Lease.
14. Condemnation Eminent Domain. If any portion of the premises of which the Premises are a part is taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceeding or actions, the Landlord grants an option to purchase and or sells and
conveys the Premises or any portion thereof, to the governmental or other public authority, agency, body or public utility seeking to take the Premises or any portion thereof, then this Lease, at the option of the Landlord, will terminate, and the term hereof will end as of such date as the Landlord fixes by notice in writing. The Tenant will have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings. The Tenant may, however, file a claim for any taking of fixtures and improvements owned by the Tenant, and for moving expenses. Except as provided in the preceding sentence, all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant will execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the Premises or any portion thereof. The Tenant will vacate the Premises, remove all of the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord. The Tenant will repay the Landlord for such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
15. Fire and Other Casualty. If there is a fire or other casualty, the Tenant will give immediate notice to the Landlord. If the Premises are partially damaged by fire, the elements or other casualty, the Landlord will repair the same as speedily as practicable, but the Tenant's obligation to pay the rent hereunder will not cease. If, in the opinion of the landlord, the Premises are so substantially damaged as to render them untenantable, then the rent will cease until such time as the Premises are made tenant able by the Landlord. If, however, in the opinion of the Landlord, the Premises are so substantially damaged that the Landlord decides not to rebuild, then the rent will be paid up to the time of such destruction and this Lease will terminate as of the date of such destruction. The rent, and any additional rent, will be apportioned as of the termination date, and any rent paid for any period beyond that date will be repaid to the Tenant. However, the preceding provisions of this Paragraph 15 will not become effective or be applicable if the fire or other casualty and damage are the result of the carelessness, negligence or improper conduct of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors. In such case, the Tenant's liability for the payment of the rent and the performance of all the covenants, conditions and terms hereof on the Tenant's part to be performed will continue and the Tenant will be liable to the Landlord for the damage and loss suffered by the Landlord. If the Tenant is insured against any of the risks herein covered, then the proceeds of such insurance will be paid over to the Landlord to the extent of the Landlord's costs and expenses to make the repairs hereunder, and such insurance carriers will have no recourse against the Landlord for reimbursement.
16. Reimbursement of Landlord. If the Tenant fails or refuses to comply with any of the terms and conditions of this Lease, the Landlord may carry out and perform such conditions at the cost and expense of the Tenant, which amounts will be payable on demand to the Landlord. This remedy will be in addition to such other remedies as the Landlord may have by reason of the breach by the Tenant of any of the terms and conditions of this Lease.
17. Increase of Insurance Rates. If for any reason it is impossible to obtain fire and other hazard insurance on the buildings and improvements on the Premises in an amount and in
the form and from insurance companies acceptable to the Landlord, the Landlord may, at any time, terminate this Lease, upon giving to the Tenant fifteen (15) days' notice in writing of the Landlord's intention to do so. Upon the giving of such notice, this Lease will terminate as of the date specified in such notice. If by reason of the use to which the Premises are put by the Tenant of character of or the manner in which the Tenant's business is carried on, the insurance rates for fire and other hazards increase, the Tenant will, upon demand, pay to the Landlord, as additional rent, the amounts by which the premiums for such insurance are increased.
18. Inspection and Repair. The Landlord and the Landlord's agents, employees or other representatives, will have the right to enter into and upon the Premises or and part thereof, at all reasonable hours, on any reasonable prior notice, for the purpose of examining the Premises or making such repairs of alterations therein as may be necessary for the safety and preservation thereof. This clause will not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs.
19. Right to Exhibit. The Tenant will permit the Landlord and the Landlord's agents, employees or other representatives to show the Premises to persons wishing to rent or purchase the Premises, and Tenant agrees that on and after six (6) months next preceding the expiration of the term hereof, the Landlord or the Landlord's agents, employees or other representative will have the right to place notices on the front of the Premises or any part thereof, offering the Premises for rent or sale; and the Tenant will permit the same to remain thereon without hindrance or molestation. The Tenant will also permit the Landlord and the Landlord's agents, employees or other representatives to show the Premises to prospective mortgagees of the Premises or the land and improvements of which the Premises are a part.
20. Removal of Tenant's Property. Any equipment, fixtures, goods or other property of the Tenant that are not removed by the Tenant upon the termination of this Lease, or upon any quitting, vacating or abandonment of the Premises by the Tenant, or upon the Tenant's eviction, will be considered as abandoned and the Landlord will have right, without any notice to the Tenant, to sell or otherwise disprove of the same, at the expense of the Tenant, and will not be accountable to the Tenant for any part of the proceeds of such sale, if any.
21. Events of Default; Remedies Upon Tenant's Default. The following are "Events of Default" under this Lease: (a) a default by the Tenant in the payment of rent, or any additional rent when due or within ten (10) days thereafter; (b) a default by the Tenant in the performance of any of the other covenants or conditions of this Lease, which the Tenant does not cure within thirty (30) days after the Landlord gives the Tenant written notice of such default; (c) the death of the Tenant (if the Tenant is an individual); (d) the liquidation or dissolution of the Tenant (if the Tenant is an entity) ; (e) the filing by the Tenant of a bankruptcy, insolvency or receivership proceeding; (f) the filing of a bankruptcy, insolvency or receivership proceeding against the Tenant which is not dismisses within thirty (30) days after the filing thereof; (g) the appointment of, or the consent by the Tenant to the appointment of, a custodian, receiver, trustee, or liquidator of all or a substantial part of the Tenant's assets; (h) the making by the Tenant of an assignment for the benefit of creditors or an agreement of composition; (i) if the Premises are or become abandoned, deserted, vacated or vacant; (j) the eviction of the Tenant; or (k) if this Lease, the Premises or the Tenant's interest in the Premises passes to another by virtue of any court proceedings, writ of execution, levy, or judicial or foreclosure sale. If an Event of Default
occurs, the Landlord, in addition to any other remedies contained in this Lease or as may be permitted by law, may either by force or otherwise, without being liable for prosecution thereof, or for damages, re-enter, possess and enjoy the Premises. The Landlord may then re--let the Premises and receive the rents thereof and apply the same, first to the payment of such expenses, reasonable attorney fees and costs, as the Landlord may have incurred in re--entering and repossessing the Premises and in making such repairs and alternations as may be necessary; and second to the payment of the rents due hereunder. The Tenant will remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the re--entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, and deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.
22. Termination on Default. If an Event of Default occurs, the Landlord may, at anytime thereafter, terminate this Lease and the term hereof, upon giving the Tenant five (5) days' notice in writing of the Landlord's intention so to do. Upon giving of such notice, this Lease and the term hereof will end on the date fixed in such notice as if such date was the date originally fixed in this Lease for the expiration hereof; and the Landlord will have the right to remove all persons, goods, fixtures and chattels from the Premises, by force or otherwise, without liability for damage.
23. Non-Liability of Landlord. The Landlord will not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical gas, power conveyor, refrigeration, sprinkler, air--conditioning or heating systems, elevators or hoisting equipment; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other tenant or of the Landlord or the Landlord's or the Tenant's or any other tenant's agents, employees, guests, invitees, subtenants, assignees or successors; or attribute to any interference with, interruption of, or failure beyond the control of the Landlord, of any services to be furnished or supplied by the Landlord. This limitation on the Landlord's liability will not apply to damage or injury resulting from gross negligence or willful misconduct of the Landlord or the Landlord's agents, employees, guests, licensees, invitees, assignees or successors.
24. Non-Waiver by Landlord. The various rights, remedies, options, and elections of the Landlord under this Lease are cumulative. The failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this Lease or to exercise any election or option, or to resort or have recourse to any remedy conferred in this Lease or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one remedy conferred in this Lease or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, will not be constructed or deemed to be waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same will continue in full force and effect.
25. Non-Performance by Landlord. This Lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and conditions hereof, will not be
affected, curtailed, impaired or excused because of the Landlord's inability to supply and service or material called for in this Lease, by reason of any rule, order, regulation, or preemption by any governmental entity, authority, department, agency, or subdivision or for any delay which may arise by reason or negotiations for the adjustment of any fire or other casualty loss because of strikes or other labor trouble or any cause beyond the control of the Landlord.
26. Validity of Lease. The terms, conditions, covenants and provisions of this Lease will be deemed to be severable. If any clause or provision contained in this Lease is adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it will not affect the validity of any other clause or provision in this Lease, but such other clauses or provisions will remain in full force and effect.
27. Notices. All notices required under the terms of this Lease will be given and will be complete by mailing such notices by certified or registered mail, return receipt requested, or by hand delivery, fax or overnight delivery service, to the address of the parties as shown at the beginning of this Lease, or to such other address as may be designated in writing, with notice of change of address is given in the same manner.
28. Title and Quiet Enjoyment. The Landlord covenants and represents that the Landlord is the owner of the Premises and has the right and authority to enter into, execute and deliver this Lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants contained in this Lease, will and may peaceably and quietly have, hold and enjoy the Premises for the term of this Lease.
29. Entire Contract. This Lease contains the entire contract between the parties. No representative, agent or employee of the Landlord has been authorized to make any representations or promises with reference to the leasing of the Premises, or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, will be binding unless reduced to writing and signed by the Landlord and the Tenant.
30.1 Adjustment of Rent (A.) Tax Increase. If in any calendar year during the term and of any renewal or extension of the term hereof, the annual municipal taxes assessed against the land and improvements leased hereunder or of which the Premises are a part, are greater than the municipal taxes assessed against such lands and improvements for the calendar year 2003, which is hereby designated as the base year, then, in addition to the rent fixed in this Lease, the Tenant will pay a sum equal to the amount by which such tax exceeds the annual tax for the base year, inclusive of any increase during any such calendar year. Such sum will be considered as additional rent and will be paid in as many equal installments as there are months remaining in the calendar year in which such taxes exceed the taxes for the base year, on the first day of each month in advance, during the remaining months of that year. If the term hereof commences after the first day of January or terminates prior to the last day of December in any year, then such additional rent resulting from a tax increase will be proportionately adjusted for the fraction of the calendar year involved.
30.2 Adjustment of Rent (B) Consumer Price Index (CPI). If in any calendar year during the term and of any renewal or extension of the term hereof, the annual CPI year 2003, which is hereby designated as the base year, then, in addition to the rent fixed in this Lease, the
Tenant will pay a sum equal to the amount by which such CPI exceeds the CPI for the base year, inclusive of any increase during any such calendar year. Such sum will be considered as additional rent and will be paid in as many equal installments as there are months remaining in the calendar year in which such CPI exceed the CPI for the base year, on the first day of each month in advance, during the remaining months of that year. If the term hereof commences after the first day of January or terminates prior to the last day of December in any year, then such additional rent resulting from a CPI increase will be proportionately adjusted for the fraction of the calendar year involved. Any increase shall not exceed a cap of five (5%) percent in any one year.
31. Liens. If any construction or other liens are created or, filed against the Premises by reason of labor performed or materials furnished for the Tenant in the erection, construction, completion, alteration, repair or addition to any building or improvement, the Tenant will, upon demand, at the Tenant's own cost and expense, cause such lien or liens to be satisfied and discharged of record together with any lien claims that may have been filed. Failure to do so, will entitle the Landlord to resort to such remedies as are provided in this Lease for any default of this Lease, in addition to such as are permitted by law.
32. Waiver of Subrogation Rights. The Tenant waives all rights of recovery against the Landlord or the Landlord's agents, employees or other representatives for any loss, damages or injury of any nature whatsoever to property or persons for which the Tenant is insured. The Tenant will obtain from Tenant's insurance carriers and will deliver to the Landlord, waivers of the subrogation rights under the respective policies.
33. Security. The Tenant has deposited with the Landlord the sum of $5,850.00 (the "Security Deposit") as security for the payment of the rent hereunder and the full and faithful performance by the Tenant of the covenants and conditions on the part of the Tenant to be performed. Such Security Deposit will be returned to the Tenant, without interest, after the expiration of the term hereof, provided that the Tenant has fully and faithfully performed all such covenants and conditions and is not in arrears in rent. During the term hereof, the Landlord may, if the Landlord so elects, have recourse to such Security Deposit, to make good any default by the Tenant, and the Tenant will, on demand, promptly restore the Security Deposit to its original amount. The Landlord will assign or transfer the Security Deposit, for the benefit of the Tenant, to any subsequent owner or holder of the reversion or title to the Premises, and the assignee will be; one liable for the repayment thereof as provided in this Lease, and the assignor will be released by the Tenant from all liability to return such Security Deposit. This provision will be applicable to every change in title and does not permit the Landlord to retain the Security Deposit after termination of the Landlord's ownership. The Tenant will not mortgage, encumber or assign the Security Deposit without the written consent of the Landlord.
34. Estoppel Certificates. The Tenant will at any time and from time to time upon not less than ten (10) days' prior notice by the Landlord, execute, acknowledge and deliver to the Landlord or any other party specified by the Landlord, a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications) and the dates to which the rent, additional rent and other charges have been paid, and stating whether or not, to the knowledge of the signer of such certificate, the Tenant or the Landlord is in default in
performance of any covenant, agreement or condition contained in this Lease, and if so, specifying each such default of which the signer may have knowledge, as well as certifying to such other matters as the Landlord or the intended recipient of such certificate may reasonably request.
35. Conformation with Laws and Regulations. The Landlord may pursue the relief or remedy sought in any invalid clause, by conforming such clause with the provisions of the statutes or the regulations of any governmental agency as if the particular provisions of the applicable statutes or regulations were set forth at length in this Lease.
36. Number and Gender. In all references in this Lease to any parties, persons or entities, the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of this Lease may require. All the terms, covenants and conditions contained in this Lease will be for and will inure to the benefit of and will bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives, successors and assigns.
In Witness Whereof, the parties have signed this Lease, or caused. these presents to be signed by their proper officers or other representatives, the day and year first above written.
Witnessed or Attested by:
(Seal) Future Land Investments, Inc.
BY:/s/ [Landlord]
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Landlord
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(Seal) Two Rivers Community Bank
BY:/s/ Barry B. Davall, President & CEO
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Tenant
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LEASE ADDENDUM
BUSINESS AND COMMERCIAL USE
THIS LEASE ADDENDUM, made the 30th of June 2003,
BETWEEN Futureland Investments, Inc., referred to as the "Landlord", whose address is 149 Durham Road, South Plainfield, New Jersey 07080
AND Two River Community Bank, referred to as the "Tenant", whose address is 1250 Highway 35 South, Middletown, New Jersey.
1. Lease. This Lease Addendum modifies a Lease Agreement, dated January 28, 2003, between the Landlord and the Tenant with regard to the premises located at 500-502 Angel Street and Highway 35, Aberdeen, New Jersey. The Terms of the Lease Agreement, except as modified in the within Lease Addendum, shall continue to be binding upon the Landlord and the Tenant.
2. Rent. The rent shall be increased by $250.00 to $2250.00 a month as rent to September 30, 2003, and thereafter to $4,150 a month, due on the 1st day of each month. This increase is due to the agreement of Landlord to permit the Tenant to tear down a building which the Landlord was going to renovate and rent, and will be effective with the August rent payment.
In Witness Whereof, the parties have signed this Lease Addendum, or caused these presents to be signed by their proper officers or other representatives, the day and year first above written.
(Seal) Futureland Investments, Inc. (Seal)Two Rivers Community Bank
BY:/s/ [Landlord] BY:/s/ Michael J. Gormley, EVP
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Landlord Tenant
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Exhibit 10.21
AGREEMENT OF LEASE - OFFICE MAX PLAZA
This Paragraph 1 is an integral part of this Lease and all of the terms hereof are incorporated into this Lease in all respects. In addition to the other terms which are defined in this Lease, the following capitalized terms, whenever used in this Lease, shall have the meanings set forth in this Paragraph, and only such meanings, unless such meanings are expressly contradicted, limited or expanded elsewhere herein:
(a) Date of Lease: June 7, 2002
(b) Landlord: CIRCLE PLAZA ASSOCIATES
(c) Address of Landlord: P.O. Box 428 155 Markham Place Little Silver, NJ 07739
(d) Tenant: TWO RIVER COMMUNITY BANK
(e) Address of Tenant: 1250 Route 35 Middletown, New Jersey 07748
(f) Permitted Use: Bank offices ("back office operation")
(g) Lease Term: Five (5) years
(h) Possession and Lease
Commencement Date: The date Landlord and Tenant execute
the Lease and Landlord substantially
completes Landlord's Work and delivers
possession of the Premises to Tenant
Rent Commencement Date: July 1, 2002
(i) Expiration Date: June 30, 2007
(j) Initial Annual Basic Rent Rate: $33, 000.00 per annum ($2,750.00 per
month) subject to adjustment as
provided in paragraph 5(a)(i) hereof
and Exhibit D hereto
(k) Tenant's Expense Share: Tenant pays its pro-rata increase in
real estate share of real estate taxes
and building operating costs multiplied
by the Expense Share as set forth
below.
Common Area Maintenance Charges: 3.97%.
Real Estate Tax Charges: 3.97%
(1) Tenant's Initial Estimated
Tax Payment: $493.08 per month.
(m) Tenant's Initial Common Area
Maintenance Payment: $464.50 per month
(n) Intentionally Omitted
(o) Security Deposit: $3,000.00
(p) Broker: Magee Realty Consultants
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(q) Shopping Center: The land and improvements located in the Borough of Eatontown and commonly known as Office Max Plaza, as more particularly shown on the plan annexed hereto as Exhibit A and made a part hereof.
(r) Common Areas: All areas, improvements, space, equipment and special services in or at the Shopping Center provided by Landlord for the common or joint use and benefit of tenants of the Shopping Center, their officers, employees, agents, servants, customers and other invitees, including without limitation all parking areas, access roads, driveways, entrances and exits, retaining walls, landscaped areas, truck serviceways or tunnels, loading docks, pedestrian malls, courts, stairs, ramps and sidewalks, exterior stairs, comfort and first aid stations, washrooms and parcel pickup stations, onsite and offsite signs identifying or advertising the Shopping Center, and maintenance buildings.
(s) Insurance Requirements: All requirements of any insurance policy covering or applicable to any part of the Shopping Center or the Premises or the use thereof all requirements of the issuer of any such policy, and all orders, rules, regulations, recommendations and other requirements of the Association of Fire Underwriters, Factory Mutual Insurance Companies, the Insurance Services Organization, and any other body exercising the same or similar functions and having jurisdiction or cognizance of any part of the Shopping Center or the Premises.
(t) Legal Requirements: All laws, statutes and ordinances (including building codes and zoning regulations and ordinances) and the orders, rules, regulations, directives and requirements of all Federal, State, county and city departments, bureaus, boards, agencies, offices, commissions and other subdivisions thereof or of any official thereof, or of any other governmental, public or quasi-public authority, whether now or hereafter in force, which may be applicable to the Shopping Center or the Premises, or any part thereof and all requirements, obligations and conditions of all instruments of record affecting the Shopping Center.
(a) Landlord hereby demises and leases to Tenant and Tenant hereby rents and hires from Landlord, those certain premises known as Store #3a (the "Premises") consisting of a portion of the Shopping Center, which Premises are substantially as shown by crosshatching on Exhibit A annexed hereto, together with a non-exclusive right to use, in common with others, the Common Areas, as the same may be designated from time to time by Landlord, subject, however, to the terms and conditions of this Lease and to rules and regulations for the use thereof as prescribed from time to time by Landlord.
(b) Landlord reserves the right to change the number and location of buildings, building dimensions, the number of floors in any of the buildings, store dimensions, Common Areas, and the identity and type of other stores and tenancies comprising the Shopping Center, provided only that the size of the Premises, reasonable access to the Premises and the parking facilities as shown on Exhibit A shall not be materially impaired.
(c) Landlord reserves to itself the use of the roof exterior walls (other than the store front) and the area above and below the Premises together with, upon reasonable notice to Tenant except in the case of an emergency, the right to install, maintain, use, repair, and replace pipes, ducts, conduits, wires and structural elements leading through the Premises and which serve other parts of the Shopping Center.
(d) By occupying the Premises or any portion thereof, Tenant shall be deemed to have accepted the Premises.
(a) Prior to the Lease Commencement Date, Landlord shall complete the work described in Exhibit "B" annexed hereto and made part hereof (the "Landlord's Work"), at its sole cost and expense. Tenant shall pay to Landlord any expense incurred by Landlord as a result of change requested by Tenant which affect Landlord's Work.
(b) Tenant agrees that subsequent to the Commencement Date it shall, at its sole cost and expense, provide all work of whatsoever nature that is necessary to complete the Premises and open the Premises for business to the public (collectively, the "Tenant's Work"). The Tenant will be responsible to obtain all building permits and to build-out the space as per its requirements. This Work shall include but not be limited to the distribution of HVAC; erection of internal partition; installation of drop ceiling as needed; installation of lighting fixtures and other electrical needs; installation of flooring; painting; reconfiguration and extension of sprinkler
heads as needed. Tenant agrees to furnish Landlord, with a complete and detailed set of plans and specifications drawn by a registered architect, setting forth and describing Tenant's Work in such detail as Landlord may reasonably require. Tenant's architect and any contractor used in performing Tenant's Work shall be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed. Landlord may require Tenant, at Tenant's sole cost and expense, to furnish a bond or other security satisfactory to Landlord to assure diligent and faithful performance of Tenant's Work, If said plans and specifications are not so furnished by Tenant within the required time periods Landlord may, at its option, terminate this Lease and the tenancy hereby created at any time thereafter, while such plans and specifications have not been so furnished, by notice in writing thereof to Tenant. No deviation from the final set of plans and specifications, once submitted to and approved by Landlord, shall be made by Tenant without Landlord's prior written consent. Approval of plans and specifications by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy or sufficiency, and Tenant shall be solely responsible for such plans and specifications. If Tenant fails to complete Tenant's Work in accordance with such plans and specifications prior to July 1, 2002, Landlord may, at Landlord's option, terminate this Lease and the tenancy hereby created or may, at Landlord's option enter the Premises and complete Tenant's Work, and Tenant shall pay the cost thereof to Landlord upon demand. In the event Tenant's Work is not completed by July 1, 2002, Landlord shall have the right to terminate this Lease on notice to Tenant, and the tenancy hereby created.
The term of this Lease (the "Term") shall commence July 1, 2002 or such earlier date that Landlord delivers possession of the premises to Tenant and shall expire on the Expiration Date.
(a) Tenant shall pay to Landlord during the Term, in lawful money of the United States, without any prior demand therefor and without any offsets or deductions whatsoever, the following sums (collectively, "Rent"):
(i) fixed rent ("Basic Rent") at the Initial Annual Basic Rent Rate for the portion of the Term commencing on the Rent Commencement Date and ending on June 30, 2003, and thereafter at the rate or rates per annum specified in the Basic Rent Escalation Rider annexed hereto as Exhibit D and made a part hereof;
(ii) additional rent ("Additional Rent") consisting of all other sums of money as shall become due from and be payable by Tenant hereunder (for default in the payment of which Landlord shall have the same remedies as for a default in the payment of Basic Rent).
(b) Basic Rent shall be payable in advance in equal monthly installments beginning on the Commencement Date and continuing on the first day of each calendar month thereafter during the Term, except that Tenant has, simultaneously with the execution of this Lease, paid to Landlord the first month's Basic Rent, receipt of which (if by check, subject to collection) is hereby acknowledged.
(c) In the event that the Commencement Date shall occur on a day other than the first day of a calendar month, the monthly installment of Basic Rent for the unexpired portion of the month in which the Commencement Date occurs shall be prorated on the basis of the actual number of days in such month. In the event the Expiration Date shall occur on a day other than the last day of a calendar month, then the amount of the monthly installment of the Basic Rent, for the last month or portion thereof in which the Expiration Date occurs shall be prorated on the basis of the actual number of days in such month, and any excess prepaid Basic Rent and Additional Rent shall be refunded by Landlord to Tenant on the Expiration Date.
(d) If Tenant shall fail to pay any rents, charges or other sums ten (10) days after the same become due and payable, such unpaid amounts shall bear interest at the per annum rate of two percent (2%) in excess of the rate from time to time announced by Citibank, N.A. as its "prime rate", calculated on the basis of actual days elapsed, based on a 360 day year, from the due date of such rents, charges or other sums to the date of payment; provided, however, that such interest shall never exceed the maximum legal rate from time to time permitted by applicable law. In addition thereto and to the extent permitted by applicable law, if Tenant shall
fail to pay any rents, charges or other sums, within ten (10) days after the same become due and payable, then Tenant shall also pay to Landlord Additional Rent to cover Landlord's additional overhead and administrative costs and expenses arising out of such late payment in the amount of $200.00. The provisions herein for Additional Rent shall not be construed to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligation to pay all such sums at the time or times herein stipulated. Notwithstanding the imposition of such Additional Rent, Tenant shall be in default under this Lease if any or all payments required to be made by Tenant are not made at the time herein stipulated, and neither the demand for, nor collection by Landlord of, such Additional Rent shall be construed as a curing of such default on the part of Tenant.
(e) If any of the Rent payable under the terms of this Lease shall be or
become uncollectible, reduced or required to be refunded because of any
applicable law, ordinance, order, rule, requirement or regulation, Tenant shall
enter into such agreement(s) and take such other steps (without additional
expense to Tenant) as Landlord may request and as may be legally permissible to
permit Landlord to collect the maximum rents which from time to time during the
continuance of such legal rent restriction may be legally permissible (and not
in excess of the amounts reserved therefor under this Lease). Upon the
termination of such legal rent restriction, (a) the Rent shall become and
thereafter be payable in accordance with the amounts reserved herein for the
periods following such termination and (b) Tenant shall pay to Landlord, to the
maximum extent legally permissible, an amount equal to (i) the Rent which would
have been paid pursuant to this Lease but for such legal rent restriction less
(ii) the Rent paid by Tenant during the period such legal rent restriction was
in effect.
(a) For purposes of this Lease, the term "Taxes" shall mean all real estate taxes, assessments (special or otherwise), ad valorem charges, front foot benefit charges, water and sewer rents, rates and charges (other than charges which are based on consumption and are paid directly by tenants or included in Operating Costs), city and county taxes, minor privilege permits and any other governmental liens, impositions or charges of a similar or dissimilar nature, whether general, special, ordinary, extraordinary, foreseen or unforeseen, and any payments in lieu of such charges, which may be levied, assessed or imposed on or with respect to all or any part of the Shopping Center by any taxing authority, whether or not the same constitutes one or more tax lots. If, however, by law, any assessment may be divided and paid in installments, then, for the purposes of this Paragraph 6(A) such assessment shall be deemed to have been so divided, (B) such assessment shall be deemed payable in the maximum number of installments permitted by law, and (C) there shall be deemed included in taxes for each calendar year the installment(s) of such assessment becoming payable during such calendar year, together with interest payable during such calendar year on such installments(s) and on all installments thereafter becoming due as provided by law, all as if such assessment had been so divided. If at any time during the Term the methods of taxation prevailing at the date hereof shall be altered so that in lieu of or as an addition to or as a substitute for the whole or any part of the Taxes now levied, assessed or imposed on all or any part of the Shopping Center, there shall be levied, assessed or imposed (1) a tax, assessment, levy, imposition or charge based on the rents received therefrom whether or not wholly or partially as a capital levy or otherwise, or (2) a tax, assessment, levy, imposition, or charge measured by or based in whole or in part upon all or any part of the Shopping Center and imposed on Landlord, or (3) a license fee measured by the rent payable by Tenant to Landlord, or (4) any other tax, levy, imposition, charge or license fee however described or imposed, then all such taxes, assessments, levies, impositions, charges or license fees or the part thereof so measured or based, shall be deemed to be Taxes. In no event, however, shall Tenant be required to pay Landlord's income taxes unless such income tax is in lieu of or partial substitution for Taxes. The benefit of any discount for any early payment or prepayment of Taxes shall accrue solely to the benefit of Landlord and such discount shall be subtracted from Taxes.
(b) There shall be excluded from Taxes any real estate taxes, assessments and other charges attributable to new ground floor leasable area hereafter constructed as part of the Shopping Center. In the event that such new area is not separately assessed, the portion of the real estate taxes, assessments and other charges attributable to such new area shall be determined by Landlord, in its reasonable judgment, and such portion shall be excluded from Taxes.
(c) Tenant shall pay to Landlord, as Additional Rent for each calendar year falling wholly or partially within the Term, an amount ("Tenant's Tax Payment") equal to the product of Taxes for such calendar year and Tenant's Expense Share.
(d) For the period, if any, between the Commencement Date and the last day of the calendar year in which the Commencement Date occurs, Tenant shall pay to Landlord on account of Tenant's Tax Payment, a monthly amount equal to Tenant's Initial Estimated Tax Payment, as set forth in Paragraph 1(1) hereof, on the first day of each month (provided that if the Commencement Date is other than the first day of a calendar month, the payment for the month in which the Commencement Date occurs shall be appropriately prorated). With respect to each calendar year commencing after the calendar year in which the Commencement Date occurs, Landlord may furnish to Tenant an estimate of amounts that will be payable by Tenant pursuant to Paragraph 6(c) hereof for such year, and upon receipt of such estimate Tenant will thereafter pay to Landlord, on the first day of each month during such year, on account of Tenant's Tax Payment, an amount equal to 1/12 of such estimate. Landlord may revise such estimate from time to time. Until such estimate has been furnished to Tenant, Tenant shall pay to Landlord, on the first day of each month during such year, an amount equal to the amount payable by Tenant pursuant to Paragraph 6(c) for the previous calendar year divided by the number of months contained in the Term during such previous calendar year. At the end of each calendar year, Landlord shall furnish Tenant with a reconciliation statement setting forth the amounts payable by Tenant for such year pursuant to Paragraph 6(c) hereof and the amounts paid by Tenant on account thereof pursuant to this Paragraph 6(d). Any additional amounts payable by Tenant pursuant to such statement shall be payable within fifteen (15) days after receipt of such statement, and the amount of any overpayment by Tenant shall be promptly refunded by Landlord.
(e) Any Additional Rent payable by Tenant pursuant to this Paragraph 6 shall be collectible by Landlord in the same manner as Basic Rent.
(f) if the Commencement Date or Expiration Date shall occur on a date other than January 1 or December 31, respectively, any Additional Rent under this Paragraph 6 for the calendar year in which the Commencement Date or Expiration Date shall occur, as the case may be, shall be appropriately prorated. In no event shall Basic Rent ever be reduced by operation of this Paragraph 6. The rights and obligations of Landlord and Tenant under the provisions of this Paragraph 6 with respect to any Additional Rent shall survive the Expiration Date or any sooner termination of the Term.
(g) if the lessor under any ground or underlying lease of or the holder of any mortgage of the Shopping Center, or portion thereof shall require any tax escrow deposits, in advance of the due date, then Tenant shall deposit with Landlord, in advance, an amount equal to Tenant's Expense Share of such deposits.
(h) Tenant agrees to pay prior to delinquency any and all taxes and assessments levied, assessed or imposed during the Term upon or against (i) all furniture, fixtures, signs and equipment and any other personal property installed or located within the Premises, (ii) all alterations, additions, betterments or improvements of whatsoever kind or nature made by or on behalf of Tenant to the Premises, including any Tenant's Work or work to be performed by Tenant, as the same may be separately levied, taxed and assessed against or imposed directly upon Tenant by the tax authorities and (iii) the rentals payable hereunder by Tenant to Landlord (other than Landlord's Federal, State and local income taxes thereon).
(i) Should any governmental authority require that a tax, other than the Taxes above mentioned, be paid by Tenant, but collected by Landlord, for and on behalf of said governmental authority, and from time to time forwarded by Landlord to said governmental authority, the same shall be paid by Tenant to Landlord payable in advance.
(j) Only Landlord shall have the right to contest the validity or amount
of any Taxes by appropriate proceedings. Landlord, in its sole judgment, may
settle any such proceedings. In the event Landlord receives any refund of such
Taxes, Landlord shall credit such proportion of such refund as shall be
allocable to payments of Tenant's Tax Payment actually made by Tenant (less
costs, expenses and reasonable attorneys' and appraisers' fees) against the next
succeeding payments of Tenant's Tax Payment due from Tenant, or during the last
year of the term, Landlord will refund such net refund to Tenant within thirty
(30) days following the Expiration
Date provided Tenant is not then in default of any of its obligations under this Lease. Tenant agrees that it shall be bound by Landlord's judgment as to whether or not to contest the validity or amount of any Taxes, and Tenant agrees that it shall not at any time contest the validity or amount of any Taxes.
(k) With respect to any Taxes for which Tenant is responsible hereunder, the official tax bill shall be conclusive evidence of the amount of Taxes levied, assessed, or imposed, as well as of the items taxed. A copy of such tax bill shall, upon request of Tenant, be submitted by Landlord to Tenant.
(a) For purposes of this Lease, the term "Operating Costs" shall mean the total cost and expense incurred in operating, managing, equipping, lighting, repairing, replacing, insuring and maintaining the Shopping Center, including without limitation, gardening and landscaping, sidewalks, curbs, storm drainage systems and other utility systems, sprinkler systems, fire protection and security alarm systems and equipment, traffic control equipment, the cost of public liability and property damage insurance, repairs, line painting, lighting, sanitary control, including the septic system, removal of snow, trash, rubbish, garbage and other refuse, depreciation on or rentals of machinery and equipment used in such maintenance, the cost of personnel to implement such services, to direct parking and to police the Common Areas, and twenty (20%) percent of all of the foregoing costs to cover Landlord's administrative and overhead costs.
(b) There shall be excluded from Operating Costs (1) debt service under any mortgage of the Shopping Center; (2) rental payments under any ground or underlying lease of the Shopping Center and (3) Taxes.
(c) All costs of operating, managing, equipping, lighting, repairing, replacing, insuring and maintaining the Shopping Center shall be included in Operating Costs for the calendar year in which such cost is incurred by Landlord, except that:
(1) the cost of replacing (but not repairing) any roof shall be amortized over a seven year period, and 1/7 of said cost shall be included in Operating Costs for each of seven consecutive calendar years, commencing with the calendar year in which such cost is incurred by Landlord;
(2) the cost of replacing (but not repairing) the asphalt surface of the common parking area shall be amortized over a seven year period, and 1/7 of said cost shall be included in Operating Costs for each of seven consecutive calendar years, commencing with the calendar year in which such cost is incurred by Landlord; and
(3) the cost of reconstruction and replacement of the facade of the Shopping Center shall be amortized over a fifteen year period, and 1/15 of said cost shall be included in Operating Costs for each of fifteen consecutive calendar years, commencing with the calendar year in which such cost is incurred by Landlord.
(4) the cost of replacing the septic system or part thereof shall be amortized over a seven (7) year period, and 1/7 of said cost shall be included in Operating Costs for each of seven (7) consecutive calendar years, commencing with the calendar year in which such cost is incurred by Landlord.
(d) Tenant shall pay to Landlord, as Additional Rent for the period, if any, between the Commencement Date and December 31 of the calendar year in which the Commencement Date occurs, a monthly amount equal to Tenant's Initial Common Area Maintenance Payment, as set forth in Paragraph 1(m) hereof for each calendar month (provided that if the Commencement Date is other than the first day of a calendar month, the payment for the month in which the Commencement Date occurs shall be appropriately prorated) Tenant's Initial Common Area Maintenance Payment shall be payable in advance in monthly installments beginning on the Commencement Date and continuing on the first day of each calendar month thereafter.
(e) Tenant shall pay to Landlord, as Additional Rent for each calendar year falling wholly or partially within the Term (commencing with the calendar year next following the calendar year in which the Commencement Date occurs) an amount ("Tenant's Common Area
Maintenance Payment") equal to the greater of (i) an amount equal to twelve (12) times Tenant's Initial Common Area Maintenance Payment or (ii) the product of Operating Costs for such calendar year and Tenant's Expense Share.
(f) With respect to each calendar year commencing with the calendar year next following the calendar year in which the Commencement Date occurs, Landlord may furnish to Tenant an estimate of amounts that will be payable by Tenant pursuant to Paragraph 7(e) hereof for such year, and upon receipt of such estimate Tenant will thereafter pay to Landlord, on the first day of each month during such year on account of Tenant's Common Area Maintenance Payment, an amount equal to 1/12 of such estimate. Landlord may revise such estimate from time to time. Until such estimate has been furnished to Tenant, Tenant shall pay to Landlord, on the first day of each month during such year, an amount equal to the monthly amount payable by Tenant pursuant to Paragraph 7(d) hereof for the previous calendar year, or an amount equal to 1/12 of the amount payable by Tenant pursuant to Paragraph 7(e) hereof for the previous calendar year, whichever is applicable. At the end of each calendar year, Landlord shall furnish Tenant with a reconciliation statement setting forth the amounts payable by Tenant for such year pursuant to Paragraph 7(e) hereof and the amounts paid by Tenant on account thereof pursuant to this Paragraph 7(f). Any additional amounts payable by Tenant pursuant to such statement shall be payable within fifteen (15) days after receipt of such statement, and the amount of any overpayment by Tenant shall be promptly refunded by Landlord.
(g) Any Additional Rent payable by Tenant pursuant to this Paragraph 7 shall be collectible by Landlord in the same manner as Basic Rent.
(h) If the Expiration Date shall occur on a date other December 31, any Additional Rent under this Paragraph 7 for the calendar year in which the Expiration Date shall occur shall be appropriately prorated. In no event shall Basic Rent ever be reduced by operation of this Paragraph 7. The rights and obligations of Landlord and Tenant under the provisions of this Paragraph 7 with respect to any Additional Rent shall survive the Expiration Date or any sooner termination of the Term.
(i) If at any time during the Term, Landlord constructs new improvements as part of the Shopping Center resulting in an increase in ground floor leasable area of more than 10% over the ground floor leasable area of the Shopping Center as of the date of this Lease, then, from and after the date of issuance of a certificate of occupancy covering such new improvements, Tenant's Expense Share, for purposes of this Paragraph 7 only, shall be adjusted to a percentage equal to the product of Tenant's Expense Share (as set forth in Paragraph 1(k) hereof) and a fraction, the numerator of which is the net rentable area of all ground floor space in the Shopping Center as of the date of this Lease and the denominator of which is the net rentable area of all ground floor space in the Shopping Center including such new improvements. Any Additional Rent under this Paragraph 7 for the calendar year in which the certificate of occupancy for such new improvements has been obtained shall, if such new improvements require an adjustment to Tenant's Expense Share pursuant to this Paragraph 7(i), be appropriately prorated.
(a) Tenant shall use the Premises for the Permitted Use, as set forth in Paragraph 1(g) hereof and shall at all times during the Term shall continuously conduct and operate Tenant's business at the Premises under Tenant's Trade Name, as defined in Paragraph 1(f) hereof. Tenant will not use or permit, or suffer the use of the Premises for any other business or purpose. Tenant shall not sell, display or solicit sales in the Common Areas. Tenant shall not use or permit the use of any vending machines or public telephones on, at or about the Premises without the prior written consent of Landlord. Tenant shall not commit waste, perform any acts or carry on any practice which may injure the Shopping Center or be a nuisance or menace to other tenants in the Shopping Center.
(b) Tenant shall provide, install and at all times maintain in the Premises all suitable furniture, fixtures, equipment and other personal property necessary for the conduct of Tenant's business therein in a businesslike manner. Tenant shall conduct its business in the Premises during the regular customary days and hours for such type of business in the city or trade area in which the Shopping Center is located, and will keep the Premises open for business from 10:00 AM until at least 6:00 PM each day of the week, provided, however, that Tenant shall not be required to be open for business on Sunday.
(c) Intentionally omitted.
(d) Tenant shall not permit any business to be operated in or from the Premises by any concessionaire or licensee without the prior written consent of Landlord.
(e) Tenant shall cause all deliveries to be made to the rear of the Premises.
(f) Tenant will not, without the Landlord's prior written consent, store, place or maintain any merchandise or rubbish containers or other articles in any vestibule or entry of the Premises or on the sidewalks adjacent thereto or elsewhere outside the Premises.
(g) Tenant will not use or permit the use of any apparatus, or sound reproduction or transmission, or any musical instrument, in such manner that the sound so reproduced shall be audible beyond the confines of the Premises, and will not use any other advertising medium, including without limitation flashing lights or search lights, which may be heard or experienced outside of the Premises.
(h) Tenant will not cause or permit objectionable odors to emanate or be dispelled from the Premises.
(i) Tenant will not solicit business, distribute handbills or other advertising matter or hold demonstrations in the parking areas or other Common Areas.
(j) Tenant will not permit the parking of delivery vehicles so as to interfere with the use of any driveway, walk, parking area, or other Common Areas.
(k) Tenant will not use the plumbing facilities for any other purpose than that for which they are constructed and will not permit any foreign substance of any kind to be thrown therein and the expense of repairing any breakage, stoppage, seepage or damage, whether occurring on or off the Premises, resulting from a violation of this provision by Tenant or Tenant's employees, agents or invitees shall be borne by Tenant. All grease traps and other plumbing traps shall be kept clean and operable by Tenant at Tenant's own cost and expense.
(1) Intentionally deleted.
(m) Tenant will not place or cause or permit to be placed within the Premises pay telephones, vending machines (except those solely for the use of Tenant's employees) or amusement devices of any kind without the prior written consent of Landlord.
(n) Tenant, at its sole cost and expense, shall comply with all Legal Requirements and all Insurance Requirements relating to or affecting the Premises, and shall procure all permits necessary for the Permitted Use.
(o) Tenant shall not place a load upon any floor that exceeds either the floor load per square foot that such floor was designed to carry or exceeds that which is allowed by any Legal Requirement.
(p) Tenant and its employees, agents, invitees, and licensees shall faithfully observe and strictly comply with, and shall not permit violation of, any rules and regulations concerning the Shopping Center as Landlord may from time to time make and communicate to Tenant ("Rules and Regulations"). In the case of any conflict or inconsistency between the provisions of this Lease and any Rules and Regulations, the provisions of this Lease shall control. Landlord shall have no duty or obligation to enforce any Rule or Regulation, or any term, covenant or condition of any other lease, against any other tenant, and Landlord's failure or refusal to enforce any Rule or Regulation or any term, covenant or condition of any other lease against and other tenant shall be without liability of Landlord to Tenant.
(a) All Common Areas shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce rules and regulations with respect to all Common Areas. Tenant agrees to abide by and conform with such rules and regulations; to cause its concessionaires and suppliers, officers, agents, employees and independent contractors so to abide and conform. Landlord shall
have the right to construct, maintain and operate lighting facilities in and on all Common Areas; to police the same; from time to time to change the area, level, location and arrangement of parking areas and other facilities located in the Common Areas; to restrict parking by tenants, their officers, agents and employees to employee parking areas; to enforce parking charges (by operation of meters or otherwise), with appropriate provisions for free parking ticket validating by Tenants; to close all or any portion of the Common Areas to such extent as may, in the opinion of Landlord's counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or the public therein; to close temporarily all or any portion of the parking areas or parking facilities; to discourage noncustomer parking; and to do and perform such other acts in and to the Common Areas as, in the use of good business judgment, Landlord shall determine to be advisable with a view to the improvement of the convenience and use thereof by tenants, their officers, agents, employees and customers. Landlord will operate and maintain the Common Areas in such manner as Landlord, in its sole discretion, shall determine from time to time. Without limiting the scope of such discretion, Landlord shall have the full right and authority to employ all personnel and to make all rules and regulations pertaining to and necessary for the proper operation and maintenance of the Common Areas.
(b) All Common Areas not within the Premises, which Tenant may be permitted to use and occupy, are to be used and occupied under a non-exclusive right, and if the amount of the Common Areas be diminished, Landlord shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of Rent, nor shall such diminution of the Common Areas be deemed a constructive or actual eviction.
(a) Tenant shall make no improvements, alterations, changes or additions to the Premises which involve structural changes to the Premises or the Shopping Center or which affect the mechanical, plumbing, electrical or other utility systems of the Shopping Center without the Landlord's prior written approval. Before proceeding with any such improvement, alterations, changes or additions, Tenant shall submit to Landlord detailed plans and specifications therefor, for Landlord's consent. Tenant shall reimburse Landlord for all reasonable expenses incurred by Landlord in connection with (i) its decision as to whether to approve the proposed improvements, alterations, changes or additions, and (ii) inspecting the same to determine whether the same are being or have been performed in accordance with the approved plans and specifications therefor and with all Legal Requirements and Insurance Requirements, including, without limitation, the fees and expenses of any architect or engineer employed for such purpose.
(b) On the Expiration Date or date of earlier termination of this Lease all improvements, alterations, changes and additions shall become the property of Landlord and shall be surrendered with the Premises. All fixtures installed in Premises during the Term shall be and remain a part of the Premises and shall be deemed the property of Landlord as of the date such fixtures are completed, or as of the date such fixtures are attached to or built into the Premises, and shall not be removed by Tenant. At Landlord's option, any or all of the foregoing which may be designated by Landlord shall be removed by Tenant, at its sole cost and expense, on or before the Expiration Date or date of earlier termination of this Lease, in which event Tenant shall restore the Premises to their condition prior to the making of such improvements, alterations, changes or additions, repair any damage or injury to the Shopping Center at its sole cost and expense. Notwithstanding the foregoing, Tenant shall have the right to remove its furniture and bank equipment from the Premises so long as it repairs any damage or injury to the Premises caused by such removal.
(c) Any removal of Tenant's personal property from the Shopping Center shall be accomplished in a manner which will minimize any damage or injury to the Premises and the Shopping Center and any such damage or injury shall be promptly repaired by Tenant at its sole cost and expense. Any personal property of Tenant not removed by Tenant prior to the Expiration Date or date of sooner termination of this Lease shall, at Landlord's option, either become the property of Landlord or shall be disposed of or stored by Landlord at Tenant's risk and expense.
(d) No approval of plans or specifications by Landlord or consent by Landlord allowing Tenant to make improvements, alterations, changes or additions to the Premises shall in any way be deemed to be an agreement by Landlord that the contemplated work complies with any Legal Requirements or Insurance Requirements or the certificate of occupancy for the Premises or the
Shopping Center, or deemed to be a waiver by Landlord of any of the provisions of this Lease. Notice is hereby given that neither Landlord, Landlord's agents, the lessor under any underlying lease of the Shopping Center, or portion thereof or the holder of any mortgage on the Shopping Center, or portion thereof shall be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other liens for such labor or materials shall attach to or affect any estate or interest of Landlord or any other such party in and to the Premises or the Shopping Center.
(a) Tenant shall provide and install and maintain signs on the outside facade above the show windows, which signs shall not project but shall be placed flat against said facade, and shall maintain such signs in good condition and repair at all times. Landlord reserves the right to approve and to specify the design, type and construction of any such signs, which approval shall not be unreasonably withheld or delayed.
(b) Except as provided in Paragraph 11(a) hereof, Tenant will not place or suffer to be placed or maintained on any exterior door, wall or window of the Premises any sign, awning or canopy, or advertising matter or other thing of any kind, and will not place or maintain any exterior lighting, plumbing fixture or protruding object or any decoration, lettering or advertising matter on the glass of any window or door of the Premises.
(a) Landlord shall keep and maintain the foundation, exterior walls and roof of the building in which the Premises are located and the Common Areas in good repair, except that Landlord shall not be called upon to make any such repairs occasioned by the act or neglect of Tenant, its agents, employees, invitees, licensees or contractors. Landlord shall not be called upon to make any other improvements or repairs of any kind upon the Premises.
(b) Except as provided in Paragraph 12(a) hereof, Tenant shall keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) the Premises and every part thereof and any and all appurtenances thereto wherever located, including, without limitation, the exterior and interior portion of all doors, door checks, windows, plate glass, storefront, all plumbing and sewage facilities within the Premises, including free flow up to the main sewer line, fixtures, heating and air conditioning and electrical systems (whether or not located in the Premises), sprinkler system, walls, floors and ceilings, and any Tenant's Work and other work performed by Tenant pursuant to Paragraph 10 hereof.
(c) Tenant shall be responsible, at its sole cost and expenses for providing its own heat, air conditioning and ventilation with the unit now servicing the Premises, for keeping same in good order and repair, and replacing the same as and when necessary. Any replacement shall, upon installation become the property of Landlord, if said unit has a boiler attached thereto, Tenant agrees to carry boiler insurance and provide a certificate thereof to Landlord.
(d) Tenant will keep all exterior and interior store front surfaces clean and will maintain the rest of the Premises and all areas immediately adjoining the Premises in a clean, orderly and sanitary condition and free of insects, rodents, vermin and other pests.
(e) Tenant shall, at its sole cost and expense, keep all outside areas immediately adjoining the Premises, including, without limitation, sidewalks and loading docks, free from ice and snow.
(f) Tenant will not permit accumulations of any debris, refuse and garbage, but will remove the same and keep the same in odor-proof, rat-proof containers within the interior of the Premises, shielded from the view of the general public, until removed, and will not burn any refuse but will cause all such refuse to be removed by such person or companies, including Landlord, as may be designated in writing by Landlord, and will pay all charges therefor, which shall in all events be reasonable; provided, however, that Landlord may decline to designate any such person or company in which event all such refuse shall be removed at Tenant's expense by such person or company as Tenant, subject to Landlord's prior written approval, shall select.
(g) Tenant will, at its sole cost and expense, supply, maintain, repair and replace any fire extinguishers or other fire prevention equipment and safely equipment (including installation of approved hoods and ducts if cooking activity is conducted on the Premises) required by any
Legal or Insurance Requirements, or otherwise recommended or required by any insurance carrier insuring the Shopping Center or any portion thereof.
(a) Tenant shall at all times during the Term, keep in full force and effect a policy of public liability and properly damage insurance with respect to the Premises, and the business conducted by Tenant and any subtenants of Tenant in the Premises, in limits of not less than $1,000,000 per person, $3,000,000 per accident and $500,000 for property damage. The policy shall name Landlord, any person, firms or corporations designated by Landlord, and Tenant as insured, and shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord twenty (20) days' prior written notice. Said insurance shall be with an insurance company approved by Landlord, and a copy of the policy shall be delivered to Landlord, if Tenant fails to secure and maintain insurance policies complying with the provisions of this Paragraph 13(a), Landlord may, but shall not be required to, secure and maintain such insurance policies and Tenant shall pay the cost thereof to Landlord, as Additional Rent, upon demand.
(b) Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by the standard form of fire insurance policy. Tenant agrees to pay any increase in premiums for fire and extended coverage insurance that may be charged daring the Term on the amount of such insurance which may be carried by Landlord on he Premises or the Shopping Center, resulting from Tenant's use or manner of use of the Premises or from the type of merchandise sold by Tenant in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule, issued by the organization establishing the insurance rate for the Premises, showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up the fire insurance rate on the Premises.
(c) In the event Tenant's occupancy causes any increase of premium for the fire, boiler and/or casually rates on the Premises or Shopping Center or any part thereof above the rate of the least hazardous type of occupancy legally permitted in the Premises, Tenant shall pay the additional premium on the fire, boiler and/or casualty insurance policies by reason thereof. Tenant also shall pay, in such event, any additional premium on the rent insurance policy that may be carried by the Landlord for its protection against rent loss through fire. Bills for such additional premiums shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as Additional Rent.
(d) Tenant will indemnify Landlord and save it harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon or at the Premises, or the occupancy or use by Tenant of the Premises and Common Areas or any part thereof or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, lessees or concessionaires. If Landlord shall be made a party to any litigation commenced by or against Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney's fees incurred or paid by Landlord in connection with such litigation. Tenant shall also pay all costs, expenses and reasonable attorney's fees that may be incurred or paid by Landlord in enforcing the covenants and agreements in this Lease.
(e) Landlord shall, at Tenant's expense, replace any and all plate and other glass in the Premises damaged or broken from any cause, and the cost thereof shall be paid by Tenant to Landlord on demand, as Additional Rent. Landlord may insure, and keep insured, at Tenant's expense, all plate and other glass in the Premises for and in the name of Landlord. Bills for the premiums there for shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be payable by Tenant on demand, as Additional Rent.
(a) Tenant shall be solely responsible for and promptly pay all charges for heat, water, gas, electricity or any other utility used or consumed in the Premises. Should Landlord elect to supply the water, gas, heat, electricity or any other utility used or consumed in the Premises,
Tenant agrees to purchase and pay for the same as Additional Rent at the applicable rates filed by the Landlord with the proper regulatory authority, or, in the alternative, if Landlord so elects, Landlord and Tenant from time to time shall enter into a supplementary agreement in writing by which Tenant agrees to pay as Additional Rent the increase in the fair and reasonable rental value of the Premises due to the supplying of any such utilities. In no event shall Landlord be liable for an interruption or failure in the supply of any such utilities to the Premises.
(b) if any utility is metered, and the meter covers both the Premises and other occupied premises, Tenant's obligation with respect to utility charges arising from such meter shall bear the same ratio to the total amount of such charges as the leasable area of the Premises bears to the aggregate leasable area of the Premises and such other premises.
15. Intentionally omitted.
(a) Tenant shall not (i) assign or otherwise transfer this Lease or the term and estate hereby granted, (ii) sublet all or part of the Premises or allow the same to be used or occupied by others or in violation of Paragraph 8 hereof, or (iii) mortgage, pledge or encumber this Lease or all or any part of the Premises in any manner by reason of any act or omission on the part of Tenant, without the prior written consent of Landlord in each instance, which consent Landlord shall be entitled to withhold in its sole discretion.
(b) If this Lease be assigned, whether or not in violation of the terms of this Lease, Landlord may collect rent from the assignee. If the Premises or any part thereof be sublet or be used or occupied by anybody other than Tenant, whether or not in violation of this Lease, Landlord may, after default by Tenant and expiration of Tenant's time to cure such default, if any, collect rent from the subtenant or occupant. In either event, Landlord may apply the net amount collected to the rent herein reserved. The consent by Landlord to an assignment, transfer, encumbering or subletting pursuant to any provision of this Lease shall not in any way be considered to relieve Tenant from obtaining the express prior consent of Landlord to any other or further assignment, transfer, encumbering or subletting. Neither any assignment of this Lease nor any subletting, occupancy or use of the Premises or any part thereof by any person other than Tenant nor any collection of rent by Landlord from any person other than Tenant, nor any application of any such rent as provided in this Paragraph 16 shall, under any circumstances be deemed a waiver of any of the provisions of Paragraph 16(a) hereof or relieve, impair, release or discharge Tenant of its obligations fully to perform the terms of this Lease on Tenant's part to be performed and Tenant shall remain fully and primarily liable there for.
(c) Any assignment or subletting, if consented to, shall be further subject to and conditioned upon the following: (1) at the time of any proposed subletting or assignment, Tenant shall not be in default under any of the terms, provisions or conditions of this Lease; and (ii) the sublessee or assignee shall occupy only the Premises and conduct its business in accordance with the Permitted Use; and (iii) that if the rents charges or other sums required to be paid by such sublessee or assignee exceed the rents, charges or other sums reserved hereunder, then Tenant shall pay to Landlord monthly the entire amount of such excess, which shall be deemed Additional Rent, and (iv) prior to occupancy, Tenant and its assignee or sublessee shall execute, acknowledge and deliver to Landlord a fully executed counterpart of a written assignment of lease or sublease, as the case may be (consented to by any guarantor of this Lease), by the terms of which: (x) in case of an assignment, Tenant will assign to such assignee Tenant's entire interest in this Lease, together with any Security Deposit, and all prepaid rents hereunder, and the assignee will accept said assignment and assume and agree to perform as the obligation of such assignee directly to and for the benefit of Landlord and enforceable by Landlord, all of the terms, covenants and conditions of this Lease on Tenant's part to be performed; or (y) in case of a subletting, the sublease in all respects will be subject and subordinate to all of the terms, covenants and conditions of this Lease and the sublessee thereunder will agree to be bound by and to perform all of the terms, covenants and conditions of this Lease on Tenant's part to be performed, except the payment of rents, charges and other sums reserved hereunder, which Tenant shall continue to be obligated to pay and shall pay to Landlord; and (v) notwithstanding any such assignment or subletting under the terms of this Paragraph, both Tenant and any guarantor will acknowledge that, notwithstanding any such assignment or subletting and the consent of Landlord thereto, neither Tenant nor said guarantor, if any, is released or discharged from any liability whatsoever under this Lease and both shall continue liable with the same force
and effect as though no assignment or sublease had been made; and (vi) Tenant shall pay to Landlord the sum of One Thousand Dollars ($1,000.00) to cover Landlord's administrative costs, overhead and attorneys' fees in connection with such assignment or subletting.
(d) If Tenant, or any guarantor of this Lease, is a corporation or partnership, and if at any time during the Term the person or persons who, on the date of this Lease, owns or own a majority of such corporation's voting shares or such partnership's partnership interest, as the case may be, ceases or cease to own a majority of such shares (whether such transfer occurs at one time or at intervals so that, in the aggregate, such a transfer shall have occurred), or such partnership interest as the case may be (except as the result of transfer by gift or inheritance) or if such guarantor, if any, is dissolved, then (i) Tenant shall give Landlord prior written notice of such event in accordance with Paragraph 16(f) hereof and (ii) any such event shall be considered to be an assignment prohibited by the provisions of Paragraph 16(a) hereof. This Paragraph 16(d) shall not be applicable to any corporation, all the outstanding voting stock of which is listed on a national securities exchange (as defined in the Securities Exchange Act of 1934, as amended). For the purposes of this Paragraph 16(d), stock ownership shall be determined in accordance with the principles set forth in Section 544 of the Internal Revenue Code of 1954 as the same existed on August 16, 1936, as amended, and the term "voting stock" shall refer to shares of stock regularly entitled to vote for the election of directors of the corporation.
(e) If Tenant receives consent under Paragraph 16(a) hereof to any subletting, assignment, transfer, mortgaging, pledging or encumbrance of this Lease, the annual Basic Rent thereafter shall be no less than (1) an amount equal to the average combined annual Basic Rent during the three (3) full 12 month calendar years immediately preceding any such transfer, or (ii) the highest annual combined Basic Rent since the Commencement Date if Tenant at the time of the transfer has been occupying the Premises less than three (3) full 12 month calendar years, or (iii) the Basic Rent payable pursuant to Paragraph 5 hereof increased by the percentage increase in the Index from the Index for the month in which the Commencement Date occurs to the Index for the last month immediately preceding any such transfer, whichever of the foregoing is applicable. Tenant and any transferee shall promptly execute an agreement prepared by Landlord amending this Lease to provide for the payment of the revised annual Basic Rent during the remainder of the Term and all legal costs with respect thereto shall be paid by Tenant to Landlord forthwith on demand as Additional Rent. All of the other terms, covenants and conditions of this Lease shall remain as herein specified.
(f) If Tenant intends to assign this Lease, sublet or part with possession of all or any part of the Premises, or to transfer this Lease in any other manner, in whole or in part or any estate or interest hereunder, then and so often as such event shall occur, Tenant shall give prior written notice to Landlord of such intent, specifying therein the proposed assignee, subtenant or transferee and Landlord shall, within thirty (30) days thereafter, notify Tenant in writing either, that (i) it consents or does not consent in accordance with the provisions and qualifications in this Paragraph 16 or (ii) it elects to terminate this Lease. If Landlord elects to terminate this Lease as aforesaid, Tenant shall notify Landlord in writing within fifteen (15) days thereafter of Tenant's intention either to refrain from such assignment, subletting or transfer, or to accept the termination of this Lease, if Tenant fails to deliver such notice within such period of fifteen (15) days, this Lease will thereby be terminated upon the expiration of the said fifteen (15) day period. If Tenant advises Landlord it intends to refrain from such assignment, subletting or transfer, then Landlord's right to terminate this lease as aforesaid is null and void in such instance.
(g) Landlord shall have no liability for brokerage commissions arising out of a sublease or assignment by Tenant and Tenant shall and does hereby indemnify Landlord and hold it harmless from any and all liability for brokerage commissions arising out of any such sublease or assignment.
(a) Landlord or its representatives, or designees, may enter the Premises at reasonable times under the circumstances, whether or not during business hours, to inspect the Premises, to enforce any provisions of this Lease, to make or cause to be made such repairs as Landlord may deem necessary or desirable, to cure defaults of Tenant pursuant to the rights granted Landlord under Paragraph 23 hereof, to repair any utility lines or system or systems servicing other parts of the Shopping Center, to rectify any condition in the Premises adversely affecting other
occupants of the Shopping Center or, upon prior reasonable notice to Tenant, to exhibit the Premises to others. In the case of an emergency, Landlord may enter the Premises without notice to Tenant but Landlord shall make a good faith effort to provide telephone notice.
Landlord shall not be liable for any damage to property of Tenant or of others located in the Premises or in the Shopping Center, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise. Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, falling ceiling tiles, steam, gas, electricity, water, rain or snow or leaks from any part of the Premises or Shopping Center or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature. Landlord shall not be liable for any such damage caused by other tenants or persons in the Premises, occupants of adjacent property, of the Shopping Center, or the public, or caused by operations in construction of any private, public or quasi-public work. Landlord shall not be liable for any latent or patent defect in the Premises or in the building of which they form a part. All property of Tenant kept or stored on the Premises shall be so kept or stored at the risk of Tenant only and Tenant shall hold Landlord harmless from and hereby waives any claims arising out of damage to the same or damage to Tenant's business, including subrogation claims by Tenant's insurance carrier, unless such damage shall be caused by the willful act or gross neglect of Landlord.
(a) Tenant shall give immediate notice (by telephone, confirmed in writing) to Landlord of any damage caused to the Premises by fire or other casualty, and if Landlord does not elect to terminate this Lease as provided in Paragraph 19(b) hereof Landlord shall proceed with reasonable diligence and at its sole cost and expense to repair and restore the Premises (other than any Tenant's Work, any improvements, alterations, changes and additions to the Premises, and any personal property of Tenant) to substantially the same condition as immediately prior to said damage or destruction.
(b) If the Shopping Center or the Premises shall be destroyed or substantially damaged by a casualty not covered by Landlord's insurance, or if 25% or more of the Premises is damaged or rendered untenantable by a casualty covered by Landlord's insurance, or if the Premises are not affected but 25% or more of the Shopping Center, or such portion of the Common Areas as shall render the Premises or the Shopping Center untenantable, is damaged or rendered untenantable, then in any such event Landlord may elect either to terminate this Lease or to proceed to rebuild and repair the Premises or that portion of the Shopping Center so damaged. Landlord shall give written notice to Tenant of such election within 90 days after the occurrence of such casualty, or within 30 days after the adjustment of the insurance settlement, whichever is later. In the event that such notice of termination shall be given, this Lease shall terminate as of the date provided in such notice of termination (whether or not the Term shall have commenced) with the same effect as if that date were the Expiration Date.
(c) If the Premises are damaged, the Basic Rent and the Additional Rent payable pursuant to Paragraphs 6 and 7 hereof, shall be abated in proportion to the degree in which Tenant's use of the Premises is impaired during the period of any damage, repair or restoration provided for in this Paragraph 19. Except for such abatement, Tenant shall not be entitled to any compensation or damage for loss in the use of the whole or any part of the Premises and/or any inconvenience or annoyance occasioned by damage, destruction, repair or restoration.
(a) if the whole or any portion of the Premises or shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, this Lease shall terminate as of the date of the vesting or acquisition of title in the condemning authority with the same effect as if said date were the Expiration Date.
(b) If the whole or any portion of the Shopping Center (other than the Premises) shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, this Lease shall, at the option of Landlord, terminate as of the date of the vesting or acquisition of title in the condemning authority with the same effect as if said date were the Expiration Date.
(c) Landlord shall give written notice to Tenant of any termination of this Lease pursuant to Paragraph 20(a) or (b) within 90 days after the date of such acquisition or condemnation.
(d) The proceeds of any condemnation award shall be the property of Landlord, whether such award is compensation for damages to Landlord's or Tenant's interest in the Premises, and Tenant hereby assigns all of its interest in any such award to Landlord; provided, however, that Landlord shall have no interest in any award made to Tenant for loss of business, relocation expenses, or for the taking of Tenant's personal property if a separate award for such items is made to Tenant.
(a) The occurrence of any one or more of the following events and the continuation thereof beyond the applicable grace period herein provided, if any, shall constitute an "Event of Default":
(i) if Tenant shall default in the payment of (A) Basic Rent if any, and such default shall continue for a period of 5 business days after written notice from Landlord of such default or (B) any item of Additional Rent and such default shall continue for a period of 10 business days after written notice from Landlord of such default;
(ii) if Tenant shall default in the observance or performance of any of its covenants for obligations under this Lease (other than the payment of Basic Rent, and Additional Rent), and shall not have cured such default within 30 days after written notice from Landlord of such default, or, if such default is of such a nature that it cannot be completely remedied within said 30 days, Tenant shall not (A) have promptly, upon the giving by Landlord of such notice, advised Landlord of Tenant's intention to institute all steps necessary to remedy such situation, (B) promptly institute and thereafter diligently prosecute to completion all steps necessary to remedy the same, and (C) complete such remedy within a reasonable time after the date of the giving of said notice by Landlord and in any event prior to such time as would either subject Landlord or Landlord's agents to prosecution for a crime or cause a default under any lease or mortgage referred to in Paragraph 24 hereof; or
(iii) if any event shall occur or any contingency shall arise whereby this Lease or the estate hereby granted or the unexpired balance of the Term would, by operation of law or otherwise, devolve upon or pass to any person other than Tenant except as is expressly permitted under Paragraph 16 hereof; or
(iv) if the Premises shall become vacated, deserted or abandoned for a period of 10 consecutive business days or if Tenant shall fail to take occupancy of the Premises within 30 days after the Commencement Date; or
(v) if Tenant shall file a voluntary petition in bankruptcy or insolvency, or commence a case under the Federal Bankruptcy Code, or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law (foreign or domestic), or shall make an assignment for the benefit of creditors or shall seek or consent or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any part of Tenant's personal property; or
(vi) if within 60 days after the commencement of any proceeding against Tenant, whether by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal bankruptcy act or any other present or future applicable federal, state or other statute or law (foreign or domestic), such proceeding shall not have been dismissed, or if, within 60 days after the appointment or any trustee, receiver or liquidator of Tenant or of all or any part of Tenant's personal property, without the consent or acquiescence of Tenant, such appointment shall not have been vacated or otherwise discharged, or if any execution or attachment shall be issued against Tenant or any of Tenant's personal property pursuant to which the Premises, or any part thereof shall be taken or occupied or attempted to be taken or occupied; or
(vii) if Tenant shall default in the observance or performance of any of its covenants or obligations under any other lease between Landlord and Tenant, and shall not have cured such default within the applicable grace period, if any, set forth therein.
(b) If at any time, (i) Tenant shall be comprised of two or more persons, or (ii) Tenant's obligations under this Lease shall have been guaranteed by any person, or (iii) Tenant's interest in this Lease shall have been assigned, "Tenant", as used in subdivisions (v) and (vi) of Paragraph 21(a), shall mean any one or more of the persons primarily or secondarily liable for Tenant's obligations under this Lease. Any monies received by Landlord from or on behalf of Tenant during the pendency of any proceeding of the types referred to in subdivisions (v) and (vi) of Paragraph 21(a) shall be deemed paid as compensation or the use and occupation of the Premises and the acceptance of any such compensation by Landlord shall not be deemed an acceptance of Rent or a waiver on the part of Landlord of any rights under this Lease.
(a) In the case of any Event of Default as hereinabove provided (not cured within the applicable cure period, if any, set forth in the Lease), Landlord shall have the immediate right to reenter the Premises and to dispossess Tenant and all other occupants therefrom and remove and dispose of all property therein or, at Landlord's election, to store such property in a public warehouse or elsewhere at the cost and for the account of Tenant, and without Landlord being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby. Upon the occurrence of any such Event of Default, Landlord shall also have the right, at its option, in addition to and not in limitation of any other right or remedy, to terminate this Lease by giving Tenant three (3) days' notice of termination and upon the expiration of said three (3) days, this Lease, and the Term shall cease and terminate as fully and completely as if the date of expiration of such three (3) day period were the Expiration Date and thereupon, unless Landlord shall have theretofore demanded possession of the Premises, Landlord shall have the immediate right of possession, in the manner aforesaid, and Tenant and all other occupants shall quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter mentioned.
(b) If by reason of the occurrence of any such Event of Default, the Term shall end before the Expiration Date, or Landlord shall take possession of the Premises, or Tenant shall be ejected, dispossessed, or removed therefrom by summary proceedings or in any other manner, whether or not specifically enumerated in this Lease, or if the Premises become vacant, deserted or abandoned, Landlord at any time thereafter may relet the Premises, or any part or parts thereof either in the name of Landlord or as agent for Tenant, for a term or terms which may, at Landlord's option, be less than or exceed the period of the remainder of the Term, and at such rent or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, shall determine. Landlord shall receive the rents from such reletting and shall apply the same first, to the payment of such expenses as Landlord may have incurred in connection with reentering, ejecting, removing, dispossessing, reletting, altering, repairing, redecorating, subdividing or otherwise preparing the Premises for reletting, including brokerage and attorneys' fees and expenses; second, to the payment of any indebtedness other than rents, charges and other sums due hereunder from Tenant to Landlord; and the residue, if any, Landlord shall apply to the fulfillment of the terms, covenants and conditions of Tenant hereunder and Tenant hereby waives all claims to the surplus, if any. Tenant shall be and hereby agrees to be liable for and to pay Landlord any deficiency between the rents, charges and other sums reserved hereunder (conclusively presuming the Additional Rent, if any, to be the same as payable for the year immediately preceding such termination or reentry) and the net rentals, as aforesaid, of reletting, if any, for each month of the period which otherwise would have constituted the balance of the Term. Tenant hereby agrees to pay such deficiency in monthly installments on the rent days specified in this Lease, and any suit or proceeding brought to collect the deficiency for any month, either during the Term or after any termination thereof shall not prejudice or preclude in any way the rights of Landlord to collect the deficiency for any subsequent month by a similar suit or proceeding. Landlord shall in no event be liable in any way whatsoever for the failure to relet the Premises or in the event of such reletting, for failure to collect the rents reserved thereunder. Landlord is hereby authorized and empowered to make such repairs, alterations, decorations, subdivision or other preparations for the reletting of the Premises as Landlord shall deem advisable, without in any way releasing Tenant from any liability hereunder, as aforesaid.
(c) No such reentry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless Landlord gives written notice to Tenant of such intention or the termination thereof shall result as a matter of law or be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous default.
(d) In the event this Lease is terminated pursuant to the foregoing provisions of this Paragraph 22, Landlord may recover from Tenant all damages it may sustain by reason of Tenant's default, including the cost of recovering the Premises and reasonable attorneys' fees and expenses and, upon so selecting and in lieu of the damages that may be recoverable under Paragraph 22(b) above (measured by the monthly deficiency, if any), shall be entitled to recover from Tenant, as and for liquidated damages, and not as a penalty, an amount equal to the difference between the rents, charges and other sums reserved hereunder for the period which otherwise would have constituted the balance of the Term from the latest of the date of termination of this Lease, the date of reentry or the date through which monthly deficiencies shall have been paid in full (conclusively presuming the Additional Rent, if any, to be the same as payable for the year immediately preceding such termination or reentry) and the rental value of the Premises at the time of such election, for such period, both discounted at the rate of four percent (4%) per annum to present worth, all of which shall immediately be due and payable by Tenant to Landlord. In determining the rental value of the Premises the rental realized by any reletting, if such reletting be accomplished by Landlord within a reasonable time after the termination of this Lease or within a reasonable time after Landlord regains possession of the Premises, shall be deemed prima facie to be the rental value. Nothing herein contained, however, shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amounts referred to in this Paragraph 22(d).
(e) The parties hereby waive trial by jury in any action, proceeding or counterclaim brought by either party against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant created hereby, Tenant's use or occupancy of the Premises or any claim for injury or damage.
(f) Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event Tenant shall be evicted or dispossessed from the Premises for any cause, or Landlord reenters the Premises following the occurrence of any Event of Default hereunder, or this Lease is terminated before the Expiration Date.
(g) In the event of any breach or threatened breach by Tenant of any of the terms and provisions of this Lease, Landlord shall have the right to injunctive relief and declaratory relief as if no other remedies were provided herein for such breach.
(h) The rights and remedies herein reserved by or granted to Landlord and Tenant are distinct, separate and cumulative, and the exercise of any one of them shall not be deemed to preclude, waive or prejudice Landlord's or Tenant's right to exercise any or all others. Whether or not specifically enumerated in this Lease, Landlord hereby reserves all rights and remedies at law and in equity and nothing contained in this Lease shall be construed as a limitation of any such rights or remedies.
(i) Landlord and Tenant hereby expressly waive any right to assert a defense based on merger and agree that neither the commencement of any action or proceeding, nor the settlement thereof nor the entry of judgment therein shall bar Landlord or Tenant from bringing any subsequent actions or proceeding, nor the settlement thereof nor the entry of judgment therein shall bar Landlord or Tenant from bringing any subsequent actions or proceedings from time to time.
(j) Nothing contained in this Paragraph 22 shall be deemed or construed to require Landlord to give the notices herein provided for prior to the commencement of a summary proceeding for nonpayment of rent or a plenary action for the recovery of rent on account of any default in the payment of rent, it being intended that any such notice or notices are for the sole and only purpose of creating a conditional limitation or a condition precedent hereunder pursuant to which this Lease shall terminate and Tenant shall become a holdover tenant.
(k) The words "reenter", "reentry" and "reentered" as used in this Lease shall not be deemed to be restricted to their technical legal meanings.
(l) In the event Landlord commences any summary proceeding or action for nonpayment of rent, Tenant covenants and agrees that it will not interpose, by consolidation of actions or otherwise, any non-mandatory counterclaim or other claim seeking affirmative relief of whatsoever nature or description in any such proceeding.
(m) Wherever in this Lease it is provided that Landlord is entitled to receive attorneys' fees, or if any rent owing under this Lease is collected by or through an attorney at law, Tenant agrees to pay as such attorneys' fees an amount equal to the greater of (i) fifteen percent (15%) of the amount owed to Landlord or (ii) the maximum amount allowed by law to be collected as attorneys' fees.
If Tenant shall default in the performance of any term of this Lease on Tenant's part to be performed, Landlord, without thereby waiving such default, may, but shall not be obligated to, perform the same for the account and at the expense of Tenant, without notice in case of emergency and upon 10 days' prior notice in all other cases. Landlord may enter the Premises at any time to cure any default without thereby incurring any liability to Tenant or anyone claiming through or under Tenant. Bills for any expenses incurred by Landlord in connection with any such performance or involved in collecting or endeavoring to collect rent or enforcing or endeavoring to enforce any rights against Tenant under or in connection with this Lease or pursuant to law, including any cost, expense and disbursement involved in instituting and prosecuting summary proceedings, as well as bills for any property, material, labor or services provided, furnished or rendered, including reasonable attorneys fees and expenses, shall be paid by Tenant as Additional Rent on demand. In the event that Tenant is in arrears in payment of Rent, Tenant waives Tenant's right, if any, to designate the items against which any payments made by Tenant are to be credited and Landlord may apply any payments made by Tenant to any items Landlord sees fit, irrespective of and notwithstanding any designation or requests by Tenant as to the items against which any such payments shall be credited. Landlord reserves the right, without liability to Tenant to suspend furnishing to Tenant electrical energy and all or any other services (including heat, ventilating and air conditioning), whenever Landlord is obligated to furnish the same, in the event that (but only for so long as) Tenant is in arrears in paying Landlord therefor.
(a) This Lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the Shopping Center or portion thereof and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. The provisions of this Paragraph 24(a) shall be self-operative and no further instruments of subordination shall be required. However, if Landlord requests confirmation of the subordination provided for in this Paragraph 24(a), Tenant shall, without charge therefor, promptly execute and deliver to Landlord any certificate or instrument which Landlord may at any time request in connection therewith.
(b) The holder of any mortgage referred to in Paragraph 24(a) may elect that this Lease shall have priority over such mortgage and upon notification by such mortgagee to Tenant, this Lease shall be deemed to have priority over such mortgage whether this Lease is dated prior to or subsequent to the date of such mortgage.
(c) Tenant agrees to give the lessor under any lease or the holder of any mortgage referred to in Paragraph 24(a) hereof a copy, by registered mail, of any notice of default served upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of notice of assignment of rents and leases, or otherwise) of the address of such lessor or mortgagee. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then each such lessor or mortgagee shall have an additional 30 days within which to cure such default or, if such default cannot be cured within that time, then such additional time as may be necessary to cure such default (including but not limited to commencement of lease termination or mortgage foreclosure proceedings if necessary to effect
such cure), in which event this Lease shall not be terminated while such remedies are being so diligently pursued.
(d) If at any time prior to the termination of this Lease, the lessor under any lease or the holder of any mortgage referred to in Paragraph 24(a) (or any person, or such person's successors or assigns, who acquires the interest of Landlord under this Lease through foreclosure action or an assignment or deed in lieu of foreclosure) shall succeed to the rights of Landlord under this Lease through possession or foreclosure or delivery of a new lease or deed or otherwise, Tenant agrees at the election and upon request of any such person, to fully and completely attorn, from time to time, to and recognize such person as Tenant's landlord under this lease upon the then executory terms of this Lease. Upon such attornment this Lease shall continue in full force and effect as a direct lease between Tenant and such successor landlord except that such successor landlord shall not be:
(i) liable for any previous act or omission of any prior landlord (including Landlord);
(ii) subject to any offsets or defenses which may have theretofore accrued to Tenant against any prior landlord (including Landlord);
(iii) bound by any previous prepayment of Basic Rent, or Additional Rent, if any, for a period greater than one month in advance;
(iv) bound by any modifications of this lease, unless such modification has been approved in writing by such lessor or holder of any mortgage; or
(v) liable for any security deposits pursuant to the lease unless such security has actually been delivered to such lessor or holder of a mortgage.
On the Expiration Date or upon the sooner termination of this Lease or upon reentry by Landlord upon the Premises, Tenant shall surrender, vacate and deliver to Landlord the Premises, including all improvements, additions, alterations and replacements thereon, trade fixtures, furnishings, furniture, equipment, merchandise and other personal property installed or placed in or on the Premises by Tenant unless removed by Ten ant pursuant to Paragraph 10 hereof, "broom clean" and in good order, condition and repair except for ordinary wear, tear and damage by fire or other insured casualty. if the Premises are not surrendered upon the Expiration Date or sooner termination of this Lease, Tenant hereby indemnifies Landlord against liability resulting from delay by Tenant in so surrendering the Premises, including any claims made by any succeeding Tenant or prospective Tenant founded upon such delay. Tenant's obligations under this Paragraph 25 shall survive the Expiration Date or sooner termination of this Lease. At the option of Landlord, Tenant shall be required to remove the vault.
Tenant, if and so long as it pays the Rent and performs and observes the other terms and covenants to be performed and kept by it as provided in this Lease, shall have the peaceable and quiet possession of the Premises during the Term free of the claims of Landlord or anyone claiming by, through or under Landlord, subject to the terms of this Lease and any lease or mortgage referred to in Paragraph 24(a) hereof. This covenant shall be construed as a covenant running with the Land and shall not be construed as a personal covenant or obligation of Landlord, except to the extent of Landlord's interest in this Lease and then subject to the terms of Paragraph 28(k) and (1) hereof.
Tenant has deposited with Landlord a sum equal to the amount of the Security Deposit, as set forth in Paragraph 1(o) hereof, as security for the full and punctual performance by Tenant of all of the terms of this Lease, in the event Tenant defaults in the performance of any of the terms of this Lease, including the payment of Rent, Landlord may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any Rent or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any of the terms of this Lease, including any damages or deficiency in the reletting of
the Premises, whether accruing before or after summary proceedings or other reentry by Landlord. in the case of every such use, application or retention, Tenant shall, on demand, pay to Landlord the sum so used, applied or retained which shall be added to the security deposit so that the same shall be replenished to its former amount. If Tenant shall fully and punctually comply with all of the terms of this Lease, the security, without interest, shall be returned to Tenant after the termination of this Lease and delivery of exclusive possession of the Premises to Landlord. In the event of a sale or lease of the Shopping Center Landlord shall have the right to transfer the security to the vendee or lessee and Landlord shall ipso facto be released by Tenant from all liability for the return of such security; and Tenant agrees to look solely to the new landlord for the return of said security; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new landlord, Tenant shall not assign or encumber or attempt to assign or encumber the monies deposited herein as security and neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or encumbrance.
(a) No agreement to accept a surrender of this Lease shall be valid unless in writing signed by Landlord. The delivery of keys or possession to Landlord or any agent or employee of Landlord shall not operate as a termination of this Lease or surrender of the Premises.
(b) No provision of this Lease shall be deemed to have been waived by Landlord or Tenant unless such waiver be in writing signed by the party making such waiver. The failure of Landlord or Tenant to seek redress for violation of, or to insist upon strict performance of, any covenant or condition of this Lease, shall not be deemed a waiver thereof or prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation.
(c) The receipt by Landlord of Basic Rent, and/or any items of Additional Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser amount than the Basic Rent, or Additional Rent, if any, herein stipulated shall be deemed to be other than on account of the earliest Basic Rent, or Additional Rent, if any, reserved hereby which is due and owing at the time such payment is received by Landlord. No endorsement or statement on any check or any letter accompanying any check or payment of any such Rent shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right or remedy provided in this Lease.
(d) The captions used in this Lease are for convenience only and do not in any way limit or amplify the terms and provisions hereof. Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender.
(e) The Exhibits hereto are hereby incorporated into this Lease.
(f) This Lease and all other agreements and instruments signed contemporaneously herewith contain the entire agreement between parties, and no agreement, representation or inducement shall be effective to change, modify or terminate this Lease in whole or in part unless such agreement, representation or inducement is in writing and signed by both parties hereto.
(g) Tenant at any time or from time to time at the request of Landlord or at the request of the lessor under any lease or the holder of any lease or mortgage referred to in Paragraph 24(a) hereof, will execute, acknowledge and deliver to the party so requesting, a certificate by Tenant certifying:
(i) that this Lease has not been modified, changed, altered or amended in any respect and is in full force and effect (or, if there have been modifications, stating the modifications and that the Lease is in full force and effect as modified);
(ii) that this Lease is the only Lease between Landlord and Tenant affecting the Premises;
(iii) that Tenant has accepted the Premises (or part thereof), is in occupancy of the Premises, or part thereof, and is paying Rent hereunder, for which it is then liable on a current basis;
(iv) that there are then existing no credits, offsets or defenses against the enforcement of any provisions of this Lease (or, if so, specifying the same);
(v) the dates, if any, to which the Rent or other charges due hereunder have been paid in advance and that there has been no prepayment of Rent other than as provided for in this Lease;
(vi) that there are no existing defaults by Landlord or Tenant under this Lease (or, if so, specifying such default);
(vii) whether or not Tenant has exercised any renewal options or other options which may be provided in this Lease;
(viii) that there are no actions, whether voluntary or otherwise, pending against Tenant under the bankruptcy laws of the United States or any state thereof; and
(ix) such further information with respect to the Lease or the Premises as Landlord, or such lessor or mortgagee, may request.
Any such certificate may be relied upon by any prospective purchaser of the Shopping Center or of the interest of Landlord in any part thereof, by any mortgagee or prospective mortgagee thereof, by any lessor or prospective lessor thereof by any lessee or prospective lessee thereof or by any prospective assignee of any mortgage thereof. The failure of Tenant to execute, acknowledge and deliver to Landlord a statement in accordance with the provisions of this Paragraph 28(g) within 10 days after request therefor shall constitute an acknowledgment by Tenant, which may be relied on by any person who would be entitled to rely upon any such statement, that such statement as submitted by Landlord is true and correct.
(h) If any provision of this Lease should be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this Lease shall not be affected thereby.
(i) The terms, provisions and covenants contained in this Lease shall apply to, inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors and permitted assigns and shall be covenants running with the land.
(j) In the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed and performed by Landlord, Tenant shall look solely to the estate and property of Landlord in the Shopping Center for the collection of any sum of money on a judgment, or for the payment or expenditure of any money under any decree of specific performance, injunctive relief or other equitable relief (or other judicial process) requiring performance by Landlord of any obligation under this Lease. No other property or assets of the Landlord, Landlord's agents, incorporators, shareholders, officers, directors, partners, principals (disclosed or undisclosed) or affiliates shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies.
(k) The term "Landlord" shall mean only the owner at the time in question of the present Landlord's interest in the Shopping Center and in the event of a sale or transfer of the Shopping Center (by operation of law or otherwise) the transferor shall be and hereby is automatically and entirely released and discharged, from and after the date of such sale or transfer, of all liability in respect of the performance of any of the terms of this Lease on the part of Landlord thereafter to be performed.
(1) Tenant hereby expressly waives any and all rights granted by or under any present or future laws to redeem Landlord's reversionary interest in the Shopping Center. In addition, in the event of any lawful termination of the Term or any repossession of the Premises by reason of Tenant's default hereunder, Tenant waives (i) any notice of reentry or of the institution of legal proceedings to that end, (ii) any right of redemption, reentry or repossession, and (iii) the benefit of any laws now or hereafter in force exempting properly from liability for rent or otherwise. The
provisions of this Paragraph shall survive the Expiration Date or sooner termination of this Lease.
(m) Neither Landlord nor Tenant shall record this Lease, any amendment to this Lease, or any other memorandum of this Lease without the prior written consent of the other party and in the event such consent is given the party requesting such consent shall pay all transfer taxes, recording fees and other charges in connection with such recording notwithstanding any provision of law imposing liability therefor upon the other party.
(n) Except as otherwise expressly set forth herein all notices, requests, demands, approvals or consents required hereunder or by law (collectively, "Notices") shall be in writing and shall be given by personal delivery by mailing the same, certified or registered mail, return receipt requested, postage prepaid, or by recognized overnight courier with receipt acknowledged addressed to Landlord at the Address of Landlord, as set forth in Paragraph 1(c) hereof and if to Tenant, at the Address of Tenant, as set forth in Paragraph 1(e) hereof if such Notice is given prior to the Commencement Date and thereafter at the Premises. Notices shall be deemed given upon such personal delivery, the next day if by recognized overnight carrier or, if mailed, 2 business days after mailing. The persons designated for the receipt of Notices, and the addresses to which Notices may be given or made by either party, may be changed or supplemented by Notice given by such party to the other and notwithstanding the preceding sentence such Notice shall be effective 10 days after mailing or delivery.
(o) Tenant expressly acknowledges that neither Landlord nor Landlord's agents has made or is making, and Tenant, in executing and delivering this Lease, is not relying upon, any warranties, representations, promises or statements, except to the extent that the same are expressly set forth in this Lease, and no rights, easements or licenses are or shall be acquired by Tenant by implication or otherwise unless expressly set forth in this Lease.
(p) Tenant warrants that it has not employed nor had any dealings or discussions with any broker or agent in connection with the negotiation or execution of this Lease other than the broker, if any, referred to in Paragraph 7(p) hereof. Landlord agrees to pay said broker a commission in accordance with a separate agreement. Tenant agrees to indemnify Landlord and hold it harmless from and against any and all liability for commissions or other compensation or charges and all costs and expenses incurred in defense of the claim if this warranty is breached. In the event of a suit on any such claim, Landlord shall notify and impede Tenant, or Tenant may intervene.
(q) Tenant hereby waives any claim against Landlord which it may have based upon any assertion that Landlord has unreasonably withheld or unreasonably delayed any consent, and Tenant agrees that its sole remedy shall be an action or proceeding to enforce any such provision or for specific performance, injunction or declaratory judgment. In the event of such a determination, the requested consent shall be deemed to have been granted. The sole remedy for Landlord's unreasonably withholding or delaying of consent shall be as provided in this Paragraph 28(s).
(r) The terms of this Lease shall bind and benefit the successes and assigns of the parties with the same effect as if mentioned in such instance where a party is named or referred to, except that no violation of the provisions of Paragraph 16 hereof shall operate to vest any right in any successors or assignee of Tenant and that the provisions of this Paragraph shall not be construed as modifying the conditions of limitation contained in Paragraph 16 hereof.
(s) This lease may be executed in several counterparts, each of which shall constitute an original instrument and all of which shall together constitute one and the same instrument.
(t) Landlord does hereby grant Tenant a right of first refusal to lease with respect to Store 4 (the laundromat space) and Store 4a, for the Permitted Use (1)(f). In the event Landlord receives an offer to lease with respect to either or both spaces, Landlord shall provide written notice thereof to the Tenant, setting forth the pertinent terms and conditions of the proposed leasing. Tenant shall have thirty (30) days within which to notify the Landlord in writing that it accepts or rejects its right of first refusal to lease the space. Failure of the Tenant to notify the Landlord in writing of its intention, shall be deemed a waiver of its rights hereunder. In the event Tenant elects not to exercise its rights of first refusal or otherwise waives its rights hereunder, then Landlord shall have the right to proceed to lease the space to the proposed tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the day and year first above written.
ATTEST: CIRCLE PLAZA ASSOCIATES,
NEW JERSEY LIMITED PARTNERSHIP, Landlord
/s/ Pati L. Clark By: /s/ Jospeh P. Lucarelli
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JOSEPH P. LUCARELLI, General Partner
ATTEST: TWO RIVER COMMUNITY BANK, Tenant
/s/ Michael J. Gormley By: /s/ Barry B. Davall
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EXHIBIT A DEMISED PREMISES
[MAP OF OFFICEMAX PLAZA]
EXHIBIT B LANDLORD'S WORK
The Landlord will erect a one hour demising wall; install windows on the westerly elevation (the number and location of which shall be determined by Landlord's architect); bathrooms as per architect's plans shall be built to code, including utilities stubbed for kitchen; the utilities for the space shall be separated; the HVAC system shall be in good working order as of the Commencement Date of the Lease and of sufficient capacity to sufficiently heat and cool the space; Landlord shall provide barrier-free access on the westerly elevation.
EXHIBIT C2 RENEWAL OPTION RIDER
1. The provisions of this Rider shall supersede any inconsistent provisions contained in the Lease.
2. Provided Tenant shall have fully performed all of the terms, provisions, covenants, conditions and agreements on its part to be performed under this Lease, and shall not then be in default under this Lease, Tenant shall have the right, at its option, to renew this Lease for two (1) renewal terms of three (3) years each, the first renewal term to commence on the day following the Expiration Date of the Lease and the Second Renewal Term to commence on the Expiration Date of the First Renewal Term.
3. Tenant shall exercise the renewal options by giving to Landlord written notice of such election to renew not later than one (1) year prior to the Expiration Date, and upon the giving of such notice this Lease thereupon shall be deemed renewed for the renewal term with the same force and effect as if the renewal term had been originally included in the Term.
4. Tenant may not exercise its option to renew unless said option has theretofore been properly exercised in accordance herewith.
5. All the terms, provisions, agreements, covenants and conditions of this Lease shall continue in full force and effect during the renewal term. Basic Rent shall continue to be increased during the renewal term in accordance with the provisions of Exhibit D to this Lease.
6. Any uncured default or termination, cancellation or surrender of this Lease during the Term shall terminate any right of renewal hereunder.
7. As used herein, "Term" shall include the renewal term of this Lease if this Lease is renewed pursuant to the provisions of this Rider.
EXHIBIT C3 LEASE ASSIGNMENT RIDER
1. Notwithstanding anything contained in Paragraph 16(a) of the Lease to the contrary, Landlord shall not unreasonably withhold its consent to an assignment of this Lease to any entity to which Tenant is selling its entire business, provided that the following conditions are satisfied:
(a) All applicable terms and conditions of Paragraph 16 (including, without limitation, the provisions of Paragraph 16(c) are complied with in full;
(b) The assignee shall pay to Landlord prior to the effective date of the assignment a Security Deposit (or additional Security Deposit) in an amount equal to the sum of (i) twice the Basic Rent payable during the calendar month immediately preceding the month in which the effective date of the assignment occurs, (ii) 1/6 of the then estimated annual Additional Rent payable pursuant to Paragraphs 6 and 7 of this Lease. Failure to comply with any of the foregoing conditions shall cause the assignment to be void.
EXHIBIT C4 HAZARDOUS SUBSTANCE RIDER
1. If Tenant receives any notice of the happening of any event involving the use, release, threatened release, spill, discharge or cleanup of any Hazardous substance on or about the demised premises or into the environment (any such event is hereinafter referred to as a "Hazardous Discharge") or of any complaint, order, citation, or notice with regard to any Hazardous Substance or any Environmental Law affecting Tenant (an "Environmental Complaint') from any person or entity, including the Department of Environmental Protection of New Jersey ("DEP") and the United States Environmental Protection Agency ("EPA'), then Tenant shall give immediate oral and written notice of same to Landlord and to any mortgagee of all or a portion of the Shopping Center of which Tenant has received notice (collectively, "Landlord's Mortgagee") detailing all relevant facts and circumstances.
"Hazardous Substance" shall mean any substance, gas, material, chemical or pollutant which is or may be regulated by or defined as or included in the definition of "Hazardous Substances", "Toxic Substances", "Hazardous Waste", "Hazardous Materials", or words of similar impart under any Environmental Law, including, without limitation, petroleum, radon gas, lead paint, asbestos, and polychlorinated biphenyls.
"Environmental Law" shall mean all legal requirements relating to the protection of human health or the Environment, including, without limitation: (i) all legal requirements relating to the reporting licensing, permitting, investigation or remediation of emissions, discharges, releases, or threatened releases of Hazardous Substances into the Environment or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances and (ii) all legal requirements pertaining to the protection of the health and safety of employees or the public.
"Environment" shall mean soil, surface waters, ground waters, land, stream, sediments, surface or subsurface strata and ambient air.
2.(a) Without limitation of the foregoing, Landlord shall have the right, but not the obligation, to exercise any of its rights as provided in Paragraph 23 of this Lease or to enter onto the Premises or to take such actions as it deems necessary or advisable to cleanup, remove, resolve or minimize the impact of or otherwise deal with any Hazardous Substance, Hazardous Discharge or Environmental Complaint. All costs and expenses incurred by Landlord in the exercise of any such rights shall be deemed to be Additional Rent hereunder and shall be payable by Tenant to Landlord upon demand.
(b) Tenant shall at all times during the term of this Lease maintain in full force and effect environmental impairment insurance satisfactory to Landlord and Landlord's mortgagee as to carrier, amount, coverage and all other aspects, taking into account all reasonable factors including, without limitation, the Standard Industrial Classification number of Tenant.
3. The occurrence of any of the following events shall constitute an Event of Default under this Lease:
(a) If Landlord receives its first notice of a Hazardous Discharge or an Environmental Complaint on or pertaining to the Premises other than from Tenant, and Landlord does not receive a notice (which may be given in any oral or written form, provided same is followed with all due dispatch by written notice given by certified mail, return receipt requested) of such Hazardous Discharge or Environmental Complaint from the Tenant within three (3) business days of the time Landlord first receives said notice other than from Tenant; or
(b) if the DEP, EPA or any other local, state or federal agency asserts or creates a first lien upon any or all of the Premises by reason of the occurrence of a Hazardous Discharge or an Environmental Complaint or otherwise; or
(c) if the DEP, EPA or any other local, state or federal agency asserts a claim against the Tenant, the demised premises or Landlord for damages or cleanup costs related to a Hazardous Discharge or an Environmental Complaint on or pertaining to the Premises; provided
however, such claim shall not constitute a default if within fifteen (15) days of the occurrence giving rise to the claim:
(d) Tenant can prove to Landlord's satisfaction that Tenant has commenced and is diligently pursuing either: (x) cure or correction of the event which constitutes the basis for the claim, and continues diligently to pursue such cure or correction to completion, or (y) proceedings for an injunction, restraining order or other appropriate emergent relief preventing such agency or agencies from asserting such claim, which relief is granted within ten (10) days of the occurrence giving rise to the claim and the emergent relief is not thereafter dissolved or reversed on appeal; and
(e) In either of the foregoing events, Tenant has posted a bond, letter of credit or other security satisfactory in form, substance and amount to Landlord and the agency or entity asserting the claim to secure the proper and complete cure or correction of the event which constitutes the basis for the claim.
4. Tenant hereby agrees to defend, indemnify, and hold Landlord harmless from and against any and all claims, losses, liabilities, damages and expenses (including without limitation, cleanup costs and reasonable attorney's fees arising by reason of any of the aforesaid or any action against Tenant under this indemnity) arising directly or indirectly from, out of or by reason of any Hazardous Discharge or Environmental Complaint occurring either (i) during or attributable to the Term and any other period of possession of the Premises by Tenant or (ii) by reason of or attributable to Tenant's operations. This indemnity shall apply notwithstanding any negligent or other contributory conduct by or on the part of Landlord, its mortgagee or any one or more other parties or third parties.
5.(a) if Tenant's operations on the Premises now or hereafter constitute an "Industrial Establishment" subject to the requirements of the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K6 et seq., and the regulations pertaining thereto, N.J.A.C. 7:26B-1 et seq. ("ISRA"), then prior to the expiration or sooner termination of this Lease and upon any and every condemnation, casualty, assignment or sublease (if permitted), change in ownership or control of Tenant or any other closure, transfer or event by Landlord or Tenant which is subject to the requirements of ISRA, Tenant shall comply with all requirements of ISRA pertaining to an Industrial Establishment closing or transferring operations, at its sole cost and expense, to the satisfaction of the DEP and Landlord. Without limitation of the foregoing, Tenant's obligations shall include (A) the proper filing of the initial notice to the DEP required by N.J.A.C. 7:26B-3.2, (B) the performance to DEP's and Landlord's satisfaction of all air, soil, ground water and surface water sampling and tests required by N.J.A.C. 7:26B-4.1-4.3 and (C) either (x) the filing of a "negative declaration" with DEP under N.J.A.C. 7:26B-5.2 which has been approved by DEP or (y) the performance of a proper and approved cleanup plan to the full satisfaction of DEP and Landlord in accordance with N.J.A.C. 7:26B-5.3. Tenant shall immediately provide Landlord with copies of all correspondence, reports, notices, orders, findings, declarations and other materials pertinent to Tenant's compliance and DEP's requirements under ISRA, as any of same are issued or received by Tenant from time to time.
(b) Tenant shall be responsible for any environmental cleanup costs, penalties or damages arising from its use of the Premises. The provisions of this Paragraph shall survive the Expiration Date or sooner termination of this Lease.
6. In the event of Tenant's failure to comply in full with this Article, Landlord may, at its option, perform any or all of Tenant's obligations as aforesaid and all costs and expenses incurred by Landlord in exercise of this right shall be deemed to be Additional Rent payable on demand.
7. This Paragraph shall survive the Expiration Date or sooner termination of the Lease.
EXHIBIT D BASIC RENT ESCALATION RIDER
The Basic Rent payable for the portion of the Term commencing on July 1, 2002 shall be as follows:
(a) For the portion of the Term commencing on the Commencement Date and ending twelve (12) months after the Commencement Date, at the rate of $33,000.00 per annum ($2,750.00 per month);
(b) For the portion of the Term commencing on the second anniversary of the Commencement Date and terminating twelve (12) months thereafter, at the rate of $33,990.00 per annum ($2,832.50 per month);
(c) For the portion of the Term commencing at the third anniversary of the Commencement Date and terminating twelve (12) months thereafter; at the rate of $35,009.70 per annum ($2,917.48 per month);
(d) For the portion of the Term commencing at the fourth anniversary of the Commencement Date and terminating twelve (12) months thereafter; at the rate of $36,059.99 per annum ($3,005.00 per month);
(e) For the portion of the Term commencing at the fourth anniversary of the Commencement Date and terminating twelve (12) months thereafter; at the rate of $37,141.79 per annum ($3,095.15 per month);
The Basic Rent during the first renewal period commencing on the sixth anniversary of the Commencement Date shall be determined as follows:
"Market Rent" shall mean the fair market rent for the demised premises for the Renewal Term, determined as of the date of 180 days prior to the expiration of the First Renewal Term (the "Determination Date"), based upon the rents generally in effect for comparable office space in Monmouth County, New Jersey. Market rent (for the purpose of determining the fixed rent only during the Renewal Term) shall be determined on what is commonly known as the "gross" basis; this is, in computing Market Rent it shall be assumed that all real estate taxes and customary services are included in the market rent. Notwithstanding the foregoing, the base rent for the Second Renewal Term shall be thereafter increased from time to time as provided in this Lease, and the base year for tax and operating expenses increases, tax base and base operating expenses for the Renewal Term shall all be deemed redefined as and recomputed on the basis of the last calendar year of the Initial Term of this Lease.
Landlord shall notify Tenant ("Landlord's Determination Notice") of Landlord's determination of the Market Rent not later than 60 days after the Determination Date. If Tenant disagrees with Landlord's determination, Tenant shall notify Landlord (`Tenant's Notice of Disagreement') within 15 days of receipt of Landlord's Determination Notice. Time shall be of the essence with respect to Tenant's Notice of Disagreement, and the failure of Tenant to give notice within the time period set forth above shall conclusively be deemed an acceptance by Tenant of the Market Rent as determined by Landlord and a waiver by Tenant of any right to dispute such Market Rent, if Tenant timely gives its Tenant's Notice of Disagreement, then the Market Rent shall be determined as follows: Landlord and Tenant shall, within 30 days of the date on which Tenant's Notice of Disagreement was given, each appoint an Appraiser for the purpose of determining the Market Rent. An "Appraiser" shall mean a duly qualified impartial real estate appraiser who is a member of the American Institute of Real Estate Appraisers and who has at least 10 years' experience in appraising properties in Central New Jersey. In the event that the two Appraisers so appointed fall to agree as to the Market Rent within a period of 30 days after the appointment of the second Appraiser, such two Appraisers shall forthwith appoint a third Appraiser who shall make a determination within 30 days thereafter, if such two Appraisers fail to agree upon such third Appraiser within 10 days following the last 30 day period, such third Appraiser shall be appointed by the Monmouth County Assignment Judge of the New Jersey Superior Court. Such two Appraisers or three Appraisers, as the case may be, shall proceed with all reasonable dispatch to determine the Market Rent. The decision of such Appraisers shall be final; such decision shall be in writing and a copy shall be delivered simultaneously to Landlord and Tenant. if such Appraisers fail to deliver their decision as set forth above prior to the commencement of the Renewal Term, Tenant shall pay Landlord the
base rent and tax expense increases at the rate as of the last day of the Initial Term, until such decision is so delivered, if the Market Rent as determined above is in excess of the actual rent paid, then Tenant, upon demand, shall pay to Landlord the difference between the actual rent paid and the Market Rent from the commencement of the Renewal Term. Landlord and Tenant shall each be responsible for and shall pay the fee of the Appraiser appointed by them respectively, and Landlord and Tenant shall share equally the fee of the third Appraiser.
In no event will the rent for the first year of the First Renewal Term be less than the rent for the last year of the Initial Term.
Once the Market Rent is determined for the first year of the Renewal Term, the Rent shall increase by three percent (3%) for each year during the first Renewal Term.
Rent for the first year of the Second Renewal Term shall be determined on the basis of the Market Rent formula set forth hereinabove. In no event will Rent for the first year of the second Renewal Term be less than the Rent for the last year of the first Renewal Term. Once the Market Rent is determined for the first year of the second Renewal Term, the Rent shall increase annually thereafter at the rate of three percent (3%).
Exhibit 10.22
LEASE AGREEMENT
Between
CRL REALTY ASSOCIATES, LP
OWNER OF EASTPOINTE SHOPPING PLAZA
By CRL REALTY MANAGEMENT, Inc. GENERAL PARTNER
BY ROBERT LINDMARK, PRESIDENT
LANDLORD
AND
TWO RIVER COMMUNITY BANK
1250 Hwy 35
Middletown, NJ 07748
TENANT
Dated: 11 March 2005
Premises: 2345 Highway #36
Atlantic Highlands, New Jersey 07716
Tenant's Store Name: TWO RIVER COMMUNITY BANK
Tenant's Store Number: 1 & 2
Square Footage: 2080 sq. feet
TABLE OF CONTENTS
Page
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1. POSSESSION and USE .................................................... 4
2. TERM of LEASE and OPTION to RENEW ..................................... 5
3. ASSIGNMENT or SUBLETTING .............................................. 5
4. RENT and ADDITIONAL RENT .............................................. 7
5. SECURITY .............................................................. 7
6. INSURANCE ............................................................. 8
7. UNAVAILABILITY of FIRE INSURANCE, RATE INCREASES ...................... 8
8. WATER DAMAGE .......................................................... 8
9. LIABILITY of LANDLORD and TENANT ...................................... 9
10. REAL ESTATE TAXES ..................................................... 9
11. ACCEPTANCE of RENTAL SPACE ............................................ 9
12. QUIET ENJOYMENT ....................................................... 9
13. UTILITIES and SERVICES ................................................ 9
14. TENANT'S REPAIRS, MAINTENANCE, and COMPLIANCE ......................... 10
15. LANDLORD'S REPAIRS and MAINTENANCE .................................... 11
16. ALTERATIONS ........................................................... 11
17. FIXTURES .............................................................. 12
18. SIGNS ................................................................. 12
19. ACCESS to RENTAL SPACE ................................................ 13
20. FIRE and OTHER CASUALTY ............................................... 13
21. EMINENT DOMAIN ........................................................ 14
22. TENANT'S CERTIFICATE .................................................. 14
23. DEFAULT, RE-ENTRY and EVICTION, DAMAGES ............................... 14
A. Default; B. Re-Entry and Eviction; C. Damage
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24. CONDITIONS of REINSTATEMENT of LEASE .................................. 16
25. SURRENDER, WAIVER ..................................................... 16
26. END of TERM ........................................................... 16
27. COMMON AREAS .......................................................... 17
28. COMMON AREA MAINTENANCE and SERVICES .................................. 17
29. SUBORDINATION to MORTGAGE ............................................. 17
30. LANDLORD'S CONSENT .................................................... 18
31. CORPORATE RESOLUTION .................................................. 18
32. ISRA COMPLIANCE ....................................................... 18
33. DISCHARGE of HAZARDOUS and/or TOXIC SUBSTANCES; ....................... 19
INDEMNIFICATION
34. GENERAL INDEMNIFICATION and HOLD HARMLESS ............................. 19
35. INTEREST on LATE PAYMENTS ............................................. 19
36. DELIVERY of LEASE ..................................................... 20
37. BINDING/GOVERNING LAW ................................................. 20
38. CAPTIONS AND INTERPRETATION ........................................... 20
39. NOTICES ............................................................... 20
40. SURVIVAL .............................................................. 21
41. FULL AGREEMENT ........................................................ 21
42. BROKERS ............................................................... 21
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BUSINESS LEASE
THE LANDLORD AGREES TO RENT AND TENANT AGREES to lease the Rental Space for the term and at the rent stated, as follows: (The words "Landlord" and "Tenant" includes all Landlords and all Tenants under this Lease.)
SUMMARY PAGE
Landlord: CRL Realty Associates LP, P.O. Box 323, Navesink, NJ 07752
Tenant: Two River Community Bank, 1250 Hwy 35, Middletown, NJ 07748
Rental Space: Store #1 & 2, along with the drive in facilities, all as more
particularly depicted on the site plan which is attached to
this Lease as Exhibit "A"
Square Footage: 2080 sf. (4.16 % of shopping center for NNN calculations)
Shopping Center: Eastpointe Shopping Plaza at 2345 -2399 Highway #36, Atlantic
Highlands, NJ 07716
Date of Lease: March 11, 2005
Initial Term: 5 years
Security: $ 0.00
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Rent for the Term is to be calculated as follows:
a. Annual Fixed Rent: The following Rent is payable in equal monthly installments, except as expressly modified by Article 4 of this Lease, during the initial Term of this Lease,:
Lease Years Annualized Rent Monthly Installments
----------- --------------- --------------------
For that portion of the initial $16,620.00 NNN $1,385.00
Term which falls within
calendar year 2005
For the remainder of the $33,340.00 NNN $2,770.00
initial Term
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b. Maintenance/common area charge: Lease year #1 - $3060.00: $ 255.00 per month. Additional charges may be assessed if necessary pursuant to Article 28.
c. Insurance Charge: Lease year #1 - $1080.00; $ 90.00 per month. Additional charges to be calculated pursuant to Article 6.
d. Real Estate Tax Charge: Lease year #1- $3,960.00: $ 330.00 per month. Additional charges to be calculated pursuant to Article 10.
Liability Insurance. Minimum amounts: Combined single limit for bodily injury and property damage for each occurrence $1,000,000, total aggregate yearly coverage $2,000,000.
Use of Rental Space: Bank and related financial services
Additional Agreements:
a. Tenant shall have an option to renew the lease for three (3) additional five (5) year terms, each of which shall be referred to as a renewal Term in this Lease. The Annual Fixed Rent payable during the full duration of each renewal Term shall be an amount equal to the product of (i) the Annual Fixed Rent payable during the full duration of the immediately preceding Term of this Lease, which shall be deemed to be $33,240.00 for
the initial Term of this Lease, and (ii) the actual cumulative increase in the New York - New Jersey Consumer Price Index - Urban (CPI-U) between the commencement date of the immediately preceding Term of this Lease and the termination date of the immediately preceding Term of this Lease, PROVIDED, HOWEVER, that the increase in Annual Fixed Rent for any renewal Term of this Lease shall be neither less than l0% nor more than 25% of the Annual Fixed Rent payable during the full duration of the immediately preceding Term of this Lease, notwithstanding the actual cumulative increase in the New York - New Jersey Consumer Price Index - Urban (CPI-U).
The term "Index" as used herein shall mean the index now known as the Revised Consumer Price Index for All Urban Consumers (CPI-U), New York, New York-Northeastern New Jersey (1982-84=100), issued and published by the Bureau of Labor Statistics of the U.S. Department of Labor (the "Bureau"). If the Bureau discontinues the publication of the Index, or publishes the Index less frequently, or alters the same in some other manner, then Landlord, in its sole discretion, shall adopt a substitute index or substitute procedure which reasonably reflects and monitors consumer prices.
b. Landlord shall not permit any other organization which is in the business of providing banking and financial services, which shall be defined to include banks the deposits of which are insured by the FDIC, savings banks, stock brokerage companies, trust companies, credit unions and consumer finance businesses to operate on Block 729, Lot 21 of the Tax Map of the Township of Middletown, and acknowledges that its agreement to restrict competitive uses under this sentence is indispensable to the Tenant. Notwithstanding the terms of the preceding sentence, HT Video may continue to maintain and operate the ATM which is presently installed in the space which it leases from Landlord. Landlord will not permit any other present or future tenant of Eastpointe Shopping Plaza to install an ATM in the space which such tenant leases from Landlord. If either (i) HT Video vacates the space which it presently occupies or (ii) HT Video removes the presently installed ATM, then Landlord will not permit HT Video or the successor tenant in the space presently occupied by HT Video to install or operate an ATM in such space.
c. The initial Term of this Lease and the payment of Rent, as defined in this Lease, shall commence when Tenant actually opens its branch for business at the Rental Space.
d. Tenant may, in the exercise of its sole discretion, terminate this Lease in the event that the New Jersey Department of Banking and Insurance does not, on or before June 30, 2005, issue final approval to the Tenant for the establishment and operation of a branch office at the Rental Space by the Tenant, in which event all of the Tenant's rights, duties and obligations under this Lease shall be extinguished ipso facto.
1. POSSESSION and USE
The Landlord shall give possession of the Rental Space to the Tenant for the initial and each renewal Term. The Tenant shall take possession of and use the Rental Space for the purpose stated above. The Tenant may not use the Rental Space for any other purpose without the written consent of the Landlord.
The Rental Space shall, for all purposes of this Lease, include the drive-in banking facilities which are appurtenant to Stores 1 and 2. Landlord shall not charge any separate Rent to Tenant for the drive-in banking facilities.
The Tenant shall not allow the Rental Space to be used for any unlawful or hazardous purpose. The Tenant is satisfied that the Rental Space is zoned for the Use stated. The Tenant shall obtain any necessary certificate of occupancy or other certificate permitting the Tenant to use the Rental Space for that Use, at Tenant's sole cost and expense. Tenant shall comply with all orders, ordinances and regulations of all governmental authorities relating to the use of the Rental Space.
The Tenant shall not use the Rental Space in any manner that results in
(1) an increase in the rate of fire or liability insurance or (2) cancellation
of any fire or liability insurance policy on the Rental Space. The Tenant shall
comply with all requirements of the insurance companies insuring the Rental
Space. The Tenant shall not abandon the Rental Space during the Term of this
Lease or permit it to become vacant for extended periods. Abandonment shall be
defined as failure to open for business during stated business hours for five
(5) consecutive business days without notice to and permission of the Landlord.
The Tenant shall keep the Rental Space open for business during those days and
hours which are, in the sole judgment of Tenant, customary banking days and
hours in New Jersey.
2. TERM of LEASE and OPTION to RENEW
The initial Term of the Lease shall be for five (5) years, which Term shall commence on the date when Tenant actually opens its branch for business at the Rental Space, and shall end on the fifth anniversary of the date when Tenant actually opens its branch for business at the Rental Space.
If this Lease is still in full force and effect, and Tenant shall not be
in default in accordance with the terms and provisions of this Lease, and Tenant
shall be in possession of the Rental Space pursuant to this Lease, Tenant shall
have the option to renew this Lease for three (3) additional consecutive five
(5) year terms, provided written notice of the election of such option shall be
sent by Tenant to Landlord not less than six (6) months prior to the expiration
of the then current initial or renewal Term, as the case may be. If said option
is duly exercised, the term of this Lease shall automatically be extended for
the period of the option, without the requirement of any further instrument,
upon all of the same terms, provisions and conditions set forth in this Lease,
except that the Annual Rent during the options periods shall be increased as
provided in Paragraph a. of Additional Agreements, above.
3. ASSIGNMENT or SUBLETTING
The Tenant may not do any of the following without the Landlord's written consent and without payment of a fee to the Landlord: (a) assign this Lease to any assignee (other than an assignee which is a financial institution the deposits in which are insured by an agency if the United States (a "Permitted Assignee")); (b) sublet all or any part of the Rental Space; (c) permit any other person or business to use the Rental Space; or (d) mortgage or encumber this Lease. Any consent by Landlord to an otherwise prohibited assignment or subletting shall not in any
manner be construed to relieve Tenant or any assignee or sublessee from
obtaining the Consent in writing of Landlord to any further otherwise prohibited
assignment or subletting. Any prohibited assignment or sublease made by Tenant
without Landlord's prior written consent shall be void and a default under this
Lease, giving Landlord the right to exercise all of its remedies hereunder,
including but not limited to the right to Terminate this Lease. Landlord agrees
(i) that Tenant may assign this Lease to any Permitted Assignee upon notice to
Landlord, but without Landlord's permission, and (ii) that its consent to any
otherwise prohibited assignment or sublease requested by Tenant will not be
unreasonably withheld.
Notwithstanding the foregoing, Landlord agrees that in the event Tenant desires to either assign this Lease to an assignee which is not a Permitted Assignee or sublet the Rental Space during the term of this Lease, Tenant will notify Landlord in writing of its desire to assign or sublet and provide Landlord with the following information;
(1) Name and address of prospective assignee or sub-tenant;
(2) Business of prospective assignee or sub-tenant;
(3) Proposed assignment or subletting start date;
(4) Personal financial statements and income tax returns for prior three years of prospective assignee or sub-tenant;
(5) Business code number or Standard Industrial Classification (SIC) number of prospective assignee or sub-tenant.
Landlord will review the information received and notify Tenant within fourteen (14) days thereafter whether or not it will consent to the assignment or subletting. Landlord will be under no obligation whatsoever to agree to any otherwise prohibited assignment or subletting where, in the Landlord's sole and absolute discretion, to do so would:
(1) Permit an undercapitalized or financially unstable person or entity to enter into possession of the Rental Space;
(2) Permit a use which would conflict or compete in a substantially similar business with any tenant then renting space in the Eastpointe Shopping Plaza;
(3) Subject the Shopping Center, or the Rental Space, to the provisions of the New Jersey Environmental Cleanup Responsibility Act, or any superseding federal environmental regulations, as amended from time to time;
(4) Result in the expenditure of any funds by Landlord;
(5) Require review of any assignment or subletting proposal where a Tenant was delinquent in the payment of any monetary obligation or in breach of any performance obligation imposed by the lease terms; -
(6) Require Landlord to obtain any federal, state, county or municipal permit to allow the assignment or subletting;
(7) Otherwise make the Landlord deem itself to be insecure
In the event Landlord determines to agree to any such otherwise prohibited assignment or subletting, the Landlord will cause to be prepared a written agreement of assignment or subletting between Landlord, Tenant and Assignee or Subtenant setting forth all of the terms of agreement between the parties. No such assignment or subletting will be effective until the written agreement is executed by all parties. The Landlord's attorney's fees and costs incurred in the assignment or subletting shall be paid in full by Tenant. In no event shall an assignment or subletting relieve or release the Tenant of its obligations under the Lease which are attributable to the term of the Lease prior to the assignment or subletting.
4. RENT and ADDITIONAL RENT
For any portion of the initial Term or any renewal Term of this Lease which consists of a partial calendar month, Tenant shall pay the Rent to the Landlord for such partial month, which shall be based on the number of days in such month which are within the initial Term of this Lease, at the Landlord's address, in advance, without demand, set off or deduction whatsoever on the first day of such partial month, together with prorated additional changes as herein provided. For each full calendar month within the initial Term or any renewal Term of this Lease, Tenant shall pay the Rent to the Landlord at the Landlord's address in equal monthly installments, in advance, without demand, set off or deduction whatsoever on the first day of each such month during the Term of the Lease, together with additional changes as herein provided.
The Landlord and Tenant agree that the Landlord will be entitled to receive from the Tenant a charge of five (5%) of the monthly installment of Rent where the Tenant fails to pay any month's Rent prior to the tenth (10th) business day of the month. Business days under this Lease shall be considered Monday through Friday and shall not include Saturday and Sunday. The late charge of five percent (5%) will be due and payable as "additional rent" from Tenant to Landlord and shall be collected by Landlord with the next following month's installment of Rent.
If the Tenant fails to comply with any agreement in the Lease, the Landlord may do so on behalf of the Tenant. The Landlord may charge the cost to comply, including reasonable attorney's fees, to the Tenant as "additional rent". The additional rent shall be due and payable as Rent with the next monthly Rent payment. Non-payment of additional rent shall give the Landlord the same rights against the Tenant as if the Tenant failed to pay the Rent.
5. SECURITY
Intentionally omitted
6. INSURANCE
The Tenant agrees that it will, at its sole cost and expense, carry liability insurance covering the leased Premises with a combined single limit for bodily injury and property damage in the minimum amount of ONE MILLION DOLLARS ($1,000,000) per occurrence and, TWO MILLION DOLLARS ($2,000,000) total aggregate yearly coverage, and the Tenant further agrees that it will add as a party insured by such policy the interest of the Landlord and will furnish Landlord with a certificate of the liability insurance prior to the commencement of the term of this lease and thereafter on an annual basis. The liability insurance policy to be obtained by Tenant may cover other properties which are occupied by Tenant, with the understanding that the full limits set forth above must apply to the Leased Premises, not withstanding any other claims submitted pursuant to said policy. The policy shall also cover the use and or misuse of any hazardous materials
All policies of insurance shall contain a clause that the insurance company cannot cancel or refuse to renew without at least ten (10) days written notice to any and all parties in interest.
Landlord and Tenant both agree that each party, in connection with insurance policies required to be furnished in accordance with the terms and conditions of this lease, or in connection with insurance policies which they obtain insuring such insurable interest as Landlord or Tenant may have in its own properties, whether personal or real, shall expressly waive any right of subrogation on the part of the insurer against the Landlord or Tenant. Should such waiver not be available then the policy for which the waiver is not available must name the other party as an additional named insured affording it the same coverage as that provided the party obtaining said coverage. Landlord and Tenant each mutually waive all right of recovery against each other, their agents, or employees for any loss, damage or injury of any nature whatsoever to property or person for which either party is required by this lease to carry insurance.
The Tenant shall pay as additional rent a pro-rated share of the insurance that the Landlord carries on the property equaling a percentage of the Rental Space square footage as the numerator and the total square footage of the plaza as the denominator, said percentage for the life of the Lease to be 4.16%.
7. UNAVAILABILITY of FIRE INSURANCE, RATE INCREASES
If due to the Tenant's use of the Rental Space the Landlord cannot obtain and maintain fire insurance on the Building in an amount and form reasonably acceptable to the Landlord, the Landlord may cancel this Lease on 30 days notice to the Tenant. If due to the Tenant's use of the Rental Space the fire insurance rate increases, the Tenant shall pay the increase in the premium to the Landlord on demand.
8. WATER DAMAGE
The Landlord shall not be liable for any damage or injury to any persons or property caused by the leak or flow of water from or into any part of the Building.
9. LIABILITY OF LANDLORD AND TENANT
The Landlord shall not be liable for injury or damage to any person or property unless it is due to the Landlord's act or neglect. The Tenant is liable for any loss, injury or damage to any person or property caused by the act of neglect of the Tenant or the Tenant's agents, servants, independent contractors, patrons and employees. The Tenant shall defend the Landlord from and reimburse the Landlord for all liability and costs resulting from any injury or damage due to the act of neglect of the Tenant or the Tenant's agents, servants, independent contractors, patrons and employees.
10. REAL ESTATE TAXES
The Landlord shall collect and pay the yearly Municipal Real Estate Taxes (including without limitation assessments for public improvements or benefits and interest on unpaid installments thereof) on the Land and Building upon assessment by the municipality and following pro rata contribution by the Tenant. As part of the rent for the unit, the Tenant shall pay the sum of $ 330.00 per month for and on account of municipal real estate taxes as against a yearly assessment a pro-rated share of the Real Estate Taxes equaling a percentage of the Rental Space square footage as the numerator and the total square footage of the plaza as the denominator, said percentage for the life of the Lease to be 4.16%. The Landlord will adjust the monthly installments after receiving the Final Tax Bill from the municipality.
The Tenant agrees to pay to the local tax authorities and any other governmental agencies, throughout the term of this lease and any renewal thereof, all personal property taxes which may be levied against Tenant's merchandise, trade fixtures, and other personal property in and about the premises.
11. ACCEPTANCE OF RENTAL SPACE
The Tenant has inspected the Rental Space and agrees that the Rental Space is in satisfactory condition. The Tenant accepts the Rental Space "as is", however, Landlord shall deliver the space free of hazardous materials and with the building systems (HVAC, plumbing and electrical) in good working order.
12. QUIET ENJOYMENT
The Landlord has the right to enter into this Lease. If the Tenant complies with this Lease, the Landlord must provide the Tenant with undisturbed possession of the Rental Space, subject, however, to the Terms of this Lease and to the Terms of all covenants, restrictions, easements and encumbrances now or hereafter affecting the Landlord's interest in the Shopping Center.
13. UTILITIES AND SERVICES
The Tenant shall arrange and pay for all utilities and services required for the Rental Space, including payment of any deposits or similar charges required to be paid in connection therewith, including but not limited to the following:
(a) Hot and cold water
(b) Electric
(c) Gas
(d) HVAC (heating, ventilation and air conditioning)
(e) Extermination services
(f) Recycling
(g) Immediate delivery area for Rental Space cleanup.
If the Tenant fails to pay for any items set forth herein, the Landlord may pay the same and consider the same as "additional rent", which will give rise to all remedies available to landlord to collect the Rent or additional rent. Furthermore, the failure to pay any item shall be considered a breach of Lease by Tenant, which shall give rise to all of the remedies for breach of Lease set forth under the Terms and conditions of the within Lease.
The Landlord shall pay for the following utilities and services for the Rental Space: NONE
The Landlord is not liable for any inconvenience or harm caused by any stoppage or reduction of utilities and services beyond the control of the Landlord of which are necessary by reason of accident or repairs, alterations or improvements. This does not excuse the Tenant from paying rent.
14. TENANT'S REPAIRS, MAINTENANCE, AND COMPLIANCE
The Tenant shall:
(a) Promptly comply with all laws, orders, rules and requirements of governmental authorities, insurance carries, board of fire underwriters, or similar groups.
(b) Maintain the Rental Space and all equipment and fixtures in it in good repair and appearance.
(c) Make all necessary repairs to the Rental Space and all equipment and fixtures in it, except structural repairs. "Structural repairs" shall mean exterior roof, exterior walls and exterior and subterranean foundation.
(d) Maintain the Rental Space in a neat, clean, safe, and sanitary condition, free of all garbage, litter and debris
(e) Keep the walkway, front and rear entrance and exit adjacent to the Rental Space clean and free from trash, debris, snow and ice.
(f) Use all electric, plumbing and other facilities in the Rental Space safely.
(g) Use no more electricity than the wiring or feeders to the Rental Space can safely carry.
(h) Promptly replace all broken glass and repair window frames and signs in the Rental Space
(i) Do nothing to destroy, deface, damage, or remove any part of the Rental Space.
(j) Keep nothing in the Rental Space which in flammable, dangerous or explosive or which might increase the danger of fire or other casualty.
(k) Promptly notify the Landlord when there are conditions that need repair, whether the Landlord or Tenant is obligated to do the repair.
(l) Do nothing to destroy the peace and quiet of the Landlord, other Tenants, or persons in the neighborhood.
(m) Avoid littering in the building of on its grounds.
(n) Maintain in good condition and repair any and all entrances and exits including the door frame(s) for its Rental Space.
(o) Make necessary repairs of the plumbing, sprinkler, cooling, heating, electrical, gas and like systems within the Rental Space, which repairs shall become the property of the Landlord upon the Tenant's vacating of the Rental Space or the expiration of this Lease, whichever is sooner
The Tenant shall pay the expenses of complying with the above. All repairs are to be of the same quality, design and class as the original work.
15. LANDLORD'S REPAIRS AND MAINTENANCE
The Landlord shall:
(a) Maintain the public areas, foundation, exterior roof and exterior walls in good condition.
(b) Make all structural repairs (as defined in Article 14(c) above) unless these repairs are made necessary by the act or neglect of the Tenant or the Tenant's employees, agents, servants, independent contractors and patrons.
16. ALTERATIONS
The Tenant may not make any interior or exterior changes or additions to the Rental Space without the Landlord's written consent. Any changes or additions made without the Landlord's written consent shall be removed by the Tenant on demand. Tenant shall, subsequent to the effective date of this Lease but prior to fully occupying the Rental Space, submit to Landlord a written description of those improvements and alterations to the rental space which Tenant believes to be necessary to the successful operation of the full service bank branch office contemplated by this Lease. Landlord shall, within ten (10) days after the issuance of such
description of improvements and alterations by Tenant, object in writing to any improvements and alterations which are not acceptable to Landlord. If Landlord does not object to those improvements and alterations to the Rental Space which are proposed by Tenant, then Landlord shall be deemed to have accepted Tenant's proposed improvements and alterations. If Landlord timely objects to those improvements and alterations to the Rental Space which are proposed by Tenant, Landlord and Tenant shall meet and make a good faith effort to reach agreement as to which of those improvements and alterations to the Rental Space which are proposed by Tenant are acceptable.
Except as specifically provided to the contrary in this Lease, all changes or additions made with the Landlord's written consent shall become the property of the Landlord when completed and paid for by the Tenant. They shall remain as part of the Rental Space at the end of the Term without disturbance and without charge to the Landlord. The Tenant shall promptly pay for all costs of any permitted changes or additions. The Tenant shall not allow any mechanic's lien or other claim to be filed against the Building. If any lien or claim is filed against the Building, the Tenant shall have it promptly removed.
All changes and alterations must conform to all applicable state and municipal ordinances and regulations. Tenant shall obtain, at its sole cost, all necessary approvals and permits to make any changes or additions and proof of any necessary approvals and permits shall be given to the Landlord prior to Tenant's making any changes or additions.
17. FIXTURES
The Tenant may install and remove property, machinery, equipment and fixtures in the Rental Space during the term of the lease subject to compliance with applicable rules and regulations of governmental boards and bureaus having jurisdiction thereof at the cost and expense of Tenant. However, if the Tenant is in default and moves out, or is dispossessed, and fails to remove any property, machinery, equipment and fixtures or other property prior to such default, dispossess or removal, then the property, machinery, equipment and fixtures or other property shall be deemed, at the option of the Landlord, to be abandoned; or at the Landlord's option, the Landlord may remove the property and charge the reasonable cost and expense of removal, storage and disposal to the Tenant, which total costs shall be deemed to be additional rent hereunder. The Tenant shall be liable for any damage which it causes in the removal of any property from the Rental Space.
Notwithstanding any term to the contrary in this Lease, Tenant may, upon the expiration or termination of this Lease, regardless of the reason for or circumstances surrounding such expiration or termination, remove all or any portion of those changes, alterations, property, machinery, equipment and fixtures to or within the Rental Space which are utilized by the Tenant in the conduct of its business, including, but not limited to, safe deposit boxes, financial transactions equipment and data processing equipment.
18. SIGNS
Tenant shall prepare a signage plan, and present the signage plan to Landlord for Landlord's approval. Landlord and Tenant shall, within ten (10) days of the presentation of a
signage plan by Tenant to Landlord, but in any event on or before April 30, 2005, agree on a signage plan. Tenant shall, at its expense and with the cooperation of Landlord, pursue all municipal approvals which are necessary to implement the signage plan upon which the Landlord and Tenant agree. The Tenant shall obtain the Landlord's written consent before placing any sign, lettering or lights on the exterior of the Rental Space or in any show window thereof, which is visible from the exterior or to erect or display any other signage or display either appendant to or connected with the Rental Space, all except as contemplated by the agreed upon signage plan.
All signage and displays must conform to all applicable state and municipal ordinances and regulations.
19. ACCESS TO RENTAL SPACE
The Landlord shall have access to the Rental Space, but only when the branch bank office which occupies the Rental Space is open for business, on reasonable notice to the Tenant to (a) inspect or protect the Rental Space (b) make necessary repairs, alterations, or improvements, (c) supply services, (d) show it to prospective buyers, mortgage lenders, contractors or insurers and (e) effect compliance with any law, order, or regulation of any governmental authority having jurisdiction.
The Landlord may show the Rental Space to rental applicants at reasonable hours on notice to the Tenant within six (6) months before the end of the Term.
None of the foregoing shall constitute an actual or constructive eviction of Tenant or a deprivation of its rights, nor subject Landlord to any liability or impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, supervision or repair of the unit or any part thereof, other than as herein provided or entitle Tenant to any compensation or diminution or abatement of the Rent.
20. FIRE AND OTHER CASUALTY
The Tenant shall notify the Landlord at once of any fire or other casualty in the Rental Space. The Tenant is not required to pay Rent when the Rental Space is unusable. If the Tenant uses part of the Rental Space, the Tenant must pay Rent pro-rate for the usable part.
If the Rental Space is partially damaged by fire or other casualty, the Landlord shall repair it as soon as possible. This includes the damage to the Rental Space and fixtures installed by the Landlord. The Landlord need not repair or replace anything installed by the Tenant.
Either party may cancel this Lease if the Rental Space is so damaged by fire or other casualty that it cannot be repaired within 90 days. If the parties cannot agree, the opinion of a contractor chosen by the landlord and the Tenant will be binding on both parties.
This Lease shall end if the Rental Space is totally destroyed. The Tenant shall pay Rent to the date of destruction.
If the fire or other casualty is caused by the act or neglect of the Tenant or the Tenant's employees, the Tenant shall pay for all repairs and all other damages.
21. EMINENT DOMAIN
Eminent domain is the right of a government to lawfully condemn and take private property for public use. Fair value must be paid for the property. The taking occurs either by court order of by deed to the condemning party. If any part of the Rental Space is taken by eminent domain, Tenant may cancel this Lease on 30 days notice to Landlord. The entire payment for the taking shall belong to the Landlord. The Tenant shall make no claim for the value of this Lease for the remaining part of the Term.
22. TENANT'S CERTIFICATE
At the request of the Landlord, but only to the extent that the
representations requested are true, correct and complete, the Tenant shall sign
and return to Landlord without charge within 15 days after demand a certificate:
(1) Ratifying this Lease; (2) Certifying that the Tenant is in occupancy of the
Rental Space and that this Lease is in full force and effect and has not been
assigned, modified, supplemented or amended, except as noted; (3) Certifying
that the Landlord has fully performed all of the Landlord's Agreements in this
Lease; (4) Certifying that there are no defenses or offsets against enforcement
of this Lease by Landlord; (5) Reciting the amount Tenant has paid as prepaid
rental and the date to which rental has been paid; (6) Reciting the amount of
any security deposit; (7) Stating that the Tenant has no rights to the Rental
Space except as stated in this Lease.
23. DEFAULT, RE-ENTRY AND EVICTION, DAMAGES
Tenant shall be in default under this Lease:
If (i) Tenant defaults in payment of any Rent or any additional charges
and such default continues for ten (10) days after the same has become due; or
(ii) Tenant defaults in fulfilling any of the covenants or agreements of this
Lease and such default is not cured or commenced to be cured (and diligently
prosecuted to completion thereafter) within ten (10) days after notice from
Landlord or upon any person or corporation other than Tenant, except as may be
specifically permitted by this Lease; or (iii) Tenant vacates or abandons the
Rental Space; or (iv) if at any time during the Term of this Lease a petition in
bankruptcy or insolvency or for reorganization or arrangement of for the
Appointment of a receiver or trustee of all or part of Tenant's property is
filed against Tenant, same is not vacated within thirty (30) days thereafter; or
(v) if Tenant makes an assignment for the benefit of creditors, otherwise seeks
relief under or is the debtor-party to any insolvency proceedings under any
federal or state bankruptcy or insolvency statue. In any of such events Landlord
may give Tenant a written notice specifying a day not less than ten (10) days
thereafter whereupon Tenant shall quit and surrender the Rental Space to
Landlord and Tenant shall remain liable as hereinafter provided. Tenant waives
trial by jury in any action or proceeding by Landlord to enforce Landlord's
rights hereunder. Tenant further waives any and all statutory rights of
redemption following Termination of this Lease or dispossess of Tenant.
In the event of abandonment of the Rental Space by the Tenant, the Landlord reserves a right of re-entry, which allows the Landlord to declare the Lease in default and re-enter and take back possession of the Rental Space. Any personal property of the Tenant remaining in the Rental Space shall become the property of the Landlord who may (a) dispose of it and charge the Tenant for the cost of disposal; or (b) keep it as abandoned property. In the event of default, or if the Tenant violates any agreement in this Lease, the Landlord reserves the right to remove the Tenant by eviction. The landlord may also evict the Tenant for any one of the other grounds of good cause provided by law. After a court order of eviction and compliance with the warrant of removal, the Landlord may re-enter and take back possession of the Rental Space. If the cause for eviction is non-payment of Rent, notice does not have to be given to the Tenant before the Landlord files a complaint. If there is any other cause to evict, the Landlord must give to the Tenant the notice required by law before the Landlord files a complaint for eviction.
The Tenant is liable for all damages caused by the Tenant's violation of any agreement in this Lease. This includes reasonable attorney's fees and costs.
After abandonment or eviction, the Tenant shall pay the Rent for the Term until the Lease is terminated by the Landlord for any reason, or until the Landlord re-rents the Rental Space, if sooner. If the Landlord re-rents the Rental Space for less than the Tenant's Rent, the Tenant shall pay the difference until the end of the Term. The Tenant shall not be entitled to any excess resulting from the re-renting. The Tenant shall also pay (a) all reasonable expenses incurred by the Landlord in keeping the Rental Space in good order and preparing the Rental Space for re-renting and (b) commissions paid to a broker for finding a new Tenant. In case this Lease is terminated by summary proceedings or otherwise, as provided in this Article, whether or not the Leased Premises are relet, Landlord shall be entitled to recover from the Tenant, the following:
(i) an amount equal to the excess of all Rent reserved hereunder for the unexpired portion of the term of this Lease; and
(ii) all reasonable expenses incurred by Landlord in obtaining possession, in altering, repairing and putting the Leased Premises in good order and in reletting the same, including reasonable attorneys' fees, brokerage commissions and other expenses.
Without any previous notice or demand, separate actions may be maintained by Landlord against Tenant from time to time to recover any damages which, at the commencement of any such action, have then or theretofore become due and payable to the Landlord under this Article and subsections hereof without waiting until the end of the then current term.
All sums which Tenant has agreed to pay as additional rent or other lease charges shall be deemed rent reserved in this lease within the meaning of this Article.
Notwithstanding any other provisions contained in this Lease and only if the Tenant is an institution the deposits of which are insured by the Federal Deposit Insurance Corporation, in the event that (a) the Tenant or its successors or assignees shall become insolvent or bankrupt, or if
its or their interests under this Lease shall be levied upon or sold under execution or other legal process and (b) the depositary institution then operating on the Premises is closed, or taken over by any depositary institution supervisory authority ("Authority"), Landlord may, in such event, terminate this Lease as a result of such bankruptcy, insolvency, levy or sale prior to the expiration of its term only with the concurrence of any receiver or liquidator appointed by such Authority; provided that, in the event that this Lease is terminated by any such receiver or liquidator, the maximum claim of Landlord for rent, damages or indemnity resulting from the termination, rejection or abandonment of the unexpired term of this Lease by such receiver or liquidator shall, by law, in no event be greater than an amount equal to all accrued and unpaid rent to the date of such termination.
24. CONDITIONS OF REINSTATEMENT OF LEASE
Notwithstanding other provisions of this Lease herein, it is understood and agreed by Tenant, that in the event Tenant defaults in any condition, term or covenant of the within Lease and Landlord is compelled to institute Summary Dispossess proceedings to regain possession of the premises, Tenant shall be responsible for payment of all costs of suit and reasonable attorneys fees incurred by Landlord (which shall be deemed "additional rent"), as well as all monies (either Rent, additional rent, late charges, or interest) then due and owing under the Terms of the Lease prior to and as a condition of reinstatement of the Lease and dismissal of any and all proceedings.
25. SURRENDER, WAIVER
No agreement to accept a surrender of the Rental Space shall be valid unless in writing signed by Landlord. The delivery of keys to any employee of Landlord or of Landlord's agents shall not operate as a Termination of the Lease or a surrender of the Rental Space. The Landlord's failure to enforce any agreement in this Lease shall not prevent the Landlord from enforcing the agreement for any violations occurring at a later time. The receipt by Landlord of Rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach. No provision of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser amount on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check nor any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or pursue any other remedy in this Lease provided.
26. END OF TERM
At the end of the Term or if evicted, the Tenant shall (a) leave the Rental Space broom clean and in good order and condition, (b) remove all of the Tenant's personal property, (c) remove all signs, movable furniture and trade fixtures furnished by the Tenant and restore that portion of the Rental Space on which they were placed, and (d) repair all damage caused by moving.
If the Tenant leaves any property in the Rental Space, the Landlord may
(a) dispose of it and charge the Tenant for the cost of disposal, or (b) keep it
as abandoned property.
In the event that Tenant shall remain in the Rental Space for any period beyond the end of this Lease without the prior written consent of Landlord, this will create a month-to-month tenancy at twice the Rent for the last Lease year of the Term, subject to all the other provisions of this Lease then in effect, and the acceptance of Rent or additional charges by Landlord shall not be deemed to create a new or additional tenancy other than aforesaid.
27. COMMON AREAS
The common areas shall be under the sole control and management of the Landlord who may establish rules and regulations for them. The Tenant agrees to obey such rules and regulations, including the designation of "No Employee Parking Areas".
The Tenant agrees that there will be no truck deliveries made nor will its trucks or delivery vehicles be parked any other areas than those designated as "service areas", generally located in the rear of the Shopping Center.
28. COMMON AREA MAINTENANCE AND SERVICES
Notwithstanding the provisions of Article #14 of the Lease, the Tenant agrees to pay in addition to the Annual Fixed Rent the sum of $ 255.00 per month during the term of this Lease to defray the cost of exterior maintenance and repairs services to be performed in, on and around the exterior areas of the Shopping Center, including but not limited to all buildings and the parking lot area, striping, paving, landscaping, lighting, sweeping, snow removal, garbage removal, common area liability insurance, security and policing of the common areas, and any other service required to be performed to maintain the premises in a clean, safe and orderly fashion. Landlord shall be obligated to contract with materialmen, suppliers and independent contractors to perform the exterior maintenance and repair services and shall supervise the completion of the services to be performed on the exterior of the premises. Landlord shall be entitled to a management fee of 5% of the total common area expenses. In the event that the costs of the aforesaid maintenance and repair services exceed the total sum of all base maintenance fees collected from the Tenant and all other Tenants of the Shopping Center in any one year, then and in that event only, Tenant agrees to pay as "additional rent" a proportionate share of such excess costs to perform exterior maintenance and repair services. The proportionate share shall be 4.16%. The fraction shall be multiplied by the actual amount of such excess cost of performing such exterior maintenance and repair services. Tenant's proportionate share of the excess shall be due and payable within fifteen (15) days of presentation by Landlord of a written calculation of the excess amount due from Tenant. The failure of the Tenant to pay the proportionate share of such excess shall be deemed a default in the payment of "additional rent" and shall entitle the Landlord to all of the remedies set forth at Articles 4, 13, 23, and 24 of the Lease.
29. SUBORDINATION TO MORTGAGE
In a foreclosure sale all mortgages which now or in the future affect the Building have priority over this Lease. This means that the holder of a mortgage may end this Lease on a
foreclosure sale. The Tenant shall sign all papers needed to give any mortgage priority over this Lease. If the Tenant refuses, the Landlord may sign the papers on behalf of the Tenant.
30. LANDLORD'S CONSENT
Wherever in this Lease, the consent of the Landlord is required before Tenant may take any action on the Rental Space, the Landlord agrees that its consent will not be unreasonably withheld nor delayed.
31. CORPORATE RESOLUTION
In the event Tenant under this Lease is a corporation, Tenant agrees to provide, within thirty (30) days after execution of this Lease, a resolution of the board of directors of Tenant corporation approving the execution of this Lease. In the event Tenant fails to provide the aforementioned, Landlord shall, at its option, have the right to Terminate this Lease upon ten (10) days' prior written notice to Tenant.
32. ISRA COMPLIANCE
The Landlord and Tenant agree and understand that the public policy of the State of New Jersey may require the investigation and abatement of environmental problems or potential problems which may result in pollution to the environment. Accordingly, the State of New Jersey has adopted the Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et seq.) (ISRA) which requires that certain industrial establishments and the conduct of their business come within the scope and framework of ISRA. For purposes of providing information to the State of New Jersey, Department of Environmental Protection, only in the event ISRA is found applicable to the leasing of this property, the Tenant supplies the following information to assist the Landlord in determining if the Industrial Site Recovery Act, or any other similar environmental control law, applies to the Tenant's operation in the demised premises.
(a) Tenant's Federal Employers Identification Number: 22-3704019
(b) Tenant's NAICS Number: 522110
In the event that the Tenant in any way changes or alters the scope and nature of its business, resulting in a change of the above numbers being assigned to the Tenant, then and in that event only, Tenant agrees to immediately make available to the Landlord the newly assigned numbers as applicable.
If required, the Tenant agrees to allow the Landlord, its employees, agents, servants, representatives and independent contractors access to the premises during normal business hours for purposes of inspection, repair, removal and remedial action necessary to be taken on the part of the Landlord to comply with the requirements of the New Jersey Department of Environmental Protection in administering the provisions of the Industrial Site Recovery Act, and the regulations promulgated thereunder. Tenant further agrees to supply to Landlord, its employees, agents, servants, representatives and independent contractors any and all information or documentation necessary and required by the New Jersey Department of Environmental Protection in order to comply with the requirements of the Industrial Site Recovery Act, the regulations promulgated thereunder, and to execute any and all applications, certifications,
affidavits or other documents required by the New Jersey Department of Environmental Protection to enable Landlord to comply with the requirements of the Industrial Site Recovery Act, and the regulations promulgated thereunder for the continued operation, improvement, development, sale or transfer of the lands and buildings of which the Leased premises form a part. The failure of the Tenant to comply with the provisions of this Article of the Lease shall be deemed a breach of Lease and shall entitle the Landlord to all of the remedies set forth in the Lease as a result of the Tenant's breach of the Lease.
33. DISCHARGE OF HAZARDOUS AND/OR TOXIC SUBSTANCES; INDEMNIFICATION
The Landlord and Tenant agree that the Tenant shall be solely responsible for the proper, safe and approved handling, storage, treatment and disposal of any and all chemicals, solvents, solutions, toxins or other materials used in the business conducted by the Tenant on and in the Rental Space. The Tenant shall obtain, at its sole cost and expense, any and all permits, licenses or other approvals necessary to conduct its business in the Rental Space. The Tenant agrees to install, at its sole cost and expense, any and all safety equipment, fire fighting apparatus, systems, appliances, fire detection systems, smoke alarms, or any and other systems, equipment and apparatus necessary to conduct its business in the Rental Space. Tenant further agrees to pay any and all charges for standby access for gas, electric, water, sewer or any other utility necessary to conduct its business on the site.
The Tenant further agrees that it will not discharge any and all hazardous, toxic or flammable substances, solutions or liquids into the sanitary sewer or onto the lands and buildings forming the Shopping Center but will dispose of the same in accordance with any and all applicable laws governing its disposal. THE TENANT AGREES TO INDEMNIFY AND HOLD HARMLESS THE LANDLORD FROM ANY AND ALL LIABILITY FOR AND ON ACCOUNT OF ITS COMPLIANCE OR NON-COMPLIANCE WITH THE PROVISIONS OF THIS ARTICLE AND ANY OTHER ARTICLE OF THIS LEASE GOVERNING THE ACTIVITIES CONDUCTED BY THE TENANT ON AND IN THE RENTAL SPACE.
34. GENERAL INDEMNIFICATION AND HOLD HARMLESS
The Tenant agrees that it will hold harmless and indemnify the Landlord from any and all damages, claims or loss, liability, suits at law, cost and expense (including attorneys' fees, costs of investigation, defense and disbursements), causes of action or other actions which may occur as a result of damages to any of the Landlord's other Tenants in the Shopping Center, their invitees, customers, patrons or agents, or the property belonging to any of the same, where such damages or action are occasioned by the operation of the Tenant's business, and further agrees to provide Landlord with a copy of its liability insurance policy indemnifying the Landlord and/its Tenants, customers, patrons, invitees or agents from any and all damage which may occur by reason of the activity surrounding Tenant's business conducted on the site.
35. INTEREST ON LATE PAYMENTS
Except for the charge for late payment of Rent the Tenant agrees that in the event any other payment obligation imposed upon the Tenant is unpaid for a period of 30 days after its
payment due date, then and in that event only, the Landlord will be entitled to collect the sum of 1 1/2% per month on the outstanding balance of any sum due and owing to Landlord under the Lease which is unpaid for a period in excess of 30 days. Interest shall be calculated on the outstanding balance due from the payment due date to the date of payment by Tenant. Such interest payment shall be deemed "additional rent" due from Tenant to Landlord, the non payment of which shall entitle the Landlord to all of the remedies set forth in this Lease.
36. DELIVERY OF LEASE
This Lease shall not be binding upon the Landlord and Tenant until it is signed by the Landlord, and a true copy of the fully executed Lease and Rider delivered to the Tenant. An offer of Lease to the Tenant shall be accepted by the Tenant within twenty days after the forwarding to the Tenant of the original and copies of the Lease and Rider by execution of the original and all copies of the Lease and Rider and return of the same to Landlord for execution of the Lease and Rider by its proper corporate officers. If the Lease and Rider are not so accepted within the twenty-day period, the offer of Lease from Landlord to Tenant is automatically withdrawn. In the event the Tenant fails to tender the first payment of Rent required under this Lease upon the Landlord being able to deliver possession of the Rental Space to Tenant, then the Tenant shall have no right to enter into possession of the Rental Space until such sums are paid in full to Landlord. In the event the Tenant fails to pay the aforesaid sums upon delivery of the Rental Space for possession by Tenant and demand for the sums from Tenant by the Landlord, then this Lease shall be deemed null and void and the Landlord and Tenant shall have no further rights, each to the other.
37. BINDING/GOVERNING LAW
This Lease binds the Landlord and the Tenant and all parties who lawfully succeed to their rights or take their places. This Lease shall at all times be governed by the laws of New Jersey.
38. CAPTIONS AND INTERPRETATION
The captions, section numbers, article numbers and index appearing in this Lease in no way define, limit, construe or describe the scope or intent of such sections or articles of this Lease. The language in all parts of this Lease shall in all cases be construed as a whole according to its fair meaning, and not strictly for nor against either Landlord or Tenant, and should a court be called upon to interpret any provision hereof, no weight shall be given to, nor shall any construction or interpretation be influenced by, any presumption of preparation of a Lease by Landlord or Tenant. If any Term or provision of this Lease or the application hereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such Term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each Term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
39. NOTICES
All notices given under this Lease must be in writing. Each party must accept and claim the notices given by the other. Unless otherwise provided by law, they may be given by (a)
personal delivery, or (b) certified mail, return receipt requested. Notices shall be addressed to the Landlord at the address written at the beginning of this Lease and to the Tenant at the Rental Space and if mailed, the date of mailing shall be the date notice is given.
40. SURVIVAL
If any agreement in this Lease is contrary to law, the rest of the Lease shall remain in effect.
41. FULL AGREEMENT
The parties have read this Lease. It contains their full and complete agreement. It may not be changed except in writings signed by the Landlord and the Tenant.
42. BROKERS
Tenant represents and warrants to the Landlord that no broker introduced the property to the Tenant and the Tenant to the Landlord. The Landlord shall pay a commission to no one. The Tenant agrees to indemnify and hold Landlord harmless from any and all claims of other brokers and expenses in connection with the negotiation of or the entering into this Lease by Tenant.
WITNESS: CRL REALTY ASSOCIATES, LP
By: /s/ Robert Lindmark
------------------------------ ------------------------------------
Robert Lindmark, President
For CRL Realty Management, Inc., General
Partner
ATTEST TWO RIVER COMMUNITY BANK
/s/ Michael J. Gormley By: /s/ Barry B. Davall
------------------------------ ------------------------------------
Barry B. Davall, President
|
Exhibit 10.23
Lease
From
ASBURY AVENUE EAST, L.L.C.
to
TWO RIVER COMMUNITY BANK
ARTICLE I
Reference Data and Exhibits
DATE March 8, 2002
LOCATION OF PREMISES Asbury Avenue, Tinton Falls, NJ
Block 128.03, Lots 23, 24, 25,
26 39.01, 40
LANDLORD Asbury Avenue East, L.L.C.
ADDRESS OF LANDLORD c/o 1481 Oak Tree Road,
Iselin, NJ
TENANT Two River Community Bank
ADDRESS OF TENANT c/o 1250 Highway 35 South,
Middletown, NJ 07748
LEASE TERM Fifteen (15) Years
BASE RENT See Exhibit "C"
PUBLIC LIABILITY $2,500,000.00
PROPERTY INSURANCE 100% Full Replacement Value
SECURITY One Month's Rent
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1.1 Data
1.2 Table of Contents
2.1 Premises
2.2 Building
2.3 The Property
2.4 Plans and Specifications
2.5 Completion Date
2.6 Approval Contingency
3.1 Terms of this lease
3.2 Preliminary Period
3.3 Initial Term
3.4 Renewal Terms
4.1 Construction of Building and Improvements
4.2 Tenant's Work
4.3 Completion of Construction
4.4 Utilities
5.1 Base Rent
5.2 Additional Rent
5.3 Additional Payment to Landlord
5.4 Net Lease
6.1 No Right to Encumber without Consent
7.1 Real Estate Taxes
7.2 Taxes
7.3 Method of Payment
7.4 Tax Appeal
7.5 Pro-Rated Payment
ARTICLE IX Insurance
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ARTICLE X TENANT's Additional Covenants
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10.1 Affirmative Covenants
10.1.1 Use and Occupancy
10.1.2 Compliance with Law
10.1.3 Payment for TENANT's Work
10.1.4 Indemnity
10.1.5 LANDLORD's Right to Enter
10.1.6 Personal Property at TENANT's Risk
10.1.7. Payment of LANDLORD's Cost of Enforcement
10.1.8 Yield Up
10.1.9 Maintenance
10.1.10 Repair Obligations
10.1.11 Roof/HVAC Repair Obligations
10.2 Negative Covenants
10.2.1. Overloading, Nuisance, etc.
10.2.2 Installation, Alteration or Additions
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10.3 Leasehold Improvements
11.1 Warranty on Use
11.2 Quiet Enjoyment; Non-Disturbance
ARTICLE XII Casualty or Taking ----------- ------------------ 12.1 TENANT to Repair or Rebuild in the Event of Casualty 12.2 Right to Terminate in Event of Casualty 12.3 Eminent Domain ARTICLE XIII Defaults ------------ -------- 13.1 Events of Default 13.2 Remedies 13.3 Remedies Cumulative 13.4 TENANT's Waivers 13.5 Effective of LANDLORD's Actions 13.6 Late Charge ARTICLE XIV Miscellaneous Provisions ----------- ------------------------ 14.1 Assignment, Subletting, etc. 14.2 Notice from One Party to the Other 14.3 Recording 14.4 Acts of God 14.5 Waiver of Subrogation |
14.6 No Accord and Satisfaction 14.7 Applicable Law and Construction 14.8 TENANT's Certificate 14.9 Limitation on Liability ARTICLE XV Common Area ---------- ----------- 15.1 Common Area 15.2 Common Area Charges 15.3 Common Area Services 15.4 Determination and Payment of Common Area Charges ARTICLE XVI Signs ----------- ----- 16.1 Signs ARTICLE XVII Hazardous Waste Provisions ------------ -------------------------- 17.1 Hazardous Waste ARTICLE XVIII Subordination and Non-Disturbance Agreement ------------- ------------------------------------------- 18.1 Subordination and Non-Disturbance Agreement ARTICLE XIX Regulatory Approval of Tenant ----------- ----------------------------- 19.1 Regulatory Approval ARTICLE XX Construction of Shopping Center ---------- ------------------------------- 20.1 Development Project 20.2 Cooperation in Project 20.3 Easements ARTICLE XXI Security Deposit ----------- ---------------- 21.1 Amount of Security Deposit 21.2 Sale of Property 21.3 Insolvency of Tenant |
22.1 Option to Renew
23.1 Additional lending facilities
EXHIBIT A - Site Plan
EXHIBIT B - Plans and Specifications
EXHIBIT C - Base Rent
EXHIBIT D - Property
EXHIBIT E - Rules and Regulations
2.1 Premises LANDLORD hereby leases to TENANT and TENANT hereby leases from LANDLORD, subject to and with the benefit of the terms, covenants, conditions and provisions of this Lease, the parcel of land (the "Land") shown on the site plan as described on Exhibit A annexed hereto and made a part hereof, together with any and all improvements, appurtenances, rights, privileges and easements befitting, belonging or pertaining thereto, which are a part of the premises shown on Exhibit A. The land, together with all appurtenances thereto and the building and improvements which LANDLORD shall build thereon in accordance with the terms of this Lease, are hereinafter collectively referred to as the "Demised Premises".
2.2 Building The Landlord hereby covenants and agrees to construct for the use by the Tenant in accordance with the terms hereof an approximately two thousand five hundred (+/- 2,500) square foot building together with an approximately nine hundred (+/- 900) square foot three-lane drive through which shall be constructed on the pad site as delineated on Exhibit A.
2.3 Property: The Demised Premises plus the proposed shopping center/office building (the "Shopping Center") together shall be referred to as the Property as seen on Exhibit D. The Shopping Center shall include an approximately +/- 28,000 square foot retail/office center and a +/- 6,000 square foot freestanding building unless otherwise changed by the Landlord.
2.4 Plans and Specifications. The building to be erected by the Landlord on the Demised Premises shall be constructed in accordance with the Plans (as hereinafter defined) set forth in Exhibit B attached hereto and made a part hereof as may be amended by the Tinton Falls Planning Board. The construction of the building shall be subject, however, to any nominal lateral or forward or rearward deviation in the location and dimension as are set forth on the
Plans reserving, however, to the Landlord the right of ingress and egress adjacent to the Demised Premises and through the Shopping Center and also reserving space for all pipes, ducts, wires and the like, leading to and from the property.
2.5 Completion Date. The Landlord hereby covenants that the Landlord shall complete the construction of the Demised Premises on or before twelve (12) months of the date of receipt by Landlord of all building permits for the construction of the Demised Premises. In the event that the Landlord has not completed the construction of the Demised Premises on or before said date, then the Tenant shall have the option to terminate the Lease, in which event neither Landlord nor Tenant shall have any further obligation to the other.
2.6 Approval Contingency. This Lease is contingent upon Landlord obtaining all necessary governmental approvals for the construction of the Demised Premises. In the event Landlord does not receive all necessary governmental approvals within nine (9) months from the date of lease execution Landlord can terminate this Lease.
ARTICLE III
3.1 Terms of this Lease. The term of this Lease shall include an initial term as described in Section 3.3 hereof ("Initial Term"), and renewal terms as described in Section 3.4 hereof.
3.2 Preliminary Period. The preliminary period ("Preliminary Period") shall commence on the date of execution of this Lease and shall terminate on the commencement date of the Initial Term of this Lease.
3.3 Initial Term. The Initial Term of this Lease and TENANT'S obligation to commence payment of rent to LANDLORD hereunder ("the Rental Commencement Date") shall commence on the earlier of (i) the date on which TENANT opens for business with the public at the Demised Premises; or (ii) forty-five (45) days after LANDLORD has delivered the bank
building substantially in compliance with the Plans ready for TENANT to commence its interior fit-up work. The Initial Term shall continue for a period of fifteen (15) years from the first day of the first month which occurs on or after the commencement date of the Initial Term. Promptly after the commencement date of the Initial Term, LANDLORD and TENANT shall execute and deliver to each other a memorandum supplement to this Lease setting forth the commencement date and expiration date of the Initial Term.
3.4 Renewal Terms. Provided that this Lease is in full force and effect and there is no uncured Event of Default (as defined in Article XIII hereof), TENANT shall have the option to extend this Lease for two (2) renewal terms of five (5) years each (each such period being referred to as a "Renewal Term") . Each Renewal Term shall commence upon the expiration of the Initial Term or a previous Renewal Term, as the case may be, and shall be upon the same terms and conditions as the Initial Term, except as otherwise specifically provided for in this Lease. The option for each Renewal Term shall be exercised by TENANT giving LANDLORD written notice at least twelve (12) months prior to the expiration of the then current term of this Lease, time being of the essence.
ARTICLE IV
4.1 Construction of Building and Improvements. LANDLORD shall, at its sole cost and expense, construct a one-story building containing +/- 2,500 square feet of space (the "Building") plus a 900 square foot three lane drive through (the "Drive Through") with appurtenances thereto (the "Improvements") in accordance with architectural, engineering, electrical and mechanical plans, drawings and specifications prepared by a licensed architect and approved by LANDLORD and TENANT (the "Plans"). It is understood by TENANT that the architecture for the Building and Improvements shall conform with that of the proposed Shopping Center. LANDLORD shall, reasonably promptly after the approval of the Plans, apply
for a building permit for the construction of the Building and Improvements. LANDLORD shall commence construction of the Building and Improvements within ninety (90) days after the issuance of all necessary governmental approvals and permits therefore and shall proceed diligently with the construction of the Building and Improvements in a timely and workmanlike fashion.
In construction of the Building and Improvements, LANDLORD shall comply with all laws, ordinances, municipal rules and regulations and the regulations and requirements of public authorities applying to or affecting the conduct of any work relating to the Demised Premises, the Building and the Improvements.
4.2 Tenant's Work. The TENANT hereby acknowledges and agrees that the LANDLORD shall only be responsible for the construction of the Building in accordance with the Plans and that it shall be the TENANT'S responsibility, at its sole cost and expense, to perform any additional tenant fit-up work in connection with the Building that TENANT so desires. Neither the performance of the TENANT fit-up work nor the obtaining of any and all necessary permits therefore shall be the responsibility of LANDLORD. Both LANDLORD and TENANT hereby covenant and agree that they will use their best efforts to enable their respective contractors to complete their required work in connection with the construction of the Demised Premises and the TENANT'S fit-up work on a timely basis and shall instruct their respective contractors to complete their work with as little interference as possible with the other contractors on the site.
4.3 Completion of Construction. Promptly upon completion of construction of the Building and Improvements, LANDLORD shall give notice of such completion to TENANT. In addition, LANDLORD shall furnish to TENANT a copy of the Certificate of Occupancy for the Building.
4.4 Utilities. LANDLORD shall furnish electric, gas and telephone lines and conduits and water and sewer pipes at the outer edge of the Demised Premises. TENANT shall be responsible for hooking up to such utility lines, pipes and conduits, at its sole cost and expense. LANDLORD grants to TENANT an easement over those portions of the Shopping center adjacent to the Demised Premises for the purpose of tying in to said utility lines, pipes and conduits. In the event that any damage is caused to the parking lot, paving areas, walkways or other parts of the proposed Shopping Center as a result of the tying in to said utility lines, pipes and conduits by the TENANT, then the TENANT shall, at its sole cost and expense promptly repair said damage.
ARTICLE V
5.1 Base Rent. TENANT covenants and agrees to pay to LANDLORD the sum of ONE MILLION THREE HUNDRED THIRTY ONE THOUSAND SEVEN HUNDRED THREE AND 75/100 ($1,331,703.75) DOLLARS throughout the term of the Lease as set forth in Exhibit "C" attached hereto and made a part hereof to Asbury Avenue East, L.L.C., c/o 1481 Oak Tree Road, Iselin, New Jersey 08830 or such other place as LANDLORD may by notice in writing to TENANT from time to time direct, in monthly installments as set forth on Exhibit "C", in advance, on or before the first ( day of each calendar month for the then current month during the term of this Lease. Base Rent for the first month of the term of this Lease shall be paid upon execution of this Lease by both parties.
5.2 Additional Rent. All sums which TENANT under any of the provisions of this Lease assumes or agrees to pay, or which TENANT agrees are to be at the expense of TENANT, are deemed and considered to be rent, and in the event of non-payment thereof, LANDLORD will have all rights and remedies provided for herein, by law or equity, in the case of non-payment of rent.
5.3 Net Lease. The annual rent, additional rent and all other sums required to be paid by TENANT under this Lease shall be absolutely net to LANDLORD throughout the term of this Lease, free of deductions or setoffs whatsoever with respect to the Premises and/or the ownership, leasing, operation, maintenance, repair, rebuilding, use or occupation thereof, or with respect to any interest of LANDLORD therein, it being the intention of the parties hereto that, by the execution of this Lease, TENANT shall, during the term of this Lease, assume, pay, or otherwise discharge, with respect to the Premises, every obligation relating thereto, except as otherwise expressly provided in this Lease.
No event or occurrence during the term of this Lease, whether foreseen or unforeseen, shall give TENANT the right to terminate this Lease or to quit or surrender the Premises or relieve TENANT of its liability for the full annual minimum rent, additional rent and other sums required to be paid by TENANT under this Lease, or performance of any of TENANT'S other obligations under this Lease.
ARTICLE VI
6.1 No Right to Encumber without Consent. Without LANDLORD'S prior written consent, which consent shall not be unreasonably withheld, TENANT shall not have the right to encumber this Lease or TENANT'S interest in the Demised Premises or the Improvements, furnishings, furniture, equipment, fixtures, and personal property thereon; provided, however, that said consent may be withheld by LANDLORD in the event that said encumbrance would adversely affect the LANDLORD'S ability to sell, refinance or redistribute its ownership interests in the Property.
ARTICLE VII
7.1 Real Estate Taxes. As additional rent, TENANT agrees to pay its proportionate share of all taxes levied upon the Property and land of any nature whatsoever, including special assessments. Special assessments shall be prorated taking into consideration the useful life of the improvement and the years remaining on the TENANT's lease term. In no event shall TENANT be responsible for the proportionate share of assessments beyond the term of this lease.
The payment by TENANT of all real estate taxes shall commence simultaneously with the Initial Term rent payments hereunder and shall be payable throughout the term of this Lease. TENANT'S proportionate share shall be a fractional share of the taxes assessed against the Property, the numerator of which shall be the number of square feet of gross floor area of the Demised Premises and the denominator of which shall be the number of square feet of gross floor area in all the buildings in the Property once a Certificate of Occupancy is issued for the other buildings. Until that date TENANT'S proportionate share shall be as follows: Fifteen (15%) Percent of the land cost and a percentage of the improvement cost that is proportionate to the improvements used by the TENANT. If there are no other improvements on the property except for those improvements that are for the TENANT's use, TENANT shall pay One Hundred (100%) Percent of the improvement costs of the tax bill.
7.2 Taxes. TENANT agrees to pay all taxes levied upon personal property, including trade fixtures and inventory, kept on the Demised Premises, as well as all taxes levied against the Demised Premises during the term of this Lease, after the presentation to TENANT by LANDLORD of statements from taxing jurisdiction in which the property is located.
LANDLORD may direct the taxing authorities to send the statements directly to TENANT, in which case TENANT shall pay all such taxes prior to the date when any interest or
penalty shall be due and shall immediately provide proof of payment to LANDLORD. TENANT and LANDLORD further agrees that TENANT, in the name of LANDLORD, but at TENANT's sole expense, may protest any assessment before any taxing authority or board or maintain any necessary legal action in reference to said assessment or for the recovery of any taxes paid thereon. Nothing herein contained shall require TENANT to pay any income or excess profits taxes assessed against LANDLORD or any corporate, capital stock, or franchise tax imposed upon LANDLORD. In addition, LANDLORD may protest any assessment regarding the Demised Premises before any taxing authority or board or maintain any necessary legal action in reference to said assessment or for the recovery of any taxes paid thereon and TENANT shall pay its proportionate share of any such action.
7.3 Method of Payment. Except in the case where TENANT shall pay taxes directly, LANDLORD shall give written notice advising TENANT of its estimated proportionate share of the amount of taxes, together with a copy of the tax bill, and TENANT shall pay such amount to LANDLORD together with its monthly rental payment. If this Lease shall terminate during a tax year, TENANT shall pay to LANDLORD its prorated portion of the amount that would have been due for the full tax year based on the number of days of said tax year expired on the date of termination.
7.4 Tax Appeal. TENANT shall have the right, in concert with other TENANTS and/or LANDLORD (but without cost to LANDLORD) to consent or appeal any tax or special assignment.
7.5 Pro-Rated Payment. All sums to be paid by TENANT to LANDLORD pursuant to this Article VII shall be pro-rated from the Rental Commencement Date.
ARTICLE VIII
8.1 Utilities and Charges Therefor. Commencing on the date on which the LANDLORD has delivered the Demised Premises ready for TENANT to commence its interior fit-up work, and during the entire term of this Lease, TENANT agrees to pay directly to the Authority charged with the collection thereof, all charges for water, gas electricity, telephone, sewer and other utilities, including hook-up fees therefore, used or consumed in the Demised Premises and shall make its own arrangements for such utilities. TENANT shall produce to LANDLORD upon request receipts for payment of utility bills which, if unpaid, could become a lien upon the Demised Premises. TENANT shall pay when due and prior to the time that any lien or charge may be imposed upon the Demised Premises for nonpayment thereof, any assessment or charges made by a public utility or municipal or other public body against the Demised Premises for any improvement benefiting the Demised Premises. In the event any such services cannot be reasonably procured from any authority, and LANDLORD provides any such services, TENANT shall reimburse LANDLORD for its proportionate share of any such services used or consumed in the Demised Premises as additional rental.
ARTICLE IX
During the Lease Term, TENANT, at its expense, shall maintain in effect:
a. fire and casualty insurance (with broadest available form of extended coverage endorsement, including vandalism and malicious mischief) on the Building and Improvements on the Demised Premises in an amount equal to one hundred percent (100%) of the full replacement cost value thereof. On each anniversary of the commencement of this Lease, TENANT shall request the insurer to determine if the replacement cost value has increased, and if the insurer determines that there has been an increase, TENANT shall increase the amount of
the coverage so that the policies insure one hundred percent (100%) of the replacement cost value of the Building and Improvements; and
b. general public liability insurance against claims for personal injury, death or property damage occurring on or about the Demised Premises with combined single limit liability protection in the amount of not less than Two Million Five Hundred Thousand Dollars ($2,500,000.00).
During the Preliminary Period, and with respect to any construction performed by TENANT in connection with any TENANT fit-up, TENANT, at its expense, shall maintain in effect Completed Value Form Builders Risk Insurance with an extended coverage endorsement on one hundred percent (100%) of the value of the Building and Improvements.
All insurance policies set forth above shall be carried in favor of LANDLORD and TENANT, as their respective interests may appear. In addition, all such insurance shall be in such form and with such responsible companies licensed to do business in the State of New Jersey as LANDLORD shall approve, which approvals shall not be unreasonably withheld. Each policy shall contain a provision that no act or omission of TENANT shall affect or limit the obligation of the insurance company to pay LANDLORD the amount of the loss sustained. All policies shall provide for at least thirty (30) days written notice to LANDLORD before cancellation or modification. Insurance certificates and original policies furnishing of all such insurance shall be provided to LANDLORD throughout the entire term of this Lease.
ARTICLE X
10.1 Affirmative Covenants. At all times during the term of this Lease and such further time as TENANT occupies the Demised Premises or any part thereof, TENANT shall covenant as follows:
10.1.1 Use and Occupancy. To use or occupy the Demises Premises as a commercial bank and for no other purposes. TENANT shall not close its business for more than ten (10) days or move out of or vacate the Demised Premises during the term of this Lease.
10.1.2 Compliance with Law. To make all repairs, alterations, additions or replacements to the Demised Premises required by any law or ordinance or any order or regulation of any public authority because of TENANT's use of the Demised Premises not occasioned by the material negligence of the Landlord or the negligence of any other tenants in the Shopping Center; to keep the Demised Premises equipped with all safety appliances so required because of such use; to procure any licenses and permits required for any such use; to pay all municipal, county or state taxes assessed against the personal property or any kind owned by or placed in, upon or about the Demised Premises by TENANT; and to comply with the orders and regulation of all governmental authorities, except that TENANT may defer compliance so long as the validity of any such law, ordinance, order or regulation shall be contested by TENANT in good faith and by appropriate legal proceedings and provided that TENANT first gives LANDLORD assurances reasonably satisfactory to LANDLORD against any loss, cost or expense on account thereof. LANDLORD has not made any warranty or representation as to whether TENANT will be able to procure any license, permit, or approval with respect to the Demised Premises, nor is this Lease in any way contingent upon TENANT's ability to procure any such license, permit or approval with respect to the Demised Premises.
10.1.3 Payment for TENANT's Work. To pay promptly when due the entire cost of any work to the Demised Premises undertaken by TENANT and to bond against or discharge any liens for labor or materials within ten (10) days after written request by LANDLORD; to procure all necessary permits before undertaking such work; and to do all of such work in good and workmanlike manner, employing materials of good quality and complying with all governmental requirements. The TENANT covenants and agrees that with regard to any construction work to
be performed with respect to the Demised Premises, the TENANT will require all general contractors and subcontractors to execute a Waiver of Liens which will provide that said general contractors or subcontractors shall not be permitted to file any liens for labor or materials in connection with said construction.
10.1.4 Indemnity. To defend with counsel, save harmless and indemnify Landlord from all claims or damage to or of any person or property while on the Demised Premises unless arising from any negligence of LANDLORD, and from all claims or damage to or of any person or property occasioned by any omission, fault, neglect or other misconduct of TENANT.
10.1.5 LANDLORD's Right to Enter. To permit Landlord and its agents to examine the Demised Premises at reasonable times and to show the Demised Premises to prospective purchasers and lenders, provided such entry shall not unreasonably interfere with TENANT's occupancy of its business in the Demised Premises. LANDLORD shall provide reasonable notice to TENANT of any showing unless there is an emergency.
10.1.6 Personal Property at TENANT's Risk. That all of the furnishings, fixtures, equipment, effects and property of every kind, nature, and description of TENANT and of all persons claiming under TENANT that may be on the Demised Premises shall be at the sole risk and hazard of TENANT, including if the whole or any part thereof shall be destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting of water pipes.
10.1.7 Payment of LANDLORD's Cost of Enforcement. To pay on demand LANDLORD's expenses, including reasonable attorney's fees, incurred in enforcing any obligation of TENANT under this Lease or in curing any default by TENANT under this Lease as provided in Section 13.2(d), provided LANDLORD shall prevail in any judicial proceedings in respect to such enforcement.
10.1.8 Yield Up. At the expiration of the term of this Lease or earlier termination of this Lease: to remove all trade fixtures and personal property; to repair any damage caused by such
removal; to remove all TENANT's signs wherever located; and to surrender all keys to the premises and yield up the Demised Premises, broom clean and in the same good order and repair in which TENANT is obligated to keep and maintain the Demised Premises by the provisions of this Lease, reasonable wear and tear excepted. Any property not so removed shall be deemed abandoned and may be removed and disposed of by Landlord in such manner as LANDLORD shall determine, without any obligation on the part of LANDLORD to account to TENANT for any proceeds therefrom, all of which shall become the property of LANDLORD. TENANT shall further indemnify LANDLORD against all loss, cost and damage resulting from TENANT's failure and delay in surrendering the Demised Premises.
10.1.9 Maintenance. To maintain the Demised Premises and, at its own expense, to effect all necessary repairs and replacements to the Demised Premises and to keep the Demised Premises in good order and condition, reasonable wear and tear excepted, and to keep the Demised Premises in a clean and sanitary condition according to applicable state, city and county health and sanitary laws and ordinances during the term of this Lease. The Demised Premises shall not be maintained as, nor become, a private or public nuisance. In addition, at all times during the term of the Lease, TENANT shall maintain a maintenance contract with a qualified reputable service maintenance company for the heating, ventilation and air conditioning equipment ("HVAC") servicing the Demised Premises which contract shall include specific provisions for regularly scheduled periodic routine maintenance. TENANT shall furnish LANDLORD with a true copy thereof.
10.1.10 Repair Obligations. Notwithstanding any language to the contrary set forth herein, TENANT shall be responsible for all necessary repairs to the exterior and foundation of the Demised Premises provided that said repairs are occasioned by the act, neglect or negligence on the part of the TENANT, its invitees, licensees, agents, contractors or customers.
10.1.11 Roof/HVAC Repair Obligations. Notwithstanding any language to the contrary set forth herein, TENANT shall be responsible for all necessary repairs to the roof and HVAC systems of the Demised Premises provided said repairs are not occasioned by the material act, neglect or negligence on the part of the LANDLORD.
10.2 Negative Covenants. TENANT covenants that it shall at all times during the Lease term and such further times as TENANT occupies the Demised Premises or any part thereof:
10.2.1 Overloading, Nuisance, etc. Not injure, overload, deface or otherwise harm the Demised Premises; not commit any nuisance; nor make any use of the Demised Premises which is improper, offensive or contrary to any law or ordinance.
10.2.2 Installation, Alteration or Additional. Not make any installations, alterations or additions (except only the non structural installation of fixtures necessary or appropriate for the conduct of its business), without on each occasion obtaining the prior written consent of LANDLORD, LANDLORD's consent not to be unreasonably withheld.
10.3 Leasehold Improvements. During the term of this Lease, all leasehold improvements shall remain the property of TENANT, and TENANT shall also be entitled to the depreciation therefrom.
ARTICLE XI
11.1 Warranty on Use. LANDLORD warrants and represents that it is the owner in fee of the Land shown on Exhibit "A".
11.2 Quiet Enjoyment. LANDLORD agrees that upon TENANT'S paying the rent and performing and observing the agreements, conditions and other provisions on its part to be performed and observed hereunder, TENANT shall and may peaceably and quietly have, hold
and enjoy the Demised Premises during the Lease Term without any danger of hindrance or molestation from LANDLORD or anyone claiming under LANDLORD, subject to the covenants and conditions of this Lease.
ARTICLE XII
12.1 LANDLORD to Repair or Rebuild in the Event of Casualty. In case the Demised Premises or any part thereof shall be damaged or destroyed by fire or other casualty, taken (which term or reference to an eminent domain action generally, for the purposes of this article, shall include a sale in lieu of the exercise of the right of eminent domain) or ordered to be demolished by the action of any public authority in consequence of a fire or other casualty, this Lease shall, unless it is terminated as provided below in Section 12.2 or 12.3, remain in full force and effect, except as provided below, and LANDLORD shall, at its expense, proceed with due diligence to repair or rebuild the Demised Premises, or what may remain thereof, so as to restore it as nearly as practicable to the condition it was in immediately prior to such damage or destruction. Said repair or rebuilding shall relate to the work to be performed by LANDLORD in connection with the Building and shall not relate to the Tenant fit-up work described in this Lease. In the event, however, that the destruction to the Demised Premises exceeds fifty percent (50%) of the insurable value thereof, then the LANDLORD shall have the right to terminate the Lease upon sixty (60) days notice to TENANT. In the event that the LANDLORD is not able to repair the Demised Premises for full use and operation by the TENANT within eight (8) months of the date of said casualty, then the TENANT shall have the right to terminate this Lease upon sixty (60) days written notice to the LANDLORD. In the event that as a result of said casualty, TENANT is not able to occupy any part of the Demised Premises, then TENANT'S rental obligations to LANDLORD with regard to its base rent payments shall cease until the TENANT is able to re-occupy the Demised Premises. In the event that as a result of said casualty,
TENANT is only able to occupy a part of the Demised Premises, then TENANT'S rental obligations to LANDLORD with regard to its base rent payments shall be reduced on a pro-rata basis based upon the percentage of the Demised Premises still usable by TENANT.
12.2 Right to Terminate in Event of Casualty. In case of any damage or destruction occurring in the last twelve (12) months of the Initial Term or any Renewal Term of this Lease, to the extent of fifty percent (50%) or more of the insurable value of the Building, TENANT or LANDLORD may, at its option, to be evidenced by notice in writing given to the other within twenty (20) days after the occurrence of such damage or destruction, in lieu of repairing or replacing the Building, elect to terminate this Lease on the date of such notice. In the event the TENANT or LANDLORD shall so terminate, all insurance proceeds shall become the property of the LANDLORD.
12.3 Eminent Domain. It is understood and agreed that if the whole of the Demised Premises shall be taken for any public or quasi- public use under any statute, or by right of eminent domain, or by private purchase by public authority in lieu of the exercise of the right of eminent domain or if any part of the Demised Premises is so taken and the part not so taken is insufficient for the reasonable operation of TENANT's business in the reasonable opinion of TENANT in consultation with LANDLORD, which opinion shall not be arbitrarily or capriciously determined, then in any of such events, this Lease shall cease and expire on the date when possession shall be taken thereunder of the Demised Premises or part thereof and all rents, taxes and other charges shall be prorated and paid to such date.
In the event that only a part of the Demised Premises is so taken and the part not so taken shall be sufficient for the reasonable operation of the TENANT's business, this Lease shall remain unaffected except:
a. The TENANT shall be entitled to a pro-rated reduction in the rent to be paid hereunder, after the date of such taking, based on the proportion which the space so taken bears
to the space originally demised, provided that consideration shall be given to the respective values of the space taken and the space not taken based on the award received;
b. The LANDLORD shall promptly after such taking, and at the LANDLORD's expense, restore that part of the Building and Improvements not so taken to as near its former condition as is reasonably possible. The TENANT shall be responsible, at the TENANT'S expense, for the restoration of all its TENANT fit-up work at the Demised Premises so that TENANT can re-open for business in the Demised Premises. In the event, however, that the taking of the Demised Premises exceeds fifty percent (50%) of either the square footage or insurable value of the Demised Premises, then LANDLORD shall have the right to terminate this Lease upon sixty (60) days notice to the TENANT.
In the event of any condemnation, taking or sale as aforesaid, whether whole or partial, LANDLORD and TENANT shall be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceedings, or as may be otherwise agreed, taking into consideration the fact that LANDLORD is the owner of the Building and the Improvements. TENANT shall be entitled to receive such part of the award that relates to non-fixtures and other items of personalty owned by TENANT and utilized in connection with the Demised Premises. Nothing contained herein, however, shall operate to reduce the amount of the award which LANDLORD would otherwise receive for its fee interest in the Demised Premises. In the event the condemning authority does not make separate awards and the parties are unable to agree as to amounts which are to be allocated to the respective interests of LANDLORD and TENANT, then each party shall select a M.A.I. real estate appraiser, (individually, an "Appraiser" and collectively, the "Appraisers") and the two Appraisers shall select a third Appraiser and the three Appraisers shall determine the amount of such condemnation awarded which is to be allocated to the respective interests of LANDLORD and TENANT. In the event the two Appraisers are unable to agree on the selection
of the third Appraiser, the third Appraiser shall be selected by the president of the Board of Realtors of Monmouth County, New Jersey.
ARTICLE XIII
13.1 Events of Default. The occurrence of any one of the following shall constitute an event of default by TENANT whereupon LANDLORD may exercise its remedies herein:
a. failure by TENANT to pay any sum required by this Lease on or before the due date thereof;
b. failure by TENANT to perform or comply with any obligation of TENANT required hereunder within fifteen (15) days after written notice thereof from LANDLORD, or if such performance cannot be completed in fifteen (15) days, within a reasonable time provided TENANT is diligently pursuing such performance;
c. the filing of a petition against TENANT for adjudication of it as a bankrupt or insolvent or for its reorganization or the appointment of a receiver or trustee for the benefit of its creditors, if such petition is not dismissed within sixty (60) days of filing; or the filing of such a petition by TENANT; or an assignment by TENANT for the benefit of its creditors; or the taking of possession of the property by any governmental officer or agency pursuant to statutory authority for the dissolution or liquidation of the TENANT;
d. if the Demised Premises shall be unoccupied by TENANT or the TENANT shall cease operating its business for a period of ten (10) consecutive days;
e. if TENANT's leasehold interest in the Demised Premises is taken by execution;
f. failure of TENANT to pay a five percent (5%) late fee, which shall be imposed for any rent not received by LANDLORD within ten (10) days after the date on which any rent or other payment required hereunder is due.
13.2 Remedies. In addition to all other remedies available to LANDLORD at law or equity, upon the occurrence of any event of default by TENANT, LANDLORD at its option, may:
a. terminate this Lease and all the interests of TENANT in the Demised Premises by giving TENANT ten (10) days notice of termination, and TENANT shall thereupon surrender the Demised Premises in the same condition and with the same effect (except as to TENANT's continuing liability for damages) as if the full term of this Lease had expired;
b. with or without terminating this Lease, re-enter and repossess through judicial proceedings the Demised Premises, or any part thereof, and relet, or attempt to relet, any or all parts thereof upon such terms and conditions and to such persons or entities, for such uses, and for such period or periods of time as LANDLORD in its sole discretion, shall determine, including a term beyond the original expiration date of this Lease. For the purpose of such reletting, LANDLORD may make repairs, alterations, redecorations or additions to the Demised Premises to the extent it determines the same to be desirable or convenient, and the cost of such work shall be charged and payable by TENANT on demand. However, LANDLORD shall not be responsible or liable for any failure to relet the Demised Premises or any part thereof, or for any failure to collect any rent upon such reletting;
c. with or without terminating this Lease , accelerate on demand the due date for the payment of all rent remaining to be paid from and after the occurrence of the event of default to the expiration of the term of this Lease, and such an amount shall be paid to LANDLORD on demand as liquidated damages for TENANT's default, in addition to all sums due and unpaid as of the date of the event of default. The termination of this Lease by LANDLORD shall not relieve TENANT of its obligation to pay these sums to LANDLORD as liquidated damages;
d. pay or perform for the account of TENANT any obligation or work to be paid or done by TENANT pursuant to the provisions of this Lease which TENANT has failed to pay or do, and LANDLORD may re-enter and repossess through judicial proceedings such part of the
Demised Premises as may be necessary to perform such work. TENANT shall pay to LANDLORD on demand as additional rent the amount so paid by LANDLORD or expended by LANDLORD to do the work or otherwise cure the default by TENANT, together with interest on amounts expended at the rate of ten percent (10%) per annum. Notwithstanding anything above requiring LANDLORD to give notice to TENANT as a condition to the occurrence of an event of default, in an emergency where there is an immediate threat to the Demised Premises unless payment is made or work done, LANDLORD may pay or perform obligations on behalf of TENANT which TENANT has failed to pay or perform after notice to TENANT as much in advance as practicable under the circumstances prior to LANDLORD's payment or performance on behalf of TENANT.
13.3 Remedies Cumulative. Any and all rights and remedies which LANDLORD may have under this Lease, and at law and equity, shall be cumulative and shall not be deemed inconsistent with each other, and any two or more of such rights and remedies may be exercised at the same time insofar as permitted by law.
13.4 TENANT's Waivers. TENANT hereby waives the service of any notice of intention to re-enter provided for in any statute, or of the institution of legal proceedings for the purpose, and in addition waives any right of redemption or re-entry or repossession, or to restore the operation of this Lease if it is terminated or if TENANT is dispossessed by any judgment or by warrant of any court or judge in the case of re-entry or repossession by LANDLORD, or in the case of expiration of the term of this Lease. Tenant, in addition, waives any and all benefits of any and all laws now or hereafter in force or effect exempting property of TENANT from liability for rent or for debt.
TENANT waives the right to any notices to quit as may be specified in N.J.S.A. 2A:18-61.4, as amended, and LANDLORD agrees to give TENANT sixty (60) days prior notice to vacate.
13.5 Effect of Landlord's Actions. Neither the failure by LANDLORD to insist upon the strict performance of any covenant, agreement or condition of this Lease or to exercise any right or remedy with respect thereto, nor the acceptance of any full or partial rental payment or other compensation payable hereunder, shall constitute a waiver of the breach of any such covenant, agreement or condition of this Lease. LANDLORD, notwithstanding any such failure or acceptance of payment, shall have the right hereafter to insist upon the strict performance by TENANT of any and all terms, covenants, agreements, conditions and provisions of this Lease to be performed by TENANT. There shall be no waiver of any term covenant, agreement, conditions and provision hereof except by written agreement of the party to be charged with the waiver.
13.6 Late Charge. In the event that any monthly installment of rent shall become overdue for a period in excess of five (5) days, TENANT shall pay any additional charge to defray the expenses incident to handling each such overdue installment equivalent to five percent (5%) of each such overdue installment. Such additional charge shall be due on demand and payable as additional rent and acceptance by LANDLORD of any overdue installment of rent and such additional charge shall not be construed as a waiver of TENANT's obligation to pay each installment of rent on the first day of each calendar month as hereinabove set forth.
ARTICLE XIV
14.1 TENANT shall not, without the prior written consent of LANDLORD, which consent shall not be unreasonably withheld except as set forth below, assign this Lease or sublet a portion of the Demised Premises, or mortgage, pledge or encumber its leasehold interest created hereby (a "Pledge"). In the event that LANDLORD consents to any assignment or subletting, TENANT shall nevertheless remain liable for the performance of this Lease, and such consent shall not be deemed to be consent to any further subletting or assignment. TENANT agrees to pay LANDLORD, upon demand, the reasonable costs incurred by LANDLORD in
connection with any request by TENANT for LANDLORD to consent to any assignment, subletting or pledge by TENANT. LANDLORD shall have the right to unreasonably withhold its approval from any assignment or subletting in the event that the assignee or sublessee is engaged in a business other than as a commercial bank. If LANDLORD approves any assignment or subletting, LANDLORD shall receive all profit from any subletting. Notwithstanding anything to the contrary contained herein, in the event that there is a bank consolidation or takeover of Two River Community Bank by another commercial bank, TENANT shall have the right to assign the Lease to said commercial bank with the understanding that the assignee shall assume all obligations under the Lease, including but not limited to, the payment of rent.
14.2 Notice from One Party to the Other. Any notice from LANDLORD to TENANT or from TENANT to LANDLORD shall be deemed duly served if mailed by express, registered or certified mail, return receipt requested, postage prepaid, addressed, or if delivered by a nationally-recognized next day or courier service, if to TENANT, at the original address of TENANT or such other address as TENANT shall have last designated by notice in writing to LANDLORD, and if to LANDLORD, at the original address of LANDLORD or such other address as LANDLORD shall have last designated by notice in writing to TENANT. Any notice shall be deemed effective when received.
14.3 Recording. TENANT agrees not to record this Lease, but TENANT agrees on request of the LANDLORD, to execute a Notice or short form of this Lease in a recordable form in compliance with applicable statutes, and reasonably satisfactory to LANDLORD's attorney. Any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease.
14.4 Acts of God. In any case where either party hereto is required to do any act, excluding the payment of rent or other sum required to be paid by TENANT to LANDLORD hereunder, delays caused by or resulting from Acts of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations,
or other causes beyond such party's reasonable control shall not be counted in determining the time during which work shall be completed, whether such time be designated by a fixed date, a fixed time or "a reasonable time".
14.5 Waiver of Subrogation. All insurance which is carried by either party with respect to the Demised Premises, whether or not required, shall include provisions which either designate the other party as one of the additional insureds or deny to the insurer acquisition by subrogation of rights or recovery against the other for loss or injury against which the waiving party is protected by insurance carried by the other any right to participate in the adjustment of loss or to receive insurance proceeds and agrees upon request promptly to endorse and deliver to the other party any checks or other instruments in payment of loss in which it is named as payee.
14.6 No Accord and Satisfaction. No acceptance by LANDLORD of a lesser sum than the rent of any other charges then due shall be deemed to be other than on account of the earliest installment of such rent or charge due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent or other charge be deemed an accord and satisfaction, and LANDLORD may accept such check or payment without prejudice to LANDLORD's right to recover any balance of such installments or pursue any other remedy in this Lease provided.
14.7 Applicable Law and Construction. This Lease shall be governed by and construed in accordance with the laws of the State of New Jersey, and if any provisions of this Lease shall to any extent be invalid, the remainder of this Lease shall not be affected thereby. There are no oral or written agreements between LANDLORD and TENANT affecting this Lease. This lease may be amended only by instruments in writing executed by LANDLORD and TENANT. LANDLORD shall not be deemed in any way or for any purpose, to have become, by the execution of this Lease or any action taken thereunder, a partner of TENANT in its business or otherwise a joint venturer or member of any enterprise of TENANT. The titles of the several Articles and Sections contained herein are for convenience of reference only and shall not be
considered in construing this Lease. Unless repugnant to the context, the words "LANDLORD" and "TENANT" appearing in this Lease shall be construed to mean those names above and their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively.
14.8 TENANT's Certificate. Tenant shall from time to time within ten (10) days of any request by LANDLORD execute and deliver to LANDLORD a certificate in form for recording stating that this Lease is in full force and effect, has not been modified (or, if it has been modified, identifying the modification), that to the best of TENANT's knowledge, no default exists on the part of either LANDLORD or TENANT (or, if such a default does exist, specifying the default) and specifying that date to which rent and other charges have been paid by TENANT hereunder. It is intended that any purchaser or mortgagee of LANDLORD's fee interest in the Demised Premises or any assignee of LANDLORD's interest in this Lease may rely on such a certificate by TENANT.
14.9 Limitation of Liability. The liability of LANDLORD, its members, and successors of interest, under or with respect to this Lease, shall be strictly limited to and enforceable only out of its or their interest in the Demised Premises, and shall not be enforceable out of any other assets. In the event of the voluntary or involuntary transfer of fee ownership of the Demised Premises, LANDLORD shall be freed and relieved of all liability and obligation hereunder which shall thereafter accrue and TENANT shall look solely to such successor in interest for the performance of the covenants and obligations of the LANDLORD hereunder which shall thereafter accrue. LANDLORD acknowledges that any sale or other transfer of the Demised Premises shall be subject to the rights of TENANT under this Lease. TENANT acknowledges that no mortgagee which shall succeed to the interests of LANDLORD shall be liable for any previous act or omission of the LANDLORD.
ARTICLE XV
15.1 Common Area. LANDLORD hereby grants to TENANT, in common with LANDLORD and other tenants, with respective invitees and licensees, the right to use the parking and public areas in the Property of which the Demised Premises is a part, Subject to the conditions hereinafter provided. TENANT hereby agrees that:
a. LANDLORD may designate in the Property an area for TENANT's employee parking.
b. Said parking area will not be used for permanent garaging or overnight parking.
c. TENANT will conform with the reasonable rules and regulations of the common areas as LANDLORD may adopt common for all other tenants (Exhibit "E")
d. LANDLORD reserves the right to close any or all portions of the common areas to such extent and for such time as is legally necessary to prevent a dedication thereof or the accrual of any rights to any person or to the public therein; and to make changes, additions, depletions, alterations or improvements in and to said common areas, including methods of ingress to and egress from such common areas, provided there shall be no obstruction of TENANT's rights of ingress to and egress from the Demised Premises.
15.2 Common Area Charges. LANDLORD shall operate, maintain and repair the common areas for the Property. TENANT, for the common areas services to be performed by LANDLORD, shall pay, as additional rent, on the first day of each month, its proportionate share of LANDLORD's costs for the Common Area Services commencing on the date of the beginning of the Initial Term and on each successive anniversary thereof during the term of this Lease.
15.3 Common Area Services. "Common Area Charges" shall mean in connection with the operation and repair of the common area:
TENANT's proportionate share of the expenses of maintaining all common areas including without limitation all costs and expenses of operating, maintaining and repairing, cleaning, painting, striping, policing and securing the Common Areas (including the cost of equipment and employment taxes); removal of snow, ice, trash and debris; regulation of traffic; costs and expenses of inspecting of machinery and equipment used in the operation and maintenance of the common areas and personal property taxes and other charges incurred in connection with such equipment; costs and expenses of repair of paving, curbs, walkways, landscaping, drainage, pipes, ducts, conduits and similar items, and lighting facilities; costs and expenses of planting, replanting and replacing flowers, shrubbery and planters; costs and expenses incurred in the rental of music program service and loudspeaker systems, including furnishing electricity therefor; costs of water and sewer if not metered separately; and costs of services, if any, furnished by the LANDLORD for non-exclusive use of all tenants.
15.4 Determination and Payment of Common Area Charges. TENANT'S proportionate share of the Common Area Charges will be determined by using a fraction, the numerator of which shall be the square footage of the Demised Premises and the denominator of which shall be the total number of square feet of gross floor area for all buildings that have a building permit on the Property. Until that date TENANT shall pay a percentage of the Common Area Charges that is proportionate to the amount of Common Area Services provided by LANDLORD for the TENANT's use of the site. If no other improvements are constructed on the property except for those improvements that are for the TENANT's use, TENANT shall pay One Hundred Percent (100%) of the Common Area Charges.
The annual charge to TENANT for the first Lease year shall be an amount estimated by LANDLORD. Within ninety (90) days after the end of each year, LANDLORD may furnish to TENANT a statement of LANDLORD's costs of common area services paid by LANDLORD during such period, and thereupon there shall be an adjustment between LANDLORD and TENANT so that LANDLORD shall receive the entire of TENANT's proportionate share and no
more. If additional amounts are found to be due and owing LANDLORD, such amount shall be payable by TENANT within twenty (20) days after the rendition of the statement, and if amounts are found to be owing to TENANT, then TENANT shall be entitled to a credit against its share of Common Area Charges for the ensuing lease year. For the next ensuing lease year, TENANT's proportionate share of the Common Area Charges shall be based upon such costs determined for immediately preceding lease year which shall be adjusted as herein provided.
The TENANT'S obligation to commence to pay the cost of its common area services shall commence on the same date as the commencement of its obligation to pay basic rent pursuant to the terms of this Lease.
ARTICLE XVI
16.1 Signs. TENANT shall have the right to place signs, at its own expense, upon the exterior of the Demised Premises identifying TENANT, provided such signs comply with the local ordinances and regulations, are of a reasonable size, content and color are not flashing or otherwise considered to be a distraction or nuisance to third parties, and all such signs shall be subject to the prior written approval of LANDLORD and shall be at TENANT's sole cost and expense. It is the responsibility of TENANT to investigate the rules and regulations of any and all appropriate governmental authorities governing sign size and location and to obtain any necessary approval. LANDLORD may install a monument for the shopping center or other signage. Said signage shall be at locations designated by LANDLORD and shall be designed in accordance with LANDLORD'S plans.
ARTICLE XVII
17.1 Hazardous Waste. TENANT represents that its Standard Industrial Classification is SIC 6159 and such number is presently exempt from the Industrial Site Recovery Act as set forth in the N.J.S.A. et seq. ("ISRA"). TENANT covenants to maintain its exempt status for the
term of this Lease or LANDLORD may terminate this Lease. TENANT shall immediately notify LANDLORD of any change in its exempt status.
TENANT shall, at TENANT'S own expense, comply with ISRA and the regulations promulgated thereunder in the event of the closing, termination or transfer of TENANT's operation at the premises. TENANT shall also provide all information within TENANT's control requested by LANDLORD including a Letter of Non-Applicability. In the event that ISRA compliance becomes necessary at the premises due to any action or non-action on the part of the LANDLORD, then LANDLORD shall comply with ISRA and all requirements of the NJDEP and TENANT will cooperate in the execution of any documents required by LANDLORD or the State of New Jersey.
ARTICLE XVIII
18.1 Subordination and Non-Disturbance Agreement. The TENANT hereby covenants and agrees to enter into a Subordination and Non- Disturbance Agreement with LANDLORD, in form and substance satisfactory to LANDLORD in its reasonable judgment, upon the request of Landlord and to execute such additional agreements and documents from time to time as LANDLORD may request in connection therewith.
ARTICLE XIX
19.1 Regulatory Approval. The obligation of TENANT to comply with the terms and conditions of this Lease are subject to the receipt by Tenant of appropriate federal and state regulatory approvals for the operation of a branch of its bank in the Demised Premises within ninety (90) days of the date hereof. The Tenant shall use its best efforts to immediately apply for said federal and state approvals and to diligently prosecute its approval applications. In the event that the TENANT has not obtained said approvals within ninety (90) day period, then the LANDLORD shall have the right to terminate this Lease, in which event neither party shall have
any further obligation to the other except as set forth below. In the event that the TENANT is not successful in obtaining the above-described approvals, then the TENANT hereby agrees to (i) immediately notify LANDLORD in writing of said fact, (ii) reimburse the LANDLORD for all charges incurred by the LANDLORD, including interest payments, points, (charged by its lender) and reasonable attorneys' fees, in connection with the loan obtained by LANDLORD to construct the Demised Premises and (iii) continue to pay the LANDLORD'S interest charges for a period from the date on which the LANDLORD is notified that the TENANT has not obtained said approvals until the earlier of: (i) the date on which the LANDLORD signs a lease with another tenant for the Demised Premises; or (ii) nine (9) months from the date on which the TENANT has notified the LANDLORD that it has not obtained said approvals.
ARTICLE XX
20.1 Development Project. TENANT acknowledges that the LANDLORD may undertake a development project on the land adjacent to and including the Premises, which development project may consist of a +/- 28,000 sq. ft. retail/office center and a +/- 6,000 square foot freestanding building as set forth on Exhibit D or other permitted uses. The foregoing is for informational purposes only. In no event shall LANDLORD be required to undertake any or all of the development project.
20.2 Cooperation in Project. TENANT agrees to cooperate with LANDLORD and any construction personnel in connection with the development project including, without limitation, allowing reasonable access onto the Demised Premises to construction personnel in order to construct any improvements in connections with the development project. In addition, TENANT shall not object to the development project or any approvals required to be obtained by LANDLORD by any governmental authority.
20.3 Easements. LANDLORD hereby reserves the right to allow cross access easements and/or right of ways among and between the properties to be used in the development
project if necessary or desirable for the construction, parking, and use of the development project and its improvements.
ARTICLE XXI
21.1 Amount of Security Deposit. As security for the faithful performance by TENANT of all of the terms of this Lease, TENANT will concurrently with the execution and delivery of this Lease, deposit with LANDLORD the sum of SIX THOUSAND THREE HUNDRED NINETY ONE AND 66/100 ($6,391.66) DOLLARS which equals one month's rent and which shall herein be referred to as the Security Deposit, which shall be returned to TENANT, without interest, thirty (30) days after the day set forth for the expiration of the Term herein (notwithstanding the fact that this Lease may be sooner terminated), provided, however, that TENANT has fully and faithfully carried out all of the terms of this Lease. TENANT's acceptance of the return of the Security Deposit shall constitute an absolute release by TENANT of LANDLORD for and from any and all claims of any kind arising out of this Lease. The security deposit shall be adjusted so that it remains equal to one month's rent. LANDLORD shall have the right to apply any part of the Security Deposit to cure any default of TENANT and if LANDLORD does so, TENANT shall upon demand deposit with LANDLORD the amount so applied so that LANDLORD shall have the full Security Deposit on hand at all times during the Term of this Lease.
21.2 Sale of Property. In the event of a sale of the Building or lease of the land on which it stands, LANDLORD shall have the right to transfer the Security Deposit to the vendee or lessee and the LANDLORD shall be considered released by the TENANT from all liability for the return of the Security Deposit and the TENANT shall look solely to the new LANDLORD for the return of the Security Deposit and it is agreed that this shall apply to every transfer or assignment made of the Security Deposit to a new LANDLORD. The Security Deposit shall not be mortgaged, assigned or encumbered by TENANT. Any mortgagee of
LANDLORD shall be relieved and released from any obligation to return the Security Deposit in the event such mortgagee comes into possession of the Demised Premises and/or the Building by reason of foreclosure of its mortgage or any proceeding in lieu thereof.
Insolvency of TENANT. In the event of the insolvency of TENANT, or other
proceeding described in Section 17.04 or in the event of the entry of a judgment
in bankruptcy in any court against TENANT which is not discharged within thirty
(30) days after entry, or in the event a petition is filed by or against TENANT
under any chapter of the bankruptcy laws of the State of New Jersey or the
United States of America, then in such event, LANDLORD may require the TENANT to
deposit security in an amount which in LANDLORD's sole judgment would be
sufficient to adequately assure TENANT's performance of all of its obligations
under this Lease including all payments subsequently accruing. Failure of TENANT
to deposit the security required by this Section within ten (10) days after
LANDLORD's written demand shall constitute a material breach of this Lease by
TENANT.
ARTICLE XXII
22.1 Option to Renew. Tenant has the option, at the end of the term,
provided Tenant is not in default under the Lease, to renew this Lease for two
(2) additional five (5) year renewal terms. The Base Rent during each term shall
be as follows:
MONTHLY MONTHLY MONTHLY YEARLY
BUILDING DRIVE THRU TOTAL TOTAL
-------- ---------- ----- -----
FIRST RENEWAL:
YEARS 16-20 $ 8,596.25 $ 1,547.33 $ 10,143.58 $121,722.90
SECOND RENEWAL:
YEARS 21-25 $ 10,315.50 $ 1,856.79 $ 12,172.29 $146,067.48
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The rent shall be payable as provided in accordance with the Lease. TENANT shall notify the LANDLORD in writing at least .one hundred twenty (120) days prior to the expiration of the term and the first renewal term of TENANT's desire to renew the Lease.
ARTICLE XXIII
23.1 Additional Lending Facilities. Landlord agrees that no other bank, lending institution, credit unions or ATM's will be permitted on the site during the term of this Lease, unless TENANT subleases or assigns this Lease to a tenant that is not a commercial bank pursuant to Section 14.1.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed the day and year first above written.
LANDLORD:
WITNESS: ASBURY AVENUE EAST, L.L.C.
/s/ Doug Sitar By: /s/ William Sitar
----------------------------- -----------------------------------
Doug Sitar William Sitar, Managing Member
TENANT:
/s/ Michael J. Gormley TWO RIVER COMMUNITY BANK
-----------------------------
SVP
By: /s/ Barry B. Davall, President
-----------------------------------
Barry B. Davall, President
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EXHIBIT "A"
MATCH EXISTING
[MAP]
EXHIBIT "B"
Plans and Specifications
Landlord shall perform the following work:
Construction of a +/- 2,500 square foot building with +/-900 square foot three lane drive- up window and a pass thru lane.
o All footings, foundation and structural work for the facility.
o The building skin consisting of a metal stud exterior with a brick facade.
o Wood truss roof with Timberline shingles throughout.
o The drive-thru structure in its entirety.
o The interior face of the exterior walls to be insulated and sheet-rocked, taped and spackled
o Two bathrooms complete.
o Sprinkler mains.
o HVAC equipment with no distribution.
o Electrical service to panel box at interior of the building.
o All required entrances, doors, frames, hardware and curtainwall.
EXHIBIT "C"
MONTHLY YEARLY
MONTHLY TOTAL YEARLY TOTAL
------- ----- ------ -----
Building Drive Thru Building Drive Thru Yearly Total
-------- ---------- -------- ---------- ------------
1 Commencement of $ 5,416.66 $ 975.00 $ 6,391.66 $ 65,000.00 $ 11,700.00 $ 76,700.00
Initial Term-Year 5
2 Years 6- 10 $ 6,229.17 $ 1,121.25 $ 7,350.42 $ 74,750.00 $ 13,455.00 $ 88,205.00
3 Years 11- 15 $ 7,163.54 $ 1,289.44 $ 8,452.98 $ 85,962.50 $ 15,473.25 $101,435.75
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* The above rent is solely the Base Rent and does not include the additional rent, such as taxes, CAM and any other additional rent, which shall be payable in accordance with the Lease.
EXHIBIT "D"
[MAP]
EXHIBIT "E"
1. All loading and unloading shall be done only in the areas and through the entrances designated for such purposes by Landlord.
2. No aerial or any other device shall be erected on the roof or exterior walls of the Demised Premises, or on the grounds without in each instance, the written consent of the Landlord. Any aerial so installed without such written consent shall be subject to removal by the Landlord, its agents or representatives without notice at any time and at the sole cost and expense of Tenant. In addition, Tenant shall use Landlord's roofer, at its sole cost and expense, in conjunction with Tenant's installation of all devices erected on the roof.
3. No loudspeakers, televisions, radios or other devices shall be used in a manner so as to be heard or seen outside of the Demised Premises without the prior written consent of the Landlord.
4. Tenant shall keep the Demised Premises at a temperature sufficiently high to prevent freezing of water pipes and fixtures.
5. Tenant shall, at Tenant's costs, contract the services of an exterminator on a monthly basis or whenever deemed necessary by the Landlord.
6. Tenant is not permitted to use any space heaters, including but not limited to kerosene, propane or electric.
7. The plumbing facilities shall not be used for any other purpose than that for which they were constructed, and no foreign substance of any kind shall be thrown therein, and the expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant, who shall, or whose employees, agents or invitees shall, have caused it.
8. Tenant shall promptly comply with all laws, orders, directions, rules and requirements of governmental authorities and cognizant insurance carriers.
9. Maintain the rental space and all equipment within it in good repair and appearance, and in neat, clean, safe and sanitary condition free of all garbage, papers, and trash.
10. Use all electric, plumbing and other facilities in the Demised Premises safely.
11. Promptly notify Landlord when there are conditions that require repair by Landlord.
12. Comply with all rules and regulations made by Landlord from time to time, respecting the delivery or shipment of merchandise, supplies, and fixtures to and from the Demised Premises.
13. Immediately notify Landlord of any accident, fire or damage occurring to the Demised Premises.
14. Do anything or permit anything to be done which tends to destroy the peace and quiet of the Landlord, invitees or persons in the neighborhood.
15. Use or operate any equipment that in the Landlord's sole judgment is or may be harmful to the Demised Premises or the Building of which the Demised Premises is a part.
16. Conduct any auction, fire sale, bankruptcy sale, going-out-of-business sale, or lost-our-lease sale, in or about the Demised Premises.
17. On a daily schedule, keep the sidewalks and outside adjacent areas to the Demised Premises clear of debris, ice and snow.
18. The Building is a smoke-free environment. There shall be no smoking permitted anywhere in the building within and including common areas, bathrooms, hallways, stairwells and lobbies. Smoking is not permitted anywhere within the Tenant's Premises.
19. When electrical wiring of any kind is introduced, it must be connected as directed by Landlord, and no stringing or cutting of wires will be allowed, except with the prior written consent of Landlord, and shall be done only by contractors approved by Landlord.
20. Landlord shall have the right to prescribe the weight, size and position of all safes and other bulky or heavy equipment, massed files and all freight brought into the Building by Tenant, and also the times of moving the same in and out of the Building. All such moving must be done under the supervision of the Landlord. Landlord will not be responsible for loss of or damage to any such equipment or freight from any cause; but all damage done to the Building by moving or maintaining any such equipment or freight shall be repaired at the expense of the Tenant. All safes shall stand on a base of such size as shall be designated by the Landlord. The Landlord reserves the right to inspect all freight to be brought into the Building, and to exclude from the Building all freight which violates any of these Rules and Regulations, or violates the Lease, of which these Rules and Regulations are a part. Tenant shall provide the Landlord with ten (10) days written notice prior to the positioning or installation of any item requiring Landlord's attention under this paragraph.
21. Failure of Tenant to comply with these Rules and Regulations constitutes a Default under this Lease. After giving Tenant notice of such Default and an opportunity to cure the same within the time provided by this Lease, Landlord may (in addition to pursuing any other remedies available to Landlord under this Lease) take the action necessary to cure the Default at Tenant's expense. Tenant shall pay each such bill, as Additional Rent, within ten (10) days after Landlord gives Tenant notice of the amount due.
Exhibit 10.24
PHOENIX INTERNATIONAL LTD., INC.
500 International Parkway
Heathrow, Florida 32746
Telephone: (407) 548-5100
Fax: (407) 548-5299
APPLICATION PROCESSING AGREEMENT
Type of entity: State of formation:
Bank FDIC New Jersey
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Mailing Address: Business Address (if different from
mailing address):
1250 Highway 35 South
Middletown, New Jersey 07748
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City, State, Postal Code: City, State, Postal Code:
Middletown, New Jersey 07748
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Phone Number: Fax Number:
(732)747-0101 (732)747-6866
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|
Phoenix International Ltd., Inc. ("Phoenix") has developed a retail banking system, which it uses to provide bank and application processing services to its customers. The party identified as Customer above ("Customer") wishes to obtain such services from Phoenix. In consideration of the obligations of the and agreements of the parties as set forth below, the parties hereby agree as follows:
1. Definitions
1.1. Client Software means the object code of the client resident portions of the Phoenix System which will reside at Customer's premises for input, review, use, and modification of Customer's data.
1.2. Documentation means the user documentation relating to the Phoenix System provided to Customer by or on behalf of Phoenix.
1.3. Material means any documents, magnetic media, equipment, negotiable items, or other information or material in any related to the services provided hereunder.
1.4. Phoenix System means the hardware and Phoenix software used by Phoenix to provide the Application processing Service hereunder.
1.5. Processing Services means the bank and application processing and other services to be provided by Phoenix hereunder and identified on Exhibit A annexed hereto.
1.6. Related Expenses means reasonable travel and other out-of-pocket expenses incurred by Phoenix in the performance of its obligations hereunder, including (without limitation) airfare, travel costs, lodging costs, and meals; shipping charges, courier and delivery charges; tape, cartridge, CD and diskette cost; voice and data telecommunications expenses, and the cost of forms, supplies, microfiche, and courier services. To the extent reasonably possible, Phoenix will obtain the approval of Customer prior to incurring substantial Related Expenses, and Customer will not unreasonably withhold such approval. Phoenix travel expenses shall be in conformance with the Phoenix Travel and Entertainment Policy as in effect from time to time, a copy of which shall be provided to Customer upon request.
2. Services
2.1. Application processing. Phoenix agrees to furnish to Customer and Customer agrees to obtain the Processing Services as specified on Exhibit A. Customer agrees that during the term of this agreement Phoenix will be the exclusive provider of such Processing Services. Customer may obtain additional products and services offered by Phoenix at Phoenix's then current prices for such services by amending Exhibit A.
2.2. Installation and Training. Phoenix will provide installation and training services under the conditions and for the fees specified in Exhibit D annexed hereto. Installation services are provided pursuant to a written installation plan, executed by Phoenix and Customer, and incorporated by reference into this Agreement within 30 days after the Effective Date as herein after defined. The Installation Plan shall be based upon the allocation of responsibilities contained in Exhibit B.
2.3. Network Support. Phoenix will also provide Network Support Services consisting of communication line monitoring and support personnel to discover, diagnose, repair, or report line problems to the appropriate telecommunications company. This service is included in the fee for telecommunications services also listed in Exhibit C.
2.4. Communications Management Services. Customer may obtain communication management services from Phoenix to assist with the acquisition or installation of communications hardware and equipment, or any move of Customer's facilities, at the cost and fees set forth in Exhibit C.
2.5. Changes to Services. Phoenix reserves the right to make changes to services including, but not limited to, operating procedures, security procedures, the type of equipment resident at, and the location of the data processing center, provided that Phoenix shall not delete services or make changes which would cause a material increase in Customer's cost of doing business without Customer's prior approval. Phoenix will provide Customer with reasonable prior written notice of changes which will materially affect Customer's procedures or reporting.
2.6. Data Retention, Phoenix shall retain data for the periods set forth in Exhibit F annexed hereto and may destroy all data thereafter.
3. Term.
This Agreement shall commence on the date of the agreement ("the Effective Date") and shall continue for 60 months from the first day of live processing of Customer's accounts (the "Installation Date"), or such other Date as is mutually agreed upon by Phoenix and Customer. Upon expiration, the Agreement will automatically renew for successive terms of 24 months unless either party provides written notice to the other of its intent not to renew for another term at least 180 days prior to expiration of the then current term. Notwithstanding the foregoing, the effective date shall not occur unless and until Customer obtains approval from the Federal Deposit Insurance Corporation and the applicable New Jersey State Banking authorities for the operation of a bank. In the event such approvals are not obtained on or before April 1, 2000, either Customer or Phoenix may cancel this agreement with no liability to the other except for any direct costs or expenses incurred by Phoenix in connection with this Agreement prior to cancellation.
4. Price and Payment
4.1. Fees. Fees for the Processing Services, implementation, and training are set forth in Exhibit B, including, where applicable, minimum monthly charges.
4.2. Payment. Customer shall make all payments due to Phoenix by check or wire transfer within 30 days after invoice. Estimated base charges and actual charges shall be invoiced monthly in arrears on the first of each month. Late payments will accrue interest at the rate of 1 1/2 % per month.
4.3. Fee Adjustment. Phoenix may adjust the Services Fees listed on Exhibit B once per year after the first anniversary of the Installation Date upon 30 days written notice to Customer. Each change shall be limited to the lesser of 8% or the change in the U.S. Department of Labor, Consumer Price Index for Urban Wage Earners and Clerical Workers, All Cities, (1982=100) for the preceding 12 month period. Phoenix may increase fees in excess of this limit when it implements major system enhancements which are provided to comply with changes in government regulations, provided that no such change shall exceed 15%.
4.4. Taxes. Customer shall be responsible for all taxes in connection with the provision of products or services hereunder, including but not limited to all sales, use, withholding, and excise taxes. In no event shall Customer be responsible for taxes based upon the net income of Phoenix.
4.5. Related Expenses. Customer agrees to pay all Related Expenses incurred by Phoenix in the provision of services hereunder. All fees for communications services are based upon services rendered from Phoenix's premises. Off-premises services and support will be provided upon Customer's request on an as available basis at Phoenix's then current charges for time and materials, plus Related Expenses. These charges will be invoiced monthly.
5. Customer Obligations
5.1. Data. Customer shall provide all data for input to the Phoenix System for processing in a format and manner specified by Phoenix. Customer shall determine and be responsible for the authenticity and accuracy of all information and data submitted to Phoenix, and for confirming the accuracy of data received from Phoenix. Customer shall review all reports furnished by Phoenix within 15 days for accuracy and shall work with Phoenix to reconcile any out of balance conditions. If data is to be transmitted from multiple sources, Phoenix will not begin processing until all data has been received. Phoenix shall not be responsible for transmission or communication errors, or other problems with transmission of data not associated with the Phoenix System. The Customer is also responsible for retention and backup of all data and processing records provided by Phoenix.
5.2. Network and Equipment. Customer will provide at its own expense all equipment, computer software, network equipment, communication lines, and interface devices required to use the Client Software and access the Phoenix System except where Phoenix has been retained to acquire equipment for this purpose. All such equipment shall comply with Phoenix's hardware and network standards guide.
5.3. Customer Contact. Customer will designate and maintain throughout the Term of this Agreement a relationship contact manager to act as liaison between the Customer and Phoenix. All operational communications between Phoenix and the Customer shall be conducted to and from the liaison.
5.4. Use of Phoenix Banking System. Customer agrees to comply with any operating instructions on the use of the Phoenix Banking System provided by Phoenix.
5.5. Customer Personnel. Customer shall designate appropriate Customer personnel for training in the use of the Phoenix Banking System.
5.6. Access. Customer shall supply Phoenix with reasonable access to the Customer site during normal business hours for installation and shall cooperate with Phoenix personnel in the installation and implementation of the services.
5.7. Connections. The Customer is responsible for taking all necessary legal steps for the interconnection of the Customer's transmissions with third party carriers. The Customer is responsible for securing all licenses, permits, right of ways,
and other arrangements necessary for such interconnection and transmission and receipt of Customer's Material.
5.8. Delivery of Material. The Customer shall be responsible for transporting the Material to and from Phoenix, at Customer's sole cost and expense. All insurance with respect to the transportation of the Material shall be the sole responsibility of Customer. Risk of loss of the Material to and from Phoenix shall be borne by the Customer.
5.9. Business Recovery. Phoenix's business recovery plan is designed to minimize, but not eliminate, risks associated with a disaster affecting the Phoenix data center supplying the Processing Services. Phoenix does not warrant that service will be uninterrupted or error free in the event of a disaster. Customer is responsible for adopting a business recovery plan relating to disasters affecting Customer's facilities and for securing business interruption insurance or other insurance necessary for Customer's protection. Phoenix shall maintain adequate backup procedures including storage of duplicate record files as necessary to reproduce Customer's records and data consistent with the provisions of section 2.6., as defined in Exhibit E. In the event of a service disruption due to reasons beyond Phoenix's control, Phoenix shall use diligent efforts to mitigate the effects of such an occurrence.
6. Service Performance Standards; System Availability
6.1. Hours of Operation. Phoenix shall provide that the Phoenix System and the Application processing Services are available for daily processing tasks 98% of the time each month during regular hours of operation as set forth below. Phoenix will also be responsible for providing that the Phoenix System has a reasonable end user response time, with an average response time of three to five seconds for routine transactions, defined as basic deposit, withdrawal, and single inquiry transactions.
Hours of Operation, Eastern Standard Time
Monday 7:00 A.M. - 8:00 P.M. Tuesday 7:00 A.M. - 8:00 P.M. Wednesday 7:00 A.M. - 8:00 P.M. Thursday 7:00 A.M. - 8:00 P.M. Friday 7:00 A.M. - 8:00 P.M. Saturday 7:00 A.M. - 3:00 P.M. Sunday unattended |
The System will not be attended on Sundays or on the holidays observed by the Federal Reserve Bank, including the following:
New Year's Day President's Birthday Martin Luther King Day Thanksgiving Day
Memorial Day Christmas Day Independence Day Columbus Day Labor Day Veterans' Day |
However, on President Day, Columbus Day and Veterans Day Customer will have access to Phoenix personnel.
6.2 Extension of Hours. Phoenix will use its best effort to accommodate requests for exceptions or extensions of the hours of operation. These hours may be modified based on dependencies with reporting files required to be sent to other servicing organizations.
6.3 Exclusions. Notwithstanding anything to the contrary contained
herein, Phoenix shall not be responsible for (i) telecommunications
failures, (ii) service interruptions beyond Phoenix's control, (iii)
delay or failure of any third party courier or delivery service,
(iv) failure of any third party vendor to deliver information,
files, magnetic media, products, support or services, or other
materials required for Phoenix to provide service hereunder.
7. Problem Reporting and Resolution.
7.1. Problem Reporting. Customer is responsible for reporting problems to Phoenix's customer service or operations staff at the contact numbers or addresses provided by Phoenix from time to time.
7.2. Problem Response. Phoenix shall respond to each reported problem promptly based on the severity of the problem and its effect on Customer's operations. Phoenix shall use reasonable commercial efforts to either resolve each problem or provide Customer with information to allow Customer's personnel to address the problem. In the event the resolution of a reported problem which materially impacts Customer's operations will carry-over to the next business day, Phoenix will provide Customer with a status report for the problem and an estimate of the resolution time and course of action, if possible. Phoenix will provide Customer with a daily report on the status of unresolved issues.
7.3. Service Performance and Standards Remedy. If Phoenix or the System fails to meet the percentage up-time and performance standards specified above and such failure is not the result in whole or in part, of a Customer error or omission, any act, failure or omission of any third party, or any other circumstance beyond Phoenix's reasonable control, Customer shall notify Phoenix immediately in writing specifying the performance standard(s) not met and the nature of the deficiency. Within 15 days of receipt of such notice, Phoenix shall establish and provide Customer in writing with an action plan to meet the service performance standard(s). Upon expiration of such 15-day period, Phoenix shall have 30 days to bring its performance to the percentage/standard specified in the relevant service performance standard. Phoenix shall report the nature and status of its efforts at the end of such period.
Should Phoenix's performance remain below the applicable standard after such 30-day period, Phoenix shall have an additional 60 days to correct the situation and bring the affected performance up to the standard. During this period, Customer will be provided with a 15% reduction in the monthly Phoenix invoice for each month that the performance standard(s) remain deficient.
Should Phoenix's performance remain below the service standards following all such periods, Customer may elect to either (i) provide Phoenix with additional time to improve the affected standard, during which time Customer will continue to receive a 15% reduction in the monthly Phoenix invoice, or (ii) terminate the service agreement by giving Phoenix written notice of termination. Customer may also terminate the service agreement if Phoenix's performance remains below the relevant service performance standard for more than three monthly periods in any 12 month period by giving Phoenix written notice of termination. Such termination shall be without penalty or any charge to Customer other than charges for service fees incurred prior to the effective date of termination. This right of termination shall be Customer's sole and exclusive remedy for Phoenix's failure to meet any service performance standard and after such termination neither party shall have any liability or obligation to the other exception pursuant to any specified obligations that survive termination under the terms of the agreement and any addenda hereto.
8. Software License.
8.1. License. Subject to the restrictions and limitations of this Agreement and to payment of the fees set forth herein, Phoenix hereby grants to Customer a non-exclusive, non-transferable license during the term of this Agreement within the United States to:
(a) Use the Client Software on Customer's own network for its own internal data entry and processing needs but only at the headquarters and branch marketing locations;
(b) make a reasonable number of additional copies of the Client Software for testing, backup, and archival purposes in support of its ordinary use of the Client Software;
(c) use the Documentation in support of Customer's Use of the Client Software;
(d) make a reasonable number of additional copies of the Documentation or portions thereof as required to support the Use of the Client Software;
(e) use the Client Software for the benefit of its Affiliates, provided that the appropriate license fees have been paid for such Affiliates, and provided that no more than the number of servers which have been authorized hereunder are utilized.
8.2. Restrictions. Customer may use the Client Software for its own internal data processing needs. Customer may not, without the prior written consent of Phoenix:
(a) translate, reverse engineer, de-compile, interpret or disassemble the Client Software;
(b) transfer, distribute, sell, lease, or assign the Client Software or Documentation;
(c) or make any changes to the Client Software.
8.3. Title to Intellectual Property. The Phoenix System and Documentation are (i) copyrighted works protected by copyright laws, treaties, and conventions of the United States and (ii) contain trade secrets and Confidential Information of Phoenix protected under applicable law. Phoenix retains all right, title, and interest in and to the Phoenix System and Documentation, and all copyright, trade secret, patent and other intellectual property rights contained therein, subject only to the limited license granted to Customer above. Phoenix shall also exclusively own all changes, modifications, and additions to the to the Phoenix System and Documentation, whether made by or on behalf of Phoenix, Customer, or their employees, agents or otherwise, provided, however, that Customer shall own any additions to the Software which are not based on the Software or other Phoenix code and which are produced by Customer without significant assistance from Phoenix. To the extent that changes, including all associated intellectual property rights, are not owned in their entirety by Phoenix immediately upon their creation, Customer agrees to assign (and hereby automatically assigns) all right, title and interest therein to Phoenix, without any requirement of consideration or further documentation. Customer agrees to take such further action and execute such further documentation as Phoenix may reasonably request to give effect to this Section.
8.4. Documentation. Phoenix shall provide Documentation associated with the software as produced and provided by Phoenix and/or Phoenix, including, but not limited to, the Phoenix Software Documentation which contains program descriptions, reference materials, operational instructions, etc.
8.5. Modification of Software. Customer may not materially modify, change, or alter the Phoenix System or data base structure without Phoenix's prior written consent. In the event Customer makes any modification of the Phoenix System or data base structure, Phoenix shall have no liability to Customer or any third party as a result therefrom and the performance standards otherwise provided for herein shall not apply.
8.6 Protection of Proprietary Rights
a) Customer acknowledges that the Phoenix System and Documentation are proprietary to Phoenix. Customer further acknowledges that the Client Software,
including all techniques, algorithms and processes contained therein or any modification thereof or extraction therefrom, contains confidential, valuable trade secrets of Phoenix and that Customer will safeguard such trade secrets to the fullest extent possible. Without limiting the generality of the foregoing, Customer also agrees not to disclose all or part of the Phoenix Software to any person or party other than Customer's authorized personnel as necessary to utilize the Phoenix Software as permitted by this Agreement. Customer agrees that it will not distribute, nor permit any other person or entity to distribute or exploit, all or any part of the Phoenix Software in any manner. Customer's obligations under this Paragraph shall survive termination of this Agreement.
b) The Customer shall not register in its own name any of the Phoenix Software or any other intellectual or industrial property right, whether registered or not, used by the Phoenix or any of its affiliates.
c) The Customer undertakes, for the duration and after the expiration of this Agreement, not to question the validity of any proprietary rights of Phoenix in the Phoenix Software or any other intellectual property right of Phoenix. The invalidity of any proprietary right in the Phoenix Software shall not be a reason for the invalidity of this Agreement, nor for the repayment of any sums paid hereunder. If all or any portion of the Phoenix Software is declared invalid, the fees paid to the Phoenix hereunder shall be deemed to have been fixed from the beginning in an amount equal to the fees due in respect of such invalid proprietary right.
9. Patent and Copyright Indemnity
9.1. Infringement Claims. If a third party claims that the Phoenix System infringes any patent, copyright, trade secret, or similar intellectual property right of any third party, and such claim would impair Customer's right to use the Phoenix system hereunder or subject the customer to monetary damages, Phoenix shall (as long as Customer is not in default under this Agreement or any other agreement with Phoenix) defend Customer against that claim at Phoenix's expense and pay all damages awarded by a court in a final judgment, provided that Customer (i) promptly notifies Phoenix in writing of any such claim, (ii) allows Phoenix to control the defense and disposition of such claim, including any related settlement negotiations, and (iii) cooperates with Phoenix, at Phoenix's expense, in the defense of such claim.
9.2. Remedies. If such a claim is made or appears possible, Phoenix may, at its option, either (i) secure for Customer the right to continue to use the Phoenix System, (ii) modify or replace the Phoenix System so it is non-infringing. If neither of the foregoing is possible, Phoenix may terminate this Agreement, refund a pro-rata portion of Customer's set up fees based on a five year straight line cost, and provide reasonable assistance to allow Customer to migrate to an alternate vendor. Phoenix has no obligation hereunder for any claim based on a modified version of the Phoenix System Software which has not been prepared
solely by Phoenix, or for any combination, operation or use of the Phoenix System with any hardware or software not approved in writing by Phoenix. THIS SECTION STATES PHOENIX'S ENTIRE OBLIGATION TO CUSTOMER WITH RESPECT TO MATTERS OF TITLE OR ANY CLAIM OF INFRINGEMENT THEREOF.
10. Warranties, Disclaimers, and Limitations of Liability.
10.1. Warranty. Phoenix shall perform all Processing Services in a diligent and workmanlike manner consistent with standards of the industry. Phoenix further warrants that the Phoenix System shall operate substantially in accordance with the program descriptions included in the Documentation. Phoenix does not warrant that the Phoenix System will operate without interruption or be error-free. In the event Customer discovers any non-conformance by the Phoenix System with the above warranty (a "defect"), Customer agrees to provide Phoenix notice of such defect, and shall, upon Phoenix's request, provide such data and information regarding the defect as Phoenix may require to recreate the defect. Phoenix agrees, as its exclusive obligation for any breach of such warranty, to use its best reasonable efforts to correct reported defects. Phoenix shall not be responsible for (i) unreported defects, (ii) defects caused by misuse or abuse of the Phoenix System, (iii) defects caused by use of the Phoenix System with hardware or software other than that approved by Phoenix for use with the Phoenix System, or for (iv) changes made to the Client Software other than by Phoenix or with Phoenix's consent. Customer shall be limited to the warranties provided by third-party licensors or manufacturers with respect to third-party software or equipment that may be provided by Phoenix.
10.2. Disclaimer. Except as provided above, Phoenix specifically disclaims any other warranties of any kind, express, implied or statutory, including, but not limited to, any warranties of merchantability or fitness for a particular purpose.
10.3. Limitation of Liability. In no event shall Phoenix be liable for any special, indirect, incidental or consequential damages resulting from the use, or inability to use, the licensed products or the provision or non-provision of processing services arising out of any other circumstances associated with the subject matter of this agreement, including without limitation damages based on loss of profit, loss or interruption of data or computer time, alteration or erroneous transmission of data, even if Phoenix is advised in advance of the possibility of such damages. Phoenix's total liability to Customer under any provision of this Agreement (other than indemnification under Section 9) or for any and all claims, losses or damages relating to the Licensed Products (whether based on tort, contract, or any other theory), other than claims based upon the (gross negligence or) willful misconduct of Phoenix, shall be limited to the amount actually paid by Customer to Phoenix for the Licensed Products giving rise to the liability. The parties acknowledge that each of them relied upon the inclusion of this limitation in consideration of entering into this Agreement.
10.4. Remedy for Default. If Phoenix fails to fulfill its obligations under this Agreement in any material respect, Customer's sole and exclusive remedy shall be the right to terminate this Agreement, except as may be specifically provided herein.
10.5. Third Parties. Phoenix is not liable for any act or omission of any other company (including Phoenix or any affiliate or licensor of Phoenix), individual, sub-contractor or agent, furnishing a portion of the Processing Services or facilities, equipment, or services associated with such services.
11. Confidential Information
11.1. Confidential Information means any competitively sensitive or secret business, marketing, or technical information of Phoenix or Customer, including the terms of this Agreement and all other Agreements and communications between Phoenix and Customer. Phoenix's Confidential Information shall also include, but not be limited to, the Phoenix System and Documentation, including all changes, modifications, and additions thereto. Customer's Confidential Information shall also include, but not be limited to, Customer's data, and all information concerning Customer's customers and their accounts. Confidential Information shall not include information which is (i) generally known to the public or readily ascertainable from public sources (other than as a result of a breach of confidentiality hereunder), (ii) independently developed by the receiving party without reference to or reliance on any Confidential Information of the disclosing party, as demonstrated by written records of the receiving party, or (iii) obtained from an independent third party who created or acquired such information without reference to or reliance on Confidential Information.
11.2. Confidentiality. Each Party agrees at all times to maintain the complete confidentiality of the Confidential Information of the other. Each Party shall not permit or authorize access to, or disclosure of, the Confidential Information of the other to any person or entity other than employees or advisors who have a "need to know" such information in order to enable the receiving party to exercise its rights or perform its obligations under this Agreement. Neither party shall disclose or supply the Confidential Information of the other to any non-employee third party without the prior written approval of the other party, which approval shall not be unreasonably withheld, provided the requesting party can demonstrate a need for such disclosure in order to comply with its obligations hereunder and such third party agrees to be bound by these confidentiality provisions. Either party may disclose portions of the Confidential Information of the other to governmental regulatory authorities if such disclosure is required by applicable laws, provided the party required to make such disclosure notifies the other party of the applicable legal requirements before such disclosure occurs and assists the other party to obtain such protection as may be available to preserve the confidentiality of such information.
11.3. Disposal. Prior to disposal of any media or materials that contain any part of the Phoenix System, Documentation, or other Confidential Information of Phoenix, Customer shall obliterate or otherwise destroy all code, instructions, commentary, or further evidence of Confidential Information, for example, by erasing, incinerating, or shredding such materials.
11.4. Regulator Requests. Phoenix will comply with Customer's reasonable request for internal or third party auditors access to the Phoenix Data Center, the Phoenix Banking System relating to Customer, and Customer's data and reports. Customer will provide Phoenix with reasonable notice of such audits, and will cause its auditors and staff to conduct such audits in a manner designed to minimize the disruption to Phoenix's operations.
12. Termination
12.1. Termination by Phoenix. Phoenix may terminate this Agreement upon:
(a) Customer's failure to pay any amount when due if such amount is not paid within 90 days following invoice;
(b) Upon a breach of Customer's agreements and obligations hereunder, if such breach is not cured within 30 days following notice thereof by Phoenix; or
(c) If Customer ceases to do business, makes a composition or assignment for the benefit of its creditors, makes a general arrangement with its creditors concerning any extension or forgiveness of any of its secured debt, becomes a debtor under the Bankruptcy Code or insolvent, suffers or seeks the appointment of a receiver to the whole or any material part of its business, takes any action to liquidate or wind up the whole or any material part of its business, is found subject to any provisions of any bankruptcy code concerning involuntary bankruptcy or similar proceeding, or suffers a material adverse change in its financial position.
12.2. Effect of Termination by Phoenix. Upon termination of this Agreement by Phoenix, Customer will be responsible for all costs of conversion to a new system, including but not limited to all of Phoenix's reasonable costs for preparing records, files, reports, and related materials for transfer, plus any costs and fees for technical counseling provided by Phoenix. Such costs will be estimated by Phoenix and incorporated into a separate termination agreement to be executed prior to termination of services, unless a later date is mutually agreed upon. In addition, the Customer will be obligated to purchase all computer equipment deemed surplus by Phoenix as a result of the termination of this Agreement. The purchase price for such equipment shall be the then current book value for equipment purchased by Phoenix or the then current buyout price if the equipment was leased by Phoenix. Such purchase by the Customer is limited to equipment purchased or leased in conjunction with
Phoenix performing services under this agreement. Phoenix reserves the right to retain any such equipment for its own use or use of its other Customers upon termination of the agreement.
12.3. Termination by Customer. Customer may terminate this Agreement upon:
(a) 30 days written notice to Phoenix accompanied by a cancellation fee based on the remaining unused term of this Agreement equal to the average monthly invoice for the past six months multiplied by the remaining number of months left in the then current term, multiplied by 80%, plus any unamortized set up fees or third party costs existing on Phoenix's books on the date of termination. Customer understands and agrees that Phoenix losses incurred as a result of early cancellation of the Agreement would be difficult or impossible to calculate as of the effective date of cancellation, since the losses incurred will vary based on, among other things, the number of Customers using the Phoenix System on the date the Agreement cancelled. Accordingly, the amount set forth in the first sentence of this subsection represents the parties' good faith estimate of Phoenix's liquidated damages, and is not a penalty,
(b) Upon Phoenix's breach of its obligations hereunder as set forth in Section 7.3 and the expiration of all cure periods provided for therein.
12.4. Result of Termination by Customer.
(a) If Customer terminates this Agreement under Section 12.3(a), Customer shall be responsible for all costs and expenses of conversion to a new system, plus Phoenix's time and materials rates for assistance required to complete such conversion.
(b) If Customer terminates this Agreement under Section 12.3(b), Phoenix shall provide reasonable assistance if requested by Customer to assist in such conversion.
12.5. Return of Data Files. Upon expiration, cancellation, or termination of this Agreement, Phoenix shall furnish to Customer such copies of Customer's data files as Customer may request in Phoenix's standard machine readable format form along with such information as is reasonable and customary to enable Customer to de-convert from the Phoenix Banking System. Customer Data files will be delivered provided Customer consents, agrees and authorizes Phoenix to retain such files until (i) Phoenix has been paid in full for all fees for all services provided hereunder through the date of such files are returned to Customer, and Customer has been paid any and all other amounts that are due or will become due under this Agreement, including, but not limited to, data communication lease obligations, if any; (ii) Phoenix has been paid its then current time and materials rates for de-conversion assistance, if any, for
providing any services necessary or requested by Customer for de-conversion assistance, (iii) if this Agreement is being terminated, Phoenix has been paid any applicable termination and cancellation fee pursuant to this agreement, and (iv) Customer has returned to Phoenix all Phoenix Confidential Information requested by Phoenix. Upon Customer's approval, Phoenix shall be permitted to destroy customer's files and data any time after 90 days from the final use of such files for processing.
12.6. Return of Phoenix Software and Documentation.
Upon termination, expiration or cancellation, the Customer shall return to Phoenix all copies of the Phoenix Software, Documentation and manuals and other documentation provided to Customer or prepared by Customer in relation to the Phoenix Software. The Customer will remove all copies of the Phoenix Software from its equipment and certify such fact by written correspondence to Phoenix, the Customer will immediately discontinue use and/or exploitation of Phoenix Software, make any and all payments owed to Phoenix under this Agreement or under any agreement between Phoenix and Customer and cease any claim or further right in or to the Phoenix Software. Upon the occurrence of a termination by Phoenix, Phoenix shall be entitled to receive its costs, court costs, costs of investigation, and reasonable attorneys fees and expenses, in collecting protect or preserve its rights with respect to the Licensed Software.
The Customer acknowledges that the failure of the Customer to cease using and returning the Phoenix Software at the termination or expiration of this Agreement will result in immediate and irremediable damage to Phoenix and to the rights of any subsequent licensee. The Customer acknowledges and admits that there is no adequate remedy at law for such failure and agrees that in the event of such failure, Phoenix shall be entitled to equitable relief by way of temporary and permanent injunctions and such other and further relief as any court with jurisdiction may deem just and proper.
13. Migration.
The Customer may migrate to an in-house environment at any time after the first year of the initial term of this Agreement. To migrate, Customer must pay Phoenix a software license fee for the Phoenix System at Phoenix's then current price, less a discount determined by the number of years customer has received service hereunder as follows:
Completion of Discount Year as Customer Percentage 1 12% 2 16% 3 20% 4 24% 5 30% |
Customer must notify Phoenix at least 180 days prior to the intended date of migration of its intent to execute such option. Upon migration to an in-house processing, Customer will assume all reasonable costs for preparing records, files, reports, and related materials, any technical counseling provided by Phoenix, all installation and implementation costs for such migration, and must purchase the hardware, network, and communications equipment required to support such processing as required by Phoenix. Such costs will be estimated by Phoenix and incorporated into a separate agreement to be executed prior to the migration of the system unless a later date is agreed upon. Additionally, Customer will be obligated to purchase all computer equipment deemed surplus by Phoenix as a result of the migration. The purchase price shall be the then current book value for equipment purchased by Phoenix or the then current buyout price if the equipment was leased by Phoenix. Such purchase by the Customer is limited to equipment purchased or leased in conjunction with Phoenix performing services under this agreement.
14. Indemnification by Customer.
After the date hereof, Customer shall defend, indemnify and hold Phoenix, its officers, directors, employees, agents, shareholders and affiliates, harmless from and against any and all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs, expenses (including reasonable attorneys' fees, interest, penalties and disbursements and court costs), settlements or money judgments asserted against, resulting to, or imposed upon Phoenix, directly or indirectly, by reason of, or resulting from the breach by Customer of any representation, warranty, covenant, agreement or other obligation of Customer contained in or made pursuant to this Agreement or any other document or instrument delivered in connection with this Agreement, or any claims arising in connection with or relating to the business of Customer or the presence, removal, condition, location or use of the Processing Services or use of the Phoenix System or of or relating to the Material or any transmission, or interconnection of such Material with third party providers or carriers or the use or misuse of the subject matter being transmitted or any other claim made against Phoenix relating to Customer's programming or transmissions.
15. Miscellaneous.
15.1. Exclusivity. Phoenix shall be the exclusive provider of application processing service to Customer during the term of this Agreement.
15.2. Rights Not Exclusive. No right or remedy of either party provided hereby shall be exclusive of any other right or remedy.
15.3. No Waiver. No failure of either party to exercise any of its rights under any provision of this Agreement or waiver of any breach of the terms of this
Agreement by the other party shall be construed as waiver of such rights or of any other breach of the same or any other provision hereof
15.4. Notices. All notices, requests and other communications required or permitted to be given or delivered hereunder to either party should be in writing, and shall be personally delivered, or sent by certified or registered mail, postage prepaid and addressed, or by overnight courier such as Federal Express to such party at the address shown on the first page of this Agreement, or at such other address as shall have been furnished by notice given in compliance with this section. All notices, requests and other communications shall be deemed to have been given upon delivery as evidenced by the return receipt or delivery records of the courier.
15.5. Insurance. Customer shall maintain such insurance coverage as it deems appropriate to protect Customer and its customers from losses or damages, including without limitation losses or damages resulting from any theft, forgery, computer manipulation or other misconduct of any person. Phoenix shall carry liability insurance but shall not be liable for any losses or damages in excess of the lesser of $1,000,000 or the amount of any such liability coverage or the amounts provided for in Section 10.3 hereof, Customer shall also maintain workers' compensation, public liability and group travel insurance coverage for Customer's employees while on the premises of Phoenix.
15.6. Entire Agreement. The parties agree that this agreement, and all exhibits and attachments hereto contain the entire agreement between the parties concerning the subject matter hereof.
15.7. Amendment, Waiver. This agreement may not be amended or altered and no rights shall be deemed waived unless such amendment or waiver is set forth in writing and executed by all parties hereto.
15.8. Assignment. This agreement may not be assigned by either party without the express written consent to of the other party, provided that either party may assign all of its rights and obligations hereunder to any successor in interest to all or substantially all of its business or assets without such consent if such successor agrees to be bound by the terms of this Agreement. This agreement shall be binding upon and shall inure to the benefit of each party's permitted successors and assigns.
15.9. Severability_ If any provision of this agreement should be held to be invalid, illegal or unenforceable, then such provision shall be construed in such a way as to make such provision enforceable, or this agreement shall be construed as if such provision had never been contained herein, and such invalidity, illegality or unenforceability shall not affect any other provision hereof.
15.10. Headings. The headings contained in this agreement are for convenience only and shall be ignored when interpreting this agreement and shall not be construed
to alter or change any provision hereof
15.11. Choice of Law. This agreement shall be governed by the laws of the State of Florida without regard to its choice of law rules.
15.12. Force Majeure. Neither party shall be in default by reason of any failure in the performance of this agreement (other than a failure to make payment when due or to comply with restrictions upon the use of any confidential information or trade secrets) if such failure arises out of any act, event or circumstance beyond the reasonable control of such party, whether or not otherwise foreseeable. The party so affected will resume performance as soon as reasonably possible.
15.13. Enforcement; If either party brings an action under this agreement (including appeal), the prevailing party shall be entitled to recover reasonable attorneys' fees and costs.
15.14. Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, and which when taken together shall constitute one complete instrument.
15.15. Litigation. All disputes regarding or arising out of this Agreement shall be heard exclusively in the Courts of the State of Florida to which jurisdiction and venue the parties irrevocably consent, except that Phoenix shall be entitled to obtain equitable relief, such as injunctive relief, from any court of competent jurisdiction in order to protect its rights in the Phoenix System, or any associated intellectual property rights. Termination or limitation of Phoenix's rights in the Phoenix System, or any associated intellectual property rights may not be awarded under any circumstances.
15.16. Compliance with Law. Customer is and will be during the Term of this Agreement, will be, in compliance with all government laws, rules, regulations and administrative requirements, including without limitation:
(a) Submitting a copy of this agreement to the appropriate regulatory agencies prior to the date Services commence;
(b) Providing adequate notice to the appropriate regulatory agencies of the termination of this Agreement or any material changes in Services;
(c) retaining records of its accounts as required by regulatory authorities;
(d) Obtaining and maintaining, at its own expense, any Fidelity Bond required by any regulatory or government agency; and
(e) Maintaining at its own expense, such casualty and business interruption insurance coverage for loss of records from fire, disaster, or other causes, and taking such precautions regarding the same, as may be required by regulatory authorities.
15.17. Employees. During the Term of this Agreement and for a period of two years thereafter, neither party will directly or indirectly solicit for employment any employee of the other without the prior written consent of the other. In the event of a breach of this paragraph, the breaching party shall pay the non-breaching party a sum equal to the employees base compensation for the previous twelve month period multiplied by on hundred thirty-three percent (133%). This sum shall be deemed liquidated damages and shall be agreed to be a fair sum to compensate the non-breaching party.
15.18. Third Party Review: Phoenix provides for periodic SAS 70, Type I independent audits of its operations. Phoenix shall provide each Client serviced from the audited data center with a copy of the audit and shall charge each Client a prorated share of the audit cost not to exceed $1,000.00 per audit. Each audit shall comply with all applicable FDIC other federal regulations pertaining thereto. Phoenix and Client agree that third party auditor will be responsible for proper application and testing of currently applicable data processing and regulatory standards.
15.19. Survival. All rights and obligations of the parties under this Agreement that, by their nature, do not terminate with the expiration or termination of this Agreement shall survive the expiration or termination of this Agreement.
15.20. Not a Joint Venture or Partnership. This Agreement shall not be construed as creating a joint venture, co-venture or a co-partnership between the parties nor result in a joint service offering to their respective customers. Neither party shall have any authority to bind the other or the other's representatives in any way.
ACCEPTED AND AGREED AS OF THE EFFECTIVE DATE:
Two River Community Bank Phoenix International Ltd., Inc. ------------------------------------ ---------------------------------------- Signature Signature /s/ Michael J. Gormley /s/ Richard T. Powers ------------------------------------ ---------------------------------------- Print Name Print Name Senior Vice President & Treasurer Senior Vice President ------------------------------------ ---------------------------------------- Print Title Print Title November 17, 1999 November 18, 1999 ------------------------------------ ---------------------------------------- Date Date |
EXHIBIT A
Customer & Product Controls
Administrative Controls
Customer Processing Deposit Processing Loan Processing Teller
Processing Nightly Processing
General Ledger Administration & Maintenance Executive Information System
Data Dictionary: Deposits
Data Dictionary: Loans
Data Dictionary: Customer Information
Report Dictionary Internet Home Banking Voice Response
Safe Deposit Box Processing
IRA Processing
ACH Processing
Call Report Extracts (quarterly)
EXHIBIT B
Standard Fee Schedule
Account and Transaction Processing Pricing
(All fees monthly unless specified)
Core Processing Volume Sensitive Monthly Fee
--------------- ---------------- -----------
Minimum Processing Fee up to 10,000 accounts $ 5,000
Monthly minimum for Core Processing
months 1-4 $ 2,500
Deposit Accounts $.60 per account
Loan Accounts $.75 per account
General Ledger $.25 per account
Relationship Management System Included
Teller System Included
Executive Information System Included
Ancillary Systems
Call Reporting $200.00
Accounts Payable $250.00
Loan Origination $500.00
Deposit Document Preparation $500.00
Voice Response System $600.00
Internet Banking $.15 per account $1,500.00
Optical Reporting $.01 per account $500.00
Test Bank $.05 per account $400.00
Business Recovery Service $.02 per account $500.00
Data Communications
Terminal Access $15.00 per terminal
Communications Hardware maintenance $65.00 per month
Telephone Lines Pass thru
Equipment Charges DSU/CSU Pass thru
|
Phoenix Inc. shall add to these charges an administrative fee of Eight Percent (8%) to all pass through costs
Data Transmissions ------------------ Coupon Orders $200.00 Check Orders $200.00 ATM Balance Files $500.00 ATM Card Files $200.00 Debit Card Files $500.00 POD/Statement Files $500.00 Receiving ACH Files $500.00 Originating ACH Files $500.00 Misc., Transaction Files Quote |
Note: All fees quoted herein are minimum monthly processing fees. Conversion, training, installation and processor certification fees for all ancillary products will be quoted under separate cover upon request.
Research Fee Based upon actual time at then current rate
Data Base Mass Changes Based upon actual time at then current rate
Third Party Certification Currently Phoenix certified $2,500.00
Non-certified based upon actual time at then current rates
New Branch Set up Fees
Branches 1-5 No Charge
Branches 5-20 $2,500.00 per branch
System Administrator Changes
New Product Set up Fee
(includes parameter set up and testing)
Deposit per product
Loans per product
Relationship
Management System $250.00 per product
Other System Administrator Changes
(Includes parameter set up and testing)
General Ledger
Bank Controls
Security changes 10 Free Changes per month
Additional changes based
upon actual time at then
current rates
Design Teller Receipts $200.00 per receipt
Develop Crystal Reports $75.00 per request
Custom Extracts/Development Quote
Teller and Platform Procedures Manual Quote
Safe Deposit Box Setup Quote
One Time Set Up Fee
Base on asset size, number of
products and accounts
System Implementation Services:
Set-Up Phoenix Product Definitions
Deposit, Loans, Client Relationship $40,000.00 Minimum
Management, and General
Ledger Set up base
Training Fees
Phoenix Training For Core System $25,400.00 plus reasonable out of pocket
travel expense
|
Standard Fee Schedule
Phoenix Internet Banking System *
Estimated Installation Costs
Implementation Services $ 9,600.00
Bill Payment Set up Fees $ 3,000.00
Web Site Design Quote
Monthly Recurring Fee $.15 per account $1,500.00 Minimum
Data Communications Charges Pass Thru
Phoenix Voice Response System *
Estimated Installation Costs
Implementation Services $ 7,000.00
Voice Response Hardware Required $ 8,000.00.
Data Communications Charges Pass Thru
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* Price quotes valid until Nov 30,1999
Exhibit C - Communication Management Services
Local Network Services
Phoenix shall act as Customer's designated representative to arrange for the purchase, installation and maintenance of data lines, modems or other interface devices necessary to access the Phoenix System. Maintenance services shall be provided for a designated call window and service level (i.e., depot, on-site) as shall be agreed upon by Phoenix and Customer. Where requested, this option may include additional dial-up lines and equipment to be utilized as a back up to the regular data lines.
Phoenix shall bill Customer for the actual charges incurred for the data lines and for the maintenance of the modems and other interface devices. Phoenix shall add to these charges an administrative fee of eight percent (8 %), equipment purchase and installation fees will be amortized over 36 months and will be billed to Customer at the price listed below or Customer shall pay one time for all hardware and installation upon installation of the hardware and communications lines. Customer shall have ownership of the equipment at the end of the full amortization period or shall pay the unamortized balance if the contract is terminated prior to sixty (60) months.
Estimated Monthly Line Costs $ 700.00
Network Design Services
Phoenix shall perform a survey of Customer's operations and shall analyze communications requirements. A network design plan shall be created and submitted to Customer for its approval. Where Customer has requested, the plan shall include a provision for Dial Backup service for Contingency Operations.
Network Design Fee: $ 1,000.00
Bank Two River Community Bank Phoenix, Inc.
By: _________________________________ By: ______________________________
Name: /s/ Michael J. Gormley Name:
--------------------------------- ------------------------------
Title: Senior Vice President & Treasurer Title:
--------------------------------- ------------------------------
Date: November 17, 1999 Date:
--------------------------------- ------------------------------
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Phoenix , Inc.
4175 Veterans Memorial Highway, Suite 405
Ronkonkoma, NY 11779
This letter authorizes Phoenix to act as our representative to order on our behalf the equipment and/or circuitry shown on the attached Schedule C-1.
It is further understood and agreed that Title to the computer hardware shall pass from the manufacturer/supplier to Client upon full payment.
Phoenix will acquire all hardware and related telecommunications equipment and order required telecommunications lines and will be responsible for payment of all invoices relative to the purchase, delivery, installation, insurance, and subsequent maintenance of the above equipment, plus any taxes that may apply. Phoenix will capitalize the equipment and related telecommunications costs over the initial thirty-six (36) month term of the Agreement and invoice client on a monthly basis beginning on the month in which the communications facilities are first utilized.
Original manufacturers terms and conditions are in effect on delivery and if maintenance services are desired, they are described in manufacturer/supplier documents.
Sincerely,
By: /s/ Michael J. Gormley
Two River community Bank
-------------------------------------------
Title: Senior Vice President & Treasurer
-------------------------------------------
Date: November 17, 1999
-------------------------------------------
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EXHIBIT D
Installation And Training Activities
Training in the use and operation of the Phoenix Banking System' licensed to Phoenix by Phoenix International Ltd., Inc., a Florida corporation ("Phoenix") for the number of Client personnel designated will be provided primarily at the Client site or, alternately, at a site designated by Phoenix . Installation services are those activities designated to establish the Bank on the Phoenix Banking SystemTM at the Phoenix , Ronkonkoma, New York, center and to transfer the processing of Client's data from the present financial servicer processing system to Phoenix for any existing Client accounts to be serviced by Phoenix .
A. Phoenix Responsibilities
1. Phoenix shall designate a Phoenix installation manager to oversee all installation activities and coordinate these activities with the Client Liaison.
2. Phoenix shall conduct a post-contract impact analysis to determine changes in Client's operation activities to conform to the Phoenix System.
3. The Phoenix installation manager shall meet at Client's site with Client's management and operation personnel, as soon as possible after execution of the Agreement, for a detailed discussion of installation and training activities. Detailed Installations plan, specifying Phoenix and Client responsibilities will be completed within 15 business days of the Agreement.
4. Phoenix shall write and test the computer software programs required to convert Client's database and accounts from the current processor or formats and third party processors or formats to the appropriate Phoenix format. Phoenix shall also review results of the installation and edit programs with Client to verify accuracy.
5. Phoenix shall provide education and training to designated Client personnel and the applications selected by Client from Schedule A.
6. All training shall take place at Client Banking Office, or, if necessary, at a Phoenix designated training facility in accordance with the mutual agreed upon installation and training activities referenced in paragraph 3 above.
Phoenix shall verify that Client's personnel have concluded training and are ready for processing under the Phoenix system for their necessary use of the system.
Phoenix shall monitor Client's site preparation activities and provide advice regarding:
- Telecom Equipment; Remote Print.
- Telecom Line Locations.
- Electrical Power Requirements.
- Air Conditioning Requirements.
B. Client Responsibilities
Client shall designate a Client installation manager to be Phoenix 's primary contact. The Client installation manager shall be responsible for coordination of proper resources from Client management and operations to ensure timely completion of all Client projects, including but not limited to:
o Review and selection of processing options.
o Establishing Chart of Accounts.
o Gathering information for product and parameter set-up.
o Analysis and verification of pre-installation test output.
o Availability of Client to assist in balancing and verification of data accuracy.
Client shall designate a training manager to coordinate attendance at Phoenix training classes and to supervise the training of all other Client personnel by the Phoenix staff. The training manager shall verify that personnel selected by Client to attend Phoenix classes have sufficient product knowledge and experience to teach other Client staff. The training manager shall also assure that there is sufficient time set aside for the training of all necessary and available Client's personnel.
Client shall notify third parties in writing of its intent to use Phoenix as the data processing service provider and will support Phoenix 's actions in set-up, deconverting, testing and preparing the Phoenix system for productive use.
Client shall select and order all forms, coupons, and other items necessary for supporting the loan servicing operation.
Client shall prepare the installation site for all Equipment and Telecom lines including proper electrical and air conditioning.
Client shall use only equipment that has been certified for use with the software by Phoenix. Phoenix may be contracted to provide equipment and installation service in which case the equipment to be purchased will be specified in Schedule C.I., attached,
Bank Two River Community Bank Phoenix, Inc.
By: _________________________________ By: ______________________________
Name: /s/ Michael J. Gormley Name: /s/ Richard T. Powers
--------------------------------- ------------------------------
Title: Senior Vice President & Treasurer Title: Senior Vice President
--------------------------------- ------------------------------
Date: November 17, 1999 Date: November 18, 1999
--------------------------------- ------------------------------
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EXHIBIT E
Business Recovery Services
BUSINESS RECOVERY SERVICES
A "Disaster" shall mean any unplanned interruption of the operations of or inaccessibility to the Phoenix Data Center which appears, in Phoenix 's reasonable judgment, to require relocation of processing to an alternative site Phoenix shall notify Client as soon as possible after it deems a service outage to be a Disaster. Phoenix shall move the processing of Client's Base On-line Services to an alternative processing center as expeditiously as possible, and shall coordinate the cutover to back-up data lines with the appropriate carriers. Client shall maintain adequate records of all transactions during the period of service interruption, and shall have personnel available to assist Phoenix in implementing the switch over to the alternative-processing site. During a Disaster, Optional or On-Request Services shall be provided by Phoenix only to the extent that there is adequate capacity at the alternate center, and only after stabilizing the provision of Base Online Services.
TESTING
Phoenix shall test its Business Recovery Services Plan by conducting one (1) annual test. Client agrees to participate in one f test annually to assist Phoenix in such testing. Test results will be made available to Client's regulators, internal and external auditors, and (upon request) to Client's insurance underwriters,
CLIENT BUSINESS RECOVERY PLANNING
Client understands and agrees that the Phoenix Business Recovery Plan is designed to minimize but not eliminate risks associated with a Disaster affecting Phoenix 's Application Processing Center. Phoenix does not warrant that service will be uninterrupted or error free in the event of a Disaster. Client maintains responsibility for adopting a Business Recovery Plan relating to disasters affecting Client's facilities, and for securing business interruption insurance or other insurance as necessary to properly protect Client's revenues in the event of a disaster. Phoenix disaster and recovery services shall meet all applicable FDIC or other federal regulatory requirements.
COMMUNICATIONS
Phoenix shall work with Client to establish a plan for alternative data communications in the event of a Disaster. Client shall be responsible for furnishing any additional communications equipment and data lines required under the adopted plan from the Client's Diaster Recovery Facility to Phoenix's Processing Application Center
Bank Two River Community Bank Phoenix, Inc.
By: _________________________________ By: ______________________________
Name: /s/ Michael J. Gormley Name: /s/ Richard T. Powers
--------------------------------- ------------------------------
Title: Senior Vice President & Treasurer Title: Senior Vice President
--------------------------------- ------------------------------
Date: November 17, 1999 Date: November 18, 1999
--------------------------------- ------------------------------
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Please retain the second copy of this authorization form for your records.
EXHIBIT F
Performance Expectations/Standards
On-Line: 7:00 a.m. - 8:00 p.m. Monday - Friday
7:00 a.m. - 3:00 p.m. Saturday
Unattended Sunday and Holidays
System Availability
-------------------
Monthly Average 98%
Report Delivery
---------------
Receipt of Optical Download:
Terminal Response Time
----------------------
Transaction Average
Client Service Responsiveness
-----------------------------
Help Desk: 7:30 a.m. - 5:00 p.m. M-F
After Hours : On Call
Data Center Project Schedule: Published monthly
Status Reporting: Prior day exceptions by 9:00
a.m.
Incident Resolution Call: 2 hours intervals until
resolution
Data Communications
-------------------
Terminal (Station)
Additions/Deletions: 2 weeks from date of request
Branch Additions: Subject to Data Communications
Provider
Record Retention
----------------
Daily Production Files 60 days
EOM 13 months
EOQ 5 quarters
EOY 7 years (offsite)
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Amendment # 1 to the Application Processing Agreement between Harland Financial Solutions, Inc. ("HFS") and Two River Community Bank ("Customer"), dated on or about November 17, 1999.
This Amendment #1 to the Application Processing Agreement (the "Amendment #1 ") is entered into between Harland Financial Solutions ("HFS") and Two River Community Bank ("Customer"), and modifies a certain Application Processing Agreement dated on or about November 17, 1999 between Customer and Phoenix International LTD. (HFS' predecessor in interest), whereby Customer contracted for certain Processing Services related to HFS' Phoenix System (the "Processing Agreement"). The terms and conditions set forth in this Addendum are in addition to the terms and conditions contained in the Processing Agreement and any other referenced addenda, attachments, exhibits, schedules (together, the "Agreement"). Where conflicts arise between the terms of the Agreement and this Amendment, the specific terms of this Amendment shall govern. Customer and HFS agree to modify the terms of the Agreement as follows:
HFS has assumed the Agreement. Therefore, "Phoenix International, LTD" is changed to "Harland Financial Solutions, Inc.", and "Phoenix" is changed to "HFS" where such terms appear in the Agreement.
The term of this Agreement will extend through June 30, 2006. Upon expiration, the Agreement will automatically renew for successive terms of two (2) years unless either party provides written notice to the other of its intent not to renew for another term at least six (6) months prior to the expiration of the Agreement.
Exhibit B --- Standard Fee Schedule. In Exhibit B of the Agreement:
The sections entitled Core Processing and Data Transmissions are eliminated and replaced with the following:
"Customer agrees to pay to HFS the following fees for the Remote Processing Services. Except as otherwise provided, all fees are recurring monthly fees. Customer understands and agrees that all fees quoted herein are monthly processing fees.
"Conversion, training, installation and processor certification fees for any products not specified herein will be provided by HFS to Customer separately upon Customer's request."
Recurring Monthly Fees Based on Customer's Asset Value
Commencing on January 1, 2005 and for each month thereafter during the renewal period of the Agreement, Customer will pay fees based on the Customer's Asset Value according to the following schedule:
Customer shall pay to HFS a Monthly Asset Value Payment (as defined below) in each month of the agreement (prorated for the number of days of partial months). Customer shall pay to HFS a Monthly Asset Value Payment based on its Asset Value as of the last business day of the immediately preceding month. Each Monthly Asset Value Payment shall be due and payable within thirty (30) days of Customer's receipt of an invoice for such amount.
Monthly Asset Value Payment. For purposes of this Amendment #1, "Monthly Asset Value Payment" shall mean and be determined according to the following formula:
Monthly Asset Value Payment:
$6800.00 + ($22.00 x (total bank assets/one million))
For the computation above, "total bank assets" is in millions.
Reporting Requirements. On or before the third (3rd) business day of each
calendar month, Customer shall submit to HFS (by such means as directed by
HFS from time to time (i.e., via email, fax or other means where
confirmation of receipt by HFS is available)) its Asset Value as of the
last business day of the immediately preceding calendar month. In the
event Customer fails to provide its Asset Value in a timely manner as
provided in this Section, HFS shall have the right and option to either
(i) wait on the Asset Value to be provided or (ii) rely on the most
recently provided Asset Value for Customer and proceed with invoicing for
charges as provided hereunder (and adjusting the charges for the
immediately following months if the Asset Value is subsequently determined
to have been incorrect).
The Section entitled Non-Recurring Fees is amended as follows:
Develop Crystal Reports... Quote
Additional Fees
All other terms in Exhibit B remain in force, including, without limitation, the fees related to Data Communications and all other Non-Recurring Fees (beginning on page 21 of the Agreement). Any additional data communication requirements or Non-Recurring Fees not listed in Exhibit B are subject to Quote and additional fees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above:
HARLAND FINANCIAL SOLUTIONS, INC TWO RIVER COMMUNITY BANK
By: /s/ Corbin A. Shaver By: /s/ Michael J. Gormley
----------------------------- ---------------------------------
(Authorized Signature)
Name: Corbin A. Shaver Name: Michael J. Gormley
----------------------------- ---------------------------------
Title:SVP and General Manager Title: EVP/CFO
----------------------------- ---------------------------------
Date: 02/01/2005 Date: 02/01/2005
----------------------------- ---------------------------------
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Exhibit 10.25
Quotien(SM) Bill Payment Service Agreement
Version 01.01.03
Internet Bill Payment
Service Agreement
THIS SERVICE AGREEMENT is made effective upon the last signature, by and between Two River Community Bank ("the Financial Institution" or "Fl") and Online Resources Corporation ("Online Resources").
Recitals:
A. Online Resources has developed and operates a system which enables consumer and small business customers of financial institutions to initiate bill payment and certain other financial services through the use of proprietary technology which links consumers to their financial institution and which presents certain information through remote consumer devices such as personal computer browsers.
B. FI desires to retain Online Resources for the purpose of providing financial services on behalf of FI for the benefit of FI's customers.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties, intending legally to be bound, mutually agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the respective meanings set forth below:
"Agreement" shall mean this Agreement and all Exhibits attached hereto, as such Agreement and attached Service Description and any of such Exhibits shall be amended in writing from time to time.
"ATM Network" shall mean the electronic banking network that provides its member FIs with telecommunications, card and PIN authorization and data base support, links to networks providing similar functions, and consolidates the processing and settlement of transactions.
"Billable Account" shall mean a primary bill payment DDA Account tied to a single bill payment "merchant list" for the Quotien(SM) Service.
"Bill Payment Services" shall mean the bill payment services described in Exhibit A hereof.
Two River Community Bank
Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
"Customer" shall mean an FI's individual or small business depositor (as defined by the FI) based in the U.S. and maintaining a DDA Account.
"Customer Services" shall mean the services provided to Users as summarized in the Service Description, Exhibit A which are the responsibility of FI to provide.
"Designated Quotien(SM) Services" shall mean the Quotien(SM) Services priced in Exhibit B and described in Exhibit A.
"DDA Account" shall mean a demand deposit account.
"Functional Requirements Document" shall mean the written document that Online Resources produces to identify the systems and service features to be included in the FI's offering; and any special processing features required by the Fl, its processor, or any EFT network that will be involved in the transmission or processing of the transactions under this Agreement.
"Integrated Support Software" shall mean the software which is used to enable Customer Services Representatives to enroll customers, link merchants, order devices and fulfillment materials, produce reports, set up end-user billing, and communicate via e-mail with Users.
"Integrated Support System" shall mean the procedures, systems, and software Online Resources has developed to coordinate the enrollment of Users on, and their use of, the Quotien(SM) System.
"Merchant Services" shall mean the processes and procedures related to soliciting merchant and payment information for inclusion in the database.
"Quotien(SM) Services" shall mean any combination of services including enabling devices, Integrated Support Software and Services that are provided to FI's Users through a link to Online Resources' platform.
"Quotien(SM) System" shall mean the electronic banking and information system that enables the Fl to provide, through Online Resources, Quotien(SM) Services.
"Password" shall mean the personal identification code assigned to each User and authorized by Online Resources to enable such User to access and receive services delivered through the electronic banking network including those delivered under the Quotien(SM) System.
Two River Community Bank
Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
"PC Browser-Based Application" shall mean the application software that Online Resources has developed for the purpose of enabling Users to access the Quotien(SM) System via the Internet or Extranet and receive Quotien(SM) Services.
"PIN" shall mean the personal identification number assigned to each User and authorized by the ATM network to enable such User to access and receive services delivered through the electronic banking network including those delivered under the Quotien(SM) System.
"User" shall mean a "Customer" who has accessed the Quotien(SM) System through PC Browser-Based Application and uses his assigned PIN or Password to access the Designated Quotien(SM) Services.
2. Business Relationship
2.1 Online Resources' Responsibilities
Online Resources agrees to be solely responsible for providing the Designated Quotien(SM) Services to FI for the benefit of its Users. The services are described in Exhibit A and are subject to the prices set forth in Exhibit B. For items not specified in Exhibit B, Online Resources reserves the right to provide individual quotes.
Online Resources agrees to provide the Designated Quotien Services at 110% of the industry standard performance levels detailed in the published Online Resources Service Quality Index, which may be periodically modified. If 110% of the composite industry standard is not met at FI level in each of three consecutive months, then Online Resources will pay a penalty in a sum equal to 10% of the FI's last invoice, not to exceed $10,000 per month, provided the FI is current and in good standing on all open invoices payable to Online.
2.2 Fl Responsibilities
FI is responsible for:
a. Assigning a product manager to this service;
b. Ensuring that FI sales and other personnel understand the features and functions of the services, and have an opportunity to participate in FI's Test programs.
FI agrees to actively market the Designated Quotien(SM) Service either independently or by participating in one of Online Resources' consumer marketing programs. At a minimum,
Two River Community Bank
Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
this includes communicating the product and service features and benefits to the consumer market through regular branch merchandising and Customer communications.
FI agrees to be responsible for providing front-line Customer Service, either through its own call center or through Online Resources' service bureau.
3. Grant of Licenses
3.1 Service Marks and Trademarks
While this Agreement is in effect, Online Resources grants to FI a non-exclusive, non-transferable license to use all of Online Resources' service marks and trademarks in connection with marketing the Quotiens"' Service and in providing Customer Service to Users.
3.2 Integrated Support Software
While this Agreement is in effect, Online Resources grants to FT a non-exclusive, non-transferable license to use Integrated Support Software solely in connection with providing those Customer Services which FI is obligated to provide under this Agreement.
3.3 Marketing Rights
While this Agreement is in effect, Online Resources grants to FI a non-assignable, non-transferable right to market and distribute the Designated Quotien' Service to Customers.
Notwithstanding such license, Online Resources reserves the right to offer non-banking electronic services through the Quotien(SM) System to Users upon prior written approval of Fl, which approval shall not be unreasonably withheld.
4. Representations, Warranties, and Covenants of Online Resources
In order to induce FI to execute this Agreement, Online Resources represents, warrants, and covenants (in addition to any other covenants contained herein) to FI as follows:
4.1 Requirements
Online Resources will comply with all network and processor requirements and procedures, as well as with all applicable laws and regulations, while providing the Quotien(SM) Service to Users.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
The FI agrees to provide and maintain a test account to enable ORCC to test the initial and on-going functionality of the Quotien(sm) Internet Bill Payment Application. The FI agrees to establish these accounts with ORCC at no charge.
4.2 Fl Service Marks and Trademarks
Online Resources will not use any of FI's service marks and trademarks except for the purpose of identifying the Designated Quotien(sm) Services to Users and in any such case, only with the prior written consent of FI.
4.3 Advertising, Messaging, and Product Information
Online Resources reserves the right to advertise to targeted groups of Users based on an internal analysis of its database with the prior written approval of FI, which approval shall not be unreasonably withheld.
Online Resources agrees it will not disclose User information including confidential bill payment data and User lists to any third party, unless requested by the User.
4.4 User Satisfaction Surveys
Online Resources will conduct periodic (monthly) end user satisfaction surveys. The purpose of the survey is to measure users' perception of the quality of the service versus their expectations. Approximately one percent of users across Online Resources' clients are randomly selected for the survey. No user will receive a survey more than once every 365 days. Surveys are performed online and are anonymous (Online Resources cannot identify the user). At the time of this contract the survey measures overall user satisfaction as well as users' perception of: system performance, account statement, bill payment and customer care. The results of the survey are incorporated into the Service Quality Index which are available to the financial institution on a periodic (monthly) basis.
4.5 Confidentiality
Online Resources will maintain the confidentiality of the FI's trade secrets, know-how, procedures, or manuals of which Online Resources acquires knowledge during the term of this Agreement (FI's Confidential Information). Online Resources agrees not to disclose, publish, divulge, or reveal any of the FI's Confidential Information unless required by lawful subpoena. Online Resources shall also maintain the confidentiality of the Users and their account information. Notwithstanding the foregoing, Online Resources shall have the right to compile information regarding Users' use of the Quotien(SM) Service, and make such marketing information available for sale, provided such information is not specific to any Users or FI.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
4.6 Representations and Warranties
Online Resources represents and warrants that it has the exclusive right, title, and interest in and to the Quotien(sm) Service and the Quotien(sm) System, and each component thereof, and that distribution of the Quotien(sm) Services and/or the Quotien(sm) System, or any portion thereof, to Fl as provided herein, is not subject to or violative of any right, title, or interest of any third party or third parties in and to the Quotien(sm) Service and/or the Quotien(SM) System.
4.7 Gramm Leach Bliley Act Compliance: Security and Privacy
The purpose of this section is to ensure that this Agreement conforms with the applicable provisions of the Gramm-Leach-Bliley Act (the "Act").
4.7.1 Online Resources generally agrees to maintain the Confidential Information (defined below) in confidence and in a secure manner and agrees not to disclose such Confidential Information to any third party or use such Confidential Information except for the limited purposes of carrying out its obligations under the Agreement. "Confidential Information" shall mean any data or information that is proprietary to the disclosing party and not generally known to the public, whether in tangible or intangible form, including, but not limited to, the following information: databases, customer lists, and other customer or consumer specific data deemed to be "nonpublic personal information" under the Rules.
4.7.2 Online Resources agrees and represents to the FI that it implements a security program including measures designed to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information (the "Guidelines").
4.7.3 The FI has the right to make reasonable requests to inspect, during normal business hours and upon 30 days advance written notice, Online Resources' Program, associated audit reports, summaries of test results or equivalent measures taken by Online Resources to ensure that it's security measures meet the objectives of the Guidelines in accordance with the Rules and this Amendment. These inspections will be performed on Online Resources' premises and the bank will be billed at a rate of $200 per hour plus expenses for such inspections. Notwithstanding the previous sentence, Online Resources agrees that upon written request and payment of applicable fees to promptly provide the FI with a copy of any audit or test result report that it is legally permitted to disclose, that would assist the Fl in evaluating Online Resources' program, including but not limited to, any SAS 70 report covering Online's operations. (Please refer to Exhibit B.)
4.7.4 In carrying out the above-described obligations to secure and protect the respective Confidential Information of the FI, Online Resources agrees that it will protect the Confidential Information of the Fl and will require any of its service providers or
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
subcontractors to protect and safeguard the Confidential Information of the FI to the same degree required of Online Resources.
4.7.5 Online Resources agrees that in the event there is a breach of security resulting in unauthorized disclosure of the Confidential Information of the FI, Online will promptly notify the FI of such breach, the nature of such breach, and the corrective action taken to respond to the breach.
5. Covenants of Fl
In order to induce Online Resources to execute this Agreement, and in addition to any other covenants contained herein, the FI covenants with Online Resources as follows:
5.1 Requirements
FI will continue to comply with all network and processor requirements and procedures, and remain responsible for network and processor transaction fees.
5.2 Disclosures
FI will provide Users with all disclosures required under the Electronic Funds Transfer Act and shall cooperate with Online Resources to develop resolution procedures mandated under federal and/or state banking and consumer protection laws.
5.3 Confidentiality
FI will maintain the confidentiality of any of Online Resources' trade secrets, know-how, procedures, or manuals of which FI acquires knowledge during the term of this Agreement ("Online Resources Confidential Information"). FI agrees not to disclose, publish, divulge, or reveal any of such Online Resources Confidential Information unless required by a lawful subpoena.
5.4 Notice and Correction of Malfunctions
FI shall promptly notify Online Resources of any acts or conditions which cause the Quotien' System to malfunction or which adversely impact the ability of Online Resources to provide the Designated Quotien(sm) Services. FI agrees to promptly correct any malfunction or such other act or condition and to take whatever action is reasonably required to prevent the same from recurring.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
5.5 Payment of Fees
Recurring monthly minimum fees are billable beginning on the date specified in Exhibit B. Invoices are due and payable immediately upon presentation. FT shall make arrangements for collection through ACH debits to designated Fl account and FI shall provide appropriate authorization for Online to collect invoices through ACH debits, which shall be processed no sooner than the 20th of the month. FI shall be subject to 1.5% monthly penalty on outstanding overdue amounts. FI has 60 days from the invoice date to report any billing discrepancies.
Online Resources may increase the fees described in the exhibits to this Agreement only after the first anniversary of the effective date, and will provide forty five days written notice to FI prior to any increase in fees. If the effect of such price increase would be to raise FI's fees described in the exhibits to this agreement by more than 10%, FI may, at its option, terminate this Agreement without the early termination fees set forth in Section 7.4. FI must notify Online Resources of its intent to terminate within 30 days of receipt of notice from Online Resources of a Fee change.
6. Default
6.1 Event of Default
An Event of Default shall have occurred if (a) a party hereto shall breach any covenant contained in this Agreement and shall have failed to cure such breach within the greater of (i) 20 business days from the date of receiving written notice of such breach by the non-breaching party or (ii) such reasonable length of time required to cure such breach, provided such party is diligently pursuing a cure, in both cases after having received written notice from the non-breaching party of the breach; (b) a party hereto shall (i) become subject to any bankruptcy or insolvency proceeding under a Federal or state statute, (ii) become insolvent or subject to direct control by a trustee, receiver, or similar authority or (iii) has wound up or liquidated, voluntarily or otherwise.
6.2 Rights Upon an Event of Default
If an Event of Default occurs on the part of a party hereunder, the other party shall have the right within 60 days following the occurrence of the Event of Default to terminate this Agreement upon written notice to the other party.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
7. Term
7.1 Initial Term
The initial term of this Agreement shall expire three years from the effective date specified above.
7.2 Renewals
The Agreement shall automatically renew for successive three-year terms unless notice of termination is provided by FI or Online Resources no less than 60 days preceding the expiration of any term. Renewal pricing will be provided to FI 90 days prior to automatic renewal date.
7.3 Rights of Termination
Following termination of this Agreement, FI agrees to pay a de-conversion fee of $5,000 to obtain the following information:
o Provide Fl in machine-readable formatted file(s) which would include Customer, Merchant and Scheduled Payment Data.
7.4 Early Termination
Termination of this Agreement by FI for any reason prior to expiration will cause FI to pay Online Resources all outstanding balances and also a termination fee equivalent to the highest monthly invoice amount times the remaining number of months in the service agreement term, as set forth in Exhibit B. FI must notify Online Resources in writing within 30 days of its intent to terminate. The early termination fee is payable in full within 30 days of early termination of this Agreement.
8. Miscellaneous
8.1 Notice
Any notice to be given hereunder shall be delivered by hand, including by messenger or overnight courier, or sent by certified or registered mail, return receipt requested, addressed as follows or as designated, in writing, by any party hereto. If to Online Resources:
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
Online Resources Corporation
7600 Colshire Drive, 6th Floor
McLean, VA 22102
Attn: Chief Financial Officer
with a copy to:
Minez, Levin, Cohn, Ferris, Glovsky & Popeo, PC
12021 Sunset Hills Road, Suite 310
Reston, VA 20190
Attn: Mark J. Wishner, Esq.
If to Fl:
Two River Community Bank
with a copy to:
8.2 Assignment
FI may not assign any of its interests in, rights, or obligations under this Agreement without the prior written consent of Online Resources, except that any FI which acquires, merges, combines, or consolidates with Fl should automatically succeed to all the rights and obligations of FI under this Agreement. Online Resources may not assign its rights or obligations under this Agreement without the prior written consent of Fl, provided, however, such consent shall not be required in connection with the acquisition of Online Resources' business. In all cases hereunder, consent will not be unreasonably withheld.
In the event the Fl is acquired, merged, combined, or consolidated with a financial institution wishing to offer the Designated Quotien(sm) Services to Customers whose account access requires a separate technical implementation, the succeeding institution will pay an additional system set-up fee. That fee will be negotiated between Online Resources and the succeeding financial institution.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
8.3 Entire Agreement
This Agreement embodies the entire agreement of the parties relating to the subject matter hereof. This Agreement supersedes all prior correspondence, conversation, memoranda, and agreements between the parties
8.4 Successors and Assigns
This Agreement shall bind the successors and assigns of the parties hereto and inure to the benefit of the permitted successors and assigns thereof.
8.5 Force Majeure
No party shall be held liable or held in breach of this Agreement if prevented, hindered, or delayed in the performance or observance of any provision hereof by reason of any act of God, strike, lockout, riot, acts of war, terrorism, epidemics, government actions, or regulation imposed after the date hereof, judicial order, or other cause beyond such party's reasonable control. Both parties agree that, once executed by both parties, this Agreement shall supersede all other prior agreements between the two parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written.
ONLINE RESOURCES CORPORATION
By: /s/
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Signature Date
Print Name
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TWO RIVER COMMUNITY BANK
By: /s/ Michael Gormley 3/17/03
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Signature Date
Michael Gormley
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Print Name
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Two River Community Bank
Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
Exhibit A: Service Description
Quotien(SM) Services
The Quotien(SM) Bill Payment Service is made up of all the features and service options described in this Exhibit. The Designated Quotien(SM) Services are the service components to be delivered to the Financial Institution as reflected in the Functional Requirements Document based on the FI Implementation Questionnaire and the Electronic Funds Transfer Disclosure for Retail Accounts.
Account Accessibility
Users shall be able to access up to 40 accounts at their financial institution (Fl), if their accounts are accessible to Online Resources via the ATM Network and support bill payment transactions. At minimum, all Users will have access to their primary checking account.
Only accounts that can be accessed through the ATM Network in formats supported by Online Resources can support Quotien(SM) transactions. Supported formats may be expanded by Online Resources from time to time.
With the Designated Quotien(SM) Services, Users can access their accounts via the PC Browser-based application. Upon general availability, access will also be provided via private commercial networks, such as America Online (AOL). Online Resources will support bill payment transactions initiated through other software, such as Microsoft Money and Quicken, and will comply with industry standards such as OFX and Gold.
Bill Payments
Users shall be able to pay any merchant currently on the system and to add merchants to the system. The term "merchant" shall include, but not be limited to, a business, charitable institution, or professional service organization such as a law firm or doctors' group in the U.S., but shall exclude the Internal Revenue Service, as well as all state and local tax authorities. Users shall be able to schedule bill payments up to 364 days in the future.
o Users shall be able to schedule bill payments to occur on a regular basis: weekly, biweekly, monthly, semi-monthly, quarterly, semi-annually, or annually for up to 45 years.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
o Users shall be able to review, change, and cancel scheduled future or recurring payments up until midnight the day before the transaction is scheduled.
o Users who are consumers (as opposed to Small Business Customers of the FI) may make an unlimited number of bill payments throughout a given month. Online Resources reserves the right to review accounts with more than 20 bill payments per month to identify Small Business Users.
Transaction Summary
o All Users shall be able to obtain a statement of their online activity, which shall include an itemized list of completed transactions for the past 45 days, scheduled transactions forward through same date next month, and future balances forward through the same date next month.
Operating Assumptions
Online Resources pulls an initial account balance from the primary DDA Account at the beginning of each end-user session. Online Resources pulls other account balances to support User activity throughout the session. The FI agrees and guarantees to accept as good all payments confirmed by Online Resources based on that initial balance.
Stand-In
It is strongly recommended that Online Resources be allowed to provide a limited set of functionality when the FI or the ATM Network is not available in order to increase the availability of Bill Payment Services to Users. Specifications for this option will be defined during Implementation.
System Maintenance and Processing Support
Online Resources provides ongoing system maintenance to support the Quotien(sm) Service. These include batch file transfers, software maintenance, customer and merchant database maintenance and software upgrades.
Each business day Online Resources will make up to two attempts to process an FI's batch files or the activity updates from the Integrated Support Software. If an error on the FI's part requires additional Re-processing Support by Online Resources, Online Resources will provide it as needed on a fee basis.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
Client Services
Account Management Services
Online Resources will assign an Account Manager who is responsible for Online Resources' ongoing post-implementation relationship with the FI and serves as the primary point of contact for non-operational issues for the FI. The Account Manager provides marketing consultation to FIs who request such assistance to develop marketing programs where opportunities exist to increase the User base for bill payment. Examples of marketing support include: an online banking marketing guide, sample consumer marketing campaigns, sample branch communication package, and optional marketing services.
Training Services (optional)
Online Resources can provide optional Training Services for FIs at its facilities in McLean, Virginia or at the FI's site. Training Services are available on a fee basis.
Customer Service Training
Online Resources provides two days of training to enable FI personnel to:
o Use the Integrated Support Software and service Users.
o Resolve any problems that are incidental to Quotien(sm) System.
Branch Sales Training
At the option of the FI, Online Resources will also provide training to enable FI trainers to teach branch personnel how to sell the Designated Quotien(sm)' Services, as well as sales procedures they should follow. FI may elect to have Online Resources train branch personnel directly.
MIS Reports
Online Resources provides detailed sales and usage reports to assist the FI in monitoring product performance. Additional reports are available on a custom fee basis.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
The Quotien(sm) Marketing Workshop (optional)
This optional workshop is a seminar program that guides participating Fls through the planning process by helping them define their marketing objectives, which drives key decisions about pricing, positioning, and promotions.
Solicitation Package (optional)
Online Resources has created a solicitation package that FIs can brand and produce. The campaign includes sign-up forms, newspaper ads, posters, direct mail, outdoor, broadcast (radio and TV), and customer communications pieces, brochures, and statement stuffers.
Marketing Services (optional)
Online Resources can provide marketing services to clients. These services include the creation and production of advertising and promotional materials, either as principal or agent. These services are optional and quoted separately.
Internet Services
Online Resources provides Web Site Design and Hosting Services as set forth in the Web Site Design and Hosting Agreement.
Customer Services
FI can provide front-line Customer Services through its own call center, or Online Resources can provide Customer Service in the FI's name in a service bureau environment.
Fl Customer Service
The FI is responsible for providing front-line Customer Service, either through its own call center or through Online Resources' service bureau. Customer Service Representatives establish and man incoming voice phone lines, receive telephone calls and correspondence from Users, and are responsible for the following tasks.
Internet Bill Payment
Customer Setup and Maintenance
o Process the application and enter customer data into the Integrated Support System.
o Link Users to merchants listed on the sign-up form.
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
o Perform account maintenance by entering changes to the User's account, card/PIN/Password information, and merchant information.
Resolution of User Inquiries
Customer Service Representatives are responsible for responding to inquiries in the following categories:
o Additional accounts to be linked to the Designated Quotien(sm) Services.
o Pricing of the Designated Quotien(sm) Services.
o Transactional questions about bill payments.
o Navigation through the access devices.
o Features of the Designated Quotien(sm) Services.
Other Requests or Issues
Customer Services Representatives will answer other requests, such as those for a change of address or cancellation of service, and enter such changes into the Integrated Support System. They will also work with Online Resources to identify and diagnose any system issues or reported problems.
Online Resources' Additional Fl and End User Support
Online Resources is responsible for supporting the FI and its Users in the following areas:
o Technical fulfillment of linking end users to their Enabling Access Device.
o Merchant relationships including payment inquiries, account updates, and new merchant solicitation.
o Technical support, including related communications issues for the Designated Quotien(sm) Services.
o User error as defined by Regulation E (12 CFR 205 et seq.), in cooperation with FI.
o All escalated FI inquiries.
Hours of Operation
Online Resources' service bureau option, operating in the name of the FI, is available 24 hours per day, 7 days a week, with the exception of the following holidays:
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
New Years Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
Additional FI support calls, including technical customer support, payment inquiries, FI-escalated issues, or other questions or requests can be made to Online Resources' 24 x 7 call center at any time. The call center's ability to provide immediate and final resolution may be dependent on merchants' or FI's hours of operation, further technical, network and/or systems research, end user availability, or other factors.
Service Standards
o User registrations will be processed within two (2) business days for online registrations and registration forms.
o FI Customer Service will process and complete merchant links within ten (10) business days from the date they are received.
o FI Customer Service Representatives shall respond to User inquiries as set forth above by the close of business.
o Online Resources' additional Fl and User support will provide call-back assistance in any case in which immediate and final resolution did not occur in the call center (i.e., dependent upon contact with third parties, etc.) no later than the end of the next business day from receipt of call.
Late Charges and Penalty Guidelines
The parties agree that responsibility for paying any late charges and/or penalties incurred due to a late payment to a merchant shall be as follows:
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Responsibility for Paying Late
Reason for Late Payment Charges/Penalties
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Online FI User
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Lost, cannot determine reason X
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Not sent as scheduled X
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Sent to wrong location X
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U. S. Mail delay X
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Delay by merchant X
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Failure of FI to maintain database X
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Intervention by FI X
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Incorrect entry by FI X
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Scheduled incorrect number of days before due date X
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Scheduled incorrectly X
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Incorrect account information supplied by User X
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Quotien(SM) Bill Payment Service Agreement Version 01.01.03 Internet Bill Payment
A late payment to a merchant is defined as a payment that has not arrived at the merchant within the allowable number of days stated on the screen at the time the User scheduled the payment.
Any Stop Payments requested as a "stand alone" transaction by the institution or the end user are billable and will be reflected on the monthly invoice. In addition, stop payments initiated due to user error will be billed. If a stop payment is initiated as part of a payment inquiry in order to resolve a payment problem, a separate stop payment fee does not apply.
Any Check Copies requested as a "stand alone" transaction by the institution or the end user are billable and will be reflected on the monthly invoice. A detailed check copy report is attached to the invoice. There is no additional fee for check copies requested to resolve a payment posting issue as part of the normal payment inquiry process.
Service Boundaries
Quotien(sm) Internet Bill Payment Services are broad and flexible in order to meet the many varied needs of the User and FI. However, some boundaries of the service are noted below:
o The address for User stored in Online Resource's database must comply with U.S. postal standards.
o The maximum payment amount supported by Online Resources is $25,000; however, payments over $25,000 are allowed with a contract addendum signed by the FI.
o Payments are made in U.S. dollar denominations to U.S.-based merchants.
o The payment guarantee does not apply to payments made to "excluded" merchants.
Two River Community Bank
Exhibit 10.26
THE TOWN BANK
OF
WESTFIELD
1999 EMPLOYEE STOCK OPTION PLAN
1. Purpose of the 1999 Employee Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available employees ("Eligible Employees", as hereinafter defined) and to encourage their highest level of performance. The 1999 Employee Stock Option Plan (the "Employee Stock Option Plan") amends in its entirety, restates, supersedes and terminates all preceding stock option plans for employees and is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Eligible Employees who are in a position to contribute to the long-term success and growth of the Corporation, (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Eligible Employees with experience and ability, and (iii) associating more closely the interests of the Eligible Employees with those of the Corporation's stockholders.
The term "Eligible Employees" as used in this Employee Stock Option Plan means the employees and officers of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Employee Stock Option Plan.
Under the Employee Stock Option Plan, options (singularly, an "Option", collectively, the "Options") to purchase voting common stock, $5.00 par value ("Common Stock") of the Corporation, may be granted, which options, if granted to Eligible Employees who are also employees (including officers who are employees) of the Corporation, a parent corporation or a subsidiary Corporation of the Corporation, may, at the time of grant, be designated as incentive stock options ("ISOs"), with the attendant tax benefits, as provided for under sections 421 and 422 of the Internal Revenue Code of 1986, as amended, and any successor statute and regulations promulgated or proposed thereunder (the "Code"). The aggregate number of shares of Common Stock reserved for grant from time to time under the Employee Stock Option Plan is 31,169 shares of Common Stock, which shares may be authorized but unissued shares of Common Stock or shares of Common Stock which shall have been or which may be reacquired by the Corporation, as the Board of Directors of the Corporation shall from time to time determine. In no event may there be dedicated under the Employee Stock Option Plan a number of shares of Common Stock of the Corporation greater than five percent of the outstanding shares of Capital Stock of the Corporation. The aggregate number of shares of Common Stock reserved for grant under the Employee Stock Option Plan shall be subject to adjustment as provided in Paragraph 11. If an Option shall expire or terminate for any reason without having been exercised in full, the shares represented by the portion thereof not so exercised shall (unless the Employee Stock Option Plan shall have been terminated) become available for other Options under the Employee Stock Option Plan. The Employee Stock Option Plan shall become effective upon approval by the Board of Directors and stockholders of the Corporation as provided in Paragraph 12. Subject to Paragraph 13, no Option shall be granted under the Employee Stock Option Plan after the tenth (10th) anniversary of the approval of the Employee Stock Option Plan by the stockholders of the Corporation, or December 31, 2009, whichever occurs first.
3. Administration of the Employee Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Employee Stock Option Plan. The Committee shall consist of either the entire Board of Directors (provided that a majority of the Board of Directors and a majority of the Directors acting as the Committee are disinterested persons) or a Committee appointed by the Board of Directors consisting of one or more disinterested persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Employee Stock Option Plan, to direct the grant of Options; to determine the purchase price of the Common Stock covered by each Option, the Eligible Employees to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to designate Options as ISOs; to interpret the Employee Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Employee Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Eligible Employees as a prerequisite to, and in connection with, a grant of Options under the Employee Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Employee Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Employee Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Employee Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options and Designating ISOs.
(a) Options may be granted only to (i) employees (including officers who are employees) of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant (Options so granted may be designated as ISOs), and (ii) to officers of the Corporation, a parent corporation or a subsidiary corporation thereof on the date of grant, without regard to whether they are employees. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the nature of the duties of the respective persons, their present and potential contributions to the Corporation's successful operation or to successful operation of a parent corporation or a subsidiary corporation thereof, as the case may be, and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, an Eligible Employee may receive Options on more than one occasion under the Employee Stock Option Plan.
(b) In the case of each ISO granted to an employee, the aggregate fair market value (determined at the time the ISO is granted) of the Common Stock with respect to which the ISO is exercisable for the first time by such employee during any calendar year (under all plans of the Corporation and any parent corporation or any subsidiary corporation thereof) may not exceed $100,000.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event in the case of an ISO shall it be less than the fair market value of a share of the Common Stock on the date the ISO is granted or one hundred and ten percent (110%) of the fair market value of a share of the Common Stock on the date the ISO is granted if the Holder owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of a parent or subsidiary corporation thereof (a "Ten Percent Holder"). In no event may the option price of a share of Common Stock be less than the
greater of the par value of a share of stock or 85 percent of its fair market value on the date the Option is granted. For all purposes under the Employee Stock Option Plan, if at the time of grant the Common Stock is publicly traded, its fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on that day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an ISO is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse.
The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10. The term of an ISO granted to a third-party Ten Percent Holder shall be no more than five years from the date of grant.
7. Exercise of Options.
(a) An Option may be exercised, in whole or in part, from time to time commencing on the first anniversary of the date of the grant of the Option. However, not more than 25 percent of the shares subject to an Option may be purchased prior to the second anniversary of the date of grant of the Option, not more than 50 percent of the shares subject to an Option may be purchased prior to the third anniversary of the date of grant of the option, and not more than 75 percent of the shares subject to an Option may be purchased prior to the fourth anniversary of the date of grant of the Option. All shares not previously purchased may be purchased after the fourth anniversary of the date of grant of the Option provided the Option has not lapsed or been previously terminated. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options that are not designated as ISOs may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional, shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise; provided, that if permitted by related Agreement or by the Committee, the purchase price may be paid in whole or in part, in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then an Eligible Employee or has been an Eligible Employee of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof (i) on the date of its grant, and, (ii) in the case of an ISO, from the date of grant, continuously until a date not earlier than a date which is three months (one year in the case of a Holder who is disabled as provided in section 10(b), below) prior to the date of exercise.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Employee Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be an Eligible Employee of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), such Option may, subject to the provisions of the Employee Stock Option Plan, be exercised (to the extent that he was entitled to exercise such option at the termination of his employment or service as an officer pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years (five years in the case of a Ten Percent Holder) after the date on which such Option was granted. Any Option held by a Holder (A) whose employment with the Corporation shall be terminated for cause, or (B) who is an employee who terminates his employment voluntarily and without the consent of the Corporation or any parent corporation or any subsidiary corporation thereof, as the case may be (which consent shall be presumed in the case of retirement), shall, to the extent not theretofore exercised, terminate immediately upon such termination.
(b) Other than as provided in Paragraph 9(a), Options granted under the Employee Stock Option Plan shall not be affected by any change of duties or job of a Holder so long as the Holder remains an Eligible Employee.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date employment terminates for purposes of the Employee Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Employee Stock Option Plan or in any Option granted pursuant to the Employee Stock Option Plan shall confer upon any Eligible Employee or other person any right to continue in the employ of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, to terminate the employment of any Eligible Employee at any time.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Employee Stock Option Plan shall:
(a) die (i) while he is employed by the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof, or while serving as an officer of any such corporation, or (ii) within 90 days after the termination of such employment (other than termination for cause or, in the case of an employee, voluntarily on his part and without the consent of the Corporation or a parent corporation or a subsidiary corporation thereof, as the case may be, which consent shall be presumed in the case of retirement); or
(b) while employed by the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Code while serving as an employee or an officer of any such corporation, then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by
will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise, to the extent provided in Paragraph 9, shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years (five years in the case of a Ten Percent Holder) after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Employee Stock Option Plan and to any Eligible Employee shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent or a subsidiary, or a sale of all or substantially all of the assets or stock of the Corporation or its parent or a subsidiary, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary of which the Holder is then an employee or officer, then, if the Committee shall so determine, each Option under the Employee Stock Option Plan, if such event shall occur with respect to the Corporation or its parent or a subsidiary, or each Option granted to an employee or officer of the Corporation, a parent or subsidiary of the Corporation respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Employee Stock Option Plan.
The Employee Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and such adoption is duly ratified in accordance with applicable law by a vote of a two thirds majority of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Employee Stock Option Plan by the Board of Directors and stockholders, the Committee may, in its discretion, grant Options under the Employee Stock Option Plan, the exercise of which shall be expressly subject to the condition that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that such Holder will be acquiring such shares for his own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Employee Stock Option Plan will not be sold except pursuant to an effective registration statement under such Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Employee Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination under Section 2, above, of the Employee Stock Option Plan, suspend, terminate, modify or amend the Employee Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any Eligible Employee during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to eligibility for participation in the Employee Stock Option Plan, shall be subject to the two thirds approval of stockholders in the manner provided in Paragraph 12, except that any such increase, reduction, or change that may result from adjustments authorized by Paragraph 11 or adjustments based on revisions to the Code (to the extent permitted by such authorities) shall not require such approval. Further, no adjustment in the number of shares available under the Employee Stock Option Plan shall violate the limitations of Paragraph 2. No suspension, termination, modification, or amendment of the Employee Stock Option Plan may, without the express written consent of the Holder of an Option, adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option other than an ISO, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any Eligible Employee who shall have been employed or so served for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board of Directors may, in any specific case, authorize financing for any Eligible Employee who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by such Eligible Employee pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with such exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or such subsidiary, and applicable laws.
If any such financing is authorized by the Board of Directors, such financing shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income & employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Employee Stock Option Plan or any Agreement, or any action taken pursuant to the Employee Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Employee Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Employee Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Employee Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" shall refer to an Eligible Employee who is an employee or officer of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Employee Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
3. The term "disinterested person" shall mean a Committee member who is not at the time he exercises discretion in administering the Employee Stock Option Plan an Eligible Employee and has not at any time within one year prior thereto been an Eligible Employee for selection as a person to whom stock may be allocated or to whom stock options may be granted pursuant to the Employee Stock Option Plan.
Exhibit 10.27
THE TOWN BANK
OF
WESTFIELD
2000 EMPLOYEE STOCK OPTION PLAN
1. Purpose of the 2000 Employee Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available employees ("Eligible Employees", as hereinafter defined) and to encourage their highest level of performance. The 2000 Employee Stock Option Plan (the "Employee Stock Option Plan") is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Eligible Employees who are in a position to contribute to the long-term success and growth of the Corporation, (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Eligible Employees with experience and ability, and (iii) associating more closely the interests of the Eligible Employees with those of the Corporation's stockholders.
The term "Eligible Employees" as used in this Employee Stock Option Plan means the employees and Officers of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Employee Stock Option Plan.
Under the Employee Stock Option Plan, options (singularly, an "Option", collectively, the "Options") to purchase voting common stock, $5.00 par value ("Common Stock") of the Corporation, may be granted, which options, if granted to Eligible Employees who are also employees (including Officers who are employees) of the Corporation, a parent corporation or a subsidiary corporation of the Corporation, may, at the time of grant, be designated as incentive stock options ("ISOs"), with the attendant tax benefits, as provided for under sections 421 and 422 of the Internal Revenue Code of 1986, as amended, and any successor statute and regulations promulgated or proposed thereunder (the "Code"). The aggregate number of shares of Common Stock reserved for grant from time to time under the Employee Stock Option Plan is 31,169 shares of Common Stock, which shares may be authorized but unissued shares of Common Stock or shares of Common Stock which shall have been or which may be reacquired by the Corporation, as the Board of Directors of the Corporation shall from time to time determine. In no event may there be dedicated under the Employee Stock Option Plan a number of shares of Common Stock of the Corporation greater than five percent of the outstanding shares of Capital Stock of the Corporation. The aggregate number of shares of Common Stock reserved for grant under the Employee Stock Option Plan shall be subject to adjustment as provided in Paragraph 11. If an Option shall expire or terminate for any reason without having been exercised in full, the shares represented by the portion thereof not so exercised shall (unless the Employee Stock Option Plan shall have been terminated) become available for other Options under the Employee Stock Option Plan. The Employee Stock Option Plan shall become effective upon approval by the Board of Directors and stockholders of the Corporation as provided in Paragraph 12. Subject to Paragraph 13, no Option shall be granted under the Employee Stock Option Plan after the tenth (10th) anniversary of the approval of the Employee Stock Option Plan by the stockholders of the Corporation, or December 31, 2010, whichever occurs first.
3. Administration of the Employee Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Employee Stock Option Plan. The Committee shall consist of either the entire Board of Directors (provided that a majority of the Board of Directors and a majority of the Directors acting as the Committee are disinterested persons) or a Committee appointed by the Board of Directors consisting of one or more disinterested persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Employee Stock Option Plan, to direct the grant of Options; to determine the purchase price of the
Common Stock covered by each Option, the Eligible Employees to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to designate Options as ISOs; to interpret the Employee Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Employee Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Eligible Employees as a prerequisite to, and in connection with, a grant of Options under the Employee Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Employee Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Employee Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Employee Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options and Designating ISOs.
(a) Options may be granted only to (i) employees (including Officers who are employees) of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant (Options so granted may be designated as ISOs), and (ii) to Officers of the Corporation, a parent corporation or a subsidiary corporation thereof on the date of grant, without regard to whether they are employees. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the nature of the duties of the respective persons, their present and potential contributions to the Corporation's successful operation or to successful operation of a parent corporation or a subsidiary corporation thereof, as the case may be, and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, an Eligible Employee may receive Options on more than one occasion under the Employee Stock Option Plan.
(b) In the case of each ISO granted to an employee, the aggregate fair market value (determined at the time the ISO is granted) of the Common Stock with respect to which the ISO is exercisable for the first time by such employee during any calendar year (under all plans of the Corporation and any parent corporation or any subsidiary corporation thereof) may not exceed $100,000.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event in the case of an ISO shall it be less than the fair market value of a share of the Common Stock on the date the ISO is granted or one hundred and ten percent (110%) of the fair market value of a share of the Common Stock on the date the ISO is granted if the Holder owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of a parent or subsidiary corporation thereof (a "Ten Percent Holder"). In no event may the option price of a share of Common Stock be less than the greater of the par value of a share of stock or 85 percent of its fair market value on the date the Option is granted. For all purposes under the Employee Stock Option Plan, if at the time of grant the Common Stock is publicly traded,
its fair market value shall be the last reported sale price, regular way, on the last preceding trading day, of, in case no such reported sale takes place on that day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an ISO is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10. The term of an ISO granted to a third-party Ten Percent Holder shall be no more than five years from the date of grant.
7. Exercise of Options.
(a) An Option may be exercised, in whole or in part, from time to time commencing on the first anniversary of the date of the grant of the Option. However, not more than 25 percent of the shares subject to an Option may be purchased prior to the second anniversary of the date of grant of the Option, not more than 50 percent of the shares subject to an Option may be purchased prior to the third anniversary of the date of grant of the option, and not more than 75 percent of the shares subject to an Option may be purchased prior to the fourth anniversary of the date of grant of the Option. All shares not previously purchased may be purchased after the fourth anniversary of the date of grant of the Option provided the Option has not lapsed or been previously terminated. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options that are not designated as ISOs may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional, shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise; provided, that if permitted by related Agreement or by the Committee, the purchase price may be paid in whole or in part, in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then an Eligible Employee or has been an Eligible Employee of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof (i) on the date of its grant, and, (ii) in the case of an ISO, from the date of grant, continuously until a date not earlier than a date which is three months (one year in the case of a Holder who is disabled as provided in section 10(b), below) prior to the date of exercise.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Employee Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be an Eligible Employee of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), such Option may, subject to the provisions of the Employee Stock Option Plan, be exercised (to the extent that he was entitled to exercise such option at the termination of his employment or service as an Officer pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years (five years in the case of a Ten Percent Holder) after the date on which such Option was granted. Any Option held by a Holder (A) whose employment with the Corporation shall be terminated for cause, or (B) who is an employee who terminates his employment voluntarily and without the consent of the Corporation or any parent corporation or any subsidiary corporation thereof, as the case may be (which consent shall be presumed in the case of retirement), shall, to the extent not theretofore exercised, terminate immediately upon such termination.
(b) Other than as provided in Paragraph 9(a), Options granted under the Employee Stock Option Plan shall not be affected by any change of duties or job of a Holder so long as the Holder remains an Eligible Employee.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date employment terminates for purposes of the Employee Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Employee Stock Option Plan or in any Option granted pursuant to the Employee Stock Option Plan shall confer upon any Eligible Employee or other person any right to continue in the employ of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, to terminate the employment of any Eligible Employee at any time.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Employee Stock Option Plan shall:
(a) die (i) while he is employed by the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof, or while serving as an Officer of any such corporation, or (ii) within 90 days after the termination of such employment (other than termination for cause or, in the case of an employee, voluntarily on his part and without the consent of the Corporation or a parent corporation or a subsidiary corporation thereof, as the case may be, which consent shall be presumed in the case of retirement); or
(b) while employed by the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Code while serving as an employee or an Officer of any such corporation, then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise, to the extent provided in Paragraph 9, shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years (five years in the case of a Ten Percent Holder) after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Employee Stock Option Plan and to any Eligible Employee shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent or a subsidiary, or a sale of all or substantially all of the assets or stock of the Corporation or its parent or a subsidiary, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary of which the Holder is then an employee or Officer, then, if the Committee shall so determine, each Option under the Employee Stock Option Plan, if such event shall occur with respect to the Corporation or its parent or a subsidiary, or each Option granted to an employee or Officer of the Corporation, a parent or subsidiary of the Corporation respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Employee Stock Option Plan.
The Employee Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and such adoption is duly ratified in accordance with applicable law by a vote of a two thirds majority of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Employee Stock Option Plan by the Board of Directors and stockholders, the Committee may, in its discretion, grant Options under the Employee Stock Option Plan, the exercise of which shall be expressly subject to the condition that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that such Holder will be acquiring such shares for his own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Employee Stock Option Plan will not be sold except pursuant to an effective registration statement under such Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Employee Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination under Section 2, above, of the Employee Stock Option Plan, suspend, terminate, modify or amend the Employee Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any Eligible Employee during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to
eligibility for participation in the Employee Stock Option Plan, shall be
subject to the two thirds approval of stockholders in the manner provided in
Paragraph 12, except that any such increase, reduction, or change that may
result from adjustments authorized by Paragraph 11 or adjustments based on
revisions to the Code (to the extent permitted by such authorities) shall not
require such approval. Further, no adjustment in the number of shares available
under the Employee Stock Option Plan shall violate the limitations of Paragraph
2. No suspension, termination, modification, or amendment of the Employee Stock
Option Plan may, without the express written consent of the Holder of an Option,
adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option other than an ISO, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any Eligible Employee who shall have been employed or so served for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board of Directors may, in any specific case, authorize financing for any Eligible Employee who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by such Eligible Employee pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with such exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or such subsidiary, and applicable laws.
If any such financing is authorized by the Board of Directors, such financing shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income & employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Employee Stock Option Plan or any Agreement, or any action taken pursuant to the Employee Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Employee Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Employee Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Employee Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" shall refer to an Eligible Employee who is an employee or Officer of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Employee Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
3. The term "disinterested person" shall mean a Committee member who is not at the time he exercises discretion in administering the Employee Stock Option Plan an Eligible Employee and has not at any time within one year prior thereto been an Eligible Employee for selection as a person to whom stock may be allocated or to whom stock options may be granted pursuant to the Employee Stock Option Plan.
Exhibit 10.28
THE TOWN BANK
OF
WESTFIELD
2001 EMPLOYEE STOCK OPTION PLAN
1. Purpose of the 2001 Employee Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available employees ("Eligible Employees", as hereinafter defined) and to encourage their highest level of performance. The 2001 Employee Stock Option Plan (the "Employee Stock Option Plan") is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Eligible Employees who are in a position to contribute to the long-term success and growth of the Corporation, (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Eligible Employees with experience and ability, and (iii) associating more closely the interests of the Eligible Employees with those of the Corporation's stockholders.
The term "Eligible Employees" as used in this Employee Stock Option Plan means the employees and Officers of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Employee Stock Option Plan.
Under the Employee Stock Option Plan, options (singularly, an "Option", collectively, the "Options") to purchase voting common stock, $5.00 par value ("Common Stock") of the Corporation, may be granted, which options, if granted to Eligible Employees who are also employees (including Officers who are employees) of the Corporation, a parent corporation or a subsidiary corporation of the Corporation, may, at the time of grant, be designated as incentive stock options ("ISOs"), with the attendant tax benefits, as provided for under sections 421 and 422 of the Internal Revenue Code of 1986, as amended, and any successor statute and regulations promulgated or proposed thereunder (the "Code"). The aggregate number of shares of Common Stock reserved for grant from time to time under the Employee Stock Option Plan is 28,465 shares of Common Stock, which shares may be authorized but unissued shares of Common Stock or shares of Common Stock which shall have been or which may be reacquired by the Corporation, as the Board of Directors of the Corporation shall from time to time determine. In no event may there be dedicated under the Employee Stock Option Plan a number of shares of Common Stock of the Corporation greater than five percent of the outstanding shares of Capital Stock of the Corporation. The aggregate number of shares of Common Stock reserved for grant under the Employee Stock Option Plan shall be subject to adjustment as provided in Paragraph 11. If an Option shall expire or terminate for any reason without having been exercised in full, the shares represented by the portion thereof not so exercised shall (unless the Employee Stock Option Plan shall have been terminated) become available for other Options under the Employee Stock Option Plan. The Employee Stock Option Plan shall become effective upon approval by the Board of Directors and stockholders of the Corporation as provided in Paragraph 12. Subject to Paragraph 13, no Option shall be granted under the Employee Stock Option Plan after the tenth (10th) anniversary of the approval of the Employee Stock Option Plan by the stockholders of the Corporation, or December 31, 2011, whichever occurs first.
3. Administration of the Employee Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Employee Stock Option Plan. The Committee shall consist of either the entire Board of Directors (provided that a majority of the Board of Directors and a majority of the Directors acting as the Committee are disinterested persons) or a Committee appointed by the Board of Directors consisting of one or more disinterested persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Employee Stock Option Plan, to direct the grant of Options; to determine the purchase price of the
Common Stock covered by each Option, the Eligible Employees to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to designate Options as ISOs; to interpret the Employee Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Employee Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Eligible Employees as a prerequisite to, and in connection with, a grant of Options under the Employee Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Employee Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Employee Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Employee Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options and Designating ISOs.
(a) Options may be granted only to (i) employees (including Officers who are employees) of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant (Options so granted may be designated as ISOs), and (ii) to Officers of the Corporation, a parent corporation or a subsidiary corporation thereof on the date of grant, without regard to whether they are employees. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the nature of the duties of the respective persons, their present and potential contributions to the Corporation's successful operation or to successful operation of a parent corporation or a subsidiary corporation thereof, as the case may be, and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, an Eligible Employee may receive Options on more than one occasion under the Employee Stock Option Plan.
(b) In the case of each ISO granted to an employee, the aggregate fair market value (determined at the time the ISO is granted) of the Common Stock with respect to which the ISO is exercisable for the first time by such employee during any calendar year (under all plans of the Corporation and any parent corporation or any subsidiary corporation thereof) may not exceed $100,000.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event in the case of an ISO shall it be less than the fair market value of a share of the Common Stock on the date the ISO is granted or one hundred and ten percent (110%) of the fair market value of a share of the Common Stock on the date the ISO is granted if the Holder owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of a parent or subsidiary corporation thereof (a "Ten Percent Holder"). In no event may the option price of a share of Common Stock be less than the greater of the par value of the Common Stock or eighty-five percent (85%) of its fair market value on the date the Option is granted. For all purposes under the Employee Stock Option Plan, if at the time of grant the Common Stock
is publicly traded, its fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on that day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an ISO is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10. The term of an ISO granted to a third-party Ten Percent Holder shall be no more than five years from the date of grant.
7. Exercise of Options.
(a) An Option may be exercised, in whole or in part, from time to time commencing on the first anniversary of the date of the grant of the Option. However, not more than 25 percent of the shares subject to an Option may be purchased prior to the second anniversary of the date of grant of the Option, not more than 50 percent of the shares subject to an Option may be purchased prior to the third anniversary of the date of grant of the option, and not more than 75 percent of the shares subject to an Option may be purchased prior to the fourth anniversary of the date of grant of the Option. All shares not previously purchased may be purchased after the fourth anniversary of the date of grant of the Option provided the Option has not lapsed or been previously terminated. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options that are not designated as ISOs may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional, shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise; provided, that if permitted by related Agreement or by the Committee, the purchase price may be paid in whole or in part, in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then an Eligible Employee or has been an Eligible Employee of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof (i) on the date of its grant, and, (ii) in the case of an ISO, from the date of grant, continuously until a date not earlier than a date which is three months (one year in the case of a Holder who is disabled as provided in section 10(b), below) prior to the date of exercise.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Employee Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be an Eligible Employee of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), such Option may, subject to the provisions of the Employee Stock Option Plan, be exercised (to the extent that he was entitled to exercise such option at the termination of his employment or service as an Officer pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years (five years in the case of a Ten Percent Holder) after the date on which such Option was granted. Any Option held by a Holder (A) whose employment with the Corporation shall be terminated for cause, or (B) who is an employee who terminates his employment voluntarily and without the consent of the Corporation or any parent corporation or any subsidiary corporation thereof, as the case may be (which consent shall be presumed in the case of retirement), shall, to the extent not theretofore exercised, terminate immediately upon such termination.
(b) Other than as provided in Paragraph 9(a), Options granted under the Employee Stock Option Plan shall not be affected by any change of duties or job of a Holder so long as the Holder remains an Eligible Employee.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date employment terminates for purposes of the Employee Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Employee Stock Option Plan or in any Option granted pursuant to the Employee Stock Option Plan shall confer upon any Eligible Employee or other person any right to continue in the employ of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, to terminate the employment of any Eligible Employee at any time.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Employee Stock Option Plan shall:
(a) die (i) while he is employed by the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof, or while serving as an Officer of any such corporation, or (ii) within 90 days after the termination of such employment (other than termination for cause or, in the case of an employee, voluntarily on his part and without the consent of the Corporation or a parent corporation or a subsidiary corporation thereof, as the case may be, which consent shall be presumed in the case of retirement); or
(b) while employed by the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Code while serving as an employee or an Officer of any such corporation, then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise, to the extent provided in Paragraph 9, shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years (five years in the case of a Ten Percent Holder) after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Employee Stock Option Plan and to any Eligible Employee shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent or a subsidiary, or a sale of all or substantially all of the assets or stock of the Corporation or its parent or a subsidiary, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary of which the Holder is then an employee or Officer, then, if the Committee shall so determine, each Option under the Employee Stock Option Plan, if such event shall occur with respect to the Corporation or its parent or a subsidiary, or each Option granted to an employee or Officer of the Corporation, a parent or subsidiary of the Corporation respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Employee Stock Option Plan.
The Employee Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and such adoption is duly ratified in accordance with applicable law by a vote of a two thirds majority of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Employee Stock Option Plan by the Board of Directors and stockholders, the Committee may, in its discretion, grant Options under the Employee Stock Option Plan, the exercise of which shall be expressly subject to the condition that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that such Holder will be acquiring such shares for his own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Employee Stock Option Plan will not be sold except pursuant to an effective registration statement under such Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Employee Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination under Section 2, above, of the Employee Stock Option Plan, suspend, terminate, modify or amend the Employee Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any Eligible Employee during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to
eligibility for participation in the Employee Stock Option Plan, shall be
subject to the two thirds approval of stockholders in the manner provided in
Paragraph 12, except that any such increase, reduction, or change that may
result from adjustments authorized by Paragraph 11 or adjustments based on
revisions to the Code (to the extent permitted by such authorities) shall not
require such approval. Further, no adjustment in the number of shares available
under the Employee Stock Option Plan shall violate the limitations of Paragraph
2. No suspension, termination, modification, or amendment of the Employee Stock
Option Plan may, without the express written consent of the Holder of an Option,
adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option other than an ISO, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any Eligible Employee who shall have been employed or so served for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board of Directors may, in any specific case, authorize financing for any Eligible Employee who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by such Eligible Employee pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with such exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or such subsidiary, and applicable laws.
If any such financing is authorized by the Board of Directors, such financing shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income & employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Employee Stock Option Plan or any Agreement, or any action taken pursuant to the Employee Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Employee Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Employee Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Employee Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" shall refer to an Eligible Employee who is an employee or Officer of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Employee Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
3. The term "disinterested person" shall mean a Committee member who is not at the time he exercises discretion in administering the Employee Stock Option Plan an Eligible Employee and has not at any time within one year prior thereto been an Eligible Employee for selection as a person to whom stock may be allocated or to whom stock options may be granted pursuant to the Employee Stock Option Plan.
Exhibit 10.29
THE TOWN BANK
OF
WESTFIELD
2002 EMPLOYEE STOCK OPTION PLAN
1. Purpose of the 2002 Employee Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available employees ("Eligible Employees", as hereinafter defined) and to encourage their highest level of performance. The 2002 Employee Stock Option Plan (the "Employee Stock Option Plan") is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Eligible Employees who are in a position to contribute to the long-term success and growth of the Corporation, (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Eligible Employees with experience and ability, and (iii) associating more closely the interests of the Eligible Employees with those of the Corporation's stockholders.
The term "Eligible Employees" as used in this Employee Stock Option Plan means the employees and Officers of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Employee Stock Option Plan.
Under the Employee Stock Option Plan, options (singularly, an
"Option", collectively, the "Options") to purchase voting common stock, $5.00
par value ("Common Stock") of the Corporation, may be granted, which options, if
granted to Eligible Employees who are also employees (including Officers who are
employees) of the Corporation, a parent corporation or a subsidiary corporation
of the Corporation, will, at the time of grant, be designated as incentive stock
options ("ISOs"), with the attendant tax benefits, as provided for under
Sections 421 and 422 of the Internal Revenue Code of 1986, as amended, and any
successor statute and regulations promulgated or proposed thereunder (the
"Code"). The aggregate number of shares of Common Stock reserved for grant from
time to time under the Employee Stock Option Plan is 75,000 shares of Common
Stock, which shares may be authorized but unissued shares of Common Stock or
shares of Common Stock which shall have been or which may be reacquired by the
Corporation, as the Board of Directors of the Corporation shall from time to
time determine. In no event may there be dedicated under the Employee Stock
Option Plan a number of shares of Common Stock of the Corporation greater than
five percent of the outstanding shares of Capital Stock of the Corporation. The
aggregate number of shares of Common Stock reserved for grant under the Employee
Stock Option Plan shall be subject to adjustment as provided in Section 11. If
an Option shall expire or terminate for any reason without having been exercised
in full, the shares represented by the portion thereof not so exercised shall
(unless the Employee Stock Option Plan shall have been terminated) become
available for other Options under the Employee Stock Option Plan. The Employee
Stock Option Plan shall become effective upon approval by the Board of Directors
and stockholders of the Corporation as provided in Section 12. Subject to
Section 13, no Option shall be granted under the Employee Stock Option Plan
after the tenth (10th) anniversary of the approval of the Employee Stock Option
Plan by the stockholders of the Corporation, or December 31, 2012, whichever
occurs first.
3. Administration of the Employee Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Employee Stock Option Plan. The Committee shall consist of either the entire Board of Directors (provided that a majority of the Board of Directors and a majority of the Directors acting as the Committee are disinterested persons) or a Committee appointed by the Board of Directors consisting of one or more disinterested persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Employee Stock Option Plan, to direct the grant of Options; to determine the purchase price of the
Common Stock covered by each Option, the Eligible Employees to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to interpret the Employee Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Employee Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Eligible Employees as a prerequisite to, and in connection with, a grant of Options under the Employee Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Employee Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Employee Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Employee Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options and Designating ISOs.
(a) Options may be granted only to employees, including Officers who are employees of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant (Options so granted may be designated as ISOs). In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the nature of the duties of the respective persons, their present and potential contributions to the Corporation's successful operation or to successful operation of a parent corporation or a subsidiary corporation thereof, as the case may be, and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Section 2 above, an Eligible Employee may receive Options on more than one occasion under the Employee Stock Option Plan.
(b) In the case of each ISO granted to an employee, the aggregate fair market value (determined at the time the ISO is granted) of the Common Stock with respect to which the ISO is exercisable for the first time by such employee during any calendar year (under all plans of the Corporation and any parent corporation or any subsidiary corporation thereof) may not exceed $100,000.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event shall it be less than the fair market value of a share of the Common Stock on the date the ISO is granted or one hundred and ten percent (110%) of the fair market value of a share of the Common Stock on the date the ISO is granted if the Holder owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or of a parent or subsidiary corporation thereof (a "Ten Percent Holder"). For all purposes under the Employee Stock Option Plan, if at the time of grant the Common Stock is publicly traded, its fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on that day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted
to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an ISO is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than ten (10) years from the date of grant, subject to earlier termination as provided in Sections 9 and 10. The term of an ISO granted to a third-party Ten Percent Holder shall be no more than five (5) years from the date of grant.
7. Exercise of Options.
(a) An Option may be exercised, in whole or in part, from time to time commencing on the first anniversary of the date of the grant of the Option. However, not more than twenty-five percent (25%) of the shares subject to an Option may be purchased prior to the second anniversary of the date of grant of the Option, not more than fifty percent (50%) of the shares subject to an Option may be purchased prior to the third anniversary of the date of grant of the option, and not more than seventy-five percent (75%) of the shares subject to an Option may be purchased prior to the fourth anniversary of the date of grant of the Option. All shares not previously purchased may be purchased after the fourth anniversary of the date of grant of the Option provided the Option has not lapsed or been previously terminated. Notwithstanding the foregoing, the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) An Option may be exercised as to any or all, full or fractional, shares of Common Stock as to which the Option is then exercisable.
(c) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise; provided, that if permitted by related Agreement or by the Committee, the purchase price may be paid in whole or in part, in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(d) Except as provided in Sections 9 and 10 no Option may be exercised unless the Holder thereof is then an Eligible Employee or has been an Eligible Employee of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof from the date of grant, continuously, until a date not earlier than a date which is three months (one year in the case of a Holder who is disabled as provided in Section 10(b), below)) prior to the date of exercise.
(e) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Employee Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be an Eligible Employee of the Corporation or any parent or subsidiary thereof (except as set forth in this Section 9), such Option may, subject to the provisions of the Employee Stock Option Plan, be exercised (to the extent that he was entitled to exercise such option at the termination of his employment or service as an Officer pursuant to any Agreement) at any time within ninety (90) days after such termination, but not more than ten (10) years (five (5) years in the case of a Ten Percent Holder) after the date on which such Option was granted. Any Option held by a Holder (A) whose employment with the Corporation shall be terminated for cause, or (B) who is an employee who terminates his employment voluntarily and without the consent of the Corporation or any parent corporation or any subsidiary corporation thereof, as the case may be (which consent shall be presumed in the case of retirement), shall, to the extent not theretofore exercised, terminate immediately upon such termination.
(b) Other than as provided in Section 9(a), Options granted under the Employee Stock Option Plan shall not be affected by any change of duties or job of a Holder so long as the Holder remains an Eligible Employee.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date employment terminates for purposes of the Employee Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Employee Stock Option Plan or in any Option granted pursuant to the Employee Stock Option Plan shall confer upon any Eligible Employee or other person any right to continue in the employ of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, to terminate the employment of any Eligible Employee at any time.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Employee Stock Option Plan shall:
(a) die (i) while he is employed by the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof, or while serving as an Officer of any such corporation, or (ii) within ninety (90) days after the termination of such employment (other than termination for cause or, in the case of an employee, voluntarily on his part and without the consent of the Corporation or a parent corporation or a subsidiary corporation thereof, as the case may be, which consent shall be presumed in the case of retirement); or
(b) while employed by the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Code while serving as an employee or an Officer of any such corporation, then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise, to the extent provided in Section 9, shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten (10) years (five (5) years in the case of a Ten Percent Holder) after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices,
and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Employee Stock Option Plan and to any Eligible Employee shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent or a subsidiary, or a sale of all or substantially all of the assets or stock of the Corporation or its parent or a subsidiary, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary of which the Holder is then an employee or Officer, then, if the Committee shall so determine, each Option under the Employee Stock Option Plan, if such event shall occur with respect to the Corporation or its parent or a subsidiary, or each Option granted to an employee or Officer of the Corporation, a parent or subsidiary of the Corporation respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Employee Stock Option Plan.
The Employee Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and such adoption is duly ratified in accordance with applicable law by a vote of a two-thirds majority of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Employee Stock Option Plan by the Board of Directors and stockholders, the Committee may, in its discretion, grant Options under the Employee Stock Option Plan, the exercise of which shall be expressly subject to the condition that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that such Holder will be acquiring such shares for his own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Employee Stock Option Plan will not be sold except pursuant to an effective registration statement under such Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Employee Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination under Section 2 above, of the Employee Stock Option Plan, suspend, terminate, modify or amend the Employee Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any Eligible Employee during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to eligibility for participation in the Employee Stock Option Plan, shall be subject to the two thirds approval of stockholders in the manner provided in Section 12, except that any such increase, reduction, or change that may result from adjustments authorized by Section 11 or adjustments based on revisions to the Code (to the extent permitted by such authorities) shall not require such approval. Further, no adjustment in the number of shares
available under the Employee Stock Option Plan shall violate the limitations of
Section 2. No suspension, termination, modification, or amendment of the
Employee Stock Option Plan may, without the express written consent of the
Holder of an Option, adversely affect the rights of such Holder under such
Option.
14. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income and employment tax obligations.
15. Severability.
In the event that any one or more provisions of the Employee Stock Option Plan or any Agreement, or any action taken pursuant to the Employee Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Employee Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Employee Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
16. Applicable Law.
The Employee Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
17. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" shall refer to an Eligible Employee who is an employee or Officer of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Employee Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to Sections 9 or 10.
3. The term "disinterested person" shall mean a Committee member who is not at the time he exercises discretion in administering the Employee Stock Option Plan an Eligible Employee and has not at any time within one year prior thereto been an Eligible Employee for selection as a person to whom stock may be allocated or to whom stock options may be granted pursuant to the Employee Stock Option Plan.
Exhibit 10.30
THE TOWN BANK
OF
WESTFIELD
1999 DIRECTOR STOCK OPTION PLAN
1. Purpose of the 1999 Director Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available persons to serve as Directors of the Corporation (the "Directors") and to encourage their regular attendance at Board and committee meetings and to obtain their highest level of performance. The 1999 Director Stock Option Plan (the "Director Stock Option Plan") amends in its entirety, restates, supersedes and terminates all preceding Director Stock Option Plans and is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Directors; and (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Directors with experience and ability.
The term "Directors" as used in this Director Stock Option Plan means the Directors and the members of any advisory committee to the Board of Directors of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Director Stock Option Plan.
Under the Director Stock Option Plan, options (singularly, an "Option", collectively, the "Options") to purchase voting common stock, $5.00 par value ("Common Stock") of the Corporation, may be granted. The aggregate number of shares of Common Stock reserved for grant from time to time under the Director Stock Option Plan is 31,169 shares of Common Stock, which shares may be authorized but unissued shares of Common Stock or shares of Common Stock which shall have been or which may be reacquired by the Corporation, as the Board of Directors of the Corporation shall from time to time determine. The aggregate number of shares of Common Stock reserved for grant under the Director Stock Option Plan shall be subject to adjustment as provided in Paragraph 11. In no event shall the number of shares reserved for grant under the Director Stock Option Plan exceed five percent of the issued and outstanding shares of capital stock of the Corporation. If an Option shall expire or terminate for any reason without having been exercised in full, the shares represented by the portion thereof not so exercised shall (unless the Director Stock Option Plan shall have been terminated) become available for other Options under the Director Stock Option Plan. The Director Stock Option Plan shall become effective upon approval by the Board of Directors and stockholders of the Corporation as provided in Paragraph 12. Subject to Paragraph 13, no Option shall be granted under the Director Stock Option Plan after the tenth (10th) anniversary of the approval of the Director Stock Option Plan by the stockholders of the Corporation, or December 31, 2009, whichever occurs first.
3. Administration of the Director Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Director Stock Option Plan. The Committee shall consist of either the entire Board of Directors or a Committee appointed by the Board of Directors consisting of one or more persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Director Stock Option Plan, to direct the grant of Options; to determine the purchase price of the Common Stock covered by each Option, the Directors to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to interpret the Director Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Director Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting
transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Directors as a prerequisite to, and in connection with, a grant of Options under the Director Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Director Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Director Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Director Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options.
An option may be granted only to a person who is a Director of, or, if the Board of Directors in its sole and absolute discretion shall elect, a member of an advisory committee to the Board of Directors of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the number of Board and Committee meetings the person attends, the performance of the Corporation and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, a person may receive Options on more than one occasion under the Director Stock Option Plan.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event shall it be less than the greater of the par value of the Common Stock or eighty-five percent of the fair market value of the Common Stock on the date the Option is issued. If, at the time an Option is granted the Common Stock is publicly traded, fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an Option is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10.
7. Exercise of Options.
(a) An Option granted as a Director's annual fee for service may be exercised, in whole or in part, by the last day of the year for which it was granted. All Options issued for attendance at meetings shall be fully exercisable, in whole or in part, at all times. All shares not previously purchased may be purchased after the close of the year for which the Option under which they may be purchased was granted provided the Option has not lapsed or been previously terminated. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise, or in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then a Director, or has been a Director, of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof on the date of its grant.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Director Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be a Director of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), any Option held by that person may, subject to the provisions of the Director Stock Option Plan, be exercised (to the extent that he was entitled to exercise such Option at the termination of his service as a Director or member of an advisory committee to the Board of Directors, as the case may be, pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years after the date on which such Option was granted.
(b) Other than as provided in Paragraph 9(a), Options granted under the Director Stock Option Plan shall not be affected by any change of committee assignment of a Holder so long as the Holder remains a Director.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date of termination of service as a Director for purposes of the Director Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Director Stock Option Plan or in any Option granted pursuant to the Director Stock Option Plan shall confer upon any Director or other person any right to continue on the Board of Directors, or any committee thereof, of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, regarding the Director or committee member.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Director Stock Option Plan shall:
(a) die (i) while he is serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof; or
(b) while serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as from time to time amended or the comparable provision in any future tax statute (the "Code"), then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise to the extent provided in Paragraph 9 shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Director Stock Option Plan and to any Director or member of an advisory committee of the Board of Directors of the Corporation, shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent corporation, or a sale of all or substantially all of the assets or stock of the Corporation or its parent corporation, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary corporation, and the Holder is then a Director or a member of an advisory committee to the Board of Directors of such corporation, then, if the Committee shall so determine, each Option under the Director Stock Option Plan, if such event shall occur with respect to the Corporation or its parent corporation, or each Option granted to a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent or a subsidiary respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Director Stock Option Plan.
The Director Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and ratified in accordance with applicable law by a vote of not less than two-thirds of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Director Stock Option Plan by the Board of Directors and its ratification by the stockholders, the Committee may, in its discretion, grant Options under the Director Stock Option Plan, the exercise of which shall be expressly subject to the conditions that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that he or she will be acquiring such shares for his or her own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Director Stock Option Plan will not be sold except pursuant to an effective registration statement under the Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Director Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination of the Director Stock Option Plan, suspend, terminate, modify or amend the Director Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any person during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to eligibility for participation in the Director Stock Option Plan, shall be subject to the approval of stockholders in the manner provided in Paragraph 12, except that any such increase, reduction, or change that may result from adjustments authorized by Paragraph 11 or adjustments based on revisions to the Code (to the extent permitted by such authorities) shall not require such approval, and further, shall be subject to the limitations set forth in Paragraph 2. No suspension, termination, modification, or amendment of the Director Stock Option Plan may, without the express written consent of the Holder of an Option, adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks, which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any person who shall have served as a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent corporation of the Corporation or subsidiary corporation of the Corporation for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board of Directors may, in any specific case, authorize financing for any person who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by the person pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with its exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him or her. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or a parent or subsidiary corporation of the Corporation, and applicable laws.
If any such financing is authorized by the Board of Directors, it shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income and employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Director Stock Option Plan or any Agreement, or any action taken pursuant to the Director Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Director Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Director Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Director Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" means a member of the Board of Directors of the Corporation and/or a member of an advisory committee to the Board of Directors, as the case may be, of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Director Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
Exhibit 10.31
THE TOWN BANK
OF
WESTFIELD
2000 DIRECTOR STOCK OPTION PLAN
1. Purpose of the 2000 Director Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available persons to serve as Directors of the Corporation (the "Directors") and to encourage their regular attendance at Board and committee meetings and to obtain their highest level of performance. The 2000 Director Stock Option Plan (the "Director Stock Option Plan") is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Directors; and (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Directors with experience and ability.
The term "Directors" as used in this Director Stock Option Plan means the Directors and the members of any advisory committee to the Board of Directors of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Director Stock Option Plan.
Under the Director Stock Option Plan, options (singularly, an "Option", collectively, the "Options") to purchase voting common stock, $5.00 par value ("Common Stock") of the Corporation, may be granted. The aggregate number of shares of Common Stock reserved for grant from time to time under the Director Stock Option Plan is 31,169 shares of Common Stock, which shares may be authorized but unissued shares of Common Stock or shares of Common Stock which shall have been or which may be reacquired by the Corporation, as the Board of Directors of the Corporation shall from time to time determine. The aggregate number of shares of Common Stock reserved for grant under the Director Stock Option Plan shall be subject to adjustment as provided in Paragraph 11. In no event shall the number of shares reserved for grant under the Director Stock Option Plan exceed five percent of the issued and outstanding shares of capital stock of the Corporation. If an Option shall expire or terminate for any reason without having been exercised in full, the shares represented by the portion thereof not so exercised shall (unless the Director Stock Option Plan shall have been terminated) become available for other Options under the Director Stock Option Plan. The Director Stock Option Plan shall become effective upon approval by the Board of Directors and stockholders of the Corporation as provided in Paragraph 12. Subject to Paragraph 13, no Option shall be granted under the Director Stock Option Plan after the tenth (10th) anniversary of the approval of the Director Stock Option Plan by the stockholders of the Corporation, or December 31, 2010, whichever occurs first.
3. Administration of the Director Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Director Stock Option Plan. The Committee shall consist of either the entire Board of Directors or a Committee appointed by the Board of Directors consisting of one or more persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Director Stock Option Plan, to direct the grant of Options; to determine the purchase price of the Common Stock covered by each Option, the Directors to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to interpret the Director Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Director Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and
regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Directors as a prerequisite to, and in connection with, a grant of Options under the Director Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Director Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Director Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Director Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options.
An option may be granted only to a person who is a Director of, or, if the Board of Directors in its sole and absolute discretion shall elect, a member of an advisory committee to the Board of Directors of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the number of Board and Committee meetings the person attends, the performance of the Corporation and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, a person may receive Options on more than one occasion under the Director Stock Option Plan.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event shall it be less than the greater of the par value of the Common Stock or eighty-five percent of the fair market value of the Common Stock on the date the Option is issued. If, at the time an Option is granted the Common Stock is publicly traded, fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an Option is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10.
7. Exercise of Options.
(a) The vested portion of an Option granted as a Director's annual fee for service may be exercised, in whole or in part, through and until the termination of the Director Stock Option Plan. All Options issued for attendance at meetings shall be fully exercisable, in whole or in part, at any time through and until the termination of the Director Stock Option Plan. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise, or in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then a Director, or has been a Director, of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof on the date of its grant.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Director Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be a Director of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), any Option held by that person may, subject to the provisions of the Director Stock Option Plan, be exercised (to the extent that he was entitled to exercise such Option at the termination of his service as a Director or member of an advisory committee to the Board of Directors, as the case may be, pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years after the date on which such Option was granted.
(b) Other than as provided in Paragraph 9(a), Options granted under the Director Stock Option Plan shall not be affected by any change of committee assignment of a Holder so long as the Holder remains a Director.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date of termination of service as a Director for purposes of the Director Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Director Stock Option Plan or in any Option granted pursuant to the Director Stock Option Plan shall confer upon any Director or other person any right to continue on the Board of Directors, or any committee thereof, of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, regarding the Director or committee member.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Director Stock Option Plan shall:
(a) die (i) while he is serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof; or
(b) while serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as from time to time amended or the comparable provision in any future tax statute (the "Code"), then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise to the extent provided in Paragraph 9 shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Director Stock Option Plan and to any Director or member of an advisory committee of the Board of Directors of the Corporation, shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent corporation, or a sale of all or substantially all of the assets or stock of the Corporation or its parent corporation, or the disposition by the Corporation of substantially all of the assets or stock of a subsidiary corporation, and the Holder is then a Director or a member of an advisory committee to the Board of Directors of such corporation, then, if the Committee shall so determine, each Option under the Director Stock Option Plan, if such event shall occur with respect to the Corporation or its parent corporation, or each Option granted to a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent or a subsidiary respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Director Stock Option Plan.
The Director Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and ratified in accordance with applicable law by a vote of not less than two-thirds of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Director Stock Option Plan by the Board of Directors and its ratification by the stockholders, the Committee may, in its discretion, grant Options under the Director Stock Option Plan, the exercise of which shall be expressly subject to the conditions that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that he or she will be acquiring such shares for his or her own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Director Stock Option Plan will not be sold except pursuant to an effective registration statement under the Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Director Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination of the Director Stock Option Plan, suspend, terminate, modify or amend the Director Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any person during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to eligibility for participation in the Director Stock Option Plan, shall be subject to the approval of stockholders in the manner provided in Paragraph 12, except that any such increase, reduction, or change that may result from adjustments authorized by Paragraph 11 or adjustments based on revisions to the Code (to the extent permitted by such authorities) shall not require such approval, and further, shall be subject to the limitations set forth in Paragraph 2. No suspension, termination, modification, or amendment of the Director Stock Option Plan may, without the express written consent of the Holder of an Option, adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks, which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any person who shall have served as a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent corporation of the Corporation or subsidiary corporation of the Corporation for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board of Directors may, in any specific case, authorize financing for any person who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by the person pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with its exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him or her. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or a parent or subsidiary corporation of the Corporation, and applicable laws.
If any such financing is authorized by the Board of Directors, it shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the Holder's satisfaction of all applicable federal, state, and local income and employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Director Stock Option Plan or any Agreement, or any action taken pursuant to the Director Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Director Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Director Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Director Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" means a member of the Board of Directors of the Corporation and/or a member of an advisory committee to the Board of Directors, as the case may be, of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Director Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
Exhibit 10.32
THE TOWN BANK
OF
WESTFIELD
2001 DIRECTOR STOCK OPTION PLAN
1. Purpose of the 2001 Director Stock Option Plan.
The Town Bank of Westfield (the "Corporation") desires to attract and retain the best available persons to serve as Directors of the Corporation (the "Directors") and to encourage their regular attendance at Board and committee meetings and to obtain their highest level of performance. The 2001 Director Stock Option Plan (the "Director Stock Option Plan") is intended to contribute significantly to the attainment of these objectives by (i) providing long-term incentives and rewards to all Directors, and (ii) assisting the Corporation and any subsidiary of the Corporation in attracting and retaining Directors with experience and ability.
The term "Directors" as used in this Director Stock Option Plan means the Directors and the members of any advisory committee to the Board of Directors of (i) the Corporation, (ii) any parent of the Corporation, or (iii) any subsidiary of the Corporation.
2. Scope and Duration of the Director Stock Option Plan.
Under the Director Stock Option Plan, options (singularly, an
"Option", collectively, the "Options") to purchase voting common stock, $5.00
par value ("Common Stock") of the Corporation, may be granted. The aggregate
number of shares of Common Stock reserved for grant from time to time under the
Director Stock Option Plan shall be an amount equal to a maximum of five percent
(5%) of the then outstanding shares of Common Stock; provided, however, that the
number of shares issuable hereunder together with the number of shares issuable
under any other stock option plan maintained by the Bank, except such stock
option plan which qualifies as an incentive stock option plan pursuant to
Section 422 of the Internal Revenue Code of 1986, as from time to time amended
or the comparable provision in any future tax statute (the "Code"), does not
exceed ten percent (10%) of the then outstanding shares of Common Stock. Shares
of Common Stock underlying Options granted hereunder may be authorized but
unissued shares of Common Stock or shares of Common Stock which shall have been
or which may be reacquired by the Corporation, as the Board of Directors of the
Corporation shall from time to time determine. The aggregate number of shares of
Common Stock reserved for grant under the Director Stock Option Plan shall be
subject to adjustment as provided in Paragraph 11. In no event shall the number
of shares reserved for grant under the Director Stock Option Plan exceed five
percent of the issued and outstanding shares of capital stock of the
Corporation. If an Option shall expire or terminate for any reason without
having been exercised in full, the shares represented by the portion thereof not
so exercised shall (unless the Director Stock Option Plan shall have been
terminated) become available for other Options under the Director Stock Option
Plan. The Director Stock Option Plan shall become effective upon approval by the
Board of Directors and stockholders of the Corporation as provided in Paragraph
12. Subject to Paragraph 13, no Option shall be granted under the Director Stock
Option Plan after the tenth (10th) anniversary of the approval of the Director
Stock Option Plan by the stockholders of the Corporation, or December 31, 2011,
whichever occurs first.
3. Administration of the Director Stock Option Plan.
The Board of Directors of the Corporation shall appoint a committee (the "Committee") to administer the Director Stock Option Plan. The Committee shall consist of either the entire Board of Directors or a Committee appointed by the Board of Directors consisting of one or more persons, who are Directors of the Corporation, and who shall serve at the pleasure of the Board of Directors.
The Committee shall have authority in its discretion, subject to, and not inconsistent with, the express provisions of the Director Stock Option Plan, to direct the grant of Options; to determine the purchase price of the Common Stock covered by each Option, the Directors to whom, and the time or times at which, Options shall be granted and the number of shares to be covered by each Option; to interpret the Director Stock Option Plan; to determine the time or times at which Options may be exercised; to prescribe, amend and rescind rules and regulations relating to the Director Stock Option Plan, including, without limitation, such rules and regulations as it shall deem advisable to insure that transactions involving Options may qualify for exemption under such rules and regulations as the Securities and Exchange Commission may promulgate or propose from time to time exempting transactions from Section 16(b) of the Securities Exchange Act of 1934; to determine the terms and provisions of, and to cause the Corporation to enter into, agreements with Directors as a prerequisite to, and in connection with, a grant of Options under the Director Stock Option Plan (the "Agreements"), which Agreements may vary from one another as the Committee shall deem appropriate; and to make all other determinations it may deem necessary or advisable for the administration of the Director Stock Option Plan. The Committee may delegate to one or more of its members, or to one or more agents, those administrative duties as the Committee may deem advisable and may employ (or authorize any person to whom it has delegated duties, as aforesaid) to employ one or more persons to render advice with respect to any responsibility it (or that person) may have under the Director Stock Option Plan.
The Board of Directors of the Corporation may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall hold its meetings at such times and places as it shall deem advisable. Members may participate in meetings through conference telephone calls or similar arrangements. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem necessary or advisable. No member of the Committee shall be liable for any action or determination taken or made, or not taken or not made, in good faith with respect to the Director Stock Option Plan or any Option granted under it.
4. Eligibility: Factors to be Considered in Granting Options.
An option may be granted only to a person who is a Director of, or, if the Board of Directors in its sole and absolute discretion shall elect, a member of an advisory committee to the Board of Directors of the Corporation, or a parent corporation or a subsidiary corporation thereof on the date of grant. In determining the persons to whom Options shall be granted and the number of shares of Common Stock to be covered by each Option, the Committee shall take into account the number of Board and Committee meetings the person attends, the performance of the Corporation and such other factors as the Committee in its sole and absolute discretion shall deem relevant. Subject to the provisions of Paragraph 2, above, a person may receive Options on more than one occasion under the Director Stock Option Plan.
5. Option Price.
The purchase price per share of the Common Stock covered by each Option shall be established by the Committee, but in no event shall it be less than the greater of the par value of the Common Stock or one hundred percent (100%) of the fair market value of the Common Stock on the date the Option is granted. If, at the time an Option is granted the Common Stock is publicly traded, fair market value shall be the last reported sale price, regular way, on the last preceding trading day, or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices, regular, in either case on the principal national securities exchange, if any, on which the Common Stock is admitted to trading or listed, or if not so admitted to trading or listed on any national securities exchange, the average of the closing reported bid and asked prices on the last preceding trading day as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable system, or if not listed for quotation through NASDAQ or any comparable system, the average of the closing bid and asked prices on the last preceding trading day as recorded by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Committee for that purpose. If the Committee shall determine that no stock quotation is available or that the stock price quotation is not representative
of fair market value by reason of the lack of a significant number of recent transactions or otherwise, the Committee may determine fair market value in such a manner as it shall deem appropriate under the circumstances. If, at the time an Option is granted, the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine its fair market value. The determination of the fair market value of the Common Stock shall be made by the Committee without regard to any restrictions, other than a restriction which, by its terms, will never lapse. The date on which the Committee adopts a resolution expressly granting an Option shall be considered the date on which that Option is granted.
6. Term of Options.
The term of each option shall be fixed by the Committee, but in no event shall it be more than 10 years from the date of grant, subject to earlier termination as provided in Paragraphs 9 and 10.
7. Exercise of Options.
(a) The vested portion of an Option granted as a Director's annual fee for service may be exercised, in whole or in part, through and until the termination of the Director Stock Option Plan. All Options granted for attendance at meetings shall be fully exercisable, in whole or in part, at any time through and until the termination of the Director Stock Option Plan. Notwithstanding the foregoing, (i) the Committee may in its discretion issue Options from time to time which are immediately exercisable in full or which are exercisable at such other time or times as the Committee in its sole and absolute discretion determines, except that no Option shall be exercisable later than ten years after its date of grant.
(b) Options may be exercised in such manner and at such time or times as the Committee in its sole and absolute discretion shall determine, except that in no event shall any such Option be exercisable later than ten years after its date of grant.
(c) An Option may be exercised as to any or all, full or fractional shares of Common Stock as to which the Option is then exercisable.
(d) The purchase price of the shares of Common Stock as to which an Option is exercised shall be paid in full in cash at the time of exercise, or in installments. In addition, the Holder (as hereinafter defined) shall, upon notification of the amount due and prior to, or concurrently with, delivery to the Holder of a certificate representing such shares of Common Stock, pay promptly any amount necessary to satisfy applicable tax requirements (whether federal, state, local, or otherwise). If the purchase price is to be paid in installments, the Holder shall pay the down payment, if any, and the balance as the related Agreement or Committee may permit.
(e) Except as provided in Paragraphs 9 and 10, no Option may be exercised unless the Holder thereof is then a Director, or has been a Director, of the Corporation or any parent of the Corporation or any subsidiary of the Corporation or any combination thereof on the date of its grant.
(f) A Holder shall have the rights of a stockholder with respect to shares of Common Stock covered by an Option only upon becoming the Holder of record of such shares of Common Stock.
8. Nontransferability.
No Options granted under the Director Stock Option Plan shall be transferable other than by will or by the laws of descent and distribution of any state which has, or would have, jurisdiction of the estate of a deceased Option Holder. Options may be exercised during the lifetime of the Holder only by the Holder.
9. Termination of Relationship with the Corporation.
(a) If a Holder ceases to be a Director of the Corporation or any parent or subsidiary thereof (except as set forth in this Paragraph 9), any Option held by that person may, subject to the provisions of the
Director Stock Option Plan, be exercised (to the extent that he was entitled to exercise such Option at the termination of his service as a Director or member of an advisory committee to the Board of Directors, as the case may be, pursuant to any Agreement) at any time within 90 days after such termination, but not more than ten years after the date on which such Option was granted.
(b) Other than as provided in Paragraph 9(a), Options granted under the Director Stock Option Plan shall not be affected by any change of committee assignment of a Holder so long as the Holder remains a Director.
(c) Any Agreement may contain such provisions as the Committee shall approve with reference to the determination of the date of termination of service as a Director for purposes of the Director Stock Option Plan and the effect of leaves of absence, which provisions may vary from one Agreement to another.
(d) Nothing in the Director Stock Option Plan or in any Option granted pursuant to the Director Stock Option Plan shall confer upon any Director or other person any right to continue on the Board of Directors, or any committee thereof, of the Corporation or any parent corporation or any subsidiary corporation thereof, or affect the right of the Corporation or any such parent corporation or any such subsidiary corporation, as the case may be, regarding the Director or committee member.
10. Death or Disability of Holder.
If a person to whom an Option has been granted under the Director Stock Option Plan shall:
(a) die while he is serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or a subsidiary corporation thereof; or
(b) while serving as a Director or member of an advisory committee of the Board of Directors of the Corporation or a corporation which is a parent corporation or subsidiary corporation thereof, become permanently and totally disabled within the meaning of Section 22(e)(3) of the Code, then to the extent that the Option was exercisable immediately prior to the happening of such event, such Option may be exercised as set forth herein by the Holder or, in the event of death, by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or, if no such person has such right, by his executors or administrators, and the period for exercise to the extent provided in Paragraph 9 shall be extended to six months in the case of the permanent and total disability or in the case of the death of the Holder, but no more than ten years after the date such Option was granted, as shall be prescribed in the Holder's Agreement.
11. Adjustments upon Changes in Capitalization.
(a) Each Agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares of Common Stock covered by such Option, the Option prices, and the number of shares of Common Stock as to which Options shall be exercisable at any time, in the event of changes in the outstanding Common Stock of the Corporation or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, by reason of stock dividends, split-ups, split-downs, reverse splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, spin-offs, reorganizations, liquidations, and the like. In the event of any such change in the outstanding Common Stock of the Corporation, the aggregate number of shares of Common Stock or the number of shares of Common Stock to which any other class of stock of the Corporation may be converted, as to which Options may be granted under the Director Stock Option Plan and to any Director or member of an advisory committee of the Board of Directors of the Corporation, shall be appropriately adjusted by the Committee, whose determination shall be conclusive. No adjustment shall be made in any minimum number of shares of Common Stock which may be purchased at any time.
(b) In the event of the dissolution, liquidation, merger, reorganization, separation or consolidation of the Corporation or its parent corporation, or a sale of all or substantially all of the assets or stock of the Corporation or its parent corporation, or the disposition by the Corporation of substantially all of the assets or
stock of a subsidiary corporation, and the Holder is then a Director or a member of an advisory committee to the Board of Directors of such corporation, then, if the Committee shall so determine, each Option under the Director Stock Option Plan, if such event shall occur with respect to the Corporation or its parent corporation, or each Option granted to a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent or a subsidiary respecting which such event shall occur, shall terminate simultaneously with the happening of such event, and the Corporation shall pay the Holder in lieu thereof an amount equal to (i) the difference between the fair market value of one share of Common Stock on the date of such change, less the Option price per share of Common Stock, multiplied by (ii) the number of shares subject to the Option, without regard to whether the Option is then otherwise exercisable.
12. Effectiveness of the Director Stock Option Plan.
The Director Stock Option Plan shall become effective on the date that it is adopted by the Board of Directors and ratified in accordance with applicable law by a vote of not less than two-thirds of the stockholders entitled to vote thereon. At any time commencing on the date of the adoption of this Director Stock Option Plan by the Board of Directors and its ratification by the stockholders, the Committee may, in its discretion, grant Options under the Director Stock Option Plan, the exercise of which shall be expressly subject to the conditions that at the time of exercise a Registration Statement under the Securities Act of 1933 (the "Act") with respect to such shares shall be effective, or other provision satisfactory to the Committee shall have been made so that shares may be issued without violation of the Act or applicable state or foreign securities laws. If the shares of the Common Stock issuable upon exercise of an Option are not registered under the Act, and if the Committee shall deem it advisable, the Holder may be required to represent and agree in writing (i) that he or she will be acquiring such shares for his or her own account and not with a view to the distribution thereof, (ii) that any shares of Common Stock acquired pursuant to the Director Stock Option Plan will not be sold except pursuant to an effective registration statement under the Act or an exemption from the registration provisions of the Act and in accordance with applicable state or foreign securities laws, and (iii) that the Holder accepts such restrictions on transfer of such shares (including, without limitation, the affixing to any certificate representing such shares of an appropriate legend restricting transfer of such shares), as the Corporation may reasonably impose under the Act or applicable state or foreign securities laws.
13. Termination and Amendment of the Director Stock Option Plan.
The Board of Directors of the Corporation may, at any time prior to the termination of the Director Stock Option Plan, suspend, terminate, modify or amend the Director Stock Option Plan; provided that any increase in the aggregate number of shares of Common Stock reserved for issue upon the exercise of Options, any increase in the maximum number of shares for which Options may be granted to any person during any period, any reduction in the purchase price of the Common Stock covered by any Option, any extension of the period during which Options may be granted or exercised, any change in the formula for determining the amount payable upon exercise of the Option, or any material modification in the requirements as to eligibility for participation in the Director Stock Option Plan, shall be subject to the approval of stockholders in the manner provided in Paragraph 12, except that any such increase, reduction, or change that may result from adjustments authorized by Paragraph 11 or adjustments based on revisions to the Code (to the extent permitted by such authorities) shall not require such approval, and further, shall be subject to the limitations set forth in Paragraph 2. No suspension, termination, modification, or amendment of the Director Stock Option Plan may, without the express written consent of the Holder of an Option, adversely affect the rights of such Holder under such Option.
14. Financing for Investment in Stock of the Corporation.
Upon exercise by a Holder of an Option, the Board of Directors may cause the Corporation or any subsidiary to give or arrange for financing, including direct loans, secured or unsecured, or guaranties of loans by banks, which loans may be secured in whole or in part by assets of the Corporation or any subsidiary, to any person who shall have served as a Director or member of an advisory committee to the Board of Directors of the Corporation, a parent corporation of the Corporation or subsidiary corporation of the Corporation for a period of at least six months at the end of the fiscal year last ended immediately prior to arranging such financing; but the Board
of Directors may, in any specific case, authorize financing for any person who shall not have served for such a period. Such financing shall be for the purpose of providing funds for the purchase by the person pursuant to the exercise of an Option and/or for payment of taxes incurred in connection with its exercise, and/or for the purpose of otherwise purchasing or carrying a stock investment in the Corporation. The maximum amount of liability incurred by the Corporation and its subsidiaries in connection with all such financing outstanding shall be determined from time to time in the sole and absolute discretion of the Board of Directors. Each loan shall bear interest at a rate determined by the Committee provided that such rate of interest shall not be less than the lowest rate which avoids imputation of interest at a higher rate under the Code. Each recipient of such financing shall be personally liable for the full amount of all financing extended to him or her. Such financing shall be based upon the judgment of the Board of Directors that such financing may reasonably be expected to benefit the Corporation, and that such financing as may be granted shall be consistent with the Certificate of Incorporation and bylaws of the Corporation or a parent or subsidiary corporation of the Corporation, and applicable laws.
If any such financing is authorized by the Board of Directors, it shall be administered by the Committee.
15. Withholding.
In the discretion of the Committee, the Corporation's obligation to deliver the Common Stock upon the exercise of an Option shall be subject to the HoIder's satisfaction of all applicable federal, state, and local income and employment tax obligations.
16. Severability.
In the event that any one or more provisions of the Director Stock Option Plan or any Agreement, or any action taken pursuant to the Director Stock Option Plan or such Agreement, should, for any reason, be unenforceable or invalid in any respect under the laws of the United States, any state of the United States or any other government, such unenforceability or invalidity shall not affect any other provision of the Director Stock Option Plan or of any Agreement but in such particular jurisdiction and instance the Director Stock Option Plan and the affected Agreement shall be construed as if such unenforceable or invalid provision had not been contained therein or if the action in question had not been taken thereunder.
17. Applicable Law.
The Director Stock Option Plan shall be governed by, and interpreted, construed and applied in accordance with, the laws of the State of New Jersey.
18. Miscellaneous.
1. The terms "parent corporation" and "subsidiary corporation" shall have the meanings .set forth in Sections 425(e) and (f) of the Code, respectively.
2. The term "Holder" means a member of the Board of Directors of the Corporation and/or a member of an advisory committee to the Board of Directors, as the case may be, of the Corporation, a parent corporation, or a subsidiary corporation thereof who is granted an Option under the Director Stock Option Plan and any person who is entitled to exercise such Holder's Option pursuant to paragraphs 9 or 10.
Exhibit 10.33
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") made as of the 4th day of December, 2002 (the "Commencement Date") between THE TOWN BANK OF WESTFIELD, a New Jersey banking corporation, with offices at 520 South Avenue, Westfield, New Jersey 07090 ("TBW" or the "Company"), and EDWIN WOJTASZEK, residing at 65 Boehmhurst Avenue, Sayreville, New Jersey 08872 (the "Employee").
WHEREAS, the Employee has been a loyal and long-term employee of TBW for many years; and
WHEREAS, TBW wishes to provide the Employee with the comfort of knowing that if the Employee loses his or her position with TBW, or any related entities, as a result of any involuntary termination or upon a "change in control", the Employee will be entitled to receive a severance benefit;
NOW, THEREFORE, the parties agree, intending to be legally bound, as follows:
1. Definitions. For purposes of this Agreement, the following words and phrases shall be defined as follows:
a. "Base Compensation" shall mean the base salary which is payable on a regular basis to the Employee in effect immediately prior to a termination without "cause", in the case of a Basic Severance Benefit payable under Section 4(a) hereof, or immediately prior to a Change in Control in the case of a Change in Control Severance Benefit payable under Section 4(b) hereof, including the last full calendar year's bonus and fringe benefits.
b. "Cause" shall include, but not be limited to, any material false statement that was intentionally or negligently made, contained in any corporate records; the commission by the Employee of any crime or fraud against the Company or its property, or any crime involving moral turpitude or reasonably likely to bring discredit upon the Company; and any violation of the Company's operating policies.
c. "Change in Control" shall mean (i) the acquisition of ownership of stock of the Company, by any person (including, without limitation, a corporation, trust, partnership, joint venture, limited liability company (a "Person") or by any group of Persons), whether directly, indirectly, beneficially or of record, which acquisition, together with stock held by such person or group, represents more than 50% of the total voting power of all outstanding stock of the Company (provided that no Change in Control shall occur under this subparagraph (i) if the Person acquiring any additional stock already possessed more than 50% of the total fair market voting power of the stock of the Company); (ii) any merger or consolidation of the Company which the stockholders of the Company before such merger or consolidation do not, as a result of the merger or consolidation, own at least 50% of the merged or consolidated entity; or (iii) any nomination and election of 50% or more of all members of the Board of Directors of the Company that occurs at any three consecutive meetings of the shareholders, whose election is without the recommendation of the Board. "Change in Control" shall not include the acquisition of the Company's stock by any Company employee benefit plans.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
e. "Termination Date" shall mean the last day the Employee performs any services for TBW, or any related entity or successor entity, and is paid wages as an employee, exclusive of vacation and severance payments, and excluding any leave of absence periods.
2. Term. The term of the Agreement shall commence on the Commencement Date, and shall continue on an uninterrupted basis until and including December 4, 2004; or until terminated with the mutual consent of the Employee and TBW; or upon the voluntary termination of the Employee's employment with TBW or any successor entity. Upon the Employee's Termination Date, no additional services shall be required of the
Employee (unless provided otherwise under any consulting agreement), and any payments due for the performance of any services, and reimbursement for any expenses, shall be made within a period of 15 days from the Termination Date.
3. Condition for Severance Benefits. In order to be entitled to payment of any severance benefits, the Employee agrees to execute a General Release that shall fully release and forever discharge the company and any and all related companies, form all claims the Employee may have based on employment with the Company. These claims shall include, but are not limited to, claims arising under the Constitution of the United States, a release of any rights or claims the Employee may have under the Age Discrimination in Employment Act of 1967; Title VII of the Civil Right Act of 1964; the Civil Rights Act of 1966; the Equal Pay Act; or any other federal, state or local laws or regulations prohibiting employment discrimination; the Employee Retirement Income Security Act of 1974; Executive Orders 11246 and 11141; the Constitution of the State of New Jersey or any other states in which the Employee resides or works; any New Jersey or other state laws against discrimination; any claims of breach of public policy of the State of New Jersey or other state, negligence, breach of contract, wrongful discharge, constructive discharge, breach of an implied covenant of good faith and fair dealings; any express or implied contracts with the Company or any related companies; any federal or state common law and any federal, state or local statutes, ordinances and regulations.
The General Release shall be in a format prepared by the Company, which shall be consistent with the above provisions and shall comply with the Older Workers Benefit Protection Act of 1990 ("OWBPA"), including a 21-day period to review the General Release, and a 7-day revocation period (or any other periods required under any future laws). Any severance payments shall be the Employee's exclusive right and remedy against the Company.
4. Severance Benefits. The Employee's employment may be terminated by the Employee or by the Company or any related entity or successor entity "without "Cause", notice or liability at any time. Upon the occurrence of any termination of employment, the following severance benefits shall be provided, depending upon the specific circumstances of any termination:
a. Basic Severance Benefit. If the Company, or any related entity or successor entity terminates the Employee's employment with the Company for any reason, without "Cause", the Employee shall be entitled to a Basic Severance Benefit equal to payment of the Employee's Base Compensation for a period of six (6) months.
b. Change in Control Severance Benefit. If the Company, or any related entity or successor entity terminates the Employee's employment in anticipation of a reorganization or a "Change in Control", or if the Company, or any related entity or any successor entity terminates the Employee's employment following a Change in Control for any other reasons without "Cause", or if the Employee's employment is "constructively terminated" as defined in Section 8, the Employee shall receive a payment equal to the Employee's Base Compensation for a period of six (6) months.
Both the Basic Severance Benefit and a Change in Control Severance Benefit shall solely be paid to the Employee in a single lump sum payment. In either case, the applicable severance benefit shall not be paid until eight days after receipt of an executed copy of a General Release by the Company, as provided in Section 3. Severance benefit payments shall also be reduced to the extent of any advance payments, for any excess expense reimbursements, and for any amounts owed to the Company by the Employee (other than normal personal residence, home equity and similar loans).
In the event of the death of the Employee after the commencement of entitlement to any severance benefit payable under Section 4, all benefits shall be paid in a lump sum to the Employee's spouse, or if no spouse exists, to the Employee's estate.
Notwithstanding any interpretation to the contrary, in no event shall the Employee be entitled to both the Basic Severance Benefit and the Change in Control Severance Benefit.
5. Benefits. Upon the occurrence of any termination of employment by the
Company, or any related entity or successor entity without "Cause", or
upon the occurrence of a "constructive termination" in accordance with
Section 8, the Employee shall be entitled to the following general
benefits.
a. All Base Compensation through the Termination Date shall be paid in accordance with the Company's normal payroll procedures.
b. All accrued vacation pay shall be included in the Employee's final paycheck.
c. The Employee shall be entitled to elect to receive continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 and/or applicable New Jersey law ("COBRA") after his Termination Date, which is the date of the "qualifying event" under COBRA. The Company shall pay the full cost of any COBRA coverage elected by the Employee, or any member of the Employee's immediate family for a period of up to 12 months.
d. All medical, group-term life insurance, long-term disability, short-term disability, and other welfare benefits shall be terminated in accordance with the provisions of all plans. The Employee may be entitled to individual conversion privileges under the various policies. The Company shall provide such information to the Employee regarding all individual conversion rights.
e. The Employee shall be entitled to a distributions of all benefits
under the Company retirement programs, in accordance with the
provisions of all Plan documents. All severance benefits paid in the
Plan Year in which the Termination Date occurs (but not any
subsequent Plan Years) shall be treated as Compensation for purposes
of Employee Salary Reduction Contributions to the Section 401(k)
Plan, if permitted in accordance with the provision of the Section
401(k) Plan, unless the Employee directs otherwise. For purposes of
all other Company Contributions, all severance benefits shall be
considered as Compensation to the extent required under the Section
401(k) Plan.
f. The Employee shall be entitled to exercise any vested Stock Options, in accordance with the provisions of the relevant plan, and any individual Option Agreements.
g. Any executive benefits shall terminate on the Termination Date.
h. The Employee shall be entitled to state unemployment benefits, in accordance with the rules for the State of New Jersey.
Notwithstanding any provision to the contrary, except as provided in this Agreement, the payment of any severance benefits shall not be treated as extending any individual's employment for any employee benefit or employment purposes.
6. Voluntary Termination, Retirement, Death and Disability. The Employee shall not be entitled to any severance benefits in the event of any voluntary termination of employment either before, or after, any Change in Control or other corporate events, unless a "constructive termination" shall occur, as defined in Section 8. Furthermore, notwithstanding any provisions to the contrary, no severance benefits shall be payable in the event the Employee becomes disabled, dies or otherwise retires in accordance with the normal policies of the Company.
7. Discharge for Cause. The Company, or any related entity or successor entity may immediately terminate this Agreement and the Employee's employment at any time for "Cause". Upon termination of this Agreement for Cause, the Company shall have no further obligations to the Employee other than to pay for services performed and reimbursement for expenses payable as of the date of such termination, and to provide any benefits as legally required under Section 4. However, the Employee shall have no right to the payment of any Basic Severance or Change in Control Severance Benefits in the event of a termination for "Cause".
a. Upon the occurrence of a "Change in Control" of the Company, including any affiliated or subsidiary companies, followed by the involuntary termination of the Employee's employment within a period of one year after such Change in Control, other than for "Cause", retirement, death or disability, the Employee shall be entitled to receive all severance benefits identified in Sections 4(b) and 5 of the Agreement, and any other benefits to which the Employee is entitled under any other Company programs. Upon the occurrence of a Change in Control and a "Constructive Termination" of the Employee, the Employee shall also have the right to voluntarily terminate the Employee's employment at any time for a period of up to one year after such Change in Control, and to receive the severance benefits identified in Section 4(b) and 5. For purposes of this Agreement, a "Constructive Termination" shall mean (i) a resignation by the Employee due to any diminution or adverse change in the circumstances of his employment (as determined by him in good faith), including, without limitation, his reporting relationships, job description, duties, responsibilities, compensation, perquisites, office or location of employment, or (ii) a decision by the Employee not to accept an offer of employment with a successor to Employer. The specific arrangement referred to above are not intended to exclude the Employee's participation in any other benefits available to executive personnel of the Company or any related entity or successor entity. Upon the occurrence of any of these events, the Employee shall provide the Company with not less than fourteen days prior written notice of resignation given within a reasonable period of time not to exceed three months after the occurrence of the last event giving rise to said Constructive Termination. If the Company in good faith disputes that the Employee is entitled to terminate the Employee's employment due to a Constructive Termination, it shall so inform the Employee in writing within fourteen days of the written notice provided by the Employee. Pending resolution of the dispute, the Company shall continue to pay the Employee's Base Compensation and benefits. If it is ultimately determined that the Employee did not have grounds for voluntarily terminating the Employee's employment, the Employee shall return to the Company, without interest, all cash compensation received by the Employee subsequent to the day the Employee's employment was terminated.
b. If all or any portion of the amounts payable to the Employee under this Agreement, either alone or together with other payments which the Employee has the right to receive from the Company or any related entity or successor entity, constitute "excess parachute payments" within the meaning of Section 280G of the Code that are subject to the excise tax imposed by Section 4999 of the Code (or any successor sections), the Company or any related entity or successor entity shall increase the amounts payable hereunder to the extent necessary to place the Employee in the same after-tax position as he would have been and had no such excise tax been imposed on the payments hereunder. The determination of the amount of any such excise taxes shall initially be made by the independent accounting firm employed by the Company immediately prior to the Change in Control.
If at a later date it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, assessment by the Internal Revenue Service or otherwise) that the amount of excise taxes payable by the Employee is greater than the amount initially so determined, then the Company or any related entity or successor entity shall pay the Employee an amount equal to the sum of (A) such additional excise taxes, plus (B) any interest, fines and penalties with respect to such additional excise taxes, plus (C) the amount necessary to reimburse the Employee for any income, excise or other taxes payable by the Employee with respect to the amounts specified in (A) and (B) above and the reimbursement provided by this clause (C).
9. Waivers. A waiver by either party of any term or condition of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. All rights, remedies, undertakings or obligations contained in this Agreement shall be cumulative and none of them shall be in limitation of any other right, remedy, undertaking or obligations of either party.
10. Severability. If any one or more provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal and unenforceable provision had never been contained herein.
11. Liability Coverage. The Company, and any related entity or successor entities agrees to indemnify the Employee in accordance with the terms of TBW Bylaws. The Company also agrees to continue to provide any existing officers and directors insurance and/or liability policies covering the Employee through any Termination Date, and shall use its best efforts to continue to maintain the policies in effect at the time of termination or comparable policies covering the Employee for the Employee's period of employment with the Company, and for a period of six years after the date of any termination. In no event shall the Employee receive any lesser officers and directors protection, than is provided to the current active Board of Directors.
12. Execution of Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
13. Entire Agreement. This Agreement contains the entire agreement between the Employee and the Company with respect to the transactions contemplated herein and supersedes all previous written and oral agreements, negotiations, commitments, and understandings between the Company and the Employee with respect to the subject matter of this Agreement. Its terms shall not be altered or otherwise amended except pursuant to an instrument in writing signed by each of the parties hereto and making specific reference to this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Employee, his or her heirs, executors, administrators, and legal representations, and the Company, its successors and assigns.
15. Amendment. This Agreement may not be altered, changed, amended or terminated except by written agreement signed by the Employee and the Company.
16. Written Notices. Any notice, request or other document to be give hereunder by the Company to the Employee or by the Employee to the Company shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid and addressed as follows:
If to the Company:
The Town Bank of Westfield
520 South Avenue
Westfield, New Jersey 07090
Attn: Chairman of the Board
If to the Employee:
Edwin Wojtaszek
65 Boehmhurst Avenue
Sayreville, New Jersey 08872
17. New Jersey Law. The Employee and the Company agree that this Agreement and any interpretation thereof shall be governed by the laws of the State of New Jersey.
18. Headings. The headings contained in this Agreement are for reference only. In the event of a conflict between a heading and the context of any Section, the context of the Section shall control.
19. Successor Obligations. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Employee expressly to assume and agree to perform all obligations of this Agreement.
WITNESS:
/s/ Robert W. Dowens, Sr. /s/ Edwin Wojtaszek
------------------------- -------------------------------------------
Edwin Wojtaszek, Employee
WITNESS: THE TOWN BANK OF WESTFIELD
/s/ Robert W. Dowens, Sr. By: /s/ Ronald J. Frigerio
------------------------- ---------------------------------------
Ronald J. Frigerio
Chairman of the Board of Directors
|
FIRST AMENDMENT TO SEVERANCE AGREEMENT
MADE AS OF DECEMBER 4, 2002
Edwin Wojtaszek (the "Employee") and Town Bank, formerly known as The Town Bank of Westfield (the "Bank") have previously entered into a Severance Agreement made as of December 4, 2002 (the "Agreement"). The parties have agreed that the term of that Agreement should be extended and, accordingly, agree:
(1) The reference to December 4, 2004 in Paragraph 2 of the Agreement is hereby amended to read December 31, 2005.
(2) Except for that change, the Agreement shall remain in full force and effect and the parties hereby ratify and affirm all terms of the Agreement.
WITNESS:
/s/ Robert W. Dowens, Sr. /s/ Edwin Wojtaszek
------------------------- -------------------------------------------
Edwin Wojtaszek, Employee
ATTEST: TOWN BANK
/s/ Robert W. Dowens, Sr. By: /s/ Joseph F.X O'Sullivan
------------------------- ---------------------------------------
Joseph F.X. O'Sullivan, Chairman
of the Board of Directors
|
December 20, 2004
Exhibit 10.34
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") made as of the 4th day of December, 2002 (the "Commencement Date") between THE TOWN BANK OF WESTFIELD, a New Jersey banking corporation, with offices at 520 South Avenue, Westfield, New Jersey 07090 ("TBW" or the "Company"), and ROBERT W. DOWENS, SR., residing at 7 Apple Grove Drive, Holmdel, New Jersey 07733 (the "Employee").
WHEREAS, the Employee has been a loyal and long-term employee of TBW for many years; and
WHEREAS, TBW wishes to provide the Employee with the comfort of knowing that if the Employee loses his or her position with TBW, or any related entities, as a result of any involuntary termination or upon a "change in control", the Employee will be entitled to receive a severance benefit;
NOW, THEREFORE, the parties agree, intending to be legally bound, as follows:
1. Definitions. For purposes of this Agreement, the following words and phrases shall be defined as follows:
a. "Base Compensation" shall mean the base salary which is payable on a regular basis to the Employee in effect immediately prior to a termination without "cause", in the case of a Basic Severance Benefit payable under Section 4(a) hereof, or immediately prior to a Change in Control in the case of a Change in Control Severance Benefit payable under Section 4(b) hereof, including the last full calendar year's bonus and fringe benefits.
b. "Cause" shall include, but not be limited to, any material false statement that was intentionally or negligently made, contained in any corporate records; the commission by the Employee of any crime or fraud against the Company or its property, or any crime involving moral turpitude or reasonably likely to bring discredit upon the Company; and any violation of the Company's operating policies.
c. "Change in Control" shall mean (i) the acquisition of ownership of stock of the Company, by any person (including, without limitation, a corporation, trust, partnership, joint venture, limited liability company (a "Person") or by any group of Persons), whether directly, indirectly, beneficially or of record, which acquisition, together with stock held by such person or group, represents more than 50% of the total voting power of all outstanding stock of the Company (provided that no Change in Control shall occur under this subparagraph (i) if the Person acquiring any additional stock already possessed more than 50% of the total fair market voting power of the stock of the Company); (ii) any merger or consolidation of the Company which the stockholders of the Company before such merger or consolidation do not, as a result of the merger or consolidation, own at least 50% of the merged or consolidated entity; or (iii) any nomination and election of 50% or more of all members of the Board of Directors of the Company that occurs at any three consecutive meetings of the shareholders, whose election is without the recommendation of the Board. "Change in Control" shall not include the acquisition of the Company's stock by any Company employee benefit plans.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
e. "Termination Date" shall mean the last day the Employee performs any services for TBW, or any related entity or successor entity, and is paid wages as an employee, exclusive of vacation and severance payments, and excluding any leave of absence periods.
2. Term. The term of the Agreement shall commence on the Commencement Date, and shall continue on an uninterrupted basis until and including December 4, 2004; or until terminated with the mutual consent of the Employee and TBW; or upon the voluntary termination of the Employee's employment with TBW or any successor entity. Upon the Employee's Termination Date, no additional services shall be required of the
Employee (unless provided otherwise under any consulting agreement), and any payments due for the performance of any services, and reimbursement for any expenses, shall be made within a period of 15 days from the Termination Date.
3. Condition for Severance Benefits. In order to be entitled to payment of any severance benefits, the Employee agrees to execute a General Release that shall fully release and forever discharge the company and any and all related companies, form all claims the Employee may have based on employment with the Company. These claims shall include, but are not limited to, claims arising under the Constitution of the United States, a release of any rights or claims the Employee may have under the Age Discrimination in Employment Act of 1967; Title VII of the Civil Right Act of 1964; the Civil Rights Act of 1966; the Equal Pay Act; or any other federal, state or local laws or regulations prohibiting employment discrimination; the Employee Retirement Income Security Act of 1974; Executive Orders 11246 and 11141; the Constitution of the State of New Jersey or any other states in which the Employee resides or works; any New Jersey or other state laws against discrimination; any claims of breach of public policy of the State of New Jersey or other state, negligence, breach of contract, wrongful discharge, constructive discharge, breach of an implied covenant of good faith and fair dealings; any express or implied contracts with the Company or any related companies; any federal or state common law and any federal, state or local statutes, ordinances and regulations.
The General Release shall be in a format prepared by the Company, which shall be consistent with the above provisions and shall comply with the Older Workers Benefit Protection Act of 1990 ("OWBPA"), including a 21-day period to review the General Release, and a 7-day revocation period (or any other periods required under any future laws). Any severance payments shall be the Employee's exclusive right and remedy against the Company.
4. Severance Benefits. The Employee's employment may be terminated by the Employee or by the Company or any related entity or successor entity "without "Cause", notice or liability at any time. Upon the occurrence of any termination of employment, the following severance benefits shall be provided, depending upon the specific circumstances of any termination:
a. Basic Severance Benefit. If the Company, or any related entity or successor entity terminates the Employee's employment with the Company for any reason, without "Cause", the Employee shall be entitled to a Basic Severance Benefit equal to payment of the Employee's Base Compensation for a period of six (6) months.
b. Change in Control Severance Benefit. If the Company, or any related entity or successor entity terminates the Employee's employment in anticipation of a reorganization or a "Change in Control", or if the Company, or any related entity or any successor entity terminates the Employee's employment following a Change in Control for any other reasons without "Cause", or if the Employee's employment is "constructively terminated" as defined in Section 8, the Employee shall receive a payment equal to the Employee's Base Compensation for a period of six (6) months.
Both the Basic Severance Benefit and a Change in Control Severance Benefit shall solely be paid to the Employee in a single lump sum payment. In either case, the applicable severance benefit shall not be paid until eight days after receipt of an executed copy of a General Release by the Company, as provided in Section 3. Severance benefit payments shall also be reduced to the extent of any advance payments, for any excess expense reimbursements, and for any amounts owed to the Company by the Employee (other than normal personal residence, home equity and similar loans).
In the event of the death of the Employee after the commencement of entitlement to any severance benefit payable under Section 4, all benefits shall be paid in a lump sum to the Employee's spouse, or if no spouse exists, to the Employee's estate.
Notwithstanding any interpretation to the contrary, in no event shall the Employee be entitled to both the Basic Severance Benefit and the Change in Control Severance Benefit.
5. Benefits. Upon the occurrence of any termination of employment by the
Company, or any related entity or successor entity without "Cause", or
upon the occurrence of a "constructive termination" in accordance with
Section 8, the Employee shall be entitled to the following general
benefits.
a. All Base Compensation through the Termination Date shall be paid in accordance with the Company's normal payroll procedures.
b. All accrued vacation pay shall be included in the Employee's final paycheck.
c. The Employee shall be entitled to elect to receive continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 and/or applicable New Jersey law ("COBRA") after his Termination Date, which is the date of the "qualifying event" under COBRA. The Company shall pay the full cost of any COBRA coverage elected by the Employee, or any member of the Employee's immediate family for a period of up to 12 months.
d. All medical, group-term life insurance, long-term disability, short-term disability, and other welfare benefits shall be terminated in accordance with the provisions of all plans. The Employee may be entitled to individual conversion privileges under the various policies. The Company shall provide such information to the Employee regarding all individual conversion rights.
e. The Employee shall be entitled to a distributions of all benefits
under the Company retirement programs, in accordance with the
provisions of all Plan documents. All severance benefits paid in the
Plan Year in which the Termination Date occurs (but not any
subsequent Plan Years) shall be treated as Compensation for purposes
of Employee Salary Reduction Contributions to the Section 401(k)
Plan, if permitted in accordance with the provision of the Section
401(k) Plan, unless the Employee directs otherwise. For purposes of
all other Company Contributions, all severance benefits shall be
considered as Compensation to the extent required under the Section
401(k) Plan.
f. The Employee shall be entitled to exercise any vested Stock Options, in accordance with the provisions of the relevant plan, and any individual Option Agreements.
g. Any executive benefits shall terminate on the Termination Date.
h. The Employee shall be entitled to state unemployment benefits, in accordance with the rules for the State of New Jersey.
Notwithstanding any provision to the contrary, except as provided in this Agreement, the payment of any severance benefits shall not be treated as extending any individual's employment for any employee benefit or employment purposes.
6. Voluntary Termination, Retirement, Death and Disability. The Employee shall not be entitled to any severance benefits in the event of any voluntary termination of employment either before, or after, any Change in Control or other corporate events, unless a "constructive termination" shall occur, as defined in Section 8. Furthermore, notwithstanding any provisions to the contrary, no severance benefits shall be payable in the event the Employee becomes disabled, dies or otherwise retires in accordance with the normal policies of the Company.
7. Discharge for Cause. The Company, or any related entity or successor entity may immediately terminate this Agreement and the Employee's employment at any time for "Cause". Upon termination of this Agreement for Cause, the Company shall have no further obligations to the Employee other than to pay for services performed and reimbursement for expenses payable as of the date of such termination, and to provide any benefits as legally required under Section 4. However, the Employee shall have no right to the payment of any Basic Severance or Change in Control Severance Benefits in the event of a termination for "Cause".
8. Change in Control.
a. Upon the occurrence of a "Change in Control" of the Company, including any affiliated or subsidiary companies, followed by the involuntary termination of the Employee's employment within a period of one year after such Change in Control, other than for "Cause", retirement, death or disability, the Employee shall be entitled to receive all severance benefits identified in Sections 4(b) and 5 of the Agreement, and any other benefits to which the Employee is entitled under any other Company programs. Upon the occurrence of a Change in Control and a "Constructive Termination" of the Employee, the Employee shall also have the right to voluntarily terminate the Employee's employment at any time for a period of up to one year after such Change in Control, and to receive the severance benefits identified in Section 4(b) and 5. For purposes of this Agreement, a "Constructive Termination" shall mean (i) a resignation by the Employee due to any diminution or adverse change in the circumstances of his employment (as determined by him in good faith), including, without limitation, his reporting relationships, job description, duties, responsibilities, compensation, perquisites, office or location of employment, or (ii) a decision by the Employee not to accept an offer of employment with a successor to Employer. The specific arrangement referred to above are not intended to exclude the Employee's participation in any other benefits available to executive personnel of the Company or any related entity or successor entity. Upon the occurrence of any of these events, the Employee shall provide the Company with not less than fourteen days prior written notice of resignation given within a reasonable period of time not to exceed three months after the occurrence of the last event giving rise to said Constructive Termination. If the Company in good faith disputes that the Employee is entitled to terminate the Employee's employment due to a Constructive Termination, it shall so inform the Employee in writing within fourteen days of the written notice provided by the Employee. Pending resolution of the dispute, the Company shall continue to pay the Employee's Base Compensation and benefits. If it is ultimately determined that the Employee did not have grounds for voluntarily terminating the Employee's employment, the Employee shall return to the Company, without interest, all cash compensation received by the Employee subsequent to the day the Employee's employment was terminated.
b. If all or any portion of the amounts payable to the Employee under this Agreement, either alone or together with other payments which the Employee has the right to receive from the Company or any related entity or successor entity, constitute "excess parachute payments" within the meaning of Section 280G of the Code that are subject to the excise tax imposed by Section 4999 of the Code (or any successor sections), the Company or any related entity or successor entity shall increase the amounts payable hereunder to the extent necessary to place the Employee in the same after-tax position as he would have been and had no such excise tax been imposed on the payments hereunder. The determination of the amount of any such excise taxes shall initially be made by the independent accounting firm employed by the Company immediately prior to the Change in Control.
If at a later date it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, assessment by the Internal Revenue Service or otherwise) that the amount of excise taxes payable by the Employee is greater than the amount initially so determined, then the Company or any related entity or successor entity shall pay the Employee an amount equal to the sum of (A) such additional excise taxes, plus (B) any interest, fines and penalties with respect to such additional excise taxes, plus (C) the amount necessary to reimburse the Employee for any income, excise or other taxes payable by the Employee with respect to the amounts specified in (A) and (B) above and the reimbursement provided by this clause (C).
9. Waivers. A waiver by either party of any term or condition of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. All rights, remedies, undertakings or obligations contained in this Agreement shall be cumulative and none of them shall be in limitation of any other right, remedy, undertaking or obligations of either party.
10. Severability. If any one or more provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal and unenforceable provision had never been contained herein.
11. Liability Coverage. The Company, and any related entity or successor entities agrees to indemnify the Employee in accordance with the terms of TBW Bylaws. The Company also agrees to continue to provide any existing officers and directors insurance and/or liability policies covering the Employee through any Termination Date, and shall use its best efforts to continue to maintain the policies in effect at the time of termination or comparable policies covering the Employee for the Employee's period of employment with the Company, and for a period of six years after the date of any termination. In no event shall the Employee receive any lesser officers and directors protection, than is provided to the current active Board of Directors.
12. Execution of Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
13. Entire Agreement. This Agreement contains the entire agreement between the Employee and the Company with respect to the transactions contemplated herein and supersedes all previous written and oral agreements, negotiations, commitments, and understandings between the Company and the Employee with respect to the subject matter of this Agreement. Its terms shall not be altered or otherwise amended except pursuant to an instrument in writing signed by each of the parties hereto and making specific reference to this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Employee, his or her heirs, executors, administrators, and legal representations, and the Company, its successors and assigns.
15. Amendment. This Agreement may not be altered, changed, amended or terminated except by written agreement signed by the Employee and the Company.
16. Written Notices. Any notice, request or other document to be give hereunder by the Company to the Employee or by the Employee to the Company shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid and addressed as follows:
If to the Company:
The Town Bank of Westfield
520 South Avenue
Westfield, New Jersey 07090
Attn: Chairman of the Board
If to the Employee:
Robert W. Dowens, Sr.
7 Apple Grove Drive
Holmdel, New Jersey 07733
17. New Jersey Law. The Employee and the Company agree that this Agreement and any interpretation thereof shall be governed by the laws of the State of New Jersey.
18. Headings. The headings contained in this Agreement are for reference only. In the event of a conflict between a heading and the context of any Section, the context of the Section shall control.
19. Successor Obligations. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Employee expressly to assume and agree to perform all obligations of this Agreement.
WITNESS:
/s/ Nicholas A. Frungillo, Jr. /s/ Robert W. Dowens, Sr.
------------------------------ -------------------------------------------
Robert W. Dowens, Sr., Employee
WITNESS: THE TOWN BANK OF WESTFIELD
/s/ Nicholas A. Frungillo, Jr. By: /s/ Ronald J. Frigerio
------------------------------ ----------------------------------------
Ronald J. Frigerio
Chairman of the Board of Directors
|
FIRST AMENDMENT TO SEVERANCE AGREEMENT
MADE AS OF DECEMBER 4, 2002
Robert W. Dowens, Sr. (the "Employee") and Town Bank, formerly known as The Town Bank of Westfield (the "Bank") have previously entered into a Severance Agreement made as of December 4, 2002 (the "Agreement"). The parties have agreed that the term of that Agreement should be extended and, accordingly, agree:
(1) The reference to December 4, 2004 in Paragraph 2 of the Agreement is hereby amended to read December 31, 2005.
(2) Except for that change, the Agreement shall remain in full force and effect and the parties hereby ratify and affirm all terms of the Agreement.
WITNESS:
/s/ Nicholas A. Frungillo, Jr. /s/ Robert W. Dowens, Sr.
------------------------------- -----------------------------------------
ROBERT W. DOWENS, SR., Employee
ATTEST: TOWN BANK
/s/ Nicholas A. Frungillo, Jr. By: /s/ Joseph F. X. O'Sullivan
------------------------------- -------------------------------------
Joseph F.X. O'Sullivan, Chairman
of the Board of Directors
|
December 20, 2004
Exhibit 10.35
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") made as of the 4th day of December, 2002 (the "Commencement Date") between THE TOWN BANK OF WESTFIELD, a New Jersey banking corporation, with offices at 520 South Avenue, Westfield, New Jersey 07090 ("TBW" or the "Company"), and NICHOLAS A. FRUNGILLO, JR., residing at 1571 Rising Way, Mountainside, New Jersey 07092 (the "Employee").
WHEREAS, the Employee has been a loyal and long-term employee of TBW for many years; and
WHEREAS, TBW wishes to provide the Employee with the comfort of knowing that if the Employee loses his or her position with TBW, or any related entities, as a result of any involuntary termination or upon a "change in control", the Employee will be entitled to receive a severance benefit;
NOW, THEREFORE, the parties agree, intending to be legally bound, as follows:
1. Definitions. For purposes of this Agreement, the following words and phrases shall be defined as follows:
a. "Base Compensation" shall mean the base salary which is payable on a regular basis to the Employee in effect immediately prior to a termination without "cause", in the case of a Basic Severance Benefit payable under Section 4(a) hereof, or immediately prior to a Change in Control in the case of a Change in Control Severance Benefit payable under Section 4(b) hereof, including the last full calendar year's bonus and fringe benefits.
b. "Cause" shall include, but not be limited to, any material false statement that was intentionally or negligently made, contained in any corporate records; the commission by the Employee of any crime or fraud against the Company or its property, or any crime involving moral turpitude or reasonably likely to bring discredit upon the Company; and any violation of the Company's operating policies.
c. "Change in Control" shall mean (i) the acquisition of ownership of stock of the Company, by any person (including, without limitation, a corporation, trust, partnership, joint venture, limited liability company (a "Person") or by any group of Persons), whether directly, indirectly, beneficially or of record, which acquisition, together with stock held by such person or group, represents more than 50% of the total voting power of all outstanding stock of the Company (provided that no Change in Control shall occur under this subparagraph (i) if the Person acquiring any additional stock already possessed more than 50% of the total fair market voting power of the stock of the Company); (ii) any merger or consolidation of the Company which the stockholders of the Company before such merger or consolidation do not, as a result of the merger or consolidation, own at least 50% of the merged or consolidated entity; or (iii) any nomination and election of 50% or more of all members of the Board of Directors of the Company that occurs at any three consecutive meetings of the shareholders, whose election is without the recommendation of the Board. "Change in Control" shall not include the acquisition of the Company's stock by any Company employee benefit plans.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
e. "Termination Date" shall mean the last day the Employee performs any services for TBW, or any related entity or successor entity, and is paid wages as an employee, exclusive of vacation and severance payments, and excluding any leave of absence periods.
2. Term. The term of the Agreement shall commence on the Commencement Date, and shall continue on an uninterrupted basis until and including December 4, 2004; or until terminated with the mutual consent of the Employee and TBW; or upon the voluntary termination of the Employee's employment with TBW or any successor entity. Upon the Employee's Termination Date, no additional services shall be required of the Employee (unless provided otherwise under any consulting agreement), and any payments due for the
performance of any services, and reimbursement for any expenses, shall be made within a period of 15 days from the Termination Date.
3. Condition for Severance Benefits. In order to be entitled to payment of any severance benefits, the Employee agrees to execute a General Release that shall fully release and forever discharge the company and any and all related companies, form all claims the Employee may have based on employment with the Company. These claims shall include, but are not limited to, claims arising under the Constitution of the United States, a release of any rights or claims the Employee may have under the Age Discrimination in Employment Act of 1967; Title VII of the Civil Right Act of 1964; the Civil Rights Act of 1966; the Equal Pay Act; or any other federal, state or local laws or regulations prohibiting employment discrimination; the Employee Retirement Income Security Act of 1974; Executive Orders 11246 and 11141; the Constitution of the State of New Jersey or any other states in which the Employee resides or works; any New Jersey or other state laws against discrimination; any claims of breach of public policy of the State of New Jersey or other state, negligence, breach of contract, wrongful discharge, constructive discharge, breach of an implied covenant of good faith and fair dealings; any express or implied contracts with the Company or any related companies; any federal or state common law and any federal, state or local statutes, ordinances and regulations.
The General Release shall be in a format prepared by the Company, which shall be consistent with the above provisions and shall comply with the Older Workers Benefit Protection Act of 1990 ("OWBPA"), including a 21-day period to review the General Release, and a 7-day revocation period (or any other periods required under any future laws). Any severance payments shall be the Employee's exclusive right and remedy against the Company.
4. Severance Benefits. The Employee's employment may be terminated by the Employee or by the Company or any related entity or successor entity "without "Cause", notice or liability at any time. Upon the occurrence of any termination of employment, the following severance benefits shall be provided, depending upon the specific circumstances of any termination:
a. Basic Severance Benefit. If the Company, or any related entity or successor entity terminates the EmpIoyee's employment with the Company for any reason, without "Cause", the Employee shall be entitled to a Basic Severance Benefit equal to payment of the Employee's Base Compensation for a period of six (6) months.
b. Change in Control Severance Benefit. If the Company, or any related entity or successor entity terminates the Employee's employment in anticipation of a reorganization or a "Change in Control", or if the Company, or any related entity or any successor entity terminates the Employee's employment following a Change in Control for any other reasons without "Cause", or if the Employee's employment is "constructively terminated" as defined in Section 8, the Employee shall receive a payment equal to the Employee's Base Compensation for a period of six (6) months.
Both the Basic Severance Benefit and a Change in Control Severance Benefit shall solely be paid to the Employee in a single lump sum payment. In either case, the applicable severance benefit shall not be paid until eight days after receipt of an executed copy of a General Release by the Company, as provided in Section 3. Severance benefit payments shall also be reduced to the extent of any advance payments, for any excess expense reimbursements, and for any amounts owed to the Company by the Employee (other than normal personal residence, home equity and similar loans).
In the event of the death of the Employee after the commencement of entitlement to any severance benefit payable under Section 4, all benefits shall be paid in a lump sum to the Employee's spouse, or if no spouse exists, to the Employee's estate.
Notwithstanding any interpretation to the contrary, in no event shall the Employee be entitled to both the Basic Severance Benefit and the Change in Control Severance Benefit.
5. Benefits. Upon the occurrence of any termination of employment by the
Company, or any related entity or successor entity without "Cause", or
upon the occurrence of a "constructive termination" in accordance with
Section 8, the Employee shall be entitled to the following general
benefits.
a. All Base Compensation through the Termination Date shall be paid in accordance with the Company's normal payroll procedures.
b. All accrued vacation pay shall be included in the Employee's final paycheck.
c. The Employee shall be entitled to elect to receive continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 and/or applicable New Jersey law ("COBRA") after his Termination Date, which is the date of the "qualifying event" under COBRA. The Company shall pay the full cost of any COBRA coverage elected by the Employee, or any member of the Employee's immediate family for a period of up to 12 months.
d. All medical, group-term life insurance, long-term disability, short-term disability, and other welfare benefits shall be terminated in accordance with the provisions of all plans. The Employee may be entitled to individual conversion privileges under the various policies. The Company shall provide such information to the Employee regarding all individual conversion rights.
e. The Employee shall be entitled to a distributions of all benefits
under the Company retirement programs, in accordance with the
provisions of all Plan documents. All severance benefits paid in the
Plan Year in which the Termination Date occurs (but not any
subsequent Plan Years) shall be treated as Compensation for purposes
of Employee Salary Reduction Contributions to the Section 401(k)
Plan, if permitted in accordance with the provision of the Section
401(k) Plan, unless the Employee directs otherwise. For purposes of
all other Company Contributions, all severance benefits shall be
considered as Compensation to the extent required under the Section
401(k) Plan.
f. The Employee shall be entitled to exercise any vested Stock Options, in accordance with the provisions of the relevant plan, and any individual Option Agreements.
g. Any executive benefits shall terminate on the Termination Date.
h. The Employee shall be entitled to state unemployment benefits, in accordance with the rules for the State of New Jersey.
Notwithstanding any provision to the contrary, except as provided in this Agreement, the payment of any severance benefits shall not be treated as extending any individual's employment for any employee benefit or employment purposes.
6. Voluntary Termination, Retirement, Death and Disability. The Employee shall not be entitled to any severance benefits in the event of any voluntary termination of employment either before, or after, any Change in Control or other corporate events, unless a "constructive termination" shall occur, as defined in Section 8. Furthermore, notwithstanding any provisions to the contrary, no severance benefits shall be payable in the event the Employee becomes disabled, dies or otherwise retires in accordance with the normal policies of the Company.
7. Discharge for Cause. The Company, or any related entity or successor entity may immediately terminate this Agreement and the Employee's employment at any time for "Cause". Upon termination of this Agreement for Cause, the Company shall have no further obligations to the Employee other than to pay for services performed and reimbursement for expenses payable as of the date of such termination, and to provide any benefits as legally required under Section 4. However, the Employee shall have no right to the payment of any Basic Severance or Change in Control Severance Benefits in the event of a termination for "Cause".
8. Change in Control.
a. Upon the occurrence of a "Change in Control" of the Company, including any affiliated or subsidiary companies, followed by the involuntary termination of the Employee's employment within a period of one year after such Change in Control, other than for "Cause", retirement, death or disability, the Employee shall be entitled to receive all severance benefits identified in Sections 4(b) and 5 of the Agreement, and any other benefits to which the Employee is entitled under any other Company programs. Upon the occurrence of a Change in Control and a "Constructive Termination" of the Employee, the Employee shall also have the right to voluntarily terminate the Employee's employment at any time for a period of up to one year after such Change in Control, and to receive the severance benefits identified in Section 4(b) and 5. For purposes of this Agreement, a "Constructive Termination" shall mean (i) a resignation by the Employee due to any diminution or adverse change in the circumstances of his employment (as determined by him in good faith), including, without limitation, his reporting relationships, job description, duties, responsibilities, compensation, perquisites, office or location of employment, or (ii) a decision by the Employee not to accept an offer of employment with a successor to Employer. The specific arrangement referred to above are not intended to exclude the Employee's participation in any other benefits available to executive personnel of the Company or any related entity or successor entity. Upon the occurrence of any of these events, the Employee shall provide the Company with not less than fourteen days prior written notice of resignation given within a reasonable period of time not to exceed three months after the occurrence of the last event giving rise to said Constructive Termination. If the Company in good faith disputes that the Employee is entitled to terminate the Employee's employment due to a Constructive Termination, it shall so inform the Employee in writing within fourteen days of the written notice provided by the Employee. Pending resolution of the dispute, the Company shall continue to pay the Employee's Base Compensation and benefits. If it is ultimately determined that the Employee did not have grounds for voluntarily terminating the Employee's employment, the Employee shall return to the Company, without interest, all cash compensation received by the Employee subsequent to the day the Employee's employment was terminated.
b. If all or any portion of the amounts payable to the Employee under this Agreement, either alone or together with other payments which the Employee has the right to receive from the Company or any related entity or successor entity, constitute "excess parachute payments" within the meaning of Section 280G of the Code that are subject to the excise tax imposed by Section 4999 of the Code (or any successor sections), the Company or any related entity or successor entity shall increase the amounts payable hereunder to the extent necessary to place the Employee in the same after-tax position as he would have been and had no such excise tax been imposed on the payments hereunder. The determination of the amount of any such excise taxes shall initially be made by the independent accounting firm employed by the Company immediately prior to the Change in Control.
If at a later date it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, assessment by the Internal Revenue Service or otherwise) that the amount of excise taxes payable by the Employee is greater than the amount initially so determined, then the Company or any related entity or successor entity shall pay the Employee an amount equal to the sum of (A) such additional excise taxes, plus (B) any interest, fines and penalties with respect to such additional excise taxes, plus (C) the amount necessary to reimburse the Employee for any income, excise or other taxes payable by the Employee with respect to the amounts specified in (A) and (B) above and the reimbursement provided by this clause (C).
9. Waivers. A waiver by either party of any term or condition of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. All rights, remedies, undertakings or obligations contained in this Agreement shall be cumulative and none of them shall be in limitation of any other right, remedy, undertaking or obligations of either party.
10. Severability. If any one or more provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal and unenforceable provision had never been contained herein.
11. Liability Coverage. The Company, and any related entity or successor entities agrees to indemnify the Employee in accordance with the terms of TBW Bylaws. The Company also agrees to continue to provide any existing officers and directors insurance and/or liability policies covering the Employee through any Termination Date, and shall use its best efforts to continue to maintain the policies in effect at the time of termination or comparable policies covering the Employee for the Employee's period of employment with the Company, and for a period of six years after the date of any termination. In no event shall the Employee receive any lesser officers and directors protection, than is provided to the current active Board of Directors.
12. Execution of Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
13. Entire Agreement. This Agreement contains the entire agreement between the Employee and the Company with respect to the transactions contemplated herein and supersedes all previous written and oral agreements, negotiations, commitments, and understandings between the Company and the Employee with respect to the subject matter of this Agreement. Its terms shall not be altered or otherwise amended except pursuant to an instrument in writing signed by each of the parties hereto and making specific reference to this Agreement.
14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Employee, his or her heirs, executors, administrators, and legal representations, and the Company, its successors and assigns.
15. Amendment. This Agreement may not be altered, changed, amended or terminated except by written agreement signed by the Employee and the Company.
16. Written Notices. Any notice, request or other document to be give hereunder by the Company to the Employee or by the Employee to the Company shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid and addressed as follows:
If to the Company:
The Town Bank of Westfield
520 South Avenue
Westfield, New Jersey 07090
Attn: Chairman of the Board
If to the Employee:
Nicholas A. Frungillo, Jr.
1571 Rising Way
Mountainside, New Jersey 07092
17. New Jersey Law. The Employee and the Company agree that this Agreement and any interpretation thereof shall be governed by the laws of the State of New Jersey.
18. Headings. The headings contained in this Agreement are for reference only. In the event of a conflict between a heading and the context of any Section, the context of the Section shall control.
19. Successor Obligations. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by
agreement in form and substance satisfactory to the Employee expressly to assume and agree to perform all obligations of this Agreement.
WITNESS:
/s/ Robert W. Downes, Sr. /s/ Nicholas A. Frungillo, Jr.
--------------------------- ----------------------------------------
Nicholas A. Frungillo, Jr., Employee
WITNESS: THE TOWN BANK OF WESTFIELD
/s/ Robert W. Downes, Sr. By: /s/ Ronald J. Frigerio
--------------------------- ------------------------------------
Ronald J. Frigerio
Chairman of the Board of Directors
|
FIRST AMENDMENT TO SEVERANCE AGREEMENT
MADE AS OF DECEMBER 4, 2002
Nicholas A. Frungillo, Jr. (the "Employee") and Town Bank, formerly known as The Town Bank of Westfield (the "Bank") have previously entered into a Severance Agreement made as of December 4, 2002 (the "Agreement"). The parties have agreed that the term of that Agreement should be extended and, accordingly, agree:
(1) The reference to December 4, 2004 in Paragraph 2 of the Agreement is hereby amended to read December 31, 2005.
(2) Except for that change, the Agreement shall remain in full force and effect and the parties hereby ratify and affirm all terms of the Agreement.
WITNESS:
/s/ Robert W. Dowens, Sr. /s/ Nicholas A. Frungillo, Jr.
---------------------------- ----------------------------------------
NICHOLAS A. FRUNGILLO, JR., Employee
ATTEST: TOWN BANK
/s/ Robert W. Dowens, Sr. By: /s/ Joseph F.X. O'Sullivan
---------------------------- ------------------------------------
Joseph F.X. O'Sullivan, Chairman
of the Board of Directors
|
December 20, 2004
Exhibit 10.36
AURUM TECHNOLOGY INC.
INTERNET MASTER SERVICES AGREEMENT
As of the date set forth below (the "Effective Date"), Aurum Technology Inc., a Delaware corporation ("Aurum"), and the customer whose name appears below ("Customer") hereby enter into this Internet Master Services Agreement consisting of the Standard Terms and Conditions and the Schedules marked and initialed below, which are attached hereto and incorporated herein for all purposes.
Unless otherwise specifically provided otherwise in this Agreement or a Schedule, AURUM or its subcontractors will be the exclusive provider to Customer, and Customer agrees to exclusively obtain from AURUM, the Authorized Services described in the Schedules marked below, which Schedules are attached hereto and incorporated herein by reference. The Schedules marked below set forth the specific terms and conditions applicable to the Authorized Services.
Place an "X" in the
appropriate box(es) below
-------------------------
Schedule A - Aurum Personal eBanking Services |X|
Schedule B - Aurum Business eBanking Services |X|
Schedule C - Bill Payment Services |X|
|_| Schedule D - Internet Services: Select Package
|X| Standard (25 Pages)
|_| Premium (50 Pages)
|_| Custom
|_| Migrate Existing Web Site to Aurum
Optional (Choose one)
---------------------
SSL Encryption Certificate (1st Year)
|
GEO Trust |_| VeriSign |_|
IN WITNESS WHEREOF, the parties have duly executed this Agreement by the duly authorized signatures below as of June 11, 2003 (the "Effective Date").
CUSTOMER: AURUM:
The Town Bank of Westfield Aurum Technology, Inc.
/s/ Robert W. Dowens, Sr. /s/ Anthony Ficarra
---------------------------- ----------------------------
[Authorized Signature] [Authorized Signature]
Name: Robert W. Dowens, Sr. Name: Anthony Ficarra
------------------------------
Title: President & CEO Title: Senior Vice President Electronic
------------------------------ Business
Date: June 11, 2003 Date: 7/22/03
------------------------------ ------------------------------
ADDRESS: ADDRESS:
520 South Avenue 2701 W. Plano Parkway
------------------------------ Suite 600
Westfield, New Jersey Plano, Texas 75075-8206
------------------------------ Attn: Vice President of eBusiness
07090
------------------------------
|
CONTACT INFORMATION: CONTACT INFORMATION: Telephone: 908-301-0800 Telephone: (972) 943-2600 Facsimile: 908-301-0894 Facsimile: (972) 943-2802 Town Bank of Westfield Confidential & Proprietary Signature Page (v.2003) |
AURUM INTERNET MASTER SERVICES AGREEMENT
STANDARD TERMS AND CONDITIONS
As of the Effective Date, Aurum and Customer hereby enter into this Internet Master Services Agreement consisting of these Standard Terms and Conditions and the Schedules marked and initialed on the signature page of this Agreement, which are attached hereto and incorporated herein for all purposes.
WHEREAS, Aurum provides Internet Services to financial institutions; and
WHEREAS, Customer desires to purchase certain Internet Services from Aurum.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Aurum and Customer agree as follows:
ARTICLE I - SERVICES
1.1 Authorized Services. During the Term, Aurum agrees to provide to Customer, and Customer agrees to accept from Aurum, the Authorized Services, subject to the terms and conditions set forth herein. Customer agrees that Aurum shall be the sole and exclusive provider of the services that are the subject matter of this Agreement for the Customer. For purposes of the foregoing, the term "Customer" shall include Customer's affiliates.
1.2 Additional Services. If Customer requests Aurum to perform any service that is not an Authorized Service, then Aurum may provide such service as an "Additional Service".
1.3 Software Access License. During the Term and subject to the limitations set forth herein, Aurum grants to Customer a limited, non-exclusive, and non-assignable license to access the Software located on Aurum's Server for the purpose of receiving the Authorized Services and using the "Aurum System" to provide banking functionality and other related services to the End User Customers. Aurum reserves all rights not expressly granted herein. Without limiting the foregoing, Customer has no right to possess the Software or any copies thereof in any form.
1.4 Aurum Mark License. During the Term and subject to the limitations set forth herein, Aurum grants to Customer a limited, non-exclusive, and non-assignable license to use Aurum's service mark and trademark solely for the purpose of describing the Authorized Services and the Aurum System to the actual and potential End User Customers and for no other purpose. Aurum reserves all rights not expressly granted herein.
1.5 Customer Mark License. During the Term and subject to the limitations set forth herein, Customer grants to Aurum a limited, non-exclusive, and non-assignable license to use Customer's service marks and trademarks solely for the purpose of performing the Authorized Services and for no other purpose. Customer reserves all rights not expressly granted herein.
1.6 Regulatory Compliance. Customer shall be responsible for (i) compliance
with all state and federal laws and regulations governing banks and other
financial institutions; (ii) any disclosure to its End User Customers with
respect to the Authorized Services and each Customer product or service
made available through the Aurum System ("Customer Product/Service");
(iii) the terms and conditions of any Customer Product/Service; (iv) the
terms, conditions, and any limitations on which any Customer
Product/Service may be accessed, utilized or transactions originated by
any End User Customer; (v) determining the authority of any person
accessing a Customer Product/Service; and (vi) preparing, maintaining, and
monitoring compliance with verifiable documentation with respect to the
foregoing.
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Customer acknowledges and agrees that Customer shall not rely upon Aurum for advice regarding compliance with governmental regulations. Customer must independently verify its compliance with such regulations through its own legal counsel. Aurum shall use commercially reasonable efforts, during the Term of this Agreement, to be in substantive compliance with federal rules and regulations as they relate to vendors of Authorized Services. In the event that there is a significant change in the manner by which the Authorized Services can be furnished hereunder, as a result of a regulatory compliance requirement, Aurum and Customer shall negotiate in good faith to resolve the compliance issue. If Aurum determines that compliance is cost prohibitive, Aurum may elect to terminate the Agreement without penalty, by furnishing Customer with thirty (30) days prior written notice. Regulatory disclosure requirements are the responsibility of Customer.
If Customer believes that any modifications to the Aurum System are required under any laws, rules, or regulations, Customer will promptly so inform Aurum. Aurum will perform any modifications to the Aurum System or recommend changes to operating procedures of Customer that Aurum determines are necessary or desirable; provided, that if any such changes or modifications result in a significant increase in Aurum's cost of providing Authorized Services, Aurum will be entitled to increase the charges under this Agreement by an amount that reflects a pro rata allocation of Aurum's increased cost among the applicable Aurum customers. New or enhanced Aurum System features, functions, reports, or other services that may result from such modifications or recommendations may be provided as an Additional Service. Notwithstanding the foregoing, Customer acknowledges that the Aurum System may, from time to time, consist in part of System(s) licensed by Aurum from third-parry vendor(s) and, therefore, Aurum shall have no duty or responsibility to modify any such third-party System under this Section, except to the extent that the vendor thereof has such a duty or responsibility to modify such System pursuant to the applicable license agreement between Aurum and such vendor.
1.7 Audits. Aurum will provide auditors and inspectors that Customer designates in writing with reasonable access to the Data Center during business hours for the limited purpose of performing audits or inspections of Customer's business. Aurum will provide to such auditors and inspectors assistance as Aurum deems reasonable. Customer shall bear all expenses associated with such audit or inspection and shall also compensate Aurum for any Additional Services provided in connection with the audit or inspection. Customer shall insure that any audit or inspection requested by Customer shall be conducted without undue disruption to Aurum's business or operations. Aurum will not be required 1) to provide access to data of other Aurum customers, or 2) permit access to the Data Center during such times as Aurum deems that such access would be likely to create undue disruption to its operations (e.g., when other auditors or inspectors are present).
1.8 Aurum System Changes. Aurum shall have the right to modify the Aurum System including, without limitation, to (i) make changes in the method of access to or delivery of the Aurum System including, without limitation, interface procedures ("Interface Changes"), (ii) make modifications to the Aurum System which are provided to Customer at no additional cost ("Aurum System Enhancements"). The identification in this Agreement of specific brands or names of third-party providers is for reference only. Customer acknowledges and agrees that it will not rely on such brand names or third-party providers as a promise by Aurum to use any particular brand or third-party provider. Aurum reserves the right to substitute any brand or third-party provider of the Authorized Services, at its sole discretion, at any time with or without notice, provided that the quality of the Authorized Services is not materially diminished by such substitution.
1.9 Correction of Errors. Aurum will correct any errors in customer files that
result in errors in reports or other output where such errors (i) are due
solely to either malfunctions of Aurum's equipment or the Aurum Systems or
errors of Aurum's operators, programmers, or other personnel, and (ii) are
called to Aurum's attention within the time frames specified below. Aurum
will, to the extent reasonably practicable, correct any other errors as an
Additional Service. Customer will balance reports to verify master file
information and will inspect and review all reports and other output
(whether printed or electronically transmitted) created from data provided
by Customer to Aurum. Customer will reject all incorrect reports or output
(i) within two Business Days after receipt of daily reports or output,
(ii) within
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five Business Days after receipt of annual, quarterly, or monthly reports or output, and (iii) within three Business Days after receipt of all other reports or output. This Section 1.09 sets forth Customer's exclusive remedies for errors in reports or other output provided by Aurum under this Agreement.
1.10 Aurum as Customer's Agent. Customer acknowledges and agrees that Aurum's implementation and provision of Authorized Services hereunder necessitates certain agreements with third parties (such as service agreements and licensing agreements for software or hardware used in the Aurum Personal eBanking Services). Customer hereby appoints Aurum as Customer's agent (a) at Customer's request, to execute or enter into, on Customer's behalf, licensing or other agreements reasonably for Aurum's implementation and provision of the Authorized Services hereunder, and (b) to install any hardware or software reasonably required for Aurum's implementation and provision of the Authorized Services hereunder.
1.11 Core Processing. During the Term, Customer is required (i) to maintain Aurum as its core data processing vendor or (ii) to utilize Aurum provided systems for its core data processing. Customer's failure to do so will be considered a breach of this Agreement by Customer.
ARTICLE II - TERM
2.1 Term. This Agreement will begin on the Effective Date and, unless terminated earlier pursuant to the terms of this Agreement, will continue for a period of five (5) years from the Operational Date (the "Initial Term"). Thereafter, this Agreement will automatically renew for successive terms of two (2) years each (the "Renewal Terms") unless either party gives the other party written notice at least six (6) months prior to the expiration date of the Initial Term or the Renewal Term then in effect that the Agreement will not be renewed beyond such Initial Term or Renewal Term. Notwithstanding the termination of this Agreement for any reason, each Schedule entered into prior to the effective date of such termination will remain in full force and effect in accordance with the provisions thereof, including each of the provisions of this Agreement incorporated by reference into such Schedule.
ARTICLE III - PAYMENTS TO AURUM
(a) Authorized Services. Aurum's Fees for the Authorized Services are set forth in the Schedule describing such Authorized Service.
(b) Additional Services. Aurum's Fees for Additional Services are Aurum's then standard charges for such services, or, if Aurum then has no standard charges for such services, upon whatever other basis that the parties agree.
3.2. Additional Charges. In addition to the Fees, Customer will also pay Aurum the following, if applicable:
(a) All costs incurred by Aurum in mailing reports, other output or materials to Customer, its customers, or third parties.
(b) All reasonable actual, out-of-pocket costs and expenses, including, without limitation, travel and travel-related expenses, which are incurred by Aurum in providing Authorized or Additional Services when incurred at Customer's request.
(c) Any other charges expressly provided in this Agreement.
(d) All taxes, however designated or levied, based upon any charges under this Agreement, or upon this Agreement, the Aurum System or the Authorized or Additional Services, or materials provided hereunder, or their use, including without limitation state and local privilege or excise taxes based on gross revenue, sales and use taxes, and any taxes or amounts in lieu thereof paid or
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payable by Aurum in respect of the foregoing, exclusive, however, of franchise taxes and taxes based on the net income of Aurum.
3.3. Time of Payment. All charges under this Agreement will be due and payable
within ten (10) days of invoice date. Any charges not paid within thirty
(30) days of invoice date will bear interest until paid at a rate equal to
the lesser of 1.5% per month or the maximum interest rate allowed by
applicable law.
3.4. Cost of Living Adjustment. Aurum may, with 60 days' prior written notice to Customer, increase the fees and charges listed in a schedule for recurring services once in each year of the initial or a renewal term after the first year of such term; but Aurum may not in any year increase them more than the percentage increase in the Employment Cost Index for Total Compensation (not seasonally adjusted), Private Industry Workers, White Collar Occupations Excluding Sales, June 1989=100, published monthly by the Bureau of Labor Statistics, U.S. Department of Labor, for the 12-month period preceding the increase. In calculating the percentage increase, Aurum will use the most recently available ECI, as of a date that is no more than 30 and no less than 10 days prior to the date for the required written notice, and the ECI that preceded it by 12 months. If the ECI is no longer published or is replaced by another or an adjusted index, Aurum may use a comparable index in calculating increases.
3.5. Service Level Credits. If Aurum fails to meet the Service Levels set forth in the applicable Schedules, then Aurum will apply the applicable credits against the Fees. Payment of the Service Level credits will be Customer's sole and exclusive remedy for damages arising out of the failure of Aurum to achieve those Service Levels for which such credits are paid.
ARTICLE IV - SYSTEMS, DATA,
CONFIDENTIALITY AND PRIVACY
4.1. Aurum Systems. All Aurum Systems are and will remain the exclusive property of Aurum or licensors of such Aurum Systems, as applicable, and, except as expressly provided in this Agreement, Customer will have no ownership interest or other rights in any Aurum System. Customer acknowledges that the Aurum Systems include Aurum proprietary information and agrees to keep the Aurum Systems confidential at all times. Upon the expiration or termination of this Agreement, Customer will return all copies of all items relating to the Aurum Systems that are in the possession of Customer and certify to Aurum in writing that Customer has retained no material relating to the Aurum Systems.
4.2. Customer's Information. Information relating to Customer or End User Customers contained in Customer's data files is the exclusive property of Customer and Aurum will only be the custodian of that information. Aurum agrees to hold in confidence all proprietary information of Customer and End User Customers provided to Aurum in accordance with Section 4.3. However, upon the request of any appropriate federal or state regulatory authority with jurisdiction over Customer's business and after Aurum has, when reasonably possible, notified Customer of such request, Aurum will allow such authority access to all records and other information of Customer and its customers in the possession of Aurum and provide as an Additional Service any related assistance that is required. Promptly after the termination or expiration of this Agreement and the payment to Aurum of all sums due and owing, including without limitation any amounts due under Sections 5.5 or 5.6, Aurum will, at Customer's request and expense, return to Customer all of Customer's information, data, and files in Aurum's then standard machine-readable format and media.
4.3. Confidentiality. Except as otherwise provided in this Agreement, Aurum and Customer each agree that all information communicated to one by the other or the other's affiliates, whether before or after the Effective Date, will be received in strict confidence, will be used only for purposes of this Agreement, and except for the requirements of Section 4.2 will not be disclosed by the recipient party, its agents, subcontractors, or employees without the prior written consent of the other party. Each party agrees to take all reasonable precautions to prevent the disclosure to outside parties of such information, including, without limitation, the terms of this Agreement, except as required by legal, accounting, or regulatory requirements beyond the reasonable control of the recipient party. If Customer is required to disclose any proprietary information of Aurum in accordance with any such legal, accounting, or regulatory requirements, then Customer will
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promptly notify Aurum of such requirement and will cooperate with Aurum (at Aurum's expense) in Aurum's efforts, if any, to avoid or limit such disclosure (including, without limitation, obtaining an injunction or an appropriate redaction of the proprietary information in question). The provisions of this Section will survive the expiration or termination of this Agreement for any reason.
4.4. Privacy. Notwithstanding any provision in this Agreement or the Schedules to the contrary, Aurum agrees that (i) the data of Customer is owned by Customer, (ii) Aurum will maintain the confidentiality of Customer's data in accordance with Section 4.3 of this Agreement, (iii) Aurum will only use Customer's data to provide the Authorized Services, and for no other purpose without Customer's prior written consent, which consent may be withheld for any reason, (iv) Aurum will safeguard the data in accordance with Section 4.6 and (v) subject to Customer's payment of all charges due to Aurum and to applicable regulatory requirements, Aurum will, at Customer's request, either return or destroy Customer's data upon termination or expiration of this Agreement.
4.5 Safeguarding Data Integrity. Aurum will make reasonable efforts to: (i)
ensure the security and confidentiality of End User Customer information;
(ii) protect against any anticipated threats or hazards to the security or
integrity of such information; and (iii) protect against unauthorized
access to or use of such information that could result in substantial harm
or inconvenience to any End User Customer. Aurum will provide additional
internal computer data integrity safeguards that Customer reasonably
requests as an Additional Service. Aurum will also employ and maintain
controlled access systems in the Data Center.
4.6 Security. During the Term, Aurum will employ commercially reasonable system security measures. At Customer's request, Aurum will make available to Customer a description of its methods and procedures to safeguard the Aurum System and, as part of Aurum's Authorized Services, may provide Customer and Customer Data Center with procedures, which Customer is obligated to employ to help secure the integrity of the Aurum System and Customer's data. Customer shall have no right, license or privilege to conduct its own security or intrusion testing of the Aurum System without the express written permission of Aurum. Aurum agrees to notify Customer of a security breach of an End User Customer's account on the Aurum System immediately or no later than 24 hours following discovery. Customer understands and acknowledges that certain risks are inherent in the transmission of information over the Internet. Customer chooses to use the security measures, which may be provided by Aurum even though other security procedures are available.
Customer shall inform Aurum prior to creating any connection to an Internet Service Provider (ISP) or other computer services company if such connection is made from any point on Customer's computer network that is connected to Aurum. In the event that such a connection to the Internet is to be made, Customer must first obtain the firewall and Internet security policy document of Aurum. Customer hereby agrees to abide by the rules contained in such document. This document shall be provided to Customer at Customer's request. This document may be revised by Aurum from time to time to keep current with technology and Customer shall be solely responsible for ensuring its compliance with the most current requirements.
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4.7 Contingency Planning. Each party's contingency planning activities will comply with such of the following regulatory policies as may be applicable to Customer's business, as the same may be amended or replaced from time to time: (a) Federal Deposit Insurance Corporation, Financial Institution Letter. FIL-68-97, dated July 14, 1997; (b) Federal Reserve System Supervision and Regulation, Number SR 97-15, dated May 2, 1997; (c) Office of the Comptroller of the Currency, OCC 97-23, dated May 16, 1997; (d) Office of Thrift Supervision, CEO Ltr 72, dated July 23, 1997; and (e) National Credit Union Administration, Letter to Credit Unions No. 97-CU-3, dated April 7, 1997. If compliance with any amendments or replacements of these policies would significantly increase Aurum's cost of providing products or services, Aurum will be entitled to increase the fees and charges under an agreement by an amount that reflects a pro rata allocation of Aurum's increased cost among the Aurum customers affected by the change.
4.8 Service Auditor's Report. Aurum will provide to Customer at Aurum's then standard charge, one copy of Aurum's most recent service auditor's report, performed pursuant to nationally recognized auditing standards for service organizations, applicable to the services provided by Aurum to Customer.
ARTICLE V - TERMINATION AND
RELATED MATTERS
5.1. Mediation. If a dispute arises out of or relates to an agreement, including but not limited to its formation or a breach of it, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation conducted under the Commercial Mediation Rules of the American Arbitration Association (except for those changes specifically set forth in these terms and conditions), or such other rules and procedures to which the parties and the mediator may agree, before resorting to litigation or some other dispute resolution procedure. Mediation will commence when a party sends a written request for mediation of a dispute to the other party, and the parties will select a single mediator to serve. The parties will each pay their own expenses in connection with the mediation (including attorneys' fees and other costs), and they will share equally in paying the mediator (including any fees and other costs).
5.2. Termination for Non-Payment. If Customer defaults in the payment of any charges or other amounts due under this Agreement and fails to cure such default within ten (10) days after receiving written notice specifying such default, then Aurum may, by giving Customer at least thirty (30) days prior written notice thereof, terminate this Agreement or the applicable Schedule as of a date specified in such notice.
5.3. Termination for Cause. If either party materially defaults in its performance under this Agreement, except for non-payment of amounts due to Aurum, and fails to either substantially cure such default within ninety days after receiving written notice specifying the default or, for those defaults which cannot reasonably be cured within ninety (90) days, promptly commence curing such default and thereafter proceed with all due diligence to substantially cure the default, then the party not in default may, by giving the defaulting party at least thirty days prior written notice thereof, terminate this Agreement or the applicable Schedule as of a date specified in such notice.
5.4. Termination for Insolvency. If either party becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation or insolvency or for the appointment of a receiver, conservator, or similar officer, or makes an assignment for the benefit of all or substantially all of its creditors or enters into any agreement for the composition, extension, or readjustment of all or substantially all of its obligations, then the other party may, by giving prior written notice thereof to the non-terminating party, terminate this Agreement as of a date specified in such notice.
5.5. Payment Upon Termination. The parties acknowledge that upon termination of any Schedule for any reason, (other than by election by either party not to renew the Agreement pursuant to Section 2.1 or termination by Customer pursuant to Section 5.3, 5.4 or 7.5), Aurum will incur damages resulting from such termination that will be difficult or impossible to ascertain. Therefore, prior to such termination and in addition to all
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other amounts then due and owing to Aurum, Customer will pay to Aurum as
reasonable liquidated damages an amount equal to the sum of subsections
(a) and (b):
(a) All costs reasonably incurred by Aurum in connection with such termination, including without limitation telecommunication line disengagement expenses and costs of terminating leases on or shipping or storing any Equipment provided to Customer by or through Aurum under the applicable Schedule, plus a twenty-five percent management fee on such costs, plus Aurum's charges for any Additional Services reasonably requested by Customer for deconversion assistance and Aurum's then standard charges for the resources utilized to prepare any test or conversion tapes (together, the "Termination Costs"). Aurum may, at its option, invoice Customer for the lesser of (i) Aurum's good faith estimate of the Termination Costs, or (ii) the aggregate of the charges payable to Aurum pursuant to Article III for the two calendar months preceding the month in which notice of termination is given. If the actual Termination Costs are greater or less than the amount of Aurum's invoice that is paid by Customer under the immediately preceding sentence, then Customer will pay Aurum, or Aurum will refund to Customer, as the case may be, the difference between the actual Termination Costs and the amount paid.
(b) Eighty percent (80%) during the first two years of the agreement,
seventy percent (70%) during the third year, sixty percent (60%)
during the fourth year and fifty percent (50%) during the fifth year
and beyond, of the total compensation that would have been paid or
reimbursed to Aurum under the applicable Schedule during the
remainder of the Term of the applicable Schedule ("Termination
Fees"). The amount of total compensation will be computed by
multiplying the total number of months remaining in the Initial Term
or the Renewal Term then in effect for the applicable Schedule from
the effective date of the termination by the greater of (i) the
average monthly charge to Customer for Authorized Services under the
applicable Schedule during the twelve (12) calendar months
immediately preceding the calendar month in which notice of
termination was given or (ii) the monthly charge payable by Customer
if the minimum volume requirements was used to determine such
monthly charge. If the applicable Schedule has been in effect less
than twelve (12) calendar months prior to the giving of the notice
of termination, then the parties will compute the amount due under
this subsection (b) using the average monthly charge for Authorized
Services under the applicable Schedule made during such lesser
number of calendar months. If termination of the applicable Schedule
occurs prior to the Operational Date for the applicable Schedule,
then the parties will compute the amount due under this subsection
(b) assuming that the Operational Date had occurred when scheduled
by Aurum and using the average monthly charges reasonably estimated
to be paid by Customer.
All amounts payable under this Section 5.5 will be invoiced and paid prior to the effective date of such termination and prior to the release of any test tapes or other data of Customer.
5.6. Payment Upon Nonrenewal. If Customer gives or receives notice not to renew this Agreement pursuant to Section 2.1, or Customer terminates this Agreement under Section 7.5, Customer will pay to Aurum an amount equal to all amounts then due and payable to Aurum, plus (a) Aurum's charges for any Additional Services reasonably requested by Customer for deconversion assistance, (b) Aurum's then standard charges for the resources utilized to prepare any test or conversion tapes, and (c) all other costs reasonably incurred by Aurum in connection with such election not to renew or termination that are described in Section 5.5(a) and that relate to obligations that Customer approved, which extend beyond the then current term of this Agreement or earlier termination date under Section 7.5. All amounts payable under this Section 5.6 will be invoiced and paid prior to the expiration date and prior to the release of any test tapes or other data of Customer.
5.7. Effect of Termination. Upon termination of this Agreement, Customer shall promptly and without charge return to Aurum or destroy all copies of all Documentation, maintenance and policy manuals and other publications of Aurum relating to the Aurum System or Authorized Services (collectively "Copies"). Customer shall destroy all Copies contained on any had drive or other fixed medium of storage. Customer's license to access the Software and license to use Aurum's trademarks and service marks as provided in this
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Agreement shall immediately terminate. Within sixty (60) days from the date of termination of this Agreement, an officer of Customer shall certify in writing to Aurum that Customer has complied with all requirements of this Section.
ARTICLE VI - LIABILITY AND INDEMNITY
6.1. Limitation of Liability. Subject to any exclusive remedy set forth in this Agreement or any Schedule, if Aurum becomes liable to the Customer under this Agreement or any Schedule for any other reason, whether arising by negligence, willful misconduct or otherwise, then (a) the damages recoverable against Aurum for all events, acts, delays, or omissions will not exceed in the aggregate the compensation payable to Aurum pursuant to the Schedule under which such liability arose for the lesser of the months that have elapsed since the Operational Date for the applicable Schedule or the three months ending with the latest month in which occurred the events, acts, delays, or omissions for which damages are claimed, and (b) THE MEASURE OF DAMAGES WILL NOT INCLUDE, AND AURUM SHALL NOT BE LIABLE FOR, ANY AMOUNTS FOR ANY LOSS OF PROFITS OR INDIRECT, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY PARTY, INCLUDING THIRD PARTIES, OR DAMAGES WHICH COULD HAVE BEEN AVOIDED HAD THE OUTPUT PROVIDED BY AURUM BEEN VERIFIED BY CUSTOMER BEFORE USE. Customer may not assert any cause of action against Aurum of which the Customer knew or should have known more than two years prior to such assertion. In connection with the conduct of any litigation with third parties relating to any liability of Aurum to Customer or to such third parties, Aurum will have all rights which are appropriate to its potential responsibilities or liabilities. Aurum will have the right to participate in all such litigation and to settle or compromise its liability to third parties.
6.2 Warranty. Aurum will provide the Authorized Services in a professional and workmanlike manner. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 6.2, AURUM DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, IN FACT, BY STATUTE OR BY OPERATION OF LAW OR OTHERWISE, CONTAINED IN OR DERIVED FROM THIS AGREEMENT, ANY OF THE SCHEDULES ATTACHED HERETO, ANY OTHER DOCUMENTS REFERENCED HEREIN, OR IN ANY OTHER MATERIALS, PRESENTATIONS OR OTHER DOCUMENTS OR COMMUNICATIONS WHETHER ORAL OR WRITTEN, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY; FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OF INFORMATIONAL CONTENT AND SYSTEM INTEGRATION.
6.3. Force Majeure. Each party will be excused from performance under this Agreement, except for any payment obligations, for any period and to the extent that it is prevented from performing, in whole or in part, as a result of any cause beyond its reasonable control, including, but not limited to, Internet network failures or Internet capacity limitations, compliance with regulations, orders or instructions of any federal, state or municipal government or any department or agent thereof that delay or restrict performance hereunder, the other party, any act of God, war, civil disturbance, court order, labor dispute, third party nonperformance, or failures, fluctuations or nonavailability of electrical power, heat, light, air conditioning, or telecommunications equipment. Such nonperformance will not be a default or a ground for termination as long as reasonable means are taken to expeditiously remedy the problem causing such nonperformance.
6.4. Cross Indemnity. Aurum and Customer each will indemnify, defend, and hold harmless the other from any and all claims, actions, damages, liabilities, costs, and expenses, including without limitation reasonable attorney's fees and expenses, arising out of (a) the death or bodily injury of any agent, employee, customer, or business invitee of the indemnitor, and (b) the damage, loss, or destruction of any tangible personal or real property of the indemnitor.
6.5. Reliance on Instructions. Aurum is entitled to rely upon and act in accordance with any instructions, guidelines or information provided to Aurum by Customer, which are given by persons having actual or apparent authority to provide such instructions, guidelines, or information, and will incur no liability in doing so. Customer will indemnify, defend, and hold harmless Aurum from any and all claims, actions, damages, liabilities, costs, and expenses, including without limitation reasonable attorneys' fees and expenses, arising out of or resulting from Aurum acting in accordance with this Agreement.
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6.6. Intellectual Property Indemnity. Aurum and Customer each will indemnify, defend and hold harmless the other from any and all claims, actions, damages, liabilities, costs and expenses, including without limitation, reasonable attorney's fees and expenses, arising out of any claims of infringement by the indemnitee of any United States letters patent, any trade secret, or any copyright, trademark, service mark, trade name or similar proprietary rights conferred by common law or by any law of the United States or any state alleged to have occurred because of Systems provided or work performed by the indemnitor. However, this indemnity will not apply unless the indemnitee informs the indemnitor as soon as practicable of any claim or action alleging such infringement and has given the indemnitor full opportunity to control the response thereto and the defense thereof, including, without limitation, any agreement relating to settlement.
(a) Customer will indemnify, defend and hold harmless Aurum against any claim made by any person that is based on Aurum's providing the products or services described in this Agreement and Schedule ("Aurum Indemnified Claim"), but this indemnity, defense and hold harmless will not apply if the claim arises from Aurum's gross negligence or willful misconduct.
(b) Aurum shall promptly notify Customer in writing and in reasonable detail of any Aurum Indemnified Claim. Customer shall have the authority to control the defense and settlement of such Aurum Indemnified Claim, and Aurum shall give reasonable assistance to Customer to enable Customer to defend the Aurum Indemnified Claim. Aurum shall have the right, but not the obligation, to participate, at its own expense, with respect to any such Indemnified Claim. No such Aurum Indemnified Claim shall be settled or compromised by Customer without the prior written consent of Aurum if such settlement or compromise in any manner indicates that Aurum contributed to or was responsible for the cause of any such Aurum Indemnified Claim, or if such settlement or compromise imposes any obligations upon Aurum or requires Aurum to take any action.
(c) Customer shall not be liable for any Aurum Indemnified Claim under this Section 6.7 to the extent that such Aurum Indemnified Claim is found in a final and binding arbitration award or a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of Aurum.
6.8. Use of the System by Third Parties. Without limiting the terms of Section 6.1, the parties acknowledge that Customer is solely responsible for the use of the Aurum System (and any resulting damages) by End User Customers and other third parties including, without limitation, any improper or unauthorized transfers of funds from accounts via the Aurum System, any failure or delay in transmitting a message back from a Bill Pay vendor or the use for any purpose of any financial calculators contained in the Aurum System.
ARTICLE VII - MISCELLANEOUS
7.1. Binding Nature and Assignment. Each agreement is binding on the parties and their respective successors and permitted assigns. Neither party may assign an agreement unless it obtains the prior written consent of the other party, which consent will not be unreasonably withheld. The following transactions relating to either party will not require approval of the other party under this section: an initial public offering of stock, a sale of stock, any merger (including a reincorporation merger), consolidation, reorganization or stock exchange or a sale of all or substantially all of the assets of a party or of an entire line of business of a party or other similar or related transaction in which such parry is the surviving entity or, if such party is not the surviving entity, the surviving or succeeding entity continues to conduct the business conducted by such party prior to consummation of the transaction.
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7.2. Hiring of Employees. During the term of this Agreement and for a period of twelve months thereafter, neither party will, without the prior written consent of the other, offer employment to or employ any person employed then or within the preceding twelve months by the other parry, if the person was involved in providing or receiving Services.
7.3. Notices. Any notice under this Agreement will be deemed to be given when
(i) delivered by hand or when mailed by registered United States mail,
return receipt requested, and (ii) addressed to the recipient party at its
address set forth on the signature page of this Agreement and to the
attention of its President, in the case of Customer, or to the attention
of Director of eBusiness, with a copy to General Counsel, in the case of
Aurum. Either party may from time to time change its address for
notification purposes, by giving the other prior written notice of the new
address and the date upon which it will become effective.
7.4. Relationship Between Aurum and Customer. Except for the specific agency provisions set forth in the Schedules, this Agreement does not in any way create the relationship of principal and agent, or any similar relationship between Aurum and Customer, including, but not limited to, that of joint venturers, partners, employees, or associates. Neither party is granted any right or authority to assume or create any obligation or responsibility for, or on behalf of, the other party or to otherwise bind the other party, other than as may be expressly authorized in this Agreement.
7.5. Modification. Aurum may from time to time modify any of the provisions of this Agreement or a Schedule to be effective at any time on or after the expiration of the Initial Term of this Agreement or the applicable Schedule by giving Customer at least six months prior written notice describing the modification and the date upon which it will be effective (the "Modification Date"). If Aurum gives Customer notice of a modification pursuant to this Section, Customer may, by giving Aurum written notice at least three months prior to the Modification Date, terminate this Agreement or the applicable Schedule as of such Modification Date or at a specified later date. Unless Customer provides such notice, the modification will be effective for any period after the Modification Date.
7.6. Waiver. A waiver by either of the parties of any of the covenants, conditions, or agreements to be performed by the other or any breach thereof will not be construed to be a waiver of any succeeding breach or of any other covenant, condition, or agreement contained in this Agreement.
7.7. Media Releases. All media releases, public announcements, and public disclosures by either Party or either Party's employees or agents relating to this Agreement or the subject matter of this Agreement, including without limitation promotional or marketing material, but excluding any announcement intended solely for internal distribution by a Party or any disclosure required by legal, accounting, or regulatory requirements beyond the reasonable control of a Party, will be coordinated with and approved by the other Party in writing prior to release. Without limiting its rights in general, either Party specifically may list the other Party's name in customer reference lists without prior consent of the other Party.
7.8. Entire Agreement. This Agreement and all attached Schedules constitute the entire agreement between Aurum and Customer with respect to the subject matter of this Agreement. There are no understandings or agreements relative to this Agreement which are not fully expressed herein and no change, waiver, or discharge of this Agreement will be valid unless in writing and executed by the party against whom such change, waiver, or discharge is sought to be enforced. This Agreement may be amended only by an amendment in writing, signed by the parties.
7.9. Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the Term, such provision shall be fully severable. This Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.
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7.10. Survival. All provisions of this Agreement that by their nature are intended to survive the expiration or termination of this Agreement shall survive and remain in full force and effect.
7.11. No Third Party Beneficiary Rights. No provision of this Agreement is intended or shall be construed to provide or create any third party beneficiary right or any other right of any kind in any End User Customer or any client, customer, member, affiliate, insurer, lender, shareholder, partner, officer, director, employee or agent of any parry hereto, or in any other person.
7.12. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflict-of-laws principles thereof.
7.13. Execution of Agreement. Two (2) original copies of this Agreement will be
executed and submitted to Aurum by Customer. Aururn will return one of the
executed copies to Customer. By executing this Agreement, Customer
represents and warrants that (a) this Agreement has been duly authorized;
(b) such execution does not, and will not, cause a breach by Customer of
any other contract, agreement, or understanding to which Customer is a
party; and (c) this Agreement constitutes a valid, fully enforceable, and
legally binding obligation of Customer. Customer will maintain this
Agreement as an official record of Customer continuously from the time of
its execution.
ARTICLE VIII - DEFINITIONS
8.1 Definitions. In addition to all other terms defined in the Agreement and Schedules, the following terms as used in the Agreement and Schedules shall have the following meanings:
(a) "Additional Service" means any service requested by Customer and provided by Aurum pursuant to terms and conditions agreed to by the parties and which is not an Authorized Service.
(b) "Agreement" means this Internet Master Services Agreement, together with all Schedules and amendments attached hereto or hereafter attached by mutual consent of the parties (all of which are incorporated herein by reference).
(c) "Aurum Personal eBanking Services" are the services described in
Section 1 of Schedule A to the Agreement.
(d) "Aurum Personal eBanking System" is that portion of the Aurum System utilized to provide the Aurum Personal eBanking Services.
(e) "Aurum's Server" means the server-grade computers maintained by Aurum on which the Aurum System and Customer's web site resides.
(f) "Authorized Services" means the services requested by Customer on the signature page of this Agreement and the Additional Services purchased by Customer.
(g) "Aurum System" shall mean Systems, Software, Aurum's proprietary Internet banking system, telephone banking system or other application provided by Aurum as more fully described in the Schedules, together with all Aurum System Enhancements and modifications made available to Customer under this Agreement.
(h) "Aurum Telephone Banking Data Center" is the space at one or more locations where Aurum provides the Aurum Telephone Banking Service.
(i) "Aurum Telephone Banking Service" is the service described in
Section 1 of Schedule E to the Agreement.
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(j) "Aurum Telephone Banking System" is that portion of the Aurum System utilized to provide the Aurum Telephone Banking Service.
(k) "Business Day" is each weekday, Monday through Friday, which is not a holiday of the Federal Reserve Bank for the Federal Reserve District in which Customer's principle office is located.
(1) "Customer Data Center" shall mean (i) the Customer's internal data processing department operating on Aurum provided systems or (ii) Aurum operating as the Customer's service bureau or data processing provider.
(m) "Data Center" is the space at one or more locations where Aurum performs Internet Services, excluding Customer locations.
(n) "Documentation" means that portion of the System that provides installation and operating instructions for use of the System by Customer.
(o) "Internet Services" means certain electronic business related services offered by Aurum, including but not limited to, Internet services, Internet banking services, telephone banking services and ATM and debit card services.
(p) "End User Customer" means a customer, client or member of Customer who uses the System.
(q) "Equipment" (if applicable) means Customer's computer equipment, software, communications software, communications lines, router, channel service unit, dial-up modem, connecting cables, telephone hardware and software, and any additional equipment (i.e. personal computer, etc.) needed to meet the required specifications for use with the Aurum System.
(r) "Fees" mean all fees payable by Customer to Aurum under this Agreement including, but not limited to, all the fees listed Section 3.1, Termination Fees (defined in Section 5.5), and fees payable under any Schedule.
(s) "Operational Date" is the later of (i) the Effective Date, or (ii) the first day of the calendar month in which the Aurum System is implemented and Customer has the capability to utilize any portion of the Aurum System or Authorized Services.
(t) "Parties" is a reference to Customer and Aurum together.
(u) "Schedule" means an exhibit or attachment to this Agreement that describes an Authorized Service, sets forth additional terms and conditions governing the provision of such Authorized Service, and specifies the requirements for such Authorized Service.
(v) "Schedule Term" with respect to any applicable Schedule means the Schedule Initial Term and all Schedule Renewal Terms as defined in the applicable Schedule.
(w) "Software" means that portion of the Aurum System that is comprised of Aurum's computer programs installed on the Aurum Server.
(x) "System" or "Systems" are (i) computer programs, including without limitation software, firmware, application programs, operating systems, files, and utilities; (ii) supporting documentation for such computer programs, including without limitation input and output formats,
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program listings, narrative descriptions, operating instructions and procedures, user and training documentation, special forms, and source code; and (iii) the tangible media upon which such programs are recorded, including without limitation chips, tapes, disks, and diskettes.
(y) "Term" with respect to the Agreement means the Initial Tem (defined in Section 2.1) and all Renewal Terms (defined in Section 2.1).
(z) "Web site" means Customer's Internet presence found at Customer's Uniform Resource Locator (URL) address.
8.2 Capitalized terms used without definition in the Schedules shall have the meanings set forth in this Agreement.
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ADDENDUM TO
AURUM TECHNOLOGY INC.
INTERNET MASTER SERVICES AGREEMENT
STANDARD TERMS & CONDITIONS
Each of the provisions of this addendum is incorporated into the Standard Terms & Conditions and expressly supersedes such Terms & Conditions to the extent they are inconsistent with them.
1.) Section 1.3 is hereby deleted in its entirety and replaced by the following:
"Software Access License. During the Term and subject to the limitations set forth herein, Aurum grants to Customer a limited, non-exclusive, and non-assignable license to access the Software located on Aurum's Server for the purpose of receiving the Authorized Services and using the "Aurum System" to provide banking functionality and other related services to the End User Customers. Aurum reserves all rights not expressly granted herein. Without limiting the foregoing, Customer has no right to possess the Software or any copies thereof in any form. Aurum hereby represents that is authorized to license to Customer the applicable Software."
2.) The first paragraph of Section 1.6 is hereby deleted in its entirety and replaced by the following:
"Regulatory Compliance. Customer shall be responsible for (i) compliance
with all state and federal laws and regulations governing banks and other
financial institutions; (ii) any disclosure to its End User Customers with
respect to the Authorized Services and each Customer product or service
made available through the Aurum System ("Customer Product/Service");
(iii) the terms and conditions of any Customer Product/Service; (iv) the
terms, conditions, and any limitations on which any Customer
Product/Service may be accessed, utilized or transactions originated by
any End User Customer; (v) determining the authority of any person
accessing a Customer Product/Service; and (vi) preparing, maintaining, and
monitoring compliance with verifiable documentation with respect to the
foregoing. Customer acknowledges and agrees that Customer shall not rely
upon Aurum for advice regarding compliance with governmental regulations.
Customer must independently verify its compliance with such regulations
through its own legal counsel. Aurum shall use commercially reasonable
efforts, during the Term of this Agreement, to be in substantive
compliance with federal rules and regulations as they relate to vendors of
Authorized Services. In the event that there is a significant change in
the manner by which the Authorized Services can be furnished hereunder, as
a result of a regulatory compliance requirement, Aurum and Customer shall
negotiate in good faith to resolve the compliance issue. If Aurum
determines that compliance is cost prohibitive, Aurum, may elect to
terminate the Agreement without penalty, upon six months advance notice to
Customer, or on the date 30-days prior to the date the applicable law,
regulation or rule goes into effect, whichever time period is shorter. In
the event Aurum reasonably determines that it may continue to provide some
services under this Agreement despite its right to terminate in the
preceding sentence, Aurum agrees to enter good faith negotiations with
Customer to determine a mutually acceptable means to continue providing
Customer with those services not affected. Such negotiation period will
not exceed thirty days. Regulatory disclosure requirements are the
responsibility of Customer."
3.) Section 1.9 is hereby deleted in its entirety and replaced by the following:
"Correction of Errors. Aurum will correct any errors in customer files that result in errors in reports or other output where such errors (i) are due solely to either malfunctions of Aurum's equipment or the Aurum Systems or errors of Aurum's operators, programmers, or other personnel, and (ii) are called to Aurum's attention within the time frames specified below. Aurum will, to the extent reasonably practicable, correct any other errors as an Additional Service. Customer will balance reports to verify master file information and will inspect and review all reports and other output (whether printed or electronically transmitted) created from data provided by Customer to Aurum. Customer will reject all incorrect reports or output (i) within five Business Days after receipt of daily reports or output, (ii) within five Business Days after receipt of annual, quarterly, or monthly reports or output, and (iii) within five Business Days after receipt of all other reports or output. This Section 1.09 sets forth Customer's exclusive remedies for errors in reports or other output provided by Aurum under this Agreement."
Internet Master Services Agreement
Town Bank of Westfield
4.) Section 4.2 is hereby deleted in its entirety and replaced by the following:
"Customer's Information. Information relating to Customer or End User Customers contained in Customer's data files is the exclusive property of Customer and Aurum will only be the custodian of that information. Aurum agrees to hold in confidence all proprietary information of Customer and End User Customers provided to Aurum in accordance with Section 4.3. However, If Aurum is required to disclose any proprietary information of Customer in accordance with any legal, accounting, or regulatory requirements, then Aurum will promptly notify Customer of such requirement and will cooperate with Customer (at Customer's expense) in Customer's efforts, if any, to avoid or limit such disclosure (including, without limitation, obtaining an injunction or an appropriate redaction of the proprietary information in question). Promptly after the termination or expiration of this Agreement and the payment to Aurum of all sums due and owing, including without limitation any amounts due under Sections 5.5 or 5.6, Aurum will, at Customer's request and expense, return to Customer all of Customer's information, data, and files in Aurum's then standard machine-readable format and media."
5.) Section 6.1 is hereby deleted in its entirety and replaced by the following:
"Limitation of Liability. Subject to any exclusive remedy set forth in this Agreement or any Schedule, if Aurum becomes liable to the Customer under this Agreement or any Schedule for any other reason, whether arising by negligence, willful misconduct or otherwise, then (a) the damages recoverable against Aurum for all events, acts, delays, or omissions will not exceed in the aggregate the compensation payable to Aurum pursuant to the Schedule under which such liability arose for the lesser of the months that have elapsed since the Operational Date for the applicable Schedule or the six months ending with the latest month in which occurred the events, acts, delays, or omissions for which damages are claimed, and (b) THE MEASURE OF DAMAGES WILL NOT INCLUDE, AND AURUM SHALL NOT BE LIABLE FOR, ANY AMOUNTS FOR ANY LOSS OF PROFITS OR INDIRECT, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF ANY PARTY, INCLUDING THIRD PARTIES, OR DAMAGES WHICH COULD HAVE BEEN AVOIDED HAD THE OUTPUT PROVIDED BY AURUM BEEN VERIFIED BY CUSTOMER BEFORE USE. Customer may not assert any cause of action against Aurum of which the Customer knew or should have known more than two years prior to such assertion. In connection with the conduct of any litigation with third parties relating to any liability of Aurum to Customer or to such third parties, Aurum will have all rights which are appropriate to its potential responsibilities or liabilities. Aurum will have the right to participate in all such litigation and to settle or compromise its liability to third parties.
6.) Section 6.4 is hereby deleted in its entirety and replaced by the following:
"Cross Indemnity. Aurum and Customer each will indemnify, defend, and hold harmless the other from any and all claims, actions, damages, liabilities, costs, and expenses, including without limitation reasonable attorney's fees and expenses, resulting from the act or omission of the indemnifying party that causes (a) the death or bodily injury of any agent, employee, customer, or business invitee of the indemnitor, and/or (b) the damage, loss, or destruction of any tangible personal or real property of the indemnitor.
7.) Section 6.5 is hereby deleted in its entirety and replaced by the following:
"Reliance on Instructions. Aurum is entitled to rely upon and act in accordance with any instructions, guidelines or information provided to Aurum by Customer, which are given by persons having actual or apparent authority to provide such instructions, guidelines, or information, and will incur no liability in doing so. Customer will indemnify, defend, and hold harmless Aurum from any and all claims, actions, damages, liabilities, costs, and expenses, including without limitation reasonable attorneys' fees and expenses, arising out of or resulting from Aurum acting in accordance with such instructions."
Internet Master Services Agreement
Town Bank of Westfield
8.) Section 7.10 is hereby deleted in its entirety and replaced by the following:
"Survival. All provisions of this Agreement that by their nature are intended to survive the expiration or termination of this Agreement shall survive and remain in full force and effect, including but not limited to Sections 4.2, 4.3 and 7.1."
IN WITNESS WHEREOF, the parties have duly executed this Agreement by the duly authorized signatures below as of June 11, 2003 (the "Effective Date")
AURUM TECHNOLOGY TOWN BANK OF WESTFIELD
By: /s/ Anthony M. Ficarra By: /s/ Robert W. Dowens, Sr.
------------------------------ ---------------------------------------
Name: Anthony M. Ficarra Name: Robert W. Dowens, Sr.
---------------------------- -------------------------------------
Title: SVP- Electronic Business Title: President & Chief Executive Officer
--------------------------- ------------------------------------
Date: 7/22/03 Date: June 11, 2003
---------------------------- -------------------------------------
Internet Master Services Agreement
Town Bank of Westfield
Page 3 of 3
|
Exhibit 10.37
AURUM TECHNOLOGY INC.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
THIS INFORMATION TECHNOLOGY SERVICES AGREEMENT by and between Aurum Technology Inc., a Delaware corporation with its principal place of business located in Plano, Texas ("Aurum"), and Customer, as identified below, (each of Aurum and Customer, a "party," and collectively, the "parties") is made as of the later of the dates on which the parties sign below.
Aurum provides information technology products and services to the financial services industry, including eBusiness services, image-based item processing and core systems and services.
Customer and Aurum want to establish a business relationship pursuant to which Aurum will now, and as Customer may decide in the future, provide information technology solutions to Customer.
The parties agree to the terms and conditions set forth on this page and in the following attachments that are incorporated into the agreements of the parties and made a part of them by this reference. Each schedule, and the terms and conditions on this page and in the General Terms & Conditions, constitutes a separate and independent legal agreement.
|X| General Terms & Conditions (v. 200 ) |_| Core Data Processing Schedule (v. 200 ) |_| Image/Item Processing Schedule (v. 200 ) |_| ATM and/or Debit Card Services Schedule (v. 200 ) |_| Telephone Banking System Schedule (v. 200 ) |_| Professional Services Schedule (v. 200 ) |X| Software Schedule (v. 2003.1-BSI Town Bank of Westfield 8.20.03) |_| Addendum to (v. 200 )
THE AUTHORIZED OFFICER OR REPRESENTATIVE OF EACH PARTY has signed this Information Technology Services Agreement as a legally binding obligation of such party.
AURUM TECHNOLOGY INC. The Town Bank of Westfield
("CUSTOMER")
By: /s/ Mike Hill By: /s/ Robert W. Dowens, Sr.
-------------------------------------- -------------------------------------
Mike Hill Robert W. Dowens, Sr.
-------------------------------------- -------------------------------------
Name Name
SVP President & Chief Executive Officer
-------------------------------------- -------------------------------------
Title Title
9-2-2003 September 2, 2003
-------------------------------------- -------------------------------------
Date Date
2701 West Plano Parkway 520 South Avenue
-------------------------------------- -------------------------------------
(Street Address) (Street Address)
Suite 600
-------------------------------------- -------------------------------------
(Suite No. or Other) (Suite No. or Other)
|
Plano, Texas 75075-8210 Westfield, New Jersey 07090
-------------------------------------- -------------------------------------
(City, State & Zip Code) (City, State & Zip Code)
972-943-2612 908-301-0894
-------------------------------------- -------------------------------------
(Facsimile Number) (Facsimile Number)
General.Counsel@Aurum Technolgy.com
-------------------------------------- -------------------------------------
(Email) (Email)
General Counsel
-------------------------------------- -------------------------------------
(Person to Whom Notices Should (Person to Whom Notices Should
be Addressed) be Addressed)
|
1.) Customer will license the electronic forms products ("Products") listed below, and further identified in the License/Support-Line Agreement to be executed by and between Customer and Bankers Systems, Inc., a copy of which is attached hereto and is incorporated herein by reference, under the terms and conditions contained in the License/Support-Line Agreement. Upon the effective date of the License/Support-Line Agreement, the following Products will be available for use by Customer:
Bankers Systems Inc. eForms Deposit Application Bankers Systems Inc. eForms IRA Application
2.) Customer will pay to Aurum the following amounts for the applicable license(s) to use the Products:
$1,500.00 for eForms Deposit Application Due Upon execution of this schedule $750.00 for eForms IRA Application Due Upon execution of this schedule |
Following execution of this schedule, Aurum will invoice and Customer will pay the appropriate annual usage/maintenance fee(s) stated on the applicable exhibits to the License/Support/Line Agreement for the Products identified in item 1 above.
3.) EXCEPT AS SET FORTH HEREIN, AURUM MAKES NO WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE PRODUCTS.
4.) This schedule is expressly conditioned upon acceptance of the License/Support-Line Agreement by Bankers Systems, Inc.
AURUM TECHNOLOGY INC.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
THIS INFORMATION TECHNOLOGY SERVICES AGREEMENT by and between Aurum Technology Inc., a Delaware corporation with its principal place of business located in Plano, Texas ("Aurum"), and Customer, as identified below, (each of Aurum and Customer, a "party," and collectively, the "parties") is made as of the later of the dates on which the parties sign below.
Aurum provides information technology products and services to the financial services industry, including eBusiness services, image-based item processing and core systems and services.
Customer and Aurum want to establish a business relationship pursuant to which Aurum will now, and as Customer may decide in the future, provide information technology solutions to Customer.
The parties agree to the terms and conditions set forth on this page and in the following attachments that are incorporated into the agreements of the parties and made a part of them by this reference. Each schedule, and the terms and conditions on this page and in the General Terms & Conditions, constitutes a separate and independent legal agreement.
|X| General Terms & Conditions (v. 2003.2)
|X| Core Data Processing Schedule (v. 2003.1)
|X| Image/Item Processing Schedule (v. 2003.1)
|_| Professional Services Schedule (v. 200 )
|_| Network Services Schedule for Providing ATM and/or Debit Card
Services (v. 200 )
|_| Hardware Purchase Schedule (v. 200 )
|X| Addendum to General Terms & Conditions (v. 2003.1)
THE AUTHORIZED OFFICER OR REPRESENTATIVE OF EACH PARTY has signed this Information Technology Services Agreement as a legally binding obligation of such party.
AURUM TECHNOLOGY INC. The Town Bank of Westfield
("CUSTOMER")
By: By: /s/ Robert W. Dowens, Sr.
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Robert W. Dowens, Sr.
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Name Name
President & Chief Executive Officer
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Title Title
June 10, 2003
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Date Date
2701 West Plano Parkway 520 South Avenue
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(Street Address) (Street Address)
Suite 600
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(Suite No. or Other) (Suite No. or Other)
|
Plano, Texas 75075-8210 Westfield, New Jersey 07090
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(City, State & Zip Code) (City, State & Zip Code)
972-943-2612 908-301-XXXX 0894
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(Facsimile Number) (Facsimile Number)
General.Counsel@Aurum Technolgy.com NFrungillo@TownBank.com
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(Email) (Email)
General Counsel Nicholas A. Frungillo, Jr., Executive V.P.
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(Person to Whom Notices Should (Person to Whom Notices Should
be Addressed) be Addressed)
|
AURUM TECHNOLOGY INC.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
GENERAL TERMS & CONDITIONS
PRODUCTS & SERVICES
1. Aurum will provide Customer the products or services that are described in a schedule.
2. Aurum will be Customer's sole provider of recurring services described in a schedule for the term set forth in that schedule.
3. If Customer requests Aurum to provide any product or service not specifically addressed in a schedule, then Aurum may, but is not obligated to, provide such additional product or service upon mutually agreeable terms and conditions.
TERM & RENEWALS
4. An agreement is effective and binding upon both parties as of the date made.
5. Aurum will deliver a product or begin to provide a service on the date set forth in the schedule applicable to that product or service. In the case of recurring services (as set forth in a schedule), Aurum will continue to provide such services from the date that they begin through the initial term set forth in the applicable schedule.
6. Unless either party gives the other written notice of its decision not to renew a recurring service under a schedule at least 180 days prior to the end of the initial term for that service, or of any renewal term for such service, the term for that recurring service will automatically renew for the renewal term set forth in the applicable schedule.
PAYMENTS
7. Customer will maintain a demand deposit account with an FDIC-insured depository institution that has been identified to Aurum at least 10 days prior to that date on which the first of any product or service is to be first provided or delivered to Customer. Unless Customer has otherwise paid such invoice by means acceptable to Aurum, Customer authorizes Aurum to draft electronically by debit to Customer's designated account, no earlier than 10 days after the date of the invoice, the monthly invoice amount from the account. Customer agrees to execute and forward to Aurum any other documents or agreements that Customer's depository institution requires to authorize Aurum's drafting from the account. Customer will maintain on deposit in the account enough funds to pay Aurum's draft.
8. Customer's account with Aurum will be delinquent if the debit transaction is dishonored. Aurum will apply each month to the delinquent account balance a late fee equal to the lesser of 2% of the outstanding and delinquent account balance or the maximum lawful late fee.
9. If Customer in good faith disputes any invoiced amounts, Customer will provide written notification of such dispute to Aurum, setting forth in reasonable detail the amount and reason for the dispute. Such notice will be given prior to the date that the disputed payment is due to Aurum. The parties will immediately negotiate in good faith to resolve the dispute. If the parties cannot resolve the dispute prior to the date when the disputed amount would be due, then Aurum may, at its sole discretion, require that the disputed amount be paid in full and without offset against any other funds or obligations owing to Aurum pending the resolution of such dispute.
10. Regardless of any earmarking or other designation by Customer, Aurum will apply any payments received from or on behalf of Customer under any schedule (a) first, to late fees due under any schedule, (b) next, to
any outstanding and delinquent account balances (beginning with the oldest charges) under any schedule and (c) finally, to any remaining invoiced account balances.
11. Aurum may, with 60 days' prior written notice to Customer, increase the fees and charges listed in a schedule for recurring services once in each year of the initial or a renewal term after the first year of such term; but Aurum may not in any year increase them more than the percentage increase in the Employment Cost Index for Total Compensation (not seasonally adjusted), Private Industry Workers, White Collar Occupations Excluding Sales, June 1989=100, published monthly by the Bureau of Labor Statistics, U.S. Department of Labor, for the 12-month period preceding the increase. In calculating the percentage increase, Aurum will use the most recently available ECI, as of a date that is no more than 30 and no less than 10 days prior to the date for the required written notice, and the ECI that preceded it by 12 months. If the ECI is no longer published or is replaced by another or an adjusted index, Aurum may use a comparable index in calculating increases.
12. Customer is responsible for paying any sales, use, excise, value-added, personal property or other tax or duty, regardless of what it is called, that any taxing authority levies on the products and services purchased under a schedule; but Customer is not responsible for any tax based upon Aurum's net income. Aurum will charge Customer the tax or duty that is its responsibility.
13. If Customer gives or receives notice not to renew an agreement, Customer will pay to Aurum an amount equal to the sum of (a) all amounts then due and payable to Aurum under such agreement, (b) Aurum's then standard charges for any additional services requested by Customer for deconversion assistance (including charges for the resources utilized to prepare any test or deconversion tapes) and (c) all other costs reasonably incurred by Aurum in connection with such election not to renew (including telecommunication line disengagement expenses and costs of terminating leases on or shipping or storing any equipment provided to Customer by or through Aurum under an agreement and the management fee on such costs set forth in the applicable schedule) that relate to obligations which Customer approved and which extend beyond the then current term of the agreement. Aurum will invoice and Customer must pay all such amounts prior to the earlier of the expiration date or the release of any test tapes or other data or information of Customer.
DATA OWNERSHIP & PRIVACY
14. All information of Customer (including that of its customers) provided to Aurum by Customer and contained in Aurum's data files, is the exclusive property of Customer, and Aurum is only the custodian of that information. Except as may be otherwise provided in a schedule, both Aurum and Customer (and, as to both parties, their employees, agents and independent contractors) will receive and hold all information communicated to one by the other or the other's affiliates, whether before or after the date of an agreement, in strict confidence, will use such information only for purposes of an agreement and will not disclose such information without the prior written consent of the other party. Each party will take all commercially reasonable precautions to prevent the disclosure to outside parties of such information including, but not limited to, the terms of an agreement, except as required by legal, accounting or regulatory requirements (including requirements of a Federal or state regulatory authority with jurisdiction over Customer or Customer's business). If a party is required to disclose any information of the other party in accordance with any such legal, accounting or regulatory requirements, then such party will, unless otherwise prohibited by law, promptly notify the other party of such requirement and will cooperate with such other party (at their expense) in their efforts, if any, to avoid or limit such disclosure (including, without limitation, obtaining an injunction or an appropriate redaction of the information in question). The provisions of this section will survive the expiration or termination of an agreement.
15. Promptly after the termination of, or the expiration of the term applicable to, an agreement and the payment to Aurum of all fees and charges due under such agreement, Aurum will, at Customer's request and expense, return to Customer all of Customer's information with respect to such terminated or expired agreement in Aurum's then standard machine-readable format and media. The provisions of this section will survive the expiration or termination of an agreement.
16. Aurum will use commercially reasonable efforts to (a) ensure the security and confidentiality of Customer information (including that of its customers), (b) protect against any anticipated threats or hazards to the security or integrity of such information and (c) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any Customer. Aurum will employ and maintain controlled access to systems in its data centers and other facilities where such information is located.
17. Customer will inform Aurum prior to creating any connection to the Internet or to any third-party computer network if such connection is made from any point on Customer's computer network that is connected to Aurum's network. Customer will, prior to making such a connection, first obtain (and Aurum will, at Customer's request, provide a copy of) the firewall and Internet security policy of Aurum and will abide by the rules contained in it as the same may be amended from time to time to keep current with technology. Customer will be solely responsible for complying with the most current requirements of such policy.
BUSINESS CONTINUITY
18. Aurum will maintain for its own protection, with carriers that it deems in its sole discretion appropriate and in amounts that it determines in its sole discretion to be adequate, errors and omissions and employee dishonesty coverage for its personnel and insurance coverage for loss from fire, disaster or other causes contributing to interruption of normal services, reconstruction of data file media and related processing costs, additional expenses incurred to continue operations and business interruption to reimburse Aurum for losses resulting from suspension of services due to physical loss of equipment.
19. Each party will develop, maintain and, as necessary in the event of business interruption, execute a business resumption plan and will provide to the other party, its auditors and regulators access to the plan and to plan test results as such other party may reasonably request from time to time, including such information that may be reasonably required to ensure that the plans are compatible. Aurum will not provide access to information of other Aurum customers.
20. Each party will be responsible for training its own personnel as required in connection with all applicable contingency planning activities.
21. Each party's contingency planning activities will comply with such of the following regulatory policies as may be applicable to Customer's business, as the same may be amended or replaced from time to time: (a) Federal Deposit Insurance Corporation, Financial Institution Letter FIL-68-97, dated July 14, 1997; (b) Federal Reserve System Supervision and Regulation, Number SR 97-15, dated May 2, 1997; (c) Office of the Comptroller of the Currency, OCC 97-23, dated May 16, 1997; (d) Office of Thrift Supervision, CEO Ltr 72, dated July 23, 1997; and (e) National Credit Union Administration, Letter to Credit Unions No. 97-CU-3, dated April 7, 1997. If compliance with any amendments or replacements of these policies would significantly increase Aurum's cost of providing products or services, Aurum will be entitled to increase the fees and charges under an agreement by an amount that reflects a pro rata allocation of Aurum's increased cost among the Aurum customers affected by the change.
EXAMINATIONS & AUDITS
22. Aurum will provide auditors and inspectors that Customer designates in writing with reasonable access to its facilities during business hours for the limited purpose of performing audits or inspections of Customer's business. Aurum will provide the assistance to such auditors and inspectors as Aurum deems reasonable. Customer will bear all expenses associated with such audit or inspection and will also compensate Aurum for any services provided in connection with the audit or inspection. Customer will insure that any audit or inspection requested by Customer will be conducted without undue disruption to Aurum's business or operations. Aurum will not (a) provide access to information of other Aurum customers or (b) permit access to its facilities during such times as Aurum deems that such access would be likely to create undue disruption to its operations.
23. Each year during the term of an agreement, Aurum will provide to Customer, at Customer's request and at no additional charge, one copy of Aurum's most recent audited financial statements.
24. Aurum will provide to Customer at Aurum's then standard charge, one copy of Aurum's most recent service auditor's report, performed pursuant to nationally recognized auditing standards for service organizations, applicable to the services provided by Aurum to Customer.
WARRANTIES
25. Aurum will use due care in providing the services set forth in an agreement.
26. Aurum represents and warrants that its providing the products and services described in an agreement will not infringe on any United States letters patent, any trade secret, or any copyright, trademark, service mark, trade name or similar proprietary right conferred by common law or by any law of the United States or any state and that it has no knowledge of any existing adverse claim against its right to provide such products and services.
27. Aurum will use commercially reasonable efforts to provide its services in a manner that will allow Customer to comply with Federal laws, rules and regulations as the same may be amended or replaced from time to time. If Customer believes that a modification to Aurum's services is required under any law, rule or regulation, Customer will promptly so inform Aurum. Aurum will perform any modifications to the manner in which it provides its services that Aurum determines are necessary or desirable; provided, if any such changes or modifications result in an increase in Aurum's cost of providing such services, Aurum will be entitled to increase the charges under an agreement by an amount that reflects a pro rata allocation of Aurum's increased cost among the Aurum customers using such services. Customer acknowledges that Aurum has no duty or responsibility to modify any third-party product, except to the extent that the vendor thereof has such a duty or responsibility to modify such product pursuant to the applicable license agreement between Aurum and such vendor. New or enhanced features, functions, reports or other services that may result from such modifications may be provided to Customer at an additional cost.
28. Aurum represents and warrants that, in providing the products and services described in an agreement, it will comply in all material respects with all applicable laws, rules and regulations.
29. EXCEPT AS EXPRESSLY SET FORTH IN AN AGREEMENT (INCLUDING THESE TERMS AND CONDITIONS), AURUM DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, WITH RESPECT TO ANY PRODUCT OR SERVICE PROVIDED UNDER SUCH AGREEMENT, ABOUT ITS PERFORMANCE OR LEGAL OR REGULATORY COMPLIANCE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OF INFORMATIONAL CONTENT OR SYSTEM INTEGRATION.
LIABILITY; INDEMNIFICATION
30. Customer will balance reports to verify master file information and will
inspect and review all reports and other output (whether printed,
microfiche or electronically transmitted) created from data provided by
Customer to Aurum. Customer will reject all incorrect reports or output
(a) within 2 business days after receipt of daily reports or output, (b)
within 5 business days after receipt of annual, quarterly or monthly
reports or output and (c) within 3 business days after receipt of all
other reports or output. Aurum will correct any errors in Customer's files
that result in errors in reports or other output where such errors are
solely because of either malfunctions of Aurum's equipment or its systems
or errors of Aurum's operators, programmers or other personnel and are
called to Aurum's attention within the time frames specified for balancing
and rejecting reports. Aurum will, to the extent reasonably practicable,
correct any other errors for an additional charge. The foregoing will be
Customer's exclusive remedies for errors in reports or other output
provided by Aurum older an agreement.
31. Aurum will be responsible for data and other information (including personal property) of Customer from the time that such is received by Aurum at its facilities until it is, in the case of data, processed and files based thereon are transmitted to Customer and, in the case of other information (including personal property), released for pickup at Aurum's facility to a courier or other representative designated by Customer, provided, Aurum's liability for the destruction or disappearance of data or other information (including personal property) will be limited to cases where the destruction or disappearance is due entirely to the negligence or willful misconduct of Aurum and, if so, Aurum's sole obligation is to reconstruct the data or other information (including personal property) from back-up files that Aurum is obligated by an agreement to create and maintain or from files created and maintained by Customer.
32. If either party has a claim against the other based on an agreement including, but not limited to, its formation or a breach of it, such party must bring that claim, by filing with the other party a request for mediation, within 2 years of the occurrence that is the basis for the claim.
33. Aurum's liability with respect to any claim based on a service provided under an agreement is limited to the total fees and charges actually paid to Aurum for that service in the 3-month period before that occurrence. In the case of product purchases, Aurum's liability is limited to the purchase price actually paid to Aurum for the product. The foregoing limitations do not apply to infringement claims made under an agreement.
34. Regardless of anything else in an agreement and to the greatest extent permitted by law, no court, tribunal, arbitrator or presiding officer of any administrative or other proceeding may award to Customer any special, indirect, consequential, speculative or incidental damages (including, without limitation, lost profits or goodwill) or punitive damages in any dispute (including, without limitation, any dispute based on alleged fraudulent, willful or dishonest conduct) against Aurum, and Customer expressly, completely and irrevocably waives any right to obtain such damages in connection with any such proceeding. Customer acknowledges that, prior to agreeing to the foregoing provision, it has consulted, or waived the right to consult, legal counsel as to the consequences of this provision. The foregoing limitations do not apply to infringement claims made under an agreement.
35. Neither party will be liable for any default or delay in the performance of its obligations under an agreement (except for the payment of money) if and to the extent such default or delay is caused, directly or indirectly, by acts of God, governmental acts, accidents, wars (declared or undeclared), terrorism, threats of terrorism, acts of a public enemy, epidemics or quarantines, riots or civil unrest, labor disputes, fires, storms, earthquakes, floods or elements of nature, Federal, state or municipal actions or regulations, failure or refusal by any regulatory or other agency to act upon or grant permits or licenses, or any other cause beyond the reasonable control of such party, provided such default or delay could not have been prevented by commercially reasonable precautions and cannot reasonably be circumvented by the non-performing party through the use of commercially reasonable alternative sources, workaround plans or other means.
36. Aurum and Customer each will indemnify, defend and hold harmless the other from any and all claims, actions, damages, liabilities, costs and expenses, including without limitation, reasonable attorneys' fees and other costs, arising out of any claims of infringement of any United States letters patent, any trade secret, or any copyright, trademark, service mark, trade name or similar proprietary right conferred by common law or by any law of the United States or any state alleged to have occurred because of the products or services provided by the indemnitor. This indemnity will not apply unless the indemnitee informs the indemnitor as soon as practicable, but in no event more than 30 days, of any claim or action alleging such infringement and has given the indemnitor full opportunity to control the response thereto and the defense thereof, including, without limitation, any agreement relating to settlement.
37. Customer will indemnify, defend and hold harmless Aurum against any claim made by any person that is based on Aurum's providing the products or services described in an agreement, but this indemnity, defense and hold harmless will not apply if the claim arises from Aurum's gross negligence or willful misconduct.
TERMINATION
38. If Customer defaults in the payment of any charges, fees or other amounts due under any agreement with Aurum and fails to cure such default within 10 calendar days after having received written notice of such default, then Aurum, by giving Customer at least 30 days prior written notice, may (but is not obligated to) terminate any one or all agreements that it has with Customer as of the date specified in such notice.
39. If either party materially defaults in its performance under an agreement (except for non-payment of amounts due to Aurum), after receiving written notice of such default the defaulting party will promptly commence curing the default and thereafter will proceed with commercially reasonable efforts to substantially cure the default. If the defaulting party fails to substantially cure such default as quickly as practicable (but in no event beyond the date that is 90 days after receiving written notice of the default or, for those defaults which cannot reasonably be cured within 90 days, the date that is within the period of time which is commercially reasonable to cure the default), then the party not in default may, by giving the defaulting party at least 30 days' prior written notice, terminate such agreement (but no other agreement) as of the date specified in such notice.
40. If (a) either party (i) becomes or is declared insolvent or bankrupt, is the subject of any proceedings relating to its liquidation or insolvency or for the appointment of a receiver, conservator or similar officer, or makes an assignment for the benefit of all or substantially all of its creditors or enters into any agreement for the composition, extension or readjustment of all or substantially all of its obligations or (ii) fails to perform its obligations under an agreement to prevent or circumvent a default or delay in the performance of its obligations under an agreement that is caused by an event beyond such party's reasonable control and (b) there is, as a result of that event or failure, a material adverse effect upon the non-terminating party's performance under an agreement, then the other party may, by giving prior written notice thereof to the non-terminating party, terminate such agreement (but no other agreement) as of the date specified in such notice.
41. Subject to payment of the liquidated damages provided for in the applicable schedule, Customer may for any reason (including acquisition of 50% or more of the stock or assets of Customer by another person or entity, whether by merger, reorganization, sale, transfer or other similar transaction) terminate an agreement by giving Aurum prior written notice of such termination and specifying the date of termination in such notice, which date will be not less than 60 days after the date of the notice and which date must be reasonably acceptable to Aurum.
42. During any period prior to termination of an agreement (including specified notice periods), Aurum will provide the products and services under such agreement and will charge Customer for such products and services, and Aurum will reasonably cooperate with Customer in its transition to a new service provider.
MISCELLANEOUS
43. Each schedule, and these terms and conditions that are by reference a part of it, constitutes a separate and independent legal agreement. The parties may agree to one or more additional schedule(s); and, if so, the agreement(s) established will be evidenced by signing an Information Technology Services Agreement that will incorporate these terms and conditions and those set forth in such schedule(s).
44. Each agreement is the entire agreement of the parties and supersedes all other prior agreements and understandings, whether written or verbal, with respect to products and services described in that agreement. Each agreement may not be amended except in a writing signed on behalf of both parties, and no waiver of any provision of or right under an agreement will be effective against a party unless that waiver is in a writing signed on behalf of the party against whom the waiver is asserted.
45. Each agreement is binding on the parties and their respective successors and permitted assigns. Neither party may assign an agreement unless it obtains the prior written consent of the other party, which consent will not be unreasonably withheld. The following transactions relating to either party will not require
approval of the other party under this section: an initial public offering of stock, a sale of stock, any merger (including a reincorporation merger), consolidation, reorganization or stock exchange or a sale of all or substantially all of the assets of a party or of an entire line of business of a party or other similar or related transaction in which such party is the surviving entity or, if such party is not the surviving entity, the surviving or succeeding entity continues to conduct the business conducted by such party prior to consummation of the transaction.
46. If a dispute arises out of or relates to an agreement, including but not limited to its formation or a breach of it, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation conducted under the Commercial Mediation Rules of the American Arbitration Association (except for those changes specifically set forth in these terms and conditions), or such other rules and procedures to which the parties and the mediator may agree, before resorting to litigation or some other dispute resolution procedure. Mediation will commence when a party sends a written request for mediation of a dispute to the other party, and the parties will select a single mediator to serve. The parties will each pay their own expenses in connection with the mediation (including attorneys' fees and other costs), and they will share equally in paying the mediator (including any fees and other costs).
47. All notices, claims, demands and other communications between the parties must be in writing and will be deemed given (a) in the case of a facsimile transmission or email, when the sender has received an electronic confirmation of transmission by the transmitting equipment (provided that such transmission is completed prior to 5:00 p.m., local time at the location of the recipient, on a business day; otherwise, such transmission will be deemed to have been received on the next business day); (b) in the case of delivery by a standard overnight carrier, upon the date of delivery indicated in the records of such carrier; or (c) in the case of delivery by hand, when delivered by hand addressed to the person at the address set forth on the signature page of an agreement (or to another address provided by notice under this section).
48. The laws of the State of Texas, excluding its choice of law principles, will govern the relationship between the parties and disputes, differences, controversies or claims directly or indirectly based on an agreement, including those relating to the formation, validity, interpretation, construction, performance, breach, enforceability or termination of an agreement and duties based on tort, contract or statutory concepts.
49. THE PARTIES HEREBY IRREVOCABLY AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO AN AGREEMENT WILL EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN DALLAS COUNTY, TEXAS. BY EXECUTION AND DELIVERY OF AN AGREEMENT, EACH PARTY, ON BEHALF OF ITSELF AND ITS PERMITTED SUCCESSORS AND ASSIGNS, IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT OVER ITSELF AND ITS PROPERTY WITH RESPECT TO ANY SUCH ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT WILL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.
50. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BASED ON AN AGREEMENT.
51. Except as expressly provided for with respect to mediation, the prevailing party in any action brought by a party pursuant to an agreement is entitled to recover reasonable attorneys' fees and other costs incurred in connection with such action including, but not limited to, expenses and costs of investigation, witness fees and travel, in addition to any other relief to which the prevailing party may be entitled.
52. The parties understand that an agreement is a legally binding agreement that may affect their rights. Each party represents to the other that they have received legal advice from counsel of their choice regarding the meaning and legal significance of an agreement and that they are satisfied with their legal counsel and the advice received from their legal counsel or that they have waived their right to do so.
53. If any provision of an agreement requires judicial or administrative interpretation or interpretation by an arbitrator, mediator or similar person, such person interpreting that agreement will not apply a presumption that its terms will be more strictly construed against the person who itself or through its agent prepared that document.
54. The invalidity or unenforceability of any provision of an agreement will not affect the validity or enforceability of the other provisions of that agreement and such other provisions will remain in full force and effect. If any provision of an agreement is deemed to be unenforceable by reason of its extent, duration, scope or otherwise, then the parties contemplate that the person making that determination will reduce such extent, duration, scope or other provision and will enforce it in its reduced form for all purposes contemplated by that agreement. Nothing in an agreement, express or implied, is intended to confer upon any person not a party to that agreement any rights or remedies of any nature whatsoever under or by reason of that agreement.
55. In the event of a conflict between these terms and conditions and any provision in a schedule, these terms and conditions will govern the interpretation of an agreement.
56. During the term of an agreement and for a period of 12 months thereafter, neither party will, without the prior written consent of the other, offer employment to or employ any person employed then or within the preceding 12 months by the other party, if the person was involved in providing or receiving the products or services covered by that agreement.
57. Termination of an agreement will not affect the rights or obligations of the parties that arose prior to, or that are expressly intended by their terms to continue beyond, any such termination, and such rights or obligations, and the dispute resolution procedures set forth in these terms and conditions, will survive any such termination.
ADDENDUM TO
AURUM TECHNOLOGY INC.
INFORMATION TECHNOLOGY SERVICES AGREEMENT
GENERAL TERMS & CONDITIONS
Each of the provisions of this addendum is incorporated into the General Terms & Conditions and expressly supersedes such terms and conditions to the extent they are inconsistent with them.
1.) Paragraph 9 is hereby deleted in its entirety and replaced by the following:
"If Customer in good faith disputes any invoiced amounts, Customer will provide written notification of such dispute to Aurum, setting forth in reasonable detail the amount and reason for the dispute. Such notice will be given prior to the date that the disputed payment is due to Aurum. The parties will immediately negotiate in good faith to resolve the dispute. If the parties cannot resolve the dispute prior to the date when the disputed amount would be due, then Customer may withhold the disputed amount or 5% of the total invoice amount for the invoice containing the disputed amount, whichever is less. Customer shall have no further right to off set against any other funds or obligations owing to Aurum, pending the resolution of such dispute."
2.) Paragraph 21 is hereby deleted in its entirety and replaced by the following:
"Each party's contingency planning activities will comply with such of the following regulatory policies as may be applicable to Customer's business, as the same may be amended or replaced from time to time: (a) Federal Deposit Insurance Corporation, Financial Institution Letter FIL-68-97, dated July 14, 1997; (b) Federal Reserve System Supervision and Regulation, Number SR 97-15, dated May 2, 1997; (c) Office of the Comptroller of the Currency, OCC 97-23, dated May 16, 1997; (d) Office of Thrift Supervision, CEO Ltr 72, dated July 23, 1997; and (e) National Credit Union Administration, Letter to Credit Unions No. 97-CU-3, dated April 7, 1997. If compliance with any amendments or replacements of these policies would significantly increase Aurum's cost of providing products or services, Aurum will be entitled to increase the fees and charges under an agreement by an amount that reflects a pro rata allocation of Aurum's increased cost among the Aurum customers affected by the change. However, any increase in the fees and charges under an agreement under this provision will not exceed 20% of the total monthly invoice amount paid by Customer to Aurum for all services Customer is receiving as of the effective date of such increase. For purposes of this provision only, the total monthly invoice amount will be based on the average of the fees paid to Aurum by Customer for all services received by Customer from Aurum during the 12 months preceding the effective date of such increase, recalculated based on the account volume, number of users or other applicable measure as of the effective date of such increase."
3.) For the agreement formed by Customer's Core Processing Schedule only Paragraph 30 is hereby deleted in its entirety and replaced by the following:
"Customer will balance reports to verify master file information and will inspect and review all reports and other output (whether printed, microfiche or electronically transmitted) created from data provided by Customer to Aurum. Customer will reject all incorrect reports or output (a) within 3 business days after receipt of daily reports or output, (b) within 7 business days after receipt of annual, quarterly or monthly reports or output and (c) within 4 business days after receipt of all other reports or output. Aurum will correct any errors in Customer's files that result in errors in reports or other output where such errors are solely because of either malfunctions of Aurum's equipment or its systems or errors of Aurum's operators, programmers or other personnel and are called to Aurum's attention within the time frames specified for balancing and rejecting reports. Aurum will, to the extent reasonably practicable, correct any other errors for an additional charge. The foregoing will be Customer's exclusive remedies for errors in reports or other output provided by Aurum under an agreement."
4.) Paragraph 31 is hereby deleted in its entirety and replaced by the following:
"Aurum will be responsible for data and other information (including personal property) of Customer from the time that such is received by Aurum at its facilities until it is, in the case of data, processed and files based thereon are transmitted to Customer and, in the case of other information (including personal property), released for pickup at Aurum's facility to a courier or other representative designated by Customer, provided, Aurum's liability for the destruction or disappearance of data or other information (including personal property) will be limited to cases where the destruction or disappearance is due to the negligence or willful misconduct of Aurum while such information is in the control and/or custody of Aurum and such information, in the case of data, was not in any way damaged or lost in transmission to Aurum or due to time bombs, Trojan horses, other viruses or other destructive code that was included in such information prior to its receipt by Aurum, or in the case of other information (including personal property), was not in any way damaged or incomplete prior to its receipt by Aurum, and if so, Aurum's sole obligation is to reconstruct the data or other information (including personal property) from back-up files that Aurum is obligated by an agreement to create and maintain or from files created and maintained by Customer."
5.) Paragraph 33 is hereby deleted in its entirety and replaced by the following:
"Aurum's liability with respect to any claim based on a service provided under an agreement is limited to the total fees and charges actually paid to Aurum for that service in the 6-month period before that occurrence. In the case of product purchases, Aurum's liability is limited to the purchase price actually paid to Aurum for the product. The foregoing limitations do not apply to infringement claims made under an agreement."
IN WITNESS WHEREOF, the parties have duly executed this addendum by the duly authorized signatures below as of June 10, 2003.
AURUM TECHNOLOGY INC. TOWN BANK OF WESTFIELD
By: /s/ Robert H. Carpenter, Jr. By: /s/ Robert W. Dowens, Sr.
----------------------------------- --------------------------------
Name: /s/ Robert W. Carpenter, Jr. Name: Robert W. Dowens, Sr.
-------------------------------- ------------------------------
Title: Vice President Title: President & CEO
------------------------------- -----------------------------
Date: 6/18/2003 Date: June 10, 2003
-------------------------------- ------------------------------
|
INITIAL TERM
Five (5) years
RENEWAL TERM
Two (2) years
BEGINNING DATE FOR SERVICES
September 19, 2003 or a mutually agreed upon date not later than
October 5, 2003.
I. Definitions:
The following definitions apply to the Services described in this Schedule and are provided as a supplement to definitions included in the Terms & Conditions.
(a) "Additional Services" are any Service which is not a Basic Service, an Optional Service, or a Conversion Service, requested of AURUM to perform by Customer.
(b) "AURUM Systems" are all Systems, except for Systems provided by Customer, used by AURUM to provide Services, including without limitation any improvements, modifications, or enhancements made by AURUM to any System and provided to Customer under the Terms & Conditions.
(c) "Basic Services" are the Services listed in Exhibit A.
(d) "Business Day" is each weekday, Monday through Friday, which is not a holiday of Customer.
(e) "Conversion Services" are those services and listed in Exhibit C and instructions reasonably required for Customer to convert to and use the AURUM Systems that are performed by AURUM on a mutually agreeable schedule. Customer will cooperate in the conversion effort and timely provide whatever information, data, clerical and office support, management decisions, approvals, and signoffs that AURUM reasonably requires. According to a plan to be developed by Customer and AURUM, AURUM will train a mutually designated group of Customer's personnel in the proper use of the AURUM Systems to enable such personnel to train Customer`s user personnel in the use of the AURUM Systems. Customer will cooperate with AURUM in scheduling training in conjunction with Customer's conversion to the AURUM Systems.
(f) "Customer Systems" are the Systems listed in Exhibit D to be provided by Customer for use in conjunction with AURUM Systems.
(g) "Data Center" is the space at one or more locations where AURUM performs Services, excluding Customer locations.
(h) "Equipment" is all telecommunications lines, modems, and other equipment, including without limitation terminals, control units, ports, logical units, and all related data transmission services required by AURUM for Customer to access the AURUM Systems, transmit data to AURUM, and receive reports and other output from AURUM.
(i) Operational Date" is the later of (i) the Beginning Date for Services, or (ii) the first day of the calendar month in which any Conversion Services are completed and Customer has the capability to input transactions or data for processing by AURUM.
(j) "Optional Services" are the Services listed in Exhibit B.
(k) "PC Software" means, if applicable, the PC-based software applications to be utilized by Customer in connection with the Services, as such software applications are described in Exhibit A.
(l) "Service" or "Services" are all of the services to be provided by AURUM under the Terms & Conditions, which include the Basic Services, Optional Services, Conversion Services, and Additional Services.
(m) "System" or "Systems" are (i) computer programs, including without limitation software, firmware, application programs, operating systems, files, and utilities; (ii) supporting documentation for such computer programs, including without limitation input and output formats, program listings, narrative descriptions, operating instructions and procedures, user and training documentation, special forms, and source code; and (iii) the tangible media upon which such programs are recorded, including without limitation chips, tapes, disks, and diskettes.
II. Core Processing Services
AURUM will:
(a) Beginning on the Operational Date, operate the AURUM Systems at the Data Center, and accept data and other input from Customer. AURUM will make daily, monthly, and other reports and output, including specially requested reports, available to Customer at the Data Center for delivery or transmit them to Customer, subject to Customer's timely delivery or transmission of data and other input to the Data Center for processing. AURUM will provide the Services in accordance with the schedule provided to Customer by AURUM upon commencement of the Services, which may be updated by AURUM from time to time. AURUM will not be responsible for the loss of any input or output during transit.
(b) Require Customer to comply with all operating instructions for the AURUM Systems that are issued by AURUM from time to time. Except as otherwise provided in the Terms & Conditions, Customer will be responsible for the supervision, management, and control of its use of the AURUM Systems, including without limitation (i) implementing sufficient procedures to satisfy its requirements for the security and accuracy of the data and other input Customer provides, (ii) implementing reasonable procedures to verify reports and other output from AURUM within the time frames specified in Paragraph 30 of Terms & Conditions, and (iii) specifying the methods of accrual calculation to be used by AURUM in providing the Services from the options available in the AURUM Systems.
(c) Provide all Equipment at Customer's expense, including related shipping, installation, and maintenance Fees, and advise Customer on the compatibility of its Equipment with the AURUM Systems. Customer may elect, with AURUM's approval, to provide such Equipment at Customer's expense, subject to Fees for Additional Services required for AURUM Systems access or configuration. Customer will maintain all Equipment owned or leased by Customer in good working order in accordance with manufacturer's specifications.
(d) Provide for Customer's use one copy of AURUM's standard user documentation and one copy of any revisions describing the preparation of input for and use of output from the AURUM Systems. Such documentation will address the reports provided under the Terms & Conditions. Upon Customer's request, AURUM will provide additional copies of such documentation at AURUM's then standard Fees.
(e) Correct any errors or omissions in customer files that result in errors or omissions in reports or other output where such errors or omissions (i) are due solely to either malfunctions of AURUM's equipment or the AURUM Systems or errors of AURUM's operators, programmers, or other personnel, and (ii) are called to AURUM's attention within the time frames specified in Paragraph
30 of Terms & Conditions. AURUM will, to the extent reasonably practicable, correct any other errors as an Additional Service.
(f) Provide standard AURUM forms for use at the Data Center. Unless otherwise agreed in writing, Customer will provide or pay for all customized forms required by Customer. These forms will conform to AURUM's reasonable specifications. Customer will also provide all forms produced or printed at Customer's premises and required for the performance of Services, or will pay mutually agreed Fees to AURUM for such forms if provided by AURUM at Customer's request.
(g) Establish, modify, or substitute from time to time any Equipment, processing priorities, programs, or procedures used in the operation of the AURUM Systems or the provision of the Services that AURUM reasonably deems necessary, and notify Customer of any such changes that will affect Customer's operations.
III. Liquidated Damages
The parties acknowledge that upon termination of the Agreement of which this schedule is a part for any reason, Aurum will incur damages resulting from such termination that will be difficult or impossible to ascertain.
Prior to such termination, except termination by Customer for a material default or for insolvency, bankruptcy or the like, and in addition to all other amounts then due to Aurum, Customer will pay to Aurum as reasonable liquidated damages (and not as a penalty) the sum of (a) all costs reasonably incurred by Aurum in connection with such termination, including telecommunication line disengagement expenses and costs of terminating leases on or shipping or storing any equipment provided to Customer by or through Aurum under the Agreement of which this schedule is a part, a 25% management fee on such costs, Aurum's Fees for any additional services requested by Customer for de-conversion assistance and Aurum's then standard Fees for any test or de-conversion tapes and (b) the product of (1) the average monthly Fee to Customer for services under the Agreement of which this schedule is a part during the 12 calendar months immediately preceding the calendar month in which notice of termination was given, (2) the total number of months remaining in either the term then in effect from the effective date of the termination and (3) 80% for termination on or before the end of the second year following the Beginning Date for Services, 70% for termination after the end of second year following the Beginning Date for Services but before the end of the third year following the Beginning Date for Services, 60% for termination after the end of the third year following the Beginning Date for Services but before the end of the fourth year following the Beginning Date for Services and 50% for termination after the end of the fourth year following the Beginning Date for Services. If the Agreement of which this schedule is a part has been in effect less than 12 calendar months prior to the giving of the notice of termination, then the parties will compute the amount due under subsection (b) above using the average monthly Fee for services made during such lesser number of calendar months. If termination of the Agreement of which this schedule is a part occurs prior to the providing of any services, then the parties will compute the amount due under subsection (b) above assuming an estimated monthly Fee that Aurum would have reasonably expected.
In the case of termination by Customer for a material default or for insolvency, bankruptcy or the like, Customer will pay to Aurum only the amounts set forth in subsection (a) of the preceding paragraph.
Aurum may, at its option, invoice Customer for the greater of (a) Aurum's good faith estimate of the termination costs or (b) the aggregate of the Fees payable to Aurum for the 2 calendar months preceding the month in which notice of termination is given. If the actual termination costs are greater or less than the amount of Aurum's invoice that is paid by Customer under the immediately preceding sentence, then Customer will pay Aurum, or Aurum will refund to Customer, as the case may be, the difference between the actual termination costs and the amount paid.
Aurum will invoice and Customer will pay all amounts payable under this section prior to the earlier of (a) the effective date of such termination or (b) the release to Customer of any test tapes or other data or information of Customer.
IV. Service Fees
Customer will pay AURUM for the Services as follows:
(a) For Basic Services, the Fees listed in Exhibit A.
(b) Months 1-3 Customer will be invoiced at the lowest tier rate of $.70
and starting the fourth month, at the volume based rates in Exhibit
A.
(b) For Optional Services, AURUM's then standard Fees for such Services listed in Exhibit B.
(c) For Conversion Services, the applicable conversion Fee listed in Exhibit C.
(d) For Additional Services, AURUM's then standard Fees for such Services, or, if AURUM then has no standard Fees for such Services, upon whatever other basis that the parties agree.
(e) All costs incurred by AURUM (i) in mailing reports or other output to Customer, its customers, or third parties, and (ii) in transporting, shipping, or delivering reports, output, or input between the Data Center and Customer's locations.
(f) All actual, out-of-pocket costs and expenses, including, without limitation, travel and travel-related expenses, which are incurred by AURUM in providing Services when incurred at Customer's request.
(g) Any other Fees expressly provided in the Terms and Conditions
Core Account Processing - Monthly Rate
-----------------------------------------------------------------------------------------------------------
Service Description Unit of Monthly Fee Monthly Fee Monthly Fee
Measure First 2,500 2,501-7,500 7,501 >
-----------------------------------------------------------------------------------------------------------
A. Combined Deposit Services
-----------------------------------------------------------------------------------------------------------
Non -Interest Bearing Account Fee Account $1.00 $.85 $.70
-----------------------------------------------------------------------------------------------------------
Upgrades Upgrade N/C N/C N/C
-----------------------------------------------------------------------------------------------------------
B. Combined Lending Services
-----------------------------------------------------------------------------------------------------------
Account Fee Account $1.00 $.85 $.70
-----------------------------------------------------------------------------------------------------------
Upgrades Upgrade N/C N/C N/C
-----------------------------------------------------------------------------------------------------------
C. Safe Deposit Services
-----------------------------------------------------------------------------------------------------------
Account Fee Account $1.00 $.85 $.70
-----------------------------------------------------------------------------------------------------------
Upgrades Upgrade N/C N/C N/C
-----------------------------------------------------------------------------------------------------------
D. Shareholder Services
-----------------------------------------------------------------------------------------------------------
Account Fee Account $1.00 $.85 $.70
-----------------------------------------------------------------------------------------------------------
Upgrades Upgrade N/C N/C N/C
-----------------------------------------------------------------------------------------------------------
E. General Ledger Services
-----------------------------------------------------------------------------------------------------------
Account Fee Account $1.00 $.85 $.70
-----------------------------------------------------------------------------------------------------------
Upgrades Upgrade N/C N/C N/C
-----------------------------------------------------------------------------------------------------------
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These per account fees also include the following services.
Single Integrated System Integrated Accounts Payable Accounting Integrated CIF Integrated Regulatory Reporting Integrated Platform - Deposits Integrated Profitability Analysis Integrated Platform - Loans Parameter Driven Integrated Teller Advanced Security Integrated CRM Shared Tables for Rates, Service Fees, etc. Integrated ODBC Report Writer Customer/Account Level Messaging Integrated Windows Presentation Option or On line Help and Documentation Integrated Browser Presentation Option Unlimited History Retention All Except DDA - 60 Days Integrated OFAC Reporting OFAC Integrated Safe Deposit Box Accounting Elan' Real Time Interface Integrated Shareholder Accounting Integrated General Ledger |
Optional Services are not included in the Basic Services One-time Fee, Monthly Fee, or Other Fees. Prices are as of the Effective Start Date, are subject to change by AURUM at any time , and may be discontinued by AURUM with notice.
-------------------------------------------------------------------------------------------------------------------
Unit of One-time Monthly Annual
Service Description Measure Fee Fee Fee
-------------------------------------------------------------------------------------------------------------------
A. Deposit Services
-------------------------------------------------------------------------------------------------------------------
On-line NSF Exception Processing Module N/C
-------------------------------------------------------------------------------------------------------------------
RIP System (Return item Processing) Module N/C
-------------------------------------------------------------------------------------------------------------------
12 Month Demand Deposit Rolling History Module $100
-------------------------------------------------------------------------------------------------------------------
NSF Notices Notice N/C
-------------------------------------------------------------------------------------------------------------------
Customer Notices Notice N/C
-------------------------------------------------------------------------------------------------------------------
IRA Statement Statement N/C
-------------------------------------------------------------------------------------------------------------------
Account Reconciliation Services (ARP)
-------------------------------------------------------------------------------------------------------------------
Account $5
-------------------------------------------------------------------------------------------------------------------
Transaction $0.045
-------------------------------------------------------------------------------------------------------------------
B. Lending Services
-------------------------------------------------------------------------------------------------------------------
Insurance Reporting Tape $40
-------------------------------------------------------------------------------------------------------------------
Credit Reporting Tape $40
-------------------------------------------------------------------------------------------------------------------
Coupon Tape Tape $40
-------------------------------------------------------------------------------------------------------------------
Notices Notice N/C
-------------------------------------------------------------------------------------------------------------------
Loan Amortization Schedule $1.00
-------------------------------------------------------------------------------------------------------------------
C. Automated Clearing House (ACH)
-------------------------------------------------------------------------------------------------------------------
Base Fee Month N/C
-------------------------------------------------------------------------------------------------------------------
Transaction Fee Transaction $0.07
-------------------------------------------------------------------------------------------------------------------
D. Over-the-Counter Reporting
-------------------------------------------------------------------------------------------------------------------
Fee (Bonds, etc.) Per Item $0.50
-------------------------------------------------------------------------------------------------------------------
Forms (1099, 1098, 5498, etc.) Item Quote
-------------------------------------------------------------------------------------------------------------------
E. COLD Storage System
-------------------------------------------------------------------------------------------------------------------
OMSE Software (10 Concurrent Users) License $7,000 N/C
-------------------------------------------------------------------------------------------------------------------
OMSE Processing Month $470
-------------------------------------------------------------------------------------------------------------------
OMSE Software Additional License (10 License $3,000 $75
Users)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
F. Other Services
-------------------------------------------------------------------------------------------------------------------
Auditor Report (SAS70) Report $800
-------------------------------------------------------------------------------------------------------------------
Hardware Maintenance Quote
-------------------------------------------------------------------------------------------------------------------
Programming Changes Quote
-------------------------------------------------------------------------------------------------------------------
Special Training Quote
------------------------------------------------------------------------------------------------------------------
Special Reports Quote
-------------------------------------------------------------------------------------------------------------------
Year-End Processing Forms (Not GR Form) Quote
-------------------------------------------------------------------------------------------------------------------
PC Based Products Quote
-------------------------------------------------------------------------------------------------------------------
On-line Check Ordering Quote
-------------------------------------------------------------------------------------------------------------------
G. Graphical User Interface (GUI)
-------------------------------------------------------------------------------------------------------------------
ABS GUI Seats 1-18 N/C N/C N/C
-------------------------------------------------------------------------------------------------------------------
ABS GUI Seats > 18 $100 N/C N/C
-------------------------------------------------------------------------------------------------------------------
H. Browser User Interface (Browser)
-------------------------------------------------------------------------------------------------------------------
ABS Browser Seat $100 N/C N/C
-------------------------------------------------------------------------------------------------------------------
I. ABS Deposit Platform
--------------------------------------------------------------------------------------------------------------------
License Workstation N/C
--------------------------------------------------------------------------------------------------------------------
Maintenance Deposit Account N/C
--------------------------------------------------------------------------------------------------------------------
Training Additional Day Quote
--------------------------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------------------------
Unit of One-time Monthly Annual
Service Description Measure Fee Fee Fee
-------------------------------------------------------------------------------------------------------------------
J. ABS Loan Platform
-------------------------------------------------------------------------------------------------------------------
License Workstation N/C
-------------------------------------------------------------------------------------------------------------------
Maintenance Loan Account N/C
-------------------------------------------------------------------------------------------------------------------
Training Additional Day Quote
-------------------------------------------------------------------------------------------------------------------
K. ABS Teller Platform
-------------------------------------------------------------------------------------------------------------------
License Workstation N/C
-------------------------------------------------------------------------------------------------------------------
Maintenance Deposit Account N/C
-------------------------------------------------------------------------------------------------------------------
Training Additional Day Quote
-------------------------------------------------------------------------------------------------------------------
L. ABS Interface
-------------------------------------------------------------------------------------------------------------------
Asset/Liability Forecasting
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied interface N/A
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Interface Quote
-------------------------------------------------------------------------------------------------------------------
ATM - On-line
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied interface $3,500 $60
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied interface $8,000 $1,600
-------------------------------------------------------------------------------------------------------------------
ATM - Batch
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface N/C N/C
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied $5,000 $1,000
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Test $450 $90
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Test $450 $90
-------------------------------------------------------------------------------------------------------------------
Call Report Download
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface $1,400 $25
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Interface $2,500 $450
-------------------------------------------------------------------------------------------------------------------
Check image 3rd Party
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface N/C N/C
-------------------------------------------------------------------------------------------------------------------
Party Supplied Interface $10,000 $2,000
-------------------------------------------------------------------------------------------------------------------
Child Support
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface N/C
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Interface
-------------------------------------------------------------------------------------------------------------------
Deposit Platform
-------------------------------------------------------------------------------------------------------------------
Aurum Platform Interface N/C N/C
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Interface $4,500 $900
-------------------------------------------------------------------------------------------------------------------
Loan Platform
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface N/C N/C
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Interface $5,500 $92
-------------------------------------------------------------------------------------------------------------------
On-line Teller Interface
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface N/C N/C
-------------------------------------------------------------------------------------------------------------------
3rd Party Supplied Seat $500 $100
-------------------------------------------------------------------------------------------------------------------
Voice Response Unit - On-line
-------------------------------------------------------------------------------------------------------------------
Aurum Supplied Interface $6,000 $500
-------------------------------------------------------------------------------------------------------------------
Calls Per transaction $0.07
-------------------------------------------------------------------------------------------------------------------
Time per Call Per minute $0.07
-------------------------------------------------------------------------------------------------------------------
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Exhibit C Conversion Services
--------------------------------------------------------------------------------------------------------------------
Service Description Unit of One-time Monthly Other Fee
Measure Fee Fee
--------------------------------------------------------------------------------------------------------------------
A. Conversion Service
--------------------------------------------------------------------------------------------------------------------
Core Data Conversion Account $1.00
--------------------------------------------------------------------------------------------------------------------
Application Training @ Aurum Center Conversion $4,000
--------------------------------------------------------------------------------------------------------------------
Implementation Services Conversion $5,000
--------------------------------------------------------------------------------------------------------------------
Out of pocket travel expenses Actual As incurred
--------------------------------------------------------------------------------------------------------------------
Out of pocket Customer conference call expense Actual As incurred
--------------------------------------------------------------------------------------------------------------------
|
Note: Excludes Customer ancillary systems such as COLD, Excel, or other server-based systems.
Exhibit D Customer Systems
Customer will provide, at Customer's expense, the Customer Systems. Customer will be responsible for any license or maintenance fees related to providing the Customer Systems for use by AURUM in connection with the Services. Customer will, at Customer's expense, ensure that the Customer Systems are at all times compatible with the AURUM Systems and AURUM will have no liability hereunder for any delay or failure to perform Services which arises as a result of the failure of Customer to maintain any Customer System so that it is compatible with the AURUM Systems.
For all Customer Systems PC Software.
(a) Notwithstanding II.(c) of this schedule, Customer will, at Customers expense, provide and be responsible for all Equipment required for Customer to use the AURUM PC Software ("PC Software Equipment").
(b) Without AURUM's prior written consent, Customer will not (i) install any System other than the AURUM PC Software on the applicable PC Software Equipment (ii) sell, assign, lease, transfer, or disclose to any third party the AURUM PC Software, (iii) use the AURUM PC Software for the commercial benefit of any third party; (iv) copy or reproduce the AURUM PC Software; or (v) reverse assemble, reverse compile, or otherwise recreate the AURUM PC Software. Customer may transfer its use of the AURUM PC Software to a backup or replacement system to the PC Software Equipment on a temporary or permanent basis provided Customer gives prior written notice to AURUM and discontinues use of the AURUM PC Software on the applicable PC Software Equipment.
List of Customer Systems:
1. Customer owned Desktop Systems and Applications Software
INITIAL TERM
Five (5) years
RENEWAL TERM
One (1) year
BEGINNING DATE FOR SERVICES
September 19, 2003 or a mutually agreed upon date not later than
October 5, 2003.
All Item Processing Services shall be performed pursuant to Customer's reasonable specifications, subject to the capabilities of Aurum's hardware and software utilized to deliver said Item Processing Services. All times indicated in this Schedule refer to the time zone in which the Transaction Center is located.
I. DEFINITIONS
The following definitions apply to the Basic Services described in this schedule and are provided as a supplement to definitions included in the Agreement:
(a) "Account" shall mean a demand deposit, negotiable order of withdrawal, other checking type of account, money market deposit account, or other savings type account offered by Customer to its end-customer(s).
(b) "Aurum Business Hours" are each Business Day from 07:00 to 18:00 local time.
(c) "Aurum Image Archive" shall mean the electronic storage of the bitonal front and back item images at an Aurum designated facility.
(d) "Business Day" is each weekday, Monday through Friday, which is not a holiday of the Federal Reserve Bank for the Federal Reserve District in which Customer's principle office is located.
(e) "Conversion Services" shall mean a mutually agreeable schedule that Aurum will provide services and instructions reasonably required for Customer to convert to and use the Item Processing Services.
(f) "Crippled Statement" shall mean an end-customer statement whose number of Items to be enclosed is greater than or less than the enclosure count for that statement or as the result of missing Images.
(g) "Customers Data Processing Services Provider" is the customer itself or vendor appointed by Customer to perform Customer's core data processing services.
(h) "Effective Date" is the date that this Agreement is executed by Aurum.
(i) "Exception Item" shall mean an Item, the automated processing of which is interrupted because of a condition defined by Customer, such definitions which may be changed from time to time.
(j) "Exception Item File" shall mean the file of Exception Items that Customer's Data Processing Services Provider or Customer's end customer creates and transmits to Aurum.
(k) "Home Banking Archive Interface Product" is the Aurum home banking archive interface described in this schedule.
(I) "Implementation Date" shall mean the date the service begins for the Home Banking Archive Interface Product in a production environment.
(m) "Inclearing Item" shall mean a Customer Item that Aurum receives from the Federal Reserve Bank or other financial institution with an incoming cash letter for the purpose of performing Item Processing Services.
(n) "Initial Term" is defined at the beginning of this Schedule.
(o) "Item Image" is a digitized black and white image of the front and back of each item.
(p) "Item" is a document or other segment of media on which is recorded information evidencing a withdrawal from or draft against (i) a demand deposit, negotiable order of withdrawal, or other checking account offered by Customer to its customers, or (ii) an internal Customer general ledger account, deposit ticket, loan coupon or cash ticket.
(q) "Item Posting File" shall mean a file that Aurum creates from captured Items for transmission to Customer's Data Processing Services Provider.
(r) "Item Processing Services" are the Services Aurum will provide to Customer, and Customer will purchase from Aurum, for their total requirements for Item Processing Services and are also referred to herein as "Basic Services".
(s) "MICR" is the magnetic ink character recognition information that is encoded on Items for processing.
(t) "MICR Rejects" shall mean Items captured during prime pass that are rejected due to the inability to properly interpret the MICR encoding. The inability to interpret the MICR encoding may be caused by a variety of reasons, including but not limited to: (a) or MICR encoding; (b) missing MICR encoding; (c) physical document damage. Aurum will electronically repair and may physically repair the MICR Rejects.
(u) "Monthly Fee" is the monthly amount paid to Aurum based upon charges defined in Exhibit A.
(v) "On-Us Item" shall mean an Item that is drawn on the Customer or Customer's end-customer.
(w) "Original Item Retrieval" shall mean occasionally removing Items from the check vault upon Customer's request.
(x) "Operational Date" shall mean the first day the Customer is functionally processed with images captured to the archive, transit work released for delivery, and posting files delivered to Customer's Data Processing Services Provider.
(y) "Over-the-Counter" shall mean Items submitted by Customer branch offices, departments, or Customer's end-customers for the purpose of performing Item Processing Services.
(z) "Pre-encoded Item" shall mean an Item received by Aurum that has required MICR line fields encoded, which Aurum will capture.
(aa) "Renewal Terms" are defined in the Terms and Renewals section.
(bb) "Return Item" shall mean an Item that Customer instructs Aurum to return. Customer will provide Aurum with a reason for the return of Return Items.
(cc) "Serial Fine Sort" shall mean the sorting of check Items into account, amount, and or check number order.
(dd) "Service" or "Services" are all of the services to be provided by Aurum under this Agreement, which include Image Item Processing and Conversion Services.
(ee) "Special Programming" shall mean the provision of programming resources to support Customer's request for new or modified products or services.
(ff) "Statement Cycle Date" shall mean the ending cycle date printed on end-customer's Account statement.
(gg) "Statement Rendering" shall mean the insertion of an end-customer statement and required Items and inserts into an envelope, sealing the envelope in preparation for mailing to the end-customer. Aurum may apply postage, which will be recovered by the Customer.
(hh) "System" or "Systems" are (i) computer programs, including without limitation software, firmware, application programs, operating systems, files, and utilities; (ii) supporting documentation for such computer programs, including without limitation input and output formats, program listings, narrative descriptions, operating instructions and procedures, user and training documentation, special forms, and source code; and (iii) the tangible media upon which such programs are recorded, including without limitation chips, tapes, disks, diskettes, and any other storage media.
(ii) "Transaction Center" is the space at one or more locations where Aurum performs Item Processing Services.
(jj) "Transit Item" is an encoded or unencoded Item drawn on another financial institution that Aurum will capture for the purpose of creating an outgoing cash letter.
(kk) "Unencoded Item" shall mean a document received by Aurum where the dollar amount or any other required data field is not encoded.
II. ITEM PROCESSING SERVICES
Aurum shall provide the following Basic Services to Customer:
Aurum will digitize and capture the black and white images of the front and back of each Pre-encoded Item and each Over-the-Counter Item and assign a batch and sequence number to each Item.
Outgoing cash letters will be prepared in accordance with Customer's cash letter requirements, which may change from time to time. As an Additional Service, Items for cash letter endpoints greater than twelve (12) will be re-passed and prepared in accordance with Customer's cash letter requirements, which may change from time to time.
Aurum will complete the transmission of an Item Posting File containing all Over-the-Counter Items to Customer's Data Processing Services Provider by the timeframe documented in Section VII, Processing Times.
Aurum will receive Customer's Inclearing cash letter from the Federal Reserve Bank or other financial institution and balance the Items to the cash letter amount. Aurum will digitize and capture black and white images of the front and back of each Item and assign a sequential trace number, which becomes a part of the Inclearing transaction. Items rejected from the capture will be corrected and re-entered. When all Inclearing Items are captured and balanced an Item Posting File containing all Inclearing Items will be created for transmission to Customer's Data Processing Services Provider. When required, Aurum will capture and outsort Inclearing Items creating cash letters for financial institutions who are end-customers of Customer or end-customers who utilize payable through draft processing.
Aurum will complete the transmission of an Item Posting File containing all Inclearing Items to Customer's Data Processing Services Provider no later than timeframe detailed on Section VII, Processing Times.
The daily incoming cash letter will be reconciled to the dollar amount charged by the Federal Reserve Bank or other financial institution. All cash letter differences, missing items, extra items, etc., will be reconciled and the proper balancing reports and/or entries will be prepared.
All errors detected during the incoming cash letter process are to be adjusted the same Business Day. Aurum will notify Customer of all same day settlement adjustments prior to 14:30 on the Business Day of presentment. Aurum will provide Customer with copies of all adjusting entries that are prepared and the supporting documentation substantiating the adjustment. This documentation will be packaged and made available for pickup by Customer or Customer's courier prior to 18:00 the Business Day of presentment.
Aurum will electronically repair and may physically repair the MICR Rejects.
Aurum will receive unencoded and pre-encoded proof work processed at
Customer's and Customer's end customer locations in accordance with
mutually agreed upon delivery time. Aurum will proof and endorse
each transaction, and encode the dollar amount of each unencoded
Transit Item and full field encode Customer defined on-us Items.
Proof corrections detected by Aurum will be available for pickup by
Customer or Customer's courier by the timeframe documented in
Section VII, Processing Times.
Teller balancing tapes and tapes accompanying deposits will be included in the daily work sent to Aurum by Customer, and Aurum will make said balancing tapes and item processing Exception Items such as debits or credit Items without offsets or Items from unbalanced transactions remaining at the end of each Business Day's processing available for pickup by Customer or Customer's courier by the timeframe documented in Section VII, Processing Times.
All Unencoded Items delivered to Aurum by the required delivery deadline will be processed to meet Customer's outgoing correspondent cash letter deadline; provided, however, that Aurum shall have at least three (3) hours to process unencoded work and three (3) hours to process pre-encoded work. Aurum will make best reasonable efforts to handle Customer's work received after the required deadline.
Any deposit adjustment of $1.00 or less (said dollar amount may reasonably be adjusted over time, based on Customer requirements) will be charged to a Customer specified sundry general ledger account, using a system generated entry. All errors detected during the Over-the-Counter process are to be adjusted the same day. Original copies of adjustments will be processed with the proof transactions; and the offsetting side of the adjustment entry will be sent to the Customer for processing.
Any deposit adjustment of more than $1.00 (said dollar amount may reasonably be adjusted over time, based on current industry standard practices) will be charged to Customer's end-customer or Customer's designated general ledger account using forms. All errors detected during the Over-the-Counter process are to be adjusted the same day. Original copies of adjustments will be processed with the proof transactions; and the offsetting side of the adjustment entry will be sent to the Customer for processing.
Aurum will prepare proof corrections to Customer's end-customer on forms for reasons including but not limited to:
a) Error(s) found in addition or subtraction
b) Check Item was listed for the wrong amount
c) Tape total was listed incorrectly
d) Check Item listed was not enclosed
e) Check item enclosed, not listed
f) Cash not included in deposit total
g) Tape total not listed in deposit
h) Collections not included in deposit
i) Non-Negotiable Item in deposit
j) Items drawn on foreign institutions
Aurum will prepare proof corrections to Customer's designated general ledger account on forms for reasons including but not limited to:
a) Cash ticket missing
b) Cash ticket for wrong amount
c) Wrong cash ticket used
d) Currency included in work
e) Cashed check Item missing
f) Cashed check Item enclosed was not listed
g) Cashed check Item for wrong amount
h) Other miscellaneous correction
i) Items drawn on foreign institutions
Aurum will receive a notice print file in a mutually accepted format from Customer's Data Processing Services Provider no later than the timeframe detailed on Section VII, Processing Times. The notices will be printed in a mutually accepted format for the Customer and made available by the timeframe detailed on Section VII, Processing Times.
Aurum will receive a statement print text file(s) and a statement
reconciliation file(s) in a format mutually agreed to from
Customer's Data Processing Service Provider according to the
timeline detailed in Section VII, Processing Times. The file will
contain the following segregation categories: (a) Image statements,
(b) with Item enclosures less than fifty (50), (c) with Item
enclosures fifty (50) or greater; (d) zero Item enclosure; and (e)
special request statements. Aurum will print statement text and Item
images for Image statements in simplex or duplex mode, as is
mutually agreed to by Customer and Aurum, in preparation for
statement rendering. The print quality will be consistent with that
required by automated ZIP code sorting equipment and acceptable to
Customer, Aurum and Customer's ZIP code sort vendor.
Aurum will manually render conventional statements that do not qualify for automated rendering due to excessive physical page count (greater than nine (9)). Aurum will insert the statement and inserts into a Customer provided envelope that is acceptable to Customer and Aurum, seal the envelope, and release the envelope to the ZIP code sort vendor according to the timeline detailed in Section VII, Processing Times.
Aurum will manually render conventional statements that do not qualify for automated rendering due to excessive physical page count (greater than nine (9)) or excessive item count (fifty (50) or more)) will count all Items and match this count against the number of enclosures indicated on the statement. If the count matches, Aurum will insert the statement, Items and any inserts into a Customer provided envelope that is acceptable to Customer and Aurum, seal the envelope, and release the envelope to the ZIP code sort vendor according to the timeline detailed in Section VII, Processing Times.
Aurum will review fine sort reject Items and where possible resolve Item count discrepancies prior to categorizing a statement as a Crippled Statement. If any Item count discrepancy cannot be resolved, Aurum will follow Customer's written instructions for statement handling; such instructions to be mutually agreed to in advance for statement handling. Aurum will process as exceptions any statements that are not to be mailed to the end-customer via pre-sort first class mail. These exception statements will be identified by unique intelligent insertion marks or bar code, which will be mutually agreed upon by Aurum and Customer. From information printed on the statement or provided separately by Customer, Aurum will forward the statement to the appropriate location as designated.
Aurum will process, as a Manual Handling, all statements that are deemed crippled and forward to the appropriate location as designated. These could be made available for pickup by Customer or Customer's courier according to the timeline detailed in Section VII, Processing Times, following determination of the Crippled Statement condition.
Aurum will manually insert up to three (3) statement inserts into Customer statements. The statement inserts will be of a size, format and quality that is acceptable to Aurum. The proposed statement inserts will be submitted to Aurum at least ten (10) Business Days in advance of the Statement Cycle Date.
Aurum will Serial Fine Sort Items for accounts designated by Customer. Accounts requiring Serial Fine Sort will be maintained in a separate Statement Cycle on the Customer's core data processing system or designated as Serial Fine Sort accounts in a manner that is acceptable to Customer and Aurum
At Statement cycle time, the Items scheduled for return to Customer's end-customer will be fine sorted into statement order, which is generally account number within one or more levels of groups, in preparation for statement rendition. Rejects from the fine sort process will be manually filed.
On a daily basis, Aurum may fine sort internal Customer documents, including but not limited to: loan items, general ledger Items and savings Items into amount or Account number order. Daily fine sorted Items will be available for pickup by Customer or Customer's courier by the timeframe documented in Section VII, Processing Times.
According to the documented timeframe in Section VII, Processing Times, the transmission of Customer's complete Account Exception Item File from Customer's Data Processing Services Provider to Aurum will be completed. Aurum will make Exception Items available for Customer review and available for pickup by Customer or Customer's courier by the timeframe documented in Section VII, Processing Times; provided, however, that Aurum shall have at least four (4) hours to process the Exception Items file from Customer's Data Processing Service Provider.
Aurum will store Items by cycle and date according to Customer's Statement Cycle definitions in a secure environment.
For Items not returned in Customer's end-customer statements for two
(2) calendar months, Aurum will then return the Items to the
Customer or make the Items available for pickup by the Customer or a
Customer designated agent. Aurum may destroy the Items at Customer
expense.
At Customer's request, Aurum will FAX Items from the archive.
At Customer's request, Aurum will create a photocopy of an Item from the archive and make them available for pick-up.
Items designated by the Customer as Return Items will be returned by Aurum to the Federal Reserve Bank the same Business Day; provided Customer has met the applicable Aurum Return Item deadline. Items to be returned by Aurum will be marked in accordance with Federal Reserve regulations.
After Customer has reviewed its exception item reports and made the necessary pay/no-pay decisions, Customer's Data Processing Services Provider will complete transmission of a file in a format mutually agreed to by the parties containing all Return Item requests with reason for return by the timeframe in Section VII, Processing Times, for Items captured the previous Business Day.
Aurum will out sort, balance to Customer provided control total and properly stamp each Item to be returned with the Customer's designated reason, and prepare the Return Item cash letter to be picked up by the Customer or Customer's courier for delivery to the Federal Reserve Bank by 23:59 each Business Day. Such Items to be returned will be contained in a file transmitted by Customer's Data Processing Service Provider. One cash letter copy is to be retained by Aurum and one copy will be forwarded to Customer.
Aurum will qualify each Return Item in accordance with Regulation "J" specifications; provided that the applicable return Item deadline has been met by Customer.
Aurum will receive from the Federal Reserve Bank the Customer's return deposit Items for review and processing. Aurum will create a debit transaction for the account; Incoming deposited return items will be packaged and made available for pick up by Customer's courier.
Aurum will, as designated by the Customer, begin to notify the financial institution of first deposit of all dishonored checks for $2,500.00 or more, or other amount to remain in compliance with Regulation CC and J and any other applicable federal laws and regulations. By 23:59 of each Business Day, Aurum will have completed transmission of large item notifications for those items requiring them that were presented the previous Business Day. By 08:00 of the Business Day following dispatch of the return item cash letter and transmission of the large item notification, Aurum will make a report of all large item notices processed on the previous Business Day available for pickup by Customer or Customer's courier. Aurum requires a 10-business day written notification to commence this service. Customer must notify EARNS and establish a contract for this service. A fee from EARNS will be directly billed to the Customer.
At Customer's request, Aurum will manually retrieve an Item.
Aurum will provide Customer with assistance to resolve out-of-balance conditions in particular, inbound or outbound check processing operations.
(b) Archive Services
Customer can purchase from Aurum, software that will enable their customers to retrieve their Item Images from a CD-ROM or DVD-ROM. The software can be licensed for the Customer's customers as described in Section VI, Service Charges.
For end-customers who receive an image statement, Aurum will retrieve check images from the Aurum-controlled online archive; merging those check images with the corresponding periodic statement text; and write that data to a CD-ROM for delivery to and use by the end-customer.
Aurum will grant a license to Customer to use the applicable computer software to retrieve Item Images by utilizing Customer's equipment and telecommunications circuitry to access the item Image archive located at the Aurum Transaction Center. Aurum will license access to Item Images by concurrent sessions installed on Customer workstations at a price detailed in Section VI, Service Charges. Additionally, there is a one-time charge for software installation that does not include telecommunications network design, telecommunications line installation and testing, data communications equipment at Customer and Aurum Transaction Center location, or travel-related expenses.
Aurum agrees to provide Customer with on-line access to Item Images for ninety (90) days after the Item Images have been created. At the end of the ninety (90) day period, Aurum will create two (2) CD's or DVD's, one of which shall be delivered by Aurum to Customer, the other of which may be used in a jukebox for near-line storage. Aurum shall have no further storage or archive obligations with respect to Customer's Item Images, including the back-up of CD's/DVD's in the jukebox. Customer acknowledges that the CD's/DVD's delivered by Aurum to Customer are Customer's source of archived data for regulatory compliance and future conversion purposes and should be retained by Customer for these and all other purposes. In the event Customer requests Aurum to provide CD's/DVD's of Item Images previously provided to Customer on CD/DVD, Aurum will provide such Item Images to Customer, if available to Aurum, and Customer agrees to pay Aurum for such services at Aurum's then in effect hourly rate.
Aurum will grant a license to Customer to use the applicable computer software to retrieve Item Images by utilizing Customer's equipment and telecommunications circuitry to access the Item Image archive located at the Aurum Transaction Center. Aurum will license access to Item Images by concurrent sessions installed on Customer workstations at a price detailed in Section VI, Service Charges. Additionally, there is a one-time charge for software installation that does not include telecommunications network design, telecommunications line installation and testing, data communications equipment at Customer and Aurum Transaction Center location, or travel-related expenses.
Aurum shall assume responsibility for maintaining customer access to Item Images for a period not to exceed seven (7) years, so long as Item Images are maintained on equipment controlled by Aurum. Fees are based upon tiers according to the Customer's monthly prime pass volume and documented in Section VI, Service Charges. In addition to the monthly fee, there is a one-time charge for installation. The one-time fee for installation is payable in full on the Effective Date.
In the event that Aurum is unable to successfully transmit any Item Posting File to Customer, Aurum will burn a CD-ROM or DVD containing the data and make it available for pickup by Customer or Customer's courier, or, arrange for courier delivery to Customer's Data Processing Services Provider.
Aurum will provide standard reports - All Items Listing, Cash Letter
Detail, Cash Letter Summary, Change Log, and the Item Balancing
Sheet - in a mutually acceptable format each Business Day and make
the file available for pickup by Customer using a TCP/IP transfer
utility or physically available by the timeframe documented in
Section VII, Processing Times.
(d) Miscellaneous
Aurum will provide Special Programming at Customer's request for new or modified products or services at the current programming hourly rate.
Aurum will provide item processing consulting services at Customer's request for new or modified products or services at the current hourly rate.
Customer will be responsible for the selection, expense and overall management of the couriers that are used for the transportation of all Items, records, and other data between Customer offices and the Transaction Center, the Inclearing Items from the Federal Reserve Bank to the Transaction Center, and for the transportation of Transit Items to the Federal Reserve Bank or other upstream correspondent banks. The parties agree that such courier service may be either an existing courier service shared by other Aurum customers or, if Customer in its sole discretion determines that it is not feasible or desirable to utilize such existing courier service, such other courier service as is designated by Customer.
III. HOME BANKING ARCHIVE INTERFACE
This Home Banking Archive Interface Product is designed and usage is intended to enable the access, retrieval, and transfer of a single item image from the Aurum Image Archive to the Customer's home banking application utilized by account holders of Customer for presentation of a single item image per each account holder's request. Use of the Home Banking Archive Interface Product for all other purposes is expressly prohibited without the written approval of Aurum. This Schedule authorizes use of the Home Banking Archive Interface Product to interface with the following home banking application (check one box only):
|X| Aurum eBanking
|_| Digital Insight
|_| Fundtech
|_| Q-Up
|_| PremiercCom or PremiereCorp
|_| S1
Aurum or its designees will perform all modifications or customizations to the Home Banking Archive Interface Product requested by Customer under an approved written professional services agreement between the parties.
In consideration for the provision set forth above, Customer will pay Aurum the amounts set forth in Exhibit A attached hereto after the Implementation Date of the Home Banking Archive Interface Product. Monthly fees are for management and operation of the Home Banking Archive Interface Product as defined and exclude all other charges, specifically necessary telecommunication connectivity requirements.
Customer will (i) provide all telecommunications components necessary for connectivity between the Home Banking Archive Interface Product and Customer's home banking application; (ii) provide Aurum specifications necessary for the implementation and testing of the Home Banking Archive Interface Product; (iii) grant Aurum access to data generated by the Home Banking Archive Interface Product for support purposes; (iv) contract with AURUM for Aurum Image Archive services; and (v) perform all commercially reasonable user authentication, data encryption, "firewall protection", and security management related to connecting and using the Home Banking Archive Interface Product and accessing the Aurum Image Archive that is accordance with: (a) generally accepted industry standards, (b) industry regulatory requirements, and (c) Aurum published network connectivity standards.
The Home Banking Archive Interface Product will be available seven days per week except for time periods designated by Aurum to perform system maintenance, repair, and component upgrades or replacement. Images captured by Aurum will be available to the Home Banking Archive Interface Product by 08:00 a.m. local time the following Business Day. Images will remain available to the Home Banking Archive Interface Product for a period less than ninety (90) days.
Aurum's failure to achieve this performance standard will not be conclusive evidence of a material breach by Aurum of this agreement. Customer may, however, if the facts and circumstances of such failure so warrant, declare a material breach of this agreement.
CUSTOMER'S SOLE WARRANTY WITH RESPECT TO COMPUTER HARDWARE AND SOFTWARE SUPPLIED BY THIRD PARTIES AND USED BY AURUM IN PROVIDING THE SERVICE UNDER THIS SCHEDULE, IS THE WARRANTY PROVIDED BY SUCH THIRD PARTY AS IT MAY BE AVAILABLE TO CUSTOMER. AURUM HEREBY DISCLAIMES ANY REPRESENTATION OR WARRANTY WHATSOEVER ABOUT THE PERFORMANCE OR LEGAL OR REGULATORY COMPLIANCE, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY COMPUTER HARDWARE AND SOFTWARE SUPPLIED BY THIRD PARTIES. Customer acknowledges that Aurum has no duty or responsibility to modify any such third-party product, except to the extent that the vendor thereof has such a duty or responsibility to modify such product pursuant to the applicable license agreement between Aurum and such vendor.
IV. CONVERSION SERVICES
Aurum shall provide Conversion Services required to implement the Services detailed above. Customer and Aurum will develop a mutually agreeable business design and implementation plan detailing responsibilities, accountabilities, tasks and timelines. The implementation timeline will commence at contract execution and culminate with the implementation of contracted Services at the conclusion of a four
(4) to six (6) month period. Aurum and Customer agree to provide each other with reasonable access to personnel required to develop and implement the image Services solution as defined in the implementation project plan.
Customer and Aurum will mutually agree upon the Conversion Date. Customer and Aurum will mutually agree to any modifications to the implementation plan or date.
V. CUSTOMER RESPONSIBILITIES
Customer will do the following:
1. Deliver to Aurum all Items, in a condition and form consistent with the generally accepted requirements of a high-speed item processing operation. Customer assumes full responsibility for the accuracy, completeness, and authenticity of all Items furnished to Aurum, and Aurum shall thus be entitled to rely thereon and will have no obligation or responsibility to audit, check, or verify the Items. Without limiting the generality of the foregoing, Customer shall have sole responsibility for (a) verifying dates, signatures, amounts, authorizations, endorsements, payment notices, collection times, fees and charges imposed by Customer on its customers and other similar matters on all Items delivered to Aurum; (b) placing stop payments and holds on accounts; and (c) determining the correctness of all magnetic ink inscribed or appearing on Items, regardless of by whom or when inscribed. If any Items submitted to Aurum are incorrect, or in a condition inconsistent with the generally accepted requirements of a high speed item processing operation, Aurum may, in its sole discretion, either (i) require Customer to resubmit completed and corrected Items, or (ii) correct and complete the Items itself and Customer will pay Aurum the charges for any Additional Services provided by Aurum to correct or complete such Items or otherwise prepare such Items for processing.
2. Provide Inclearing, Unencoded and Preencoded Items to Aurum
each Business Day according to the schedule contained in
Section VII, Processing Times.
3. Provide to Aurum by mutually agreeable means, current information reasonably required by Aurum concerning the accounts offered by Customer to its end-customers and internal Customer general ledger accounts.
4. Ensure that all Items and other documents or media which Aurum may be required to process under this Agreement are in a format acceptable to Aurum and contain, in machine readable form, the data and information required by Aurum.
5. Ensure appropriate personnel of Customer are properly trained to utilize the Item Processing Services.
6. In a manner prescribed by Aurum, Customer will balance non-business account statement cycles for monthly periodic statements so that approximately the same number of statements are to be prepared on each of the no more than twenty (20) Business Days during the month. The Monthly Statement print files will be transmitted, in a format acceptable to Aurum, including intelligent insertion marks or bar coding indicating the number of Items to be enclosed with each statement.
7. Cooperate with Aurum in the performance of Item Processing Services and provide to Aurum such data and information, management decisions, regulatory interpretations and policy guidelines as Aurum reasonably requires.
8. Provide Aurum with contact list and escalation procedures to insure that production problems and other issues requiring Customer attention are addressed on a timely basis by the appropriate individual(s).
9. Be responsible for the transportation of all Items, records, and other data between Customer offices and the Transaction Center and the related costs.
10. Appoint Aurum as its agent for purposes of receiving Items from and returning Items to clearing organizations. Customer will notify all appropriate third parties of such appointment and pay or reimburse Aurum for any charges payable to such clearing organizations for, or required as a condition to, so receiving or returning Items.
11. Forward directly to Aurum any On-Us items or other Items that are posted by or on behalf of Customer without being entered into the clearing process.
12. Networking and communication devices provided by Customer must be approved by Aurum to insure compatibility with the Aurum System.
13. Provide adequate space for the installation of telephone drop(s) necessary to connect Customer's terminals with the telephone lines that communicate with the Aurum Systems. Aurum agrees to schedule with the telephone company the technical aspects of said installation of the data communications telephone lines. Charges made by the telephone company for the initial installation and ongoing costs of the data communications telephone lines along with any additional drops or changes to the drop locations in the future will be the responsibility of the Customer.
IV. SERVICE CHARGES
The monthly service fee for Basic Services is based on the volume of the described services multiplied by the unit cost/charge for that service.
(i) Item Processing Services Unit Cost Image Item Capture - POD/Proof and Transit 0.0220 Per item Image Item Capture - Inclearing 0.0220 Per Item Image Item Capture - Low Speed Repair 0.1470 Per Item Conventional Encoding - POD 0.0290 Per Field Deposit Corrections (write off) 0.5280 Per Item Deposit Corrections (documented) 2.8420 Per Item Notice Print 0.0820 Per Notice Statement Print (Laser) 0.0460 Per Impression Notice and Statement Rendering - Manual Without Items 0.3170 Per Statement Statement Rendering - Manual With Items 0.5280 Per Statement Statement Inserts - Manual 0.0250 Per Insert Fine Sort, Serial Sort and Miscellaneous Sort 0.0120 Per Item Cycle Sort/Exception Item Pull 0.0050 Per Item Warehousing 0.0020 Per Item Fax Copies 1.6240 Per Item Photocopies 1.0960 Per Item Outbound Returns 1.6240 Per Item Incoming Returns 0.6090 Per Item Large Item Notification (EARNS) 2.4360 Per Item Manual Item Retrieval 3.2480 Per Item Adjustment Research 17.8600 Per Hour |
Client Archive CD-ROM 16.5000 Per Media Client Archive DVD-ROM 81.0000 Per Media End-Customer CD-ROM Statement 10.50 Per Media On-Line Image Archive Access 0.0040 Per Prime Pass Item Near-Line Access (7 year storage) Tiers Per Month 0 -- 50,000 prime pass items per month 350.00 0 - 150,000 prime pass items per month 600.00 Aurum Monthly Discount tier: $5,000 increments to the average base service charge ($5,242) in any processing month (750.00) Per Month |
(ii) Other Expense
Description Charge
----------- ------
Telecommunication Charges Customer Expense
EARNS Fees Customer shall pay EARNS
Invoices. Aurum shall not
have any responsibility
for EARNS charges for
Customer.
Postage Customer Expense
Zip Sorting Customer Expense; Direct Bill by Zip Sort
Vendor
Federal Reserve Courier Customer Managed; Customer Direct
Expense
Other Courier Customer Managed; Customer Direct
Expense
Mailing Supplies Customer Expense
Forms and Paper Customer Expense and
Customer Provided,
including but not limited
to statement form,
envelopes, general ledger
tickets, custom control
tickets
Document destruction Customer Expense
Technical Support Current Rate
|
(iii) Minimum Monthly Charge. If the aggregate charges for Item Processing Services are less than $4,455.00 per calendar month, Customer will be billed the minimum contract amount of $4,455.00.
Customer will be levied the following one-time charges for requested licenses:
CD Statement Software License 1 - 24 copies $225 each
(Price Based on the number of 25 - 49 copies $200 each
bundled copies purchased at any 50 - 99 copies $150 each
one time) 100+ copies $125 each Per License
On-Line Archive License Per Concurrent Session;
first two (2) licenses at no
1,350.00 charge
Near-Line Archive License Per Bank; WAIVED for
6,500.00 the initial time
|
Customer will be levied a one-time charge of $20,000.00 for the conversion of Item Image processing. The one-time charge does not include supplies, forms, telecommunications network design, telecommunications line installation and testing, data communications equipment at Customer and Aurum Transaction Center locations, or travel-related expenses. The one time fee is payable on the Effective Date. Aurum will quote charges for additional or future conversions separately.
Item Image Processing Conversion $20,000.00 WAIVED
VII. PROCESSING TIMES
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Over-the-counter Items Business Day --- Monday through
Friday
50% by 16:00
100% by 18:00
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Inclearing Items Business Day - Monday through
Friday
RCPC by 09:30
City by 13:30
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(b) File Transmission Requirements
------------------------------
|
Aurum Friday
24:00
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Inclearing Transmission by Business Day - Monday through
Aurum Friday
18:00
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Notice Print Text File Business Day - Monday through
Transmission by Customer Friday
by Customer 04:00
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Statement Print Text File First Business Day following
Transmission(s) Completed by Statement Cycle Date
Customer 04:00
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Statement Reconciliation File First Business Day following
Transmission(s) Completed by Statement Cycle Date
Customer - Image Statement Only 06:00
--------------------------------------------------------------------
|
Customer
--------
--------------------------------------------------------------------
Exception Items Available for Next Business Day Monday through
Pickup by Customer Friday
07:30
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|
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Check and Notice Print Next Business Day Monday through
Available for Pickup by Friday
Customer 07:30
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(f) Zip Code Sort Vendor Release Time
---------------------------------
--------------------------------------------------------------------
Zip code Sort Vendor Release Monday through Friday End of Day
Time
--------------------------------------------------------------------
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VIII. SERVICE LEVEL STANDARDS
Beginning on the first day of the calendar month immediately following the
expiration of one hundred and twenty (120) days after the Operational
Date, Aurum shall perform Services in such a manner so as to meet or
exceed the following performance standards. Compliance with the
Performance Standards will be determined on a monthly basis. Customer will
report incidents of non-compliance to Aurum and Aurum will keep accurate
records relating to such compliance. A failure by Aurum to meet a
Performance Standard shall be deemed to be an "Occurrence". When
reasonably possible, Customer must report incidents suspected to be
Performance Standard Occurrences to Aurum within seventy-two (72) hours,
or immediately upon becoming aware of the incident after the seventy-two
(72) hour deadline.
1. Inclearing Capture and Posting File Transmission
--------------------------------------------------------------------------------------------------
Service See Section II, Item Processing Services
Description
--------------------------------------------------------------------------------------------------
Prerequisites Inclearing Items are presented in the industry standard format of:
- not greater than 250-300 items per batch and
- listing for each bundle and
- Item order matching listing and
- one cash letter summary listing per sending endpoint.
Inclearings Items are delivered to Aurum according to the
schedule shown in Section VII, Processing Times.
The MICR reject rate will not exceed 1%.
--------------------------------------------------------------------------------------------------
Performance Aurum will initiate the transmission of the Inclearing Item
Standard Posting File to Customer's Data Processing Services Provider
according to Section VII, Processing Times, eighty-nine percent
(89%) of each month's Business Days on a rolling three (3) month
average. Failure to initiate the Inclearings Item Posting File
transmission by the applicable deadline is not considered to be a
Performance Standard Occurrence unless Customer's Data Processing
Services Provider is unable to post the Inclearing Item Posting
File in a timely manner.
--------------------------------------------------------------------------------------------------
Measurement Aurum daily transmission report.
Monthly Inclearing Item volume.
Late transmissions reported by Customer to Aurum for review,
validation and tracking.
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|
2. Over-the-Counter Item Processing and Posting File Transmission.
--------------------------------------------------------------------------------------------------
Service See Section II, Item Processing Services
Description
--------------------------------------------------------------------------------------------------
Prerequisites Proofs of Deposit Items are presented in a clean and
orderly fashion.
Pre-encoded Items are presented in the industry standard
format of:
-not greater than 250-300 items per batch and
-listing for each bundle and Item order matching listing
All items oriented in the same direction Single in separate
bundles
Proof of Deposit and Pre-encoded Items are delivered to
Aurum according to the schedule shown in Section VII,
Processing Times.
The Pre-encoded Items MICR reject rate will not exceed 1%.
--------------------------------------------------------------------------------------------------
Performance Aurum will initiate the transmission of the Over the Counter Item
Standard Posting File to Customer's Data Processing Services Provider
according to Section VII, Processing Times, eighty-nine percent
(89%) of each month's Business Days on a rolling three (3) month
average. Failure to initiate the Over the Counter Item Posting
File transmission by the applicable deadline is not considered to
be a Performance Standard Occurrence unless Customer's Data
Processing Services Provider is unable to post the Over the
Counter Item Posting File in a timely manner.
--------------------------------------------------------------------------------------------------
Measurement Aurum daily transmission report. Late transmissions
reported by Customer to Aurum for review, validation and
tracking.
--------------------------------------------------------------------------------------------------
|
3. Statement Rendering
--------------------------------------------------------------------------------------------------
Service See Section II, Item Processing Services
Description
--------------------------------------------------------------------------------------------------
Prerequisites Delivery of printed statements, image match file and
statement fine sort file according to the schedule
contained in Section VII, Processing Times.
Marketing inserts are available ten (10) Business Days
prior to insertion; must be of a size, format and quality
acceptable to Aurum.
--------------------------------------------------------------------------------------------------
Performance 95% of non-Crippled Statements that can be machine-rendered will
Standard be rendered and bear a postmark date not exceeding three
(3) Business Days after the Business Day upon which Aurum
receives the printed statements from Customer for non-month
end statements and four (4) Business Days for month-end
statements eighty-nine percent (89%) of each month's
Business Days on a rolling three (3) month average.
--------------------------------------------------------------------------------------------------
Measurement Monthly statement volume.
--------------------------------------------------------------------------------------------------
Monthly report of statement activity maintained by Aurum.
--------------------------------------------------------------------------------------------------
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4. Outgoing Return Item Processing and Large Item Notification
--------------------------------------------------------------------------------------------------
Service See Section II, Item Processing Services
Description
--------------------------------------------------------------------------------------------------
Prerequisites Complete Return Item data file transmission from Customers'
Data Processing Services Provider has been received by the
time specified in Section VII, Processing Times.
--------------------------------------------------------------------------------------------------
Performance 1. On-time release of Return Item cash letter within time frames
Standard required by applicable law ninety-five percent (95%) of each
month's Business Days on a rolling three (3) month average.
2. On-time electronic notification of dishonored Items of
$2,500.00 or more within time frames required by law
ninety-five percent (95%) of each month's Business Days on
a rolling three (3) month average.
--------------------------------------------------------------------------------------------------
Measurement Aurum daily transmission log.
Monthly Return Item volume.
Monthly large item notification volume.
Customer maintained log of late Return Items volume.
Customer maintained log of late large item notifications
volume.
Late Return Items reported to Aurum for review, validation
and tracking.
Late large Item notifications reported to Aurum for review,
validation and tracking.
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5. Image Item Storage and Archive
--------------------------------------------------------------------------------------------------
Service See Section II, Item Processing Services
Description
--------------------------------------------------------------------------------------------------
Prerequisites The Inclearing Items MICR reject rate will not exceed 1%.
The Pre-encoded Items MICR reject rate will not exceed 1%.
Proof of Deposit Items are presented in a clean and orderly
fashion.
Pre-encoded Items are presented in the industry standard
format of:
- not greater than 250-300 items per batch and
- listing for each bundle and Item order matching listing
All items oriented in the same direction
Inclearings, Proof of Deposit and Pre-encoded Items are
delivered to Aurum according to the schedule shown in
Section VII, Processing Times.
--------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------
Performance Availability each Business Day by the time specified in Section
Standard VII, Processing Times of archived image Items eighty-nine
percent (89%) of each month's Business Days on a rolling
three (3) month average.
--------------------------------------------------------------------------------------------------
Measurement Aurum daily on-line reports.
Customer reported instances where archived image Item access was
late
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(b) Certain Exceptions
Notwithstanding anything contrary in this Agreement or the Sections, Aurum will not be responsible for, and may exclude from the calculation of compliance with the Performance Standard, any failure to meet a Performance Standard if, during, and to the extent that such failure is related to or caused by (i) any matter constituting force majeure, (ii) Customer's failure to perform its obligations under this Agreement where such failure was the proximate use of the failure to meet the Performance Standard, (iii) special production jobs, testing procedures or other services which are given priority at the request of the Customer, (iv) any significant increase in processing volumes or business resulting from the acquisition, directly or indirectly, of assets or stock of a financial institution by Customer, whether by merger or otherwise, (in each case during a reasonable transition period to be agreed upon by Aurum and Customer in good faith), (v) significant unforeseen increases in processing volumes or business or any significant change in the nature or scope of Services provided under this Agreement (in each case during a reasonable transition period to be agreed upon by Aurum and Customer in good faith), (vi) any significant change in the manner in which Customer conducts its business (in each case during a reasonable transition period to be agreed upon by Aurum and Customer in good faith). Multiple Occurrences on consecutive Business Days for the same Performance Standard which result from the same or proximate use will be considered a single Occurrence. An incident which results in missing multiple Performance Standards will be considered a single Performance Standard Occurrence which will be categorized (for tracking purposes) based on how Customer reports the failure to Aurum.
In the event that four (4) Occurrences take place during any six (6) month period with respect to the same Performance Standard, then, for a period of thirty (30) days after receipt by Customer of a report from Aurum reflecting the fourth Occurrence, Customer will have the right to terminate this Agreement, through delivery of written notice to Aurum; provided the effective date of such termination will not be less than ninety (90) days after receipt by Aurum of such notice.
Customer's right to terminate this Agreement pursuant to the provisions of this Section will constitute Customer's sole remedy with respect to any data processing Occurrences.
Aurum and Customer acknowledge that changing requirements may from time to time require modification to Performance Standards. Accordingly, Aurum and Customer agree to review Performance Standards from time to time and shall negotiate in good faith to arrive at mutually agreeable revisions to the Performance Standards.
IX. LIQUIDATED DAMAGES
The parties acknowledge that upon termination of this agreement for any reason, Aurum will incur damages resulting from such termination that will be difficult or impossible to ascertain.
Prior to such termination, except termination by Customer for a material
default, under "Remedy for Occurrences" under Article V111(c) or for
insolvency, bankruptcy or the like, and in addition to all other amounts
then due to Aurum, Customer will pay to Aurum as reasonable liquidated
damages (and not as a penalty) the sum of (a) all costs reasonably
incurred by Aurum in connection with such termination, including
telecommunication line disengagement expenses and costs of terminating
leases on or shipping or storing any equipment provided to Customer by or
through Aurum under this agreement, a 25% management fee on such costs,
Aurum's charges for any additional services requested by Customer for
de-conversion assistance and Aurum's then standard charges for any test or
de-conversion tapes and (b) the product of (1) the average monthly charge
to Customer for services under this agreement during the 12 calendar
months immediately preceding the calendar month in which notice of
termination was given, (2) the total number of months remaining in either
the term then in effect from the effective date of the termination and (3)
80% for termination on or before the end of the second year following the
Beginning Date for Services, 70% for termination after the end of second
year following the Beginning Date for Services but before the end of the
third year following the Beginning Date for Services, 60% for termination
after the end of the third year following the Beginning Date for Services
but before the end of the fourth year following the Beginning Date for
Services and 50% for termination after the end of the fourth year
following the Beginning Date for Services. If this agreement has been in
effect less than 12 calendar months prior to the giving of the notice of
termination, then the parties will compute the amount due under subsection
(b) above using the average monthly charge for services made during such
lesser number of calendar months. If termination of this agreement occurs
prior to the providing of any services, then the parties will compute the
amount due under subsection (b) above assuming an estimated monthly charge
that Aurum would have reasonably expected.
In the case of termination by Customer under "Remedy for Occurrences" under Article VIII(c) or for a material default or for insolvency, bankruptcy or the like, Customer will pay to Aurum only the amounts set forth in subsection (a) of the preceding paragraph.
Aurum may, at its option, invoice Customer for the greater of (a) Aurum's good faith estimate of the termination costs or (b) the aggregate of the charges payable to Aurum for the 2 calendar months preceding the month in which notice of termination is given. If the actual termination costs are greater or less than the amount of Aurum's invoice that is paid by Customer under the immediately preceding sentence, then Customer will pay Aurum, or Aurum will refund to Customer, as the case may be, the difference between the actual termination costs and the amount paid.
Aurum will invoice and Customer will pay all amounts payable under this section prior to the earlier of (a) the effective date of such termination or (b) the release to Customer of any test tapes or other data or information of Customer.
Home Banking Archive Interface Exhibit A Home Banking Archive Interface Product Fees
--------------------------------------------------------------------------------
Service Unit Unit Price
--------------------------------------------------------------------------------
Conversion (One-Time) Fee is based upon the
following schedule as applied against the
Customer's asset volume. Bank
--------------------------------------------------------------------------------
$0 - $100,999,999 $5,000.00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Monthly Fee is based upon the following
schedule as applied against the Customer's asset
volume.
--------------------------------------------------------------------------------
$0 - $100,999,999 $150.00
--------------------------------------------------------------------------------
$101,000,000 - $300,999,999 $200.00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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Other terms:
o The Monthly Fee is based on the asset size of the institution on the December 31 call report, and will be reviewed on April 1st of each year
Exhibit 10.38
MAC(R) NETWORK PARTICIPATION AGREEMENT
This MAC(R) Network Participation Agreement ("Agreement") is dated 9-20-2000, 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07091 ("MAC Participant" or "you").
MAS operates an electronic fund transfer network using the federally registered service mark and logo, "MAC(R)" and known as the "MAC(R) Network" which includes automated teller machine, point of banking and point of sale terminals identified by the registered MAC service marks and accessed by using certain plastic cards with magnetically encoded stripes issued by participating financial institutions to their account holders allowing such account holders to perform certain banking, financial and purchase transactions. MAC Participant desires to participate in the MAC Network, issue MAC cards to its depositors and, if it elects to do so, operate MAC terminals.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and MAC Participant agree to be legally bound by the terms of this Agreement as hereinafter set forth.
1. DEFINED TERMS. All capitalized terms used in this Agreement and not otherwise described herein shall have the meanings set forth in the MAC Rules.
2. MAC NETWORK PARTICIPATION. MAS agrees to provide you with access to the MAC Network, a license to use the MAC Marks and processing of Transaction requests by your MAC Cardholders through the MAC Switch, all of which shall comprise the MAC Network services. You agree to participate in the MAC Network in accordance with the following:
a. Access to the MAC Network. We agree to provide you with access to the MAC Switch and other resources necessary to receive and process Transaction requests made by your MAC Cardholders at MAC Terminals which are linked to the MAC Network and owned, operated or sponsored by other MAC Participants, ATOs and Merchants participating in the MAC Network.
b. Processing MAC Transaction Requests. We agree to receive at our MAC Switch and to process on your behalf requests, messages and other material and items transmitted to you through us by and from other MAC Participants, ATOs and Merchants operating MAC Terminals as a result of the use of MAC Cards by your MAC Cardholders. We will process these Transactions on your behalf in accordance with our MAC Rules and your instructions.
c. MAC Network Processing Options. As a MAC Participant, we agree that you shall have the right to choose your method of connection to and processing in our MAC Network from the following options:
(i) You may choose to use MAS as a processor to authorize Transactions conducted by your Cardholders and/or, at your option, to operate, control, supervise and monitor any of your MAC Terminals. If you choose this option you agree to enter into a separate agreement with MAS for its processing services.
(ii) You may operate as a Direct Intercept Processor to authorize your own Transactions and operate, control, supervise and monitor the MAC Terminals you operate through your own self-operated computer facilities. If you choose to operate in this manner you must establish a direct communications link to our MAC Switch and satisfactorily complete Certification with the MAC Network.
(iii) You may choose to use the services of another Processor to authorize Transactions conducted by your Cardholders and/or to operate, control, supervise and monitor any MAC Terminals you operate as well. Further, you may choose to share these responsibilities with a Processor by performing either of these functions for yourself while using the Processor to perform the other service. Or, you may choose to
authorize your own Transactions and operate, control, supervise and monitor the MAC Terminals you operate but connect to the MAC Switch through another Processor. If you choose any variation of this option, you must designate such Processor to us and such Processor must meet the standards for third party Processors under the MAC Rules, enter into a MAC Processor Agreement with us, establish a communications link to our MAC Switch and satisfactorily complete Certification with the MAC Network.
You shall indicate your selection of processing options to us on the Specification Form which you complete in accordance with our instructions.
3. LICENSE TO USE MAC MARKS. MAS owns the MAC Marks which are the federally registered service marks of the terms MONEY ACCESS CARD(R), MONEY ACCESS CENTER(R), MONEY ACCESS SERVICE(R) and MAC(R) with related symbols and logos. MAS also owns certain other federally registered service marks using MAC or a derivative thereof. For the term of this Agreement, MAS hereby grants to you a nonexclusive, non-transferable license, without a right of sublicense, to use the MAC Marks in compliance with MAC Graphic Standards on MAC Terminals, Cards, signs and various forms of marketing materials. To preserve the integrity of the MAC Marks, we shall have the right to approve your first use of the MAC Marks and thereafter, from time to time, may inspect your records of use or collect samples of your use of the MAC Marks during the term of this Agreement. The MAC license will terminate immediately and without further action by us if you use the MAC Marks in any manner without our consent other than as provided herein or upon any termination of this Agreement.
4. MAC NETWORK RULES. The MAC Network has adopted rules and regulations, policies, operating procedures, Transaction routing requirements, MAC Graphic Standards and technical specifications and requirements, including but not limited to Transaction sets, message formats, receipt requirements, Cardholder instructions and screens (collectively herein the "MAC Rules" or "our Rules"). These MAC Rules govern the provision of MAC Network services. We may modify or amend the MAC Rules from time to time, including the Transactions or Transaction sets and may require all MAC Terminals to be altered if necessary, at your cost, to accommodate the Transaction modification. You agree to abide by and comply with the MAC Rules at all times in participating in the MAC Network and using MAC Network services.
We agree to deliver to you prior to execution of this Agreement a copy of the MAC Rules to enable you to participate in the MAC Network. We also agree to provide you with any amendments, updates and changes to the MAC Rules as they occur from time to time. Any such amendments and changes to the MAC Rules shall be effective as provided in such Rules. You acknowledge you have received a copy of the MAC Rules. You agree if you are in noncompliance with our MAC Rules at any time during the term of this Agreement, you will pay the standard MAC fines and penalties for each such occurrence as set forth in the MAC Rules and that such noncompliance may be the basis of termination of this Agreement.
a. Schedule of Fees. You agree to pay the fees and charges set forth on the Schedule of Fees to this Agreement for our MAC Network services provided under this Agreement. You agree that if we add new MAC Network services or Transactions during the term of this Agreement we may amend such Schedule of Fees to add charges for such new services or Transactions at any time. All other fees shall be due for payment within thirty (30) days from the date billed. We will submit monthly statements for the fees, communications and related charges, plastic cards, supplies, marketing materials and other costs payable by you pursuant to this Agreement. Payment will be made in accordance with the MAC Rules. We may increase or decrease the Schedule of Fees effective January 1 of each year upon not less than one hundred twenty (120) days' prior written notice to you.
b. MAC Interchange Fees. You agree to pay the MAC Interchange Fees set forth on the Schedule of Fees for each Transaction conducted by one of your MAC Cardholders at a MAC ATM or POB Terminal operated by another MAC Participant or an ATO. We may increase or decrease the Interchange Fees upon not less than one hundred twenty (120) days' prior written notice to you.
c. MAC Interchange Payments. Upon collection, we will pay you a MAC Interchange Payment when a MAC Cardholder of another MAC Participant uses one of your MAC ATM or POB Terminals. In addition, we may from time to time adopt payments for other purposes. If we adopt such payments we will notify you, tell you when such payments will commence and make payments to you when appropriate. We may increase or decrease the Interchange or other payments upon not less than one hundred twenty (120) days' written notice to you.
d. Taxes and Expenses. In addition to the applicable standard charges itemized on the Schedule of Fees, you agree to pay all federal, state and local taxes assessed in connection with your participation in the MAC Network other than those taxes which are based on the net income or property of MAS as well as all other expenses, fees and charges imposed by a governmental entity arising out of or incidental to your use of MAC Network services.
6. CLEARING ACCOUNT. For the purpose of settling daily Transactions and the fees, charges and expenses for MAC Network services, you will establish and maintain, during the term of this Agreement, a clearing account at a financial institution designated or approved by us. You agree to maintain at all times in such account a balance sufficient to pay all daily settlement entries, fees, charges and expenses incurred for participation in the MAC Network. You hereby grant MAS authorization to effect credits to and debits from the clearing account for daily settlement among Participants, ATOs and Merchants and for payment of the fees, charges and expenses due and owing to MAS. You agree to execute any documentation required by us or by the designated settlement bank to grant authority to us to debit or credit such account.
7. CONFIDENTIALITY OF INFORMATION. You acknowledge that we have, through the expenditure of a significant amount of time, effort, costs and research, developed and/or secured the right to use various computer programs, forms, logos, manuals, and related materials, including our MAC Rules, which constitute property of great value and/or trade secrets, and that disclosure to others of such materials may result in loss or irreparable damage to us. You further acknowledge that the MAC Network in its entirety constitutes a trade secret of MAS which is revealed to you in confidence. Accordingly, you agree to hold and use any and all such property and information regarding the MAC Network in confidence, and not to disclose, reveal, copy, sell, transfer, sub-license, assign or distribute any part or parts of it, in any form, to any individual, firm, corporation, or other entity, or permit any of your employees, agents or representatives to do so, except as expressly permitted in writing by us. You further agree that upon termination of your participation in the MAC Network for any reason, you will immediately return all such property to us.
(a) Disclaimer of Certain Damages. The duties and responsibilities of MAS under this Agreement will be limited to those expressly set forth and undertaken herein. In no event shall MAS be liable to MAC Participant for (i) any loss of use, revenue, profit or business opportunities or indirect, incidental, consequential, punitive, special or exemplary damages, even if MAS is informed or is otherwise aware or should be aware, of the possibility or likelihood of such damages and regardless of whether any limited remedy provided hereunder is determined to fail in its essential purpose, (ii) losses or damages attributable to or arising from overhead allocations or general and administrative costs and expenses of MAC Participant, (iii) losses or damages caused other than by MAS's own gross negligence or intentional misconduct, or (iv) losses or damages arising out of the fraudulent or criminal acts of third parties.
(b) Damages Cap. Notwithstanding any provision contained in this Agreement
to the contrary, the aggregate liability of MAS during each consecutive twelve
(12) month period beginning on the Effective Date for any and all claims,
demands, costs, losses, damages or other potential or actual expenses which are
in any way related, directly or indirectly, to the execution, performance or
subject matter of this Agreement shall not exceed the average monthly amount of
fees paid by MAC Participant to MAS during such period, exclusive of interchange
and pass-through fees, multiplied by three (3), regardless of the form of action
employed, whether in contract, warranty, tort (including negligence) or
otherwise.
(c) Risk Allocation. The parties agree that the limitation of liability set forth in this Section 8 is a reasonable allocation of risk and that such limitation shall apply to any remedy ordered by a court, regardless of whether such court determines that any remedy provided for hereunder fails in its essential purpose.
9. FORCE MAJEURE. Neither MAS nor MAC Participant shall be liable for any loss resulting from a delay or failure in its provision of MAC Network services or in the operation of a MAC Terminal due in whole or in part to any natural disaster, epidemic, fire, act of God, strike, war, riot, civil disturbance, court order, statute, governmental issuance, technological facility outage, shortage of or significant fluctuation in power or any other cause beyond its reasonable control.
10. NO WARRANTIES. MAS HEREBY DISCLAIMS ALL WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY EXPRESS AND IMPLIED WARRANTIES OF MERCHANT-ABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11. INDEPENDENT ENTITY. We agree to provide MAC Network services to you as an independent contractor only. None of MAS's officers, employees, agents or representatives will be subject to your control.
12. INSURANCE. You agree to obtain all insurance coverage which is required by state and federal law and regulation and dictated by prudent business practices in connection with your participation in the MAC Network.
13. RIGHT OF INSPECTION OF RECORDS. Upon reasonable notice to us and during normal business hours, your representatives, auditors, and/or representatives of your regulatory agencies may inspect any file which we maintain regarding the provision of MAC Network services to you.
14. ASSIGNMENT AND MERGER. This Agreement may not be assigned by you without our prior written consent. If you are the subject of or a participant in a merger or acquisition by (i) statute, (ii) purchase of assets, (iii) sale or exchange of stock, (iv) consolidation or (v) any other means, such merger or acquisition shall not terminate this Agreement; rather, this Agreement shall remain in full force and effect after such merger or acquisition as the obligation of the surviving financial institution.
15. EFFECTIVE DATE AND TERM. This Agreement shall be effective when fully executed by us in original form and the required payments hereunder have been delivered to us. This Agreement shall be for an initial term of five (5) years from the date services to your MAC Cardholders commence hereunder and, thereafter, for successive one (1) year renewal terms unless terminated in accordance with paragraph 16 herein.
16. TERMINATION. This Agreement may be terminated in its entirety by either
party at the end of the initial term or any renewal term upon one hundred eighty
(180) days' prior written notice to the other party. In addition, we may
terminate this Agreement at any time if you breach the provisions hereof, fail
to abide by the MAC Rules or, notwithstanding paragraph 14 herein, are acquired
by a party which is not a MAC Participant. In the event of an early termination,
you agree to pay the special termination fees provided in the MAC Rules.
17. AMENDMENTS. Except for amendments, expansions and other changes to the MAC Rules, this Agreement may be amended only by a writing duly executed by both parties. We may amend, expand or otherwise change the MAC Rules in whole or in part at any time.
18. ENTIRE AGREEMENT. This Agreement, including all addenda, exhibits hereto and the MAC Rules constitute the entire understanding between the parties as to MAC Network services and supersede all previous communications, past practices, commitments and writings.
19. SEVERABILITY. If any provision of this Agreement is held invalid, illegal, void or unenforceable by reason of any judicial decision all other provisions of this Agreement shall nevertheless remain in full force and effect.
20. WAIVERS. No course of dealing or failure to enforce any provision or exercise any right under this Agreement by either party shall be construed as a waiver of such provision or right, affect the validity of this Agreement or curtail the ability of any party to enforce such provision or exercise such right in the future.
21. NOTICES. All notices by one party to the other under this Agreement shall be in writing and shall be considered delivered when actually received or three (3) business days after placement in the U.S. Postal Service, whichever is sooner. Notice shall be sent to each party at the addresses set forth in the first paragraph of this Agreement. Either party may change the address for notices at any time by providing written notice of such change to the other party.
22. HEADINGS. The titles and headings which precede the text of this Agreement have been inserted solely for convenience of reference and contain no substantive meaning.
23. APPLICABLE LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware.
In Witness Whereof, the parties hereto have executed this Agreement by their duly authorized representatives on the date first written above.
MONEY ACCESS SERVICE INC.
By: /s/ Lois Pembroke
---------------------------
Lois Pembroke, Sales Executive
-------------------------------
Name and Title (Printed)
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By: /s/ Robert W. Dowens, Sr.
---------------------------
Robert W. Dowens, Sr. President
-------------------------------
Name and Title (Printed)
|
Schedule of Fees State of New Jersey
Participant agrees to pay MAS:
MAC Network Access Fees
1. Card Royalty Fee
A. Debit Cards -a monthly fee per card capable of performing MAC Network debit Transactions (excluding Credit Cards).
1-100,000 $0.025 100,001-1,000,000 0.01 over 1,000,000 0.005 |
B. Credit Cards - a $.01 fee per year per card capable of performing MAC Network credit Transactions. Fee is assessed quarterly.
2. **ATM and POB Transaction Fee - a per Transaction fee (including Declines) for use of a Card issued by Participant at ATM and POB Terminals operated by other Participants or ATOs in the Network plus Interchange Fee for each Transaction in accordance with the MAC Interchange Tables. All transactions, including Declines are charged at each level, regardless of the tier reached.
1-25,000 $.13
25,001-50,000 .11
50,001-100,000 .07
100,001-500,000 .06
500,001-1,000,000 .05
1,000,001-2,500,000 .04
over 2,500,000 .03
3. POS Transaction Fees
|
A. **POS Transaction Fee - a per Transaction fee for use of a Card issued by Participant at POS Terminals for a Transaction request in the Network. All Transactions, including Declines are charged based on the lowest fee tier achieved in a given month.
1-100,000 $.075 100,001-250,000 .06 250,001-500,000 .05 500,001-1,000,000 .04 over 1,000,000 .03 |
B. Issuer Reimbursement Fee - a payment to the Issuer Participant as collected from the POS Acquirer in the amount of $.10 per approved purchase.
4. An Operating fee of $200.00 per month.
5. A Card prefix fee of $3.00 per month for each prefix associated with a BIN, regardless of the number of BINs.
6. An adjustment fee of $.05 per adjustment processed on the Administrative Terminal (MAC Manager/MAC Remote).
7. A deposit adjustment fee of $1.00 per adjustment manually processed by
MAS.
8. A monthly Administrative Workstation (MAC Manager/MAC Remote) support fee of $50 for each workstation in excess of one. No monthly support fee is assessed for the first workstation.
9. Negative File Fee of $.02 per month for each record maintained on file for intercept processors and authorization processors.
10. A monthly fee of $100 for a Participant that surcharges Transactions at their ATMs.
11. A fee of $0.05 per a surcharged Transaction.
12. Telecommunications fees as applicable to Participant will be billed monthly.
In addition to the fees stated above, the following fee applies to Direct Intercept Processors, authorization processors and co-operative processors that do not provide a positive balance file (PBF):
13. Stand-in Transaction Fee of $.04 per transaction authorized in Stand-In Processing mode.
In addition to the above, the following fees apply to Direct Intercept Processors:
14. Direct Intercept Processor link or host maintenance link connect fee of $500 per communications line, per month.
15. A modem lease of $50 per modem, per month or a modem maintenance fee of $18 per modem, per month for Direct Intercept Processor link or host maintenance link, as applicable to Participant.
16. Universal Service Fund fees, as implemented by the Federal Communications Commission (FCC), will be billed as a percentage of applicable monthly telecommunication fees.
17. Testing and Certification* $250 per hour
18. Installation of New Port or Change of Port $2,000 per port
*Includes administrative set up, testing and certification. Hours billed for testing and certification are based on individual needs of processor. Administrative setup requires a minimum of forty hours. Minimums are due upon execution of contract.
In addition to network participation fees the following charges pertain to certain reporting and file distribution and delivery charges for providing and delivering reports:
1 A monthly report distribution fee of:
o $125 via paper
o $75 via fiche, $5 per additional copy of reports via fiche per month
o $50 via host to host transmission
2. A monthly reconciliation file fee of:
o $125 via tape
o $75 via transmission
3. A transmission fee of $.30 per minute will be assessed for all transmissions initiated by the MAC Network.
1. ATM Transaction Fee - a per Inter-Regional Arrangement ATM transaction fee (including Declines) of $.10 by use of a Card issued by User and Transactions acquired at User's ATM Terminal.
Honor - Inter-Regional Arrangement Interchange Fees-Pass-Through
(For information purposes only)
Withdrawals $.50
Transfers $.30
Inquiries $.30
Denials $.30
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MONEY ACCESS SERVICE(R)
A payment to the Terminal Acquirer as collected from the Issuer Participant:
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ATM is Located in:
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Region A Region B
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Regions Middle Atlantic/Midwest All Other
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All Other States
States DE, IN, KY, NJ, OH, PA, WI, WV
and Metro NY**
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On-premise withdrawal $0.34 On-premise withdrawal $0.45
Off-premise withdrawal $0.34 Off-premise withdrawal $0.55
Deposit $1.00 Deposit $1.00
Transfer $0.25 Transfer $0.25
Interchange Inquiry $0.25 Inquiry $0.25
Denial $0.25 Denial $0.25
Other* $0.25
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* "Other" transactions are available to cardholders in IL, IN, KY, MI, OH, WI and WV only.
** Metro New York consists of the following: West Chester, Rockland, Nassau and Suffolk counties and the 5 boroughs of New York city.
MAC(R) NETWORK PARTICIPATION SPECIFICATION FORM
In accordance with your MAC(R) Network Participation Agreement, on this Specification Form you hereby choose your method of connection to and processing in the MAC Network. All capitalized terms used herein shall have the meanings set forth in the MAC Rules.
|X| MONEY ACCESS SERVICE INC. will be your processor and you will operate in the following manner.
|_| Full Service
|_| Authorization Processor
|X| Cooperative Processor
|_| You will be your own Processor and authorize your Cardholder Transactions and, if appropriate, drive your own Terminals.
|_| You have selected a third party as your Processor who will authorize your Cardholder Transactions and, if appropriate, drive your Terminals. You understand that your Processor must be certified according to the MAC Rules to provide you with access to the MAC Network. The Processor you have selected is:
Name: ___________________________________________ Address: ________________________________________
Contact: ________________________________________ Phone No: _______________________________________
If you have selected a third party as your Processor, you may elect to settle your daily Transactions directly or through your third party Processor. Please indicate below by your initials your preference for settlement:
|_| MAS should settle directly with you.
|_| MAS should settle with your third party processor. You understand that if you select this settlement option you bear all settlement risks regarding solvency and financial creditworthiness of your selected third party processor.
TOWN BANK OF WESTFIELD
By: /s/ Robert W. Dowens, Sr.
---------------------------------------------
Name and Title (Printed): Robert W. Dowens, Sr., President
--------------------------------
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MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
This MONEY ACCESS SERVICE Processing Agreement ("Agreement") is dated 9-20-2000, 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User" or "you").
MAS provides Electronic Fund Transfer processing for automated teller machine, point of banking and point of sale Terminals and accessed by using certain plastic cards with magnetically encoded stripes issued by financial institutions to their account holders allowing such account holders to perform certain banking, financial and purchase Transactions. Additionally, MAS offers services for the authorization of Transactions and provides Gateway services to various EFT Networks, as well as certain other EFT services ("MAS Processing Services"). User desires to purchase and use MAS Processing Services.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Agreement as hereinafter set forth.
All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in Exhibit A attached hereto and made a part hereof.
You hereby agree to use MAS as the processor of Transactions conducted by your Cardholders and/or at your Terminals. While you are a User of MAS Processing Services under this Agreement, you elect to interface with MAS in one of the following modes:
|_| Full Service
|_| Authorization Processor
|X| Cooperative Authorization Processor
|_| Intercept Processor
|_| Independent Sales Organization (ISO)
You understand and agree that the mode you elect now for your Interface to MAS will govern you for the duration of this Agreement. You may elect to use any or all of the following MAS Processing Services set forth below; however, you agree that during the term of this Agreement we shall be the exclusive provider to you of any of the services described below which you elect:
(i) MAS Authorization Services. In accordance with your Cardholder information you will supply to us, we will authorize or decline Transaction requests received from any Terminals at which your Cardholders have access or any Networks in which you participate by our comparison to your Cardholder information which can consist of any of the following: (a) real time account records, (b) daily account balances or (c) parameter instructions.
(ii) MAS Terminal Driving Services. We will establish a direct electronic connection between the ATM and/or POB Terminals you operate and our switch in order to operate, supervise and monitor such Terminals for you.
(iii) Gateway Services. We will provide electronic connections from the switch to other Network switches and other card issuers which will permit you to acquire ATM, POB and/or POS Transactions of other Networks' and/or issuers' Cardholders at Terminals we operate for you and to facilitate Transactions by your Cardholders, if any, at the ATM, POS or POB Terminals of other Networks. You may choose among the Gateway services we inform you we are able to provide. If you elect to
purchase any of our Gateway services from us you will appropriately complete and execute applications, membership agreements, sponsorship agreements or other documents as may be necessary to offer such Gateway services as may be required by us or the relevant regional or national ATM Network or card issuer, and shall provide to us evidence of your authority to participate in such Networks or with such card issuers, as we may require from time to time.
(iv) Additional Services. We also offer an array of additional MAS Processing Services from which you may select to complement your Electronic Fund Transfer products. These Processing Services include telephone banking, bill payment, self service banking and Cardholder service charge products. You shall indicate your selection of additional MAS Processing Services on the Specification Forms you complete, and execute an addendum to this Agreement for each such service you desire. From time to time we may introduce new Processing Services which you may select by executing a further addendum to this Agreement.
(a) Support Equipment and Terminals. You agree to purchase or lease and install such ATM and POB Terminals as you desire to operate and you agree to obtain and maintain in good working order at your expense the data processing and communications equipment which is necessary and appropriate to facilitate the provision of MAS Processing Services. You shall independently determine the locations of the Terminals you choose to operate in accordance with the rules of the Networks you join and subject to any necessary regulatory approvals.
(b) Location of Terminals.
(1) United States and its Territories. You agree that subject to
Section 3b. (2) of this Agreement, the MAS Processing Services to be provided
under this Agreement shall only occur at Terminals located in the United States
of America or its territories.
(2) Outside of the United States or its Territories. If you desire to receive MAS Processing Services at any Terminal located outside of the United States of America, you agree to first provide MAS with a written schedule of any country or countries in which you intend to receive MAS Processing Services. You may not obtain MAS Processing Services for Terminals located outside of the United States of America and its territories without MAS's prior written approval. If MAS agrees to provide such services to you, that approval will be, subject to the following conditions and other conditions to which the parties agree at the time:
(i) We can terminate the provision of MAS Processing Services in any country at any time and without being deemed to be in breach of the MAS Processing Agreement if we, in our sole discretion, determine that continued provision of service to Terminals located in such country could adversely impact MAS. If we terminate the provision of MAS Processing Services in a particular country, we will provide you with sixty (60) days' prior notice of such termination, unless exigent circumstances exist.
(ii) If any provision of the Agreement is declared or found to be illegal, unenforceable or void under the laws of any country ("Voided Provision"), for purposes of the laws of the specific country in which the provision is void, the Agreement will be construed as if not containing the Voided Provision, and the rest of the Agreement will remain in full force and effect, and the rights and obligations of the parties hereto shall be construed and enforced accordingly under the laws of that country; provided, however, that the parties consent to the enforcement of the entire Agreement, including the Voided Provision, under the laws of the State of Delaware.
(iii) The parties hereto affirmatively consent that interpretation, construction and performance of this Agreement, including the provision of MAS Processing Services in any country outside of the United States of America or its territories, shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the principle of conflicts of laws. The parties also
consent to the jurisdiction and venue in the Delaware courts with respect to the enforcement of any matter under this Agreement, regardless as to the location of any Terminal receiving MAS Processing Services.
(iv) You have obtained all necessary authorizations required under the laws, regulations and code provisions of each country in which you seek to receive MAS Processing Services.
(v) You are not aware of any provision of the law, regulation or code under the laws of each country in which you seek to receive MAS Processing Services that would prevent (a) the provision of the MAS Processing Services to you or (b) the enforcement of this Agreement in accordance with its terms. During the term of this Agreement, the parties also agree to promptly notify each other of the enactment or promulgation of any provision of the law, regulation or code under the laws of each country in which you seek to receive MAS Processing Services that would prevent (a) the provision of the MAS Processing Services or (b) the enforcement of this Agreement in accordance with its terms.
We will perform our processing in accordance with your instructions and information provided to us on our Specification Forms and the rules of the Networks you join.
(a) Schedule of Fees. You agree to pay our fees and charges set forth on the Schedule of Fees attached hereto as Exhibit B and Exhibit C for our MAS Processing Services. Further, you agree to pay all third party charges (including, but not limited to, our charges related to telecommunications services and transportation expenses) incurred in connection with our provision of MAS Processing Services. You agree that if we add new MAS Processing Services or Transaction types during the term of this Agreement we may amend the Schedule of Fees to add charges for such new services or Transaction types at any time. Any service performed by us at your request or as necessitated by your act or failure to act which is beyond the scope of the MAS Processing Services you select on the Specification Forms shall be billed to you at our standard rates then in effect including charges for personnel and computer time, equipment, supplies, out-of-pocket costs and other expenses which you agree to pay us. Commencing upon execution of this Agreement, all applicable fees and charges shall be payable upon invoice to you. We will submit monthly statements for the fees, charges, supplies and other costs payable by you pursuant to this Agreement. Payment will be made in accordance with Section 6 hereof. We may increase or decrease the Schedule of Fees effective January l of each year upon not less than one hundred twenty (120) days' prior written notice to you.
(b) Taxes. In addition to the applicable standard fees and charges for MAS Processing Services and any other service we perform for you, you agree to pay all federal, state and local taxes assessed as well as all other expenses, fees and charges imposed by a governmental entity arising out of or incidental to your use of MAS Processing Services other than those taxes, expenses, fees or charges which are based on the net income or property of MAS.
For payment of the fees, charges, expenses and taxes, if any, due and owing to MAS under this Agreement, you will establish and maintain for the term of this Agreement a clearing account at a financial institution designated or approved by us. If you have executed a MAC Network Participation Agreement or MAC Network Authorized Terminal Operator Sponsorship Agreement and already have established a clearing account pursuant thereto, then for purposes of this Agreement you hereby grant MAS authorization to effect credits to and debits from such clearing account for payment of the fees, charges, expenses and taxes due and owing to MAS under this Agreement. You agree to execute any documentation required by us or by the designated settlement bank to grant authority to us to debit or credit such account. You agree to maintain at all times in the clearing account a balance sufficient to pay all amounts due and owing to MAS under the MAC Network Participation Agreement or MAC Network Authorized Terminal Operator Sponsorship Agreement, if applicable, and this Agreement.
You acknowledge that we have, through the expenditure of a significant amount of time, effort, costs and research, developed and/or secured the right to use various computer programs, forms, logos, manuals, and related materials, including our operating procedures and technical specifications, which constitute property of great value and/or trade secrets, and that disclosure to others of such materials may result in loss or irreparable damage to us. Accordingly, you in your use of our MAS Processing Services agree to hold and use any and all such property or information in confidence, and not to disclose, reveal, copy, sell, transfer, sub-license, assign or distribute any part or parts of it, in any form, to any individual, firm, corporation, or other entity, or permit any of your employees, agents or representatives to do so, except as expressly permitted in writing by us. You further agree that upon termination of your use of MAS Processing Services for any reason, you will immediately return all such property to us.
We acknowledge that, in your use of our MAS Processing Services, you may disclose to us certain confidential information relating to your Cardholders (if applicable). Accordingly, we agree to hold and use any and all such Cardholder information in confidence, and not to disclose, reveal, copy, sell, transfer, assign or distribute any part or parts of it, in any form, to any person or entity, or permit any of our employees, agents, or representatives to do so, except as expressly permitted in writing by you or as required by applicable law.
Each party shall notify the other party immediately upon discovery of any evidence which might indicate that any of the MAS Processing Services are not satisfactory. Upon such notification, both parties shall consult and test in a manner that MAS deems appropriate to solve the problem. If we determine that the problem arises from hardware, software, personnel or other items within our control, we shall correct within a reasonable time not to exceed thirty (30) days from the date on which any such errors are brought to our attention. If we determine that the problem arises from the equipment, software, personnel procedures, communication or site facilities or other items within your control, you at your own cost shall correct the problem within a reasonable time not to exceed thirty (30) days from the date on which any such errors are brought to your attention.
Neither MAS nor User shall be liable for any loss resulting from a delay or failure in its provision of MAS Processing Services or in the operation of a Terminal due in whole or in part to any natural disaster, epidemic, fire, act of God, strike, war, riot, civil disturbance, court order, statute, governmental issuance, technological facility outage, shortage of or significant fluctuation in power or any other cause beyond its reasonable control.
(a) Disclaimer of Certain Damages. The duties and responsibilities of MAS under this Agreement will be limited to those expressly set forth and undertaken herein. In no event shall MAS be liable to User for (i) any loss of use, revenue, profit or business opportunities or indirect, incidental, consequential, punitive, special or exemplary damages, even if MAS is informed or is otherwise aware or should be aware, of the possibility or likelihood of such damages and regardless of whether any limited remedy provided hereunder is determined to fail in its essential purpose, (ii) losses or damages attributable to or arising from overhead allocations or general and administrative costs and expenses of User, (iii) losses or damages caused other than by MAS's own gross negligence or intentional misconduct, or (iv) losses or damages arising out of the fraudulent or criminal acts of third parties.
(b) Damages Cap. Notwithstanding any provision contained in this Agreement
to the contrary, the aggregate liability of MAS during each consecutive twelve
(12) month period beginning on the Effective Date for any and all claims,
demands, costs, losses, damages or other potential or actual
expenses which are in any way related, directly or indirectly, to the execution, performance or subject matter of this Agreement shall not exceed the average monthly amount of fees paid by User to MAS during such period, exclusive of interchange and pass-through fees, multiplied by three (3), regardless of the form of action employed, whether in contract, warranty, tort (including negligence) or otherwise.
(c) Risk Allocation. The parties agree that the limitation of liability set forth in this Section 10 is a reasonable allocation of risk and that such limitation shall apply to any remedy ordered by a court, regardless of whether such court determines that any remedy provided for hereunder fails in its essential purpose.
MAS HEREBY DISCLAIMS ALL WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY EXPRESS AND IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
We agree to provide MAS Processing Services to you as an independent contractor only. None of MAS's officers, employees, agents or representatives will be subject to your control.
You agree to obtain all insurance coverage which is required by state and federal law and regulation and dictated by prudent business practices in connection with your use of MAS Processing Services.
Upon reasonable notice to us and during normal business hours your representatives, auditors, and/or representatives of your regulatory agencies may inspect any file which we maintain regarding the provision of MAS Processing Services to you.
This Agreement may not be assigned by you without our prior written consent. If you are the subject of or a participant in a merger or acquisition by (i) statute, (ii) purchase of assets, (iii) sale or exchange of stock, (iv) consolidation or (v) any other means, such merger or acquisition shall not terminate this Agreement; rather, this Agreement shall remain in full force and effect after such merger or acquisition as the obligation of the surviving financial institution.
This Agreement shall be effective as of the date indicated in the introductory paragraph hereof provided that it is fully executed by us in original form and the payments required hereunder have been delivered to us. The initial term of the Agreement shall be five (5) years from the date our services commence under this Agreement and, thereafter, for successive one (1) year renewal terms unless terminated in accordance with paragraph 17 herein.
This Agreement may be terminated in its entirety by either party at the end of the initial term or any subsequent term upon one hundred eighty (180) days' prior written notice to the other party. In the event you breach this Agreement causing an early termination or terminate this Agreement prior to the expiration of its term, you agree to pay an early termination fee in an amount equal to the product of your average monthly fees times the number of months left in your current term.
This Agreement may be amended only by a writing duly executed by both parties.
This Agreement, including all schedules, addenda and exhibits hereto, constitutes the entire understanding between the parties as to MAS Processing Services and supersedes all previous communications, commitments and writings.
If any provision of this Agreement is held invalid, illegal, void or unenforceable by reason of any judicial decision, all other provisions of this Agreement shall nevertheless remain in full force and effect.
No course of dealing or failure to enforce any provision or exercise any right under this Agreement by either party shall be construed as a waiver of such provision or right, affect the validity of this Agreement or curtail the ability of any party to enforce such provision or exercise such right in the future.
All notices by one party to the other under this Agreement shall be in writing and shall be considered delivered when actually received or three (3) days after placement in the U.S. Postal Service, whichever is sooner. Notice shall be sent to each party at the addresses set forth in the first paragraph of this Agreement. Either party may change the address for notices at any time by providing written notice of such change to the other party.
The titles and headings which precede the text of this Agreement have been inserted solely for convenience of reference and contain no substantive meaning.
This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware.
In Witness Whereof, the parties hereto have executed this Agreement by their duly authorized representatives on the date first written above.
MONEY ACCESS SERVICE INC.
By:/s/ Lois Pembroke ----------------------------- Lois Pembroke, Sales Executive -------------------------------- Name and Title (Printed) |
EXHIBIT A
DEFINED TERMS
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
"Automated Teller Machine" or "ATM"- An electronic device activated by a Cardholder which permits such Cardholder to access his or her account(s) for the purpose of conducting banking Transactions. An ATM includes a full function as well as a cash dispensing only machine.
"Business Day" - That part of any day, Monday through Friday, on which substantially all business functions are conducted and which is not a legal holiday.
"Cardholder" - A customer of a card issuer who has been issued a card which activates a Terminal and permits such customer to access his or her account(s) for the purpose of conducting Transactions.
"Gateway" - A technical interface between a computer processing switch and a Network switch, a card issuing body or a provider of EFT or EBT services for the purpose of conducting Transactions.
"Electronic Benefits Transfer" or "EBT" - The provision of government entitlement programs to those individuals who are entitled to receive such entitlements or benefits through the use of magnetically striped or other cards capable of storing information regarding the Cardholder and capable of accessing ATM, POB and POS Terminals to receive distribution of such entitlements or benefits.
"Electronic Fund Transfer" or "EFT" - A transfer of funds that is initiated through a Terminal, telephone, computer or magnetic tape and results in a debit or credit to an account.
"Interface" - The combination of the computer programs and communications links by which a Network switch can receive messages directly from and send messages directly to parties which have an agreement to use such Network's services.
"MAC" - The service mark and logo which designate the MONEY ACCESS SERVICE brand of Network services.
"MAS" - MONEY ACCESS SERVICE as operated by MONEY ACCESS SERVICE INC. or any
successor corporations.
"Network" - An organization of computer hardware, software, communications facilities, Terminals, documentation and service marks designed to support the interchange of Transactions among financial institutions and others.
"Point of Banking" or "POB" - The utilization of EFT access cards for banking Transactions at clerk operated Terminals in merchant locations.
"Point of Sale" or "POS" - The utilization of EFT access cards for Transactions at retail locations.
"Processing Services" - The authorization of Transactions; the operation, control, supervision and monitoring of Terminals deployed by a participant; and/ or the provision of electronic connections from MAS to MAC or another Network switch or card issuer to others.
"Specification Form" - A form provided by MAS on which a User documents its instructions and selections of the options offered by MAS in its Processing Services.
"Terminal" - An electronic communications device through which a Transaction is initiated.
"Transaction" - An EFT request made at a Terminal by a Cardholder to his or her card issuer to debit or credit funds from his or her account(s) which is approved by such card issuer.
"User" - A financial institution or other entity which has entered into an agreement with MAS to use MAS Processing Services.
* * *
EXHIBIT B
MONEY ACCESS SERVICE(R) PROCESSING
SCHEDULE OF FEES
User agrees to pay MAS:
1. A one time set-up/installation fee of $4,900 (Waived).
A. Terminal fee for each ATM or Other On- Line Terminal of $175 per month.
B. Telecommunications fees, as applicable to User, will be billed monthly.
C. Universal Service Fund fees, as implemented by the Federal Communications Commission (FCC), will be billed as a percentage of applicable monthly telecommunication fees.
A. A telecommunications charge of $.07 per Transaction or status message from the ATM. Status messages include, but are not limited to, messages regarding card reader failures, dispenser failures, receipt printer failures, communication failures and "I'm Alive" messages. Telecommunication fees are based upon the deployment of dial ATM devices and software configurations that would not cause an average transaction duration to exceed connection times of 18 seconds. If average connection exceeds 18 seconds, User will incur an additional telecommunications assessment at the rate of $.002 per second over the first l8 seconds.
B. A telecommunications charge of $3.00 for each downline load of ATM screens, messages and instructions to a dial-up ATM.
C. A monthly Terminal driving/support fee based upon the aggregate number of dial-up ATMs supported by MAS in each tier. Fees are charged at each level, regardless of the tier reached.
# of ATMs Fee per ATM --------- ----------- 1 - 100 $35 101 - 250 $30 Over 250 $25 |
3. An add/change/delete fee of $100 per ATM installed, de-installed or moved. ATM changes include, but are not limited to, general and Regulation E information, configuration or cartridge information, and terminal option changes.
4. A card fee of $.08 per month for each card record maintained on the MAS card management system.
5. An ATM and POB Transaction processing fee of $.08 for each foreign MAC Transaction, including Declines, processed on behalf of User.
6. An ATM and POB Transaction processing fee of $.08 at User's own ATM and POB Terminals, processed on behalf of User.
7. A POS Transaction processing fee of $.06 for each MAC Transaction, including Declines, processed on behalf of User.
8. A co-op processor connect fee of $125 per communications line, per month.
9. A customized text fee of $50.00 per month plus $25.00 per requested change for Terminal screen or receipt message changes (if used).
Telecommunication fees, not covered by 1(C) or 2(A), as applicable to User, will be billed monthly.
EXHIBIT C
MONEY ACCESS SERVICE(R) PROCESSING
SCHEDULE OF FEES
CLIENT-REQUESTED SUPPORT SERVICES
Fees for Conversions, Mergers/Acquisitions and Deconversions
o The following fees are inclusive of all required work, except ATM add and delete fees (see Exhibit B) and testing and certification time which will be billed separately as stated below, for the support of a standard conversion of an existing client to a different processing mode during a Regularly Scheduled Switch Outage. (See ** Note Below)
Standard Lead Time
Calendar Days*
Service (See *Note Below) Fee
------- ----------------- ---
FS to AP 100-120 Days $4,900
FS to IP 100-120 Days $4,900
FS to Co-Op 100-120 Days $4,900
AP to IP 80-100 Days $2,200
AP to FS 80-100 Days $4,000
IP to AP 80-100 Days $2,100
Co-OP to IP 80-100 Days $2,200
Co-Op to FS 60- 80 Days $4,000
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o The following fees are inclusive of all required work, except ATM add and delete fees (see Exhibit B) and testing and certification time which will be billed separately as stated below, for the support of a standard merger or acquisition of two exiting clients during a Regularly Scheduled Switch Outrage. (See ** Note Below)
Standard Lead Time
Calendar Days*
Service (See *Note Below) Fee
------- ----------------- ---
FS by FS 90-110 Days $4,200
FS by AP 80-100 Days $3,400
FS by IP 80-100 Days $3,400
FS by Co-Op 80-100 Days $3,400
AP by AP 90-110 Days $2,800
AP by IP 70- 90 Days $2,800
AP by Co-Op 90-110 Days $2,800
IP by AP 90-110 Days $2,800
IP by IP 80-100 Days $2,800
IP by Co-Op 90-110 Days $2,800
Co-Op by AP 90-110 Days $2,800
Co-Op by IP 80-100 Days $2,800
Co-Op by Co-Op 90-110 Days $2,800
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o The following fees are inclusive of all required work, except ATM delete fees (see Exhibit B) and testing and certification time which will be billed separately as stated below, for the support of a standard deconversion of an existing client to a third party processor during a Regularly Scheduled Switch Outage. (See ** Note Below)
Standard Lead Time
Calendar Days*
Service (See *Note Below) Fee
------- ----------------- ---
FS to 3PPFI 80-100 Days $3,400
AP to 3PPFI 80-100 Days $2,800
IP to 3PPFI 60- 80 Days $2,800
Co-Op to 3PPFI 80-100 Days $3,400
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* NOTE: Additional charges will be incurred for priority and emergency events requested outside of the published timeframes. A priority event is defined as a request for a service to be completed in less than 99% of the earliest standard lead time and will be billed at 1.5 times the stated fee. An emergency event is defined as a request for a service to be completed in less than 50% of the earliest lead time and will be billed at 2 times the stated fee. These events will be scheduled at the discretion of MAS.
** NOTE: An additional fee will be incurred for the support of conversions, mergers, acquistions, deconversions on an off-cycle schedule as follows:
$2,000 for an off-cycle business day
$5,000 for an on-cycle weekend
o A fee of $250 per hour per person for MAS support for standard testing and certification of client requested changes. The fee applies, but is not limited, to message format changes, processor/software conversions, mergers/acquisitions, deconversions, transmissions and other client-requested changes or additions.
o An additional fee of $250 per hour per person for support of client-requested special development efforts requiring software changes, special reports and other client specific changes.
o A fee of $250 per hour per person for MAS support of client requested testing of disaster recovery capabilities. These services include, but are not limited, to processing, transmissions, creating reports and transmitting files. The fee will be doubled for weekend support.
o A fee of $1,000 for the support of a host software convesion intitiated by the client or their processor. The fee is inclusive of all work required to support the conversion execept for certification times that will be billed seperately at the rates stated above.
o A setup fee of $500 to add a unique identifier (pseudo ID) to the switch to designate a group of terminals or participant IDs for settlement, billing or other purposes.
o A fee of $100 per month per pseudo ID for settlement and reporting support.
o A $500 per report or file for the retransmission of a report or file more than 10 days old.
o A cancellation fee of $200 per day times (10 days less the number of days cancellation notice) for a client requested cancellation of any project where work has already been done and the notice of cancellation is received less than 10 business days prior to the scheduled implementation date. This fee is in addition to any fees for work completed by MAS up to such cancellation date.
Notice (days) Fee
------------- ---
0 $2,000
1 1,800
2 1,600
3 1,400
4 1,200
5 1,000
6 800
7 600
8 400
9 200
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o A fee of $200 per BIN file or database change, with a maximum of $5,000 per outage, for miscellaneous changes including but not limited to:
BIN changes
New settlement account number
Stand-in parameter changes
Routing changes
Name changes
Transaction set changes
o A fee of $1,000 for support of client-requested message format change. The fee is inclusive of all work required to support the change except the testing, certification and development time that will be billed separately as stated above.
o A fee of $200 per requested addition of or change to card limit groups. This does not apply to initial limit group set ups for new clients.
o A fee of $200 for each requested copy of the current card master file maintained on the system.
o A fee of $1,500 for a client-requested card reissue.
o A $200 fee for client-requested individual special reports and mailing labels. Report options include cards not activated or card not used since specified date. This cost may not include programming or development, if required.
o A fee of $500 for requested exceptional maintenance processes. Options include, but are not limited to,
Cardholder deletes
Account number replacement, change, or delete
Reissue plastics for one or more BINs
Mass deletes of cards or accounts
This cost may not include programming or development, if needed.
o A fee of $200 per client request for negative file reports or tapes.
o A $200 fee to load client supplied negative file tape to support stand-in authorization. Cost does not include reformatting tape, if required.
o The following charges pertain to certain reporting and file distribution and delivery charges for providing and delivering reports. (This fee will not be charged if the report is combined with a report that is produced pursuant to a MAC Network Participation agreement for which a fee is charged under that agreement).
1. A monthly report distribution fee of:
o $75 via fiche, $5 per additional copy of reports via fiche per month
o $50 via Access Work Station (AWS)
2. A monthly reconciliation file fee of:
o $125 via tape
o $75 via transmission
3. A transmission fee of $.30 per minute will be assessed for all transmissions initiated by MAS.
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
ADDENDUM
FOR
SCHEDULE OF USER'S SELECTION
OF
ADDITIONAL PROCESSING SERVICES
This Addendum is dated 9-20 , 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User" or "you") and shall supplement, amend and become part of the MONEY ACCESS SERVICE Processing Agreement dated 9- 20, 2000 between MAS and User ("MAS Processing Agreement").
In connection with the MAS Processing Services set forth in the MAS Processing Agreement, MAS offers other services which facilitate the processing of Transactions ("Additional Processing Services"). At the time of execution of the MAS Processing Agreement or at any later time, User may select Additional Processing Services. User's most recent selection of Additional Processing Services is itemized herein. Any previous selections by User of Additional Processing Services are reflected on earlier addenda. The features of and charges for the Additional Processing Services that User selects on this addenda are set forth in separate Addenda to the MAS Processing Agreement which are attached hereto and incorporated herein by reference.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Addendum as hereinafter set forth.
1. DEFINED TERMS. All capitalized terms used in this Addendum and not otherwise defined herein shall have the meanings set forth in the MAS Processing Agreement or Exhibit A thereto.
2. USER'S SELECTION OF ADDITIONAL PROCESSING SERVICES. From the list below,
User selects those Additional Processing Services by which it places its initials.
Advanced ATM Functionality
-------
Cardholder Service Charging Service
-------
RWD Card Protection Service
-------
Dial Up ATM
-------
EBT Processing Service
-------
Electronic Banking Service
-------
RWD Gateway Service
-------
Gateway Sponsorship
-------
MAC Phone Card Service
-------
RWD MasterCard Debit Card/Visa Check Card
-------
RWD Off-line Debit Fraud Risk Identification Service
-------
On-Line Services
-------
Other Special Terms
-------
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3. CONFIRMATION OF MAS PROCESSING AGREEMENT. Except as otherwise amended hereby, the MAS Processing Agreement is hereby ratified in all respects and shall remain in full force and effect.
4. AGREEMENT TO SEPARATE ADDENDA. The execution by MAS and User of this Addendum for Schedule of User's Selection of Additional Processing Services shall evidence the parties' agreement to
the terms, conditions and pricing set forth in the separate Addenda for each of the Additional Processing Services that User selects hereinabove.
5. NEWLY SELECTED ADDITIONAL PROCESSING SERVICES. This Addendum reflects User's newly selected Additional Processing Services and shall supplement any earlier addenda executed for such purpose.
In Witness Whereof, the parties hereto have executed this Addendum by their duly authorized representatives on the date first written above.
MONEY ACCESS SERVICE INC.
By:/s/ Lois Pembroke ----------------------------- Lois Pembroke, Sales Executive -------------------------------- Name and Title (Printed) |
TOWN BANK OF WESTFIELD
By:/s/ Robert W. Dowens, Sr. -------------------------------- Robert W. Dowens, Sr., President -------------------------------- Name and Title (Printed) |
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
ADDENDUM
FOR
ADDITIONAL PROCESSING SERVICES
GATEWAY SERVICE
This Addendum is dated 9-20 , 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User" or "you") and shall supplement, amend and become part of the MONEY ACCESS SERVICE Processing Agreement dated 9-20 , 2000, between MAS and User ("MAS Processing Agreement").
In addition to the MAS Processing Services set forth in the MAS Processing Agreement, MAS offers other services which facilitate the processing of Transactions ("Additional Processing Services"). User elects the Additional Processing Services described herein.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Addendum as hereinafter set forth.
1. DEFINED TERMS
All capitalized terns used in this Addendum and not otherwise defined herein shall have the meanings set forth in the MAS Processing Agreement or Exhibit A thereto.
2. GATEWAY SERVICE
You hereby request and we hereby agree to provide you with our Gateway service which will afford extended EFT access to your Cardholders (if any) and the Cardholders of other Networks and/or card issuing organizations you designate by your initials below:
RWD Cirrus/Master Card Cards X ATMs
------------- ------- ------
RWD PLUS/VISA X Cards X ATMs
------------- ------- ------
LP/RWD American Express Card
-------------
LP/RWD Discover Card
-------------
Magic Line
-------------
NYCE
-------------
Internet
-------------
Maestro U.S.A Inc.
-------------
Interlink
-------------
Other (Specify)
------------- --------------------
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You must establish and maintain appropriate (i) status as an active member of or participant in and/or (ii) arrangements to acquire Transactions of each of the other Networks and/or card issuing organizations you designate for our Gateway service. You represent and warrant to us that at all times during which this Addendum is operative you will be an active member of or participant in and/or hold an arrangement to acquire Transactions of each Network and/or card issuing organization you designate for our Gateway service. Through our Gateway service, we will receive (i) Transaction requests of your Cardholders made at Terminals of other Networks for your authorization and/or (ii) Transaction requests by Cardholders of other Networks and/or card issuing organizations made at your Terminals for authorization by such other Networks or card issuing organizations.
3. OTHER USER RESPONSIBILITIES
You are responsible to comply in all respects with the rules, regulations and standards of the other Networks to which we provide our Gateway service for you. You will be solely responsible for all other Networks' membership and other fees, fines, assessments, inquiries, adjustments, records, reconcilements, accountings and every other category of fees presently existing and hereafter imposed in connection with the Transaction requests for which we provide our Gateway service to you.
4. FEES
For the Additional Processing Services described in this Addendum, you agree to pay MAS the applicable fees in accordance with the schedule of fees set forth on Exhibit GS-l hereto.
5. EFFECTIVE DATE AND TERM
This Addendum shall be effective when fully executed by us in original form and the required payments hereunder have been delivered to us. This Addendum shall be for a term coterminous with the remaining initial term or current renewal term of the MAS Processing Agreement and shall, thereafter, be renewed automatically for successive one (1) year terms unless terminated in accordance with paragraph 17 of the MAS Processing Agreement.
This Addendum shall terminate immediately upon expiration or earlier termination of the MAS Processing Agreement.
6. AMENDMENT OF MAS PROCESSING AGREEMENT
Except as otherwise amended hereby, the MAS Processing Agreement is hereby ratified in all respects and shall remain in full force and effect.
7. AGREEMENT TO ADDENDUM
User has agreed to the terms of this Addendum by at the time of its execution of the MAS Processing Agreement or at any later time by execution of an Addendum for Schedule of User's Selection of Additional Processing Services to supplement the MAS Processing Agreement. The signatures of MAS and User set forth in the MAS Processing Agreement and the above referenced Addendum shall serve as evidence of the parties' agreement to this Addendum.
The fees payable by User for Gateway Service shall be as follows:
1. A national network transaction fee of $.10 for a transaction (including Declines) by use of a Card issued by User at a national and/or regional network terminal.
2. A regional network transaction fee of $.10 for a transaction (including Declines) by use of a Card issued by User at a national and/or regional network terminal.
3. A national network acquirers fee of $.10 for each transaction (including Declines) acquired at User's terminal by a national and/or regional network cardholder.
4. A regional network acquirers fee of $.10 for each transaction (including Declines) acquired at User's terminal by a national and/or regional network cardholder.
5. A monthly Gateway Access fee of $50 per Network.
In addition to the fees stated above, the following fee applies to Direct Intercept Processors that are sponsored into the national networks by MAS and who surcharge transactions at their ATMs:
6. A monthly fee of $500 for files of international BINs that should not be surcharged in accordance with national network rules.
1. All applicable regional network transaction fees including but not limited to: ATM fees, fines and assessments, POS fees, adjustment fees and interchange fees/payments will be passed through as incurred by MAS.
1. All applicable national network transaction fees including but not limited to: ATM fees, fines and assessments, POS fees, adjustment fees and interchange fees/payments per the interchange table will be passed through as incurred by MAS.
2. A monthly sponsorship fee of $50.00 for access per national network.
3. An annual card royalty fee of:
$.025 per debit card (assessed quarterly)
$.01 per credit card (assessed quarterly)
4. A Transaction fee for a Transaction by use of a card issued by User in a non-MAC national terminal plus interchange fees per the interchange table:
Transaction Fee for Plus: $.05
Transaction Fee for Cirrus $.08
|
Interchange Table
-----------------
(For information purposes only)
American
Express Discover Plus/Visa* Cirrus/MC*
Withdrawal .65 .65 .50 .50
Deposit NA NA NA NA
Transfer NA NA .25 .25
Inquiry .35 .35 .25 .25
Other NA NA NA NA
Denial .35 .35 .25 .25
|
* Represents domestic (USA) interchange rates only.
POS Reimbursement: Per the Network
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
ADENDUM
FOR
ADDITIONAL PROCESSING SERVICES
CARD PRODUCTION SERVICE
This Addendum is dated 9-20 , 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User" or "you") and shall supplement, amend and become part of the MONEY ACCESS SERVICE Processing Agreement dated 9-20 , 2000, between MAS and User ("MAS Processing Agreement").
In addition to the MAS Processing Services set forth in the MAS Processing Agreement, MAS offers other services which facilitate the processing of Transactions ("Additional Processing Services"). User elects the Additional Processing Services described herein.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Addendum as hereinafter set forth.
1. DEFINED TERMS
All capitalized terms used in this Addendum and not otherwise defined herein shall have the meanings set forth in Exhibit A to the MAS Processing Agreement.
2. CARD PRODUCTION SERVICE
You hereby request and we hereby agree to provide you with our Card Production Service in which we will administer the issuance and periodic reissuance to your Cardholders of MAC cards. In accordance with your instructions on the Specification Form, we will arrange for the purchase of plastic cards, assignment of personal identification numbers, establishment of Cardholder records and/or embossing and encoding in accordance with MAC graphic standards and/or mailings.
3. FEES
For the Additional Processing Services described in this Addendum, you agree to pay MAS the applicable fees in accordance with the Schedule of Fees set forth on Exhibit CPS-1 hereto.
4. EFFECTIVE DATE AND TERM
This Addendum shall be effective when fully executed by us in original form and the required payments hereunder have been delivered to us. This Addendum shall be for a terra coterminous with the remaining initial term or current renewal term of the MAS Processing Agreement and shall, thereafter, be renewed automatically for successive one (1) year terms unless terminated in accordance with paragraph 17 of the MAS Processing Agreement. This Addendum shall terminate immediately upon expiration or earlier termination of the MAS Processing Agreement
5. CONFIRMATION OF MAS PROCESSING AGREEMENT
Except as otherwise amended hereby, the MAS Processing Agreement is hereby ratified in all respects and shall remain in full force and effect.
6. AGREEMENT TO ADDENDUM
User has agreed to the terms of this Addendum by at the time of its execution of the MAS Processing Agreement or at any later time by execution of an Addendum for Schedule of User's Selection of Additional Processing Services to supplement the MAS Processing Agreement. The signatures of MAS and User set forth in the MAS Processing Agreement and the above referenced Addendum shall serve as evidence of the parties' agreement to this Addendum.
EXHIBIT CPS-1
SCHEDULE OF FEES
for
ADDITIONAL PROCESSING SERVICES
CARD PRODUCTION SERVICE
1. Design of Card:
a. A Generic MAC Plastic fee of $.20 (includes FI name & network affiliations)
b. Customized Proprietary Plastic As quoted by manufacturer
2. Card Processing Fees:
(Processed by MAC and mailed directly to consumer):
A per Card fee of $.62/card for adding card record to file; card encoding, embossing, and tipping; matching of card carrier to plastic; insertion of card into carrier and envelope; window envelope; card carrier; and metering.
3. Branch Issuance via Application:
A per Card fee of $.40/card for the creation of skeleton record; card encoding; embossing; and tipping; application; and PIN creation.
4. Miscellaneous:
a. A $10.00 each fee to pull Cards on an exception basis + express mail charge
b. Hotstamping:
- Die creation as per quote
- Hotstamping on existing plastics as per quote
c. Statement insert stuffing fee of $.01 each (statement insert provided by FI meeting the required specifications).
5. Postage:
a. Postage fees are Pass through (Will be billed monthly as applicable to User).
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
ADDENDUM
FOR
MASTERCARD DEBIT CARD/ VISA CHECK CARD
This Addendum is dated 9-20 , 2000, by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, Delaware 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User" or "you") and shall supplement, amend and become part of the MONEY ACCESS SERVICE Processing Agreement dated 9-20 , 2000 between MAS and User ("MAS Processing Agreement").
In addition to the MAS Processing Services set forth in the MAS Processing Agreement, MAS offers other services which facilitate the processing of Transactions ("Additional Processing Services"). User elects the Additional Processing Services described herein.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Addendum as herein after set forth.
1. DEFINED TERMS. All capitalized terms used in this Addendum and not otherwise defined herein shall have the meanings set forth in the MAS Processing Agreement or Exhibit A thereto.
2. MASTERCARD DEBIT CARD/ VISA CHECK CARD. You hereby request and we hereby agree to provide you with the features of our MASTERCARD DEBIT CARD/ VISA CHECK CARD services you elect below by which you can offer your Cardholders national debit capabilities by linking their MAC(R) Cards with the debit programs of VISA U.S.A., Inc. ("VISA") and/or MasterCard International, Incorporated ("MasterCard") (each, an "Association") at points of sale:
|_| Our MASTERCARD DEBIT CARD service provides your Cardholders with enhanced use of their MAC Cards through MasterCard's debit program.
|X| Our VISA CHECK CARD service provides your Cardholders with enhanced use of their MAC Cards through VISA's debit program.
3. MASTERCARD DEBIT CARD/ VISA CHECK CARD HOLD/MATCH SERVICE AND PRE-AUTHORIZATION RE-APPLY SERVICE.
Our HOLD/MATCH SERVICE for users of MASTERCARD DEBIT CARD or VISA CHECK CARD causes the expiration of a "hold" on funds in a Cardholder's account to occur only upon the occurrence of (i) a matching MASTERCARD DEBIT CARD or VISA CHECK CARD Purchase Completion or (ii) the passage of pre-set number of hours that you designate on the Specification Form.
Designation of Hold Hours: As determined by User and set forth on the Specification Form, User elects to impose a hold on funds of Cardholders engaging in Purchases until such time as a Purchase Completion occurs.
Our PRE-AUTHORIZATION RE-APPLY SERVICE for users of MASTERCARD DEBIT CARD or VISA CHECK CARD provides the User with the ability to extend the hold period that you designate on the Specification Form pending the receipt of Purchase completions.
4. USER RESPONSIBILITIES. In accordance with your elections in Section 2 herein, you must establish and maintain appropriate status for VISA as a Principal or Associate member, or for MasterCard as a Principal or Affiliate member and be authorized to participate in the debit programs of such
organization(s). You represent and warrant to us that at all times during which this Addendum is operative you will maintain the appropriate active membership(s) and authorization(s).
You are responsible to purchase the appropriate Association manuals and comply
in all respects with the rules, regulations and standards of VISA and/or
MasterCard for which we provide you with MASTERCARD DEBIT CARD or VISA CHECK
CARD support services. You are solely responsible for all membership and other
fees, fines, assessments, inquiries, adjustments, records, reconcilements,
accountings and every other category of monetary obligation presently existing
and hereafter imposed on by VISA and/or MasterCard, as applicable given your
elections in Section 2 herein. If you elect to use our HOLD/MATCH SERVICE or
PRE-AUTHORIZATION RE-APPLY SERVICE in Section 3, you must designate on the
Specification Form a range of hours for all holds. You are responsible for the
additional MASTERCARD DEBIT CARD or VISA CHECK CARD Authorization fees set forth
on Schedule MCV-1. MAS shall not be responsible for any election made by User in
Section 3 of this Addendum and User shall indemnify, defend and hold harmless
MAS for any such elections.
5. SETTLEMENT ACCOUNT. User shall be required to maintain their Settlement Account with MAS for not less than one hundred eighty (180) days after the last transaction is processed under this Agreement. Settlement Account shall be defined to include settlement, daily chargeback, daily interchange, daily chargeback processing activity and any and all association pass-through fees. User must accept, process and settle all activity related to Transactions processed under this Agreement regardless of the termination of this Agreement.
6. MAS RESPONSIBILITIES. We will (i) receive Transaction requests of your Cardholders through the MASTERCARD DEBIT CARD or VISA CHECK CARD services you elect and (ii) process such requests in accordance with the Cardholder information you provide us. If you are qualified and elect to use our HOLD/MATCH SERVICE or PRE-AUTHORIZATION REAPPLY SERVICE, we will impose a hold on each Transaction until the criteria you have selected to terminate the hold as set forth on the attached Specification Form has been satisfied.
7. FEES. For the Additional Processing Services described in this Addendum, you agree to pay MAS the applicable fees in accordance with the Schedule of Fees set forth on Exhibit MCV-1 hereto. Users of our HOLD/MATCH SERVICE or PRE-AUTHORIZATION RE-APPLY SERVICE, described in Section 3 will also pay fees per authorization as set forth on Exhibit MCV-1 hereto. User will be responsible for all Association fees including, but not limited to, any set up fees and monthly fees assessed by the Association to MAS which relates to participation in MASTERCARD DEBIT CARD or VISA CHECK CARD Service or MAS's processing of Transactions hereunder.
8. EFFECTIVE DATE AND TERM. This Addendum shall be effective when fully executed by us in original form and the required payments hereunder have been delivered to us. This Addendum shall be for a term coterminous with the remaining initial term or current renewal term of the MAS Processing Agreement and shall, thereafter, be renewed automatically for successive one (1) year terms unless terminated in accordance with paragraph 17 of the MAS Processing Agreement.
This Addendum shall terminate immediately upon expiration or earlier termination of the MAS Processing Agreement.
9. CONFIRMATION OF MAS PROCESSING AGREEMENT. Except as otherwise amended hereby, the MAS Processing Agreement is hereby ratified in all respects and shall remain in full force and effect.
10. AGREEMENT TO ADDENDUM. User has agreed to the terms of this Addendum at the time of its execution of the MAS Processing Agreement or at any later time by execution of an Addendum for Schedule of User's Selection of Additional Processing Services to supplement the MAS Processing Agreement. The signatures of MAS and User set forth in the MAS Processing Agreement and the above referenced Addendum shall serve as evidence of the parties' agreement to this Addendum.
EXHIBIT MCV-1
SCHEDULE OF FEES
for
ADDITIONAL PROCESSING SERVICES
MASTERCARD DEBIT CARD/ VISA CHECK CARD
The fees payable by User for the MASTERCARD DEBIT CARD or VISA CHECK CARD shall be as follows:
Set-Up Fee
1. One-Time Set-Up
MC Debit Card/Visa Check Card $2,000
Processing Fees
1. Monthly Access/Gateway Fee $100
2. Completion or Posting Transaction Fee $ 15
3. Quarterly Reporting
Principals Not Applicable
Affiliate/Associate or Other Membership 100/quarter
4. Chargeback/Retrieval Request $13 per Item
|
Each subsequent action will be accessed at the per item rate
5. Credit Card Network Processing Fees as pass-through:
A. Fees as described in the MasterCard Consolidated Billing System manual are included on the monthly MAS invoice as pass-through fees.
B. Fees as described in the VISA U.S.A. Inc., Operating Regulations, Volume I - General Rules are included on the monthly MAS invoice as pass-through fees.
C. Any charges and fees incurred by card vendors, shall be passed through to User.
D. Pass-through fees not covered under item 5 herein, as applicable to User will be billed to User.
6. Fraud Reporting
A. MasterCard SAFE Reporting $50/mo.
B. Visa Confirmed Fraud Reporting $50/mo.
7. Telecommunications at cost
Optional Services
1. Hold/Match Service Implementation Fee $100
A. Hold/Match fee per Authorization:
Billing Increment ----------------- 1 to 12 hours $0.024 13 to 24 hours $0.028 25 to 36 hours $0.032 37 to 48 hours $0.035 49 to 60 hours $0.038 61 to 72 hours $0.040 73 to 84 hours $0.042 85 to 96 hours $0.044 each additional 12 hours +$0.002 |
Hold/Match fees are calculated based on the total number of Pre-authorization transactions for the month.
2. Pre-Authorization Re-Apply Service Fee $.04 per transaction per day
Card Production Fees
1. Generic MasterCard Debit Card/Visa Check Card and Business Card fee.
A. A set-up fee, covering the cost of client setup on card vendors system and any necessary programming, will be passed through to User.
B. A per Card fee based upon the number of Cards issued. This fee includes plastic, window envelopes and insertion, ultragraphics, indent printing, CVV/CVC calculation, embossing, encoding, tipping, card carrier, printing of card carriers, matching of cards to carriers, activation labels and affixing of activation labels.
#of Plastics Cost/Standard Card Cost/Business Card ------------ ------------------ ------------------ 1 - 500 $1.75 $2.50 Over 500 1.50 2.25 |
Monthly Volume includes Continuous Issue, Mass Issue and Reissues.
C. A PIN Creation fee of $.30 per PIN which includes generation of PIN, printing of PIN mailer and PIN mailer.
D. Postage fees are pass-through.
2. Custom MasterCard Debit Card/Visa Check Card and Business Card fee.
A. A one time set-up fee of $300,
B. Customized Proprietary Plastic will be quoted by manufacturer.
C. A per Card fee based upon the number of Cards issued. This fee includes window envelopes and insertion, ultragraphics, indent printing, CVV/CVC calculation, embossing, encoding, tipping, card carrier, printing of card carriers, matching of cards to carriers, activation labels and affixing of activation labels.
# of Plastics Cost/card ------------- --------- 1 - 500 $1.40 over 500 $1.15 |
Monthly Volume includes Continuous Issue, Mass Issue and Reissues.
D. A PIN Creation fee of $.30 per PIN which includes generation of PIN, printing of PIN mailer and PIN mailer.
E. Postage fees are pass-through
3. Miscellaneous service fees:
A. A $10.00 each fee to pull Card on an exception basis plus express mail charge.
B. Statement insert stuffing fee of $.01 each (statement insert provided by FI meeting the required specifications.)
MONEY ACCESS SERVICE(R) PROCESSING AGREEMENT
ADDENDUM
FOR
OFF-LINE DEBIT
FRAUD RISK IDENTIFICATION SERVICES
This Addendum is dated 9-20 , 2000 by and between MONEY ACCESS SERVICE INC. with offices located at 1100 Carr Road, Wilmington, DE 19809 ("MAS", "we" or "us") and TOWN BANK OF WESTFIELD with offices located at 520 SOUTH AVE., WESTFIELD, NJ 07090 ("User", "you" or "your") and shall supplement, amend and become part of the MONEY ACCESS SERVICE Processing Agreement dated 9-20 , 2000, between MAS and User (the "MAS Processing Agreement").
In connection with the MAS Processing Services set forth in the addendum for Off-Line Debit-Visa Check Card/MasterCard Debit Card to the MAS Processing Agreement, MAS offers, a service designed to detect and report patterns of potentially fraudulent use of off-line debit cards known as the Fraud Risk Identification Service. MAS's provision of access to the Fraud Protection Service and the associated reporting and notice undertakings hereunder are collectively referenced below as the Service. User elects the Service described herein.
NOW, THEREFORE, in consideration of the mutual premises herein contained, MAS and User agree to be legally bound by the terms of this Addendum as hereinafter set forth.
1. DEFINED TERMS
All capitalized terms used in this Addendum and not otherwise defined herein shall have the meanings set forth in the MAS Processing Agreement or Exhibit A thereto.
2. THE SERVICE
(a) Participation in the Fraud Protection Service. User shall communicate to MAS the off-line debit cards selected by User to participate in the Service (each, a "Card") on the User Service Election Form attached hereto and incorporated herein by reference as Exhibit FRIS-l, as such exhibit may be amended from time to by mutual agreement of the parties.
(b) Election of Service Type; Fraud Activity Thresholds. User shall designate its Service election on Exhibit FRIS-l.
(1) Comprehensive Service Election. If a "Comprehensive Service" election is made by User on Exhibit FRIS-1, upon MAS's determination that a suspected fraud activity threshold determined by MAS in its sole discretion from time to time ("Threshold") has been met with respect to any Card, MAS shall attempt to communicate with User's cardholder, at the telephone number provided by User, to determine whether the reported use of the Card was unauthorized. MAS is authorized to disclose information regarding use of the Card to persons at such telephone number and to rely upon the direction of such persons. MAS's policies, procedures and options for response to claims of fraudulent activity, inability to contact the cardholder and reporting to the User shall be provided to User by MAS from time to time.
(2) Independent Service Election. If an "Independent Service" election is made by User on Exhibit FRIS-l, upon MAS's determination that a Threshold has been met with respect to any Card, MAS will inform User of such determination in accordance with procedures set forth in MAS's Service documentation from time to time. Upon the election by User of the Independent
Service, MAS will have no obligation, duty or responsibility to attempt to communicate with User's cardholder.
(c) Ownership of Systems Required to Provide Service. MAS does not hereby convey nor does User hereby obtain any right in the programs, systems, data or materials utilized by MAS in the performance of the Service under this Addendum or the MAS Processing Agreement.
(d) Authorization to Use the Service. User shall comply with all applicable provisions of this Agreement and MAS's policy and procedures statements distributed from time to time. User shall provide to MAS information related to User's confirmed fraud experience as required by MAS from time to time.
(e) Provision of Needed Data to MAS upon User's Comprehensive Service Election. Upon User's Comprehensive Service election on Exhibit FRIS-1, prior to the Start Date, and as updated from time to time thereafter, User shall provide MAS with the names and corresponding valid telephone numbers for all of its cardholders whose Cards will participate in the Service in such format as MAS shall specify from time to time (the "Cardholder Data"). MAS may refuse to process, and may return to User, any Cardholder Data that in MAS's opinion are not of a quality suitable for processing or do not comply with MAS's standards and procedures. User will be responsible for correcting and resubmitting any rejected Cardholder Data.
(f) Contact of User's Cardholders upon User's Comprehensive Service Election. Upon User's Comprehensive Service election on Exhibit FRIS-l, User authorizes MAS to contact User's cardholders, as necessary, upon its determination that a Threshold has been triggered by such cardholders' account activity. User agrees that MAS is entitled to rely upon User's Cardholder Data without verification and acknowledges that any error in such Cardholder Data may prevent or impede MAS from contacting such Cardholders.
(g) Periodic Surveys. Regardless of User's service level election on Exhibit FRIS-l, User agrees to participate in periodic confidential surveys to assess Service performance.
(h) HNC Software Sublicense. The software sublicensing agreement, attached hereto as Exhibit FRIS-2 as such exhibit may be amended from time to time, is incorporated herein by reference.
3. EFFECTIVE DATE; TERM; SERVICE START DATE.
(a) This Addendum shall become effective, without further action, as of the date first written above (the "Effective Date") and shall remain in full force and effect until MAS ceases to offer the Service or until the expiration of the initial term or current renewal term of the MAS Processing Agreement, whichever is sooner; provided that either party to this Agreement may terminate this Agreement for any reason whatsoever, without penalty, by providing thirty (30) days' prior written notice to the other party.
(b) Notwithstanding the Effective Date, MAS shall begin to provide the Service to User on the date set forth on Exhibit FRIS-l (the "Start Date").
4. FEES.
In consideration for the Services, User agrees to pay to MAS a Service set-up fee as set forth in Exhibit FRIS-1 prior to the Start Date. In addition, User shall pay to MAS Service usage fees as described on Exhibit FRIS-I related to User's service level election. Notwithstanding any other provision of the MAS Processing Agreement or any addenda thereto, if HNC Software Inc., increases the costs charged to MAS associated with the Service, MAS may increase User's Service usage fees to reflect such increases. The timing and form of payment of such fees shall be governed by the MAS Processing Agreement. Any costs associated with User's receipt of the Service shall be borne by User.
5. DISCLAIMER OF LIABILITY.
MAS shall not be responsible for any losses, damages, or liabilities, whether in
contract, tort (including negligence), strict liability or under any other
theory, incurred by User or any of its cardholders, that is in any way
associated with the Service, including without limitation any losses, damages or
liabilities that are (a) caused (i) by any inaccuracy or error in the Service,
(ii) by any disclosure of cardholder information to a person contacted through
the Cardholder Data provided by User, or (iii) during scheduled maintenance
necessary to support the Service. In no event shall MAS be liable for indirect,
special, incidental, or consequential damages including without limitation lost
profits incurred by User, its agents, or any cardholders in connection with the
Service. Without limiting the foregoing, MAS disclaims any warranty, express or
implied, in the selection on any Threshold.
6. INDEMNIFICATION.
User shall indemnify, defend and hold MAS and respective directors, officers, agents and employees harmless from and against any and all losses, claims, demands, actions, causes of action, suits, costs, attorneys' fees, damages, expenses, compensation, penalties, liabilities and obligations of any kind asserted by a third party resulting from, arising out of, or incurred in connection with the Service.
7. CONFIRMATION OF MAS PROCESSING AGREEMENT
Except as otherwise amended hereby, the MAS Processing Agreement is hereby ratified in all respects and shall remain in full force and effect.
EXHIBIT FRIS-1
USER SERVICE ELECTION FORM
The undersigned User wishes to participate in the Fraud Risk Identification Service (FRIS), and designates the following type of service and cards for coverage through such service.
Schedule of Fees
User agrees to pay MAS:
Initial Implementation Set-up Fee
1. A one-time set-up fee of $1,000.
Service Level Election
Comprehensive Service |X|
In addition to the fees above, User shall pay to MAS the following:
1. Monthly Card Residency Fee of $.02 per active*card on file. (Waived).
2. Transaction Fee of $.03 per transaction submitted for neural network scoring and processed by MAS with respect to any Card.
Independent Service |_|
In addition to the fees above, User shall pay to MAS the following:
1. Monthly Card Residency Fee of $.02 per active*card on file.
2. Transaction Fee of $0.3 per transaction submitted for neural network scoring and processed by MAS with respect to any Card.
Reporting and File Distribution and Delivery Fees
1. Telecommunication fees as applicable to Participant will be billed monthly.
Consortium Fraud File Fee
1. Monthly Fee of $50 for file maintenance and administration.
Cardholder Profile Transmission Fees Authorization Processor/Intercept Processor/Third Party Processor Clients Only
Optional Service
1. Monthly Card Record Storage Fee of $.02 per card record maintained on the FRIS card profile system.
2. Monthly File Maintenance Fee of $150 for file maintenance and administration.
3. Telecommunication fees as applicable to Participant will be billed monthly.
4. Certification fees as applicable to Participant will be billed.
* Active is defined as any offline debit card which conducted a transaction via the MasterCard Debit Card and Visa Check Card system during the month, that was submitted for neural network scoring.
User Prefix Total # of Cards Active # of Cards ----------- ---------------- ----------------- ----------- ---------------- ----------------- |
Note: Prefixes participating in the Service need to be submitted four (4) weeks prior to their inclusion.
EXHIBIT FRIS-2
SUBLICENSE AGREEMENT
1. MAS grants to User a nonexclusive, nontransferable (except as provided in Section 10 below) sublicense to use proprietary software for use with debit card accounts ("HNC Software") developed by HNC Software Inc., ("HNC") only in object code form as provided herein and to use the manuals and related written materials that describe the use or functionality of the HNC Software (the "Documentation") for the HNC Software. User's rights may not be sublicensed, assigned, or transferred in any respect, whether by operation of law or otherwise, except as specifically set forth in this Agreement. User's rights and license with respect to the HNC Software are subject to termination if MAS's rights under the License and Software Distribution Agreement between HNC and MAS are terminated. User acknowledges that the HNC Software is designed for detection of debit card fraud and, as such, User agrees not to use the HNC Software for any other purpose. In addition, User acknowledges and agrees that the performance of the HNC Software is optimized for cardholders domiciled in the United States and Canada. As such, User agrees it will not use the HNC Software with respect to any cardholders known by User to be domiciled outside of the United States and Canada.
2. User acknowledges that the HNC Software is copyrighted and is the sole and exclusive property of HNC Software Inc. No right, title, or interest in or to the HNC Software (including any right, title or interest in or to any patent, copyright, trademark, or other Intellectual Property or proprietary rights in or related to the HNC Software), other than the sublicense expressly granted hereby, is transferred from MAS to User. Title to and ownership of the HNC Software shall remain exclusively with HNC and its licensors (if any). User shall not alter or erase any proprietary notices appearing on the HNC Software.
3. The HNC Software contains trade secrets of HNC, and to protect them, User agrees not to decompile, reverse engineer, disassemble, or otherwise reduce the HNC Software to human perceivable form. Except as otherwise provided in this Agreement, User may not use, copy, modify, adapt, translate, rent, lease, loan, resell for profit, distribute, network or create derivative works based upon the HNC Software or any part thereof.
4. The User may copy those components of the HNC Software which MAS is permitted to use hereunder solely for internal archival and backup purposes to enable User to use the HNC Software as permitted by this Agreement. User may transfer the HNC Software to a backup computer in the event of computer malfunction. User shall reproduce all copyright and proprietary notices on the HNC Software in their exact form on all such copies. Upon MAS's reasonable request, User shall inform MAS of the number and location of any copies of the HNC Software in such User's possession.
5. LIMITED LIABILITY. REGARDLESS WHETHER ANY REMEDY SET FORTH HEREIN OR IN ANY OF HNC'S LIMITED WARRANTIES FAILS OF ITS ESSENTIAL PURPOSE OR OTHERWISE, HNC AND/OR MAS WILL NOT BE LIABLE FOR ANY LOST PROFITS, LOSS OF BUSINESS OR FOR INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES SUFFERED BY USER OR OTHERS ARISING OUT OF OR RELATED TO THIS ADDENDUM, THE HNC SOFTWARE, THE DOCUMENTATION OR ANY OTHER HNC PRODUCTS OR SERVICES, FOR ALL CAUSES OF ACTION OF ANY KIND (INCLUDING BUT NOT LIMITED TO TORT, CONTRACT, NEGLIGENCE, STRICT PRODUCT LIABILITY AND BREACH OF WARRANTY) EVEN IF HNC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
6. LIMIT ON MAXIMUM LIABILITY. HNC'S AND MAS'S TOTAL COLLECTIVE LIABILITY TO USER UNDER THIS ADDENDUM WILL IN NO EVENT EXCEED THE TOTAL DOLLARS PAID BY USER OR MAS UNDER THIS ADDENDUM (EXCLUSIVE OF REIMBURSED EXPENSES) FOR THE HNC SOFTWARE DURING THE FIRST TWELVE (12) MONTHS OF THIS AGREEMENT OR DURING THE TWELVE-MONTH PERIOD PRECEDING THE DATE ON WHICH THE CAUSE OF ACTION RESULTING IN SUCH LIABILITY ACCRUED, WHICHEVER AMOUNT IS GREATER.
7. User acknowledges that the HNC Software contains confidential and proprietary information belonging to HNC and its licensors (if any). User shall use reasonable efforts to hold the HNC Software and Documentation in confidence and shall not knowingly or negligently disclose or use the HNC Software except as permitted by this Agreement. As used herein, "reasonable efforts" means at least the same degree of care to safeguard and preserve the confidentiality of HNC's and its licensors' confidential and proprietary information as User would exercise with respect to User's own confidential information, which shall not be less than a reasonable standard of care. User shall not use the HNC Software other than as expressly permitted by this Agreement. User's obligations of confidentiality under this Section and User's obligations under Section 3 above shall survive the termination of this Agreement for any reason for a period of five (5) years. Without limiting the generality of the foregoing, User agrees that in the event that User breaches any of the provisions contained in this Agreement then, MAS and/or HNC shall be authorized and entitled to seek from any court of competent jurisdiction (i) a temporary restraining order, (ii) preliminary and permanent injunctive relief; and (iii) an equitable accounting for all profits or benefits arising out of such breach. Such rights or remedies shall be cumulative and in addition to any other rights or remedies to which MAS and/or HNC may be entitled.
8. User shall be in default of this Agreement if: (a) User breaches any confidentiality obligation and does not cure such breach within ten (10) days after notice thereof by MAS; or (b) User materially breaches any other obligation contained in this Agreement and fails to cure such breach within thirty (30) days after notice thereof by MAS. If User defaults, MAS may terminate this Agreement and require User to destroy or return to MAS all copies of the HNC Software in User's possession.
9. Consortium Data. As a condition of being permitted to use the HNC Software, User agrees to provide MAS with Client Fraud Data (as such term is defined below) which will be submitted by MAS to HNC on behalf of User. MAS and HNC will treat such data as the Confidential Information of User. HNC shall use such Client Fraud Data only in performing services in accordance with this Addendum. Such Client Fraud Data will be incorporated by HNC into the appropriate consortium database on an anonymous basis and User hereby agrees that such Client Fraud Data (as so incorporated into the consortium database) may be perpetually used by HNC without charge to develop models related to the given HNC Software product, reports and consulting activities that will be used by HNC and its customers. HNC shall also own any derived variables from such data. Such data will only be made available to those employees of HNC who need such information in order to perform their responsibilities hereunder.
For purposes of this Addendum, "Client Fraud Data" shall mean current data and information of User, which information is collected by MAS on a go-forward basis from the effective date of this Addendum and incorporated into a proprietary data base containing data of other HNC clients which is used by HNC for developing "consortium" models and algorithms for use with the HNC Software.
User acknowledges and agrees that Client Fraud Data submitted to MAS for use in the Fraud Control Consortium will be formatted as reasonably specified by MAS. If User fails to meet such requirements, User acknowledges and agrees that HNC may, in its discretion, exclude any unfit and/or unsuitable Client Fraud Data submitted by User to the Fraud Control Consortium. In such event, User's data will not be included in the Fraud Control Consortium and, as such, User acknowledges and agrees that User may receive diminished benefits from the Fraud Control Consortium.
10. Assignment. User shall not, without the prior written consent of MAS, assign or transfer this Addendum. Such consent shall not be unreasonably withheld. However, MAS may, in its discretion, withhold consent to any assignment of this Agreement (and such withholding of consent will be deemed to be reasonable) where: (i) such assignment is to a competitor of HNC (for purposes of this Addendum, a "competitor of HNC" is defined as one which offers a software solution which purports to solve the same problems as the HNC Software, and other similar products in HNC's product line); and (ii) the assignee is located outside the United States and/or Canada.
Exhibit 10.39
AGREEMENT OF LEASE
WITH PURCHASE OPTION
(HEREIN REFERRED TO AS THE "AGREEMENT")
Dated: __________________________
CONJOE REALTY CO., INC.
a New Jersey Corporation
c/o Robert Papandrea, Vice President
54 DOCK WATCH HOLLOW
WARREN, NEW JERSEY 07059,
AS LANDLORD/SELLER
AND
RONALD FRIGERIO, as agent for
THE TOWN BANK OF WESTFIELD, In Organization
115 EAST GROVE STREET
WESTFIELD, NEW JERSEY 07091
AS TENANT/PURCHASER
FRIERI & CONROY
777 WALNUT AVENUE
CRANFORD, NEW JERSEY 07016
(908) 653-1441
TABLE OF CONTENTS
SECTION 1. THE LEASE........................................................1
SECTION 2. USE..............................................................1
SECTION 3. LEASE COMMENCEMENT...............................................1
SECTION 4. PRE-COMMENCEMENT EXPENSES........................................1
SECTION 5. TERM.............................................................2
SECTION 6. RENT COMMENCEMENT DATE...........................................2
SECTION 7. RENT.............................................................2
SECTION 8. FIRST OPTION TO RENEW............................................2
SECTION 9. SECOND OPTION TO RENEW...........................................3
SECTION 10. THIRD OPTION TO RENEW............................................3
SECTION 11. TENANT/PURCHASER FIT-UP..........................................3
SECTION 12. SECURITY.........................................................4
SECTION 13. TAXES............................................................4
SECTION 14. UTILITIES........................................................4
SECTION 15. REPAIRS MAINTENANCE AND REPLACEMENTS.............................5
SECTION 16. COMPLIANCE WITH LAWS.............................................5
SECTION 17. ALTERATIONS AND IMPROVEMENTS.....................................5
SECTION 18. INSURANCE........................................................5
SECTION 19. INDEMNITY........................................................6
SECTION 20. FIRE AND OTHER CASUALTY..........................................6
SECTION 21. CONDEMNATION.....................................................6
SECTION 22. ASSIGNMENT AND SUBLETTING........................................7
SECTION 23. LANDLORD/SELLER'S RIGHT OF ACCESS................................7
SECTION 24. SUBORDINATION TO MORTGAGES. NONDISTURBANCE BY MORTGAGEE..........8
SECTION 25. CERTIFICATE OF LEASE STATUS......................................8
SECTION 26. SIGNS............................................................8
SECTION 27. NON-LIABILITY OF LANDLORD/SELLER.................................8
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SECTION 28. CONSTRUCTION LIEN CLAIMS.........................................8 SECTION 29. LANDLORD/SELLER'S RIGHT TO CURE..................................8 SECTION 30. HOLDING OVER.....................................................9 SECTION 31. ENVIRONMENTAL MATTERS............................................9 SECTION 32. DEFAULT.........................................................10 SECTION 33. FORCE MAJEURE...................................................11 SECTION 34. WAIVER OF SUBROGATION...........................................11 SECTION 35. BROKERAGE.......................................................11 SECTION 36. QUIET ENJOYMENT.................................................11 SECTION 37. LEASE SCHEDULES AND EXHIBITS....................................11 SECTION 38. RECORDATION OF LEASE............................................11 SECTION 39. NOTICES.........................................................12 SECTION 40. BINDING EFFECT..................................................12 SECTION 41. APPLICABLE LAW..................................................12 SECTION 42. REMOVAL OF TENANT/PURCHASER'S PROPERTY..........................12 SECTION 43. SUMS DEEMED ADDITIONAL RENT.....................................13 SECTION 44. PURCHASE OPTION.................................................13 SECTION 45. FIRST RIGHT OF REFUSAL..........................................13 SECTION 46. EARLY TERMINATION...............................................14 SECTION 47. VALIDITY OF LEASE/AUTHORITY TO LEASE............................14 SECTION 48. ENTIRE AGREEMENT................................................14 |
SECTION 1. THE LEASE
Landlord/Seller hereby leases to Tenant/Purchaser and Tenant/Purchaser hereby rents from Landlord/Seller the entire property located at 520 South Avenue West, Westfield, New Jersey, also known as Lot 20, Block 2510 on the tax map of the Township of Westfield and as more particularly described in Exhibit A, which is annexed hereto and hereinafter referred to as the "Premises". It is understood and agreed that, subject to the Tenant/Purchaser's right of purchase and first refusal as hereinafter defined, the Premises may be conveyed by the Landlord/Seller to another person or entity. Upon such conveyance, the third party shall take title subject to and such transferee shall recognize the Tenant/Purchaser's tenancy hereunder and the terms and provisions of this Lease.
It is further understood and agreed that Tenant/Purchaser is in the process of forming, with the requisite approval of the New Jersey Department of Banking and the Federal Deposit Insurance Corporation, a New Jersey commercial banking corporation, the charter application for which is soon to be filed, to be named "The Town Bank of Westfield" or such substitute name as may be required by the New Jersey Commissioner of Banking (the "Bank"). Upon the charter being duly issued by the New Jersey Department of Banking and the Bank becoming duly qualified to do a banking business in New Jersey, Tenant/Purchaser shall assign this Lease to the Bank and upon the Bank's assuming each and every obligation of Tenant/Purchaser under this Lease, Landlord/Seller shall release Tenant/Purchaser from any further Lease obligations and there shall be no further liability to Tenant/Purchaser thereafter.
SECTION 2. USE
The Tenant/Purchaser may use and occupy the Premises as a commercial banking office. The Tenant/Purchaser's use of the Premises is expressly made subject to the provisions of Section 31 of this Lease. In addition to the limitations set forth in the aforesaid Section 31, the Tenant/Purchaser shall not use or occupy nor knowingly permit the Premises or any part thereof to be used or occupied for any unlawful business use or purpose or for any purpose or in any manner which is in violation of any present or future governmental laws or regulations. The Tenant/Purchaser shall save harmless and indemnify the Landlord/Seller from and against all costs, expenses, liabilities, losses, damages, injunctions, suits, fines, penalties, claims, and demands, arising out of Tenant/Purchaser's own negligence, except if the Landlord/Seller shall be compensated therefore by recovery under fire or extended coverage insurance.
SECTION 3. LEASE COMMENCEMENT
The Lease Commencement Date shall be upon, or before at Tenant/Purchaser's option, issuance of the Certificate of Authority from the New Jersey Department of Banking (hereafter the "COA"), currently anticipated in February, 1998.
SECTION 4. PRE-COMMENCEMENT EXPENSES
Tenant/Purchaser agrees to begin payment of all real estate taxes that come due on the Premises upon execution of this Lease by both parties. Tenant/Purchaser shall pay all real estate taxes to the Landlord/Seller on a monthly pro-rata basis in arrears. At the time of execution of this Lease, the monthly payment is approximately $1,497.00. All pre-commencement expenses shall cease to be paid by Tenant/Purchaser upon the happening of any of the following events:
A. the denial of the COA; or
B. the Tenant/Purchaser failing to obtain final site plan approval on or before February 1, 1998 from the Westfield Planning Board for the use of the Premises as a bank with drive-up facilities in accordance with the plans submitted by Tenant/Purchaser to the Westfield Planning Board; or
C. the Tenant/Purchaser failing to obtain approval for the curb cut in the driveway for entrance to the drive-up facility as shown on the plans submitted to the Westfield Planning Board and the New Jersey Department of Transportation; or
D. the receipt of an unsatisfactory engineering inspection report of the condition of the Premises within 21 days from the execution of this Agreement. An unsatisfactory report shall be a report that the Tenant/Purchaser deems unsatisfactory in its sole and absolute discretion.
E. Rent Commencement as hereafter defined.
Upon the occurance of sub-part A, B, C, D or E herein, Tenant/Purchaser will stop payment of real estate taxes as pre-commencement expenses and all rights under this Lease and Purchase Option shall terminate.
SECTION 5. TERM
The Lease term shall be five (5) years beginning from the Rent Commencement Date (the "Initial Term") as hereafter defined with three (3) five year fixed rent renewal options as defined and set forth hereafter.
SECTION 6. RENT COMMENCEMENT DATE
Tenant/Purchaser shall begin the payment of Rent as hereafter set forth exactly ninety (90) days after issuance of the COA to the Bank or upon the Bank opening for business, whichever first occurs. In no event, however, shall Rent Commencement be later than May 1, 1998. In the event that Rent Commencement begins on a day other than the first day of the month, rent for that month will be prorated for the number of days remaining in that month.
SECTION 7. RENT
Rent during the Initial Term shall, for a period of five (5) years, be as follows:
Lease Year Annual Monthly
---------- ------ -------
1 $24,000.00 $2,000.00
2-5 $54,000.00 $4,500.00
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The Tenant/Purchaser covenants and agrees to pay the Landlord/Seller as a total base rent for the Premises, without set-off or deduction of any kind, the sum of TWO HUNDRED FORTY THOUSAND ($240,000.00) DOLLARS, payable by the 15th day of each calendar month in accordance with the above monthly installments as noted herein for the entire Initial Term.
SECTION 8. FIRST OPTION TO RENEW
Provided Tenant/Purchaser is not at the time of exercise and, prior to the expiration of the applicable Lease term will not be in default under this Lease and has not been in default of the Lease during the expiring Term, Tenant/Purchaser shall have an option to renew this Lease for a renewal term of five (5) years. This option may be exercised only by Tenant/Purchaser upon written notice to Landlord/Seller not less than six (6) months prior to the expiration of the initial Term. The terms and conditions of the first renewal term of the exercised option shall be the same as those in this Lease except only as hereinafter provided.
Rent during the first renewal term shall be as follows
Lease Year Annual Monthly ---------- ------ ------- 6-10 $70,000.00 $5,833.00 |
The Tenant/Purchaser covenants and agrees to pay the Landlord/Seller as a total base rent for the Premises, without set-off or deduction of any kind, the sum of THREE HUNDRED FIFTY THOUSAND ($350,000.00)
DOLLARS, payable by the 15th day of each calendar month in equal installments as noted herein for the entire First Renewal Term.
SECTION 9. SECOND OPTION TO RENEW
Provided Tenant/Purchaser is not at the time of exercise and, prior to the expiration of the applicable Lease term will not be in default under this Lease and has not been in default of the Lease during the expiring Term, Tenant/Purchaser shall have an option to renew this Lease for a renewal term of five (5) years. This option may be exercised only by Tenant/Purchaser upon written notice to Landlord/Seller not less than six (6) months prior to the expiration of the First Renewal Term. The terms and conditions of the second renewal term of the exercised option shall be the same as those in this Lease except only as hereinafter provided.
Rent during the second renewal term shall be as follows
Lease Year Annual Monthly ---------- ------ ------- 11-15 $80,000.00 $6,667.00 |
The Tenant/Purchaser covenants and agrees to pay the Landlord/Seller as a total base rent for the Premises, without set-off or deduction of any kind, the sum of FOUR HUNDRED THOUSAND ($400,000.00) DOLLARS, payable in equal monthly installments as noted herein for the entire Second Renewal Term.
SECTION 10. THIRD OPTION TO RENEW
Provided Tenant/Purchaser is not at the time of exercise and, prior to the expiration of the applicable Lease term will not be in default under this Lease and has not been in default of the Lease during the expiring Term, Tenant/Purchaser shall have an option to renew this Lease for a renewal term of five (5) years. This option may be exercised only by Tenant/Purchaser upon written notice to Landlord/Seller not less than six (6) months prior to the expiration of the Second Renewal Term. The terms and conditions of the third renewal term of the exercised option shall be the same as those in this Lease except only as hereinafter provided.
Rent during the third renewal term shall be as follows
Lease Year Annual Monthly ---------- ------ ------- 16-20 $90,000.00 $7,500.00 |
The Tenant/Purchaser covenants and agrees to pay the Landlord/Seller as a total base rent for the Premises, without set-off or deduction of any kind, the sum of FOUR HUNDRED FIFTY THOUSAND ($450,000.00) DOLLARS, payable in equal monthly installments as noted herein for the entire Third Renewal Term.
SECTION 11. TENANT/PURCHASER FIT-UP
After signing the Lease and depositing the rent security, Tenant/Purchaser may commence its fit-up work required to convert the Premises into a commercial bank location with drive-in facility. This work, at the sole cost and expense of Tenant/Purchaser, shall be performed in accordance with architect plans and specifications as approved by Tenant/Purchaser and the Township of Westfield including all appeal periods. Prior to application being made to the Township of Westfield for approval, Landlord/Seller shall be given a set of the plans for review and informational purposes only. Landlord/Seller shall cooperate with Tenant/Purchaser in making all appropriate and necessary applications to convert Premises as set forth herein including execution of owners consent as may be required by the Westfield Planning Board or any other appropriate agency. Insurance certificates and a hold harmless agreement shall be required of any general contractor employed by Tenant/Purchaser to complete the renovations to the Premises. Said certificates and hold harmless agreement shall be in place prior to work commencing.
SECTION 12. SECURITY
Simultaneous with the Rent Commencement Date Tenant/Purchaser shall deposit the sum of FOUR THOUSAND ($4,000.00) DOLLARS with the Landlord/Seller, as security for the full and faithful performance by the Tenant/Purchaser of each and every term, covenant, and condition of this Lease. In the event that the Tenant/Purchaser shall default in respect of any of the terms, provisions, covenants, and conditions of this Lease, including but not limited to payment of any rent, the Landlord/Seller may use, apply, or retain the whole or any part of the security so deposited for the payment of any such rent in default or for any other sum which the Landlord/Seller shall expend by reason of Tenant/Purchaser's default, including any damages or deficiency in the reletting of the Premises, whether such damages or deficiency shall accrue before or after summary proceedings or other re-entry by the Landlord/Seller.
Tenant/Purchaser shall pay to Landlord/Seller on demand the amount so applied in order to restore the security to its original amount. In the event that the Tenant/Purchaser shall fully and faithfully comply with all the terms, provisions, covenants, and conditions of this Lease, the security or any balance thereof shall be returned to the Tenant/Purchaser after the time fixed as the expiration of this Lease or any renewals thereof. In the absence of evidence satisfactory to the Landlord/Seller of any assignment of the right to receive the security, or the remaining balance thereof, the Landlord/Seller may return the security to the original Tenant/Purchaser, regardless of one or more assignments of the Lease itself. This provision, however, shall not be construed as a consent by the Landlord/Seller to any such assignment.
In the event of a bona fide sale of the Premises to a third party, the Landlord/Seller shall have the right to transfer the security to the vendee for the benefit of the Tenant/Purchaser, and the Landlord/Seller shall be considered released by the Tenant/Purchaser from all liability for the return of such security, and the Tenant/Purchaser agrees to look to the new Landlord/Seller solely for the return of the security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord/Seller. Prior to any such transfer of security, the Landlord/Seller shall have given the Tenant/Purchaser written notice thereof and the transferee shall have assumed the responsibilities relating thereto, as herein contained, in writing.
The security deposit under this Lease shall not be assigned or encumbered by the Tenant/Purchaser without the written consent of the Landlord/Seller.
In the event the Federal Deposit Insurance Corporation (hereafter the "FDIC"), by statute or published regulation, requires the treatment of the security different from that herein provided, the applicable FDIC required procedure will be adhered to by the parties.
SECTION 13. TAXES
Tenant/Purchaser shall be responsible for all real estate taxes beginning on the Rent Commencement Date. Tenant/Purchaser shall make all tax payments quarterly when due directly to the Township of Westfield. Landlord/Purchaser shall provide Tenant/Purchaser a copy of the annual tax bill immediately upon receipt of same. However, Tenant/Purchaser's agreement to pay the real estate taxes is expressly contingent upon the full cooperation of the Landlord/Seller with the Tenant/Purchaser in the event that Tenant/Purchaser shall choose to file a tax appeal with the appropriate authorities at any time during the term of this Lease.
SECTION 14. UTILITIES
Tenant/Purchaser shall make arrangements directly with the suppliers of electricity, gas and water to have these utility bills put in Tenant/Purchaser's name and shall promptly pay all bills for such services directly to the suppliers of such services.
Tenant/Purchaser shall furnish heat, cooling and all other services Tenant/Purchaser may deem necessary or desirable in connection with its occupancy of the Premises at Tenant/Purchaser's sole cost and expense.
SECTION 15. REPAIRS MAINTENANCE AND REPLACEMENTS
Throughout the term of this Lease, the Tenant/Purchaser shall, at its sole cost and expense, maintain and keep the Premises (including sidewalks, parking, entrance and exitways) in as good order and repair as at the Lease Commencement Date, ordinary wear and tear excepted and shall make any and all replacements required for this purpose. The Tenant/Purchaser shall promptly perform, or cause to be performed, all required repairs to the Premises. These obligations include but are not limited to snow removal, paving, painting, HVAC, electric, plumbing, roof repairs and glass.
SECTION 16. COMPLIANCE WITH LAWS
The Tenant/Purchaser shall comply with any law, ordinance, and regulation, whether federal, state, county, or municipal, as well as rules and regulations adopted by the Landlord/Seller for the building of which the Premises is a part, applicable to the Premises, relating to use or occupancy thereof or, to the making of repairs, changes, alterations, or improvements, ordinary or extraordinary, seen or unforeseen, including but not limited to the performance of any duty imposed upon the Landlord/Seller or Tenant/Purchaser in respect of the sidewalks or curbs adjacent to the Leased Property. The Tenant/Purchaser shall comply with any and all rules and regulations applicable to the Premises issued by the Board of Fire Underwriters, or by any other body hereinafter constituted exercising similar functions, and by insurance companies writing policies covering the Premises which now or hereafter may become applicable to the Premises. The Tenant/Purchaser shall pay all costs, expenses, claims, fines, penalties, and damages that may be imposed because of the Tenant/Purchaser's negligence and the Tenant/Purchaser's use of the Premises, and shall save harmless and indemnify the Landlord/Seller from and against any and all liability arising from such noncompliance. The Landlord/Seller and the Tenant/Purchaser shall each promptly give notice to the other of any notice of violation received by them. Without diminishing the obligation of the Tenant/Purchaser, if the Tenant/Purchaser shall at any time fail to comply as expeditiously as reasonably feasible with any law, ordinance, rule, or regulation concerning or affecting the Premises, or the use and occupancy thereof, and, if a stay is necessary with respect to such compliance, shall have failed to obtain such stay, then the Landlord/Seller after fifteen (15) days prior written notice to the Tenant/Purchaser may so comply. The Tenant/Purchaser shall have the right to contest by appropriate legal proceedings in the name of the Tenant/Purchaser or the Landlord/Seller, or both, without cost or expense to the Landlord/Seller, the validity or application of any such law, ordinance, rule, or requirement and the Landlord/Seller shall cooperate with the Tenant/Purchaser and will execute and deliver any appropriate papers which may be necessary to permit the Tenant/Purchaser to contest the validity or application thereof.
SECTION 17. ALTERATIONS AND IMPROVEMENTS
Except for those alterations, improvements and demolition set forth in the plans and specifications provided to the Township of Westfield Planning Board that form the basis of the ultimate building permit application, no alterations, additions, or improvements shall be made, and no climate regulating, air conditioning, cooling, heating or sprinkler systems, television or radio antennas, heavy equipment, apparatus and fixtures, shall be installed in or attached to the Premises, without the written consent of the Landlord/Seller, which shall not be unreasonably withheld or delayed. All such alterations and improvements shall be made in a good and workmanlike manner. Unless otherwise provided for herein, all such alterations, additions, or improvements and systems, when made, installed in or attached to the Premises, shall belong to and became the property of the Landlord/Seller and shall be surrendered with the Premises and as part thereof upon the expiration or sooner termination of this Lease, without hindrance, molestation or injury. Nothing contained herein shall prevent future alterations by the Tenant/Purchaser as deemed necessary by said Tenant/Purchaser.
SECTION 18. INSURANCE
18.1. Liability Insurance. Effective on the Lease Commencement Date, or such earlier date as Tenant/Purchaser may enter the Premises or perform any work therein, the Tenant/Purchaser shall be required to maintain, at its sole cost and expense, comprehensive public liability insurance in minimum single limit of $2,000,000.00 per occurrence. The policies of insurance hereunder shall provide that they shall not be cancelable without thirty (30) days' written notice to the Landlord/Seller and the Tenant/Purchaser from insurer except in the event of nonpayment in which case notice of cancellation shall be ten (10) days. All insurance shall be issued by
reputable insurers licensed to do business in the State of New Jersey. Each policy shall name Landlord/Seller and any mortgagee, if required, as an additional assured. Evidence shall be furnished to the Landlord/Seller by the Tenant/Purchaser at all times during the Lease term, indicating that all required premiums for insurance hereunder have been paid and that such coverage is in effect. A certificate setting forth the scope of coverage and policy limits for each required policy hereunder shall be furnished to the Landlord/Seller by the Tenant/Purchaser and at all times maintained on file at the Landlord/Seller's office.
18.2. All Risk Insurance. Effective on the Lease Commencement Date Tenant/Purchaser shall provide property insurance coverage on the Premises for 100% of the total replacement cost of the building.
SECTION 19. INDEMNITY
Except to the extent that the Landlord/Seller shall receive compensation from insurance proceeds, the Tenant/Purchaser shall save harmless and indemnify the Landlord/Seller from and against any and all liability, penalties, damages, expenses, and judgments by reason of any injury or claim or injury to person or property, of any nature, arising out of the use, occupation, and control of the Premises by the Tenant/Purchaser at any time during the term of this Lease, including those resulting from any work in connection with any alterations, changes, new construction, or demolition. The Tenant/Purchaser is hereby subrogated to any rights of the Landlord/Seller against any other parties whomsoever in connection therewith. The Landlord/Seller shall promptly notify the Tenant/Purchaser of any claim asserted against the Landlord/Seller on account of any such injury or claimed injury to persons or property and shall promptly deliver to the Tenant/Purchaser the original or a true copy of any summons or other process, pleading, or notice issued in any suit or other proceedings to assert or enforce any such claim. The Tenant/Purchaser shall have the right to defend any such suit with attorneys of its own selection. The Landlord/Seller shall have a right, if it sees fit, to participate in such defense at its own expense. The indemnity provided for in this Section 19 shall not extend to the Landlord/Seller's intentional or negligent act or for damage caused by fire or the extended coverage hazards.
SECTION 20. FIRE AND OTHER CASUALTY
Effective upon the Lease Commencement Date, in case of fire or other casualty, the Tenant/Purchaser shall give immediate notice to the Landlord/Seller. If the Leased Premises shall be partially damaged by fire, the elements or other casualty so that Tenant/Purchaser is able to satisfactorily operate its business, as Tenant/Purchaser may in its sole discretion determine, then the Tenant/Purchaser shall repair the same as speedily as practicable, but the Tenant/Purchaser's obligation to pay the rent hereunder shall not cease unless and until the Lease is terminated in accordance with this Section 20. If, however, in the reasonable opinion of the Tenant/Purchaser and the Landlord/Seller, the Premises shall be totally destroyed or so extensively and substantially damaged as to require practically a rebuilding thereof, then the rent shall be paid to the time of such destruction and then and from thenceforth this Lease shall come to an end unless Tenant/Purchaser in its sole discretion should decide to rebuild the Premises. In no event, however, shall the provisions of this clause become effective or be applicable, if the fire or other casualty and damage shall be the result of the carelessness, negligence or improper conduct of the Tenant/Purchaser or the Tenant/Purchaser's agents, employees, guests, licensees, invitees, subtenants, assignees or successors and, as a result thereof, insurance proceeds shall be not collectible. In such case, the Tenant/Purchaser's liability for the payment of the rent and the performance of all the covenants, conditions, and terms hereof on the Tenant/Purchaser's part to be performed shall continue and the Tenant/Purchaser shall be liable to the Landlord/Seller for the damage and loss suffered by the Landlord/Seller. If the Tenant/Purchaser shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to the Tenant/Purchaser to the extent of the Tenant/Purchaser's costs and expenses to make the repairs hereunder, and such insurance carriers shall have no recourse against the Landlord/Seller for reimbursement, unless the damage is caused by the action of the Landlord/Seller in which case the Tenant/Purchaser may proceed to collect all expenses from Landlord/Seller.
SECTION 21. CONDEMNATION
21.1. If the whole of the Premises shall be taken for any public or any quasi-public use or by private purchase in lieu thereof, under any statute or by right of eminent domain, then this Lease shall automatically terminate as of the date that title shall have been taken. If any part of the Premises shall be so taken to render the
remainder thereof unusable, in the reasonable judgment of the Tenant/Purchaser with satisfactory proof thereof to the Landlord/Seller, for the purposes for which the Premises was leased, then the Landlord/Seller and the Tenant/Purchaser shall each have the right to terminate this Lease on thirty (30) days' notice to the other, given within ninety (90) days after the date of the filing of the complaint for condemnation. In the event that this Lease shall terminate or be terminated, the rent shall, if and as necessary, be equitably adjusted.
21.2. If any part of the Premises shall be so taken and this Lease shall not terminate or be terminated under the provisions of subparagraph 21.1 hereof, then the rental shall be equitably apportioned according to the space so taken, and the Landlord/Seller shall, at its own cost and expense, restore the remaining portion of the Premises the extent necessary, as mutually determined by the Landlord/Seller and Tenant/Purchaser, to render it reasonably equitable for the purposes for which it was leased.
21.3. All compensation awarded or paid upon such a total or partial taking of the Premises shall belong to and be the property of the Landlord/Seller without any participation by the Tenant/Purchaser; provided, however, that nothing contained herein shall be construed as precluding the Tenant/Purchaser from prosecuting any claim directly against the condemning authority in such condemnation proceedings for loss of business, or depreciation to, damage to, or cost of removal of, or for the value of stock, trade fixtures, furniture, and other personal property belonging to the Tenant/Purchaser, provided, however, that no such claim shall diminish or otherwise adversely affect the Landlord/Seller's award. However, any award to Landlord/Purchaser shall be limited to the purchase price of the Premises as set forth in Section 44 A and all money awarded above said price shall be given to Tenant/Purchaser as reimbursement for all improvements to the Premises. Furthermore, in the event of a partial condemnation the award shall be apportioned on a pro rated basis using the purchase price set forth in Section 44 A for the Landlord/Purchaser and the total cost of all improvements made to the Premises for the Tenant/Purchaser. The ratio of Landlord/Seller's number to Tenant/Purchaser's number shall form the basis of any proration in a partial condemnation. By way of example, if the Landlord/Seller's price is $600,000 and the improvement costs of Tenant/Purchaser are $400,000 and the partial condemnation award is $10,000, then in that event the Landlord/Seller would receive $6,000 of the award and the Tenant/Purchaser would receive $4,000 of the award.
SECTION 22. ASSIGNMENT AND SUBLETTING
Tenant/Purchaser shall be permitted to assign or sublet the Premises to any lawful user for that users particular purpose without first obtaining the Landlord/Seller's approval. However, the Landlord/Seller's approval, if obtained, shall not operate or serve to excuse, relieve or release the Tenant/Purchaser from any liability, obligation or responsibility hereunder unless otherwise agreed to by the Parties.
If, in spite of the foregoing prohibitions, this Lease is nevertheless assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Sec.101 et seq (the "Bankruptcy Code"), such assignee shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment and shall upon demand execute and deliver to Landlord/Seller an instrument confirming such assignment; and provided further that any and all monies or other considerations payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord/Seller, shall be and remain the exclusive property of Landlord/Seller and shall not constitute property of Tenant/Purchaser or of the estate of Tenant/Purchaser within the meaning of the Bankruptcy Code. Any and all monies or other considerations constituting Landlord/Seller's property under the preceding sentence not paid or delivered to Landlord/Seller shall be held in trust for the benefit of Landlord/Seller and be promptly paid or delivered to Landlord/Seller.
SECTION 23. LANDLORD/SELLER'S RIGHT OF ACCESS
Due to the nature of Tenant/Purchasers' business as a commercial bank and the essential security requirements thereof, Landlord/Seller shall have only controlled access to the Premises at all times and in all circumstances. Tenant/Purchaser shall provide appropriate escort when access is requested by Landlord/Seller. Tenant/Purchaser hereby agrees to exculpate Landlord/Seller from any liability due to Landlord/Seller's inability to enter the Premises in the event of an emergency.
SECTION 24. SUBORDINATION TO MORTGAGES. NONDISTURBANCE BY MORTGAGEE
Landlord/Seller represents that it currently has no mortgage on the Premises. In the event however should Landlord/Seller take a mortgage on the Premises, the Mortgagee shall agree that so long as Tenant/Purchaser is in compliance with the terms of this Agreement, the Mortgagee shall not disturb the tenancy and shall fully abide by the requirements of the terms of this Agreement.
SECTION 25. CERTIFICATE OF LEASE STATUS
The Tenant/Purchaser shall at any time upon thirty (30) days' prior written notice by the Landlord/Seller, execute, acknowledge and deliver to the Landlord/Seller, in recordable form, a certificate certifying that this Lease is unmodified and in full force and effect or, if modified, then that this Lease is in full force and effect as modified, setting forth the modifications and the dates to which the rent and other additional charges required to be paid hereunder have been paid. Such certificate shall affirmatively state (if such is the case) that the Landlord/Seller is not in default under this Lease and that the Tenant/Purchaser is not possessed of any set-offs or defenses against the enforcement of this Lease of any nature whatsoever. Such certificate shall be in such form that it may be relied upon by the Landlord/Seller, by any prospective purchaser of the fee or any interest therein or any mortgagee thereof or any assignee of any mortgagee upon the fee of the Premises.
SECTION 26. SIGNS
Tenant/Purchaser shall obtain all permits for the erection of signs on the Premises and shall be paid for by the Tenant/Purchaser. All such signs shall at all times comply with and conform to all applicable ordinances, laws, and regulations in effect governing signs and their erection. The Tenant/Purchaser shall save harmless and indemnify the Landlord/Seller from and against any violation hereof and shall defend any action for violation at its cost and expense.
SECTION 27. NON-LIABILITY OF LANDLORD/SELLER
Except in the case of the Landlord/Seller's act or negligence, the Landlord/Seller shall not be liable for any damage or injury which may be sustained by the Tenant/Purchaser or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or of the electrical gas, power, conveyor, refrigeration, sprinkler, air conditioning or heating systems, elevators or hoisting equipment, or by reason of the elements, beyond the control of the Landlord/Seller, or any services to be furnished or supplied by the Landlord/Seller.
SECTION 28. CONSTRUCTION LIEN CLAIMS
If any construction lien claim shall at any time be filed against the Premises or any part thereof by reason of work, labor, service or materials, performed or furnished by the Tenant/Purchaser or on the Tenant/Purchaser's order, then the Tenant/Purchaser shall forthwith cause such lien or notice to be discharged or bonded after being notified of its filing. If the Tenant/Purchaser shall not procure such discharge or secure such bonding within sixty (60) days of such notice, then the Landlord/Seller may, but shall not be obligated to, discharge the lien or notice by paying the amount claimed to be due, which sum, including the Landlord/Seller's reasonable attorneys' fees, shall be due and payable by the Tenant/Purchaser to the Landlord/Seller as additional rent on the first day of the next following month.
SECTION 29. LANDLORD/SELLER'S RIGHT TO CURE
In addition to all remedies of the Landlord/Seller contained herein and available to it at law, in equity or pursuant to any statute, the Landlord/Seller shall have the right after thirty (30) days written notice to the Tenant/Purchaser to cure any default of the Tenant/Purchaser hereunder, which default arises as a result of the non-payment by the Tenant/Purchaser or the failure of the Tenant/Purchaser to obligate himself for payment of any sums of money required to be expensed, utilized or paid over hereunder. The Landlord/Seller shall provide the Tenant/Purchaser with notice of having cured the Tenant/Purchaser's default pursuant to this Section 29 within five
(5) days of having so cured the Tenant/Purchaser's default. In such event, any and all sums reasonably expended by the Landlord/Seller or for which the Landlord/Seller shall obligate itself shall become due and payable from the Tenant/Purchaser to the Landlord/Seller as additional rent on the first day of the month following the expenditure or the obligation by the Landlord/Seller of such sum.
SECTION 30. HOLDING OVER
If the Tenant/Purchaser shall fail at the expiration or sooner termination of this Lease to yield up immediate possession of the Premises to the Landlord/Seller, except in the event of conditions beyond the control of Tenant/Purchaser in which event Tenant/Purchaser shall have a sixty (60) day grace period, then it shall be considered as a holdover tenancy. This shall not be deemed a waiver by Landlord/Seller of any rights or reentry otherwise available to it. Receipt of rent or any part thereof during such holding over shall not act as an affiance of the tenancy, nor act as a bar or waiver of the Landlord/Seller's right to deem the Lease terminated and of no further force and effect.
SECTION 31. ENVIRONMENTAL MATTERS
The following requirements shall be in addition to, and concurrent with, the requirements set forth in other Sections of this Lease.
A. The Tenant/Purchaser covenants and agrees that it shall provide the Landlord/Seller with immediate telephone and written notice of any discharge of a "Hazardous Substance or Waste" within the meaning of N.J.S.A. 58:10-23.11b(k) with respect to the Premises. Tenant/Purchaser further covenants and represents that it will not dispose of, process or generate Hazardous Substance or Waste at the Premises.
B. The Tenant/Purchaser hereby agrees to save harmless and indemnify the Landlord/Seller from and against any and all damages, costs and expenses, including, without limitation, attorneys' fees, incurred for cleanup and remediation necessitated by or resulting from a discharge of any "Hazardous Substance or Waste" within the meaning of the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq., or a release of any hazardous substance within the meaning of the Comprehensive Environmental Response, Compensation and liability Act, 42 U.S.C.S. Section 9601, et seq., occurring subsequent to the commencement of this Lease. Any and all preexisting and prior environmental conditions, including present or future migration of Hazardous Substance or Waste from neighboring properties, are specifically exempt from this indemnification.
C. The Tenant/Purchaser covenants and agrees that it shall provide the Landlord/Seller with immediate telephone and written notice of any release of any "Hazardous Substance" within the meaning of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.S. Section 9602, et seq., with respect to the Premises.
D. The Tenant/Purchaser hereby agrees to indemnify and hold harmless
the Landlord/Seller from and against any damages, costs and expenses, including
without limitation attorneys' fees, incurred for cleanup and remediation
necessitated by or resulting from any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a hazardous substance into the environment as defined in 42 U.S.C.
Section 9601(14).
E. Landlord/Seller represents that the Premises is free of environmental hazards including underground storage tanks or other underground facilities and no violations have been served upon the Landlord/Seller from the Department of Environmental Protection or any other State or Federal agency regarding hazardous substances on the Premises to the date hereof. In addition, Tenant/Purchaser shall at its sole cost and expense commission a Phase 1 environmental audit of the entire Premises the report of which will be delivered to Tenant/Purchaser and to Landlord/Seller. In the event that report discloses the presence of any hazardous materials or hazardous waste or underground storage tanks actionable under existing applicable law, Tenant/Purchaser shall have thirty (30) days from receipt of said report to notify Landlord/Seller of its intent to continue with the Lease or cancel the Lease. In the event that Tenant/Purchaser shall determine to continue with the Lease, Landlord/Seller, at its sole cost and expense will begin remediation of any such conditions to the extent legally required within thirty (30) days from receiving notice to do so from Tenant/Purchaser. Landlord/Seller shall diligently continue
remediation until same has been complete and all required documentation from the Department of Environmental Protection or any other appropriate agency has been received, copies of which shall be provided to Tenant/Purchaser.
SECTION 32. DEFAULT
Upon the occurrence of any of the following events, each of which shall be deemed an Event of Default, the Landlord/Seller shall have the right to reenter the Premises to declare this Lease and the tenancy hereby created terminated, end notwithstanding such termination, to hold the Tenant/Purchaser liable to all remaining rent unpaid hereunder and any damages which may accrue to the Landlord/Seller:
32.1. Events of Default.
A. Rent. Failure to pay rent (base rent or additional rent) on the date due, which failure is not cured within seven (7) days from said date.
B. Breach of Covenant. Breach by Tenant/Purchaser of a any covenant, representation, condition or requirement of this Lease, the performance or observance of which is required by the Tenant/Purchaser (other than for the payment of rent), which breach or failure shall not be cured by the Tenant/Purchaser within thirty (30) days of written notice from the Landlord/Seller specifying such breach or failure, unless such breach cannot reasonably be cured within thirty (30) days, and the Tenant/Purchaser shall be diligently attempting to cure the same, in which case the Tenant/Purchaser shall have a reasonable time, not to exceed an additional one hundred eighty (180) days, so to cure.
C. Insolvency. If the Tenant/Purchaser shall be adjudicated a bankrupt or insolvent or shall avail itself of any insolvency law for the appointment of a Receiver or Trustee, or shall make an assignment for the benefit of creditors, or shall have a petition or insolvency or bankruptcy filed against it which shall not be vacated within ninety (90) days of such filing
D. Abandonment. Abandonment of the Premises by the Tenant/Purchaser.
E. Limitations on Rights of Landlord/Seller to Terminate Lease. Notwithstanding any other provision of this Lease, in the event the Tenant/Purchaser or its successors or assigns shall became insolvent, bankrupt, or make an assignment for the benefit of creditors, or if it or their interests hereunder shall be levied upon or sold under execution or other legal process, or in the event the bank to being operated on the Premises is closed, or is taken over by the Superintendent of Banks of the State of New Jersey, or other bank supervisory authority, the Landlord/Seller may terminate the Lease only with the concurrence of said Superintendent or other bank supervisory authority, and any such authority shall in any event have the election either to continue or terminate the Lease, provided, that in the event this Lease is terminated, the maximum claim of Landlord/Seller for damages or indemnity for injury resulting from the rejection or abandonment of the unexpired Lease shall in no event be in an amount exceeding the rent reserved by the Lease, without acceleration for the year next succeeding the date of the surrender of the Premises to the Landlord/Seller, or the date of the re-entry of the Landlord/Seller, whichever first occurs, whether before or after the closing of the bank, plus an amount equal to the unpaid rent accrued, without acceleration up to such date.
32.2. Late Payment of Rent.
Without prejudice to any other right of the Landlord/Seller herein contained, the Landlord/Seller shall have the right to charge a late fee for rent paid later than the seventh (7th) day of each month in which such payment shall have been due, which fee shall be two percent (2%) per month of the amount of late rent. Said late charge shall be due as additional rent and payment thereof shall cure any default under this paragraph 32.2.
32.3. Landlord/Seller`s Lien.
Upon the Tenant/Purchaser's default, the Landlord/Seller shall have, with respect to all personal property and equipment of the Tenant/Purchaser, all statutory and common law liens of Landlords, now or hereafter available to it to the extent permitted under applicable FDIC regulations.
32.4. Cumulative Remedies.
All remedies of the Landlord/Seller and the Tenant/Purchaser herein shall be cumulative and shall be deemed to be in addition to all other remedies, both statutory and available at law and in equity.
SECTION 33. FORCE MAJEURE
Any performance or undertaking required to be performed or undertaken by the Landlord/Seller or the Tenant/Purchaser herein shall be performed or undertaken as expeditiously as possible. It shall not be a breach of this Lease if such performance or undertaking is prevented, delayed or hindered by unavailability of materials, strikes, acts of war, quotes, acts of governmental authorities, casualties, Acts of God or other forces beyond the Landlord/Seller's or the Tenant/Purchaser's control.
SECTION 34. WAIVER OF SUBROGATION
The Landlord/Seller and the Tenant/Purchaser each waive all rights of recovery against the other or their respective agents, employees or other representatives for any loss, damages or injury of any nature whatsoever to the Premises, persons and personal property in the Premises, provided that such loss, damage or injury results from fire or the extended coverage hazards. Each party will obtain from its insurance carriers, and will deliver to the other, waiver of Subrogation rights under the respective policies, but this provision shall remain in effect despite either party's failure to obtain such waiver from its insurance carriers.
SECTION 35. BROKERAGE
The parties represent and warrant that no real estate brokers have been involved in the transaction contemplated hereby. Both parties shall save harmless and indemnify the other from and against any claims for brokerage commissions by any person or entity claiming a commission from that party.
SECTION 36. QUIET ENJOYMENT
The Tenant/Purchaser upon the payment of the rent and additional rent herein set forth and upon the performance of all the terms, covenants, and conditions of this Lease shall at all times during the lease term and any extensions or renewals or modifications thereof, peaceably and quietly enjoy the Premises without disturbance from the Landlord/Seller or persons claiming through the Landlord/Seller.
SECTION 37. LEASE SCHEDULES AND EXHIBITS
All schedules and exhibits annexed to this lease are expressly integrated herein and made a part hereof.
SECTION 38. RECORDATION OF LEASE
The Tenant/Purchaser shall not record this Lease without the Landlord/Seller's prior approval in writing. The Tenant/Purchaser hereby constitutes Landlord/Seller its attorney-in-fact to discharge such recordation in the event of a breach of this covenant. The Tenant/Purchaser may record a memorandum of this Lease, setting forth the terms hereof, the Tenant/Purchaser's options, and right of non-disturbance.
SECTION 39. NOTICES
All notices required or permitted hereunder shall be in writing and shall be delivered by United States registered or certified mail, return receipt requested, addressed as follows:
If to the Landlord/Seller:
Conjoe Realty Co., Inc.
c/o Robert Papandrea, V.P.
54 Dock Watch Hollow
Warren, NJ 07059
with a copy to:
Louis DiMare, Esq.
Garrubbo & Romankow
53 Cardinal Drive
Westfield, New Jersey 07090
If to the Tenant/Purchaser:
Ronald Frigerio, as agent for the Town Bank of Westfield, In Organization
115 East Grave Street
Westfield, New Jersey 07090
with a copy to:
Donna M. Conroy, Esq.
Frieri & Conroy, Esqs.
777 Walnut Avenue
Cranford, NJ 07016
SECTION 40. BINDING EFFECT
This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors, representatives and assigns.
SECTION 41. APPLICABLE LAW
This Lease shall be governed by and construed under the laws of the State of New Jersey. Venue for any legal action filed in this matter shall be the Superior Court located in Elizabeth, New Jersey.
SECTION 42. REMOVAL OF TENANT/PURCHASER'S PROPERTY
Any equipment, fixtures, goods or other property of the Tenant/Purchaser, not removed by the Tenant/Purchaser upon the termination of this Lease, or upon any quitting, vacating or abandonment of the Premises by the Tenant/Purchaser, or upon the Tenant/Purchaser's eviction, shall, at the option of the Landlord/Seller, be considered as abandoned and the Landlord/Seller shall have the right, without any notice to the Tenant/Purchaser, to sell or otherwise dispose of the same, at the expense of the Tenant/Purchaser, and shall not be accountable to the Tenant/Purchaser for any part of the proceeds of such sale, if any, except that the sale shall be conducted in a commercially reasonable manner and an accounting of the proceeds actually realized by Landlord/Seller will be made available for inspection by Tenant/Purchaser upon its request. Notwithstanding the preceding sentence, it is expressly agreed that the Tenant/Purchaser shall be permitted to remove any and all equipment, machinery and trade fixtures belonging to it from the Premises at the termination of this Lease. Any and all damage to the Premises which shall result from such removal shall be repaired by the Tenant/Purchaser.
SECTION 43. SUMS DEEMED ADDITIONAL RENT
All charges, costs and expenses which the Tenant/Purchaser is required to pay hereunder, together with all interest and penalties that may accrue thereon in the event of the Tenant/Purchaser's failure to pay such amounts, and all damages, costs and expenses which the Landlord/Seller may incur by reason of any default of the Tenant/Purchaser or failure on the Tenant/Purchaser's part to comply with the terms of this Lease, shall be deemed to be additional rent and, in the event of nonpayment by the Tenant/Purchaser, the Landlord/Seller shall have all the rights and remedies with respect thereto as the Landlord/Seller has for the non-payment of the basic rent.
SECTION 44. PURCHASE OPTION
Tenant/Purchaser shall have, in its sole and absolute discretion, the option to purchase the Premises at the end of the First Renewal Term (year 10), Second Renewal Term (year 15) and at the end of the Third Renewal Term (year 20) upon the following terms:
A. Purchase price shall be eighty percent (80%) of the fair market value of the Premises.
B. Fair Market Value shall be determined by obtaining three appraisals of the Premises and obtaining the average of the three appraisals. The appraisals set forth herein shall be conducted by an appraiser one each chosen by the Tenant/Purchaser and Landlord/Seller, respectively. The third and final appraiser shall be one chosen by mutual agreement between the two appraisers chosen by the Tenant/Purchaser and Landlord/Seller, respectively.
C. The Tenant/Purchaser must give notice of the intent to exercise the option to purchase not less than sixth (6) months prior to the end of the First Renewal Term, Second Renewal Term or Third Renewal Term as the case may be. Tenant/Purchaser must give the Landlord/Seller notice in writing at the address listed in Section 39 in the same manner as if the Tenant/Purchaser were renewing the lease term. This shall be the Option Exercise Date.
D. Closing of title will take place as soon as possible but in no event more than six months after notice is given to Landlord/Seller by Tenant/Purchaser except as otherwise provided in sub-part E below.
E. Tenant/Purchaser's obligation under this Purchase Option shall be conditioned upon title to the Premises being good and marketable such that same shall be insurable by a New Jersey licensed title insurance company, at regular rates, free and clear of all liens. Failure of Landlord/Purchaser to provide such clear title shall be a breach of this Purchase Option and Landlord/Seller shall reimburse Tenant/Seller for all money expended by Tenant/Purchaser in anticipation of the purchase, including but not limited to legal, engineering, surveying and all other fees. This remedy is in addition to any other remedy available to Tenant/Purchaser at law or in equity.
F. At closing, Landlord/Seller shall deliver to Tenant/Purchaser a bargain and sale deed with covenants against grantor's acts for the Premises and an affidavit of title in the usual form and corporate resolution approving the sale and any other documents required to properly and effectively convey full ownership to Tenant/Purchaser.
SECTION 45. FIRST RIGHT OF REFUSAL
In the event that Landlord/Seller shall wish to sell the Premises at a time not coincident with Tenant/Purchaser's option to purchase, then in that event Tenant/Purchaser shall have the right of first refusal. Upon written notification from the Landlord/Seller that it wishes to sell the Premises to a third party, Tenant/Purchaser shall then have forty five days (45) to notify Landlord/Seller that it will exercise its option to purchase the Premises pursuant to the terms of Section 44 or at the price offered by the third party, whichever is less, all other terms of Section 44 shall remain in force and govern the sale and transfer of title. Should Tenant/Purchaser fail to agree to exercise the purchase option for the Premises at that time and Landlord/Seller goes through with the sale to the third party or not, Tenant/Purchaser shall retain the right to exercise the option to purchase pursuant to Section 44 hereof so long as the option set forth in Section 44 has not then expired.
SECTION 46. EARLY TERMINATION
46.1. Tenant/Purchaser has or will apply to the New Jersey Department of Banking for the issuance of Charter in the name of "The Town Bank of Westfield" and pursuant thereto will diligently proceed with the solicitation of the minimum equity required by statute and regulations to obtain a Certificate of Authority to perform a commercial banking business at the Premises. In the event the Charter has not been issued by January 1, 1998 or in the event the Certificate of Authority has not been issued within eighteen (18) months after the earlier of the issuance of Charter or by July 1, 1999, then in any of such event Tenant/Purchaser, on thirty (30) days notice, may terminate this Lease.
46.2. Tenant/Purchaser shall diligently prosecute its application for site plan approval. In the event such approval is not obtained prior to January 1, 1998, Tenant/Purchaser may, upon thirty (30) days' notice to the Landlord/Seller, terminate this Lease.
46.3. Tenant/Purchaser must obtain site plan approval for a bank with a drive-up facility as submitted, including curb cut approval from the Department of Transportation, on or before January 1, 1998. In the event such approval is not obtained prior to January 1, 1998, Tenant/Purchaser may, upon thirty (30) days' notice to the Landlord/Seller, terminate this Lease.
46.4. Tenant/Purchaser must obtain a satisfactory engineering report within twenty-one days of the date of execution. Failure to obtain said satisfactory report to Tenant/Purchaser shall be an event of early termination by election of Tenant/Purchaser only.
46.5. In the event of termination under either Section 46.1, 46.2, such termination shall be deemed to be the expiration of this Lease under Section 12 in so far as the return of security is concerned.
46.6. In the event that Tenant/Purchaser is within thirty (30) days of approval under 46.2 or 46.3 or within forty five (45) days of approval under 46.1, Landlord/Seller will provide Tenant/Purchaser with extension of the dates contained in those Sections to such time as is required to obtain the approvals set forth in those Sections.
SECTION 47. VALIDITY OF LEASE/AUTHORITY TO LEASE
The terms, conditions, covenants, and provisions of this Lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clause or provisions shall remain in full force and effect.
Landlord/Seller represents that it has good title and has authority to enter into this Lease for the Premises.
SECTION 48. ENTIRE AGREEMENT
This Agreement of Lease with Purchase Option constitutes the entire agreement of the parties. There are no other agreements, express or implied. Any oral representations, undertakings or agreements are expressly merged herein. This Lease may not be changed, amended or modified except by an agreement in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Lease this 17th day of September, 1997.
Attest:
Conjoe Realty Co., Inc.,
a New Jersey Corporation,
as Landlord/Seller
/s/ Patricia Papandrea By: /s/ Robert Papandrea
--------------------------------- ---------------------------------------
, Sec. Robert Papandrea, Vice President
Attest:
Attest: Ronald Frigerio, as Agent for The Town
Bank of Westfield, In Organization,
as Tenant/Purchaser
/s/ Germaine B. Thakit By: /s/ Ronald Frigerio
--------------------------------- ---------------------------------------
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Asst, Sec. Ronald Frigerio, as Agent for The Town Bank of Westfield, In Organization
CORPORATE RESOLUTION
BE IT RESOLVED that the Board of Directors of Conjoe Realty Co., Inc. have voted and unanimously approved Robert Papandrea, Vice President, to sign a certain Agreement of Lease with Purchase Option between Conjoe Realty Co., Inc. and Ronald Frigerio, as agent for The Town Bank of Westfield, In Organization.
By: /s/ Patricia Papandrea
-----------------------------
Sec.
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ADDENDUM TO LEASE AGREEMENT
This Addendum entered into as of this 15 day of Jan, 1998 by and between Ronald Frigerio, as agent for The Town Bank of Westfield In Organization with an address of 115 East Grove Street, Westfield, New Jersey (hereafter "Tenant/Purchaser" ) and Conjoe Realty Co, Inc. with an address of c/o Robert Papandrea, Vice President 54 Dock Watch Hollow, Warren, New Jersey (hereafter" Landlord/Seller") the parties agree as follows:
WHEREAS the Tenant/ Purchaser and Landlord/ Seller have previously agreed to a lease for 520 South Avenue, Westfield, New Jersey (the" Premises"); and
WHEREAS as a condition of lease the Tenant/Purchaser was to obtain final approval from the New Jersey Department of Transportation for a curb cut in conjunction with the final site plan approval by the Township of Westfield; and
WHEREAS the Tenant/Purchaser is diligently pursuing said approvals and the Landlord/ Seller wishes to afford the Tenant/Purchaser every opportunity to obtain said approvals prior to commencing payment of rent.
NOW THEREFORE the parties acknowledge receipt of One dollar ($1.00) each to the other in hand and in consideration of the mutual covenants of the parties they agree as follows:
1. Sections 46.2 and 46.3 of the Lease between the Tenant/Purchaser and the Landlord/Seller are hereby amended to extend the time within which Tenant/Purchaser may obtain final approval from New Jersey Department of Transportation for a curb cut and final site plan approval from the Township of Westfield through and including March 31, 1998. All other dates and times in the Agreement of Lease and the provisions thereto shall remain unchanged.
2. To the extent that the terms of this Addendum to Lease are contrary to or different from the Agreement of Lease, the terms of this Addendum to Lease Agreement shall control.
The parties hereto have set there hands to this Addendum as of the date and year first above written.
Attest: Conjoe Realty Co., Inc.,
a New Jersey Corporation,
as Landlord/Seller
By: /s/ Robert Papandrea
--------------------------------- -----------------------------------
, Sec. Robert Papandrea, Vice-President
Ronald Frigerio, as Agent for The Town
Bank of Westfield, In Organization,
Attest: as Tenant/Purchaser
By: /s/ Ronald Frigerio
--------------------------------- -----------------------------------
, Sec. Ronald Frigerio, as Agent for
The Town Bank of Westfield, In
Organization
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Exhibit 10.40
The Landlord and the Tenant agree to rent the Rental Space for the Term and at the Rent Stated as follows: (The words Landlord and Tenant include all landlords and all tenants under this Lease.)
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Date of Lease: September 13, 2005
Term: 15 years with three 5 year options
Beginning date: October 1, 2006
(date to be adjusted to date of occupancy)
Ending date: September 30, 2021
(date to be adjusted to end of 15th year)
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Landlord: FANWOOD PLAZA PARTNERS, LLC
a New Jersey limited liability company
219 South Street (Suite 106)
New Providence, NJ 07974
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Tenant: THE TOWN BANK
a corporation of the State of New Jersey
520 South Avenue
Westfield, NJ 07090
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Rental Space: a free standing building containing approximately 2,966 square
feet as
1. set forth on the attached proposed floor plan
dated December 13, 2004 prepared by Carol C. Hewit,
A.I.A., 800 Kimball Avenue, Westfield, NJ 07090
2. set forth on the attached proposed site plan
dated 2005. prepared by EKA Associates, P.A., 1765 East Second
Street, Scotch Plains, NJ, 07076
Building: 328 South Avenue, Fanwood, NJ 07023 (Lot 5, Block 91)
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Base Rent for the Term is $1,557,000.00. It is subject to adjustment starting January 1, 2009 in accordance with paragraph 25.
The Rent is payable in advance on the first day of each month as follows:
$8,650.00 starting September 1, 2006 and adjusted annually starting January 1, 2009 in accordance with paragraph 25.
Security: $10,000.00
Liability Insurance: Minimum amounts:
for each person injured: $1,000,000.00;
for any one accident: $3,000,000.00;
for property damage: $1,000,000.00; or
single limit: $3,000,000.00.
casualty limit: $1,000.000.00
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9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 1
Municipal Real Estate Taxes $ Base Year 2006 or 2007(1)
Use of Rental Space: Bank branch facility with drive-up windows; marketing and sale of financial or financial related products. The use includes the business of a trust company, investment, security and/or safe deposit business, loan office, operating of a drive-up banking facility, sales of insurance and insurance related products (i.e., annuities), sales of securities and mutual funds, operation of one or more automated teller machines (ATM's) including a drive-up ATM, other financial services, general executive and administrative offices and all activities necessary or incidental to the foregoing and any similar or allied business and any combination of the foregoing.
Additional agreements:
The Landlord represents that the Landlord acquired the Property on June 16, 2005 and will make application to the Fanwood Planning Board for site plan approval of the project set forth on the conceptual plan for the development of 314-328 South Avenue, Fanwood, NJ (Block 91, Lots 3-5) prepared by EKA Associates, P.A. dated May 6, 2005.
The site plan shows a proposed second structure for Goddard Systems for use as a child care center, with an address of 214 South Avenue. The site plan provides 68 parking stalls for the shared use by the Tenant, the Goddard School, and Fanwood Plaza. ss.184-160 of the Fanwood Land Use Ordinance requires one parking stall per 250 square feet of floor area for a bank and one space for each employee for a child care center. The bank's requirement is 12 parking spaces. The Goddard School's requirement is 19 parking spaces. The requirement for both uses is 31 parking spaces. The remaining 37 parking spaces exceed the minimum requirement for both uses and are available for both tenants as well as Fanwood Plaza. Unless directed to do so by the Fanwood Planning Board, the parking spaces will not be designated for either tenant.
By design, the Rental Space involves shared parking and shared maintenance of the parking area with the occupant of the child care center about to be located at 314 South Avenue, Fanwood, NJ.
All references in this Business Lease to "Landlord's Written Consent" are amended to provide that the Landlord's consent shall not be unreasonably withheld or delayed.
The Landlord's obligations under this Lease are contingent upon the Landlord's obtaining:
a. site plan approval from the Planning Board of the Borough of Fanwood,
b. construction financing from Synergy Bank,(2)
c. a building permit for the construction of a free standing building, and
d. a certificate of occupancy and a zoning use permit upon completion of construction of a new free standing building.
The Landlord will provide the Tenant with regular status reports as to the Landlord's obligations, including notice of any public meetings with the Fanwood Planning Board.
The Tenant's obligations under this Lease are contingent upon:
a. the Tenant's review and approval of the Landlord's proposed free standing building and site plan,
b. site plan approval from the Planning Board of the Borough of Fanwood,
c. the completion of construction of a new free standing building,
(2) The construction mortgage closing took place on June 16, 2005.
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d. the issuance of a certificate of occupancy and a zoning use permit for the Tenant's use of the Rental Space e. the issuance of all required federal, state and local approvals for the operation of a branch bank at the Rental Space including, without limitation, the New Jersey Department of Banking. |
The Tenant will provide the Landlord with regular status reports as to the Tenant's obligations, including notice of any public meetings with the New Jersey Department of Banking. The Tenant will also assist the Landlord in the presentation of the site plan application by providing one or more witnesses to testify as to the Tenant's proposed banking operations at the Property.
The Landlord shall provide the Rental Space to the Tenant in accordance with a "work letter" to be attached to this Lease. The "work letter" will be prepared and mutually agreed upon after the Landlord's architect completes the construction plans for the building. The Tenant shall "fit up" the Rental Space in accordance with the "work letter".
The Landlord will not lease the building at 314 South Avenue to another financial institution with the same or similar uses as the Tenant without the Tenant's consent.
The Landlord has not conducted a Phase 1 Environmental Audit. The two existing structures at 314 & 328 South Avenue were constructed as single-family residential dwellings. During the past fifteen years, the buildings have been used by Children's Specialized Hospital as office buildings. The lot at 324 South Avenue was virgin wooded land until 1986 when it was cleared and developed as a parking lot for Fanwood Plaza. The SIC numbers for the past uses are exempt from the requirements of ISRA.
The Landlord will, as part of the demolition of the two existing structures and the construction of the two new structures at 314 & 328 South Avenue, remove all asbestos and underground storage tanks. The Tenant shall have the right to inspect the site during the course of the demolition and construction and to conduct such environmental investigations as the Tenant deems appropriate.
1. Possession and Use
2. Delay in Giving of Possession
3. No Assignment or Subletting
4. Base Rent and Additional Rent
5. Security
6. Liability Insurance
7. Unavailability of Fire Insurance, Rent Increases
8. Water Damage
9. Liability of Landlord and Tenant
10. Acceptance of Rental Space
11. Quiet Enjoyment
12. Utilities and Services
13. Tenant's Repairs, Maintenance and Compliance
14. Landlord's Repairs and Maintenance
15. No Alterations
16. Signs
17. Window Treatments
18. Access to Rental Space
19. Fire and Other Casualty
20. Eminent Domain
21. Subordination to Mortgage
22. Tenant's Certificate
23. Violation, Eviction, Re-entry and Damages
24. ISRA Compliance
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25. Rent Adjustment for Third through Twentieth Years
26. Option to Renew
27. Right of First Refusal
28. Notices
29. No Waiver
30. Survival
31. End of Term
32. Binding
33. Full Agreement
1. Possession and Use
The Landlord shall give possession of the Rental Space to the Tenant for the Term stated above. The Tenant shall take possession of and use the Rental Space for the purpose stated above. The Tenant may not use the Rental Space for any other purpose without the written consent of the Landlord.
The Tenant shall not allow the Rental Space to be used for any unlawful or hazardous purpose. The Tenant shall obtain any necessary certificate of occupancy, use permit or other certificate permitting the Tenant to use the Rental Space for that Use.
The Landlord has advised the Tenant that the Building is located in the GC General Commercial District and that a bank or other financial institution is a permitted use. The Tenant has represented to the Landlord that the Tenant will use the Rental Space for the use set forth above in accordance with the requirements of the GC General Commercial District. The Tenant shall not knowingly use the Rental Space in any way that would violate the Municipal Zoning Ordinance.
The Tenant shall not use the Rental Space in any manner that results in:
a. an increase in the rate of fire or liability insurance, or
b. cancellation of any fire or liability insurance policy on the Rental Space.
The Tenant shall comply with all requirements of the insurance companies insuring the Rental Space.
The Tenant shall not abandon the Rental Space during the Term of this Lease or permit it to become vacant for extended periods.
2. Delay in Giving of Possession
This paragraph applies if:
a. the Landlord cannot give possession of the Rental Space to the Tenant on the beginning date, and
b. the reason for the delay is not the Landlord's fault.
The Landlord shall not be held liable for the delay. The Landlord shall then have 180 days in which to give possession. If possession is given within that time, the Tenant shall accept possession and pay the rent from that date. The ending date of the Term shall be fifteen years after the starting date. If possession is not given within that time, this Lease may be cancelled by either party on notice to the other.
3. No Assignment or Subletting
The Tenant may not do any of the following without the Landlord's written consent:
a. assign this Lease, except to a successor by merger or acquisition
b. sublet all or any part of the Rental Space, or
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c. permit any other person or business to use the Rental Space.
The Landlord specifically consents to a shared use of the Rental Space by a joint venture partner engaged in the sale of financial or financial related products pursuant to an agreement with the Tenant.
If the Tenant requests the Landlord to assign or sublet this Lease, the following provisions shall apply:
a. Landlord's Consent Required. Upon requesting the Landlord's consent to an Assignment or Sublease, Tenant shall notify Landlord, in writing, of the name and address of the Assignee and the nature and character of the Assignee's business, and shall provide Landlord with appropriate financial information including, without limitation, financial statements of the Assignee. Landlord shall not unreasonably withhold or delay the Landlord's consent to any Assignment or Sublease, provided, however, it shall conclusively be deemed that the Landlord's refusal or withholding of consent is not unreasonable if:
(1) the net worth of the proposed Assignee does not, in Landlord's sole judgment, provide adequate credit for the proposed Assignee to assume the performance of all of the Tenant's obligations under the Lease; or
(2) the business reputation, managerial skills and operational skills of the proposed Assignee are not in accordance with generally acceptable commercial standards;
(3) the use of the Rental Space by the proposed Assignee is not identical to the use permitted by this Lease; or
(4) the use of the Rental Space by the proposed Assignee will violate or create a potential violation of any laws or other agreements affecting the Rental Space, the Landlord or other tenants and occupants of the Property.
b. Permitted Transfers. The Tenant may, upon written notice to the Landlord, assign this Lease without need of the prior consent of the Landlord to:
(1) any wholly-owned subsidiary or the Tenant's parent corporation,
(2) any person or corporation owning 100% of Tenant's stock, or
(3) any company into which the Tenant may be merged or consolidated so long as substantially all the assets then held by the Tenant become the property of the continuing entity.
c. Written Instrument Required. The Landlord's consent to any Assignment or Sublease shall not be effective unless and until a written instrument of such Assignment or Sublease, in form and substance reasonably acceptable to Landlord, has been delivered to and executed by the Landlord.
The Tenant shall pay Landlord the sum of five hundred dollars ($500.00) to cover Landlord's administrative costs, overhead and attorney's fees in connection with such Assignment or Sublease. The money is payable upon Tenant's initial submission of its Assignment or Sublease proposal to Landlord.
The consent by Landlord to any Assignment or Sublease shall not relieve the Tenant from the obligation to obtain the Landlord's express written consent to any other Assignment or Sublease, nor shall reference anywhere else in this Lease to an assignee or subtenant be considered as a consent by the Landlord to such Assignment or Sublease or a waiver of the provisions of this Lease.
d. No Release of Tenant's Liability. No sublease or any other transfer by Tenant, either with or without the Landlord's consent, required or otherwise, during the term of this Lease, shall release the Tenant from any liability under the terms of this Lease, nor shall the Tenant be relieved of the obligation of performing any of the terms, covenants and conditions of this Lease.
The Tenant may, however, request the Landlord to release the Tenant and the Landlord will, in good faith, assess the Tenant's request in the context of the financial strength and stability of the assignee. The decision of the Landlord is a matter of the Landlord's sole discretion and cannot be contested by the Tenant.
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Exception: If the Landlord approves an Assignment of Lease (as distinguished from a Sublease), such assignment shall release the Tenant from any liability under the terms of this Lease and shall relieve the Tenant of the obligation of performing the terms, covenants and conditions of this Lease.
4. Base Rent and Additional Rent
The Tenant shall pay the Base Rent and Additional Rent to the Landlord at the Landlord's address.
The Tenant shall pay rent to the Landlord by U.S. mail or personal delivery. Although good personal checks will be accepted by the Landlord, if the Landlord receives any check which is returned by the Tenant's bank, the Landlord reserves the right to require the Tenant to pay rent by money order, bank cashier's checks, certified check, or cash.
If the Tenant fails to comply with any agreement in this Lease after reasonable notice and a reasonable opportunity to cure, the Landlord may do so on behalf of the Tenant. The Landlord may charge the cost to comply, including reasonable attorney's fees (as defined in subparagraph (f) below), to the Tenant as "Additional Rent". The Additional Rent shall be due and payable as Rent with the next monthly Rent payment. Non-payment of Additional Rent shall give the Landlord the same rights against the Tenant as if the Tenant failed to pay the Rent.
The Tenant shall also pay as Additional Rent:
a. Tax Rent -- Real Estate Taxes: Tax Rent equal to 100% of the municipal real estate tax attributable to the Rental Space at 328 South Avenue. The tax is not yet known and will not be known until the building is constructed and approved and the property is assessed by the Borough of Fanwood.(3) The Tenant shall pay the monthly tax on the first day of each month starting with the first rent payment. The Landlord shall, in turn, pay the tax to the municipality. The monthly amount shall be adjusted when the second year's final tax bill is received by the Landlord. Thereafter, the monthly amount shall be adjusted when future final tax bills are received by the Landlord. The Tenant's liability for this Tax Rent shall be pro-rated for any part of the calendar year that the Tenant does not occupy the Rental Space under this Lease.
b. Late Charge: The Tenant will pay a Late Charge of 5% of the monthly rent installment if rent is paid on or after the 6th day after the due date. The late charge is to account for the Landlord's administrative costs and expenses.
c. Interest: If the Tenant shall fail to pay any Rent or Additional Rent within 15 days after the same first became due and payable, such unpaid amounts shall bear interest at a rate of 5% above the announced prime or base rate set by CitiBank, N.A. (or its successor) from the due date thereof to the date of its payment, but in no event at more than the highest legal rate.
d. Bank Fee: A $40.00 fee for each check returned by a bank (i.e., for insufficient or uncollected funds, etc.)
e. Replacement Key Charge: A $150.00 fee for each key replaced by the Landlord.
f. Legal Costs: All reasonable attorney's fees, court costs, court officer fees and other expenses incurred by the Landlord in the enforcement of the Tenant's obligations, including suits for possession, except where the Landlord's claim is adjudicated to be without merit. The minimum fee for a suit for possession is $750.00.
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If any action or proceeding arising out of or relating to this Lease is commenced by either party then, as between the Landlord and the Tenant, the prevailing party shall be entitled to receive from the other party, in addition to any other relief that may be granted, all reasonable attorney's fees, costs and expenses incurred in that action or proceeding.
5. Security
Any security deposit paid pursuant to this Lease will be held by the Landlord during the Term of this Lease. The Landlord may deduct from the Security any expenses incurred in connection with the Tenant's violation of any agreement in this Lease. For example, if the Tenant does not leave the Rental Space in good condition at the end of the Term, normal wear and tear excepted, the security may be used to put it in good condition. If the amount of damage exceeds the Security, the Tenant shall pay the additional amount to the Landlord on demand.
If the Landlord uses the security or any part of it during the Term, the Tenant shall, on demand, pay the Landlord for the amount used. The amount of the security is to remain constant throughout the Term. The security is not to be used by the Tenant for the payment of Rent. The Landlord shall account to the Tenant for any security used and repay to the Tenant any balance remaining within a reasonable time (not to exceed 60 days) after the end of the Term. The Tenant shall not be entitled to interest on the security.
If the Landlord's interest in the Rental Space is transferred, the Landlord shall turn over the security to the new Landlord. The Landlord shall notify the Tenant of the name and address of the new Landlord. Notification must be given within 5 days after the transfer, by registered or certified mail. Once the new Landlord assumes the Landlord's obligations under this Lease, the Landlord shall then no longer be responsible to the Tenant for the repayment of the security. The new Landlord shall be responsible to the Tenant for the return of the security in accordance with the terms of this Lease.
6. Casualty and Liability Insurance
The Tenant shall obtain, pay for, and keep in effect for the benefit of the Landlord and the Tenant casualty and public liability insurance on the Rental Space in the amounts set forth on page 1 of this Lease. The insurance company and the Broker must be acceptable to the Landlord. This coverage must be in at least the minimum amounts stated above.
All policies shall state that the insurance company cannot cancel or refuse to renew without at least 10 days written notice to the Landlord.
The Tenant shall deliver the original policy to the Landlord with proof of payment of the first year's premium. This shall be done not less than 5 days before the Beginning of the Term. The Tenant shall deliver a renewal policy to the Landlord with proof of payment not less than 5 days before the expiration date of each policy.
The Tenant's public liability insurance on the Rental Space shall:
a. include a waiver of subrogation,
b. include fire legal liability coverage, and
c. designate the Landlord as an additional insured (not a named insured).
7. Unavailability of Fire Insurance, Rate Increases
If, due to the Tenant's use of the Rental Space, the Landlord cannot obtain and maintain fire insurance on the Building in an amount and form reasonably acceptable to the Landlord, the Landlord may cancel this Lease on 30 days notice to the Tenant. If due to the Tenant's use of the Rental Space the fire insurance rate is increased, the Tenant shall pay the increase in the premium to the Landlord on demand.
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8. Water and Other Damage
The Landlord shall not be liable for any damage or injury to any person or property caused by the leak or flow of water over which the Landlord has no control from or into any part of the Building. The Tenant has to insure this risk of loss. Note: The Landlord's insurance does not cover all losses for damage to the Tenant's property and the Landlord does not indemnify the Tenant as to water damage not covered by the Landlord's insurer. Exception: The Landlord shall remain liable for any damage or injury to any person or property caused by the leak or flow of water arising from any structural defect in the Landlord's building.
9. Liability of Landlord and Tenant
The Landlord shall not be liable for injury or damage to any person or property unless it is due to the Landlord's willful act or neglect. The Landlord shall defend the Tenant from and reimburse the Tenant for all liability costs resulting from any injury or damage due to the willful act or neglect of the Landlord or the Landlord's authorized representatives (i.e., employees, agents, customers or clients, and guests).
The Tenant is liable for any loss, injury or damage to any person or property caused by the act or neglect of the Tenant or the Tenant's authorized representatives, customers or clients, and guests. The Tenant shall defend the Landlord from and reimburse the Landlord for all liability and costs resulting from any injury or damage due to the act or neglect of the Tenant or the Tenant's authorized representatives (i.e., employees, agents, customers or clients, and guests).
For the purpose of this paragraph, the obligation of a party to indemnify or hold harmless shall be limited to the sum that exceeds the amount of insurance proceeds, if any, received by the party being indemnified.
10. Acceptance of Rental Space
The Landlord shall deliver the Rental Space to the Tenant in a new and clean condition in accordance with the "work letter" to be attached to this Lease. The Tenant shall inspect the Rental Space and determine whether the Rental Space is in satisfactory condition, suitable for the Tenant's intended use. Thereafter, the Tenant shall "fit up" the Rental Space in accordance with the Tenant's "work letter".
11. Quiet Enjoyment
Upon satisfaction of the contingencies set forth above under Additional Agreements, the Landlord has the right to enter into this Lease. If the Tenant complies with this Lease, the Landlord must provide the Tenant with undisturbed possession of the Rental Space. This means that on paying the rent and performing the conditions and covenants contained in this Business Lease, the Tenant shall and may peaceably and quietly have, hold and enjoy the Rental Space.
12. Utilities and Services
The Tenant shall arrange and pay for all separately metered utilities and services required for the Rental Space, including the following; Y=Yes N=No
[ Y ] HVAC
[ Y ] Hot and cold water
[ Y ] Electric
[Y] Gas
[ Y ] Telephone
[ Y ] Cable Television
[ Y ] Janitorial service
The Tenant's failure to make timely payment of the Tenant's utility charges shall be an event of default for which Landlord reserves a right of re-entry under Paragraph 23.
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The Tenant shall pay pro rata (25%) for the following utilities and services that are to be shared with the occupant of the building at 314 South Avenue, Fanwood, NJ:
[ Y ] Lawn care
[ Y ] Snow removal
[ Y ] Leaf Removal
[ Y ] Sanitary sewer
[ Y ] Trash disposal
[ Y ] Reserves for replacement of the landscaping and parking lot
improvements
The Goddard School, its successors and assigns, will pay the remaining 75%.
The Landlord is not liable for any inconvenience or harm caused by any stoppage or reduction of utilities and services beyond the control of the Landlord. This does not excuse the Tenant from paying Rent.
13. Tenant's Repairs, Maintenance and Compliance
The Tenant shall:
a. Promptly comply with all laws, orders, rules and requirements of governmental authorities, insurance carriers, board of fire underwriters or similar groups.
b. Maintain the Rental Space and all equipment and fixtures in it in good repair and appearance.
c. Make all necessary repairs and replacements to the Rental Space and all equipment and fixtures in it, except structural repairs as per paragraph 14.
d. Maintain the Rental Space in a neat, clean, safe, and sanitary condition, free of all garbage.
e. Keep the walks, driveway, parking area, yard, entrances, hallways and stairs clean and free from trash and debris. This includes, without limitation, cleanup of the ATM area and the drive-up window area.
f. Use all electric, plumbing and other facilities in the Rental Space safely.
g. Use no more electricity than the wiring or feeders to the Rental Space can safely carry.
h. Promptly replace all broken glass in the Rental Space.
i. Do nothing to destroy, deface, damage or remove any part of the Rental Space.
j. Keep nothing in the Rental Space which is inflammable, dangerous or explosive or which might increase the danger of fire or other casualty.
k. Promptly notify the Landlord when there are conditions that need structural repair.
l. Do nothing to destroy the peace and quiet of the Landlord, other tenants or persons in the neighborhood.
m. Avoid littering in the building or on its grounds.
n. Recycle recyclables in accordance with the law and the Landlord's requirements.
o. Maintain an inside temperature during the heating season of not less than 50(degree) F.
The Tenant shall pay any reasonable expenses involved in complying with the above.
14. Landlord's Repairs and Maintenance
The Landlord shall;
a. Maintain (subject to the provisions of this Lease) the public areas, roof, and exterior walls in good condition,
b. Make all structural repairs (the Tenant may be liable for the cost incurred by the Landlord when made necessary by the act or neglect of the Tenant or the Tenant's authorized representatives, customers or clients, and guests),
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15. No Alterations
Except for emergency repairs, the Tenant may not make any changes or additions to the Rental Space without the Landlord's written consent. All changes or additions made without the Landlord's written consent shall be removed by the Tenant on demand.
All changes or additions made with the Landlord's written consent shall become the property of the Landlord when completed and paid for by the Tenant. They shall remain as part of the Rental Space at the end of the Term. The Landlord may demand that the Tenant remove any changes or additions at the end of the Term. The Tenant shall promptly pay for all costs of any permitted changes or additions. The Tenant shall not allow any mechanic's lien or other claim to be filed against the Building. If any lien or claim is filed against the Building as the result of any action of the Tenant, the Tenant shall have it promptly removed.
The Tenant intends to install a vault that will become a permanent part of the Rental Space. It will not have to be removed at the end of the term of the Lease.
16. Signs
The Tenant shall be permitted to place signs on or about the Rental Space, provided that the Tenant or the Landlord (as part of the Landlord's site plan application to the Planning Board of the Borough of Fanwood) obtains governmental approval for the signs. The Tenant shall obtain the Landlord's written consent before placing any sign on or about the Rental Space. Signs must conform with all applicable municipal ordinances and regulations.
The Tenant's signs must conform to Landlord's design standards for the building. The Tenant must remove the Tenant's signs at the end of the term of the Lease.
17. Window Treatments
Tenant shall obtain the Landlord's written consent before placing any window treatments on or about the Rental Space. Window treatments must conform to the standards established by the Landlord, subject to the Tenant's security requirements.
18. Access to Rental Space
The Landlord shall have access to the Rental Space on reasonable notice to the Tenant to:
a. inspect the Rental Space,
b. make necessary repairs, alterations or improvements,
c. supply services, and
d. show it to prospective buyers, mortgage lenders, contractors or insurers.
The Landlord may show the Rental Space to rental applicants at reasonable hours on notice to the Tenant within 6 months before the end of the Term.
The Landlord may enter the Rental Space at any time without notice to the Tenant in case of emergency.
Except for an emergency, all access by the Landlord to the Rental Space shall be:
a. in the company of the Tenant's Security Officer or another officer designated by the Tenant,
b. when the Tenant is not open for business to the public, and
c. with minimum possible disruption of the Tenant's business.
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19. Fire and Other Casualty
The Tenant shall notify the Landlord at once of any fire or other casualty in the Rental Space. The Tenant is not required to pay Rent when the Rental Space is unusable. If the Tenant uses part of the Rental Space, the Tenant must pay Rent pro-rata for the usable part.
If the Rental Space is partially damaged by fire or other casualty, the Landlord shall repair it as soon as possible. This includes the damage to the Rental Space and fixtures installed by the Landlord. The Landlord need not repair or replace anything installed by the Tenant.
Either party may cancel this Lease if the Rental Space is so damaged by fire or other casualty that it cannot be repaired within 180 days. If the parties cannot agree, the opinion of a contractor chosen by the Landlord and the Tenant will be binding on both parties.
This Lease shall end if the Rental Space is totally destroyed. The Tenant shall pay Rent to the date of destruction.
Note: If the fire or other casualty is caused by the act or neglect of the Tenant or the Tenant's employees, the Tenant shall be responsible to pay for all repairs and all other damage.
20. Eminent Domain
Eminent domain is the right of a government to lawfully condemn and take private property for public use. Fair value must be paid for the property. The taking occurs either by court order or by deed to the condemning party. If any part of the Rental Space is taken by eminent domain, either party may cancel this Lease on 30 days notice to the other. The entire payment for the taking shall belong to the Landlord. The Tenant shall make no claim for the value of this Lease for the remaining part of the Term.
21. Subordination to Mortgage; Non-Disturbance by Mortgagees
In a foreclosure sale all mortgages that now or in the future affect the Building have priority over this Lease. This means that the holder of a mortgage may end this Lease on a foreclosure sale. Subject to the terms of the non-disturbance agreement referred to below, the Tenant shall sign all papers needed to give any mortgage priority over this Lease. If the Tenant refuses, the Landlord may sign the papers on behalf of the Tenant.
The Landlord shall obtain from any mortgagee or ground lessor a non-disturbance agreement (in such form and substance as may reasonably be acceptable to the Tenant) that permits the Tenant to use and occupy the Rental Space so long as the Tenant is not in default under this Lease. The Tenant must attorn to the mortgagee or ground lessor.
In the event of a foreclosure, the Landlord shall immediately notify the Tenant (in accordance with paragraph 29) of the pendency of the foreclosure proceeding.
The Landlord warrants and represents that as of the date of this Lease no such proceeding has been filed and the Landlord is not aware of any threatened foreclosure proceeding.
22. Tenant's Certificate
At the request of the Landlord, the Tenant shall sign a certificate stating that:
a. this Lease has not been amended and is in effect or, if it has been amended, specifying such amendment,
b. the Landlord has fully performed all of the Landlord's agreements in this Lease,
c. the Tenant has no rights to the Rental Space except as stated in this Lease,
d. the Tenant has paid all Rent to date, and
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e. the Tenant has not paid Rent for more than one month in advance.
The Certificate shall also list all the property attached to the Rental Space owned by the Tenant.
23. Violation, Eviction, Re-entry and Damages
The Landlord reserves a right of re-entry that allows the Landlord to end this Lease and re-enter the Rental Space if the Tenant violates any agreement in this Lease. This is done by eviction. Eviction is a court procedure to remove a tenant. Eviction is started by the filing of a complaint in court and the service of a summons on a tenant to appear in court.
The Landlord may also evict the Tenant for any one of the other grounds of good cause provided by law. After a court order of eviction and compliance with the warrant of removal, the Landlord may re-enter and take back possession of the Rental Space. If the cause for eviction is non-payment of Rent, notice does not have to be given to the Tenant before the Landlord files a complaint. If there is any other cause to evict, the Landlord must give to the Tenant the notice required by law before the Landlord files a complaint for eviction.
The Tenant is liable for all damages caused by the Tenant's violation of any agreement in this Lease. The Landlord is also liable for all damages caused by the Landlord's violation of any agreement in this Lease. This includes reasonable attorneys fees and costs in accordance with paragraph 4.f.
After eviction, the Tenant shall be liable to pay the Rent for the Term or until the Landlord re-rents the Rental Space, if sooner. If the Landlord re-rents the Rental Space for less than the Tenant's Rent, the Tenant shall pay the difference until the end of the Term. The Tenant shall not be entitled to any excess resulting from the re-renting. The Tenant shall also be liable to pay:
a. all reasonable expenses incurred by the Landlord in preparing the Rental space for re-renting, and
b. commissions paid to a broker for finding a new tenant.
24. Environmental Representations/ISRA Compliance
The Landlord represents that to the best of the Landlord's knowledge, information and belief:
a. No toxic wastes, pollutants, asbestos, PCB's or other toxic substances are located upon or beneath the premises in which the Rental Space is located,
b. No debris has been buried beneath the Property,
c. Landlord has no knowledge that the Property has ever been used to generate, refine, produce, store, handle, transfer, process or transport any "Hazardous Substance" or "Hazardous Waste" as such terms are defined in N.J.S.A. 58:10-23.1l(b)(k) and/or N.J.A.C. 7:1-3.3,
d. The premises will not be so used by any party prior to the commencement date of this Lease.
e. No notice has been received of any outstanding violation of any governmental law, rule, statute, ordinance or regulation by the Landlord or any agent or affiliate of the Landlord.
The Landlord shall indemnify and hold harmless the Tenant with respect to any violation of these representations.
The Tenant shall, at the Tenant's own expense, comply with the Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 et seq. and the regulations promulgated thereunder. This means that the Tenant shall:
a. Make, if required by law or regulation, all submissions to, provide all information to and comply with all requirements of the Bureau of Industrial Site Evaluations of the New Jersey Department of Environmental Protection.
b. Prepare and submit, if required by law or regulation, any required plans and financial assurance and carry out the approved plans.
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c. Provide all information requested by the Landlord for preparation of a non-applicability affidavit and promptly sign such affidavits when requested by the Landlord.
d. Indemnify, defend and save harmless the Landlord from all fines, suits, procedures, claims, and actions of any kind arising out of, or in any way connected with, any discharge of hazardous substances or waste at the Rental Space which occur during the term of this Lease as a result of the Tenant's actions; or arising out of the Tenant's failure to provide all information, make sure all submissions are made, and take all actions required by the ISRA Bureau or any other division of NJDEP. The Tenant's failure to abide by the terms of this Paragraph shall be restrainable by injunction.
The Tenant shall not be responsible for prior acts of the Landlord or other tenants of the Landlord, and, in no event shall the Tenant be responsible for any liability arising out of any acts prior to the Tenant's occupancy.
25. Rent Adjustment for Third through Fifteenth Years
The monthly rent reserved during the third through fifteenth years shall be $8,650.00 adjusted by the revised Consumer Price Index for Urban Wage Earners and Clerical Workers for New York, New York-Northeastern New Jersey (C.P.I.) with a base period of June 2006 ( ) as follows:
SAMPLE Monthly Rent Adjustment
Starting Date
------------------------
C.P.I. for June 2008 ( ) x $8,650.00 = $
----------------------------
C.P.I. for June 2006 ( ) 1 January 1, 2009
C.P.I. for June 2009 ( ) x $8,650.00 = $
----------------------------
C.P.I. for June 2006 ( ) 1 January 1, 2010
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The same formula shall be applied to calculate the adjustments for the remaining years of the term. No annual adjustment shall exceed 1.05% of the previous year's rent. If, however, the C.P.I. exceeds 1.05%, the excess shall be "banked" and applied to one or more future rent adjustments where the C.P.I. is le than 1.05%. The intent here is that the 1.05% shall be cumulative during the term of the Lease.
26. Option to Renew
The Landlord hereby grants to the Tenant an option to renew this Lease for three additional terms of five years from:
January 1, 2021 to December 31, 2025 January 1, 2026 to December 31, 2030 January 1, 2031 to December 31, 2035.
If the Tenant fails to notify the Landlord of the Tenant's intention to exercise each option to renew by the following notice dates:
January 1, 2020
January 1, 2025
January 1, 2030
each such option to renew shall become null and void. The notice shall be given in accordance with Paragraph 29 of this Lease.
9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 13
For the first five-year option, the monthly rent reserved starting January 1, 2021 shall be adjusted (but not reduced) to Fair Market Rent ("FMR") for the Rental Space. The monthly rent starting January 1, 2022 shall be adjusted by the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for New York, New York-Northeastern New Jersey (C.P.I.) with a base period of June 2020 ( ) as follows:
Monthly Rent Adjustment
Starting Date
-----------------------
C.P.I. for June 2021 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2020 ( ) 1 January 1, 2022
C.P.I. for June 2022 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2020 ( ) 1 January 1, 2023
C.P.I. for June 2023 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2020 ( ) 1 January 1, 2024
C.P.I. for June 2024 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2020 ( ) 1 January 1, 2025
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For the second five year option, the monthly rent reserved starting January 1, 2026 shall be adjusted (but not reduced) to Fair Market Rent ("FMR") for the Rental Space. The monthly rent starting January 1, 2027 shall be adjusted by the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for New York, New York-Northeastern New Jersey (C.P.I.) with a base period of June 2025 ( ) as follows:
Monthly Rent Adjustment
Starting Date
-----------------------
C.P.I. for June 2026 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2025 ( ) 1 January 1, 2027
C.P.I. for June 2027 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2025 ( ) 1 January 1, 2028
C.P.I. for June 2028 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2025 ( ) 1 January 1, 2029
C.P.I. for June 2029 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2025 ( ) 1 January 1, 2030
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For the third five year option, the monthly rent reserved starting January 1, 2031 shall be adjusted (but not reduced) to Fair Market Rent ("FMR") for the Rental Space. The monthly rent starting January 1, 2032 shall be adjusted by the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers for New York, New York-Northeastern New Jersey (C.P.I.) with a base period of June 2030 ( ) as follows:
Monthly Rent Adjustment
Starting Date
-----------------------
C.P.I. for June 2031 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2030 ( ) 1 January 1, 2032
C.P.I. for June 2032 ( ) x FMR = $
---------------------------- ---
C.P.I. for June 2030 ( ) 1 January 1, 2033
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9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 14
C.P.I. for June 2033 ( ) x FMR = $ ---------------------------- --- C.P.I. for June 2030 ( ) 1 January 1, 2034 C.P.I. for June 2034 ( ) x FMR = $ ---------------------------- --- C.P.I. for June 2030 ( ) 1 January 1, 2035 |
For the purpose of this Paragraph the Fair Market Rent is to be determined as follows:
a. By the agreement of the parties.
b. If the parties are unable to agree, by arbitration in Fanwood, New Jersey. The Landlord and the Tenant shall each select an appraiser having the qualifications of an MAI with a principal office located within ten miles from the Rental Space. If the appraisers selected by the Landlord and the Tenant are unable to agree upon a Fair Market Rent within 21 days after the issue is submitted to each appraiser, then both appraisers shall select a third independent appraiser having the qualifications of State Certified Real Estate Appraiser to determine the Fair Market Rent within 21 days after the issue is submitted. The cost of the appraisal shall be shared equally between the Landlord and the Tenant. The Fair Market Rent shall not be less than the lower of the two appraisals nor higher than the higher of the two appraisals.
27. Right to Purchase at Fair Market Value
The Landlord grants to the Tenant the right to purchase the property at 314-328 South Avenue if and when the Landlord elects to sell the property to a third party. Sales to present or future members of the Landlord will not be deemed to be a third party. This means that the Landlord shall first offer to the Tenant the right to purchase the property at Fair Market Value. The Landlord's notice shall be given in accordance with paragraph 29 of this Business Lease. If the Tenant fails to exercise the right to purchase the property at Fair Market Value within thirty (30) calendar days after receipt of the Landlord's notice, this right to purchase shall become null and void and the Landlord shall have the right to market and sell the property to a third party.
For the purpose of this paragraph, the Fair Market Value is to be determined as follows:
a. By the agreement of the parties.
b. If the parties are unable to agree, by arbitration in Scotch Plains, New Jersey. The Landlord and the Tenant shall each select an appraiser having the qualifications of an MAI and with a principal office located within ten miles from the Rental Space. If the appraisers selected by the Landlord and the Tenant are unable to agree upon a Fair Market Value within 21 days after the issue is submitted to each appraiser, then both appraisers shall select a third independent appraiser having the qualifications of a State Certified Real Estate Appraiser to detetinine the Fair Market Value within 21 days after the issue is submitted. The cost of the appraisal shall be shared equally between the Landlord and the Tenant. The Fair Market Value shall not be less than the lower of the two appraisals nor higher than the higher of the two appraisals.
28. Notices
All notices given under this Lease must be in writing. Each party must accept and claim the notices given by the other. Unless otherwise provided by law, they may be given by:
a. personal delivery, or
b. certified mail, return receipt requested, or
c. confirmed telephone facsimile or other electronic media, or
d. recognized national courier service with delivery confirmation (i.e., Federal Express, Airborne Express, United Parcel Service).
Notices shall be addressed to the Landlord at the address written at the being of this Lease and to the Tenant at the Rental Space with a copy to:
9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 15
Leib, Kraus, Grispin & Roth
Attn: Robert H. Kraus, Esq.
328 Park Avenue, P. O. Box 310
Scotch Plains, NJ 07076-0310
29. No Waiver
The Landlord's failure to enforce any agreement in this Lease shall not prevent the Landlord from enforcing the agreement for any violations occurring at a later time.
30. Governing Law/Survival
This Lease shall be construed by a court of competent jurisdiction in the State of New Jersey in accordance with the laws of the State of New Jersey. If any agreement in this Lease is contrary to law, the rest of the Lease shall remain in effect.
31. End of Term
At the end of the Term, the Tenant shall:
a. leave the Rental Space clean,
b. remove all of the Tenant's property,
c. remove all signs and restore that portion of the Rental Space on which they were placed,
d. repair all damage caused by moving, and
e. return the Rental Space to the Landlord in the same condition as it was at the beginning of the Term except for normal wear and tear.
If the Tenant leaves any property in the Rental Space, the Landlord may
a. dispose of it and charge the Tenant for the cost of disposal, or
b. keep it as abandoned property.
32. Binding
This Lease binds the Landlord and the Tenant and all parties who lawfully succeed to their rights or take their places.
33. Full Agreement
The parties have read this Lease. It contains their full agreement. It may not be changed except in writing signed by the Landlord and the Tenant.
9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 16
SIGNATURES
The Landlord and the Tenant agree to the terms of this Business Lease by signing below. (If a party is a corporation or limited liability company, this Lease is signed by its proper corporate officers and its corporate seal is affixed or it is signed by its proper limited liability company officers and the company seal
is affixed.)
WITNESSED OR ATTESTED BY: FANWOOD PLAZA PARTNERS, LLC
/s/ Lisa J. Larue /s/ John P. Boyle, III
----------------------------------- ---------------------------------------
Lisa J. Larue By John P. Boyle, III Manager
/s/ Lisa J. Larue /s/ Robert H. Kraus
----------------------------------- ---------------------------------------
Lisa J. Larue By Robert H. Kraus Manager
THE TOWN BANK
/s/ Angela Bellino /s/ Robert W. Dowens, Sr.
----------------------------------- ---------------------------------------
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Secretary By Robert W. Dowens, Sr. President
9/13/05 Fanwood Plaza Partners, LLC to The Town Bank - Business Lease 17
SUBSIDIARIES OF THE REGISTRANT
None.*
* Upon consummation of the acquisition, Two River Community Bank, a New Jersey chartered commercial bank, and The Town Bank, a New Jersey chartered commercial bank, will be a subsidiaries of the Registrant. Two River Community Bank has two subsidiaries, TRCB Investment Company, a New Jersey corporation, and TRCB Title Agency L.L.C., a New Jersey limited liability company.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated January 21, 2005, accompanying the consolidated financial statements of Two River Community Bank contained in the Registration Statement and Prospectus of Community Partners Bancorp. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts."
/s/ GRANT THORNTON LLP Philadelphia, Pennsylvania November 7, 2005 |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
The Town Bank:
We consent to the use in the Registration Statement on Form S-4 filed by Community Partners Bancorp of our report dated February 7, 2005, with respect to the balance sheets of The Town Bank as of December 31, 2004 and 2003, and the related statements of income, changes in shareholders' equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, included herein, and to the reference to our firm under the heading "Experts" in the proxy statement/prospectus.
/s/ KPMG LLP
Short Hills, New Jersey
November 4, 2005
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CONSENT OF CURTIS SECURITIES LLC
We hereby consent to the inclusion of our opinion letter, dated August 16, 2005, to the Board of Directors of Two River Community Bank ("Two River") as Annex D to the Joint Proxy Statement/Prospectus relating to the proposed transaction among Community Partners Bancorp (the "Registrant"), Two River and The Town Bank contained in the Registrant's Registration Statement on Form S-4, as filed with the Securities and Exchange Commission ("SEC") on November 10, 2005 and to the references to our firm and the opinion in the Joint Proxy Statement/Prospectus. In giving our consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the "Act"), or the rules and regulations of the SEC thereunder (the "Regulations"), nor do we admit that we are experts with respect to any part of the Registration Statement on Form S-4 within the meaning of the term "experts" as used in the Act or the Regulations.
/s/ CURTIS SECURITIES LLC
November 10, 2005
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CONSENT OF JANNEY MONTGOMERY SCOTT LLC
We hereby consent to the inclusion of our opinion letter, dated August 16, 2005, to the Board of Directors of The Town Bank ("Town Bank") as Annex E to the Joint Proxy Statement/Prospectus relating to the proposed transaction among Community Partners Bancorp (the "Registrant"), Two River Community Bank and Town Bank contained in the Registrant's Registration Statement on Form S-4, as filed with the Securities and Exchange Commission ("SEC") on November 10, 2005, and to the references to our firm and the opinion in the Joint Proxy Statement/Prospectus. In giving our consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the "Act"), or the rules and regulations of the SEC thereunder (the "Regulations"), nor do we admit that we are experts with respect to any part of the Registration Statement on Form S-4 within the meaning of the term "experts" as used in the Act or the Regulations.
/s/ JANNEY MONTGOMERY SCOTT LLC
November 10, 2005
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COMMUNITY PARTNERS BANCORP
POWER OF ATTORNEY
FORM S-4
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Barry B. Davall and Michael J. Gormley, as their attorney-in-fact, with power of substitution, for him or her in any and all capacities, to sign any and all amendments (whether pre- or post-effective), to this Registration Statement on Form S-4 of Community Partners Bancorp (SEC File No. 333-_____) and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.
Signature Title Date
--------- ----- ----
/s/ Barry B. Davall President, Chief Executive Officer and November 10, 2005
---------------------------------- Director
Barry B. Davall
/s/ Michael J. Gormley Vice President, Chief Financial Officer
---------------------------------- and Treasurer November 10, 2005
Michael J. Gormley (Principal Financial Officer)
/s/ Michael Bis Controller and Chief Accounting Officer November 10, 2005
---------------------------------- (Principal Accounting Officer)
Michael Bis
/s/ Charles T. Parton Chairman of the Board November 10, 2005
----------------------------------
Charles T. Parton
/s/ Joseph F.X. O'Sullivan Vice Chairman of the Board November 10, 2005
----------------------------------
Joseph F.X. O'Sullivan
/s/ Michael W. Kostelnik, Jr. Director November 10, 2005
----------------------------------
Michael W. Kostelnik, Jr.
/s/ Frank J. Patock, Jr. Director November 10, 2005
----------------------------------
Frank J. Patock, Jr.
/s/ Robert B. Cagnassola Director November 10, 2005
----------------------------------
Robert B. Cagnassola
/s/ Frederick H. Kurtz Director November 10, 2005
----------------------------------
Frederick H. Kurtz
/s/ John J. Perri, Jr. Director November 10, 2005
----------------------------------
John J. Perri, Jr.
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