SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM l0-K
___
/X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
___
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ___________________
Commission file number 0-l0699
HUBCO, INC.
(Exact name of registrant as specified in its Charter)
New Jersey 22-2405746
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
3l00 Bergenline Avenue
Union City, New Jersey 07087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 348-2300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value
(Title of Class)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of March 17, 1994 was $136,299,870.
The number of shares of Registrant's Common Stock, no par value,
outstanding as of March 17, 1994 was 6,490,470.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part(s) Into
Documents Which Incorporated
Annual Report to Shareholders Part I
for the fiscal year ended Part II
December 31, 1993 ("HUBCO's 1993
Annual Report"), pages 23 through 36
Proxy Statement used in
connection with the Annual
Meeting of Shareholders to
be held March 22, 1994
(HUBCO's Proxy Statement
for its 1994 Annual Meeting")
pages 4 through 16 and page 22 under the
captions "Proposal 1 - Election
of Directors", "Executive
Compensation", "Stock Ownership of
Management and Principal
Shareholders" and "Certain
Transactions with Management".
Notwithstanding the foregoing, the
information contained in HUBCO's
Proxy Statement for its 1994 Annual
Meeting pursuant to Items 402(k) and
402(l) of Regulation S-K is not
incorporated by reference and is not
to be deemed part of this report. Part III
With the exception of information specifically incorporated by
reference, HUBCO's 1993 Annual Report and HUBCO's Proxy Statement for its
1994 Annual Meeting are not to be deemed part of this report.
<PAGE> -3-
HUBCO, INC.
Form l0-K Annual Report
For The Fiscal Year Ended December 31, 1993
PART I
ITEM 1. BUSINESS
(a) General Development of Business.
HUBCO, Inc. ("HUBCO" or "Registrant" or the "Company") is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"). HUBCO was organized under the
laws of New Jersey in 1982 by Hudson United Bank for the purpose of
creating a bank holding company for Hudson United Bank. HUBCO directly
owns Hudson United Bank ("the Bank") and a second subsidiary, HUB Financial
Services, Inc. HUBCO is also the indirect owner, through Hudson United
Bank of an investment subsidiary and an inactive subsidiary. Each of
HUBCO's direct and indirect subsidiaries is described below in this Item
1.
Growth of Hudson United Bank
Hudson United Bank was incorporated in 1890 as a state-chartered
commercial bank. The bank took on its present name in a merger with United
National Bank of Bergen County in 1972. In 1975, Hudson United Bank
acquired an additional branch when it purchased Peoples Trust Company of
Dunellen. In 1981, the bank sold one of its branches in Bloomfield, New
Jersey. In 1983, the bank acquired another branch when it assumed the
deposits and purchased certain assets of Pan American National Bank from
the Federal Deposit Insurance Corporation ("FDIC") and began operating the
former Pan American National Bank office in Union City, New Jersey as a
branch of Hudson United Bank. Additional branches were opened in West New
York, North Bergen, and Edgewater, New Jersey in 1986, 1988 and 1990,
respectively.
Since October 1990, HUBCO has engaged in a series
of acquisitions, which are briefly described below. As of the filing
of this Form 10-K, the Company has two substantial acquisitions
pending. In May, 1993, the Company and the Bank agreed to acquire
Statewide Savings Bank, S.L.A. ("Statewide"), a mutual savings and
loan association, in a merger-conversion transaction. Under the
agreement, the Company will sell shares of its common stock to
Statewide's eligible depositors and other voting members at a
discounted price (which is the lesser of $18.00 per share, or 95%
of the market price of HUBCO stock for the 10 trading days prior to
the closing date) in an amount equal to the appraised value of
Statewide as determined by an independent appraiser. The
independent appraiser has, on a preliminary basis as of December 6,
1993, determined the appraised value of Statewide to be approximately
$35 million. The Company's stockholders will be offered any
remaining shares at the same price as the shares are offered to
Statewide's depositors. Shares not sold to Statewide's eligible
<PAGE> -4-
depositors, other voting members and the Company stockholders are
expected to be sold to the public at the then market price. As part of
the transaction and simultaneously with the closing, Statewide will
convert from a state savings and loan to a state mutual savings
bank charter, from mutual to stock form and finally to a Commercial Bank
Charter and then be merged into the Company's banking subsidiary,
Hudson United Bank. As of the end of Statewide's last fiscal year on
March 31, 1993, Statewide reported total assets, tangible net worth and
net income of $518 million, $13.4 million and $5.1 million, respectively
and had 13 branch offices serving Northern New Jersey markets. In
December 1993, the Company filed a registration statement on Form
S-3 for purposes of proceeding with the merger conversion and the
sale of the Company's common stock. At about the same time, the
Company, the Bank and Statewide filed various regulatory
applications with the New Jersey Department of Banking, the Federal
Deposit Insurance Corporation ("FDIC") and the Board of Governors
of the Federal Reserve System ("FRB"). The New Jersey Department
of Banking approved the applications that were filed by the Bank
and by Statewide. However, the FDIC proposed a new policy and
new interim regulations on mutual to stock conversions in January
and February, 1994 and eventually, Statewide was required in March
1994 to file a new notice of conversion with the FDIC. On March
25, 1994, Statewide's notice of conversion was accepted by the FDIC
for processing, but such processing may take up to 60 days. The
policy of the FDIC on conversions, especially merger conversions,
is still evolving and the effect of this on the approval of
the Statewide transaction, is difficult to determine at
this time. The transaction is subject to the approval of the FDIC
and the FRB, neither of which have been received. The
transaction is also subject to the approval of Statewide's
depositors at a meeting to be held for that purpose. Statewide has
the right to terminate the transaction if any of the approvals
impose substantial conditions. The parties recently agreed to
extend to the date after which either party could
terminate the acquisition agreement to June 30, 1994.
The acquisition of Statewide has taken longer than the
Company anticipated due to a variety of factors. As a consequence,
the Company has incurred and continues to incur substantial
expenses for legal, accounting and printing costs in connection
with the acquisition. If the acquisition were not consummated
these expenses, which have been capitalized, would impact the
Company's earnings , and there could be in that quarter a decline
in earnings compared to the prior quarter.
In November, 1993, the Company and its subsidiary bank
agreed to acquire Washington Bancorp, Inc. and its subsidiary,
Washington Savings Bank (together "Washington") for a combination
of cash and convertible preferred stock with an aggregate
consideration of approximately $40.5 million. In the transaction,
approximately 51% of Washington's common stock will be converted
into a new Class A Convertible preferred stock of the Company and 49% of
Washington shares will be converted into cash at $16.10 per share,
with Washington stockholders having the right to elect either cash
or the preferred stock. Each full share of preferred stock will
have a stated value of, and be redeemable for, $24.00 or be convertible
into one share of Company common stock. The holders of the preferred
<PAGE> -5-
stock will be entitled to receive an annual dividend to be set annually
on the basis of the average market price of the Company's common stock
during a twenty consecutive business day period ending two days
prior to the date the dividend is set. The dividend will range
from $1.00 per share of preferred stock if the common stock is
trading at $24.00 or higher, up to $1.68 per share if the common
stock is trading below $19.00. If the common stock is trading
between $19.00 and $23.99, the dividend will be between $1.56 and
$1.10 per share. The shares are immediately convertible whenever HUBCO
shares trade at an average price of $24.00 for a ten day period.
At December 31, 1993, Washington reported $282.6 million
in assets and $2.8 million in earnings for the year and had eight
branch offices serving Northern New Jersey markets.
Consummation of the transaction contemplated by the
Washington Merger Agreement is subject to a number of conditions,
including, among others, obtaining all necessary regulatory
approvals and the approval of Washington's shareholders, the
receipt by Washington of a fairness opinion and, to the extent
necessary, the approval of the Company's stockholders. The Company
has made a determination that a vote of the Company's stockholders
will not be required.
The Company has the right to terminate the Washington
Merger Agreement for a number of reasons, including if there is a
material adverse change in the business, operations or financial
condition of Washington. Under the material adverse change clause,
but without limiting the definition of a material adverse change,
the Company has the right to terminate the Washington Merger
Agreement if Washington's largest non-performing loan, a loan of
approximately $9.0 million, is not brought to performing status or
if substantial steps are not taken to proceed with foreclosure on
the loan. Although the Company anticipates that it will proceed
with the acquisition of Washington, it continues to examine this
loan and the circumstances surrounding the collateral.
The Company's acquisition philosophy is to seek in-market
or contiguous market opportunities which can be accomplished with
little dilution to earnings. Since October 1990, the Company has
acquired the assets and liabilities of six institutions, adding to
its assets and liabilities a total of $807.2 million in assets and
$805.7 million in liabilities and expanding its branch network from
15 branches to 37 branches. Over 80% of these assets and
liabilities were acquired through government assisted transactions
which allows the Bank to reprice deposits, review loans and
purchase only those loans which meet its underwriting criteria.
The balance of the assets and liabilities were acquired in
traditional negotiated private transactions which the Company
believes present a different level of risk than the risk presented in
government assisted transactions.
<PAGE> -6-
Summary of Acquisitions
The following chart summarizes the acquisitions undertaken by the
Company since October 1990:
<TABLE>
<CAPTION>
DEPOSITS LOANS
GOVERNMENT PREMIUM ASSUMED PURCHASED BRANCHES
INSTITUTION ASSISTED PAID (IN MILLIONS) (IN MILLIONS) ACQUIRED
<S> <C> <C> <C> <C> <C>
Mountain Ridge State Bank Yes $ 325,000 $ 47.0 $12.0 1
Meadowlands National Bank No $ 415,000(1) $ 35.5 $22.1 3
Center Savings and Loan Association Yes $ 10,000 $ 89.9 $78.6 1
Irving Savings and Loan Association Yes $ 5,000 $161.1 $62.4 5
Broadway Bank and Trust Company Yes $3,406,000 $345.7 $ 9.5 8
Pilgrim State Bank No $6,000,000(2) $122.9 $46.7 6
<FN>
(1) Represents the purchase price paid to the shareholders of Meadowlands
National Bank.
(2) Represents the amount paid as purchase price to Ramapo, the owner of
the assets immediately prior to closing.
</TABLE>
The Company's profitability and its financial condition
may be significantly impacted by the continuing implementation of
its acquisition strategy and by the consummation of the acquisition
of Statewide and the acquisition of Washington.
If the acquisition of Statewide and the acquisition of
Washington are both consummated, the Company will add 21 branch
offices (some of which it may close) and approximately $781 million
in assets, increasing the Company's branches by more than 50% and
its assets by 75%. Moreover, it is likely that an expansion of
this magnitude will necessitate substantially increased staffing in
the Company's operations along with the increased revenue stream.
In addition to the other challenges presented by the
acquisitions of Statewide and Washington, both institutions have a
significant volume of non-performing assets, including non-accrual
loans and real estate acquired in connection with collection
actions on loans ("OREO properties"). At December 31, 1993, the
Company had $11.5 million in non-performing assets, while Statewide
had $12.5 million and Washington had $20.0 million. The Company does plan
to utilize bulk sales of problem assets to reduce these non-performing
assets.
The Company intends to continue to seek acquisition opportunities
that arise in its market area. There can be no assurance that the
Company will be able to acquire additional financial institutions
or, if additional financial institutions are acquired, that these
acquisitions will be managed successfully to enhance the
profitability of the Company.
On November 8, 1993, the Company's Board of Directors
authorized a stock repurchase plan and authorized management to
repurchase up to 10% of its outstanding common stock per year
beginning immediately. At that time, the Company had approximately
6.9 million shares outstanding. As of March 1, 1994, the Company
had repurchased 455,081 shares at a cost of $10,131,898 , of
which 12,300 shares have been reissued by the Company as awards
<PAGE> -7-
under its restricted stock plan and the balance of the Treasury shares
will be reissued in the Statewide merger conversion stock offering.
The Company's management currently does not have intentions to purchase
additional shares under the stock repurchase plan but intends to re-examine
the issue from time to time. The Company's last repurchase of shares
was on January 24, 1994.
On January 14, 1994, the Company sold $25 million
aggregate principal amount of subordinated debt in a private
placement. The subordinated debentures bear interest at 7.75% per
annum payable semi-annually. The debentures mature in 2004 (i.e.,
ten years after the date of original issuance) and payment of the
principal of the debentures may be accelerated only upon the
bankruptcy or insolvency of the Company or its major banking
subsidiary. The debt was issued under an indenture intended to
comply with the terms and conditions of the Trust Indenture Act of
1939 and the Company is obligated to register the subordinated debt
with the SEC by July 13, 1994, for an exchange offer for registered
securities or in a resale transaction. The subordinated debt has
been structured to comply with the current rules of the Board of
Governors of the Federal Reserve System regarding debt which will
qualify as Tier 2 capital under the FRB capital adequacy rules.
It may also be invested in the banking subsidiary as Tier I capital.
The Company sold the debt as part of a long term strategy to raise
capital and did not need the additional capital or funds raised to
pay for existing acquisitions. The Company intends to use the net
proceeds from the sale of the subordinated debt for general
corporate purposes, including investments in and advances to the
Company's subsidiaries, and for financing possible future
acquisitions of deposits and banking assets. Pending such use, the
Company or its subsidiaries may temporarily invest the net proceeds
in investment grade securities.
The Company has outgrown the space at its headquarters
office and commencing in the fourth quarter of 1993 the Company actively
undertook a search for additional space to expand its headquarters
operations. In March of 1994, the Company contracted to purchase
a 64,350 square foot building in Mahwah, New Jersey to house the
executive offices of the Company and the Company's data processing
subsidiary, which will service the Bank's data processing and check
processing needs and will offer its services to smaller banks in
the New York and New Jersey area. The net increase in the
Company's total other expenses directly attributable to this
purchase is anticipated to be approximately one percent.
Other Subsidiaries
HUBCO has a second directly-owned subsidiary called HUB Financial
Services, Inc., a data processing subsidiary formed in January 1983, which
has primarily serviced automobile and equipment leases for Hudson United
Bank, on a fee basis. In 1988 HUB Financial Services, Inc. received
approval from the Federal Reserve Board for making, acquiring, selling and
servicing real estate mortgage loans, and commenced operations as a
mortgage broker.
<PAGE> -8-
In 1984, Hudson United Bank established a subsidiary corporation
in Delaware to manage a portion of its investment portfolio and had
contributed $20,033,509 of its investment portfolio to the corporation as
of December 31, 1992. In February 1993, the assets of the Delaware
Corporation were transferred up to its parent, Hudson United Bank, in the
form of a dividend and the subsidiary was dissolved. In 1987, Hudson United
Bank established a subsidiary corporation in New Jersey to manage a portion
of its investment portfolio and to operate under state tax law as an
investment company. As of December 31, 1993, $338,630,069 of the Bank's
investment portfolio is being managed by the New Jersey corporation.
Hudson United Bank also owns an inactive subsidiary, Lafayette Development
Corp.
Unionization of Hudson United Bank
Hudson United Bank is administratively divided into three
divisions: the Northern Division, the Southern Division and the Essex
Division. The Southern Division of Hudson United Bank is unionized. Local
153 of the Office and Professional Employees International Union represents
the bank's clerical staff in the Southern Division's bargaining unit. In
February 1993, a three-year collective bargaining agreement was negotiated
which provides for a modest increase in wages, an increase in hours of
employment, contributions towards the cost of providing health care
benefits and an increase in the annual pension benefit for employees with
more than three years of service who were employed as of March 1, 1990.
Currently, approximately 49% of the employees in the bargaining unit are
members of the union. The collective-bargaining agreement expires February
28, 1996.
Regulatory Matters
There are a variety of statutory and regulatory restrictions
governing the relations among HUBCO and its subsidiaries:
Capital Adequacy Guidelines
Bank holding companies must comply with the Federal Reserve
Board's risk-based capital guidelines, which became effective on February
15, 1989 and were fully phased-in on December 31, 1992. Under the
guidelines, risk weighted assets are calculated by assigning assets and
certain off-balance sheet items to broad risk categories. The total dollar
value of each category is then weighted by the level of risk associated
with that category. As of December 31, 1992, minimum risk-based capital
to risk based assets ratio of 8.00% must be attained. At least one half
of an institution's total risk based capital must consist of Tier 1
capital, and the balance may consist of Tier 2, or supplemental, capital.
Tier 1 capital consists primarily of common stockholder's equity along with
preferred or convertible preferred stock, minus goodwill. Tier 2 capital
consists of an institution's allowance for loan and lease losses, subject
to limitation, hybrid capital instruments and certain subordinated debt.
The allowance for loan and lease losses which is considered Tier 2 capital
is limited to l.25% of an institution's risk-based assets. As of December
<PAGE> -9-
31, 1993, HUBCO's total risk-based capital ratio was 14.85% consisting of
a Tier 1 ratio of 13.60% and a Tier 2 ratio of l.25%. Both ratios exceed
the requirements under these regulations.
In addition, the Federal Reserve Board has promulgated a leverage
capital standard, with which bank holding companies must comply. Bank
holding companies must maintain a minimum Tier l capital to total assets
ratio of 3%. However, institutions which are not among the most highly
rated by federal regulators must maintain a ratio 100-to-200 basis points
above the 3% minimum. As of December 31 1993, HUBCO had a leverage capital
ratio of 7.22%.
The FDIC also imposes risk based and leverage capital guidelines
on Hudson United Bank. These guidelines and the ratios to be met are
substantially similar to those imposed by the Federal Reserve Board. If
a bank does not satisfy the FDIC's capital requirements, it will be deemed
to be operated in an unsafe and unsound manner and will be subject to
regulatory action. As of December 31, 1993, Hudson United Bank had a risk
weighted capital ratio of 13.94% and a leverage capital ratio of 6.70%.
These ratios exceed the requirements under the FDIC regulations. See also
"Management's Discussion and Analysis of Financial Condition and Results
of Operation - Capital."
Restrictions on Dividend Payments
The payment of dividends by the Bank to HUBCO is regulated.
Under the New Jersey Banking Act of 1948, as amended, Hudson United Bank
may pay dividends only out of retained earnings, and out of surplus to the
extent that surplus exceeds 50 percent of stated capital. Under the
Financial Institutions Supervisory Act, the FDIC has the authority to
prohibit a state-chartered bank from engaging in conduct which, in the
FDIC's opinion, constitutes an unsafe or unsound banking practice. Under
certain circumstances, the FDIC could claim that the payment of a dividend
or other distribution by a bank to its sole shareholder constitutes an
unsafe or unsound practice.
Restrictions on Transactions Between HUBCO and the Bank
The Banking Affiliates Act of 1982, as amended, severely
restricts loans and extensions of credit by the Bank to HUBCO and HUBCO
affiliates (except affiliates which are banks). In general, such loans
must be secured by collateral having a market value ranging from 100% to
130% of the loan, depending upon the type of collateral. Furthermore, the
aggregate of all loans from the Bank to HUBCO and its affiliates may not
exceed 20% of that Bank's capital stock and surplus and, singly to HUBCO
or any affiliate, may not exceed l0% of the Bank's capital stock and
surplus. Similarly, the Banking Affiliates Act of 1982 also restricts the
Bank in the purchase of securities issued by, the acceptance from
affiliates of loan collateral consisting of securities issued by, the
purchase of assets from, and the issuance of a guarantee or standby letter-
of-credit on behalf of, HUBCO or any of its affiliates.
<PAGE> -10-
Holding Company Supervision
Under the Bank Holding Company Act, HUBCO may not acquire
directly or indirectly more than 5 percent of the voting shares of, or
substantially all of the assets of, any bank without the prior approval of
the Federal Reserve Board. HUBCO cannot acquire any bank located outside
New Jersey unless the law of such other state specifically permits the
acquisition.
In general, the Federal Reserve Board, under its regulations and the
Bank Holding Company Act, regulates the activities of bank holding
companies and non-bank subsidiaries of banks. The regulation of the
activities of banks, including bank subsidiaries of bank holding companies,
generally has been left to the authority of the supervisory government
agency, which for Hudson United Bank is the New Jersey Department of
Banking (the "Department").
Interstate Banking Authority
New Jersey law allows New Jersey banking organizations to acquire
or be acquired by banking organizations in other states on a "reciprocal"
basis (i.e., provided the other state's laws permit New Jersey banking
organizations to acquire or be acquired by banking organizations in that
state on substantially the same terms and conditions applicable to banking
acquisitions solely within the state).
FIRREA
The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") established new capital standards and enhanced
regulatory oversight of the thrift industry. Many thrifts were unable to
comply with the new regulations creating opportunities for mergers and
acquisitions by commercial banks as well as other thrift institutions.
From time to time, HUBCO investigates potential opportunities that arise
as the result of this legislation and the enforcement of regulations
promulgated thereunder.
While FIRREA focuses primarily on the recovery and reform of the
savings and loan industry, there are provisions which affect commercial
banks. Such provisions include a new deposit insurance system, increased
deposit insurance premiums, restrictions on acceptance of brokered deposits
and increased consumer-related disclosure requirements.
Recent Regulatory Enactments
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted in December 1991. FDICIA was primarily designed to
provide additional financing for the FDIC by increasing its borrowing
ability. The FDIC was given the authority to increase deposit insurance
premiums to repay any such borrowing. In addition, FDICIA identifies the
following capital standard categories for financial institutions: well
<PAGE> -11-
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. As a result of FDICIA,
the various banking regulatory agencies have set certain capital and other
measures for determining the categories into which financial institutions
fall. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions depending on the category
in which an institution is classified. Pursuant to FDICIA,
undercapitalized institutions must submit recapitalization plans, and a
company controlling a failing institution must guarantee such institution's
compliance with its plan. FDICIA also required the various regulatory
agencies to prescribe certain non-capital standards for safety and
soundness relating generally to operations and management, asset quality
and executive compensation, and permits regulatory action against a
financial institution that does not meet such standards. The agencies have
implemented some of those regulations and have proposed to implement
others.
The deposits of the Bank are insured up to applicable limits by the
FDIC. Accordingly, the Bank is subject to deposit insurance assessments
to maintain the Bank Insurance Fund (the "BIF") of the FDIC. As of January
1, 1993, the FDIC began a risk-based insurance assessment system. This
approach is designed to ensure that a banking institution's insurance
assessment is based on three factors: the probability that the applicable
insurance fund will incur a loss from the institution; the likely amount
of the loss; and the revenue needs of the insurance fund. Management
believes that the provision of FDICIA and the risk-based insurance
assessment will not have a material effect upon the financial position of
HUBCO.
Source of Strength Doctrine
According to Federal Reserve Board policy, bank holding companies
are expected to act as a source of financial strength to each subsidiary
bank and to commit resources to support each such subsidiary. This support
may be required at times when a bank holding company may not be able to
provide such support. Furthermore, in the event of a loss suffered or
anticipated by the FDIC - either as a result of default of a bank
subsidiary of the Company or related to FDIC assistance provided to the
subsidiary in danger of default - the other bank subsidiaries of the
Company may be assessed for the FDIC's loss, subject to certain exceptions.
(b) Industry Segments.
The Registrant has one industry segment -- commercial banking.
<PAGE> -12-
(c) Narrative Description of Business.
HUBCO exists primarily to hold the stock of its subsidiaries.
During 1993, HUBCO had two directly-owned subsidiaries -- Hudson United
Bank and HUB Financial Services, Inc. In addition, HUBCO, through Hudson
United Bank, indirectly owns two additional subsidiaries. The historical
growth of, and regulatory scheme affecting, each of HUBCO's direct and
indirect subsidiaries is described in Item 1(a) above, which is
incorporated herein by reference.
HUBCO is a legal entity separate from its subsidiaries. The
stock of the Bank is HUBCO's principal asset. Dividends from Hudson United
Bank are the primary source of income for HUBCO. As explained above in
Item 1(a), legal and regulatory limitations are imposed on the amount of
dividends that may be paid by the Bank to HUBCO.
Hudson United Bank currently maintains its head office in Union
City, New Jersey. The Bank operates out of 37 offices in six northern New
Jersey counties. Of these offices, all but one are located in the northern
New Jersey counties of Bergen, Essex, Hudson, Morris and Passaic. One
other branch is located in Dunellen, Middlesex County, New Jersey. HUBCO
owns a two-story building one block from Hudson United Bank's main office
which HUBCO is leasing to the Bank as an operations center. In March of
1994, HUBCO contracted to purchase a 64,350 square foot building in Mahwah,
New Jersey to house the executive offices of HUBCO and the Company's data
processing subsidiary, which will service the Bank's data processing and
check processing needs and will offer its services to smaller banks in the
New York and New Jersey area.
At December 31, 1993, HUBCO through its subsidiaries had deposits
of $935,687,813, net loans of $518,579,459 and total assets of
$1,041,824,323. HUBCO ranked 12th among New Jersey commercial banks and
bank holding companies in terms of asset size as of December 31, 1993.
The Bank is a full service commercial bank and offers the
services generally performed by commercial banks of similar size and
character, including checking, savings, and time deposit accounts,
certificates of deposit, trust services, safe deposit boxes, secured and
unsecured personal and commercial loans and residential and commercial real
estate loans. The principal focus of the Bank is its local market place.
The Bank's deposit accounts are competitive in the current
environment and include money market accounts and a variety of interest-
bearing transaction accounts.
In the lending area, the Bank primarily engages in consumer
lending, commercial lending and real estate lending activities.
Hudson United Bank offers a variety of trust services. At
December 31, 1993, the Trust Department had approximately $99,571,000 of
assets under management or in its custodial control.
<PAGE> -13-
There are over 100 commercial banks throughout New Jersey, many
of which have offices in Northern New Jersey. In addition, large banks in
New York City compete for the business of New Jersey residents and
businesses located in HUBCO's primary areas of trade. A number of other
depository institutions compete for the business of individuals and
commercial enterprises in New Jersey including savings banks, savings and
loan associations, brokerage houses, financial subsidiaries of the retail
industry and credit unions. Other financial institutions, such as mutual
funds, consumer finance companies, factoring companies, and insurance
companies, also compete with HUBCO for both loans and deposits.
Competition for depositors' funds, for creditworthy loan customers and for
trust business is intense.
Despite intense competition with institutions commanding greater
financial resources, the Bank's supply of funds has imposed no substantial
impediment to its normal lending functions. While the Bank is limited to
making commercial loans to a single borrower in an amount not to exceed
fifteen percent of its capital and has a "house limit" significantly below
that level, it has, on occasion, arranged for participation by other banks
in larger loan accommodations.
The Bank has focused on becoming an integral part of the
communities it serves. Officers and employees are trained to meet the
needs of their customers and emphasis is placed on addressing the needs of
the local communities served.
HUBCO and its subsidiaries had 400 full-time employees and 87
part-time employees as of December 31, 1993, compared to 388 full-time and
68 part-time employees at the end of 1992.
(d) Financial Information about foreign and
domestic operations and export sales.
Not Applicable
<PAGE> -14-
(e) Executive Officers of the Registrant
The following table sets forth certain information as to each
executive officer of HUBCO who is not a director.
NAME,AGE AND
POSITION WITH OFFICER OF PRINCIPAL OCCUPATION
HUBCO HUBCO SINCE DURING PAST FIVE YEARS
D. Lynn Van Borkulo- 1988 1st Sr. Vice President, Hudson
Nuzzo, 44 United Bank, Corporate
Secretary, HUBCO; at Hudson
United Bank since 1967. Last
five years has progressed from
V.P. and Sr. Trust Officer to
V.P. Commercial Loans, to S.V.P.
Corporate Affairs. Was promoted
to 1st SVP in 1988.
Christina L. Maier, 40 1987 Assistant Treasurer of HUBCO and
Senior Vice President and
Controller of the Bank; at
Hudson United Bank since 1979.
Last five years served as
Controller; promoted to Senior
Vice President in 1988.
<PAGE> -15-
(f) Statistical Disclosure Required Pursuant to
Securities Exchange Act, Industry Guide 3.
The statistical disclosures for a bank holding company
required pursuant to Industry Guide 3 are contained in HUBCO's 1992
Annual Report on pages 8-10 and 14-17, and on the following pages of
this Report on Form 10-K:
PAGES(S) OF
ITEM OF GUIDE 3 THIS REPORT
II. Investment Portfolio . . . . . . . . . . . . . . . . . 17
III. Loan Portfolio . . . . . . . . . . . . . . . . . . . . 18-20
IV. Summary of Loan Loss Experience. . . . . . . . . . . . 21-21a
V. Deposits . . . . . . . . . . . . . . . . . . . . . . . 22
VI. Return on Equity and Assets. . . . . . . . . . . . . . 23
VII. Short-Term Borrowings. . . . . . . . . . . . . . . . . 24-25
<PAGE> -16-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM II
INVESTMENT PORTFOLIO
Book Value at End of Each Report Period
December 31
1993 1992 1991
(In Thousands of Dollars)
U.S. Treasury and Other U.S.
Government Agencies and
Corporations $391,098 $291,377 $ 89,613
State and Political Subdivisions 25,652 16,068 13,158
Other Securities 4,833 14,424 35,928
Common Stock 5,102 592 155
Preferred Stock 0 61 61
________ ________ ________
TOTAL $426,685 $322,522 $138,915
======== ======== ========
<TABLE>
Maturities and Weighted Average Yield at End of Latest Reporting Period
<CAPTION>
MATURING
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
and other
U.S. Government
Agencies and
Corporations $60,861 6.43% $277,079 6.17% $ 8,789 5.51% $44,433 5.35%
States and Political
Subdivisions 15,746 5.12 4,394 5.42 2,526 6.33 2,922 7.29
Other Securities 1,246 8.51 1,545 8.54 635 5.20 1,407 8.46
Common Stock 5,102 2.46 -- -- -- -- -- --
Preferred Stock 0 -- -- -- -- -- -- --
_______ ____ ________ ____ _______ ____ _______ ____
TOTAL $82,955 5.97% $283,018 6.17% $11,950 5.67% $48,762 5.55%
======= ======== ======= =======
</TABLE>
Weighted average yields on tax-exempt obligations have been computed on a
fully tax-equivalent basis assuming a tax rate of 35 percent.
<PAGE> -17-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM III
LOAN PORTFOLIO
Types of Loans At End of Each Reported Period
December 31
1993 1992 1991 1990 1989
Commercial, Financial,
and Agricultural $119,563 $129,550 $132,090 $118,734 $107,335
Real Estate -
Construction 7,117 3,777 3,108 7,422 7,102
Real Estate -
Mortgage 330,018 298,995 257,064 157,558 136,101
Installment 77,945 86,903 77,334 86,766 112,510
Lease Financing 122 1,644 6,158 14,258 26,338
Foreign -- -- -- -- --
________ ________ ________ ________ ________
TOTAL $534,765 $520,869 $475,754 $384,738 $389,386
======== ======== ======== ======== ========
<PAGE> -18-
HUBCO, Inc. and Subsidiaires
S.E.C. GUIDE 3 - ITEM III
LOAN PORTFOLIO
The following table shows the maturity of loans (excluding residential
mortgages of 1-4 family residences, installment loans and lease financing)
outstanding as of December 31, 1993. Also provided are the amounts due after
one year classified according to the sensitivity to changes in interest rates.
Maturities and Sensitivity to Changes in Interest Rates
MATURING
After One After
Within But Within Five
One Year Five Years Years Total
Commercial, Financial,
and Agricultural $ 58,037 $32,990 $28,536 $119,563
Real Estate Construction 5,652 1,465 - 0 - 7,117
Real Estate - Mortgage 75,722 43,897 18,571 138,190
________ _______ _______ ________
TOTAL $139,411 $78,352 $47,107 $264,870
======== ======= ======= ========
INTEREST SENSITIVITY
Fixed Variable
Rate Rate
Due After One But Within Five Years $48,815 $29,537
Due After Five Years 26,501 20,606
_______ _______
TOTAL $75,316 $50,143
======= =======
<PAGE> -19-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM III
LOAN PORTFOLIO
Nonaccrual, Past Due and Restructured Loans
December 31
1993 1992 1991 1990 1989
____ ____ ____ ____ ____
(In Thousands of Dollars)
Loans accounted for on
a nonaccrual basis $5,534 $4,248 $4,160 $8,224 $3,332
Loans contractually past
due 90 days or more as
to interest or principal
payments 1,443 1,409 1,181 894 1,778
Loans whose terms have
been renegotiated to
provide a reduction or
deferral of interest
or principal because of a
deterioration in the
financial position of
the borrower 2,177 2,257 3,527 808 - 0 -
At the end of the reporting period, there were no loans not
disclosed under the preceding two sections where known information about
possible credit problems of borrowers causes management of the Company
to have serious doubts as to the ability of such borrowers to comply
with the present loan repayment terms and which may result in disclosure
of such loans in the two preceding sections in the future.
At December 31, 1993 and 1992, there were no concentrations of
loans exceeding 10% of total loans which are not otherwise disclosed as
a category of loans pursuant to Item III.A. of Guide 3.
<PAGE> -20-
<TABLE>
HUBCO, Inc. and Subsidiaires
S.E.C. GUIDE 3 - ITEM IV
SUMMARY OF LOAN LOSS EXPERIENCE
<CAPTION>
The following is a summary of the activity in the allowance for possible loan
losses, broken down by loan category:
Year Ended December 31
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Amount of Loans Outstanding at End of Year $534,765 $520,869 $475,754 $384,738 $389,386
======== ======== ======== ======== ========
Daily Average Amount of Loans $529,340 $520,305 $414,667 $375,123 $393,940
======== ======== ======== ======== ========
Balance of Allowance for Possible
Loan Losses at Beginning of Year $ 7,605 $ 6,698 $ 5,232 $ 3,012 $ 2,195
Loans Charged Off:
Commercial, Financial and Agricultural (637) (4,622) (2,038) (338) (54)
Real Estate - Construction -- -- -- -- --
Real Estate - Mortgage (138) (227) (237) (70) --
Installment (283) (337) (336) (820) (377)
Lease Financing (122) (355) (364) (1,100) (873)
________ _________ _________ _________ ________
Total Loans Charged Off (1,180) (5,541) (2,975) (2,328) (1,304)
======== ========= ========= ========= ========
Recoveries of Loans Previously Charged Off:
Commercial, Financial and Agricultural 141 609 185 40 2
Real Estate-Construction -- -- -- -- --
Real Estate-Mortgage 59 8 -- -- --
Installment 104 57 120 93 76
Lease Financing 82 158 337 265 183
________ ________ ________ ________ ________
Total Recoveries 386 832 642 398 261
________ ________ ________ ________ ________
Net Loans Charged Off (794) (4,709) (2,333) (1,930) (1,043)
Provision Charged to Expense 3,600 4,116 2,312 4,150 1,860
Additions Acquired Through Acquisitions 400 1,500 1,487 -- --
________ ________ ________ ________ ________
Balance at End of Year $ 10,811 $ 7,605 $ 6,698 $ 5,232 $ 3,012
======== ======== ======== ======== ========
Ratios
Net Loans Charged Off to
Average Loans Outstanding .15% .91% .58% .54% .26%
Allowance for Possible Loan
Losses to Average Loans
Outstanding 2.0% 1.5% 1.6% 1.4% .8%
</TABLE>
<PAGE> -21-
<TABLE>
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM IV
SUMMARY OF LOAN LOSS EXPERIENCE
ALLOWANCE FOR POSSIBLE LOAN LOSSES ALLOCATION
<CAPTION>
December 31, 1993 December 31, 1992 December 31, 1991 December 31, 1990 December 31, 1989
% of Loans % of Loans % of Loans % of Loans % of Loans
In Each In Each In Each In Each In Each
Category To Category To Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
Applicable To:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic, Commercial
Financial and
Agricultural $ 3,693 22.36% $3,288 24.87% $3,349 27.77% $1,716 30.86% $1,850 27.57%
Real Estate --
Construction 86 1.33 187 .73 335 .65 650 1.93 - 1.82
Real Estate -- Mortgage 2,896 61.71 1,010 57.40 1,005 54.03 523 40.95 420 34.95
Installment 469 14.58 1,114 16.68 670 16.26 1,308 22.55 340 28.90
Lease Financing 31 .02 125 .32 335 1.29 785 3.71 402 6.76
Foreign - - - - - - - - - -
Unallocated 3,636 N/A 1,881 N/A 1,004 N/A 250 - - N/A
_______ _______ ______ _______ ______ _______ _______ _______ ______ _______
TOTAL $10,811 100.00% $7,605 100.00% $6,698 100.00% $5,232 100.00% $3,012 100.00%
The allowance for possible loan losses has been allocated according to the amount deemed to be
reasonably necessary to provide for the possibility of losses being incurred within the above categories
of loans at the date indicated.
</TABLE>
<PAGE> -21a-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM V
DEPOSITS
The following table sets forth average deposits and average rates for each of
the years indicated.
1993 1992 1991
Amount Rate Amount Rate Amount Rate
(In Thousands of Dollars)
Domestic Bank Offices:
Non-interest-bearing
demand deposits $185,848 $152,397 $113,504
Interest-bearing
demand deposits 112,836 2.74% 97,494 3.34% 63,348 4.84%
Savings deposits 342,540 2.58 278,925 3.26 174,557 4.86
Time deposits 251,128 3.37 303,029 4.54 197,020 6.53
Foreign bank offices -- -- --
________ ________ ________
TOTAL $892,352 $831,845 $548,429
======== ======== ========
Maturities of time certificates of deposit and other time deposits of $100,000
or more issued by domestic offices, outstanding at December 31, 1993 are
summarized as follows:
Time
Certificates Other Time
of Deposit Deposits Total
3 months or less $12,000 $--- $12,000
Over 3 through 6 months 5,030 --- 5,030
Over 6 through 12 months 4,636 --- 4,636
Over 12 months 1,985 --- 1,985
_______ ____ _______
$23,651 $--- $23,651
======= ==== =======
<PAGE> -22-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM VI
RETURN ON EQUITY AND ASSETS
Year Ended December 31,
1993 1992 1991
Return on Average Assets 1.44% 1.05% .82%
Return on Average Equity 19.34 17.38 12.75
Dividend Payout Ratio 23.00 25.04 33.44
Average Equity to Average
Assets Ratio 7.44 6.04 6.45
<PAGE> -23-
HUBCO, Inc. and Subsidiaries
S.E.C. GUIDE 3 - ITEM VII
SHORT-TERM BORROWINGS
The following table shows the distribution of the Company's short-term
borrowings and the weighted average interest rates thereon at the end of
each of the last three years. Also provided are the maximum amount of
borrowings and the average amounts of borrowings as well as weighted
average interest rates for the last three years. The term for each type
of borrowing disclosed is one day.
Federal Funds
Purchased and
Securities Sold
Under Agreement Other Short-
to Repurchase Term Borrowings
(In Thousand of Dollars)
Year ended December 31:
1993 $19,629 $1,000
1992 14,133 1,000
1991 12,040 1,000
Weighted average interest
rate at year end:
1993 2.50% 2.95%
1992 2.92 3.05
1991 4.02 4.22
Maximum amount outstanding
at any month's end:
1993 $29,269 $1,000
1992 17,010 1,000
1991 24,574 1,000
Average amount outstanding
during the year:
1993 $14,603 $ 938
1992 14,500 928
1991 13,790 929
<PAGE> -24-
Federal Funds
Purchased and
Securities Sold
Under Agreement Other Short-
to Repurchase Term Borrowings
(In Thousand of Dollars)
Weighted average interest
rate during the year:
1993 2.28% 3.09%
1992 3.31 4.00
1991 4.79 6.11
<PAGE> -25-
ITEM 2. PROPERTIES
The corporate headquarters of HUBCO and the main office of Hudson United
Bank are located in a four story facility in Union City, New Jersey.
The property is approximately 42,400 square feet and is owned by Hudson
United Bank. Hudson United Bank occupies 36 additional branch offices,
of which 18 are owned and 18 are leased.
All leased properties have rental payments at or below fair market
value. Of the eighteen properties leased, one has an option to purchase
and nine have renewal options for terms of five to sixty-four years.
The remaining eight locations have expiration dates ranging from 1995-
2005.
The data processing and deposit services center for the Bank is located
in a two-story building in Union City, New Jersey, which is
approximately 14,000 square feet. The building is owned by HUBCO and
leased to Hudson United Bank. HUBCO has outgrown the space at its
headquarter's office and commencing in late December 1993, HUBCO
actively undertook a search for additional space to expand its
headquarter's operations. In March of 1994, HUBCO purchased a 64,350
square foot building in Mahwah, New Jersey, to house the executive
offices of HUBCO and the Company's data processing subsidiary.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, lawsuits and claims may be
brought by and may arise against HUBCO and its subsidiaries. In the
opinion of management, no legal proceedings which have arisen in the
normal course of the Company's business and which are presently pending
or threatened against HUBCO or its subsidiaries, when resolved, will
have a material adverse effect on the business or financial condition of
HUBCO or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Shareholders of HUBCO
during the fourth quarter of 1993.
<PAGE> -26-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
As of December 31, 1993, HUBCO had approximately 1,596
shareholders.
HUBCO's common stock was listed on the American Stock Exchange
during 1992. Effective March 1, 1993, HUBCO is listed on the Nasdaq
National Market. The following represents the high and low sale prices
from each quarter during the last two years. The numbers have been
restated to reflect a 10% stock dividend paid by HUBCO on June 1, 1993.
1993
High Low
1st Quarter $24 5/8 $16
2nd Quarter 24 3/8 19
3rd Quarter 25 1/4 20 1/4
4th Quarter 24 1/4 20
1992
High Low
1st Quarter $12 1/2 $ 8 3/8
2nd Quarter 12 5/8 10 5/8
3rd Quarter 13 11 3/8
4th Quarter 16 7/8 12
The following table shows the per share quarterly cash dividends
paid upon the common stock over the last two years.
1993 1992
March 1 $.10 March 1 $.09
June 1 .11 June 1 .09
September 1 .11 September 1 .09
December 1 .12 December 1 .10
December 1 .03 (extra) December 1 .03 (extra)
Dividends are generally declared within 30 days prior to the
payable date, to stockholders of record l0-20 days after the declaration
date.
<PAGE> -27-
ITEM 6. SELECTED FINANCIAL DATA
(In Thousands Except For Per Share Amounts)
Reference should be made to pages 4-6 of this Report on Form
10-K for a discussion of recent acquisitions which affect the
comparability of the information contained in this table.
1993 1992 1991 1990 1989
Net Interest Income $ 47,018 $ 41,013 $ 26,472 $ 22,991 $ 23,293
Provision for Loan 3,600 4,116 2,312 4,150 1,860
Losses
Net Income 14,202 9,641 5,021 2,215 3,309
Per Share Data(1)
Net Income 2.06 1.58 1.01 .45 .67
Cash Dividends .47 .40 .33 .33 .33
Declared
Balance Sheet Totals:
Total Assets-12/31 1,041,825 931,911 673,159 595,128 548,132
Long Term Debt-12/31 - - 763 831 899
Average Equity - 73,451 55,467 39,367 37,634 37,123
for year
Average Assets - 987,894 918,116 610,297 549,704 530,556
for year
(1) Per share data is adjusted retroactively to reflect a 10% stock
dividend paid November 15, 1991 to stockholders of record on November 6,
1991, and a 10% stock dividend paid June 1, 1993 to stockholders of
record on May 11, 1993.
ITEM 7.
HUBCO'S 1993 Annual Report contains on pages 6 through 22,
the information required by Item 7 and that information is
incorporated herein by reference. That discussion is supplemented
by the following information.
On March 18, 1994, HUBCO entered into an interest rate exchange
agreement (the "agreement") for the purpose of hedging the interest
rate related to the $25,000,000 subordinated debt issued in January,
1994. The agreement is a contractual agreement between HUBCO and its
counterparty to exchange fixed and floating rate interest obligations
without exchange of the underlying notional amount of $25,000,000.
The agreement was entered into in an effort to lower the overall
cost of borrowings. such agreement involves interest rate risk. If
interest rates increase, the benefit resulting from the agreement
<PAGE> -28-
will be diminished. The notional principal amount is used to
express the volume of the transaction involved in this agreement;
however, this amount does not represent exposure to credit loss.
HUBCO's counterparty to the agreement is the fixed rate payor on the
agreement and HUBCO is the floating rate payor on the agreement. The
The floating rate is reset every three months. As of the date of the
agreement, the net reduction in the interest rate on the subordinated
debt was 1.65%. The original term of this agreement is 3 years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
HUBCO's 1992 Annual Report contains on pages 23 through 36,
the information required by Item 8 and that information is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In March 1991, the Audit Committee of the Board of Directors
of the Company recommended that Arthur Andersen be engaged as the
Company's independent accountants to audit the books and records
of the Company for 1991. The Company did not have any
disagreement with Ernst & Young on any matter of accounting
principles or practice, financial statement disclosure, or
auditing scope or procedure. Ernst & Young's year-end reports
did not contain an adverse opinion or a disclaimer of opinion and
were not qualified as to uncertainty, audit scope, or accounting
principles. The Audit Committee's recommendation was approved by
the Board of Directors on March 26, 1991.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
HUBCO's Proxy Statement for its 1994 Annual Meeting on
pages 4 to 6, under the caption "Proposal I - Election of
Directors", contains the information required by Item 10 with
respect to directors of HUBCO and certain information with
respect to executive officers and that information is
incorporated herein by reference. Certain additional information
regarding executive officers of HUBCO, who are not also
directors, appears under subsection (e) of Item 1 of this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
HUBCO's Proxy Statement for its 1994 Annual Meeting
contains on pages 10 to 20, under the caption "Executive
Compensation", and on page 22 under the caption "Compensation
Committee Interlocks and Insider Participation", the information
required by Item 11 and that information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<PAGE> -29-
HUBCO's Proxy Statement for its 1994 Annual Meeting
contains on pages 7 to 9, under the caption "Stock Ownership of
Management and Principal Shareholders", the information required
by Item 12 and that information is incorporated herein by
reference. The Company knows of no person or group which is the
beneficial owner of more than five percent of any class of the
Company's voting securities, except as set forth on pages 7 and 8
of HUBCO's Proxy Statement for its 1994 Annual Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HUBCO's Proxy Statement for its 1994 Annual Meeting on
page 22 under the captions "Compensation Committee Interlocks and
Insider Participation" and "Certain Transactions with
Management", contains the information required by Item 13 and
that information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) & (2) List of Financial Statements and Financial
Statement Schedules
The below listed consolidated financial statements and
report of independent public accountants of HUBCO, Inc.
and subsidiaries, included in the Annual Report of the
Registrant to its Shareholders for the year ended
December 31, 1993, are incorporated by reference in
Item 8:
Reports of Independent Public Accountants
Consolidated Balance Sheets at
December 31, 1993 and 1992
Consolidated Statements of Income for the Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1993,
1992 and 1991
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Schedules to the Consolidated Financial Statements required
by Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
<PAGE> -30-
(a) (3) Exhibits
List of Exhibits
(2a) Agreement and Plan of Reorganization dated as
of May 21, 1993, between HUBCO, Hudson and
Statewide, together with Exhibit A, the Plan of
Conversion. (Incorporated by reference from the
Company's Current Report on Form 8-K dated May
21, 1993.)
(2b) Agreement and Plan of Merger dated as of November 8, 1993,
between HUBCO, Inc., Hudson United Bank and Washington
Bancorp, Inc. and Washington Savings Bank. (Incorporated
by reference from the Company's Current Report on Form 8-K
dated November 8, 1993.)
(3a) The Certificate of Incorporation of HUBCO, Inc.
filed May 5, 1982 and amendments to the Certificate
of Incorporation, dated November 22, 1983, January 30,1984
January 11, 1985, July 17, 1986, March 25, 1987, April 26,
1991, November 26, 1991, March 25, 1992 and May 17,
1993.
(3b) The By-Laws of HUBCO, Inc.
(4) Indenture dated as of January 14, 1994 between HUBCO, Inc.
and Summit Bank as Trustee for $25,000,000 7.75%
Subordinated Debentures due 2004.
(10a) Employment contract with Kenneth T. Neilson.
(Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991,
Exhibit (10a).
(10b) Employment contract with James E. Schierloh.
(Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991,
Exhibit (10b).
(10c) Employment contract with D. Lynn Van Borkulo.
(Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991,
Exhibit (10c).
(10d) Collective Bargaining Agreement with Local 153 of the
Office and Professional Employees International Union,
dated January 26, 1993. (Incorporated by reference from
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, Exhibit (10d).
<PAGE> -31-
(10e) Purchase and Assumption Agreement dated April 14, 1993,
among the Company, Hudson United Bank, Ramapo Financial
Corporation and The Ramapo Bank. (Incorporated by
reference from the Company's Current Report on Form 8-K
dated April 14, 1993.)
(13) 1993 Annual Report to Shareholders
(22) List of Subsidiaries.
(24) Consent of Arthur Andersen & Co.
(b) Reports on Form 8-K
Form 8-K dated November 8, 1993
Item 5. Other Events --
Reported on the announcement by the Company that it
and its principal subsidiary, Hudson United Bank,
have entered into an Agreement and Plan of Merger
with Washington Bancorp, Inc. and Washington
Savings Bank, pursuant to which HUBCO will acquire
Washington Bancorp, Inc. for a combination of
securities and cash.
Item 7. Exhibits --
Included Agreement and Plan of Merger dated as of November
8, 1993, Stock Option Agreement between Washington
Bancorp, Inc. and HUBCO, Inc. dated November 8, 1993 and
press release dated November 8, 1993.
<PAGE> -32-
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
HUBCO, INC.
By:s/ James E. Schierloh
James E. Schierloh
Chairman of the Board
Dated: March 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
s/James E. Schierloh Chairman of the
James E. Schierloh Board and Director March 22, 1994
s/Kenneth T. Neilson President and March 22, 1994
Kenneth T. Neilson Director
s/Robert J. Burke Director March 22, 1994
Robert J. Burke
s/Henry G. Hugelheim Director March 22, 1994
Henry G. Hugelheim
s/Harry J. Leber Director March 22, 1994
Harry J. Leber
s/Charles F.X. Poggi Director March 22, 1994
Charles F. X. Poggi
s/Sr. Grace Frances Strauber Director March 22, 1994
Sister Grace Frances
Strauber
<PAGE> -33-
s/Edwin Wachtel Director March 22, 1994
Edwin Wachtel
s/Christina L. Maier Assistant March 22, 1994
Christina L. Maier Treasurer
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HUBCO, Inc.
The undersigned, being over the age of 18 years old,
for the purposes of forming a corporation under the New Jersey
Business Corporation Act, does hereby execute the following
certificate of incorporation:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be HUBCO, Inc.
(hereinafter the "Corporation").
ARTICLE II
CURRENT REGISTERED OFFICE
AND CURRENT REGISTERED AGENT
The address of the Corporation's initial registered
office is 80 Park Plaza, 23rd Floor, Newark New Jersey 07102.
The name of the current registered agent at that address is
Ronald H. Janis.
ARTICLE III
INITIAL BOARD OF DIRECTORS
AND NUMBER OF DIRECTORS
The number of directors shall be governed by the by-
laws of the Corporation. The number of directors constituting
the initial Board of Directors shall be twelve. The names and
addresses of the initial Board of Directors are as follows:
Name Address
John T. Clark 3100 Bergenline Avenue
Union City, New Jersey 07087
James C. McClave 3100 Bergenline Avenue
Union City, New Jersey 07087
Ronald David 2 Broadway
New York, New York 10004
Arthur L. Dickson 51 Newark Street
Hoboken, New Jersey 07030
<PAGE>
Name Address
Henry Hugelheim 752 Greeley Avenue
Fairview, New Jersey 07022
Harry J. Leber 2000 Kennedy Boulevard
Union City, New Jersey 07087
George P. Moser, Sr. 415 32nd Street
Union City, New Jersey 07087
Harold J. Olsen 638 Anderson Avenue
Cliffside Park, New Jersey 07010
Charles F.X. Poggi 15th and Adams Street
Hoboken, New Jersey 07030
James E. Schierloh East 210 Route 4
Paramus, New Jersey 07652
Sister Grace Frances 308 Willow Avenue
Strauber Hoboken, New Jersey 07030
Robert J. Burke Foot of Pershing Road
Weehawken, New Jersey 07087
ARTICLE IV
CORPORATE PURPOSE
The purpose for which the Corporation is organized
is to engage in any activities for which corporations may be
organized under the New Jersey Business Corporation Act,
subject to any restrictions which may be imposed from time to
time by the laws of the United States or the State of New
Jersey with regard to the activities of a bank holding
company.
<PAGE>
ARTICLE V
CAPITAL STOCK
The Corporation is authorized to issue 2,000,000
shares of common stock, all of which are without nominal or
par value.
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify its officers,
directors, employees, and agents and former officers,
directors, employees and agents, and any other persons serving
at the request of the Corporation as an officer, director,
employee or agent of another corporation, association,
partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees, judgments, fines,
and amounts paid in settlement) incurred in connection with any
pending or threatened action, suit, or proceeding, whether
civil, criminal, administrative or investigative, with respect
to which such officer, director, employee, agent or other
person is a party, or is threatened to be made a party, to
the full extent permitted by the New Jersey Business
Corporation Act. The indemnification provided herein shall
not be deemed exclusive of any other right to which any person
seeking indemnification may be entitled under any by-law,
agreement, or vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and
as to action in another capacity, and shall inure to the
benefit of the heirs, executors, and the administrators of any
such person. The Corporation shall have this power to
purchase and maintain insurance on behalf of any persons
enumerated above against any liability asserted against him
and incurred by him in any such capacity, arising out of his
status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the
provisions of this Article.
ARTICLE VII
NAME AND ADDRESS OF INCORPORATOR
The name and address of the incorporator is: Ronald
H. Janis, c/o Clapp & Eisenberg, 80 Park Plaza, 23rd Floor,
Newark, New Jersey 07102.
IN WITNESS WHEREOF, I, the incorporator of the
above named Corporation, have hereunto signed this certificate
of incorporation on the 5th day of May, 1982.
Ronald H. Janis
<PAGE>
CERTIFICATE OF AMENDMENT
to
CERTIFICATE OF INCORPORATION
of
HUBCO, Inc.
Pursuant to actions taken at a properly called and
duly noticed special meeting of stockholders of HUBCO, Inc.
and in accordance with Section 14A:9-4(3) of the New Jersey
Business Corporation Act, the undersigned does hereby execute
the following Certificate of Amendment to the Certificate of
Incorporation of HUBCO, Inc.:
1. The name of the Corporation is HUBCO, Inc (the
"Corporation").
2. A special meeting of the stockholders owning
common stock of the Corporation called for the purpose, inter
alia, of considering amendments to the Corporation's
Certificate of Incorporation was convened on December 11,
1984, adjourned to January 4, 1985 and further adjourned to
January 11, 1985.
3. The number of shares of common stock of the
Corporation entitled to vote on the adoption of the amendments
to the Corporation's Certificate of Incorporation was
1,724,625.
4. At the January 11, 1985 session of the special
meeting, the stockholders adopted amended Article III of the
Certificate of Incorporation of the Corporation. The number of
shares voted for the amendment was 1,165,174; The number
of shares voted against the amendment was 324,110. Amended
Article III will read in its entirety as follows:
<PAGE>
ARTICLE III
INITIAL BOARD OF DIRECTORS
AND NUMBER OF DIRECTORS
The number of directors shall be governed by the by-
laws of the Corporation. The number of directors constituting
the initial Board of Directors shall be twelve. The names and
addresses of the initial Board of Directors are as follows:
Name Address
John T. Clark 3100 Bergenline Avenue
Union City, New Jersey 07087
James C. McClave 3100 Bergenline Avenue
Union City, New Jersey 07087
Ronald David 2 Broadway
New York, New York 10004
Arthur L. Dickson 51 Newark Street
Hoboken, New Jersey 07030
Henry Hugelheim 752 Greeley Avenue
Fairview, New Jersey 07022
Harry J. Leber 2000 Kennedy Boulevard
Union City, New Jersey 07087
George P. Moser, Sr. 415 32nd Street
Union City, New Jersey 07087
<PAGE>
Name Address
Harold J. Olsen 638 Anderson Avenue
Cliffside Park, New Jersey 07010
Charles F.X. Poggi 15th and Adams Street
Hoboken, New Jersey 07030
James E. Schierloh East 210 Route 4
Paramus, New Jersey 07652
Sister Grace 308 Willow Avenue
Frances Strauber Hoboken, New Jersey 07030
Robert J. Burke Foot of Pershing Road
Weehawken, New Jersey 07087
Shareholders shall have no right to increase or
decrease the number of directors constituting the Board,
except by the affirmative vote of at least three-quarters of
all of the outstanding shares of common stock entitled to vote
thereon, said vote to take place at an annual or special
meeting of the Corporation's stockholders called for the
purpose of considering such matter. Any director may be
removed from office by the stockholders of the Corporation,
but only for cause.
Notwithstanding anything else in this Certificate of
Incorporation to the contrary (and notwithstanding the fact
that a lesser percentage may be permitted by law, this
Certificate of Incorporation or the by-laws of the
Corporation), the provisions of this Article III may not be
amended, altered, changed or repealed in any respect, nor may
any provision inconsistent herewith be adopted, unless such
action is approved by the affirmative vote of at least three-
quarters of all of the outstanding shares of common stock
entitled to vote thereon, said vote to take place at an annual
or special meeting of the Corporation's stockholders called
for the purpose of considering such matter.
5. At the January 11, 1985 session of the special
meeting, the stockholders adopted an amendment to the
Certificate of Incorporation of the Corporation by adding a
new Article VIII thereto. The number of shares voted for the
amendment was 1,169,869; the number of shares voted against
the amendment was 319,763.
<PAGE>
New Article VIII will read as follows:
ARTICLE VIII
CLASSIFICATION OF DIRECTORS
The directors shall be divided into three classes,
as nearly equal in number as possible, with the term of office
of the first class to expire at the first annual meeting of
stockholders following the meeting at which this Article VIII
is adopted, the term of office of the second class to expire
at the second annual meeting of stockholders following the
meeting at which this Article VIII is adopted and the term of
office of the third class to expire at the third annual
meeting of stockholders following the meeting at which this
Article VIII is adopted.
<PAGE>
If this Article VIII is adopted at a special
meeting of stockholders, directors of the second and
third classes shall be elected to their terms at such special
meeting, and directors of the first class shall be designated
in advance of such special meeting by the Board of Directors
from among the directors elected at the preceding annual
meeting of stockholders and shall not be required to stand for
election at such special meetings of stockholders. If this
Article VIII is adopted at an annual meeting of stockholders,
all three classes of directors shall be elected to their terms
at such annual meeting. At each annual meeting of
stockholders following the initial classification and
election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire
at the third succeeding annual meeting of stockholders after
their election or as soon thereafter as their successors have
been elected and qualified.
Notwithstanding anything else in this Certificate of
Incorporation to the contrary (and notwithstanding the fact
that a lesser percentage may be permitted by law, this
Certificate of Incorporation or the by-laws of the
Corporation), the provisions of this Article VIII may not be
amended, altered, changed or repealed in any respect, nor may
any provision inconsistent herewith be adopted, unless such
action is approved by the affirmative vote of at least three-
quarters of all of the outstanding shares of common stock
entitled to vote thereon, said vote to take place at an annual
or special meeting of the Corporation's stockholders called
for the purpose of considering such matter.
<PAGE>
6. At the January 11, 1985 session of the special
meeting, the stockholders adopted an amendment to the
Certificate of Incorporation of the Corporation adding a new
Article IX thereto. The number of shares voted for the
amendment was 1,178,252; the number of shares voted against
the amendment was 313,726. New Article IX will read as
follows:
ARTICLE IX
MINIMUM PRICE
The stockholder vote required to approve a Business
Combination (as hereinafter defined) shall be as set forth in
this section.
A. (1) Except as otherwise expressly provided in this
section, the affirmative vote of at least three-
quarters of all of the outstanding shares of common
stock entitled to vote thereon shall be required in
order to authorize any of the following:
<PAGE>
(a) any merger or consolidation of the Corporation
or any subsidiary thereof with a Related
Person (as hereinafter defined) or any other
corporation which after such merger or
consolidation would be a Related Person;
(b) any sale, lease, exchange, transfer or other
disposition, including without limitation, a
mortgage, or any other security device, of all
or any Substantial Part (as hereinafter
defined) of the assets of the Corporation
(including without limitation any voting
securities of subsidiary) or of a subsidiary,
to a Related Person;
(c) the issuance or transfer by the Corporation or
any subsidiary thereof of any securities of
the Corporation or a subsidiary of the
Corporation to a Related Person;
(d) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation
proposed by or on behalf of a Related Person;
(e) any reclassification of securities (including
any reverse stock split) or recapitalization
of the Corporation, or any merger or
consolidation of the Corporation,
with any of its Subsidiaries or any other
transaction (whether or not with or otherwise
involving Related Person) which has the
effect, directly or indirectly, of increasing
the proportionate share of any class of equity
or convertible securities of the Corporation
or any Subsidiary which is directly or
indirectly beneficially owned by any Related
Person;
<PAGE>
(f) any agreement, contract or other arrangement
providing for any of the transactions
described in this section of the Certificate
of Incorporation.
(2) Such affirmative vote shall be required
notwithstanding any other provision of this
Certificate of Incorporation, any provision of law
or any agreement with any national securities
exchange which might otherwise permit a lesser vote
or no vote.
(3) The Term Business Combination" as used in this
section shall mean any transaction which is
referred to in any one or more of subparagraphs (a)
through (f) above.
B. The provisions of Part A of this section shall not be
applicable to any particular Business Combination, and
such Business Combination shall require only such
affirmative shareholder vote and such approval by the
Board of Directors as is required by any other provision
of this Certificate of Incorporation, any provision of
law or any agreement with any national securities
exchange, if all of the conditions specified in either of
the following subparagraphs (1) or (2) are met:
<PAGE>
(1) The Business Combination shall have been approved
by a majority of the directors of the Corporation
then in office.
(2) All the following conditions have been met:
(a) The aggregate amount of (x) cash and (y) Fair
Market Value (as hereinafter defined), as of
the date of the consummation of the Business
Combination, of consideration other than cash
to be received per share by holders of common
stock in such Business Combination shall be at
least equal to the amount determined under
sub-clauses (i) and (ii) below:
(i) if the Related Person has acquired shares
of the Corporation's common stock in a
tender offer for or has requested or
invited the tender of the Corporation's
common stock in a transaction subject to
the provisions of Section 14(d) of the
Securities Exchange Act of 1934, the
highest per share price (including any
brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the
Related Person for any share of common
stock acquired by it (a) within the one-
year period immediately prior to the
first public announcement of the proposal
of the Business Combination (the
"Announcement Date") or (b) in connection
with the tender offer or request or
invitation of tenders, whichever is
higher;
<PAGE>
(ii) if the Related Person has not made such a
tender offer for or invited or requested
the tender of the Corporation's common
stock, two time the highest Fair Market
Value per share of the Corporation's
common stock during the one-year period
ending with the Announcement Date.
(b) The consideration to be received by holders of
a particular class of outstanding voting stock
shall be in cash or in the same form as the
Related Person has previously paid for shares
of such class of voting stock. If the Related
Person has paid for shares of any class of
voting stock with varying forms of
consideration, the form of consideration such
class of voting stock shall be either cash or
the form used to acquire the largest number of
shares of such class of voting stock
previously acquired by it.
C. For the purpose of this section the following definitions
apply:
(1) The term "Related Person" shall mean and include
(a) any individual, corporation, partnership or
other person or entity which together with its
"affiliates" (as that term is defined in Rule 12b-2
of the General Rules and Regulations under the
Securities Exchange Act of 1934), is the
"beneficial owner" (as that term is defined in Rule
13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934) in the
aggregate of 10 percent or more of the outstanding
shares of the common stock of the Corporation; and
(b) any "affiliate" (as that term is defined in
Rule 12b-2 under the Securities Exchange Act of
1934) of any such individual, corporation,
partnership or other person or entity. Without
limitation, any shares of the common stock of the
Corporation which any Related Person has the right
to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants or options
or otherwise, shall be deemed "beneficially owned"
by such Related Person.
<PAGE>
(2) The term "Substantial Part" shall mean more than 25
percent of the total assets of the Corporation, as
of the end of its most recent fiscal year ending
prior to the time the determination is made.
(3) The term "Fair Market Value" shall mean: (a) in the
case of stock, the highest closing sale price
during the 30-day period immediately preceding the
date in question if a specific date for valuation
thereof is specified or during the period in
question if a period for valuation thereof is
specified of a share of such stock on the Composite
Tape for American Stock Exchange-Listed Stocks, or,
if such stock is not quoted on the Composite Tape,
on the America Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal
United States securities exchange registered under
the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on
any such exchange, the highest closing price or
closing bid quotation with respect to a share of
such stock during the 30-day period preceding such
date in question or during such period in question
on the National Association of Securities Dealers,
Inc. Automated Quotation System or any system then
in use, or if no such quotations are available, the
fair market value on the date in question of a
share of such stock as determined by the Board of
Directors, in good faith; and (b) in the case of
property other than cash or stock, the fair market
value of such property on the date in question as
determined by the Board of Directors in good faith.
(4) In the event of any Business Combination in which
the Corporation survives, the phrase "consideration
other than cash to be received" as used in
paragraph (2)(a) of Part B of this Article shall
include the shares of common stock and/or the
shares of any other class of outstanding voting
stock retained by the holders of such shares.
D. Nothing contained in this section shall be construed to
relieve any related Party from any fiduciary obligation
imposed by law.
E. If any question shall arise as to the applicability of
this Article IX or as to the interpretation of any of its
provisions, such question shall be resolved by the Board
of Directors, and the Board's resolution shall be final
and binding.
<PAGE>
F. Notwithstanding any other provision of this Certificate
of Incorporation ( and notwithstanding the fact that a
lesser percentage may be permitted by law, this
Certificate of Incorporation or the by-laws of the
Corporation), the provisions of this Article IX may not
be amended, altered, changed or repealed in any respect,
nor may any provision inconsistent herewith be adopted,
unless such action is approved by the affirmative vote of
the holders of at least three-quarters of all of the
outstanding shares of common stock entitled to vote
thereon, said vote to take place at an annual or special
meeting of the Corporation's stockholders called for the
purpose of considering such matter.
IN WITNESS WHEREOF, this certificate has been
executed by a duly authorized officer of the Corporation on
this 11th day of January, 1985.
HUBCO, Inc.
By:
John T. Clark
President
<PAGE>
ARTICLE V
CAPITAL STOCK
The Corporation is authorized to issue
4,224,625 shares of Common Stock, all of
which are without nominal or par value.
6. The share division and the amendment to the
Corporation's Certificate of Incorporation affected by this
certificate shall become effective August 1, 1986.
IN WITNESS WHEREOF, this certificate has been executed by
a duly authorized officer of the Corporation this 17th day of
July, 1986.
HUBCO, Inc.
By:
John T, Clark, President
<PAGE>
AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
HUBCO, INC.
HUBCO, Inc., a New Jersey corporation, does hereby
certify as follows:
1. The name of the corporation is: HUBCO, Inc.
(the "Corporation").
2. The Corporation is hereby amending its
certificate of incorporation as follows:
(A) The existing "ARTICLE V-CAPITAL STOCK" is
deleted in its entirety. In lieu thereof, the following
Article V is added to the certificate of incorporation:
ARTICLE V
CAPITAL STOCK
The Corporation is authorized to issue 5,200,00
shares of common stock, all of which are without nominal or
par value.
(B) NEW ARTICLE X
A new Article X is added to the Corporation's
certificate of incorporation as follows:
ARTICLE X
LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS
A director or officer 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 such provision shall not relieve
a director or officer from liability for ant breach of duty
based upon an act or omission (i) in breach of such person's
duty of loyalty to the Corporation or its shareholders, (ii)
not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper
personal benefit. If the New Jersey Business Corporation Act
is amended after approval by the shareholders of this
provision to authorize corporate action further eliminating or
limiting the personal liability of directors officers, then
the liability of a director and/or officer of the Corporation
shall be eliminated or limited to the fullest extent permitted
by the New Jersey Business Corporation Act as so amended.
<PAGE>
Any repeal or modification of the foregoing
paragraph by the shareholders of the Corporation or otherwise
shall not adversely affect any right or protection of a
director or officer of the Corporation existing at the time of
such repeal or modification.
3. The foregoing amendments were adopted at the
annual meeting of shareholders of HUBCO, Inc. held March 24,
1987.
4. At such annual meeting there were outstanding
and entitled to vote 3,552,727 shares of common stock, without
nominal or par value.
5. At such annual meeting shareholders cast
2,557,012 votes for, and 120,190 votes against the amendment
of Article V and 2,531,799 votes for, and 133,827 votes
against the addition of Article X.
6. The amendment to Article V and the addition of
Article X were adopted by a majority of the votes cast by the
holders of shares entitled to vote thereon.
IN WITNESS WHEREOF, John T. Clark, President of HUBCO,
Inc., has executed this certificate on behalf of HUBCO, Inc.
on this 25th day of March, 1987.
HUBCO, INC.
By:
John T. Clark, President
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
HUBCO, INC.
Dated: As of March 27, 1991
Pursuant to the provisions of Section 14A:9-4(3) of the
New Jersey Business Corporation Act, the undersigned
corporation hereby certifies as follows:
1. The name of the corporation is HUBCO, Inc. (the
"Corporation").
2. The following amendment to the Corporation's
Certificate of Incorporation was approved by the directors of
the Corporation and duly adopted by the shareholders of the
Corporation at a meeting duly held on March 26, 1991:
Article V of the Corporation's Certificate of
Incorporation is deleted in its entirety, and following is
substituted therefore:
ARTICLE V
CAPITAL STOCK
(A) The total authorized capital stock of the
Corporation shall be 6,700,000 shares, consisting of 5,200,000
shares of Common Stock and 1,500,000 shares of preferred Stock
which may be issued in one or more classes or series. The shares
of Common Stock shall constitute a single class and shall be
without nominal or par value. The shares of Preferred Stock
of each class of series shall be without nominal or par value,
except that the amendment authorizing the initial issuance of
any class or series, adopted by the Board of Directors as
provided herein, may provide that shares of any class or
series shall have a specified par value per share, in which
event all of the shares of such class or series shall have the
par value per share so specified.
(B) The Board of Directors of the Corporation is
expressly authorized from time to time to adopt and to cause
to be executed and filed without further approval of the
shareholders amendments to this Certificate of Incorporation
authorizing the issuance of one or more classes or series of
Preferred Stock for such consideration as the Board of
Directors may fix. In an amendment authorizing any class or
series of Preferred Stock, the Board of Directors is expressly
authorized to determine:
<PAGE>
(a) The distinctive designation of the class or
series and the number of shares which will constitute the
class or series, which number may be increased or
decreased (but not below the number of shares then
outstanding in that class or above the total shares
authorized herein) from time to time by action of the
Board of Directors.
(b) The dividend rate of the shares of the class or
series, whether dividends will be cumulative, and, if so,
from what date or dates;
(c) The price or prices at which, and the terms and
conditions on which, the shares of the class or series
may be redeemed at the option of the Corporation;
(d) Whether or not the shares of the class or
series will be entitled to the benefit of a retirement of
sinking fund to be applied to the purchase or redemption
of such shares and, if so entitled, the amount of such
fund and the terms and provisions relative to the
operation thereof;
(e) Whether or not the shares of the class or
series will be convertible into, or exchangeable for, any
other shares of stock of the Corporation or other
securities, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and
any adjustments thereof, at which such conversion or
exchange may be made, and any other terms and conditions
of such conversion or exchange;
(f) The rights of the shares of the class or series
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(g) Whether or not the shares of the class or
series will have priority over, parity with, or be junior
to the shares of any other class or series in any
respect, whether or not the shares of the class or series
will be entitled to the benefit of limitations
restricting the issuance of shares of any other class or
series having priority over or on parity with the shares
of such class or series and whether or not the shares of
the class or series are entitled to restrictions on the
payment of dividends on, the making of other
distributions in respect of, and the purchase or
redemption of shares of any other class or series of
Preferred Stock or Common Stock ranking junior to the
shares of the class or series;
(h) Whether the class or series will have voting
rights,, in addition to any voting rights provided by
law, and if so, the terms of such voting rights; and
(i) Any other preferences, qualifications,
privileges, options and other relative or special rights
and limitations of that class or series.
3. 4,083,828 shares of the Corporation's common stock
were entitled to vote on the amendment. 2,286,958 shares were
voted in favor of the amendment and 636,102 shares were vote
against the amendment.
IN WITNESS WHEREOF the undersigned has caused this
certificate to be executed by its duly qualified officer as of
the date and year first written above.
HUBCO, INC.
By:
Kenneth Neilson, President
<PAGE>
AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
HUBCO, INC.
Hubco, Inc., a New Jersey corporation, pursuant to
N.J.S.A. 14A:7-15.1, does hereby certify as follows:
(a) The name of the corporation is: Hubco, Inc. (the
"Corporation").
(b) A ten percent (10%) stock split was declared by the
Corporation on October 29, 1991 pursuant to which one share of
Common Stock, no par value, will be distributed for each 10
shares of Common Stock, no par value, held by shareholders on
the record date of November 6, 1991, effective November 15,
1991. A resolution approving the share division was adopted
by the Board of directors of the Corporation at its regular
meeting held on the 29th day of October, 1991.
(c) The share division will not adversely affect the
rights or preferences of the holders of outstanding shares and
will not result in the percentage of authorized shares that
remains unissued after the share division exceeding the
percentage of authorized shares that was unissued before the
share division.
(d) There were issued and outstanding as of the record
date of November 6, 1991, 4,120,078 shares of Common Stock
without par value which are shares subject to the share
division. As a result of the share division, in which one
share will be issued for every 10 shares issued and
outstanding, those 4,120,078 shares will be divided into
4,532,086 shares issued and outstanding.
(e) The Corporation is hereby amending its certificate of
incorporation in connection with the share division to
increase the authorized common stock, as follows:
The existing "Article V(A)" is deleted in its entirety.
In lieu thereof, the following Article V(A) is added to the
certificate of incorporation:
(A) The total authorized capital stock of the
Corporation shall be 7,220,000 shares, consisting of
5,720,000 shares of Common Stock and 1,500,000 shares of
Preferred Stock which may be issued in one or more
classes or series. The shares of Preferred Stock of each
class of series shall be without nominal or par value,
except that the amendment authorizing the initial
issuance of any class or series, adopted by the Board of
Directors as provided herein, may provided that shares of
any class or series shall have a specified par value per
share, in which event all of the shares of such class or
series shall have the par value per share so specified.
IN WITNESS WHEREOF, Kenneth T. Neilson, President of
Hubco, Inc., has executed this certificate on behalf of Hubco,
Inc. on this 26th day of November, 1991.
HUBCO, INC.
By:
Kenneth T. Neilson, President
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
HUBCO, INC.
HUBCO, Inc., a New Jersey corporation, does hereby
certify as follows:
1. The name of the corporation is: HUBCO, Inc. (the
"Corporation").
2. The Corporation is hereby amending its certificate
of incorporation as follows:
Paragraph A of Article V is deleted in its entirety, and
in place therefore the following is substituted:
"(A) The total authorized capital stock of the
Corporation shall be 15,000,000 shares, consisting
of 12,000,000 shares of Common Stock and 3,000,000
shares of Preferred Stock which may be issued in
one or more classes or series. The shares of
Common Stock shall constitute a single class and
shall be without nominal or par value, except that
the amendment authorizing the initial issuance of
any class or series, adopted by the Board of
Directors as provided herein, may provide that
shares of any class or series shall have a specific
par value per share, in which event all of the
shares of such class or series shall have the par
value per share so specified."
3. The foregoing amendment was adopted at the annual
meeting of shareholders of the Corporation held March 24,
1992.
4. At such annual meeting there were outstanding and
entitled to vote 4,531,492 shares of common stock, without
nominal or par value.
5. At such annual meeting shareholders cast 2,747,095
votes for, and 411,302 votes against the amendment to Article
V.
6. The amendment to Article V was adopted by a majority
of the votes cast by the holders of shares entitled to vote
thereon.
IN WITNESS WHEREOF, Kenneth T. Neilson, President of the
Corporation, has executed this certificate on behalf of the
Corporation on this 25th day of March, 1992.
HUBCO, INC.
By
Kenneth T. Neilson, President
<PAGE>
AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
HUBCO, INC.
HUBCO, Inc. a New Jersey Corporation, pursuant to
N.J.S.A. 14A:7-15.1, does hereby certify as follows:
(a) The name of the Corporation is: HUBCO, Inc. (The
"Corporation").
(b) A ten percent (10%) stock split was declared by the
Corporation on April 20, 1993, pursuant to which one share of
common stock, no par value, will be distributed for each 10
shares of common stock, no par value, held by shareholders on
the record date of May 11, 1993, effective June 1, 1993. A
resolution approving the share division was adopted by the
Board of Directors of the Corporation at its regular meeting
held on the 20th day of April, 1993.
(c) The share division will not adversely affect the
rights or preferences of the holders of outstanding shares and
will not result in the percentage of authorized shares that
remains unissued after the share division excluding the
percentage of authorized shares that was unissued before the
share division.
(d) That there were issued and outstanding as of the
record date of May 1, 1993, 6,286,342 shares of common stock
without par value which are the shares subject to the share
division. As a result of the share division, in which one
share will be issued for every 10 shares issued and
outstanding, those 6,286,342 shares will be divided into
6,914,353 shares issued and outstanding.
(e) The Corporation is hereby amending its Certificate
of Incorporation in connection with the share division to
increase the authorized common stock and the authorized
preferred stock as follows:
The existing "Article V(A)" is deleted in its entirety.
In lieu thereof, the following Article V(A) is added to
the Certification of Incorporation:
"(A) The total authorized capital stock of the
Corporation shall be 16,500,000 shares, consisting of
13,200,000 shares of common stock and 3,300,000 shares of
Preferred Stock which may be issued in one or more
classes or series. The shares of common stock shall
constitute a single class and shall be without nominal or
par value, except that the amendment authorizing the
initial issuance of any class or series, adopted by the
Board of Directors, as provided herein, may provide that
shares of any class or series shall have a specific par
value per share, in which event all of the shares of such
class of series shall have the par value so specified."
In Witness Whereof, Kenneth T. Neilson, President of
HUBCO, Inc. has executed this Certificate on behalf of HUBCO,
Inc. on this 17th day of May, 1993.
HUBCO, Inc.
By:
Kenneth T. Neilson, President
<PAGE>
HUBCO, Inc.
UNION CITY, NEW JERSEY
RESOLUTION ADOPTING REVISION BY BYLAWS
To Be Presented at Board Meeting
of October 20, 1987
Resolved that pursuant to a Waiver of Notice signed by all
Directors and attached to the Minutes of this Meeting, the revision
of the Bylaws of HUBCO, Inc. in their entirety, in the form
attached to the Minutes of this Meeting, be and the same is hereby
adopted.
HUBCO, Inc.
Union City, New Jersey
REVISED BYLAWS
Adopted by the Board of Directors
October 20, 1987
ARTICLE I - SHAREHOLDERS MEETINGS
1. Annual Meeting - The annual meeting of shareholders for the
election of directors and such other business as may properly
come before the meeting shall be held upon not less than ten
nor more than sixty days written notice of the time, place and
purposes of the meeting. The annual meeting shall be held on
the fourth Tuesday of March each year at the principal place
of business of the Corporation, 3100 Bergenline Avenue, Union
City, New Jersey, or at such other time and place as shall be
fixed by the Board of Directors.
2. Special Meetings - A special meeting of shareholders may be
called for any purpose by the Chairman of the Board, the
President or the Board of Directors. A special meeting shall
be held upon not less than ten nor more than sixty days
written notice of the time, place and purposes of the meeting.
3. Action Without Meeting - The shareholders may act without a
meeting by written consent or consents pursuant to N.J.S.
14A:5-6. Such written consent or consents shall be filed in
the minute book.
4. quorum - A majority of the outstanding common stock
represented in person or by proxy shall constitute a quorum at
any meeting of shareholders. Less than a quorum may adjourn
any meeting, and the meeting may be held, as adjourned,
without further notice.
5. Shareholder Action - A majority of the votes cash shall decide
every question or matter submitted to the shareholders at any
meeting, unless otherwise provided by law or by the
certificate of incorporation.
6. Record Date - The Board of Directors shall fix a record date
for each meeting of shareholders and for other corporate
action for purposes of determining the shareholders of the
Corporation who are entitled to: (i) notice of or to vote at
any meeting of shareholders; (ii) give a written consent to
any action without a meeting: or (iii) receive payment of any
dividend, distribution, or allotment of any right. The record
date shall not be more than sixty days nor less than ten days
prior to the shareholders meeting, or other corporate action
or event to which it relates.
<PAGE>
7. Mailing or Delivering Notice - Shareholders shall be under a
duty to notify the Secretary of the Corporation of any change
in their address. All notices, dividends or distributions to
which a shareholder is entitled shall be mailed to the most
recent address listed for each shareholder on the books of the
Corporation.
8. Inspectors of Election - Every election of directors shall be
managed by three inspectors, who shall be appointed by the
Board of Directors. The inspectors of election shall tabulate
the proxies and ballots for the election of directors and,
after the election, shall file with the secretary of the
meeting a certificate under their hands, certifying the result
thereof and the names of the directors elected. The
inspectors of election, at the request of the Board of
Directors or Chairman of the meeting, shall act as tellers of
any other vote by ballot taken at such meeting, and shall
certify the result thereof.
9. Proxies - Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing.
ARTICLE II - DIRECTORS
1. Board of Directors - The Board of Directors (the "Board"),
shall have power to manage and administer the business and
affairs of the Corporation. Except as expressly limited by
law, all powers of the Corporation shall be vested and may be
exercised by the Board.
2. Number and Term of Office - The number of directors shall be
not less than five and not more than twenty-five. The exact
number shall be determined by the Board., Directors shall be
divided into three classes, as nearly equal in number as
possible. Directors of one of the classes shall be elected by
the shareholders at each annual meeting, and the directors so
elected shall hold office until the third succeeding annual
meeting of shareholders and until their successors shall have
been elected and qualified. If the Board changes the number
of directors constituting a full Board, the new number shall
be apportioned as nearly equally as possible among the three
classes, provided that no director's term of office may be
shortened by his or her being reassigned to another class, and
provided further that new directors may be elected to terms
shorter than three years if necessary, to keep the classes of
equal or nearly equal size. The Board shall have the right to
increase the number of directors between annual meetings and
to fill vacancies so created and other vacancies occurring for
any reason, provided that vacancies caused by increasing the
number of directors shall be apportioned as nearly equally as
possible among the three classes of directors, and provided
further that directors appointed by the Board to fill
vacancies occurring for any reason shall serve only until the
next annual meeting of shareholders (and until their
successors shall have been elected and qualified) at which
time the balance of their terms, if any, shall be filled by
directors elected by the shareholders. (revised January 18,
1984).
<PAGE>
3. Regular Meetings - A regular meeting of the Board shall be
held without notice immediately following and at the same
place as the annual shareholders' meeting for the purpose of
electing officers and conducting any other business as may
come before the meeting. The Board shall hold a regular
meeting on the second and fourth Tuesday of each month but any
regular meeting may be held on such other day as the Board by
resolution may designate. Any regular meeting may be omitted
entirely. All regular meetings may be held without notice to
any director, except that a director not presentat the time of
the adoption of a resolution setting forth different or additional
regular meeting dates shall be entitled to notice of those
meetings.
4. Special Meetings - A special meeting of the Board may be
called for any purpose at any time by the Chairman of the
Board, the President or by five directors. The meeting shall
be held upon such notice as is reasonable under the
circumstances, but if the meeting is not called by the
Chairman or the President then upon not less than one day's
notice if given orally (either by telephone or in person), or
upon not less than two days' notice if given by telegraph or
by mail to the business or residence address of each director.
The notice shall specify the time and place of the meeting.
5. Action Without Meeting - The Board may act without a meeting
if, prior or subsequent to the action, each member of the
board shall consent in writing to the action. The written
consent or consent or consents shall be filed in the minute
book.
6. Quorum - A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law or these
bylaws. However, a smaller number may adjourn any meeting and
the meeting may be held, as adjourned, without further notice.
The act of the majority present at a meeting at which a quorum
is present shall be the act of the Board, unless otherwise
provided by law or these bylaws.
7. Vacancies in Board of Directors - Any vacancy in the Board,
including a vacancy caused by an increase in the number of
directors, may be filled by the affirmative vote of a majority
of the remaining directors.
<PAGE>
ARTICLE III - COMMITTEES OF THE BOARD
1. Executive Committee - The Bank's Amended and Integrated
Certificate of Incorporation provides that:
"An Executive Committee of the Board of Directors may be
appointed from time to time by the Board of Directors
from among the Directors."
There shall be an Executive Committee of the Board of Directors
composed of seven members to be appointed from time to time by the
Board of Directors, all of whom shall hold office from the time of
their appointment until the first meeting of the Board of Directors
following the next annual meeting of stockholders and until their
successors are appointed. Two of such members shall be the
Chairman and the President.
The Executive Committee may make rules and regulations for the
transaction of its business subject to the approval of the Board of
Directors.
The Executive Committee shall have all of the powers and be subject
to all of the duties provided by law subject, however, to the
limitation that the executive Committee shall act only between
meetings of the Board and only on matters which in the opinion of
the Committee should not be deferred for Board action.
The minutes of each meeting of the Executive Committee shall be
presented to the Board of Directors at its next meeting following
such meeting of the Executive Committee, except as otherwise
provided by law.
2. Other Committees - The Board may appoint, from time to time,
other committees for such purposes and with such powers as the
Board may determine.
ARTICLE IV - WAIVERS OF NOTICE
Any notice required by these bylaws, by the certificate of
incorporation, or by the New Jersey Business Corporation Act
may be waived in writing by any person entitled to notice.
The waiver, or waivers, may be executed either before or after
the event with respect to which the notice is waived. Each
director or shareholder attending a meeting without
protesting, prior to its conclusion, the lack of proper notice
shall be deemed conclusively to have waived notice of the
meeting.
<PAGE>
ARTICLE V - OFFICERS
1. Election - At its regular meeting following the annual meeting
of shareholders, the Board shall elect a Chairman, a
President, a Treasurer, a Secretary, and it may elect such
other officers as it shall deem necessary. One person may
hold two or more offices.
2. Chairman of the Board - The Board shall appoint one of its
members to be Chairman of the Board to serve at the pleasure
of the Board. Such person shall preside at all meetings of
the Board and of the shareholders. The Chairman of the Board
shall supervise the carrying out of the overall policies and
objectives of the Corporation and may exercise such specific
additional powers and duties as from time to time may be
assigned by the Board. In the absence or disability of the
President, the Chairman shall perform his duties.
3. President - The Board shall appoint one of its members to be
President of the Corporation. In the absence or disability of
the Chairman, the President shall preside at any meeting of
the Board unless the Board appoints a temporary Chairman.
Subject to the Authority of the Board, and on matters of
overall policy subject to consultation with the Chairman, the
President shall have general executive powers and shall have
and may exercise any and all other powers and duties
pertaining by law or practice to the office of President. The
President shall also have and may exercise such further powers
and duties as from time to time may be conferred or assigned
by the Board. The President shall be an ex-office member of
all Board Committees to which he is not appointed.
4. Vice President - The Board may appoint one or more Vice
Presidents who shall perform the duties and have the authority
as from time to time may be delegated to him by the Chairman,
the President or by the Board.
5. Secretary - The Board shall appoint a Secretary of the
Corporation who shall be custodian of the corporate seal,
records, documents and papers. The Secretary shall have and
may exercise any and all other powers and duties pertaining by
law or practice to the office of Secretary and shall also
perform such other duties as may be assigned from time to time
by the Board.
6. Secretary to the Board - The Board shall appoint a Secretary
to the Board who shall be Secretary for meetings of the Board
and shall keep accurate minutes of those meetings.
7. Treasurer - The Board shall appoint a Treasurer who shall have
the custody of the funds and securities of the Corporation and
shall keep or cause to be kept regular books of account for
the Corporation. The Treasurer shall perform such other
duties and possess such other powers as are incident to his
office or as shall be assigned to him by the President or the
Board.
8. Other Officers - The Board may appoint one or more Assistant
Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as from
time to time may appear to the Board to be required or
desirable to transact the business of the Corporation. Such
officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be
conferred upon, or assigned to, them by the Board, the
Chairman of the board, or the President.
<PAGE>
9. Tenure of Office - The Chairman, the President and all other
officers shall hold office at the will of the Board. Any
vacancy occurring in the office of Chairman, President,
Secretary or Treasurer shall be filled by the Board.
ARTICLE VI - SHARE CERTIFICATES
The shares of the Corporation shall be represented by
certificates signed by or in the name of the Corporation, by
the Chairman of the Board, or the President or a Vice
President, and by the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Corporation, and may
be sealed with the seal of the Corporation. Any signature and
the seal may be reproduced by facsimile. In case any officer
who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at
the date of its issue.
ARTICLE VII - AMENDMENTS TO AND EFFECT OF BYLAWS: FISCAL YEAR
1. Force and Effect of Bylaws - These bylaws are subject to the
provisions of the New Jersey Business Corporation Act and the
Corporation's certificate of incorporation, as it may be
amended from time to time. If any provision in these bylaws
is inconsistent with a provisions of the Act or the
certificate of in corporation , the provisions of the act or
the Certificate of Incorporation shall govern.
2. Amendments to Bylaws - These bylaws may be altered, amended,
or repealed by the shareholders or the Board. Any bylaw
adopted, amended, or repealed by the shareholders may be
amended or repealed by the Board, unless the resolution of the
shareholders adopting such bylaw expressly reserves to the
shareholders the right to amend or repeal it.
3. Fiscal Year - The fiscal year of the Corporation shall begin
on the first day of January each year.
4. Records - The certificate of incorporation, the bylaws, and
the proceedings of all meetings of the shareholders, the
Board, and standing committees of the Board, shall be recorded
in appropriate minute books provided for the purpose. The
minutes of each meeting shall be signed by the Secretary or
other officer appointed to act as secretary of the meeting.
5. Inspection - A copy of the bylaws, with all amendments
thereto, shall at all times be kept in a convenient place at
the principal place of business of the Corporation, and for a
proper purpose shall be open for inspection to any shareholder
during business hours.
<PAGE>
HUBCO, Inc.
Union City, New Jersey
WAIVER OF NOTICE OF INTENDED ACTION
TO REPEAL AND ALTER BYLAWS BY REVISING THE SAME
We, the undersigned, being all of the Directors of HUBCO,
Inc., a corporation of New Jersey, do hereby waive any and all
notice of the intended action to repeal the existing Bylaws of
HUBCO, Inc. and to alter the same by adopting a complete revision
thereof and do hereby consent to action on such revision at the
Meeting of the Board of Directors to be held on October 20, 1987 or
at any subsequent Meeting of the Board of Directors.
ROBERT J. BURKE HARRY J. LEBER
JOHN T. CLARK JAMES C. McCLAVE
ANDREW M. CUOMO HAROLD J. OLSEN
RONALD L. DAVID CHARLES F.X. POGGI
ARTHUR L. DICKSON JAMES E. SCHIERLOH
SHELDON S. GOLDSTEIN SR. GRACE FRANCES STRAUBER
HENRY G. HUGELHEIM EDWIN WACHTEL
<PAGE>
HUBCO, INC.
AND
SUMMIT BANK
as Trustee
================
INDENTURE
Dated as of January 14, 1994
===============
$25,000,000
7.75% Subordinated Debentures
due 2004
INDENTURE dated as of January 14, 1994 between HUBCO, INC. a
New Jersey corporation (the "Company"), and Summit Bank, a New
Jersey banking corporation, as trustee ("Trustee").
WHEREAS, the Company has duly authorized the issue of its
unsecured debentures to be issued (the "Securities") up to such
principal amount or amounts as may from time to time be authorized
in accordance with the terms of this Indenture and to provide,
among other things, for the authentication, delivery and
administration thereof, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
indenture and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the
Securities by the holders thereof, the Company and the Trustee
mutually covenant and agree for the equal and proportionate benefit
of the respective holders from time to time of the Securities as
follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Accountants' Certificate" means a certificate from Arthur
Andersen & Co. or other independent certified public accountants of
national standing.
"Affiliate" means, when used with reference to the Company or
another Person, any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the
Company or such other Person, as the case may be. For the purposes
of this definition, "control" when used with respect to any
specified Person means the power to direct or cause the direction
of management or policies of such Person, directly or indirect}y,
whether through the ownership of Voting Stock, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Agent" means any Registrar, Paying Agent, co-registrar,
authenticating agent, Securities Custodian or agent for service of
notices and demands.
"Board of Directors" means the Board of Directors of any
Person or any duly authorized committee of such Board of Directors.
"Business Day" means any day excluding Saturday, Sunday and
any day which is a Legal Holiday.
<PAGE>
"Capitalized Lease Obligation" means any lease obligation of
a Person incurred with respect to any property (whether real,
personal or mixed) acquired or leased by such Person and used in
its business that is required to be recorded as a capitalized lease
in accordance with generally accepted accounting principles.
"Capital Stock" means any and all shares, interests,
participation rights or other equivalents (however designated) of
corporate stock.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" means the class of stock, which, at the date of
this Indenture, is designated as the Common Stock, without par
value, of the Company and stock of any class or classes into which
such Common Stock may thereafter be changed or reclassified.
"Company" means the party named as such in the first paragraph
of this Indenture and, subject to Article 4, its successors.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any
particular time be administered which office is, at the date as of
which the Indenture is dated, the address of the Trustee specified
in Section 10.2, or such other address as the Trustee may give by
notice to the Company.
"Default" means any event or condition which is, or after
notice or lapse of time or both would be, an Event of Default.
"Depository" means the depository for the Global Security
issued hereunder, which shall initially be The Depository Trust
Company, and its successor or successors or nominees or any
corporation or financial or banking institution which the Company
may appoint as a successor Depository pursuant to the terms of
Section 2.6.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Event of Default" shall have the meaning provided in Section
6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time.
"Global Security" means the single certificate evidencing in
global form the Security or Securities issuable or issued in whole
or in part in global form which is substantially in the form of
Exhibit A-2 and delivered to the Depository or Securities
Custodian.
<PAGE>
"Guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect,
in any manner, of any part or all of such obligation or (ii) an
agreement, direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance)
of any part or all of such obligation, including, without limiting
the foregoing, the payment of amounts drawn down by letters of
credit. The amount of a Guarantee shall be deemed to be the
maximum amount of the obligation guaranteed for which the guarantor
could be held liable under such Guarantee. "Guaranteed" when used
as a verb herein has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Hudson United Bank" means Hudson United Bank, a New Jersey
State chartered commercial bank, and a wholly-owned Subsidiary of
the Company.
"Indebtedness" means, with respect to any Person, (a) all
obligations of such Person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof), (b) all indebtedness of such Person
which is evidenced by a note, debenture, bond or other similar
instrument, (including, without limitation, Capitalized Lease
Obligations) or representing the deferred and unpaid balance of the
purchase price of any property or services, (c) all indebtedness of
such Person, (including, without limitation, Capitalized Lease
Obligations) incurred, assumed or given in an acquisition (whether
by way of purchase, merger or otherwise) of any business, real
property or other assets, (d) all obligations of such Person to
purchase securities or other property which arise out of or in
connection with the sale of the same or substantially similar
securities or property ("Repurchase Agreements"), (e) any
indebtedness of others described in the preceding clauses (a), (b),
(c) and (d) that such Person has Guaranteed or secured by a lien on
any asset of such Person or for which it is otherwise liable and
(f) any amendment, renewal, extension, deferral, modification,
restructuring or refunding of any such indebtedness, obligation or
Guarantee.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Interest Payment Date" means the interest payment dates
specified in paragraph 1 of the forms of Security annexed hereto as
Exhibits A-1 and A-2.
<PAGE>
"Legal Holiday" means any day on which commercial banking
institutions in New York or New Jersey are authorized by law or
regulation to close.
"Lien" means any lien, security interest, charge or
encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest.
"Major Bank Subsidiary" means a Subsidiary of the Company that
is a bank, as defined in 12 U.S.C. sec. 1813 or any successor law, the
assets of which as reported on Schedule RC of its most recent
Consolidated Report of Condition and Income that had been filed
prior to the date of this Indenture equal or exceed 80% of the
assets reported on the most recent Quarterly Report on Form 10-Q
that had been filed prior to the date of this Indenture for the
consolidated Company.
"New Securities" has the meaning set forth in Section 2.2.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees and other liabilities
payable from time to time and any covenants or conditions to be
performed or observed under the documentation governing such
Indebtedness.
"Officer" of any Person means the Chairman of the Board of
Directors, the President, any Senior Vice-President, any
Vice-President, the Treasurer, the Secretary or the Controller of
such Person.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer, Assistant
Secretary or Assistant Controller of any Person conforming to the
requirements set forth in Sections 10.4 and 10.5 and complying with
Section 314 of the TIA.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company and who
is reasonably acceptable to the Trustee. Each such opinion shall
comply with Section 314 of the TIA and include the statements set
forth in Sections 10.4 and 10.5, if and to the extent required
hereby. For the purpose of rendering an opinion, such counsel may
rely as to factual matters upon certificates or other documents
furnished by Officers and directors of the Company and upon such
other documents as such counsel deems appropriate as a basis of
their opinion, copies of which shall be delivered with such
opinion.
"Paying Agent" shall have the meaning set forth in Section
2.3.
<PAGE>
"Person" means any individual, corporation, partnership,
association, joint venture, trust, entity, unincorporated
organization or government or any agency or political subdivision
thereof.
"Qualified Holder" means at any time, (i) any Initial
Purchaser and (ii) a Person, which individually, or collectively
with its affiliates or other entities for which the same investment
advisor, investment manager, trustee or custodian is acting in
connection with the Securities, holds one or more Securities (or
beneficial interests therein) representing at least 10% of the
aggregate outstanding principal amount of the Securities then
outstanding (a "Qualified Group") and has been designated by a
Qualified Group to act as the Qualified Holder. A Qualified Holder
shall be entitled to be recognized as such upon the filing of a
certificate (which may be in the form of an ombudsman certificate)
with the Company and the Trustee, identifying the Qualified Holder
and, if applicable, the members of the Qualified Group.
"Record Date" means, with respect to any Interest Payment
Date, the Business Day fifteen days prior to an Interest Payment
Date.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" shall have the meaning set
forth in Section 2.2.
"Repurchase Agreement" shall have the meaning set forth in the
definition of "Indebtedness."
"Restricted Securities" mean "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the 7.75% Subordinated Debentures due 2004
of the Company issued pursuant to this Indenture and, from and
after the consummation of the Registered Exchange Offer, any New
Securities issued in exchange therefor pursuant to Section 2.2.
"Securities Act" means the Securities Act of 1933, as amended
and in effect from time to time.
"Securities Custodian" means Chemical Bank the custodian for
the Depository under an existing contractual relationship between
the Depository and the Securities Custodian which will hold the
Global Security which is issued hereunder, and any successor entity
thereto.
"Senior Indebtedness" means any and all Indebtedness of the
Company, whether outstanding on the date of this Indenture as
originally executed or thereafter created or incurred, except any
particular Indebtedness, for which the instrument creating or
evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall be subordinate or
shall rank pari passu in right of payment to the Securities.
<PAGE>
"Significant Subsidiary or Subsidiaries" means as of any date
any Subsidiary which singly, or one or more Subsidiaries which in
the aggregate, would be a "significant subsidiary" on such date as
defined in Rule 1-02 of Regulation S-X under the Securities Act and
the Exchange Act.
"Subsidiary" means, with respect to the Company, any
corporation, bank, association, partnership or other business
entity of which more than 50% of the Voting Stock or other
ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, officers or
trustees thereof or other persons performing similar functions is
at the time owned in the aggregate, directly or indirectly, by the
Company and its Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
sec.77aaa-77bbbb), as amended and in effect at the date as of which
this Indenture was originally executed or, if this Indenture is
qualified under the TIA, from and after the date of such
qualification, the TIA as in effect at the date of such
qualification, except in either case as provided in Section 8.3.
"Trustee" means the party named as such above until a
successor replaces it pursuant to this Indenture and thereafter
means such successor.
"Trust Officer", when used with respect to the Trustee, means
any officer assigned by the Trustee to administer the corporate
trust business of the Trustee, including without limitation any
vice president, any assistant vice president, any assistant
secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers, who shall, in any case, be responsible for the
administration of this document, and also means, with respect to a
particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with
the particular subject.
"U.S. Government Obligations" means direct or indirect
obligations of the United States of America or an agency of the
United States of America for the payment of which the full faith
and credit of the United States of America is pledged.
"Voting Stock" means Capital Stock which ordinarily has voting
power for the election of directors, whether at all times or only
so long as no senior class of Capital Stock has such voting power
by reason of any contingency.
<PAGE>
SECTION 1.2. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture, whether or not this Indenture is qualified under the
TIA.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a
Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Securities means the Company.
All other terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined
by SEC rule under the TIA and not otherwise defined herein have the
meanings so assigned to them therein.
SECTION 1.3. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined
shall be interpreted in accordance with generally
accepted accounting principles;
(iii) references to "generally accepted
accounting principles" shall mean generally
accepted accounting principles in effect in the
United States as at the time of any computation;
(iv) "or" is not exclusive;
(v) words in the singular include the plural,
and in the plural include the singular;
(vi) provisions apply to successive events and
transactions; and
(vii) the words "herein", "hereof" and
"hereunder" and other words of similar import refer
to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
<PAGE>
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form and Dating.
The definitive Securities and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit A-
1, which is part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange
rule or usage, which shall be provided in writing by the Company to
the Trustee. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the Securities
shall constitute, and are hereby expressly made, a part of this
Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
The Securities will initially be issued in global form,
substantially in the form of Exhibit A-2. Such Global Security
shall represent such of the outstanding Securities as shall be
specified therein and shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding
Securities represented thereby may from time to time be reduced to
reflect exchanges. Any endorsement of a Security in global form to
reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the
Trustee or the Securities Custodian, at the direction of the
Trustee, in such manner and upon instructions given by the holder
thereof.
Payment of principal of and any interest on any Security
in global form shall be made to the holder thereof.
SECTION 2.2. Execution and Authentication.
Two Officers shall sign the Securities for the Company by
manual or facsimile signature. The Company's seal shall be
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the
Security shall nevertheless be valid.
<PAGE>
A Security shall not be valid until executed on behalf of
the Company and authenticated by the manual signature of the
Trustee, if upon original issuance, or manual signature of the
Trustee or an authenticating agent appointed pursuant to this
Section 2.2 if other than upon original issuance. The signature of
the Trustee or of an authenticating agent shall be conclusive
evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original
issue in the aggregate principal amount of not more than
$25,000,000 pursuant to a written order of the Company signed by
two Officers directing the Trustee to authenticate the Securities.
The order shall specify the amount of Securities to be
authenticated, the rate of interest to be paid and the date upon
which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time
may not exceed $25,000,000, except as provided in Section 2.8.
On or immediately after the consummation of a registered
exchange offer ("Registered Exchange Offer") pursuant to the
Registration Rights Agreement by and among the Company and each of
the purchasers identified on Schedule I thereto (the "Initial
Purchasers") dated as of January 14, 1994 (as amended and in effect
from time to time, the "Registration Rights Agreement"), the
Trustee shall authenticate new securities ("New Securities") for
original issue in the aggregate principal amount of not more than
$25,000,000, less the principal amount of any Securities which are
not surrendered in the Registered Exchange Offer, pursuant to a
written order of the Company signed by two Officers directing the
Trustee to authenticate the New Securities. The New Securities
shall be identical in all material respects to the Securities
except that the New Securities will be registered under the
Securities Act, shall not bear the transfer restrictions set forth
on the face of the form of Securities and shall not contain the
interest rate step-up provision set forth in paragraph 18 of the
Securities. The order to the Trustee shall specify the amount of
New Securities to be authenticated, the rate of interest to be paid
and the date upon which the original issue of New Securities
pursuant to the Registered Exchange Offer is to be authenticated
and shall further provide instructions concerning registration,
amounts for each Holder and delivery. The aggregate principal
amount of New Securities outstanding at any time may not exceed
$25,000,000, less the aggregate principal amount of Securities
outstanding, if any, except as provided in Section 2.8.
The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Securities. Unless
limited by the terms of such appointment, an authenticating agent
may authenticate Securities whenever the Trustee may do so. An
authenticating agent may authenticate Securities on behalf of the
Trustee, except upon original issuance and pursuant to Section 2.7.
Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company, a Subsidiary
or an Affiliate of the Company.
<PAGE>
The Securities shall be issuable without coupons and
only in denominations of $100,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency in the
State of New Jersey or the City of New York, New York where
Securities may be presented for registration of transfer or for
exchange ("Registrar"), an office or agency where Securities may be
presented for payment ("Paying Agent") and an office or agency
where notices or demands to or upon the Company in respect of the
Securities and the Indenture may be served. The Registrar shall
keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar"
includes any co-registrars appointed by the Company. The term
"Paying Agent" includes any additional Paying Agent. If any of the
Securities are Restricted Securities and any of the Securities are
Global Securities, the Company shall appoint a Registrar or a co-
registrar that shall be a member of or otherwise participate in the
Depository's program for registering transfers of Restricted
Securities. Such Registrar or co-registrar shall also be eligible
to serve as a Securities Custodian. So long as any Securities are
Restricted Securities and any Securities are in global form,
Security holders shall effect the exchange, transfer and
registration of Securities through the Registrar or co-registrar
meeting the requirements of the preceding two sentences. The
Company may change any Paying Agent, Registrar or co-registrar and
shall provide notice of any such change to any Securityholder.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture. Such
agreement shall implement and comply with the provisions of this
Indenture that relate to such Agent. The Company shall give prompt
written notice to the Trustee of the name and address of any Agent
who is not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent,
the Trustee shall act as such. The Company, any Subsidiary or any
of their Affiliates may act as Paying Agent, Registrar or co-
registrar.
The Company initially appoints the Depository Trust
Company to act as depository with respect to the Global Security,
and appoints the Trustee as Registrar and Paying Agent and agent
for service of notices and demands. The Company initially appoints
Chemical Bank as co-registrar and Securities Custodian.
<PAGE>
SECTION 2.4. Paying Agent to Hold Money in Trust.
On or prior to the due date of principal of, premium, if
any, and interest on any Securities, the Company shall deposit with
the Paying Agent money sufficient to pay such principal, premium,
if any, and interest so becoming due. The Company shall require
each Paying Agent other than the Trustee to agree in writing that
the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee on behalf of the Securityholders all
money held by the Paying Agent for the payment of principal of,
premium, if any, and interest on the Securities (whether such money
has been paid to it by the Company or any other obligor on the
Securities) and shall notify the Trustee in writing of any failure
by the Company (or any other obligor on the Securities) in making
any such payment. While any such failure continues, the Trustee
may require a Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed. The Company at any
time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company) shall have no further liability for the
money so paid over to the Trustee. If the Company acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Securityholders all money held by it as Paying
Agent.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the
names and addresses of Securityholders. If (i) the Trustee is not
the Registrar, the Company shall, or (ii) if there is a co-
registrar, the co-registrar shall, furnish to the Trustee fifteen
days prior to each Interest Payment Date for the Securities and at
such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably
require, containing all of the information in the possession or
control of the Registrar, the Company or any of its Paying Agents
other than the Trustee, as to the names and addresses of
Securityholders, and the Company shall otherwise comply with TIA sec.
312(a).
SECTION 2.6. Registration of Transfer and Exchange.
(a) The transfer and exchange of Securities in global
form shall be effected through the Depository, in accordance with
this Indenture (including the restrictions on transfer set forth
herein) and the procedures of the Depository therefor.
<PAGE>
When definitive Securities are presented to the Registrar
or a co-registrar with a request to register their transfer or to
exchange such definitive securities for an equal aggregate
principal amount of definitive Securities of other authorized
denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange if the requirements for such
transaction are met; provided that a definitive Security presented
or surrendered for registration of transfer or exchange for another
Security (i) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
such co-registrar duly executed by the Holder thereof or his
attorney duly authorized in writing and (ii) shall be accompanied
by a duly completed certificate of the transferor in substantially
the form of Exhibit B hereto and, to the extent specified therein,
an opinion of counsel to the effect set forth therein; and,
provided further, that, in the case of a transfer pursuant to an
exemption from registration in accordance with Rule 144, Rule 145
or Regulation S under the Securities Act, or in reliance on another
exemption from the registration requirements of the Securities Act
(other than an exemption under Rule 144A under the Securities Act),
such transfer shall be effected by the delivery of definitive
Securities registered in the name of the transferee (or its
nominee) in the books maintained by the Registrar of the
Securities.
The registration of any definitive Security upon transfer
or exchange shall be effective only after the surrender of the
definitive Security and the issuance by the Company and
authentication by the Trustee or the authenticating agent of a
replacement Security. To permit registrations of transfer and
exchanges, the Company shall issue and the Trustee or the
authenticating agent shall authenticate Securities at the
Registrar's request. The Company will not make any service charge
for any registration of transfer or exchange but may require
payment by the party requesting such registration of transfer or
exchange of a sum sufficient to cover any tax or other governmental
charge in connection therewith.
All definitive Securities issued upon any registration of
transfer or exchange of Securities shall be the valid obligations
of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
(b) Except as permitted by the following paragraph or
until such time as the same is no longer required under the
applicable requirements of the Securities Act or applicable state
securities laws, each certificate evidencing the Securities in
global form and the definitive Securities (and all securities
issued in exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
<PAGE>
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY OTHER APPLICABLE SECURITIES LAW. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF HUBCO,
INC. (THE "COMPANY") THAT THIS SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY, (2) SO LONG
AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IN A
TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 (IF AVAILABLE) OR RULE 145 UNDER THE
SECURITIES ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (6)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND SUBJECT IN THE CASE OF EACH OF CLAUSES
(2), (3), (4), (5) AND (6) ABOVE TO THE RECEIPT BY THE
REGISTRAR OR CO-REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR
TO SUCH EFFECT AND IN THE CASE OF EACH OF CLAUSES (3), (4) AND
(5) ABOVE TO THE DELIVERY TO THE TRANSFEREE OF DEFINITIVE
SECURITIES REGISTERED IN ITS NAME (OR ITS NOMINEE'S NAME) ON
THE BOOKS MAINTAINED BY THE REGISTRAR, AND IN THE CASE OF
CLAUSE (5) ABOVE TO RECEIPT OF AN OPINION (IN SUBSTANTIALLY
THE FORM OF EXHIBIT C TO THE INDENTURE REFERRED TO BELOW OR
OTHERWISE SATISFACTORY TO THE COMPANY AND THE REGISTRAR) OF
COUNSEL EXPERIENCED IN SECURITIES MATTERS (WHICH COUNSEL MAY
BE AN EMPLOYEE OF THE TRANSFEROR) TO THE EFFECT THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, AND IN EACH
CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS IN ANY
APPLICABLE STATE OF THE UNITED STATES."
The transfer and exchange of Securities may be made in
global form only if such Security is being transferred to a
qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act.
<PAGE>
(c) Any Securities which are presented to the Registrar
for exchange pursuant to a Registered Exchange Offer shall be
exchanged for New Securities of equal aggregate principal amount
upon surrender to the Registrar of the Securities to be exchanged;
provided, however, that the Securities so surrendered for exchange
shall be duly endorsed and accompanied by a transmittal letter or
written instrument of transfer in form satisfactory to the Company,
the Trustee and the Registrar duly executed by the Holder thereof
or his attorney who shall be duly authorized in writing to execute
such document. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall
authenticate and deliver to the Registrar the same aggregate
principal amount of New Securities as Securities that have been
surrendered.
(d) Notwithstanding any other provisions of this
Indenture (other than the provisions set forth in part (e) of this
Section 2.6), a Security in global form may not be transferred as
a whole except by the Depository to a nominee of the Depository or
by a nominee of the Depository to the Depository or another nominee
of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(e) If at any time the Depository for the Securities
notifies the Company that it is unwilling or unable to continue as
Depository for the Securities, the Company may appoint a successor
Depository with respect to the Securities. If a successor
Depository for the Securities is not appointed by the Company
within 90 days after the Company receives such notice, the Company
will execute, and the Trustee, upon receipt of an officers'
certificate for the authentication and delivery of definitive
Securities, will authenticate and deliver, Securities in definitive
form, in an aggregate principal amount equal to the aggregate
principal amount of the Securities in global form, in exchange for
such Securities in global form.
The Company may at any time and in its sole discretion
determine that the Securities issued in the form of global
Securities shall no longer be represented by such global
Securities. In such event the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of definitive Securities, will
authenticate and deliver, Securities in definitive form, in an
aggregate principal amount equal to the aggregate principal amount
of the Securities in global form, in exchange for such Securities
in global form.
If a definitive Security is issued in exchange for any
portion of the Global Security after the close of business at the
office or agency where such exchange occurs on any Record Date and
before the opening of business at such office or agency on the next
succeeding Interest Payment Date, interest will not be payable on
such Interest Payment Date in respect of such definitive Security,
but will be payable on such Interest Payment Date only to the
Person to whom interest in respect of such portion of such Global
Security is payable in accordance with the provisions of this
Indenture.
Definitive Securities issued in exchange for an interest
in a Global Security pursuant to this Section 2.6 shall be
registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Registrar.
The Registrar shall deliver such definitive Securities to the
Persons in whose names such Securities are so registered.
<PAGE>
(f) Any Person having a beneficial interest in the
Global Security upon request and upon satisfaction of the
requirements set forth below, may exchange or transfer in whole or
in part as provided herein its interest in the Global Security for
one or more definitive Securities. Upon receipt by the Registrar
of (i) written or electronic instructions from the Depository or
its nominee on behalf of any Person having a beneficial interest in
the Global Security and (ii) a written order of such Person
containing registration instructions accompanied by a certificate
of such Person in substantially the form of Exhibit B hereto and,
to the extent specified therein, an opinion of counsel to the
effect set forth therein, the Registrar or the Securities
Custodian, at the direction of the Registrar, will cause, in
accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, the aggregate
principal amount of the Securities in global form to be reduced
and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate, the Trustee will authenticate and deliver to such
Person or the transferee, as the case may be, a definitive
Security.
Any holder of a definitive Security may, upon
satisfaction of the requirements set forth below, as provided
herein, exchange or transfer in whole or in part such definitive
Security for an interest in the Global Security. Upon receipt by
the Registrar of a definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form
satisfactory to the Registrar together with (a) certification,
substantially in the form of Exhibit B hereto, that such definitive
Security is being registered or transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the Securities Act, and (b)
written instructions directing the Registrar to make, or to direct
the Securities Custodian to make, an endorsement on the Security in
global form to reflect an increase in the aggregate principal
amount of the Securities represented by the Security in global
form, the Registrar shall cancel such definitive Security and
cause, or direct the Securities Custodian to cause, in accordance
with the standing instructions and procedures existing between the
Depository and the Securities Custodian, the aggregate principal
amount of Securities represented by the Security in global form to
be increased accordingly.
(g) At such time as all interests in the Global Security
have either been exchanged for definitive Securities, converted,
repurchased or canceled, such Global Security shall be canceled by
the Registrar. At any time prior to such cancellation, if any
interest in the Global Security is exchanged for definitive
Securities, redeemed, converted, repurchased or canceled, the
principal amount of Securities represented by such Security in
global form shall be reduced and an endorsement shall be made on
such Security in global form, by the Registrar or the Securities
Custodian, at the direction of the Registrar, to reflect such
reduction.
<PAGE>
SECTION 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or
if the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee, at the Company's request, shall authenticate and deliver,
a replacement Security if the requirements of the Trustee and the
Company are met, provided that the Trustee shall not be required to
authenticate or replace any such Security which has been called for
redemption in accordance with the terms thereof. If required by
the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of each of the foregoing to protect the Company, the
Trustee, any Agent or any authenticating agent from any loss which
any of them may suffer if a Security is replaced. The Company may
charge the Securityholder who has lost a Security for its expenses
in replacing a Security.
Every replacement Security is an obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.8. Outstanding Securities.
The Securities outstanding at any time are all the
Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those reductions
in the interests in the Global Security effected by the Trustee
hereunder and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.7, it
ceases to be outstanding and interest ceases to accrue unless the
Trustee receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser.
If all principal of, premium, if any, and any interest on
any of the Securities are considered paid under Section 3.1, such
Securities shall cease to be outstanding and interest on them shall
cease to accrue.
Subject to Section 2.9, a security does not cease to be
outstanding because the Company, a Subsidiary or an Affiliate holds
such Security.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required
aggregate principal amount of Securities have concurred in any
direction, waiver, amendment or consent, Securities owned by the
Company, a Subsidiary or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.
Securities owned by the Company, a Subsidiary or an Affiliate of
the Company which have been pledged in good faith may be regarded
as outstanding if the Trustee receives an Officer's Certificate
<PAGE>
stating that said Securities have been so pledged, that the pledgee
is entitled to vote with respect to such Securities and that the
pledgee is not the Company or any other obligor on the Securities,
a Subsidiary or an Affiliate of the Company, a Subsidiary or such
other obligor.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and execute and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that
the Company (with the concurrence of the Trustee) considers
appropriate for temporary Securities. Each temporary Security
shall be executed by the Company and be authenticated by the
Trustee upon the same conditions and in substantially the same
manner, and with like effect, as the definitive Securities.
Without unreasonable delay, the Company shall prepare and the
Trustee upon receipt of a written order of the Company signed by
two officers, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary
Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Securities surrendered to them for
redemption, registration of transfer, exchange or payment. The
Trustee shall cancel all Securities surrendered for redemption,
registration of transfer, exchange, payment, replacement or
cancellation and shall destroy canceled Securities. The Company
may not issue new Securities to replace Securities that it has paid
or that have been delivered to the Trustee for cancellation, except
as expressly permitted by any of the provisions of this Indenture.
All canceled Securities held by the Trustee shall be destroyed and
certification of their destruction delivered to the Company.
<PAGE>
SECTION 2.12. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP"
numbers (if then generally in use), and the Trustee shall use CUSIP
numbers (if such have been obtained) in notices of exchange as a
convenience to Holders; provided that any such notice shall state
that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any
notice of exchange and that reliance may be placed only on the
other identification numbers printed on the Securities.
SECTION 2.13. Defaulted and Additional Interest.
(a) If the Company fails to make a payment of interest
on the Securities, it shall pay such interest plus, to the extent
lawful, interest on the defaulted interest at the same rate of
interest specified in the Securities, to the Persons who are
Securityholders on a subsequent special record date. The Company
shall fix the special record date and payment date in a manner
reasonably satisfactory to the Trustee. The payment date shall be
no less than 15 days after such record date. At least 15 days
before the special record date, the Company shall mail to
Securityholders a notice that states the special record date,
payment date and amount of such interest to be paid.
(b) As provided in the Registration Rights Agreement,
the Company is obligated on or prior to a date (the "Additional
Interest Date") that is 180 days after the date of issuance of the
Securities (the "Closing Date") (i) to file and cause to become
effective with the SEC a registration statement on an appropriate
form (the "Exchange Registration Statement") with respect to a
proposed offer (the "Registered Exchange Offer") to the holders of
the Securities, and (ii) to commence the Registered Exchange Offer
and cause the same to remain open for a period of not less than the
period required under applicable Federal and state law, to provide
the Securityholders the opportunity to exchange any and all of the
Securities for a like aggregate principal amount of debt securities
of the Company that are substantially identical to the Securities.
If the Exchange Registration Statement shall not have been filed
and become effective and the Registered Exchange Offer commenced on
or before the Additional Interest Date, then on that date and
thereafter interest on the Securities shall be increased by one
percent (1.00%) per annum. Such additional interest shall cease to
accrue on the date on which the Exchange Registration Statement is
filed and declared effective and a Registered Exchange Offer
commenced or, in certain circumstances, a shelf registration
statement is filed and has been declared effective pursuant to the
Registration Rights Agreement. This description of the
Registration Rights Agreement is only a summary and is qualified in
its entirety by reference to the detailed provisions in the
Registration Rights Agreement.
<PAGE>
(c) The Trustee, pursuant to Section 6.2(b), shall be
under no obligation to pay the additional interest provided for in
paragraph (b) of this Section 2.13 unless it shall have received an
Officers' Certificate directing the Trustee to pay such additional
interest in accordance with the terms of Section 2.13(b). The
Trustee shall be entitled to rely on such Officers' Certificate
until it shall have received an Officers' Certificate to the effect
that the Company is no longer required to pay such additional
interest pursuant to the Registration Rights Agreement.
ARTICLE 3
COVENANTS
SECTION 3.1. Payment of Securities.
The Company shall pay the principal of, premium, if any,
and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER DOCUMENT
RELATING TO THE SECURITIES, THE SECURITIES WILL BEAR INTEREST FROM
JANUARY 14, 1994, PAYABLE SEMIANNUALLY ON JANUARY 15 AND JULY 15 OF
EACH YEAR COMMENCING JULY 15, 1994. The Securities mature on
January 15, 2004. An installment of principal, premium, if any, or
interest shall be considered paid on the date it is due if the
Trustee or Paying Agent (other than the Company, a Subsidiary or an
Affiliate) holds on that date money designated for and sufficient
to pay such installment if payment thereof is not then prohibited
by Article 9.
The Company shall pay interest (including interest that
accrues after or would accrue but for the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Company to the extent that such interest
is an allowed claim enforceable against the debtor in a bankruptcy
case under Title 11 of the U.S. Code) on overdue principal at the
rate then borne by the Securities; it shall pay interest (including
interest that accrues after or would accrue but for the
commencement of any case, proceeding or other action relating to
the bankruptcy, insolvency or reorganization of the Company to the
extent that such interest is an allowed claim enforceable against
the debtor in a bankruptcy case under Title 11 of the U.S. Code) on
overdue premium, if any, and installments of interest at the same
rate to the extent legally permitted.
SECTION 3.2. Maintenance and Office or Agency.
The Company shall designate in the State of New Jersey,
or in the city of New York, New York, an office or agency (which
may be an office of the Trustee, Registrar or co-registrar) where
at all times the Securities may be surrendered for registration of
transfer or exchange and where at all times the notices and demands
to or upon the Company in respect of the Securities and this
Indenture may be served and where the Securities may be presented
for payment. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail so to
designate any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 10.2.
<PAGE>
The Company may also designate from time to time one or
more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided that no such
designation or rescission shall in any manner relieve the Company
of its obligation so to designate as aforesaid an office or agency
in the State of New Jersey, or in the city of New York, New York,
for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
The Company hereby designates the Trustee's Corporate
Trust Office in Summit, New Jersey, as one such office or agency of
the Company in accordance with Section 2.3.
SECTION 3.3. Maintenance and Inspection of Books and Records.
The Company will keep, and will cause each Subsidiary to
keep, proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit and will
cause each Subsidiary to permit, each Qualified Holder (or its
representative) at such Qualified Holder's expense to visit and
inspect any of their respective properties, to examine and make
abstracts from their respective books of account and other records,
and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants, all
for such reasonable purposes and at such reasonable times as such
Person shall request in writing to the Company and as often as any
such Person may reasonably request. The right of inspection under
this Section 3.3 shall not include the right to materials, or
information or data: (i) which the Company may not, in the opinion
of counsel for the Company, disclose pursuant to confidentiality
restrictions under applicable law, regulation or contract; or (ii)
with respect to which such inspection or disclosure would likely,
in the opinion of counsel for the Company, cause the loss of an
attorney/client privilege.
SECTION 3.4. Corporate Existence.
Subject to Article 4, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and that of each Subsidiary and the
rights (charter and statutory) and corporate franchises of the
Company and its Subsidiaries; provided that the Company shall not
be required to preserve any such existence (except of the Company),
right or franchise if the Board of Directors of the Company, or of
the Subsidiary concerned, shall determine that the preservation
thereof is no longer desirable or necessary in the conduct of the
business as presently conducted of the Company or such Subsidiary
and that the loss thereof is not adverse in any material respect to
the Holders or to the business, financial prospects, results of
operations or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
<PAGE>
SECTION 3.5. Compliance with Laws.
The Company is a duly registered bank holding company
under the Bank Holding Company Act of 1956, as amended. The
Company and each of its Subsidiaries possess all material
authorizations, approvals, orders, licenses, franchises,
certificates and permits of and from all foreign and domestic
governmental regulatory officials and bodies (including all
applicable banking officials and bodies), necessary to own or hold
their respective properties and to conduct the respective
businesses in which they are engaged. Each such authorization,
approval, order, license, franchise, certificate and permit is
valid and in full force and effect, and there is no proceeding
pending or threatened (and, to the best knowledge of the Company,
no basis for any such proceeding exists) which may lead to the
revocation, termination, suspension or non-renewal of any
authorization, approval, order, license, franchise, certificate or
permit and there is no default thereunder.
SECTION 3.6. No Violation or Contravention.
The execution and delivery by the Company of this
Indenture, the issuance, sale and delivery of the Securities and
the performance by the Company of its obligations hereunder and
under the Securities, and the consummation of the transactions
contemplated hereby and under the Securities have been duly
authorized by all necessary corporate action on the part of the
Company and do not and will not violate any provision of the
Charter Documents of the Company or of any of its Subsidiaries, and
do not and will not violate, or conflict with, or constitute a
default under, or permit the termination of, or result in the
creation of any lien, claim or encumbrance upon any property of the
Company or any of its Subsidiaries under, (i) any statute or law or
any judgment, decree, order, regulation or rule of any court or
governmental authority, domestic or foreign, to which the Company
or any of its Subsidiaries or any of their respective properties
may be subject, or (ii) any material contract, indenture, mortgage,
loan agreement, note, lease or other material agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which any of them may be bound, or to which any of
their respective properties may be subject, which conflict,
default, termination or lien, claim or encumbrance would have a
material adverse effect upon the operations, business, prospects,
assets, properties or condition (financial or other) of the Company
and its subsidiaries taken as a whole.
<PAGE>
SECTION 3.7. Notice of Defaults.
(a) In the event that any Indebtedness (in an amount
which exceeds $5,000,000, whether under a single agreement or in
the aggregate) other than Indebtedness under any Repurchase
Agreement of the Company or any Subsidiary has been or could upon
the delivery of notice or passage of time or both be declared due
and payable before its maturity because of the occurrence of any
event or condition (including, without limitation, any Default
under this Indenture), the Company promptly shall give written
notice thereof to the Trustee.
(b) In the event that the Company or any Subsidiary shall
receive, with respect to any Indebtedness (in an amount which
exceeds $5,000,000) under any Repurchase Agreement of the Company
or any Subsidiary, a written notice from the other party to such
Repurchase Agreement clearly alleging a default under such
Repurchase Agreement which immediately enables, or would upon
further notice or lapse of time or both enable, such other party to
declare such Indebtedness due and payable before its maturity, the
Company shall promptly give written notice thereof to the Trustee.
SECTION 3.8. Compliance Certificate.
The Company shall deliver to the Trustee within 90 days
after the end of each fiscal year of the Company, and within 45
days after the end of each fiscal quarter of the Company, an
Officers' Certificate, which shall comply with Section 10.5, and
which shall: (a) state whether or not the signers know of any
Default, provided, if they do know of such a Default, the
certificate shall describe the Default and its status and the
action that the Company is taking or proposes to take with respect
thereto; (b) state whether the Company is in compliance with the
covenants contained in Section 3.12; and (c) state whether this
Indenture is required to be qualified under the TIA.
The Company shall deliver to the Trustee, within 105 days
after the end of each of its fiscal years, an Accountants'
Certificate stating (a) that their audit examination has included
a review of the terms of this Indenture and the Securities as they
relate to accounting matters and (b) whether, during the course of
their audit examination, any Default has come to their attention
and, if such a Default has come to their attention, specifying the
nature and period of existence thereof, provided that the
independent certified public accountants delivering such
Certificate shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any such Default that
would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards.
<PAGE>
Promptly after any officer of the Company obtains
knowledge of any Default, and in any event within 10 Business Days
thereafter, the Company shall deliver an Officer's Certificate to
the Trustee describing such Default and its status and the action
that the Company is taking or proposes to take with respect
thereto.
SECTION 3.9. SEC Reports.
The Company shall file with the Trustee, within 15 days
after it files them with the SEC, copies of the annual reports and
of the information, documents (including Forms 10-K, 10-Q and 8-K)
and any other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe), if
any, which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The Company also shall
comply with the other provisions of TIA sec. 314(a) whether or not
this Indenture is qualified under the TIA.
SECTION 3.10. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, or plead, or in
any manner whatsoever claim, and shall resist any and all efforts
to be compelled to take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal
of and/or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which
may affect the covenants or the performance of this Indenture; and
(to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law and
covenants that it shall not hinder, delay or impede the execution
of any power herein granted to the Trustee but shall suffer and
permit the execution of every such power as though no such law had
been enacted.
SECTION 3.11. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before any penalty accrues thereon, (i) all income and
other material taxes, assessments and governmental charges levied
or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiaries and (ii) all
lawful claims for labor, materials and supplies which, if unpaid,
might by law become a material Lien upon the property of the
Company or any Subsidiaries; provided that none of the Company or
any Subsidiary shall be required to pay or discharge or cause to be
paid or discharged any such tax, assessment, charge or claims the
amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate
provision has been made.
<PAGE>
SECTION 3.12. Maintenance of Properties and Insurance.
The Company shall cause all properties (except for such
properties as are not material in the aggregate to the operations,
business, condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole) owned by or leased to it or any
Subsidiary and used or useful in the conduct of its business or the
business of such Subsidiary to be maintained and kept in normal
condition, repair and working order and shall cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
The Company shall provide or cause to be provided, for
itself and any Subsidiaries of the Company, insurance (including
appropriate self-insurance as defined below) against loss or damage
of the kinds customarily insured against by corporations similarly
situated and owning like properties, including, but not limited to,
public liability insurance, with reputable insurers or with the
government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles and
by such methods as shall be customary for corporations similarly
situated in the industry. For purposes of the foregoing,
"appropriate self-insurance" means any self-insurance if, and only
to the extent that, such self-insurance is customarily effected by
corporations engaged in the same or similar businesses, similarly
situated, and is otherwise prudent in the circumstances and the
Company or such Subsidiary maintains adequate reserves with respect
thereto.
Nothing in this Section shall prevent the Company from
pledging any of its assets (whether already owned or acquired after
the date hereof) as collateral security for the Indebtedness and
Obligations of the Company.
SECTION 3.13. Liquidation.
The Company shall not adopt any plan of liquidation which
provides for, contemplates or the effectuation of which is preceded
by (A) the sale, lease, conveyance or other disposition of all or
substantially all the assets of the Company otherwise than
substantially as an entirety in accordance with Article 4 and (B)
the distribution of all or substantially all the proceeds of such
sale, lease, conveyance or other disposition and of the remaining
assets of the Company to holders of Common Stock of the Company,
unless the Company shall in connection with the adoption of such
plan make provision for, or agree that prior to making any
liquidating distributions it will make provision for, the
satisfaction in full in cash of the Company's obligations hereunder
and under the Securities as to the payment of all principal of and
premium, if any, and interest on the Securities.
<PAGE>
SECTION 3.14. Information.
(a) For as long as any of the Securities remain
outstanding and are Restricted Securities, the Company covenants
and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) under the Exchange Act, make
available to any holder or beneficial holder of Securities that
continue to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Securities from such
holder or beneficial holder, the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities
Act.
(b) The Company shall provide to each Qualified Holder
a copy of each notice or certificate required to be delivered by it
to the Trustee pursuant to Section 3.7 or 3.8 and each Form 10-K or
Form 10-Q delivered by it to the Trustee pursuant to Section 3.9
concurrently with the delivery thereof to the Trustee.
ARTICLE 4
MERGER, ETC.
SECTION 4.1. When Company May Merge, etc.
The Company shall not consolidate or merge with or into,
or sell, assign, transfer, convey, lease or otherwise dispose of,
directly or indirectly, all or substantially all of its assets to,
any Person unless:
(1) the Person formed by or surviving any such
consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer or lease or
conveyance or other disposition shall have been made, is
a corporation organized and existing under the laws of
the United States, any state thereof or the District of
Columbia;
(2) the corporation formed by or surviving any such
consolidation or merger (if other than the Company), or
to which such sale, lease, conveyance or other
disposition shall have been made, expressly assumes by
supplemental indenture the due and punctual payment or
performance of all the Obligations of the Company under
the Securities and this Indenture; and
<PAGE>
(3) immediately before and immediately after such
transaction, and giving effect thereto, no Default shall
have occurred and be continuing.
The Company shall deliver to the Trustee prior to any
proposed transaction an Officers' Certificate, an Opinion of
Counsel and an Accountants' Certificate each stating that the
proposed transaction and such supplemental indenture comply with
this Indenture.
SECTION 4.2. Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of all
or substantially all of the assets, of the Company in accordance
with Section 4.1, the successor corporation formed by such
consolidation or into which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and may
exercise every right and power and will be bound by all obligations
and covenants of, the Company under this Indenture with the same
effect as if such successor corporation had been named as the
Company herein and, in the case of any sale, assignment, transfer,
conveyance or disposition (other than a transfer or conveyance by
way of lease), the Company (which term shall for the purpose mean
the Person named as the "Company" in the first paragraph of this
Indenture or any successor corporation which previously shall have
become liable in the manner prescribed in this Article 4) shall be
relieved of all obligations and covenants and shall no longer
exercise any rights or powers under this Indenture and the
Securities.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.1. Events of Default.
An "Event of Default" occurs if:
(i) the Company defaults in the payment of
interest on any Security when the same becomes due and
the default continues for a period of 20 days, whether or
not such payment shall be prohibited by the provisions of
Article 9 hereof;
(ii) the Company defaults in the payment of all
or any part of the principal of (or premium, if any, on)
any Security when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise,
whether or not such payment shall be prohibited by the
provisions of Article 9 hereof;
(iii) the Company fails to comply with any of
its other agreements or covenants in, or provisions of,
the Securities or this Indenture, and such failure
continues for the period and after the notice specified
below;
<PAGE>
(iv) a final judgment or final judgments for
the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any
Subsidiary which remains undischarged and unbonded for a
period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all
such judgments (to the extent not paid or covered by
insurance as confirmed to the Company and the Trustee in
writing by the appropriate insurance carrier) exceeds
$5,000,000;
(v) (A) the entry by a court having jurisdiction
in the premises of (1) a decree or order for relief in respect of
the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or (2) a decree or order adjudging the Company
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company under any applicable Federal or State
law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or of all
or substantially all of its assets, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree
or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(B) the commencement by the Company of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or any
other case or proceeding to be adjudicated a bankrupt or insolvent,
or the consent by it to the entry of a decree or order for relief
in respect of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law,
or the consent by it to the filing of such petition or to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
the Company of all or substantially all of its assets or the taking
of corporate action by the Company in furtherance of any such
action, or the failure generally of the Company to pay its debts as
the same become due or the making by the Company of a general
assignment for the benefit of its creditors; or
<PAGE>
(vi) (A) the entry by a court having jurisdiction
in the premises of (1) a decree or order for relief in respect of
any Significant Subsidiary of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (2) a decree or
order adjudging any such Significant Subsidiary bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of any such Significant Subsidiary under any applicable
Federal or State law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
any such Significant Subsidiary or of all or substantially all of
its assets, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(B) the commencement by any Significant
Subsidiary of the Company of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of any such
Significant Subsidiary in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law,
or the consent by it to the filing of such petition or to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of
any such Significant Subsidiary or of all or substantially all of
its assets or the taking of corporate action by any such
Significant Subsidiary in furtherance of any such action, or the
failure generally of any such Significant Subsidiary to pay its
debts as the same become due or the making by any Significant
Subsidiary of a general assignment for the benefit of its
creditors; or
(vii) (A) (1) the appointment by the Federal
Deposit Insurance Corporation or the Board of Governors of the
Federal Reserve System (or other competent government agency having
primary regulatory authority over any Major Bank Subsidiary) under
any applicable Federal or State banking, insolvency or other
similar law now or hereafter in effect of a receiver, conservator
or other similar official for any Major Bank Subsidiary or for all
or substantially all of its assets or (2) the entry of a decree or
order in any case or proceeding under any applicable Federal or
State banking, insolvency or other similar law now or hereafter in
effect adjudging any Major Bank Subsidiary insolvent or bankrupt,
or appointing any receiver, conservator or other similar official
for any Major Bank Subsidiary or for all or substantially all of
its assets, or ordering the winding up or liquidation of its
affairs; or
<PAGE>
(B) (1) the filing by any Major Bank
Subsidiary with the Federal Deposit Insurance Company or the Board
of Governors of the Federal Reserve System (or other competent
government agency having primary regulatory authority over any
Major Bank Subsidiary) of a notice of voluntary liquidation or
other similar action under any applicable Federal or State banking,
insolvency or other similar law now or hereafter in effect or (2)
the commencement by any Major Banking Subsidiary of any case or
proceeding under any applicable Federal or State banking,
insolvency or other similar law now or hereafter in effect to be
adjudicated insolvent or bankrupt or seeking the appointment of a
receiver, conservator or other similar official for any Major Bank
Subsidiary or for all or substantially all of its assets, or the
consent by any Major Bank Subsidiary to the entry of a decree or
order in any case or proceeding under the Federal or State banking,
insolvency or other similar laws adjudging any Major Bank
Subsidiary insolvent or bankrupt, or appointing any receiver,
conservator or other similar official for any Major Bank Subsidiary
or for all or substantially all of its assets, or ordering the
winding up or liquidation of its affairs or the taking of any
corporate action by any Major Bank Subsidiary in furtherance of
such action.
A Default under clause (iii) of this Section 5.1 is not
an Event of Default until the Trustee notifies the Company in
writing, or the Holders of at least 25% in aggregate principal
amount of the Securities then outstanding notify the Company and
the Trustee in writing, of the Default, and the Company does not
cure the Default within 30 days after receipt of the notice. The
notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default." Such notice shall
be given by the Trustee if so requested in writing by the Holders
of at least 25% in aggregate principal amount of the Securities
then outstanding. Any notice required to be delivered by the
Trustee to the Company hereunder shall be given promptly after the
Trustee becomes aware of such Default or is requested by the
Holders to deliver such notice.
SECTION 5.2. Acceleration.
If an Event of Default specified in clause (v) or (vii)
of Section 5.1 occurs, the principal of and accrued interest on the
Securities shall become and be immediately due and payable without
any declaration or other act on the part of any Holder. The
Holders of at least a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee may
rescind an acceleration and its consequences if (i) all existing
Events of Default, other than the nonpayment of principal of or
interest on the Securities which have become due solely because of
the acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of
competent jurisdiction. No such waiver or rescission shall extend
to or shall affect any subsequent default or shall impair any right
consequent thereon.
<PAGE>
SECTION 5.3. Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or in
equity to collect the payment of principal of, premium, if any, or
interest on the Securities, to the extent that any of the foregoing
are then due and owing or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy hereunder shall
not impair the right or remedy or constitute a waiver thereof and
no single or partial exercise thereof precludes any other or
further exercise thereof or the exercise of any other right or
privilege. No right or remedy provided herein is exclusive of any
other right or remedy provided by law. All rights and remedies are
cumulative to the extent permitted by law.
SECTION 5.4. Waiver of Past Defaults.
Subject to Sections 5.2, 5.7 and 8.2, the Holders of at
least a majority in principal amount of the Securities then
outstanding by notice to the Trustee may waive on behalf of the
holders of all the Securities an existing Default and its
consequences, except a Default in the payment of the principal of,
premium, if any, or interest on any Security as specified in
clauses (i) or (ii) of Section 5.1. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of
this Indenture; but no such waiver shall extend to any subsequent
or other Default or impair any right consequent thereon.
SECTION 5.5. Control by Majority.
The Holders of at least a majority in aggregate principal
amount of the Securities then outstanding may direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction:
(a) that conflicts with law or this Indenture, (b) that the Trustee
determines may be unduly prejudicial to the rights of other
Securityholders or (c) that may involve the Trustee in personal
liability against which the Trustee is not indemnified to its
satisfaction.
<PAGE>
SECTION 5.6. Limitation on Suits.
No Holder of any Security shall have any right by virtue
or by availing itself of any provision of this Indenture to
institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this
Indenture, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official or for any other
remedy hereunder unless:
(i) the Holder gives to the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding make
a written request to the Trustee to institute such action
or proceeding in its own name as trustee hereunder;
(iii) such Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss,
liability, cost or expense to be incurred therein or
thereby;
(iv) the Trustee does not comply with such
request within 60 days after receipt of such notice,
request and the offer of indemnity;
(v) during such 60 day period the Holders of
at least a majority in principal amount of the Securities
then outstanding do not give the Trustee a direction
inconsistent with the request; and
(vi) no direction inconsistent with such
request shall have been given to the Trustee pursuant to
Section 5.5.
A Securityholder may not use this Indenture to prejudice
the rights of another Securityholder or to obtain or seek to obtain
a preference or priority over another Securityholder or to enforce
any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all
holders of Securities. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the
Trustee shall be entitled to such relief as can be given either at
law or in equity.
SECTION 5.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture,
except for the provisions of Article 9, the right of any Holder of
a Security to receive payment of principal of, premium, if any, or
interest on the Security on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
<PAGE>
SECTION 5.8. Collection Suit by Trustee.
If an Event of Default specified in Section 5.1(i) or
(ii) occurs and is continuing, the Trustee may in its own name or
as trustee of an express trust, institute any action or proceeding
at law or in equity against the Company or any other obligor upon
the Securities for the collection of the whole amount of principal,
premium, if any, and accrued interest remaining unpaid on the
Securities, together with interest on overdue principal and, to the
extent that such payment is lawful, interest on overdue premium, if
any, and installments of interest, in each case at the rate then
borne by the Securities, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel and prosecute any such
action or proceeding to judgment or final decree and enforce any
such judgment or final decree against the Company or any other
obligor upon the Securities and collect in the manner provided by
law out of the property of the Company or any other obligor upon
the Securities, wherever situated, the moneys adjudged or decreed
to be payable.
SECTION 5.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property
and shall be entitled and empowered to collect and receive any
moneys or other property payable or deliverable on any such claims
and to distribute the same, and any trustee, receiver, liquidator,
custodian or similar official in any such judicial proceeding is
hereby authorized by each Securityholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Securityholders, to pay to
the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 6.7
except as a result of negligence or bad faith. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or
consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Securityholder in any such proceeding.
<PAGE>
All rights of action and of asserting claims under this
Indenture, or under any of the Securities, may be enforced by the
Trustee without the possession of any of the Securities or the
production thereof in any trial or other proceedings relative
thereto, and any such action or proceedings instituted by the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the holders of the Securities.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee shall
be held to represent all the holders of the Securities, and it
shall not be necessary to make any holders of the Securities
parties to any such proceedings.
SECTION 5.10. Priorities.
If the Trustee collects any money pursuant to this
Article 5, it shall, subject to the provisions of Article 9, pay
out the money in the following order:
First: to the Trustee for amounts due under Section
6.7;
Second: in case the principal of the Securities shall
not have become and be then due and payable,
to the payment of interest in default in the
order of the maturity of the installments of
such interest, with interest upon the overdue
installments of interest at the same rate as
the rate of interest specified in the
Securities, such payments to be made ratably
to the person entitled thereto, without
discrimination or preference;
Third: in case the principal of the Securities shall
have become and shall be then due an payable,
to the payment of the whole amount then owing
and unpaid upon all the Securities for
principal and interest, with interest upon the
overdue principal, and upon overdue
installments of interest at the same rate as
the rate of interest specified in the
Securities; and in case such moneys shall be
insufficient to pay in full the whole amount
so due and unpaid upon the Securities, then to
the payment of such principal and interest,
without preference or priority of principal
over interest, or of interest over principal,
or of any installment of interest over any
other installment of interest, or of any
Security over any other Security, ratably to
the aggregate of such principal and accrued
and unpaid interest; and
<PAGE>
Fourth: to the Company or any other obligors on the
Securities, as their interests may appear, or
any other Person lawfully entitled thereto or
as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company,
may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 5.10.
SECTION 5.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in
its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made
by the party litigant. This Section 5.11 does not apply to a suit
by the Trustee, a suit by a Holder pursuant to Section 5.7, or a
suit by Holders of more than 10% in aggregate principal amount of
the Securities then outstanding.
ARTICLE 6
TRUSTEE
SECTION 6.1. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of
Default:
(1) The Trustee undertakes to perform only those
duties that are specifically set forth in this Indenture
or the TIA and no others, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee.
<PAGE>
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions delivered to the
Trustee by the Company pursuant to this Indenture and
conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture but need not confirm the
accuracy of mathematical computations.
(c) Notwithstanding anything to the contrary herein
contained, the Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section 6.1.
(2) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer, unless
it is proved that the Trustee was negligent in
ascertaining the pertinent facts.
(3) Except as otherwise provided in Section 6.1(a),
the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 5.5.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee
is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability.
The Trustee may refuse to perform any duty or exercise any right or
power unless it receives reasonable security or indemnity against
any loss, liability, cost or expense, including but not limited to
the legal fees and disbursements of its counsel.
(f) The Trustee shall not be obligated to pay interest
on any money received by it unless otherwise agreed in writing with
the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
The Trustee has no obligation to invest monies held by it hereunder
except pursuant to written instructions received by the Trustee and
signed by two officers of the Company.
<PAGE>
SECTION 6.2. Rights of Trustee.
(a) The Trustee may rely on any document believed by it
to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes or
omits to take in good faith and without negligence in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
and retained with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith and without negligence which
it reasonably believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel as to matters of
law shall be full and complete authorization and protection in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
(f) Unless otherwise specifically provided in the
Indenture, any demand, request, direction or notice from the
Company shall be sufficient if signed by an Officer of the Company.
(g) In the event an opinion of counsel is required to be
delivered pursuant to Section 2.6 at such time as the Trustee is
not also the Registrar, then such opinion of counsel shall also be
satisfactory to the Trustee.
SECTION 6.3. Individual Rights of Trustee.
The Trustee, or any agent of the Company or the Trustee,
in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 6.10 and 6.11.
SECTION 6.4. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities; it shall not be
accountable for the Company's use of the proceeds from the
Securities; it shall not be accountable for any money paid to the
Company, or upon the Company's direction, if made under and in
accordance with any provision of this Indenture; it shall not be
responsible for the use or application of any money received by any
Paying Agent other than the Trustee; and it shall not be
responsible for any statement of the Company in this Indenture or
any statement in the Securities other than its certificate of
authentication.
<PAGE>
SECTION 6.5. Notice of Defaults.
If a Default occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to Securityholders a notice
of the Default within 90 days after the occurrence thereof unless
such Default shall have been cured before the giving of such
notice, provided that except in the case of a Default in the
payment of the principal of or interest on any Security (including
any failure to make any mandatory redemption payment required
hereunder), the Trustee may withhold the notice if and so long as
the board of directors, executive committee or a trust committee of
directors and/or responsible officers of the Trustee in good faith
determines that withholding the notice is in the interests of
Securityholders.
SECTION 6.6. Reports by Trustee to Holders.
This Section 6.6 shall not be operative as part of this
Indenture unless and until this Indenture is qualified under the
TIA and, until such qualification, this Indenture shall be
construed as if this Section 6.6 were not contained herein. The
Company shall provide the Trustee with written notice as promptly
as practical, but in any event no later than 30 days before the
date (if any) on which this Indenture is expected to be qualified
under the TIA.
Each calendar year the Trustee, if required by the
provisions of TIA sec. 313(a), shall mail to Securityholders a brief
report dated as of such reporting date that complies with TIA sec.
313(a). The Trustee also shall comply with TIA sec. 313(b) and sec.
313(c).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the
SEC and each securities exchange, if any, on which the Securities
are listed. The Company shall notify the Trustee in writing when
the Securities are listed on any securities exchange.
SECTION 6.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, advances and
expenses incurred by it in connection with the performance of its
duties under this Indenture including reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
<PAGE>
The Company shall indemnify the Trustee against any loss,
liability, cost or expense incurred by it arising out of or in
connection with the performance of its duties under this Indenture,
except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend such claim and the Trustee
shall cooperate in such defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses
of such counsel.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through
negligence, willful misconduct or bad faith. The Company need not
pay for any settlement made by the Trustee without the Company's
consent. The Company will only withhold consent where in good
faith the Company believes there are reasonable grounds for
withholding consent.
The obligation of the Company under this Section 6.7 to
compensate the Trustee and to pay and reimburse the Trustee for
such expenses, disbursements and advances shall constitute
additional Indebtedness.
To secure the Company's payment obligations in this
Section, subject to the priorities set forth in Section 5.10
hereof, the Trustee shall have a Lien prior to the Securities on
all money or property held or collected by the Trustee, except that
held in trust to pay the principal of and interest on particular
Securities. Such obligations shall survive the satisfaction and
discharge of the Indenture.
When the Trustee incurs expenses or renders services
after an Event of Default specified in clause (v) and (vi) of
Section 5.1 occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration
under any bankruptcy law.
SECTION 6.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this
Section.
Subject to TIA sec. 310(b), the Trustee may resign and be
discharged from the trust hereby created by so notifying the
Company in writing, such resignation and discharge to become
effective as provided in the last paragraph of this Section. The
Holders of a majority in principal amount of the then outstanding
Securities may remove the Trustee by so notifying the Trustee and
the Company in writing. The Company may remove the Trustee if:
(i) the Trustee fails to satisfy the
requirements of Section 6.10;
<PAGE>
(ii) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect
to the Trustee under any bankruptcy, insolvency,
reorganization or other similar law;
(iii) a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official or
other public officer takes charge of the Trustee or its
property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
promptly appoint a successor Trustee by written instrument,
executed by the Board of Directors of the Company, one copy of
which instrument shall be delivered to the resigning or removed
Trustee and one copy to the successor Trustee. The Trustee shall
be entitled to payment of its fees and reimbursement of its
expenses while acting as Trustee.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the retiring
Trustee, the Company or the Holders of at least 10% in principal
amount of the then outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any
Securityholder who has been a Securityholder for at least 6 months,
fails to comply with Section 6.10, any Securityholder may petition
any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company.
Thereupon the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to all
Securityholders. A retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to
the Lien provided for in Section 6.7. Notwithstanding replacement
of the Trustee pursuant to this Section 6.8, the Company's
obligations under Section 6.7 shall continue for the benefit of the
retiring Trustee.
<PAGE>
SECTION 6.9. Successor Trustee or Agent by Merger, etc.
If the Trustee or an Agent consolidates, merges or
converts into, or transfers all or substantially all of its
corporate trust business to, another corporation, the successor
corporation without any further act shall be the successor Trustee
or any Agent, subject, inter alia, to the provisions of Section
6.10.
SECTION 6.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which
shall be a corporation organized and doing business under the laws
of the United States of America or of any state or territory
thereof or of the District of Columbia authorized under such laws
to exercise corporate trust powers, shall be subject to supervision
or examination by Federal or State authority and shall have a
combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition and shall
not be the Company or any Subsidiary or Affiliate of the Company.
This Indenture shall always have a Trustee who satisfies
the requirements of TIA sec. 310(a)(1). The Trustee is subject to and
will comply at all times with TIA sec. 310(b) whether or not this
Indenture is then qualified under the TIA.
SECTION 6.11. Preferential Collection of Claims Against the
Company.
The Trustee shall be subject to, and the Trustee shall at
all times comply with, TIA sec. 311(a), excluding any creditor
relationship listed in TIA sec. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA sec. 11(a) to the extent
indicated therein whether or not this Indenture is then qualified
under the TIA.
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.1. Termination of Company's Obligations.
The Securities shall not be callable or redeemable by the
Company. This Indenture shall cease to be of further effect
(except that the Company's obligations under Section 6.7 and the
Trustee's and Paying Agent's obligations under Section 7.3 shall
survive) when all outstanding Securities theretofore authenticated
and issued have been delivered (other than destroyed, lost or
stolen Securities which have not been replaced or paid) to the
<PAGE>
Trustee for cancellation and the Company has paid all sums payable
hereunder and under the Securities. In addition, the Company may
terminate all of its obligations under this Indenture, other than
its obligations under those Sections specifically noted below, at
any time within one year of the stated maturity of the Securities
if:
(1) (a) the Company irrevocably deposits in trust
with the Trustee cash or U.S. Government Obligations
(which shall not be callable or payable at the issuer's
option) sufficient (in an opinion set forth in an
Accountant's Certificate delivered by the Company to the
Trustee) to pay, or which at maturity will be sufficient
to pay, principal, premium, if any, and interest on the
Securities to and at maturity and to pay all other sums
payable by it hereunder, provided that the Trustee shall
have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the
payment of said principal, premium, if any, and interest
with respect to the Securities; and (b) provided such
deposit shall not cause the Trustee to have a conflicting
interest for purposes of the TIA, whether or not the
Indenture shall then be qualified under the TIA; and (c)
no Event of Default pursuant to clause (v), (vi) or (vii)
of Section 5.1 or event which with notice or lapse of
time would become an Event of Default pursuant to clause
(v), (vi) or (vii) of Section 5.1 shall have occurred and
be continuing on the date of such deposit or during the
period ending 123 days after such date; and (d) the
Company has delivered to the Trustee (i) either (x) a
ruling directed to the Trustee received from the Internal
Revenue Service to the effect that the Holders of the
Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of the Company's
exercise of its option under this Section 7.1 and will be
subject to Federal income tax in the same manner and at
the same times as would have been the case if such option
had not been exercised or (y) an Opinion of Counsel to
the same effect as the ruling described in clause (x)
accompanied by a ruling to that effect published by the
Internal Revenue Service and (ii) an Opinion of Counsel
to the effect that (x) the trust funds will not be
subject to any rights of holders of Senior Indebtedness
including without limitation those arising under Article
9 of this Indenture, and (y) after the passage of 123
days following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(2) the Company delivers to the Trustee an
Officers' Certificate stating that all of the provisions
of this Section 7.1 have been complied with, and an
Opinion of Counsel, reasonably satisfactory to the
Trustee, to the same effect; and
<PAGE>
(3) no Default shall have occurred and be
continuing on the date of such deposit.
Then, in such event, the obligations of the Company under this
Indenture shall cease to be of further effect (except as provided
in this paragraph) and the Trustee, on demand of the Company, shall
execute proper instruments acknowledging confirmation of and
discharge under this Indenture. The Company may make the deposit
only if Article 9 does not prohibit such payment. However, the
Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.13,
3.1, 3.2, 3.12, 6.7, 6.8, 7.1, 7.2 and 7.4 and the Trustee's and
Paying Agent's obligations hereunder, including under Section 7.3,
shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's and the Trustee's obligations in
Section 6.7 and the Trustee's and Paying Agent's obligations in
Section 7.3 shall survive. After such irrevocable deposit made
pursuant to this Section 7.1 and satisfaction of the other
conditions set forth in this Section 7.1, the Trustee upon the
written request signed by two Officers of the Company shall
acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay
principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or
before such payment date in such amounts as will provide the
necessary cash.
SECTION 7.2. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 7.1. It shall
apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the
Securities. Money and U.S. Government Obligations held in trust
shall not be subject to Article 9.
SECTION 7.3. Repayment to Company.
In connection with the satisfaction and discharge of this
Indenture, the Trustee and the Paying Agent shall promptly pay to
the Company upon written request any excess money or Securities
then held by them.
<PAGE>
The Trustee and the Paying Agent shall pay to the Company
upon written request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for
two years after the date upon which such payment shall have become
due; provided that the Company shall have first caused notice of
such payment to be mailed to each Securityholder entitled thereto
no less than 30 days prior to such repayment. After payment to the
Company, Securityholders entitled to the money must look to the
Company for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability
of the Trustee and such Paying Agent with respect to such money
shall cease. If any money is returned to the Company pursuant to
this Section 7.3, the Company agrees to be responsible for
compliance with the escheat laws of the State of New Jersey.
SECTION 7.4. Reinstatement.
If the Trustee or Paying Agent is unable to apply any
money in accordance with Section 7.2 by reason of any legal
proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 7.2 until such
time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 7.2; provided that, if the Company
has made any payment of principal of, premium, if any, or interest
on any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 8
AMENDMENTS
SECTION 8.1. Without Consent of Holders.
The Company and the Trustee may amend this Indenture or
the Securities without the consent of any Securityholder:
(i) to cure any ambiguity, defect or
inconsistency;
(ii) to comply with Section 4.1;
(iii) to provide for uncertificated Securities
in addition to or in place of certificated Securities;
(iv) to make any change that does not adversely
affect the rights hereunder of any Securityholder, except
changes that adversely affect the rights of any holders
of Senior Indebtedness under Article 9 or Sections 5.1,
5.2, or 5.9 unless the holders of such Senior
Indebtedness consent to the change; or
<PAGE>
(v) to comply with the TIA provided that, in the
case of clause (i) through (iv) above, inclusive, the
Company has delivered to the Trustee an Opinion of
Counsel stating that such change does not adversely
affect the rights of any Securityholder.
After an amendment or waiver under this Section 8.1 becomes
effective, the Company shall mail to Securityholders a notice
briefly describing the amendment or waiver.
The Company and the Trustee agree to amend this Indenture
to the extent required in connection with any registration of the
Securities or New Securities under the Securities Act and
qualification of this Indenture (or a similar indenture) under the
TIA pursuant to the Registration Rights Agreement to effectuate
such registration and qualification as provided in the Registration
Rights Agreement.
SECTION 8.2. With Consent of Holders.
Except as provided below and subject to Sections 2.8 and
2.9, the Company and the Trustee may amend this Indenture or the
Securities with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Securities.
Upon the written request of the Company signed by two Officers,
accompanied by a resolution of the Board of Directors of the
Company authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the
consent of the Securityholders as aforesaid, the Trustee, subject
to Section 8.6, shall join with the Company in the execution of
such supplemental indenture.
It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof. An amendment under this Section
may not make any change that adversely affects the rights of any
holders of Senior Indebtedness under Article 9 or Sections 5.1, 5.2
or 5.9 unless the holders of such Senior Indebtedness consent to
the change.
After an amendment or waiver under this Section 8.2
becomes effective, the Company shall mail to the Holder of each
Security affected thereby a notice briefly describing the amendment
or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture. The Holders of at
least a majority in principal amount of the Securities then
outstanding may waive compliance in a particular instance by the
Company with any provision of this Indenture or the Securities.
<PAGE>
Without the consent of each Securityholder affected,
however, an amendment or waiver under this Section may not:
(i) change the amount of Securities whose
Holders must consent to an amendment or waiver;
(ii) reduce the rate of or change the time for
payment of interest including, without limitation,
default interest and additional interest payable pursuant
to the Registration Rights Agreement on any Security;
(iii) reduce the principal of any Security or
change the time for payment thereof;
(iv) make any Security payable in money other
than that stated in the Security;
(v) make any change in Section 5.4, 5.7 or the
first or fourth paragraphs of this Section 8.2;
(vi) make any change in Article 9 that
adversely affects in any manner the rights of any
Securityholder; or
(vii) waive a Default in the payment of
principal of or interest on, or premium, if any, with
respect to, any Security.
SECTION 8.3. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall
be set forth in a supplemental indenture that complies with the TIA
as then in effect whether or not this Indenture is then qualified
under the TIA. The Trustee shall be entitled to receive and rely
upon an opinion of counsel as to whether any such supplemental
indenture complies with the TIA.
SECTION 8.4. Revocation and Effect of Consents.
(a) Until an amendment or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of
a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the
Trustee receives written notice of revocation before the date on
which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount of Securities have
consented to such amendment or waiver. An amendment or waiver
becomes effective upon receipt by the Trustee of such Officers'
Certificate and the written consents from the Holders of the
requisite percentage in principal amount of Securities.
<PAGE>
(b) The Company may, but shall not be obligated to, fix
a record date for the purpose of determining the Holders entitled
to consent to an amendment or waiver. If a record date is fixed,
then notwithstanding the second and third sentence of paragraph (a)
of this Section 8.4, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment or waiver or to
revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent to
an amendment or waiver shall be valid or effective, if granted more
than 120 days after such record date.
(c) After an amendment or waiver becomes effective, it
shall bind every Securityholder, unless it is of the type described
in clauses (i) through (vii) of Section 8.2. In such case, the
amendment or waiver shall bind each Holder who has consented to it
and every subsequent Holder that evidences the same debt as the
consenting Holder's security.
SECTION 8.5. Notation on or Exchange of Securities.
Upon the Company's written request, the Trustee shall
place an appropriate notation provided by the Company about an
amendment or waiver on any Security thereafter authenticated. The
Company in exchange for all Securities may issue, and the Trustee
shall authenticate, new Securities that reflect the amendment or
waiver.
SECTION 8.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment hereto or
supplemental indenture authorized pursuant to this Article 8 if the
amendment does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but
need not, sign it. In determining whether to sign such amendment
or supplemental indenture the Trustee shall be entitled to receive
and shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that
such amendment or supplemental indenture is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that
it will be valid and binding upon the Company in accordance with
its terms. The Company may not sign an amendment hereto or
supplemental indenture until the Board of Directors approves it.
<PAGE>
ARTICLE 9
SUBORDINATION
SECTION 9.1. Securities Subordinated to Senior Indebtedness.
Notwithstanding the provisions of Sections 5.2 and 5.3,
the Company covenants and agrees, and the Trustee and each Holder
of the Securities by his acceptance thereof (whether upon original
issue or upon transfer, assignment or exchange thereof) likewise
covenants and agrees, that all payments of the principal of,
premium, if any, and interest on, the Securities by the Company
shall be subordinated in accordance with the provisions of this
Article 9 to the prior payment in full, in cash or cash
equivalents, of all amounts payable under Senior Indebtedness.
SECTION 9.2. Priority and Payment Over of Proceeds in Certain
Events.
(a) Upon any payment or distribution of assets or
securities of the Company, as the case may be, of any kind or
character, whether in cash, property or securities, upon any disso-
lution or winding up or total or partial liquidation or reorgani-
zation of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all
amounts payable under Senior Indebtedness shall first be paid in
full in cash, or payment provided for in cash or cash equivalents,
before the Holders or the Trustee on behalf of the Holders shall be
entitled to receive any payment of principal of premium, if any, or
interest on the Securities or distribution of any assets or
securities. Before any payment may be made by the Company of the
principal of, and premium, if any, or interest on the Securities
upon any such dissolution or winding up or liquidation or reorgani-
zation, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee on their behalf
would be entitled, except for the provisions of this Article 9,
shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior
Indebtedness or their representatives or to the trustee under any
indenture under which the Senior Indebtedness may have been issued
to the extent necessary to pay all such Senior Indebtedness in full
after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness except that the
Securityholders would be entitled to receive securities that are
subordinated to Senior Indebtedness to at least the same extent as
the Securities.
(b) No direct or indirect payment by or on behalf of the
Company of principal of, premium, if any, or interest on the
Securities whether pursuant to the terms of the Securities or upon
<PAGE>
acceleration of otherwise shall be made and no Securities may be
acquired by the Company for cash or property if at the time of such
payment or acquisition there exists a default in the payment of all
or any portion of principal of, premium, if any, or interest on any
Senior Indebtedness when due and payable, and such default shall
not have been cured or waived or the benefits of this sentence
waived by or on behalf of the holders of such Senior Indebtedness.
(c) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, the Trustee or
any Holder shall have received any payment on account of the
principal of, premium, if any, or interest on the Securities (other
than as permitted by paragraphs (a) and (b) of this Section 9.2) at
a time when such payment is prohibited by this Section 9.2 and
before the principal or, premium, if any, and interest on Senior
Indebtedness is paid in full or provision made for such payment
then and in such event (subject to the provisions of Section 9.8)
such payment or distribution shall be received and held in trust
for the holders of Senior Indebtedness and, upon written notice
delivered within 30 days after such payment was received by the
Trustee, shall be paid over to the holders of such Senior
Indebtedness or the representative of the holders of such Senior
Indebtedness and pursuant to the directions of such
representatives, shall be paid over or delivered to the holders of
the Senior Indebtedness remaining unpaid, but only to the extent
necessary to pay in full in cash or cash equivalents the principal
of, and premium, if any, and interest on such Senior Indebtedness
in accordance with its terms after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
Nothing contained in this Article 9 shall limit the right
of the Trustee or the Holders of Securities to take any action to
accelerate the maturity of the Securities pursuant to Section 5.2
or to pursue any rights or remedies hereunder or otherwise
permitted by applicable law, subject to the rights under paragraphs
(a), (b) and (c) above of holders of Senior Indebtedness to receive
cash, property or securities otherwise payable or deliverable to
the Holders of the Securities.
Upon any payment or distribution of assets or securities
referred to in this Article 9, the Trustee and the Holders shall be
entitled to rely upon any order or decree of a court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending and upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person (excluding the Company) making any such payment or
distribution, delivered to the Trustee for the purpose of
ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 9.
<PAGE>
SECTION 9.3. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article 9 or elsewhere in this
Indenture shall prevent (i) the Company, except under the
conditions described in Section 9.2, from making payments at any
time for the purpose of making such payments of principal of,
premium, if any, and interest on the Securities in accordance with
the provisions of this Indenture and the Securities, or from
depositing with the Trustee any moneys for such payments, or (ii)
the application by the Trustee (subject to the conditions contained
in Section 9.2) of any moneys deposited with it for the purpose of
making such payments of principal of, premium, if any, and interest
on the Securities, to the Holders entitled thereto unless at least
one Business Day prior to the day upon which such payment would
otherwise (except for the prohibitions contained in Section 9.2)
become due and payable, the Trustee shall have received the written
notice provided for in Section 9.2(c) or in Section 9.9. The
Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the
Company.
SECTION 9.4. Rights of Holders of Senior Indebtedness Not to be
Impaired.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure
to act in good faith by any such holder, or by any noncompliance by
the Company, with the terms and provisions and covenants herein
regardless of any knowledge thereof any such holder may have or
otherwise be charged with.
The provisions of this Article 9 are intended to be for
the benefit of, and shall be enforceable directly by the holders of
the Senior Indebtedness, without any act or notice of acceptance
hereof or reliance hereon.
SECTION 9.5. Authorization to Trustee to Take Action to
Effectuate Subordination.
Each Holder of Securities by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate, as between
the holders of Senior Indebtedness and the Holders, the
subordination as provided in this Article 9 and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 9.6. Subrogation.
Upon the payment in full of all amounts payable under or
in respect of the Senior Indebtedness, the Holders shall be
subrogated equally and ratably to the rights of the holders of such
<PAGE>
Senior Indebtedness to receive payments or distributions of assets
of the Company made on such Senior Indebtedness until the
Securities shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to holders of such Senior
Indebtedness of any cash, property or securities to which Holders
of the Securities would be entitled except for the provisions of
this Article 9 and no payment over pursuant to the provisions of
this Article 9 to holders of such Senior Indebtedness by the
Holders, shall, as between the Company, its creditors other than
holders of such Senior Indebtedness and the Holders, be deemed to
be a payment by the Company to or on account of such Senior
Indebtedness, it being understood that the provisions of this
Article 9 are solely for the purpose of defining the relative
rights of the holders of such Senior Indebtedness, on the one hand,
and the Holders, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article
9 shall have been applied, pursuant to the provisions of this
Article 9, to the payment of all amounts payable under the Senior
Indebtedness, then and in such case, the Holders shall be entitled
to receive from the holders of such Senior Indebtedness at the time
outstanding any payments or distributions received by such holders
of Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of the Senior Indebtedness
in full.
SECTION 9.7. Obligations of Company Unconditional.
Nothing contained in this Article 9 or elsewhere in this
Indenture or in any Security is intended to or shall impair, as
between the Company and the Holders, the obligations of the
Company, which are absolute and unconditional, to pay to the
Holders the principal of, premium, if any, and interest on the
Securities as and when the same shall become due and payable in
accordance with their terms and the terms hereof or is intended to
or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or any Holder
from exercising all remedies otherwise permitted by applicable law
upon Default under this Indenture, subject to the rights, if any,
under this Article 9 of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
<PAGE>
SECTION 9.8. Article 10 Not a Bar to Events of Default.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any
provision of this Article 9 shall not be construed as preventing
the occurrence of an Event of Default under Section 5.1.
SECTION 9.9. Trustee Entitled to Assume Payment Not Prohibited
in Absence of Notice.
Neither the Trustee nor the Paying Agent shall at any
time be charged with the knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee
or the Paying Agent or the taking of any other action by the
Trustee, unless and until the Trustee or Paying Agent shall have
received written notice thereof from the Company or one or more
holders of Senior Indebtedness or from any trustee or agent
therefor; and, prior to the receipt of any such written notice, the
Trustee or Paying Agent shall be entitled to assume conclusively
that no such facts exist. Unless at least one Business Day prior
to the date on which by the terms of this Indenture any moneys are
to be deposited by the Company with the Trustee or any Paying Agent
(whether or not in trust) for any purpose (including, without
limitation, the payment of the principal premium, if any, or the
interest on any Security), the Trustee or Paying Agent shall have
received with respect to such moneys the written notice provided
for in the preceding sentence, the Trustee or Paying Agent shall
have full power and authority to receive such moneys and to apply
the same to the purpose for which they were received and shall not
be affected by any notice to the contrary which may be received by
it on or after such date. Nothing contained in this Section 9.9
shall limit the right of the holders of Senior Indebtedness to
recover payments as contemplated by Section 9.2. The Trustee shall
be entitled to rely on the delivery to it of a written notice by a
Person representing himself or itself to be a holder of Senior
Indebtedness (or a trustee on behalf of, or other representative
of, such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or a trustee on behalf of any
such holder.
SECTION 9.10. Right of Trustee to Hold Senior Indebtedness.
Subject to TIA sec. 310(b) and 311, the Trustee and any
Agent shall be entitled to all of the rights set forth in this
Article 9 in respect of any Senior Indebtedness at any time held by
it to the same extent as any other holder of such Senior
Indebtedness and nothing in this Indenture shall be construed to
deprive the Trustee or any Agent of any of its rights as such
holder.
<PAGE>
SECTION 9.11. Trustee not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and shall not be liable to
any such holder if it shall mistakenly pay over or distribute to
Securityholders or the Company or any other person monies or assets
to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article Nine or otherwise.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Trust Indenture Act Controls.
Notwithstanding any other provision of this Indenture, if
any provision of this Indenture limits, qualifies or conflicts with
another provision which would be deemed to be included in this
Indenture by the TIA if this Indenture were or shall become a
qualified Indenture under the TIA, the required provision of the
TIA shall control whether or not this Indenture is then so
qualified.
SECTION 10.2. Notices.
Any notice or communication to the Company or the Trustee
is duly given if in writing and delivered in person or transmitted
by first-class mail (registered or certified, return receipt
requested) or by telecopier (confirmed by first-class mail) or
overnight air courier guaranteeing next day delivery to the address
set forth below:
If to the Company:
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attention: Kenneth T. Neilson, President
Telecopy No.: 201-348-3493
If to the Trustee:
Summit Bank
367 Springfield Avenue
Summit, New Jersey 07901
Attention: Corporate Trust Department
Telecopy No.: (908) 522-0624
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication to a Securityholder shall be
mailed by first-class mail to his address shown on the register
kept the Registrar. Failure to mail a notice or communication to
a Securityholder or any defect in such notice or communication
shall not affect its sufficiency with respect to other
Securityholders.
<PAGE>
If a notice or communication is mailed or sent in the
manner provided above within the time prescribed, it is duly given,
whether or not the addressee receives it, except that notice to the
Trustee or the Company shall only be effective upon receipt thereof
by the Trustee or the Company.
If the Company mails a notice or communication to
Securityholders, it shall mail a copy to the Trustee and each Agent
at the same time.
SECTION 10.3. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA sec. 312(b)
with other Securityholders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA sec.
312(c), whether or not this Indenture is qualified under the TIA.
SECTION 10.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company shall
deliver to the Trustee:
(i) an Officer's Certificate (which shall
include the statements set forth in Section 10.5) stating
that, in the opinion of the signers, all conditions
precedent and covenants, compliance with which
constitutes a condition precedent, if any, provided for
in this Indenture relating to the proposed action or
inaction have been complied with; and
(ii) an Opinion of Counsel reasonably
satisfactory to the Trustee (which shall include the
statements set forth in Section 10.5) stating that, in
the opinion of such counsel, all such conditions
precedent and covenants, compliance with which
constitutes a condition precedent, if any, provided for
in this Indenture relating to the proposed action or
inaction have been complied with.
SECTION 10.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(i) a statement that the Person making such
certificate or opinion has read such covenant or
condition;
<PAGE>
(ii) a brief statement as to the nature and
scope of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(iii) a statement that, in the opinion of such
Person, he has made such examination or investigation as
is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(iv) a statement as to whether or not, in the
opinion of such Person, such condition or covenant has
been complied with.
SECTION 10.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a
meeting of Securityholders. The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions.
SECTION 10.7. Legal Holidays.
If a payment date is a Legal Holiday, payment may be made
on the next Business Day, and, except in the case of the date on
which the final payment of principal is to be made, no interest on
the amount payable on such payment date shall accrue for the
intervening period.
SECTION 10.8. Duplicate Originals.
The parties may sign any number of copies of this
Indenture. One signed copy is enough to prove this Indenture.
SECTION 10.9. Governing Law.
THIS INDENTURE AND EACH SECURITY SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS TO BE
PERFORMED WHOLLY IN THE STATE OF NEW JERSEY, WITHOUT GIVING EFFECT
TO THE CONFLICTS OF LAWS RULES THEREOF.
SECTION 10.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any Subsidiary.
Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.11. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the Trustee
in this Indenture shall bind its successor.
<PAGE>
SECTION 10.12. Severability.
In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
SECTION 10.13. No Recourse Against Others.
No director, officer, employee, stockholder, Subsidiary
or Affiliate, as such, of the Company shall have any liability for
any obligations of the Company under the Securities or this
Indenture. Each Securityholder by accepting a Security waives and
releases such liability. The waiver and release are part of the
consideration for the issue of the Securities.
SECTION 10.14. Table of Contents, Headings, etc.
The Table of Contents, Cross Reference Table and Headings
of the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 10.15. Counterpart Originals.
This Indenture may be signed in two or more counterparts.
Each signed copy shall be an original, but all of them together
represent the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed and, where appropriate, their
respective corporate seals to be hereunto affixed and attested, all
as of January 14, 1994.
Dated: January 14, 1994 HUBCO, INC.
By:s\KENNETH T. NEILSON
Dated: January 14, 1994 SUMMIT BANK
By:s\JOSEPH MATE
<PAGE>
EXHIBIT A-1
[Face of Security]
CUSIP No.
No. $ ____________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF HUBCO, INC. (THE "COMPANY") THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO
THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT IN A TRANSACTION COMPLYING WITH REGULATION S UNDER THE
SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 (IF AVAILABLE) OR RULE 145 UNDER THE
SECURITIES ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
SUBJECT IN THE CASE OF EACH OF CLAUSES (2), (3), (4), (5) AND (6)
ABOVE TO THE RECEIPT BY THE REGISTRAR OR CO-REGISTRAR OF A
CERTIFICATION OF THE TRANSFEROR TO SUCH EFFECT AND IN THE CASE OF EACH
OF CLAUSES (3), (4) AND (5) ABOVE TO THE DELIVERY TO THE TRANSFEREE OF
DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR IN ITS NOMINEE'S
NAME) ON THE BOOKS MAINTAINED BY THE REGISTRAR, AND IN THE CASE OF
CLAUSE (5) ABOVE TO RECEIPT OF AN OPINION (IN SUBSTANTIALLY THE FORM
OF EXHIBIT C TO THE INDENTURE REFERRED TO BELOW OR OTHERWISE
SATISFACTORY TO THE COMPANY AND THE REGISTRAR) OF COUNSEL EXPERIENCED
IN SECURITIES MATTERS (AND WHICH COUNSEL MAY BE AN EMPLOYEE OF THE
TRANSFEROR) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS IN ANY APPLICABLE STATE OF THE UNITED STATES.
HUBCO, INC.
7.75% SUBORDINATED DEBENTURE
DUE JANUARY 15, 2004
HUBCO, INC., a corporation organized and existing under the
laws of the State of New Jersey, promises to pay to ____________ or
its registered assigns, the principal sum of $______________ on
January 15, 2004.
Interest Payment Dates: January 15 and July 15 beginning July 15,
1994
Record Dates: January 1 and July 1
HUBCO, INC.
Dated: By: __________________________
By: __________________________
__________________________ (SEAL)
THE DEBENTURES ARE NOT DEPOSITS OF HUBCO, INC. OR OF ANY BANKING
SUBSIDIARY THEREOF AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER FEDERAL AGENCY.
<PAGE> A-1-2
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-
mentioned Indenture.
SUMMIT BANK, as Trustee
Dated:
By: _____________________
Authorized Signature
<PAGE> A-1-3
[Back of Security]
HUBCO, INC.
7.75% Subordinated Debenture due 2004
1. Interest. HUBCO, INC., a New Jersey corporation (the
"Company"), promises to pay interest on the principal amount of this
Security at the interest rate per annum shown above. The Company
shall pay interest semiannually on January 15 and July 15 of each year
(each an "Interest Payment Date"), commencing July 15, 1994. Interest
on the Securities shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January
14, 1994. The Company shall pay interest including interest that
accrues after or would accrue but for the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company to the extent that such interest is an
allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the U.S. Code on overdue principal at the rate then
borne by the Securities; it shall pay interest including interest that
accrues after or would accrue but for the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company to the extent that such interest is an
allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the U.S. Code on overdue premium, if any, and
installments of interest at the same rate to the extent legally
permitted. Interest shall be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on
this Security (except defaulted interest) to the Person who is the
registered holder of this Security at the close of business on the
Record Date immediately preceding the Interest Payment Date. Payments
of principal, premium, if any, and interest shall be made (i) upon
application to the Trustee by the Holder or Holders of at least U.S.
$500,000 in aggregate principal amount of definitive Securities not
later than ten days prior to the relevant Record Date or date of
maturity, by wire transfer in immediately available funds to a U.S.
dollar account maintained and designated to the Trustee by such Holder
or Holders with a bank in the United States and (ii) by check mailed
to the Holder's registered address if no application is made on a
timely basis pursuant to (i) above. The holder must surrender this
Security at the office of the Paying Agent to collect payments of
principal and premium, if any. The Company shall pay principal,
premium, if any, and interest in money of the United States of America
that at the time of payment is legal tender for payment of public and
private debts. If a payment date is a Legal Holiday, payment may be
made on the next Business Day, and, except on the case of the date on
which the final payment of principal is made, no interest on the
amount payable on such payment date shall accrue for the intervening
period.
<PAGE> A-1-4
3. Paying Agent and Registrar. Initially, the Trustee
shall act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-registrar and shall provide notice of
any such change to each Securityholder. The Company or any of its
Subsidiaries or Affiliates may act in any such capacity.
4. Indenture; Limitations. This Security is one of the
Securities issued by the Company under an Indenture dated as of
January 14, 1994 (the "Indenture") between the Company and Summit Bank
(the "Trustee"). The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. sec. 77aaa-77bbbb) (the "TIA") as
amended and in effect on the date of the Indenture or, if this
Indenture is qualified under the TIA, from and after the date of such
qualification, the TIA as amended and in effect at the date of
qualification. The Securities are subject to all such terms, the
description herein of the rights of the Holder of this Security is
qualified in its entirety by the provisions of the Indenture and
Securityholders are referred to the Indenture and the TIA for a
statement of such terms. The Securities are general unsecured
obligations of the Company and limited to $25,000,000 in aggregate
principal amount. The Indenture imposes certain limitations on the
ability of the Company or the Trustee, as the case may be, to make
payments in respect of the Securities under certain circumstances.
Capitalized terms used in this Security and not defined in this
Security shall have the meanings set forth in the Indenture.
5. Denominations, Transfer, Exchange. The Securities
initially were issued in global form. Such global security represents
such of the outstanding Securities as shall be specified therein or
endorsed thereon in accordance with the Indenture. The Securities are
in registered or global form without coupons and only in denominations
of $100,000 and integral multiples of $100,000. The transfer of
Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted
by the Indenture. In addition, a Security presented or surrendered
for registration of transfer or exchange for another Security must be
accompanied by a certification in the form provided in the Indenture
and in the case of a transfer of a Security in reliance on an
exemption from the registration requirements of the Securities Act,
other than Rule 144A, 144 or 145 or Regulation S, an opinion of
counsel experienced in securities matters (and which counsel may be an
employee of the transferor) in the form provided in the Indenture or
otherwise satisfactory to the Company and the Registrar.
6. Persons Deemed Owners. The registered holder of a
Security may be treated as its owner for all purposes.
7. Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years after the date upon which
<PAGE> A-1-5
such payment shall have become due; provided that the Company shall
have first caused notice of such payment to be mailed to each
Securityholder entitled thereto no less than 30 days prior to such
repayment, the Trustee and the Paying Agent shall pay the money back
to the Company at its request. After that, Securityholders entitled
to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
8. Discharge Prior to Maturity. The Securities shall not
be callable or redeemable by the Company. If within one year of the
stated maturity of the Securities the Company deposits with the
Trustee cash or U.S. Government Obligations (which shall not be
callable or payable at the issuer's option) sufficient (in an opinion
set forth in an Accountant's Certificate delivered by the Company to
the Trustee) to pay principal of, premium, if any, and accrued
interest on the Securities to and at maturity, and all other amounts
payable under the Indenture, the Company shall be discharged from the
Indenture and the Securities, except for certain sections thereof and
subject to certain conditions.
the Indenture or the Securities may be amended with the consent of the
holders of at least a majority in principal amount of the then
outstanding Securities, and any existing default may be waived with
the consent of the holders of a majority in principal amount of the
then outstanding Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to cure
any ambiguity, defect or inconsistency, to provide for the assumption
of the obligations of the Company under the Indenture by a successor
corporation to the extent permitted under the Indenture, to provide
for uncertificated Securities in addition to or in place of
certificated Securities, to make any change that does not adversely
affect the rights of any Securityholder, except certain changes that
adversely affect rights of any holders of Senior Indebtedness or to
comply with the TIA.
10. Subordination. The Securities are subordinated in
right of payment, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness (as
defined in the Indenture) of the Company whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Securityholder by his acceptance hereof agrees to be
bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such
purpose.
11. Defaults and Remedies. An Event of Default is: default
for 20 days in payment of interest on the Securities; default in
payment of all or any part of principal or premium, if any, on the
<PAGE> A-1-6
Securities when due at maturity, upon acceleration or otherwise;
failure by the Company for the period specified in the Indenture after
notice to it to perform certain covenants and to comply with any of
its other agreements in the Indenture or the Securities; certain final
judgments which remain undischarged; certain events of bankruptcy or
insolvency; and certain other events. If an Event of Default due to
certain events of bankruptcy or insolvency as described in the
Indenture occurs and is continuing, the principal of and accrued
interest on the Securities shall become and be due and payable
immediately. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Company
must furnish annual and quarterly compliance certificates to the
Trustee.
12. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company, its Subsidiaries
or its Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer,
employee or shareholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or
the Indenture. Each Securityholder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
14. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
15. Abbreviation. Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
16. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the
Securities as a convenience to the holders of such Securities. No
representation is made as to the accuracy of such numbers as printed
on the Securities, and reliance may be placed only on the other
identification numbers printed thereon.
<PAGE> A-1-7
17. Legend Required. Except as otherwise provided in the
Indenture, each certificate evidencing the Securities shall bear a
legend in substantially the form set forth on the face of this
Security.
18. Registration Rights Agreement. The Securities are
issued subject to the Registration Rights Agreement. As provided in
the Registration Rights Agreement, the Company is obligated on or
prior to a date (the "Additional Interest Date") that is 180 days
after the date of issuance of the Securities (the "Closing Date") (i)
to file and cause to become effective with the SEC a registration
statement on an appropriate form (the "Exchange Registration
Statement") with respect to a proposed offer (the "Registered Exchange
Offer") to the holders of the Securities, and (ii) to commence the
Registered Exchange Offer and cause the same to remain open for a
period of not less than the period required under applicable Federal
and state law, to provide the Securityholders the opportunity to
exchange any and all of the Securities for a like aggregate principal
amount of debt securities of the Company that are substantially
identical to the Securities. If the Exchange Registration Statement
shall not have been filed and become effective and the Registered
Exchange Offer commenced on or before the Additional Interest Date,
then on that date and thereafter interest on the Securities shall be
increased by one percent (1.00%) per annum. Such additional interest
shall cease to accrue on the date on which the Exchange Registration
Statement is filed and declared effective and a Registered Exchange
Offer commenced or, in certain circumstances, a shelf registration
statement is filed and has been declared effective pursuant to the
Registration Rights Agreement. This description of the Registration
Rights Agreement is only a summary and is qualified in its entirety by
reference to the detailed provisions in the Registration Rights
Agreement.
<PAGE> A-1-8
ASSIGNMENT FORM
To assign this Debenture, fill in the form below and have your
signature guaranteed:
For value received, I or we assign and transfer this Debenture to
_________________________________________________________________
(Insert assignee's social security or tax I.D. No.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code) and
_________________________________________________________________
_________________________________________________________________
irrevocably appoint [______________] agent to transfer this Debenture
on the books of the Company. The agent may substitute another to act
for him.
Date: ___________ Your Signature: _________________________
(Sign exactly as your name
appears in the Debenture)
Signature Guaranteed: ___________________________________________
<PAGE> EXHIBIT A-2
CUSIP No. 404382AB9
No. R-1 [Face of Security] $25,000,000
Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred
except as a whole by the Depository to a nominee of the Depository or
by a nominee of the Depository to the Depository or another nominee of
the Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository. Unless this
certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York)
("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such
other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof,
Cede & Co., has an interest herein.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF HUBCO, INC. (THE "COMPANY") THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO
THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT IN A TRANSACTION COMPLYING WITH REGULATION S UNDER THE
SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN
ACCORDANCE WITH RULE 144 (IF AVAILABLE) OR RULE 145 UNDER THE
SECURITIES ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
SUBJECT IN THE CASE OF EACH OF CLAUSES (2), (3), (4), (5) AND (6)
ABOVE TO THE RECEIPT BY THE REGISTRAR OR CO-REGISTRAR OF A
CERTIFICATION OF THE TRANSFEROR TO SUCH EFFECT AND IN THE CASE OF EACH
OF CLAUSES (3), (4) AND (5) ABOVE TO THE DELIVERY TO THE TRANSFEREE OF
DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR IN ITS NOMINEE'S
NAME) ON THE BOOKS MAINTAINED BY THE REGISTRAR, AND IN THE CASE OF
CLAUSE (5) ABOVE TO RECEIPT OF AN OPINION (IN SUBSTANTIALLY THE FORM
OF EXHIBIT C TO THE INDENTURE REFERRED TO BELOW OR OTHERWISE
SATISFACTORY TO THE COMPANY AND THE REGISTRAR) OF COUNSEL EXPERIENCED
IN SECURITIES MATTERS (AND WHICH COUNSEL MAY BE AN EMPLOYEE OF THE
TRANSFEROR) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS IN ANY APPLICABLE STATE OF THE UNITED STATES.
HUBCO, INC.
7.75% SUBORDINATED DEBENTURE
DUE JANUARY 15, 2004
HUBCO, INC., a corporation organized and existing under the
laws of the State of New Jersey, promises to pay to Cede & Co. or its
registered assigns, the principal sum of Twenty-five Million Dollars
or such amount as shall be the outstanding principal amount hereof
after (i) subtracting the aggregate principal amount of any definitive
Securities issued upon transfer of or in exchange for a portion or
portions hereof and (ii) adding the aggregate principal amount of any
definitive Securities cancelled upon transfer or exchange for a
resulting portion or portions hereof on January 15, 2004.
Interest Payment Dates: January 15 and July 15 beginning July 15,
1994
Record Dates: January 1 and July 1
HUBCO, INC.
Dated: January ___, 1994 By: __________________________
By: __________________________
(SEAL)
<PAGE> A-2-2
THE DEBENTURES ARE NOT DEPOSITS OF HUBCO, INC. OR OF ANY BANKING
SUBSIDIARY THEREOF AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER FEDERAL AGENCY.
<PAGE> A-2-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-
mentioned Indenture.
SUMMIT BANK, as Trustee
Dated: ________________, 1994
By: _____________________
Authorized Signature
<PAGE> A-2-4
[Back of Security]
HUBCO, INC.
7.75% Subordinated Debenture due 2004
1. Interest. HUBCO, INC., a New Jersey corporation (the
"Company"), promises to pay interest on the principal amount of this
Security at the interest rate per annum shown above. The Company
shall pay interest semiannually on January 15 and July 15 of each year
(each an "Interest Payment Date"), commencing July 15, 1994. Interest
on the Securities shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from January
14, 1994. The Company shall pay interest including interest that
accrues after or would accrue but for the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company to the extent that such interest is an
allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the U.S. Code on overdue principal at the rate then
borne by the Securities; it shall pay interest including interest that
accrues after or would accrue but for the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company to the extent that such interest is an
allowed claim enforceable against the debtor in a bankruptcy case
under Title 11 of the U.S. Code on overdue premium, if any, and
installments of interest at the same rate to the extent legally
permitted. Interest shall be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on
this Security (except defaulted interest) to the Person who is the
registered holder of this Security at the close of business on the
Record Date immediately preceding the Interest Payment Date. This
being the Global Security (as defined in the Indenture referred to
below) deposited with DTC acting as depositary and registered in the
name of Cede & Co. ("Cede"), a nominee of DTC, Cede, as holder of
record of this Global Security shall be entitled to receive payments
of principal and interest by wire transfer of immediately available
funds to a U.S. dollar account maintained by Cede with a bank in the
United States. The holder must surrender this Security at the office
of the Paying Agent to collect payments of principal and premium, if
any. The Company shall pay principal, premium, if any, and interest
in money of the United States of America that at the time of payment
is legal tender for payment of public and private debts. If a payment
date is a Legal Holiday, payment may be made on the next Business Day,
and, except on the case of the date on which the final payment of
principal is made, no interest on the amount payable on such payment
date shall accrue for the intervening period.
3. Paying Agent and Registrar. Initially, the Trustee
shall act as Paying Agent and Registrar. The Company may change any
Paying Agent, Registrar or co-registrar and shall provide notice of
any such change to each Securityholder. The Company or any of its
Subsidiaries or Affiliates may act in any such capacity.
<PAGE> A-2-5
4. Indenture; Limitations. This Security is one of the
Securities issued by the Company under an Indenture dated as of
January 14, 1994 (the "Indenture") between the Company and Summit Bank
(the "Trustee"). The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. sec. 77aaa-77bbbb) (the "TIA") as
amended and in effect on the date of the Indenture or, if this
Indenture is qualified under the TIA, from and after the date of such
qualification, the TIA as amended and in effect at the date of
qualification. The Securities are subject to all such terms, the
description herein of the rights of the Holder of this Security is
qualified in its entirety by the provisions of the Indenture and
Securityholders are referred to the Indenture and the TIA for a
statement of such terms. The Securities are general unsecured
obligations of the Company and limited to $25,000,000 in aggregate
principal amount. The Company irrevocably undertakes to the holder
hereof to exchange this Global Security in accordance with the terms
of the Indenture in whole or in part without charge upon request of
such holder for definitive Securities upon delivery hereof to the
Registrar together with any certificates, letters or writings required
in Section 2.6 of the Indenture. Upon any exchange or transfer of all
or a portion of this Global Security for definitive Securities, or
upon any exchange or transfer of definitive Securities for an interest
in this Global Security, in accordance with the terms of the
Indenture, this Global Security shall be endorsed to reflect the
change of the principal amount evidenced hereby as provided for in
Section 2.6(g) of the Indenture. The Indenture imposes certain
limitations on the ability of the Company or the Trustee, as the case
may be, to make payments in respect of the Securities under certain
circumstances. Capitalized terms used in this Security and not
defined in this Security shall have the meanings set forth in the
Indenture.
5. Denominations, Transfer, Exchange. This global
security represents such of the outstanding Securities as shall be
specified herein or endorsed hereon in accordance with the Indenture.
The aggregate amount of outstanding Securities represented hereby may
from time to time be reduced to reflect exchanges. The Securities
initially were issued in global form. The Securities are in
registered or global form without coupons and only in denominations of
$100,000 and integral multiples of $100,000. The transfer of
Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted
by the Indenture. In addition, a Security presented or surrendered
for registration of transfer or exchange for another Security must be
accompanied by a certification in the form provided in the Indenture
and in the case of a transfer of a Security in reliance on an
exemption from the registration requirements of the Securities Act,
other than Rule 144A, 144 or 145 or Regulation S, an opinion of
counsel experienced in securities matters (and which counsel may be an
employee of the transferor) in the form provided in the Indenture or
otherwise satisfactory to the Company and the Registrar.
<PAGE> A-2-6
6. Persons Deemed Owners. The registered holder of a
Security may be treated as its owner for all purposes.
7. Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years after the date upon which
such payment shall have become due; provided that the Company shall
have first caused notice of such payment to be mailed to each
Securityholder entitled thereto no less than 30 days prior to such
repayment, the Trustee and the Paying Agent shall pay the money back
to the Company at its request. After that, Securityholders entitled
to the money must look to the Company for payment unless an abandoned
property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
8. Discharge Prior to Maturity. The Securities shall not
be callable or redeemable by the Company. If within one year of the
stated maturity of the Securities the Company deposits with the
Trustee cash or U.S. Government Obligations (which shall not be
callable or payable at the issuer's option) sufficient (in an opinion
set forth in an Accountant's Certificate delivered by the Company to
the Trustee) to pay principal of, premium, if any, and accrued
interest on the Securities to and at maturity, and all other amounts
payable under the Indenture, the Company shall be discharged from the
Indenture and the Securities, except for certain sections thereof and
subject to certain conditions.
9. Amendments and Waivers. Subject to certain exceptions,
the Indenture or the Securities may be amended with the consent of the
holders of at least a majority in principal amount of the then
outstanding Securities, and any existing default may be waived with
the consent of the holders of a majority in principal amount of the
then outstanding Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to cure
any ambiguity, defect or inconsistency, to provide for the assumption
of the obligations of the Company under the Indenture by a successor
corporation to the extent permitted under the Indenture, to provide
for uncertificated Securities in addition to or in place of
certificated Securities, to make any change that does not adversely
affect the rights of any Securityholder, except certain changes that
adversely affect rights of any holders of Senior Indebtedness or to
comply with the TIA.
10. Subordination. The Securities are subordinated in
right of payment, in the manner and to the extent set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness (as
defined in the Indenture) of the Company whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Securityholder by his acceptance hereof agrees to be
bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such
purpose.
<PAGE> A-2-7
11. Defaults and Remedies. An Event of Default is: default
for 20 days in payment of interest on the Securities; default in
payment of all or any part of principal or premium, if any, on the
Securities when due at maturity, upon acceleration or otherwise;
failure by the Company for the period specified in the Indenture after
notice to it to perform certain covenants and to comply with any of
its other agreements in the Indenture or the Securities; certain final
judgments which remain undischarged; certain events of bankruptcy or
insolvency; and certain other events. If an Event of Default due to
certain events of bankruptcy or insolvency as described in the
Indenture occurs and is continuing, the principal of and accrued
interest on the Securities shall become and be due and payable
immediately. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture
or the Securities. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Company
must furnish annual and quarterly compliance certificates to the
Trustee.
12. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company, its Subsidiaries
or its Affiliates, as if it were not Trustee.
13. No Recourse Against Others. A director, officer,
employee or shareholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or
the Indenture. Each Securityholder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
14. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
15. Abbreviation. Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as:
<PAGE> A-2-8
TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants
in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the
Securities as a convenience to the holders of such Securities. No
representation is made as to the accuracy of such numbers as printed
on the Securities, and reliance may be placed only on the other
identification numbers printed thereon.
17. Legend Required. Except as otherwise provided in the
Indenture, each certificate evidencing the Securities shall bear a
legend in substantially the form set forth on the face of this
Security.
18. Registration Rights Agreement. The Securities are
issued subject to the Registration Rights Agreement. As provided in
the Registration Rights Agreement, the Company is obligated on or
prior to a date (the "Additional Interest Date") that is 180 days
after the date of issuance of the Securities (the "Closing Date") (i)
to file and cause to become effective with the SEC a registration
statement on an appropriate form (the "Exchange Registration
Statement") with respect to a proposed offer (the "Registered Exchange
Offer") to the holders of the Securities, and (ii) to commence the
Registered Exchange Offer and cause the same to remain open for a
period of not less than the period required under applicable Federal
and state law, to provide the Securityholders the opportunity to
exchange any and all of the Securities for a like aggregate principal
amount of debt securities of the Company that are substantially
identical to the Securities. If the Exchange Registration Statement
shall not have been filed and become effective and the Registered
Exchange Offer commenced on or before the Additional Interest Date,
then on that date and thereafter interest on the Securities shall be
increased by one percent (1.00%) per annum. Such additional interest
shall cease to accrue on the date on which the Exchange Registration
Statement is filed and declared effective and a Registered Exchange
Offer commenced or, in certain circumstances, a shelf registration
statement is filed and has been declared effective pursuant to the
Registration Rights Agreement. This description of the Registration
Rights Agreement is only a summary and is qualified in its entirety by
reference to the detailed provisions in the Registration Rights
Agreement.
<PAGE> A-2-9
ASSIGNMENT FORM
To assign this Debenture, fill in the form below and have your
signature guaranteed:
For value received, I or we assign and transfer this Debenture to
_________________________________________________________________
(Insert assignee's social security or tax I.D. No.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code) and
_________________________________________________________________
_________________________________________________________________
irrevocably appoint [______________] agent to transfer this Debenture
on the books of the Company. The agent may substitute another to act
for him.
Date: ___________ Your Signature: _________________________
(Sign exactly as your name
appears in the Debenture)
Signature Guaranteed: ___________________________________________
<PAGE> A-2-10
SCHEDULE OF EXCHANGES FOR DEFINITIVE SECURITIES
_______________________________________________
The following exchanges of a part of this Global Security for
definitive Securities have been made:
Principal Signature
Amount of Amount of Amount of of
decrease in increase in this Global authorized
Principal Principal Security officer of
Amount of Amount of following Trustee or
Date of this Global this Global such decrease Securities
Exchange Security Security (or increase) custodian
<PAGE> EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF SECURITIES
Re: 7.75% Subordinated Debentures due 2004 of Hubco, Inc. (the
"Securities")
This Certificate relates to $_______ principal amount of
Securities held in * ____book-entry or * ____ definitive form by the
undersigned (the "Transferor").
The Transferor*:
has requested the Registrar or co-registrar by written order
to deliver in exchange for its beneficial interest in the Global
Security held by the depository a Security or Securities in
definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
has requested the Registrar or co-registrar by written order
to register $_________ (U.S.) principal amount of Securities which are
held in the form of definitive Securities in the name of the
undersigned and which have been delivered to the Registrar or co-
registrar for exchange of such Securities for a beneficial interest in
the Global Security. In connection with such request and in respect
of such Securities, the Transferor does hereby certify that it is a
"qualified institutional buyer" as defined below.
has requested the Registrar or co-registrar by written order
to exchange or register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify as follows:*
Upon registration of such transfer, each beneficial owner of
the Securities will be a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")), and each such person has been advised that the
Securities have been resold, pledged or otherwise transferred to it in
reliance upon Rule 144A;
Each person in whose name the Securities are to be
registered upon transfer (or, in the case of a transfer to a nominee,
each beneficial owner of such Securities) has been advised that such
notes have been resold, pledged or otherwise transferred to it in
reliance upon Regulation S under the Securities Act, and each such
person has been advised and has confirmed to the Transferor that the
sale, pledge or other transfer has been made in compliance with the
provisions of Regulation S and the address of such person is an
address outside the United States (as defined in Regulation S);
<PAGE> A-2-12
Such Security is being transferred pursuant to Rule 144 or
Rule 145 under the Securities Act or pursuant to an effective
registration statement under the Securities Act;
Such Security is being transferred in reliance on an
exemption from the registration requirements of the Securities Act
other than the exemptions specified above. An opinion (in
substantially the form of Exhibit C to the Indenture or otherwise
satisfactory to the Company and the Registrar) of counsel experienced
in securities matters (which counsel may be an employee of the
transferor), to the effect that such transfer does not require
registration under the Securities Act and is in compliance with any
applicable securities laws of the applicable state, accompanies this
Certificate.
___________________________
[INSERT NAME OF TRANSFEROR]
By:
Date:
* Check applicable box in the case of a transfer of securities.
<PAGE> EXHIBIT C
[FORM OF OPINION OF COUNSEL]
[Letterhead of Counsel]
[Date]
Hubco, Inc.
3100 Bergenline Avenue
Union City, NJ 07087
[__________________],
as Registrar
[__________________],
[__________________],
Re: $ 25,000,000 Principal Amount of 7.75%
Subordinated Debentures due 2004 of HUBCO, Inc.
Gentlemen:
[Name of transferor] has requested that we deliver this opinion
to you in connection with the transfer (the "Transfer") to [name of
transferee] (the "Transferee") of the above-referenced debentures (the
"Debentures") of Hubco, Inc.
In connection with this opinion, we have relied upon a
certificate of an officer of the Transferee, a copy of which is
annexed hereto, and have made such other investigation as we deem
necessary or appropriate to enable us to render the opinion set forth
below.
On the basis of the foregoing and in reliance thereon, and
assuming that the Debentures issued to the Transferee in connection
with the Transfer each contain a legend stating that the Debentures
have not been registered under the Securities Act of 1933, as amended
(the "Act"), and may not be sold or transferred in the absence of
registration or an exemption therefrom under said Act, we are of the
opinion that the Transfer does not require registration under the Act
and the Indenture pursuant to which the Debentures have been issued is
not required to be qualified under the Trust Indenture Act of 1939, as
amended.
Our opinion herein is limited to United States federal law and
the blue sky laws of [ ] and we assume no responsibility as
to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction. This opinion is furnished by us solely for
your benefit, and is not to be otherwise used, circulated or relied
upon without our express written consent.
Very truly yours,
<PAGE> CROSS-REFERENCE TABLE
HUBCO, INC.
Trust Indenture
Act Section Indenture
sec.310(a)(1) 6.10
(a)(2) 6.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 6.8; 6.10; 9.10
(c) Not Applicable
sec.311(a) 6.11
(b) 6.11
(c) Not Applicable
sec.312(a) 2.5
(b) 10.3
(c) 10.3
sec.313(a) 6.6
(b)(1) Not Applicable
(b)(2) 6.6
(c) 6.6; 10.2
(d) 6.6
sec.314(a) 3.9; 10.2
(b) Not Applicable
(c)(1) 10.4
(c)(2) 10.4
(c)(3) Not Applicable
(d) Not Applicable
(e) 10.5
(f) 3.8
sec.315(a) 6.1(b)
(b) 6.5
(c) 6.1
(d) 6.1
(e) 5.11
sec.316(a)(last sentence) 2.8
(a)(l)(A) 5.5
(a)(l)(B) 5.4
(a)(2) Not Applicable
(b) 5.7
sec.317(a)(1) 5.6
(a)(2) 5.6
(b) 2.4
sec.318(a) 10.1
___________
Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE> TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.. . . . . . . . . . . . . . . . . . . . .1
SECTION 1.2. Incorporation by Reference of Trust Indenture Act.. .7
SECTION 1.3. Rules of Construction.. . . . . . . . . . . . . . . .7
ARTICLE 2
THE SECURITIES
SECTION 2.1. Form and Dating.. . . . . . . . . . . . . . . . . . .8
SECTION 2.2. Execution and Authentication. . . . . . . . . . . . .8
SECTION 2.3. Registrar and Paying Agent. . . . . . . . . . . . . 10
SECTION 2.4. Paying Agent to Hold Money in Trust.. . . . . . . . 11
SECTION 2.5. Securityholder Lists. . . . . . . . . . . . . . . . 11
SECTION 2.6. Registration of Transfer and Exchange.. . . . . . . 11
SECTION 2.7. Replacement Securities. . . . . . . . . . . . . . . 16
SECTION 2.8. Outstanding Securities. . . . . . . . . . . . . . . 16
SECTION 2.9. Treasury Securities.. . . . . . . . . . . . . . . . 17
SECTION 2.10. Temporary Securities. . . . . . . . . . . . . . . . 17
SECTION 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . 18
SECTION 2.12. CUSIP Numbers.. . . . . . . . . . . . . . . . . . . 18
SECTION 2.13. Defaulted and Additional Interest.. . . . . . . . . 18
ARTICLE 3
COVENANTS
SECTION 3.1. Payment of Securities.. . . . . . . . . . . . . . . 19
SECTION 3.2. Maintenance of Office or Agency.. . . . . . . . . . 20
SECTION 3.3. Maintenance and Inspection of Books and Records . . 20
SECTION 3.4. Corporate Existence.. . . . . . . . . . . . . . . . 21
SECTION 3.5. Compliance with Laws. . . . . . . . . . . . . . . . 21
SECTION 3.6. No Violation or Contravention. . . . . . . . . . . 22
SECTION 3.7. Notice of Defaults. . . . . . . . . . . . . . . . . 22
SECTION 3.8. Compliance Certificate. . . . . . . . . . . . . . . 23
SECTION 3.9. SEC Reports.. . . . . . . . . . . . . . . . . . . . 23
SECTION 3.10. Waiver of Stay, Extension or Usury Laws.. . . . . . 23
SECTION 3.11. Payment of Taxes and Other Claims.. . . . . . . . . 24
SECTION 3.12. Maintenance of Properties and Insurance.. . . . . . 24
SECTION 3.13. Liquidation.. . . . . . . . . . . . . . . . . . . . 25
SECTION 3.14. Information.. . . . . . . . . . . . . . . . . . . . 25
ARTICLE 4
MERGER, ETC.
SECTION 4.1. When Company May Merge, etc.. . . . . . . . . . . . 26
SECTION 4.2. Successor Corporation Substituted.. . . . . . . . . 26
<PAGE> ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.1. Events of Default.. . . . . . . . . . . . . . . . . 27
SECTION 5.2. Acceleration. . . . . . . . . . . . . . . . . . . . 30
SECTION 5.3. Other Remedies. . . . . . . . . . . . . . . . . . . 30
SECTION 5.4. Waiver of Past Defaults.. . . . . . . . . . . . . . 30
SECTION 5.5. Control by Majority.. . . . . . . . . . . . . . . . 31
SECTION 5.6. Limitation on Suits.. . . . . . . . . . . . . . . . 31
SECTION 5.7. Rights of Holders to Receive Payment. . . . . . . . 32
SECTION 5.8. Collection Suit by Trustee. . . . . . . . . . . . . 32
SECTION 5.9. Trustee May File Proofs of Claim. . . . . . . . . . 33
SECTION 5.10. Priorities. . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.11. Undertaking for Costs.. . . . . . . . . . . . . . . 35
ARTICLE 6
TRUSTEE
SECTION 6.1. Duties of Trustee.. . . . . . . . . . . . . . . . . 35
SECTION 6.2. Rights of Trustee.. . . . . . . . . . . . . . . . . 35
SECTION 6.3. Individual Rights of Trustee. . . . . . . . . . . . 37
SECTION 6.4. Trustee's Disclaimer. . . . . . . . . . . . . . . . 37
SECTION 6.5. Notice of Defaults. . . . . . . . . . . . . . . . . 37
SECTION 6.6. Reports by Trustee to Holders.. . . . . . . . . . . 38
SECTION 6.7. Compensation and Indemnity. . . . . . . . . . . . . 38
SECTION 6.8. Replacement of Trustee. . . . . . . . . . . . . . . 39
SECTION 6.9. Successor Trustee or Agent by Merger, etc.. . . . . 40
SECTION 6.10. Eligibility; Disqualification.. . . . . . . . . . . 40
SECTION 6.11. Preferential Collection of Claims Against the
Company.. . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.1. Termination of Company's Obligations. . . . . . . . 41
SECTION 7.2. Application of Trust Money. . . . . . . . . . . . . 43
SECTION 7.3. Repayment to Company. . . . . . . . . . . . . . . . 43
SECTION 7.4. Reinstatement.. . . . . . . . . . . . . . . . . . . 43
ARTICLE 8
AMENDMENTS
SECTION 8.1. Without Consent of Holders. . . . . . . . . . . . . 44
SECTION 8.2. With Consent of Holders.. . . . . . . . . . . . . . 44
SECTION 8.3. Compliance with Trust Indenture Act.. . . . . . . . 46
SECTION 8.4. Revocation and Effect of Consents.. . . . . . . . . 46
SECTION 8.5. Notation on or Exchange of Securities.. . . . . . . 47
SECTION 8.6. Trustee to Sign Amendments, etc.. . . . . . . . . . 47
<PAGE> ARTICLE 9
SUBORDINATION
SECTION 9.1. Securities Subordinated to Senior Indebtedness. . . 47
SECTION 9.2. Priority and Payment Over of Proceeds in Certain
Events. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.3. Payments May Be Paid Prior to Dissolution.. . . . . 49
SECTION 9.4. Rights of Holders of Senior Indebtedness Not to be
Impaired .. . . . . . . . . . . . . . . . . . . . . 50
SECTION 9.5. Authorization to Trustee to Take Action to
Effectuate Subordination.. . . . . . . . . . . . 50
SECTION 9.6. Subrogation.. . . . . . . . . . . . . . . . . . . . 50
SECTION 9.7. Obligations of Company Unconditional. . . . . . . . 51
SECTION 9.8. Article 10 Not a Bar to Events of Default.. . . . . 51
SECTION 9.9. Trustee Entitled to Assume Payment Not Prohibited in
Absence of Notice.. . . . . . . . . . . . . . . . . 51
SECTION 9.10. Right of Trustee to Hold Senior Indebtedness. . . . 52
SECTION 9.11. Trustee not Fiduciary for Holders of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . 52
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Trust Indenture Act Controls. . . . . . . . . . . . 52
SECTION 10.2. Notices.. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.3. Communication by Holders with Other Holders.. . . . 53
SECTION 10.4. Certificate and Opinion as to Conditions Precedent. 53
SECTION 10.5. Statements Required in Certificate or Opinion.. . . 54
SECTION 10.6. Rules by Trustee and Agents.. . . . . . . . . . . . 54
SECTION 10.7. Legal Holidays. . . . . . . . . . . . . . . . . . . 54
SECTION 10.8. Duplicate Originals.. . . . . . . . . . . . . . . . 55
SECTION 10.9. Governing Law.. . . . . . . . . . . . . . . . . . . 55
SECTION 10.10. No Adverse Interpretation of Other Agreements.. . . 55
SECTION 10.11. Successors. . . . . . . . . . . . . . . . . . . . . 55
SECTION 10.12. Severability. . . . . . . . . . . . . . . . . . . . 55
SECTION 10.13. No Recourse Against Others. . . . . . . . . . . . . 55
SECTION 10.14. Table of Contents, Headings, etc. . . . . . . . . . 55
SECTION 10.15. Counterpart Originals.. . . . . . . . . . . . . . . 55
<PAGE>
To Our Stockholders, Customers and Friends:
For HUBCO, 1993 represented a year of growth. Completion of the
acquisition of Pilgrim State Bank in June along with the full year
effect of our 1992 acquisitions allowed us to attain record levels
including $1.042 billion in assets, $14.2 million in earnings and
$79.0 million in stockholders' equity.
We believe that our geographic expansion, along with the
strengthening of our financial base, will allow us to better serve
our customers as a community bank, and be responsive to their needs
while responding to changes in the economic climate.
Strong Balance Sheet - Our balance sheet growth during 1993 was
primarily due to our acquisition. Total assets increased by 11.8%,
deposits expanded by 11% to $936 million and loans increased by
2.5% to $519 million. Stockholders' equity ended the year at $79.0
million, up 15.6% from last year.
Total non-performing assets of $10,022,000 (.96% of assets) were up
from last year due partially to our acquisition of Pilgrim State Bank
in the second quarter. As a percentage of assets, however, our ratio
is among the lowest in New Jersey. Non-accrual loans at year-end
were $5,534,000 which represents 1.07% of net loans. Our reserve for
possible loan losses of $10,811,000 as a percentage of loans was
2.02% (a record level for HUBCO) and covered 195% of non-accrual
loans, 140% of non-performing loans and 108% of non-performing
assets at year end. Our credit losses during 1993 continued at a
low level.
HUBCO's capital ratios remain strong. At December 31, 1993, our
Tier I Capital Ratio was 13.60%, our Total Risk Based Capital Ratio
was 14.85% and our Leverage Capital Ratio was 7.22%. These ratios
all exceed the regulatory requirements of 6%, 10% and 5%
respectively to be considered a well capitalized institution. We
expect that our strong capital base will continue to be used to
support internal asset generation and allow us to continue our
acquisition program.
Stronger Operating Results - Net income for 1993 of $14,202,000
represents a 47% increase over 1992 which had also been a record year.
Per share income was affected by our successful stock offering in
May of 1992, however, earnings per share still increased by 30%
over 1992 to $2.06. For the year, we achieved a return on average
assets of 1.44% versus 1.05% last year and a return on average
equity of 19.34% up from 17.38% last year.
These results were made possible by a historically strong net
interest margin combined with a 12% increase in other income which
represents primarily fee driven services. Our efficiency also
improved during 1993 as we had fewer non-recurring expenses than in
1992. We maintained our provision for loan losses at a high level
during 1993 to ensure adequacy during this period of growth
for HUBCO and to account for uncertainty concerning the strength
of the New Jersey economy. Our operating results demonstrate
the benefit of our acquisition program. As we grow and are able to
maintain our interest margin, increase fee income and enhance
efficiency, our bottom line results improve dramatically.
<PAGE>
Stockholder Recognition - During 1993, the Board declared a 10%
stock dividend in April while maintaining the quarterly cash
dividend at eleven cents per share. In October, the Board
increased the quarterly cash dividend to twelve cents and declared
a special year-end dividend of three cents. These actions
effectively raised the dividend payout 17.5% over 1992 reflecting
the Board's confidence in HUBCO's future prospects.
A Changing Acquisition Environment - The opportunities of the past
three years to acquire failed institutions from the Government is
winding down as the banking industry becomes healthier and the
economy improves. Future opportunities will arise with healthy
institutions which either no longer wish to operate under the
burdensome government regulations in effect today or which find it
difficult to operate profitably and enhance shareholder value in
today's economic environment.
HUBCO believes it can continue to be a successful acquirer in this
environment. In fact, the last three merger agreements entered
into by HUBCO arose in this environment.
Our acquisition philosophy, however, is not changing. We are
seeking acquisitions which enhance our franchise and which are
accretive to earnings within a short time frame. We will continue
to work toward maximizing efficiencies as we grow while devoting
attention to asset quality and to internal controls.
Continued Community Banking Focus - We believe that by
concentrating our activities in a focused geographic area, we gain
a thorough knowledge of our trade area. This allows us to evaluate
loan requests faster and to quickly assemble information necessary
to reach decisions. We use this competitive advantage to increase
market share and to monitor asset quality.
We compete in providing banking services to companies up to $10
million in sales. As our competition grows or are acquired by out
of state banks, they often outgrow the ability to provide
personalized service to small local companies. We are committed to
our community banking focus. In order to ensure that we do not
outgrow our customers or this market, we are regionalizing our
operations. We have already established a North Region and an
Essex Region with their own Presidents who are responsible for
maintaining customer contacts and directing the local marketing and
sales efforts. We will also be staffing these Regions with
commercial lending officers to ensure fast customer response on
requests.
To further support these efforts, during this past year we
established three new regional Advisory Boards (bringing the total
to four). These boards provide feedback on our products and
services, help us identify new prospects and to stay in touch with
what is happening in our communities.
Incentive Driven Organization - We continue to be an incentive
driven organization. Our bonus program is based on three levels of
established performance goals: 1) HUBCO must achieve a targeted
return on equity; 2) Departments must operate within budgeted
income and expense controls; and 3) Individuals must attain
established primary objectives. The goals at each level must be
met in the order above for the bonus to be paid. The year 1993
was the third consecutive year in which bonuses have been paid
under the program.
Besides the bonus program, we have sales incentive programs which
pay incentives to officers and employees who refer certain types of
new business to the bank. We incentivize the products which are
most profitable for us and which we feel will help us to achieve
our overall goals.
Finally, we have a branch incentive program which divides our
branches into groups based on their size. The branches within each
group compete with each other for deposit growth and the generation
of mortgage and consumer loans. The top branches in each
group receive cash awards for every person in that branch.
We believe that our Incentive Programs are an integral part of our
competitive culture and support our strong financial results.
<PAGE>
Technology Enhancements - During 1993, we established telephone
banking at HUBCO. At present, the service is for inquiries only,
but during 1994 this service will be expanded to allow activation
of transfers between accounts and loan payments by telephone.
We have determined that our current software system does not
provide the flexibility and timely management reports which we need
to manage our business in the 90's. We have contracted for a fully
integrated software package which will provide more detailed
information in a timely manner. This will help us to be more
efficient in processing and enhance customer service.
The software should be installed in the second quarter of 1994.
We have also contracted for an imaging system which will capture
images of all checks processed. Bank statements and checks will be
returned to customers in an imaged format. This system will speed
research, streamline our transit operation and provide efficiencies
in check processing. We expect that the savings generated from
this imaging system net of its cost will result in savings for
HUBCO.
Finally, we have established a technology committee to study new
technology as it develops and to help identify which items can help
us increase market share or become more efficient.
On-Going Strategy - HUBCO's fundamental operating strengths include
its strong capital ratios, execellent asset quality, adequate coverage of
non-performing loans through its Allowance for Possible Loan
Losses, strong core earnings (with returns on assets and equity
which compare favorably with our peer group), an efficient delivery
system and a proven track record of successful acquisition
activity.
Our core strategies will not change from those which have guided us
in the past. Asset quality will continue to receive top priority.
Our sales skills will be sharpened and growth in fee income will be
stressed. Our emphasis on cost control will not waiver. Banking
has always been and will remain a low profit margin industry.
The tide of consolidation in the banking industry will continue
both with banks outside New Jersey seeking to enter the State and
banks already here seeking to become more efficient through
acquisitions. These types of changes, especially when rapid, have
a beneficial effect on solid, well managed local institutions.
Customers seek institutions which are stable and have a reputation
and presence in the community. We expect to capitalize on these
customer preferences and expand our customer base in all of the
communities we serve.
While we will continue to seek expansion opportunities, a
community banking focus will be maintained. When growth through
acquisitions ceases to be economically attractive, we will
capitalize on our larger branch network and sales skills to sell our
services. As we redeploy our investment portfolio into loans, the
increased interest margin should replace acquisitions as our engine
for earnings growth.
Other Announcements - During 1993, three valued directors retired
from our Board. John T. Clark, who had been a Director since 1977
and served as President of the Company until his retirement in
1989, retired from the Board in December. Sheldon S. Goldstein,
who had served as a Director since 1986, retired from the Board in
November. James C. McClave, our Chairman Emeritus, retired from
the Board of Directors in October after a 35 year career in banking
with United National Bank of Bergen County and Hudson United Bank.
The knowledge, advice and commitment of these three individuals
will be missed, and we are sure you will join us in wishing them
well in retirement.
We would like to thank our officers and employees for their
continuous diligent efforts and success in establishing HUBCO as a
premier community bank. We would also like to recognize the Board
of Directors for their dedication, insight and advice and our
Advisory Councils for their support and help. Finally, we wish to
thank our shareholders for their continuing support as our industry
evolves. We will continue to do our best to see that your
investment and confidence in HUBCO is rewarded.
Sincerely,
James E. Schierloh Kenneth T. Neilson
Chairman President &
Chief Executive Officer
<PAGE>
SENIOR MANAGEMENT
One of HUBCO's greatest assets is its strong Senior Management
team. Individuals who are committed to maximizing your return on
investment and dedicated to exercising sound judgement in managing
banking risks.
JAMES E. SCHIERLOH
CHAIRMAN OF THE BOARD
Mr. Schierloh, a retired Certified Public Accountant and a Registered
Municipal Accountant, was appointed Chairman of the Board of HUBCO,
Inc. and Hudson United Bank in September 1990. He has been a
Director for 30 years and was Chairman of Hudson United Bank's
Audit Committee for 26 years. Mr. Schierloh was a partner at
Schierloh & Lane and previously with Touche Ross and Price
Waterhouse. He is a graduate of Lehigh University with a B.S. in
Accounting.
KENNETH T. NEILSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Appointed President in September 1989, Mr. Neilson joined Hudson
United Bank in October 1983 and served as First Senior Vice
President/Senior Lending Officer and Assistant to the President.
He was previously with The Summit Bancorporation, and American
National Bank . He is a graduate of St. Olaf College and the Stonier
Graduate School of Banking. Mr. Neilson is Chairman of the Hudson County
Chamber of Commerce, a Trustee of the Franciscan Health Care System of
New Jersey, a member of the Executive Committee of the New Jersey Bankers
Association, a Director of the New Jersey Chapter of the National
Conference of Christians and Jews, and a member of the Executive
Board of the Bergen Council of the Boy Scouts of America. He also
serves on the Board of the New Jersey Bankers Political Action
Committee and chairs the Legislation and Taxation Committee of
the New Jersey Bankers Association.
WILLIAM J. BEYER, III
FIRST SENIOR VICE PRESIDENT
Appointed First Senior Vice President in October 1991, Mr. Beyer's
responsibilities encompass Branch Operations, Annuity and Mutual
Funds Sales and General Services. Previously, Mr. Beyer was
President of HUB National Bank. His 20 plus years of banking
experience include positions in Lending, Business Development and
Human Resources Management with The Summit Bancorporation. He is
a graduate of Rider College with a B.S. in Finance and serves as a
Trustee for Overlook Hospital.
<PAGE>
THOMAS J. SHARA, JR.
FIRST SENIOR VICE PRESIDENT AND SENIOR LOAN OFFICER
Mr. Shara has been with Hudson United Bank since 1981. Starting in
the officer trainee program, Mr. Shara was rotated through all the
departments in the bank during his training. He was assigned
permanently to the Commercial Loan area in 1982 and has assumed a
variety of positions with the most recent as First Senior Vice
President and Senior Loan Officer in July 1990. His areas of
responsibility include Commercial Lending, Mortgage Lending, Retail
Lending and Business Development. Mr. Shara received his B.S. and
M.B.A. degrees from Fairleigh Dickinson University and is on the
Board of Directors for the Park Performing Arts Center in Union
City and The Boys & Girls Club of Paterson.
D. LYNN VAN BORKULO-NUZZO, Esq.
FIRST SENIOR VICE PRESIDENT AND CORPORATE SECRETARY
Mrs. Van Borkulo-Nuzzo joined Hudson United Bank in 1967 and has
worked at the branch level and in various departments including
Controllers, Trust and Commercial Loans. She was promoted to First
Senior Vice President, Corporate Affairs in 1988 and to Corporate
Secretary in 1990. In addition to Corporate Affairs, she is
responsible for Compliance and Marketing. Mrs. Van Borkulo-Nuzzo
is a graduate of St. Peter's College and received her Law Degree
from Seton Hall Law School. Mrs. Van Borkulo-Nuzzo also attended
the National Graduate Trust School at Northwestern University.
JOHN F. McILWAIN
CHIEF CREDIT OFFICER
Mr. McIlwain joined Hudson United Bank in July 1992. His current
responsibilities include the Credit Department, Loan Review, Loan
Operations, Loan Work-Outs and the Collection Department.
Prior to joining Hudson United, Mr. McIlwain spent most of his
banking career at Irving Trust/Irving Bank Corporation, serving as
Senior Vice President and Deputy Group Executive, Community Banking
Group. Mr. McIlwain holds a B.A. in Economics from Duke University
and an M.B.A. in Finance from New York University.
<PAGE>
MANAGEMENT ANALYSIS
FINANCIAL REVIEW
This financial review presents management's discussion and
analysis of operating results and financial condition. It should
be read in conjunction with the audited consolidated financial
statements and the accompanying notes beginning on page 23 of
this report. Unless otherwise noted, all dollar amounts are
presented in thousands.
OVERVIEW
During 1993, the Company made use of its strong capital
position to once again take advantage of acquisition opportunities
in Northern New Jersey, continuing its strategy to attempt to
enhance profitability and build market share through both internal
growth and acquisitions. HUBCO achieved record results in three
key financial areas: earnings, asset base and stockholders'
equity. Net income rose 47% to a level of $14.2 million in 1993
from $9.6 million in 1992; assets increased by 11.8% to $1.042
billion at December 31, 1993 from $932 million at year-end 1992;
and stockholders' equity reached $79.0 million, a 15.6% increase
over the 1992 level of $68.3 million. In addition, HUBCO increased
its regular quarterly cash dividend from $.10 per share in the
first quarter to $.11 per share in the second and third quarters.
For the fourth quarter, the Company increased its regular quarterly
cash dividend to $.12 per share and paid a special year-end cash
dividend of $.03 per share.
Highlights of the Company's 1993 financial accomplishments
include:
Return on average assets was 1.44%, up from 1.05% in
1992 and .82% in 1991.
Return on average stockholders' equity was 19.34%
for 1993. This compares to 17.38% in 1992 and
12.75% in 1991.
<PAGE>
Net interest margin increased to 5.20% in 1993 from
4.97% in 1992 and 4.94% in 1991, primarily as a
result of a 37% increase in average net interest
earning assets.
Efficiency ratio, which measures operating expense
as a percentage of recurring tax equivalent income,
improved to 53.2% for 1993, down from 69.6% in 1992
and 67.6% in 1991.
The allowance for possible loan losses represented
140.20% of non-performing loans at the end of 1993
compared with 116.91% and 87.13% of non-performing
loans at December 31, 1992 and December 31, 1991,
respectively. As a percentage of total loans, the
allowance increased to 2.02% for 1993 from 1.46% for
1992 and 1.41% for 1991.
ACQUISITIONS
HUBCO's acquisition philosophy is to attempt to seek in-market
or contiguous market opportunities which HUBCO believes can be
accomplished with little dilution to earnings. When evaluating
acquisitions, HUBCO conducts a due diligence review to attempt to
identify both risks and income potential and then attempts to
structure a transaction which allows it to manage the risk while
earning a fair return on the investment. HUBCO reviews both
government-assisted and private transactions in its acquisition
considerations.
In 1993, the Company consummated one acquisition. On June 30,
1993, the Company, through Hudson United Bank ("the Bank"),
acquired the branches, deposits and certain assets of Pilgrim State
Bank ("Pilgrim") from the Ramapo Bank ("Ramapo") immediately
following a merger of Pilgrim into Ramapo. The purchase price for
the acquisition was $6 million. Effective July 1, 1993, the Bank
opened branches at six locations formerly housing Pilgrim branches.
On July 3, 1993, the Bank converted the computer systems and
operating procedures of the former Pilgrim branches to conform to
its own.
<PAGE>
In 1992, the Company consummated two acquisitions. On
February 21, 1992, the Company, through the Bank, acquired the
deposits and certain of the loans of Irving Federal Savings and
Loan Association (Irving) from the Resolution Trust Corporation
(RTC). Effective February 22, 1992, the Bank opened branches at
five of the eight locations formerly housing Irving branches. The
accounts of Irving's other three branches were consolidated into
other acquired branches of Irving. The Bank paid the RTC a premium
of $5 thousand in connection with the acquisition of the deposits.
The Bank purchased certain of the loans at a premium over their par
value and others at a discount from their par value. The Bank's
purchase of the loans resulted in a net unamortized discount. From
this net discount, the Bank allocated $1.5 million to its allowance
for possible loans losses to cover the risks inherent in the
acquired loans.
On March 13, 1992, the Company, through the Bank, acquired the
insured deposits of Broadway Bank and Trust Co. (Broadway) from the
Federal Deposit Insurance Corporation (FDIC). Effective March 16,
1992, the Bank opened branches at all eight locations formerly
housing Broadway branches. The Bank paid the FDIC a premium of
$3.4 million in connection with the acquisition of the Broadway
deposits.
The significant financial information relative to the 1992 and
1993 acquisitions is set forth in Note (2) to the financial
statements.
At the end of 1993, the Company had two acquisitions pending.
In May 1993, the Company and the Bank agreed to acquire Statewide
Savings Bank, SLA in a merger-conversion transaction. In November
1993, the Company and the Bank agreed to acquire Washington
Bancorp, Inc. and its subsidiary, Washington Savings Bank. Both
acquisitions are still awaiting various regulatory approvals, and
there can be no assurances that the acquisitions will be
consummated. Additional information relative to the pending
acquisitions is set forth in Note (2) to the financial statements.
<PAGE>
RESULTS OF OPERATIONS
EARNINGS SUMMARY
HUBCO earned net income of $14,202, or $2.06 per share in 1993
compared to $9,641, or $1.58 per share, in 1992 and $5,021, or
$1.01 per share, in 1991. Key factors contributing to HUBCO's
strong earnings improvement in 1993 were increases in net interest
income and total other income of $6,005, or 14.6%, and $949, or
12.4%, respectively. A significant decrease in total other
expenses of $4,378, or 12.7%, also contributed to 1993's earnings
enhancement, along with a decrease of $516, or 12.5%, in the
provision for loan losses. Partially offsetting the 1993 gains was
an increase in the provision for income taxes of $7,287, which was
significantly larger than the 1992 provision.
For the year ended December 31, 1992, the reported earnings of
$9,641 represented an increase of $4,620, or 92.0%, compared with
1991. The increase was primarily attributable to increases of
$14,541 and $2,186 in net interest income and total other income
and a decrease in the provision for income taxes of $1,772. The
1992 gains were partially offset by increases in the provision for
possible loan losses and in total other expenses of $1,804 and
$12,075, respectively.
NET INTEREST INCOME
The Company's principal source of revenue is its net interest
income, which is the difference between the interest earned on
assets and interest paid on the funds acquired to support those
assets. The principal interest earning assets are loans made to
businesses and individuals, followed by investment securities and
federal funds sold in the inter-bank market. Net interest income
is affected by the balances and mix of interest-earning assets and
interest-bearing liabilities and changes in their corresponding
yield and costs, and by the volume of interest earning assets
funded by non-interest bearing deposits.
The tables presented on page 8 show, for the three years ended
December 31, 1993, 1992 and 1991 the average distribution of
assets, liabilities and stockholders' equity and the interest
earned or paid on related items, as well as the Company's net yield
on interest earning assets (i.e., net interest income divided by
average interest earning assets). Non-taxable income from loans
and investment securities is presented on a tax-equivalent basis
whereby tax-exempt income is adjusted upward by an amount
equivalent to the prevailing federal income taxes that would have
been paid if the income had been fully taxable. The assumed tax
rate was 35% in 1993 and 34% in 1992 and 1991.
<PAGE>
<TABLE>
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS'
EQUITY: INTEREST RATES AND INTEREST DIFFERENTIALS
(In Thousands of Dollars)
<CAPTION>
1993 1992 1991
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Domestic Loans & Direct
Lease Financing(1):
Taxable $517,761 $43,240 8.35% $505,464 $45,004 8.90% $397,416 $39,550 9.95%
Nontaxable 5,182 471 9.09 6,026 609 10.11 6,181 774 12.52
Taxable Investment
Securities 345,845 22,350 6.46 278,119 19,991 7.19 113,744 9,286 8.16
Nontaxable Investment
Securities 23,403 1,680 7.18 16,015 1,374 8.58 24,922 2,295 9.21
Federal Funds Sold
and Securities
Purchased
Under Agreements
to Resell 25,895 771 2.98 32,782 1,342 4.09 15,139 896 5.92
Time Deposits in
Other Banks,
Domestic - - - - - - 18 1 5.56
-------- ------- -------- ------- -------- -------
Total Interest Earning
Assets 918,086 68,512 7.46 838,406 68,320 8.15 557,420 52,802 9.47
Noninterest Earning Assets:
Cash and Due
from Banks 42,699 48,812 31,089
Premises and
Equipment,Net 17,603 14,277 11,968
Accrued Interest
Receivable 8,291 8,346 5,607
Other Assets 10,216 15,710 10,289
Less Allowance for
Possible Loan
Losses (9,001) (7,435) (6,076)
-------- -------- --------
TOTAL $987,894 $918,116 $610,297
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1993 1992 1991
Average Yield/ Average Yield/ Average Yield
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Bearing Liabilities:
Demand Deposits $112,836 $3,095 2.74% $ 97,494 $ 3,256 3.34% $ 63,34 $ 3,064 4.84%
Savings Deposits 342,540 8,833 2.58 278,925 9,094 3.26 174,55 8,482 4.86
Time Deposits 251,128 8,451 3.37 303,029 13,744 4.54 197,02 12,864 6.53
Federal Funds Purchased
and Securities Sold
Under Agreements to
Repurchase 14,603 333 2.28 14,500 480 3.31 13,79 660 4.79
Other 938 29 3.09 1,269 59 4.65 2,86 217 7.59
-------- ------- -------- ------- ------- -------
Total Interest Bearing
Liabilities 722,045 20,741 2.87 695,217 26,633 3.83 451,57 25,287 5.60
Noninterest Bearing
Liabilities:
Demand Deposits 185,848 152,397 113,504
Other 6,550 15,035 5,851
-------- -------- --------
914,443 862,649 570,930
Stockholders' Equity 73,451 55,467 39,367
-------- -------- --------
TOTAL $987,894 $918,116 $610,297
======== ======== ========
Net Interest Earnings $47,771 $41,687 $27,515
======= ======= =======
Net Yield on Interest
Earning Assets 5.20% 4.97% 4.94%
==== ==== ====
Tax Equivalent Adjustments:
Loans $ 165 $ 207 $ 263
Investment Securities 588 467 780
------- ------- -------
TOTAL $ 753 $ 674 $ 1,043
======= ======= =======
(1) For the purpose of these computations, non-accruing loans are included in the daily average loan amount outstanding. Fees are
included in loan interest. Loans and total interest earning assets are net of unearned income.
</TABLE>
<PAGE>
In 1993, net interest income increased to $47,018 from $41,013
in 1992, an increase of $6,005, or 14.6%. This increase was due to
an increase of $52,852, or 36.9%, in net average interest earning
assets (average interest earning assets less average interest
paying liabilities) and a greater decline in interest rates on
interest bearing liabilities (96 basis points) than the
corresponding decline in yield on interest earning assets (69 basis
points).
Interest income on a tax-equivalent basis increased by only
$192, or .3%, during 1993 despite an increase of $79,680 in average
interest earning assets volume. A key factor in the moderate
increase was the decrease in yield on total interest earning assets
- - - - from 8.15% in 1992 to 7.46% in 1993 - which significantly reduced
any gain in interest earnings as a result of volume. However, the
increase in the average investment portfolio of $75,114, or 25.5%,
more than offset the decreased average yield on the portfolio and
posted a net increase to earnings of $2,665. During 1992, an
average increase of $155,468, or 112.1%, in the investment
portfolio also contributed to increased interest income. The
exceptionally large increase in 1992 had been a result of the funds
received by the Bank in the Irving and Broadway acquisitions, net of
deposit runoff, which had been invested predominantly in government
securities. The yield on the Company's taxable investment
portfolio decreased to 6.46% in 1993 from 7.19% in 1992 and 8.16%
in 1991. The tax-equivalent yield on the non-taxable investment
securities portfolio declined to 7.18% in 1993 from 8.58% in 1992
and 9.21% in 1991. The decreases in the investment portfolio yields from
1991 to 1993 were attributable to lower market interest rates on
instruments purchased to replace higher yielding securities which
matured. The increase in average loan volume of $11,453, or 2.24%,
during 1993 was not significant enough to offset the decreased
average yield on the portfolio. During 1992, the increase in the
loan portfolio of $107,893, or 26.7%, had been more than sufficient
to offset the loss in interest earnings created by the decline in
yields. The average yield on the Company's taxable domestic loan
portfolio decreased to 8.35% in 1993 from 8.90% in 1992 and 9.95%
in 1991. The tax-equivalent yield on the non-taxable loan
portfolio decreased to 9.09% in 1993 from 10.11% in 1992 and 12.52%
in 1991. These decreases in yield were a result of general
declines in market interest rates. In 1993, the interest income
impact of non-performing loans lowered the yield on taxable loans
by 12 basis points, compared to 9 basis points in 1992 and 6 basis
points in 1991.
<PAGE>
Interest expense decreased by $5,892, or 22.1%, during 1993.
Although the volume of interest bearing liabilities increased by
$26,828, or 3.9%, the decrease of 96 basis points in the cost of
funds was sufficient enough to generate a reduction in interest
expense. This was in direct contrast to the situation in 1992,
where a significant decline (177 basis points) in the cost of funds
was not enough to offset the additional expense generated by an
increased volume of $243,642, or 54.0%. Non-interest bearing
deposits, which had decreased to 18% of total average deposits
during 1992 due to the acquisitions, rose to 21% of average
deposits during 1993, falling once again within the pre-1992 levels
of 19 - 21%.
The net interest margin, which measures net interest income as
a percent of average earning assets, was 5.20% for 1993. This is
an improvement over the 1992 and 1991 levels of 4.97% and 4.94%,
respectively.
The table on page 10 sets forth the changes in interest income
and interest expense as they relate to changes in volume and
changes in rate for the years 1993, 1992 and 1991.
<PAGE>
<TABLE>
CHANGES IN NET INTEREST EARNINGS DUE TO VOLUME/RATE
<CAPTION>
1993 Compared to 1992 1992 Compared to 1991
Increase/(Decrease) Due To Increase/(Decrease) Due To
Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C>
Interest Earned On:
Domestic Loans and Direct
Lease Financing:
Taxable $1,072 $(2,836) $(1,764) $ 9,941 $(4,487) $ 5,454
Nontaxable (80) (58) (138) (19) (146) (165)
Taxable Investment Securities 4,530 (2,171) 2,359 11,930 (1,225) 10,705
Nontaxable Investment Securities 557 (251) 306 (773) (148) (921)
Federal Funds Sold and
Securities Purchased under
Agreements to Resell (249) (322) (571) 790 (344) 446
Domestic Time Deposits - - - (1) -- (1)
------ ------- ------- ------- ------- -------
Total Interest Earning Assets $5,830 $(5,638) $ 192 $21,868 $(6,350) $15,518
====== ======= ======= ======= ======= =======
Interest Paid On:
Demand Deposits $ 471 $ (632) $ (161) $ 1,328 $(1,136) $ 192
Savings Deposits 1,845 (2,106) (261) 3,997 (3,385) 612
Time Deposits (2,113) (3,180) (5,293) 5,568 (4,688) 880
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase 3 (150) (147) 33 (213) (180)
Other (13) (17) (30) (93) (65) (158)
------ -------- -------- -------- -------- --------
Total Interest Bearing Liabilities $ 193 $(6,085) $(5,892) $10,833 $(9,487) $ 1,346
======= ======== ======== ======== ======== ========
Net Interest Earnings $5,637 $ 447 $ 6,084 $11,035 $ 3,137 $14,172
======= ======== ======== ======== ======== ========
</TABLE>
<PAGE>
During 1993, interest income rose only $192 due to a $5,830
increase from volume being significantly offset by a $5,638
reduction due to lower rates. Interest expense decreased by $5,892
in 1993 due to a $193 increase from volume which was more than
offset by a significant $6,085 savings from rate reductions.
During 1992, interest income also increased by a net $15,518 as a
$21,868 increase from volume was only partially offset by a $6,350
reduction due to lower rates. However, in 1992 an increase in
interest expense of $10,833 due to volume was only partially offset
by a $9,487 savings from rate producing a net increase of $1,346 in
interest expense compared to 1991. The rate/volume combinations
resulted in increased net interest income of $6,084 and $14,172 for
1993 and 1992, respectively.
PROVISION FOR POSSIBLE LOAN LOSSES
The Company maintains an allowance for possible loan losses at
a level considered by management to be adequate to cover the
inherent risks of loss associated with its loan portfolio. The
allowance for possible loan losses is based on estimates, and
ultimate losses may vary from the current estimates. Management
formally reviews the loan portfolio and evaluates credit risk on a
quarterly basis throughout the year. Such review endeavors to take
into consideration the financial condition of the borrowers, fair
market value of collateral, level of delinquencies, historical loss
experience by portfolio, industry trends and the impact of local
and national economic conditions. See "Asset Quality".
The provision for possible loan losses was $3,600 for 1993
compared to $4,116 for 1992. This decrease of $516, or 12.5%, was
a result of the perception that the local economy is improving.
During 1992, the provision for possible loan losses was $4,116
compared to $2,312 for 1991. This $1,804, or 78.0%, increase in
the provision was made to account for loans acquired in the Irving
and Broadway transactions, and to replenish the allowance after
several loans were charged off.
OTHER INCOME
Total other income increased $949, or 12.4%, in 1993.
The increase in total other income in 1992 from 1991, was
$2,186, or 40.0%, for the year.
Investment securities gains (losses) for the three years ended
December 31, 1993, 1992 and 1991 were $0, $(26) and $39,
respectively, reflective of the Company's intentions to hold its
securities until maturity.
The Company derived $5,981 in service charges on deposit
accounts during 1993, an increase from 1992 of $1,149, or 23.8%.
In 1992, income from service charges on deposit accounts had
increased by $1,107, or 29.7%, from 1991. In both instances, the
increased fees are a result of the increased volume in demand
deposit accounts. Average demand deposit accounts (interest
bearing and non-interest bearing) increased by $48,793, or 19.5%,
in 1993 and by $73,039, or 41.3%, in 1992 as a result of internal
growth and the acquisitions completed in the respective years.
<PAGE>
Slightly offsetting the gain in service charges was a decrease
during 1993 in other income of $160, or 7.1%. The decrease is
primarily attributable to the swing between the two years on
miscellaneous gains and losses, which includes gains or losses
booked on teller differences, fraudulent checks cashed, inventory
write-offs, equipment obsolescence and property sales, etc. During
1993, miscellaneous gains and losses generated a net loss of $394,
which is included in other expenses, compared to a net gain of $155
included in 1992's other income. Annuity sale fees for 1993 also
declined by $293, or 75.5%, due to the restructuring of the annuity
program. Annuity sales for 1992 had increased by $320, or 285.7%,
over 1991 under the previous program. A third item contributing to
the decrease in other income is the decline in income from
acquisition-related settlement items. This income is generated
from the settlement procedures utilized by the RTC and the FDIC on
regulatory-assisted transactions, and is based on the various
timing schedules for settlement that run throughout a period of
approximately one year on these transactions. During 1992, the
Irving and Broadway acquisitions created income on settlement items
totalling $315, which represented an increase of $200, or 173.9%,
over the 1991 settlement income generated by the Center
transaction. As final settlement of the Irving and Broadway
transactions extended into 1993, additional settlement income was
derived in the amount of $288, a decrease of $27, or 8.6%, over
1992. The pending Statewide and Washington acquisitions are
private transactions and will not generate income of this nature
during 1994 if they are consummated. Offsetting these decreases in
other income items were increases during 1993 in credit card income
and branch service-related fee income of $110, or 74.8%, and $294,
or 41.1%, respectively. During 1992, credit card processing fees
were basically unchanged from 1991, while branch service-related
fee income had decreased by $120, or 14.4%.
<PAGE>
OTHER EXPENSES
Total other expenses decreased by $4,378, or 12.7%, to
$29,971 during 1993 from $34,349 in 1992. The Pilgrim acquisition
impacted many categories as the costs for six additional branch
locations, with their related staffing, occupancy and equipment
needs, were absorbed. Salaries increased by $1,435, or 13.7%, as
a result of the increased number of employees and annual salary
increases of approximately 4.0%. Pension and other employee
benefits increased by $1,362, or 42.2%, primarily due to salary-
related increases in payroll taxes of $140, or 13.6%; insurance
increases of $393, or 29.1%, due to a 1992 plan termination that
resulted in a $265 credit in 1992 and a $66 increase in 1993 due to
the Pilgrim acquisition, and also an increase in the contingent
performance bonus accrual of $447, or 55.7%. Other expenses
had increased by $12,075, or 54.2%, in 1992 primarily as a result
of the two acquisitions in the first quarter of 1992 and the
charitable contribution made at year-end 1992.
Despite the mid-year addition of the six Pilgrim locations,
occupancy expense decreased during 1993 by $126, or 4.0%. This
decrease was achieved through the closing of a branch in North
Bergen, the sale of an office building in Old Bridge, the
renegotiation of several of the acquired leases and significant
real estate tax refunds arising from several successful tax
appeals. Equipment expense increased during 1993 by $200, or
11.4%, due to the additional equipment needs of the acquired
Pilgrim branches. During 1992, the increase in occupancy and
equipment expense was $831, or 20.2%, which included in-house
computer system upgrades to accommodate the 1992 acquisitions.
The reduction of $443, or 78.8%, in the net cost to operate
other real estate during 1993 is the result of a year-end 1992
charitable donation of a $4,000 property which also explains the
decrease of $3,999, or 99.2%, in charitable contribution expenses
for 1993. The property, which was donated to four local urban
hospitals, was responsible for the 1992 increases in the net cost
to operate other real estate and in charitable contributions of $81
and $4,000, respectively. Deposit and other insurance costs
increased in general, and the Company absorbed additional expense
in 1993 of $276, or 13.9%, compared with a $670, or 50.9%, increase
in 1992. Both increases were primarily related to additional FDIC
insurance premiums due to the increased size of the Company.
Outside service fees were flat as the Company strove to streamline
the operations of the acquired institutions. Outside service fees
during 1992 had increased by $112, or 4.2%, due mostly to
acquisition-related items. Amortization of intangible assets was
$0 during 1993, compared to $2,424 in 1992 and $292 in 1991. The
increase of $2,132 in 1992 represented the full write-off of the
Broadway and Irving core deposit intangibles, as well as the write-
off of the remaining balance of goodwill resulting from the 1983
acquisition of Pan American National Bank, thereby eliminating the
balance of intangible assets as of December 31, 1992. Other
expenses decreased during 1993 by $651, or 16.7%, due primarily to
the following: a decrease of $213, or 19.5%, in operating supplies
resulting from the merger of HUB National Bank into Hudson United
Bank on September 25, 1992, creating efficiencies of scale; a
reduction of $142, or 30.0%, in telephone expense generated from
the installation of a more efficient system; and a decrease in
acquisition costs of $257, or 54.8%, based on the difference in the
type and magnitude of the 1993 acquisition compared with the 1992
acquisitions. During 1992, other expenses had increased by $1,835,
or 88.5%, most of which was acquisition-related.
<PAGE>
FEDERAL INCOME TAXES
The federal income tax provision of $6,976 in 1993 compares
with $207 in 1992 and $1,725 in 1991. The 1993 increase of $6,769
over the 1992 tax provision is due to two non-recurring events in
1992 which reduced the 1992 provision - a $1,475 reversal of
previously accrued tax liabilities that were no longer deemed
necessary, and a $2,400 tax benefit related to the $4,000
charitable contribution in 1992. Excluding those two items in
1992, the 1993 provision would have increased by approximately $4.0
million based on an increase in net income before federal income
taxes of $11,330, or 115.0%, and also based on an increase in the
statutory federal income tax rate of 1%. The effective federal
income tax rates for 1993, 1992 and 1991 were 32%, 2%, and 23%,
respectively.
FINANCIAL CONDITION
Total assets at December 31, 1993 increased by $109,914, or
11.8%, over the prior year-end as a direct result of the Pilgrim
acquisition. The most significant change is reflected in the
increase of $104,163, or 32.3%, in the investment portfolio. Total
loans increased by $13,896, or 2.7%. Cash and due from banks
increased by $11,142, or 29.0%, due to the acquired correspondent
bank accounts and to the increase in the target balance and
reserves required to be maintained at the Federal Reserve Bank to
support the increased deposit levels. Premises and equipment
increased by $2,904, or 19.2%. Of that amount, $672 represents
properties acquired in the Pilgrim transaction. The remaining
increase of $2,232 is primarily attributable to the closings early
in 1993 on real estate purchases from the RTC and the FDIC of
former Irving and Broadway branch locations which are now branches
of Hudson United Bank. Accrued interest receivable increased by
$766 as a result of the increased volume in the loan and investment
portfolios. The deposit increase of $92,462 was attained through
the acquisition of Pilgrim. Federal funds purchased and securities
sold under agreements to repurchase increased by $5,496 due to
normal business cycle balance fluctuations and the movement of some
Pilgrim transaction accounts into this account type.
At December 31, 1992, total assets had increased $258,752 over
December 31, 1991. The increase was funded primarily by a $234,369
increase in deposits resulting from the acquisitions of Irving and
Broadway. The most significant change in 1992 was the $46,658
increase in net loans, all of which were acquisition-related.
LOAN PORTFOLIO
The Company's loan portfolio at December 31, 1993 totalled
$534,765, an increase of $13,896, or 2.7%, over year-end 1992.
Excluding the Pilgrim acquisition effect, the portfolio decreased
$32,774, or 6.3%, for a number of reasons. The Company began
selling fixed rate residential mortgage loans in the secondary
market, continued to de-emphasize the making of indirect loans, and
received payoffs on certain loans in its portfolio. This was
compounded by weak loan demand as consumer confidence in the
economic recovery faltered in the face of a new administration and
a weak regional economy. Also, a general return to health on the
part of the Company's competitors with a renewed desire to lend,
further impacted the already small market of creditworthy
borrowers.
The Company's loans are primarily to businesses and
individuals located in northern New Jersey. The below table
presents a summary of the Company's loan portfolio:
December 31
1993 1992 1991
- - - -----------------------------------------------------------------------------
Loans secured by real estate:
Residential mortgage loans-fixed $ 81,281 $ 85,887 $ 58,250
Residential mortgage loans-variable 68,451 72,580 62,599
Residential home equity loans 38,103 25,578 25,420
Construction loans 7,117 3,777 3,108
Commercial mortgage loans 107,577 115,413 94,820
--------- --------- --------
302,529 303,235 244,197
--------- --------- --------
Commercial and industrial loans:
Secured by real estate 34,789 24,366 12,939
Other 139,899 130,139 153,612
--------- -------- --------
174,688 154,505 166,551
--------- -------- --------
Loans to individuals for household,
family and other personal
expenditures 57,548 63,129 65,006
--------- -------- --------
$ 534,765 $520,869 $475,754
========= ======== ========
At December 31, 1993, residential mortgage loans, including home equity
loans, amounted to $187,835 or 35.1%, of the Company's total loan portfolio.
Residential loans are predominantly secured by one to four family properties in
the Bank's primary market area of northern New Jersey. Loans kept for the
Bank's portfolio are primarily underwritten to FNMA anf FHLMC standards.
Loan to value ratios generally do not exceed 75%, and terms do not exceed 20
years for loans maintained in the Company's portfolio. Residential mortgage
loans increased by $3,790, or 2.1%, as a result of loans obtained through the
Pilgrim acquisition. Discounting the acquired loans of $15,510, residential
mortgage loans decreased by $11,720, or 6.4%, due to payments, refinances,
and the sale of newly generated loans to the secondary market in an effort to
build the mortgage servicing portfolio. From 1991 to 1992, residential mortgage
loans increased by $37,776, or 25.8%, all of which was attributable to the
Irving acquisition.
<PAGE>
Construction loans are made only to what the Company views as
a select group of well established local developers. Construction loans
are primarily made on buildings which are generally under contract before
being built. The Company inspects properties prior to advances being made.
Construction loans increased by $3,340, or 88.4%, in 1993 from 1992 as a result
of one new loan. There was a moderate increase in construction loans during
1992.
Commercial mortgage loans are generally made to local property owners and
are written under the following underwriting standards: generally, debt service
coverage must be at least 125%, and the loan to value ratio may not exceed 67%
of the lesser of the purchase price or appraised value. Most of the Company's
commercial mortgage loans are for a maximum term of 15 years requiring fixed
principal plus interest payments under which the borrower pays off an equal
amount of the principal balance of the loan each month. For example a borrower
with a loan maturing in five years would pay off 1/60 of the principal balance
of the loan plus interest each month. The effect of such payment is to reduce
the principal balance of the loan more rapidly than a traditional amortization
schedule or balloon loan. Commercial mortgage loans decreased by $7,836, or
6.8%, from 1992 to 1993 despite $2,330 in commercial mortgage loans acquired
from Pilgrim.The decrease is primarily attributable to heavy principal payments
on 15-year commercial mortgages and a decline in activity for this type of
loan. Commercial mortgage loans increased from 1991 to 1992 by $20,593, or
21.7%. Approximately $15,500 of the increase was obtained through the Company's
acquisition of Irving and the remainder through internal growth. The commercial
mortgage portfolio is comprised primarily of owner occupied properties.
<PAGE>
Commercial loans generally are made to companies located within the
Bank's market area and generally consist of loans to operating companies such
as manufacturers, wholesalers and retailers. Commercial borrowers must provide
three years of financial statements along with financial statements of the
individual owners of the borrowing entity. These loans are generally
collateralized and personally guaranteed by such owners. Commercial loans
are made for various purposes including working capital, capital purchases, or
expansion. Working capital loans generally are made for a term of one year.
Loans for capital purchases and expansion are generally extended for three to
seven years. Commercial and industrial loans increased by $20,183, or 13.1%,
during 1993, as a result of the Pilgrim acquisition, a new business development
calling program, and an expanded customer base generated through the establish-
ment of local advisory boards. From 1991 to 1992, commercial and industrial
loans decreased by $12,046, or 7.2%. As existing loans repayed, the volume of
new loans was not sufficient to offset runoff.
Loans to individuals are installment loans made to individuals, primarily
for automobiles. These loans are underwritten to predetermined income and debt
ratios. On automobile loans, title to the auto is held as collateral. Loans
to individuals decreased $5,581, or 8.8%, as a result of a phaseout of our in-
direct loan program and a general reluctance by consumers to borrow during a
continuing weak local economy. In addition, many customers converted existing
personal loans into home equity loans, which are carried under loans secured by
real estate. Loans to individuals decreased from 1991 to 1992 by $1,877, or
2.9%, which was attributable to a general slowdown in consumer purchases of new
automobiles.
<PAGE>
Other loans consist of non-installment loans to individuals for non-
personal purposes and finance leases. The Company discontinued its lease
program in 1989 but some leases originating before that time remain in the
portfolio. Other loans decreased by $4,899, or 19.3%, during 1993. Included
in the decrease is a decrease of $1,522, or 92.6%, in leases. The remaining
decrease of $3,377 resulted from the payoffs received. Other loans, net of a
$4,514 runoff in leases, had increased during 1992 due to new volume, primarily
loans secured by marketable collateral.
ASSET QUALITY
The Company's principal earning assets are its loans, which
are primarily to businesses and individuals located in New Jersey.
Inherent in the lending function is the risk of deterioration in
borrowers' ability to repay loans under existing loan agreements.
Risk elements include nonaccrual, past due and restructured loans,
potential problem loans, loan concentrations and other real estate.
Although the Company actively solicits creditworthy borrowers,
prevailing market conditions have required a strict monitoring
process for credit risk. This process requires scrutiny at all
levels -- the initial application, analysis of ongoing ability to
pay according to terms, determination of the appropriateness of
collateral, periodic loan review and the periodic review of the
adequacy of the allowance for possible loan losses.
<PAGE>
The following table summarizes the Company's non-performing assets:
December 31
1993 1992 1991
Nonaccruing Loans:
Commercial $1,391 $1,310 $ 1,928
Real Estate 3,398 2,124 1,537
Installment 745 814 695
------ ----- -------
TOTAL NONACCRUING LOANS 5,534 4,248 4,160
Renegotiated Loans 2,177 2,257 3,527
------ ----- ------
TOTAL NON-PERFORMING LOANS 7,711 6,505 7,687
Other Real Estate 2,311 1,252 5,683
------ ----- ------
TOTAL NON-PERFORMING ASSETS $10,022 $7,757 $13,370
====== ===== ======
Ratios:
Nonaccruing Loans to
Total Loans Outstanding 1.03% 0.82% 0.87%
Non-Performing Assets to
Total Assets .96% 0.83% 1.99%
Allowance for Possible Loan
Losses to Non-Accruing
Loans 195.36% 179.03% 161.01%
Allowance for Possible Loan
Losses to Non-performing
Loans 140.20% 116.91% 87.13%
The Company prior to 1992 included loans past due 90 days or
more and accruing in its definition of non-performing loans and
non-performing assets. This is a more conservative approach than
is generally used by other commercial banks, which exclude loans
past due 90 days or more and accruing from non-performing loans and
non-performing assets. In order to present its asset quality
discussion to the reader in a format that is comparable to other
financial institutions, the Company has adopted the more prevalent
reporting method and has excluded past due loans.
At December 31, 1993, loans past due 90 days or more and still
accruing and the applicable asset quality ratios were as follows:
Loans Past Due 90 Days or More and Accruing:
December 31
1993 1992 1991
Commercial $1,139 $ 589 $ 636
Real Estate 225 647 301
Installment 79 173 244
------ ------ ------
TOTAL LOANS
PAST DUE 90
DAYS OR MORE
AND ACCRUING $1,443 $1,409 $1,181
====== ====== ======
Ratios:
Loans Past Due 90
Days or More
and Accruing
to Total Loans
Outstanding .27% .27% .25%
Loans Past Due 90
Days or More
and Accruing to
Total Assets .14% .15% .18%
The amount of interest income on non-performing loans which
would have been recorded had these loans continued to perform under
their original terms amounts to $813, $563 and $423 for the years
ended December 31, 1993, 1992 and 1991, respectively. The amount
of interest income recorded on such loans was $193, $96 and $177
for the years ended December 31, 1993, 1992 and 1991, respectively.
The Company has no outstanding commitments to advance additional
funds to borrowers with non-performing loans.
<PAGE>
Nonaccruing loans consist of commercial, real estate and
installment loans on which the Company has ceased accruing
interest. The majority of non-accruing loans are secured and each has
an attorney working with the loan officer to attempt to resolve the problem.
Nonaccruing commercial loans increased by $81, or 6.2%, in 1993. As a result
of the Pilgrim acquisition, the Company obtained non-accruing commercial
loans totalling $504. Not counting the acquired loans, non-accruing commercial
loans decreased in 1993 by $423, or 32.3% as a result of collections and
charge-offs. During 1992, non-accruing commercial loans decreased by $618, or
32.1%, also as a result of collections and charge-offs.
Nonaccruing real estate loans are principally loans in
foreclosure secured by real estate, primarily single family
residential properties and some commercial properties. From
1992 to 1993, nonaccruing real estate loans increased $1,274, or
60.0%, and from 1991 to 1992, nonaccruing real estate loans
increased $587, or 38.2%. In both instances, the increase is due
to the continuation of a poor regional economy and the long
foreclosure process in New Jersey. Management does not anticipate
incurring a material loss from the resolution of these loans.
Nonaccruing installment loans are loans to individuals.
Generally such loans are secured by automobiles or real estate.
At December 31, 1993, nonaccruing installment loans were $745, or
.68%, of the consumer portfolio. This represents a decrease of
$69, or 8.5%. From 1991 to 1992, non-accruing installment loans
increased by $119, or 17.1%.
Renegotiated loans are loans which are renegotiated to assist
borrowers after the borrower has suffered adverse effects in
financial condition. Terms are tailored to fit the ability of the
borrower to repay in line with its current financial status. This
category consists primarily of commercial loans. The decrease in
renegotiated loans from 1992 to 1993 of $80, or 3.5%, is the
result of principal reductions made by the borrowers. The decrease
in this category from 1991 to 1992 of $1,270, or 36.0%, is due to
the return to performing status of loans previously considered to
be non-performing.
<PAGE>
Other real estate ("ORE") consists of property on which the Bank
has completed or substantially completed foreclosure proceedings. Before
a property is placed in ORE, a current appraisal is ordered to determine
current market value. Loans are written down to market value before being
moved to ORE.
The increase of $1,059, or 84.6%, in ORE from 1992 to 1993 is
due to the foreclosures or in-substance foreclosures on four
commercial properties and the addition of a $500 commercial property
acquired from Pilgrim.
The decrease in ORE from 1991 to 1992 of $4,431, or 78.0%, is
due to the disposal during 1992 of four properties that had been
carried as other real estate since 1991. The Company sold three
properties in open market sales for a total reduction of $454 to
other real estate. The fourth property was donated by the Company
jointly to the foundations of the Franciscan Health System of New
Jersey, Inc., Palisades General Hospital, St. Joseph's Hospital,
and Barnert Hospital.
All costs associated with the holding and maintaining of ORE
properties are expensed as incurred.
Total non-performing loans increased from $6,505 at December
31, 1992 to $7,711 at December 31, 1993, an increase of $1,206, or
18.5%, all of which is attributable to the non-performing loans
acquired from Pilgrim. As a percentage of total loans, non-
performing loans decreased from 1.25% in 1992 to 1.03% in 1993.
Total non-performing loans decreased from $7,687 in 1991 to
$6,505 in 1992, a decrease of $1,182, or 15.4%. Total non-
performing loans as a percentage of loans decreased from 1.62% in
1991 to 1.25% in 1992.
<PAGE>
Efforts to control and improve the level of non-performing
loans are continuing. Efforts are made to identify slow paying
loans and generally collection efforts are instituted. After
identification, steps are taken to understand the problems of the
borrower and to work with the borrower toward resolving the
problem, if practicable. Continuing collection efforts are a
priority for the Bank.
Loans past due 90 days or more and still accruing consist of
commercial, real estate and installment loans which are
experiencing temporary difficulties. Such loans are categorized as
accruing if the Bank believes that the delinquency is temporary and
the loan is adequately collateralized and in the process of
collection. Loans which are not expected to be resolved on a
timely basis are put on nonaccrual status and collection efforts
are begun. The increase in loans past due 90 days or more from
1992 to 1993 of $34, or 2.4%, and from 1991 to 1992 of $228, or
19.3%, were primarily due to increases in overall loan volume,
coupled with continuing poor economic conditions.
Loan concentrations are considered to exist when there are
amounts loaned to separate borrowers engaged in similar activities
which would cause them to be similarly impacted by economic or
other conditions. At December 31, 1993, 1992 and 1991, there were
no concentrations of loans exceeding 10% of total loans which are
not otherwise disclosed as a category in Note (5) to HUBCO's
financial statements included elsewhere in this Annual Report.
<PAGE>
The following is a summary of the activity in the allowance
for possible loan losses, broken down by loan category:
Year Ended December 31
1993 1992 1991
Amount of Loans Outstanding at End of Year $534,765 $520,869 $475,754
======== ======== ========
Daily Average Amount of Loans $529,340 $520,305 $414,667
======== ======== ========
Balance of Allowance for Possible
Loan Losses at Beginning of Year $ 7,605 $ 6,698 $ 5,232
Loans Charged Off:
Commercial, Financial and Agricultural (637) (4,622) (2,038)
Real Estate - Construction (-) (-) (-)
Real Estate - Mortgage (138) (227) (237)
Installment (283) (337) (336)
Lease Financing (122) (355) (364)
-------- -------- --------
Total Loans Charged Off (1,180) (5,541) (2,975)
-------- -------- --------
Recoveries of Loans Previously Charged Off:
Commercial, Financial and Agricultural 141 609 185
Real Estate - Construction - - -
Real Estate - Mortgage 59 8 -
Installment 104 57 120
Lease Financing 82 158 337
-------- -------- --------
Total Recoveries 386 832 642
-------- -------- --------
Net Loans Charged Off (794) (4,709) (2,333)
Provision Charged
to Expense 3,600 4,116 2,312
Additions Acquired Through
Acquisitions 400 1,500 1,487
-------- -------- --------
Balance at End of Year $ 10,811 $ 7,605 $ 6,698
======== ======== ========
Ratios
Net Loans Charged Off to
Average Loans Outstanding .15% .91% .58%
Allowance for Possible Loan
Losses to Average Loans
Outstanding 2.0% 1.5% 1.6%
<PAGE>
The allowance for possible loan losses at year-end 1993 was $10,811, increase
of $3,206 compared to year-end 1992. The allowance at year-end 1993 represents
2.02% of total loans outstanding, compared to 1.46% at year-end 1992. Manage-
ment formally reviews the loan portfolio and evaluates credit risk on at least
a quarterly basis throughout the year. Such review takes into consideration the
financial condition of the borrowers, fair market value of collateral, level of
delinquencies, historical loss experience by category, industry trends and the
impact of local and national economic conditions.
INVESTMENT PORTFOLIO
The Company maintains an investment portfolio to fund increased loans or
decreased deposits. The portfolio is composed of select investments that the
Company believes are suitable for the Company and which it believes will
perform reasonably well under various interest rate scenarios. These
investments are of high quality and extremely liquid.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). SFAS 115 requires entities to
classify their securities into either a held-to-maturity, available-for-sale or
trading category. Each of these classifications requires a different basis
of accounting. Held-to-maturity securities are accounted for at amortized cost
with fair value changes not recognized. Available-for-sale securities are
accounted for at fair value with fair value changes reported as a net of tax
amount in a separate component of stockholders' equity. Trading securities are
accounted for at fair value with fair value changes reported in the income
statement. SFAS 115 is effective for fiscal years beginning after December 15,
1993. The Company has adopted this standard as of December 31, 1993. As of
December 31, 1993, the effect of implementing SFAS 115 was an increase in the
carrying value of the investment portfolio of $6,722.
<PAGE>
The following table summarizes the composition of the portfolio's investments
as of December 31, 1993 and 1992:
Gross Unrealized
Estimated
Amortized ------------------ Market
Cost Gains (Losses) Value
Available for Sale:
December 31, 1993:
U.S. Government $104,728 $ 5,580 $ - $110,308
U.S. Government Agencies 10,482 502 (1) 10,983
State and Political Subdivisions 1,600 237 - 1,837
Other securities 2,107 223 (5) 2,325
Equity securities 4,916 381 (195) 5,102
-------- ------- ------ --------
$123,833 $ 6,923 $(201) $130,555
======== ======= ====== ========
Held to Maturity:
December 31, 1993
U.S. Government $104,957 $ 2,648 $(125) $107,480
U.S. Government Agencies 164,850 3,104 (651) 167,303
State and Political Subdivisions 23,815 496 (4) 24,307
Other securities 2,508 94 - 2,602
-------- ------- ------ --------
$296,130 $ 6,342 $(780) $301,692
======== ======= ====== ========
December 31, 1992
U.S. Government $185,581 $ 6,859 $ - $192,440
U.S. Government Agencies 105,796 3,237 (19) 109,014
States and Political Subdivisions 16,068 368 (50) 16,386
Other securities 14,424 300 (1) 14,723
Equity securities 653 47 (4) 696
-------- ------- ------ --------
$322,522 $10,811 $(74) $333,259
<PAGE>
Investments increased by $104,163, or 32.3%, from $322,522 at
December 31, 1992 to $426,685 at December 31, 1993. Of that
amount, $6,722 represents the SFAS 115 adjustment; $31,781
represents the securities acquired from Pilgrim and the remainder
of the increase is due to purchases that were primarily funded by
declines in loans and federal funds sold. In keeping with its
investment policy, most new purchases were in U.S. Governments and
Agency Securities. Maturities of corporate bonds during 1993 were
reinvested in municipal bonds in an effort to increase yields
through tax-exempt holdings. In addition to the Bank's investment
portfolio, the Company increased its holdings of equity securities
by $4,263, from $653 at December 31, 1992 to $4,916 at December 31,
1993.
Investments increased by $183,607, or 132.2%, from $138,915 at
December 31, 1991 to $322,522 at December 31, 1992. The large
increase was attributable to the significant amount of cash
received through the Irving and Broadway transactions which, in the
absence of loan demand, was invested in the securities portfolio.
Investments were predominantly in government securities with
maturities greater than one year and less than five years,
consistent with the Bank's internal policy on structuring its
investment portfolio. Municipal securities increased by $2,910, or
22.1%, as the Company sought to increase its yields through tax-
exempt holdings with limited risk. Holdings of other securities,
which consist primarily of AA rated corporate bonds, decreased by
$21,504, or 59.9%, as funds from maturing bonds were reinvested
elsewhere.
Generally,the Company's investment philosophy is to select
investments with maturities spread over five years. These
investments are primarily U.S. Treasury and agency obligations.
DEPOSITS
The Company's branch system includes 37 branch offices located
in Hudson, Bergen, Passaic, Essex, Middlesex and Morris Counties,
New Jersey. The system is divided into three administrative
groups. One group consists of the 14 offices in Hudson United
Bank's Northern Region, the second group consists of the 15
branches in the southeastern portion of Hudson United Bank's market
and the third group consists of the 8 branches in the Bank's Essex
Region. Each branch operates as a retail sales and service unit
offering a complete line of deposit and loan products.
In the face of increased competition from mutual funds and
credit unions, depositors remained very selective during 1993 as to
the placement of their funds. The acquisitions were the key factor
in the posted deposit growths for 1993 and 1992 of $92,462, or
11.0%, and $234,369, or 38.5%, respectively. Excluding the
acquired deposits, total deposits at December 31, 1993 decreased by
$30,414, or 3.6%.
<PAGE>
The following table summarizes the Company's deposit base:
At December 31
1993 1992 1991
Demand
Deposits $205,233 $171,178 $128,328
NOW
Accounts 114,604 103,181 53,490
Money Market
Deposit
Accounts 37,290 27,836 39,778
Other Savings
Deposits 342,822 272,154 176,950
Time Certificates
of Deposit
of $100,000
or more 23,651 23,695 27,559
Other Time
Deposits 212,088 245,182 182,752
-------- -------- --------
$935,688 $843,226 $608,857
======== ======== ========
Non-interest bearing demand deposits, for which all financial
institutions compete, increased to $205,233 at December 31, 1993,
a growth of $34,055, or 19.9%. Of that amount, $21,361, or 12.5%,
represented demand deposit accounts acquired from Pilgrim. The
remaining increase of $12,694, or 7.4%, was due to internal
growth. Demand deposits had increased by $42,850, or 33.4%, during
1992 as a result of the Irving and Broadway acquisitions.
NOW accounts increased in 1993 by $11,423, or 11.1%, due to
the $16,513 in NOW accounts obtained through the Pilgrim
acquisition. During 1992, NOW accounts increased by $49,691, or
92.9%, as a result of the acquisitions and also due to shifts from
money market deposit accounts.
Money market deposit accounts increased by $9,454, or 34.0%,
due to the $26,187 acquired from Pilgrim. Discounting the Pilgrim
accounts, this deposit type experienced a decrease of $16,733, or
60.1%, as the rate differential between money market and other
savings accounts was nominal, causing customers to opt for the less
restrictive regular savings accounts. During 1992, money market
deposit accounts decreased by $11,942, or 30.0%, due to shifts into
the more flexible NOW accounts.
Other savings deposits increased by $70,668, or 26.0%, of
which $39,247, or 14.4%, represents deposits acquired from Pilgrim.
The remaining increase of $31,421, or 11.6%, is primarily due to
movement out of money market accounts and other time deposits.
During 1992, savings deposits increased by $95,204, or 53.8%, due
to the acquisitions.
Time certificates of deposit of $100,000 or more decreased
during 1993 (excluding Pilgrim additions of $1,677) and 1992 by
$1,722, or 7.3%, and $3,864, or 14.0%, due to a general outflow of
these types of funds experienced by the banking industry.
<PAGE>
Other time deposits decreased by $33,094, or 13.5%, during
1993. Excluding the addition of $17,891 in time deposits acquired
from Pilgrim, the net runoff was $50,985, or 20.8%. While some of
the decline is attributable to movement into demand deposit and
savings accounts, other time deposits were also reduced as high-
yielding certificates matured and depositors sought alternative
investment products outside of the banking industry where a greater
return could be obtained.
OTHER ASSETS AND OTHER
LIABILITIES
Other assets decreased from $16,004 at December 31, 1992 to
$6,648 at December 31, 1993, a decrease of $9,356, or 58.5%. The
decrease is attributable to the payment of and reversal of two
large items that had been included in the other assets total at
year-end 1992. At year-end 1992, $3,235 in accounts receivable
from the RTC and the FDIC on the Center, Irving and Broadway
acquisitions remained open. The items were paid during the first
quarter of 1993. Also, transit generated suspense items totalling
$6,260 at December 31, 1992 were corrected within the first week of
1993. At December 31, 1993, the other assets total of $6,648 was
primarily composed of $352 in accounts receivable, $1,460 in
deferred tax assets, $2,575 in inventories and prepaid expenses,
$1,757 in transit suspense items, and $504 in miscellaneous assets.
Other liabilities increased by $1,315, or 21.1%, from $6,239
at December 31, 1992 to $7,554 at December 31, 1993, primarily due
to temporary increases in suspense items.
INTEREST RATE SENSITIVITY
Interest rate movements and deregulation of interest rates
have made managing the Company's interest rate sensitivity
increasingly important. The Company's Asset and Liability
Committee is responsible for managing the Company's exposure to
changes in market interest rates. The Committee attempts to
maintain stable net interest margins by generally matching the
volume of assets and liabilities maturing, or subject to repricing,
and by adjusting rates in relation to market conditions to
influence volumes and spreads.
The difference between the volume of assets and liabilities
that reprice in a given period is the interest sensitivity gap. A
"positive" gap results when more assets than liabilities mature or
are repriced in a given time frame. Conversely, a "negative" gap
results when there are more liabilities than assets maturing or
being repriced during a given period of time. The smaller the gap,
the less the effect of market volatility on net interest income.
Asset/liability management is the utilization of this information
to develop strategies to allocate funds to certain types of assets
and offer different liability products to achieve a certain asset-
liability balance and to produce the desired profit margins.
<PAGE>
In certain instances, where a trend in market interest rates
is determined, it may be advantageous to selectively mismatch asset
and liability repricing to take advantage of short term interest
rate movements and the shape of the yield curve. The Company's
ratio of rate sensitive assets to rate sensitive liabilities was
approximately 60% on December 31, 1993, based on contractual
maturities and asset prepayment assumptions for the next 12 months.
Because of the weak loan demand, the Company has been purchasing
fixed rate bonds with proceeds received from the reduction of federal
funds and the funds received in conjunction with the acquisitions. The
effect of this is a negative gap position which in a declining interest
rate environment will increase the Company's net interest spread as the
cost of the Company's deposits and other liabilities may be expected to
fall faster than the interest received on its earning assets.
Conversely, if interest rates increase, the negative gap means that
interest received on earning assets may be expected to increase
more slowly than the interest paid on the Company's liabilities,
therefore decreasing the net interest spread. The negative gap is
evaluated together with the magnitude of change anticipated in
different asset and liability categories. Because most deposits
are core (checking and savings), the magnitude of interest rate
change in these core accounts is estimated to be less than 50% of
any prime rate change and the effect of a rate change on the net
interest margin should be minimal.
The Company has managed its overall asset/liability sensitivity through
on-balance sheet pricing strategies. In the past, the Company has not used
derivative products to limit interest rate risk. In late 1993 and early 1994,
the Company began considering the use of such derivatives. The Company could
use, but is not limited to, interest rate swaps, covered call option contracts
and future contracts.
Interest rate swaps generally involve the exchange of fixed
and floating rate interest payments between two parties without the
exchange of the related notional amount. A covered call option
contract requires the maker to deliver, upon exercise, an
underlying security at a fixed "strike" price. Future contracts
can also limit interest rate sensitivity by hedging underlying
assets and liabilities from adverse movement of interests rates.
<PAGE>
The following table shows the GAP position of the Company at
December 31, 1993:
<TABLE>
INTEREST RATE SENSITIVITY ANALYSIS
December 31, 1993
<CAPTION>
Due Between
Due Within 91 Days Due After Non-Interest
90 Days and One Year One Year Bearing Total
<S> <C> <C> <C> <C> <C>
ASSETS
Short-Term
Investments $ 9,800 $ -- $ -- $ -- $ 9,800
Investment Securities 82,457 41,174 303,054 -- 426,685
Total Loans 225,394 121,983 182,013 -- 529,390
Non-Interest Bearing
Assets -- -- -- 75,950 75,950
--------- --------- -------- ------- ----------
Total Assets $ 317,651 $ 163,157 $485,067 $75,950 $1,041,825
Percent of
Total Assets 30.49% 15.66% 46.56% 7.29% 100.00%
SOURCE OF FUNDS
Interest-Bearing
Deposits $ 545,591 $ 155,676 $ 29,188 $ -- $730,455
Short-Term Borrowings 19,629 -- -- -- 19,629
Long-Term Debt -- -- -- -- --
Other Liabilities -- -- -- 212,787 212,787
Stockholders' Equity -- -- -- 78,954 78,954
Total Source of Funds $ 565,220 $ 155,676 $ 29,188 $291,741 $1,041,825
Percent of Total Source of Fund 54.25% 14.95% 2.80% 28.00% 100.00%
Interest Rate Sensitivity Gap $(247,569) $ 7,481 $455,879 $(215,791)
Cumulative Interest
Rate Sensitivity Gap $(247,569) $(240,088) $215,791
</TABLE>
<PAGE>
LIQUIDITY
Liquidity is a measure of the Company's ability to generate
sufficient cash flow in order to meet all current and future
financial obligations and commitments as they arise. One source of
cash flow for liquidity purposes is provided by maturing loans and
investments. However, the primary source of liquidity is the
ability to attract new deposits and to renew deposit obligations as
they mature. The Company utilizes its branch banking system to
access retail customers who provide a highly stable source of "core
funds." These funds are comprised of demand deposits, savings
accounts and certificates of deposit.
From 1990 through 1993, the Company expanded its core deposit
base via acquisitions. During 1992 and 1993, an increased emphasis
on customer service was instituted as the Company competed for
deposit funds.
The Company may also purchase federal funds or arrange other
short term borrowings for specific purposes as necessary, including
to effect its interest rate sensitivity management.
The Company actively manages its liquidity position under the
direction of both the Asset and Liability Committee and the
Investment Committee. Periodic review under prescribed policies
and procedures is intended to ensure that the Company will maintain
adequate levels of available funds. At December 31, 1993, the
Company's primary and secondary liquidity ratios were well above
stated policy.
CAPITAL
The Federal Reserve Bank recently issued regulations to
redefine the adequacy of bank capital based upon the sensitivity of
assets and off-balance sheet exposures to risk factors. Four
categories of risk weights (0%, 20%, 50% and 100%) were established
to be applied to different types of balance sheet assets and off-
balance sheet exposures. The aggregate of the risk weighted items
(risk-based assets) is the denominator of the ratio, the numerator
of which is a newly defined risk-based capital. Under the
regulations, risk-based capital has been classified into two
categories. Tier 1 capital includes common and qualifying
perpetual preferred stockholders' equity (including capital surplus
and retained earnings), less goodwill. Tier 2 capital includes
mandatory convertible debt, allowance for possible loan losses, subject to
certain limitations, and certain subordinated and term debt
securities. Total qualifying capital consists of Tier 1 capital
and Tier 2 capital; however, the amount of Tier 2 capital may not
exceed the amount of Tier 1 capital in the computation of total
qualifying capital. At December 31, 1993, the minimum capital
ratio required under the above formula was 4.0% for Tier 1 capital
and 8.0% for total qualifying capital. The Company at December 31,
1993 exceeded the 1993 requirements with Tier 1 capital of 13.60%
and total qualifying capital of 14.85%.
<PAGE>
The Federal Reserve Board also issued new leverage capital
adequacy standards in August 1990. Under these standards, in
addition to the risk-based capital ratios, a bank holding company
must also maintain a ratio of Tier 1 capital (using the risk-based
capital definition) to total assets of at least 3%. Institutions
which are not "top-rated" will be expected to maintain a ratio 100
to 200 basis points above this ratio. The Company's leverage ratio
as of December 31, 1993 was 7.22%.
Hudson United Bank is also subject to similar but separate
capital adequacy guidelines promulgated by the FDIC. As of
December 31, 1993, Hudson United's Tier I Capital Ratio was 12.69%,
its total capital ratio was 13.94% and its leverage ratio was 6.70%.
In May 1992, the Company completed a public offering and
issued 1,725,000 new shares of common stock at $12.25 per share,
which resulted in a total Price to Public of $21,131. After
deducting the underwriting discount and other offering expenses,
the proceeds to the Company were $19,715.
On June 1, 1993, the Company paid a ten percent stock dividend
to stockholders of record May 11, 1993 which resulted in the
issuance of 628,011 new shares of common stock.
On November 8, 1993, HUBCO's Board of Directors authorized a
stock repurchase plan and authorized management to repurchase up to
10% of its outstanding common stock per year beginning immediately.
At that time, HUBCO had approximately 6.9 million shares
outstanding. As of December 31, 1993, HUBCO had repurchased
221,000 shares at a cost of $4.834 million.
On January 14, 1994, HUBCO sold $25 million aggregate
principal amount of subordinated debt in a private placement. The
subordinated debentures bear interest at 7.75% per annum payable
semi-annually. The debentures mature in 2004 (i.e. ten years after
the date of original issuance). The subordinated debt has been
structured to comply with the current rules of the FRB regarding
debt which will qualify as Tier 2 capital under the FRB capital
adequacy rules. HUBCO sold the debt as part of a long term
strategy to raise capital and did not need the additional capital
or funds raised to pay for existing acquisitions. HUBCO intends to
use the net proceeds from the sale of the subordinated debt for
general corporate purposes, including investments in and advances
to HUBCO's subsidiaries, and for financing possible future
acquisitions of deposits and banking assets. Pending such use,
HUBCO, or its subsidiaries, may temporarily invest the net proceeds
in investment grade securities.
<PAGE>
The following table summarizes the capital ratios as of December 31, 1993:
RATIOS AT DECEMBER 31, 1993
1993 MINIMUM HUDSON HUBCO, INC.
CAPITAL RATIOS REQUIREMENTS* UNITED BANK & SUBSIDIARIES
Tier I Capital 6.0% 12.69% 13.60%
Total Capital 10.0% 13.94% 14.85%
Leverage 5.0% 6.70% 7.22%
*For qualification as a well-capitalized institution.
At the end of the reported period, there were no known
uncertainties that will have or that are reasonably likely to have
a material effect on the Company's liquidity, capital resources or
operations; nor is the Company aware of any current recommendations
by the regulatory authorities which, if they were to be implemented,
would have such an effect.
The Company had no material commitments for capital expenditures as of
December 31, 1993. However, HUBCO has outgrown the space at its headquarters
office and commencing in late 1993, HUBCO actively undertook a search for
additional space to expand its headquarters operations and may acquire a
facility in the near future for its relocation. While it is possible that
the new headquarters could result in some additional expense, the Company
does not anticipate that it will be material.
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
HUBCO, INC. and Subsidiaries
(in thousands, except share data)
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
ASSETS:
Cash and due from banks (Note 3) $ 49,542 $ 38,400
Federal funds sold 9,800 23,300
--------- -------
TOTAL CASH AND CASH EQUIVALENTS 59,342 61,700
--------- -------
Investment securities (Notes 1 and 4):
Available for sale, at market value
(amortized cost of $123,833 for 1993) 130,555 ---
Held to maturity, at cost (market value of $301,692 and
$333,259 for 1993 and 1992, respectively) 296,130 322,522
--------- --------
TOTAL INVESTMENT SECURITIES 426,685 322,522
--------- --------
Loans (Notes 1, 5, 7AND 8):
Real estate -- mortgage 224,647 261,563
Commercial and financial 178,827 152,244
Consumer credit 109,169 105,418
Direct lease financing 122 1,644
--------- --------
534,765 520,869
--------- --------
Less:
Allowance for possible loan losses (Notes 1 and 6) 10,811 7,605
Deferred loan fees 676 718
Unearned income 4,699 6,703
---------- ---------
NET LOANS 518,579 505,843
--------- ---------
Premises and equipment, net (Notes 1 and 9) 18,001 15,097
Accrued interest receivable 10,259 9,493
Other real estate (Note 1) 2,311 1,252
Other assets (Notes 2, 10 and 11) 6,648 16,004
--------- ---------
TOTAL ASSETS $1,041,825 $ 931,911
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits
Noninterest bearing $ 205,233 $ 171,178
Interest bearing 730,455 672,048
---------- --------
TOTAL DEPOSITS 935,688 843,226
---------- --------
Federal funds purchased and securities
sold under agreements to repurchase 19,629 14,133
Accrued taxes and other liabilities 7,554 6,239
---------- --------
TOTAL LIABILITIES 962,871 863,598
---------- --------
COMMITMENTS AND CONTINGENCIES (Notes 14 and 15)
STOCKHOLDERS' EQUITY (Notes 12 and 13):
Preferred stock, no par value; authorized
3,300,000 shares, none issued -- --
Common stock, no par value; authorized 13,200,000 shares;
issued 6,933,361 and outstanding 6,724,661 and issued
6,286,342 and outstanding 6,285,572
shares in 1993 and 1992, respectively 18,492 16,766
Additional paid-in capital 49,048 34,077
Retained earnings 12,669 18,042
Treasury stock, at cost, 208,770 and 770
shares in 1993 and 1992, respectively ( 4,571) ( 6)
Restricted stock award ( 946) ( 566)
Unrealized gain on investment securities
available for sale, net of income taxes of $2,460 4,262 --
---------- --------
TOTAL STOCKHOLDERS' EQUITY 78,954 68,313
---------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,041,825 $ 931,911
========== ========
The accompanying notes to consolidated financial statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
HUBCO, INC. and Subsidiaries
(in thousands, except per share data)
<CAPTION>
For The Years
Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans:
Taxable $ 43,240 $ 45,004 $ 39,550
Tax-exempt 306 402 511
------- ------- -------
43,546 45,406 40,061
------- ------- -------
Interest and dividends on investment securities:
Taxable 22,350 19,991 9,286
Tax-exempt 1,092 907 1,515
------- ------- -------
23,442 20,898 10,801
------- ------- -------
Interest on federal funds sold 771 1,342 897
------- ------- -------
TOTAL INTEREST INCOME 67,759 67,646 51,759
------- ------- -------
INTEREST EXPENSE:
Savings deposits 11,928 12,350 11,546
Time deposits and certificates of deposits 8,451 13,744 12,864
Interest on short-term borrowings 362 539 877
------- ------- -------
TOTAL INTEREST EXPENSE 20,741 26,633 25,287
------- ------- -------
NET INTEREST INCOME 47,018 41,013 26,472
PROVISION FOR POSSIBLE LOAN LOSSES 3,600 4,116 2,312
------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 43,418 36,897 24,160
OTHER INCOME:
Trust department income 525 591 667
Service charges on deposit accounts 5,981 4,832 3,725
Investment securities gains (losses) -- (26) 39
Other 2,100 2,260 1,040
------- ------- -------
8,606 7,657 5,471
------- ------- -------
52,024 44,554 29,631
------- ------- -------
OTHER EXPENSES:
Salaries 11,910 10,475 8,429
Pension and other employee benefits (Note 11) 4,591 3,229 2,861
Occupancy expense 3,056 3,182 2,334
Equipment expense 1,960 1,760 1,777
Net cost to operate other real estate 119 562 481
Deposit and other insurance 2,262 1,986 1,316
Outside services 2,782 2,790 2,678
Amortization of intangible assets -- 2,424 292
Charitable contributions (Note 1) 33 4,032 32
Other 3,258 3,909 2,074
------- ------- -------
29,971 34,349 22,274
------- ------- -------
INCOME BEFORE PROVISION
FOR INCOME TAXES 22,053 10,205 7,357
PROVISION FOR INCOME TAXES (Note 10):
Federal 6,976 207 1,725
State 875 357 611
------- ------- -------
7,851 564 2,336
------- ------- -------
NET INCOME $ 14,202 $ 9,641 $ 5,021
======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1) 6,909 6,091 4,955
======= ======= =======
NET INCOME PER SHARE (Note 1) $2.06 $1.58 $1.01
======= ======= =======
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
HUBCO, INC. and Subsidiaries
For the Years Ended December 31, 1993, 1992 and 1991
(in thousands, except share data)
<CAPTION>
Unrealized
Gain on
Investment
Common Stock Additional Restricted Securities
------------------ Paid-in Retained Treasury Stock Available
Shares Amount Capital Earnings Stock Awards for Sale
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 4,112,098 $10,968 $15,727 $11,430 ($ 249) ($309) $ -
Net income -- 1991 - - - 5,021 - - -
Cash dividends --
$.33 per share - - - ( 1,679) - - -
Purchase of 1,000 shares
of treasury stock - - - - ( 5) - -
Issuance of restricted
stock 7,980 21 54 3 254 (332) -
Amortization of restricted
stock - - - - - 195 -
10% stock dividend 411,414 1,097 2,863 ( 3,960) - - -
--------- ------- ------- ------- ---- ---- ----
Balance at December 31, 1991 4,531,492 12,086 18,644 10,815 - (446) -
Net income -- 1992 - - - 9,641 - - -
Cash dividends --
$.40 per share - - - ( 2,414) - - -
Issuance of common stock,
net of related expenses 1,725,000 4,600 15,115 - - - -
Return of 770 shares of
restricted stock to
treasury stock - - - - ( 6) 6 -
Issuance of restricted
stock 29,850 80 318 - - (398) -
Amortization of restricted
stock - - - - - 272 -
--------- ------- ------- ------- ---- ---- ----
Balance at December 31, 1992 6,286,342 16,766 34,077 18,042 ( 6) (566) -
Net income -- 1993 - - - 14,202 - - -
Cash dividends --
$.47 per share - - - ( 3,267) - - -
10% stock dividend 628,011 1,675 14,653 (16,328) - - -
Return of 1,122 shares of
restricted stock to
treasury stock - - - 1 ( 11) 10 -
Issuance of restricted
stock 19,008 51 318 19 280 (668) -
Amortization of
restricted stock - - - - - 278 -
Purchase of 221,000 shares
of treasury stock - - - - (4,834) - -
Unrealized gain on
investment securities
available for sale, net
of income taxes of $2,460 - - - - - - 4,262
--------- ------- ------- ------- ------ ----- -----
Balance at December 31, 1993 6,933,361 $18,492 $49,048 $12,669 ($4,571) ($946) $4,262
========= ======= ======= ======= ====== ===== =====
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
HUBCO, INC. and Subsidiaries
(in thousands)
<CAPTION>
For The Years
Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,202 $ 9,641 $ 5,021
Adjustments to reconcile net income to net cash
provided by operating activities-
Provision for possible loan losses 3,600 4,116 2,312
Provision for depreciation and amortization 1,899 4,479 1,814
Amortization of investment security premiums 1,300 1,074 284
Accretion of investment security discount (320) (295) (161)
Investment securities (gains) losses - 26 (39)
Noncash charitable contribution - 4,000 -
Deferred income taxes (398) (4,035) (100)
Decrease (increase) in interest receivable (57) (2,587) 364
(Decrease) increase in interest payable (466) (3,646) (1,387)
(Decrease) increase in accrued taxes and
other liabilities 1,544 (4,201) (3,110)
(Increase) decrease in other assets 6,998 (4,981) (3,474)
-------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 28,302 3,591 1,524
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 61 8,570 13,214
Proceeds from maturities of investment securities 71,980 64,983 31,159
Net cash acquired through acquisitions 43,134 425,698 16,505
Net cash paid for acquisitions (227) (3,411) (425)
Net decrease in loans 30,334 11,583 5,628
Purchase of investment securities (138,681) (232,340) ( 30,212)
Purchases of premises and equipment (3,853) (3,366) (1,677)
(Increase) decrease in other real estate (389) 431 32
-------- -------- --------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 2,359 272,148 34,224
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 22,108 (6,933) 22,734
Net decrease in certificates of deposit (52,522) (265,477) (52,602)
Net increase (decrease) in Federal funds
purchased and securities sold under
agreements to repurchase 5,496 2,093 (17,734)
Net decrease in short-term borrowings - (763) (68)
Net proceeds from issuance of common stock - 19,715 -
Cash dividends (3,267) (2,414) (1,679)
Acquisition of treasury stock (4,834) (6) (5)
-------- -------- -------
NET CASH USED IN
FINANCING ACTIVITIES (33,019) (253,785) (49,354)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,358) 21,954 (13,606)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 61,700 39,746 53,352
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 59,342 $ 61,700 $ 39,746
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for
Interest $ 21,017 $ 30,279 $ 25,929
Income taxes 8,477 3,823 1,785
======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HUBCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1993
(in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
HUBCO, Inc. (the Company) provides a full range of banking services to
individual and corporate customers through its subsidiary and branch locations
in New Jersey. The Company is subject to the regulations of certain Federal
and state agencies and undergoes periodic examinations by those regulatory
authorities.
Basis of presentation and consolidation: The consolidated financial statements
include the accounts of HUBCO, Inc. and its subsidiaries, all of which are
wholly owned. As more fully described in Note 2 to the financial statements,
the Company acquired Meadowlands National Bank during 1991 by purchasing all of
its outstanding stock. During 1991, the Company purchased certain assets and
assumed certain liabilities of Center Savings and Loan Association, through the
Resolution Trust Corporation, as receiver. During 1992, the Company purchased
certain assets and assumed certain liabilities of Irving Federal Savings and
Loan Association through the Resolution Trust Corporation as receiver. During
1992, the Company also purchased certain assets and assumed certain liabilities
of Broadway Bank and Trust Company through the FDIC as receiver. During 1993,
the Company purchased certain assets and assumed certain liabilities of Pilgrim
State Bank (Pilgrim) from the Ramapo Financial Corporation (Ramapo). (See
Note 2).
All significant intercompany accounts and transactions are eliminated in
consolidation.
The financial statements have been prepared in accordance with generally
accepted accounting principles. In preparing the consolidated financial
statements, management is required to make estimates & assumptions that affect
the reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for possible loan
losses & the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of the
allowance for possible loan losses and the valuation of other real estate,
management obtains independent appraisals for significant properties.
In addition to real estate loans, a substantial portion of the Company's loans
are collateralized by real estate in depressed markets throughout New Jersey.
Accordingly, the ultimate collectibility of a substantial portion of the
Company's loan portfolio is particularly susceptible to changes in market
conditions in New Jersey.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to recognize potential losses on
loans, future additions to the allowance may be necessary based on changes in
economic conditions, particularly in New Jersey. In addition, various regula-
tory agencies, as an integral part of their examination process, periodically
review the Company's allowance for possible loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgments of information available to them at the time of their examination.
<PAGE>
Disclosures About Fair Value of Financial Instruments: In December 1991, the
FASB issued SFAS No. 107, "Disclosures About Fair Value of Financial Instru-
ments." The Company has adopted the provisions of SFAS No. 107 for its year
ended December 31, 1992.
Investment securities: The Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," (SFAS 115) effective December 31, 1993. As permitted by the
statement, the Company did not retroactively restate prior years financial
statements. This Statement requires the Company to classify its investment
securities as: (1) held for investment purposes (held to maturity), (2)
available for sale and (3) held for trading purposes.
Securities for which the Company has the ability and intent to hold until
maturity are classified as held to maturity. These securities are carried at
cost adjusted for amortization of premiums and accretion of discounts on a
straight-line basis which is not materially different from the interest method.
Securities which are held for indefinite periods of time which management
intends to use as part of its asset/liability strategy, or that may be sold in
response to changes in interest rates, changes in prepayment risk, increases in
capital requirements or other similar factors, are classified as available for
sale and are carried at fair value. Differences between an investment's
amortized cost and fair value is charged/credited directly to stockholders'
equity, net of income taxes. The cost of securities sold is determined on a
specific identification basis. Gains and losses on sales of investment
securities are recognized in the income statement upon sale.
The Company has no securities held for trading purposes at December 31, 1993.
Loans: Loans are recorded at their principal amounts, net of unearned income,
if any. Interest income on loans not made on a discounted basis is credited to
income based on principal amounts outstanding at applicable interest rates.
Interest income on consumer credit loans is recorded primarily using the actu-
arial method.
Recognition of interest on the accrual method is discontinued when interest or
principal payments are 90 days or more in arrears for commercial and financial
loans, 120 days or more in arrears for consumer credit and 180 days or more in
arrears for real estate mortgage loans or when collateral is insufficient to
cover principal and interest, or when other factors indicate that collection of
such amounts is doubtful. A nonaccrual loan is not returned to an accrual
status until interest is received on a current basis and other factors indi-
cating doubtful collection cease.
The net amount of all loan origination fees, direct loan origination costs and
loan commitment fees are deferred and recognized over the estimated life of the
related loans as an adjustment of yield.
<PAGE>
For certain homogeneous categories of loans, such as some residential mortgages
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics.The fair value
of other types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Lease financing: Subsidiaries of the Company once provided car and equipment
financing to their customers. Direct financing leases are carried at the aggre-
gate of lease payments receivable plus estimated residual values, net of un-
earned income. Unearned income on direct financing leases is amortized over the
lease terms resulting in an approximate level rate of return.
Allowance for possible loan losses: The allowance is maintained at a level
believed adequate by management to absorb potential losses in the loan port-
folio. Management's determination of the adequacy of the allowance is based on
an evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth and composition of the loan portfolio and other
relevant factors. The allowance is increased by provisions for loan losses
charged against income and reduced by net charge-offs.
Premises and equipment: Land, buildings and furniture, fixtures and equipment
are carried at cost. Depreciation on substantially all buildings and furniture,
fixtures and equipment is provided using the straight-line method based on
estimated useful lives. Maintenance and repairs are expensed as incurred and
additions and improvements are capitalized.
Other real estate: Other real estate includes loan collateral that has been
formally repossessed and collateral on loans that has been substantively
repossessed, that is when the primary risks and rewards of collateral ownership
have passed from the debtor to the lender (in-substance foreclosed). Loans
which are in-substance foreclosed are reduced to the fair value of the collat-
eral (if less than the loan receivable) by chargeoffs against the allowance for
possible loan losses and are reclassified as other real estate in the accompa-
nying consolidated balance sheets. Subsequent reductions in the fair value of
the collateral are charged to current operations.
In December 1992, the Company contributed certain real estate previously
acquired through foreclosure to a charity. The carrying amount of the other
real estate contributed was $4,000.
Intangibles: Core deposit intangible assets relating to premiums paid on the
assumption of deposits are generally amortized, on a straight-line basis, over
the estimated average remaining lives of such deposits
(primarily 1 to 6 years).
Amortization expense of intangible assets, primarily core deposit intangibles,
was $2,424 and $292 for 1992 and 1991, respectively. At December 31, 1992, all
intangible assets had been fully amortized.
Pension plan: Costs for the Company's two pension plans are actuarially deter-
mined by the frozen initial liability cost method and the accrued benefit (unit
credit) cost method.
Deposits: The fair value of demand deposit savings accounts and certain money
market deposits is the amount reported in the financial statements. The fair
value of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities. The fair value
of these certificates of deposit was $204,400 and $238,610 at December 31, 1993
and 1992, respectively.
<PAGE>
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased and securities sold under agreements to repurchase at
December 31, 1993 and 1992, generally have an original term to maturity of less
than 30 days and therefore, their carrying value is a reasonable estimate of
fair value.
Federal income taxes: The Financial Accounting Standards Board has issued
Statement No. 109, "Accounting for Income Taxes," effective the first quarter
of 1993, which changes the method of accounting for income taxes from the
deferred method to the asset/liability method. The Company elected to adopt the
provisions of the Statement in the fourth quarter of 1992. The effect of adopt-
ing SFAS 109 on prior periods was not significant and therefore prior interim
or annual periods have not been restated. Certain income and expense items are
recorded differently for financial reporting purposes than for Federal income
tax purposes. Provisions for deferred taxes are made in recognition of these
temporary differences.
The Company and its subsidiaries file a consolidated Federal income tax return.
Each subsidiary provides for income taxes on a separate return basis and remits
to (receives from) the Company amounts determined to be their tax liability
(benefit).
Per share amounts: Net income and cash dividends per share amounts are based on
the weighted average number of common shares outstanding during the year,
adjusted retroactively for the 10 percent stock dividend paid in 1993.
Cash equivalents: Cash equivalents include amounts due from banks and Federal
funds sold. For these short-term investments, their carrying amount is a
reasonable estimate of fair value.
Reclassifications: Certain reclassifications have been made to the 1992 and
1991 amounts in order to conform with the 1993 presentation.
(2) ACQUISITIONS:
Completed: On April 22, 1991, the Company completed the acquisition of all of
the common stock of Meadowlands National Bank (MNB) for cash consideration of
$415. The transaction was accounted for as a purchase.
In addition, on September 20, 1991, the Bank acquired certain assets & assumed
certain liabilities of Center Savings & Loan Association (Center) from the
Resolution Trust Corporation (RTC) as receiver. The transaction was accounted
for as a purchase.
The following is a summary of these acquisitions:
MNB Center
Cash paid at acquisition $ 415 $ 10
Balances at acquisition date
Cash and cash equivalents 4,930 11,575
Loans 22,102 78,555
Total assets 36,856 90,937
Deposits 35,509 89,863
Total liabilities 35,841 90,927
<PAGE>
As of December 31, 1992, there were two claims to be processed totaling $1,417
which represented the final settlement claims related to the Center
acquisition. Both claims were paid in the first quarter of 1993.
On February 21, 1992, the Bank acquired certain assets and assumed certain
liabilities of Irving Federal Savings and Loan Association (Irving) from the
Resolution Trust Corporation (RTC) as receiver. The transaction was accounted
for as a purchase.
In addition, on March 13, 1992, the Bank assumed the insured deposits of
Broadway Bank and Trust Company (Broadway) under a Deposit Insurance Transfer
and Asset Purchase Agreement with the Federal Deposit Insurance Corporation
(FDIC). The Bank also obtained a nonexclusive option to purchase certain of
Broadway's loans from the FDIC. Under the option the Bank purchased approxi-
mately $9.5 million of commercial and mortgage loans. The transaction was
accounted for as a purchase.
The following is a summary of these acquisitions:
Irving Broadway
Cash paid at acquisition $ 5 $ 3,406
Balances at acquisition date
Cash and cash equivalents 99,361 322,926
Loans 62,357 -
Total assets 161,997 345,518
Deposits 161,055 345,724
Total liabilities 162,002 348,924
As of December 31, 1992, the Bank has a receivable of $236 from the RTC related
to the Irving acquisition that was included in other assets. Final settlement
of this transaction occurred in February, 1993.
As of December 31, 1992, the bank had a receivable of $2,957 from the FDIC
related to the Broadway acquisition that was included in other assets. The
receivable was settled in the first quarter 1993.
On June 30, 1993, the Bank purchased the branches, deposits and certain assets
of Pilgrim from Ramapo, for a purchase price of $6 million. In connection with
the Pilgrim transaction, the Bank assumed deposits of approximately $122.9
million and other liabilities of approximately $0.4 million. The Bank received
approximately $123.1 million in assets, including $46.7 million in loans and
participation interests in loans. Nonperforming assets totaling approximately
$1.7 million were included in the assets acquired by the Bank.
The following is a summary of the Pilgrim transaction:
Cash paid at acquisition $ 227
Balances at acquisition date
Cash and cash equivalents 42,907
Loans 46,670
Total assets 123,113
Deposits 122,876
Total liabilities 123,340
Pending: In May 1993, the Company and its banking subsidiary agreed to acquire
Statewide Savings Bank, SLA (Statewide), a mutual savings and loan association,
in a merger-conversion transaction. Under the agreement, the Company will sell
shares of its common stock to Statewide eligible depositors and other voting
members at a discounted price (lesser of $18 per share or market price at
closing date) in an amount equal to the appraised value of Statewide as deter-
mined by an independent appraiser which, on a preliminary basis, is approxi-
mately $35 million. The Company's stockholders will be offered any remaining
shares at the same price offered to Statewide's depositors.
<PAGE>
Shares not sold to Statewide eligible depositors, other voting members and
Company stockholders are expected to be sold at a market price to the public.
As part of the transaction, Statewide will convert from a state savings and
loan to a state mutual savings bank charter, from mutual to stock form and will
then be merged into the Company's banking subsidiary.
As of its most recent fiscal year ended March 31, 1993, Statewide reported
total assets, tangible net worth and net income of $518 million, $13.3 million
and $5.6 million, respectively. The transaction is subject to Statewide
depositor and various regulatory approvals.
In November 1993, the Company and its subsidiary bank agreed to acquire
Washington Bancorp, Inc. and its subsidiary, Washington Savings Bank (together
Washington) for a combination of cash and convertible preferred stock for an
aggregate consideration of approximately $40.5 million. In the transaction,
51% of Washington's shares will be converted into preferred stock at .6708 per
share and 49% will be converted to cash at $16.10 per share with Washington
stockholders having the right to elect either cash or preferred stock. As part
of the merger, Washington Savings Bank will be merged into the Company's
banking subsidiary.
As of its most recent year ended December 31, 1993, Washington reported total
assets, stockholders' equity and net income of $283 million, $33.5 million and
$2.8 million, respectively. The transaction is subject, among other things, to
Washington and HUBCO stockholder and various regulatory approvals.
Both of the pending acquisitions will be accounted for using the purchase
method and are expected to be finalized prior to June 30, 1994.
(3) CASH AND DUE FROM BANKS:
Banks are required to maintain an average reserve balance with the Federal
Reserve Bank. The average 1993 amount of this reserve for the Company's sub-
sidiary was approximately $13,449.
(4) INVESTMENT SECURITIES:
The amortized cost and estimated market value of investment securities as of
December 31 are summarized as follows:
1993
Gross Unrealized Estimated
Amortized ----------------- Market
Cost Gains (Losses) Value
Held to Maturity
U. S. Government $104,957 $2,648 ($125) $107,480
U. S. Government
agencies 164,850 3,104 ( 651) 167,303
States and political
subdivisions 23,815 496 ( 4) 24,307
Other securities 2,508 94 - 2,602
-------- ------ ------ --------
$296,130 $6,342 ($780) $301,692
======== ====== ====== ========
<PAGE>
1993
Gross Unrealized Estimated
Amortized ----------------- Market
Cost Gains (Losses) Value
Available for Sale
U. S. Government $104,728 $5,580 $ - $110,308
U. S. Government
agencies 10,482 502 (1) 10,983
States and political
subdivisions 1,600 237 - 1,837
Other securities 2,107 223 (5) 2,325
Equity securities 4,916 381 (195) 5,102
-------- ------- ----- -------
$123,833 $6,923 ($201) $130,555
======== ======= ===== =======
1992
Gross Unrealized Estimated
Amortized ----------------- Market
Cost Gains (Losses) Value
Held to Maturity
U. S. Government $185,581 $ 6,859 $ - $192,440
U. S. Government
agencies 105,796 3,237 (19) 109,014
States and political
subdivisions 16,068 368 (50) 16,386
Other securities 14,424 300 (1) 14,723
Equity securities 653 47 (4) 696
-------- ------- ----- --------
$322,522 $10,811 ($74) $333,259
======== ======= ===== ========
At December 31, 1993, the Company adopted the provisions of SFAS 115. As a
result, investment securities with a market value of $130,555 were designated
as available for sale. Accordingly, the net unrealized gain of such securities
totaling $4,262 has been recorded as a seperate component of stockholders'
equity at December 31, 1993.
The amortized cost and estimated market value of debt securities at December 31
1993 and 1992, by contractual maturity, are shown below. 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.
1993
----------------------
Estimated
Amortized Market
Cost Value
Available for Sale
Due in one year or less $ 10,057 $ 10,289
Due after one year
through five years 95,319 100,757
Due after five years
through ten years 9,243 9,691
Due after ten years 1,887 2,213
-------- --------
116,506 122,950
Mortgage-backed securities 2,411 2,503
Equity securities 4,916 5,102
-------- --------
$123,833 $130,555
======== ========
<PAGE>
1993
----------------------
Estimated
Amortized Market
Cost Value
Held to Maturity
Due in one year or less $ 64,563 $ 65,016
Due after one year
through five years 169,007 174,031
Due after five years
through ten years 2,279 2,348
Due after ten years 8,882 9,136
-------- --------
244,731 250,531
Mortgage-backed securities 51,399 51,161
-------- --------
$296,130 $301,692
======== ========
1992
----------------------
Estimated
Amortized Market
Cost Value
Held to Maturity
Due in one year or less $ 39,695 $ 40,410
Due after one year
through five years 233,371 241,860
Due after five years
through ten years 21,344 22,130
Due after ten years 4,200 4,313
-------- --------
298,610 308,713
Mortgage-backed securities 23,259 23,850
Equity securities 653 696
-------- --------
$322,522 $333,259
======== ========
Sales of investment securities are summarized as follows:
1993 1992 1991
Proceeds from sales $61 $8,570 $13,214
Gross gains from sales 4 31 153
Gross losses from sales (4) (57) (114)
Investment securities with a book value of $60,005 and $25,968 at December 31,
1993 and 1992, respectively, are pledged to secure public funds, securities
sold under agreements to repurchase and for other purposes as required or per-
mitted by law.
(5) Loans:
The Company's loans are primarily to businesses and individuals located
in New Jersey.
A summary of loans is as follows
1993 1992
Loans secured by real estate:
Residential $187,835 $184,045
Construction 7,117 3,777
Commercial 142,366 139,779
Commercial and industrial loans 119,380 104,721
Loans to individuals for household,
family and other personal
expenditures 57,548 63,129
Other loans 20,519 25,418
-------- --------
Total loans $534,765 $520,869
======== ========
Net loans had a fair value of approximately $538,954 and $517,639 at December
31, 1993 and 1992, respectively.
<PAGE>
(6) ALLOWANCE FOR POSSIBLE LOAN LOSSES:
The allowance for possible loan losses is based on estimates, and ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reflected in opera-
tions in the periods in which they become known.
A summary of the activity in the allowance for possible loan losses
is as follows:
1993 1992 1991
Balance at January 1 $ 7,605 $6,698 $5,232
Additions (deductions):
Provision charged
to expense 3,600 4,116 2,312
Allowance acquired
through mergers
or acquisitions 400 1,500 1,487
Recoveries on loans
previously charged off 386 832 642
Loans charged off (1,180) (5,541) (2,975)
------- ------ ------
Balance at December 31 $10,811 $7,605 $6,698
======= ====== ======
(7) NONPERFORMING LOANS:
The following table presents information related to loans which are on
nonaccrual, contractually past due ninety days or more as to interest or
principal payments and loans which have been restructured to provide a
reduction or deferral of interest or principal for reasons related to the
debtors' financial difficulties.
December 31
1993 1992
Nonaccrual loans $ 5,534 $ 4,248
Renegotiated loans 2,177 2,257
------ ------
Total nonperforming loans $ 7,711 $ 6,505
====== ======
90 days or more past due $ 1,443 $ 1,409
Gross interest income which
would have been recorded
under original terms $ 813 $ 563
Gross interest income recorded
during the year 193 96
Commitments for additional
funds None None
====== ======
(8) LOANS TO RELATED PARTIES:
In the ordinary course of business, the Company and its subsidiaries have
extended credit to various directors, officers and their associates. The
aggregate extension of this credit is summarized below:
December 31
1993 1992
Balance at January 1 $4,951 $3,390
New loans issued 371 1,646
Repayment of loans (2,553) (85)
------ ------
Balance at December 31 $2,769 $4,951
====== ======
At December 31, 1993, $2,360 of related party loans were fully secured by real
estate or marketable securities. Excluded from the above are loans to former
directors in the amounts of $2,063 and $4,507 as of December 31, 1993 and 1992,
respectively. In addition, there were letters of credits to former directors in
the amount of $5,136 as of December 31, 1992. There were none outstanding as of
December 31, 1993.
<PAGE>
(9) PREMISES AND EQUIPMENT:
The following is a summary of premises and equipment:
December 31
1993 1992
Land $ 4,264 $ 4,475
Premises 15,020 12,493
Furniture, fixtures and equipment 6,745 4,719
------- -------
26,029 21,687
Less Accumulated for depreciation 8,028 6,590
------- -------
$18,001 $15,097
======= =======
Depreciation and amortization expense for premises and equipment for 1993, 1992
and 1991 amounted to $1,621, $1,505 and $1,327, respectively.
(10) INCOME TAXES:
The components of the provision for income taxes are as follows:
For the Years Ended
December 31
1993 1992 1991
Federal:
Current $7,374 $4,242 $1,825
Deferred (398) (4,035) (100)
State 875 357 611
------- ------ ------
Total provision for
income taxes $7,851 $564 $2,336
======= ====== ======
A reconciliation of the provision for income taxes, as reported, with the Fed-
eral income tax at the statutory rate of 35 percent in 1993 and 34 percent for
1992 and 1991, is as follows:
For the Years Ended
December 31
1993 1992 1991
Tax at statutory rate $7,719 $3,470 $2,501
Increase (decrease) in taxes
resulting from:
Tax-exempt income (494) (394) (689)
State taxes on income, net of
Federal income tax effect (306) (121) (208)
Reversal of reserves no
longer deemed necessary - (1,475) -
Noncash charitable contribution
basis for tax in excess
of book - (680) -
Other, net 57 (593) 121
------- ------ -------
Provision for Federal
income taxes $6,976 $ 207 $1,725
======= ====== =======
Deferred Federal income taxes result primarily from income relating to leasing
activities, income currently taxable on nonperforming loans not recorded for
financial statement purposes, excess provisions for possible loan losses which
are not currently deductible and a charitable contribution of other real estate
At December 31, 1993, the Company has a net deferred tax asset of approximately
$1,460 included in other assets. Considered in the determination of this amount
is a deferred tax asset of $1,500 representing the tax effect of the charitable
contribution of other real estate at its fair value, net of the permanent diff-
erence reflected above.
<PAGE>
In order to fully realize the deferred tax asset, the Company will need to gen-
erate future taxable income during periods in which existing deductible tempo-
rary differences reverse, unless they reverse during periods which can be
carried back to tax paying periods. Based upon the Company's historical and
current pretax earnings, management believes it more likely than not that the
Company will generate future net taxable income in sufficient amounts to
realize its net deferred tax asset at December 31, 1993, however, there can be
no assurance that the Company will generate any earnings or any specific level
of continuing earnings. The Company did not record any valuation allowances
against its deferred tax assets at December 31, 1993 and 1992.
(11) PENSION PLANS AND POSTRETIREMENT
BENEFITS:
The Company has two noncontributory pension plans which cover eligible
employees (a base plan and a nonbargaining plan). The plans provide for
payments to qualified employees based on salary and years of service. The
Company's funding policy for these plans is to make the maximum annual
contributions allowed by the applicable regulations.
Net pension cost (income) includes the following:
1993 1992 1991
Service cost -- benefits earned
during the year $169 $107 $ 97
Interest cost on projected
benefit obligation 492 456 404
Actual return on plan assets (607) (581) (523)
Net amortization and deferral (8) (45) (79)
---- ---- ----
Net periodic pension
cost (income) 46 (63) (101)
Supplemental pension cost - 4 11
---- ---- ----
$ 46 ($59) ($90)
==== ==== ====
Assumptions used in the accounting for the plans in 1993, 1992 and 1991 as of
December 31 were:
1993 1992 1991
Weighted average
discount rates 7.00% 8.00% 8.00%
Rate of increase in
compensation levels 4.00% 4.00% 4.00%
Expected long-term
rate of return
on assets 8.00% 8.00% 8.00%
<PAGE>
The following table sets forth the funded status and amounts recognized in the
consolidated balance sheets at December 31 for the Company's plans:
December 31
------------------
1993 1992
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$6,706 and $5,701 for 1993 and
1992, respectively $6,841 $5,755
------ ------
Projected benefit obligation for
service rendered to date (7,263) (6,046)
Plan assets at fair value 8,178 7,631
------ ------
Projected benefit obligation
less than plan assets 915 1,585
Unrecognized portion as of
December 31, of net asset
existing at date of adoption
of FASB Statement No. 87 (186) (220)
Prior service cost not yet
recognized in net periodic
pension cost 885 965
Unrecognized net asset
at December 31 (890) (2,100)
------ ------
Net pension asset recognized in
the consolidated balance sheet
at December 31 $ 724 $ 230
====== ======
The Company has a 401(k) savings plan covering substantially all employees.
Under the Plan, the Company matches (up to a maximum of three percent) either
25 or 50 percent of the employee's contribution. The Company's contributions
under the Plan were approximately $130, $67 and $100 in 1993, 1992 and 1991,
respectively.
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for Postretire-
ment Benefits Other Than Pensions" (SFAS 106). SFAS 106 establishes standards
of financial accounting & reporting for an employer that offers postretirement
benefits other than pensions to its employees. This standard requires employers
to accrue the cost of postretirement benefits other than pensions over the
careers of active employees.
The Company and its subsidiaries previously provided medical insurance coverage
and group life insurance for its retirees who met certain employment criteria.
These benefits, which were funded through operations, amounted to $176 in 1991.
In 1992, the Company eliminated such benefits for current and future retirees
and increased the pension benefits. Current retirees receive an additional
annual pension benefit of $.8 & $1, respectively, for the base and nonbargain-
ing plans. Future retirees of the base plan employed as of March 1, 1990 will
be entitled to an $.8 annual increase. Based on current policies and the
restructuring of retiree benefits, there was no significant impact related to
the implementation of SFAS 106.
<PAGE>
(12) COMMON STOCK:
On April 20, 1993, the Board of Directors approved a 10 percent stock dividend
payable on June 1, 1993 to holders of record at May 11, 1993.
During 1989, the Company adopted a restricted stock plan in which 100,000
shares of the Company's common stock may be granted to officers and key
employees. During 1992, the Company amended the Plan to increase the maximum
number of shares of common stock which may be awarded to 330,000 shares, after
giving retroactive effect to the 10 percent stock dividend in April 1993.
During 1993 and 1992, 36,520 and 32,835 shares of common stock were awarded
which vest between two to five years from the date of grant.The value of shares
issued that have not been earned ($946) and ($566) has been recorded as a
reduction of stockholders' equity for 1993 and 1992, respectively. Amortization
of restricted stock awards charged to expense amounted to $278, $272 and $195
in 1993, 1992 and 1991, respectively.
During 1993, the Company adopted a stock option plan in which 110,000 shares of
the Company's common stock may be granted to nonemployee directors. The options
are granted at an exercise price equal to the fair market value at the date of
grant and will vest and become exercisable three years after the date of grant.
The plan will terminate in 2003. During 1993, 2,750 options were granted. Non-
employee directors who do not elect to participate in the plan are eligible for
benefits under an alternative arrangement. Under this arrangement, each nonem-
ployee director with at least three years of service upon retirement will
receive a benefit (not to exceed ten years) equal to 10% of the director's
retainer in effect at the date of retirement. During 1993, the Company incurred
an expense of $2 related to this arrangement.
On November 8, 1993, the Company's Board of Directors authorized management to
repurchase up to 10 percent of its outstanding common stock per year beginning
immediately. Purchases may be made from time to time in the open market or in
privately negotiated transactions depending upon market conditions and subject
to regulatory considerations. Timing, price, quantity and manner of purchases
will be at the discretion of the Company's officers. The program may be dis-
continued or suspended at any time, and there is no assurance that the Company
will purchase the full amount authorized. The acquired shares are to be held
in treasury to be used for pension plan investments, stock option and other
employee benefit plans, general corporate purposes and/orin connection with
the issuance of common stock in pending or future acquisitions. As of February
1,1994, the Company had purchased 442,781 shares at an aggregate cost of $9.869
million.
(13) RESTRICTIONS ON SUBSIDIARY DIVIDENDS,
LOANS OR ADVANCES:
Certain restrictions exist regarding the ability of the Bank to transfer funds
to the Company in the form of cash dividends, loans or advances. State banking
regulations allow for the payment of dividends in any amount provided that
capital stock will be unimpaired and there remains an additional amount of
paid-in capital of not less than 50 percent of the capital stock amount. As of
December 31, 1993, the entire undistributed earnings of the Bank, $28,246, was
included in consolidated retained earnings and was available for distribution
to the Company.
Under Federal Reserve regulations, the Bank is also limited as to the amount it
may loan to its affiliates, including the Company. All such loans are required
to be collateralized by specific obligations.
<PAGE>
(14) LEASES:
Total rental expense for all leases amounted to approximately $924, $858 and
$387 in 1993, 1992, and 1991, respectively. At December 31, 1993, the minimum
total rental commitments under all noncancellable leases on bank premises with
initial or remaining terms of more than one year were as follows:
1994 $ 791
1995 815
1996 788
1997 570
1998 455
Thereafter 1,933
It is expected that in the normal course of business, leases that will expire
will be renewed or replaced by leases of other properties.
(15) COMMITMENTS AND CONTINGENT
LIABILITIES:
The Company and its subsidiaries, from time to time, may be defendants in legal
proceedings. In the opinion of management, based upon consultation with legal
counsel, the ultimate resolution of these legal proceedings will not have a
material effect on the consolidated financial statements. In the normal course
of business, the Company and its subsidiaries have various commitments and con-
tingent liabilities such as commitments to extend credit, letters of credit and
liability for assets held in trust which are not reflected in the accompanying
financial statements.
Loan commitments are made to accommodate the financial needs of the Company's
and its subsidiaries' customers. Standby letters of credit commit the Company
and its subsidiaries to make payments on behalf of customers when certain
specified future events occur. They primarily are issued to support inventory
purchases and performance bonds.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Company's normal credit
policies. Collateral (e.g., securities, receivables, inventory, equipment) is
obtained based on management's credit assessment of the customer.
The Company's maximum exposure to credit loss for loan commitments (unfunded &
unused lines of credit) and standby letters of credit outstanding at December
31, 1993 was $77,297 and $13,760, respectively. Loan commitments and standby
letters of credit were $38,461 and $12,478, respectively, at December 31, 1992.
Commitments under commercial letters of credit used to facilitate customers
trade transactions were $442 and $189 at December 31, 1993 and 1992, respec-
tively.
The Company's loan portfolio is diversified with no industry comprising greater
than 10 percent of the total outstanding. Real estate loans are primarily made
in the local lending area. The Company requires collateral on all real estate
exposures and generally requires loan to value ratios of no greater than 67
percent for commercial mortgages and 75 percent for residential mortgages.
<PAGE>
(16) HUBCO, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEETS
December 31
1993 1992
Assets:
Cash $ 1,085 $ 3
Marketable equity securities 5,102 543
Investment in:
Bank subsidiary 73,058 55,958
Nonbank subsidiary -- HUB Financial
Services, Inc. 427 10,415
Accounts receivable 477 337
Premises and equipment, net 1,284 1,366
Other assets 65 -
------- -------
TOTAL ASSETS $81,498 $68,622
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payable for the purchase of treasury stock $ 2,225 $ -
Accrued taxes and other liabilities 319 288
Amount due to Hudson United Bank - 21
------- -------
TOTAL LIABILITES 2,544 309
STOCKHOLDER'S EQUITY 78,954 68,313
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $81,498 $68,622
======= =======
STATEMENTS OF INCOME
Year Ended December 31
1993 1992 1991
Income:
Cash dividends from bank subsidiary $11,381 $2,863 $1,912
Cash dividends from nonbank subsidiary - 600 -
Interest 124 307 16
Rental income 238 238 238
------- ------- ------
11,743 4,008 2,166
Expenses:
General and administrative 581 759 341
Interest - 35 57
------- ------- -------
581 794 398
------- ------- -------
Income before income tax expense (credit)
and equity in undistributed net income
of subsidiaries 11,162 3,214 1,768
Income tax benefit (73) (360) (49)
------- ------- ------
11,235 3,574 1,817
Equity in undistributed net income of:
Bank subsidiary 2,955 6,337 3,039
Nonbank subsidiary 12 (270) 165
------- ------- -------
NET INCOME $14,202 $9,641 $5,021
======= ======= =======
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $14,202 $ 9,641 $5,021
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation 81 83 83
Amortization of restricted stock 278 641 478
Increase in investment in subsidiaries (2,966) (26,667) (4,219)
Increase in accounts receivable (140) (146) (116)
Decrease (increase) in other assets (65) 7 (7)
Increase in payable for the
purchase of treasury stock 2,225 - -
Increase in accrued taxes and other
liabilities (38) 288 (26)
------- ------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 13,577 (16,153) 1,214
------- ------- -------
INVESTING ACTIVITIES:
Purchase of marketable equity securities (4,373) (543) -
Capital expenditures - (3) -
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,373) (546) -
------- ------- -------
FINANCING ACTIVITIES:
Decrease in amount due to Hudson United Bank (21) (19) (18)
Decrease in note payable - (763) (68)
Issuance of common stock - 19,715 -
Dividends paid (3,267) (2,414) (1,679)
Acquisition of treasury stock (4,834) (6) (5)
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (8,122) 16,513 (1,770)
------- ------- -------
INCREASE (DECREASE) IN CASH 1,082 (186) (556)
CASH AT BEGINNING OF YEAR 3 189 745
------- ------- -------
CASH AT END OF YEAR $ 1,085 $ 3 $ 189
======= ======= =======
</TABLE>
(17) SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following quarterly financial information for the two years ended December
31, 1993 is unaudited. However, in the opinion of management, all adjustments,
which include only normal recurring adjustments necessary to present fairly the
results of operations for the periods are reflected. Results of operations for
the periods are not necessarily indicative of the results of the entire year or
any other interim period.
<PAGE>
Three Months Ended
---------------------------
March 31 June 30 Sept. 30 Dec. 31
1993:
Interest income $16,389 $16,323 $17,619 $17,428
Interest expense 5,297 4,967 5,370 5,107
Net interest income 11,092 11,356 12,249 12,321
Provision for possible loan losses 750 750 1,050 1,050
Gain (loss) on sale of securities 4 (2) - (2)
Other income 1,817 2,195 2,402 2,192
Other expenses 7,084 7,451 8,084 7,352
Income before income taxes 5,079 5,348 5,517 6,109
Income tax expense 1,872 1,844 1,781 2,354
Net income 3,207 3,504 3,736 3,755
Net income per share .46 .51 .54 .55
1992:
Interest income $14,560 $18,482 $17,784 $16,820
Interest expense 7,143 7,416 6,419 5,655
Net interest income 7,417 11,066 11,365 11,165
Provision for possible loan 615 671 615 2,215
Loss on sale of securities - (15) (11) -
Other income 1,534 1,805 1,985 2,359
Other expenses 6,166 9,150 8,973 10,060
Income before income taxes 2,170 3,035 3,751 1,249
Income tax expense (benefit) 724 611 930 (1,701)
Net income 1,446 2,424 2,821 2,950
Net income per share .29 .43 .41 .43
(18) SUBSEQUENT EVENT:
In January, 1994, the Company sold $25 million aggregate principal amount of
subordinated debentures in a private placement. The debentures, which mature in
2004, bear interest at 7.75% per annum payable semiannually. The Company is
obligated to register the debentures with the Securities and Exchange
Commission by July, 1994, for an exchange offer or in a resale transaction.
The Company intends to use the net proceeds from the sale of the debentures
for general corporate purposes, including investments in and advances to the
Company's subsidiaries, and for financing possible future acquisitions of
deposits and banking assets.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of HUBCO, Inc.:
We have audited the accompanying consolidated balance sheets of HUBCO, Inc. (a
New Jersey corporation) and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1993. These financial statements are the responsibility of the Company's man-
agement. Our responsibility is to express an opinion on these financial state-
ments based on our audits.
We conducted our audits in accordance with generally accepted auditing stand-
ards. 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 & significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. 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 HUBCO, Inc. and subsidiaries
as of December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended Decmber 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1992 the
Company changed its method of accounting for income taxes and in 1993 its
method of accounting for investments in debt and equity securities.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
February 1, 1994
<PAGE>
<PAGE>
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest Income $ 67,759 $ 67,646 $ 51,759 $ 49,809 $ 51,113
Interest Expense 20,741 26,633 25,287 26,818 27,820
------ ------ ------ ------ ------
Net Interest Income 47,018 41,013 26,472 22,991 23,293
Provision for Possible Loan Losses 3,600 4,116 2,312 4,150 1,860
------ ------ ------ ------ ------
Net Interest Income After Provision
for Possible Loan Losses 43,418 36,897 24,160 18,841 21,433
Other Income 8,606 7,657 5,471 4,532 4,196
Other Expenses 29,971 34,349 22,274 20,013 19,863
------ ------ ------ ------ ------
Income Before Income Taxes 22,053 10,205 7,357 3,360 5,766
Income Tax Provision 7,851 564 2,336 1,145 2,457
Net Income $ 14,202 $ 9,641 $ 5,021 $ 2,215 $ 3,309
======= ======= ====== ====== ======
Per Share Data:
Weighted Average Common Shares
Outstanding 6,909 6,091 4,955 4,941 4,969
Net Income Per Common Share $2.06 $1.58 $1.01 $0.45 $0.67
Cash Dividends Per Common Share $0.47 $0.40 $0.33 $0.33 $0.33
Balance Sheet Summary:
Investment Securities $426,685 $322,522 $138,915 $150,536 $ 89,177
Loans, Net of Deferred Loan Fees
and Uncurrent Income 529,390 513,448 465,883 371,700 369,232
Total Assets 1,041,825 931,911 673,159 595,128 548,132
Deposits 935,688 843,226 608,857 512,823 484,192
Stockholders' Equity 78,954 68,313 41,099 37,567 37,400
Ratios:
Return on Average Assets 1.44% 1.05% .82% .40% .62%
Return on Average Equity 19.34 17.38 12.75 5.89 8.91
Dividend Payout 23.01 25.04 33.44 73.63 49.65
Average Equity to Average Assets 7.44 6.04 6.45 6.85 7.00
</TABLE>
<PAGE>
Market and Dividend Information
HUBCO, Inc. is traded on the Nasdaq National Market under the
symbol HUBC. At year end, there were approximately 1,596
stockholders of record.
HUBCO, Inc. stock price range:
The numbers have been restated to reflect a 10% stock dividend paid
by HUBCO on June 1, 1993.
1993 1992
Low High Low High
- - - --------------------------------------------------
1st quarter 16 24 5/8 8 3/8 12 1/2
2nd quarter 19 24 3/8 10 5/8 12 5/8
3rd quarter 20 1/4 25 1/4 11 3/8 13
4th quarter 20 24 1/2 12 16 7/8
Dividends paid
- - - --------------------------------------------------
March 1, 1993 $.10 per share
June 1, 1993 $.11 per share
September 1, 1993 $.11 per share
December 1, 1993 $.12 per share
December 1, 1993 $.03 per share (extra)
On April 20, 1993 the Board of Directors approved a 10% stock
dividend payable June 1, 1993 to stockholders of record on May 11,
1993.
On October 12, 1993 the Board of Directors approved an extra year-
end cash dividend of $.03 per share payable to stockholders of
record on November 15, 1993.
March 1, 1992 $.09 per share
June 1, 1992 $.09 per share
September 1, 1992 $.09 per share
December 1, 1992 $.10 per share
December 1, 1992 $.03 per share (extra)
On October 13, 1992 the Board of Directors approved an extra year-
end cash dividend of $.03 per share payable to stockholders of
record on November 16, 1992.
HUBCO, Inc. will provide, free of charge, to any stockholder, upon
written request, a copy of the Corporation's Annual Report on Form
10-K, including the financial statements and schedules which has
been filed with the Securities & Exchange Commission. Requests
should be addressed to:
D. Lynn Van Borkulo-Nuzzo, Secretary
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Duplicate accounts and mailings are costly and often unnecessary.
We can consolidate such accounts upon written request if you will
notify either the Corporate Secretary at the above address or
Carolyn B. O'Neill, American Stock Transfer and Trust Company,
40 Wall Street, New York, NY 10269
Dividend Investment Plan
If you are not enrolled in the Corporation's Dividend Investment
Plan and would like to join the plan, you may obtain information by
writing to the Corporate Secretary at the above address.
HUBCO, INC. & SUBSIDIARIES
HUBCO, INC.
BOARD OF DIRECTORS
Robert J. Burke
President, Union Dry Dock & Repair Co.
Henry G. Hugelheim
Retired
Harry J. Leber
Retired
Kenneth T. Neilson
President & CEO
Charles F.X. Poggi
President, The Poggi Press
James E. Schierloh
Chairman of the Board
Sister Grace Frances Strauber
Chairperson, Franciscan Health Care System of New Jersey
Edwin Wachtel
President/CEO
Europe Craft Imports, Inc.
HUBCO, Inc.
OFFICERS
James E. Schierloh
Chairman
Kenneth T. Neilson
President & CEO
D. Lynn Van Borkulo-Nuzzo, Esq.
Vice President & Corporate Secretary
Christina L. Maier
Assistant Treasurer
Margaret Warianka
Auditor
HUDSON UNITED BANK
BOARD OF DIRECTORS
Robert J. Burke
Joan David
Thomas R. Farley, Esq.
Henry G. Hugelheim
Harry J. Leber
Kenneth T. Neilson
Charles F.X. Poggi
James E. Schierloh
Sister Grace Frances Strauber
Edwin Wachtel
HUB FINANCIAL SERVICES, INC.
BOARD OF DIRECTORS
William J. Beyer, III
Robert J. Burke
Kenneth T. Neilson
James E. Schierloh, Chairman
Thomas J. Shara
HUB FINANCIAL SERVICES, INC.
OFFICERS
Kenneth T. Neilson
President & CEO
Christina L. Maier
Treasurer
John Calley
Vice President & Investment Officer
William J. Beyer, III
Secretary
ADVISORY COUNCIL MEMBERS
BERGEN COUNTY
Richard Lane
Managing Director, Diraje Corporation
Frank Leanza, Esq.
President, Leanza, Agrapidis & Kalebic, P.C.
Steven Sklow
President, International Foam Products, Inc.
Bernard Stubovsky, CPA
Partner, Demetrius & Company, CPA's
Steven Sy
President, H.S.S. Services
ESSEX COUNTY
Charles Cummins
President, Cummins & Shack, O.D., P.A.
Barbara Miskiv, CPA
Maglin, Miskiv, Leipzig
James Mortenson, CPA
Mortenson & Associcates
George T. Rawding, Esq.
Bannon, Rawding, McDonald & Mascera, PA
HUDSON COUNTY
Rene Abreu
President, The Mortgage Pros, Inc.
Joseph Baldomero, CPA
Managing Partner, Baldomero & Pena
Louis DeFalco, CPA
Managing Partner, DeFalco & Company
Stewart Farber, CPA
Managing Partner, Julius Farber & Company
Ernesto Garcia
President, Action Agency
Antonio Pelaez, Sr.
President, Anpesil Distributors, Inc.
Chris Wolf
President, Schuetzen Park, Inc.
PASSIAC COUNTY
William Book
President, Book Chevrolet/Buick
Vincent Citarelli
President, VIP Brokerage Corporation
John Demetrius, CPA
Partner, Demetrius & Company
George Homcy
President, North Jersey Regional Chamber of Commerce
Kenneth Rose, Esq.
<PAGE>
LIST OF SUBSIDIARIES
SUBSIDIARIES OF HUBCO, INC.:
Hudson United Bank, organized under the banking laws of the State of New
Jersey.
HUB Financial Services, Inc., organized under the New Jersey Business
Corporation Act.
SUBSIDIARIES OF HUDSON UNITED BANK:
Hendrik Hudson Corp. of New Jersey, organized under the New Jersey Business
Corporation Act.
Lafayette Development Corp., organized under the New Jersey Business
Corporation Act.
ARTHUR ANDERSEN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement No. 33-72330.
s/ARTHUR ANDERSEN & CO.
______________________
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
March 30, 1994
