AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
HUBCO, INC.
<TABLE>
<CAPTION>
(Exact name of registrant as specified in its charter)
<S> <C> <C>
NEW JERSEY 6711 22-2405746
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
3100 BERGENLINE AVENUE
UNION CITY, NEW JERSEY 07087
(201) 348-2300
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
KENNETH T. NEILSON, PRESIDENT
3100 BERGENLINE AVENUE
UNION CITY, NEW JERSEY 07087
(201) 348-2300
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
--------------------
Please send copies of all communications to:
RONALD H. JANIS, ESQ. PETER H. EHRENBERG, ESQ.
CLAPP & EISENBERG, P.C. LAURA R. KUNTZ, ESQ.
One Newark Center Lowenstein, Sandler, Kohl,
Newark, New Jersey 07102 Fisher & Boylan, P.C.
(201) 642-3900 65 Livingston Avenue
Roseland, New Jersey 07068
(201) 992-8700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time of the Merger, as defined in the Agreement and Plan of Merger
dated as of November 8, 1993, as amended (the "Merger Agreement"), among the
Registrant, Hudson United Bank, Washington Bancorp, Inc. and Washington
Savings Bank attached as Appendix A to the Proxy Statement-Prospectus.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
--------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Preferred Stock. 938,690 shares $14.00 $13,141,660 $4,531.61
- ---------------------------------------------------------------------------------------------
Common Stock. . . . . . . (2) (3) (3) None (4)
=============================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee pursuant to
Regulation (SECTION MARK)230.457(c), (f)(1) and (i), based on the average of the high
and low prices for Washington Bancorp, Inc. Common Stock on, April 14, 1994 (within five
days of the date hereof).
(2) Such indeterminate number of shares of Common Stock as may be issuable upon conversion of
the Preferred Stock referred to above.
(3) No additional consideration will be received in connection with the exercise of the
conversion privilege.
(4) No additional fee is required pursuant to Regulation (SECTION MARK)230.457 (i).
</FN>
</TABLE>
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
============================================================================
<PAGE>
<PAGE>
HUBCO, INC.
PART I
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INFORMATION REQUIRED IN PROSPECTUS
CROSS REFERENCE SHEET
------------
Item 1. Cross Reference Sheet.
Pursuant to Item 501 of Regulation S-K, this cross reference sheet shows the
location in the Proxy Statement--Prospectus of responses to Items 1 through 19
of Part I of Form S-4.
Location or Heading In
Item No. Prospectus-Proxy Statement
-------- -------------------------
A. Information About the Transaction
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus . . . . . . . . . Cross Reference Sheet, Cover Page
of Proxy Statement--Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . Inside Front Cover
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information . . . . . . . . . SUMMARY; Special Considerations
(a) . . . . . . . . . . . . . SUMMARY--Introduction
(b) . . . . . . . . . . . . SUMMARY--Introduction
(c) . . . . . . . . . . . . SUMMARY
(d) . . . . . . . . . . . . SELECTED FINANCIAL DATA
(e) . . . . . . . . . . . . PRO FORMA COMBINED FINANCIAL
INFORMATION
(f) . . . . . . . . . . . . . PRO FORMA COMBINED FINANCIAL
INFORMATION
(g) . . . . . . . . . . . . . COMPARATIVE MARKET PRICE DATA
(h) . . . . . . . . . . . . . THE MEETING--Votes Required
(i) . . . . . . . . . . . . . THE MERGER--Regulatory Approvals
(j) . . . . . . . . . . . . . THE MERGER--Rights of Dissenting
Stockholders
(k) . . . . . . . . . . . . . THE MERGER--Federal Income Tax
Consequences of the Merger
4. Terms of the Transaction
(a) . . . . . . . . . . . . . THE MERGER; DESCRIPTION OF HUBCO
CAPITAL STOCK
(b) . . . . . . . . . . . . . THE MERGER--Opinions of
Washington's Financial Adviser
(c) . . . . . . . . . . . . . THE MERGER--General
<PAGE>
<PAGE>
5. Pro Forma Financial Information PRO FORMA COMBINED FINANCIAL
INFORMATION
6. Material Contacts with the
Company Being Acquired . . . THE MERGER--Background of the
Merger
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters NOT APPLICABLE
8. Interests of Named Experts and
Counsel . . . . . . . . . NOT APPLICABLE
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . NOT APPLICABLE
B. Information About the Registrant
10. Information with Respect to S-3
Registrants . . . . . . . . INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE; RECENT DEVELOPMENTS
11. Incorporation of Certain
Information by Reference . . INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
12. Information with Respect to S-2
or S-3 Registrants . . . . . NOT APPLICABLE
13. Incorporation of Certain
Information by Reference . INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants . . . . . NOT APPLICABLE
C. Information About the Company
Being Acquired
15. Information with Respect to S-3
Companies . . . . . . . . NOT APPLICABLE
16. Information with Respect to S-2
or S-3 Companies . . . . . INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
17. Information with Respect to
Companies Other Than S-3 or S-2
Companies . . . . . . . . NOT APPLICABLE
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations are to be
Solicited . . . . . . . . ANNUAL MEETING OF WASHINGTON
STOCKHOLDERS; THE MERGER--Rights of
Dissenting Stockholders; Interests
of Certain Persons in the Merger;
Management and Operations of
Washington and the Savings Bank
Following the Merger
19. Information if Proxies Consents
or Authorizations are not to be
Solicited or in an Exchange Offer NOT APPLICABLE
<PAGE>
<PAGE>
[Washington Bancorp, Inc. letterhead]
, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Washington Bancorp, Inc. ("Washington"), which will be held at Schuetzen Park,
North Bergen, New Jersey on , 1994 at 10:00 a.m. (the "Meeting").
At the Meeting, you will be asked to consider and vote upon a proposal to
approve an Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which Washington will merge (the "Merger") with and into HUBCO, Inc. ("HUBCO")
and Washington Savings Bank will merge with and into Hudson United Bank, a
subsidiary of HUBCO. Pursuant to the Merger, Washington's stockholders will be
entitled to receive either $16.10 in cash or 0.6708 of a share of a new series
of HUBCO's Series A Preferred Stock ("HUBCO Preferred Stock") in exchange for
each share of Washington's Common Stock which they own on the effective date
of the Merger, subject to limitations and allocation provisions set forth in
the Merger Agreement. Under the terms of the Merger Agreement, no more than
49% of Washington's Common Stock may be exchanged for cash and no more than
51% may be exchanged for HUBCO Preferred Stock. Each full share of HUBCO
Preferred Stock will have a stated value of, and be redeemable for, $24.00.
Each full share of HUBCO Preferred Stock also will be convertible into one
share of HUBCO Common Stock. The holders of HUBCO Preferred Stock will be
entitled to receive an annual dividend to be set annually on the basis of the
average market price of HUBCO'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 HUBCO Preferred Stock if such
average market price is at $24.00 or higher, up to $1.68 per share if such
average market price is below $19.00. If such average market price is between
$19.00 and $23.99, the dividend will be between $1.56 and $1.10 per share.
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger by various regulatory agencies and approval of
Washington's stockholders as described below.
Your Board of Directors has unanimously approved the Merger Agreement and
recommends that you vote FOR approval of the Merger Agreement.
In addition, the holders of Washington's Common Stock will be asked to
elect three directors to serve on Washington's Board of Directors. Your Board
of Directors recommends that you vote FOR the proposed slate of directors.
The enclosed Notice of Annual Meeting of Stockholders and Proxy
Statement-Prospectus describe the Merger and provide specific information
concerning the Meeting. Your attention is also directed to the enclosed 1993
Annual Report. Please read these materials carefully and consider the
information contained in them. Your vote is of great importance, as the
approval of Washington's stockholders of the Merger Agreement is required to
consummate the Merger.
It is very important that your shares be represented at the Meeting,
regardless of whether you plan to attend in person. The affirmative vote of a
majority of the outstanding shares of Washington's Common Stock will be
required to approve the Merger Agreement. Consequently, the failure of a
stockholder to vote will have the same effect as a vote against the proposal.
Therefore, I urge you to execute, date and return the enclosed proxy card in
the enclosed postage-paid envelope as soon as possible to ensure that your
shares will be voted at the Annual Meeting. You should not send in
certificates for your shares at this time.
On behalf of the Board of Directors, I urge you to vote FOR approval of
the Merger Agreement and FOR the proposed slate of directors.
Sincerely,
Paul Rotondi
Chairman of the Board
and Chief Executive Officer
<PAGE>
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
WASHINGTON BANCORP, INC.
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, the
Annual Meeting of Stockholders of Washington Bancorp, Inc. ("Washington") will
be held at Schuetzen Park, North Bergen, New Jersey, New Jersey, on ,
1994 at 10:00 a.m. for the purpose of considering and voting upon the
following matters:
1. To consider and act upon a proposal to approve an Agreement and Plan
of Merger, dated as of November 8, 1993, as amended (the "Merger Agreement"),
attached as Appendix A to the accompanying Proxy Statement-Prospectus,
providing for the merger (the "Merger") of Washington with and into HUBCO,
Inc. ("HUBCO"). Pursuant to the Merger Agreement, shareholders of Washington
will be entitled to receive either $16.10 in cash or 0.6708 of a share of a
new series of HUBCO's Series A Preferred Stock ("HUBCO Preferred Stock") in
exchange for each share of Washington's Common Stock which they own on the
effective date of the Merger, subject to limitations and allocation provisions
set forth in the Merger Agreement. Under the terms of the Merger Agreement, no
more than 49% of Washington's Common Stock may be exchanged for cash and no
more than 51% may be exchanged for HUBCO Preferred Stock. Each full share of
HUBCO Preferred Stock will have a stated value of, and be redeemable for,
$24.00. Each full share of HUBCO Preferred Stock also will be convertible into
one share of HUBCO Common Stock. The holders of HUBCO Preferred Stock will be
entitled to receive an annual dividend to be set annually on the basis of the
average market price of HUBCO'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 HUBCO Preferred Stock if such
average market price is $24.00 or higher, up to $1.68 per share if such
average market price is below $19.00. If such average market price is between
$19.00 and $23.99, the dividend will be between $1.56 and $1.10 per share.
2. To elect three directors to serve on the Board of Directors.
3. To consider and act upon other matters that may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on 1994 as
the date for determining the shareholders of record entitled to receive notice
of, and to vote at, the Meeting.
Holders of Washington's Common Stock have the right to dissent from the
vote on the Merger Agreement and to receive payment of the fair value of their
shares upon compliance with the applicable provisions of Section 262 of the
Delaware General Corporation Law, the full text of which is included as
Appendix C to the Proxy Statement-Prospectus that is attached to this Notice
of Annual Meeting. For a summary of the dissenters' rights of Washington's
stockholders, see "THE MERGER--Rights of Dissenting Stockholders" in the Proxy
Statement-Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS,
By: Thomas Bingham,
Secretary
Hoboken, New Jersey
, 1994
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE REVOKED
AT ANY TIME PRIOR TO ITS EXERCISE.
<PAGE>
<PAGE>
PROXY STATEMENT
WASHINGTON BANCORP, INC.
PROSPECTUS
HUBCO, INC.
Series A Preferred Stock, Stated Value $24.00
This Proxy Statement-Prospectus is being furnished to the holders of
common stock, par value $.10 per share ("Washington Common Stock"), of
Washington Bancorp, Inc., a Delaware corporation ("Washington"), in connection
with the solicitation of proxies by the Board of Directors of Washington for
use at the Annual Meeting of Washington's stockholders to be held at Schuetzen
Park, North Bergen, New Jersey, on , 1994 at 10:00 a.m., and at any
adjournments or postponements thereof (the "Meeting").
At the Meeting, the stockholders of record of Washington Common Stock as
of the close of business on , 1994 will elect three directors and will
consider and vote upon a proposal (the "Merger Proposal") to approve the
Agreement and Plan of Merger, dated as of November 8, 1993, as amended (the
"Merger Agreement"), by and among HUBCO, Inc., a New Jersey corporation
("HUBCO"), HUBCO's wholly-owned Hudson United Bank subsidiary (the "Bank"),
Washington and Washington's wholly-owned Washington Savings Bank subsidiary
(the "Savings Bank"), pursuant to which Washington will merge with and into
HUBCO (the "Merger") and the Savings Bank will merge with and into the Bank.
Pursuant to the Merger, Washington's stockholders will be entitled to receive
either $16.10 in cash or 0.6708 of a share of a new series of HUBCO's
Preferred Stock in exchange for each share of Washington Common Stock which
they own on the effective date of the Merger, subject to limitations and
allocation provisions set forth in the Merger Agreement. Under the terms of
the Merger Agreement, no more than 49% of the Washington Common Stock may be
exchanged for cash and no more than 51% may be exchanged for HUBCO Preferred
Stock. Each full share of HUBCO Preferred Stock will have a stated value of,
and be redeemable for, $24.00. Each full share of HUBCO Preferred Stock also
will be convertible into one share of HUBCO Common Stock. The holders of the
HUBCO Preferred Stock will be entitled to receive an annual dividend to be set
annually on the basis of the average market price of HUBCO'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
HUBCO Preferred Stock if such average market price is $24.00 or higher, up to
$1.68 per share if such average market price is below $19.00. If such average
market price is between $19.00 and $23.99, the dividend will be between $1.56
and $1.10 per share. For a description of the Merger Agreement, which is
included in its entirety as Appendix A to this Proxy Statement-Prospectus, see
"THE MERGER". This Proxy Statement-Prospectus and the accompanying proxy card
are first being mailed to stockholders of Washington on or about , 1994.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
---------------
The date of this Proxy Statement-Prospectus is , 1994.
<PAGE>
<PAGE>
This Proxy Statement-Prospectus also constitutes a prospectus of HUBCO
with respect to up to 938,690 shares of HUBCO Preferred Stock issuable
pursuant to the Merger, including shares issuable to holders of Washington
stock options, and the shares of HUBCO Common Stock issuable upon conversion
of such Preferred Stock. The number of shares of HUBCO Preferred Stock is
based upon the conversion of 51% of the outstanding shares of Washington
Common Stock into 0.6708 of a share of HUBCO Preferred Stock and the assumed
conversion of outstanding Washington stock options. Each share of HUBCO
Preferred Stock is initially convertible into one share of HUBCO Common Stock.
See "THE MERGER--Effect of the Merger."
The HUBCO Preferred Stock is being created for purposes of the Merger.
Accordingly, there is no market for the HUBCO Preferred Stock at the present
time. HUBCO Common Stock, into which the HUBCO Preferred Stock will be
convertible, is quoted on the NASDAQ National Market ("NASDAQ"). The closing
sale price of HUBCO Common Stock on NASDAQ on April , 1994 was $ per share.
Application will be made to list the HUBCO Preferred Stock on NASDAQ, but
there can be no assurance that such listing will be successful, since it is
necessary to have at least two market makers for the stock to be listed.
AVAILABLE INFORMATION
HUBCO and Washington are subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith file reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements and other information can be obtained, upon payment of prescribed
fees, from the SEC at the Public Reference Room, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected and copied at the SEC's
facilities referred to above and at the SEC's Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661. HUBCO has filed
with the SEC a Registration Statement on Form S-4 (together with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933 (the "Securities Act"), with respect to the shares of HUBCO Preferred
Stock issuable pursuant to the Merger and the shares of HUBCO Common Stock
issuable upon conversion of the HUBCO Preferred Stock. This Proxy
Statement-Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
SEC's principal office in Washington, D.C.
Statements contained in this Proxy Statement-Prospectus or in any
document incorporated by reference in this Proxy Statement-Prospectus, as to
the contents of any contract or other document referred to herein or therein,
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by HUBCO (File No. 0-10699)
and Washington (File No. 0-15826) pursuant to the Exchange Act are hereby
incorporated by reference in this Proxy Statement-Prospectus and made a part
hereof:
1. HUBCO's Annual Report on Form 10-K for the year ended December 31,
1993 as amended by Form 10-K/A filed with the Commission on April ,
1994;
2. The description of HUBCO's Common Stock set forth in HUBCO's
Registration Statement on Form 8A filed by HUBCO pursuant to Section 12
of the Exchange Act, and any amendment or report filed for the purpose of
updating any such description;
3. Washington's Annual Report on Form 10-K for the year ended
December 31, 1993 (the "Washington 10-K") as amended by Form 10-K/A; and
4. Pages through of Washington's 1993 Annual Report to
Stockholders (consisting solely of the Washington 10-K). A copy of
Washington's Annual Report to Stockholders accompanies this Proxy
Statement--Prospectus.
All documents filed by HUBCO pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement-Prospectus
and prior to the Meeting shall be deemed incorporated by reference in this
Proxy
2
<PAGE>
<PAGE>
Statement-Prospectus and a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed
incorporated herein by reference will be deemed to be modified or superseded
for the purpose of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in the other subsequently filed document which
also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus incorporates by reference documents which
are not presented herein or delivered herewith. Such documents relating to
HUBCO, other than certain exhibits to such documents, are available without
charge upon request made to HUBCO, Inc., 3100 Bergenline Avenue, Union City,
New Jersey 07087, Attention: D. Lynn Van Borkulo-Nuzzo, Esq., Corporate
Secretary (telephone: 201-348-2326). Such documents relating to Washington,
other than certain exhibits to such documents, are available without charge
upon request made to Washington Bancorp, Inc., 609 Washington Street, Hoboken,
New Jersey 07030, Attention: Thomas Bingham (telephone: 201-798-8600). In
order to ensure timely delivery of the documents, any request should be made
by , 1994.
INFORMATION REGARDING STATEWIDE
HUBCO has entered into an Agreement and Plan of Reorganization with
Statewide Savings Bank ("Statewide") which, together with Statewide's plan of
conversion, provides for (i) the conversion of Statewide from a
state-chartered mutual savings and loan association to a state-chartered
mutual savings bank, (ii) the conversion of Statewide from the mutual to the
stock form of organization, (iii) the acquisition by HUBCO of all of the
outstanding shares of capital stock to be issued by Statewide in exchange for
cash in an amount equal to Statewide's appraised value, (iv) the offering of
stock by HUBCO in a like amount, (v) the conversion of Statewide to a
state-chartered commercial bank, and (vi) the merger of Statewide with and
into the Bank (collectively, the "Statewide Acquisition"). For information
regarding the Statewide Acquisition and for financial information regarding
Statewide, see "INTRODUCTION--Statewide Acquistion", "SPECIAL CONSIDERATIONS",
"Pro Forma Combined Condensed Unaudited Financial Statements" and Appendix E
to this Proxy Statement-Prospectus.
All information contained in this Proxy Statement-Prospectus with respect
to HUBCO was supplied by HUBCO, all such information with respect to
Washington was supplied by Washington and all such information with respect to
Statewide was supplied by Statewide. Although neither HUBCO nor Washington nor
Statewide have any knowledge that would indicate that any statements or
information relating to the other entities contained herein are inaccurate or
incomplete, none of such entities can warrant the accuracy or completeness of
such information or statements as they relate to any other entity.
No person is authorized to give any information or to make any
representations other than as contained herein and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Proxy Statement-Prospectus does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this document nor any
distribution of securities made hereunder shall under any circumstances create
an implication that there has been no change in the affairs of HUBCO,
Washington or Statewide since the date hereof or that the information herein
is correct as of any time subsequent to the date hereof.
3
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TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . 2
INFORMATION REGARDING STATEWIDE. . . . . . . . . . . . . . . . . . . . 3
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RECENT DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
COMPARATIVE MARKET PRICE DATA. . . . . . . . . . . . . . . . . . . . . 12
ACTUAL AND PRO FORMA PER SHARE DATA. . . . . . . . . . . . . . . . . . 14
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . 17
SUMMARY SELECTED PRO FORMA DATA. . . . . . . . . . . . . . . . . . . . 20
SPECIAL CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . 22
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Parties to the Merger . . . . . . . . . . . . . . . . . . . . . . . . 24
Statewide Acquisition . . . . . . . . . . . . . . . . . . . . . . . . 25
THE MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Votes Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Recommendation of the Washington Board. . . . . . . . . . . . . . . . 27
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Background of and Reasons for the Merger. . . . . . . . . . . . . . . 28
Opinions of Washington's Financial Advisor. . . . . . . . . . . . . . 29
Conversion of Washington's Shares . . . . . . . . . . . . . . . . . . 32
Election Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Allocation Procedure. . . . . . . . . . . . . . . . . . . . . . . . . 34
No Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . 35
Conversion of Stock Options . . . . . . . . . . . . . . . . . . . . . 35
Payment of Cash and Delivery of Shares. . . . . . . . . . . . . . . . 36
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . 36
Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 39
Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . 39
Conditions to Consummation of the Merger. . . . . . . . . . . . . . . 40
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 41
Conduct of Washington's Business Pending the Merger . . . . . . . . . 41
HUBCO's Stock Option for Washington Shares. . . . . . . . . . . . . . 42
Termination, Waiver and Amendment . . . . . . . . . . . . . . . . . . 43
Management and Operations of Washington and the Savings Bank
Following the Merger . . . . . . . . . . . . . . . . . . . . . . . . 44
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . 44
Accounting Treatment of the Merger. . . . . . . . . . . . . . . . . . 45
Rights of Dissenting Stockholders . . . . . . . . . . . . . . . . . . 45
DESCRIPTION OF HUBCO CAPITAL STOCK . . . . . . . . . . . . . . . . . . 47
DESCRIPTION OF HUBCO PREFERRED STOCK . . . . . . . . . . . . . . . . . 47
DESCRIPTION OF HUBCO COMMON STOCK. . . . . . . . . . . . . . . . . . . 50
COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER DELAWARE
AND NEW JERSEY LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 52
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PRO FORMA COMBINED CONDENSED UNAUDITED FINANCIAL STATEMENTS. . . . . . 55
ELECTION OF WASHINGTON'S DIRECTORS . . . . . . . . . . . . . . . . . . 63
STOCKHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 71
ADVANCE NOTICE OF CERTAIN MATTERS TO BE CONDUCTED AT AN
ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
LEGAL OPINION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
APPENDICES:
Appendix A: Agreement and Plan of Merger . . . . . . . . . . . . . . A-1
Appendix B: Stock Option Agreement . . . . . . . . . . . . . . . . . B-1
Appendix C: Section 262 of the Delaware General Corporation Law. . . C-1
Appendix D: Fairness Opinion of Capital Consultants of
Princeton, Inc.. . . . . . . . . . . . . . . . . . . . . D-1
Appendix E: Information Regarding Statewide. . . . . . . . . . . . . E-1
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SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding HUBCO, Washington or the matters to be considered at
the Meeting and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Proxy Statement-Prospectus, the
Appendices hereto and the documents referred to herein.
This Proxy Statement-Prospectus contains detailed information regarding
the Statewide Acquisition. Although it was initially contemplated that the
Statewide Acquisition would be completed prior to the consummation of the
Merger, HUBCO and Statewide have experienced certain regulatory delays which
make it difficult to predict when and if the Statewide Acquisition will be
completed. Consummation of the Statewide Acquisition is subject to numerous
conditions described herein, but is not a condition precedent to the
consummation of the Merger.
Parties to the Merger
HUBCO. HUBCO is a bank holding company whose principal operating
subsidiary is Hudson United Bank (the "Bank"), a state-chartered commercial
bank. The corporate headquarters of HUBCO and the main office of the Bank are
located at 3100 Bergenline Avenue, Union City, New Jersey 07087; telephone
(201) 348-2300. Incorporated in 1890, the Bank is a full service commercial
bank which primarily serves small and mid-sized businesses and consumers in
Northern New Jersey, its primary market area. The Bank currently operates 37
branches in Hudson, Bergen, Passaic, Essex, Middlesex and Morris counties. The
deposits of the Bank are insured by the Bank Insurance Fund (the "BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"). As of December 31, 1993,
HUBCO had consolidated assets of $1.042 billion, consolidated deposits of
$935.7 million and consolidated stockholders' equity of $79.0 million. Based
on assets, at December 31, 1993, HUBCO was the 12th largest commercial bank
holding company headquartered in New Jersey. HUBCO's strategy is to enhance
profitability and build market share through both internal growth and
acquisitions. Since October, 1990, HUBCO has acquired 24 branches, $802.1
million in deposits and $807.2 million in assets from six financial
institutions in both government-assisted and private transactions. As a result
of certain of these transactions, HUBCO's asset base grew 38% to $931.9
million at year end 1992 from $673 million at year end 1991. In 1993, HUBCO's
asset base grew 12% to $1.042 billion at December 31, 1993.
Washington. Washington is a bank holding company incorporated under the
laws of Delaware. Washington conducts substantially all of its operations
through the Savings Bank, its wholly-owned subsidiary. The Savings Bank
conducts business in New Jersey through eight branches located in the New
Jersey counties of Bergen and Hudson. As of December 31, 1993, Washington had
consolidated assets of $282.6 million, consolidated deposits of $246.0 million
and consolidated stockholders' equity of $33.5 million.
Effect of the Merger; Exchange of Stock
Pursuant to the Merger Agreement, Washington will merge with and into
HUBCO and the Savings Bank will merge with and into the Bank. On the effective
date of the Merger (the "Effective Date"), each outstanding share of
Washington Common Stock will be converted into either $16.10 in cash or 0.6708
of a share of HUBCO's Series A Preferred Stock (the "HUBCO Preferred Stock"),
subject to limitations and allocation provisions set forth in the Merger
Agreement. Under the terms of the Merger Agreement, no more than 49% of the
Washington Common Stock may be exchanged for cash and no more than 51% may be
exchanged for HUBCO Preferred Stock. Each full share of HUBCO Preferred Stock
will have a stated value of, and be redeemable for, $24.00. Each full share of
HUBCO Preferred Stock also will be convertible into one share of HUBCO Common
Stock. The holders of HUBCO Preferred Stock will be entitled to receive an
annual dividend to be set annually on the basis of the average market price of
the HUBCO 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 HUBCO Preferred Stock if such average market price is
$24.00 or higher, up to $1.68 per share if such average market price is below
$19.00. If such average market price is between $19.00 and $23.99, the
dividend will be between $1.56 and $1.10 per share.
Election and Allocation Procedures
Each record holder of Washington Common Stock will receive a form of
Preference Statement, which includes a Letter of Transmittal, ("Preference
Statement") together with this Proxy Statement-Prospectus. The Preference
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Statement is to be used by Washington stockholders to submit their Washington
stock certificates and, if they wish, to specify whether they prefer to have
their shares converted into the right to receive cash or into HUBCO Preferred
Stock or have no preference. SUCH SPECIFICATIONS WILL BE EFFECTIVE ONLY IF
SUCH SPECIFICATIONS, ACCOMPANIED BY THE STOCK CERTIFICATES FOR THE SHARES TO
WHICH THEY RELATE, ARE RECEIVED BY THE EXCHANGE AGENT, NO LATER THAN 5:00 P.M.
on the third business day prior to the Closing (the "Preference Deadline").
SINCE ALL ELECTIONS MADE ON A PREFERENCE STATEMENT ARE IRREVOCABLE, AND SINCE
THE SUBMISSION OF STOCK CERTIFICATES WILL PRECLUDE A STOCKHOLDER FROM
THEREAFTER SELLING SUCH SHARES ON THE MARKET, STOCKHOLDERS MAY WISH TO DEFER
SUBMITTING THEIR COMPLETED PREFERENCE STATEMENTS UNTIL SHORTLY BEFORE THE
PREFERENCE DEADLINE. WASHINGTON WILL SEND TO ALL STOCKHOLDERS OF RECORD A
NOTICE IDENTIFYING THE DATE OF THE PREFERENCE DEADLINE AS PROMPTLY AS
PRACTICAL AFTER THE CLOSING DATE HAS BEEN ESTABLISHED BUT IN NO EVENT LATER
THAN 25 DAYS PRIOR TO THE PREFERENCE DEADLINE. THE CLOSING IS EXPECTED TO
OCCUR LATE IN THE SECOND QUARTER OR EARLY IN THE THIRD QUARTER OF 1994. Except
with respect to stockholders who hold shares for two or more beneficial
owners, a stockholder may not specify a preference that part of such
stockholder's shares be converted into cash and part into HUBCO Preferred
Stock and must include in his Preference Statement all shares of Washington
Common Stock owned by such holder. See "The Merger--Election Procedure". ANY
WASHINGTON STOCKHOLDER WHO DOES NOT SUBMIT A PROPERLY COMPLETED PREFERENCE
STATEMENT PRIOR TO THE PREFERENCE DEADLINE WILL BE DEEMED TO HAVE SPECIFIED
"NO PREFERENCE". The Merger Agreement contains provisions governing the
allocation of cash and HUBCO Preferred Stock, based upon the tabulation of the
Preference Statements submitted to the Exchange Agent. In general, the
allocation procedures contemplate that the preferences set forth in the
Preference Statements will be honored to the maximum extent consistent with
certain cash and stock limitations provided for in the Merger Agreement. See
"The Merger--Allocation Procedure".
Meeting of Shareholders
The Meeting will be held at Schuetzen Park, North Bergen, New Jersey, on
, 1994 at 10:00 a.m. The purposes of the Meeting are to consider and vote
upon a proposal to approve the Merger Agreement and to elect three directors.
Votes Required; Record Date
Only holders of record of shares of Washington Common Stock at the close
of business on , 1994 (the "Record Date") will be entitled to vote at the
Meeting. The affirmative vote of holders of a majority of the outstanding
shares of Washington Common Stock will be required to approve the Merger
Agreement. The affirmative vote of a plurality of the outstanding shares of
Washington Common Stock represented at the Meeting is required to elect
directors. See "ELECTION OF WASHINGTON'S DIRECTORS." As of the March 15, 1994,
there were 2,307,937 shares of Washington Common Stock outstanding and
entitled to be voted.
The directors and executive officers of Washington and their affiliates
beneficially owned, as of March 15, 1994, 386,079 shares (or approximately
16.4% of the outstanding shares) of Washington Common Stock. HUBCO owned, as
of March 15, 1994, 92,000 shares (or approximately 4.0% of the outstanding
shares) of Washington Common Stock. As of March 15, 1994, the directors and
executive officers of HUBCO and their affiliates did not beneficially own any
shares of Washington Common Stock. Also, as of that date, neither the Bank nor
the Savings Bank beneficially owned any shares of Washington Common Stock
directly or in a fiduciary capacity. HUBCO and the directors of Washington
intend to vote their shares in favor of the Merger. See "THE MEETING--Votes
Required."
Conversion of Outstanding Washington Stock Options
The Merger Agreement provides that all outstanding stock options that
have not been exercised prior to the Effective Time will be converted into
cash, HUBCO Preferred Stock or options for HUBCO Preferred Stock, at the
election of the option holder. Washington maintains a Stock Option Plan for
employees and a Stock Option Plan for
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directors and options are outstanding under both Plans. Under both Option
Plans, options will become fully vested upon consummation of the acquisition
of Washington. Therefore, each option holder will be eligible to exercise or
to convert all of his or her options prior to the Effective Time.
Under the terms of the Merger Agreement, holders of options may convert
their unexercised options into cash or HUBCO Preferred Stock. In exchange for
each unexercised option to purchase a share of Washington Common Stock, a
holder may elect to receive either (i) cash equal to the difference between
the exercise price and $16.10 (the "Cash-Out Amount") or (ii) shares of HUBCO
Preferred Stock in an amount equal to the Cash-Out Amount divided by $24.00.
However, no more than 51% of the outstanding options may be converted into
HUBCO Preferred Stock and, if holders of more than 51% of the options elect to
convert their options to Preferred Stock, HUBCO and Washington will agree on
allocation procedures. Option holders who receive either cash or HUBCO
Preferred Stock will surrender their option for cancellation and the option
will be canceled if the Merger is consummated. No fractional shares of HUBCO
Preferred Stock will be issued and in lieu thereof a holder will receive cash
equal to such fraction multiplied by a valuation of $24.00. See "No Fractional
Shares." If a holder elects to convert the options to cash or HUBCO Preferred
Stock, he or she will realize taxable income at ordinary income tax rates in
an amount equal to the value of what the holder has received. See "Federal
Income Tax Consequences."
As an alternative to receiving cash or Preferred Stock equal to the
Cash-Out Amount, a holder of an option to purchase Washington Common Stock may
elect to have his or her options converted into an option to purchase HUBCO
Preferred Stock. In such event, each option to purchase one share of
Washington Common Stock will be converted into the right to purchase 0.6708
shares of HUBCO Preferred Stock. Under the terms of the Merger Agreement,
options to purchase only up to 20,000 shares of HUBCO Preferred Stock may be
issued under this alternative and, if too many holders select this
alternative, HUBCO could terminate the Merger.
Holders of options to purchase Washington Common Stock will receive an
Option Preference Form together with this Proxy Statement-Prospectus and may
exercise the election by submitting the Option Preference Form to the Exchange
Agent together with the Stock Option Award by the Preference Deadline. Option
holders will be notified of the Preference Deadline as promptly as practical
after the Closing date has been established but in no event later than 25 days
prior to the Preference Deadline. An option holder who fails to submit an
Option Preference Form by the Preference Deadline or who fails to specify a
preference on the form will be deemed to have elected to receive cash in
exchange for his or her options. See "THE MERGER--Conversion Of Stock
Options."
Recommendation of the Washington Board of Directors
Washington's Board of Directors (the "Washington Board") believes that
the Merger will provide significant value to all of Washington's stockholders.
ACCORDINGLY, WASHINGTON'S BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS THAT WASHINGTON'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
See "THE MERGER--Background of and Reasons for the Merger." For
information regarding the interests of certain officers and directors of
Washington in the Merger, see "THE MERGER--Interests of Certain Persons in the
Merger."
Benefits of the Transaction
Pursuant to the Merger Agreement, the Savings Bank will merge with and
into the Bank. HUBCO expects the combined bank to achieve revenue growth and
to achieve substantial noninterest expense savings by consolidating
operations.
Opinions of Financial Adviser
Capital Consultants of Princeton, Inc. ("Capital Consultants") has served
as financial adviser to Washington in connection with the Merger and has
rendered an opinion to the Washington Board that, as of November 8, 1993, the
consideration to be received in the Merger was fair to the holders of the
Washington Common Stock from a financial point of view. Capital Consultants
has delivered an opinion dated as of the date of this Proxy
Statement-Prospectus to the same effect. For additional information, see "THE
MERGER--Opinions of Washington's Financial Adviser."
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The opinion of Capital Consultants dated as of the date of this Proxy
Statement-Prospectus is attached as Appendix D to this Proxy
Statement-Prospectus. Stockholders are urged to read such opinion in its
entirety for a description of the procedures followed, matters considered and
limitations on the review undertaken in connection therewith.
Effective Time
The Merger will become effective at the date and time (the "Effective
Time") that certificates of merger are filed in accordance with the New Jersey
Business Corporation Act (the "BCA") and the Delaware General Corporation Law
(the "GCL"). The certificates of merger will be filed as soon as practicable
after the expiration of all applicable waiting periods in connection with
approvals of governmental authorities and the satisfaction or waiver of all
other conditions to the consummation of the Merger, or on such other date as
may be agreed upon by HUBCO and Washington.
Conditions; Regulatory Approvals
Consummation of the Merger is subject to various conditions, including
receipt of the stockholder approval solicited hereby, receipt of the necessary
regulatory approvals, receipt of opinions of counsel regarding certain
matters, including certain tax aspects of the Merger, and satisfaction of
other customary closing conditions.
The regulatory approvals and consents necessary to consummate the Merger
include the approval of or a waiver by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), approval of the Department of
Banking of the State of New Jersey (the "Department"), and the approval of the
Federal Deposit Insurance Corporation ("FDIC"). There can be no assurance that
such regulatory approvals or waiver will be obtained, and, if the Merger is
approved, there can be no assurance as to the date of any such approval or
waiver. Furthermore, there can be no assurance that any such approvals will
not contain a condition or requirement that causes such approvals to fail to
satisfy the conditions set forth in the Merger Agreement and described under
"THE MERGER--Conditions to Consummation of the Merger."
See "THE MERGER--Conditions to Consummation of the Merger," "--Regulatory
Approvals," and "--Conduct of Washington's Business Pending the Merger".
Termination of the Merger Agreement
The Merger Agreement may be terminated, and the Merger abandoned, prior
to the Effective Date, either before or after its approval by Washington's
shareholders, (i) by the mutual consent of Washington and HUBCO; (ii) by
Washington if the "Pre-Closing Price" is less than $18.00 per share or if
Washington's Board shall have approved another transaction (which is not
contemplated) through exercise of its fiduciary obligations; or (iii) by
either Washington or HUBCO individually under certain specified circumstances,
including the failure of the Merger to become effective by October 31, 1994,
unless the failure to consummate the Merger by such time is due to the breach
of a covenant contained in the Merger Agreement by the party seeking to
terminate. The "Pre-Closing Price" is the median closing sale price of the
HUBCO Common Stock, as quoted on the Nasdaq National Market, for the first 20
of the 22 consecutive trading days immediately preceding the closing date of
the Merger. See "THE MERGER--Termination, Waiver and Amendment."
Management After the Merger
HUBCO has agreed that immediately after the Effective Time, it will cause
two directors of the Savings Bank to be named to the Board of Directors of the
Bank. The Merger will have no other impact upon the composition of the Boards
of Directors of HUBCO or the Bank. See "THE MERGER--Management and Operations
of Washington and the Savings Bank Following the Merger."
Interests of Certain Persons in the Merger
Certain members of Washington's management and the Washington Board may
be deemed to have interests in the Merger in addition to their interests, if
any, as stockholders of Washington generally. These include, among other
things, provisions in the Merger Agreement relating to indemnification, Mr.
Rotondi's severance agreement, certain
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other employee benefits and the appointment of Savings Bank directors to the
Board of Director or advisory committee of the Bank. See "THE
MERGER--Interests of Certain Persons in the Merger."
Certain Federal Income Tax Considerations
The Merger is conditioned upon receipt of an opinion of counsel to the
effect that the Merger will constitute a tax-free reorganization as defined in
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended. For
information regarding certain federal income tax matters, see "THE
MERGER--Federal Income Tax Consequences."
Accounting Treatment
The Merger will be accounted for as a purchase for financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities
of Washington will be adjusted to their estimated fair market values at the
date that the Merger is consummated. The resulting premiums and discounts will
be accreted to and amortized against income, respectively, over the remaining
estimated lives of the assets and liabilities on a level yield basis. For a
discussion of the effects of purchase accounting, see "PRO FORMA COMBINED
CONDENSED UNAUDITED FINANCIAL STATEMENTS" and "THE MERGER--Accounting
Treatment of the Merger."
Stock Option Agreement
As an inducement and a condition to HUBCO's entering into the Merger
Agreement, HUBCO and Washington entered into a Stock Option Agreement, dated
as of November 8, 1993 (the "Stock Option Agreement"), pursuant to which HUBCO
received an option (the "Option"), upon the occurrence of certain events (none
of which has yet occurred to the best of HUBCO's and Washington's knowledge),
to purchase up to 765,000 shares of Washington Common Stock (representing
approximately 33% of the outstanding shares of Washington Common Stock on
November 8, 1993), at a price of $11.50 per share, subject to adjustment in
certain circumstances and subject to termination within certain periods. The
Stock Option Agreement may discourage competing offers to the Merger and is
intended to increase the likelihood that the Merger will be consummated in
accordance with the terms of the Merger Agreement.
The Stock Option Agreement will terminate upon either (i) the termination
of the Merger Agreement or (ii) the consummation of the Merger; provided,
however, that if termination of the Merger Agreement occurs after the
occurrence of a "Triggering Event" (as defined in the Stock Option Agreement),
then the Stock Option Agreement will not terminate until the later of 18
months following the date of the termination of the Merger Agreement or the
consummation of any proposed transactions which constitute the Triggering
Event.
A copy of the Stock Option Agreement is attached to this Proxy
Statement-Prospectus as Appendix B. See "THE MERGER--HUBCO's Stock Option for
Washington Shares."
Certain Differences in Stockholders' Rights
At the Effective Time, stockholders of Washington, except those who
receive only cash in the Merger (including those who perfect dissenters'
rights in accordance with the GCL), will become shareholders of HUBCO. The
rights of stockholders of HUBCO are determined by the BCA and by HUBCO's
certificate of incorporation and by-laws. The rights of stockholders of HUBCO
differ from the rights of stockholders of Washington with respect to certain
important matters, including certain voting requirements. For a summary of
these differences, see "COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER
DELAWARE AND NEW JERSEY LAW."
Dissenters' Rights
Under the GCL, holders of Washington Common Stock who do not vote in
favor of the Merger Agreement and who comply with certain notice requirements
and other procedures will have the right to dissent from the Merger and to be
paid cash for the fair value of their shares of Washington Common Stock. "Fair
value" is determined by a court as of the day prior to the day of the meeting
of shareholders at which the Merger is approved, excluding any appreciation or
depreciation in anticipation of the Merger. In order for a holder of
Washington Common Stock to
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perfect dissenters' rights, such holder must file with Washington, prior to
the vote of stockholders at the Meeting, a written notice of dissent
indicating an intent to demand payment for such holder's shares. Neither the
delivery of a proxy card directing a vote against the Merger Agreement nor the
failure to vote for the Merger Agreement will constitute such written notice.
Certain additional procedures must be followed in order for a holder of
Washington Common Stock to exercise dissenters' rights. Any deviation from
such procedures may result in the forfeiture of dissenters' rights.
Accordingly, holders of Washington Common Stock wishing to dissent from the
Merger Agreement are urged to read carefully "THE MERGER--Rights of Dissenting
Stockholders" and Appendix C attached to this Proxy Statement-Prospectus and
to consult with their own legal advisers.
Statewide Acquisition
Statewide Savings Bank, S.L.A. ("Statewide"), headquartered in Jersey
City, New Jersey, was organized in 1943 as a state-chartered savings and loan
association under the name First Savings and Loan Association of Jersey City.
In 1973, Statewide changed its name to Statewide Savings and Loan Association,
and in 1988, to Statewide Savings Bank, S.L.A. As of December 31, 1993,
Statewide had total assets of $500.3 million, total deposits of $425.8
million, and total retained earnings of $32.2 million, of which $14.9 million
represented goodwill. Statewide's principal business is attracting deposits
and investing primarily in one to four family mortgage loans and
mortgage-backed securities and, to a lesser extent, consumer loans and
investment securities. Through its wholly owned subsidiary, Statewide
Financial Services, Inc., Statewide also engages in the sale of annuity
products. Statewide's deposits are insured by the Savings Association
Insurance Fund (the "SAIF") of the FDIC. The primary market area for Statewide
includes the neighborhoods surrounding its 13 branch offices in Northern New
Jersey.
HUBCO has entered into an Agreement and Plan of Reorganization with
Statewide which, together with Statewide's plan of conversion (the
"Conversion"), provides for (i) the conversion of Statewide from a
state-chartered mutual savings and loan association to a state-chartered
mutual savings bank, (ii) the conversion of Statewide from the mutual to the
stock form of organization,(iii) the acquisition by HUBCO of all of the
outstanding shares of capital stock to be issued by Statewide in exchange for
cash in an amount equal to Statewide's appraised value, (iv) the offering of
stock by HUBCO in a like amount, (v) the conversion of Statewide to a
state-chartered commercial bank, and (vi) the merger of Statewide with and
into the Bank (collectively, the "Statewide Acquisition"). For information
regarding the Statewide Acquisition and for financial information regarding
Statewide, see "INTRODUCTION--Statewide Acquisition", "Pro Forma Combined
Condensed Unaudited Financial Statements" and Appendix E to this Proxy
Statement-Prospectus.
The Statewide Acquisition is subject to various conditions. These
conditions include approval of Statewide's plan of conversion by Statewide's
depositors, receipt of regulatory approvals, the absence of a material adverse
change in the business or financial condition of Statewide since March 31,
1993, the receipt by HUBCO and Statewide of certain legal opinions and the
sale of an aggregate dollar amount of HUBCO's Common Stock equal to the
appraised value of Statewide. There can be no assurance that the conditions
necessary to consummate the Statewide Acquisition will be satisfied.
CONSUMMATION OF THE MERGER IS NOT CONTINGENT ON CONSUMMATION OF THE STATEWIDE
ACQUISITION. Consummation of the Statewide Acquisition has been delayed as a
result of increased regulatory scrutiny of mutual-to-stock conversions and
certain proposed legislation. Because of such delays, HUBCO and Statewide have
extended the period during which the Conversion may occur. The Agreement
between HUBCO and Statewide currently provides that either HUBCO or
Statewide may terminate the transaction if any required application for
regulatory approval is denied or is approved with certain adverse conditions or
if the Conversion is not consummated by June 30, 1994. See "SPECIAL
CONSIDERATIONS."
Special Considerations
See "Special Considerations" for a discussion of additional factors to be
considered prior to voting upon the Merger.
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RECENT DEVELOPMENTS
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 March 1, 1994, HUBCO
had repurchased 455,081 shares at a cost of $10,131,898, of which 12,300
shares have been reissued by HUBCO as awards under its restricted stock plan.
HUBCO's management currently does not intend to purchase additional shares
under the stock repurchase plan but intends to re-examine the issue from time
to time. HUBCO's last repurchase of shares was on January 24, 1994.
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 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 subordinated debt has been structured to comply with the
current rules of the Board of Governors of the Federal Reserve System ("FRB")
regarding debt which will qualify as Tier 2 Capital under the FRB Capital
Adequacy Rules. The subordinated debt must be registered with the SEC for
public resale prior to July 13, 1994 or the interest rate on the subordinated
debt will increase by 1%. 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 pending acquisitions. HUBCO intends to use the net proceeds from the
sale of the subordinated debt for general corporate purposes, including
investments, advances to HUBCO's subsidiaries, and to fund future
acquisitions.
On March 18, 1994, HUBCO entered into an interest rate exchange agreement
intended to hedge the interest risk related to the $25 million subordinated
debt. The agreement is a contractual agreement between HUBCO and its
counter-party to exchange fixed and floating rate interest obligations.
HUBCO's counter-party to the agreement is the fixed rate payor and HUBCO is
the floating rate payor. The floating rate is reset every three months. The
term of the agreement is three years.
On April 13, 1994, HUBCO issued a press release announcing that its net
income for the first quarter ended March 31, 1994 had increased to $3,786,000,
or $.58 per share, from $3,207,000, or $.46 per share for the year ago period.
HUBCO's net income for the quarter ended December 31, 1993 was $3,755,000, or
$.55 per share. For the first quarter of 1994, net interest income increased
to $12,379,000, up 12% from $11,092,000 from the year ago period. The net
interest margin was 5.05%, which is lower than last year partially due to the
subordinated debt which was issued in January 1994. The provision for possible
loan losses decreased to $450,000 for the first quarter of 1994, compared to
$750,000 in the same quarter of the last year. At March 31, 1994, HUBCO's
total assets increased to $1.079 billion, total loans were at $512 million and
deposits were $953 million. As of March 31, 1994, HUBCO reported total
non-performing assets of $8,279,000, up $285,000 from March 31, 1993, but down
$1,743,000 from December 31, 1993. HUBCO is expected to file its quarterly
report on Form 10-Q for the period ending March 31, 1994 on or before May 15,
1994 and the Form 10-Q may be requested from HUBCO. See "AVAILABLE
INFORMATION".
HUBCO has outgrown the space at its headquarters office and commencing in
the second half of 1993 HUBCO actively undertook a search for additional space
to expand its headquarters operations. In April 1994, HUBCO purchased a 64,350
square foot building in Mahwah, New Jersey to house the executive offices of
HUBCO and HUBCO'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 HUBCO's
total other expenses directly attributable to this purchase is anticipated to
be approximately one percent.
COMPARATIVE MARKET PRICE DATA
Pursuant to the Merger Agreement, shareholders may elect to receive
$16.10 in cash or 0.6708 shares of the HUBCO A Preferred Stock of HUBCO for
each share of Washington Common Stock that they own. There will be no market
for this HUBCO Preferred Stock until after the Effective Time. In general, the
HUBCO Preferred Stock is redeemable for $24.00 per share at HUBCO's option at
any time after the closing sale price of HUBCO Common Stock is $24.00 or more
for 20 consecutive business days. Accordingly, based solely upon the
redemption price, 0.6708 of a share of the HUBCO Preferred Stock may be deemed
to have a value of $16.10 (i.e., 0.6708 multiplied by $24.00). Each full share
of HUBCO Preferred Stock is convertible into one full share of HUBCO Common
Stock.
The HUBCO Preferred Stock has a significantly higher dividend rate than
the HUBCO Common Stock into which it is convertible. Consequently, HUBCO
Preferred Stock may trade at a value higher than the HUBCO
12
<PAGE>
<PAGE>
Common Stock when the HUBCO Common Stock is trading at values significantly
below $24.00 a share, although there can be no assurance that the HUBCO
Preferred Stock will trade at a higher price and it may trade at a lower
price. As a consequence, the equivalent price per share of Washington Common
Stock, as shown in the following table for Common Stock, may be lower or
higher than the equivalent market price per share data for the HUBCO Preferred
Stock when it commences trading.
HUBCO Common Stock (into which the HUBCO Series A Preferred Stock will be
convertible) and Washington Common Stock are included for quotation on the
NASDAQ. HUBCO's NASDAQ symbol is HUBC and Washington's NASDAQ symbol is WBNC.
Prior to March 1, 1993, HUBCO Common Stock was listed on the American Stock
Exchange (AMEX). The following table sets forth, for the indicated periods,
the high and low closing prices per share of HUBCO Common Stock and Washington
Common Stock as reported by NASDAQ or AMEX, as the case may be, and the
equivalent price per share of Washington Common Stock (a "Washington Common
Share") based on the price of HUBCO Common Stock issuable in the Merger.
<TABLE>
<CAPTION>
Equivalent
Price Per
Washington
HUBCO Washington Common Share
--------------- ----------------- ---------------
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
1992 Quarter Ended:
March 31. . . . . . $12 1/2 $ 8 3/8 $ 5 $ 3 1/2 $ 8 3/8 $ 5 5/8
June 30 . . . . . . 12 5/8 10 5/8 5 3/4 4 8 1/2 7 1/8
September 31. . . . 13 11 3/8 6 4 3/4 8 3/4 7 5/8
December 31 . . . . 16 7/8 12 7 1/2 5 3/4 10 2/8 8
1993 Quarter Ended:
March 31. . . . . . 24 5/8 16 8 1/4 6 1/2 16 1/12 10 3/4
June 30 . . . . . . 24 3/8 19 8 6 1/4 16 3/8 12 3/4
September 31. . . . 25 1/4 20 1/8 8 6 1/4 17 13 1/2
December 31 . . . . 24 1/4 20 14 1/2 7 1/2 16 1/4 13 7/16
1994 Quarter Ended:
March 31. . . . . . 23 3/4 20 1/4 14 1/2 12 1/4 15 15/16 13 9/16
Second Quarter through
May , 1994 . . . .
</TABLE>
The following table sets forth the reported closing price per share of
HUBCO Common Stock, the reported closing price per share of Washington Common
Stock and the equivalent price per Washington Common Share on (i) October 1,
1993, the last business day preceding issuance by Washington of a press
release indicating that it was reviewing merger proposals; (ii) November 5,
1993, the last business day preceding public announcement of the signing of
the Merger Agreement; and (iii) May , 1994, a date shortly prior to the
mailing of this Proxy Statement-Prospectus:
Equivalent
HUBCO Price Per
Common Washington Washington
Stock Common Stock Common Share
------ ------------ -----------
October 1, 1993 . . . . . . $24 1/4 $ 7 1/2 $16 1/4
November 5, 1993. . . . . . 20 1/2 12 1/2 13 3/4
May , 1994.
The equivalent price per Washington Common Share at each specified date
and for each period represents the reported closing price of a share of HUBCO
Common Stock on such date or for such period multiplied by 0.6708 (the
"Ratio"). Based on such equivalent prices, the Ratio would have resulted in a
premium over the market price per share of Washington Common Stock of 116.7%
as of October 1, 1993, 10.0% as of November 5, 1993 and % as of May , 1994.
13
<PAGE>
<PAGE>
Washington stockholders are advised to obtain current market quotations
for HUBCO Common Stock and Washington Common Stock. Inasmuch as the Ratio is
fixed, Washington stockholders who receive HUBCO Preferred Stock in the
Merger and who intend to convert those shares into shares of HUBCO Common
Stock are not assured of receiving any specific market value of HUBCO Common
Stock upon such conversion. The market price of HUBCO Common Stock at the
Effective Time may be higher or lower than the market price at the time the
Merger Agreement was executed, at the date of mailing of this Proxy
Statement-Prospectus or at the time of the Meeting.
On November 8, 1993, HUBCO's Board of Directors authorized a stock
repurchase program under which HUBCO may repurchase up to 10% of its
outstanding stock each year. As of March 1, 1994, HUBCO had repurchased
455,081, or 6.56%, of its outstanding Common Stock. HUBCO's management
currently does not intend to purchase additional shares under the stock
repurchase plan but intends to re-examine the issue from time to time.
The holders of HUBCO Common Stock are entitled to receive dividends when
and if declared by HUBCO's Board of Directors out of funds legally available
therefor. HUBCO has paid regular cash dividends since its inception in 1982.
Although HUBCO currently intends to continue to pay cash dividends on the
HUBCO Common Stock, there can be no assurance that HUBCO's dividend policy
will remain unchanged after the Merger. In addition, the payment of dividends
by the Bank to HUBCO is regulated. Under the New Jersey Banking Act of 1948,
as amended, the Bank may pay dividends only out of retained earnings, and out
of surplus to the extent that surplus exceeds 50% of stated capital. 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.
Adjusted for stock dividends declared during the period, HUBCO paid the
following per share cash dividends during the period indicated below:
1992 1993 1994
---- ---- ----
First Quarter . . . . . . . . . $.09 $.10 $.12
Second Quarter. . . . . . . . . .09 .11
Third Quarter . . . . . . . . . .09 .11
Fourth Quarter. . . . . . . . . .10 .12
Special Year-end Dividend . . . .03 .03
--- ---
Total. . . . . . . . . . . . . $.40 $.47
Washington has not paid any cash dividends since 1990. During 1993 and
1992, Washington was subject to a Memorandum of Understanding with the
Federal Reserve Board (the "FRB") which required FRB approval prior to the
payment of any cash dividends. That Memorandum of Understanding was rescinded
in January 1994. No dividends have been declared subsequent to that date. Due
to the proposed Merger and the terms of the Merger Agreement,Washington does
not anticipate declaring a dividend.
ACTUAL AND PRO FORMA PER SHARE DATA
The following table sets forth per share data relating to dividends, net
income and book value of HUBCO Common Stock and Washington Common Stock, both
on an actual (historical) basis and on a pro forma combined basis. The actual
per share data has been derived from the consolidated financial statements of
HUBCO and Washington incorporated by reference herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE".
The pro forma per share data has been derived from the pro forma
combined condensed consolidated financial statements (appearing elsewhere
herein) of HUBCO, Washington and Statewide as of and for the year-ended
December 31, 1993 and gives effect to (i) the Merger, accounted for as a
purchase, (ii) the Statewide Acquisition, accounted for as a purchase, (iii)
the issuance by HUBCO of $25,000,000 of 7.75% subordinated debentures due
2004 (completed on January 14, 1994) and (iv) the repurchase by HUBCO of
shares of its Common Stock at a cost of $9,869,000 under its stock repurchase
program with respect to repurchases that occurred between January 1 and
January 24, 1994. See "PRO FORMA COMBINED CONDENSED UNAUDITED FINANCIAL
STATEMENTS". Pro forma per share amounts have been determined based on the
assumption set forth in the Pro Forma Combined Condensed Unaudited Financial
Statements, including the assumption that 829,995 shares of HUBCO Preferred
14
<PAGE>
<PAGE>
Stock are issued in the Merger. To the extent that the table presents data
reflecting conversion of the HUBCO Preferred Stock, it has been further
assumed that each share of HUBCO Preferred Stock will be converted into one
share of HUBCO Common Stock. Upon consummation of the Statewide Acquisition,
Statewide will cease to be a mutual financial institution and instead will
issue stock to be held by HUBCO. For purposes of this table, it has been
assumed that in the Statewide Acquisition HUBCO will issue 1,944,444 shares
of HUBCO Common Stock at a subscription price of $18.00 per share for
aggregate consideration, before expenses, of $35 million. While pro forma
information about Statewide is included in the following table, there can be
no assurance that the Statewide Acquisition will be consummated. Consummation
of the Merger is not conditioned upon the Statewide Acquisition. See
"INTRODUCTION--Statewide Acquisition."
The actual pro forma and pro forma equivalent per share data included in
the table should be read in conjunction with the financial statements of
HUBCO, Washington and Statewide, the pro forma combined condensed financial
statements of HUBCO, Washington and Statewide, and the related notes
accompanying such financial statements, all of which are incorporated by
reference herein or appear elsewhere herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE," "PRO FORMA COMBINED CONDENSED UNAUDITED FINANCIAL
STATEMENTS" and APPENDIX E. The pro forma data presented below is not
necessarily indicative of the results that would actually have been attained
if the Merger and the Statewide Acquisition had been consummated as of
January 1, 1993, or results that may be attained in the future.
For the Year Ending
December 31, 1993
-------------------
CASH DIVIDENDS PER:
Common Share of HUBCO--Actual (1) . . . . . . . . . $ .47
Common Share of Washington--Actual (1). . . . . . . --
Common Share of Washington converted into HUBCO
Preferred Stock, pro forma (1)(2). . . . . . . . . .97
Common Share of Washington, converted into HUBCO
Common Stock, pro forma (1)(3)(4) .32
NET INCOME PER:
Common Share of HUBCO--Actual . . . . . . . . . . . 2.06
Common Share of Washington--Actual. . . . . . . . . 1.23
HUBCO and Washington pro forma (5):
Common Share of HUBCO--primary . . . . . . . . . . 2.17
Common Share of HUBCO--fully diluted . . . . . . . 2.11
Common Share of Washington converted into HUBCO
Common Stock (3)(6) . . . . . . . . . . . . . . . 1.42
HUBCO, Washington and Statewide pro forma(7):
Common Share of HUBCO--primary . . . . . . . . . . 2.53
Common Share of HUBCO--fully diluted . . . . . . . 2.46
Common Share of Washington converted into HUBCO
Common Stock (3)(6) . . . . . . . . . . . . . . . 1.65
NET BOOK VALUE PER: As of December 31, 1993
-----------------------
Common Share of HUBCO--Pro Forma (8). . . . . . . . $11.35
Common Share of Washington--Actual. . . . . . . . . 14.53
HUBCO and Washington pro forma (5)
Common Share of HUBCO. . . . . . . . . . . . . . . 11.35
Common Share of Washington converted into HUBCO
Common Stock (3)(9) . . . . . . . . . . . . . . . 7.61
HUBCO, Washington and Statewide pro forma (6)
Common Share of HUBCO. . . . . . . . . . . . . . . 12.60
Common Share of Washington converted into HUBCO
Common Stock (3)(9) . . . . . . . . . . . . . . . 8.45
PRO FORMA EQUIVALENT VALUE OF SERIES A PREFERRED
STOCK, BASED SOLELY UPON $24.00 REDEMPTION PRICE
FOR PREFERRED STOCK (2)(10) . . . . . . . . . . . . $16.10
(Footnotes start on next page)
15
<PAGE>
<PAGE>
- ----------
(1) For information regarding HUBCO's and Washington's dividends, and the
market price of HUBCO Common Stock, see "Comparative Market Price
Data." The initial dividend rate on the HUBCO Preferred Stock will
depend on the average closing price of the HUBCO Common Stock as quoted
on NASDAQ during a twenty (20) business day period ending shortly
before the Effective Time. Such rate will be reset shortly after the
annual anniversary date of the Effective Time. See "DESCRIPTION OF
HUBCO PREFERRED STOCK." For purposes of this table, the dividend on the
HUBCO Preferred Stock reflects (i) the dividend that would be payable
if such average price equalled the closing price of HUBCO Common Stock
on April , 1994 (the "Assumed Dividend") multiplied by the exchange
ratio of 0.6708. The equivalent dividend in fact may range from $.67 to
$1.13 depending on the actual average closing price of the HUBCO Common
Stock.
(2) This pro forma equivalent calculation assumes the conversion of a share
of Washington Common Stock into 0.6708 shares of HUBCO Preferred Stock.
(3) This pro forma equivalent calculation assumes the conversion of a share
of Washington Common Stock into 0.6708 shares of HUBCO Preferred Stock
and thereafter the conversion of the 0.6708 shares of HUBCO Preferred
Stock into 0.6708 shares of HUBCO Common Stock.
(4) The dividend rate shown assumes the HUBCO Preferred Stock is converted
into HUBCO Common Stock and is based on the $.47 of cash dividends paid
by HUBCO on its Common Stock during the calendar year 1993. See
"Comparative Market Price Data" for the history of dividends paid by
HUBCO since 1992.
(5) The pro forma information shown here assumes only that HUBCO and
Washington are combined and does not take into account the effect of
the Statewide Acquisition.
(6) The net income per Common Share of Washington is shown assuming
conversion of a share of the Washington Common Stock into HUBCO
Preferred Stock and the subsequent conversion of the HUBCO Preferred
Stock into HUBCO Common Stock. Preferred stock does not normally have
ascribed to it an income per share.
(7) The information shown reflects the combination of HUBCO, Washington and
Statewide.
(8) The information shown reflects the actual book value of HUBCO Common
Stock as of December 31, 1993, with pro forma adjustments for the sale
of $25,000,000 in subordinated debt, the repurchase of HUBCO Common
Stock on or after January 1, 1994 and consummation of the Merger. See
"PRO FORMA COMBINED CONDENSED UNAUDITED FINANCIAL STATEMENTS."
(9) The net book value per common share of Washington is only shown
assuming conversion of the Washington Common Stock into HUBCO Preferred
Stock and the subsequent conversion of the HUBCO Preferred Stock into
HUBCO Common Stock, since preferred stock has ascribed to it only a
liquidation preference and does not reflect a net book value.
(10) This value assumes that the HUBCO Preferred Stock is redeemed at $24.00
per share and that at the time of redemption no accumulated and unpaid
dividends are outstanding.
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial and other
data of HUBCO, Washington and Statewide. Results of operations for the nine
months ended December 31, 1993 for Statewide are derived in part from the
unaudited consolidated financial statements included in Appendix E of this
Proxy Statement-Prospectus. The interim data have been prepared on the same
basis as the other consolidated financial statements of Statewide presented
in Appendix E. The Management of Statewide has represented that such data
includes all adjustments (consisting solely of normal recurring accruals
except for the effects of the adoption of Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes") necessary for a fair
presentation of the results for the unaudited periods. The results of
operations for the period ended December 31, 1993 for Statewide are not
necessarily indicative of the results that may be expected for any other
period.
16
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
Years Ended December 31,
1993 1992 1991 1990 1989
---------------------------------------------------
(In thousands except per share amounts)
<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(1). . . $2.06 $1.58 $1.01 $0.45 $0.67
Cash dividends per common share(1). $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. . . . . . . . . . . . . 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
Performance Ratios:
Return on average assets. . . . . . 1.44% 1.05% 0.82% 0.40% 0.62%
Return on average equity. . . . . . 19.34 17.38 12.75 5.89 8.91
Dividend payout . . . . . . . . . . 23.00 25.04 33.44 73.63 49.65
Average equity to average assets. . 7.44 6.04 6.45 6.85 7.00
Net interest margin(2). . . . . . . 5.20 4.97 4.94 4.72 4.92
Asset Quality Ratios:
Allowance for possible loan losses to
total loans, net(3). . . . . . . . 2.04 1.48 1.44 1.41 .82
Allowance for possible loan losses to
non-performing loans(4). . . . . . 118.10 96.10 75.53 52.71 58.93
Allowance for possible loan losses to
non-performing assets (excluding loans
past due 90 days or more and
accruing). . . . . . . . . . . . . 107.87 98.04 50.10 39.39 90.40
Non-performing loans to total loans,
net(3)(4). . . . . . . . . . . . . 1.73 1.54 1.90 2.67 1.38
Non-performing assets to total
loans, net plus other real
estate(3)(5) . . . . . . . . . . . 2.16 1.78 3.09 3.77 1.38
Non-performing assets (excluding loans
past due 90 days or more and accruing)
to total loans, net plus other real
estate(3)(5) . . . . . . . . . . . 1.88 1.51 2.84 3.53 .90
Net charge-offs to average loans,
net. . . . . . . . . . . . . . . . .15 .91 .58 .54 .28
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividend
Requirements(6)
Excluding Interest on Deposits. . 33.91 13.37 8.31 3.85 4.68
Including Interest on Deposits. . 2.05 1.38 1.29 1.12 1.21
- --------------
<FN>
(1) Income per share and dividends paid have been restated to reflect a 10% stock dividend paid
June 1, 1993.
(2) Computed on a tax equivalent basis.
(3) Total loans are net of unearned income and deferred loan fees.
(4) Non-performing loans include non-accruing loans, loans past due 90 days or more and accruing
and renegotiated loans.
(5) Non-performing assets include non-performing loans plus other real estate.
(6) The ratio of earnings to combined fixed charges and preferred stock dividend requirements is
computed by dividing the sum of income before taxes, fixed charges and preferred dividends by
the sum of fixed charges and preferred dividends. Fixed charges represents interest expenses
(including interest attributable to capital leases, the estimated interest component of
operating lease rental payments and both excluding and including interest on deposits). Prior
to the Merger, HUBCO will not have issued any preferred stock. Accordingly, HUBCO's ratios
include no amount with respect to preferred dividends.
</FN>
</TABLE>
17
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF WASHINGTON
Year Ended December 31,
------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Interest income . . . . . . . . . . $ 18,557 $ 21,879 $ 27,594 $ 31,301 $ 33,142
Interest expense. . . . . . . . . . 8,812 12,190 19,119 22,543 23,730
-------- -------- -------- -------- --------
Net interest income . . . . . . . . 9,745 9,689 8,475 8,758 9,412
Provision for losses on loans . . . 420 1,100 1,500 2,350 6,927
-------- -------- -------- -------- --------
Net interest income after provision
for losses on loans. . . . . . . . 9,325 8,589 6,975 6,408 2,485
Other income. . . . . . . . . . . . 949 2,290 2,569 859 585
Other expenses. . . . . . . . . . . 8,768 8,694 9,306 10,674 7,959
-------- -------- -------- -------- --------
Income/(loss) before income taxes,
extraordinary items and change in
accounting principle . . . . . . . 1,506 2,185 238 (3,407) (4,889)
Income tax expense/(benefit). . . . (1,018) 628 552 (1,538) (989)
-------- -------- -------- -------- --------
Income/(loss) before extraordinary
items and change in accounting
principle. . . . . . . . . . . . . 2,524 1,557 (314) (1,869) (3,900)
Extraordinary items . . . . . . . . -- 539 (1,034) -- --
Change in accounting principle. . . 300 -- -- -- --
Net income/(loss) . . . . . . . . . $ 2,824 $ 2,096 $(1,348) $(1,869) $(3,900)
======= ======= ======== ======== ========
Per Share Data:
Weighted average number of common
shares outstanding (in thousands). 2,297 2,276 2,264 2,264 2,262
Dividends per share.. . . . . . . . $ -- $ -- $ -- $ 0.07 $ 0.28
Income per share:
Income/(loss) before extraordinary
item and cumulative effect of change
in accounting principle. . . . . . $ 1.10 $ 0.68 $ (0.14) $ (0.83) $ (1.72)
Extraordinary items. . . . . . . . -- 0.24 (0.46) -- --
Cumulative effect of change in
accounting principle. . . . . . . .13 -- -- -- --
-------- -------- -------- -------- --------
Net income/(loss) per share. . . . $ 1.23 $ 0.92 $ (0.60) $ (0.83) $ (1.72)
======== ======== ======== ======== ========
Balance Sheet Summary:
Investment and mortgage-backed
securities . . . . . . . . . . . . $ 92,264 $ 67,576 $ 56,455 $ 79,904 $ 57,677
Loans, net. . . . . . . . . . . . . 170,185 191,501 195,508 230,557 244,714
Total assets. . . . . . . . . . . . 282,635 285,771 293,727 337,626 351,281
Deposits. . . . . . . . . . . . . . 246,043 252,623 259,021 275,327 273,383
Advances from FHLB. . . . . . . . . 400 -- -- 28,500 40,500
Stockholders' equity. . . . . . . . 33,541 30,469 28,216 29,215 30,830
Performance Ratios:
Return on average assets. . . . . . 0.99% 0.72% (0.42%) (0.54%) (1.08%)
Return on average equity. . . . . . 8.98 7.21 (4.72) (6.16) (11.16)
Dividend payout . . . . . . . . . . -- -- -- (8.43) (16.54)
Average equity to average assets. . 11.04 10.03 8.91 8.78 9.70
Net interest margin . . . . . . . . 3.58 3.55 2.80 2.65 2.69
Asset Quality Ratios:
Allowance for losses on loans to
total loans, net . . . . . . . . . 1.66% 1.45% 1.53% 1.12% 1.93%
Allowance for losses on loans to
non-performing loans . . . . . . . 21.84 31.52 17.97 14.86 27.01
Allowance for losses on loans and REO
to non-performing assets . . . . . 21.49 19.39 14.14 12.00 18.77
Non-performing loans to total loans,
net. . . . . . . . . . . . . . . . 7.61 4.60 8.51 7.52 7.14
Non-performing assets to total loans,
net plus other real estate, net. . 11.30 10.66 14.03 11.83 9.96
Net charge-offs to average loans,
net. . . . . . . . . . . . . . . . 0.19 0.66 0.47 1.89 2.07
</TABLE>
18
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF STATEWIDE
Nine Months Ended
December 31, Year Ended March 31,
----------------- -------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations:
Interest and dividend income . . . . . . .$ 26,120 $ 30,860 $ 39,822 $ 44,400 $ 48,150 $ 52,202 $ 56,452
Interest expense . . . . . . . . . . . . . 12,857 17,073 21,829 30,605 37,387 42,252 42,928
------- ------- -------- -------- -------- -------- --------
Net interest and dividend income before
provision for loan losses . . . . . . . . 13,263 13,787 17,993 13,795 10,763 9,950 13,524
Provision for loan losses. . . . . . . . . 360 182 193 1,933 186 3,762 194
------- ------- -------- -------- -------- -------- --------
Net interest and dividend income after
provision for loan losses . . . . . . . . 12,903 13,605 17,800 11,862 10,577 6,188 13,330
Other income . . . . . . . . . . . . . . . 1,102 1,402 2,010 3,564 1,739 4,122 (2,720)
Operating expenses . . . . . . . . . . . . 9,045 8,911 12,233 12,964 13,611 13,386 11,586
------- ------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary credit. . . . . . . . . 4,960 6,096 7,577 2,462 (1,295) (3,076) (976)
Income taxes . . . . . . . . . . . . . . . 1,700 2,052 2,490 1,461 35 77 64
Income before extraordinary credit and
change in accounting principle. . . . . . 3,260 4,044 5,087 1,001 (1,330) (3,153) (1,040)
Extraordinary credit from utilization of
net operating loss carryforward . . . . . 0 0 0 1,233 0 0 0
------- ------- -------- -------- -------- -------- --------
Cumulative effect of change in
accounting principle. . . . . . . . . . . 669 0 0 0 0 0 0
Net income (loss). . . . . . . . . . . . .$ 3,929 $ 4,044 $ 5,087 $ 2,234 $ (1,330) $ (3,153) $ (1,040)
======= ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
At December 31, At March 31,
----------------- ------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Financial Condition:
Total assets . . . . . . . . . . . . . . .$500,275 $525,596 $517,885 $531,785 $529,225 $564,786 $599,125
Deposits . . . . . . . . . . . . . . . . . 425,802 443,210 440,034 460,926 454,783 484,939 488,317
Investment securities. . . . . . . . . . . 46,176 24,954 18,224 23,945 23,580 38,694 37,764
Mortgage-backed securities available
for sale. . . . . . . . . . . . . . . . . 4,789 0 7,517 0 0 0 0
Mortgage-backed securities . . . . . . . . 201,397 205,644 208,248 180,304 142,693 133,331 141,526
Loans receivable, net. . . . . . . . . . . 186,453 240,012 230,929 264,914 308,905 343,320 373,547
Federal Home Loan Bank advances. . . . . . 39,367 51,667 45,092 43,392 49,192 46,492 52,792
Retained earnings, substantially
restricted. . . . . . . . . . . . . . . . 32,240 27,268 28,312 23,225 20,991 22,321 25,474
Selected Financial Ratios:
Return on average total assets . . . . . . 1.03% 1.01% 0.96% 0.42% (0.24)% (0.54)% (0.16)%
Return on average retained earnings. . . . 17.16 21.20 19.43 10.16 (6.14) (12.19) (3.90)
Average retained earnings to average
total assets. . . . . . . . . . . . . . . 6.02 4.78 4.95 4.15 3.98 4.42 4.21
Allowance for loan losses to total loans
at end of period. . . . . . . . . . . . . 0.58 0.16 0.59 0.69 0.54 0.57 0.02
Nonperforming loans to total loans at
end of period . . . . . . . . . . . . . . 1.44 1.79 1.23 1.22 4.17 2.24 0.71
Allowance for loan losses to
nonperforming loans . . . . . . . . . . . 40.22 40.35 47.23 56.42 13.00 25.49 2.85
Nonperforming assets to total loans and
real estate owned . . . . . . . . . . . . 6.28 5.86 5.77 6.51 7.10 4.58 0.82
Other Data:
Number of:
Outstanding real estate loans originated 1,966 2,357 2,280 2,578 2,851 3,058 3,199
Deposit accounts. . . . . . . . . . . . . 49,215 54,580 50,807 56,671 56,531 60,996 64,560
Full service offices open . . . . . . . . 13 13 13 13 13 13 15
</TABLE>
19
<PAGE>
<PAGE>
SUMMARY SELECTED PRO FORMA DATA
The following table represents certain unaudited pro forma combined
financial information from the Pro Forma Combined Condensed Statement of
Income for the year ended December 31, 1993 and from the Pro Forma Combined
Condensed Statement of Condition at December 31, 1993, in each case after
giving effect to: (i) in the first column, the Merger, and in the second
column, both the Merger and the Statewide Acquisition, (ii) the issuance by
HUBCO of $25,000,000 of 7.75% subordinated debentures due 2004 (completed on
January 14, 1994) and (iii) the purchase by HUBCO of shares of its Common
Stock at a cost of $9,869,000 under its stock repurchase program, as if such
transactions had been consummated on January 1, 1993 (with respect to such
repurchases that occurred between January 1 and January 24, 1994). The pro
forma information is based on the historical financial statements of HUBCO,
Statewide and Washington after giving effect, using the purchase method of
accounting, to, in the first column, the Merger, and in the second column,
both the Merger and the Statewide Acquisition, as well as the above mentioned
issuance of subordinated debentures and stock repurchases. Such information is
based upon the assumptions and adjustments which are set forth elsewhere in
this Proxy Statement--Prospectus. See "PRO FORMA COMBINED CONDENSED UNAUDITED
FINANCIAL STATEMENTS". The pro forma financial information assumes that the
gross proceeds from the sale of HUBCO Common Stock in connection with the
Statewide Acquisition will total $35 million, that 1,944,444 shares of HUBCO
Common Stock will be sold as part of the Statewide Acquisition at a
subscription price of $18.00 per share and that HUBCO will pay an aggregate of
$40,397,000, including the issuance of a total of 829,995 shares of Preferred
Stock in connection with its acquisition of Washington. In addition, the pro
forma financial information assumes net proceeds of $24,671,000 from the
issuance of the $25,000,000 of subordinated debentures. While pro forma
information about Statewide is included in the following tables, there can be
no assurance that the Statewide Acquisition will be consummated and
consummation of the Merger is not conditioned upon the Statewide Acquisition.
See "INTRODUCTION--Statewide Acquisition.
Also presented are certain selected ratios derived from the pro forma
information which should be read and compared to HUBCO's historical
information. See "SELECTED FINANCIAL DATA."
The unaudited pro forma information should be read in conjunction with
the consolidated financial statements and related notes included and
incorporated by reference in this Proxy Statement-Prospectus. The pro forma
information in not necessarily indicative of operating results which would
have been achieved had the above transactions been consummated as of the
beginning of such periods presented and should not be construed as being
representative of future periods.
20
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED UNAUDITED FINANCIAL INFORMATION
Year Ended December 31, 1993
----------------------------
Pro Forma
Pro Forma Combined
Combined Hubco,
Hubco and Washington
Washington Statewide
---------- ----------
(Dollars in Thousands,
Except Per Share Amounts)
<S> <C> <C>
RESULTS OF OPERATIONS:
Net interest income before provision for loan losses . . . . $ 55,914 $ 75,042
Provision for possible loan losses . . . . . . . . . . . . . 4,020 4,740
Net interest income after provision for possible loan
losses. . . . . . . . . . . . . . . . . . . . . . . . . . . 51,894 70,302
Income before income taxes . . . . . . . . . . . . . . . . . 22,171 33,683
Net income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . 15,865 23,212
FINANCIAL CONDITION AT END OF PERIOD:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 1,334,128 1,821,724
Total deposits . . . . . . . . . . . . . . . . . . . . . . . 1,183,720 1,612,023
Total stockholders' equity . . . . . . . . . . . . . . . . . 93,576 126,203
PER SHARE DATA:
Net income per common share--primary(4). . . . . . . . . . . 2.17 2.53
Net income per common share--fully diluted . . . . . . . . . 2.11 2.46
Book value per common share. . . . . . . . . . . . . . . . . 11.35 12.60
SELECTED RATIOS:(1)
Performance ratios:
Return on assets. . . . . . . . . . . . . . . . . . . . . . 1.19% 1.27%
Return on common stockholders' equity . . . . . . . . . . . 21.54 21.84
Capital adequacy ratios:
Total stockholders' equity to assets. . . . . . . . . . . . 7.01 6.93
Tier 1 leverage ratio . . . . . . . . . . . . . . . . . . . 7.18 6.97
Risk-based capital ratios:
Tier 1 capital. . . . . . . . . . . . . . . . . . . . . . . 12.89 14.55
Total capital . . . . . . . . . . . . . . . . . . . . . . . 17.78 18.81
Asset quality ratios:
Allowance for possible loan losses to total loans, net. . . 1.94 1.64
Non-performing assets to total loans net plus other
real estate(2) . . . . . . . . . . . . . . . . . . . . . . 4.00 4.01
Non-performing assets to total assets . . . . . . . . . . . 2.14 2.01
Allowance for possible loan losses to non-performing
loans(3) . . . . . . . . . . . . . . . . . . . . . . . . . 71.39 67.51
Asset quality ratios: (5)
Allowance for possible loan losses to total loans, net. . . 1.96 1.64
Non-performing assets to total loans net plus other real
estate(2). . . . . . . . . . . . . . . . . . . . . . . . . 3.18 2.80
Non-performing assets to total assets . . . . . . . . . . . 1.69 1.39
Allowance for possible loan losses to non-performing
loans(3) . . . . . . . . . . . . . . . . . . . . . . . . . 104.08 93.11
- -------------
<FN>
(1) Ratios are based on period end.
(2) Non-performing assets consist of non-accruing loans, loans past due 90 days and still
accruing, renegotiated loans and real estate acquired in settlement of loans, including
in-substance foreclosures.
(3) Non-performing loans consist of non-accruing loans, loans past due 90 days and still
accruing and renegotiated loans.
(4) After payment of dividends on HUBCO Preferred Stock of $1,394 (representing an annual
dividend of $1.68 per share), the maximum dividend payable under the Merger Agreement.
(5) Assuming Hubco completes the intended sale of non-performing assets on which a reserve for
liquidation has been recorded, the asset quality ratios would be as shown.
</FN>
</TABLE>
21
<PAGE>
<PAGE>
SPECIAL CONSIDERATIONS
The following factors, among others described throughout this Proxy
Statement-Prospectus, should be considered carefully by stockholders of
Washington.
Significant Impact of Acquisitions on HUBCO
HUBCO's profitability and its financial condition may be significantly
impacted by the continuing implementation of its acquisition strategy and by
the consummation of the Merger and the Statewide Acquisition.
If the Merger and the Statewide Acquisition are both consummated, HUBCO
will add 21 branch offices (some of which it may close) and approximately $780
million in assets, increasing HUBCO's branches by more than 50% and its assets
by 75%. While HUBCO has successfully absorbed smaller institutions in the
recent past, no assurance can be given that HUBCO will be able to efficiently
integrate the operations of Washington and Statewide with HUBCO's operations
or to operate the resulting entity profitably.
Moreover, it is likely that an expansion of this magnitude will necessi-
tate substantially increased staffing in HUBCO's operations. While HUBCO's
management team has developed substantial experience and skill in integrating
acquired institutions and their personnel into HUBCO, given the significant
impact on operations which would result from the Merger and the Statewide
Acquisition, there can be no assurances that HUBCO's management will be able
to manage the combination of HUBCO, Washington and Statewide to achieve the
level of personnel integration or the cost savings achieved in its previous
acquisitions.
In addition to the other challenges presented by the acquisitions of
Washington and Statewide, 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, HUBCO had $11.5 million in non-performing assets, Washington had
$20.0 million and Statewide had $12.5 million. There can be no assurance that
HUBCO's management will be able to deal with these problem assets effectively
or profitably. Moreover, the acquisitions, taken as if they were consummated
at December 31, 1993, will increase HUBCO's ratio of non-performing assets to
total loans and ORE from 2.20% to 4.01% and will decrease HUBCO's coverage
ratio on its allowance for possible loan losses to non-performing loans from
118.10% to 67.51%. While HUBCO expects to take aggressive action to sell and
resolve the acquired non-performing assets. If HUBCO completes the intended
sale of non-performing assets on which a reserve for liquidation has been
recorded, the asset quality ratios would be as shown at the bottom of the
previous page under the caption "PRO FORMA COMBINED UNAUDITED FINANCIAL
INFORMATION." No assurance can be given that the actions of HUBCO's management
will substantially lessen HUBCO's exposure to non-performing assets acquired
in these transactions.
Acquisition Strategy. HUBCO seeks to enhance profitability and build
market share through both internal growth and acquisitions. HUBCO's acquisi-
tion philosophy is to seek in-market or contiguous market opportunities which
can be accomplished with little dilution to earnings. Since October of 1990,
HUBCO has acquired assets and liabilities from six other financial institu-
tions, through both government-assisted and private transactions. Both the
Merger and the Statewide Acquisition represent traditional private transac-
tions which present a different level of risk than government-assisted
transactions. HUBCO has advised Washington that it intends to continue to seek
acquisition opportunities that arise in its market area. There can be no
assurance that HUBCO will be able to acquire additional financial institutions
or, if additional financial institutions are acquired, that these acquisitions
can be managed successfully to enhance the profitability of HUBCO.
When evaluating acquisitions, HUBCO has advised Washington that it
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 risks while earning a fair return on the investment. The success of
HUBCO's acquisition strategy depends on management's skill in identifying,
analyzing, bidding on and acquiring banking entities or the assets and
liabilities of such entities being sold by federal regulators, integrating
such entities, assets and liabilities into HUBCO, and causing the resulting
entity as a whole to operate profitably. In light of this acquisition strate-
gy, Washington stockholders should not rely upon the financial information
regarding HUBCO, Washington and Statewide contained or incorporated by
reference in this Proxy Statement-Prospectus as necessarily being indicative
of future operating results of the combined entities.
Proposed Acquisition of Statewide. Upon consummation of the Statewide
Acquisition, HUBCO's total assets will increase by approximately $507 million,
resulting in a 48.7% increase in HUBCO's asset base from its level at
22<PAGE>
<PAGE>
December 31, 1993. An expansion of this magnitude will result in major changes
in HUBCO's financial situation. Unlike most of HUBCO's other recent acquisi-
tions, the Statewide Acquisition does not afford HUBCO the right to acquire
only those loans of the acquired institution which HUBCO desires to retain.
See Appendix E.
Non-Performing Asset. At December 31, 1993, Washington had $20.0 million
of non-performing assets, including one nonperforming asset of approximately
$9 million. The Internal Revenue Service, which rents the building which
secures Washington's largest non-performing asset, has announced that the site
will be converted into a customer service center with a potential loss of
2,500 permanent and seasonal jobs. If the Merger is consummated, there can be
no assurance that this non-performing loan or other non-performing assets of
HUBCO, Washington and Statewide will not have a material adverse impact upon
HUBCO's financial performance. The parties have agreed to cooperate to market
this non-performing loan so that the Bank is in a position to sell the loan
following the Effective Time of the Merger. No assurance can be given,
however, that the Bank will be able to sell such loan or about the terms of
any such sale.
Potential Impact of Changes in Interest Rate Environment
Significant changes in the interest rate environment, especially a
continuation of the recent increases in interest rates, may have a negative
impact upon the profitability of HUBCO and that impact may be magnified by the
acquisitions of Washington and/or Statewide. In part, HUBCO has managed to
become more profitable because it has increased its net interest margin in a
falling rate environment. While HUBCO's management has taken some precautions
to limit the impact of upward swings in interest rates, there can be no
assurance that HUBCO could continue to perform as well if interest rates were
to continue to rise. Washington and Statewide both reported losses in the
years 1989, 1990 and 1991 and both reported profits in the periods since 1991
as interest rates were falling. Moreover, both Washington and Statewide have a
significant amount of their assets deployed in fixed rate instruments in their
investment and loan portfolios and these instruments have helped their
earnings as rates have fallen. While HUBCO may take certain actions to limit
its exposure to interest rate increases after the consummation of the acquisi-
tions, a continued rise in interest rates could have a material adverse effect
on HUBCO's financial performance, especially after the consummation of both
acquisitions.
Proposed Legislation; Impact on the Statewide Acquisition
Statewide Savings Bank, S.L.A., as part of the Statewide Acquisition,
will become a New Jersey chartered, savings bank that is subject to regulation
by the Department and the FDIC. Statewide's plan of conversion was prepared in
accordance with the regulations of the Department and approved by the Commis-
sioner of Banking. Statewide, as part of the Statewide Acquisition, must
convert from a mutual savings bank to a state-chartered stock savings bank. On
November 22, 1993, a bill was introduced in the United States House of
Representatives entitled the "Mutual Bank Conversion Act". The proposed
legislation provides that no state-chartered savings bank may convert from a
mutual form to the stock form on or after November 22, 1993, except in
accordance with regulations adopted by the FDIC. Other legislation was
introduced in the United States Senate which would, among other things, reduce
the compensation available to directors and officers of a mutual institution
participating in a conversion transaction. In late January, 1994, the FDIC
announced a new policy on conversions and followed that policy with an interim
rule requiring the filing of notice applications with the FDIC for all
conversions of state savings banks from mutual to stock form. The Office of
Thrift Supervision ("OTS") separately adopted a new policy imposing a morato-
rium on merger conversions of state savings and loan associations and federal
savings banks, both of which are subject to OTS jurisdiction. The OTS has
prepared a draft of a new regulation limiting compensation to directors and
officers in conversion transactions and making permanent the moratorium on
merger conversions, including merger conversions for which applications have
been submitted. For pending applications, the new draft regulation permits
waivers for good cause shown. Statewide submitted a notice application to the
FDIC with respect to its conversion, which the FDIC deemed complete on March
25, 1994. In light of the regulatory and legislative activity, HUBCO and
Statewide thereafter amended the Statewide Acquisition Agreement to delete the
award of all stock-based compensation to the directors and executive officers
of Statewide. However, HUBCO has indicated that it believes it is in the best
interests of HUBCO and its shareholders that the directors and executive
officers of Statewide receive some incentive compensation, including possibly
stock-based compensation, and has proposed procedures to make such a recommen-
dation after consummation of the Statewide Acquisition. HUBCO believes, based
on these changes, that Statewide's conversion application will be recommended
for approval by the staff of the FDIC, although there can be no assurance that
the staff will recommend approval. The FDIC staff has indicated to HUBCO and
Statewide
23<PAGE>
<PAGE>
that conversion applications will be submitted for approval to the FDIC Board.
The OTS has expressed strong objections to merger conversions generally and
the Director of the OTS is a member of the FDIC Board. Because of the proposed
legislation, the intensified scrutiny of conversions by the FDIC, the OTS
draft regulations and the objections of the OTS to merger conversions, there
can be no assurance that the Statewide Acquisition will occur or, if it were
to occur, when it may take place. If the Statewide Acquisition does take
place, the former directors and executive officers of Statewide may be granted
compensation, including stock-based compensation, subject to the approval of
HUBCO's shareholders at their next annual meeting.
Adverse Impact on HUBCO's Earnings If Statewide Acquisition Terminated
The proposed acquisition of Statewide has taken HUBCO longer than HUBCO
anticipated due to a variety of factors. As a consequence, HUBCO has incurred
and continues to incur substantial expenses for legal, accounting and printing
costs in connection with the Statewide Acquisition. If the Statewide Acquisi-
tion is not consummated, these expenses, which have been capitalized, would
adversely impact the Company's earnings and there probably would be a decline
in earnings for the quarter in which the Statewide Acquisition agreement was
terminated. Throughout the last two years, HUBCO has reported increases in
quarter-to-quarter earnings.
INTRODUCTION
General
This Proxy Statement-Prospectus is being furnished to the holders of
common stock, par value $.10 per share ("Washington Common Stock"), of
Washington Bancorp, Inc., a Delaware corporation ("Washington"), in connection
with the solicitation of proxies by the Board of Directors of Washington (the
"Board") for use at the Annual Meeting of Washington's stockholders to be held
at Schuetzen Park, North Bergen, New Jersey on , 1994 at 10:00 a.m., and
at any adjournments or postponements thereof (the "Meeting").
At the Meeting, the holders of record of Washington Common Stock as of
the close of business on , 1994 (the "Record Date") will consider and vote
upon a proposal (the "Merger Proposal") to approve the Agreement and Plan of
Merger, dated as of November 8, 1993 , as amended (the "Merger Agreement"), by
and among HUBCO, Inc., a New Jersey corporation ("HUBCO"), Hudson United Bank,
a New Jersey commercial bank (the "Bank") and a wholly-owned subsidiary of
HUBCO, Washington Savings Bank, a New Jersey savings bank and wholly-owned
subsidiary of Washington (the "Savings Bank"), and Washington, pursuant to
which Washington will merge with and into HUBCO (the "Merger"), with HUBCO
surviving the Merger, and Washington Savings Bank will merge with and into the
Bank, with the Bank surviving that merger. Pursuant to the Merger Agreement,
stockholders of Washington will be entitled to receive either $16.10 in cash
or 0.6708 of a share of HUBCO's Series A Preferred Stock, no par value ("HUBCO
Preferred Stock"), for each share of Washington Common Stock outstanding at
the time that the Merger is consummated (the "Effective Time"), subject to
certain allocation and election provisions set forth in the Merger Agreement.
See "THE MERGER."
In addition, at the Meeting the holders of record of Washington Common
Stock as of the close of business on the Record Date will elect three direc-
tors to serve until the earlier of (i) the Effective Time of the Merger or
(ii) the 1997 annual meeting of Washington stockholders or such time thereaf-
ter as their successors have been elected and have qualified.
This Proxy Statement-Prospectus also constitutes a prospectus of HUBCO in
respect of the shares of HUBCO Preferred Stock issuable pursuant to the
Merger.
Parties to the Merger
HUBCO. HUBCO is a bank holding company whose principal operating subsid-
iary is Hudson United Bank (the "Bank"), a state-chartered commercial bank.
The corporate headquarters of HUBCO and the main office of the Bank are
located 3100 Bergenline Avenue, Union City, New Jersey 07087; telephone (201)
348-2300. Incorporated in 1890, the Bank is a full service commercial bank
which primarily serves small and mid-sized businesses and consumers in
Northern New Jersey, its primary market area. The Bank currently operates 37
branches in Hudson, Bergen, Passaic, Essex, Middlesex and Morris counties. The
deposits of the Bank are insured by the Bank Insurance Fund (the "BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"). As of December 31, 1993,
HUBCO had consolidated assets of $1.042 billion, consolidated deposits of
$935.7 million and consolidated stockholders'
24<PAGE>
<PAGE>
equity of $79.0 million. Based on assets, at December 31, 1993, HUBCO was the
12th largest commercial bank holding company headquartered in New Jersey.
HUBCO's principal assets and sources of income are its investments in its
subsidiaries. HUBCO is a legal entity separate and distinct from its subsid-
iaries. There are various federal and state legal limitations on the extent to
which a bank subsidiary of HUBCO may pay dividends to, finance or otherwise
supply funds to HUBCO. See "COMPARATIVE MARKET PRICE DATA."
Washington. Washington is a bank holding company subject to the Bank
Holding Company Act with its principal executive offices at 101 Washington
Street, Hoboken, New Jersey, telephone number (201) 659-0013. Washington
conducts its operations through its sole direct subsidiary, Washington Savings
Bank, a New Jersey chartered FDIC insured non-member savings bank. The Savings
Bank conducts business in New Jersey through eight branches located in the
counties of Bergen and Hudson. At December 31, 1993, Washington had total
assets of approximately $282.6 million, consolidated total deposits of
approximately $246.0 million and consolidated stockholders' equity of approxi-
mately $33.5 million.
Additional information about HUBCO and Washington and their respective
subsidiaries is included in documents incorporated by reference in this Proxy
Statement-Prospectus and in Washington's 1993 Annual Report which accompanies
this Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
Statewide Acquisition
HUBCO has entered into an Acquisition Agreement with Statewide. State-
wide, headquartered in Jersey City, New Jersey, was organized in 1943 as a
state-chartered savings and loan association under the name First Savings and
Loan Association of Jersey City. In 1973, Statewide changed its name to
Statewide Savings and Loan Association, and in 1988, to Statewide Savings
Bank, S.L.A. As of December 31, 1993, Statewide had total assets of $500.3
million, total deposits of $425.8 million, and total retained earnings of
$32.2 million, of which $14.9 million represented goodwill. Statewide's
principal business is attracting deposits and investing primarily in one to
four family mortgage loans and mortgage-backed securities and, to a lesser
extent, consumer loans and investment securities. Through its wholly owned
subsidiary, Statewide Financial Services, Inc., Statewide also engages in the
sale of annuity products. Statewide's deposits are insured by the Savings
Association Insurance Fund (the "SAIF") of the FDIC. The primary market area
for Statewide includes the neighborhoods surrounding its 13 branch offices,
which include Hudson, Union and Bergen Counties.
The Statewide Acquisition is subject to various conditions. These
conditions include approval of Statewide's plan of conversion by Statewide's
depositors, receipt of regulatory approvals, the absence of a material adverse
change in the business or financial condition of Statewide since March 31,
1993, the receipt by HUBCO and Statewide of certain legal opinions and the
sale of an aggregate dollar amount of HUBCO's Common Stock equal to the
appraised value of Statewide. There can be no assurance that the conditions
necessary to consummate the Statewide Acquisition will be satisfied.
CONSUMMATION OF THE MERGER IS NOT CONTINGENT ON CONSUMMATION OF THE STATEWIDE
ACQUISITION. Consummation of the Statewide Acquisition has been delayed as a
result of increased regulatory scrutiny of mutual to stock conversions and
certain proposed legislation. Because of such delays, HUBCO and Statewide have
extended the period during which the conversion may occur. The Agreement
between HUBCO and Statewide currently provides that either HUBCO or Statewide
may terminate the transaction if any required application for regulatory
approval is denied or is approved with certain adverse conditions or if the
conversion is not consummated by June 30, 1994.
Statewide, as part of the Statewide Acquisition, must convert from a
mutual savings bank to a state-chartered stock savings bank. On November 22,
1993, a bill was introduced in the United States House of Representatives
entitled the "Mutual Bank Conversion Act". The proposed legislation provides
that no state-chartered savings bank may convert from a mutual form to the
stock form on or after November 22, 1993, except in accordance with
regulations adopted by the FDIC. Other legislation was introduced in the
United States Senate which would, among other things, reduce the compensation
available to directors and officers of a mutual institution participating in a
conversion transaction. In late January, 1994, the FDIC announced a new policy
on conversions and followed that policy with an interim rule requiring the
filing of notice applications with the FDIC for all conversions of state
savings banks from mutual-to-stock form. The Office of Thrift Supervision
separately adopted a new policy imposing a temporary moratorium on merger
conversions of state savings and loan associations and federal savings banks,
both
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of which are subject to OTS jurisdiction. The OTS also has prepared a new
draft regulation limiting compensation to directors and officers in conversion
transactions and making permanent the moratorium on merger conversions. The
draft OTS regulation applies to all pending conversions, but with respect to
filed applications states that the OTS will consider waivers for good cause
shown. Statewide submitted a notice application to the FDIC with respect to
its conversion, which the FDIC deemed complete on March 25, 1994. In light of
the regulatory and legislative activity, HUBCO and Statewide thereafter
amended the Statewide Acquisition Agreement to delete the award of all
stock-based compensation to the directors and executive officers of Statewide.
However, HUBCO has indicated that it believes it is in the best interests of
HUBCO and its shareholders that the directors and executive officers of
Statewide receive some compensation, including possibly stock-based compensa-
tion, and has proposed procedures to make such a recommendation after consum-
mation of the Statewide Acquisition. HUBCO believes, based on these changes,
that Statewide's conversion application will be recommended for approval by
the staff of the FDIC, although there can be no assurance that the staff will
recommend approval. The FDIC staff has indicated to HUBCO and Statewide that
conversion applications will be submitted for approval to the FDIC Board. The
FDIC staff has also been instructed by the Board to propose new regulations
like those drafted by the OTS. The OTS has expressed strong objections to
merger conversions generally and the Director of the OTS is a member of the
FDIC Board. Because of the proposed legislation, the intensified scrutiny of
conversions by the FDIC and the objections of the OTS to merger conversions
and the OTS's new draft regulation, there can be no assurance that the
Statewide Acquisition will occur or, if it were to occur, when it may take
place. If the Statewide Acquisition does take place, the former directors and
executive officers of Statewide may be granted compensation, including
stock-based compensation, subject to the approval of HUBCO's shareholders at
their next annual meeting. If the Statewide acquisition does not take place,
the substantial legal, accounting and printing costs incurred by HUBCO in the
proposed acquisition, which HUBCO has capitalized, would be written off and
for the quarter in which such write-off occurred would adversely affect
earnings, probably causing a decline in earnings to comparable quarters.
THE MEETING
The Meeting
Each copy of this Proxy Statement-Prospectus mailed to holders of
Washington Common Stock is accompanied by a proxy card furnished in connection
with the Washington Board's solicitation of proxies for use at the Meeting.
The Meeting is scheduled to be held at Schuetzen Park, North Bergen, New
Jersey, on , 1994 at 11:00 a.m. Only holders of record of Washington
Common Stock at the close of business on the Record Date are entitled to
receive notice of and to vote at the Meeting. At the Meeting, holders of
Washington Common Stock will consider and vote upon (i) the Merger Proposal,
(ii) the election of directors and (iii) such other matters as may properly be
brought before the Meeting. On each matter to be considered at the Meeting by
holders of Washington Common Stock, including the election of directors, such
holders will have one vote for each share of Washington Common Stock held of
record on the Record Date. Holders of Washington Common Stock are not entitled
to cumulative voting in the election of directors.
HOLDERS OF WASHINGTON COMMON STOCK ARE REQUESTED TO PROMPTLY SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD TO WASHINGTON IN THE ENCLOSED
POSTAGE-PAID, ADDRESSED ENVELOPE
Any holder of Washington Common Stock who has delivered a proxy may
revoke it any time before it is voted by (i) attending the Meeting and voting
in person at the Meeting, (ii) giving notice of revocation in writing to the
address noted below or (iii) submitting a signed proxy card bearing a later
date than the proxy last received to Washington Bancorp, Inc., 609 Washington
Street, Hoboken, New Jersey 07030, Attention: Corporate Secretary, provided
that such notice or proxy card is actually received by Washington before the
vote of stockholders. A proxy will not be revoked by the death or supervening
incapacity of the shareholder executing the proxy unless, before the vote, the
proxy is revoked by the personal representative or guardian of the
stockholder. The shares of Washington represented by properly executed proxies
received at or prior to the Meeting and not subsequently revoked will be voted
FOR approval of the Merger Agreement and FOR the election of the proposed
nominees as directors. If any other matters are properly presented for
consideration at the Meeting, the persons named in the proxy card enclosed
herewith will have discretionary authority to vote on such matters in
accordance with their best judgment, provided, however, that such
discretionary authority will be exercised only to the extent permissible under
applicable federal and state securities and corporation laws. As of the date
of this Proxy Statement-Prospectus, Washington is unaware of any other matter
to be presented at the Meeting.
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The cost of soliciting proxies from stockholders of Washington will be
borne by Washington. Such solicitation will be made by mail, but also may be
made by telephone or in person by the directors, officers and employees of
Washington (who will receive no additional compensation for doing so).
Washington will make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals.
Washington will also retain the services of a proxy solicitating firm. The
cost of such services will depend upon the volume of usage but is not expected
to exceed $10,000.
SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
Votes Required
Only holders of record of shares of Washington Common Stock on the Record
Date will be entitled to vote at the Meeting. The affirmative vote of the
holders of a majority of the Washington Common Stock outstanding on the Record
Date will be required to approve the Merger Agreement. Therefore, a failure by
a holder of Common Stock to return a properly executed proxy statement or to
vote in person at the Meeting will have the same effect as a vote against the
Merger Agreement. The affirmative vote of a plurality of the votes cast by
holders of shares of Washington Common Stock represented at the Meeting is
required to elect directors. For purposes of determining the votes cast with
respect to any matter presented for consideration at the Meeting, including
the vote with respect to the Merger, only those cast "for" or "against" will
be included. Except as described in the following paragraph, abstentions and
broker non-votes are counted only for the purpose of determining whether a
quorum is present at such Meeting.
FAILURE BY A HOLDER OF WASHINGTON COMMON STOCK TO RETURN A PROPERLY
EXECUTED PROXY CARD OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE
THE SAME EFFECT AS VOTES AGAINST THE MERGER AGREEMENT.
As of March 15, 1994, there were 2,307,937 shares of Washington Common
Stock outstanding and entitled to vote at the Meeting. Each such share is
entitled to one vote.
The directors and executive officers of Washington and their affiliates
beneficially owned, as of March 15, 1994, 386,079 shares (or approximately
16.4% of the outstanding shares) of Washington Common Stock. HUBCO beneficial-
ly owned, as of March 15, 1994, 92,000 shares (or approximately 4.0% of the
outstanding shares) of Washington Common Stock. As of March 15, 1994, the
directors and executive officers of HUBCO and their affiliates did not
beneficially own any shares of Washington Common Stock. Also, as of that date,
neither the Bank nor the Savings Bank beneficially owned any shares of
Washington Common Stock directly or in a fiduciary capacity. HUBCO and the
directors of Washington intend to vote their shares in favor of the Merger
Agreement.
Washington's management is not aware of any individual or entity that
owned of record or beneficially more than 5% of the outstanding Washington
Common Stock as of March 15, 1994.
Recommendation of the Washington Board
The Washington Board has unanimously approved the Merger Agreement and
recommends that Washington stockholders vote FOR approval of the Merger
Agreement. For the reasons described below, the Washington Board believes that
the Merger will provide significant value to all Washington shareholders and
also will enable those who receive HUBCO Common Stock in the Merger to
participate in opportunities for growth that the Washington Board believes the
Merger makes possible. See "THE MERGER--Background of and Reasons for the
Merger" and "--Opinions of Washington's Financial Adviser."
THE MERGER
The following information, insofar as it relates to matters contained in the
Merger Agreement or the Stock Option Agreement, is qualified in its entirety
by reference to the Merger Agreement and the Stock Option Agreement, which are
incorporated herein by reference and are attached hereto as Appendix A and
Appendix B, respectively. Washington stockholders are urged to read the Merger
Agreement and the Stock Option Agreement carefully.
Background of and Reasons for the Merger
During the years ended December 31, 1988, 1989, 1990 and 1991, Washington
experienced difficulties within its loan portfolio reflecting, among other
things, weaknesses in the New Jersey real estate market and general
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economic conditions. As a result, Washington recognized net losses in each of
these years and the per share price of its Common Stock fell from $14 1/4 on
November 15,1988 (the day prior to Washington's announcement of a substantial
increase in its provision for possible loan losses) to $2.00 (the lowest
reported closing sale price of Washington Common Stock subsequent to that
announcement) on various dates in November 1990 and January 1991. While
Washington's operating performance improved and resulted in net profits in
both 1992 and 1993, and while the market price of Washington Common Stock has
recovered somewhat in recent periods, the Washington Board believes that it
may be difficult for Washington to return to the levels of profitability and
potential shareholder value that had been realized prior to the economic
difficulties of the late 1980's.
In September, 1993, Kenneth T. Neilson, the president and chief executive
officer of HUBCO, indicated to Paul Rotondi and Theodore J. Doll, the chief
executive officer and chief operating officer of Washington, that HUBCO was
interested in acquiring Washington. He noted that while HUBCO had been
focusing on government-assisted transactions, its pending acquisition of
Statewide and the potential acquisition of Washington were consistent with
HUBCO's goals for expansion.
From the outset, HUBCO's acquisition proposal was structured as a part
stock, part cash transaction, designed from HUBCO's perspective to limit per
share dilution. Washington, on the other hand, made it clear that in order for
a purchase price to be agreed upon, it would be essential for HUBCO to
recognize the strength of Washington's capital position and other underlying
strengths in Washington's balance sheet.
On September 24, 1993, discussions among the most senior executive
officers of Washington and HUBCO had reached a sufficiently advanced stage
such that both parties agreed that counsel should commence preparation of
appropriate documentation. Shortly thereafter, HUBCO presented to Washington a
letter of intent contemplating a transaction in which stockholders would
either elect to receive cash or HUBCO stock. The letter of intent contemplated
that prior to closing, Washington would pay a substantial cash dividend to all
stockholders in order to enable stockholders to realize certain of the value
reflected on Washington's balance sheet. HUBCO contemplated that
contemporaneously with the execution of a letter of intent, HUBCO would
receive a stock option covering a substantial number of shares of Washington
Common Stock.
On September 28, 1993, Washington's Board met to discuss the proposed
letter of intent and stock option. The Board concluded that it was premature
to agree to grant any stock option. With the advice of special counsel and its
financial advisor, the Board authorized management to pursue discussions with
HUBCO, to determine whether there was any continuing interest in Washington by
a second banking institution (the "Other Bank") that had previously expressed
certain interest in Washington and to continue analyzing the alternatives of
remaining independent and affiliating with any third-party. As a result of
that meeting, HUBCO abandoned its efforts to arrange for a letter of intent to
be executed and, instead, instructed its counsel to commence the preparation
of a definitive agreement at the same time that the two banks conducted due
diligence with respect to each other.
On October 4, 1993, Washington received an inquiry from the National
Association of Securities Dealers, Inc. ("NASD"), questioning an increase in
the volume of trading and the market price of Washington Common Stock. In re-
sponse, Washington issued a press release disclosing that it was engaged in
preliminary merger negotiations with an undisclosed financial institution.
On October 8, 1993, Washington received from HUBCO a preliminary draft of
a definitive Merger Agreement. The draft Merger Agreement contemplated that
each share of Washington Common Stock would be converted either into cash or a
fraction of a share of HUBCO Common Stock. Like the letter of intent, the
initial draft of the definitive agreement contemplated that if funds were
available, Washington would pay a cash dividend to its shareholders prior to
closing. On the same date that Washington received the first draft of the
definitive agreement from HUBCO, Washington was advised by the Other Bank that
it would be submitting an offer to Washington in the near future.
At the time that HUBCO submitted its first draft of the Merger Agreement
to Washington, HUBCO advised Washington that it would not be in a position to
negotiate the Merger Agreement until after October 15, 1993. In the interim,
Washington received a letter from the Other Bank disclosing the dollar amount
of cash that the Other Bank would be willing to pay to Washington's stockhold-
ers.
On October 12, 1993, Washington's Board met to review the status of
negotiations. It was noted that the amount of the all cash offer by the Other
Bank was significantly less than the amount of cash and/or stock that HUBCO
was proposing to pay and/or permit Washington to pay to stockholders in the
form of a dividend. The Board reiterated its earlier position that no
determination had yet been made as to whether or not to enter into a business
combination.
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However, the Washington Board instructed management to pursue discussions with
both the Other Bank and HUBCO. During such further discussions, it became
apparent to management of Washington that the Other Bank was not willing to
increase its offer to a point where the Other Bank's offer would be suffi-
ciently close to the HUBCO offer to permit Washington to pursue the Other
Bank's interest in Washington.
The executive officers of Washington and HUBCO, together with their
special counsel and financial advisors, conducted several meetings during the
balance of October and early November negotiating various aspects of the
definitive agreement. Washington convinced HUBCO to increase the purchase
price by the amount of the anticipated dividend, so as to eliminate any risks
that might arise in the event that Washington were unable to pay the full
amount of the dividend. Special attention was placed upon the manner in which
Washington shares were to be converted into HUBCO Common Stock. HUBCO insisted
on a fixed conversion rate with respect to this exchange. Washington, on the
other hand, indicated substantial concern with a fixed exchange rate, noting
that if HUBCO's Common Stock declined in value at or near the effective time
of a merger, the consequences of such a decline would be to increase the
likelihood that the cash portion of the total consideration paid by HUBCO
would exceed the ceiling above which a tax-free reorganization could not be
accomplished. To solve this problem, HUBCO proposed that shares of Washington
Common Stock be converted into a preferred stock that would contain dividend
features designed to insulate the preferred stock from the effect of a decline
in the market price of HUBCO's Common Stock prior to the Effective Time.
Ultimately, HUBCO proposed the dividend feature reflected in the HUBCO
Preferred Stock, pursuant to which the dividend will range from $1.00 per
share of HUBCO Preferred Stock if the average market price of HUBCO Common
Stock is $24.00 or higher during a twenty consecutive business day period
ending two days prior to the date the dividend is set, up to $1.68 per share
if the average market price of HUBCO Common Stock is below $19.00. If the
average market price of HUBCO Common Stock is between $19.00 and $23.99, the
dividend will be between $1.56 and $1.10 per share.
On November 3, 1993, the Washington Board met again to consider the terms
of the Merger proposed by HUBCO. After reports by Washington's financial
advisor and a detailed review of each provision in the proposed Merger
Agreement and Option Agreement, the Board authorized management to continue
discussions with HUBCO. Ultimately, on November 8, 1993, the Board approved
the Merger Agreement and authorized the execution of the Stock Option
Agreement.
Opinions of Washington's Financial Advisor
On September 27, 1993, the Washington Board retained Capital Consultants
of Princeton, Inc. ("Capital Consultants") to act as Washington's financial
advisor, to assist management of Washington in connection with the Merger and
related matters and, if negotiations resulted in the execution of a definitive
agreement, to render its opinion with respect to the fairness, from a finan-
cial point of view, to the stockholders of Washington of the consideration to
be received in the Merger.
Capital Consultants is regularly engaged in the valuation of banks, bank
holding companies, savings and loan associations, and thrift holding companies
in connection with mergers, acquisitions and other securities transactions.
Capital Consultants has knowledge of, and experience with, the New Jersey
banking and thrift market and financial organizations operating in that market
and was selected by Washington because of its knowledge of, experience with,
and reputation in the financial services industry. Capital Consultants is not
a market maker in either HUBCO or Washington Common Stock.
Capital Consultants has delivered to the Board of Directors of Washington
its opinion that, based upon and subject to various items set forth in its
written opinion, the consideration to be received by Washington's stockholders
pursuant to the Merger Agreement is fair, from a financial point of view, to
Washington's stockholders. In requesting Capital Consultants' advice and
opinion, Washington's Board did not impose any limitations upon Capital
Consultants with respect to the investigations made or procedures followed by
it in rendering its opinion.
The full text of the written opinion of Capital Consultants, dated as of
April , 1994, which sets forth assumptions made and matters considered, is
substantially the same as the opinion rendered by Capital Consultants as of
November 8, 1993, and is attached as Appendix D to this Proxy
Statement-Prospectus. Washington stockholders are urged to read this opinion
in its entirety. Capital Consultants' opinion is directed only to the finan-
cial terms of the Merger and does not constitute a recommendation to any
Washington stockholder as to how such stockholder should vote at the Meeting.
The summary information regarding Capital Consultants' opinion and the
procedures followed in rendering such opinion set forth in this Proxy
Statement-Prospectus is qualified in its entirety by reference to the full
text of such opinion.
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In arriving at its opinion, Capital Consultants reviewed and analyzed,
among other things, (i) the Merger Agreement; (ii) the Registration Statement
on Form S-4 of HUBCO of which this Proxy Statement-Prospectus is a part; (iii)
publicly available information relating to Washington and HUBCO, including,
for each, annual reports to stockholders and annual reports on Form 10-K filed
with the SEC for the years ended December 31, 1991 through 1993 and the
quarterly reports to stockholders and quarterly reports on Form 10-Q filed
with the SEC for the periods ended March 31, June 30 and September 30, 1993;
(iv) certain historical operating and financial information provided to
Capital Consultants by the managements of Washington and HUBCO; (v) historical
and current market data for the Washington Common Stock and the HUBCO Common
Stock; (vi) the publicly available financial data and stock market performance
data of publicly traded banking and thrift institutions which Capital Consul-
tants deemed generally comparable to Washington and HUBCO; (vii) the nature
and terms of recent acquisitions and merger transactions involving thrift
institutions and bank and thrift holding companies that Capital Consultants
considered reasonably similar to Washington and HUBCO in financial character,
operating character, historical performance and geographic market and its
economy; and (viii) such other studies, analyses, inquiries and reports as
Capital Consultants deemed appropriate. Capital Consultants has also been
engaged as the financial advisor to Statewide in connection with the Statewide
Acquisition and, in that capacity, has reviewed various documents pertaining
to Statewide--including financial statements, business plans, Kaplan
Associates' Valuation Appraisal of Statewide as of December 7, 1993 and other
documents. In addition, Capital Consultants conducted meetings with members of
senior management of Washington and HUBCO for purposes of reviewing the future
prospects of Washington and HUBCO. Capital Consultants evaluated the pro forma
ownership of the HUBCO Common Stock (after the conversion of the HUBCO
Preferred Stock, and before and after HUBCO's acquisition of Statewide) by
Washington's stockholders after receipt of the cash to be paid to Washington
stockholders, relative to the pro forma contribution of Washington's assets,
deposits, equity and earnings to the pro forma resulting company in the
Merger. Capital Consultants also took into account its experience in other
transactions, as well as its knowledge of the banking and thrift industries
and its experience in securities valuations.
In rendering its opinion, Capital Consultants assumed, without
independent verification, the accuracy and completeness of the financial and
other information and representations provided to it by Washington and HUBCO.
Capital Consultants did not conduct a physical inspection of any of the
properties or assets of Washington or HUBCO, and has not made any independent
evaluation or appraisal of any properties, assets or liabilities of Washington
or HUBCO. Capital Consultants has assumed and relied upon the accuracy and
completeness of the publicly available financial and other information
provided to it, has relied upon the representations and warranties of Washing-
ton and HUBCO made pursuant to the Merger Agreement, and has not independently
attempted to verify any of such information.
In rendering its opinion, Capital Consultants assumed that in the course
of obtaining the necessary regulatory approvals for the Merger, no conditions
will be imposed that will have a material adverse effect on the contemplated
benefits of the Merger on a pro forma basis to Washington.
In arriving at its opinion, Capital Consultants performed a variety of
financial analyses. Capital Consultants believes that its analyses must be
considered as a whole and that consideration of portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and the process underlying
Capital Consultant's opinion. The preparation of an opinion with respect to
fairness, from a financial point of view, of the consideration to be received
by stockholders is a complex process involving judgments and is not necessari-
ly susceptible to partial analyses and summary description.
In its analyses, Capital Consultants made numerous assumptions with
respect to Washington's and HUBCO's industry performance, business and
economic conditions, and other matters, many of which are beyond the control
of Washington and/or HUBCO. Any estimates reflected in Capital Consultants'
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates. Estimates of
values of companies do not purport to be appraisals or necessarily reflect the
prices at which companies or their securities may actually be sold.
In connection with its opinion, Capital Consultants performed various
analyses with respect to Washington and HUBCO. The following is a brief
summary of such analyses, certain of which were presented to the Washington
Board by Capital Consultants on or before November 8, 1993.
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Valuation Analysis
Using a valuation analysis, Capital Consultants estimated the present
value of theoretical values of Washington based on a range of
price-to-earnings ("P/E") multiples between 9.0x and 12.0x and a range of
discount rates between 6% and 8%. The range of values were based on a range of
estimated earnings for the next five years assuming annual earnings growth
rates between 5% and 10%. The results of this analysis indicated a range of
theoretical values for Washington between $8.58 per share (5% earnings growth
rate; P/E of 9.0x; 8% discount rate) and $15.87 per share (10% growth rate;
P/E of 12.0x; 6% discount rate). Capital Consultants estimated the present
value of the future dividend streams that Washington could produce over a five
year period, assuming a payout ratio from current earnings of 10% starting in
1995 and increasing to 30% by 1998. Capital Consultants also prepared a net
present value analysis that indicated theoretical values for Washington based
on a range of terminal book value multiples between 0.90x and 1.05x and a
range of discount rates between 6% and 8%. Capital Consultants determined that
these dividend payout ratios are within target ranges consistent with industry
standards; the range of terminal multiples of book value are based on the
current price/book value multiples of selected comparable companies. Such
comparable companies are referred to in the Comparable Company Analysis and
Transaction Analysis set forth below. The dividend streams and terminal values
were discounted to present value using discount rates which reflect
assumptions regarding the required rates of return of the current and
prospective stockholders of Washington Common Stock in these economic times.
The range of present values per fully diluted shares of Washington resulting
from the above referenced assumptions were $12.13 to $16.13.
Comparable Company Analysis
Capital Consultants compared the operating performance of Washington to
publicly traded thrift institutions that Capital Consultants deemed to be
similar to Washington. The group consists of nine New Jersey publicly traded
thrift institutions with total assets of between $301 million and $606 million
with an equity to assets ratio in excess of 7.0%. Capital Consultants compared
Washington with these thrift institutions based on selected operating funda-
mentals, including capital adequacy, profitability and asset quality. Using
pricing data as of September 30, 1993, the median price to latest twelve
months earnings multiple was 9.3x for the comparable thrift and 5.6x for
Washington. The median price to stated book value was 99% for the comparable
thrift and 58% for Washington. The implied market trading values derived from
such comparable company analysis, utilizing the resulting valuation ratio
medians, ranged from approximately $13.39 to $13.88 per share for Washington.
At September 30, 1993, the median equity to assets ratio was 10.05% for the
group of comparable thrift institutions and 11.37% for Washington. The median
return on average equity for the twelve months ending September 30, 1993 was
13.09% for the comparable group of thrift institutions and 7.01% for Washing-
ton. Based on the HUBCO's offer of $16.10 (in cash or HUBCO Preferred Stock)
for each share of Washington Common Stock, the HUBCO offer represented 120% of
Washington's fully diluted book value and 17.1 times Washington's latest
twelve months earnings through September 30, 1993.
Finally, Capital Consultants compared the market price, market-to-book
value and price-to-earnings multiples of the HUBCO Common Stock with
individual market multiples and medians of eighteen New Jersey publicly traded
bank holding companies having total assets between $92.4 million and $4.1
billion. The analysis also compared returns on average assets and average
equity of HUBCO to those of selected companies and the medians of the
comparable group. The analysis indicated that the HUBCO Common Stock traded on
September 30, 1993 at a price-to-earnings multiple of 13.5 times trailing
twelve months earnings for the period ending September 30, 1993 as compared to
a comparative group median of 12.2 times trailing twelve months earnings for
the period ending September 30, 1993. While the HUBCO Common Stock traded at a
price-to-book value of 229%, the comparative group median was 160%. HUBCO's
financial performance, as measured by returns on average assets and average
equity, was 1.40% and 18.91%, respectively, as compared to the median of the
selected comparable companies which was 0.82% and 11.53%, respectively. The
Capital Consultants' analyses also included summary income statement and
balance sheet data and selected ratio analyses for HUBCO and various other
potential acquirors of Washington.
Contribution Analysis
Capital Consultants prepared a contribution analysis showing the
percentage of assets, deposits, net common equity and 1992 and first nine
months of 1993 net income Washington would contribute to the combined company
on a pro forma basis, and compared these percentages to the pro forma
ownership after 49% of Washington share are cashed out by HUBCO. This analysis
was prepared with the Statewide Acquisition included and excluded. This
analysis showed that Washington, after the Statewide Acquisition, would
contribute 15.5% of pro forma consolidated total assets, 15.4% of pro forma
consolidated deposits, 16.6% of pro forma consolidated stockholders' equity,
9.3% of
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pro forma consolidated net income for 1992 and 9.8% of pro forma consolidated
net income for the first nine months of 1993, while Washington stockholders
would hold 9.0% of the pro forma ownership of HUBCO after conversion of the
HUBCO Preferred Stock.
This analysis showed that Washington, before the acquisition of
Statewide, would contribute 21.2% of pro forma consolidated total assets,
20.9% of pro forma consolidated deposits, 35.8% of pro forma consolidated
stockholders equity, 15.9% of pro forma consolidated net income for 1992 and
14.3% of pro forma consolidated net income for the first nine months of 1993,
while Washington stockholders would hold 12.2% of the pro forma ownership of
HUBCO after conversion of the Preferred Stock.
Impact Analysis
Capital Consultants analyzed the financial implications of the Merger on
HUBCO's earnings per common share and book value per common share. The
analysis was based on September 30, 1993 financial data for HUBCO and Washing-
ton and indicated that the acquisition of Washington by HUBCO would be (on a
pro forma basis for the nine months ended September 30, 1993, assuming the
acquisition was effective as of January 1, 1993) approximately 2.2% dilutive
to the earnings per share of HUBCO Common Stock and approximately 9.3%
accretive to tangible book value per share of HUBCO Common Stock on a fully
diluted basis.
Comparable Transaction Analysis
Capital Consultants performed an analysis of prices and premiums offered
in recent announced thrift acquisition transactions in the region. Multiples
of earnings and fully diluted book value implied by the consideration to be
received by Washington's stockholders in the Merger were compared with
multiples offered in such regional thrift transactions, which included pending
and completed thrift acquisitions announced between January 1, 1992 and
November 8, 1993. The median offer price to book value for this regional group
of comparable transactions was 147%. The equivalent offer price to full
diluted book value for Washington was 120% based on the HUBCO offer price of
$16.10 (in cash or HUBCO Preferred Stock) for each outstanding share of
Washington Common Stock and Washington's stockholders' equity as of September
30, 1993. The median multiple of offer price to latest twelve months earnings
was 15.0x for the comparative group, as compared to 17.1x for Washington on a
full diluted basis. Capital Consultants also reviewed the core capital ratio
to total assets of the comparative group and non-performing assets as a
percentage of total assets and in both analyses Washington was substantially
above the median of the comparative group.
It is important to note that when Capital Consultants took into account
the values shown in the comparables used in connection with the rendering of
its opinions, no company or transaction used in these analyses were identical
to Washington or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgements concerning differences in financial and operating characteristics
of the companies, the timing of the transactions and prospective buyer
interest, the earnings trends and prospects for the future, as well as other
factors that could affect the public trading values of the companies included
in the comparisons.
For Capital Consultants' services in connection with the Merger,
Washington has agreed to pay Capital Consultants a fee, if the Merger is
consummated, of approximately $75,000 plus reimbursement for reasonable
out-of-pocket expenses. Washington has also agreed to indemnify Capital
Consultants against certain liabilities, including liabilities under the
federal securities laws. Washington has paid Capital Consultants $20,000 and
will pay an additional $30,000 on the mailing of this Proxy
Statement-Prospectus, with the balance of the fee due upon consummation of the
Merger. The amount of Capital Consultants' fee was determined by negotiation
between Washington and Capital Consultants.
Conversion of Washington's Shares
At the Effective Time, each share of Washington Common Stock which is not
then held in Washington's treasury and which is not a Dissenting Share (as
defined below) or held by HUBCO, will be converted into either (i) the right
to receive $16.10 in cash, (ii) the right to receive 0.6708 shares of HUBCO
Preferred Stock, each full share of HUBCO Preferred Stock to be convertible
into one share of HUBCO Common Stock, or (iii) the right to receive a combina-
tion of shares of HUBCO Preferred Stock and cash, in each case as the Washing-
ton stockholder shall elect, subject to the limitations and allocation
procedures described below.
The Merger Agreement provides, in general, that (i) in the event that
holders of 49% or less of the Washington Common Stock elect to receive cash in
exchange for their shares, each such stockholder will receive cash, (ii) in
the
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event that holders of more than 49% of the Washington Common Stock elect to
receive cash, allocation procedures will provide for 49% of Washington's
shares to be exchanged for cash and the balance of Washington's shares will be
exchanged for HUBCO Preferred Stock, (iii) in the event that holders of 51% or
less of the Washington Common Stock elect to receive HUBCO Preferred Stock in
exchange for their shares, each such stockholder will receive HUBCO Preferred
Stock and (iv) in the event that holders of more than 51% of the Washington
Common Stock elect to receive HUBCO Preferred Stock, allocation procedures
will provide for 51% of Washington's shares to be exchanged for HUBCO Pre-
ferred Stock and the balance of Washington's shares will be exchanged for
cash. Allocation provisions in the Merger Agreement also apply with respect to
shares for which no preference is specified. See "Allocation Procedure".
As of March 15, 1994, there were 2,307,937 shares of Washington Common
Stock outstanding. At that date, no shares of such stock were held in
Washington's treasury and HUBCO held 92,000 shares of Washington Common Stock.
Election Procedure
A statement of preference ("Preference Statement") will be mailed to each
Washington stockholder along with this Proxy Statement-Prospectus. A Prefer-
ence Statement and a copy of this Proxy Statement-Prospectus will also be
mailed to persons who become stockholders of record of Washington after the
record date and before the Preference Deadline. Preference Statements will
also be available at Washington's Administrative Headquarters at all times
through the Preference Deadline described below.
The Preference Statement will enable each holder of record of Washington
Common Stock to specify whether such holder (i) has no preference as to
whether all of such holder's Washington shares will be converted into cash or
HUBCO Preferred Stock, (ii) prefers to have all of such holder's Washington
shares converted into cash at a price of $16.10 per share or (iii) prefers to
have all of such holder's Washington shares converted into HUBCO Preferred
Stock at an exchange rate of 0.6708 shares of HUBCO Preferred Stock for each
Washington share. Except as otherwise noted below with respect to a person who
holds shares for two or more beneficial owners, a holder may not specify a
preference that part of such holder's shares be converted into cash and part
into HUBCO Preferred Stock and must include in his Preference Statement all
shares of Washington Common Stock owned of record by such holder.
Shares of Washington Common Stock as to which an effective Preference
Statement specifies a preference for the right to receive HUBCO Preferred
Stock are referred to herein as "Stock Preference Shares"; shares as to which
an effective Preference Statement specifies a preference for the right to
receive cash are referred to herein as "Cash Preference Shares"; shares of
Washington Common Stock (other than Dissenting Shares) as to which no
Preference Statement is in effect, or as to which an effective Preference
Statement indicates no preference, are referred to herein as "No Preference
Shares"; and shares subject to appraisal (see "Rights of Dissenting
Stockholders") are referred to herein as "Dissenting Shares".
A statement of preference in a Preference Statement will be effective
only if the Statement is properly completed, signed and, accompanied by the
stock certificates for the shares to which it relates, received by Hudson
United Bank, Trust Department, the Exchange Agent, at , New Jersey, whether
sent by mail or delivered by hand, no later than the Preference Deadline.
Since all elections made on a Preference Statement are irrevocable, and since
the submission of stock certificates will preclude a stockholder from
thereafter selling such shares on the market, stockholders may wish to defer
submitting their completed Preference Statements until shortly before the
Preference Deadline. The Preference Deadline is 5:00 p.m. on the third
business day prior to the Closing. Washington will send to all stockholders of
record a notice identifying the Closing date and the date of the Preference
Deadline as promptly as practicable after the Closing date has been
established but in no event later than 25 days prior to the Preference
Deadline. The Closing is expected to occur late in the second or early in the
third quarter of 1994.
The method of delivery of the Preference Statement and the stock
certificates for shares to which it relates is at the election and risk of the
stockholder submitting them. If delivery is by mail, insured registered mail,
return receipt requested, should be considered. IN ANY EVENT, HOWEVER, STOCK
CERTIFICATES REPRESENTING WASHINGTON SHARES NEED NOT BE SENT TO THE EXCHANGE
AGENT AT THIS TIME. SINCE A COMPLETED PREFERENCE STATEMENT IS IRREVOCABLE AND
SINCE THE SUBMISSION OF STOCK CERTIFICATES WILL PRECLUDE A STOCKHOLDER FROM
THEREAFTER SELLING SUCH SHARES ON THE MARKET, STOCKHOLDERS MAY WISH TO DEFER
SUBMITTING THEIR PREFERENCE STATEMENTS AND STOCK CERTIFICATES UNTIL SHORTLY
BEFORE THE PREFERENCE DEADLINE.
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Any Preference Statement relating to shares which are or become
Dissenting Shares will be deemed automatically revoked.
Any record holder of Washington Common Stock who holds such stock as
nominee for two or more beneficial owners may submit separate Preference
Statements for the shares owned by each beneficial owner, each Statement to
contain a different statement of preference. For purposes of the allocation
procedures referred to below, each such separate Preference Statement will be
deemed to be submitted by a separate Washington stockholder.
Information concerning the completion and delivery of Preference
Statements and related matters are also contained in the instructions (which
stockholders are urged to read carefully) on the reverse side of the
Preference Statement. ANY SHARES COVERED BY A PREFERENCE STATEMENT DETERMINED
BY HUBCO, WASHINGTON OR THE EXCHANGE AGENT TO BE DEFECTIVE AND ANY SHARES FOR
WHICH NO PREFERENCE STATEMENT IS RECEIVED BEFORE THE PREFERENCE DEADLINE WILL
BE TREATED AS NO PREFERENCE SHARES.
For purposes of calculating the Maximum Cash Number (as defined below)
and the Maximum Stock Number (as defined below), the shares of Washington
Common Stock held by HUBCO will be considered to be outstanding stock of
Washington. HUBCO has indicated that it presently intends to submit a cash
election because it has been informed by tax counsel that for purposes of the
tax opinion to be rendered by such counsel, the shares owned by HUBCO will be
treated as if they had been converted into cash regardless of which election
is chosen. However, HUBCO reserves the right to submit a Preference Statement
electing no preference or a preference for HUBCO Preferred Stock, depending
upon a variety of factors, including whether its election for HUBCO Preferred
Stock would cause tax counsel to require more HUBCO Preferred Stock to be
issued to other holders of Washington Common Stock. The Washington shares
owned by HUBCO will be treated like any other shares in the allocation
procedures.
Allocation Procedure
The allocation among Washington stockholders (other than holders of
Dissenting Shares) of rights to receive cash or HUBCO Preferred Stock in the
Merger will be effected as follows:
(i) If the number of Cash Preference Shares is equal to 49% of the
shares of Washington Common Stock outstanding immediately prior to the
Effective Time (the "Maximum Cash Number"), then:
(a) all Stock Preference Shares and No Preference Shares will
be converted into HUBCO Preferred Stock (except as otherwise
provided for fractional shares); and
(b) all Cash Preference Shares will be converted into the right
to receive cash.
(ii) If the number of Cash Preference Shares is less than the
Maximum Cash Number and the number of Cash Preference Shares plus No
Preference Shares is equal to or greater than the Maximum Cash Number,
then:
(a) all Stock Preference Shares will be converted into HUBCO
Preferred Stock (except as otherwise provided for fractional
shares);
(b) all Cash Preference Shares will be converted into the right
to receive cash;
(c) selected No Preference Shares will be converted into the
right to receive cash, as determined by the Exchange Agent by random
selection among the holders thereof, such that the aggregate of the
Cash Preference Shares and the No Preference Shares to be converted
into the right to receive cash will equal as closely as possible,
but in no event exceed, the Maximum Cash Number; and
(d) all No Preference Shares that are not converted into the
right to receive cash will be converted into HUBCO Preferred Stock
(except as otherwise provided for fractional shares).
(iii) If the number of Cash Preference Shares is greater than the
Maximum Cash Number, then:
(a) all Stock Preference Shares and No Preference Shares will
be converted into HUBCO Preferred Stock (except as otherwise
provided for fractional shares); and
(b) each Cash Preference Share will be converted into the right
to receive (i) an amount in cash, without interest, equal to the
product of (x) $16.10 and (y) a fraction (the "Cash Fraction"), the
numerator
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of which shall be the Maximum Cash Number and the denominator of
which will be the total number of Cash Preference Shares and (ii) a
number of shares of HUBCO Preferred Stock equal to the product of
(x) 0.6708 and (y) a fraction equal to 1 minus the Cash Fraction.
(iv) If the number of Stock Preference Shares exceeds 51% of the
shares of Washington Common Stock immediately prior to the Effective Time
(the "Maximum Stock Number"), then:
(a) all Cash Preference Shares and No Preference Shares will be
converted into the right to receive cash;
(b) selected Stock Preference Shares will be converted into the
right to receive cash, as determined by the Exchange Agent by random
selection among the holders thereof, such that the aggregate of the
Cash Preference Shares, the No Preference Shares and the Stock
Preference Shares to be converted into the right to receive cash
will equal as closely as possible, but in no event exceed, the
Maximum Cash Number; and
(c) all Stock Preference Shares not converted into the right to
receive cash will be converted into HUBCO Preferred Stock (except as
otherwise provided for fractional shares).
(v) If the number of Stock Preference Shares equals the Maximum
Stock Number, then:
(a) all Cash Preference Shares and No Preference Shares will be
converted into the right to receive cash; and
(b) all Stock Preference Shares will be converted into HUBCO
Preferred Stock (except as provided for fractional shares).
HUBCO and Washington will have the right to make rules, not inconsistent
with the Merger Agreement, governing the manner and extent to which Preference
Statements are to be taken into account in making the determinations described
above. The Merger Agreement provides that if the tax opinion which is a
condition to the consummation of the Merger cannot reasonably be rendered,
then the Maximum Stock Number will be automatically increased and the Maximum
Cash Number will be automatically decreased to the minimum extent necessary to
enable such tax opinion to be rendered. The tax opinion depends upon a number
of factors, including among other things, the anticipated market value of the
HUBCO Preferred Stock. Based upon the circumstances as they presently exist,
tax counsel expects to be able to render the tax opinion without requiring an
increase in the Maximum Stock Number.
No Fractional Shares
No fractional shares of HUBCO Preferred Stock will be issued in
connection with the Merger, but in lieu thereof each holder of shares of
Washington Common Stock otherwise entitled to a fraction of a share of HUBCO
Preferred Stock will be paid in cash an amount equal to such fraction
multiplied by a valuation of $24.00 per whole share of HUBCO Preferred Stock.
No such holder will be entitled to dividends, voting rights or other rights in
respect of any such fractional share.
Conversion of Stock Options
The Merger Agreement provides that all outstanding stock options that
have not been exercised prior to the Effective Time will be converted into
cash, HUBCO Preferred Stock or options for HUBCO Preferred Stock, at the
election of the option holder. Washington maintains a Stock Option Plan for
employees and a Stock Option Plan for directors and options are outstanding
under both Plans. Under both Option Plans, options will become fully vested
upon consummation of the acquisition of Washington. Therefore, each option
holder will be eligible to exercise or to convert all of his or her options
prior to the Effective Time.
Under the terms of the Merger Agreement, holders of options may convert
their unexercised options into cash or HUBCO Preferred Stock. In exchange for
each unexercised option to purchase a share of Washington Common Stock, a
holder may elect to receive either (i) cash equal to the difference between
the exercise price and $16.10 (the "Cash-Out Amount") or (ii) shares of HUBCO
Preferred Stock in an amount equal to the Cash-Out Amount divided by $24.00.
However, no more than 51% of the outstanding options may be converted into
HUBCO Preferred Stock and, if holders of more than 51% of the options elect to
convert their options to Preferred Stock, HUBCO and Washington will agree on
allocation procedures. Option holders who receive either cash or HUBCO
Preferred Stock
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will surrender their option for cancellation and the option will be canceled
if the Merger is consummated. No fractional shares of HUBCO Preferred Stock
will be issued and in lieu thereof a holder will receive cash equal to such
fraction multiplied by a valuation of $24.00. See "No Fractional Shares." If a
holder elects to convert the options to cash or HUBCO Preferred Stock, he or
she will realize taxable income at ordinary income tax rates in an amount
equal to the value of what the holder has received. See "Federal Income Tax
Consequences."
As an alternative to receiving cash or Preferred Stock equal to the
Cash-Out Amount, a holder of an option to purchase Washington Common Stock may
elect to have his or her options converted into an option to purchase HUBCO
Preferred Stock. In such event, each option to purchase one share of
Washington Common Stock will be converted into the right to purchase 0.6708
shares of HUBCO Preferred Stock. Under the terms of the Merger Agreement,
options to purchase only up to 20,000 shares of HUBCO Preferred Stock may be
issued under this alternative and, if too many holders select this
alternative, HUBCO could terminate the Merger.
Holders of options to purchase Washington Common Stock will receive an
Option Preference Form together with this Proxy Statement-Prospectus and may
exercise the election by submitting the Option Preference Form to the Exchange
Agent together with the Stock Option Award by the Preference Deadline. Option
holders will be notified of the Preference Deadline as promptly as practical
after the Closing date has been established but in no event later than 25 days
prior to the Preference Deadline. An option holder who fails to submit an
Option Preference Form by the Preference Deadline or who fails to specify a
preference on the form will be deemed to have elected to receive cash in
exchange for his or her options.
Payment of Cash and Delivery of Shares
As soon as practicable after the Effective Time of the Merger, the
required allocations will be completed and distributions of cash (by check of
the Exchange Agent) and certificates for HUBCO Preferred Stock will be
effected; provided, however, that no cash or new certificates will be
delivered to or for the account of any holder of Washington Common Stock until
the Merger is consummated and the holder has surrendered to the Exchange Agent
(to the extent not previously surrendered with a Preference Statement) the old
certificates for such holder's Washington Common Stock, accompanied by a duly
executed letter of transmittal in proper form. A reminder notice will be sent
by the Exchange Agent after the Effective Time of the Merger to all Washington
stockholders of record who have not submitted a completed letter of transmit-
tal.
No dividends or other distributions which are declared or made with
respect to shares of HUBCO Preferred Stock to be issued or transferred to
holders of Washington Common Stock will be paid or made to persons otherwise
entitled to receive them until the certificates for their Washington Common
Stock have been surrendered. In no event will holders of Washington Common
Stock be entitled to receive any interest on any funds to be distributed to
them.
No transfer taxes will be payable by Washington stockholders in
connection with the exchange of old certificates representing Washington
Common Stock for new certificates representing HUBCO Preferred Stock, except
that if any new certificate is to be issued in a name other than that in which
the Washington certificate surrendered in exchange therefor is registered, it
will be a condition of such exchange that the person requesting such exchange
pay to the Exchange Agent any transfer or other taxes required in connection
therewith or satisfy the Exchange Agent that such tax has been paid or is not
applicable.
At the Effective Time of the Merger, the stock transfer books of
Washington will be closed and no transfer of Washington Common Stock will
thereafter be made on such books.
Federal Income Tax Consequences
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF TAXPAYERS,
INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS,
FOREIGN PERSONS AND PERSONS WHO ACQUIRED SHARES OF WASHINGTON COMMON STOCK
PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR OTHERWISE AS
COMPENSATION. WASHINGTON STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
General: It is intended that the Merger will be treated as a tax-free
reorganization as defined in Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), and that, accordingly, (i) no gain or
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loss will be recognized by the stockholders of Washington upon the exchange of
their shares of Washington Common Stock solely for shares of HUBCO Preferred
Stock pursuant to the Merger; (ii) in the case of Washington stockholders who
receive cash in whole or in part in exchange for their Washington Common
Stock, gain, if any, realized by the recipient on the exchange shall be
recognized, but in an amount not in excess of the amount of such cash; (iii)
in the case of Washington stockholders who recognize gain on the exchange of
their Washington Common Stock and in whose hands such stock was a capital
asset, such gain will be treated as capital gain (except in the case of any
stockholder as to which the exchange has the effect of a dividend by reason of
the applicability of certain attribution rules described below); (iv) the
basis of HUBCO Preferred Stock received by each stockholder of Washington in
exchange for shares of Washington Common Stock will be the same, immediately
after the exchange, as the basis of such stockholder's Washington Common Stock
exchanged therefor, reduced by the amount of cash received, if any, on the
exchange, and increased by the amount of the gain recognized, if any, on the
exchange; and (v) the holding period for any HUBCO Preferred Stock received in
exchange for Washington Common Stock will include the period during which the
Washington Common Stock surrendered on the exchange was held, provided such
stock was held as a capital asset on the date of the exchange.
Counsel to Hubco is required, as a condition of closing, to provide an
opinion to HUBCO and to Washington, with respect to the matters covered by the
foregoing paragraph. With respect to this Proxy Statement--Prospectus, counsel
has provided an opinion that, based upon the circumstances as they presently
exist, it expects to be able to render the required opinion.
Consequences to Shareholders Who Receive Cash Only: A stockholder
(including a Dissenting Shareholder) who receives only cash for his shares of
Washington Common Stock will recognize gain or loss for federal income tax
purposes measured by the difference, if any, between such holder's basis in
the stock and the amount received by him for his stock. The gain or loss will
be characterized for federal income tax purposes as capital gain or loss or as
ordinary income. The gain or loss will be characterized as a capital gain if
(a) the holder's shares of Washington Common Stock are held as capital assets
and (b) the holder receives cash with respect to all shares of Washington
Common Stock which he owns actually and by application of the attribution
rules of Section 318 of the Code discussed below. If a stockholder is not
considered as having disposed of all of his stock by reason of such attribu-
tion rules, the characterization of the gain as ordinary income or as capital
gain will depend upon whether the receipt of the cash has the "effect of the
distribution of a dividend". The application of this standard is discussed
below (see "Consequences to Stockholders Who Receive Cash and HUBCO Preferred
Stock").
Section 318 of the Code provides, in part, that a stockholder will be
considered to be the owner of shares which are owned by certain corporations,
partnerships, trusts and estates in which the stockholder has a beneficial
ownership interest, shares which such stockholder has an option to acquire,
and shares owned by certain members of his family (not including brothers and
sisters). Under certain circumstances, the attribution rules with respect to
shares attributed from a family member may be waived.
Consequences to Stockholders Who Receive Cash and HUBCO Preferred
Stock: A stockholder who receives or is considered to have received not only
cash in exchange for his Washington Stock but also HUBCO Preferred Stock
(through application of the allocation procedures described above, the
attribution rules of Section 318 of the Code or otherwise) must recognize any
gain realized (measured by the excess of (a) the sum of the cash received and
the fair market value of the HUBCO Preferred Stock received over (b) his
basis), but not in excess of the cash received. No loss may be recognized. The
characterization of the gain as either a dividend or as capital gain will be
determined on a stockholder-by-stockholder basis. In general, if the distribu-
tion of the cash is considered as having the "effect of the distribution of a
dividend", then any gain recognized will be taxed as a dividend. If the cash
is considered as not having the "effect of the distribution of a dividend",
then any gain recognized will be taxed as capital gain if the Washington
Common Stock was held as a capital asset.
The Internal Revenue Service (the "Service") applies two tests to
determine whether a distribution has the "effect of the distribution of a
dividend". Capital gains treatment will apply if the exchange is either "not
essentially equivalent to a dividend" or "substantially disproportionate" with
respect to the stockholder's interest.
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Whether a distribution is "not essentially equivalent to a dividend"
depends on the facts and circumstances concerning the individual stockholder.
It is difficult to rely upon this test because it is not subject to objective
measure and because the Service takes the view that only in very special
circumstances (generally, circumstances unrelated to the Merger) will this
test be considered to be met. The "substantially disproportionate" test,
according to the Service, apparently would be satisfied if a Washington
stockholder exchanged a portion of his Washington Common Stock for cash under
circumstances in which there has been a significant reduction in his percent-
age interest in Washington. The percentage reduction which is required by the
Service involves an analysis in which there has been a hypothetical redemption
by Washington. The analysis is complex but, in general, the Service would
assume that the Washington shares exchanged for cash by HUBCO had instead been
redeemed by Washington for an identical amount of cash immediately prior to
the exchange with HUBCO. The stockholder's percentage of all of the Washington
stock after this hypothetical redemption would be compared to the percentage
owned by the stockholder before the hypothetical redemption. If the first
percentage is less than 80% of the second percentage, no dividend will be
present. If the first percentage is equal to or greater than 80% of the second
percentage, the cash, according to the Service, will be taxed as a dividend.
All hypothetical measurements will include shares constructively owned by
application of the attribution rules. Any stockholder who seeks to rely on
this test should exercise extreme caution in light of the complex analysis
involved.
Consequences of Receipt of Cash in Lieu of Fractional Shares: In general,
cash paid in lieu of fractional share interests in corporate reorganizations
is treated as having been received in part or full payment in exchange for the
fractional share interest (and therefore subject to capital gains treatment if
the related shares are held as capital assets) if the cash distribution is
undertaken solely for purposes of saving the corporation the expense and
inconvenience of issuing and transferring fractional shares and is not
separately bargained for consideration.
Basis of HUBCO Preferred Stock: The basis of HUBCO Preferred Stock
received by a Washington stockholder who receives only HUBCO Preferred Stock
will be identical to the basis of the Washington Common Stock exchanged
therefor. Where a Washington stockholder is deemed to receive both HUBCO
Preferred Stock and cash, the basis of the HUBCO Preferred Stock received will
equal (a) the basis of the Washington Common Stock exchanged therefor, (b)
decreased by the amount of cash received and (c) increased by (i) the amount,
if any, taxed as a dividend, and (ii) the amount of gain recognized on the
exchange (not including any portion of the gain taxed as a dividend).
Holding Period: The holding period of HUBCO Preferred Stock received by a
Washington stockholder will include the holding period for the Washington
Common Stock exchanged therefor.
Redemptions and Other Dispositions: In general, the HUBCO Preferred Stock
is redeemable by HUBCO at any time from and after the date on which the market
price for HUBCO Common Stock is $24.00 or more for 20 consecutive business
days, and, in general, may be disposed of by means other than pursuant to a
redemption at any time. Whether the proceeds received by a stockholder upon a
redemption or other disposition of the HUBCO Preferred Stock will be treated
as ordinary income, or the amount of gain realized upon such redemption will
be treated as capital gain, will be dependent in part upon whether the HUBCO
Preferred Stock is "Section 306 stock" within the meaning of Section 306 of
the Code. If the HUBCO Preferred Stock is "Section 306 stock" as defined in
Section 306 of the Code, under certain circumstances all or a portion of the
amount paid in redemption or other disposition could be considered to be
ordinary income. Section 306 of the Code will not apply, however, if it can be
established to the satisfaction of the Internal Revenue Service that the
distribution of the stock and its redemption or disposition was not pursuant
to a plan having as one of its principal purposes the avoidance of federal
income taxes. There are also other exceptions from the application of Section
306 which may be available to Washington's stockholders. Stockholders are
urged to contact their advisors concerning the application of Section 306 of
the Code.
Tax Treatment of Dissenting Stockholders: A dissenting Washington
stockholder who receives cash as a result of the exercise of appraisal rights
will recognize gain or loss for federal income tax purposes which will be
capital gain or loss if his shares of Washington Common Stock are held as
capital assets and if such stockholder dissents as to all of the shares of
Washington Common Stock which he owns actually and by application of the
attribution rules set forth in Section 318 of the Code. The capital gain (or
loss) to be realized by such dissenting stockholder will be either long or
short term capital gain (or loss) depending on the individual stockholder's
holding period.
Consequences to Holders of Unexercised Washington Stock Options. Holders
of options to purchase Washington Common Stock which have been issued pursuant
to the two stock option plans maintained by Washington may elect to convert
their unexercised options to purchase shares of Washington Common Stock either
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into options having substantially the same terms and conditions to purchase a
number of shares of HUBCO Preferred Stock equal to the number of shares of
Washington Common Stock covered by such options multiplied by 0.6708 or into
the right to receive alternatively certain cash payments or HUBCO Preferred
Stock at the time of the Merger. See "THE MERGER--Conversion of Stock Options."
In the case of holders of Washington stock options treated as "incentive
stock options" pursuant to Section 422 of the Code, no gain or loss will be
recognized on a substitution of HUBCO Preferred Stock options for Washington
Common Stock options, provided the excess of the aggregate fair market value
of the HUBCO Preferred Stock subject to the options over the aggregate option
price for such shares is not greater than the excess of the aggregate fair
market value of the Washington Common Stock subject to the aggregate options
over the option price for such shares immediately prior to the substitution,
and further provided that no additional benefits are conferred upon the
holders of the new options. The substituted HUBCO Preferred Stock options also
should qualify as incentive stock options under Section 422 of the Code,
provided the terms of the new options are in full compliance with such
statutory provision. Those holders of incentive stock options who receive cash
or HUBCO Preferred Stock in cancellation of their Washington Common Stock
options will be treated as having received compensation taxable as ordinary
income equal to the amount by which the amount of cash or the value of the
HUBCO Preferred Stock received exceeds their adjusted basis in their incentive
stock options, if any.
In the case of holders of Washington Common Stock options treated as
nonstatutory options, the substitution of HUBCO Preferred Stock options for
Washington Common Stock options also does not give rise to any gain or loss,
while the receipt of cash or HUBCO Preferred Stock in cancellation of
nonstatutory Washington Common Stock options will be treated as compensation
taxable as ordinary income equal to the amount by which the amount of such
cash or the value of the HUBCO Preferred Stock received exceeds the adjusted
basis of such options, if any.
Effect of the Merger
At the Effective Time, Washington will merge with and into HUBCO, with
HUBCO surviving. Immediately thereafter, the Savings Bank will merge with and
into the Bank, with the Bank surviving. In the Merger, each share of
Washington Common Stock outstanding immediately prior to the Effective Time
will either be converted into $16.10 in cash or 0.6708 of a share of HUBCO
Preferred Stock. The manner of determining whether shares of Washington Common
Stock are converted into cash or stock is described herein under the caption
"THE MERGER--Election Procedure" and "Allocation Procedure". Any shares of
Washington Common Stock held in Washington's treasury or held directly or
indirectly by Washington or HUBCO (other than in trust accounts, managed
accounts or in any similar manner as trustee or in a fiduciary capacity or as
collateral or in lieu of a debt previously contracted) will be canceled and
retired and no payment will be made with respect thereto.
If, prior to the Effective Time, the outstanding shares of HUBCO Common
Stock are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through a change in HUBCO's
capitalization, then an appropriate and proportionate adjustment in the stock
consideration to be received by Washington stockholders will be made.
For a discussion of the rights of dissenting holders of Washington Common
Stock, see "THE MERGER--Rights of Dissenting Stockholders."
Effective Time
The "Effective Time" of the Merger will be the date and time at which
certificates of merger are filed in accordance with the New Jersey Business
Corporation Act (the "NJBCA") and the Delaware General Corporation Law (the
"GCL"). The certificates of merger will be filed as soon as practicable after
the expiration of all applicable waiting periods in connection with approvals
of governmental authorities, and the satisfaction or waiver of all other
conditions to the consummation of the Merger, or on such other date as may be
agreed upon by HUBCO and Washington.
Surrender of Certificates
Upon surrender to the Exchange Agent of one or more certificates for
Washington Common Stock, together with a properly completed letter of
transmittal and Preference Statement, the holder of Washington Common Stock
surrendering such items will receive (promptly after consummation of the
Merger) a check in cash or a certificate or certificates representing the
number of shares of HUBCO Preferred Stock, as the case may be, to which such
holder is entitled, and, where applicable, a check for the amount to be paid
in lieu of any fractional share interest, determined in the manner described
above, without interest.
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No dividends or other distributions declared or paid by HUBCO after the
Effective Time and with a record date after the Effective Time with respect to
HUBCO Preferred Stock will be paid to the holders of any unsurrendered
certificates representing Washington Common Stock until the holder duly
surrenders such certificate. Further, no interest will be paid on any cash to
be paid pursuant to the Merger. Following the surrender of certificates
representing Washington Common Stock, there will be paid to those holders of
the certificates representing shares of HUBCO Preferred Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions having a record date after the
Effective Time theretofore payable with respect to such shares of HUBCO
Preferred Stock and not yet paid and (ii) at the appropriate payment date, the
amount of dividends or other distributions having (x) a record date after the
Effective Time but prior to surrender and (y) a payment date subsequent to
surrender payable with respect to such shares of HUBCO Preferred Stock.
At the Effective Time, the stock transfer books of Washington will be
closed and no transfers of Washington Common Stock will thereafter be made. If
certificates representing shares of Washington Common Stock are presented for
transfer after the Effective Time, they will be canceled and exchanged for the
shares of HUBCO Preferred Stock and/or cash, including cash in lieu of
fractional shares, deliverable pursuant to the Merger.
Neither HUBCO nor Washington will be liable to any former holder of
Washington Common Stock for any amount delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
Any shares of Washington Common Stock as to which the holder has
perfected dissenters' rights under Delaware law will be purchased in
accordance with the procedures described under "THE MERGER--Rights of
Dissenting Stockholders" and in Appendix C to this Proxy Statement-Prospectus.
Since Preference Statements are irrevocable and since the submission of
stock certificates will preclude a stockholder from thereafter selling such
shares on the market, stockholders may wish to defer submitting their
completed Preference Statements and stock certificates until shortly before
the Preference Deadline. Washington will send to all stockholders of record a
notice identifying the date of the Preference Deadline as promptly as
practical after the Closing date has been established but in no event later
than 25 days prior to the Preference Deadline. The closing is expected to
occur late in the second or early in the third quarter of 1994.
Conditions to Consummation of the Merger
Consummation of the Merger by HUBCO and Washington is subject to the
fulfillment (or, where permissible under applicable law, waiver) at or before
the Effective Time of certain conditions, including, but not limited to, the
following conditions: (a) the required approval of the Merger Agreement and
the transactions contemplated thereby by stockholders of Washington shall have
been obtained; (b) all necessary regulatory or governmental approvals and
consents required to consummate the Merger and the transactions contemplated
thereby, shall have been received without the imposition of conditions which
would materially impair the value of Washington and the Savings Bank, taken as
a whole, to HUBCO, all conditions required to be satisfied by the terms of
such approvals or consents shall have been satisfied and all statutory waiting
periods in respect thereof shall have expired; (c) no order, judgment or
decree shall be outstanding against Washington, the Savings Bank, HUBCO, the
Bank or a third party that would have the effect of preventing completion of
the Merger; no suit, action or other proceeding shall be pending or threatened
by any governmental body in which it is sought to restrain or prohibit the
Merger; and no suit, action or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit the
Merger or obtain other substantial monetary or other relief against one or
more parties in connection with the Merger Agreement and which HUBCO or
Washington determines in good faith, based upon the advice of its counsel,
makes it inadvisable to proceed with the Merger because any such suit, action
or proceeding has a significant potential to be resolved in a way so as to
deprive the party electing not to proceed of any of the material benefits to
it of the Merger; and (d) HUBCO and Washington shall have received certain tax
opinions of HUBCO's counsel.
In addition to the foregoing conditions, HUBCO's obligations under the
Merger Agreement are conditioned upon the following, any one or more of which
may be waived by HUBCO: (a) in general, the representations and warranties of
Washington set forth in the Merger Agreement shall be true and correct in all
material respects at the closing date; (b) Washington shall have complied in
all material respects with its obligations under the Merger Agreement; (c)
HUBCO shall have received certain legal opinions of legal counsel for Washing-
ton; (d) Washington shall have furnished to HUBCO such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions as HUBCO may reasonably request; (e) holders of stock options
entitling them to purchase Washington Common Stock shall have filed elections
such that, in the aggregate, such holders will not be entitled to purchase
more than 20,000 shares of HUBCO Preferred Stock; (f) Paul Rotondi,
Washington's Chief
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Executive Officer, shall have waived certain rights under his severance
agreement; and (g) with respect to certain real property located in Jersey
City, New Jersey, the Savings Bank shall have transferred ownership of such
property in compliance with applicable environmental laws and provided HUBCO
with assurances concerning the purchase price and the potential future
liability of the Savings Bank and its successors relating to environmental
matters in connection with such property or taken other action in connection
with certain environmental matters at such property.
In addition to the other conditions set forth above, the obligations of
Washington under the Merger Agreement are also subject to the satisfaction of
the following conditions, any one or more of which may be waived by Washing-
ton; (a) in general, the representations and warranties of HUBCO set forth in
the Merger Agreement shall be true and correct in all material respects at the
closing date; (b) HUBCO shall have complied in all material respects with its
obligations under the Merger Agreement; (c) Washington shall have received
certain legal opinions of legal counsel for HUBCO; (d) Washington shall have
received an opinion from Capital Consultants to the effect that the consider-
ation to be paid to Washington stockholders is fair, from a financial point of
view; and (e) Washington shall have received from HUBCO such certificates of
officers or others and such other documents to evidence satisfaction of the
conditions set forth in the Merger Agreement as Washington may reasonably
request.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior
receipt of all necessary regulatory approvals. In order to consummate the
transaction, HUBCO must obtain regulatory approvals from the FDIC and the New
Jersey Department of Banking (the "Department") and an approval or waiver from
the Federal Reserve Board. HUBCO has applied to the FDIC to merge the Savings
Bank into the Bank, and has applied to the Federal Reserve Board for approval
or a waiver to acquire Washington under the Bank Holding Company Act of 1956,
as amended (the "Bank Holding Company Act"), and HUBCO has applied to the
Department for approval of the acquisition of the Savings Bank. Other applica-
tions required under state securities laws have been or will be filed with the
appropriate regulatory authorities.
The Merger will not proceed in the absence of all requisite regulatory
approvals. Although neither HUBCO nor Washington is aware of any basis for
disapproving the Merger, there can be no assurance that all such approvals
will be obtained, that such approvals will be received on a timely basis or
that such approvals will not impose conditions which would materially impair
the value of Washington and the Savings Bank, taken as a whole, to HUBCO. If
any such condition is imposed, the Merger Agreement permits the Board of
Directors of HUBCO to terminate the Merger Agreement.
No assurance can be given as to when, or if, necessary regulatory
approvals will be obtained or the other conditions precedent to the Merger
will be satisfied or waived by the party permitted to do so. In the event that
the Merger is not effected on or before October 31, 1994, the Merger Agreement
may be terminated by Washington or HUBCO, unless the failure of the Merger to
be effected is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe its agreements set forth in the Merger
Agreement at or before the Effective Time.
Conduct of Washington's Business Pending the Merger
The Merger Agreement requires Washington to conduct, and to cause the
Savings Bank to conduct, each of their respective businesses and engage in
transactions permitted under the Merger Agreement prior to the Effective Time
only in the ordinary course of business consistent with prudent banking
practices, except as permitted under the Merger Agreement or with the written
consent of HUBCO. Under the Merger Agreement, Washington has agreed not to
take certain actions (or to permit the Savings Bank to take such actions)
without the prior written consent of HUBCO or unless permitted by the Merger
Agreement, including, among other things, the following: (a) except for the
issuance of shares of Washington Common Stock pursuant to grants made under
Washington's Management Recognition Plan or pursuant to stock options which
are outstanding under the Washington's two stock option plans on the date of
the Merger Agreement, change the number of shares of its authorized or issued
capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued capital stock of Washington or the Savings Bank, or any
securities convertible into shares of such stock, or split, combine or
reclassify any shares of its capital stock, or declare, set aside or pay any
dividend, or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock; (b) except for the
adoption of the Savings Bank's Deferred Compensation Plan for Outside
Directors, grant any
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severance or termination pay (other than pursuant to policies or contracts of
Washington in effect on the date of the Merger Agreement and disclosed to
HUBCO) to, or enter into or amend any employment or severance agreement with,
any of its directors, officers or employees; (b) adopt any new employee
benefit plan or arrangement of any type, or award any increase in compensation
or benefits to its directors, officers or employees except with respect to a
one-time performance bonus of $25,000 to Chief Executive Officer Paul Rotondi
and employee increases in the ordinary course of business and consistent with
past practices and policies: (c) sell or dispose of any substantial amount of
assets or incur any significant liabilities other than in the ordinary course
of business consistent with past practices and policies or in response to
substantial financial demands upon the business of Washington; (d) make any
capital expenditures other than pursuant to binding commitments existing on
the date of the Merger Agreement and other than expenditures necessary to
maintain existing assets in good repair; (e) file any applications or make any
contract with respect to branching or site location or relocation; (f) agree
to acquire in any manner whatsoever (other than to realize upon collateral for
a defaulted loan) any business or entity; (g) make any material change in its
accounting methods or practices, other than changes required in accordance
with generally accepted accounting principles; (h) take any action that would
result in any of Washington's representations or warranties being untrue at
the Effective Time in any material respect; (i) change any provision of the
Certificate of Incorporation or By-laws of Washington or the Savings Bank; or
(j) agree to do any of the foregoing.
Under the Merger Agreement, neither Washington nor the Savings Bank shall
directly or indirectly, encourage or solicit or hold discussions or negotia-
tions with, or provide any information to, any person, entity or group (other
than HUBCO) concerning any merger, sale of shares or sale of substantial
assets or liabilities not in the ordinary course of business or similar
transactions involving the Savings Bank (an "Acquisition Transaction");
provided, however, that notwithstanding the foregoing, Washington may enter
into discussions or negotiations or provide any information in connection with
an unsolicited possible Acquisition Transaction if the Board of Directors of
Washington, after consulting with counsel, determines in the exercise of its
fiduciary responsibilities that such discussions or negotiations should be
commenced or such information should be furnished. Washington has agreed to
promptly communicate to HUBCO the terms of any proposal, whether written or
oral, which it may receive with respect to any such Acquisition Transaction,
and the fact that it is having discussions or negotiations with a third party
about an Acquisition Transaction.
HUBCO's Stock Option for Washington Shares
HUBCO and Washington entered into the Stock Option Agreement in
connection with the execution of the Merger Agreement. Pursuant to the terms
of the Stock Option Agreement, Washington has granted to HUBCO an option to
purchase up to 765,000 authorized but unissued shares of Washington Common
Stock, representing 33% of the outstanding Washington Common Stock as of the
date of the Stock Option Agreement, at a price of $11.50 per share. HUBCO does
not have any voting rights with respect to shares of Washington Common Stock
subject to the option prior to exercise of the option. The terms of the Stock
Option Agreement are set forth in Appendix B annexed hereto.
The purpose of the option is to increase the likelihood that the Merger
will occur by making it more difficult for another party to acquire
Washington. In the event that specifically enumerated "Triggering Events"
occur, as defined below, including but not limited to the acquisition of
beneficial ownership of at least 20% of the outstanding shares of Washington
Common Stock by a person or group other than HUBCO or an affiliate of HUBCO,
HUBCO may exercise the option in whole or in part. The ability of HUBCO to
exercise the option and to cause up to an additional 765,000 shares of
Washington Common Stock to be issued may be considered a deterrent to other
potential acquisitions of control of Washington because it is likely to
increase the cost of an acquisition of all of the outstanding shares of
Washington Common Stock. In the event that a Triggering Event occurs and the
Merger is not consummated, HUBCO would recognize a gain on the sale of the
shares of Washington Common Stock received pursuant to the exercise of the
option if such shares were sold at prices exceeding $11.50 per share.
Upon or after the occurrence of certain "Triggering Events" (as
hereinafter defined, none of which has yet occurred to the best of HUBCO's and
Washington's knowledge), and only while HUBCO is not in material breach of the
Merger Agreement, the option may be exercised by HUBCO in whole or in part.
The term "Triggering Event" is defined to mean the occurrence of any of the
following events: a person or group (as such terms are defined in the Exchange
Act and the rules and regulations thereunder), other than HUBCO or an affili-
ate of HUBCO, (a) acquires beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of at least 20% of the then
outstanding Washington Common Stock; (b) enters into a letter of intent or an
agreement with Washington
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pursuant to which such person would (i) merge or consolidate, or enter into
any similar transaction, with Washington, (ii) acquires all or a significant
portion of the assets or liabilities of Washington, or (iii) acquires
beneficial ownership of securities representing, or the right to acquire the
beneficial ownership or to vote securities representing, 20% or more of the
then outstanding Washington Common Stock; or (c) makes a filing with bank or
thrift regulatory authorities or publicly announces a bona fide proposal for
(i) any merger, consolidation or acquisition of all or a significant portion
of all the assets or liabilities of Washington or any other business
combination involving Washington, (ii) a transaction involving the transfer of
beneficial ownership or to vote securities representing 20% or more of the
outstanding Washington Common Stock (a "Proposal"), and thereafter, if such
Proposal has not been Publicly Withdrawn (as defined in the Stock Option
Agreement) at least 15 days prior to the Meeting and Washington's stockholders
fail to approve the Merger by the vote required by applicable law at the
Meeting; or (d) makes a bona fide Proposal and thereafter, but before such
Proposal has been publicly withdrawn, Washington willfully breaches any of its
covenants contained in the Merger Agreement in a manner that would materially
interfere with its ability to consummate the Merger or materially reduce the
value of the transaction to HUBCO. The term "Triggering Event" also means the
taking of any direct or indirect action by Washington or any of its directors,
officers or agents to invite, encourage or solicit any Proposal which has as
its purpose a tender offer for the Washington Common Stock, a merger,
consolidation, plan of exchange, plan of acquisition or reorganization of
Washington, or a sale of a significant number of shares of Washington Common
Stock or any significant portion of its assets or liabilities. Under the Stock
Option Agreement, a significant number means 10% of the outstanding shares of
Common Stock and a significant portion means 25% of the assets or liabilities
of Washington. "Publicly Withdrawn" for purposes of the Stock Option Agreement
means an unconditional bona fide withdrawal of the Proposal coupled with a
public announcement of no further interest in pursuing such Proposal or
acquiring any controlling influence over Washington or in soliciting or
inducing any other person (other than HUBCO or any affiliates) to do so.
HUBCO may not sell, assign or otherwise transfer its rights and
obligations under the Stock Option Agreement in whole or in part to any person
or any group of persons other than to an affiliate of HUBCO, except upon the
occurrence of a Triggering Event. The option may not be exercised at any time
that HUBCO is in material breach of the Merger Agreement without a prior
material breach by Washington having occurred. Washington is not obligated to
issue shares of Washington Common Stock upon exercise of the option (i) in the
absence of any required governmental or regulatory approval or consent
necessary for Washington to issue the Washington Common Stock covered by the
option or HUBCO to exercise the option or prior to the expiration or termina-
tion of any waiting period required by law, or (ii) so long as any injunction
or other order, decree or ruling issued by any federal or state court of
competent jurisdiction is in effect which prohibits the sale or delivery of
the Washington Common Stock subject to the option.
The Stock Option Agreement further provides that after the occurrence of
a Triggering Event and upon receipt of a written request from HUBCO,
Washington shall prepare and file a registration statement with the SEC,
covering the option and such number of shares subject thereto as HUBCO shall
specify in order to permit the sale or other disposition of the option and the
shares subject thereto; provided, however, that in no event will HUBCO have
the right to have more than one such registration statement become effective.
The Stock Option Agreement will terminate upon the termination or
consummation of the Merger Agreement and the Merger; provided, however, that
if termination of the Merger Agreement occurs after a Triggering Event, the
Stock Option Agreement shall not terminate until the later of 18 months
following the date of termination of the Merger Agreement or the consummation
of any proposed transaction which constituted a Triggering Event.
Termination, Waiver and Amendment
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of Washington: (a)
by mutual written consent of HUBCO and Washington for any reason; or (b) by
either HUBCO or Washington (i) if the Merger shall not have been consummated
on or before October 31, 1994 (unless the failure to consummate the Merger is
due to the failure of the terminating party to perform or observe its cove-
nants under the Merger Agreement) or (ii) if the stockholders of Washington
fail to approve the Merger Agreement submitted to them for approval in
connection with the Merger. HUBCO or Washington may also terminate the Merger
Agreement if any application for regulatory or governmental approval necessary
to consummate the Merger and the other transactions contemplated by the Merger
Agreement is denied or withdrawn at the request or recommendation of the
applicable regulatory agency or governmental authority or by HUBCO if any
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such application is approved with conditions which materially impair the value
of Washington and the Savings Bank taken as a whole to HUBCO.
HUBCO may terminate the Merger Agreement if (a) there shall have been a
material adverse change in the business, operations, assets, or financial
condition of Washington and the Savings Bank, taken as a whole, from that set
forth in Washington's Quarterly Report on Form 10-Q for the six months ended
June 30, 1993 and from that set forth in Washington's Annual Report on Form
10-K for the fiscal year ended December 31, 1992 (b) if there shall have been
any material breach of any representation, warranty, covenant, agreement or
obligation of Washington under the Merger Agreement which breach shall not
have been cured within thirty (30) days after receipt by Washington of notice
of such breach. The Merger Agreement may be terminated by Washington if (a)
there shall be a material adverse change in the business, operations, assets
or financial condition of HUBCO and its subsidiaries, taken as a whole, from
that set forth in HUBCO's Quarterly Report on Form 10-Q for the six months
ended June 30, 1993 and from that set forth in HUBCO's Annual Report on Form
10-K for the year ended December 31, 1992, (b) if there shall have been any
material breach of any representation, warranty, covenant, agreement or
obligation of HUBCO under the Merger Agreement which breach shall not have
been cured within thirty (30) days after receipt by HUBCO of notice of such
breach, (c) if, during the first 20 of 22 consecutive trading days immediately
preceding the Effective Time, the price of HUBCO Common Stock on NASDAQ is
less than $18.00 (determined by taking the average price of the two closing
sale prices left after discarding the nine lowest and nine highest closing
sale prices during such period) or (d) if Washington's Board shall have
approved an Acquisition Transaction after determining, upon advise of counsel,
that such approval was necessary in the exercise of its fiduciary duties under
applicable laws.
In general, each party will pay its own costs and expenses incurred in
connection with the Merger Agreement, including the Proxy
Statement-Prospectus.
Subject to applicable law, at any time prior to the Effective Time,
whether before or after approval of the transactions contemplated by the
Merger Agreement by stockholders of Washington, the parties may (a) amend the
Merger Agreement, (b) extend the time for the performance of any of the
obligations or other acts of any other party under the Agreement, (c) waive
any inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement, or
(d) waive compliance with any of the agreements or conditions contained in the
Merger Agreement. Notwithstanding these rights, however, after any approval of
the Merger by the stockholders of Washington, there may not be, without
further approval of the Merger Agreement by the stockholders of Washington,
any amendment or waiver of the Merger Agreement which reduces or changes the
amount or form of consideration to be delivered to Washington stockholders.
Management and Operations of Washington and the Savings Bank Following the
Merger
HUBCO and the Bank will be the surviving entities in the merger
transactions contemplated by the Merger Agreement. At the Effective Time, the
present Washington directors shall resign and the Board of Directors of the
Surviving Corporation shall consist of the directors and officers of HUBCO.
Interests of Certain Persons in the Merger
HUBCO has agreed to name two of Washington's directors to serve as
directors of the Bank for at least three years after consummation of the
Merger. Washington has designated Charles A. Rotondi and Joseph A. Tighe, Jr.
to be so named. Those Savings Bank directors who are not asked to serve on the
Bank's Board will serve on the Bank's advisory board for at least three years
and will receive a $1,000 monthly retainer.
Paul C. Rotondi and Washington are parties to a severance agreement that
will provide Mr. Rotondi with certain benefits if, following a "Change in
Control" (as defined in the severance agreement), Mr. Rotondi's employment is
terminated or other adverse developments occur. See "ELECTION OF WASHINGTON'S
DIRECTORS--Severance Agreement". Consummation of the Merger will constitute a
"Change in Control". Furthermore, it is not anticipated that Mr. Rotondi will
continue in active employment with HUBCO or the Bank after the Merger.
Accordingly, pursuant to the severance agreement, Mr. Rotondi will be entitled
to receive a payment equal to three times his average annual compensation over
the five previous years of his employment with the Savings Bank, together with
certain other retirement benefits. As part of the negotiations relating to the
Merger Agreement, Mr. Rotondi agreed to reduce such severance benefits by an
amount necessary to assure that no portion of such benefits will become
non-deductible excess parachute payments and do not subject Mr. Rotondi to a
20% excise tax under applicable provisions of the Internal Revenue Code. It is
anticipated that Mr. Rotondi's severance benefit will be approximately $ .
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The Merger Agreement obligates HUBCO to indemnify Washington's directors,
officers, employees and agents against claims raised within six years after
the Effective Time with respect to a wide variety of matters relating to
Washington and/or the Merger. Such indemnification extends to the fullest
extent that would have been permitted under HUBCO's Certificate of Incorpora-
tion and By-laws. HUBCO has also agreed, subject to certain limitations, to
use its best efforts to cause Washington's directors and officers to be
covered under HUBCO's directors and officers liability insurance policy.
HUBCO has agreed that, to the extent practicable, it will use its best
efforts to retain all of the Savings Bank's existing employees at similar
compensation levels and to retain all of the Savings Bank's current officers
in similar positions with the Bank. HUBCO has stated that it intends to make
available to all employees and officers of the Savings Bank that ultimately
are employed by the Bank coverage under the benefit plans generally available
to HUBCO's employees and officers on the terms and conditions available to the
Bank's employees and officers. For purposes of vesting and eligibility under
the Bank's pension and 401(k) plans and for purposes of the Bank's medical,
vacation, sick leave and disability plans, Savings Bank employees who are
employed by the Bank will be given credit for prior service with the Savings
Bank.
During 1993, the Bank adopted a Deferred Compensation Plan for Outside
Directors (the "DCP"), providing for the payment of certain benefits subse-
quent to retirement. The DCP provides that in the event of a "Change in
Control" (such as the Merger), outside directors (i.e., directors other than
Paul C. Rotondi and Theodore Doll) will receive a lump sum payment equal to
four times their current retainer in lieu of all other payments due under the
DCP. The aggregate liability to all directors under the DCP with respect to
the Merger is $252,000.
The Merger Agreement generally limits the extent to which Washington may
increase compensation levels prior to the Effective Time. However, the Merger
Agreement expressly authorized Washington to pay Paul C. Rotondi a $25,000
performance bonus prior to the Effective Time. Such bonus was paid during
1993.
Accounting Treatment of the Merger
The Merger will be accounted for by HUBCO under the purchase method of
accounting in accordance with generally accepted accounting principles. Under
the purchase method of accounting, the excess of the purchase price paid over
the fair market value of assets and liabilities acquired ("goodwill") is
recorded as an intangible asset and such asset is amortized as an expense over
the period estimated to be benefitted.
Rights of Dissenting Stockholders
Dissenting stockholders of Washington who follow the procedures specified
in Section 262 of the Delaware General Corporation Law ("Section 262") will be
entitled to have their Washington shares appraised by the Delaware Court of
Chancery and to receive payment of the "fair value" of such Washington shares,
exclusive of any element of value arising from the accomplishment or expecta-
tion of the Merger, as determined by such Court. A dissenting stockholder
should assume that neither Washington nor HUBCO will take any action to
perfect his or her appraisal rights. Therefore, a stockholder desiring to
exercise appraisal rights should strictly comply with the procedures set forth
in Section 262 and is urged to consult his or her legal advisor before
electing or attempting to exercise such rights. Failure to follow any of such
procedures may result in a termination or waiver of appraisal rights under
Section 262.
The following discussion of the provisions of Section 262 is not intended
to be a complete statement of its provisions and is qualified in its entirety
by reference to the full text of that section, a copy of which is included
herein as Appendix C.
Under Section 262, a dissenting stockholder electing to exercise
appraisal rights must satisfy both of the requirements set forth in paragraphs
1 and 2 below:
1. Deliver to Washington, before the taking of the vote on the
proposal to adopt the Merger Agreement, a written demand for appraisal of
his or her Washington Common Stock which reasonably informs Washington of
the identity of the stockholder of record and that such stockholder
intends thereby to demand the appraisal of his or her Washington Common
Stock. This written demand is in addition to and separate from any proxy
or vote against the proposal to approve the Merger. Neither a vote
against such proposal nor a proxy directing such vote shall satisfy the
requirement for such written demand. The written demand for appraisal
should be delivered either in person to the Secretary of Washington at
the Washington Annual Meeting, or by mail (certified mail, return receipt
requested, being the recommended form of transmittal) to: Thomas Bingham,
Secretary,
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Washington Bancorp, Inc., 609 Washington Street, Hoboken, New Jersey
07030 before the vote on the proposal to approve the Merger;
2. Not vote in favor of the Merger Agreement. A failure to vote
against such proposal will not constitute a waiver of appraisal rights.
However, any stockholder who executes a proxy and who desires to perfect
his or her appraisal rights must mark the proxy "Against" the proposal to
approve the Merger Agreement or must abstain because if the executed
proxy is left blank, it will be voted for such proposal.
The written demand for appraisal must be made by or for the holder of
record of the Washington Common Stock. Accordingly, such demand should be
executed by or for such stockholder of record, fully and correctly, as such
stockholder's name appears on his or her stock certificates. If the Washington
Common Stock certificates are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of the demand should be made in
such capacity and if the stock is owned of record by more than one person, as
in a joint tenancy or tenancy in common, such demand should be executed by or
for all joint owners. An authorized agent, including one of two or more joint
owners, may execute the demand for appraisal for a stockholder of record.
However, the agent must identify the record owner or owners and expressly
disclose the fact that in executing the demand he or she is acting as agent
for the record owner or owners.
Dissenting stockholders who are not the owners of record of their shares
should consult their legal counsel regarding their ability to exercise
appraisal rights with respect to the Washington Common Stock.
Within ten days after the Effective Time, HUBCO will notify each former
stockholder of Washington who has satisfied the foregoing conditions of the
date on which the Merger became effective. Within 120 days after the Effective
Time, HUBCO or any such stockholder who has satisfied the foregoing conditions
and is otherwise entitled to appraisal rights under Section 262 may file a
petition in the Delaware Court of Chancery demanding a determination of the
fair value of the Washington Common Stock formerly held by all stockholders
entitled to appraisal rights. If no such petition is filed, appraisal rights
will be lost for all stockholders who had previously demanded appraisal of
their Washington Common Stock. Dissenting stockholders seeking to exercise
appraisal rights should assume that HUBCO will not file a petition with
respect to the appraised value of Washington Common Stock and that HUBCO will
not initiate any negotiations with respect to the "fair value" of Washington
Common Stock. Accordingly, Washington stockholders who wish to exercise their
appraisal rights should regard it as their obligation to take all steps
necessary to perfect their appraisal rights in the manner prescribed in
Section 262.
Within 120 days after the day of the Effective Time, any Dissenting
Stockholder who has complied with the provisions of Section 262 is entitled,
upon written request, to receive from HUBCO a statement setting forth the
aggregate number of shares of Washington Common Stock not voted in favor of
the Merger Agreement and, with respect to which demands for appraisal were
received by Washington, the number of holders of such Washington Common Stock.
Such statement must be mailed by HUBCO within ten days after the written
request therefor has been received by HUBCO or within ten days after
expiration of the time for delivery of demands for appraisal under Section
262, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the former stockhold-
ers of Washington entitled to appraisal rights and will appraise the value of
the Washington Common Stock formerly owned by such stockholders, determining
the "fair value" exclusive of any element of value arising from the accom-
plishment or expectation of the Merger.
Although HUBCO and Washington believe that the terms of the Merger are
fair, neither can make any representation as to the outcome of any appraisal
of "fair value" as determined by the Delaware Court of Chancery, and
stockholders should recognize that such an appraisal could result in a
determination of a lower, higher or equivalent value. Moreover, HUBCO may or
may not argue in an appraisal proceeding for a determination of "fair value"
by the Delaware Court of Chancery which is lower than the value of the
consideration received by Washington stockholders pursuant to the Merger
Agreement. In determining the "fair value" of the Washington Common Stock, the
Court is required to take into account all relevant factors. Therefore, such
determination could be based upon considerations in addition to the price paid
in the Merger, such as the market value of the Washington Common Stock, asset
values, dividends, earnings, prospects, the nature of the enterprise and other
facts which could be ascertained as of the date of the Merger. The Delaware
Supreme Court has stated with respect to Section 262 that, among other things,
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court"
should be considered in an appraisal proceeding. In addition,
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Delaware Courts have decided that the statutory appraisal remedy, depending on
the relevant facts and circumstances, may or may not be a stockholder's
exclusive remedy in connection with mergers similar to the Merger.
The Court of Chancery may also, on application, (i) determine a fair rate
of interest, simple or compound, if any, to be paid to Dissenting Stockholders
in addition to the value of the capital stock for the period from the
Effective Time of the Merger to the date of payment, (ii) assess costs among
the parties as the Court deems equitable and (iii) order all or a portion of
the expenses incurred by any Dissenting Stockholder in connection with the
appraisal proceeding, including without limitation, reasonable attorneys' fees
and fees and expenses of experts, to be charged pro rata against the value of
all shares entitled to appraisal. Determinations by the Court are subject to
appellate review by the Delaware Supreme Court.
Any Dissenting Stockholder of Washington who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time of
the Merger, be entitled to vote the capital stock of Washington for any
purpose nor be entitled to the payment of dividends or other distributions on
his or her Washington Common Stock.
If no petition for an appraisal is filed within the time provided, or if
a former stockholder of Washington delivers to HUBCO a written withdrawal of
his or her demand for an appraisal and an acceptance of the consideration to
be received in the Merger, either within 60 days after the Effective Time or
with the written approval of HUBCO, then the right of such stockholder to an
appraisal will cease and such stockholder shall be entitled to receive such
consideration in the Merger, without interest, as if he or she had not
demanded appraisal of his or her Washington Common Stock. No pending appraisal
proceeding in the Court of Chancery will be dismissed as to any stockholder
without the approval of the Court, which approval may be conditioned on such
terms as the Court deems just.
DESCRIPTION OF CAPITAL STOCK OF HUBCO
General
The authorized capital stock of HUBCO consists of 13,200,000 shares of
Common Stock and 3,300,000 shares of preferred stock. As of March 15, 1994,
(i) 6,490,470 shares of Common Stock were issued and outstanding, (ii)166,450
shares of Common Stock were reserved for issuance under HUBCO's restricted
stock plan, and (iii) 110,000 were reserved for a director stock plan.
No shares of preferred stock have been issued. Under the terms of HUBCO's
Certificate of Incorporation, the Board of Directors has authority at any time
(i)to divide any or all of the preferred stock into series and determine the
designations, number of shares, relative rights, preferences and limitations
of any such series and (ii)to increase the number of shares of any such series
previously determined by it and to decrease such previously determined number
of shares to a number not less than that of the shares of such series then
outstanding.
DESCRIPTION OF HUBCO PREFERRED STOCK
The following description of the HUBCO Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock which HUBCO has agreed to
issue pursuant to the Merger Agreement. The following summary does not purport
to be complete and is qualified in its entirety by reference to Exhibit 2.1 to
the Merger Agreement--Appendix A to this Proxy Statement-Prospectus--which
contains the proposed amendment to the certificate of incorporation of HUBCO
creating the HUBCO Preferred Stock and prescribing the designations, powers,
and relative rights and preferences of the HUBCO Preferred Stock.
HUBCO Preferred Stock will be a series of cumulative convertible
preferred stock designated "Series A Preferred Stock." The HUBCO Preferred
Stock will have a stated value of $24.00 per share. The shares when issued
will be fully paid and non-assessable. HUBCO anticipates that it may issue up
to a maximum of 938,690 shares of the HUBCO Preferred Stock upon the
consummation of the acquisition of Washington although it reasonably expects
to issue a smaller number due to a variety of factors. (The pro forma
financial statements contained in this Proxy Statement-Prospectus reflect the
issuance of 829,995 shares of HUBCO Preferred Stock. See, "PRO FORMA COMBINED
CONDENSED UNAUDITED FINANCIAL STATEMENTS".) Upon the reacquisition of any of
the HUBCO Preferred Stock, through redemption, conversion or otherwise, such
reacquired shares will be canceled and will become part of the authorized and
unissued preferred stock of HUBCO, but will not be authorized and unissued
HUBCO Preferred Stock--that is, Series A Preferred Stock. The HUBCO Preferred
Stock will have the dividend, liquidation, redemption, voting and conversion
rights set forth below.
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Rank
The HUBCO Series A Preferred Stock will be senior to any other class or
series of preferred stock in respect of (1) payment of dividends, (2) payment
upon dissolution, liquidation or winding up and (3) redemption.
Dividends
The holders of HUBCO Preferred Stock, in preference to the holders of
HUBCO Common Stock and any other class or series of preferred stock, will be
entitled to receive, when and if declared by the Board of Directors of HUBCO,
out of funds legally available therefor, cumulative cash dividends at the
annual rate per share as specified below, payable in quarter-annual
installments on the 15th day of February, May, August and November in each
year, from the date of issuance. The annual dividend rate will be set on the
date which is two days prior to the Closing Date (which will immediately
precede the Effective Time) and on each anniversary thereof (each a "Reset
Date"), based upon the average "market price" of HUBCO Common Stock in the
twenty (20) consecutive business days ending two days immediately preceding
the Reset Date. The "market price" will be the closing price per share of
HUBCO Common Stock on the NASDAQ National Market System or on any national
securities exchange upon which the shares of HUBCO Common Stock may become
listed or admitted to trading. The annual dividend rate will be set as
follows:
Average Market Price
of HUBCO Common Stock Annual Dividend Rate For
Prior to the Reset Date HUBCO Preferred Stock
------------------------ ------------------------
$24.00 or more. . . . . . . . . . . . . . . . . $1.00
$23.00 to $23.99. . . . . . . . . . . . . . . . $1.10
$22.00 to $22.99. . . . . . . . . . . . . . . . $1.20
$21.00 to $21.99. . . . . . . . . . . . . . . . $1.32
$20.00 to $20.99. . . . . . . . . . . . . . . . $1.44
$19.00 to $19.99. . . . . . . . . . . . . . . . $1.56
Less than $19.00. . . . . . . . . . . . . . . . $1.68
The average market price of the HUBCO Common Stock listed in the table
will be adjusted appropriately each time the Conversion Ratio (as defined) is
required to be adjusted for certain capital changes, as described below, and
in the same proportion that the Conversion Ratio is adjusted. See below,
"Conversion Into Common Stock." As a consequence, the average market price of
the HUBCO Common Stock listed in the chart will be reduced to reflect events
such as stock splits and stock dividends effected with respect to the HUBCO
Common Stock.
Liquidation Preference
Upon the voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of HUBCO, the holders of HUBCO Preferred Stock will be entitled
to receive out of the assets of HUBCO $24.00 per share, together with
cumulative dividends accrued and unpaid to the date of payment of such $24.00
distribution preference, before any amount will be paid to the holders of
HUBCO Common Stock or any other class or series of preferred stock of HUBCO.
Such dividends will be deemed to accrue on a daily basis. The merger or
consolidation of HUBCO into or with any other corporation, or the merger of
any other corporation into HUBCO, or the sale, lease or conveyance of all or
substantially all of the property or business of HUBCO, will not be deemed to
be a dissolution, liquidation or winding up for purposes of such distribution
preference.
Redemption
Outstanding shares of HUBCO Preferred Stock may be redeemed, as a whole
(or in part but only with the consent of the holder of the shares to be
redeemed), at the option of HUBCO by vote of its Board of Directors at any
time from and after the date on which the market price for the HUBCO Common
Stock is $24.00 or more for twenty (20) consecutive business days. The $24.00
market price will be adjusted each time the Conversion Ratio is required to be
adjusted for certain capital changes as described below under "Conversion Into
Common Stock." As a consequence, the $24.00 price will be reduced by stock
splits or stock dividends effected with respect to the HUBCO Common Stock. The
HUBCO Preferred Stock may also be redeemed in connection with a merger,
consolidation or sale of all or substantially all the assets of HUBCO which
otherwise requires a vote of the holders of HUBCO Preferred Stock. See "Voting
Rights." Less than all the outstanding shares of the HUBCO Preferred Stock may
be redeemed in such
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manner as the Board of Directors of HUBCO prescribes. The redemption price for
shares of the HUBCO Preferred Stock will be $24.00 per share, plus all accrued
and unpaid dividends through the date fixed for redemption. Such dividends
will be deemed to accrue on a daily basis.
HUBCO can not redeem any other class or series of preferred stock unless
and until all shares of the HUBCO Preferred Stock have been redeemed. However,
HUBCO may repurchase in the market or in private transactions shares of its
Common Stock or shares of HUBCO Preferred Stock at any time while the HUBCO
Preferred Stock is outstanding.
Written notice of redemption will be given to each holder of record of
the shares of HUBCO Preferred Stock to be redeemed, in each case at least 15
days and not more than 45 days prior to the date fixed for redemption. If
fewer than 25 days prior notice is given to holders, then at least one
follow-up written notice must be sent to holders who have not converted by 7
days prior to the redemption date. Each such notice must specify the shares of
stock to be redeemed, the redemption price, the date fixed for redemption, the
place for payment of the redemption price and for surrender of the certificate
or certificates representing the shares to be redeemed, and if less than the
total number of shares held by a holder are to be redeemed, the number of
shares of such holder to be redeemed.
If notice of redemption has been given and if, on or before the date
fixed for redemption, the redemption price has been provided and set aside by
HUBCO with a bank with trust powers for the pro rata benefit of the holders of
the shares so called for redemption, then, from and after the date fixed for
redemption, (i) the shares of HUBCO Preferred Stock called for redemption will
no longer be deemed outstanding, (ii) the dividends thereon will cease to
accumulate, and (iii) all rights with respect to such shares will forthwith
cease. The only right of the holders of the redeemed shares after such date
will be the right to receive the redemption price for the shares called for
redemption, without interest.
HUBCO will not be obligated to make payments into or to maintain any
sinking fund for the redemption of HUBCO Preferred Stock.
Conversion Into Common Stock
Subject to the adjustment provisions described herein, the holder of any
shares of HUBCO Preferred Stock at any time prior to the date fixed for any
redemption of the HUBCO Preferred Stock will have the right to surrender the
certificates evidencing such shares and receive, in conversion of each share
of HUBCO Preferred Stock, one share (the "Conversion Ratio") of HUBCO Common
Stock.
The conversion privilege may be exercised at any time, including from and
after the date on which a notice of redemption was given and prior to the
close of business on the last day before the date of redemption stated in the
notice. To exercise the conversion privilege, the holder of HUBCO Preferred
Stock must surrender the certificates representing the shares to be converted
at the office of the transfer agent of HUBCO and give written notice to HUBCO
at such office that the holder elects to convert such shares. Such
certificates must be duly endorsed or assigned to HUBCO, or endorsed in blank.
Conversion will be deemed to have been effected immediately prior to the close
of business on the date upon which such surrender is made, and such date is
referred to as the "Conversion Date." On the Conversion Date or as promptly
thereafter as practicable, HUBCO will deliver to the holder of the stock
surrendered for conversion, or as otherwise directed by him in writing, a
certificate for the number of full shares of HUBCO Common Stock deliverable
upon conversion of such HUBCO Preferred Stock and, if applicable, a check in
respect to any fraction of a share.
HUBCO will not deliver fractional shares of HUBCO Common Stock upon
conversion of shares of HUBCO Preferred Stock. In lieu of any fractional share
of HUBCO Common Stock that would otherwise be deliverable upon conversion,
HUBCO will pay an amount in cash equal to the current market value of the
fractional share, computed on the basis of the market price on the last
business day before the Conversion Date. For this purpose, the "market price"
on any business day will be the closing price per share of HUBCO Common Stock
in the NASDAQ National Market System or, if the shares of HUBCO Common Stock
are then listed or admitted to trading on any national securities exchange,
the reported closing price per share of HUBCO Common Stock on such exchange on
such day.
The Conversion Ratio for the HUBCO Preferred Stock will be adjusted from
time to time in certain circumstances upon a stock dividend, stock split,
dividend payment (other than a cash dividend), combination, reclassification
or issuance of rights or warrants with respect to HUBCO Common Stock. No
adjustment will be made if (i) HUBCO takes the same action with respect to the
HUBCO Preferred Stock in the same proportion as if each
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share of HUBCO Preferred Stock had been converted into shares of HUBCO Common
Stock at the then applicable Conversion Ratio immediately before the record
date for the determination of holders of HUBCO Common Stock entitled to
receive the dividends, rights, warrants, or distributions or (ii) such
adjustment would not require a change of at least 1% to the Conversion Ratio
except that any change of less than 1% shall be carried forward to any
subsequent change.
Voting Rights
Except as otherwise required by New Jersey corporate law and as otherwise
provided in HUBCO's certificate of incorporation, the holders of HUBCO
Preferred Stock will have no voting rights.
Under the BCA, holders of HUBCO Preferred Stock are entitled to vote as a
class on certain amendments to HUBCO's certificate of incorporation, including
any amendment which subordinates or otherwise adversely affects the rights or
preferences of the HUBCO Preferred Stock and upon any merger which requires a
shareholder vote and would effect such an amendment to the certificate of
incorporation.
Under the terms of HUBCO's certificate of incorporation creating the
HUBCO Preferred Stock, holders of HUBCO Preferred Stock are entitled to vote
as a separate class on any merger, consolidation or sale of all or
substantially all of the assets of HUBCO if the transaction requires the
approval of the holders of the HUBCO Common Stock, except as explained below.
The affirmative vote of a majority of the outstanding HUBCO Preferred Stock
would be required to approve any such merger, consolidation or sale of assets.
However, if in connection with such a transaction the HUBCO Preferred Stock
will be redeemed prior to or simultaneously with the consummation of any such
transaction, then the approval of the holders of the HUBCO Preferred Stock
would not be required and any vote by the HUBCO Preferred Stock holders may be
disregarded. Also, under the terms of HUBCO's certificate of incorporation
creating the HUBCO Preferred Stock, any amendment to any provision of Section
C of Article V of the certificate of incorporation of HUBCO, which are the
provisions creating the HUBCO Preferred Stock, would require the affirmative
vote of a majority of the outstanding shares of HUBCO Preferred Stock.
Finally, if at any time HUBCO fails to pay for 2 quarters, whether or not
consecutive, the full quarter-annual dividends payable on the HUBCO Preferred
Stock, the holders of the HUBCO Preferred Stock will have the right, voting as
a separate class, to elect a total of two directors to the class of directors
elected at the next annual meeting of shareholders (the "Preferred
Directors"). A dividend default with respect to the HUBCO Preferred Stock,
giving rise to the right to elect the Preferred Directors, will be deemed to
continue to exist until all accrued dividends on all outstanding shares of the
HUBCO Preferred Stock have been paid to the end of the past preceding
quarterly dividend period. The Preferred Directors will continue to serve only
until the first annual meeting after which the dividend default has been fully
cured.
DESCRIPTION OF HUBCO COMMON STOCK
The following description of the HUBCO Common Stock sets forth certain
general terms of the Common Stock. The following summary does not purport to
be complete. For an additional description relating to the HUBCO Common Stock,
see "COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER DELAWARE AND NEW JERSEY
LAW."
Dividend Rights
The holders of HUBCO Common Stock are entitled to receive dividends,
when, as and if declared by the Board of Directors of HUBCO out of funds
legally available therefor, subject to the preferential dividend rights of any
preferred stock that may be outstanding. The only statutory limitation is that
such dividends may not be paid when HUBCO is insolvent. Because funds for the
payment of dividends by HUBCO must come primarily from the earnings of HUBCO's
bank subsidiary, as a practical matter, any restrictions on the ability of the
Bank to pay dividends act as restrictions on the amount of funds available for
the payment of dividends by HUBCO.
As a New Jersey chartered commercial bank, the Bank is subject to the
restrictions on the payment of dividends contained in the New Jersey Banking
Act of 1948 (the "Banking Act"). Under the Banking Act, the 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
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certain circumstances, the FDIC could claim that the payment of a dividend or
other distribution by the Bank to HUBCO constitutes an unsafe or unsound
practice.
HUBCO is also subject to certain Federal Reserve Board policies which
may, in certain circumstances, limit its ability to pay dividends. The Federal
Reserve Board policies require, among other things, that a bank holding
company maintain a minimum capital base. The Federal Reserve Board would most
likely seek to prohibit any dividend payment which would reduce a holding
company's capital below these minimum amounts.
At December 31, 1993, the Bank had $55 million available for the payment
of dividends to HUBCO. At December 31, 1993, HUBCO had $30 million available
for stockholder dividends, the payment of which would not reduce any of its
capital ratios below the minimum. See "RECENT DEVELOPMENTS."
Voting Rights
At meetings of shareholders, holders of HUBCO Common Stock are entitled
to one vote per share. The quorum for shareholders' meetings is a majority of
the outstanding shares entitled to vote represented in person or by proxy.
Except as indicated below, all actions and authorizations to be taken or given
by shareholders require the approval of a majority of the votes cast by
holders of HUBCO Common Stock at a meeting at which a quorum is present.
The Board of Directors is divided into three classes of directors, each
class being as nearly equal in number of directors as possible. Approximately
one-third of the entire Board of Directors is elected each year and the
directors serve for terms of up to three years, and, in all cases, until their
respective successors are duly elected and qualified.
The exact number of directors and the number constituting each class is
fixed from time to time by resolution adopted by a majority of the entire
Board of Directors. Shareholders may remove any director from office for
cause. The affirmative vote of at least three quarters of the shares of HUBCO
entitled to vote thereon is required to amend or repeal the provisions of
HUBCO's Certificate of Incorporation relating to the classification of the
Board of Directors and the removal of directors.
HUBCO's Certificate of Incorporation contains a "minimum price"
provision. In the event a "related person" (defined in the Certificate of
Incorporation to include persons who, together with their affiliates, own 10%
or more of HUBCO's common stock) proposes to enter into a Business Combination
(as defined in the Certificate of Incorporation) with HUBCO, the proposed
transaction will require the affirmative vote of at least three quarters of
the outstanding shares entitled to vote on the transaction, unless the
proposed transaction is (i) first approved by a majority of HUBCO's Board of
Directors, and (ii) the shareholders of HUBCO are offered consideration in an
amount equal to or in excess of an amount determined in accordance with a
formula contained in the Certificate of Incorporation. If both these tests are
met, the proposed transaction need only be approved by a majority of the
outstanding shares entitled to vote.
Liquidation Rights
In the event of liquidation, holders of HUBCO Common Stock are entitled
to receive ratably any assets distributed to shareholders, except that if
shares of preferred stock of HUBCO are outstanding at the time of liquidation,
such shares of preferred stock may have prior rights upon liquidation.
Assessment and Redemption
All outstanding shares of HUBCO Common Stock are fully paid and
nonassessable. The Common Stock is not redeemable at the option of the issuer
or the holders thereof.
Preemptive and Conversion Rights
Holders of HUBCO Common Stock do not have conversion rights or preemptive
rights with respect to any securities of HUBCO.
Other Matters
HUBCO can (except in connection with certain business combinations) issue
new shares of authorized but unissued Common Stock or preferred stock without
shareholder approval.
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COMPARISON OF THE RIGHTS OF STOCKHOLDERS
UNDER DELAWARE AND NEW JERSEY LAW
Washington is incorporated in Delaware and HUBCO is incorporated in New
Jersey. The rights of Washington stockholders are governed by Delaware law. At
the Effective Time, a Washington stockholder will become a stockholder of
HUBCO and the rights of stockholders of HUBCO are governed by New Jersey law.
The following is a comparison of certain provisions of New Jersey law and
Delaware law. This summary does not purport to be complete and is qualified in
its entirety by reference to the corporate statutes of those states, which
statutes may change from time to time, and the corporate charter of HUBCO,
which also may be changed.
Voting Requirements
Unless otherwise specified in a Delaware corporation's certificate of
incorporation, Delaware law generally provides that an amendment to the
certificate of incorporation, a sale or other disposition of all or
substantially all of a corporation's assets, or a merger or consolidation of a
corporation with another corporation requires the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. Washington's
Certificate of Incorporation does contain greater vote provisions for certain
transactions.
Under New Jersey law, unless a greater vote is specified in the
certificate of incorporation, any amendment to a New Jersey corporation's
certificate of incorporation, the voluntary dissolution of the corporation, or
the sale or other disposition of all or substantially all of a corporation's
assets otherwise than in the ordinary course of business or the merger or
consolidation of the corporation with another corporation, requires in each
case the affirmative vote of a majority of the votes cast by stockholders of
the corporation entitled to vote thereon. HUBCO's Certificate of Incorporation
presently does contain provisions specifying a greater vote in certain
circumstances. See "DESCRIPTION OF HUBCO COMMON STOCK--Voting Rights."
Under Delaware law, if the shares of the corporation are divided into
classes, the holders of the outstanding shares of each class are entitled to
vote as a class upon any proposed amendment to the certificate of
incorporation, whether or not entitled to vote thereon by the provisions of
the certificate of incorporation, if the amendment would increase or decrease
the aggregate number of authorized shares of such class, increase or decrease
the par value of the shares of such class, or alter or change the powers,
preferences, or special rights of the shares of such class so as to adversely
affect them.
Under New Jersey law, the holders of a class or series of shares are
entitled to vote as a class upon a proposed amendment to the certificate of
incorporation, whether or not entitled to vote thereon by the provisions of
the certificate of incorporation, if the amendment would exclude or limit
their right to vote on any matter, limit or deny their preemptive rights,
cancel or otherwise adversely affect their dividends which have accrued but
have not been declared, create a new class or series having or convertible
into shares having rights or preferences superior to the class or increase the
rights or preference of any class or series. In addition, notwithstanding any
provision of the certificate of incorporation, the holders of a class or
series of shares whose rights or preferences would be subordinated or
otherwise adversely affected by a proposed amendment are entitled to vote as a
class if the amendment would affect their shares in the following manner: (i)
decrease the par value; (ii) effect a conversion, exchange or reclassification
of their shares; (iii) effect a conversion or exchange of any shares of
another class or series into their class or series; (iv) change the
designation, preferences, limitations or relative rights of their shares; (v)
change the shares into a different number of shares, or into the same number
of another class or series; or (vi) divide their shares into a series or
determine the designation, preferences, limitation or relative rights of any
such series, or authorize the board to take any such action.
Cumulative Voting
Under both Delaware and New Jersey law, stockholders do not have
cumulative voting rights in the election of directors unless the certificate
of incorporation so provides, and neither HUBCO nor Washington provides for
cumulative voting.
Rights of Dissenting Stockholders
Generally, stockholders of a Delaware corporation who dissent from a
merger or consolidation of the corporation are entitled to appraisal rights.
There are, however, no statutory rights of appraisal with respect to
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stockholders of a corporation whose shares are either (i) listed on a national
securities exchange, or (ii) held of record by more than 2,000 stockholders
where such stockholders receive only shares of stock of the corporation
surviving or resulting from the merger or consolidation (or cash in lieu of
fractional interests therein). Delaware law does not provide appraisal rights
to stockholders who dissent from the sale of all or substantially all of the
corporation's assets unless the certificate of incorporation provides
otherwise. Since the exceptions from the Delaware statutory right of appraisal
do not apply to the Merger, stockholders of Washington have statutory rights
of appraisal with respect to the Merger. See "THE MERGER--Rights of Dissenting
Stockholders."
Stockholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal
rights. No statutory right of appraisal exists, however, where the stock of
the New Jersey corporation is (i) listed on a national securities exchange,
(ii) is held of record by not less than 1,000 holders, or (iii) where the
consideration to be received pursuant to the merger, consolidation or sale
consists of cash or securities or other obligations which, after the
transaction, will be listed on a national securities exchange or held of
record by not less than 1,000 holders.
Stockholder Consent to Corporate Action
Unless otherwise provided in the certificate of incorporation, Delaware
law provides that any corporate action or authorization which requires the
affirmative vote of stockholders may be taken without a meeting, if a consent
in writing to such action is signed by the holders of outstanding stock having
not less than the minimum number of votes necessary to approve such action.
Except as otherwise provided by the certificate of incorporation (and
HUBCO's certificate presently is silent on this issue), New Jersey law permits
any action required or permitted to be taken at any meeting of a corporation's
stockholders, other than the annual election of directors, to be taken without
a meeting upon the written consent of stockholders who would have been
entitled to cast the minimum number of votes necessary to authorize such
action at a meeting of stockholders at which all stockholders entitled to vote
were present and voting. The annual election of directors, if not conducted at
a stockholders' meeting, may only be effected by unanimous written consent.
Dividends
Subject to any restrictions contained in a corporation's certificate of
incorporation, Delaware law generally provides that a corporation may declare
and pay dividends out of surplus (defined as net assets minus stated capital)
or, when no surplus exists, out of net profits for the fiscal year in which
the dividend is declared and/or the preceding fiscal year.
Unless there are other restrictions contained in its certificate of
incorporation (and HUBCO's Certificate of Incorporation presently contains
none), New Jersey law generally provides that a New Jersey corporation may
declare and pay dividends on its outstanding stock so long as the corporation
is not insolvent and would not become insolvent as a consequence of the
dividend payment.
By-laws
Under Delaware law, the authority to adopt, amend, or repeal the by-laws
of a Delaware corporation is held exclusively by the stockholders (as is the
case with Washington's Certificate of Incorporation), unless such authority is
conferred upon the board of directors in the certificate of incorporation.
The board of directors of a New Jersey corporation has the power to
adopt, amend, or repeal the corporation's by-laws, unless such powers are
reserved in the certificate of incorporation to the stockholders (which
HUBCO's Certificate of Incorporation does not do).
Preemptive Rights
Under both Delaware and New Jersey law, stockholders have only such
preemptive rights as may be provided in the certificate of incorporation.
Neither HUBCO's Certificate of Incorporation nor Washington's Certificate of
Incorporation provides stockholders with preemptive rights.
Transactions Involving Officers or Directors
A Delaware corporation may loan money to, or guarantee any obligation
incurred by, its officers or directors if, in the judgment of the board of
directors, such loan or guarantee may reasonably be expected to benefit the
53<PAGE>
<PAGE>
corporation. With respect to any other contract or transaction between the
corporation and one or more of its directors or officers, such transactions
are neither void nor voidable if either (i) the director's or officer's
interest is made known to the disinterested directors or the stockholders of
the corporation, who thereafter approve the transaction, or (ii) the contract
or transaction is fair to the corporation as of the time it is approved or
ratified by either the board of directors, a committee thereof, or the
stockholders.
A New Jersey corporation may loan money to, or guarantee any obligation
incurred by, its officers, employees or directors if in the judgment of the
directors such loan or guarantee may reasonably be expected to benefit the
corporation. With respect to any other contract or transaction between the
corporation and one or more of its directors (or any other corporation or
entity in which such director or directors are otherwise interested), such
transactions are neither void or voidable if either (i) the director's or
officer's interest is made known to the disinterested directors or the
stockholders of the corporation, who thereafter approve the transaction, or
(ii) the contract or transaction is fair to the corporation as of the time it
is approved or ratified by either the board of directors, a committee thereof,
or the stockholders.
Limitations of Liability of Directors and Officers
Under New Jersey law, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit directors' or officers' liability to the corporation
or its stockholders for monetary damage for breaches of their fiduciary duty
of care. A similar provision under Delaware law applies to directors, but not
officers.
Under Delaware law, a director cannot be relieved of liability or
otherwise indemnified (i) for breaches of the duty of loyalty, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the payment of unlawful dividends or
expenditure of funds for unlawful stock purchases or redemptions, or (iv) for
transactions from which such director derived an improper personal benefit.
Under New Jersey law, a director or officer cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the corporation or
its stockholders, (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. HUBCO's Certificate of Incorporation contains a provision which
limits a director's or officer's liability to the full extent permitted by New
Jersey law. Washington's Certificate of Incorporation contains a similar
provision with respect to its directors.
Stockholder Protection Legislation
A provision of Delaware's corporate law prohibits certain transactions
between a Delaware corporation and an "interested stockholder". An "interested
stockholder" is one that is directly or indirectly a beneficial owner of 15%
or more of the voting power of the outstanding voting stock of a Delaware
corporation. The provision prohibits certain business combinations between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless (i) the business
combination is approved by the corporation's board of directors prior to the
stock acquisition date; (ii) the interested stockholder acquired at least 85%
of the voting stock of the corporation in the transaction in which he became
an interested stockholder; or (iii) the business combination is approved by a
majority of the board of directors and by the affirmative vote of two-thirds
of disinterested stockholders.
The New Jersey Shareholders Protection Act (the "Act") prohibits certain
transactions involving an "interested shareholder" and a "resident domestic
corporation". An "interested shareholder" is one that is directly or
indirectly a beneficial owner of 10% or more of the voting power of the
outstanding voting stock of a resident domestic corporation. The Act prohibits
certain business combinations between an interested shareholder and a resident
domestic corporation for a period of five years after the date the interested
shareholder acquired its stock, unless the business combination was approved
by the resident domestic corporation's board of directors prior to the stock
acquisition date. After the five-year period expires, the prohibition on
certain business combinations continues unless the combination is approved by
the affirmative vote of two-thirds of the voting stock not beneficially owned
by the interested stockholder, the combination is approved by the board prior
to the interested stockholder's stock acquisition date or certain fair price
provisions are satisfied.
54<PAGE>
<PAGE>
PRO FORMA COMBINED CONDENSED UNAUDITED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial information presents
the Pro Forma Combined Condensed Statement of Condition of HUBCO, Washington
and Statewide at December 31, 1993 after giving effect to the Merger, the
Statewide Acquisition, the issuance of $25,000,000 of 7.75% subordinated
debentures due 2004 (completed in January 1994) and the purchase by HUBCO of
442,781 shares of HUBCO Common Stock at a cost of $9,869,000 under its stock
repurchase plan, which shares are available for reissuance in the Statewide
Acquisition, as if such transactions were consummated on December 31, 1993.
Also presented is the Pro Forma Combined Condensed Statement of Income for the
year ended December 31, 1993 after giving effect to the Merger, the Statewide
Acquisition, the subordinated debt issuance and HUBCO's repurchase of shares
of Common Stock as if such transactions had been consummated on January 1,
1993. The unaudited pro forma information is based on the historical financial
statements of HUBCO, Washington and Statewide after giving effect to the
contemplated transactions using the purchase method of accounting with respect
to the Merger and the Statewide Acquisition and based upon the assumptions and
adjustments contained in the accompanying "Notes to Pro Forma Combined
Condensed Unaudited Financial Statements". The pro forma statements assume a
Subscription Purchase Price of $18.00 per share for the Statewide Acquisition
and the issuance of 1,944,444 shares of HUBCO Common Stock. While pro forma
information about Statewide is included in the following tables, there can be
no assurance that the Statewide Acquisition will be consummated and
consummation of the Merger is not conditioned upon the Statewide Acquisition.
See "INTRODUCTION--Statewide Acquisition." The pro forma statements assume a
purchase price of $16.10 in cash or 0.6708 of a share of HUBCO Preferred Stock
for the Merger and, in accordance with the allocation required under the
Merger Agreement, the conversion of 51% of Washington shares into HUBCO
Preferred Stock and the conversion of 49% of Washington shares to cash.
The unaudited pro forma information presented herein does not give effect
to operating results of HUBCO, Washington or Statewide subsequent to
December 31, 1993. Purchase accounting adjustments to estimated fair values
have been made with respect to assets and liabilities of Washington and
Statewide and related income and expense accounts based upon preliminary
estimates and evaluations as of December 31, 1993. Such preliminary estimates
and assumptions are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination, based
upon estimates and other evaluations of fair value, as of the close of the
respective transactions. Therefore, the allocations reflected in the Pro Forma
Combined Condensed Unaudited Financial Statements may differ from the amounts
ultimately determined.
The unaudited pro forma information has been prepared by HUBCO management
based upon the consolidated financial statements and related notes thereto of
HUBCO, Washington and Statewide. The Pro Forma Combined Condensed Statement of
Income is not necessarily indicative of operating results which would have
been achieved had the above mentioned transactions been consummated as of the
above-mentioned dates and should not be construed as being representative of
future periods.
55
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
(Unaudited)
Dollars in Thousands
As of December 31, 1993
Pro Forma
Pro Forma Pro Forma Combined Pro Forma
Historical Adjustments Pro Forma Historical Adjustments Hubco and Historical Adjustments Pro Forma
Hubco Hubco Hubco Washington Washington Washington Statewide Statewide Combined
---------- ----------- --------- ---------- ----------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Due From Banks $ 49,542 $(5,298)(1)(8)$44,244 $ 4,283 $ 0 $ 48,527 $ 7,478 $ 0(a) $ 56,005
Investment Securities... 296,130 24,671(2) 320,801 25,007 (18,960)(aa) 326,848 251,743 5,652(b) 584,243
Investments Available
for Sale .............. 130,555 0 130,555 67,257 0 197,812 4,789 0 202,601
Federal Funds Sold ..... 9,800 0 9,800 1,900 0 11,700 16,075 0 27,775
Loans .................. 529,390 0 529,390 173,013 1,016(bb) 703,419 187,547 5,730(c) 896,696
Allowance for Possible
Loan Losses ........... (10,811) 0 (10,811) (2,828) 0 (13,639) (1,094) 0 (14,733)
Premises and Equipment.. 18,001 0 18,001 2,614 2,953(cc) 23,568 3,942 (3,942)(d) 23,568
Other Real Estate....... 2,311 0 2,311 7,078 0 9,389 9,741 (4,393)(e) 14,737
Excess of Cost over Fair
Value of Assets
Acquired, Net ......... 0 0 0 0 5,049(dd) 5,049 14,930 (14,930)(f) 5,049
Other Assets ........... 16,907 329(1) 17,236 4,311 (92)(ee) 21,455 5,124 (796)(g) 25,783
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
Total Assets ......... $1,041,825 $19,702 $1,061,527 $282,635 $(10,034) $1,334,128 $500,275 $(12,679) $1,821,724
========== ======= ========== ======== ======== ========== ======== ========= ==========
LIABILITIES
Deposits ............... $ 935,688 $ 0 $ 935,688 $247,320 $ 712(ff)$1,183,720 $427,003 $ 1,300(h) $1,612,023
Borrowed Money ......... 19,629 0 19,629 400 0 20,029 39,367 (30,867)(i) 28,529
Other Liabilities....... 7,554 0 7,554 1,374 2,875(gg) 11,803 1,665 16,501 (j) 29,969
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
Total Liabilities..... 962,871 0 962,871 249,094 3,587 1,215,552 468,035 (13,066) 1,670,521
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
Subordinated Debentures 0 25,000(3) 25,000 0 0 25,000 0 0 25,000
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock......... 0 0 0 0 19,920(hh) 19,920 0 0 19,920
Common Stock ........... 18,492 0 18,492 231 (231)(ii) 18,492 0 4,005(k) 22,497
Capital in Excess of
Par Value ............. 49,048 0 49,048 22,500 (22,500)(ii) 49,048 0 18,753(k) 67,801
Retained Earnings ...... 12,669 0 12,669 10,744 (10,744)(ii) 12,669 32,240 (32,240)(l) 12,669
Unrealized Gain on
Investment Securities
available for sale,
net of Taxes .......... 4,262 0 4,262 186 (186)(ii) 4,262 0 0 4,262
Treasury Stock ......... (4,571) (5,298)(8) (9,869) 0 0 (9,869) 0 9,869(k) 0
Restricted Stock Award.. (946) 0 (946) (120) 120(ii) (946) 0 0 (946)
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
Total Stockholders'
Equity .............. 78,954 (5,298) 73,656 33,541 (13,621) 93,576 32,240 387 126,203
---------- ------- ---------- -------- -------- ---------- -------- --------- ----------
Total Liabilities
and Stockholders'
Equity............... $1,041,825 $19,702 $1,061,527 $282,635 $(10,034) $1,334,128 $500,275 $(12,679) $1,821,724
========== ======= ========== ======== ======== ========== ======== ========= ==========
See accompanying notes to pro forma combined condensed financial statements
56
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
Dollars in Thousands, Except for Per Share Amounts
For the Year Ended December 31, 1993
Pro Forma
Pro Forma Pro Forma Combined Pro Forma
Historical Adjustments Pro Forma Historical Adjustments Hubco and Historical Adjustments Pro Forma
Hubco Hubco Hubco Washington Washington Washington Statewide Statewide Combined
---------- ----------- --------- ---------- ----------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans.. $43,546 $ 0 $43,546 $14,782 $(669)(jj)$57,659 $18,654 $(955)(m) $75,358
Interest and Dividends on
Investments................ 23,442 1,419 (4) 24,623 3,604 (79)(kk) 28,125 16,207 1,504 (n) 42,728
(238)(9) (23)(ll) (2,050)(o)
(1,058)(p)
Interest on Federal
Funds Sold ................ 771 0 771 172 0 943 222 0 1,165
------- ------ ------- ------- ----- ------- ------- ------ --------
Total Interest Income ..... 67,759 1,181 68,940 18,558 (771) 86,727 35,083 (2,559) 119,251
------- ------ ------- ------- ----- ------- ------- ------ --------
Interest Expense:
Interest on Deposits ....... 20,379 0 20,379 8,795 (712)(mm) 28,462 14,442 (1,300)(q) 41,604
Interest on Borrowings ..... 362 0 362 18 0 380 3,170 (2,916)(r) 634
Interest on Subordinated
Debt ...................... 0 1,938(5) 1,971 0 0 1,971 0 0 1,971
33(6)
------- ------ ------- ------- ----- ------- ------- ------ --------
Total Interest Expense...... 20,741 1,971 22,712 8,813 (712) 30,813 17,612 (4,216) 44,209
------- ------ ------- ------- ----- ------- ------- ------ --------
Net Interest Income
Before Provision for
Possible Loan Losses ...... 47,018 (790) 46,228 9,745 (59) 55,914 17,471 1,657 75,042
Provision for Possible
Loan Losses ............... 3,600 0 3,600 420 0 4,020 720 0 4,740
------- ------ ------- ------- ----- ------- ------- ------ --------
Net Interest Income
After Provision for
Possible Loan Losses ...... 43,418 (790) 42,628 9,325 (59) 51,894 16,751 1,657 70,302
------- ------ ------- ------- ----- ------- ------- ------ --------
Other Income................. 8,606 0 8,606 949 0 9,555 1,785 0 11,340
------- ------ ------- ------- ----- ------- ------- ------ --------
Other Expenses:
Salaries and Other
Employee Benefits ......... 16,501 0 16,501 3,468 0 19,969 5,910 0 25,879
Occupancy and
Equipment Expense.......... 5,016 0 5,016 797 34(nn) 5,847 1,829 (478)(s) 7,198
Other Expenses ............. 8,454 0 8,454 4,503 505(oo) 13,462 4,195 (942)(t) 14,882
(1,833)(u)
------- ------ ------- ------- ----- ------- ------- ------ --------
Total Other Expenses ...... 29,971 0 29,971 8,768 539 39,278 11,934 (3,253) 47,959
------- ------ ------- ------- ----- ------- ------- ------ --------
Income Before Taxes ........ 22,053 (790) 21,263 1,506 (598) 22,171 6,602 4,910 33,683
------- ------ ------- ------- ----- ------- ------- ------ --------
Income Taxes................. 7,851 (300)(7) 7,551 (1,018) (227)(pp) 6,306 2,299 1,866(v) 10,471
------- ------ ------- ------- ----- ------- ------- ------ --------
Net Income before Cumula-
tive effect of Change
in Accounting Principle..... $14,202 $(490) $13,712 $2,524 $(371) $15,865 $4,303 $3,044 $23,212
======= ====== ======= ======= ===== ======= ======= ====== ========
Earnings per Share--Primary** $ 2.06 $ 2.05 $ 2.17* $ 2.53*
Earnings per Share-Fully
Diluted**................... $ 2.06 $ 2.05 $ 2.11 $ 2.46
Book Value per Common Share** $ 11.74 $ 11.35 $11.35 $12.60
Dividends per Share--
Common...................... $ 0.47 $ 0.47 $ 0.47 $ 0.47
Weighted Average Number
of Common Shares
Outstanding** .............. 6,909 6,675 6,675 8,619
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividend
Requirements:***
Excluding Interest on
Deposits ................. 34.59 9.05 6.72 9.04
Including Interest on
Deposits ................. 2.07 1.92 1.69 1.74
- ------------
<FN>
* After payment of Series A preferred dividends of $1,394 (representing an
annual dividend of $1.68 per share), the maximum dividend payable under the
proposed Washington Merger Agreement.
** See Note 15 in accompanying notes to proforma combined condensed financial
statements.
*** The ratio of earnings to combined fixed charges and preferred stock
dividends is computed by dividing the sum of income before taxes, fixed
charges and preferred dividends by the sum of fixed charges and preferred
dividends. Fixed charges represents interest expenses (including interest
attributable to capital leases, the estimated interest component of
operating lease rental payments and both excluding and including interest
on deposits). Prior to the Merger, HUBCO will not have issued any preferred
stock. Accordingly, HUBCO's ratios include no amount with respect to
preferred dividends.
</FN>
</TABLE>
See accompanying notes to pro forma condensed financial statements.
57
<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1) The following summarizes the transaction related to the issuance of
$25,000,000 of 7.75%, subordinated debentures due 2004 which was completed
on January 14, 1994.
<TABLE>
<CAPTION>
<S> <C>
1) Proceeds from the sale of 7.75% subordinated debentures ........................................ $25,000
Less: Applicable financing costs .............................................................. ($329)
-------
Net proceeds--recorded as an increase to cash and then transferred
to the investment portfolio ................................................................... $24,671
-------
2) Investment of proceeds from sale of subordinated debentures .................................... $24,671
-------
3) Issuance of subordinated debentures ........................................................... $25,000
=======
4) To reflect interest income as a result of the investment of the
proceeds of the subordinated debt at 5.75%.
5) To reflect interest expense on the subordinated debentures at 7.75%.
6) To reflect as interest expense the amortization of deferred financing
costs on the subordinated debt.
7) To reflect the anticipated taxes on the pro forma adjustments.
2) On November 8, 1993, HUBCO's board of directors authorized management to
repurchase up to 10 percent of its outstanding Common Stock. The following
summarizes the repurchase of shares as reflected in the accompanying pro forma
combined condensed financial statements:
8) To reflect the repurchase of 234,081 shares of treasury stock from January 1, 1994
through March 1, 1994 .......................................................................... ($ 5,298)
=======
9) To reflect a loss of interest income for the use of funds to purchase treasury shares at 4.50%
</TABLE>
58
<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3) The following summarizes the purchase transaction of Washington as reflected
in the accompanying pro forma combined condensed financial statements:
<TABLE>
<S> <C>
Issuance of 829,995 shares of Hubco preferred stock at $24 per share ................ $19,920(hh)
Cash payment to shareholders ........................................................ 19,139
Washington shares currently held by HUBCO ........................................... 1,338
-------
Aggregate Cost ...................................................................... 40,397
Add: Acquisition Costs of $610 of which $92 has been paid as of December, 1993(ee)... 610
-------
$41,007
<S> <C>
Estimate of Fair Value of Washington
Stockholders' equity at December 31, 1993, as reported .................. $33,541(ii)
Additional capital from exercising stock options prior to acquisition ... 1,838
-------
Adjusted stockholders' equity ........................................... 35,379
</TABLE>
<TABLE>
<S> <C>
Fair value adjustments:
Excess of fair value over book value of:
Mortgage-backed and other Investments securities .......... $ 197
Loans receivable ......................................... 4,016
Land and buildings ........................................ 2,953(cc)
-------
</TABLE>
<TABLE>
<S> <C>
Fair value in excess of book value of time deposits .................... (712)(ff)
Other adjustments:
Reduction in value of a real estate loan intended to be liquidated by
HUBCO shortly after acquisition ....................................... (3,000)*
Recognition of liability for payment of income taxes on recapture
of allowance for possible loan losses .................................. (1,252)
Recognition of certain other liabilities related to the
acquisition, primarily severance and estimated liabilities for
existing contingencies ................................................. (1,186)
Tax effect where appropriate, of purchase accounting adjustments ....... (437)
-------
Estimated fair value, as adjusted .................................................. 35,958
-------
Excess of cost over fair value ...................................................... $ 5,049(dd)
=======
4) Investment Securities Pro-forma Adjustment
Record the excess of the fair market value
over the book value of the investment portfolio .................................... $ 197
Record the receipt of the proceeds from the exercising
of Washington stock options prior to acquisition .................................. 1,838
Eliminate HUBCO's existing investment in Washington ................................. (1,338)
Cash payment of acquisition costs .................................................. (518)
Cash payment to shareholders' of Washington of 49% of the purchase price ........... (19,139)
-------
($18,960)(aa)
=======
- -----------
<FN>
* Washington's current intent is to hold a commercial real estate loan in its
portfolio and to restructure the loan. HUBCO's intent is to liquidate the
loan shortly after its acquisition of Washington. This adjustment is an
estimate reflecting the demonstrably different plans of the two entities
that will be reflected as part of the ultimate purchase and accounting
adjustments.
</FN>
</TABLE>
59
<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
5) Loans Pro-Forma Adjustments
<S> <C>
Record the excess of the fair market value over the book value of the loan portfolio.. $4,016
Establish reserve for liquidation of a commercial real estate
loan subsequent to acquisition ...................................................... (3,000)
------
$1,016(bb)
======
6) Other Liabilities Pro-forma Adjustments
Record liability for income taxes on recapture of allowance for possible loan
losses of Washington ............................................................... $1,252
Recognition of certain other liabilities related to the acquisition
of Washington Bancorp .............................................................. 1,186
Tax effect where appropriate, of purchase accounting adjustments .................... 437
------
$2,875(gg)
======
</TABLE>
7) The following is a summary of the adjustments required to the combined
statements of income and Combined Pro Forma Hubco and Statewide and
Historical Washington Bancorp assuming the adjustments above were made as
of the beginning of the periods presented:
(jj) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the premium on the
loan portfolio over 6 years.
(kk) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the premium on the
investment portfolio over its estimated life of 2.5 years.
(ll) To reflect a loss of interest income for the use of funds for acquisition
expenses at 4.50%.
(mm) To record the amortization of the premium on deposits.
(nn) To reflect an increase in depreciation expense reflecting the net
increased carrying value of premises and equipment.
(oo) To reflect the increase in expense from the amortization of cost over
fair value of the Washington acquisition based on a 10 year life.
(pp) To reflect the anticipated tax benefit on the proforma adjustments.
60
<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
8) The following summarizes the Statewide purchase transaction as reflected in
the accompanying proforma combined condensed financial statements:
Reissuance of 442,781 shares of HUBCO Common Stock from treasury shares ............. $ 7,970
Issuance of 1,501,663 shares of Hubco Common stock at $18
per share, net of estimated issuance expenses of $2,373 ($796(g) has been
paid as of December, 1993) ......................................................... $25,453
-------
$33,423(k)
Estimate of Fair Value of Statewide
Retained earnings at December 31, 1993 as reported .................................. $32,240(l)
=======
Excess of fair value over book value of:
Mortgage-backed and other investment securities ........................ $5,290
Loans receivable ....................................................... 5,730(c)
Land and buildings ..................................................... 2,535 13,555
-------
Fair value in excess of book value of time deposits ................... ($1,300)(h)
Prepayment penalty on advances from Federal Home Loan Bank ............. (2,194) (3,494)
-------
Other adjustments:
Elimination of historical Statewide excess of cost over fair
value of assets previously acquired by Statewide ................................... (14,930)(f)
Reduction in value of other real estate intended to
be liquidated by HUBCO shortly after acquisition ................................... *(4,393)(e)
Reserve for payment of deferred income taxes on recapture
of allowance for possible loan losses ............................................. (2,250)
Recognition of certain other liabilities related to the acquisition ................. (1,775)
Tax effect where appropriate, of purchase accounting adjustments .................... (1,479)
-------
Excess of fair value over cost (negative goodwill) ................................. $17,474
-------
Applied to reduction in value of premises and equipment ............................ $ 6,477
Recorded as a liability in the pro-forma financial statements ...................... 10,997
-------
$17,474
=======
9) Cash and Due from Banks Pro-Forma Adjustments
Record the receipt of the net proceeds from the sale of Hubco common stock ......... $33,423
Transfer proceeds to investment portfolio .......................................... (33,423)
Transfer proceeds from investment portfolio ........................................ 33,061
Repayment of advances to the Federal Home Loan Bank of New York .................... (33,061)
-------
$0(a)
=======
10) Investment Securities Pro-Forma Adjustments
Record the excess of the fair market value over the
book value of the investment securities .......................................... $5,290
Record the receipt of the net proceeds from the sale of HUBCO common stock .......... 33,423
Repayment of advances to the Federal Home Loan Bank
of New York ....................................................................... (33,061)
-------
$ 5,652(b)
=======
- ------------
<FN>
* Statewide's current intent is to hold its other real estate properties until
such properties have their improvements completed. HUBCO's intent is to
liquidate such properties shortly after its acquisition of Statewide. This
adjustment is an estimate reflecting the demonstrably different recovery
plans of the two entities that will be reflected as part of the ultimate
purchase accounting adjustments.
</FN>
</TABLE>
61
<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
11) Premises and Equipment Pro-Forma Adjustments
Record the excess of the fair market value over the book value for land and buildings $2,535
Allocation of negative goodwill applied to premises and equipment ................... (6,477)
--------
($3,942)(d)
========
12) Borrowed Money Pro-Forma Adjustments Record book value in excess of market
value of Federal Home Loan Bank advances .......................................... $ 2,194
Repayment of advances to the Federal Home Loan Bank of New York ...................... (33,061)
========
($30,867)(i)
========
13) Other Liabilities Pro-Forma Adjustments
Record liability for deferred income taxes on recapture of
allowance for possible loan losses of Statewide ................................... $2,250
Recognition of certain other liabilities related to the acquisition of Statewide .... 1,775
Tax effect of purchase accounting adjustments ...................................... 1,479
========
Record remaining excess of fair value over cost (negative goodwill) ................ 10,997
========
$16,501(j)
========
</TABLE>
14) The following is a summary of the adjustments required to the combined
statements of income assuming the adjustments above were made as of the
beginning of the periods presented:
(m) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the premium on the
loan portfolio over 6 years, the estimated average life of the loans
acquired.
(n) To reflect interest income as a result of the investment of the proceeds
of issuance of Common Stock at 4.50%.
(o) To reflect a loss of interest income due to use of funds to repay
outstanding FHLB advances at 6.20%.
(p) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the premium on the
investment portfolio over its 5 year estimated life.
(q) To record the amortization of the premium on deposits.
(r) To reflect a reduction in interest expense from the repayment of FHLB
advances.
(s) To reflect a reduction in depreciation expense reflecting the net
decreased carrying value of premises and equipment after reflecting the
premium and allocating negative goodwill.
(t) To reflect the reduction in expense from the write off of the historical
excess of cost over fair value of Statewide.
(u) To reflect the reduction in expense from the amortization of negative
goodwill resulting from the Merger Conversion based on a 6 year life of
the interest earning assets.
(v) To reflect the anticipated taxes on proforma adjustments.
15) The pro forma financial information assumes the issuance of common stock
based on a preliminary appraised value of $35,000,000, which represents
the midpoint of the appraisal range. The following represents the pro
forma combined per share data for the twelve months ended December 31,
1993, based upon the estimated minimum and maximum appraised values of
$29,750,000 and $40,250,000, respectively:
Minimum Maximum
------- -------
Earnings per share--Primary ...................... $ 2.60* $ 2.46*
Earnings per share--Fully Diluted ................ 2.52 2.40
Book value per Common share ...................... 12.42 12.77
Weighted average number of
Common shares outstanding ..................... 8,328 8,911
- ------------
* After payment of Series A preferred dividends of $1,394 (representing an
annual dividend of $1.68 per share), the maximum dividend payable under
the proposed Merger Agreement.
62
<PAGE>
<PAGE>
ELECTION OF WASHINGTON'S DIRECTORS
The Board of Directors consists of nine directors, divided into three
classes. Each of the members of the Board of Directors of Washington also serves
on the Board of Directors of the Savings Bank. Directors are elected for
staggered terms of three years each, with the term of office of only one class
of Directors expiring in each year. Directors serve until their successors are
elected and qualified. Although the Directors elected at the Annual Meeting will
be elected for three-year terms, the Merger Agreement provides that upon
consummation of the Merger, the directors of HUBCO will become the directors of
the Surviving Corporation.
The names of the three nominees for election to the Board of Directors
are set forth below, along with certain other information concerning such
individuals and the entire Board of Directors. Management believes that such
nominees will stand for election and will serve if elected as directors.
However, if any person nominated by the Board of Directors fails to stand for
election or is unable to accept election, the proxies will be voted for the
election of such other person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THOSE PERSONS WHOSE NAMES APPEAR BELOW.
<TABLE>
<CAPTION>
Name, Age, Principal
Occupation and Business Amount and Nature
Experience for Past Director Term to of Beneficial Ownership Percent of
Five Years Since Expire of Common Stock(1) Class
---------------- ------- -------- -------------------- ----------
BOARD NOMINEES
<S> <C> <C> <C> <C>
Robert A. Hand, Age 68 .................... 1979 1997 9,875(2) 0.4%
Vice President Emeritus of Stevens
Institute of Technology, Hoboken, New
Jersey; Treasurer, Polymer Processing
Institute, Hoboken, New Jersey.
Paul C. Rotondi, Age 69 ................... 1975 1997 89,791(3) 3.8%
Chairman of the Board and Chief
Executive Officer of Washington and the
Savings Bank.
Joseph A. Tighe, Jr., Age 58 ............. 1975 1997 12,084(2)(4) 0.5%
President of Tighe, Doty and Carrino,
P.A., a consulting engineering firm in
Secaucus, New Jersey; Vice-President,
TFC/CM, Inc., an architects and
engineering firm in Secaucus, New Jersey.
DIRECTORS CONTINUING IN OFFICE
Wilson A. Britten, Age 70 ................ 1965 1995 17,830(2)(5) 0.8%
Retired; former Senior Vice President
of Anchor Corporation, financial
advisors and investment underwriters.
</TABLE>
63
<PAGE>
<PAGE>
<TABLE>
Name, Age, Principal
Occupation and Business Amount and Nature
Experience for Past Director Term to of Beneficial Ownership Percent of
Five Years Since Expire of Common Stock(1) Class
---------------- ------- -------- -------------------- ----------
<S> <C> <C> <C> <C>
Theodore J. Doll, Age 49 .................. 1989 1995 91,541(6) 3.9%
President and Chief Operating
Officer of Washington and the
Savings Bank since December 26,
1989. Executive Vice President of
Washington and the Savings Bank
from October through December
1989. Mr. Doll retired in March
1988 as Executive Vice President
and Chief Administrative Officer
of Ryan, Beck & Co., an investment
banking firm.
James M. Ungerleider, Age 66 ............. 1972 1995 18,052(2) 0.8%
Retired; former President of Geismar's,
a mens' and womens' retail clothing
shop in Caldwell, New Jersey.
Theodore Doll, Jr., Age 77 ............... 1960 1996 19,187(2) 0.8%
Retired from practice as a
self-employed Certified Public
Accountant since 1979. He also
serves on the Board of Auric
Corporation, Newark,
New Jersey.
Duncan M. Lasher, Age 67 ................. 1993 1996 8,187(2) 0.4%
Retired; former Executive Vice President
of United National Bank, Plainfield,
New Jersey.
Charles A. Rotondi, Age 44 ................ 1989 1996 17,710(2) 0.8%
President, Dan Dee Belt & Bag Co.,
Inc., Hoboken, New Jersey
(manufacturers and importers).
All Directors and Executive
Officers as a group (15 persons)(7) ...... -- -- 386,917 15.7%
- ------------
<FN>
(1) As of March 15, 1994. Unless otherwise indicated, each person effectively
exercises sole (or shares with spouse) voting and dispositive power as to
the shares reported.
(2) Includes 7,187 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994.
(3) Includes 4,490 shares held for the benefit of minor children, 34,000 shares
that may be acquired pursuant to the exercise of stock options within 60
days of March 15, 1994 and the shares held by the ESOP described below as
to which Mr. Rotondi may direct the vote by virtue of shares allocated to
his account (estimated to be a total of 6,044 shares as of March 15, 1994).
(4) Includes 150 shares held for the benefit of his children.
(5) Includes 1500 shares held in trust.
(6) Includes 12,250 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994 and the shares held by the
ESOP described below as to which Mr. Doll may direct the vote by virtue of
</FN>
</TABLE>
64
<PAGE>
<PAGE>
shares allocated to his account (estimated to be a total of 2,791 shares as
of March 15, 1994). Includes 15,000 shares held by Mr. Doll's children.
(7) Includes 102,650 shares that may be acquired pursuant to the exercise of
stock options within 60 days of March 15, 1994 and 8,872 shares subject to
awards under Washington's Management Recognition and Retention Plan and
Trust (the "MRP"), as to all of which shares voting may be directed. Under
the terms of the MRP, recipients of unvested awards may direct the voting
of the shares covered by their awards and unawarded shares held in the MRP
trust are voted by the trustee in the same proportion as shares which have
been awarded. Also includes shares of Common Stock held by the Washington
Savings Bank Employee Stock Ownership Plan (the "ESOP") as to which
directors and officers of the Company may direct the vote by virtue of
shares allocated to their accounts (estimated to be a total of 28,537
shares as of March 15, 1994). Under the terms of the ESOP, shares of Common
Stock allocated to the accounts of employees are voted in accordance with
the instructions of the respective employees.
Chairman of the Board Paul C. Rotondi is the father of director Charles
A. Rotondi. Director Theodore Doll, Jr. is the father of President and director
Theodore J. Doll.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires
Washington's executive officers, directors and certain related entities, and
persons who own more than ten percent (10%) of a registered class of
Washington's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Based solely on a review of copies of such reports and representations
of Washington's executive officers and directors, Washington believes that all
Section 16(a) filing requirements applicable to executive officers and directors
were complied with except as disclosed herein. Late filings were made by Janice
Sandomenico, an executive officer, who sold 300 shares of Washington Common
Stock on September 1, 1993, and by Kim Flores, also an executive officer, who
sold 400 shares on June 15, 1993. The filings were made promptly after the
failure to timely file was discovered.
Board of Directors Meetings and Committees
During the fiscal year ended December 31, 1993, the Board of Directors
of Washington held 16 meetings. No incumbent director of Washington attended
fewer than 75% of the total meetings of the Board of Directors and committees on
which such Board member served during this period, including meetings of the
Board and committees of the Savings Bank. The following information is provided
as to certain committees of Washington's Board of Directors.
An Audit Committee, consisting of Directors Hand (Chairman), Doll, Jr.,
and Tighe, reviews Washington's budget and audit performance and evaluates
policies and procedures relating to auditing functions and controls. The Audit
Committee meets no less frequently than quarterly. The Audit Committee met four
times during 1993.
A Nominating Committee, consisting of Directors Ungerleider (Chairman),
Britten and Tighe, meets no less frequently than annually to nominate the slate
of officers for the next year and to nominate directors for the class to be
elected. While the committee will consider nominees for director recommended by
stockholders, it has not actively solicited recommendations from the
stockholders nor established any procedures for this purpose. The Nominating
Committee met once during 1993.
A Salaries Committee, consisting of Directors Britten (Chairman),
Lasher and Hand, meets as required to administer various benefit plans of
Washington and the Saving Bank and to monitor executive officer compensation.
The Salaries Committee met four times during 1993.
65
<PAGE>
<PAGE>
Directors' Compensation
Directors are paid a monthly retainer of $750, plus $250 per board
meeting attended. An additional fee of $250 is paid for each committee meeting
attended. Officers who are Directors do not receive fees for services as
Director. Honorary directors are paid $200 per board meeting attended, but are
not paid a retainer.
During 1993, James M. Ungerleider, a director of Washington and the
Savings Bank, was paid fees of $27,500 for services provided as an outside
director representative on a committee that monitors compliance under certain
regulatory agreements and for other compliance services.
During 1993, the Board adopted a retirement plan for outside directors
which will provide benefits aggregating $252,000 to the members of the Board
other than Paul C. Rotondi and Theodore J. Doll upon consummation of the
Merger. See "THE MERGER--Interests of Certain Persons in the Merger."
Summary of Cash and Certain Other Compensation
The following table sets forth, for the fiscal years ended December 31,
1993, 1992 and 1991, the annual and long-term compensation of Washington's
Chief Executive Officer and Chief Operating Officer (the "Named Officers"),
the only two executive officers whose salary and bonus exceeded $100,000
during 1993:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------
Annual Compensation(1) Awards
---------------------- --------------------------------
(a) (b) (c) (d) (f) (g) (i)
Restricted Securities All Other
Name and Stock Underlying Compensation(3)
Principal Position Year Salary ($) Bonus ($) Award(s)(2) ($) Options/SARs (#) ($)
------------------ ---- ---------- --------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul C. Rotondi, . . . . . 1993 $158,317 $29,000 $ -- $ -- $3,879
Chairman and Chief 1992 166,154 2,000 12,750 -- 4,420
Executive Officer 1991 160,000 -- -- --
Theodore J. Doll, . . . . . 1993 148,317 4,000 -- 24,500 877
President and Chief 1992 155,769 2,000 12,750 -- 877
Operating Officer 1991 150,000 -- -- --
- --------------
<FN>
(1) During the three years ended December 31, 1993, no Named Officer received
perquisites (i.e., personal benefits) in excess of the lesser of $50,000
or 10% of such individual's reported salary and bonus.
(2) Restricted Stock Awards ("RSA") are made under Washington's Management
Recognition and Retention Plan (the "MRP") and are payable in shares of
Washington Common Stock at the expiration of the vesting period
established by the Salaries Committee of the Board. Under the MRP, no
awards will vest in less than five years from the date of grant.
Dividends are paid to the executives on all RSAs at the same time and at
the same rate as all other holders of Washington Common Stock. The number
and value of aggregate RSA holdings for the Named Officers at December
31, 1993 are as follows: Paul C. Rotondi, 2,400 shares with a value of
$31,200 and Theodore J. Doll, 2,400 shares with a value of $31,200. The
foregoing values are based on the closing price of Washington Common
Stock on the NASDAQ on December 31, 1993 ($13.00 per share).
(3) Represents premiums paid on group term life insurance greater than
$50,000. Pursuant to SEC regulations, information is not provided with
respect to 1991.
</FN>
</TABLE>
66
<PAGE>
<PAGE>
Stock Options
The following table contains information regarding the grant of stock
options (all of which were granted under Washington's employee stock option
plan (the "Employee Plan")) to the Named Officers during the year ended
December 31, 1993. In addition, in accordance with rules of the Securities and
Exchange Commission (the "SEC"), the following table sets forth the
hypothetical gains or "option spreads" that would exist for such options,
assuming rates of annual compound price appreciation in Washington's Common
Stock of 5% and 10% from the date the options were granted to their final
expiration date.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(1)
------------------------------------------------------------------------ -------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
---- ------------ ------------- ------------ ----------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Paul C. Rotondi . . . . -- -- -- -- -- --
Theodore J. Doll. . . . 24,500 27.84% $7.25 9/20/2003 $115,559 $292,850
- ------------
<FN>
(A) The Employee Plan is administered by the Salaries Committee of
Washington's Board of Directors. That committee determines which
employees will receive options, the number of options to be granted and
the terms of option grants. Options generally are granted at exercise
prices equal to the fair market value of Washington's Common Stock on the
grant date.
(B) No assurances can be given that the market price of Washington's Common
Stock will appreciate over the applicable period or, if such appreciation
does occur, that such appreciation will be greater or less than the
assumed rates set forth above.
</FN>
</TABLE>
Option Exercises and Holdings
None of the Named Officers exercised any of his stock options during the
year ended December 31, 1993. The following table provides data regarding the
number of shares covered by both exercisable and non-exercisable stock options
held by the Named Officers at December 31, 1993. Also reported are the values
for "in-the-money" options, which represent the positive spread between the
exercise prices of existing options and $13.00, the closing sale price of
Washington's Common Stock on December 31, 1993. None of Mr. Rotondi's options
were "in-the-money" on that date.
UNEXERCISED OPTIONS AT FISCAL YEAR END
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY-End (#) SARs at FY-End ($)
-------------------------- ----------------------
Name (d) (e)
(a) Exercisable Unexercisable Exercisable Unexercisable
Paul C. Rotondi ........ 27,200 6,800 -- --
Theodore J. Doll........ -- 24,000 -- $138,000
67
<PAGE>
<PAGE>
Severance Agreement
Washington has entered into a Severance Agreement with Paul Rotondi,
which agreement provides that if at any time following a "Change in Control"
of Washington, Washington or the Saving Bank were to terminate his employment
with Washington or the Savings Bank, for any reason other than for "cause," or
if he were to terminate his own employment following a demotion, loss of
title, office or significant authority, a reduction in annual compensation or
relocation of his principal place of employment, he would be entitled to
receive a payment in an amount equal to three times his average annual
compensation over the five previous years of his employment with the Savings
Bank. If a Change in Control had occurred as of December 31, 1993, followed by
a termination of employment, the amount payable to Mr. Rotondi pursuant to his
severance agreement would have been $507,000. The agreement also provides for
certain retirement benefits in the event of a termination of employment for
reasons other than cause. Certain insurance coverage maintained by the Savings
Bank at the time of any such termination would be continued for a three-year
period. The Merger will constitute a "Change in Control" under the terms of
the Severance Agreement. See "THE MERGER--Interests of Certain Persons in the
Merger." Mr. Rotondi has agreed to reduce his benefits such that they will not
result in an excise tax being imposed under certain provisions of the Internal
Revenue Code.
Retirement Benefits
The Savings Bank maintains and funds a tax-qualified, non-contributory
defined benefit pension plan for its employees, which is administered by The
Retirement System Group, Inc. All salaried employees age 21 or older who have
completed at least one year of service participate in the plan. The plan
provides an annual benefit payable at age 65 equal to 2% of the employee's
"Average Annual Salary," multiplied by years of credited service, without
offset for Social Security benefits. The calculation of Average Annual Salary
is essentially based on the "Salary" reported in the Summary Compensation
Table. The average represents the average of the highest 36 months of base
salary within the final 120 months. The maximum annual benefit is 50% of the
Average Annual Salary. A participant who at the time of his or her termination
of service (for reasons other than death) has completed at least five years of
vested service shall be eligible for a vested retirement benefit. A
participant who at the time of his or her termination of service shall be
eligible for an early retirement benefit provided (a) he or she has attained
age sixty, or (b) he or she has completed thirty or more years of vested
service with the employer. Only that compensation and credited service accrued
by the participant prior to his or her termination of service is used to
compute his or her retirement benefit. A participant who incurs a termination
of service prior to his or her normal retirement date and after having
completed at least ten years of vested service is eligible for a retirement
benefit (as defined by the Retirement Plan).
The table below illustrates annual benefits under the plan assuming
retirement at age 65 during 1993, at various levels of compensation and years
of credited service. The amount of benefits shown are on a "straight life"
basis (i.e., payment during the life of the employee with no continuing
payments following the employee's death).
Amount of Annual Retirement Benefit
With Credited Years of Service
Annual ------------------------------------
Compensation 15 Years 20 Years 25 Years
------------- -------- -------- --------
$ 40,000 . . . . . . . . . . . . . $12,000 $16,000 $20,000
60,000 . . . . . . . . . . . . . 18,000 24,000 30,000
80,000 . . . . . . . . . . . . . 24,000 32,000 40,000
100,000 . . . . . . . . . . . . . 30,000 40,000 50,000
120,000 . . . . . . . . . . . . . 36,000 48,000 60,000
140,000 . . . . . . . . . . . . . 42,000 56,000 70,000
160,000 . . . . . . . . . . . . . 48,000 64,000 80,000
180,000 . . . . . . . . . . . . . 54,000 72,000 90,000
200,000 . . . . . . . . . . . . . 60,000 80,000 100,000
As of December 31, 1993, Messrs. Rotondi and Doll had 5 and 4 years of
credited service, respectively. Mr. Doll would have 20 years of credited
service at age 65 if he were to remain in the Savings Bank's employ until age
65.
Compensation Report
Washington's Board maintains a Salaries Committee which functions as a
compensation committee. Pursuant to SEC rules designed to enhance disclosure
of corporate policies regarding executive compensation, Washington has
68
<PAGE>
<PAGE>
set forth below a report of its Salaries Committee regarding compensation
policies as they affect Mr. Rotondi and Washington's other executive officers.
Washington's compensation program has three parts: a short-term
compensation program, a standard set of benefits and a long-term component.
The short-term element focuses upon the executive officer's salary and is
designed to provide appropriate reimbursement for services rendered. Executive
officers are also provided with standard benefits, including various health
and life insurance benefits, which are generally provided to all employees and
which Washington believes are comparable to those received by executive
officers at other comparable financial institutions. The long-term benefit
component has been reflected in ESOP participation and the grants of stock
options and management recognition awards to individual executive officers.
In order to restrict costs, the salaries of Messrs. Rotondi and Doll have
remained relatively constant during the last 3 years. Mr. Rotondi was awarded
a performance bonus of $25,000 during 1993 in recognition of his contributions
to Washington's improved performance.
The salaries of each of the other executive officers are based on their
experience with Washington, their contributions to Washington and an analysis
of salaries paid to executive officers at other comparable financial
institutions.
Stock options and management recognition awards have been granted to
executive officers based on their individual performance and the performance
of Washington. Option prices have generally been set at the current fair
market value on the date of grant. Accordingly, such options will gain
appreciable value if, and only if, the market value of Washington's Common
Stock increases subsequent to the date of grant. Executive officers have also
been granted RSAs, which become vested over a period of time. When shares
become vested and are actually distributed, the recipient also receives an
amount equal to accrued dividends. If employment terminates prior to the
shares being earned, such shares will be forfeited. Washington believes that
the grant of stock options and RSAs provides incentives to executives to
maximize the Washington's performance and to assure continued affiliation with
the Washington.
The Board believes that an appropriate compensation program can help in
fostering positive growth for Washington if it reflects an appropriate balance
between providing rewards to executive officers while at the same time
effectively controlling cash compensation costs. The Merger Agreement
precludes Washington from making any significant changes in executive
compensation levels. If, for any reason, the Merger Agreement is terminated,
the Salaries Committee will continue to monitor Washington's compensation
program to assure that the above-mentioned balance is maintained.
By the Salaries Committee of the Board of Directors:
Wilson A. Britten, Chairman
Robert A. Hand
Duncan M. Lasher
69
<PAGE>
<PAGE>
Performance Graph
The following chart compares Washington's cumulative total stockholder
return (on a dividend reinvested basis) over the past five years with the
NASDAQ Composite Index for U.S. Companies and the SNL Thrift Index.
INDEX OF TOTAL RETURNS
Year End
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
- --------------------------------------------------------------------------
NASDAQ Composite 100.0 121.24 102.96 165.21 192.10 219.21
Index
SNL Thrift Index 100.0 98.62 62.33 96.81 135.07 172.77
Washington 100.0 56.12 18.72 28.33 52.61 105.23
Compensation Committee Interlocks and Insider Participation
Washington's Salaries Committee consists of Wilson Britten (Chairman),
Duncan M. Lasher and Robert A. Hand. Theodore Doll, Jr. was a member of the
Salaries Committee for the first twelve days of 1993 and is also an "ex
officio" member of that Committee. Mr. Doll is the father of Theodore J. Doll,
Washington's President and Chief Operating Officer.
Theodore J. Doll is one of about 40 limited partners of a partnership
(the "Partnership") that is the obligor on the Savings Bank's largest
non-performing asset, a loan on which the Savings Bank currently has a first
mortgage and an assignment of rents (the "Bankruptcy Loan"). The Bankruptcy
Loan is currently in non-accrual status. Mr. Doll's equity interest in the
Partnership is less than 5% and he plays no role in the management or
decision-making with respect to that entity. Mr. Doll acquired his equity
interest, and the Bankruptcy Loan was made to the Partnership, at a time when
Mr. Doll was neither a director or officer of Washington (although his father
was a director of Washington when the Bankruptcy Loan was extended to the
Partnership and remains a director at this time).
During 1993, a bankruptcy petition was filed by the Partnership. That
petition was dismissed on November 10, 1993. Pursuant to a court order, rental
payments that would otherwise have been paid to the Savings Bank in accordance
with its assignment of rents were released to the City of Philadelphia to pay
a substantial portion of property tax arrearages. Rental payments were resumed
in December 1993. The interest income which would have been recorded had the
rental payments been received and the actual income recorded approximated
$580,000 and $295,000, respectively, for the year ended December 31, 1993.
The balance of the Bankruptcy Loan at March 31, 1994 was $9.2 million.
During the three years ended March 31, 1994, the largest indebtedness under
the Bankruptcy Loan was $9.3 million. The Bankruptcy Loan had an interest rate
of 10% per annum; however, the Savings Bank is currently involved in
negotiations which may result in a restructuring of the Bankruptcy Loan.
70
<PAGE>
<PAGE>
The Bankruptcy Loan is secured by an approximately 450,000 square foot
building which is rented to the Internal Revenue Service (the "IRS") under a
lease which is cancelable by the IRS upon 60 days' notice. The building is
situated in northeast Philadelphia in a site with two other IRS facilities.
The IRS announced in early December 1993 that this site will be converted into
a customer service center with a potential loss of 2,500 permanent and
seasonal jobs. It has been reported in the press that the process of reducing
the workforce at the northeast Philadelphia center will begin in 1996 and be
completed in 1999. The effect, if any, of the conversion and reduction in
workforce on the building securing this loan is unknown at this time.
The Savings Bank has loans outstanding with certain executive officers,
directors and their affiliates, which loans were made in the ordinary course
of business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. In the opinion of management, these loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in Washington's proxy materials for
next year's annual meeting of stockholders (assuming that the Merger has not
been consummated), any stockholder proposal to take action at such meeting
must be received at 609 Washington Street, Hoboken, New Jersey 07030, no later
than December , 1994. Any such proposals shall be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934, as
amended.
ADVANCE NOTICE OF CERTAIN MATTERS TO BE CONDUCTED
AT AN ANNUAL MEETING
The By-laws of Washington provide an advance notice procedure for certain
business, or nominations to the Board of Directors, to be brought before an
annual meeting. In order for a stockholder to properly bring business before
an annual meeting or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of Washington not less than 60 days
before the date fixed for such meeting; provided, however, that in the event
that less than 70 days notice or prior disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The notice must include the stockholder's
name, address and number of shares owned by the stockholder and must describe
briefly the proposed business, the reasons for bringing the business before
the annual meeting, and any material interest of the stockholder in the
proposed business. In the case of nominations to the Board, certain
information regarding the nominee must be provided.
OTHER MATTERS
The management of Washington is not aware of any business to come before
the Annual Meeting other than the matters described above in this Proxy
Statement-Prospectus. However, if any other matters should come before the
Annual Meeting, it is intended that the proxies solicited hereby will be voted
with respect to those other matters in accordance with the judgment of the
persons voting the proxies.
LEGAL OPINION
The validity of the HUBCO Preferred Stock issuable in connection with the
Merger will be passed upon for HUBCO by Clapp & Eisenberg, One Newark Center,
Newark, New Jersey 07102.
EXPERTS
The consolidated financial statements of HUBCO and subsidiaries as of and
for the years ended December 31, 1993, 1992 and 1991 incorporated by reference
in this Proxy Statement-Prospectus have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
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The consolidated financial statements of Washington as of and for the
years ended December 31, 1993, 1992 and 1991 incorporated by reference in this
Proxy Statement-Prospectus and included in the Annual Report to Stockholders
which accompanies this Proxy Statement-Prospectus have been audited by Coopers
& Lybrand, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said report.
The consolidated financial statements of Statewide as of March 31, 1993
and 1992, and for each of the three years in the period ended March 31, 1993
included in this Proxy Statement-Prospectus, have been audited by Deloitte &
Touche, independent auditors, as stated in their report appearing herein
(which report expresses an unqualified opinion and includes explanatory
paragraphs regarding the restatement of 1993 and 1992 financial statements and
matters regarding regulatory compliance), and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
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APPENDIX A
AGREEMENT AND
PLAN OF MERGER
among
HUBCO, INC.
and
HUDSON UNITED BANK
and
WASHINGTON BANCORP., INC.
and
WASHINGTON SAVINGS BANK
Dated: November 8, 1993
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of November 8, 1993
("Agreement"), is among HUBCO, Inc. ("Hubco"), a New Jersey corporation and
registered bank holding company, Hudson United Bank (the "Bank"), a New Jersey
chartered commercial banking corporation, wholly-owned by Hubco, Washington
Bancorp, Inc., a Delaware corporation ("Washington") and registered bank
holding company, and Washington Savings Bank, a New Jersey chartered stock
savings bank, wholly owned by Washington (the "Savings Bank").
WHEREAS, Hubco desires to acquire Washington and Washington's Board of
Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Washington and its
stockholders. The acquisition will be accomplished by merging Washington with
and into Hubco with Hubco surviving and Washington shareholders receiving the
consideration hereinafter set forth. Immediately after the merger of
Washington into Hubco, the Savings Bank shall be converted into a commercial
bank and then merged with and into the Bank with the Bank surviving.
WHEREAS, the Boards of Directors of Washington, Hubco, the Bank and
Savings Bank have duly adopted and approved this Agreement and the Board of
Directors of Washington has directed that it be submitted to Washington's
shareholders for approval.
WHEREAS, simultaneously with the execution of this Agreement, Washington
is issuing an option to Hubco to purchase 765,000 shares of the authorized and
unissued Washington Common Stock (as hereinafter defined) at an option price
of $11.50 per share, subject to the terms and conditions set forth in the
Option Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereto hereby
agree as follows:
ARTICLE I--THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereafter defined), Washington shall be merged with
and into Hubco (the "Merger") in accordance with the Delaware General
Corporation Law and the New Jersey Business Corporation Act and Hubco shall be
the surviving corporation (the "Surviving Corporation").
1.2. Effect of the Merger. At the Effective Time, the Surviving
Corporation shall be considered the same business and corporate entity as each
of Hubco and Washington and thereupon and thereafter, all the property,
rights, privileges, powers and franchises of each of Hubco and Washington
shall vest in the Surviving Corporation and the Surviving Corporation shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of Hubco and Washington and shall have
succeeded to all of each of their relationships, as fully and to the same
extent as if such property, rights, privileges, powers, franchises, debts,
obligations, duties and relationships had been originally acquired, incurred
or entered into by the Surviving Corporation. In addition, any reference to
either of Hubco and Washington in any contract or document, whether executed
or taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Corporation if not inconsistent with the other
provisions of the contract or document; and any pending action or other
judicial proceeding to which either of Hubco or Washington is a party, shall
not be deemed to have abated or to have discontinued by reason of the Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order
or decree may be rendered for or against it that might have been rendered for
or against either of Hubco or Washington if the Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time, the
certificate of incorporation of Hubco as it exists at the Effective Time shall
be the certificate of incorporation of the Surviving Corporation and shall not
be amended by this Agreement or the Merger but thereafter may be amended as
provided by law.
1.4. By-laws. As of the Effective Time, the By-laws of Hubco shall be the
By-laws of the Surviving Corporation until otherwise amended as provided by
law.
1.5. Directors and Officers. As of the Effective Time, the directors and
officers of Hubco shall become the directors and officers of the Surviving
Corporation.
1.6. Effective Time and Closing. The Merger shall become effective (and
be consummated) upon the later of the filing of (a) a certificate of merger
("the Delaware Certificate of Merger"), in form and substance satisfactory to
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Hubco and Washington, with the Secretary of State of the State of Delaware, or
(b) a certificate of merger (the "New Jersey Certificate of Merger"), in form
and substance satisfactory to Hubco and Washington, with the Secretary of
State of the State of New Jersey. The term "Effective Time" shall mean the
close of business on the first day when the Certificates of Merger in both New
Jersey and Delaware have been so filed. A closing (the "Closing") shall take
place prior to the Effective Time at 10:00 a.m., 10 days (or the first
business day thereafter) following the receipt of all necessary regulatory and
governmental approvals and consents and the expiration of all statutory
waiting periods in respect thereof and the satisfaction or waiver of all of
the conditions to the consummation of the Merger specified in Article VI
hereof (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at the offices of
Clapp & Eisenberg, P.C., One Newark Center, Newark, New Jersey, or at such
other place, time or date as Hubco and Washington may mutually agree upon.
Immediately following the Closing, the Delaware Certificate of Merger shall be
filed with the Delaware Secretary of State and the New Jersey Certificate of
Merger shall be filed with the New Jersey Secretary of State.
1.7 The Bank Merger. Immediately following the Effective Time, the
Savings Bank shall be converted from a savings bank to a commercial bank and
then merged with and into the Bank (the "Bank Merger") in accordance with the
provisions of the New Jersey Banking Act of 1948, as amended (the "Banking
Act"). In the Bank Merger the Bank shall be the surviving bank (the "Surviving
Bank"). Upon the consummation of the Bank Merger, the separate existence of
the Savings Bank (as converted) shall cease and the Surviving Bank shall be
considered the same business and corporate entity as each of the Savings Bank
and the Bank and all of the property, rights, privileges, powers and
franchises of each of the Savings Bank and the Bank shall vest in the
Surviving Bank and the Surviving Bank shall be deemed to have assumed all of
the debts, liabilities, obligations and duties of each of the Savings Bank and
the Bank and shall have succeeded to all or each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Bank. Upon the consummation of the Bank Merger, the certificate of
incorporation and by-laws of the Bank shall become the certificate of
incorporation and by-laws of the Surviving Bank and the officers and directors
of the Bank shall be the officers and directors of the Surviving Bank, except
that as hereafter set forth in Section 5.12, two directors of the Savings Bank
shall be added to the Board of Directors of the Bank and the other directors
of the Savings Bank shall become members of the advisory board of the Bank.
Furthermore, consistent with Section 5.12, the Board of Directors of the Bank
shall appoint the officers of the Savings Bank as officers of the Bank.
Following the execution of this Agreement, the Savings Bank shall execute and
file a conversion application and the Savings Bank and the Bank shall execute
and deliver a merger agreement (the "Bank Merger Agreement"), both in form and
substance reasonably satisfactory to the parties hereto, for delivery to the
Commissioner of Banking of the State of New Jersey and the Federal Deposit
Insurance Corporation (the "FDIC") for approval of the Bank Merger.
ARTICLE II--CONVERSION OF WASHINGTON SHARES
2.1. Conversion of Washington Common Stock. Each share of common stock,
par value $.10 per share, of Washington ("Washington Common Stock"), issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as hereinafter defined) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted as follows:
(a) Exchange Ratio and Cash Election. Subject to the other provisions
of this Section 2.1, each share of Washington Common Stock issued and
outstanding immediately prior to the Effective Time (excluding any
treasury shares, shares held by Hubco and Dissenting Shares) shall be
converted at the Effective Time into (i) the right to receive .6708
shares (the "Exchange Ratio") of Series A Preferred Stock, stated value
$24.00, of Hubco (the "Hubco Preferred Stock"), each full share of Hubco
Preferred Stock to be convertible into one share (the "Conversion Ratio")
of common stock, without par value ("Hubco Common Stock"), of Hubco, the
terms and conditions of such Hubco Preferred Stock to be substantially as
specified in Exhibit 2.1 annexed hereto, or (ii) the right to receive
$16.10 in cash, without interest (the "Per Share Cash Amount"), or (iii)
the right to receive a combination of shares of Hubco Preferred Stock and
cash determined in accordance with subparagraph (d) of this Section 2.1;
provided, however, that, in any event, if between the date of this
Agreement and the Effective Time the outstanding shares of Hubco Common
Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares,
the Conversion Ratio shall be correspondingly adjusted to reflect such
stock dividend, stock split, reclassification, recapitalization,
combination or exchange of shares. After the Effective Time, all such
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shares of Washington Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist,
and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration (as
defined in Section 2.2(b)). The holders of such certificates previously
evidencing such shares of Washington Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect
to such shares of Washington Common Stock except as otherwise provided
herein or by law. Such certificates previously evidencing such shares of
Washington Common Stock shall be exchanged for (i) certificates
evidencing shares of Hubco Preferred Stock issued in accordance with the
allocation procedures of this Section 2.1 and/or (ii) cash payable in
accordance with the allocation procedures of this Section 2.1, in each
case upon the surrender of such certificates in accordance with the
provisions of Section 2.2, without interest. No fractional shares of
Hubco Preferred Stock may be issued, and, in lieu thereof, a cash payment
shall be made pursuant to Section 2.2(e).
(b) Ratio of Hubco Preferred Stock to Cash. Subject to Section
2.1(k), the number of shares of Washington Common Stock to be converted
into the right to receive cash in the Merger (the "Cash Election Number")
shall be equal to 49% (the "Cash Percentage") of the number of shares of
Washington Common Stock outstanding immediately prior to the Effective
Time. Subject to Section 2.1(k), the number of shares of Washington
Common Stock to be converted into the right to receive Hubco Preferred
Stock in the Merger (the "Stock Election Number") shall be equal to 51%
(the "Stock Percentage") of the number of shares of Washington Common
Stock outstanding immediately prior to the Effective Time.
(c) Elections by Holders of Stock or Cash. Subject to the allocation
and election procedures set forth in this Section 2.1, each record holder
immediately prior to the Effective Time of shares of Washington Common
Stock will be entitled (i) to elect to receive cash for all of such
shares (a "Cash Election"), (ii) to elect to receive Hubco Preferred
Stock for all of such shares (a "Stock Election"), or (iii) to indicate
that such record holder has no preference as to the receipt of cash or
Hubco Common Stock for such shares (a "Non-Election"). All such elections
shall be made on a form designed for that purpose (a "Form of Election")
and in form and substance satisfactory to Hubco and Washington. Holders
of record of shares of Washington Common Stock who hold such shares as
nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided that
each such Form of Election covers all the shares of Washington Common
Stock held by each Representative for a particular beneficial owner. For
the purpose of making any allocations required in Sections 2.1(d), 2.1(e)
and 2.1(f), Dissenting Shares (as hereafter defined in Section 2.5) shall
be considered to have made a Cash Election but may not be allocated Hubco
Preferred Stock under Section 2.1(d).
(d) Oversubscription for Cash Election. If the aggregate number of
shares of Washington Common Stock covered by Cash Elections (the "Cash
Election Shares") exceeds the Cash Election Number, all shares of
Washington Common Stock covered by Stock Elections (the "Stock Election
Shares") and all shares of Washington Common Stock covered by
Non-Elections (the "Non-Election Shares") shall be converted into the
right to receive Hubco Preferred Stock, and the Cash Election Shares
shall be converted into the right to receive Hubco Preferred Stock and
cash in the following manner:
each Cash Election share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the
product of (x) the Per Share Cash Amount and (y) a fraction (the
"Cash Fraction"), the numerator of which shall be the Cash Election
Number and the denominator of which shall be the total number of
Cash Election Shares, and (ii) a number of shares of Hubco Preferred
Stock equal to the product of (x) the Exchange Ratio and (y) a
fraction equal to one minus the Cash Fraction.
(e) Oversubscription for Stock Election. If the aggregate number of
Stock Election Shares exceeds the Stock Election Number, all Cash
Election Shares and all Non-Election Shares shall be converted into the
right to receive cash, and all Stock Election Shares shall be converted
into the right to receive Hubco Preferred Stock or te right to receive
cash in the following manner:
(i) the Exchange Agent (as hereinafter defined) will select
from among the holders of Stock Election Shares, by random
selection, a sufficient number of such holders ("Cash Designees")
such that the number of shares of Washington Common Stock held by
the Cash Designees will, when added to the number of Cash Election
Shares and Non-Election Shares, be equal as closely as practicable
to the Cash Election Number, and all such Shares of Washington
Common Stock held by the Cash Designees shall be converted into the
right to receive cash; and
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(ii) the Stock Election Shares not held by Cash Designees shall
be converted into the right to receive Hubco Preferred Stock.
(f) Selection of Non-Election Shares If No Oversubscription. In the
event that neither paragraph (d) nor subparagraph (e) above is
applicable, all Cash Election Shares shall be converted into the right to
receive cash, all Stock Election Shares shall be converted into the right
to receive Hubco Preferred Stock, and the Non-Election Shares shall be
converted into either the right to receive Hubco Preferred Stock or the
right to receive cash by random selection by the Exchange Agent so that
the Stock Election Number and the Cash Election Number equal their
respective percentages of the number of shares of Washington Common Stock
outstanding as closely as possible.
The random selection process to be used by the Exchange Agent
pursuant to paragraphs (e) and (f) of this Section 2.1 will consist of
drawing by lot or such other process (other than pro rata selection) as
the Exchange Agent deems equitable and necessary to effect the
allocations described in such paragraphs. A selection will be disregarded
if, as a consequence, the Stock Election Number or the Cash Election
Number would be exceeded by more than 1,000 shares.
(g) Procedures for Holders' Elections. Elections shall be made by
holders of Washington Common Stock by mailing to the Exchange Agent a
Form of Election. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent by the holder and
accompanied by the certificates representing the shares of Washington
Common Stock as to which the election is being made (or properly
completed, signed and submitted to the Exchange Agent by an appropriate
bank or trust company in the United States or a member of a registered
national securities exchange or the National Association of Securities
Dealers, Inc. (the "NASD")). Hubco will have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted and
to disregard immaterial defects in Forms of Election. The decision of
Hubco (or the Exchange Agent) in such matters shall be conclusive and
binding, provided that Hubco (and the Exchange Agent) does not act
unreasonably. Neither Hubco nor the Exchange Agent will be under any
obligation to, but Hubco and the Exchange Agent may (if they choose to do
so), notify any person of any defect in a Form of Election submitted to
the Exchange Agent. The Exchange Agent shall also make all computations
contemplated by this Section 2.1 and all such computations shall be
conclusive and binding on the holders of Washington Common Stock,
provided that the Exchange Agent does not act unreasonably.
(h) Failure of Holder to Elect. For the purposes hereof, a holder of
Washington Common Stock who does not submit a Form of Election which is
received by the Exchange Agent prior to the Election Deadline (as
hereinafter defined) shall be deemed to have made a Non-Election. If
Hubco or the Exchange Agent shall determine that any purported Cash
Election or Stock Election was not properly made, such purported Cash
Election or Stock Election shall, unless cured by the Election Deadline
(as hereafter defined), be deemed to be of no force and effect and the
shareholder or Representative making such purported Cash Election or
Stock Election shall, for purposes hereof, be deemed to have made a
Non-Election.
(i) Mailing of Election Forms to Holders and Deadline. Hubco and
Washington shall each use its best efforts to mail the Form of Election
to all persons who are holders of record of Washington Common Stock on
the record date for the Stockholders Meeting (as defined in Section 5.7)
and who become holders of Washington Common Stock during the period
between the record date for the Stockholders Meeting and 10:00 a.m. New
York time, on the date ten calendar days prior to the anticipated
Effective Time and to make the Form of Election available to all persons
who become holders of Washington Common Stock subsequent to such day and
no later than the close of business on the Election Deadline. A Form of
Election must be received by the Exchange Agent by the close of business
on the third business day prior to the Closing (the "Election Deadline")
in order to be effective. All elections will be irrevocable.
(j) Treasury Shares and the Like Not Converted. Each share of
Washington Common Stock held in the treasury of Washington and each share
of Washington Common Stock owned by Hubco immediately prior to the
Effective Time shall be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto; provided,
however, that the Washington Common Stock held by the Washington Employee
Stock Ownership Plan and Trust (the "Washington ESOP") and the Washington
Recognition Plan and Trust (the "Washington MRP") shall not be covered by
this paragraph.
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(k) Increase in Stock Election Number Due to Tax Opinion. If the tax
opinion referred to in Section 6.1(d) and to be delivered at the Closing
(The "Tax Opinion") cannot be rendered (as reasonably determined by Clapp
& Eisenberg and concurred in by Lowenstein, Sandler, Kohl, Fisher &
Boylan) as a result of the Merger potentially failing to satisfy
continuity of interest requirements under applicable federal income tax
principles relating to reorganizations under Section 368(a) of the Code
(as hereafter defined in Section 3.8), then the Stock Percentage shall be
automatically increased and the Cash Percentage shall be automatically
decreased to the minimum extent necessary to enable the Tax Opinion to be
rendered.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Hubco shall deposit,
or shall cause to be deposited, with a bank or trust company designated
by Hubco, which may be Hudson United Bank, Trust Department (the
"Exchange Agent"), for the benefit of the holders of shares of Washington
Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates evidencing shares of Hubco Preferred
Stock and cash in such amount that the Exchange Agent possesses such
number of shares of Hubco Preferred Stock and such amount of cash as are
required to provide all of the consideration required to be exchanged by
Hubco pursuant to the provisions of this Article II (such certificates
for shares of Hubco Preferred Stock, together with any dividends or
distributions with respect thereto, and cash being hereinafter referred
to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Hubco Preferred Stock and cash out
of the Exchange Fund in accordance with Section 2.1. Except as
contemplated by Section 2.2(f) hereof, the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable either
before or after the Effective Time, Hubco will instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time evidenced outstanding
shares of Washington Common Stock (other than Dissenting Shares) (the
"Certificates"), (i) a letter of transmittal (which is reasonably agreed
to by Hubco and Washington and shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Hubco may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates evidencing shares of Hubco
Preferred Stock or cash. Upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that number of
whole shares of Hubco Preferred Stock which such holder has the right to
receive in respect of the shares of Washington Common Stock formerly
evidenced by such Certificate in accordance with Section 2.1, (B) cash to
which such holder is entitled to receive in respect of the shares of
Washington Common Stock formerly evidenced by such Certificate in
accordance with Section 2.1, (C) cash in lieu of fractional shares of
Hubco Preferred Stock to which such holder may be entitled pursuant to
Section 2.2(e) and (D) any dividends or other distributions to which such
holder is entitled pursuant to Section 2.2(c), (the shares of Hubco
Preferred Stock, dividends, distributions and cash described in clauses
(A), (B), (C) and (D) being collectively, the "Merger Consideration") and
the Certificate so surrendered shall forthwith be cancelled. In the event
of a transfer of ownership of shares of Washington Common Stock which is
not registered in the transfer records of Washington, a certificate
evidencing the proper number of shares of Hubco Preferred Stock and/or
cash may be issued and/or paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of Washington Common
Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any
time after the Effective Time to evidence only the right to receive upon
such surrender the applicable type and amount of Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of Hubco
Preferred Stock. No dividends or other distributions declared or made
after the Effective Time with respect to Hubco Preferred Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Hubco Preferred
Stock evidenced thereby, and no other part of the Merger Consideration
shall be paid to any such holder, until the holder of such Certificate
shall surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to
the holder of the certificates evidencing shares of Hubco Preferred Stock
issued in exchange therefor, without interest, (i) promptly, the
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amount of any cash payable with respect to a fractional share of Hubco
Preferred Stock to which such holder may have been entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to
such shares of Hubco Preferred Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such shares of Hubco
Preferred Stock. No interest shall be paid on the Merger Consideration.
(d) No Further Rights in Washington Common Stock. All shares of
Hubco Preferred Stock issued and cash paid upon conversion of the shares
of Washington Common Stock in accordance with the terms hereof shall be
deemed to have been issued or paid in full satisfaction of all rights
pertaining to such shares of Washington Common Stock.
(e) No Fractional Shares. No certificates or scrip evidencing
fractional shares of Hubco Preferred Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share
interests will not entitle the owner thereof to vote or to any rights of
a stockholder of Hubco. Cash shall be paid in lieu of fractional shares
of Hubco Preferred Stock, based upon a valuation of $24.00 per whole
share of Hubco Preferred Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Washington Common Stock for
two years after the Effective Time shall be delivered to Hubco, upon
demand, and any holders of Washington Common Stock who have not
theretofore complied with this Article II shall thereafter look only to
Hubco for the Merger Consideration to which they are entitled.
(g) No Liability. Neither Hubco nor the Bank shall be liable to any
holder of shares of Washington Common Stock for any such shares of Hubco
Preferred Stock or cash (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Withholding Rights. Hubco shall be entitled to deduct and
withhold, or cause the Exchange Agent to deduct and withhold, from the
consideration otherwise payable pursuant to this Agreement to any holder
of shares of Washington Common Stock the minimum amounts (if any) that
Hubco is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Hubco, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Washington Common Stock
in respect of which such deduction and withholding was made by Hubco.
2.3. Stock Transfer Books. At the Effective Time, the stock transfer
books of Washington shall be closed and there shall be no further registration
of transfers of shares of Washington Common Stock thereafter on the records of
Washington. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Hubco for any reason shall be converted into the Merger
Consideration.
2.4. Washington Stock Options. At the Effective Time, each outstanding
Stock Option (as defined in Section 3.2) to purchase shares of Washington
Common Stock shall, at the election of the option holder, either be canceled
in accordance with paragraph (a) below, or be converted into a new option in
accordance with paragraph (b) below.
(a) At the Effective Time, each outstanding Stock Option which the
holder elects to have canceled shall be canceled, and each holder of any
such option, whether or not then vested or exercisable, shall receive as
consideration for cancellation, for each share of Washington Common Stock
covered by such option (i) an amount in cash equal to the excess of
$16.10 over the applicable exercise price, or (ii) a fraction of Hubco
Preferred Stock, such number to be the product of (x) the Exchange Ratio
times (y) a fraction, the numerator of which shall be the excess of
$16.10 over the applicable exercise price and the denominator of which
shall be $16.10. No more than 51% of all stock options outstanding at the
Effective Time may be converted to Hubco Preferred Stock. If holders of
more than the applicable number of Stock Options elect Hubco Preferred
Stock, allocation procedures shall be agreed to between Hubco and
Washington.
(b) At the Effective Time, each outstanding Stock Option which the
holder elects to have converted into a new option shall be converted into
an option to purchase shares of Hubco Preferred Stock, with the right to
purchase one share of Washington Common Stock converted into the right to
purchase that number of shares of Hubco Preferred Stock equal to the
Exchange Ratio. The terms and conditions of each replacement option shall
be substantially the same as the terms and conditions of the Stock Option
prior to the Effective Time to the extent practicable, with Hubco and the
Bank substituted for Washington and the Savings Bank and with such other
changes as Hubco and the Bank deem reasonably necessary.
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(c) Forms of election, in form and substance reasonably satisfactory
to Washington and Hubco, shall be distributed to holders of Stock Options
fifteen (15) business days prior to the Closing. If such forms are not
properly completed and returned by a Stock Option holder by the Election
Deadline, such holder shall be deemed to have elected to have his or her
Stock Option canceled and shall be deemed to have elected to receive cash
as specified in paragraph (b) above.
2.5. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, any holder of Washington Common Stock shall have the right to
dissent in the manner provided in Section 262 of the General Corporation Law
of the State of Delaware (the "GCL"), and if all necessary requirements of
Section 262 of the GCL are met, such shares shall be entitled to payment of
the fair value of such shares in accordance with the provisions of Section 262
of the GCL ("Dissenting Shares"), provided, however, that (i) if any holder of
Dissenting Shares shall subsequently withdraw his demand for appraisal of such
shares within 60 days of the Effective Time, or, with the written consent of
the Surviving Corporation, any time thereafter, or (ii) if any holder fails to
follow the procedures for establishing his entitlement to appraisal rights as
provided in such Section 262 of the GCL, or (iii) if within the time periods
specified in Section 262 of the GCL, any holder or holders of the Dissenting
Shares fails to institute a judicial proceeding to determine the rights of the
holders of Dissenting Shares and to fix the fair value of the Dissenting
Shares, the right to appraisal of such shares shall be forfeited and such
shares shall thereupon be deemed to have been converted into the right to
receive and to have become exchangeable for, as of the Effective Time, the
Merger Consideration and if such event occurs prior to the Election Deadline,
the holder may make an election under Section 2.1.
2.6. Hubco Common Stock. The shares of Hubco Common Stock outstanding or
held in treasury immediately prior to the Effective Time shall not be effected
by the Merger but shall be the same number of shares of the Surviving
Corporation.
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF WASHINGTON
References herein to "Washington Disclosure Schedules" shall mean all of
the disclosure schedules required by this Article III, dated as of the date
hereof and referenced to the specific sections and subsections of Article III
of this Agreement, which have been delivered on the date hereof by Washington
to Hubco. Washington hereby represents and warrants to Hubco as follows:
3.1. Corporate Organization.
(a) Washington is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Washington has
the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and
is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the
failure to be so licensed, qualified or in good standing would not have a
material adverse effect on the business, operations, assets or financial
condition of Washington and its Subsidiary (as defined below), taken as a
whole. Washington is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHCA").
(b) The Savings Bank and 609 Washington Street Corp. ("609 WC") are
the only Subsidiaries of Washington. When used with reference to
Washington, the term "Subsidiary" means any corporation, partnership,
joint venture or other legal entity in which Washington, directly or
indirectly, owns at least a 50% stock or other equity interest or for
which Washington, directly or indirectly, acts as a general partner. The
Savings Bank is a state chartered savings bank duly organized and validly
existing in stock form and in good standing under the laws of the State
of New Jersey. All eligible accounts of depositors issued by the Savings
Bank are insured by the Bank Insurance Fund of the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted by law.
The Savings Bank and 609 WC each has the corporate power and authority to
own or lease all of its properties and assets and to carry on its
business as it is now being conducted and is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed,
qualified or in good standing would not have a material adverse effect on
the business, operations, assets or financial condition of Washington
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and the Savings Bank, taken as a whole. The Washington Disclosure
Schedule sets forth true and complete copies of the Certificate of
Incorporation and By-laws, as in effect on the date hereof, of Washington
and the Savings Bank. True and complete copies of the Certificate of
Incorporation and By-laws, as in effect on the date hereof, of 609 WC
shall be delivered by Washington to Hubco promptly. Except as set forth
in Disclosure Schedule 3.1(b) and other than the Savings Bank and 609 WC,
Washington does not own or control, directly or indirectly, any equity
interest in any corporation, company, association, partnership, joint
venture or other entity.
3.2. Capitalization. The authorized capital stock of Washington consists
of 6,000,000 shares of Washington Common Stock and 3,000,000 shares of
preferred stock, par value $.10 per share ("Washington Preferred Stock"). As
of the date hereof, there are 2,307,187 shares of Washington Common Stock
issued and outstanding. No shares of Washington Preferred Stock are issued and
outstanding. As of the date hereof, there are 172,500 shares of Washington
Common Stock issuable upon exercise of outstanding stock options granted
pursuant to the Washington Incentive Stock Option Plan (the "Option Plan") and
50,313 shares of Washington Common Stock issuable upon exercise of outstanding
stock options granted pursuant to the Option Plan for Outside Directors (the
"Directors Option Plan") (the Option Plan and the Directors Option Plan are
referred to in the aggregate as the "Washington Option Plans" and options
outstanding thereunder are referred to in the aggregate as the outstanding
"Stock Options"). The Washington Disclosure Schedule sets forth true and
complete copies of the Washington Option Plans and a true and complete list of
each outstanding Stock Option issued pursuant thereto, and a true and complete
copy of the Washington ESOP and the Washington MRP and a true and complete
list of all grants under the Washington MRP. Promptly after execution of this
Agreement, Washington shall provide to Hubco copies of all grant agreements or
written evidence of such grants reflecting all options granted under the
Washington Option Plans and all awards granted under the Washington MRP. All
issued and outstanding shares of Washington Common Stock, and all issued and
outstanding shares of capital stock of the Savings Bank, have been duly
authorized and validly issued, are fully paid, and nonassessable. The
authorized capital stock of the Savings Bank consists of 20,000,000 shares of
common stock $2.00 par value. All of the outstanding shares of capital stock
of the Savings Bank are owned by Washington and are free and clear of any
liens, encumbrances, charges, restrictions or rights of third parties. Except
for the options issued under the Washington Option Plans, the Option granted
to Hubco pursuant to the Stock Option Agreement, dated the date hereof, and
obligations of Washington and the Savings Bank under the Washington ESOP and
the Washington MRP, neither Washington nor the Savings Bank has granted or is
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the transfer, purchase,
subscription or issuance of any shares of capital stock of Washington or the
Savings Bank or any securities representing the right to purchase, subscribe
or otherwise receive any shares of such capital stock or any securities
convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of Washington, Washington and the
Savings Bank have the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby in accordance with the terms hereof. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of
Washington in accordance with the Certificate of Incorporation of
Washington and applicable laws and regulations and by the Board of
Directors of the Bank in accordance with its certificate of incorporation
and applicable laws and regulations. Except for such approvals, no other
corporate proceedings on the part of Washington or the Savings Bank are
necessary to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Washington and the
Savings Bank, and constitutes valid and binding obligations of Washington
and the Savings Bank, enforceable against Washington and the Savings Bank
in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
Washington or the Savings Bank, nor the consummation by Washington or the
Savings Bank of the transactions contemplated hereby in accordance with
the terms hereof, or compliance by Washington or the Savings Bank with
any of the terms or provisions hereof, will (i) violate any provision of
Washington's or the Savings Bank's Certificate of Incorporation or other
governing instrument or By-laws, (ii) assuming that the consents and
approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Washington, the Savings Bank or 609 WC or any of their
respective properties or assets, or (iii)
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except as set forth in the Washington Disclosure Schedule, violate,
conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the respective
properties or assets of Washington or the Savings Bank under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which Washington or the Savings Bank is a party, or by
which they or any of their respective properties or assets may be bound
or affected except, with respect to (ii) and (iii) above, such as
individually or in the aggregate will not have a material adverse effect
on the business, operations, assets or financial condition of Washington
and the Savings Bank, taken as a whole, and which will not prevent or
delay the consummation of the transactions contemplated hereby. Except
for consents and approvals of or filings or registrations with or notices
to the Board of Governors of the Federal Reserve System (the "FRB"),
FDIC, the New Jersey Department of Banking ("Department"), the New Jersey
Department of Environmental Protection and Energy ("DEPE"), the SEC, the
Secretary of State of the State of Delaware, other applicable government
authorities, and the stockholders of Washington, no consents or approvals
of or filings or registrations with or notices to any third party or any
public body or authority are necessary on behalf of Washington or the
Savings Bank in connection with (x) the execution and delivery by
Washington of this Agreement and (y) the consummation by Washington of
the Merger and the other transactions contemplated hereby.
3.4. Financial Statements.
(a) The Washington Disclosure Schedule sets forth copies of the
consolidated statements of condition of Washington as of December 31,
1992 and 1991, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for the periods ended December 31,
in each of the three years 1990 through 1992, in each case accompanied by
the audit report of Coopers & Lybrand, independent public accountants
with respect to Washington, and the unaudited consolidated statements of
condition of Washington as of June 30, 1993 and June 30, 1992 and the
related unaudited consolidated statements of income and cash flows for
the six months then ended as reported in Washington's Quarterly Report on
Form 10-Q, filed with the SEC under the Securities Exchange Act of 1934,
as amended ("1934 Act") (collectively, the "Washington Financial
Statements"). The Washington Financial Statements (including the related
notes) have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved (except as may be indicated therein or in the notes thereto),
and fairly present the consolidated financial condition of Washington as
of the respective dates set forth therein, and the related consolidated
statements of income, changes in stockholders' equity and cash flows
fairly present the results of the consolidated operations, changes in
stockholders' equity and cash flows of Washington for the respective
periods set forth therein.
(b) The books and records of Washington and the Savings Bank are
being maintained in material compliance with applicable legal and
accounting requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved
against in the Washington Financial Statements (including the notes
thereto), as of June 30, 1993, neither Washington nor the Savings Bank or
any other Subsidiary of Washington had any liabilities, whether absolute,
accrued, contingent or otherwise, material to the business, operations,
assets or financial condition of Washington and the Savings Bank, taken
as a whole which were required by GAAP (consistently applied) to be
disclosed in Washington's consolidated statement of condition as of June
30, 1993 or the notes thereto. Since June 30, 1993, Washington and the
Savings Bank have not incurred any liabilities except in the ordinary
course of business and consistent with prudent banking practice, except
as related to the transactions contemplated by this Agreement and the
adoption of the Washington Savings Bank Deferred Compensation Plan for
Outside Directors.
(d) The Merger contemplated by this Agreement will not trigger a
distribution from the special liquidation account established by the
Savings Bank in the conversion to stock form.
3.5. Broker's and Other Fees. Except for Capital Consultants of
Princeton, Inc., neither Washington or the Savings Bank nor any of their
directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement. The agreement with
Capital Consultants of Princeton, Inc. is set forth in the Washington
Disclosure Schedule. There are no fees (other than time charges billed at
usual and customary rates) payable to any consultants, including lawyers
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and accountants, in connection with this transaction or which would be
triggered by consummation of this transaction or the termination of the
services of such consultants by Washington or the Savings Bank.
3.6. Absence of Certain Changes or Events.
(a) There has not been any material adverse change in the business,
operations, assets or financial condition of Washington and the Savings
Bank or any other Subsidiary of Washington, taken as a whole, since June
30, 1993 and to the best of Washington's knowledge, no facts or condition
exists which Washington believes will cause such a material adverse
change in the future.
(b) Except as set forth in the Washington Disclosure Schedule,
neither Washington nor the Savings Bank has taken or permitted any of the
actions set forth in Section 5.2 hereof between June 30, 1993 and the
date hereof and, except for execution of this Agreement, Washington has
conducted its business only in the ordinary course, consistent with past
practice.
3.7. Legal Proceedings. Except as disclosed in the Washington Disclosure
Schedule, and except for ordinary routine litigation incidental to the
business of Washington or the Savings Bank, neither Washington nor the Savings
Bank is a party to any, and there are no pending or, to the best of
Washington's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against Washington or the Savings Bank which, if decided adversely to
Washington or the Savings Bank, would have a material adverse effect on the
business, operations, assets or financial condition of Washington and the
Savings Bank taken as a whole. Except as disclosed in the Washington
Disclosure Schedule, neither Washington nor the Savings Bank is a party to any
order, judgment or decree entered in any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Washington and the Savings Bank have duly filed (and until the
Effective Time will so file) all returns, declarations, reports,
information returns and statements ("Returns") required to be filed by
them in respect of any federal, state and local taxes (including
withholding taxes, penalties or other payments required) and has duly
paid (and until the Effective Time will so pay) all such taxes due and
payable, other than taxes or other charges which are being contested in
good faith (and disclosed to Hubco in writing). Washington and the
Savings Bank have established (and until the Effective Time will
establish) on their books and records reserves that are adequate for the
payment of all federal, state and local taxes not yet due and payable,
but are incurred in respect of Washington or the Savings Bank through
such date. The Washington Disclosure Schedule identifies the federal
income tax returns of Washington and the Savings Bank which have been
examined by the Internal Revenue Service (the "IRS") within the past six
years. No deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. The Washington Disclosure
Schedule identifies the applicable state income tax returns of
Washington, the Savings Bank and any other Subsidiaries of Washington
which have been examined by the applicable authorities within the past
six years. No deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. To the best knowledge of
Washington, there are no audits or other administrative or court
proceedings presently pending nor any other disputes pending with respect
to, or claims asserted for, taxes or assessments upon Washington or the
Savings Bank, nor has Washington or the Savings Bank given any currently
outstanding waivers or comparable consents regarding the application of
the statute of limitations with respect to any taxes or Returns.
(b) Except as set forth in the Washington Disclosure Schedule,
neither Washington, the Savings Bank or any other Subsidiary of
Washington (i) has requested any extension of time within which to file
any Return which Return has not since been filed, (ii) is a party to any
agreement providing for the allocation or sharing of taxes, (iii) is
required to include in income any adjustment pursuant to Section 481(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), by reason
of a voluntary change in accounting method initiated by Washington or the
Savings Bank (nor does Washington have any knowledge that the IRS has
proposed any such adjustment or change of accounting method) or (iv) has
filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply.
3.9. Employee Benefit Plans.
(a) Except as disclosed in the Washington Disclosure Schedule,
neither Washington, the Savings Bank or any other Subsidiary of
Washington maintains or contributes to any "employee pension benefit
plan" (the "Washington Pension Plans"), as such term is defined in
Section 3 of the Employee Retirement Income Security
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Act of 1974, as amended ("ERISA"), "employee welfare benefit plan" (the
"Washington Welfare Plans"), as such term is defined in Section 3 of
ERISA, stock option plan, stock purchase plan, deferred compensation
plan, severance plan, bonus plan, employment agreement or other similar
plan, program or arrangement. Neither Washington nor the Savings Bank
has, since September 2, 1974, contributed to any "Multiemployer Plan", as
such term is defined in Section 3(37) of ERISA.
(b) The present value of all accrued benefits under each of the
Washington Pension Plans subject to Title IV of ERISA did not, as of the
latest valuation date, exceed the then current value of the assets of
such plans allocable to such accrued benefits, based upon the actuarial
assumptions then utilized for such Plans. The actuarial assumptions then
utilized for such plans were reasonable and appropriate as of the last
valuation date and reflect then current market conditions.
(c) Each of the Washington Pension Plans is intended to be a
qualified plan within the meaning of Section 401(a) of the Code and has
been determined by the IRS to be so qualified, and Washington is not
aware of any fact or circumstance which would adversely affect the
qualified status of any such plan.
(d) During the last five years, the Pension Benefit Guaranty
Corporation has not asserted any claim for liability against Washington
or the Savings Bank which has not been paid in full.
(e) Each of the Washington Pension Plans and each of the Washington
Welfare Plans has been operated in compliance in all material respects
with the provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder, and all other applicable
governmental laws and regulations.
(f) Neither Washington nor the Savings Bank, nor, to the best
knowledge of Washington, any trustee, fiduciary or administrator of any
Washington Pension Plan or Washington Welfare Plan or any trust created
thereunder, has engaged in a prohibited transaction, as such term is
defined in Section 4975 of the Code, which could subject Washington or
the Savings Bank, or, to the best knowledge of Washington, any trustee,
fiduciary or administrator thereof, to the tax or penalty on prohibited
transactions imposed by said Section 4975.
(g) No Washington Pension Plan or any trust created thereunder has
been terminated, nor have there been any "reportable events" for which
the 30 day notice has not been waived with respect to any Washington
Pension Plan, as that term is defined in Section 4043(b) of ERISA.
(h) No Washington Pension Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA.
(i) Except as disclosed in the Washington Disclosure Schedule, there
are no pending, or, to the best knowledge of Washington, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf
of or against any of the Washington Pension Plans or the Washington
Welfare Plans or any trusts related thereto.
3.10. Reports.
(a) The Washington Disclosure Schedule lists, and Washington has
previously delivered to Hubco a complete copy of, each (i) final
registration statement, prospectus, annual, quarterly or special report
and definitive proxy statement filed by Washington since January 1, 1991
pursuant to the Securities Act of 1933, as amended ("1933 Act"), or the
1934 Act and (ii) communication (other than general advertising materials
and press releases) mailed by Washington to its stockholders as a class
since January 1, 1991, and each such final registration statement,
prospectus, annual, quarterly or special report, definitive proxy
statement or communication, as of its date, complied in all material
respects with all applicable statutes, rules and regulations enforced or
promulgated by the SEC and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading;
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
(b) Washington and the Savings Bank has, since January 1, 1991, duly
filed with the FDIC and the Department in form which was correct in all
material respects the monthly, quarterly and annual financial reports
required to be filed under applicable laws and regulations, and, subject
to permission from such regulatory authorities, Washington promptly will
deliver or make available to Hubco accurate and complete copies of such
reports. The Washington Disclosure Schedule lists all examinations of
Washington or the Savings Bank conducted by either the FRB, the FDIC or
the Department since January 1, 1991 and the dates of any responses
thereto submitted by Washington or the Savings Bank.
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3.11. Washington and Savings Bank Information. The information relating
to Washington and the Savings Bank to be contained in the Proxy
Statement/Prospectus (as defined in Section 5.6(a) hereof) to be delivered to
stockholders of Washington in connection with the solicitation of their
approval of the Merger, as of the date the Proxy Statement/Prospectus is
mailed to stockholders of Washington, and up to and including the date of the
meeting of stockholders to which such Proxy Statement/Prospectus relates, will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.12. Compliance with Applicable Law. Except as set forth in the
Washington Disclosure Schedule, each of Washington and the Savings Bank holds
all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of its business and has complied with and is not in default
in any respect under any applicable law, statute, order, rule, regulation,
policy and/or guideline of any federal, state or local governmental authority
relating to Washington or the Savings Bank (other than where such default or
noncompliance will not result in a material adverse effect on the business,
operations, assets or financial condition of Washington and the Savings Bank
taken as a whole) and Washington has not received notice of violation of, and
does not know of any violations of, any of the above.
3.13. Certain Contracts.
(a) Except for plans referenced in Section 3.9 and as disclosed in
the Washington Disclosure Schedule, (i) neither Washington nor the
Savings Bank is a party to or bound by any written contract or
understanding (whether written or oral) with respect to the employment of
any officers, employees, directors or consultants, and (ii) the
consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming
due from Washington or the Savings Bank to any officer, employee,
director or consultant thereof, except for payments due to Paul Rotondi
under his severance agreement. The Washington Disclosure Schedule sets
forth true and correct copies of all severance or employment agreements
with officers, directors, employees, agents or consultants to which
Washington or the Savings Bank is a party.
(b) Except as disclosed in the Washington Disclosure Schedule and
except for loan commitments issued in the ordinary course of business,
(i) as of the date of this Agreement, neither Washington nor the Savings
Bank is a party to or bound by any commitment, agreement or other
instrument which is material to the business, operations, assets or
financial condition of Washington and the Savings Bank taken as a whole
but in no event shall a contract for less than $50,000 a year be deemed
material under this paragraph, (ii) no commitment, agreement or other
instrument to which Washington or the Savings Bank is a party or by which
any of them is bound limits the freedom of Washington or the Savings Bank
to compete in any line of business or with any person, and (iii) neither
Washington nor the Savings Bank is a party to any collective bargaining
agreement.
(c) Except as disclosed in the Washington Disclosure Schedule,
neither Washington nor the Savings Bank or, to the best knowledge of
Washington, any other party thereto, is in default in any material
respect under any material lease, contract, mortgage, promissory note,
deed of trust, loan or other commitment (except those under which the
Savings Bank is or will be the creditor) or arrangement, except for
defaults which individually or in the aggregate would not have a material
adverse effect on the business, operations, assets or financial condition
of Washington and the Savings Bank, taken as a whole.
3.14. Properties and Insurance.
(a) Washington and the Savings Bank have good and, as to owned real
property, marketable title to all material assets and properties, whether
real or personal, tangible or intangible, reflected in Washington's
consolidated balance sheet as of December 31, 1992, or owned and acquired
subsequent thereto (except to the extent that such assets and properties
have been disposed of for fair value in the ordinary course of business
since December 31, 1992), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure
liabilities that are reflected in said balance sheet or the notes thereto
or that secure liabilities incurred in the ordinary course of business
after the date of such balance sheet, (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of Washington and the Savings
Bank taken as a whole and (iv) with respect to owned real property, title
imperfections noted in title reports delivered to Hubco prior to the date
hereof. Except as affected by the transactions contemplated hereby,
Washington and the Savings Bank as lessees have the right under valid
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and subsisting leases to occupy, use, possess and control all real
property leased by Washington and the Savings Bank in all material
respects as presently occupied, used, possessed and controlled by
Washington and the Savings Bank.
(b) The business operations and all insurable properties and assets
of Washington and the Savings Bank are insured for their benefit against
all risks which, in the reasonable judgment of the management of
Washington, should be insured against, in each case under policies or
bonds issued by insurers of recognized responsibility, in such amounts
with such deductibles and against such risks and losses as are in the
opinion of the management of Washington adequate for the business engaged
in by Washington and the Savings Bank. As of the date hereof, neither
Washington nor the Savings Bank has received any notice of cancellation
or notice of a material amendment of any such insurance policy or bond or
is in default under any such policy or bond, no coverage thereunder is
being disputed and all material claims thereunder have been filed in a
timely fashion.
3.15. Minute Books. The minute books of Washington and the Savings Bank
contain accurate records of all meetings and other corporate action held of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors), except where the failure to so maintain
such records would not have a material adverse effect on the business,
operations, assets or financial condition of Washington and the Savings Bank,
taken as a whole.
3.16. Environmental Matters. Except as disclosed in the Washington
Disclosure Schedule, neither Washington, the Savings Bank nor any other
Subsidiary of Washington has received any written notice, citation, claim,
assessment, proposed assessment or demand for abatement alleging that
Washington or the Savings Bank (either directly or as a successor in interest
in connection with the enforcement of remedies to realize the value of
properties serving as collateral for outstanding loans) is responsible for the
correction or cleanup of any condition resulting from the violation of any
law, ordinance or other governmental regulation regarding environmental
matters which correction or cleanup would be material to the business,
operations, assets or financial condition of Washington and the Savings Bank
taken as a whole. Except as disclosed in the Washington Disclosure Schedule,
Washington has no knowledge that any toxic or hazardous substances or
materials have been emitted, generated, disposed of or stored on any
non-residential property currently owned or leased by Washington or the
Savings Bank or any other Subsidiary of Washington, or owned or leased in the
three years prior to the date of this Agreement in any manner that violates
any presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials, the violation of which would have
a material adverse effect on the business, operations, assets or financial
condition of Washington and the Savings Bank, taken as a whole. Except as
disclosed in the Washington Disclosure Schedule, all property owned or leased
by Washington or the Savings Bank or any other Subsidiary of Washington which
was subject to the provisions of the Industrial Site Recovery Act, N.J.S.A.
13:1K-6, et seq. as amended ("ISRA"), complied with all applicable provisions
of ISRA at the time such property was sold or transferred.
3.17. Reserves. As of September 30, 1993, the allowance for loan losses
in the Washington Financial Statements was adequate based upon all factors
required to be considered by Washington in determining the amount of such
allowance. The methodology used to compute the loan loss reserve complies in
all material respects with all applicable FDIC and Department policies. As of
September 30, 1993, the reserve for OREO properties in the Washington
Financial Statements was adequate based upon all factors required to be
considered by Washington in determining the amount of such reserve.
3.18. No Parachute Payments. Except for Paul Rotondi, no officer,
director, employee or agent (or former officer, director, employee or agent)
of Washington or the Savings Bank or any other Subsidiary of Washington is
entitled now, or will or may be entitled to as a consequence of this Agreement
or the Merger, to any payment or benefit from Washington, the Savings Bank,
Hubco or the Bank which if paid or provided would constitute an "excess
parachute payment", as defined in Section 280G of the Code or regulations
promulgated thereunder.
3.19. Disclosure. No representation or warranty contained in Article III
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.
For these purposes, all representations and warranties about or relating to
the Savings Bank as applicable shall be deemed to include 609 WC and any other
subsidiary of Washington regardless of whether any specific reference is made
to 609 WC or any other Subsidiary of Washington.
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ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF HUBCO
References herein to the "Hubco Disclosure Schedule" shall mean all of
the disclosure schedules required by this Article IV, dated as of the date
hereof and referenced to the specific sections and subsections of Article IV
of this Agreement, which have been delivered on the date hereof by Hubco to
Washington. Hubco hereby represents and warrants to Washington as follows:
4.1. Corporate Organization.
(a) Hubco is a corporation duly organized and validly existing and
in good standing under the laws of the State of New Jersey. Hubco has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing would not have a
material adverse effect on the business, operations, assets or financial
condition of Hubco or its subsidiaries (defined below), taken as a whole.
Hubco is registered as a bank holding company under the BHCA.
(b) Each of the subsidiaries of Hubco are listed in the Hubco
Disclosure Schedule. The term "subsidiary", when used with reference to
Hubco, means any corporation, partnership, joint venture or other legal
entity in which Hubco directly or indirectly, owns at least a 50% stock
or other equity interest or for which Hubco, directly or indirectly, acts
as a general partner. Each subsidiary of Hubco is duly organized and
validly existing and in good standing under the laws of the jurisdiction
of its incorporation. The Bank is a state-chartered commercial bank whose
deposits are insured by the Bank Insurance Fund of the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted by law.
Each subsidiary has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now
being conducted and is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing
would not have a material adverse effect on the business, operations,
assets or financial condition of Hubco and its subsidiaries, taken as a
whole. The Hubco Disclosure Schedule sets forth true and complete copies
of the certificate of incorporation and by-laws of Hubco as in effect on
the date hereof.
4.2. Capitalization. The authorized capital stock of Hubco consists
solely of 13,200,000 shares of Hubco Common Stock and 3,300,000 shares of
preferred stock ("Hubco Authorized Preferred Stock"). There are no shares
of Hubco Authorized Preferred Stock outstanding. As of September 30,
1993, there were 6,933,361 shares of Hubco Common Stock issued and
outstanding. Since such date, and from time to time hereafter, Hubco may
sell or repurchase shares of its Common Stock. Except for shares issuable
under the Agreement and Plan of Merger, dated May 21, 1993, between Hubco
and Statewide Savings Bank, S.L.A., as such agreement may be amended from
time to time (the "Statewide Agreement") and shares issuable under the
Hubco Option Plan for Directors (the "Director Options"), there are no
shares of Hubco Common Stock issuable upon the exercise of outstanding
stock options or otherwise. All issued and outstanding shares of Hubco
Common Stock, and all issued and outstanding shares of capital stock of
Hubco's subsidiaries, have been duly authorized and validly issued, are
fully paid, nonassessable and free of preemptive rights, and are free and
clear of all liens, encumbrances, charges, restrictions or rights of
third parties. All of the outstanding shares of capital stock of Hubco's
subsidiaries are owned by Hubco free and clear of any liens,
encumbrances, charges, restrictions or rights of third parties. Except
for the Director Options and Hubco's obligations under the Statewide
Agreement, neither Hubco nor Hubco's subsidiaries has granted or is bound
by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the transfer, purchase or
issuance of any shares of capital stock of Hubco or Hubco's subsidiaries
or any securities representing the right to purchase, subscribe or
otherwise receive any shares of such capital stock or any securities
convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares.
4.3. Authority; No Violation.
(a) Hubco and the Bank have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution
and
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delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Hubco and the Bank in accordance with their respective
certificates of incorporation and applicable laws and regulations. No
other corporate proceedings on the part of Hubco or the Bank are
necessary to consummate the transactions so contemplated, except if
shareholder approval of Hubco shall be required for any reason. This
Agreement has been duly and validly executed and delivered by Hubco and
the Bank and constitutes valid and binding obligations of Hubco and the
Bank, enforceable against Hubco and the Bank in accordance with its
terms.
(b) Neither the execution or delivery of this Agreement by Hubco or
the Bank, nor the consummation by Hubco or the Bank of the transactions
contemplated hereby in accordance with the terms hereof or compliance by
Hubco or the Bank with any of the terms or provisions hereof will (i)
violate any provision of the Certificate of Incorporation or By-laws of
Hubco or the Bank, (ii) assuming that the consents and approvals set
forth below are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable
to Hubco or the Bank or any of their respective properties or assets, or
(iii) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any
lien, security interest, charge or other encumbrance upon any of the
respective properties or assets of Hubco or the Bank under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which Hubco or the Bank is a party, or by which Hubco or
the Bank or any of their properties or assets may be bound or affected,
except, with respect to (ii) and (iii) above, such as individually or in
the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Hubco and Hubco's
subsidiaries, taken as a whole, and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except for consents
and approvals of or filings or registrations with or notices to the FDIC,
the Department, the FRB, the Secretary of State of New Jersey, the SEC,
applicable state securities bureaus or commissions, and any approval of
Hubco's shareholders, no consents or approvals of or filings or
registrations with or notices to any third party or any public body or
authority are necessary on behalf of Hubco in connection with (a) the
execution and delivery by Hubco and the Bank of this Agreement, and (b)
the consummation by Hubco of the Merger and the other transactions
contemplated hereby. To the best of Hubco's knowledge, no fact or
condition exists which Hubco has reason to believe will prevent it from
obtaining the aforementioned consents and approvals.
4.4. Financial Statements.
(a) The Hubco Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of Hubco as of December
31, 1991 and 1992, the related consolidated statements of income, changes
in stockholders' equity and of cash flows for the periods ended December
31, in each of the three fiscal years 1990 through 1992, in each case
accompanied by the audit report of Arthur Andersen & Co., independent
public accountants with respect to Hubco for 1991 and 1992 (and Ernst &
Young with respect to 1990) and the unaudited consolidated statements of
condition of Hubco as of June 30, 1993 and June 30, 1992 and the related
unaudited consolidated statements of income, changes in stockholders'
equity and cash flows for the six months then ended as reported in
Hubco's Quarterly Report on Form 10-Q, filed with the SEC under the 1934
Act (collectively, the "Hubco Financial Statements"). The Hubco Financial
Statements (including the related notes) have been prepared in accordance
with GAAP consistently applied during the periods involved (except as may
be indicated therein or in the notes thereto), and fairly present the
consolidated financial position of Hubco as of the respective dates set
forth therein, and the related consolidated statements of income, changes
in stockholders' equity and of cash flows (including the related notes,
where applicable) fairly present the results of the consolidated
operations and changes in stockholders' equity and of cash flows of Hubco
for the respective fiscal periods set forth therein.
(b) The books and records of Hubco and the Bank are being maintained
in material compliance with applicable legal and accounting requirements,
and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved
against in the Hubco Financial Statements (including the notes thereto),
as of June 30, 1993 neither Hubco nor any of its subsidiaries had any
obligation or liability, whether absolute, accrued, contingent or
otherwise, material to the business, operations, assets or financial
condition of Hubco or any of its subsidiaries which were required by GAAP
(consistently applied) to be disclosed in Hubco's consolidated statement
of condition as of June 30, 1993 or the notes thereto. Since June 30,
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1993, neither Hubco nor any of its subsidiaries have incurred any
liabilities, except in connection with the Statewide Acquisition or the
sale of $25 million of subordinated debentures or in the ordinary course
of business and consistent with prudent banking practice.
4.5. Brokerage Fees. Except for any financial consulting fee which may be
payable to Michael Guilfoile of MG Advisors, Inc., neither Hubco nor any of
its directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement.
4.6. Absence of Certain Changes or Events. There has not been any
material adverse change in the business, operations, assets or financial
condition of Hubco and Hubco's subsidiaries taken as a whole since June 30,
1993 and to the best of Hubco's knowledge, no facts or condition exists which
Hubco believes will cause such a material adverse change in the future.
4.7. Legal Proceedings. Except as disclosed in the Hubco Disclosure
Schedule, and except for ordinary routine litigation incidental to the
business of Hubco or its subsidiaries, neither Hubco nor any of its
subsidiaries is a party to any, and there are no pending or, to the best of
Hubco's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against Hubco or any of its subsidiaries which, if decided adversely to Hubco
or its subsidiaries, would have a material adverse effect on the business,
operations, assets or financial condition of Hubco or its subsidiaries. Except
as disclosed in the Hubco Disclosure Schedule, neither Hubco nor Hubco's
subsidiaries is a party to any order, judgment or decree entered in any
lawsuit or proceeding which is material to Hubco or its subsidiaries.
4.8. Compliance With Applicable Law.
(a) Hubco has filed all 1934 Act reports that it was required to
file with the SEC under the 1934 Act, all of which complied in all
material respects with all applicable requirements of the 1934 Act and
the rules and regulations adopted thereunder. As of their respective
dates, each such report, statement, form or other document, including
without limitation, any financial statements or schedules included
therein, did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under
which they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier date.
Since January 1, 1991, Hubco and the Bank have duly filed all material
forms, reports and documents which they were required to file with each
agency charged with regulating any aspect of their business.
(b) Except as set forth in the Hubco Disclosure Schedule, each of
Hubco and Hubco's subsidiaries holds all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of its
business, and has complied with and is not in default in any respect
under any applicable law, statute, order, rule, regulation, policy and/or
guideline of any federal, state or local governmental authority relating
to Hubco or Hubco's subsidiaries (other than where such default or
noncompliance will not result in a material adverse effect on the
business, operations, assets or financial condition of Hubco and Hubco's
subsidiaries taken as a whole) and Hubco has not received notice of
violation of, and does not know of any violations of, any of the above.
4.9. Hubco Information. The information relating to Hubco and the Bank,
this Agreement and the transactions contemplated hereby in the Registration
Statement and Proxy Statement/Prospectus (as defined in Section 5.6(a)
hereof), as of the date of the mailing of the Proxy Statement/Prospectus, and
up to and including the date of the meeting of stockholders of Washington to
which such Proxy Statement/Prospectus relates, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The
Registration Statement shall comply as to form in all material respects with
the provisions of the 1933 Act and the rules and regulations promulgated
thereunder.
4.10. Funding and Capital Adequacy. At the Effective Time, Hubco will
have available to it sufficient funds to pay the cash required to be paid to
the shareholders of Washington under Article II hereof. At the Effective Time,
after taking into effect the Merger, consummation of the transactions
contemplated in the Statewide Agreement, the transactions contemplated
hereunder, including but not limited to the due assertion and perfection of
dissenters rights by stockholders of Washington under Section 262 of the GCL,
and any other transactions involving Hubco pending at that time, Hubco will
have sufficient capital to satisfy all applicable regulatory capital
requirements.
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4.11. Hubco Preferred Stock. At the Effective Time, Hubco Preferred Stock
issued pursuant to the terms of Section 2.1 hereof and, when issued, any Hubco
Common Stock issued upon conversion of Hubco Preferred Stock will be duly
authorized and validly issued, fully paid, nonassessable, free of preemptive
rights and free and clear of all liens, encumbrances or restrictions created
by or through Hubco, with no personal liability attaching to the ownership
thereof. The Hubco Preferred Stock to be issued and the Hubco Common Stock
issued upon conversion of Hubco Preferred Stock will be registered under the
1933 Act and issued in accordance with all applicable state and federal laws,
rules and regulations.
4.12. Taxes and Tax Returns.
(a) Hubco and the Bank have duly filed all returns, declarations,
reports, information returns and statements ("Returns") required to be
filed by them in respect of any federal, state and local taxes (including
withholding taxes, penalties or other payments required) and has duly
paid all such taxes due and payable, other than taxes or other charges
which are being contested in good faith (and disclosed to Washington in
writing). Hubco and the Bank have established on their books and records
reserves that are adequate for the payment of all federal, state and
local taxes not yet due and payable, but are incurred in respect of Hubco
or the Bank through such date. The Hubco Disclosure Schedule identifies
the federal income tax returns of Hubco and the Bank which have been
examined by the Internal Revenue Service (the "IRS") within the past six
years. No deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. The Hubco Disclosure
Schedule identifies the applicable state income tax returns of Hubco and
the Bank which have been examined by the applicable authorities. No
deficiencies were asserted as a result of such examinations which have
not been resolved and paid in full. To the best knowledge of Hubco, there
are no audits or other administrative or court proceedings presently
pending nor any other disputes pending with respect to, or claims
asserted for, taxes or assessments upon Hubco or the Bank, nor has Hubco
or the Bank given any currently outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any taxes or Returns.
(b) Except as set forth in the Hubco Disclosure Schedule, neither
Hubco nor the Bank nor any other subsidiary of Hubco (i) has requested
any extension of time within which to file any Return which Return has
not since been filed, (ii) is a party to any agreement providing for the
allocation or sharing of taxes, (iii) is required to include in income
any adjustment pursuant to Section 481(a) of the Internal Revenue Code of
1986, as amended (the "Code"), by reason of a voluntary change in
accounting method initiated by Hubco or the Bank (nor does Hubco have any
knowledge that the IRS has proposed any such adjustment or change of
accounting method) or (iv) has filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply.
4.13. Employee Benefit Plans.
(a) Except as disclosed in the Hubco Disclosure Schedule, neither
Hubco nor the Bank maintains or contributes to any "employee pension
benefit plan" (the "Hubco Pension Plans"), as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "employee welfare benefit plan" (the "Hubco Welfare
Plans"), as such term is defined in Section 3 of ERISA, stock option
plan, stock purchase plan, deferred compensation plan, severance plan,
bonus plan, employment agreement or other similar plan, program or
arrangement. Neither Hubco nor the Bank has, since September 2, 1974,
contributed to any "Multiemployer Plan", as such term is defined in
Section 3(37) of ERISA.
(b) The present value of all accrued benefits under each of the
Hubco Pension Plans subject to Title IV of ERISA did not, as of the
latest valuation date, exceed the then current value of the assets of
such plans allocable to such accrued benefits, based upon the actuarial
assumptions then utilized for such Plans. The actuarial assumptions then
utilized for such plans were reasonable and appropriate as of the last
valuation date and reflect then current market conditions.
(c) Each of the Hubco Pension Plans is intended to be a qualified
plan within the meaning of Section 401(a) of the Code and has been
determined by the IRS to be so qualified, and Hubco is not aware of any
fact or circumstance which would adversely affect the qualified status of
any such plan.
(d) During the last five years, the Pension Benefit Guaranty
Corporation has not asserted any claim for liability against Hubco or the
Bank which has not been paid in full.
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(e) Each of the Hubco Pension Plans and each of the Hubco Welfare
Plans has been operated in compliance in all material respects with the
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder, and all other applicable governmental
laws and regulations.
(f) Neither Hubco nor the Bank, nor, to the best knowledge of Hubco,
any trustee, fiduciary or administrator of any Hubco Pension Plan or
Hubco Welfare Plan or any trust created thereunder, has engaged in a
prohibited transaction, as such term is defined in Section 4975 of the
Code, which could subject Hubco or the Bank, or, to the best knowledge of
Hubco, any trustee, fiduciary or administrator thereof, to the tax or
penalty on prohibited transactions imposed by said Section 4975.
(g) No Hubco Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events" for which the 30
day notice period has not been waived with respect to any Hubco Pension
Plan, as that term is defined in Section 4043(b) of ERISA.
(h) No Hubco Pension Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA.
(i) Except as disclosed in the Hubco Disclosure Schedule, there are
no pending, or, to the best knowledge of Hubco, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or
against any of the Hubco Pension Plans or the Hubco Welfare Plans or any
trusts related thereto.
4.14. Contracts. Except as disclosed in the Hubco Disclosure Schedule,
neither Hubco nor the Bank, or to the best knowledge of Hubco, any party
thereto, is in default in any material respect under any material lease,
contract, mortgage, promissory note, deed of trust, loan or other commitment
(except those under which the Bank is or will be the creditor) or arrangement,
except for defaults which individually or in the aggregate would not have a
material adverse effect on the business, operations, assets or financial
condition of Hubco and the Bank, taken as a whole.
4.15. Properties and Insurance.
(a) Hubco and the Bank have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in Hubco's consolidated
balance sheet as of December 31, 1992, or owned and acquired subsequent
thereto (except to the extent that such assets and properties have been
disposed of for fair value in the ordinary course of business since
December 31, 1992), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure
liabilities that are reflected in said balance sheet or the notes thereto
or that secure liabilities incurred in the ordinary course of business
after the date of such balance sheet, (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of Hubco and the Bank taken
as a whole and (iv) with respect to owned real property, title
imperfections noted in title reports. Except as disclosed in the Hubco
Disclosure Schedule, Hubco and the Bank as lessees have the right under
valid and subsisting leases to occupy, use, possess and control all
property leased by Hubco or the Bank in all material respects as
presently occupied, used, possessed and controlled by Hubco and the Bank.
(b) The business operations and all insurable properties and assets
of Hubco and the Bank are insured for their benefit against all risks
which, in the reasonable judgment of the management of Hubco, should be
insured against, in each case under policies or bonds issued by insurers
of recognized responsibility, in such amounts with such deductibles and
against such risks and losses as are in the opinion of the management of
Hubco adequate for the business engaged in by Hubco and the Bank. As of
the date hereof, neither Hubco nor the Bank has received any notice of
cancellation or notice of a material amendment of any such insurance
policy or bond or is in default under any such policy or bond, no
coverage thereunder is being disputed and all material claims thereunder
have been filed in a timely fashion.
4.16. Environmental Matters. Except as disclosed in the Hubco
Disclosure Schedule, neither Hubco nor the Bank has received any written
notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that Hubco or the Bank (either directly or as a
successor-in-interest in connection with the enforcement of remedies to
realize the value of properties serving as collateral for outstanding
loans) is responsible for the correction or cleanup of any condition
resulting from the violation of any law, ordinance or other governmental
regulation regarding environmental matters which correction or cleanup
would be material
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to the business, operations, assets or financial condition of Hubco and
the Bank taken as a whole. Except as disclosed in the Hubco Disclosure
Schedule, Hubco has no knowledge that any toxic or hazardous substances
or materials have been emitted, generated, disposed of or stored on any
property currently owned or leased by Hubco or the Bank or any other
Subsidiary in any manner that violates or, after the lapse of time is
reasonably likely to violate, any presently existing federal, state or
local law or regulation governing or pertaining to such substances and
materials, the violation of which would have a material adverse effect on
the business, operations, assets or financial condition of Hubco and the
Bank, taken as a whole.
4.17. Reserves. As of September 30, 1993, the allowance for loan losses
in the Hubco Financial Statements was adequate based upon all factors required
to be considered by Hubco in determining the amount of such allowance. The
methodology used to compute the loan loss reserve complies in all material
respects with all applicable FDIC and Department policies. As of September 30,
1993, the reserve for OREO properties in the Hubco Financial Statements was
adequate based upon all factors required to be considered by Hubco in
determining the amount of such reserve.
4.18. Agreements with Bank Regulators. Neither Hubco nor the Bank is a
party to any agreement or memorandum of understanding with, or a party to any
commitment letter, board resolution submitted to a regulatory authority or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any court,
governmental authority or other regulatory or administrative agency or
commission, domestic or foreign ("Governmental Entity") which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit or reserve policies or its management, except for
those the existence of which has been disclosed in writing to Washington by
Hubco prior to the date of this Agreement, nor has Hubco been advised by any
Governmental Entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission, except as disclosed in
writing to Washington by Hubco prior to the date of this Agreement. Neither
Hubco nor the Bank is required by Section 32 of the Federal Deposit Insurance
Act to give prior notice to a Federal banking agency of the proposed addition
of an individual to its board of directors or the employment of an individual
as a senior executive officer, except as disclosed in writing to Washington by
Hubco prior to the date of this Agreement.
4.19. Ownership of Washington Common Stock. Excluding the shares which
Hubco may acquire pursuant to the Stock Option Agreement of even date herewith
by and between Hubco and Washington, neither Hubco nor any of its
subsidiaries, directly or indirectly, beneficially owns, or has any agreement,
arrangement or understanding for the purposes of acquiring, holding, voting or
disposing of, more than 230,000 shares of Washington Common Stock.
4.20. Disclosures. No representation or warranty contained in Article IV
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.
ARTICLE V--COVENANTS OF THE PARTIES
5.1. Conduct of the Business of Washington. During the period from the
date of this Agreement to the Effective Time, Washington shall, and shall
cause the Savings Bank to, conduct their respective businesses only in the
ordinary course and consistent with prudent banking practice, except for
transactions permitted hereunder or with the prior written consent of Hubco,
which consent will not be unreasonably withheld. Washington also shall use its
best efforts to (i) preserve its business organization and that of the Savings
Bank intact, (ii) keep available to itself the present services of its
employees and those of the Savings Bank, and (iii) preserve for itself and
Hubco the goodwill of its customers and those of the Savings Bank and others
with whom business relationships exist.
5.2. Negative Covenants.
(a) Washington agrees that from the date hereof to the Effective
Time, except as otherwise approved by Hubco in writing or as permitted or
required by this Agreement, it will not, nor will it permit the Savings
Bank to:
(i) change any provision of its Certificate of Incorporation or
By-laws or any similar governing documents of Washington or the
Savings Bank;
(ii) except for the making of any additional grants under the
Washington MRP (provided that at least 5,000 shares available under
the Washington MRP shall not be granted) and issuance of Washington
Common Stock pursuant to the present terms of the Washington Option
Plans, change the number of shares
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of its authorized or issued capital stock or issue or grant any
option, warrant, call, commitment, subscription, right to purchase
or agreement of any character relating to the authorized or issued
capital stock of Washington or the Savings Bank, or any securities
convertible into shares of such stock, or split, combine or
reclassify any shares of its capital stock, or declare, set aside or
pay any dividend, or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital
stock;
(iii) except for the adoption of the Washington Savings Bank
Deferred Compensation Plan for Outside Directors, in a form
reasonably acceptable to Hubco, with a maximum fixed total payout of
$252,000, grant any severance or termination pay (other than
pursuant to policies or contracts of Washington in effect on the
date hereof and disclosed to Hubco pursuant hereto) to, or enter
into or amend any employment or severance agreement with, any of its
directors, officers or employees; adopt any new employee benefit
plan or arrangement of any type; or award any increase in
compensation or benefits to its directors, officers or employees
except with respect to employee increases in the ordinary course of
business and consistent with past practices and policies; provided,
that Washington may grant a one-time performance bonus to Paul
Rotondi in an amount not to exceed $25,000.
(iv) sell or dispose of any substantial amount of assets or
voluntarily incur any significant liabilities other than in the
ordinary course of business consistent with past practices and
policies or in response to substantial financial demands upon the
business of Washington or the Savings Bank;
(v) make any capital expenditures other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(vi) file any applications or make any contract with respect to
branching or site location or relocation;
(vii) agree to acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or
entity;
(viii) make any material change in its accounting methods or
practices, other than changes required in accordance with generally
accepted accounting principles;
(ix) take any action that would result in any of its
representations and warranties contained in Article III of this
Agreement not being true and correct in any material respect at the
Effective Time or that would cause any of its conditions to Closing
not to be satisfied; or
(x) agree to do any of the foregoing.
5.3. No Solicitation. Washington and the Savings Bank shall not, directly
or indirectly, encourage or solicit or hold discussions or negotiations with,
or provide any information to, any person, entity or group (other than Hubco)
concerning any merger or sale of shares of capital stock or sale of
substantial assets or liabilities not in the ordinary course of business, or
similar transactions involving Washington or the Savings Bank (an "Acquisition
Transaction"). Notwithstanding the foregoing, Washington may enter into
discussions or negotiations or provide any information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of
Washington, after consulting with counsel, determines in the exercise of its
fiduciary responsibilities that such discussions or negotiations should be
commenced or such information should be furnished. Washington will promptly
communicate to Hubco the terms of any proposal, whether written or oral, which
it may receive in respect of any such Acquisition Transaction and the fact
that it is having discussions or negotiations with a third party about an
Acquisition Transaction.
5.4. Current Information. During the period from the date of this
Agreement to the Effective Time, each of Washington and Hubco will cause one
or more of its designated representatives to confer with representatives of
the other party on a monthly or more frequent basis regarding its business,
operations, properties, assets and financial condition and matters relating to
the completion of the transactions contemplated herein. On a monthly basis,
Washington agrees to provide Hubco, and Hubco agrees to provide Washington,
with internally prepared profit and loss statements no later than 15 days
after the close of each calendar month. As soon as reasonably available, but
in no event more than 45 days after the end of each fiscal quarter (other than
the last fiscal quarter of each fiscal year) ending on or after September 30,
1993, Washington will deliver to Hubco and Hubco will deliver to Washington
their respective quarterly reports on Form 10-Q, as filed with the SEC under
the 1934 Act. As soon as reasonably available, but in no event more than 90
days after the end of each calendar year, Washington will deliver to Hubco and
Hubco will deliver to Washington their respective Annual Reports on Form 10-K
as filed with the SEC under the 1934 Act.
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5.5. Access to Properties and Records; Confidentiality.
(a) Washington and the Savings Bank shall permit Hubco and its
representatives, and Hubco and the Bank shall permit Washington and its
representatives, reasonable access to their respective properties, and shall
disclose and make available to Hubco and its representatives, or Washington
and its representatives as the case may be, all books, papers and records
relating to its assets, stock ownership, properties, operations, obligations
and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' and
stockholders' meetings, organizational documents, by-laws, material contracts
and agreements, filings with any regulatory authority, accountants' work
papers, litigation files, plans affecting employees, and any other business
activities or prospects in which Hubco and its representatives or Washington
and its representatives may have a reasonable interest. Neither party shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of any customer, would
contravene any law, rule, regulation, order or judgment or would waive any
privilege. The parties will use their best efforts to obtain waivers of any
such restriction (other than waivers of the attorney-client privilege) and in
any event make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
Notwithstanding the foregoing, Washington acknowledges that Hubco may be
involved in discussions concerning other potential acquisitions and Hubco
shall not be obligated to disclose such information to Washington except as
such information is disclosed to Hubco's shareholders generally.
(b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and, if such
Merger shall not occur, each party and each party's advisors shall return to
the other party all documents or other materials containing, reflecting or
referring to such information, will not retain any copies of such information,
shall use its best efforts to keep confidential all such information, and
shall not directly or indirectly use such information for any competitive or
other commercial purposes. In the event that the Merger contemplated hereby
does not occur, all documents, notes and other writings prepared by a party
hereto or its advisors based on information furnished by the other party shall
be promptly destroyed. The obligation to keep such information confidential
shall continue for five years from the date the proposed Merger is abandoned
but shall not apply to (i) any information which (A) the party receiving the
information can establish by convincing evidence was already in its possession
prior to the disclosure thereof to it by the other party; (B) was then
generally known to the public; (C) became known to the public through no fault
of the party receiving such information; or (D) was disclosed to the party
receiving such information by a third party not bound by an obligation of
confidentiality; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
5.6. Regulatory Matters.
(a) For the purposes of holding the Stockholders Meeting referred to in
Section 5.7 hereof and qualifying under applicable federal and state
securities laws the Hubco Preferred Stock to be issued to Washington
stockholders (and the Hubco Common Stock issuable upon conversion thereof) in
connection with the Merger, the parties hereto shall cooperate in the
preparation and filing by Hubco of a Registration Statement with the SEC which
shall include an appropriate proxy statement and prospectus satisfying all
applicable requirements of applicable state and federal laws, including the
1933 Act, the 1934 Act and applicable state securities laws and the rules and
regulations thereunder (such proxy statement and prospectus in the form mailed
by Washington to the Washington shareholders together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement/Prospectus" and the various documents to be filed by Hubco under the
1933 Act with the SEC to register the Hubco Preferred Stock (and the Hubco
Common Stock issuable upon conversion thereof) for sale, including the Proxy
Statement/Prospectus, are referred to herein as the "Registration Statement").
(b) Hubco shall furnish Washington with such information concerning Hubco
and its subsidiaries as is necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to such corporations, to comply
with Section 5.6(a) hereof. Hubco agrees promptly to advise Washington if at
any time prior to the Washington shareholders' meeting referred to in Section
5.7 hereof, any information provided by Hubco in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect
and to provide Washington with the information needed to correct such
inaccuracy or omission. Hubco shall furnish Washington with such
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supplemental information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Hubco and its subsidiaries, to
comply with Section 5.6(a) after the mailing thereof to Washington
shareholders.
(c) Washington shall furnish Hubco with such information concerning
Washington, the Savings Bank and other subsidiaries of Washington as is
necessary in order to cause the Proxy Statement/Prospectus, insofar as it
relates to such corporations, to comply with Section 5.6(a) hereof. Washington
agrees promptly to advise Hubco if at any time prior to the Washington
shareholders' meeting, referred to in Section 5.6(a) hereof, any information
provided by Washington in the Proxy Statement/Prospectus becomes incorrect or
incomplete in any material respect and to provide Hubco with the information
needed to correct such inaccuracy or omission. Washington shall furnish Hubco
with such supplemental information as may be necessary in order to cause the
Proxy Statement/Prospectus, insofar as it relates to Washington, the Savings
Bank and other Subsidiaries of Washington, to comply with Section 5.6(a) after
the mailing thereof to Washington shareholders.
(d) Hubco shall as promptly as practicable make such filings as are
necessary in connection with the offering of the Hubco Preferred Stock and the
Hubco Common Stock into which it is convertible with applicable state
securities agencies and shall use all reasonable efforts to qualify the
offering of such stock under applicable state securities laws at the earliest
practicable date. Washington shall promptly furnish Hubco with such
information regarding the Washington shareholders as Hubco requires to enable
it to determine what filings are required hereunder. Washington authorizes
Hubco to utilize in such filings the information concerning Washington and the
Savings Bank provided to Hubco in connection with, or contained in, the Proxy
Statement/Prospectus. Hubco shall furnish Washington's counsel with copies of
all such filings and keep Washington advised of the status thereof. Hubco and
Washington shall as promptly as practicable file the Registration Statement
containing the Proxy Statement/Prospectus with the SEC, and each of Hubco and
Washington shall promptly notify the other of all communications, oral or
written, with the SEC concerning the Registration Statement and the Proxy
Statement/Prospectus.
(e) Washington acknowledges that Hubco is in the process of acquiring
Statewide Savings Bank, S.L.A. ("Statewide") pursuant to the Statewide
Agreement and that in connection with such Agreement, information concerning
Washington and the Savings Bank will be required to be included in the
registration statement for the sale of Hubco Common Stock in connection with
the acquisition of Statewide. In addition, Washington acknowledges that Hubco
may be obligated to file a registration statement with respect to $25 million
of subordinated debt. Washington agrees to provide Hubco with any information,
certificates, documents and other materials about Washington and the Savings
Bank as are reasonably necessary to be included in such other registration
statements, including registration statements which may be filed by Hubco
prior to the Effective Time, and Washington shall use its best efforts to
cause its attorneys and accountants to provide Hubco and its underwriters with
any consents, comfort letters, opinion letters, reports or information which
are necessary to complete the registration statements and applications for
Statewide, for the subordinated debt, or for any other purpose. As provided in
Section 5.14, Hubco shall reimburse Washington for expenses incurred by
Washington beyond the first $10,000. Hubco shall not file with the SEC any
registration statement or amendment thereof or supplement thereto containing
information regarding Washington or the Savings Bank unless Washington shall
have consented to such filing. Washington shall not unreasonably delay or
withhold any such consent.
(f) Hubco shall take any action required to be taken to keep the
Registration Statement and any blue sky filings referred to in this Section
5.6 effective and current with respect to Hubco Common Stock while any Hubco
Preferred Stock is outstanding.
(g) Hubco shall use its best efforts to have the Hubco Preferred Stock
listed on the National Association of Securities Dealers Automated Quotation
("NASDAQ") System at the Effective Time. However, Washington understands that
Hubco cannot assure Washington that the Hubco Preferred Stock will be listed.
(h) The parties hereto will cooperate with each other and use their best
efforts to prepare all necessary documentation, to effect all necessary
filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement as soon as
possible, including, without limitation, those required by the FDIC, the FRB,
the Department and the DEPE. The parties shall each have the right to review
in advance all filings with, including all information relating to the other,
as the case may be, and any of their respective subsidiaries,
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which appears in any filing made with, or written material submitted to, any
third party or governmental body in connection with the transactions
contemplated by this Agreement.
(i) Each of the parties will promptly furnish each other with copies
of written communications received by them or any of their
respective subsidiaries from, or delivered by any of the foregoing
to, any governmental body in respect of the transactions
contemplated hereby with respect to the Merger.
5.7. Approval of Stockholders. Washington will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of the
stockholders of Washington (the "Stockholders Meeting") for the purpose of
securing the approval of stockholders of this Agreement, (b) subject to the
qualification set forth in Section 5.3 hereof and the right not to make a
recommendation or to withdraw a recommendation if its investment banker
withdraws its fairness opinion prior to the Stockholders' Meeting, recommend
to the stockholders of Washington the approval of this Agreement and the
transactions contemplated hereby and use its best efforts to obtain, as
promptly as practicable, such approvals, and (c) cooperate and consult with
Hubco with respect to each of the foregoing matters.
To the extent Hubco or its counsel deems it necessary, Hubco shall take
all steps necessary to obtain the approval of its shareholders as promptly as
possible. In connection with such Shareholders' Meeting, Hubco shall take all
steps necessary to duly call, give notice and convene the meeting but may
delay calling the meeting until the registration statement on the Statewide
Agreement offering has been declared effective and the prospectus contained
therein is ready to be mailed to Hubco stockholders.
5.8. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated by this Agreement and using its best
efforts to prevent the breach of any representation, warranty, covenant or
agreement of such party contained or referred to in this Agreement and to
promptly remedy the same. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Nothing in this section shall be
construed to require any party to participate in any threatened or actual
legal, administrative or other proceedings (other than proceedings, actions or
investigations to which it is a party or subject or threatened to be made a
party or subject) in connection with consummation of the transactions
contemplated by this Agreement unless such party shall consent in advance and
in writing to such participation and the other party agrees to reimburse and
indemnify such party for and against any and all costs and damages related
thereto.
Hubco agrees that from the date hereof to the Effective Time, except as
otherwise approved by Washington in writing or as permitted or required by
this Agreement, it will not, nor will it permit the Bank to take any action
that would result in any of its representations and warranties contained in
Article IV of this Agreement not being true and correct in any material
respect at the Effective Time or that would cause any of its conditions to
Closing not to be satisfied.
5.9. Public Announcements. Hubco and Washington shall cooperate with each
other in the development and distribution of all news releases and other
public filings and disclosures with respect to this Agreement or the Merger
transaction contemplated hereby, and Hubco and Washington agree that unless
approved mutually by them in advance, they will not issue any press release or
written statement for general circulation relating primarily to the
transaction contemplated hereby, except as may be otherwise required by law or
regulation in the opinion of counsel.
5.10. Failure to Fulfill Conditions. In the event that Hubco or
Washington determines that a material condition to its obligation to
consummate the transactions contemplated hereby cannot be fulfilled on or
prior to October 31, 1994 and that it will not waive that condition, it will
promptly notify the other party. Except for any acquisition or merger
discussions Hubco may enter into with other parties, Washington and Hubco will
promptly inform the other of any facts applicable to Washington or Hubco,
respectively, or their respective directors or officers, that would be likely
to prevent or materially delay approval of the Merger by any governmental
authority or which would otherwise prevent or materially delay completion of
the Merger.
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5.11. Indemnification and Insurance.
(a) For a period of six years after the Effective Time, Hubco shall
indemnify, defend and hold harmless each person who is now, or has been
at any time prior to the date hereof or who becomes prior to the
Effective Time, a director, officer, employee or agent of Washington or
any subsidiary of Washington or serves or has served at the request of
Washington in any capacity with any other person (collectively, the
"Indemnities") against any and all claims, damages, liabilities, losses,
costs, charges, expenses (including, without limitation, reasonable costs
of investigation, and the reasonable fees and disbursements of legal
counsel and other advisers and experts as incurred), judgments, fines,
penalties and amounts paid in settlement, asserted against, incurred by
or imposed upon any Indemnitee, (i) in connection with, arising out of or
relating to any threatened, pending or completed claim, action, suit or
proceeding (whether civil, criminal, administrative or investigative),
including, without limitation, any and all claims, actions, suits,
proceedings or investigations by or on behalf of or in the right of or
against Washington or any Washington Subsidiary or their affiliates, or
by any present or former shareholder of Washington (collectively,
"Claims"), including, without limitation, any Claim which is based upon,
arises out of or in any way relates to the Merger, the proxy
statement/prospectus mailed to Washington's stockholders to vote on the
Merger, this Agreement, any of the transactions contemplated by this
Agreement, the Indemnitee's service as a member of Washington's Board of
Directors or any committee of Washington's Board of Directors, the events
leading up to the execution of this Agreement, any statement,
recommendation or solicitation made in connection therewith or related
thereto and any breach of any duty in connection with any of the
foregoing, and (ii) in connection with, arising out of or relating to the
enforcement of the obligations of Hubco set forth in this Section 5.11,
in each case to the fullest extent permitted under any applicable law,
Washington's Certificate of Incorporation or its By-Laws (and Hubco shall
also advance expenses as incurred to the fullest extent permitted under
any thereof).
(b) From and after the Effective Time, Hubco shall assume and honor
any obligation of Washington immediately prior to the Effective Time with
respect to the indemnification of the Indemnitees arising out of
Washington's Certificate of Incorporation or By-Laws as if such
obligations were pursuant to a contract or arrangement between Hubco and
such Indemnitees.
(c) In the event Hubco or any of its successors or assigns (i)
reorganizes or consolidates with or merges into or enters into another
business combination transaction with any other person or entity and is
not the resulting, continuing or surviving corporation or entity of such
consolidation, merger or transaction, or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any
person or entity, then, and in each such case, proper provision shall be
made so that the successors and assigns of Hubco assume the obligations
set forth in this Section 5.11.
(d) Hubco shall use its best efforts to have Washington's officers
and directors covered under Hubco's then current officers' and directors'
liability insurance ("D&O Insurance") policy for periods on and after the
Effective Time through the end of such policy period and during any
renewal period by the same carrier. Hubco has no current intention to
change carriers. If Hubco does change carriers, Hubco shall use
reasonable efforts to cause Washington's officers and directors to be
covered by the new carrier; provided that Hubco shall not be required to
incur additional material expense for this purpose.
(e) Any Indemnitee wishing to claim indemnification under Section
5.11, upon learning of any such claim, action, suit or proceeding, shall
promptly notify Hubco thereof, but the failure to so notify shall not
relieve Hubco of any liability it may have to such Indemnitee if such
failure does not materially prejudice Hubco. In the event of any such
claim, action, suit or proceeding (whether arising before or after the
Effective Time) as to which Hubco agrees that indemnification under this
Section 5.11 is applicable, (a) Hubco shall have the right to assume the
defense thereof and Hubco shall not be liable to such Indemnitees for any
legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnitees in connection with the defense thereof,
except that if Hubco elects not to assume such defense or counsel for the
Indemnitees advises that there are issues which raise conflicts of
interest between Hubco and the Indemnitees, the Indemnitees may retain
counsel satisfactory to them, and Hubco shall pay the reasonable fees and
expenses of such counsel for the Indemnitees as statements therefor are
received; provided however, that Hubco shall be obligated pursuant to
this paragraph (e) to pay for only one firm of counsel for all
Indemnitees in any jurisdiction with respect to a matter unless the use
of one counsel for such Indemnitees would present such counsel with a
conflict of interest that is not waived and (b) the Indemnitees will
cooperate in the defense of any such matter. Hubco shall not be
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liable for settlement of any claim, action or proceeding hereunder unless
such settlement is effected with its prior written consent; and provided
further however that Hubco shall not have any obligation hereunder to any
Indemnitee when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and
nonappealable, that the indemnification of such Indemnitee in the manner
contemplated hereby is prohibited by applicable law or public policy.
5.12. Retention of Employees, Certain Executive Officers of the Savings
Bank and Directors; Benefits.
(a) Following consummation of the Merger, to the extent practicable,
Hubco will use its best efforts to retain all of the Savings Bank's
existing employees at similar compensation levels.
(b) Following consummation of the Merger, to the extent practicable,
Hubco will use its best efforts to cause the Bank to retain the Savings
Bank's current officers in similar positions with the Bank.
(c) Immediately following consummation of the Merger, Hubco will
cause the Bank to elect two directors of the Savings Bank as directors of
the Bank. Such members shall be selected by the Savings Bank's Board of
Directors. Hubco shall cause such two persons to be elected to the Board
of Directors of the Bank for a period of at least three years from the
Effective Time. Any Savings Bank director who is not elected to be a Bank
director will become a member of the Bank's advisory board for three
years from the Effective Time and as such will be paid a retainer of
$1,000 a month. Hubco shall honor, or cause the Bank to honor, all
retirement benefit arrangements for the Savings Bank's directors
previously agreed to by Washington or the Savings Bank if such
arrangements are disclosed on the Washington Disclosure Schedule
delivered in connection herewith.
(d) Following consummation of the Merger, Hubco intends to make
available to all employees and officers of the Savings Bank employed by
the Bank coverage under the benefit plans generally available to Hubco's
employees and officers (including pension and health and hospitalization)
on the terms and conditions available to the Bank's employees and
officers. After the Effective Time, Hubco intends to terminate the
Washington Pension Plan and ESOP and may terminate or change other
existing benefit plans. Washington and Savings Bank employees who
continue as Hubco or Bank employees will be credited under the Bank's
pension and 401(k) plans for prior service with the Savings Bank, but
only for purposes of vesting and eligibility to participate. For purposes
of calculating the amount of any pension benefits from the Bank's or
Hubco's pension plans, employees will not receive credit for employment
by the Savings Bank. Savings Bank employees who come under Hubco's or the
Bank's medical, vacation, sick leave and disability plans will be given
credit under such plans for prior service with the Savings Bank.
5.13. Disclosure Supplements. From time to time prior to the Effective
Time, each party hereto will promptly supplement or amend (by written notice
to the other) its respective Disclosure Schedules delivered pursuant hereto
with respect to any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement, would have been required to be set forth
or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered materially inaccurate
thereby. For the purpose of determining satisfaction of the conditions set
forth in Article VI, no supplement or amendment to such Schedules shall
correct or cure any warranty which was untrue when made, but shall enable the
disclosure of subsequent facts or events to maintain the truthfulness of any
warranty.
5.14. Transaction Expenses of Washington. Washington shall advise Hubco
monthly of all out-of-pocket expenses which Washington has incurred in
connection with this transaction. Washington shall mutually agree with Hubco
about printing arrangements for the Proxy Statement/Prospectus before entering
into any binding contract for such expenses. Hubco agrees that, if this
Agreement is terminated otherwise than due to the wilful default of
Washington, Hubco shall reimburse Washington for any legal and accounting fees
in excess of $10,000 incurred by Washington arising out of the involvement of
Washington's attorneys and accountants in SEC registration statements or
private placement memoranda of Hubco except for the Registration Statement
prepared in connection with the Washington Stockholders' Meeting contemplated
by Section 5.7.
5.15. Compliance with Antitrust Laws. Each of Hubco and Washington shall
use its best efforts to resolve such objections, if any, which may be asserted
with respect to the Merger under the antitrust laws, including, without
limitation, the Hart-Scott-Rodino Act. In the event a suit is threatened or
instituted challenging the Merger as violative of the antitrust laws, each of
Hubco and Washington shall use its best efforts to avoid the filing of, resist
or resolve such suit. Hubco and Washington shall use their best efforts to
take such action as may be required: (a) by the Antitrust
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Division of the Department of Justice or the Federal Trade Commission in order
to resolve such objections as either of them may have to the Merger under the
antitrust laws, or (b) by any federal or state court of the United States, in
any suit brought by a private party or governmental entity challenging the
Merger as violative of the antitrust laws, in order to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order which has the effect of preventing the consummation of the Merger.
Best efforts shall include, but not be limited to, the proffer by Hubco of its
willingness to accept an order agreeing to the divestiture, or the holding
separate, of any assets of Hubco or Washington, except to the extent that any
such divestitures or holding separate arrangement would have a material
adverse effect on Hubco. The entry by a court, in any suit brought by a
private party or governmental entity challenging the Merger as violative of
the antitrust laws, of an order or decree permitting the Merger, but requiring
that any of the businesses, product lines or assets of Hubco or Washington be
divested or held separate thereafter shall not be deemed a failure to satisfy
the conditions specified in Section 6.1 hereof except to the extent that any
divestitures or holding separate arrangement would have a material adverse
effect on Hubco and Hubco shall not have voluntarily consented to such
divestitures or holding separate arrangements. For the purposes of this
Section 5.15, the divestiture or the holding separate of a branch of the Bank
or the Savings Bank with less than $25 million in assets shall not be
considered to have a material adverse effect on Hubco.
5.16. Comfort Letters. Hubco shall cause Arthur Andersen & Co., its
independent public accountants, to deliver to Washington, and Washington shall
cause Coopers & Lybrand, its independent public accountants, to deliver to
Hubco and to its officers and directors who sign the Registration Statement
for this transaction, a short form "comfort letter" or "agreed upon
procedures" letter, dated the date of the mailing of the Proxy Statement for
the Stockholders Meeting of Washington, in the form customarily issued by such
accountants at such time in transactions of this type.
5.17. Affiliates. Promptly, but in any event within two weeks, after the
execution and delivery of this Agreement, Washington shall deliver to Hubco
(a) a letter identifying all persons who, to the knowledge of Washington, may
be deemed to be affiliates of Washington under Rule 145 of the Securities Act,
including, without limitation, all directors and executive officers of
Washington and (b) copies of letter agreements, each substantially in the form
of Exhibit 5.17, executed by each such person so identified as an affiliate of
Washington.
ARTICLE VI--CLOSING CONDITIONS
6.1. Conditions of Each Party's Obligations Under this Agreement. The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable law, waiver at or prior to the Effective Time of the following
conditions:
(a) Approval of Washington Stockholders; SEC Registration. This
Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of the stockholders of Washington and, if
necessary in the opinion of Hubco's counsel, the stockholders of Hubco.
The Hubco Registration Statement shall have been declared effective by
the SEC and shall not be subject to a stop order or any threatened stop
order, and the issuance of the Hubco Preferred Stock shall have been
qualified in every state where such qualification is required under the
applicable state securities laws.
(b) Regulatory Filings. All necessary regulatory or governmental
approvals and consents (including without limitation any required
approval of the FDIC, the Department, the FRB and the DEPE) required to
consummate the transactions contemplated hereby shall have been obtained
without any term or condition which would materially impair the value of
Washington and the Savings Bank, taken as a whole, to Hubco. All
conditions required to be satisfied prior to the Effective Time by the
terms of such approvals and consents shall have been satisfied; and all
statutory waiting periods in respect thereof (including the
Hart-Scott-Rodino waiting period) shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action or other
proceeding shall be pending or threatened by any governmental body in
which it is sought to restrain or prohibit the Merger; and no suit,
action or other proceeding shall be pending before any court or
governmental agency in which it is sought to restrain or prohibit the
Merger or obtain other substantial monetary or other relief against one
or more parties hereto in connection with this Agreement and which Hubco
or Washington determines in good faith,
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based upon the advice of their respective counsel, makes it inadvisable
to proceed with the Merger because any such suit, action or proceeding
has a significant potential to be resolved in such a way as to deprive
the party electing not to proceed of any of the material benefits to it
of the Merger.
(d) Tax Opinion. Hubco and Washington shall each have received two
opinions of Clapp & Eisenberg, P.C., reasonably satisfactory in form and
substance to Washington and its counsel Lowenstein, Sandler, Kohl, Fisher
& Boylan and to Hubco, based, in each case, upon representation letters
substantially in the form of Exhibit 6.1 and as otherwise required by
Clapp & Eisenberg, dated on or about the date of such opinion, and such
other facts and representations as counsel may reasonably deem relevant,
to the effect that
(i) the Merger will be treated for federal income tax purposes
as a reorganization qualifying under the provisions of Section
368(a)(1)(A) of the Code; (ii) no gain or loss shall be recognized
upon the exchange of Washington Common Stock solely for Hubco
Preferred Stock; (iii) in the case of Washington shareholders who
receive cash in whole or in part in exchange for their Washington
Common Stock, gain, if any, realized by the recipient on the
exchange shall be recognized, but in an amount not in excess of the
amount of such cash; (iv) in the case of Washington shareholders who
recognize gain on the exchange of their Washington Common Stock and
in whose hands such stock was a capital asset on the date of the
exchange, such gain shall be treated as capital gain (long-term or
short-term, depending on the shareholders' respective holding
periods for their Washington Common Stock), except in the case of
any such shareholder as to which the exchange has the effect of a
dividend within the meaning of Section 356(a)(2) of the Code by
reason of the applicability of the stock attribution rules of
Section 318 of the Code, it being understood that the applicability
of such attribution rules to any particular shareholder shall depend
on such shareholder's particular factual circumstances; (v) the
basis of any Hubco Preferred Stock received in exchange for
Washington Common Stock shall equal the basis of the recipient's
Washington Common Stock surrendered on the exchange, reduced by the
amount of cash received, if any, on the exchange, and increased by
the amount of the gain recognized, if any, on the exchange (whether
characterized as dividend or capital gain income); and (vi) the
holding period for any Hubco Preferred Stock received in exchange
for Washington Common Stock will include the period during which the
Washington Common Stock surrendered on the exchange was held,
provided such stock was held as a capital asset on the date of the
exchange,
the first of which shall be dated on or about the date that is two
business days prior to the date the Proxy Statement is first mailed to
stockholders of Washington and the second of which shall be dated as of
the Effective Time.
6.2. Conditions to the Obligations of Hubco Under this Agreement. The
obligations of Hubco under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties; Performance of Obligations of
Washington and Savings Bank. Except for those representations which are
made as of a particular date, the representations and warranties of
Washington contained in this Agreement shall be true and correct in all
material respects on the date of the Closing ("Closing Date") as though
made on and as of the Closing Date. Washington shall have performed in
all material respects the agreements, covenants and obligations to be
performed by it prior to the Closing Date. With respect to any
representation or warranty which as of the Closing Date has required a
supplement or amendment to the Washington Disclosure Schedule to render
such representation or warranty true and correct in all material respects
as of the Closing Date, the representation and warranty shall be deemed
true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the Disclosure Schedule
related to events occurring following the execution of this Agreement and
(ii) the facts disclosed in such supplement or amendment would not either
alone, or together with any other supplements or amendments to the
Washington Disclosure Schedule, materially adversely effect the
representation as to which the supplement or amendment relates.
(b) Opinion of Counsel. Hubco shall have received an opinion of
counsel to Washington, dated the Closing Date, in form and substance
reasonably satisfactory to Hubco, covering the matters set forth on
Exhibit 6.2 hereto.
(c) Conversion of Stock Options. Sufficient holders of Stock Options
shall elect under Section 2.4(a) such that the remaining Stock Options
outstanding on the Closing Date, if converted in accordance with Section
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2.4(b) into options to purchase Preferred Stock, shall not, in the
aggregate, entitle the holders thereof to purchase (upon full vesting of
such options) more than 20,000 shares of Preferred Stock.
(d) Certificates. Washington shall have furnished Hubco with such
certificates of its officers or other documents to evidence fulfillment
of the conditions set forth in this Section 6.2 as Hubco may reasonably
request.
(e) No Parachute Payments. Paul Rotondi shall have exercised his
option to cut back his severance payments under his Severance Agreement
such that no payment under his Severance Agreement or any other plan or
arrangement he has with Washington or the Savings Bank will constitute an
"excess parachute payment," as defined in Section 280G of the Code or
regulations promulated thereunder. Without limiting the foregoing, Paul
Rotondi will forego his rights to receive 1800 shares of Washington
Common Stock pursuant to the Washington MRP.
(f) Environmental Liability. One of the following shall have
occurred: (a) the Savings Bank shall have completed the transfer of
ownership of the real property located at 125 Monitor Street, Jersey
City, New Jersey (the "Monitor Property") in compliance with all
applicable environmental laws, rules and regulations, and shall have
provided Hubco with assurances reasonably satisfactory to Hubco that (i)
the purchase price for the Monitor Property less (ii) the potential
future liability of the Savings Bank and its successors in interest for
expenses relating to environmental problems in connection with the
Monitor Property (the "Net Monitor Purchase Price") is equal to or
greater than $1.4 million; or (b) in connection with a potential transfer
of the Monitor Property which has not closed, (i) the Savings Bank and/or
the potential transferee shall have obtained from the DEPE approval of a
negative declaration or a no further action letter under ISRA, (ii) the
Savings Bank and/or the potential transferee shall have obtained from the
DEPE approval of a remedial action workplan, or (iii) if it is
anticipated that the transfer will occur prior to DEPE approval as set
forth in (i) or (ii) above, the Savings Bank and/or the transferee shall
have entered into a remediation agreement with DEPE and provided all
necessary financial assurances to complete the transfer in accordance
with ISRA, and in any event ((i), (ii) or (iii) above), the Savings Bank
shall have provided Hubco with assurances reasonably satisfactory to
Hubco that the Net Monitor Purchase Price is equal to or greater than
$1.4 million; or (c) the Savings Bank shall cause to be performed a "site
investigation" (as such term is defined under ISRA) with respect to the
Monitor Property, and if a discharge is discovered, cause to be performed
a "remedial investigation" (as such term is defined under ISRA) to
determine the nature and extent of the discharge, and thereafter provide
assurance satisfactory to Hubco that the cost of any environmental
remedial action which would be required in connection with the transfer
of the Monitor Property would be less than $240,000.
6.3. Conditions to the Obligations of Washington Under this
Agreement. The obligations of Washington under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Effective Time, of
the following conditions:
(a) Representations and Warranties; Performance of Obligations of
Hubco. Except for those representations which are made as of a particular
date, the representations and warranties of Hubco contained in this
Agreement shall be true and correct in all material respects on the
Closing Date as though made on and as of the Closing Date. Hubco shall
have performed in all material respects, the agreements, covenants and
obligations to be performed by it prior to the Closing Date. With respect
to any representation or warranty which as of the Closing Date has
required a supplement or amendment to the Hubco Disclosure Schedule to
render such representation or warranty true and correct in all material
respects as of the Closing Date, the representation and warranty shall be
deemed true and correct as of the Closing Date only if (i) the
information contained in the supplement or amendment to the Disclosure
Schedule related to events occurring following the execution of this
Agreement and (ii) the facts disclosed in such supplement or amendment
would not either alone, or together with any other supplements or
amendments to the Hubco Disclosure Schedule, materially adversely effect
the representation as to which the supplement or amendment relates.
(b) Opinion of Counsel to Hubco. Washington shall have received an
opinion of counsel to Hubco, dated the Closing Date, in form and
substance reasonably satisfactory to Washington, covering the matters set
forth on Exhibit 6.3 hereto.
(c) Fairness Opinion. Washington shall have received an opinion from
Capital Consultants of Princeton, Inc., dated as of the date the Proxy
Statement/Prospectus is mailed to Washington's stockholders, to
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the effect that, in its opinion, the consideration to be paid to
stockholders of Washington hereunder is fair to such stockholders from a
financial point of view ("Fairness Opinion"). If the Cash Percentage or
the Stock Percentage is changed for reasons set forth in Section 2.1(k),
Washington shall also have received a Fairness Opinion dated as of the
Closing Date.
(d) Certificates. Hubco shall have furnished Washington with such
certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Section 6.3 as
Washington may reasonably request.
ARTICLE VII--TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of this Agreement by the stockholders
of Washington:
(a) by mutual written consent of the parties hereto;
(b) by Hubco or Washington (i) if the Effective Time shall not have
occurred on or prior to October 31, 1994 unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe its agreements set forth herein to
be performed or observed by such party at or before the Effective Time,
or (ii) if a vote of the stockholders of Washington is taken and such
stockholders fail to approve this Agreement at the meeting (or any
adjournment thereof) held for such purpose, or (iii) if a vote of the
stockholders of Hubco is taken and such stockholders fail to approve this
Agreement at the meeting (or any adjournment thereof) held for such
purpose.
(c) by Hubco or Washington upon written notice to the other if any
application for regulatory or governmental approval necessary to
consummate the Merger and the other transactions contemplated hereby
shall have been denied or withdrawn at the request or recommendation of
the applicable regulatory agency or governmental authority or by Hubco
upon written notice to Washington if any such application is approved
with conditions which materially impair the value of Washington and the
Savings Bank, taken as a whole, to Hubco.
(d) by Hubco if (i) there shall have occurred a material adverse
change in the business, operations, assets, or financial condition of
Washington and the Savings Bank, taken as a whole, from that disclosed by
Washington in Washington's Quarterly Report on Form 10-Q for the six
months ended June 30, 1993 and Washington's Annual Report on Form 10-K
for the year ended December 31, 1992; provided that, without limiting the
foregoing, a material adverse change includes -- but is not limited to --
any increase of $1 million or more in the level of nonperforming assets
(not including the approximately $9,000,000 loan referred to as the
Inrevco loan (the "Inrevco Loan")) above the level reported by Washington
at September 30, 1993 (not including the Inrevco Loan) or the failure to
resolve the Inrevco Loan so as to make it a performing loan or to take
substantial steps to proceed with foreclosure; or (ii) there was a
material breach in any representation, warranty, covenant, agreement or
obligation of Washington hereunder and such breach shall not have been
remedied within 30 days after receipt by Washington of notice in writing
from Hubco to Washington specifying the nature of such breach and
requesting that it be remedied.
(e) by Washington, if (i) there shall have occurred a material
adverse change in the business, operations, assets or financial condition
of Hubco and its subsidiaries taken as a whole from that disclosed by
Hubco in Hubco's Quarterly Report on Form 10-Q for the six months ended
June 30, 1993 and Hubco's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992; or (ii) there was a material breach in any
representation, warranty, covenant, agreement or obligation of Hubco
hereunder and such breach shall not have been remedied within 30 days
after receipt by Hubco of notice in writing from Washington specifying
the nature of such breach and requesting that it be remedied.
(f) by Hubco if the conditions set forth in Section 6.2 are not
satisfied.
(g) by Washington if the conditions set forth in Section 6.3 are not
satisfied; and
(h) by Washington upon written notice to Hubco prior to the
Effective Time if the Pre-Closing Price is less than $18. The Pre-Closing
Price shall mean the Median Price of Hubco Common Stock calculated based
upon the Closing Price for Hubco Common Stock during the first 20 of the
22 consecutive trading days immediately
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preceding the Closing. The Closing Price shall mean the closing price of
Hubco Common Stock as supplied by NASDAQ National Market System and
published in The Wall Street Journal. The Median Price shall be
determined by taking the average price of the two Closing Prices left
after discarding the 9 lowest and 9 highest Closing Prices in the 20 day
period. The Pre-Closing Price shall be appropriately adjusted for any
stock split, stock dividend, stock combination or reclassification or
similar transaction effected by Hubco with respect to Hubco Common Stock
between the date hereof and the Effective Date. The parties shall
mutually agree upon such adjustment in writing or, if unable to agree,
shall arbitrate the dispute using a mutually agreed upon arbitrator whose
decision shall be final and nonappealable.
(i) by Washington, if Washington's Board of Directors shall have
approved an Acquisition Transaction after determining, upon advice of
counsel, that such approval was necessary in the exercise of its
fiduciary obligations under applicable laws.
7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement by either Hubco or Washington pursuant to
Section 7.1, this Agreement (other than Section 5.5(b), the last sentence of
Section 5.14, and Section 8.1) shall forthwith become void and have no effect,
without any liability on the part of any party or its officers, directors or
stockholders. Nothing contained herein, however, shall relieve any party from
any liability for any breach of this Agreement.
7.3. Amendment. This Agreement may be amended by action taken by the
parties hereto at any time before or after adoption of this Agreement by the
stockholders of Washington but, after any such adoption, no amendment shall be
made which reduces or changes the amount or form of the consideration to be
delivered to the shareholders of Washington without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties hereto.
7.4. Extension; Waiver. The parties may, at any time prior to the
Effective Time of the Merger, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver
is sought to be enforced.
ARTICLE VIII--MISCELLANEOUS
8.1. Expenses.
(a) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including legal, accounting and investment banking
fees and expenses) shall be borne by the party incurring such costs and
expenses. Notwithstanding the foregoing, Hubco may bear the expenses of
the Bank and Washington may bear the expenses of the Savings Bank.
(b) Notwithstanding any provision in this Agreement to the contrary,
in the event that either of the parties shall willfully default in its
obligations hereunder, the non-defaulting party may pursue any remedy
available at law or in equity to enforce its rights and shall be paid by
the willfully defaulting party for all damages, costs and expenses,
including without limitation legal, accounting, investment banking and
printing expenses, incurred or suffered by the non-defaulting party in
connection herewith or in the enforcement of its rights hereunder if such
non-defaulting party prevails.
(c) Notwithstanding the provisions of 8.1(a), in the event of a
termination of this Agreement, Hubco shall reimburse Washington for
certain of its expenses paid to its lawyers and accountants as set forth
in Section 5.14 hereof.
8.2. Survival. The respective representations, warranties, covenants and
agreements of the parties to this Agreement shall not survive the Effective
Time, but shall terminate as of the Effective Time, except for this Section
8.2, the provisions of Sections 5.5(b), 5.11 and 5.12(c).
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8.3. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, as follows:
(a) If to Hubco, to:
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn.: Kenneth T. Neilson, President
Copy to:
Clapp & Eisenberg
One Newark Center
Newark, New Jersey 07102
Attn.: Ronald H. Janis, Esq.
(b) If to Washington, to:
Washington Bancorp, Inc.
101 Washington Street
Hoboken, New Jersey 07030
Attn.: Paul Rotondi, Chairman
Copy to:
Peter H. Ehrenberg, Esq.
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the
date so mailed.
8.4. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns and except for the Indemnitees who are third-party beneficiaries under
Section 5.11 and the Savings Bank directors immediately prior to the Closing
Date who are third-party beneficiaries under Section 5.12(c), nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement.
8.5. Entire Agreement. This Agreement, which includes the Disclosure
Schedules hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire Agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all prior negotiations,
arrangements or understandings, written or oral, with respect thereto.
8.6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.7. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without giving effect to the principles of conflicts of
laws thereof.
8.8. Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
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IN WITNESS WHEREOF, Hubco, the Bank, Washington and the Savings Bank have
caused this Agreement to be executed by their duly authorized officers as of
the day and year first above written.
ATTEST: HUBCO, Inc.
By:_________________________________ By:__________________________________
, Secretary Kenneth T. Neilson, President
ATTEST: WASHINGTON BANCORP, INC.
By:_________________________________ By:__________________________________
, Secretary
ATTEST: HUDSON UNITED BANK
By:_________________________________ By:__________________________________
, Secretary Kenneth T. Neilson, President
ATTEST: WASHINGTON SAVINGS BANK
By:_________________________________ By:__________________________________
, Secretary
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EXHIBIT 2.1
HUBCO, INC. RESOLUTIONS TO BE ADOPTED
BY BOARD OF DIRECTORS AT
MEETING TO BE HELD ON , 1994
RESOLVED, a series of Cumulative Convertible Preferred Stock designated
"Series A Preferred Stock" be hereby established by amending the Certificate
of Incorporation to add Section C to Article V as follows:
ARTICLE V
SECTION C-SERIES A PREFERRED STOCK
(C) The Series A Preferred Stock, shall have a stated value of $24.00 per
share, and the shares therefore, when issued for such amount, shall be fully
paid and non-assessable. The Series A Preferred Stock shall consist of [ ]
shares, which number may be increased (but only in connection with a stock
split or stock dividend) or decreased from time to time (but not below the
number thereof then outstanding) by the Board of Directors. Upon the
reacquisition of any of the Series A Preferred Stock, through redemption,
conversion or otherwise, such reacquired Shares shall be canceled and shall
become part of the authorized and unissued Preferred Stock, but shall not be
authorized and unissued Series A Preferred Stock. The rights, preferences and
limitations of the Series A Preferred Stock are as follows:
(a) Rank. The Series A Preferred Stock shall be senior to any other class
or series of Preferred Stock in respect of (1) payment of dividends, (2)
payment upon dissolution, liquidation or winding up and (3) redemption.
(b) Dividends. The holders of Series A Preferred Stock, in preference to
the holders of the Common Stock and any other class or series of Preferred
Stock, shall be entitled to receive, when as, and if declared by the Board of
Directors, out of funds legally available therefor, cumulative cash dividends
at the annual rate per share as specified below, and no more, payable in
quarter-annual installments on the 15th day of February, May, August and
November in each year, from the date of issuance. The annual dividend rate
shall be set on [Insert date which is two days prior to the Closing Date, as
defined in the Agreement and Plan of Merger] and on each anniversary thereof
(each a "Reset Date"), based upon the Average Market Price of the Common Stock
of the Company in the twenty (20) consecutive business days ending two days
immediately preceding the Reset Date. Market Price shall be determined in
accordance with subparagraph (e)(iii). The annual dividend rate shall be set
as follows:
Average Market Price Annual Dividend Rate For
of Common Stock Series A Preferred Stock
------------------ ------------------------
$24.00 or more. . . . . . . . . . $1.00
$23.00 to $23.99. . . . . . . . . $1.10
$22.00 to $22.99. . . . . . . . . $1.20
$21.00 to $21.99. . . . . . . . . $1.32
$20.00 to $20.99. . . . . . . . . $1.44
$19.00 to $19.99. . . . . . . . . $1.56
Less than $19.00. . . . . . . . . $1.68
The Average Market Price of the Common Stock listed in the table shall be
adjusted appropriately each time the Conversion Ratio is required to be
adjusted under subparagraph (e) (iv) and in the same proportion as the
Conversion Ratio is adjusted. Without limiting the foregoing, the Average
Market Price of the Common Stock listed in the chart shall be reduced to
reflect stock splits and stock dividends effected with respect to the Common
Stock. The Corporation shall notify by regular mail the holders of record of
the Series A Preferred Stock of the new dividend rate each time the rate is
reset. When the dividend rate is reset and each time the Average Market Price
of the Common Stock is required to be adjusted due to a change in the
Conversion Ratio, the Corporation shall promptly file with the Transfer Agent
for the Series A Preferred Stock a statement signed by the Chairman of the
Board, President or Vice President of the Corporation and by its Treasurer or
its Secretary showing in detail the facts requiring such an adjustment and
shall exhibit the Statement to any holder of Series A Preferred Stock desiring
to inspect the Statement. For the purpose of this paragraph (b), if the
dividend rate changes in a quarter-annual installment period, the amount
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paid in such installment period shall be determined assuming that dividends
accrue daily and that the new rate was effective on and after the Reset Date.
If the dividends on the Series A Preferred Stock for any quarter-annual
dividend period shall not have been paid or declared for payment to the
holders of Series A Preferred Stock by the last day of such quarter annual
dividend period, the aggregate deficiency shall be cumulative and shall be
fully paid or declared and set apart for payment before any cash dividends or
other distribution shall be paid or set apart for payment to the holders of
the Common Stock or any other class or series of Preferred Stock of the
Corporation. Accumulations of dividends on the Series A Preferred Stock shall
not bear interest.
(c) Liquidation Preference. Upon the voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation, the
holders of Series A Preferred Stock shall be entitled to receive out of the
assets of the Corporation $24.00 per share, together with cumulative dividends
accrued and unpaid to the date of payment of such $24.00 distribution
preference, and no more, before any amount shall be paid to, or distributed
among the holders of Common Stock or any other class or series of Preferred
Stock. For the purpose of this paragraph (c), dividends shall be deemed to
accrue on a daily basis. The merger or consolidation of the Corporation into
or with any other corporation, or the merger of any other corporation into the
Corporation, or the sale, lease or conveyance of all or substantially all of
the property or business of the Corporation, shall not be deemed to be a
dissolution, liquidation or winding up for purposes of this paragraph (c).
(d) Redemption.
(i) Option to Redeem. The Corporation shall not redeem any other
class or series of Preferred Stock unless and until all shares of the
Series A Preferred Stock have been redeemed. Outstanding shares of Series
A Preferred Stock may be redeemed, as a whole (or in part but only with
the consent of the holder of the Shares to be redeemed) at the option of
the Corporation by vote of its Board of Directors at any time from and
after the date on which the market price (as defined in subparagraph
(e)(iii)) for the Corporation's Common Stock is $24.00 or more for 20
consecutive business days. If less than all the outstanding shares of the
Series A Preferred Stock are to be redeemed, the shares to be redeemed
shall be determined in such manner as the Board of Directors may
prescribe. The redemption price for shares of the Series A Preferred
Stock shall be $24.00 per share, plus all accrued and unpaid dividends
through the date fixed for redemption. For the purpose of this paragraph
(d), dividends shall be deemed to accrue on a daily basis.
(ii) Notice. Written notice of redemption shall be given to each
holder of record of the shares of Series A Preferred Stock to be
redeemed, by mailing a notice of redemption to such holder by first class
mail, at such holder's address as it shall appear on the stock books of
the Corporation, in each case at least 15 days and not more than 45 days
prior to the date fixed for redemption; provided however, if fewer than
25 days prior notice is given to holders, then at least one follow-up
written notice must be sent to holders who have not converted by 7 days
prior to the redemption date. Each such notice shall specify the shares
of stock to be redeemed, the redemption price, the date fixed for
redemption, the place for payment of the redemption price and for
surrender of the certificate or certificates representing the shares to
be redeemed, and if less than the total number of shares held by such
holder are to be redeemed, the number of shares of such holder to be
redeemed. No defect in such notice nor any defect in the mailing thereof
shall in and of itself affect the validity of the proceedings for
redemption, except as to any holder to whom the corporation has failed to
mail such notice, or as to whom the notice was defective.
(iii) Deposit of Redemption Funds. If notice of redemption shall
have been given as herein provided and if, on or before the date fixed
for redemption, the redemption price shall have been provided and set
aside by the Corporation with a bank with trust powers for the pro rata
benefit of the holders of the shares so called for redemption, then, from
and after the date fixed for redemption, the shares of Series A Preferred
Stock called for redemption shall no longer be deemed outstanding, the
dividends thereon shall cease to accumulate, and all rights with respect
to such shares shall forthwith cease. The only right of the holders of
the redeemed shares after such date shall be the right to receive the
redemption price for the shares called for redemption, without interest.
If the Board of Directors designates a bank with trust powers as a
depository of the funds to be used for redemption and as agent of the
Corporation for the giving of the notices of redemption, the receipt of
the shares and the payment of the redemption price, the acts of such
designated agent on behalf of the Corporation shall have the same effect
as if all such acts were done by the Corporation.
Any monies deposited by the Corporation with such designated bank
which shall not be required for the redemption of shares because of the
conversion of such shares subsequent to the date of deposit, shall be
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promptly repaid to the Corporation. Any other monies so deposited by the
Corporation with a designated bank and unclaimed at the end of one year
from the date fixed for redemption shall be repaid to the Corporation
upon its request, after which the holders of the shares called for
redemption shall look only to the Corporation for payment of the
redemption price.
The Corporation may use one of its subsidiary banks with trust
powers as the depository and agent for such redemption.
(iv) No Sinking Fund. The Corporation shall not be obligated to make
payments into or to maintain any sinking fund for the Series A Preferred
Stock.
(e) Conversion.
(i) Conversion Privilege. The holder of any shares of Series A
Preferred Stock at any time prior to the date fixed for redemption as
provided in paragraph (d), shall have the right to surrender the
certificates evidencing such shares and receive, in conversion of each
share of Series A Preferred Stock, one share (the "Conversion Ratio") of
the Common Stock, no par value of the Corporation.
(ii) Manner of Exercising Conversion Privilege. The conversion
privilege may be exercised at any time including from and after the date
on which a notice of redemption was given and prior to the close of
business on the last day before the date of redemption stated in the
notice. To exercise the conversion privilege, the holder of Series A
Preferred Stock shall surrender the certificates representing the shares
to be converted at the office of the Transfer Agent of the Corporation
and shall give written notice to the Corporation at such office that the
holder elects to convert such shares. Such certificates shall be duly
endorsed or assigned to the Corporation, or in blank. Conversion shall be
deemed to have been effected immediately prior to the close of business
on the date upon which such surrender is made, and such date is referred
to in this paragraph (e) as the "Conversion Date." On the Conversion Date
or as promptly thereafter as practicable, the Corporation shall deliver
to the holder of the stock surrendered for conversion, or as otherwise
directed by him in writing, a certificate for the number of full shares
of Common Stock deliverable upon conversion of such Series A Preferred
Stock and, if applicable, a check in respect to any fraction of a share
as provided in subparagraph (e) (iii).
(iii) Cash Adjustment for Fractional Share Upon Conversion. The
Corporation shall not deliver fractional shares of Common Stock upon
conversion of shares of Series A Preferred Stock. In lieu of any
fractional share of Common Stock that would otherwise be deliverable upon
conversion, the Corporation shall pay an amount in cash equal to the
current market value of the fractional share, computed on the basis of
the market price on the last business day before the Conversion Date. For
purposes of this section, the "market price" on any business day shall be
the closing price per share of Common Stock in the NASDAQ National Market
System or, if the shares of Common Stock are listed or admitted to
trading on any national securities exchange, the reported closing price
per share of Common Stock on such exchange on such day.
(iv) Adjustment of Conversion Ratio. The Conversion Ratio of the
Series A Preferred Stock shall be adjusted from time to time as follows:
(A) If at any time while any of the Series A Preferred Stock is
outstanding the Corporation shall (i) pay a dividend on its Common
Stock in shares of its capital stock, including Common Stock and
Preferred Stock, (ii) subdivide its outstanding shares of Common
Stock into a greater number of shares, (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares
of stock of the Corporation, the Conversion Ratio in effect
immediately prior thereto shall be adjusted so that the holder of
any share of Series A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of
Common Stock or other securities of the Corporation which he would
have owned or have been entitled to receive after the happening of
any of the events described above had such share of Series A
Preferred Stock been converted immediately prior to the happening of
such event. An adjustment made pursuant to this subparagraph (e)
(iv) (A) shall become effective in the case of a dividend
immediately after the opening of business on the day following the
record date for the determination of shareholders entitled to
receive such dividend, and shall become effective in the case of a
subdivision, combination or reclassification immediately after the
opening of business on the day following the day when such
subdivision, combination, or reclassification becomes effective.
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(B) If while any of the Series A Preferred Stock is
outstanding, the Corporation shall issue rights or warrants ratably
to the holders of shares of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the market price per share of Common Stock on the
record date for the determination of shareholders entitled to
receive such rights and warrants, the Conversion Ratio in effect
immediately before that record date shall be adjusted as of the day
following that record date so that it shall equal the ratio
determined by multiplying the Conversion Ratio in effect immediately
before that record date by a fraction, of which the numerator shall
be the number of shares of Common Stock outstanding on that record
date plus the number of shares of Common Stock offered for
subscription or purchase and the denominator shall be the number of
shares of Common Stock outstanding on that record date plus the
number of shares of Common Stock that the aggregate offering price
of the total number of shares so offered would purchase at such
current market price per share of Common Stock. To the extent that
such rights or warrants are not exercised before the expiration
thereof, the Conversion Ratio shall be readjusted as of the close of
business on the expiration date to the Conversion Ratio that would
then be in effect based upon the number of shares of Common Stock
actually delivered upon the exercise of such rights or warrants.
(C) If the Corporation shall distribute, to all holders of
shares of its Common Stock, evidences of its indebtedness or of its
assets (excluding cash distributions made out of current or retained
earnings) the Conversion Ratio in effect immediately before the
record date for the determination of shareholders entitled to
receive such distribution shall be adjusted immediately after the
opening of business on the day following that record date so that it
shall equal the ratio determined by multiplying the Conversion Ratio
in effect immediately prior thereto by a fraction, of which the
numerator shall be the total number of shares of Common Stock
outstanding on that record date multiplied by such current market
price per share on that record date, and of which one denominator
shall be determined by subtracting the aggregate face value of
evidences of indebtedness or the aggregate fair market value of
evidences of its assets from an amount equal to the total number of
shares of Common Stock outstanding on such record date multiplied by
the current market price per share of Common Stock on that record
date.
(D) For the purpose of any computation under subparagraphs (e)
(iv) (B) and (C) above, the current market price per share of Common
Stock at any date shall be deemed to be the average of the market
prices for the thirty consecutive business days terminating fifteen
calendar days before the day in question. The market price for each
day shall be determined as provided in subparagraph (e) (iii)
hereof.
(E) No adjustment in the Conversion Ratio for the Series A
Preferred Stock shall be made if, at the same time that the
Corporation takes an action with respect to the Common Stock that
would otherwise require adjustment under subparagraphs (A) through
(C) above, the Corporation shall take the same action with respect
to the Series A Preferred Stock in the same proportion as if each
share of Series A Preferred Stock had been converted into shares of
Common Stock at the then applicable Conversion Ratio immediately
before the record date for the determination of holders of Common
Stock entitled to receive the dividends, rights, warrants, or
distributions.
(F) Except as herein otherwise provided, no adjustment in the
Conversion Ratio shall be made by reason of the issuance of shares
of Common Stock, or any securities convertible into or exchangeable
for shares of Common Stock, or any securities carrying the right to
purchase any of the foregoing or for any other reason whatsoever.
(G) No adjustment in the Conversion Ratio shall be required
unless such adjustment would require an increase or decrease of at
least one percent (1%) of such Ratio; provided, however, that any
adjustments which by reason of this subparagraph (e) (iv) (G) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
subparagraph (e) (iv) shall be made to the nearest hundredth of a
share.
(H) Whenever the Conversion Ratio is adjusted as provided in
this subparagraph (e) (iv), the Corporation shall promptly file with
the Transfer Agent for the Series A Preferred Stock a statement
signed by the Chairman of the Board, President or Vice President of
the Corporation and by its Treasurer or its Secretary showing in
detail the facts requiring such adjustment and shall exhibit the
statement to any holder of Series A Preferred Stock desiring to
inspect the statement. In addition, with respect to adjustments made
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while any Series A Preferred Stock is outstanding, the Corporation
shall state to the Transfer Agent and in the next quarterly and
annual report that an adjustment has been effected and give the
adjusted Conversion Ratio in the Corporation's next quarterly and
annual report to shareholders. Such quarterly and annual report
shall be mailed to all holders of record of the Series A Preferred
Stock on the record date used for mailing such quarterly and annual
report to holders of Common Stock.
(v) Effect of Consolidations, Mergers or Sales on Conversion
Privilege. If at any time while any shares of the Series A Preferred
Stock are outstanding, the Corporation is consolidated or merged with or
into any other corporation or sells or conveys all or substantially all
of its assets, and pursuant to the provisions of the New Jersey Business
Corporation Act or the Corporation's certificate of incorporation the
approval of the holders of the Common Stock of the Corporation is
required for such transaction, then such transaction shall also require
for approval the affirmative vote of a majority of the outstanding Series
A Preferred Stock, voting as a separate class. Notwithstanding the
foregoing, the Corporation shall be entitled to redeem the Series A
Preferred Stock pursuant to the provisions of paragraph (d) prior to or
simultaneously with the consummation of any such transaction and if such
redemption does take place, the consent of the holders of the Series A
Preferred Stock shall not be required and if any vote upon such a
transaction by the holders of Series A Preferred Stock has been taken,
such vote shall be disregarded.
(vi) Notice of Certain Transactions Required. In addition to any
other notice required by this Article V, if at any time while Series A
Preferred Shares are outstanding the Corporation shall (i) declare a
dividend (or any other distribution) on its Common Stock other than a
cash dividend out of current retained earnings or surplus; or (ii)
authorize the issuance to all holders of its Common Stock of rights or
warrants to subscribe for or purchase shares of its Common Stock or of
any other subscription rights or warrants; or (iii) reclassify its Common
Stock (other than through a subdivision or combination or by changing the
par value); or (iv) take any other action which requires the Conversion
Ratio to be adjusted under paragraph (e) (iv); or (v) become a party to
any consolidation or merger or sell or transfer all or substantially all
of the assets of the Corporation, then the Corporation shall notify by
regular mail the holders of record of the Series A Preferred Shares at
least 15 days prior to the appropriate record date. The notice shall
briefly describe the transaction and state (i) the record date which will
be used for the purpose of determining which holders will receive such
dividend or distribution, of rights or warrants, or (ii) the date on
which any such reclassification, consolidation, merger, sale or transfer
is expected to become effective, and the record date as of which it will
be determined which holders shall be entitled to exchange their Common
Stock for securities or other property delivered upon such
reclassification, consolidation, merger, sale or transfer. The
Corporation shall mail a notice of all meetings of shareholders (and any
accompanying proxy statement) to the holders of Series A Preferred Stock
at the same time the notice (and proxy statement) is mailed to holders of
Common Stock and shall mail all other notices and financial statements to
the holders of Preferred Stock at the same time such notices and
financial statements are mailed to holders of Common Stock. If any action
is taken by means of consent, notice of such action by consent shall be
sent to the holders of Series A Preferred Stock at least 20 days prior to
the effective date of such consent. Failure to give or receive the notice
required by this subparagraph (e) (vi) or any defect therein shall not
affect the legality or validity or any such dividend, distribution, right
or warrant or other action but such failure shall not affect the rights
of the holders of Series A Preferred Stock to obtain an appropriate
remedy on account of such failure.
(vii) Corporation to Reserve Stock for Conversion. As long as any
Series A Preferred Stock remains outstanding, the Corporation shall
reserve out of its authorized but unissued Common Stock the full number
of shares of Common Stock deliverable upon the conversion of all
outstanding Series A Preferred Stock.
(f) Voting Rights.
(i) Except as otherwise required by the New Jersey Business
Corporation Act and as otherwise provided in subparagraph (e) (v) and in
this paragraph (f), the holders of Series A Preferred Stock shall have no
voting rights.
(ii) Any other provisions herein notwithstanding, if at any time the
Corporation shall have failed to pay for 2 quarters, whether or not
consecutive, the full quarter-annual dividends payable on the Series A
Preferred Stock, the holders of the Series A Preferred Stock shall have
the right, voting as a separate class, to elect a total of two directors
to the class of directors elected at the next annual meeting of
shareholders (the "Preferred Directors"). A dividend default with respect
to the Series A Preferred Stock, giving rise to the right to elect the
Preferred Directors, shall be deemed to continue to exist until all
accrued dividends on all outstanding shares of the Series A Preferred
Stock shall have been paid to the end of the past preceding quarterly
dividend period.
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(A) Subject to the limitations set forth in subparagraph (B)
below, the Preferred Directors shall be elected to a term of office
the same as the term of office of the other directors in the class
to which they are elected. At each subsequent annual meeting of
shareholders at which directors of such class are elected, until all
dividends in default on the Series A Preferred Stock shall have been
paid or declared and set apart for payment, the holders of Series A
Preferred Stock shall have the right to vote for the election of
Preferred Directors in the manner described in this subparagraph
(ii).
(B) The Preferred Directors shall hold office only until the
first meeting of shareholders following the payment, or the
declaration and setting apart for payment, of all dividends in
default on the Series A Preferred Stock, notwithstanding that the
term of the other directors in the class to which they are a member
does not expire at the time of such meeting. The successors to the
Preferred Directors shall be elected by the shareholders at such
meeting to a term of office which shall expire at the same time as
the term of office of the other directors in the class to which they
are elected.
(C) At any meeting of shareholders held while holders of Series
A Preferred Stock have the voting power to elect Preferred
Directors, the holders of a majority of the then outstanding Series
A Preferred Stock who are present in person or by proxy shall be
sufficient to constitute a quorum for the election of the Preferred
Directors as herein provided.
(D) Any vacancy caused by the death, resignation, or removal of
a Preferred Director may be filled by the remaining Preferred
Director, or if there is no remaining Preferred Director, by a
majority of the holders of Series A Preferred Stock. In the event
there is no remaining Preferred Director to fill a vacancy, a
holder(s) of 10% or more of the outstanding Series A Preferred Stock
shall have the right to require the Corporation to hold a meeting of
shareholders within 20 days (or such greater time as shall be
required by law) to fill the vacancy, unless when so requested a
shareholders' meeting is scheduled to occur in 60 days or less. Any
Preferred Director so elected shall hold office until the next
annual meeting of shareholders, at which time the holders of the
Series A Preferred Stock shall elect a Preferred Director to fill
the vacancy if the term of office of the Preferred Director who was
replaced does not expire at the time of such meeting.
(iii) While any Series A Preferred Stock is outstanding, the
amendment of any provision of this Section C of Article V of the
Certificate of Incorporation (except amendments relating to a stock split
or reduction in the authorized shares of the series that the New Jersey
Business Corporation Act authorizes the Board of Directors to adopt
without shareholder approval) shall require the affirmative vote of a
majority of the outstanding Series A Preferred Stock.
(iv) On any matter on which the holders of Series A Preferred Stock
shall be entitled to vote, they shall be entitled to one vote for each
share held. The holders of Series A Preferred Stock shall vote only as a
separate class; their votes shall not be counted together with the
holders of the Common Stock or any other class or series of Preferred
Stock as a single class.
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APPENDIX B
THE TRANSFER OF THE OPTION GRANTED BY THIS AGREEMENT IS SUBJECT TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated November 8, 1993, is by
and between HUBCO, Inc., a New Jersey corporation and registered bank holding
company ("Hubco"), and Washington Bancorp, Inc., a Delaware corporation
("WBI") and registered bank holding company for Washington Savings Bank, a
state savings bank (the "Savings Bank").
BACKGROUND
1. Hubco, WBI, the Savings Bank and Hudson United Bank (the "Bank"), a
wholly-owned subsidiary of Hubco, as of the date hereof, have executed a
definitive agreement and plan of merger (the "Merger Agreement") pursuant to
which Hubco will acquire WBI through a merger of WBI with and into Hubco (the
"Merger").
2. As an inducement to Hubco to enter into the Merger Agreement and in
consideration for such entry, WBI desires to grant to Hubco an option to
purchase authorized but unissued shares of common stock of WBI in an amount
and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Hubco and WBI, intending to be
legally bound hereby, agree:
1. Grant of Option. WBI hereby grants to Hubco the option to purchase
765,000 shares of common stock, par value $.10 per share (the "Common Stock")
of WBI at a price of $11.50 per share (the "Option Price"), subject to the
terms and conditions set forth herein (the "Option").
2. Exercise of Option. This Option shall not be exercisable until the
occurrence of a Triggering Event (as such term is hereinafter defined). Upon
or after the occurrence of a Triggering Event (as such term is hereinafter
defined), Hubco may exercise the Option, in whole or in part, at any time or
from time to time subject to the termination provisions of Section 19 of this
Agreement.
The term "Triggering Event" means the occurrence of any of the following
events:
A person or group (as such terms are defined in the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Hubco or an affiliate of Hubco:
a. acquires beneficial ownership (as such term is defined in Rule 13d-3
as promulgated under the Exchange Act) of at least 20% of the then outstanding
shares of Common Stock, except that it shall not be a Triggering Event for any
person to acquire additional Common Stock if such person beneficially owns as
of the date hereof at least 20% of the outstanding shares of Common Stock; or
b. enters into a letter of intent or an agreement, whether oral or
written, with WBI pursuant to which such person or any affiliate of such
person would (i) merge or consolidate, or enter into any similar transaction
with WBI, (ii) acquire all or a significant portion of the assets or
liabilities of WBI, or (iii) acquire beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote
securities representing 20% or more of the then outstanding shares of Common
Stock; or
c. makes a filing with bank or thrift regulatory authorities (which
filing has been accepted for processing by such authorities) or publicly
announces a bona fide proposal (such filing or proposal, a "Proposal") with
respect to (i) any merger, consolidation or acquisition of all or a
significant portion of all the assets or liabilities of WBI or any other
business combination involving WBI, or (ii) a transaction involving the
transfer of beneficial ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities representing, 20% or more
of the outstanding shares of Common Stock, and thereafter, such Proposal is
not Publicly Withdrawn (as such term is hereinafter defined) at least 15 days
prior to the meeting of stockholders of WBI called to vote on the Merger and
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WBI' stockholders fail to approve the Merger by the vote required by
applicable law at the meeting of stockholders called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before such Proposal
has been Publicly Withdrawn, WBI willfully takes any action in any manner
which would materially interfere with its ability to consummate the Merger or
materially reduce the value of the transaction to Hubco.
The term "Triggering Event" also means the taking of any material direct
or indirect action by WBI or any of its directors, officers or agents with the
intention of inviting, encouraging or soliciting, or which is likely to result
in, any proposal which has as its purpose a tender offer for the shares of
WBI' Common Stock, a merger, consolidation, plan of exchange, plan of
acquisition or reorganization of WBI, or a sale of a significant number of
shares of WBI' Common Stock or any significant portion of its assets or
liabilities.
The term "significant number" means 10% of the outstanding shares of
Common Stock. The term "significant portion" means 25% of the assets or
liabilities of WBI.
"Publicly Withdrawn", for purposes of clauses (c) and (d) above, shall
mean an unconditional bona fide withdrawal of a Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over WBI or in soliciting or inducing any other
person (other than Hubco or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at any
time (i) in the absence of any required governmental or regulatory approval or
consent necessary for WBI to issue the shares of Common Stock covered by the
Option (the "Option Shares") or Hubco to exercise the Option or prior to the
expiration or termination of any waiting period required by law, or (ii) so
long as any injunction or other order, decree or ruling issued by any federal
or state court of competent jurisdiction is in effect which prohibits the sale
or delivery of the Option Shares.
WBI shall notify Hubco promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such
notice by WBI shall not be a condition to the right of Hubco to exercise the
Option. WBI will not take any action which would have the effect of preventing
or disabling WBI from delivering the Option Shares to Hubco upon exercise of
the Option or otherwise performing its obligations under this Agreement. In
the event Hubco wishes to exercise the Option, Hubco shall send a written
notice to WBI (the date of which is hereinafter referred to as the "Notice
Date") specifying the total number of Option Shares it wishes to purchase and
a place and date for the closing of such a purchase (a "Closing"); provided,
however, that a Closing shall not occur prior to five business days after the
later of receipt of any necessary regulatory approvals and the expiration of
any legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing hereunder (a)
Hubco will make payment to WBI of the aggregate price for the Option Shares so
purchased by wire transfer of immediately available funds to an account
designated by WBI, (b) WBI will deliver to Hubco a stock certificate or
certificates representing the number of Option Shares so purchased, free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever created by or through WBI (other than restrictions imposed by
applicable securities laws), registered in the name of Hubco or its designee,
in such denominations as were specified by Hubco in its notice of exercise and
bearing a legend as set forth below and (c) Hubco shall pay any transfer or
other taxes required by reason of the issuance of the Option Shares so
purchased.
Unless a registration statement is filed and declared effective under
Section 4 hereof, a legend will be placed on each stock certificate evidencing
Option Shares issued pursuant to this Agreement, which legend will read
substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act"). These
shares may not be sold, transferred or otherwise disposed of unless a
registration statement with respect to the sale of such shares has been filed
under the 1933 Act and declared effective or, in the opinion of counsel to
Washington Bancorp, Inc., said transfer would be exempt from registration
under the provisions of the 1933 Act and the regulations promulgated
thereunder.
4. Registration Rights. Upon or after the occurrence of a Triggering
Event that occurs prior to the termination of this Agreement and upon receipt
of a written request from Hubco, WBI shall prepare and file a registration
statement with the Securities and Exchange Commission, covering the Option and
such number of
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Option Shares as Hubco shall specify in its request, and WBI shall use its
best efforts to cause such registration statement to be declared effective in
order to permit the sale or other disposition of the Option and the Option
Shares, provided that Hubco shall in no event have the right to have more than
one such registration statement become effective and provided further that WSI
may postpone such preparation and filing for a period of time (not to exceed
90 days) if in its reasonable judgment such filing would require the
disclosure of material information that WSI has a bona fide business purpose
for preserving as confidential.
In connection with such filing, WBI shall use its best efforts to cause
to be delivered to Hubco such certificates, opinions, accountant's letters and
other documents as Hubco shall reasonably request and as are customarily
provided in connection with registrations of securities under the Securities
Act of 1933, as amended, and Hubco shall provide to WSI such information
regarding Hubco as WSI shall reasonably request for purposes of preparing such
registration statement. All expenses incurred by WBI in complying with the
provisions of this Section 4, including without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for WBI
and blue sky fees and expenses shall be paid by WBI. Underwriting discounts
and commissions to brokers and dealers relating to the Option Shares, fees and
disbursements of counsel to Hubco and any other expenses incurred by Hubco in
connection with such registration shall be borne by Hubco. In connection with
such filing, WBI shall indemnify and hold harmless Hubco against any losses,
claims, damages or liabilities, joint or several, to which Hubco may become
subject, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any preliminary or
final prospectus or any amendment or supplement thereto, or arise out of a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and WBI will reimburse Hubco for any legal
or other expense reasonably incurred by Hubco in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that WBI will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such preliminary or final prospectus or such amendment or supplement thereto
in reliance upon and in conformity with written information furnished by or on
behalf of Hubco specifically for use in the preparation thereof. Hubco will
indemnify and hold harmless WBI to the same extent as set forth in the
immediately preceding sentence but only with reference to written information
specifically furnished by or on behalf of Hubco for use in the preparation of
such preliminary or final prospectus or such amendment or supplement thereto;
and Hubco will reimburse WBI for any legal or other expense reasonably
incurred by WBI in connection with investigating or defending any such loss,
claim, damage, liability or action.
5. Adjustment Upon Changes in Capitalization. In the event of any change
in the Common Stock by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of the Common
Stock, or any consolidation, merger or similar transaction of WBI with another
entity, or any sale of all or substantially all of the assets of WBI shall be
effected in such a way that the holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holder hereof) shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions specified herein and in lieu of the Common
Stock immediately theretofore purchasable and receivable upon exercise of the
rights represented by this Option, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the number of
shares of Common Stock immediately theretofore purchasable and receivable upon
exercise of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall, upon exercise of the Option, be
paid the difference between the Option Price and such cash consideration
without the need to exercise the Option.
6. Filings and Consents. Each of Hubco and WBI will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to compliance
with all applicable laws including, in the event Hubco is the holder hereof,
approval of the Board of Governors of the Federal Reserve System and WBI
agrees
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to cooperate with and furnish to the holder hereof such information and
documents as may be reasonably required to secure such approvals.
7. Representations and Warranties of WBI. WBI hereby represents and
warrants to Hubco as follows:
a. Due Authorization. WBI has full corporate power and authority to
execute, deliver and perform this Agreement and all corporate action
necessary for execution, delivery and performance of this Agreement has
been duly taken by WBI.
b. Authorized Shares. WBI has taken and, as long as the Option is
outstanding, will take all necessary corporate action to authorize and
reserve for issuance all shares of Common Stock that may be issued
pursuant to any exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby
(assuming all appropriate regulatory approvals) will violate or result in
any violation or default of or be in conflict with or constitute a
default under any term of the certificate of incorporation or by-laws of
WBI or any agreement, instrument, judgment, decree, statute, rule or
order applicable to WBI.
8. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement and that the
obligations of the parties hereto shall be specifically enforceable.
Notwithstanding the foregoing, Hubco shall have the right to seek money
damages against WBI for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, among
the parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. Hubco may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to an affiliate of Hubco, except upon or
after the occurrence of a Triggering Event. Hubco represents that it is
acquiring the Option for Hubco's own account and not with a view to or for
sale in connection with any distribution of the Option or the Option Shares.
Hubco is aware that presently neither the Option nor the Option Shares are
being offered by a registration statement filed with, and declared effective
by, the Securities and Exchange Commission, but instead are being offered in
reliance upon the exemption from the registration requirements pursuant to
Section 4(2) of the Securities Act of 1933, as amended. Hubco shall have the
right to assign this Agreement to any party it selects after the occurrence of
a Triggering Event, subject to the application of all applicable securities
laws.
11. Amendment of Agreement. In the event that the parties hereto mutually
consent, this Agreement may be amended in writing at any time, for the purpose
of facilitating performance hereunder or to comply with any applicable
regulation of any governmental authority or any applicable order of any court
or for any other purpose.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
13. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given when delivered personally, by express service, cable,
telegram or telex, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
If to Hubco:
HUBCO, Inc.
3100 Bergenline Avenue
Union, New Jersey 07087
Attn.: Mr. Kenneth T. Neilson
President
With a copy to:
Clapp & Eisenberg
1 Newark Center
Newark, New Jersey 07102
Attn.: Ronald H. Janis, Esq.
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If to WBI:
Washington Bancorp, Inc.
101 Washington Street
Hoboken, New Jersey 07030
Attn.: Mr. Paul Rotondi
Chief Executive Officer
With a copy to:
Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068
Attn.: Peter Ehrenberg, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are inserted for convenience
and reference purposes, and shall not limit or otherwise affect any of the
terms or provisions hereof.
16. Waivers and Extensions. The parties hereto may, by mutual consent,
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive (i) compliance with any of the covenants of
the other party contained in this Agreement and/or (ii) the other party's
performance of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Section 10 permitting Hubco to assign its rights and
obligations hereunder.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon either (i) the
termination of the Merger Agreement as provided therein, or (ii) the
consummation of the transactions contemplated by the Merger Agreement;
provided, however, that if termination of the Merger Agreement occurs after
the occurrence of a Triggering Event, this Agreement shall not terminate until
the later of 18 months following the date of the termination of the Merger
Agreement or the consummation of any proposed transactions which constitute
the Triggering Event.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Agreement to be executed by
its duly authorized officer, all as of the day and year first above written.
WASHINGTON BANCORP, INC.
By: ___________________________
Paul Rotondi
Chairman of the Board & CEO
HUBCO, Inc.
By: ___________________________
Kenneth T. Neilson
President
B-5
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APPENDIX C
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
262 Appraisal Rights.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to [SECTION MARK] 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to [SECTION MARK] 251, 252, 254, 257, 258, 263 or 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock which, at the
record date fixed to determine the stockholders entitled to receive notice of
and to vote at the meeting of stockholders to act upon the agreement of merger
or consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its approval
the vote of the stockholders of the surviving corporation as provided in
subsection (f) of [SECTION MARK] 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to
[SECTION-SECTION MARK] 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation;
b. Shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 stockholders;
c. Cash in lieu of fractional shares of the corporations
described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock and cash in lieu of
fractional shares described in the foregoing subparagraphs a., b.
and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under [SECTION MARK] 253 of this
title is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting,
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shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
[SECTION MARK] 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of the
stockholders entitled to appraisal rights of the effective date of the
merger or consolidation and that appraisal rights are available for any
or all of the shares of the constituent corporation, and shall include in
such notice a copy of this section. The notice shall be sent by certified
or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
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(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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APPENDIX D
[Letterhead of Capital Consultants of Princeton, Inc.]
April , 1994
Board of Directors
Washington Bancorp, Inc.
101 Washington Street
Hoboken, NJ 07030
Members of the Board:
Washington Bancorp, Inc., ("WASHINGTON") has entered into an Agreement
and Plan of Merger ("AGREEMENT") with HUBCO, Inc. ("HUBCO") which provides
for the merger of WASHINGTON with and into HUBCO ("MERGER").
If the MERGER is approved and consummated, each WASHINGTON shareholder
will receive either $16.10 in cash or 0.6708 shares of a new Series A
Preferred Stock, stated value $24.00 ("PREFERRED STOCK"), of HUBCO for all
of such holder's shares of WASHINGTON common stock, subject to the terms,
conditions, limitations and procedures set forth in the AGREEMENT. Each full
share of PREFERRED STOCK will be convertible into one share of HUBCO common
stock, without par value, under the terms and conditions specified in the
AGREEMENT. Under the AGREEMENT, 51% of WASHINGTON's shares will be converted
into the right to receive the PREFERRED STOCK and 49% will be converted into
the right to receive cash. In lieu of the issuance of an applicable fraction
of a share of HUBCO PREFERRED STOCK, a cash payment will be issued therefor
equal to such fraction of a share of HUBCO PREFERRED STOCK multiplied by
$24.00.
You have requested our opinion as to whether the consideration to be
offered in the MERGER is fair, from a financial point of view, to the
shareholders of WASHINGTON.
Capital Consultants of Princeton, Inc., as a customary part of its
investment banking business, is engaged in the evaluation of commercial
banking and thrift institutions and their securities in connection with
mergers and acquisitions, private placements and valuations for estate,
corporate and other purposes.
In arriving at our opinion, we have (a) reviewed a copy of the AGREEMENT;
(b) reviewed the Registration Statement on Form S-4 of HUBCO of which this
Proxy Statement/Prospectus is a part; (c) reviewed the most recent proxy
materials of WASHINGTON and HUBCO; (d) reviewed and analyzed the historical
financial statements of WASHINGTON and HUBCO; (e) reviewed certain publicly
available information concerning WASHINGTON and HUBCO; (f) have met with and
discussed the business and prospects with the senior managements of WASHINGTON
and HUBCO; (g) compared operating results and other financial statement
information for WASHINGTON and HUBCO with those of certain other banks and
thrifts and bank and thrift holding companies which we deemed comparable; (h)
reviewed the recent NASDAQ trading history of WASHINGTON and HUBCO common
shares; (i) compared the financial terms of the MERGER with certain publicly
available information with respect to certain other bank and thrift and bank
and thrift holding companies and the nature and terms of other thrift mergers
and acquisitions in the financial industry that we deemed relevant; and (j)
made such other analyses, studies and inquiries as we deemed relevant.
While we have taken care in our investigation and analysis, we have
relied upon and assumed the accuracy, completeness and fairness of the
financial and other information provided to us or publicly available, and have
not
D-1<PAGE>
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attempted to verify same. We have not made or obtained any independent
evaluations or appraisals of the assets or liabilities of WASHINGTON or HUBCO.
In conducting our analysis and arriving at our opinion, we have
considered such financial and other factors as we have deemed appropriate in
the circumstances. In rendering our opinion, we have assumed that in the
course of obtaining the necessary regulatory approvals for the proposed
MERGER, no conditions will be imposed that will have a material adverse effect
on the contemplated benefits of the MERGER. Our opinion is necessarily based
upon market, economic and other conditions as they exist and can be evaluated
as of the date of this letter.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the consideration to be paid in the MERGER is fair, from a
financial point of view, to the shareholders of WASHINGTON.
Very truly yours,
Capital Consultants of Princeton,
Inc.
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APPENDIX E
Information Regarding Statewide
Item Page
- ---- ----
Selected Financial Information of Statewide ........................... E-2
Management Discussion and Analysis of Financial Condition
and Results of Operations of Statewide ............................... E-3
Business of Statewide ................................................. E-12
Financial Statements:
Report of Independent Public Accountants ............................ E-30
Consolidated Statements of Financial Condition at December 31,
1993 (Unaudited) and at March 31, 1993 and 1992 (Audited) ......... E-31
Consolidated Statements of Operations and Retained Earnings for
the Nine Months Ended December 31, 1993 and 1992 (Unaudited) and
for the Three Years Ended March 31, 1993, 1992 and 1991 (Audited) .. E-32
Consolidated Statements of Cash Flows for the Nine Months Ended
December 31, 1993 and 1992 (Unaudited) and for the Three Years
Ended March 31, 1993, 1992 and 1991 (Audited) ...................... E-34
Notes to Consolidated Financial Statements .......................... E-36
E-1
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SELECTED FINANCIAL INFORMATION OF STATEWIDE
Set forth below are selected consolidated financial and other data of
Statewide. This financial data (other than ratios) for the five years ended
March 31, 1993 are derived from the Consolidated Financial Statements of
Statewide. The financial data for the nine month periods ended December 31, 1993
and 1992 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which the management of Statewide considers necessary for a fair
representation of the financial position and the results of operations for these
periods. Operating results for the nine months ended December 31, 1993 are not
necessarily indicative of the results that may be expected for the entire year
ending March 31, 1994. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information included in this Appendix E.
<TABLE>
Nine Months Ended
December 31, Years Ended March 31,
------------------ ----------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
------- ------- ------- -------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations:
Interest and dividend income ............... $ 26,120 $ 30,860 $ 39,822 $ 44,400 $ 48,150 $ 52,202 $ 56,452
Interest expense ........................... 12,857 17,073 21,829 30,605 37,387 42,252 42,928
-------- -------- -------- -------- -------- -------- --------
Net interest and dividend income before
provision for loan losses ................ 13,263 13,787 17,993 13,795 10,763 9,950 13,524
Provision for loan losses ................. 360 182 193 1,933 186 3,762 194
-------- -------- -------- -------- -------- -------- --------
Net interest and dividend income after
provision for loan losses ................. 12,903 13,605 17,800 11,862 10,577 6,188 13,330
Other income ............................. 1,102 1,402 2,010 3,564 1,739 4,122 (2,720)
Operating expenses ........................ 9,045 8,911 12,233 12,964 13,611 13,386 11,586
-------- -------- -------- -------- -------- -------- --------
Income before income taxes, extraordi-
nary credit and change in accounting
principle ................................ 4,960 6,096 7,577 2,462 (1,295) (3,076) (976)
Income taxes ............................... 1,700 2,052 2,490 1,461 35 77 64
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary credit and
change in accounting principle ............ 3,260 4,044 5,087 1,001 (1,330) (3,153) (1,040)
Extraordinary credit from utilization of
net operating loss carryforward .......... 0 0 0 1,233 0 0 0
Cumulative effect of change in account-
ing principle ............................. 669 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Net income ................................. $ 3,929 $ 4,044 $ 5,087 $ 2,234 $ (1,330) $ (3,153) $ (1,040)
======== ======== ======== ======== ======== ======== ========
Consolidated Statement of
Financial Condition:
Total assets .............................. $500,275 $525,596 $517,885 $531,785 $529,225 $564,786 $599,125
Deposits .................................. 425,802 443,210 440,034 460,926 454,783 484,939 488,317
Investment securities ..................... 46,176 24,954 18,224 23,945 23,580 38,694 37,764
Mortgage-backed securities available
for sale ................................. 4,789 0 7,517 0 0 0 0
Mortgage-backed securities ................ 201,397 205,644 208,248 180,304 142,693 133,331 141,526
Loans receivable, net .................... 186,453 240,012 230,929 264,914 308,905 343,320 373,547
Federal Home Loan Bank advances ........... 39,367 51,667 45,092 43,392 49,192 46,492 52,792
Retained earnings, substantially
restricted ............................... 32,240 27,268 28,312 23,225 20,991 22,321 25,474
Selected Financial Ratios:
Return on average total assets ............ 1.03% 1.01% 0.96% 0.42% (0.24)% (0.54)% (0.16)%
Return on average retained earnings ....... 17.16 21.20 19.43 10.16 (6.14) (12.19) (3.90)
Average retained earnings to average
total assets ............................ 6.02 4.78 4.95 4.15 3.98 4.42 4.21
Allowance for loan losses to total loans
at end of period ......................... .58 0.16 0.59 0.69 0.54 0.57 0.02
Nonperforming loans to total loans at
end of period ............................ 1.44 1.79 1.23 1.22 4.17 2.24 0.71
Allowance for loan losses to nonper-
forming loans ............................ 40.22 40.35 47.23 56.42 13.00 25.49 2.85
Nonperforming assets to total loans
and real estate owned .................... 6.28 5.86 5.77 6.51 7.10 4.58 0.82
Other Data:
Number of:
Outstanding real estate loans originated .. 1,966 2,357 2,280 2,578 2,851 3,058 3,199
Deposit accounts .......................... 49,215 54,580 50,807 56,671 56,531 60,996 64,560
Full service offices open .................. 13 13 13 13 13 13 15
</TABLE>
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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF STATEWIDE
The following discussion and analysis is intended to assist readers in
understanding Statewide's results of operations and changes in financial
position for the nine months ended December 31, 1993 and 1992 and for the fiscal
years ended March 31, 1993, 1992 and 1991, which should be read in conjunction
with the Consolidated Financial Statements of Statewide and Notes thereto
beginning on Page E-30 of this Appendix E and the other information about
Statewide contained in this Appendix E.
Financial Condition
At March 31, 1993, Statewide had total assets of $517.9 million, a
decrease of $13.9 million, or 2.6%, from March 31, 1992. The reduction in
Statewide's assets over the past fiscal year resulted from the funding of a
$20.9 million, or 4.5% net decrease in deposits over the fiscal year, which was
partially funded through a $1.7 million increase in borrowings and a $5.1
million increase in retained earnings. Total assets continued to decrease during
the period March 31, 1993 to December 31, 1993. At December 31, 1993, Statewide
had total assets of $500.3 million, a decrease of $17.6 million, or 3.4%, from
March 31, 1993. Deposits decreased by $14.2 million, or 3.2% over the nine
months ended December 31, 1993.
Loans receivable decreased from March 31, 1993 to December 31, 1993 by
$44 million, or 19.3%, to $186.5 million at December 31, 1993. This decrease was
primarily the result of increased prepayments and lower loan demand.
Mortgage-backed securities, including mortgage-backed securities
available for sale, totalled $206.2 million at December 31, 1993, a decrease of
$9.6 million or 4.4% from March 31, 1993. This decrease was primarily the result
of increased prepayments and lower loan demand.
Investment securities totalled $46.2 million at December 31, 1993, an
increase of $28 million, or 153.4%, from March 31, 1993. This increase
represents management's decision to purchase additional shorter term securities
in anticipation of an upward movement in interest rates.
Comparison of Operating Results for the Nine Months Ended December 31, 1993
and December 31, 1992.
General. Net income for the nine months ended December 31, 1993
decreased by $0.1 million, or 2.5%, to $3.9 million from $4.0 million for the
nine months ended December 31, 1992.
Interest and Dividend Income. Interest and dividend income decreased by
$4.8 million, or 15.5%, to $26.1 million for the nine months ended December 31,
1993 from $30.9 million for the nine months ended December 31, 1992. The
decrease was due to the average yield on interest-earning assets decreasing from
8.50% for the nine months ended December 31, 1992 to 7.51% for the nine months
ended December 31, 1993. This decrease of 99 basis points, or 11.6%, is
primarily due to the significant loan and mortgage-backed securities prepayments
being invested at lower interest rates.
Interest Expense. Interest expense decreased by $4.2 million, or 24.6%,
from $17.1 million for the nine months ended December 31, 1992 to $12.9 million
for the nine months ended December 31, 1993. Weighted average deposit rates
decreased 100 basis points, or 23.4% to 3.28% for the nine months ended December
31, 1993 from 4.28% for the nine months ended December 31, 1992.
Net Interest and Dividend Income Before Provision for Loan Losses. Net
interest and dividend income before provision for loan losses decreased $0.5
million, or 3.6%, to $13.3 million for the six months ended September 30, 1993
from $9.0 million for the six months ended September 30, 1992. This relative
stability is due to decreases in interest and dividend income which were
substantially offset by decreases in interest expense.
Provision for Loan Losses. Provision for loan losses increased by
$178,000 to $360,000 for the nine months ended December 31, 1993 from $281,000
for the nine months ended December 31, 1992. The allowance for loan losses to
total loans at December 31, 1993 was .6% compared with .7% at December 31, 1992.
The allowance for loan losses to nonperforming loans at December 31, 1993 was
40.2% compared to 36.2% at December 31, 1992. Statewide has advised HUBCO that
Statewide's allowance for loan losses is adequate based upon Statewide
management's ongoing review of Statewide's loan portfolio, general economic
conditions and the financial condition of particular borrowers.
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Other Income. Other income decreased $300,000, or 21.4%, to $1.1
million for the nine months ended December 31, 1993. The decrease is due
primarily to a decrease in net gains on sale of mortgage-backed securities from
$530,000 for the nine months ended December 31, 1992 to none for the nine months
ended December 31, 1993. This decrease was partially offset by an increase in
service charge income of $233,000.
Operating Expenses. Operating expenses increased by $134,000 or 1.5%,
to $9.0 million for the nine months ended December 31, 1993.
Income Taxes. Federal and state income taxes decreased by $0.4 million,
or 19.1%, to $1.7 million for the nine months ended December 31, 1993 compared
with $2.1 million for the nine months ended December 31, 1992. The decrease is
due primarily to a decrease in net income before income taxes.
Comparison of Operating Results for the Years Ended March 31, 1993 and 1992
General. Net income for the fiscal year ended March 31, 1993 increased
by $2.9 million, or 131.8%, to $5.1 million from $2.2 million for the fiscal
year ended March 31, 1992. The primary reason for the increase was an increase
in net interest and dividend income before provision for loan losses of $4.2
million. The increase in net interest and dividend income before provision for
loan losses was primarily due to a net interest margin of 3.40% for fiscal year
1993, compared with a net interest margin of 2.60% for fiscal year 1992, as the
rates Statewide paid on deposits declined faster than the return Statewide
earned on its loans and mortgage-backed securities.
Interest and Dividend Income. Interest and dividend income decreased by
$4.6 million, or 10.4%, to $39.8 million in fiscal year 1993 from $44.4 million
in fiscal year 1992. The decrease was due to the average yield on
interest-earning assets decreasing from 9.23% in fiscal year 1992 to 8.25% in
fiscal year 1993. This 98 basis point decrease represents a decline of 10.6% and
is primarily due to lower interest income on mortgage loans due to significant
loan prepayments being reinvested in shorter term mortgage-backed securities
with lower interest rates.
Interest Expense. Interest expense decreased $8.8 million, or 28.7%,
from $30.6 million in fiscal year 1992 to $21.8 million in fiscal year 1993.
Weighted average deposit rates decreased 183 basis points, or 31.1%, to 4.12%
for fiscal year 1993 from 5.95% for fiscal year 1992. In addition, there was a
shift from higher rate interest-bearing certificates of deposit to lower rate
passbook and other demand type deposit accounts. Total average certificates of
deposit, as a percentage of total average deposits, decreased from 53.4% to
47.2%.
Net Interest and Dividend Income Before Provision for Loan Losses. Net
interest and dividend income before provision for loan losses increased $4.2
million, or 30.4%, to $18.0 million for fiscal year 1993 from $13.8 million for
fiscal year 1992. The increase resulted from a period of declining interest
rates in which interest expense decreased more rapidly than interest income.
Provision for Loan Losses. Statewide's provision for loan losses
decreased by $1.7 million, to $0.2 million for fiscal year 1993 compared to a
provision of $1.9 million for fiscal year 1992. The decrease was the result of
Statewide's recording a $1.5 million provision for loan losses related to a
single loan in 1992. The allowance for loan losses to total loans at March 31,
1993 was .6% compared with .7% at March 31, 1992. The allowance for loan losses
to nonperforming loans at March 31, 1993 was 47.2% compared to 56.4% at March
31, 1992. Statewide has advised HUBCO that Statewide's allowance for loan losses
is adequate based upon management's ongoing review of Statewide's loan
portfolio, general economic conditions and the financial condition of particular
borrowers.
Other Income. Other income decreased by $1.6 million, or 43.6%, from
$3.6 million in fiscal year 1992 to $2.0 million in fiscal year 1993. The
decrease was primarily due to a decrease in net gains on sales of investment and
mortgage-backed securities from $1.8 million in fiscal year 1992 to $530,000 in
fiscal year 1993. The high level of gains in 1992 resulted from the
restructuring of Statewide's mortgage-backed securities portfolio in order to
decrease Statewide's vulnerability to interest rate risk. In addition, a gain of
$867,000 upon the termination of Statewide's defined benefit pension plan took
place during fiscal year 1992. The decrease in other income from the prior year
was partially offset by increases in income from service charges of $76,000 and
other income of $470,000, which was primarily due to an increase in net
commissions on the sale of annuities of $263,000.
Operating Expenses. Operating expenses decreased by $731,000, or 5.6%,
in fiscal year 1993 compared to fiscal year 1992. The decrease was primarily due
to a $460,000 reduction in net foreclosed real estate expense, a decrease of
$209,000 in net occupancy expenses and a decrease of $485,000 in other expenses.
These decreases were partially offset by increases in salaries and employee
benefits of $363,000.
E-4
<PAGE>
<PAGE>
Income Taxes. Federal and state income taxes increased $1.0 million, or
70.4%, during fiscal year 1993 compared to fiscal year 1992. The increase in
income tax was due to the increase in pre-tax income for fiscal year 1993. The
effective income tax rate was 39.0% for fiscal year 1993 and 55.8% for fiscal
year 1992. The level of the effective income tax rate in 1992 was increased due
to the application of a federal excise tax related to the termination of
Statewide's defined benefit pension plan. The income tax provision for fiscal
year 1992 was substantially offset by the application of income tax benefits of
$1.2 million from the utilization of a net operating loss carryforward.
Comparison of Operating Results for the Years Ended March 31, 1992 and 1991
General. Net income for the fiscal year ended March 31, 1992 increased
by $3.7 million, to $2.4 million, from a net loss of $1.3 million for the fiscal
year ended March 31, 1991. The primary reason for the increase was an increase
in net interest and dividend income before provision for loan losses of $3.0
million, which was primarily due to a net and dividend interest margin of 2.60%
for fiscal year 1992 compared with 1.98% for fiscal year 1991, an increase in
total other income of $1.8 million and a decrease in other expenses of $647,000.
This was partially offset by an increase in the provision for loan losses of
$1.7 million.
Interest and Dividend Income. Interest and dividend income decreased by
$3.7 million, or 7.8%, to $44.4 million in fiscal year 1992 from $48.1 million
in fiscal year 1991. The decrease was due to the average yield on
interest-earning assets dropping from 9.65% in fiscal year 1991 to 9.23% in
fiscal year 1992. This 42 basis point decrease represents a decline of 4.4% and
is primarily due to lower interest income on mortgage loans due to significant
loan repayments being reinvested in shorter term mortgage-backed securities with
lower interest rates.
Interest Expense. Interest expense decreased $6.8 million, or 18.1%,
from $37.4 million in fiscal year 1991 to $30.6 million in fiscal year 1992.
Weighted average deposit rates decreased 132 basis points, or 18.2%, to 5.95%
for fiscal year 1992, from 7.27% for fiscal year 1991. In addition, a shift from
higher rate interest-bearing certificates of deposit to lower rate passbook and
other demand type deposit accounts also contributed to the decrease. Total
average certificates of deposit as a percentage of total average deposits
decreased from 59.3% to 53.4%.
Net Interest and Dividend Income Before Provision for Loan Losses. Net
interest and dividend income before provision for loan losses increased $3.0
million, or 28.2% to $13.8 million for fiscal year 1992 from $10.8 million for
fiscal year 1991. The increase resulted from a falling interest rate environment
which caused interest expense to decrease more rapidly than interest income.
Provision for Loan Losses. Statewide's provision for loan losses
increased by $1.7 million to $1.9 million for fiscal year 1992 compared to a
provision of $0.2 million for fiscal year 1991. The majority of the increase was
the result of a $1.5 million increase in the allowance for loan losses related
to a single $5.5 million loan to a developer for the acquisition, development
and construction of single family residential homes in Hunterdon County, New
Jersey. The allowance for loan losses to total loans at March 31, 1992 was .7%
compared with .5% at March 31, 1991. The allowance for loan losses to
nonperforming loans at March 31, 1992 was 56.4% compared to 13.0% at March 31,
1991.
Other Income. Other income increased by $1.8 million, or 104.9%, to
$3.5 million in fiscal year 1992 from $1.7 million in fiscal year 1991. The
increase was primarily due to an increase in net gains on the sale of investment
and mortgage-backed securities of $1.7 million and a gain of $867,000 as a
result of the termination of Statewide's defined benefit pension plan, which was
partially offset by a gain of $903,000 in fiscal year 1991 resulting from
previously unrecognized past experience gains related to Statewide's defined
benefit pension plan.
Operating Expenses. Operating expenses decreased by $647,000, or 4.8%,
in fiscal year 1992 compared with fiscal year 1991. The decrease was primarily
due to decreases in net foreclosed real estate expense, which decreased by
$401,000, and a reduction in the loss realized on the investment in real estate
ventures, which decreased by $625,000. These decreases were partially offset by
increases in salaries and employee benefits of $125,000 and other operating
expense of $254,000.
Income Taxes. Federal and state income taxes increased by $1.4 million
in fiscal year 1992 from $35,000 in fiscal year 1991. The increase in income tax
was due to the increase in pre-tax income during fiscal year 1992, compared to a
net loss for fiscal year 1991. The effective income tax rate was 55.8% for
fiscal year 1992 and 2.7% for fiscal year 1991. The income tax provision for
fiscal year 1992 was substantially offset by the application of an income tax
benefit of $1.2 million from the utilization of a net operating loss
carryforward.
E-5
<PAGE>
<PAGE>
Interest Rate Sensitivity
Since the mid-1980's, Statewide has made asset/liability management a
primary focus in strategic planning. The asset/liability policy is developed and
carried out by the Asset/Liability Committee ("ALCO") with oversight provided by
the Board of Directors. The ALCO has taken a number of steps to reduce
Statewide's susceptibility to damaging interest rate risk.
Throughout the 1980's, Statewide focused on the origination of
adjustable rate mortgage products as an integral part of its asset/liability
management policy. However, due to various market conditions, the recent
originations of adjustable rate products has declined. Since the beginning of
1991, the ALCO asset/liability policy has been one of selectively restructuring
the balance sheet in the following ways: sales of small amounts of the
mortgage-backed securities with longer maturities, purchase or origination of
assets with a final maturity of seven years or less, purchase of adjustable rate
securities, and lengthening of liabilities through advances from the FHLBNY.
This combination of shortening the maturity of assets, through replacing longer
term assets lost through sales or prepayment run-off with shorter term assets,
and the lengthening of liabilities through FHLBNY borrowings and increases in
stable core deposits has led to an improvement of Statewide's asset/liability
risk profile.
Management of interest rate risk is a major determinant of the
profitability of Statewide's operations. Interest rate risk arises when an asset
matures or when the instrument's rate of interest changes in a time frame that
is different from that of the underlying liability. The difference between
interest-earning assets subject to rate change over a specific period and
interest-bearing liabilities subject to rate change over the same period is
called the interest rate sensitivity gap or "gap position." The gap position is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities. The gap position is
considered negative when the amount of interest rate sensitive liabilities is
greater than the amount of interest rate sensitive assets. During a period of
rising rates, a negative gap position tends to adversely affect earnings, while
a positive gap position tends to result in an increase in earnings. During a
period of falling interest rates, a negative gap position would result in an
increase in earnings, while a positive gap position would adversely affect
earnings.
The table set forth below presents the amounts of interest-earning
assets and interest-bearing liabilities outstanding at December 31, 1993 which
are anticipated by Statewide, based upon certain assumptions, to reprice or
mature in each of the future time periods illustrated. The amount of assets and
liabilities shown, except as noted, which reprice or mature during a particular
period were determined in accordance with the earlier of term to repricing or
the contractual terms of the asset or liability. Statewide's loan prepayment
assumptions are based upon the OTS's latest available figures which are 15% for
ARM loans, 18% for consumer loans, and a range of 13% to 37% (based upon
interest rate) for fixed rate loans.
With respect to liabilities, Statewide, based on historical data, used
a decay rate of 17% for all age groups of money market deposit accounts,
passbook accounts and N.O.W. accounts.
The table set forth below represents Statewide's interest rate
sensitivity gap at December 31, 1993:
E-6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
At December 31, 1993
-------------------------------------------------------------
Three More than
Months Four to One Year to More than
or Less 12 Months Five Years Five Years Total
-------- --------- ----------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets
Mortgage loans .......................... $ 10,239 $ 84,243 $ 50,116 $ 18,112 $162,710
Other loans .............................. 1,068 3,072 16,682 2,922 23,744
Money market investments ................. 16,075 0 0 0 16,075
Mortgage-backed securities (1) ............ 13,947 31,628 115,251 43,370 204,196
FHLBNY stock ............................. 4,170 0 0 0 4,170
Investment securities ..................... 1,011 2,001 43,164 0 46,176
-------- -------- -------- -------- --------
Total interest-earning assets ........... 46,510 120,944 225,213 64,404 457,071
-------- -------- -------- -------- --------
Less:
Net unamortized premiums and
deferred fees ............................. 29 86 406 271 792
-------- -------- -------- -------- --------
Net interest-earning assets ............. $ 46,539 $121,030 $225,619 $ 64,675 $457,863
-------- -------- -------- -------- --------
Interest-bearing liabilities
Passbook accounts ........................ 4,683 13,453 62,600 29,459 110,195
N.O.W. accounts ........................... 3,090 8,875 41,298 19,434 72,697
Money market accounts ..................... 2,206 6,335 29,481 13,873 51,895
Certificate accounts ...................... 68,343 79,208 35,849 0 183,400
Borrowed funds ........................... 10,075 4,725 21,292 3,275 39,367
-------- -------- -------- -------- --------
Total interest-bearing liabilities ...... $ 88,397 $112,596 $190,520 $ 66,041 $457,554
-------- -------- -------- -------- --------
Interest sensitivity gap ..................... $(41,858) $ 8,434 $ 35,099 $ (1,366) $ 309
======== ======== ======== ======== ========
Cumulative interest sensitivity gap .......... (41,858) (33,424) 1,675 309 309
======== ======== ======== ======== ========
Cumulative interest sensitivity gap as a
percentage of total assets ............... (8.37%) (6.68%) .33% .06% .06%
Cumulative net interest-earning assets as a
percentage of cumulative total interest-
bearing liabilities ...................... 52.65% 83.37% 112.45% 100.07% 100.07%
- ----------
(1) Includes $4.8 million of mortgage-backed securities available for sale.
</TABLE>
E-7
<PAGE>
<PAGE>
Market Value of Portfolio Equity
In addition to the use of interest rate "gap" as a measure of interest
rate risk, the concept of the change in the market value of portfolio equity has
been utilized by the OTS.
The change in market value of portfolio equity measures an
institution's vulnerability to changes in interest rates. The interest rate risk
is measured by estimating the change in the market value of an institution's
assets, liabilities, and off-balance sheet contracts in response to an
instantaneous change in the general level of interest rates. The market value of
portfolio equity is defined as the current market value of assets, minus the
current market value of liabilities, plus or minus the current market value of
off-balance sheet items. The market values are estimated by discounting the
estimated cash flow of each instrument by appropriate discount rates.
The OTS uses as a critical point a change of plus or minus 200 basis
points in interest rates to set its "normal" institutional results and peer
comparisons. The greater the change, positive or negative, in market value of
portfolio equity, the more interest rate risk within the institution. The
following table lists Statewide's percentage change in the market value of
portfolio equity at plus and minus 200 basis points ("bps") from the level of
interest rates at December 31, 1993 and March 31, 1993:
December 31, March 31,
------------- ----------------------
1993 1992 1993 1992 1991
---- ---- ---- ---- ----
+200bps ............... -26% -32% -34% -64% -137%
-200 bps .............. 17% 13% 22% 26% 70%
Average Balance, Interest Rates and Yields
The tables on the following two pages represent for the periods
indicated the total dollar amount of interest income from average
interest-earning assets and the resulting yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
in rates. All average balances are based on month end balances, which do not
differ materially from average daily balances:
E-8
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
Nine Months Ended Nine Months Ended
December 31, 1993 December 31, 1992
--------------------------------- --------------------------------
Average Average
Average Yield/ Average Yield/Cost
Balance Interest Average Cost Balance Interest
-------- -------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans ................. $187,706 $12,849 9.13% $230,621 $16,576 9.58%
Other loans .................... 22,960 1,138 6.61 20,618 1,194 7.72
Mortgage-backed
securities(1) .................. 215,845 10,610 6.55 196,971 11,176 7.57
Money market investments ....... 8,571 231 3.59 4,689 168 4.78
Investment securities .......... 24,367 996 5.45 26,971 1,402 6.93
FHLB stock ...................... 4,457 296 8.85 4,493 344 10.21
-------- ------- ----- -------- ------- -----
Total interest-earning assets ... 463,906 26,120 7.51% 484,363 30,860 8.50%
Noninterest-earning assets ......... 42,807 47,501
-------- --------
Total assets ....................... $506,713 $531,864
======== ========
Liabilities and retained earnings:
Interest-bearing liabilities:
Passbook accounts .............. $109,898 $ 2,258 2.74% $104,177 $ 2,749 3.52%
Certificate accounts ........... 190,343 5,526 3.87 221,265 8,068 4.86
N.O.W. accounts ................. 71,808 1,694 3.15 69,681 2,121 4.06
Money market accounts .......... 53,130 1,082 2.72 55,714 1,479 3.54
Borrowed funds ................. 39,148 2,297 7.82 47,677 2,656 7.43
-------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities ................... 464,327 12,857 3.69% 498,514 17,073 4.57%
Noninterest bearing liabilities.. 11,858 8,049
-------- --------
Total Liabilities ............... 476,185 506,563
Retained earnings .............. 30,528 25,301
-------- --------
Total liabilities and retained
earnings ....................... $506,713 $531,864
======== ========
Net interest income/net interest
rate spread ...................... $13,263 3.82% $13,787 3.93%
======= ==== ======= ====
Net interest earning assets/net
interest margin ................. (421) 3.49% (14,151) 3.46%
=== ======
Ratio of average interest-earning
assets to average interest-
bearing liabilities ............. 1.00 .97
==== ===
- ------------
(1) Includes 4.8 million of mortgage-backed securities available for sale in 1993.
</TABLE>
E-9
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
Years Ended March 31,
------------------------------------------------------------------------------------------------
1993 1992 1991
---------------------------- ---------------------------- ----------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
-------- -------- -------- -------- -------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Mortgage loans. . . . . . . . .$226,378 $20,100 8.88% $262,903 $25,649 9.76% $297,575 $29,694 9.98%
Other loans . . . . . . . . . . 20,680 2,335 11.29 22,469 2,741 12.20 26,600 3,382 12.71
Mortgage-backed securities(1) . 200,849 14,961 7.45 160,567 13,393 8.34 138,765 12,012 8.66
Money market investments. . . . 4,707 211 4.48 6,313 365 5.78 3,784 381 10.07
Investment securities . . . . . 25,512 1,771 6.94 24,084 1,875 7.79 27,990 2,242 8.01
FHLB stock. . . . . . . . . . . 4,493 444 9.88 4,493 376 8.37 4,493 438 9.75
-------- ------- ----- -------- ------ ----- -------- ------ -----
Total interest-earning assets . 482,619 39,822 8.25 480,829 44,399 9.23 499,207 48,149 9.65
Noninterest-earning assets . . . 46,310 48,732 44,496
-------- ------- ----- -------- ------ ----- -------- ------ -----
Total assets . . . . . . . . .$528,929 $529,561 $543,703
======== ======== ========
Liabilities and retained earnings:
Interest-bearing liabilities:
Passbook accounts . . . . . . .$104,767 $ 3,544 3.38% $ 95,522 $ 4,720 4.94% $ 92,336 $ 5,107 5.53%
Certificate accounts. . . . . . 212,235 10,139 4.78% 244,647 15,970 6.53% 276,726 22,053 7.97%
N.O.W. accounts . . . . . . . . 69,840 2,712 3.88% 56,332 3,215 5.71% 34,866 2,391 6.86%
Money market accounts . . . . . 55,532 1,905 3.43% 55,549 2,838 5.11% 56,990 3,335 5.85%
Borrowed funds. . . . . . . . . 49,552 3,529 7.12% 46,623 3,863 8.29% 53,700 4,501 8.38%
-------- ------- ----- -------- ------ ----- -------- ------ -----
Total interest-
bearing liabilities . . . . . 491,926 21,829 4.44% 498,673 30,606 6.14% 514,618 37,387 7.27%
Noninterest bearing liabilities. 11,027 8,938 7,421
-------- -------- --------
Total Liabilities . . . . . . . . 502,953 507,611 522,039
Retained earnings. . . . . . . . 25,976 21,950 21,664
-------- -------- --------
Total liabilities and retained
earnings . . . . . . . . . . .$528,929 $529,561 $543,703
======== ======== ========
Net interest income/net interest
rate spread. . . . . . . . . . . $17,993 3.81% $13,793 3.09% $10,762 2.38%
======= ==== ======= ==== ======= ====
Net interest earning assets/net
interest margin. . . . . . . . . (9,307) 3.40% (17,844) 2.60% (15,411) 1.98%
======== ==== ======== ==== ======== =======
Ratio of average interest-earning
assets to average interest-bearing
liabilities. . . . . . . . . . . .98 .96 .97
=== ==== ===
- -----------
(1) Includes $7.5 million of mortgage-backed securities available for sale in 1993.
</TABLE>
E-10
<PAGE>
<PAGE>
Rate/Volume Analysis
The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. The table distinguishes between
increases related to higher outstanding balances and those due to the volatility
of interest rates. For each category of interest earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in rate (i.e., changes in rate multiplied by prior volume) and (ii)
changes in volume (i.e., changes in volume multiplied by the prior rate).
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1993 March 31, 1992
Compared to Compared to
Year Ended Year Ended
March 31, 1992 March 31, 1991
Increase (Decrease) Increase (Decrease)
----------------------------- ------------------------------
Due to Due to
Volume Rate Net Volume Rate Net
------ ------ ------ ------ ------- -------
(in thousands) (in thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans .......................... $(3,364) $(2,185) $(5,549) $(3,387) $(658) $(4,045)
Other loans .............................. (202) (204) ( 406) (505) (136) (641)
Mortgage-backed securities(1) ............ 2,993 (1,425) 1,568 1,839 (458) 1,381
Money market investments ................ (72) (82) (154) 146 (162) (16)
Investment securities .................... 83 (187) (104) (305) (62) (367)
FHLB stock ............................... 0 68 68 0 (62) (62)
------- ------- ------- ------- ------ -------
Total ................................... (562) (4,015) (4,577) (2,212) (1,538) (3,750)
Interest-bearing liabilities:
Deposits ................................. (402) (8,041) (8,443) (523) (5,620) (6,143)
Borrowed funds ........................... 208 (542) (334) (585) (53) (638)
------- ------- ------- ------- ------ -------
Total ................................... (194) (8,583) (8,777) (1,108) (5,673) (6,781)
------- ------- ------- ------- ------ -------
Net change in net interest income ......... $ (368) $ 4,568 $ 4,200 $(1,104) $4,135 $ 3,031
======= ======= ======= ======= ====== =======
- ---------
<FN>
(1) Includes the increase or decrease in net interest income attributable to
mortgage-backed securities availablefor sale.
</FN>
</TABLE>
Nine Months Ended
December 31, 1993
Compared to
Nine Months Ended
December 31, 1992
Increase (Decrease)
---------------------------------
Volume Due to Rate Net
------ ----------- --------
(in thousands)
Interest-earning assets:
Mortgage loans ......................... $(3,085) $ (642) $(3,727)
Other loans ........................... 136 (192) (56)
Mortgage-backed securities(1) .......... 1,071 (1,637) (566)
Money market investments ............... 139 (76) 63
Investment securities ................. (135) (271) (406)
FHLB stock ............................ (3) (45) (48)
------- ------ -------
Total ................................. (1,877) (2,863) (4,740)
------- ------ -------
Interest-bearing liabilities:
Deposits ............................... (820) (3,037) (3,857)
Borrowed funds ......................... (475) 116 (359)
------- ------ -------
Total ................................. (1,295) (2,921) (4,216)
Net change in net interest income ....... $ (582) $ 58 $ (524)
======== ======= ========
- -----------
(1) Includes the increase or decrease in net interest income attributable to
mortgage-backed securities available for sale in 1993.
E-11
<PAGE>
<PAGE>
Liquidity and Capital Resources
Statewide's primary sources of funds are deposits, principal and
interest payments on loans and mortgage-backed securities, advances from the
FHLBNY and retained earnings.
Statewide is required to maintain minimum levels
of liquid assets as defined by OTS regulations. This requirement, which may be
varied at the direction of OTS, depending upon economic conditions and deposit
flows, is based upon a percentage of deposits and short-term borrowings. The
required ratio is currently 5%. Statewide's liquidity ratios were 21.02% and
10.85% at December 31, 1993 and 1992 and 10.45%, 10.68% and 8.26% at March 31,
1993, 1992 and 1991, respectively. Management currently attempts to keep
Statewide's liquidity ratio at least twice the regulatory minimum. This reflects
Statewide's strategy to reduce the risk from changes in interest rates by having
assets available to reinvest at higher rates in the event the general level of
interest rates greatly increase in the future.
Statewide utilizes the FHLBNY as an additional source of liquidity. As
of December 31, 1993, total advances outstanding amounted to $39.4 million.
Short term advances, due within one year amounted to $14.8 million and long term
advances due after one year amounted to $24.6 million.
Statewide has a pre-approved overnight line of credit at the FHLBNY
which amounted to $26.7 million at December 31, 1993. At December 31, 1993, $8.5
million was outstanding under this line.
Additionally, Statewide can pledge certain mortgage loans and
mortgage-backed securities as collateral to secure additional advances from the
FHLBNY. As of March 31, 1993, mortgage loans and mortgage-backed securities
available for pledging purposes amounted to $366.8 million and as of December
31, 1993, the amount of such loans and securities available for pledging
purposes was $367.4 million.
Impact of Inflation and Changing Prices. The financial statements of
Statewide and the notes thereto, presented elsewhere herein, have been prepared
in accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to inflation. The impact of inflation is reflected in the
increased cost of Statewide's operation. Unlike most industrial companies,
nearly all the assets and liabilities of Statewide are monetary. As a result,
interest rates have a greater impact on Statewide's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the price of goods and services.
Recently Issued Accounting Standards. In May 1993, the Financial
Accounting Standards Board (the "FASB") issued Statement of Financial Accounting
Standard No. 114, "Accounting for Creditors for Impairment of a Loan" ("SFAS
114"). SFAS 114 establishes criteria for accounting for loans that have been
impaired. It requires that impaired loans be measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate
or at the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. Statewide has not fully evaluated the effect
of SFAS 114 on its financial statements. SFAS 114 is effective for fiscal years
beginning after December 15, 1994.
In May 1993, the FASB also issued Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 establishes accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. The impact on Statewide of implementing
SFAS 115 will not be material to the financial statements. SFAS 115 is effective
for fiscal years beginning after December 15, 1993.
BUSINESS OF STATEWIDE
General
Statewide was organized in 1943 as a New Jersey chartered savings and
loan association under the name First Savings and Loan Association of Jersey
City. In 1973 Statewide changed its name to Statewide Savings and Loan
Association, and in 1988, to Statewide Savings Bank, S.L.A. Statewide will be
the successor to Statewide Savings Bank, S.L.A upon its conversion from a New
Jersey state-chartered mutual savings and loan association to a state-chartered
mutual savings bank. The eligible voting members of Statewide Savings Bank,
S.L.A. have approved this charter conversion at a special meeting of members
held October 5, 1993 and the OTS and the Commission approved applications for
the charter conversion on December 23 and December 29, 1993, respectively.
E-12
<PAGE>
<PAGE>
Statewide's principal business is attracting deposits from the general
public and investing those deposits primarily in one to four-family mortgage
loans and mortgage-backed securities and, to a lesser extent, consumer loans and
investment securities. Statewide's revenues are derived principally from
interest on its mortgage loan and mortgage-backed securities portfolio and
interest and dividends on its investment securities. Statewide's primary sources
of funds are deposits, principal and interest payments on loans and
mortgage-backed securities and advances from the Federal Home Loan Bank of New
York (the "FHLBNY"). Through its wholly owned subsidiary, Statewide Financial
Services, Inc., Statewide also engages in the sale of annuity products.
Statewide's primary market area includes the neighborhoods surrounding
its thirteen branch offices. Six branches are located in Hudson County, two in
Bergen County and five branches are located in Union County, New Jersey.
Statewide has been adversely affected by banking legislation since
1989, primarily the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"). In 1982, Statewide acquired a federally chartered savings
and loan association headquartered in Elizabeth, New Jersey. In connection with
that acquisition, Statewide recorded $27.6 million in goodwill to its statement
of financial condition, which was the excess of the fair market value of the
acquired association's liabilities over the fair market value of its assets.
Under the regulations applicable at the time of the acquisition, this goodwill
was counted as an asset of Statewide in calculating regulatory capital. Pursuant
to FIRREA, Statewide's ability to count goodwill towards regulatory capital was
substantially reduced, and is to be progressively phased out until January 1,
1995, when no goodwill may be included in calculating capital. Because of the
restrictions on goodwill imposed by FIRREA, and because of losses incurred in
Statewide's real estate loan portfolio, Statewide did not meet the minimum
capital requirements applicable to it under FIRREA and the regulations of the
OTS implementing the terms of FIRREA at their effective dates. While Statewide
met the minimum capital requirements applicable to it under FIRREA as of
December 31, 1993, its capital continues to include a portion of its goodwill.
Without this goodwill it would not meet such minimums. The amount of this
goodwill which may be counted toward capital is to be phased out over time.
As of March 31, 1993, the significance of goodwill on Statewide's
Capital Ratios is as follows:
(i) Tangible Capital Ratio of 2.5% does not
include any goodwill and is unaffected.
(ii) Core Capital Ratio of 3.3% includes $3,767,000 of qualifying
supervisory goodwill which, if eliminated, would result in a
Ratio of 2.5%.
(iii) Risk based Capital Ratio of 9.4% includes $3,767,000 of
qualifying supervisory goodwill which, if eliminated, would
result in a Ratio of 7.3%.
As of December 31, 1993, the significance of goodwill on Statewide's
Capital Ratios is as follows:
(i) Tangible Capital Ratio of 3.6% does not include any goodwill and
is unaffected.
(ii) Core Capital Ratio of 4.4% includes $3,654,000 of qualifying
supervisory goodwill, which, if eliminated, would result in a
Ratio of 3.6%.
(iii) Risk based Capital Ratio of 14.4% includes $3,654,000 of
qualifying supervisory goodwill, which, if eliminated, would
result in a Ratio of 12.0%.
Because Statewide was undercapitalized, it was required to file a
capital plan with the OTS. The capital plan provides for Statewide to increase
its capital levels through retained earnings and to thereby meet all minimum
regulatory requirements by the end of 1994. The OTS accepted Statewide's capital
plan, and issued a Capital Directive dated June 13, 1991 (the "Directive"),
which embodies the terms of the capital plan. As of December 31, 1993, Statewide
meets the capital targets required by the Directive and exceeds the minimum OTS
regulatory capital requirements.
Lending Activities
General. The primary source of income to Statewide is interest from
lending activities. The principal lending activity of Statewide is originating
first mortgage real estate loans to enable borrowers to purchase or refinance
one to four family residential real properties.
Loan Portfolio Composition. The table on the following page sets forth
information concerning the composition of Statewide's loan and mortgage-backed
securities portfolio, by type of security, in dollar amounts and in percentages
as of the dates indicated:
E-13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------
1993 1992
----------------------- ----------------------
Amount Percent Amount Percent
-------- ------- -------- -------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
One to four family residential ........................... $157,678 83.51% $198,627 81.82%
Multi family residential .................................. 4,660 2.47 4,852 2.00
Non residential ........................................... 2,169 1.15 16,675 6.87
Acquisition, development and construction ................. 0 .00 249 0.10
Land ...................................................... 455 0.24 1,100 0.45
-------- ------ -------- ------
Total mortgage loans .................................... 164,962 87.37 221,503 91.25
Other loans:
Second mortgage loans ..................................... 11,209 5.94 8,281 3.41
Home equity lines of credit .............................. 1,736 0.92 1,900 0.78
FHA insured improvement loans ............................. 9,972 5.28 10,148 4.18
Unsecured consumer loans ................................. 357 0.19 153 0.06
Guaranteed student loans ................................. 90 0.05 166 0.07
Loans on deposit accounts ................................. 407 0.22 474 0.20
Automobile loans .......................................... 80 0.04 122 0.05
-------- ------ -------- ------
Total other loans ....................................... 23,851 12.63 21,244 8.75
-------- ------ -------- ------
Total loans ............................................ 188,813 100.00 242,747 100.00
====== ======
Less:
Unearned discounts and deferred loan fees, net ............ (1,266) (1,412)
Allowance for loan losses ................................. (1,094) (1,571)
-------- --------
Loans, net ............................................... $186,453 $239,764
======== ========
Mortgage-backed securities
GNMA .................................................... $ 52,108 25.53% $ 51,168 25.20%
FHLMC .................................................... 74,162 36.33 81,443 40.11
FNMA ..................................................... 73,085 35.80 70,418 34.68
-------- ------ -------- ------
Total mortgage-backed securities ......................... 199,355 97.65 203,029 100.00
Mortgage-backed securities available for sale ............. 4,789 2.35 0 .00
-------- ------ -------- ------
Total mortgage-backed securities and mortgage-
backed securities available for sale ..................... 204,144 100.00 203,029 100.00
====== ======
Unamortized premiums, net ................................. 2,041 2,615
-------- --------
Net mortgage-backed securities ........................... $206,185 $205,644
======== ========
</TABLE>
E-14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------
1993 1992 1991
----------------------- ----------------------- -----------------------
Amount Percent Amount Percent Amount Percent
-------- ------- ------- ------- ------ -------
(In Thousands) (In Thousands) (In Thousands)
Mortgage Loans:
<S> <C> <C> <C> <C> <C> <C>
One to four family residential ................. $190,212 81.39% $224,802 83.76% $254,409 81.30%
Multi family residential ....................... 4,805 2.06 4,988 1.86 6,780 2.17
Non residential ................................ 16,324 6.99 17,316 6.45 16,153 5.16
Acquisition, development and
construction ................................. 249 0.11 249 0.09 7,590 2.43
Land .......................................... 1,048 0.45 0 .00 3,846 1.23
-------- ------ -------- ------ -------- ------
Total mortgage loans ......................... 212,638 90.99 247,355 92.16 288,778 92.29
Other loans:
Second mortgage loans ......................... 8,394 3.59 6,966 2.60 5,812 1.86
Home equity lines of credit .................... 1,569 0.67 1,855 0.69 1,648 0.53
FHA insured improvement loans ................. 10,055 4.30 11,361 4.23 15,521 4.96
Unsecured consumer loans ....................... 223 0.10 21 0.01 0 0.00
Guaranteed student loans ...................... 146 0.06 229 0.09 355 0.11
Loans on deposit accounts ..................... 450 0.19 567 0.21 755 0.24
Automobile loans .............................. 222 0.10 32 0.01 43 0.01
-------- ------ -------- ------ -------- ------
Total other loans ............................ 21,059 9.01 21,031 7.84 24,134 7.71
-------- ------ -------- ------ -------- ------
Total loans ................................. 233,697 100.00 268,386 100.00 312,912 100.00
====== ====== ======
Less:
Loans in process ............................... 0 0 (241)
Unearned discounts and deferred loan
fees, net ..................................... (1,402) (1,631) (2,069)
Allowance for loan losses ..................... (1,366) (1,841) (1,697)
-------- -------- --------
Loans, net ..................................... $230,929 $264,914 $308,905
======== ======== ========
Mortgage-backed securities
GNMA .......................................... $ 56,457 26.50% $ 57,558 32.21% $ 70,368 49.32%
FHLMC ......................................... 71,890 33.74 98,058 54.87 72,294 50.68
FNMA .......................................... 77,215 36.24 23,085 12.92 0 0.00
-------- ------ -------- ------ -------- ------
Total mortgage-backed securities ............. 205,562 96.48 178,701 100.00 142,662 100.00
====== ====== ======
Mortgage-backed securities available
for sale ..................................... 7,517 3.52 0 0.00 0 0.00
-------- ------ -------- ------ -------- ------
Total mortgage-backed securities and
mortgage-backed securities available
for sale ..................................... 213,079 100.00 178,701 100.00 142,692 100.00
====== ====== ======
Unamortized premiums, net ..................... 2,686 1,603 31
-------- -------- --------
Net mortgage-backed securities ................. $215,765 $180,304 $142,693
======== ======== ========
E-15
</TABLE>
<PAGE>
<PAGE>
Loan and Mortgage-Backed Securities Maturity Schedule. The following
table sets forth certain information at December 31, 1993 regarding the dollar
amount of loans and mortgage-backed securities in Statewide's portfolio maturing
at various periods, based upon the contractual terms to maturity or period to
repricing, after giving effect to net items:
<TABLE>
<CAPTION>
One to
Four Multi Mortgage-
Family Family Non Construc- Total Loans Backed
Residential Residential Residential tion(1) Consumer Receivable Securities(2) Total
----------- ----------- ----------- -------- -------- ---------- ----------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
Within one year ........... $ 58,593 $ 368 $ 526 $455 $ 549 $ 60,491 $ 0 $ 60,491
After one year:
One to three years ....... 11,574 0 210 0 1,239 13,023 8,115 21,138
Three to five years ...... 10,537 222 1,276 0 5,366 17,401 29,245 46,646
Five to 10 years ......... 22,629 217 72 0 8,501 31,419 104,006 135,425
10 to 20 years ........... 34,383 1,860 85 0 8,196 44,524 14,623 59,147
Over 20 years ............ 19,962 1,993 0 0 0 21,955 48,155 70,110
-------- ------ ------ ---- ------- -------- -------- --------
Total due after one year.. 99,085 4,292 1,643 0 23,302 128,322 204,144 332,466
-------- ------ ------ ---- ------- -------- -------- --------
Total amounts due ........ 157,678 4,660 2,169 455 23,851 188,813 204,144 392,957
Less (Plus):
Unearned discounts,
(premiums) and deferred
loan fees, net ............ 1,278 0 0 0 (13) 1,265 (2,041) (776)
Allowance for loan losses.. 932 5 11 5 141 1,094 0 1,094
-------- ------ ------ ---- ------- -------- -------- --------
Loans, net ................. $155,468 $4,655 $ 2,158 $450 $23,723 $186,454 $206,185 $392,639
======== ====== ======= ==== ======= ======== ======== ========
- ----------
<FN>
(1) As of December 31, 1993, Statewide had no acquisition and development loans
in its portfolio.
(2) Includes $4.8 million of mortgage-backed securities available for sale.
</FN>
</TABLE>
The following table sets forth certain information at March 31, 1993
regarding the dollar amount of loans and mortgage-backed securities in
Statewide's portfolio maturing at various periods, based upon the contractual
terms to maturity or period to repricing, after giving effect to net items:
<TABLE>
<CAPTION>
One to
Four Multi Mortgage-
Family Family Non Construc- Total Loans Backed
Residential Residential Residential tion(1) Consumer Receivable Securities(2) Total
----------- ----------- ----------- -------- -------- ---------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amounts Due:
Within one year ............ $ 74,572 $ 385 $14,000 $ 249 $ 2,451 $ 91,657 $ 7,543 $ 99,200
After one year:
One to three years ........ 13,001 17 93 1,048 1,183 15,342 3,395 18,737
Three to five years ....... 10,488 154 1,388 0 4,747 16,777 13,919 30,696
Five to 10 years .......... 23,312 450 485 0 7,623 31,870 122,164 154,034
10 to 20 years ............ 36,654 0 0 0 5,030 41,684 20,646 62,330
Over 20 years ............. 32,185 3,799 358 0 25 36,367 45,412 81,779
-------- ------ ------ ------ ------- -------- -------- --------
Total due after one year... 115,640 4,420 2,324 1,048 18,608 142,040 205,536 347,576
-------- ------ ------ ------ ------- -------- -------- --------
Total amounts due ......... 190,212 4,805 16,324 1,297 21,059 233,697 213,079 446,776
Less (Plus):
Unearned discounts,
(premiums) and deferred
loan fees, net ............. 1,402 0 0 0 0 1,402 (2,686) (1,284)
Allowance for possible loan
losses .................... 1,194 5 82 13 72 1,366 0 1,366
-------- ------ ------ ------ ------- -------- -------- --------
Loans, net .................. $187,616 $4,800 $16,242 $1,284 $20,987 $230,929 $215,765 $446,694
======== ====== ======= ====== ======= ======== ======== ========
- ----------
<FN>
(1) As of March 31, 1993, Statewide had no acquisition and development loans in
its portfolio.
(2) Includes $7.5 million of mortgage-backed securities available for sale.
</FN>
E-16
</TABLE>
<PAGE>
<PAGE>
The following table sets forth the dollar amount of all loans and
mortgage-backed securities at December 31, 1993, and due one year after December
31, 1993, which have predetermined interest rates and floating or adjustable
interest rates:
Predetermined Floating or
Rates Adjustable Rates
------------- ----------------
(In Thousands)
Real Estate Mortgage ..................... $81,432 $23,588
Mortgage-backed Securities ............... 189,599 14,545
Other Loans .............................. 21,566 1,736
-------- -------
Total ................................... $292,597 $39,869
Residential Mortgage Lending. Statewide offers first mortgage loans
secured by one to four family residences, including townhouse and condominium
units. Typically, such residences are single family homes that serve as the
primary residence of the owner. Loan originations are generally obtained from
existing or past customers and referrals from local real estate agents, builders
and members of the local communities in which Statewide has offices. All
residential mortgage loans made by Statewide are for properties located in New
Jersey.
At December 31, 1993, 83.5% of Statewide's total loans consisted of one
to four family residential loans, of which 51.3% were loans with adjustable
rates. Statewide currently offers adjustable rate mortgage ("ARM") loans on
which the interest rate adjusts annually. Statewide also periodically offers ARM
loans on which the interest rate for an initial period may be less than the
fully indexed rate, although to be eligible, Statewide requires that the
borrower qualify for the maximum payment possible after the initial interest
rate adjustment. ARM and fixed-rate loans are originated for a term of up to 30
years. Statewide currently charges origination fees of up to 2.5% on one to four
family residential mortgage loans.
Generally, ARM loans pose credit risks different from the risks
inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default. At the same time, the marketability of the underlying property may be
adversely affected by higher interest rates.
Statewide's policy is to lend up to 80% of the appraised value of
property securing a single family residential loan, and up to 90% of the
appraised value if private mortgage insurance is obtained on the amount of the
loan which exceeds 80% of the appraised value.
One to four family residential mortgage loans are generally
underwritten according to FNMA or FHLMC guidelines, except that loans may exceed
the maximum loan limits for the FNMA or FHLMC. Statewide has, in the past, sold
mortgage loans to FHLMC and other investors. Statewide has the intent and
ability to hold the loans in its portfolio as of December 31, 1993 until
maturity.
Statewide has originated, or purchased participating interests in, a
limited number of multi-family mortgage loans. As of December 31, 1993 $4.7
million, or 2.5% of Statewide's total loan portfolio, consisted of multi-family
residential mortgage loans. Currently, Statewide is not originating or
purchasing participating interests in multi-family mortgage loans.
Nonresidential Real Estate Lending. At December 31, 1993 Statewide's
nonresidential real estate loan portfolio totalled $2.2 million or 1.2% of
Statewide's total loan portfolio. At December 31, 1993, Statewide's
nonresidential real estate loan portfolio consisted of loans secured by
properties approximately as follows: $14.0 million on a resort hotel, $1.2
million on a medium size office building and $1.0 million on several small
office buildings.
The largest nonresidential real estate loan had an outstanding balance
of $1.2 million. The loan is secured by a 23,000 sq. ft. office building located
in North Bergen, New Jersey. It is a loan to facilitate the sale of the
building, which was acquired by Statewide in a foreclosure action due to the
default of the previous borrower. Scheduled payments on the loan are current.
Statewide does not currently intend to increase its nonresidential real
estate loan portfolio.
Other Loans. As of December 31, 1993, other loans totalled $23.9
million or 12.6% of Statewide's total loan portfolio. Statewide offers other
loans in the form of insured and uninsured home equity lines of credit, home
E-17
<PAGE>
<PAGE>
improvement loans, secured equity loans and secured and unsecured personal
loans. Statewide also originates other loans secured by second mortgages on one
to four family residences. These second mortgage loans are secured by
owner-occupied residences and the property may not be encumbered by other than a
first mortgage loan. These loans are generally subject to a 75% combined
loan-to-value limitation, including any other outstanding mortgage or lien on
the property. As of December 31, 1993, second mortgage loans amounted to $11.2
million, or 5.9% of total loans.
Statewide also originates Federal Housing Administration ("FHA") Title
I improvement loans. Statewide originates FHA Title I Improvement Loans both on
a direct basis and through a network of improvement contractor/dealers who are
approved by Statewide in accordance with FHA guidelines. The loans are
underwritten in accordance with FHA guidelines which provide for more liberal
equity and debt to income ratio requirements than for non-insured improvement
loans. In the event of default, the FHA insures 90% of the principal balance
plus accrued interest. The interest rates are normally higher than the interest
rates for one to four family mortgage loans due to the more liberal underwriting
standards.
For all loans originated by Statewide, upon receipt of a completed loan
application from a prospective borrower, a credit report is ordered and certain
other information is verified by an independent credit agency and, if necessary,
additional financial information is required. An appraisal of the real estate
intended to secure the proposed loan is required. Such appraisal is performed by
an independent appraiser designated and approved by Statewide. The Board of
Directors annually approves the independent appraisers used by Statewide and
approves Statewide's appraisal policy. It is Statewide's policy to obtain title
insurance on all first mortgage loans. Borrowers must also obtain hazard
insurance prior to closing. Borrowers generally are required to advance funds on
a monthly basis together with each payment of principal and interest to a
mortgage escrow account from which Statewide makes disbursements for items such
as real estate taxes and, in some cases, hazard insurance premiums.
Mortgage-Backed Securities. Statewide invests in mortgage-backed
securities and utilizes such investments to complement its mortgage lending
activities. At December 31, 1993, mortgage-backed securities, including
mortgage-backed securities available for sale, totalled $206.2 million or 41.2%
of total assets.
At March 31, 1993, all of Statewide's mortgage-backed securities
portfolio was directly insured or guaranteed by the Government National Mortgage
Association ("GNMA"), the FNMA or the FHLMC. Statewide's current policy is to
purchase mortgage-backed securities that are backed by ARM loans or have final
balloon maturities of seven years or less. As of December 31, 1993, such
mortgage-backed securities totalled $151.1 million or 73.3% of the total
mortgage-backed securities portfolio.
Statewide generally purchases mortgage-backed securities with the
express intent of holding the securities until maturity. Management has, in the
past, sold mortgage-backed securities with longer terms to maturity in order to
reduce Statewide's exposure to interest rate risk. As of December 31, 1993,
Statewide had $4.8 million in mortgage-backed securities available for sale
which are accounted for at the lower of cost or market value. At December 31,
1993, the market value of these securities was $5.0 million.
Nonperforming Assets, Classified Assets, Loan Delinquencies and
Defaults. Maintenance of asset quality is one of management's most important
tasks. Management reviews delinquent loans on a continuous basis and the Board
of Directors reviews delinquent loans monthly. Statewide also established an
Asset Classification Committee in 1989, which meets quarterly to review
Statewide's loan portfolio, makes changes in the classification of assets which
the committee deems necessary and reports its findings to the Board of
Directors. Statewide hires outside counsel experienced in collections and
foreclosure to pursue collections and to institute foreclosure and other
procedures on Statewide's delinquent loans.
Federal regulations provide for the classification of loans and other
assets such as debt and equity securities considered by the OTS to be of lesser
quality as "substandard," "doubtful," or "loss" assets. An asset is considered
"substandard" if it is inadequately protected by the current net worth and
paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the distinct possibility
that the savings institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present mak "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets that do not
expose the savings institution to risk sufficient to warrant classification in
one of the aforementioned
E-18
<PAGE>
<PAGE>
categories, but which possess some weaknesses, are required to be designated
"special mention" by management. Loans designated as special mention are
generally loans that, while current in required payments, have exhibited
some potential weaknesses that, if not corrected, could increase the level
of risk in the future.
At December 31, 1993, Statewide had special mention loans of $0.9
million which consisted of twelve one-to-four family mortgage loans where the
borrower is making payments through a bankruptcy plan or a special negotiated
repayment plan. At December 31, 1993, all of these loans were current or paid
ahead.
At December 31, 1993, Statewide had substandard assets of $12.7
million, which consisted of $9.3 million in real estate owned, $3.1 million in
first and second mortgage loans and $0.3 in consumer loans.
At December 31, 1993, Statewide had assets classified as doubtful of
$548,000 which represents Statewide's in-substance foreclosed interest in a $159
million acquisition, development and construction loan located in Jersey City.
The lead lender had previously failed and the project is currently being
marketed by the RTC. Management believes that the level of loss allowances is
adequate to absorb losses resulting from this asset if it becomes unrecoverable
in the future.
With respect to originated mortgage loans, Statewide's collection
procedures include sending a past due notice when the regular monthly payment is
not received by the 16th day of the month in which the payment is due. In the
event that payment is not received following notice of late payment, letters are
sent and phone calls are made to the borrower. When contact is made with the
borrower at any time prior to foreclosure, Statewide will attempt to obtain full
payment or work out a repayment schedule with the borrower to avoid foreclosure.
Foreclosure notices are sent when a loan is 90 days delinquent.
Statewide has experienced a decrease in loans delinquent 90 days or
more. Consequently, there has also been a decrease in the amount of foreclosed
real estate and in-substance foreclosed real estate (real estate owned) held by
Statewide. Statewide attributes these decreases, in large part, to the improved
economic conditions of its borrowers and to the resolution of a number of
properties under foreclosure.
The tables on the following three pages set forth information
concerning delinquent loans as of the periods indicated. The amounts represent
the total remaining balances of the related loans and percentage of total loans
outstanding, rather than the actual payment amounts which are overdue.
<TABLE>
<CAPTION>
At December 31, 1993
-----------------------------------------------
60-89 Days 90 Days or More
--------------------- --------------------
Principal Principal
Number of Balance Number of Balance
Loans of Loans Loans of Loans
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
One to four family .......................................... 16 $ 351 61 $2,361
Multi-family Residential/Non Residential .................... 0 0 0 0
Acquisition, Development and Construction ................... 0 0 0 0
Other loans ................................................. 30 185 56 359
-- ------ --- ------
Total delinquent loans ..................................... 46 $ 536 117 $2,720
== ====== === ======
Delinquent loans to total loans ............................. .28% 1.45%
</TABLE>
E-19
<PAGE>
<PAGE>
(Dollars in thousands)
<TABLE>
<CAPTION>
At December 31, 1992
-----------------------------------------------
60-89 Days 90 Days or More
--------------------- ---------------------
Principal Principal
Number of Balance Number of Balance
Loans of Loans Loans of Loans
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
One to four family ......................................... 43 $1,815 74 $3,545
Multi-family Residential/Non Residential ................... 0 0 0 0
Acquisition, Development and Construction .................. 0 0 1 249
Other loans ................................................ 50 319 69 549
-- ----- --- -----
Total delinquent loans .................................... 93 $2,134 144 $4,343
== ===== === =====
Delinquent loans to total loans ............................ .88% 1.79%
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1993
-----------------------------------------------
60-89 Days 90 Days or More
--------------------- ---------------------
Principal Principal
Number of Balance Number of Balance
Loans of Loans Loans of Loans
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
One to four family ......................................... 34 $1,183 64 $2,116
Multi-family Residential/Non Residential ................... 0 0 0 0
Acquisition, Development and Construction .................. 0 0 1 249
Other loans ................................................ 27 159 63 509
-- ----- --- -----
Total delinquent loans .................................... 61 $1,342 128 $2,874
== ===== === =====
Delinquent loans to total loans ............................ .57% 1.23%
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1992
-----------------------------------------------
60-89 Days 90 Days or More
--------------------- ---------------------
Principal Principal
Number of Balance Number of Balance
Loans of Loans Loans of Loans
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
One to four family ........................................ 35 $2,125 67 $2,661
Multi-family Residential/Non Residential .................. 0 0 0 0
Acquisition, Development and Construction ................. 0 0 0 0
Other loans ............................................... 37 202 88 603
-- ----- --- -----
Total delinquent loans ................................... 72 $2,327 155 $3,264
== ===== === =====
Delinquent loans to total loans ........................... .87% 1.22%
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1991
-----------------------------------------------
60-89 Days 90 Days or More
--------------------- ---------------------
Principal Principal
Number of Balance Number of Balance
Loans of Loans Loans of Loans
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
One to four family ........................................ 37 $744 79 $5,642
Multi-family Residential/Non Residential .................. 0 0 0 0
Acquisition, Development and Construction ................. 0 0 3 3,850
Other loans ............................................... 68 335 90 556
-- ----- --- -----
Total delinquent loans ................................... 105 $1,079 172 $10,048
== ===== === =====
Delinquent loans to total loans ........................... .34% 3.21%
</TABLE>
Real estate owned acquired through loan foreclosure or properties that
are in-substance foreclosures are recorded at the lower of cost or estimated
fair value. Subsequent valuations are periodically performed by management
and the carrying value is adjusted to reflect any subsequent declines in the
estimated fair value.
E-20
<PAGE>
<PAGE>
Interest income is reduced by the full amount of accrued and
uncollected interest on all loans once they become 90 days delinquent, are
placed in foreclosure or are otherwise determined to be uncollectible, unless
the loans are insured or guaranteed.
The table below sets forth information regarding Statewide's
nonperforming assets. At December 31, 1993, Statewide had no restructured loans
within the meaning of Statement of Financial Accounting Standards ("SFAS") No.
15., issued by the Financial Accounting Standards Board (the "FASB"):
<TABLE>
<CAPTION>
At December 31, At March 31,
------------------- ---------------------------------------------
1993 1992 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans delinquent 90
days or more .................... $ 843 $ 655 $ 740 $ 752 $ 5,438 $ 908
Nonaccrual delinquent
mortgage loans ................. 1,518 3,139 1,625 1,909 7,056 6,645
Other loans delinquent 90 days
or more ........................ 359 549 509 603 556 482
------- ------- ------- ------- ------- -------
Total nonperforming
loans ......................... 2,720 4,343 2,874 3,264 13,050 8,035
Total investment in real estate
and real estate owned
(including in-substance
foreclosures) ................... 9,741 10,505 11,563 15,428 9,924 8,673
------- ------- ------- ------- ------- -------
Total nonperforming
assets ........................ $12,461 $14,848 $14,437 $18,692 $22,974 $16,708
======= ======= ======= ======= ======= =======
Nonperforming loans to total
loans ........................... 1.44% 1.79 1.23% 1.22% 4.17% 2.24%
Nonperforming assets to total
loans and real estate owned ..... 6.28% 5.86% 5.77% 6.51% 7.10% 4.58%
Nonperforming loans to total
assets ......................... 0.54 .83 0.55 0.61 2.47 1.42
Nonperforming assets to total
assets .......................... 2.49 2.82 2.78 3.51 4.34 2.96
</TABLE>
In addition to the loans included in the risk element table above,
Statewide's internal loan review identified approximately $787,000 in loans
classified as substandard at December 31, 1993. These loans, as well as the
loans included in the risk elements, have been considered in the analysis of the
adequacy of the allowance for loan losses.
During the years ended March 31, 1992 and 1993, the amounts of
additional interest income that would have been recorded on nonaccrual loans,
had they been current, totalled $94,560 and $188,822 respectively.
At December 31, 1993, four parcels of real estate with a value of $6.2
million represented 63.9% of Statewide's total real estate owned. The balance
consists of 38 separate properties with an average balance of $96,000.
The largest parcel of real estate owned ("REO") is an in-substance
foreclosure of a loan originally granted in 1985 for the purpose of building 172
single family homes in Raritan Township, New Jersey. After experiencing
financial difficulty, the developer filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code during calendar year 1991. At December 31,
1993, Statewide's total investment in this loan was $2.8 million net of related
loss allowances. At December 31, 1993, the property consisted of 63 building
lots with various preliminary and final building permit approvals and site
improvements in place. In March of 1993, a plan of reorganization was approved
by the bankruptcy court whereby the builder would continue to build and sell
homes and sell building lots while
E-21
<PAGE>
<PAGE>
repaying creditors. Statewide would receive approximately $4.6 million in
payments from these activities through calendar year 1997. No additional
advances to the builder would be made by Statewide. During fiscal 1993,
payments totalling $593,340 were received by Statewide from sales activities.
Management currently does not anticipate any additional losses in connection
with this parcel.
A second large parcel of real estate owned resulted from a separate
loan to the same borrower in 1987 to develop a 48 acre tract of land in Raritan
Borough, New Jersey into residential dwelling units. At December 31, 1993, the
in-substance foreclosure balance for this parcel totalled $2.2 million. This
parcel is covered by the same plan of reorganization as to the Raritan Township
parcel described above and calls for Statewide to receive all principal and
interest due on the original loan from the sale of 119 single family homes
through calendar year 1996. The plan anticipates that Statewide would receive
approximately $3.4 million in payments from building and sale activities through
calendar year 1996. Statewide will not be advancing any additional funds to the
developer. Management does not currently anticipate any additional losses on
this parcel.
The third largest parcel of REO is the in-substance foreclosure of an
acquisition, development and construction loan made to a developer to build
twenty single family luxury homes in Chester, New Jersey. At December 31, 1993
Statewide's investment totalled $546,000 and consisted of 9 improved building
lots. The developer is operating under the protection of Chapter 11 bankruptcy
with a formal plan of reorganization currently being developed. Under a previous
order of the bankruptcy court, the developer has been making interest payments
to Statewide since September 1992 at an interest rate of the prime rate plus
1.5%. During fiscal 1993, principal and interest payments totalling $510,938
have been received by Statewide. Statewide is making no additional advances to
the developer. Management does not currently anticipate any additional losses on
this parcel.
The fourth largest parcel of REO is the in-substance foreclosure of
Statewide's interest in a $159 million acquisition, development and construction
loan located in Jersey City, New Jersey. At December 31, 1993, Statewide's total
investment in this loan was $548,000 net of related loss allowances. The
property is currently being managed and marketed for sale by the RTC. Management
believes that the level of loss allowances is adequate to absorb losses
resulting from this asset if it becomes unrecoverable in the future.
Provisions for Loan Losses. A provision for loan losses is established
through charges to earnings. Loan losses (loans charged off net of recoveries)
are charged against the allowance for loan losses when management believes that
the recovery of principal is unlikely. If the risk characteristics of the loan
portfolio change and the allowance is deemed below the level considered by
management to be adequate to absorb future loan losses on existing loans, the
provision for loan losses is increased to the level considered necessary to
provide an adequate allowance. Management's evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and economic conditions that
may affect the borrower's ability to pay. Economic conditions may result in the
necessity to change the allowance quickly in order to react to deteriorating
financial conditions of Statewide's borrowers. As a result, additional
provisions on existing loans may be required in the future if borrower's
financial conditions deteriorate or if real estate values decline.
E-22
<PAGE>
<PAGE>
The following table presents an analysis of Statewide's allowance for
loan losses at the dates indicated:
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended
December 31, Years Ended March 31,
------------------- --------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period................... $1,366 $1,841 $1,841 $1,697 $2,048 $ 80 $ 46
Provisions charged to operations............... 360 182 194 1,933 186 3,711 194
Loans charged off:
One to Four Family Residential.............. 600 314 446 160 67 65 103
Multi Family Residential.................... 0 0 75 0 0 0 0
Non Residential............................. 0 121 122 0 0 122 0
Land and Construction....................... 0 0 0 1,565 435 1,538 0
Other Loans................................. 86 36 45 64 35 90 58
------ ------ ------ ------ ------ ------ ----
Total loans charged off........................ 686 471 688 1,789 537 1,815 161
Recovery on loans:
One to Four Family Residential.............. 1 19 19 0 0 0 0
Multi Family Residential.................... 0 0 0 0 0 72 0
Non Residential............................. 0 0 0 0 0 0 1
Land and Construction....................... 13 0 0 0 0 0 0
Other Loans................................. 40 0 0 0 0 0 0
------ ------ ------ ------ ------ ------ ----
Total recovery on loans........................ 54 19 19 0 0 72 1
------ ------ ------ ------ ------ ------ ----
Net loans charged off.......................... 632 452 669 1,789 537 1,743 160
------ ------ ------ ------ ------ ------ ----
Balance, end of period......................... $1,094 $1,571 $1,366 $1,841 $1,697 $2,048 $ 80
Ratio of net charge offs during the period
to average loans outstanding
during the period............................. .30% .18% .27% .63% .17% .47% .04%
ALLOCATION OF THE ALLOWANCE
FOR LOAN LOSSES
One to Four Family Residential.............. $ 75 $ 118 $ 266 $ 279 $ 146 $ 15 $ 14
Multi Family Residential.................... 0 0 0 0 0 0 0
Non Residential............................. 0 0 0 0 0 0 0
Land and Construction....................... 5 12 12 732 1,043 1,599 0
Other Loans................................. 43 72 72 80 39 34 64
Unallocated................................. 971 1,369 1,016 750 469 400 2
------ ------ ------ ------ ------ ------ ----
Balance, end of period......................... $1,094 $1,571 $1,366 $1,841 $1,697 $2,048 $ 80
</TABLE>
E-23
<PAGE>
<PAGE>
Investment Activities
Statewide's assets, other than loans receivable and mortgage-backed
securities, are invested primarily in U.S. Government and agency securities and
in Federal Funds Sold. Statewide is required by OTS regulations to maintain a
minimum amount of liquid assets that may be invested in specific securities and
is also permitted to make certain other investments in certain securities.
Liquidity may increase or decrease depending upon the availability of funds and
comparative yields on investments in relation to the return on loans and
mortgage-backed securities. Historically, Statewide has maintained its liquid
assets above the minimum requirements imposed by Federal regulations and at a
level believed adequate to meet the cash requirements of normal daily
activities, repayment of maturing debt and potential deposit outflows. Cash flow
projections are regularly reviewed and updated to assure that adequate liquidity
is provided. As of December 31, 1993, Statewide's liquidity ratio (liquid assets
as a percentage of net withdrawable savings and current borrowings) was 21.02%
as compared to the OTS minimum requirement of 5%.
The following table shows the composition and maturities of Statewide's
investment securities portfolio, excluding FHLBNY stock for the periods
indicated:
<TABLE>
<CAPTION>
(In thousands)
At December 31, 1993
-----------------------------------------------------------------------------------
Less than 1-5 5-10 Over 10 Total Investment
1 year years years years Securities
----------- ---------- ---------- ---------- -----------------------
Book Value Book Value Book Value Book Value Book Value Mkt. Value
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
US Government &
Agency obligations......... $3,004 $43,163 $ 0 $ 0 $46,167 $46,700
Other....................... 10 0 0 0 10 67
------ ------- ----- --- ------- -------
Total investment
securities................. $3,014 $43,163 $ 0 $ 0 $46,177 $46,767
====== ======= ===== === =======
Weighted average yield...... 4.95% 5.44% .00% .00% 5.41%
At March 31, 1993
------------------------------------------------------------------------------------
Less than 1-5 5-10 Over 10 Investment
1 year years years years Securities
----------- ---------- ---------- ---------- ------------------------
Book Value Book Value Book Value Book Value Book Value Mkt. Value
---------- ---------- ---------- ---------- ----------- -------------
US Government &
Agency obligations......... $4,027 $11,152 $3,013 $ 0 $18,192 $19,098
Other....................... 32 0 0 0 32 72
------ ------- ----- --- ------- -------
Total investment
securities................. $4,059 $11,152 $3,013 $ 0 $18,224 $19,170
====== ======= ====== === ======= =======
Weighted average yield...... 6.50% 6.98% 7.47% 0% 6.95%
</TABLE>
The following table sets forth the composition of Statewide's
investment in Federal Funds Sold and investment securities portfolio at the
dates indicated: December 31,
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
1993 1992
-------------------------- ----------------------------
Book Value % of Total Book Value % of Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Federal Funds Sold............................... $11,250 18.26% $ 5,750 16.34%
Investment Securities:
U.S. Govt & Agency securities................... 46,167 74.95 24,923 70.81
Other........................................... 10 0.02 32 0.09
------- ------ ------- ------
Sub-total...................................... 57,427 93.23 30,705 87.24
FHLBNY stock 4,170 6.77 4,493 12.76
------- ------ ------- ------
Total Federal Funds Sold, Investment
Securities and FHLBNY stock..................... $61,597 100.00% $35,198 100.00%
======= ====== ======= ======
</TABLE>
E-24
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(In thousands)
March 31,
--------------------------------------------------------------------------
1993 1992 1991
---------------------- ----------------------- -----------------------
Book Value % of Total Book Value % of Total Book Value % of Total
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Federal Funds Sold................... $ 6,100 21.17% $ 6,000 17.42% $ 4,735 14.43%
Investment Securities:
U.S. Govt & Agency securities....... 18,192 63.13 23,913 69.44 23,548 71.78
Other............................... 32 0.11 32 0.09 32 0.10
------- ------ ------- ------ ------- ------
Sub-total.......................... 24,324 84.41 29,945 86.95 28,315 86.31
FHLBNY stock........................ 4,493 15.59 4,493 13.05 4,493 13.69
------- ------ ------- ------ ------- ------
Total Federal Funds Sold, Investment
Securities and FHLBNY stock......... $28,817 100.00% $34,438 100.00% $32,808 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
Sources of Funds
General. Deposit accounts have traditionally been the principal source
of Statewide's funds for use in lending and for other general business purposes.
In addition to deposits, Statewide's available sources of funds are loan and
mortgage-backed security repayments, cash flows generated from operations
including interest payments on loans and investment securities and fees, and
FHLBNY advances.
Deposits. Statewide attracts both short-term and long-term deposits
from the general public by offering a wide assortment of accounts and rates.
Statewide offers passbook accounts, checking accounts, N.O.W. accounts, money
market accounts, fixed interest rate certificates of deposit with varying
maturities and individual retirement accounts ("IRA's"). In recent years,
Statewide has de-emphasized the reliance on certificates of deposit and has
attempted to increase the relative volume of core deposits, which it considers
to be of passbook, checking, N.O.W. and money market accounts. Management
believes that core deposits are a much more stable source of funds and are less
sensitive to changes in the market level of interest rates. The percentage of
average certificates of deposits to average total deposits was 47.2%, 53.4% and
59.3% for the years ending March 31, 1993, 1992 and 1991, respectively.
Maturity terms, service fees and withdrawal penalties are established
by Statewide on a periodic basis. Rates and terms governing accounts are
determined based upon funding and liquidity requirements, rates paid by
competitors and federal regulations.
The tables on the following two pages set forth the average dollar
amount of deposits in the various types of savings programs, along with the
weighted average effective interest rates paid for the periods indicated.
E-25
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
For The Nine Months Ended December 31,
--------------------------------------------------------------------------------
1993 1992
--------------------------------------- --------------------------------------
Percent Weighted Percent Weighted
of Average of Average
Average Total Effective Average Total Effective
Balance Deposits Rate Balance Deposits Rate
------------- --------- ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Checking Accounts.............. $ 7,589,449 1.75% .00% $ 7,536,664 1.66% .00%
N.O.W. Accounts................ 71,808,419 16.59 3.12 69,680,392 15.37 4.05
Money Market Accounts.......... 53,129,761 12.28 2.74 55,713,584 12.29 3.62
Passbook Accounts.............. 109,897,842 25.39 2.74 104,177,143 22.98 3.57
------------ ----- ----- ------------ ----- ----
Total Core Deposits............ $242,425,471 56.02% 2.77% $237,107,784 52.31% 3.61%
Certificate Accounts
31 Day........................ 42,200 .01% .69% 214,635 .05% 3.63%
91 Day........................ 7,319,059 1.69 3.04 7,706,925 1.70 3.79
6 Mo.......................... 66,556,947 15.38 3.20 76,843,351 16.95 4.21
7-9 Mo........................ 9,281,795 2.14 3.23 12,272,670 2.71 4.28
12 Mo......................... 51,086,853 11.80 3.72 62,087,439 13.70 5.11
18 Mo......................... 2,176,133 .50 3.95 2,434,809 .54 5.88
24 Mo......................... 13,786,654 3.19 4.97 8,857,133 1.95 6.14
30 Mo......................... 6,797,938 1.57 5.30 8,738,908 1.93 7.22
48 Mo......................... 2,784,491 .64 6.79 780,743 .17 7.78
72 Mo......................... 645,066 .15 7.00 109,225 .02 8.20
96 Mo......................... 590,580 .14 8.35 473,282 .10 8.35
36-60 Mo...................... 3,139,550 .73 5.58 3,514,177 .78 7.34
Fixed Rate IRA................ 20,838,093 4.82 5.51 16,870,096 3.72 6.61
Variable Rate IRA............. 4,432,933 1.02 3.50 14,614,987 3.22 5.48
Passbook Rate IRA............. 864,375 .20 2.74 640,609 .14 3.66
------------ ------ ----- ------------ ------ ----
Total Certificates............. 190,342,664 43.98% 3.93% 216,158,990 47.69% 5.03%
------------ ------ ----- ------------ ------ ----
Total Deposits................. $432,768,135 100.00% 3.28% $453,266,774 100.00% 4.28%
============ ====== ===== ============ ====== ====
</TABLE>
E-26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
For The Year Ended March 31,
-------------------------------------------------------------------------------------
1993 1992 1991
--------------------------- --------------------------- ----------------------------
Percent Weighted Percent Weighted Percent Weighted
Of Average Of Average Of Average
Average Total Effective Average Total Effective Average Total Effective
Balance Deposits Rate Balance Deposits Rate Balance Deposits Rate
-------- -------- --------- --------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Checking Accounts...... $ 7,680,359 1.71% 0.00% $ 6,213,093 1.36% 0.00% $ 5,409,146 1.16% 0.00%
N.O.W. Accounts........ 69,840,110 15.52 3.90 56,331,922 12.29 5.91 34,866,359 7.48 7.14
Money Market Accounts.. 55,531,697 12.34 3.48 55,548,807 12.12 5.16 56,989,912 12.22 6.01
Passbook Accounts...... 104,767,161 23.27 3.44 95,521,914 20.84 5.11 92,336,786 19.80 5.73
------------ ----- ---- ------------ ----- ---- ------------ ----- ----
Total Core Deposits.... $237,819,327 52.84% 3.47% $213,615,736 46.61% 5.18% $189,602,203 40.66% 5.91%
Certificate Accounts
31 Day................ 215,524 .05% 3.51% 206,475 .05% 5.38% 209,804 .04% 5.73%
91 Day................ 7,649,230 1.70 3.65 11,079,242 2.42 5.47 15,154,225 3.25 7.74
6 Mo.................. 75,742,148 16.83 4.05 89,473,210 19.52 6.11 97,477,192 20.90 7.94
7-9 Mo................ 11,891,180 2.64 4.13 17,242,331 3.76 6.34 25,767,049 5.53 8.13
12 Mo................. 60,049,853 13.34 4.85 71,440,807 15.59 6.95 80,218,042 17.20 8.35
18 Mo................. 2,373,312 .53 5.58 2,748,535 .60 7.28 2,732,419 .59 8.21
24 Mo................. 9,387,674 2.09 5.94 5,740,406 1.25 7.66 5,641,624 1.21 8.31
30 Mo................. 8,419,580 1.87 6.92 9,612,155 2.10 7.85 11,517,452 2.47 8.23
48 Mo................. 782,155 .17 7.78 896,069 .20 7.77 947,620 .20 7.82
72 Mo................. 105,312 .02 8.19 119,218 .03 7.93 185,161 .04 8.17
96 Mo................. 477,028 .11 8.35 443,328 .10 8.35 414,848 .09 8.36
36-60 Mo.............. 3,751,888 .83 7.12 2,605,028 .57 8.08 2,041,067 .44 8.23
Fixed Rate IRA......... 17,487,115 3.89 6.43 12,845,794 2.80 7.16 2,678,634 .57 6.82
Variable Rate IRA...... 13,232,944 2.94 5.31 19,681,342 4.29 6.93 31,686,441 6.79 8.92
Passbook Rate IRA...... 670,320 .15 3.51 513,191 .11 5.22 54,739 .01 5.97
------------ ------ ---- ------------ ----- ---- ------------ ------ ----
Total Certificates..... 212,235,263 47.16% 4.84% 244,647,131 53.39% 6.62% 276,726,317 59.34% 8.20%
------------ ------ ---- ------------ ----- ---- ------------ ------ ----
Total Deposits......... $450,054,590 100.00% 4.12% $458,262,687 100.00% 5.95% $466,328,520 100.00% 7.27%
============ ====== ==== ============ ====== ==== ============ ====== ====
</TABLE>
E-27
<PAGE>
<PAGE>
The following table shows rate information for Statewide's certificates
of deposits at the dates indicated and maturity information at December 31,
1993.
<TABLE>
<CAPTION>
Period to Maturity from December 31, 1993
At December 31, ------------------------------------------------------
----------------------- Within One to Two to Over
1993 1992 One Year Two Years Three Years Three Years Total
---- ---- -------- --------- ---------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Certificates of Deposits
3.99% or less...................... $144,612,901 $115,750,306 $135,286,255 $ 9,326,646 $ 0 $ 0 $144,612,901
4.00% to 4.99%..................... 18,479,143 46,865,831 6,243,091 8,843,898 3,350,482 41,672 18,479,143
5.00% to 5.99%..................... 11,364,586 19,361,136 4,568,977 1,499,504 4,025,986 1,270,119 11,364,586
6.00% to 6.99%..................... 2,574,503 10,849,903 1,371,906 990,056 212,541 0 2,574,503
7.00% to 7.99%..................... 5,751,406 9,621,628 784,009 3,901,399 1,065,998 0 5,751,406
8.00% to 8.99%..................... 617,181 766,525 155,199 447,429 14,553 0 617,181
------------ ------------ ------------ ----------- ----------- ---------- ------------
Total $183,399,720 $203,215,329 $148,409,437 $25,008,932 $8,669,560 $1,311,791 $183,399,720
============ ============ ============ =========== =========== ========== ============
</TABLE>
The following table shows rate information for Statewide's certificates
of deposits at the dates indicated and maturity information at March 31, 1993.
<TABLE>
<CAPTION>
Period to Maturity from March 31, 1993
At March 31, -------------------------------------------------------------
--------------------------------- Within One to Two to Over
1993 1992 1991 One Year Two Years Three Years Three Years Total
---- ---- -------- --------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of
Deposits
3.99% or less....... $152,794,397 $ 0 $ 0 $150,121,273 $ 2,673,124 $ 0 $ 0 $152,794,397
4.00% to 4.99%...... 14,902,944 94,427,222 0 737,142 10,476,576 3,540,224 148,002 14,902,944
5.00% to 5.99%...... 14,604,298 76,241,070 1,874,000 6,366,092 2,890,588 1,378,713 3,968,905 14,604,298
6.00% to 6.99%...... 8,212,159 38,527,114 67,102,000 5,568,906 256,243 1,835,406 551,604 8,212,159
7.00% to 7.99%...... 7,178,212 19,326,405 170,417,062 2,549,839 1,953,169 1,991,312 683,892 7,178,212
8.00% to 8.99%...... 660,645 1,427,611 24,608,000 166,129 478,938 15,578 0 660,645
------------ ------------ ------------ ------------ ----------- ---------- ---------- ------------
Total $198,352,655 $229,949,422 $264,001,962 $165,509,381 $18,728,638 $8,761,233 $5,353,403 $198,352,655
============ ============ ============ ============ =========== ========== ========== ============
</TABLE>
The following table sets forth the maturity dates of Statewide's
certificates of deposit and other deposits of $100,000 or more:
Amount
-------------
Maturity Period (In Thousands)
- ----------------
Three Months or Less............................................ $21,410
Three Through Six Months........................................ 1,672
Six Through Twelve Months....................................... 2,028
Over Twelve Months.............................................. 1,800
-------
Total......................................................... $26,910
=======
Borrowings. Statewide's principal source of borrowings in past years
has been advances from the FHLBNY. Statewide has utilized these advances when
available loan and investment yields significantly exceeded the cost of
borrowings and as an interest rate risk management tool when the cost of longer
term advances is significantly lower than the rates required to attract longer
term certificates of deposit.
The following table sets forth the maximum month-end balance and
average balance of FHLBNY advances for the periods indicated:
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31, For the Year Ended March 31,
---------------------------- -----------------------------------------------
1993 1992 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
MAXIMUM BALANCE:
FHLBNY Advances......................... $48,966,666 $55,216,666 $55,216,666 $52,149,999 $65,329,981
AVERAGE BALANCE:
FHLBNY Advances......................... 39,148,348 47,677,058 48,729,166 45,154,166 46,912,499
Weighted average interest
rate of FHLBNY Advances................ 7.41% 7.18% 6.16% 7.50% 8.84%
</TABLE>
E-28
<PAGE>
<PAGE>
The following table sets forth certain information as to FHLBNY
advances at the dates indicated:
<TABLE>
<CAPTION>
At December 31, At March 31,
----------------------------- -------------------------------------------------
1993 1992 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FHLBNY Advances......................... $39,366,666 $51,666,666 $45,091,666 $43,391,666 $49,191,666
Weighted average interest
rate of FHLBNY Advances................ 7.41% 7.18% 7.64% 8.23% 8.69%
</TABLE>
Competition
Statewide faces substantial competition in attracting deposits and
creditworthy borrowers from other savings institutions, commercial banks, money
market and mutual funds, credit unions and other investment vehicles. The
ability of Statewide to attract and retain deposits depends on its ability to
provide an investment opportunity that satisfies the requirements of investors
as to a rate of return, liquidity, risk and other factors. Competition for
depositors funds and for creditworthy loan customers in Statewide's Northern New
Jersey market area is intense and involves local institutions as well as large
New York City institutions.
Properties
Statewide conducts its business through 13 branch offices, including
its home office at 70 Sip Avenue, Jersey City, New Jersey.
Legal Proceedings
Statewide is involved from time to time as a party to legal proceedings
occurring in the ordinary course of its business. Statewide believes that none
of these proceedings would, if adversely determined, have a material effect on
Statewide's consolidated financial condition or results of operations.
Employees
At December 31, 1993, Statewide had a total of 149 full-time employees
and 43 part-time employees. None of Statewide's employees are represented by a
collective bargaining unit. Management considers its employee relations to be
good.
Subsidiary Activities
As of December 31, 1993, Statewide was the 100% owner of the following
subsidiaries:
Statewide Financial Services, Inc. Statewide Financial Services, Inc.
holds a New Jersey corporate insurance license. Statewide sells tax-deferred
annuity investment products and term life insurance to its customers through
Statewide Financial Services, Inc. During the fiscal years ended March 31, 1993
and March 31, 1992, Statewide Financial Services, Inc. earned $456,120 and
$187,749 in commission income, respectively. During the nine months ended
December 31, 1993 and December 31, 1992, commission earnings were $312,956 and
$292,951, respectively.
Seventy Sip Corp. Seventy Sip Corp. is a joint venture partner in a
residential real estate development project located in Little Egg Harbor, New
Jersey. Due to a decrease in sales activity, the joint venture is experiencing
financial difficulty. Statewide does not intend to invest any additional funds
in Seventy Sip Corp. to support the joint venture, nor is it obligated to do so.
In April 1993, the construction lender to the joint venture accepted a deed to
the real estate development in lieu of repayment of the construction loan. In
addition, the construction lender agreed to replace letters of credit that were
issued by Statewide to secure improvements that were to be made by the joint
venture. These letters of credit totalled $1.8 million. As of December 31, 1993,
Statewide's investment in the joint venture was zero. See "BUSINESS OF STATEWIDE
- --Investment Activities."
E-29
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Statewide Savings Bank, S.L.A.
Jersey City, New Jersey
We have audited the accompanying consolidated statements of financial
condition of Statewide Savings Bank, S.L.A. and subsidiaries (the "Bank") as of
March 31, 1993 and 1992 and the related consolidated statements of operations
and retained earnings and of cash flows for each of the three years in the
period ended March 31, 1993. These consolidated financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our report.
In our opinion, the accompanying consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Statewide Savings Bank, S.L.A. and subsidiaries as of March 31, 1993
and 1992, and the results of operations and their cash flows for each of the
three years in the period ended March 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 22, the accompanying 1993 and 1992 financial
statements have been restated.
As discussed in Note 17, although the Bank was in compliance with
minimum regulatory capital requirements of the OTS as of March 31, 1993, the
Bank's leverage ratio at the date resulted in the Bank falling within the
"undercapitalized" category for purposes of determining the scope and severity
of corrective actions that regulators must take. As a result, the Bank may be
subject to regulatory sanctions. The financial statement impact, if any, that
might result from the failure of the Bank to maintain capital levels at least
equal to the "adequately capitalized" category cannot presently be determined.
Accordingly, no adjustments that may result from the ultimate resolution of this
uncertainty have been made in the accompanying consolidated financial
statements.
Deloitte & Touche
Parsippany, New Jersey
June 11, 1993
February 15, 1994 as to Note 22
E-30<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1993 and 1992 and (Unaudited) December 31, 1993
<TABLE>
<CAPTION>
March 31,
December 31, -----------------------------
1993 1993 1992
------------ ------------ -----------
ASSETS (Unaudited) (Restated) (Restated)
<S> <C> <C> <C>
Cash and amounts due from depository institutions............ $ 7,477,870 $ 5,211,833 $ 6,393,445
Federal funds sold........................................... 16,075,000 6,100,000 6,000,000
------------ ------------ ------------
Total cash and cash equivalents........................... 23,552,870 11,311,833 12,393,445
Investment securities (estimated market value of
$46,767,000, $19,169,750 and $24,384,344 at
December 31, 1993 and March 31, 1993 and
1992, respectively)......................................... 46,176,486 18,224,440 23,945,102
Mortgage-backed securities, net of amortization (estimated
market value of $205,879,291, $215,480,381 and
$181,784,075 at December 31, 1993 and March 31,
1993 and 1992, respectively)................................ 201,396,736 208,248,187 180,303,895
Mortgage-backed securities available for sale (estimated
market value of $5,003,884 and $7,870,900 at
December 31 and March 31, 1993, respectively)............... 4,788,557 7,516,517 --
Loans receivable, less allowance for loan losses of
$1,094,460, $1,366,001 and $1,841,404 at December
30, 1993 and March 31, 1993 and 1992, respectively.......... 186,453,460 230,928,846 264,914,246
Accrued interest receivable, net............................. 3,161,230 4,557,502 6,175,588
Real estate owned, net....................................... 9,740,953 11,538,974 15,204,455
Federal Home Loan Bank of New York stock, at cost............ 4,170,200 4,492,600 4,492,600
Premises and equipment, net.................................. 3,941,840 3,940,211 4,287,925
Excess of cost over fair value of assets acquired............ 14,929,779 15,636,517 16,578,835
Other assets................................................. 1,962,691 1,465,067 3,264,876
Investment in real estate venture, net....................... -- 23,806 224,144
------------ ------------ ------------
$500,274,803 $517,884,500 $531,785,111
============ ============ ============
LIABILITIES AND RETAINED EARNINGS
LIABILITIES:
Deposits.................................................... $425,802,115 $440,033,959 $460,925,889
Borrowed funds.............................................. 39,366,666 45,091,666 43,391,666
Advance payments by borrowers for taxes.....................
and insurance.............................................. 1,200,689 1,844,246 2,546,772
Accounts payable and other liabilities...................... 1,665,054 2,603,039 1,695,980
------------ ------------ ------------
Total liabilities......................................... 468,034,524 489,572,910 508,560,307
COMMITMENTS AND CONTINGENCIES
RETAINED EARNINGS--Substantially restricted.................. 32,240,279 28,311,590 23,224,804
------------ ------------ ------------
$500,274,803 $517,884,500 $531,785,111
============ ============ ============
See notes to consolidated financial statements.
</TABLE>
E-31
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Years Ended March 31, 1993, 1992 and 1991 and the (Unaudited) Nine
Months Ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
For the Nine Months
Ended December 31, For the Years Ended March 31,
----------------------- -------------------------------------
1993 1992 1993 1992 1991
----------- ---------- ---------- ---------- -----------
(Unaudited) (Unaudited) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans.............. $13,988,010 $17,769,489 $22,435,670 $28,389,922 $33,076,126
Interest on mortgage-backed.............
securities............................. 10,609,758 11,175,779 14,961,347 13,393,415 12,011,959
Interest and dividends on
investment securities.................. 1,226,495 1,569,908 1,981,349 2,239,760 2,623,014
Dividends on Federal Home Loan
Bank Stock............................. 295,877 344,420 444,118 376,255 438,478
----------- ----------- ----------- ----------- -----------
26,120,140 30,859,596 39,822,484 44,399,352 48,149,577
----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits................................ 10,559,943 14,417,409 18,299,668 26,742,663 32,885,843
Borrowed funds.......................... 2,297,026 2,655,958 3,529,200 3,862,905 4,501,451
----------- ----------- ----------- ----------- -----------
12,856,969 17,073,367 21,828,868 30,605,568 37,387,294
----------- ----------- ----------- ----------- -----------
NET INTEREST AND DIVIDEND
INCOME BEFORE PROVISION
FOR LOAN LOSSES......................... 13,263,171 13,786,229 17,993,616 13,793,784 10,762,283
PROVISION FOR LOAN LOSSES................ 359,841 181,818 193,654 1,932,503 185,800
----------- ----------- ----------- ----------- -----------
NET INTEREST AND DIVIDEND
INCOME AFTER PROVISION
FOR LOAN LOSSES......................... 12,903,330 13,604,411 17,799,962 11,861,281 10,576,483
----------- ----------- ----------- ----------- -----------
OTHER INCOME:
Service charges......................... 771,101 537,639 814,096 737,477 715,388
Net gain on sales of mortgage-backed
and investment securities.............. -- 529,775 529,775 1,763,509 20,090
Gain on pension plan termination........ -- -- -- 867,000 --
Other income............................ 331,196 335,212 666,119 196,420 1,003,947
----------- ----------- ----------- ----------- -----------
1,102,297 1,402,626 2,009,990 3,564,406 1,739,425
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Salaries and employee benefits.......... 4,473,976 4,024,610 5,460,939 5,097,646 4,972,769
Net occupancy expense of premises....... 1,361,800 1,300,874 1,767,632 1,977,097 2,054,684
Advertising and promotion............... 120,000 195,000 262,279 252,500 180,218
Federal insurance premiums.............. 887,387 739,688 954,084 969,497 916,141
Amortization of intangibles............. 706,737 706,737 942,318 942,318 942,318
Foreclosed real estate expense, net..... (36,742) 489,664 886,160 1,345,872 1,747,266
Loss on investment in real..............
estate venture......................... -- 140,000 140,000 334,575 960,000
Other................................... 1,531,905 1,314,766 1,819,326 2,044,135 1,837,567
----------- ----------- ----------- ----------- -----------
9,045,063 8,911,339 12,232,738 12,963,640 13,610,963
----------- ----------- ----------- ----------- -----------
(Continued)
</TABLE>
E-32
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIA0IES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS--(Concluded)
Years Ended March 31, 1993, 1992 and 1991 and the (Unaudited) Nine Months Ended
December 31, 1993 and 1992
For the Nine Months
Ended December 31, For the Years Ended March 31,
----------------------- --------------------------------------
1993 1992 1993 1992 1991
--------- ---------- ---------- --------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES, EXTRAORDINARY
CREDIT AND CHANGE IN
ACCOUNTING PRINCIPLES.................... $4,960,564 $6,095,698 $7,577,214 $2,462,047 $(1,295,055)
INCOME TAXES.............................. 1,700,716 2,051,901 2,490,428 1,461,386 34,854
---------- ---------- ---------- --------- -----------
INCOME (LOSS) BEFORE EXTRA-
ORDINARY CREDIT AND CHANGE
IN ACCOUNTING PRINCIPLE.................. 3,259,848 4,043,797 5,086,786 1,000,661 (1,329,909)
EXTRAORDINARY CREDIT--
Utilization of net operating loss
carryforward............................ -- -- -- 1,233,283 --
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE.................. 668,841 -- -- -- --
---------- ---------- ---------- --------- -----------
NET INCOME (LOSS)......................... 3,928,689 4,043,797 5,086,786 2,233,944 (1,329,909)
RETAINED EARNINGS,
BEGINNING OF PERIOD...................... 28,311,590 23,224,804 23,224,804 20,990,860 22,320,769
---------- ---------- ---------- --------- -----------
RETAINED EARNINGS,
END OF PERIOD............................ $32,240,279 $27,268,601 $28,311,590 $23,224,804 $20,990,860
=========== =========== =========== =========== ===========
See notes to consolidated financial statements.
E-33
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months Ended
December 31, 1993 and 1992
For the Nine Months For the Years Ended
Ended December 31, March 31,
------------------------ -------------------------------------
1993 1992 1993 1992 1991
(Unaudited) (Unaudited) (Restated) (Restated)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss). . . . . . . . . . . . $ 3,928,689 $ 4,043,797 $ 5,086,786 $ 2,233,944 $(1,329,909)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses . . . . . . . 359,841 181,818 193,654 1,932,503 185,800
Provision for losses on foreclosed
real estate . . . . . . . . . . . . . 179,978 297,931 465,790 601,509 1,588,754
Provision for losses on real estate
ventures . . . . . . . . . . . . . . . -- 140,000 140,000 334,575 960,000
Amortization of deferred premiums
and unearned discounts--net. . . . . . 442,941 (840,312) (1,362,249) (371,484) (993,467)
Depreciation and amortization . . . . . 1,063,626 1,081,775 1,438,143 1,619,257 1,724,528
Net gain on sales of mortgage-
backed and investment
securities . . . . . . . . . . . . . . -- (529,775) (529,775) (1,763,509) (20,090)
Loss (gain) on sale of premises and
equipment. . . . . . . . . . . . . . . -- -- -- 1,218 (28,690)
(Gain) loss on sale of real estate
owned. . . . . . . . . . . . . . . . . (290,220) (84,399) (80,016) 11,398 (21,589)
Equity in loss of joint venture . . . . 23,806 60,338 60,337 125,444 80,410
Changes in assets and liabilities:
Decrease in accrued interest
receivable . . . . . . . . . . . . . . 1,396,272 519,310 1,618,086 323,896 (18,731)
Increase (decrease) in accrued
interest payable . . . . . . . . . . . (65,285) (44,571) (29,750) (109,388) (48,460)
Decrease (increase) in other assets . . (497,624) 2,249,470 1,799,809 (1,649,008) (953,896)
(Decrease) increase in accounts
payable and other liabilities. . . . . (894,303) 487,466 921,910 626,115 (79,527)
--------- --------- --------- --------- ---------
Net cash provided by operating
activities . . . . . . . . . . . . . . 5,647,721 7,562,848 9,722,725 3,916,470 1,045,133
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from principal collections and
repayments of loans net of
originations. . . . . . . . . . . . . . 43,596,796 24,804,661 34,063,625 33,827,049 31,841,285
Proceeds from mortgage-backed
securities principal repayments . . . . 66,311,254 30,320,295 44,105,654 15,101,748 10,508,814
Proceeds from sale of mortgage-
backed securities . . . . . . . . . . . -- 10,697,723 11,232,594 39,626,639 3,043,125
Purchase of mortgage-backed
securities. . . . . . . . . . . . . . . (57,377,096) (65,346,983) (89,186,951) (90,684,869) (22,844,896)
Purchase of investment securities. . . . (31,019,758) (8,098,750) (8,098,750) (24,298,090) (5,989,028)
Proceeds from sale of investment
securities. . . . . . . . . . . . . . . -- -- 1,000,000 2,697,047 --
Proceeds from maturities of
investment securities . . . . . . . . . 3,000,000 7,000,000 12,700,000 21,190,000 13,650,000
Proceeds from redemption of
Federal Home Loan Bank stock. . . . . . 322,400 -- -- -- --
Proceeds from sale of and payments
on real estate owned. . . . . . . . . . 2,728,518 5,107,929 3,648,558 2,561,321 191,857
</TABLE>
E-34
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months Ended
December 31, 1993 and 1992
For the Nine Months For the Years Ended
Ended December 31, March 31,
------------------------ -------------------------------------
1993 1992 1993 1992 1991
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Improvements to real estate owned....... (31,482) (215,154) (241,400) (381,559) (730,420)
Purchases of premises and
equipment.............................. (358,517) (134,733) (148,110) (123,764) (134,191)
Proceeds from repayment of advances
to real estate ventures................ -- -- -- -- 33,000
Proceeds from sale of premises and
equipment.............................. -- -- -- -- 28,690
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
investing activities................. 27,172,115 4,134,988 9,075,220 (484,478) 29,598,236
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net (decrease) increase in deposit
accounts............................... $(14,210,242) $(17,684,462) $(20,877,031) $ 6,208,853 $(30,153,198)
Repayment of Federal Home Loan
Bank advances.......................... (6,775,000) (31,725,000) (7,800,000) (20,800,000) (6,300,000)
Advances from the Federal Home
Loan Bank.............................. 1,050,000 40,000,000 9,500,000 15,000,000 9,000,000
Net decrease in securities sold under
agreements to repurchase............... -- -- -- -- (6,043,000)
(Decrease) increase in advance
payments by borrowers for taxes
and insurance.......................... (643,557) (1,265,846) (702,526) 988,004 (107,703)
------------ ------------ ------------ ----------- ------------
Net cash (used in) provided by
financing activities................. (20,578,799) (10,675,308) (19,879,557) 1,396,857 (33,603,901)
------------ ------------ ------------ ----------- ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS............... 12,241,037 1,022,528 (1,081,612) 4,828,849 (2,960,532)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD..................... 11,311,833 12,393,445 12,393,445 7,564,596 10,525,128
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD........................... $23,552,870 $13,415,973 $11,311,833 $12,393,445 $ 7,564,596
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................... $12,922,254 $17,117,940 $21,858,618 $30,714,956 $37,387,294
=========== =========== =========== =========== ===========
Income taxes............................ $ 2,200,183 $ 1,044,772 $ 1,626,162 $ 91,500 $ 191,879
=========== =========== =========== =========== ===========
SUPPLEMENTAL NON-CASH
INVESTING ACTIVITIES:
Transfer from loans receivable to real
estate owned, net...................... $ 788,773 $ 363,334 $ 1,286,971 $12,119,925 $ 3,328,840
=========== =========== =========== =========== ===========
Loans to facilitate the sale of
property............................... $ 105,000 $ 812,820 $ 1,159,520 $ 3,362,985 $ --
=========== =========== =========== =========== ===========
Transfer of mortgage-backed securities
to mortgage-backed securities
available for sale..................... $ -- $ -- $ 7,516,517 $ -- $ --
=========== =========== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
E-35
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements
include the accounts of Statewide Savings Bank, S.L.A. (the "Bank") and its
wholly-owned subsidiaries, Seventy Sip Corporation, Statewide Atlantic
Corporation and Statewide Financial Services Inc. All significant intercompany
balances and transactions have been eliminated. Certain reclassifications have
been made to the prior year's financial statements to conform to the current
year's presentation.
Investment Securities and Mortgage-Backed Securities--Investment and
mortgage-backed securities held for investment are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Investment securities gains
and losses are determined on a specific identification basis. Investment and
mortgage-backed securities are stated at amortized cost because the Bank has
both the ability to hold the securities to maturity and the intent of management
is to hold such securities to maturity. In the event that management determines
to hold securities for an indefinite period of time, including securities that
management intends to use as part of its asset/liability strategy, or securities
that may be sold in response to changes in interest rates, changes in prepayment
risks, the need to increase capital or similar factors, such securities are
classified as available for sale. Securities available for sale are carried at
the lower of amortized cost or market value.
Marketable equity securities are carried at the lower of cost or market
with any market adjustments recorded to equity.
Loan Fees and Discounts--Nonrefundable loan origination fees net of
certain direct loan origination costs are deferred. Net deferred fees are
amortized as an adjustment of the yield over the life of the loan by use of the
effective interest method. Fees and costs associated with lending transactions
prior to April 1, 1988 are amortized on a straight-line basis. Discounts on
loans purchased which are probable of collection are recognized as an adjustment
to the yield over the life of the loans by use of the effective interest method.
Non-performing loans are defined as loans where management has
determined that the borrowers may be unable to meet contractual principal or
interest obligations or where interest or principal is 90 days or more past due,
unless the loans are well secured and in the process of collection. The Bank's
policy with regard to non-performing loans is to continue to accrue interest but
to provide a full reserve against the amount accrued including interest
previously accrued. Therefore, interest income is not recognized unless the
financial condition and payment record of the borrower warrant the recognition
of interest income. Interest on loans that have been restructured is accrued
according to the renegotiated terms.
Provision for Loan Losses--Provision for loan losses is established
through charges to earnings. Loan losses (loans charged off net of recoveries)
are charged against the allowance for loan losses when management believes that
the recovery of principal is unlikely. If, as a result of loans charged off or
increases in the size or risk characteristics of the loan portfolio, the
allowance is below the level considered by management to be adequate to absorb
future loan losses on existing loans, the provision for loan losses is increased
to the level considered necessary to provide an adequate allowance. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of the loans. The evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans and
economic conditions that may affect the borrowers' ability to pay. Economic
conditions may result in the necessity to change the allowance quickly in order
to react to deteriorating financial conditions of the Bank's borrowers. As a
result, additional provisions on existing loans may be required in the future if
borrowers' financial conditions deteriorate or if real estate values decline.
Real Estate Owned--Real estate properties acquired through loan
foreclosure or that are in-substance foreclosures are recorded at the lower of
cost or estimated fair value at time of foreclosure with any write-down charged
against the allowance for loan losses. Subsequent valuations are periodically
performed by management and the carrying value is adjusted by a charge to
expense to reflect any subsequent declines in the estimated fair value. Further
declines in real estate values may result in increased foreclosed real estate
expense in the future. Routine
E-36
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
holding costs are charged to expense as incurred and improvements to real
estate owned that enhance the value of real estate owned are capitalized.
Gains on the sale of real estate are recognized upon disposition of the
property to the extent allowable based upon certain down payment and other
requirements. Losses are charged to operations as incurred.
Premises and Equipment--Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Provisions for depreciation of
premises and equipment are computed using the straight-line method over three to
ten years for furniture, fixtures and equipment and forty years for buildings.
Amortization of leasehold improvements is provided using the straight-line
method over the terms of the respective lease or the estimated useful life of
the improvement, whichever is shorter.
Excess of Cost Over Assets Acquired, Net of Amortization--The cost in
excess of fair value of net assets acquired in business combinations
("goodwill") is amortized to expense over a period of twenty years using the
straight-line method.
Under the capital standards contained in the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (FIRREA), goodwill is a reduction
from retained income in calculating tangible capital. The Bank must maintain
tangible capital of not less than l.5% of total adjusted assets and must have
core capital equal to 3% of total adjusted assets, of which qualifying
supervisory goodwill may be included in core capital not to exceed 1% of total
adjusted assets through December 31, 1992 and declining annually thereafter
until it is completely phased out on January 1, 1995. Additionally, for capital
purposes, qualifying supervisory goodwill is amortized over a twenty-year
period. At March 31, 1993, all of the Bank's goodwill qualified as supervisory
goodwill. This supervisory goodwill represents approximately 3.0% of total
assets.
Investment in Real Estate Venture--One of the Bank's subsidiaries is a
participant in a joint venture engaged in the development and sale of
residential land and homes. The Bank's investment in such venture is accounted
for by the equity method. The joint venture follows the policy of capitalizing
interest and real estate taxes incurred as a cost of the property under
development.
Income Taxes--The Bank and its subsidiaries file a consolidated Federal
income tax return on a calendar year basis. Income taxes are allocated to the
Bank and its subsidiaries based on the use of their income or loss in the
consolidated return. Separate state income tax returns are filed by the Bank and
its subsidiaries.
The provision for income taxes is based upon earnings reported, after
permanent differences. Deferred income taxes are provided for timing differences
in the reporting of income and expenses for financial statement and income tax
purposes.
Effective April 1, 1993, the Bank was required to change its method of
accounting for income taxes to comply with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This Statement
will require the Bank to use an asset and liability method for financial
accounting and reporting for income taxes. Bank management has determined the
effect on the Bank from adoption of this new standard will not be material to
the financial statements.
Cash and Cash Equivalents--For purposes of reporting cash flows, the
Bank considers cash and amounts due from depository institutions and Federal
funds sold as cash and cash equivalents.
2. FEDERAL FUNDS SOLD
Federal funds sold consist of the following:
<TABLE>
<CAPTION>
March 31,
----------------------
1993 1992
---- ----
<S> <C> <C>
Federal funds sold:
Due within one day with an interest rate of 3.25% and 3.875%
at March 31, 1993 and 1992, respectively............................ $6,100,000 $6,000,000
========== ==========
</TABLE>
E-37
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
3. INVESTMENT SECURITIES
The amortized cost and estimated market values of investment in debt
securities are as follows:
<TABLE>
<CAPTION> March 31, 1992
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies maturing:
Within one year.............................. $ 4,027,939 $ 22,061 $ -- $ 4,050,000
After one year but within five years......... 11,151,816 597,247 -- 11,749,062
More than five years......................... 3,013,085 266,602 -- 3,279,688
Other.......................................... 31,600 59,400 -- 91,000
----------- -------- ------- -----------
$18,224,440 $945,310 $ -- $19,169,750
=========== ======== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1992
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies maturing:
Within one year............................. $12,717,849 $262,370 $ -- $12,980,219
After one year but within five years........ 6,052,605 107,808 17,913 6,142,500
More than five years........................ 5,143,048 4,144 4,692 5,142,500
Other 31,600 87,525 -- 119,125
----------- -------- ------- -----------
$23,945,102 $461,847 $22,605 $24,384,344
=========== ======== ======= ===========
</TABLE>
Investment securities, with an amortized cost totalling $3,865,413 and
$5,163,225 were pledged at March 31, 1993 and 1992, respectively, to secure
public deposits.
Proceeds from the sale of investment securities were $1,000,000,
$2,697,047 and $-0- in 1993, 1992 and 1991, respectively. The 1993 sales
resulted in no gross realized gains or losses. The 1992 sales resulted in
gross realized gains of $1,896 and no gross realized losses.
4. MORTGAGE-BACKED SECURITIES
The amortized cost and estimated market values of mortgage-backed
securities are as follows:
<TABLE>
<CAPTION>
March 31, 1992
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
GNMA guaranteed pass-through certificates
(net of deferred premiums of $75,038) $ 56,531,911 $3,187,578 $16,078 $ 59,703,411
FHLMC pass-through certificates (net of
deferred premiums of $1,031,143) 72,923,047 2,383,193 25,603 75,280,637
FNMA pass-through certificates (net of
deferred premiums of $1,578,577) 78,793,229 1,720,494 17,390 80,496,333
------------ ---------- ------- ------------
$208,248,187 $7,291,265 $59,071 $215,480,381
============ ========== ======= ============
</TABLE>
E-38
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
<TABLE>
<CAPTION>
March 31, 1992
--------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
GNMA guaranteed pass-through certificates
(net of deferred premiums of $104,356)....... $ 57,453,437 $1,179,192 $ 535,821 $ 58,096,808
FHLMC pass-through certificates (net of
deferred premiums of $1,157,198)............. 99,215,197 1,340,922 451,129 100,104,990
FNMA pass-through certificates (net of
deferred premiums of $549,869)............... 23,635,261 216,913 269,897 23,582,277
------------ ---------- ---------- ------------
$180,303,895 $2,737,027 $1,256,847 $181,784,075
============ ========== ========== ============
</TABLE>
Issuers of these securities have the ability to prepay them.
Mortgage-backed securities with an amortized cost totalling $60,571,375 and
$55,702,919 were pledged at March 31, 1993 and 1992 to secure Federal Home Loan
Bank of New York advances.
Proceeds from the sales of mortgage-backed securities were $11,232,594,
$39,626,639 and $3,043,125 in 1993, 1992 and 1991, respectively. The 1993, 1992
and 1991 sales resulted in gross realized gains of $529,775, $1,761,613 and
$20,090, respectively, and no gross realized losses.
5. LOANS RECEIVABLE, NET
Loans consist of the following:
March 31,
-------------------------------
1993 1992
------ ------
First mortgage loans:
Conventional................................ $183,534,608 $213,242,034
FHA insured and VA guaranteed............... 28,854,964 33,864,490
Construction................................ 248,853 248,853
------------ ------------
212,638,425 247,355,377
------------ ------------
Consumer loans:
Home improvement............................ 10,054,618 11,359,827
Second mortgage............................. 8,394,583 6,966,409
Student..................................... 146,080 229,382
Passbook.................................... 450,555 567,071
Automobile.................................. 2,820 10,636
Home equity line of credit.................. 1,790,718 1,876,246
Personal line of credit..................... 219,110 21,411
------------ ------------
21,058,484 21,030,982
------------ ------------
Total loans 233,696,909 268,386,359
------------ ------------
Less:
Deferred loan fees.......................... (654,773) (663,105)
Unearned discounts.......................... (747,289) (967,604)
Allowance for losses........................ (1,366,001) (1,841,404)
------------ ------------
(2,768,063) (3,472,113)
------------ ------------
$230,928,846 $264,914,246
============ ============
E-39
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
At March 31, 1993 and 1992, the Bank serviced loans for others
amounting to $15,875,647 and $23,235,536, respectively. Servicing loans for
others generally consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing. Loan
servicing income is recorded on the accrual basis and includes servicing fees
from investors and certain charges collected from borrowers, such as late
payment fees. In connection with these loans serviced for others, the Bank held
borrowers' escrow balances of $219,338 and $370,546 at March 31, 1993 and 1992,
respectively.
Loans three or more months in arrears or in the process of foreclosure
were: Conventional first mortgage loans--$1,449,559 and $1,908,726; FHA insured
and VA guaranteed--$666,584 and $670,622; consumer loans--$509,097 and $603,110;
and construction loans $248,853 and $-0- at March 31, 1993 and 1992,
respectively.
The amount of non-accruing loans at March 31, 1993 and 1992 was
$2,133,466 and $2,511,835, respectively, which represents .91% and .94%,
respectively, of total loans outstanding. The total interest income that would
have been recorded for the years ended March 31, 1993 and 1992, had these loans
been current in accordance with their original terms, or since the date of
origination if outstanding for only part of the year, was approximately $188,822
and $94,560, respectively.
Activity in the allowance for loan losses was as follows:
Year Ended March 31,
----------------------------------
1993 1992 1991
---- ---- ----
Balance, beginning of year $1,841,404 $1,697,711 $2,048,391
Provision for loan losses 193,654 1,932,503 185,800
Charge-offs (688,332) (1,788,810) (537,480)
Recoveries 19,275 -- --
---------- ---------- ----------
Balance, end of year $1,366,001 $1,841,404 $1,697,711
========== ========== ==========
Residential mortgage loans totalled approximately $189 million and $225
million at March 31, 1993 and 1992, respectively. These loans are primarily
secured by real estate in New Jersey.
The Bank holds in their portfolio commercial real estate loans,
multi-family residential loans, construction loans and land loans which totalled
approximately $23.6 million and $22.5 million, net of loans in process and
allowance for losses, at March 31, 1993 and 1992, respectively. These loans are
considered by management to be of somewhat greater risk of uncollectibility due
to the dependency on income production or future development of the real estate.
Of these commercial real estate loans at March 31, 1993, $4.8 million
are collateralized by multi-family residential properties, $249,000 by
construction properties, $2.2 million by land properties and $16.3 million by
commercial properties. Additionally, the majority of these loans are
collateralized by real estate in New Jersey, which, in general, is experiencing
a weak real estate market.
The Office of Thrift Supervision (OTS) regulatory capital regulations,
issued November 6, 1989, require that the portion of nonresidential construction
and land loans in excess of 80% loan-to-value ratio be deducted from total
capital for purposes of the risk-based capital standard over a 5-year-phase-in
period commencing July 1, 1990. At March 31, 1993, the Bank had no investment in
loans subject to this deduction.
E-40
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The Bank's loan portfolio includes both adjustable and fixed interest
rate loans. At March 31, 1993, the approximate composition of these loans was as
follows:
<TABLE>
<CAPTION>
Fixed Rate Adjustable Rate
- ----------------------------------------- ------------------------------------------
Term to Book Term to Rate Book
Maturity Value Adjustment Value
-------- ----- ---------- -----
<S> <C> <C> <C>
Within 1 year ............ $ 15,659,000 Within 1 year ............. $ 81,947,000
1 to 3 years.............. 3,461,000 1 to 3 years .............. 11,269,000
3 to 5 years.............. 9,071,000 3 to 5 years .............. 7,559,000
5 to 10 years............. 28,686,000 5 to 10 years ............. 1,977,000
10 to 20 years............ 41,981,000
Over 20 years............. 32,087,000
------------ ------------
$130,945,000 $102,752,000
============ ============
</TABLE>
The adjustable rate loans have interest rate adjustment limitations and
are generally indexed to the prime rate, the appropriate treasury constant
maturity rate, or the Federal Home Loan Bank advance rate. Future market factors
may affect the correlation of the interest rate adjustments with the rates the
Bank pays on short-term deposits and borrowings that have been primarily
utilized to fund these loans.
Under FIRREA, the Bank may not originate real estate loans to one
borrower in excess of 15% of its unimpaired capital except for loans that do not
exceed $500,000. This results in a dollar limitation of approximately $2,000,000
at March 31, 1993.
6. PREMISES AND EQUIPMENT, NET
Premises and equipment consists of the following:
March 31,
-------------------
1993 1992
---- ----
Land............................................... $ 1,056,425 $ 1,056,425
Buildings.......................................... 4,157,035 4,139,744
Leasehold improvements............................. 444,677 444,677
Furniture, fixtures and equipment.................. 4,809,687 4,773,456
----------- -----------
10,467,824 10,414,302
Less accumulated depreciation and amortization..... (6,527,613) (6,126,377)
----------- -----------
$ 3,940,211 $ 4,287,925
=========== ===========
Depreciation expense included in occupancy and office operations in the
consolidated statements of operations and retained earnings amounted to
$495,825, $676,939 and $782,209 for the years ended March 31, 1993, 1992 and
1991, respectively.
7. INVESTMENT IN REAL ESTATE VENTURE, NET
The Bank, through its subsidiary, has an investment in a real estate
venture engaged in the acquisition and development of real estate at March 31,
1993. The Bank's investment in such venture is as follows:
March 31,
------------------
1993 1992
---- ----
Capital contributions to real estate venture........ $1,443,500 $1,443,500
Equity in retained earnings (accumulated deficit)
of real estate venture............................. (945,119) (884,781)
Allowance for losses................................ (474,575) (334,575)
---------- ----------
$ 23,806 $ 224,144
========== ==========
E-41
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The Bank's equity in the income (loss) of the real estate venture,
which is included in other operating expenses in the consolidated statements of
income and retained earnings amounted to $(60,337) and $(125,444) and $(67,286)
for the years ended March 31, 1993, 1992 and 1991, respectively. Included in
loss on investment in real estate venture in the consolidated statements of
income and retained earnings for the years ended March 31, 1993, 1992 and 1991
are provisions for losses of $140,000, $334,575 and $96,000, respectively.
The ability of the Bank (and its service corporation) to recover the
carrying value of its investment in the real estate venture is based upon future
sales of the single family residences the joint venture is developing. The
ability to affect such sales is subject to market conditions and other factors,
all of which are beyond the Bank's control.
8. REAL ESTATE OWNED, NET
March 31,
------------------------------
1993 1992
---- ----
Acquired by foreclosure or deed
in lieu of foreclosure....................... $ 1,833,120 $ 2,039,016
Loans foreclosed in-substance................... 11,532,333 15,092,519
13,365,453 17,131,535
Less allowance for losses....................... (1,826,479) (1,927,080)
----------- -----------
$11,538,974 $15,204,455
=========== ===========
Activity in the allowance for losses for real estate owned was as follows:
March 31,
-----------------------------------------
1993 1992 1991
---- ---- ----
Balance, beginning of year.......... $1,927,080 $1,588,754 $ 24,121
Provision for losses................ 465,790 601,509 1,588,754
Charge-offs......................... (566,391) (263,183) (24,121)
---------- ---------- ----------
Balance, end of year................ $1,826,479 $1,927,080 $1,588,754
========== ========== ==========
Results of real estate operations were as follows:
<TABLE>
<CAPTION>
March 31,
------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Acquired by foreclosure or deed in lieu of foreclosure:
Net loss on sales of real estate.................... $ 55,334 $ 39,263 $ --
Holding costs....................................... 365,036 705,100 158,512
Provision charged to operations..................... 465,790 601,509 1,588,754
-------- ---------- ----------
Foreclosed real estate expense, net.................. $886,160 $1,345,872 $1,747,266
======== ========== ==========
</TABLE>
9. ACCRUED INTEREST RECEIVABLE, NET
Accrued interest receivable consists of the following:
March 31,
---------------------------
1993 1992
---- ----
Loans............................................ $2,720,095 $4,241,640
Investment securities............................ 305,876 395,293
Mortgage-backed securities....................... 1,531,531 1,538,655
---------- ----------
$4,557,502 $6,175,588
========== ==========
E-42
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
10. DEPOSITS
The weighted average cost of funds on deposit at March 31, 1993 and 1992
was 3.55% and 4.92%, respectively. A summary of deposits by typ of account is
as follows:
<TABLE>
<CAPTION>
March 31, 1993 March 31, 1992
----------------------------- --------------------------
Weighted Avg. Weighted Avg.
Amount Interest Rate Amount Interest Rate
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Passbook Savings........................... $106,078,461 3.05% $ 98,353,635 4.15%
Money Market Passbook...................... 54,555,647 3.05% 55,565,699 4.15%
Club Accounts.............................. 1,790,112 4.00% 2,028,446 4.00%
Non-Interest Bearing
Demand Accounts........................... 7,796,933 7,113,614
Super NOW Accounts......................... 70,889,233 3.40% 67,359,727 4.77%
Money Market NOW Accounts.................. 529,897 3.05% 499,426 4.15%
Certificates of deposit maturing:
One year or less.......................... 165,509,381 3.67% 174,286,970 5.34%
One to three years........................ 27,489,871 5.60% 46,418,709 7.19%
Three to five years....................... 4,761,078 7.78% 8,651,172 8.15%
Thereafter................................ 592,325 8.30% 592,571 7.69%
------------ -------------
Total certificates......................... 198,352,655 3.99% 229,949,422 5.57%
Accrued interest payable on savings
deposits.................................. 41,021 55,920
------------ ------------
$440,033,959 $460,925,889
============ ============
</TABLE>
At March 31, 1993, the Bank had approximately $26,410,000 of certificates
of deposit and other deposits of $100,000 or more.
11. BORROWED FUNDS
Borrowed funds at March 31, 1993 and 1992 which consist of advances
from the Federal Home Loan Bank of New York ("FHLBNY") are collateralized by
$60,571,375 and $55,702,900, respectively, of pledge mortgage-backed securities,
as well as stock in the Federal Home Loan Bank of New York. These advances had
interest rates payable ranging from 3.63% to 9.30% and 4.18% to 9.26%, at March
31, 1993 and 1992, respectively. The weighted average rate payable at such dates
was 7.64% and 8.23%, respectively. Such advances mature as follows:
March 31,
---------------------------
1993 1992
Maturity Amount Amount
------------------- ------- --------
One year or less.............................. $15,800,000 $15,800,000
One to two years.............................. 6,300,000 6,300,000
Two to three years............................ 6,300,000 6,300,000
Three to four years........................... 6,300,000 6,300,000
Four to five years............................ 2,391,666 6,300,000
Thereafter 8,000,000 2,391,666
----------- -----------
$45,091,666 $43,391,666
=========== ===========
At March 31, 1993, the Bank had available from the FHLBNY a line of
credit for $26,723,650 at an interest rate of 3.63% which expires October 30,
1993. At March 31, 1993, the Bank borrowed $9,500,000 from this credit line
which is included in the borrowed funds above.
E-43
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The following table sets forth the maximum month-end balance and average
balance of FHLBNY advances for the periods indicated:
March 31,
-----------------------------
1993 1992
Amount Amount
---------- -----------
Maximum balance:
FHLBNY advances........................... $55,216,666 $52,149,999
Average balance:
FHLBNY advances........................... 48,729,166 45,154,166
Weighted average interest
rate of FHLBNY advances................ 6.16% 7.50%
12. INCOME TAXES
The Bank qualifies as a thrift institution under the provisions of the
Internal Revenue Code and is therefore permitted to deduct from taxable income
an allowance for bad debts based on a percentage of taxable income before such
deduction less certain adjustments or actual loan loss write-offs. For tax years
beginning after December 31, 1986, the percentage is 8%. In the future, if the
Bank fails to meet the federal income tax requirements necessary to permit it to
deduct an allowance for bad debts, the Bank's effective federal income rate
could increase to the maximum rate prevailing under the law at that time.
Retained earnings at March 31, 1993 and 1992, includes approximately
$5,903,000 of such bad debt, for which federal income taxes have not been
provided. If such amount is used for purposes other than for bad debt losses,
including distributions in liquidation, it will be subject to federal income tax
at the then current rate.
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current provision:
Federal................................................ $1,416,117 $ 140,616 $ --
State.................................................. 223,384 87,487 34,854
Tax equivalent of the operating loss utilized.......... -- 1,233,283 --
---------- ---------- -------
1,639,501 1,461,386 34,854
---------- ---------- -------
Deferred income tax:
Federal ............................................... 849,594 -- --
State ................................................. 1,333 -- --
---------- ---------- -------
850,927 -- --
---------- ---------- -------
$2,490,428 $1,461,386 $34,854
========== ========== =======
</TABLE>
Deferred taxes arise from the recognition of certain items of revenue
and expense for tax purposes in years different from those in which they are
recognized in the financial statements. Deferred income taxes result from timing
differences primarily related to accelerated tax depreciation and the
recognition of loan fees and discounts on securities.
During 1992, the Bank utilized the remaining amount of its book and tax
net operating loss carryforward.
E-44
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
A reconciliation of the statutory Federal income tax rate to the effective
income tax rate follows:
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate...................... 34.0% 34.0% (34.0)%
Statutory Federal bad debt deduction................... 1.8 7.8 4.1
Amortization of goodwill............................... 3.9 13.1 24.7
Excise tax............................................. -- 5.5 --
Net amortization of discounts and premiums of
acquired association.................................. (.6) (2.6) (7.8)
State income tax....................................... (.1) (1.2) 1.8
Unrecognized benefit of net operating loss
carryforward to future years.......................... -- -- 13.9
Other.................................................. -- (.8) 13.9
----- ----- -----
Effective income tax rate.............................. 39.0% 55.8% 2.7%
===== ===== =====
</TABLE>
Savings and loan associations that meet certain definitional tests and
other conditions prescribed by the Internal Revenue Code are allowed to deduct,
within limitations, a bad debt deduction. This deduction can be computed as a
percentage of taxable income before such deduction or based upon actual loss
experience. For the years ended March 31, 1993, 1992 and 1991, the Bank employed
the actual loss experience method.
Prepaid income taxes, amounting to approximately $212,883 and
$88,000 at March 31, 1993 and 1992, respectively, are included in other
assets in the statements of consolidated financial condition.
13. EMPLOYEE BENEFIT PLAN
On August 19, 1991, the Board of Directors authorized the termination
of the Bank's non-contributory defined benefit plan which covered substantially
all full-time employees. The termination was effective December 31, 1991 and
participants in the plan became fully vested on that date. The Bank recorded a
pretax curtailment gain of $867,000 (net of $400,000 excise tax) which is
included in the statement of consolidated income and retained earnings, for the
year ended March 31, 1992.
In conjunction with the Bank's termination of the non-contributory
defined benefit plan, the Bank established a 401(k) Profit Sharing Plan (the
"Plan") covering all employees; whereby employees can invest up to 18% of their
earnings. The Bank will contribute 50% of each employee's contribution, not to
exceed 6% of their annual earnings. The Bank made matching contributions of
$40,148 and $18,676 in 1993 and 1992, respectively.
Additionally, the Bank, at the Board of Directors' discretion, will
make annual profit-sharing contributions to the Plan. Over the next six years,
the Bank intends to contribute $407,470 to the Plan. This amount represents 25%
of the defined benefit plan employer reversion amount to the 401(k) Profit
Sharing Plan. During 1993, the Bank contributed $109,844 to the Plan.
E-45
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The funded status of the pension plan and the amounts recognized in the
Bank's financial statements as of March 31, 1991 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $4,478,000 ............ $4,604,000
----------
Projected benefit obligation for service rendered to date .......................... $5,634,000
Plan assets at fair value, primarily a U.S. Treasury obligations
Money-Market Fund ................................................................ 6,615,000
----------
Plan assets in excess of projected benefit obligation ............................... (981,000)
Unrecognized gain (loss) from past experience different from that assumed ........... (1,000)
Unrecognized net asset at January 1, 1987 being recognized over 17 years ............ 249,000
----------
(Prepaid) accrued pension cost ...................................................... $ (733,000)
==========
Net periodic pension cost (benefit) recognized by the Bank for the year
ended March 31, 1991 is as follows:
Amortization of gain................................................................ $(1,055,000)
Service cost on benefits earned during the year..................................... 263,000
Interest cost on projected benefit obligation....................................... 437,000
Actual return on plan assets........................................................ (529,000)
Net amortization and deferral....................................................... (19,000)
-----------
Net periodic pension cost (benefit)................................................. $ (903,000)
===========
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation was 8% at 1991. The expected long-term rate
of return on assets was 8%.
During 1992 and 1991, the Bank made contributions to the pension plan
of $17,783 and $213,400, respectively.
14. COMMITMENTS AND CONTINGENCIES
Leases--Certain premises are leased under operating leases with
terms expiring through the year 2000, exclusive of renewal options. The
Bank has the option to renew or extend certain of the leases from two years
to twenty-five years beyond the original term. Some leases require the Bank
to pay for insurance, increases in property taxes and other incidental
costs. Future minimum rental payments due unde noncancellable operating
leases for years ending March 31 are as follows:
1994........................................ $157,667
1995........................................ 158,929
1996........................................ 156,437
1997........................................ 40,800
1998........................................ 10,800
Thereafter.................................. 7,350
-------
Total....................................... $531,983
=======
Net rental expense included in occupancy and office operations in
the statements of consolidated income and retained earnings amounted to
$176,000, $172,000 and $171,000 for the years ended March 31, 1993, 1992 and
1991, respectively.
Financial Instruments With Off-Balance-Sheet Risk--The Bank is a party
to financial instruments with off-balance-sheet risk in the normal course of
business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit.
These instruments involve, to varying degrees, elements of credit risk in
excess of the amount recognized in the consolidated statement of financial
condition.
E-46
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
these instruments. The Bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
1993 1992
---- ----
Financial instruments whose contract amounts
represent credit risk (contract or
notional amount):
Commitments to extend credit ...................... $1,756,000 $3,962,000
Standby letters of credit ......................... 779,000 2,455,000
Unused lines of credit............................. 1,404,000 1,234,000
Commitments to extend credit are legally binding agreements to lend to
a customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained by the Bank upon extension of credit is based on management's credit
evaluation of the borrower. Collateral held varies but may include mortgages on
commercial and residential real estate, deposit accounts with the Bank, and
automobiles.
Standby letters of credit are conditional commitments issued by the
Bank to assure the performance of financial obligations of a customer to a third
party. These commitments are primarily issued to support performance bonds in
favor of local municipalities and private obligations of customers for work
performed by third parties. Most of the Bank's standby letters of credit extend
for less than one year. The credit risk involved in issuing standby letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Bank obtains personal guarantees supporting these commitments.
Unused lines of credit are legally binding agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Lines of credit generally have fixed expiration dates or other
termination clauses. The amount of collateral obtained, if deemed necessary by
the Bank, is based on management's credit evaluation of the borrower.
15. BUSINESS COMBINATION
Goodwill resulting from the use of the purchase method of accounting
from acquisitions made prior to 1983, is being amortized to expense over a
period of twenty years using the straight-line method. The net discount arising
from the valuation of various mortgage assets is being accreted into income over
the estimated remaining life of the assets acquired, adjusted for prepayments
and subsequent mortgage asset sales, using the level yield method.
For the years ended March 31, 1993, 1992 and 1991, the effect of
amortization of goodwill was to reduce net income by approximately $942,000 each
of the years, and the effect of the accretion of the purchase accounting
discounts was to increase net income by approximately $148,000, $188,000, and
$188,000, respectively.
E-47
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Bank's financial
instruments at March 31, 1993 are as follows:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
-------- ----------
<S> <C> <C>
Financial assets:
Cash and amounts due from depository institutions....................... $ 5,212,000 $ 5,212,000
Federal funds sold...................................................... 6,100,000 6,100,000
Investment securities .................................................. 18,225,000 19,170,000
Mortgage-backed securities ............................................. 208,248,000 215,480,000
Mortgage-backed securities available for sale .......................... 7,517,000 7,871,000
----------- -----------
245,302,000 253,833,000
----------- -----------
Performing loans, less allowance for loan losses ....................... 226,999,000 231,654,000
Nonperforming loans, less allowance for loan losses .................... 3,930,000 4,118,000
----------- -----------
Total loans .......................................................... 230,929,000 235,772,000
----------- -----------
Federal Home Loan Bank of New York stock ............................... 4,493,000 4,493,000
Accrued interest receivable ............................................ 4,558,000 4,558,000
----------- -----------
Total financial assets .................................................. $485,282,000 $498,656,000
=========== ===========
Financial liabilities:
Deposits ............................................................... $440,034,000 $442,751,000
Advance payments by borrowers for taxes and insurance .................. 1,844,000 1,844,000
Accounts payable and other liabilities ................................. 1,946,000 1,946,000
Borrowed funds ......................................................... 45,092,000 49,032,000
----------- -----------
Total financial liabilities $488,916,000 $495,573,000
=========== ===========
Off-balance-sheet financial instruments:
Commitments to extend credit ........................................... $ 1,756,000 $ 1,756,000
Standby letters of credit............................................... 779,000 779,000
Unused lines of credit ................................................. 1,404,000 1,404,000
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate fair value:
Cash and Amounts Due from Depository Institutions and Federal Funds
Sold--For these short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Investment, Mortgage-Backed Securities and Mortgage-Backed Securities
Available for Sale--For investment, mortgage-backed securities and
mortgage-backed securities available for sale, fair values are based on
quoted market prices.
Loans--Fair values are estimated for portfolios of loans with similar
financial characteristics. The total loan portfolio is first divided into
performing and nonperforming categories. Performing loans are then segregated
into adjustable and fixed rate interest terms. Fixed rate loans are segmented by
type, such as construction and land development, other loans secured by real
estate, commercial and industrial loans, and loans to individuals. Certain
types, such as commercial loans and loans to individuals, are further segmented
by maturity and type of collateral.
For adjustable rate performing loans, the carrying amount less a credit
risk adjustment based on internal loan classifications is a reasonable estimate
of fair value. For fixed rate performing loans, fair value is calculated by
discounting scheduled future cash flows through estimated maturity using a
discount rate equivalent to the rate at which the Bank would currently make
loans which are similar with regard to collateral, maturity, and the type of
E-48
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
borrower. The discounted value of the cash flows is reduced by a credit risk
adjustment based on internal loan classifications. Based on the current
composition of the Bank's loan portfolio, as well as both past experience and
current economic conditions and trends, future prepayments are not expected to
materially impact scheduled future maturities and accordingly have not been
considered in calculating fair value.
For nonperforming loans, fair value is calculated by first reducing the
carrying value by a credit risk adjustment based on internal loan
classifications, and then discounting the estimated future cash flows from the
remaining carrying value at the rate at which the Bank would currently make
similar loans to credit worthy borrowers.
Federal Home Loan Bank of New York Stock--The carrying amount of the
Federal Home Loan Bank of New York Stock is equal to its fair value.
Deposit Liabilities--The fair value of deposits with no stated
maturity, such as noninterest-bearing demand deposits, money market accounts,
interest checking accounts, and savings accounts is equal to the amount payable
on demand as of March 31, 1993. Time deposits are segregated by type, size, and
remaining maturity. The fair value of time deposits is based on the discounted
value of contractual cash flows. The discount rate is equivalent to the rate
currently offered by the Bank for deposits of similar size, type, and maturity.
Borrowed Funds--The fair value of the Bank's borrowed funds is estimated
based on the discounted value of future contractual payments. The discount rate
is equivalent to the estimated rate at which the Bank could currently obtain
similar financing.
Accrued Interest Receivable, Advance Payments by Borrowers for Taxes
and Insurance, and Accounts Payable and Other Liabilities--For these short-term
instruments, the carrying amount is a reasonable estimate of fair value.
Commitments to Extend Credit, Standby Letters of Credit, and Unused
Lines of Credit--The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of the
counterparties. For fixed-rate rate loan commitments, fair value also considers
the difference between current levels of interest rates of the committed rates.
The fair value of letters of credit and lines of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
them or otherwise settle the obligations with the counterparties at the
reporting date.
17. REGULATORY CAPITAL REQUIREMENTS
The Bank is required to maintain certain levels of capital in
accordance with the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 (FIRREA) and Office of Thrift Supervision (OTS) regulations. Savings
associations must maintain tangible capital of 1.5% of tangible assets. Tangible
capital, as defined by FIRREA and the OTS regulations, consists generally of
retained income less most intangible assets including supervisory goodwill. The
OTS requires that savings associations maintain core capital of 3% of adjusted
tangible assets. Core capital consists of tangible capital plus certain
intangible assets such as certain qualifying supervisory goodwill which meets
the requirements of FIRREA. The amount of such qualifying supervisory goodwill
includable in core capital is limited to one-half of core capital and declines
each year through December 31, 1994, when supervisory goodwill may no longer be
included in core capital.
On April 22, 1991, the OTS issued a notice of proposed rulemaking
establishing a new minimum leverage ratio of 3% for savings associations without
any supervisory, financial, or operational deficiencies, that is, associations
receiving a composite rating of one on their regulatory examinations under the
OTS MACRO system. Leverage ratio is defined as the ratio of core capital to
adjusted total assets. Higher leverage ratios, generally 100 to 200 basis points
higher, will be required for all other associations, as warranted by particular
circumstances or risk profiles. Thus, for all but the most highly rated
institutions meeting the conditions set forth in the notice, the minimum
leverage ratio is 3% plus an additional amount of core capital, determined on a
case-by-case basis. In all cases, savings institutions will be required to hold
capital commensurate with the quality of risk management systems and the level
of overall risk in
E-49
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
each individual savings association through the supervisory
process on a case-by-case basis. Savings associations that no longer pass the
minimum capital standards because of the new core capital leverage ratio
requirement will be required to submit capital plans that detail the steps they
will take to reach compliance. These capital plans will be due within 60 days of
the effective date of the rule. Had these regulations been adopted at March 31,
1993, the Bank would not have met the minimum leverage ratio. Additionally,
under the prompt corrective action rule which was issued by the federal banking
agencies on September 29, 1992 and which became final on December 19, 1992, an
institution must have a leverage ratio of 4% or greater in order to be
considered adequately capitalized. The Bank did not meet the 4% leverage ratio
and therefore fell within the undercapitalized category for purposes of
determining the scope and severity of corrective actions that regulators must
take. Management is currently operating under a capital plan which provides for
achieving the 4% leverage ratio through earnings.
There is also a risk-based capital requirement of 8% of risk-weighted
assets for savings associations which is to be phased in over three years
according to a schedule that follows the Office of Comptroller of the Currency's
schedule. Such thrifts were required to meet 80% of the requirement, or 6.4% on
December 31, 1989, 90% on December 31, 1990, and 100% on January 1, 1993. The
OTS risk-based capital component does not include an interest rate risk
component which, under previously proposed FHLBB regulations, would have been
approximately 20% of risk-weighted assets. Therefore, the risk-based capital
component has been increased from 6% to 8% until the OTS finalizes the interest
rate risk portion of the regulations. In December 1990, the OTS proposed its
interest rate risk component. This proposal would require savings associations
to hold capital as a safeguard against interest rate exposure in an amount equal
to 50% of the decline in the market value of portfolio equity that would result
from an immediate parallel shift in the term structure of interest rates of plus
or minus 200 basis points. Management believes that the Bank will meet the
requirements concerning the interest rate risk component, if adopted as
proposed.
Associations which failed to meet any of the three capital standards on
December 7, 1989, are subject to certain restrictions which include growth
restrictions and a limitation on capital distributions. These thrifts were also
required to develop and submit to the OTS by January 8, 1990, acceptable capital
restoration plans which demonstrate the strategies to be utilized to meet the
capital standards. At December 7, 1989, the Bank did not meet the capital
standards set for in FIRREA and the OTS regulations implementing the FIRREA
capital standards. As a result, the Bank was required to submit a capital plan
to the OTS which included provisions requiring the Bank to meet the minimum
capital requirements prescribed by the OTS. Currently, the Bank is in compliance
with these requirements.
At periodic intervals, the OTS routinely examines the Bank's financial
statements as part of their legally prescribed oversight of the thrift industry.
Based upon these examinations, the regulators can direct that the Bank's
financial statements be adjusted in accordance with their findings.
At March 31, 1993, the Bank had the following capital ratios:
Tangible capital to adjusted total assets .............. 2.5%
Core capital to adjusted total assets .................. 3.3%
Total capital to risk-weighted assets .................. 9.4%
18. INTEREST RATE RISK
At March 31, 1993, the Bank had average interest earning assets of
approximately $475 million having a weighted average effective yield of 8.43%
and a duration of 2.38 years and average interest bearing liabilities of
approximately $487 million having a weighted average effective interest rate of
4.49% and a duration of 1.79 years. Because the interest-sensitive liabilities
reprice sooner on average than do the Bank's interest earning assets, the Bank
is exposed to interest rate risk in a rising rate environment. Such risk occurs
in a rising rate environment because liabilities will be repricing faster at
higher interest rates, thereby reducing the market value of long-term assets and
net interest income. Net interest income will fluctuate based on changes in
interest rates and changes in the levels of interest sensitive assets and
liabilities.
E-50
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
19. LOANS TO RELATED PARTIES
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with directors, executive
officers and their affiliates on the same terms as those prevailing for
comparable transactions with other borrowers. These loans amounted to $230,103
and $235,182 at March 31, 1993 and 1992, respectively, and do not involve more
than normal risks of repayment. At March 31, 1993 and 1992 these loans represent
1% of retained earnings. During 1993, no new loans were made to related parties
and repayments were $5,079.
20. RECENTLY ISSUED ACCOUNTING STANDARDS
In May 1993, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standard No. 114 "Accounting by
Creditors for Impairment of a Loan" ("SFAS 114"). SFAS 114 establishes criteria
for accounting for loans that have been impaired. It requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. The Bank has not fully evaluated the effect of SFAS 114 on its
financial statements. SFAS 114 is effective for fiscal years beginning after
December 15, 1994.
In May 1993, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standard No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115
establishes accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. The impact on the Bank of implementing SFAS 115 will not be material
to the financial statements. SFAS 115 is effective for fiscal years beginning
after December 15, 1993.
21. SUBSEQUENT EVENT
Effective May 21, 1993, the Bank entered into an Agreement and Plan of
Reorganization with HUBCO Inc. Under this plan, the Bank will convert from a
State Mutual Savings and Loan Association to a State Chartered Stock Savings
Association, and then convert into a State Chartered Commercial Bank. At such
time the Bank will be merged into HUBCO through an offering to qualified bank
depositors. This plan is subject to the approval of the OTS and the State of New
Jersey Banking Commissioner.
22. RESTATEMENT
In its previously issued financial statements as of and for the years
ended, March 31, 1993 and 1992 the Bank erroneously recognized certain
extraordinary credits related to the utilization of net operating loss
carryforwards whose realization was uncertain. The accompanying 1993 and 1992
financial statements have been restated to reflect the reduction of these
extraordinary credits. The principal effects of this restatement are as follow:
<TABLE>
<CAPTION>
1993 1992
------------------------- ---------------------------
As Previously As Previously
stated As Restated Stated As Restated
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accounts Payable and Other Liabilities ............... $ 1,946,039 $ 2,603,039 $ 1,562,263 $ 1,695,980
Retained Earnings-substantially restricted ........... 28,968,590 28,311,590 23,358,521 23,224,804
Income (loss) before extraordinary credit ............ 7,637,214 7,577,214
Extraordinary Credit.................................. 463,283 -- 1,367,000 1,233,283
Net Income 5,610,069 5,086,786 2,367,661 2,233,944
</TABLE>
E-51
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
23. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. General--The accompanying interim consolidated statement of
financial condition and the comparative interim consolidated statements of
operations and retained earnings and statements of cash flows are condensed. The
statements do not contain all of the information and footnotes required by
generally accepted accounting principles to be included in a full set of
financial statements, and have not been independently audited.
Such interim consolidated financial statements are unaudited but
include all adjustments which consist solely of normal recurring accruals and
the effect of the adoption of Statement of Financial Accounting Standard No. 109
"Accounting for Income Taxes" discussed in note D below, which are, in the
opinion of management, considered necessary for a fair presentation of the
financial condition and results of operations for the interim periods. The
interim results of operations presented in this report may not necessarily be
indicative of the consolidated results for the full year. The accompanying
financial statements should be read in conjunction with the Bank's annual
financial statements included elsewhere herein.
B. Allowance for Loan Losses--An analysis of the allowance for loan
losses follows:
For the Nine Months
Ended December 31,
----------------------
1993 1992
---- ----
Balance, beginning of period ....... $1,366,001 $1,841,404
Provision for loan losses .......... 359,841 181,818
Charge-offs ........................ (686,011) (497,490)
Recoveries ......................... 54,629 45,580
--------- ---------
Balance, end of period ............. $1,094,460 $1,571,312
========= =========
C. Nonperforming Loans--Loans three or more months in arrears or in the
process of foreclosure were: Conventional first mortgage loans--$1,605,374 and
$2,938,401; FHA insured and VA guaranteed--$755,942 and $607,005; consumer
loans--$359,473 and $549,090; and construction loans $0 and $248,253 at December
31, 1993 and 1992, respectively.
The amount of non-accruing loans at December 31, 1993 and 1992 was
$1,759,811 and $3,318,846, respectively, which represents .93% and 1.37%,
respectively, of total loans outstanding. The total interest income that would
have been recorded for the nine months ended December 31, 1993 and 1992, had
these loans been current in accordance with their original terms, or since the
date of origination if outstanding for only part of the year, was approximately
$100,893 and $216,007, respectively.
D. Income Taxes--Effective April 1, 1993, the Bank adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires a change from the "deferred method" to the "liability
method" of accounting for income taxes. The cumulative effect of adopting SFAS
109 on years prior to 1993 aggregated to an increase in net income of $668,841
due to the accelerated recognition of the deferred tax assets, net of a
valuation allowance. Financial statements for periods prior to April 1, 1993
have not been restated.
The provision for income taxes is based on pre-tax income which differs
in some respects from taxable income. In years prior to 1993, when income and
expenses were recognized in different periods for financial reporting purposes
than for income tax reporting purposes, deferred taxes were provided on timing
differences at the effective tax rate and the resulting deferred tax asset or
liability was not adjusted for subsequent changes in the tax rate. Beginning
April 1, 1993, all cumulative temporary differences, as defined by SFAS 109,
are tax effected using the current tax rate.
E-52
<PAGE>
<PAGE>
STATEWIDE SAVINGS BANK, S.L.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years Ended March 31, 1993, 1992 and 1991 and (Unaudited) The Nine Months
Ended December 31, 1993 and 1992
The tax effects of significant items comprising the net deferred tax
asset as of April 1, 1993 were as follows:
Temporary differences
Allowance for loan losses ............................. $539,700
Allowance for losses on Joint Venture ................. 332,084
Purchase accounting discount on mortgage loans ........ 220,708
Deferred loan fees..................................... 224,314
Accelerated depreciation .............................. (148,861)
Discount on dollar rolls .............................. (224,834)
Other ................................................. (11,379)
-------
931,732
Valuation allowance ................................... 381,732
-------
Net deferred tax asset ................................ $550,000
=======
The net deferred tax asset is included in other assets on the
consolidated balance sheet. The Bank expects that it will generate future
taxable income sufficient to enable the bank to realize these tax benefits;
however, there can be no assurance that the Bank will generate any earnings or
any specific level of continuing earnings. The valuation allowance relating to
the net deferred tax asset primarily relates to a capital loss incurred by the
Bank. Since capital losses are only deductible from capital gains and since it
was very unlikely that the Bank would generate sufficient capital gains to
provide for the use of the tax benefit related to the capital loss, the Bank
concluded that it was more likely than not that the related tax asset would not
be recognized and established a valuation allowance in accordance with SFAS 109.
The Bank in determining the adequacy of the valuation allowance took into
consideration the current results of operations, adequacy of the loan loss less
allowance and capital.
E. Subsequent Event--Statewide had a participation interest in a $159
million acquisition, development and construction loan. The property securing
the loan, located in Jersey City, New Jersey, is being managed and marketed for
sale by the R.T.C. The sale of the property was approved by the former
participants in January 1994. No contract has been executed at this time, but
the letter of intent provides for payments to be made to former participants
over a protracted build-out period estimated to be five to eight years. Due to
the uncertainty of receiving any proceeds, in March 1994 Statewide decided to
charge off its insubstance foreclosure balance relating to this former
participation. The March 1994 charge off, net of taxes, amounted to $365,000.
E-53
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Certificate of Incorporation and By-laws; New Jersey Law
(i) Limitation of Liability of Directors and Officers. Section
14A:2-7(3) of the New Jersey Business Corporation Act permits a corporation to
provide in its Certificate of Incorporation that a director or officer shall not
be personally liable to the corporation or its shareholders 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 any breach of duty
based upon an act or omission (a) in breach of such persons' duty of loyalty to
the corporation or its shareholders,(b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of any improper
personal benefit. HUBCO's Certificate of Incorporation includes limitations on
the liability of officers and directors to the fullest extent permitted by New
Jersey law.
(ii) Indemnification of Directors, Officers, Employees and Agents.
Under Article X of its Certificate of Incorporation, HUBCO must, to the fullest
extent permitted by law, indemnify its directors, officers, employees and
agents. Section 14A:3-5 of the New Jersey Business Corporation Act provides that
a corporation may indemnify its directors, officers, employees and agents
against judgments, fines, penalties, amounts paid in settlement and expenses,
including attorney's fees, resulting from various types of legal actions or
proceedings if the actions of the party being indemnified meet the standards of
conduct specified therein. Determinations concerning whether or not the
applicable standard of conduct has been met can be made by (a) a disinterested
majority of the Board of Directors, (b) independent legal counsel, or (c) an
affirmative vote of a majority of shares held by the shareholders. No
indemnification is permitted to be made to or on behalf of a corporate director,
officer, employee or agent if a judgment or other final adjudication adverse to
such person establishes that his acts or omissions (a) were in breach of his
duty of loyalty to the corporation or its shareholders, (b) were not in good
faith or involved a knowing violation of law or (c) resulted in receipt by such
person of an improper personal benefit.
(iii) Insurance. HUBCO's directors and officers are insured against
losses arising from any claim against them such as wrongful acts or omissions,
subject to certain limitations.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
2.1 Agreement and Plan of Merger, dated November 8, 1993, among the
Registrant, Hudson United Bank, Washington Bancorp, Inc. and Washington
Savings Bank, is hereby incorporated by reference from the Registrant's
Current Report on Form 8-K dated November 8, 1993.
2.2* Amendment to Agreement and Plan of Merger dated April, 1994, among the
Registrant, Hudson United Bank, Washington Bancorp., Inc. and
Washington Savings Bank.
2.3 Amended and Restated Agreement and Plan of Reorganization, dated as of
November 23, 1993, between Statewide Savings Bank, S.L.A., the
Registrant and Hudson United Bank as amended by Amendment No. 1 to
Amended and Restated Agreement and Plan of Reorganization, dated as of
February 25, 1994, is hereby incorporated by reference from Registrants
Registration Statement (No. 33-72330) on Form S-3.
2.4* Amendment Number 2 to Amended and Restated Agreement and Plan of
Organization, among Statewide Savings Bank, Registrant and Hudson
United Bank, dated April , 1994.
3.1 The Registrant's Certificate of Incorporation, as amended, is
hereby incorporated by reference from Exhibit 4(b) to the Registrant's
Registration Statement on Form S-3 (No. 33-72330) filed with the
Commission on December 2, 1993.
3.2 The Registrant's By-laws, as amended, are hereby incorporated by
reference from Registrant's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1991.
4.1 Form of Certificate of Amendment of the Certificate of Incorporation
of the Registrant creating the HUBCO Preferred Stock is provided
as Exhibit 2.1 to the Agreement and Plan of Merger which is provided as
Appendix A.
II-1
<PAGE>
<PAGE>
5.1 Opinion (regarding the legality of the securities being issued) of
Clapp & Eisenberg, P.C.
8.1 Opinion (regarding tax matters) of Clapp & Eisenberg, P.C.
10.1 Stock Option Agreement between the Registrant and Washington Bancorp,
Inc. dated November 8, 1993 is provided as Appendix B
12.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements.
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements (Pro Forma).
21.1 Subsidiaries of the Registrant, is hereby incorporated by reference
from Exhibit 22 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.
23.1 Consent of Coopers & Lybrand.
23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Deloitte & Touche & Co.
23.4 Consent of Clapp & Eisenberg, P.C. (included in Exhibits 5.1 and 8.1).
23.5 Consent of Capital Consultants of Princeton, Inc.
99.1* Form of proxy card to be utilized by the Board of Directors of
Washington Bancorp, Inc.
99.2* Form of Preference Statement.
99.3* Stock Option Preference Form.
- ----------
* To be filed by amendment.
(b) Financial Schedules
All schedules have been omitted because they are not applicable or the
required information is included in the financial statements or notes thereto or
incorporated by reference herein.
Item 22. Undertakings
1. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
2. The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
3. The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph 1 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Securities and Exchange Commission Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
<PAGE>
4. Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to officer,
directors and controlling persons of the Registrant pursuant to the provisions
of Item 20, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by an officer, director
or controlling person in the successful defense of any action, suit or
proceeding) is asserted by such officer, director or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4 and has duly caused this registration
statement with respect to the Series A Preferred Stock of the Company to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Union City, State of New Jersey, on the 21st day of April, 1994.
HUBCO, INC.
By /s/ Kenneth T. Neilson
-----------------------------
Kenneth T. Neilson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
------------- ----------- -------
<S> <C> <C>
/s/ James E. Schierloh Chairman of the Board and Director April 21, 1994
- ----------------------------------
(James E. Schierloh)
/s/ Kenneth T. Neilson President and Director April 21, 1994
- ---------------------------------- (Chief Executive Officer)
(Kenneth T. Neilson)
/s/ Robert J. Burke Director April 21, 1994
- ----------------------------------
(Robert J. Burke)
/s/ Henry G. Hugelheim Director April 21, 1994
- ----------------------------------
(Henry G. Hugelheim)
Director , 1994
- ----------------------------------
(Harry J. Leber)
/s/ Charles F.X. Poggi Director April 21, 1994
- ----------------------------------
(Charles F.X. Poggi)
/s/ Sister Grace Frances Strauber Director April 21, 1994
- ----------------------------------
(Sister Grace Frances Strauber)
/s/ Edwin Wachtel Director April 21, 1994
- ----------------------------------
(Edwin Wachtel)
/s/ Christina L. Maier Assistant Treasurer April 21, 1994
- ---------------------------------- Principal Financial Officer and
(Christina L. Maier) Principal Accounting Officer
</TABLE>
II-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Sequentially
Numbered
Exhibits Description Page
<S> <C>
2.1 Agreement and Plan of Merger, dated November 8, 1993, among the
Registrant, Hudson United Bank, Washington Bancorp, Inc. and Washington
Savings Bank, is hereby incorporated by reference from the Registrant's
Current Report on Form 8-K dated November 8, 1993.
2.2* Amendment to Agreement and Plan of Merger dated April , 1994, among the
Registrant, Hudson United Bank, Washington Bancorp., Inc. and Washington
Savings Bank.
2.3 Amended and Restated Agreement and Plan of Reorganization, dated as of
November 23, 1993, between Statewide Savings Bank, S.L.A., the Registrant
and Hudson United Bank as amended by Amendment No. 1 to Amended and
Restated Agreement and Plan of Reorganization, dated as of February 25,
1994, is hereby incorporated by reference from Registrants Registration
Statement (No. 33-72330) on Form S-3.
2.4* Amendment Number 2 to Amended and Restated Agreement and Plan of
Reorganization, among Registrant, Statewide Savings Bank, SLA and Hudson
United Bank, dated April , 1994.
3.1 The Registrant's Certificate of Incorporation, as amended, is hereby
incorporated by reference from Exhibit 4(b) to the Registrant's
Registration Statement on Form S-3 (No. 33-72330) filed with the
Commission on December 2, 1993.
3.2 The Registrant's By-laws, as amended, are hereby incorporated by reference
from Registrant's Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 1991.
4.1 Form of Certificate of Amendment of the Certificate of Incorporation of
the Registrant creating the HUBCO Preferred Stock is provided as Exhibit
2.1 to the Agreement and Plan of Merger which is provided as Appendix A.
5.1 Opinion (regarding the legality of the securities being issued) of Clapp &
Eisenberg, P.C.
8.1 Opinion (regarding tax matters) of Clapp & Eisenberg, P.C.
10.1 Stock Option Agreement between the Registrant and Washington Bancorp, Inc.
dated November 8, 1993 is provided as Appendix B.
12.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements.
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividend Requirements (Pro Forma).
21.1 Subsidiaries of the Registrant, is hereby incorporated by reference from
Exhibit 22 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993.
23.1 Consent of Coopers & Lybrand.
23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Deloitte & Touche & Co.
23.4 Consent of Clapp & Eisenberg, P.C. (included in Exhibits 5.1 and 8.1).
23.5 Consent of Capital Consultants of Princeton, Inc.
99.1* Form of proxy card to be utilized by the Board of Directors of Washington
Bancorp, Inc.
99.2* Form of Preference Statement.
99.3* Stock Option Preference Form.
- ------------
<FN>
* To be filed by amendment.
</FN>
</TABLE>
EXHIBIT 4.1
HUBCO, INC. RESOLUTIONS TO BE ADOPTED
BY BOARD OF DIRECTORS AT
MEETING TO BE HELD ON , 1994
RESOLVED, a series of Cumulative Convertible Preferred Stock
designated "Series A Preferred Stock" be hereby established by
amending the Certificate of Incorporation to add Section C to
Article V as follows:
ARTICLE V
SECTION C-SERIES A PREFERRED STOCK
(C) The Series A Preferred Stock, shall have a stated value
of $24.00 per share, and the shares therefore, when issued for such
amount, shall be fully paid and non-assessable. The Series A
Preferred Stock shall consist of [ ] shares, which number
may be increased (but only in connection with a stock split or
stock dividend) or decreased from time to time (but not below the
number thereof then outstanding) by the Board of Directors. Upon
the reacquisition of any of the Series A Preferred Stock, through
redemption, conversion or otherwise, such reacquired Shares shall
be canceled and shall become part of the authorized and unissued
Preferred Stock, but shall not be authorized and unissued Series A
Preferred Stock. The rights, preferences and limitations of the
Series A Preferred Stock are as follows:
(a) Rank. The Series A Preferred Stock shall be senior
to any other class or series of Preferred Stock in respect of (1)
payment of dividends, (2) payment upon dissolution, liquidation or
winding up and (3) redemption.
(b) Dividends. The holders of Series A Preferred Stock,
in preference to the holders of the Common Stock and any other
class or series of Preferred Stock, shall be entitled to receive,
when as, and if declared by the Board of Directors, out of funds
legally available therefor, cumulative cash dividends at the annual
rate per share as specified below, and no more, payable in quarter-
annual installments on the 15th day of February, May, August and
November in each year, from the date of issuance. The annual
dividend rate shall be set on [Insert date which is two days prior
to the Closing Date, as defined in the Agreement and Plan of
Merger] and on each anniversary thereof (each a "Reset Date"),
based upon the Average Market Price of the Common Stock of the
Company in the twenty (20) consecutive business days ending two
days immediately preceding the Reset Date. Market Price shall be
determined in accordance with subparagraph (e)(iii). The annual
dividend rate shall be set as follows:
<PAGE>
<PAGE>
Average Market Price Annual Dividend Rate For
of Common Stock Series A Preferred Stock
-------------------- ------------------------
$24.00 or more $1.00
$23.00 to $23.99 $1.10
$22.00 to $22.99 $1.20
$21.00 to $21.99 $1.32
$20.00 to $20.99 $1.44
$19.00 to $19.99 $1.56
Less than $19.00 $1.68
The Average Market Price of the Common Stock listed in the
table shall be adjusted appropriately each time the Conversion
Ratio is required to be adjusted under subparagraph (e)(iv) and in
the same proportion as the Conversion Ratio is adjusted. Without
limiting the foregoing, the Average Market Price of the Common
Stock listed in the chart shall be reduced to reflect stock splits
and stock dividends effected with respect to the Common Stock. The
Corporation shall notify by regular mail the holders of record of
the Series A Preferred Stock of the new dividend rate each time the
rate is reset. When the dividend rate is reset and each time the
Average Market Price of the Common Stock is required to be adjusted
due to a change in the Conversion Ratio, the Corporation shall
promptly file with the Transfer Agent for the Series A Preferred
Stock a statement signed by the Chairman of the Board, President or
Vice President of the Corporation and by its Treasurer or its
Secretary showing in detail the facts requiring such an adjustment
and shall exhibit the Statement to any holder of Series A Preferred
Stock desiring to inspect the Statement. For the purpose of this
paragraph (b), if the dividend rate changes in a quarter-annual
installment period, the amount paid in such installment period
shall be determined assuming that dividends accrue daily and that
the new rate was effective on and after the Reset Date. If the
dividends on the Series A Preferred Stock for any quarter-annual
dividend period shall not have been paid or declared for payment to
the holders of Series A Preferred Stock by the last day of such
quarter annual dividend period, the aggregate deficiency shall be
cumulative and shall be fully paid or declared and set apart for
payment before any cash dividends or other distribution shall be
paid or set apart for payment to the holders of the Common Stock or
any other class or series of Preferred Stock of the Corporation.
Accumulations of dividends on the Series A Preferred Stock shall
not bear interest.
(c) Liquidation Preference. Upon the voluntary or
involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation, the holders of Series A Preferred Stock shall
be entitled to receive out of the assets of the Corporation $24.00
per share, together with cumulative dividends accrued and unpaid to
the date of payment of such $24.00 distribution preference, and no
more, before any amount shall be paid to, or distributed among the
holders of Common Stock or any other class or series of Preferred
-2-
<PAGE>
<PAGE>
Stock. For the purpose of this paragraph (c), dividends shall be
deemed to accrue on a daily basis. The merger or consolidation of
the Corporation into or with any other corporation, or the merger
of any other corporation into the Corporation, or the sale, lease
or conveyance of all or substantially all of the property or
business of the Corporation, shall not be deemed to be a
dissolution, liquidation or winding up for purposes of this
paragraph (c).
(d) Redemption.
(i) Option to Redeem. The Corporation shall not
redeem any other class or series of Preferred Stock unless and
until all shares of the Series A Preferred Stock have been
redeemed. Outstanding shares of Series A Preferred Stock may be
redeemed, as a whole (or in part but only with the consent of the
holder of the Shares to be redeemed) at the option of the
Corporation by vote of its Board of Directors at any time from and
after the date on which the market price (as defined in
subparagraph (e)(iii)) for the Corporation's Common Stock is $24.00
or more for 20 consecutive business days. If less than all the
outstanding shares of the Series A Preferred Stock are to be
redeemed, the shares to be redeemed shall be determined in such
manner as the Board of Directors may prescribe. The redemption
price for shares of the Series A Preferred Stock shall be $24.00
per share, plus all accrued and unpaid dividends through the date
fixed for redemption. For the purpose of this paragraph (d),
dividends shall be deemed to accrue on a daily basis.
(ii) Notice. Written notice of redemption shall be
given to each holder of record of the shares of Series A Preferred
Stock to be redeemed, by mailing a notice of redemption to such
holder by first class mail, at such holder's address as it shall
appear on the stock books of the Corporation, in each case at least
15 days and not more than 45 days prior to the date fixed for
redemption; provided however, if fewer than 25 days prior notice is
given to holders, then at least one follow-up written notice must
be sent to holders who have not converted by 7 days prior to the
redemption date. Each such notice shall specify the shares of
stock to be redeemed, the redemption price, the date fixed for
redemption, the place for payment of the redemption price and for
surrender of the certificate or certificates representing the
shares to be redeemed, and if less than the total number of shares
held by such holder are to be redeemed, the number of shares of
such holder to be redeemed. No defect in such notice nor any
defect in the mailing thereof shall in and of itself affect the
validity of the proceedings for redemption, except as to any holder
to whom the corporation has failed to mail such notice, or as to
whom the notice was defective.
(iii) Deposit of Redemption Funds. If notice of
redemption shall have been given as herein provided and if, on or
-3-
<PAGE>
<PAGE>
before the date fixed for redemption, the redemption price shall
have been provided and set aside by the Corporation with a bank
with trust powers for the pro rata benefit of the holders of the
shares so called for redemption, then, from and after the date
fixed for redemption, the shares of Series A Preferred Stock called
for redemption shall no longer be deemed outstanding, the dividends
thereon shall cease to accumulate, and all rights with respect to
such shares shall forthwith cease. The only right of the holders
of the redeemed shares after such date shall be the right to
receive the redemption price for the shares called for redemption,
without interest. If the Board of Directors designates a bank with
trust powers as a depository of the funds to be used for redemption
and as agent of the Corporation for the giving of the notices of
redemption, the receipt of the shares and the payment of the
redemption price, the acts of such designated agent on behalf of
the Corporation shall have the same effect as if all such acts were
done by the Corporation.
Any monies deposited by the Corporation with such
designated bank which shall not be required for the redemption of
shares because of the conversion of such shares subsequent to the
date of deposit, shall be promptly repaid to the Corporation. Any
other monies so deposited by the Corporation with a designated bank
and unclaimed at the end of one year from the date fixed for
redemption shall be repaid to the Corporation upon its request,
after which the holders of the shares called for redemption shall
look only to the Corporation for payment of the redemption price.
The Corporation may use one of its subsidiary banks with
trust powers as the depository and agent for such redemption.
(iv) No Sinking Fund. The Corporation shall not be
obligated to make payments into or to maintain any sinking fund for
the Series A Preferred Stock.
(e) Conversion.
(i) Conversion Privilege. The holder of any shares
of Series A Preferred Stock at any time prior to the date fixed for
redemption as provided in paragraph (d), shall have the right to
surrender the certificates evidencing such shares and receive, in
conversion of each share of Series A Preferred Stock, one share
(the "Conversion Ratio") of the Common Stock, no par value of the
Corporation.
(ii) Manner of Exercising Conversion Privilege.
The conversion privilege may be exercised at any time including
from and after the date on which a notice of redemption was given
and prior to the close of business on the last day before the date
of redemption stated in the notice. To exercise the conversion
privilege, the holder of Series A Preferred Stock shall surrender
the certificates representing the shares to be converted at the
-4-
<PAGE>
<PAGE>
office of the Transfer Agent of the Corporation and shall give
written notice to the Corporation at such office that the holder
elects to convert such shares. Such certificates shall be duly
endorsed or assigned to the Corporation, or in blank. Conversion
shall be deemed to have been effected immediately prior to the
close of business on the date upon which such surrender is made,
and such date is referred to in this paragraph (e) as the
"Conversion Date." On the Conversion Date or as promptly
thereafter as practicable, the Corporation shall deliver to the
holder of the stock surrendered for conversion, or as otherwise
directed by him in writing, a certificate for the number of full
shares of Common Stock deliverable upon conversion of such Series A
Preferred Stock and, if applicable, a check in respect to any
fraction of a share as provided in subparagraph (e) (iii).
(iii) Cash Adjustment for Fractional Share Upon
Conversion. The Corporation shall not deliver fractional shares of
Common Stock upon conversion of shares of Series A Preferred Stock.
In lieu of any fractional share of Common Stock that would
otherwise be deliverable upon conversion, the Corporation shall pay
an amount in cash equal to the current market value of the
fractional share, computed on the basis of the market price on the
last business day before the Conversion Date. For purposes of this
section, the "market price" on any business day shall be the
closing price per share of Common Stock in the NASDAQ National
Market System or, if the shares of Common Stock are listed or
admitted to trading on any national securities exchange, the
reported closing price per share of Common Stock on such exchange
on such day.
(iv) Adjustment of Conversion Ratio. The
Conversion Ratio of the Series A Preferred Stock shall be adjusted
from time to time as follows:
(A) If at any time while any of the Series A Preferred
Stock is outstanding the Corporation shall (i) pay a
dividend on its Common Stock in shares of its
capital stock, including Common Stock and Preferred
Stock, (ii) subdivide its outstanding shares of
Common Stock into a greater number of shares, (iii)
combine the outstanding shares of Common Stock into
a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any
shares of stock of the Corporation, the Conversion
Ratio in effect immediately prior thereto shall be
adjusted so that the holder of any share of Series A
Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number
of shares of Common Stock or other securities of the
Corporation which he would have owned or have been
entitled to receive after the happening of any of
the events described above had such share of
-5-
<PAGE>
<PAGE>
Series A Preferred Stock been converted immediately
prior to the happening of such event. An adjustment
made pursuant to this subparagraph (e) (iv) (A)
shall become effective in the case of a dividend
immediately after the opening of business on the day
following the record date for the determination of
shareholders entitled to receive such dividend, and
shall become effective in the case of a subdivision,
combination or reclassification immediately after
the opening of business on the day following the day
when such subdivision, combination, or
reclassification becomes effective.
(B) If while any of the Series A Preferred Stock is
outstanding, the Corporation shall issue rights or
warrants ratably to the holders of shares of its
Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share
less than the market price per share of Common Stock
on the record date for the determination of
shareholders entitled to receive such rights and
warrants, the Conversion Ratio in effect immediately
before that record date shall be adjusted as of the
day following that record date so that it shall
equal the ratio determined by multiplying the
Conversion Ratio in effect immediately before that
record date by a fraction, of which the numerator
shall be the number of shares of Common Stock
outstanding on that record date plus the number of
shares of Common Stock offered for subscription or
purchase and the denominator shall be the number of
shares of Common Stock outstanding on that record
date plus the number of shares of Common Stock that
the aggregate offering price of the total number of
shares so offered would purchase at such current
market price per share of Common Stock. To the
extent that such rights or warrants are not
exercised before the expiration thereof, the
Conversion Ratio shall be readjusted as of the close
of business on the expiration date to the Conversion
Ratio that would then be in effect based upon the
number of shares of Common Stock actually delivered
upon the exercise of such rights or warrants.
(C) If the Corporation shall distribute, to all holders
of shares of its Common Stock, evidences of its
indebtedness or of its assets (excluding cash
distributions made out of current or retained
earnings) the Conversion Ratio in effect immediately
before the record date for the
-6-
<PAGE>
<PAGE>
determination of shareholders entitled to receive
such distribution shall be adjusted immediately
after the opening of business on the day following
that record date so that it shall equal the ratio
determined by multiplying the Conversion Ratio in
effect immediately prior thereto by a fraction, of
which the numerator shall be the total number of
shares of Common Stock outstanding on that record
date multiplied by such current market price per
share on that record date, and of which one
denominator shall be determined by subtracting the
aggregate face value of evidences of indebtedness or
the aggregate fair market value of evidences of its
assets from an amount equal to the total number of
shares of Common Stock outstanding on such record
date multiplied by the current market price per
share of Common Stock on that record date.
(D) For the purpose of any computation under
subparagraphs (e) (iv) (B) and (C) above, the
current market price per share of Common Stock at
any date shall be deemed to be the average of the
market prices for the thirty consecutive business
days terminating fifteen calendar days before the
day in question. The market price for each day
shall be determined as provided in subparagraph (e)
(iii) hereof.
(E) No adjustment in the Conversion Ratio for the Series
A Preferred Stock shall be made if, at the same time
that the Corporation takes an action with respect to
the Common Stock that would otherwise require
adjustment under subparagraphs (A) through (C)
above, the Corporation shall take the same action
with respect to the Series A Preferred Stock in the
same proportion as if each share of Series A
Preferred Stock had been converted into shares of
Common Stock at the then applicable Conversion Ratio
immediately before the record date for the
determination of holders of Common Stock entitled to
receive the dividends, rights, warrants, or
distributions.
(F) Except as herein otherwise provided, no adjustment
in the Conversion Ratio shall be made by reason of
the issuance of shares of Common Stock, or any
securities convertible into or exchangeable for
shares of Common Stock, or any securities carrying
the right to purchase any of the foregoing or for
any other reason whatsoever.
-7-<PAGE>
<PAGE>
(G) No adjustment in the Conversion Ratio shall be
required unless such adjustment would require an
increase or decrease of at least one percent (1%) of
such Ratio; provided, however, that any adjustments
which by reason of this subparagraph (e) (iv) (G)
are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
All calculations under this subparagraph (e) (iv)
shall be made to the nearest hundredth of a share.
(H) Whenever the Conversion Ratio is adjusted as
provided in this subparagraph (e) (iv), the
Corporation shall promptly file with the Transfer
Agent for the Series A Preferred Stock a statement
signed by the Chairman of the Board, President or
Vice President of the Corporation and by its
Treasurer or its Secretary showing in detail the
facts requiring such adjustment and shall exhibit
the statement to any holder of Series A Preferred
Stock desiring to inspect the statement. In
addition, with respect to adjustments made while any
Series A Preferred Stock is outstanding, the
Corporation shall state to the Transfer Agent and in
the next quarterly and annual report that an
adjustment has been effected and give the adjusted
Conversion Ratio in the Corporation's next quarterly
and annual report to shareholders. Such quarterly
and annual report shall be mailed to all holders of
record of the Series A Preferred Stock on the record
date used for mailing such quarterly and annual
report to holders of Common Stock.
(v) Effect of Consolidations, Mergers or Sales on
Conversion Privilege. If at any time while any shares of the
Series A Preferred Stock are outstanding, the Corporation is
consolidated or merged with or into any other corporation or sells
or conveys all or substantially all of its assets, and pursuant to
the provisions of the New Jersey Business Corporation Act or the
Corporation's certificate of incorporation the approval of the
holders of the Common Stock of the Corporation is required for such
transaction, then such transaction shall also require for approval
the affirmative vote of a majority of the outstanding Series A
Preferred Stock, voting as a separate class. Notwithstanding the
foregoing, the Corporation shall be entitled to redeem the Series A
Preferred Stock pursuant to the provisions of paragraph (d) prior
to or simultaneously with the consummation of any such transaction
and if such redemption does take place, the consent of the holders
of the Series A Preferred Stock shall not be required and if any
vote upon such a transaction by the holders of Series A Preferred
Stock has been taken, such vote shall be disregarded.
-8-
<PAGE>
<PAGE>
(vi) Notice of Certain Transactions Required. In
addition to any other notice required by this Article V, if at any
time while Series A Preferred Shares are outstanding the
Corporation shall (i) declare a dividend (or any other
distribution) on its Common Stock other than a cash dividend out of
current retained earnings or surplus; or (ii) authorize the
issuance to all holders of its Common Stock of rights or warrants
to subscribe for or purchase shares of its Common Stock or of any
other subscription rights or warrants; or (iii) reclassify its
Common Stock (other than through a subdivision or combination or by
changing the par value); or (iv) take any other action which
requires the Conversion Ratio to be adjusted under paragraph (e)
(iv); or (v) become a party to any consolidation or merger or sell
or transfer all or substantially all of the assets of the
Corporation, then the Corporation shall notify by regular mail the
holders of record of the Series A Preferred Shares at least 15 days
prior to the appropriate record date. The notice shall briefly
describe the transaction and state (i) the record date which will
be used for the purpose of determining which holders will receive
such dividend or distribution, of rights or warrants, or (ii) the
date on which any such reclassification, consolidation, merger,
sale or transfer is expected to become effective, and the record
date as of which it will be determined which holders shall be
entitled to exchange their Common Stock for securities or other
property delivered upon such reclassification, consolidation,
merger, sale or transfer. The Corporation shall mail a notice of
all meetings of shareholders (and any accompanying proxy statement)
to the holders of Series A Preferred Stock at the same time the
notice (and proxy statement) is mailed to holders of Common Stock
and shall mail all other notices and financial statements to the
holders of Preferred Stock at the same time such notices and
financial statements are mailed to holders of Common Stock. If any
action is taken by means of consent, notice of such action by
consent shall be sent to the holders of Series A Preferred Stock at
least 20 days prior to the effective date of such consent. Failure
to give or receive the notice required by this subparagraph (e)
(vi) or any defect therein shall not affect the legality or
validity or any such dividend, distribution, right or warrant or
other action but such failure shall not affect the rights of the
holders of Series A Preferred Stock to obtain an appropriate remedy
on account of such failure.
(vii) Corporation to Reserve Stock for Conversion.
As long as any Series A Preferred Stock remains outstanding, the
Corporation shall reserve out of its authorized but unissued Common
Stock the full number of shares of Common Stock deliverable upon
the conversion of all outstanding Series A Preferred Stock.
(f) Voting Rights.
(i) Except as otherwise required by the New Jersey
Business Corporation Act and as otherwise provided in subparagraph
-9-
<PAGE>
<PAGE>
(e) (v) and in this paragraph (f), the holders of Series A
Preferred Stock shall have no voting rights.
(ii) Any other provisions herein notwithstanding, if
at any time the Corporation shall have failed to pay for 2
quarters, whether or not consecutive, the full quarter-annual
dividends payable on the Series A Preferred Stock, the holders of
the Series A Preferred Stock shall have the right, voting as a
separate class, to elect a total of two directors to the class of
directors elected at the next annual meeting of shareholders (the
"Preferred Directors"). A dividend default with respect to the
Series A Preferred Stock, giving rise to the right to elect the
Preferred Directors, shall be deemed to continue to exist until all
accrued dividends on all outstanding shares of the Series A
Preferred Stock shall have been paid to the end of the past
preceding quarterly dividend period.
(A) Subject to the limitations set forth in subparagraph
(B) below, the Preferred Directors shall be elected
to a term of office the same as the term of office
of the other directors in the class to which they
are elected. At each subsequent annual meeting of
shareholders at which directors of such class are
elected, until all dividends in default on the
Series A Preferred Stock shall have been paid or
declared and set apart for payment, the holders of
Series A Preferred Stock shall have the right to
vote for the election of Preferred Directors in the
manner described in this subparagraph (ii).
(B) The Preferred Directors shall hold office only until
the first meeting of shareholders following the
payment, or the declaration and setting apart for
payment, of all dividends in default on the Series A
Preferred Stock, notwithstanding that the term of
the other directors in the class to which they are a
member does not expire at the time of such meeting.
The successors to the Preferred Directors shall be
elected by the shareholders at such meeting to a
term of office which shall expire at the same time
as the term of office of the other directors in the
class to which they are elected.
(C) At any meeting of shareholders held while holders of
Series A Preferred Stock have the voting power to
elect Preferred Directors, the holders of a majority
of the then outstanding Series A Preferred Stock who
are present in person or by proxy shall be
sufficient to constitute a quorum for the election
of the Preferred Directors as herein provided.
-10-
<PAGE>
<PAGE>
(D) Any vacancy caused by the death, resignation, or
removal of a Preferred Director may be filled by the
remaining Preferred Director, or if there is no
remaining Preferred Director, by a majority of the
holders of Series A Preferred Stock. In the event
there is no remaining Preferred Director to fill a
vacancy, a holder(s) of 10% or more of the
outstanding Series A Preferred Stock shall have the
right to require the Corporation to hold a meeting
of shareholders within 20 days (or such greater time
as shall be required by law) to fill the vacancy,
unless when so requested a shareholders' meeting is
scheduled to occur in 60 days or less. Any
Preferred Director so elected shall hold office
until the next annual meeting of shareholders, at
which time the holders of the Series A Preferred
Stock shall elect a Preferred Director to fill the
vacancy if the term of office of the Preferred
Director who was replaced does not expire at the
time of such meeting.
(iii) While any Series A Preferred Stock is
outstanding, the amendment of any provision of this Section C of
Article V of the Certificate of Incorporation (except amendments
relating to a stock split or reduction in the authorized shares of
the series that the New Jersey Business Corporation Act authorizes
the Board of Directors to adopt without shareholder approval) shall
require the affirmative vote of a majority of the outstanding
Series A Preferred Stock.
(iv) On any matter on which the holders of Series A
Preferred Stock shall be entitled to vote, they shall be entitled
to one vote for each share held. The holders of Series A Preferred
Stock shall vote only as a separate class; their votes shall not be
counted together with the holders of the Common Stock or any other
class or series of Preferred Stock as a single class.
139007
-11-
EXHIBIT 5.1
CLAPP & EISENBERG, P.C.
ONE NEWARK CENTER
NEWARK, NEW JERSEY 07102
April 20, 1994
HUBCO, Inc.,
3100 Bergenline Avenue
Union City, New Jersey 07087
Re: Registration Statement on Form S-4
HUBCO, Inc.
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 to be filed
by HUBCO, Inc. ("HUBCO") with the Securities and Exchange Commission (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of shares of preferred stock
with a stated value of $24.00 (the "Shares") to be issued pursuant to an
Agreement and Plan of Merger (the "Agreement") dated as of November 8, 1993,
by and among HUBCO, Hudson United Bank, Washington Bancorp, Inc. and
Washington Savings Bank.
In addition, we have examined the Agreement and such corporate
records, certificates and documents and have made such examinations of law as
we have deemed relevant. In our examination of such documents and records, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, and conformity with the originals of
all documents submitted to us as copies. In rendering this opinion we have
assumed without investigation the accuracy and validity of information
supplied to us by HUBCO.
On the basis of the foregoing, it is our opinion that when, as and
if the Registration Statement shall have become effective pursuant to the
provisions of the Act, and the Shares shall have been duly issued and
delivered in the manner contemplated by the Registration Statement and the
Agreement, the Shares will be legally issued, fully paid and nonassessable.
The foregoing opinion is limited to the federal laws of the United
States and the laws of the State of New Jersey, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.<PAGE>
<PAGE>
-2-
We consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference in the Prospectus included as part
of the Registration Statement to our having issued the opinion expressed
herein.
Very truly yours,
CLAPP & EISENBERG
By: /s/ Ronald H. Janis
---------------------
Ronald H. Janis
A Member of the Firm
EXHIBIT 8.1
CLAPP & EISENBERG, P.C.
ONE NEWARK CENTER
NEWARK, NEW JERSEY 07102
April 20, 1994
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn: Kenneth T. Neilson, President
Re: Mergers of Washington Bancorp, Inc.
into HUBCO, Inc. and Washington
Savings Bank into Hudson United Bank
Gentlemen:
We have represented HUBCO, Inc. ("Hubco"), a New Jersey corporation
which is a registered bank holding company, and Hudson United Bank (the
"Bank"), a New Jersey chartered commercial banking corporation which is a
wholly owned subsidiary of Hubco, in connection with the proposed merger of
Washington Bancorp, Inc. ("Washington"), a Delaware corporation which is a
registered bank holding company, into Hubco (the "Hubco Merger") and the
proposed merger of Washington Savings Bank (the "Savings Bank"), a New Jersey
chartered stock savings bank which is a wholly owned subsidiary of Washington,
into the Bank (the "Bank Merger"). The foregoing merger transactions (the
"Mergers") shall be effected pursuant to the provisions of an Agreement and
Plan of Merger dated as of November 8, 1993 by and among Hubco, the Bank,
Washington and the Savings Bank (the "Merger Agreement").
In connection with such representation, we have reviewed the
Registration Statement (Form S-4) filed with the Securities Exchange
Commission on April , 1994 pertaining to the Mergers (the "Registration
Statement"), and, in our opinion, the information included in the section of
the Registration Statement captioned "Federal Income Tax Consequences"
accurately describes the material federal income tax consequences of such
transactions. In addition, annexed hereto is a form of opinion of this firm
regarding federal income tax matters applicable to the Mergers (the "Closing
Tax Opinion"), the delivery of which is a condition precedent to the
consummation of the Mergers pursuant to the Merger Agreement. We expect to
deliver an opinion in this form at the closing of the Mergers. The delivery
of the Closing Tax Opinion is conditioned on the value of the Series A
Preferred stock of Hubco to be issued in connection with the Mergers on the
effective date of such transactions. Based on the current value of such stock
were it to be issued on the date hereof, this firm could deliver the Closing
Tax Opinion on the date hereof.<PAGE>
<PAGE>
-2-
We hereby consent to our being designated as an expert in the
Registration Statement with respect to the federal income tax consequences of
the Mergers and to the inclusion of this letter as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Clapp & Eisenberg
CLAPP & EISENBERG
A Professional Corporation
<PAGE>
<PAGE>
-3-
[CLAPP & EISENBERG LETTERHEAD]
[Effective Date of Merger]
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn: Kenneth T. Neilson, President
Washington Bancorp, Inc.
101 Washington Street
Hoboken, New Jersey 07030
Attn: Paul Rotondi, Chairman
Re: Mergers of Washington Bancorp, Inc.
into HUBCO, Inc. and Washington
Savings Bank into Hudson United Bank
Gentlemen:
We have represented HUBCO, Inc. ("Hubco"), a New Jersey corporation
which is a registered bank holding company, and Hudson United Bank (the
"Bank"), a New Jersey chartered commercial banking corporation which is a
wholly owned subsidiary of Hubco, in connection with the proposed merger of
Washington Bancorp, Inc. ("Washington"), a Delaware corporation which is a
registered bank holding company, into Hubco (the "Hubco Merger") and the
proposed merger of Washington Savings Bank (the "Savings Bank"), a New Jersey
chartered stock savings bank which is a wholly owned subsidiary of Washington,
into the Bank (the "Bank Merger"). The foregoing merger transactions shall be
effected pursuant to the provisions of an Agreement and Plan of Merger dated
as of November 8, 1993 by and among Hubco, the Bank, Washington and the
Savings Bank (the "Merger Agreement"). The within opinion is delivered
pursuant to Section 6.1(d) of the Merger Agreement. Capitalized terms used
herein not otherwise defined shall have the meanings ascribed to such terms in
the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time the Hubco
Merger shall be effected by the merger of Washington into Hubco pursuant to
New Jersey law, with Hubco surviving, and immediately after the Effective
Time, the Bank Merger shall be effected by the merger of the Savings Bank into
the Bank pursuant to New Jersey law, with the Bank surviving.
Pursuant to the Merger Agreement, at the Effective Time, each share of
common stock of Washington shall be converted, at the election of the holder
of such share, into the right to receive either $16.10 in cash or .6708 shares
of Hubco Series A Preferred Stock, having a stated value of $24.00 per share
(the "Series A<PAGE>
<PAGE>
-4-
Preferred"), provided, however, pursuant to the Merger Agreement such
elections will be adjusted as necessary to assure that the aggregate number of
shares of Washington common stock which shall be converted into cash
(including all such shares converted into cash upon the exercise of statutory
dissenter's rights and shares converted into cash in lieu of fractional shares
of Series A Preferred) shall equal 49% of the number of shares of Washington
common stock outstanding immediately prior to the Effective Time, and the
aggregate number of shares of Washington common stock which shall be converted
into Series A Preferred shall equal 51% of the number of such shares
outstanding immediately prior to the Effective Time. Notwithstanding the
foregoing, no fractional shares of Series A Preferred stock shall be issued,
and in lieu thereof, any holder of Washington common stock who otherwise would
be entitled to receive a fractional share will receive cash equal to the value
of such fractional share, based on a value of $24.00 per whole share.
At the Effective Time, unexercised stock options pertaining to Washington
common stock shall be converted, at the election of the holders of such
options, either into an option to purchase .6708 shares of Series A Preferred
per option to purchase one share of Washington common stock, or into the right
to receive cash in the amount, per share covered by the options, equal to the
excess (if any) of $16.10 over the option exercise price, or, alternatively,
shares of Series A Preferred having an aggregate value equal to the amount of
such cash, based on a value of $24.00 per share for the Series A Preferred.
However, not more than 51% of the outstanding Washington common stock options
may be converted into Series A Preferred stock.
Each share of Series A Preferred shall have a stated value of, and shall
be redeemable for, $24.00. Each share of Series A Preferred is convertible
into one share of Hubco common stock. Holders of Series A Preferred stock
shall be entitled to receive cumulative cash dividends at rates to be set
annually on the basis of the average market price of Hubco's common stock
during the twenty consecutive business day period which ends two days prior to
the date the annual dividend rate is set. The annual dividend will range from
$1.00 per share, if the Hubco common stock was a market price of $24.00 per
share or higher, to a dividend of $1.68 per share, if the Hubco common stock
has a market value of $19.00 per share or lower. If the Hubco common stock is
trading between $19.00 and $24.00 per share, the annual dividend rate for the
Series A Preferred will be set in accordance with a rate schedule at between
$1.56 and $1.10 per share. Pursuant to an opinion of the consulting firm of
MG Advisors, Inc., on which we have been authorized to rely in issuing this
opinion, on the Effective Date the Series A Preferred shall have a fair market
value of $ _________ per share.
<PAGE>
<PAGE>
-5-
Prior to the Effective Date, and with a view toward the consummation of
the Hubco Merger, Hubco purchased 92,500 shares of Washington common stock in
the open market for an aggregate price of $1,338,000.
Immediately after the Effective Time, the Bank Merger will be effected
without the issuance of any additional stock of the Bank.
In addition to the foregoing facts, on the date hereof, you have
delivered certificates in which you have made the following additional
representations in regard to the Hubco Merger and the Bank Merger and have
authorized us to rely on such representations in expressing the within
opinions:
1. The fair market value of the Series A Preferred stock and other
consideration received by each Washington shareholder in connection with the
Hubco Merger will be approximately equal to the fair market value of the
Washington stock surrendered in the transaction.
2. To the best knowledge of the management of Washington, there is
no plan or intention on the part of the shareholders of Washington on the date
hereof to sell, exchange or otherwise dispose of a number of shares of Series
A Preferred stock received in the Hubco Merger that would reduce such
Washington shareholders' ownership of Series A Preferred stock to a number of
shares having a value, as of the date of the Merger, of less than 45 percent
of the value of all of the formerly outstanding Washington common stock as of
the same date. For purposes of this representation, shares of Washington
common stock converted into cash or other property in the Hubco Merger,
surrendered by dissenters or exchanged for cash in lieu of fractional shares
of Series A Preferred stock will be treated as outstanding Washington common
stock on the date of the Hubco Merger. In valuing the formerly outstanding
Washington common stock as of the date of the Hubco Merger, there shall be
taken into account the amount of any distribution made to its shareholders in
cash or property made by reason of or in connection with the Hubco Merger. In
addition, and not in limitation of the foregoing, Washington has considered,
in making this representation, any shares of Washington common stock that have
been sold, redeemed or otherwise disposed of by shareholders who own 5 percent
or more of Washington common stock, or by shareholders who are officers or
directors of Washington, after the announcement of the Hubco Merger and prior
to the Effective Time to the extent the management of Washington has knowledge
on the date hereof of any such sales, redemptions or dispositions.
3. Following the Hubco Merger, Hubco will not issue additional
shares of its stock that would result in the present shareholders of Hubco
losing control of Hubco within the meaning of Section 368(c) of the Internal
Revenue Code of 1986, as amended
<PAGE>
<PAGE>
-6-
(the "Code"). (Hereafter, "Section" references shall be references to
Sections of the Code.).
4. None of the compensation received by any shareholder-employees
of Washington will be separate consideration for, or allocable to, any of
their shares of Washington common stock.
5. Hubco has no plan or intention to reacquire any of its stock
issued in the Hubco Merger.
6. Hubco has no plan or intention to liquidate, to sell or
otherwise dispose of any of the assets of Washington acquired in the Hubco
Merger, except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C).
7. The payment of cash in lieu of fractional shares of Series A
Preferred stock is solely for the purpose of avoiding the expense and
inconvenience to Hubco of issuing fractional shares and does not represent
separately bargained for consideration.
8. The liabilities of Washington assumed by Hubco (if any) and the
liabilities to which the transferred assets of Washington are subject (if any)
were incurred by Washington in the ordinary course of its business.
9. Following the Hubco Merger, Hubco will continue the historic
business of Washington or use a significant portion of Washington's historic
business assets in a business.
10. There is no intercorporate indebtedness existing between
Washington and Hubco that was issued, acquired, or will be settled at a
discount.
11. No parties to the Hubco Merger are investment companies as
defined in Sections 368(a)(2)(F)(iii) and (iv).
12. Washington is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A).
13. The fair market value of the aggregate assets of Washington
transferred to Hubco in the Hubco Merger will equal or exceed the sum of the
liabilities assumed by Hubco plus the amount of liabilities, if any, to which
the transferred assets are subject.
As counsel to Hubco and the Bank, we have examined the Merger
Agreement and copies of ancillary agreements, certificates, instruments and
documents pertaining to the Hubco Merger and the Bank Merger delivered by the
parties thereto. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us. As to any
facts material to our <PAGE>
<PAGE>
-7-
opinions expressed herein, we have relied on representations of the parties to
the Hubco Merger and the bank Merger without undertaking to verify the same by
independent investigation. The within opinions are based on our analysis of
the Code, Treasury Regulations promulgated thereunder, and relevant
interpretive authorities as in effect on the date hereof.
Based on the foregoing, we are of the opinion that:
1. The Hubco Merger qualifies as a "reorganization" within the
meaning of Section 368(a)(1)(A). Hubco and Washington each are a "party to a
reorganization" within the meaning of Section 368(b)(2).
2. No gain or loss will be recognized by Hubco or Washington in
connection with the Hubco Merger. Sections 361(a) and 1032.
3. No gain or loss will be recognized by the shareholders of
Washington whose common stock of Washington is converted solely into Series A
Preferred in connection with the Hubco Merger. Section 354(a).
4. In the case of shareholders of Washington whose common stock of
Washington is converted solely into cash in connection with the Hubco Merger,
gain or loss shall be recognized, measured by the difference, if any, between
the shareholder's adjusted basis in his Washington common stock and the amount
of cash into which such stock is converted. In the case of shareholders of
Washington whose common stock of Washington is converted partly into cash and
partly into Series A Preferred in connection with the Hubco Merger, gain (but
not loss), if any, shall be recognized, but in an amount not in excess of the
amount of the cash received. In the case of Washington shareholders who
recognize gain upon the conversion of their Washington common stock into cash
and in whose hands such common stock was a capital asset on the Effective
Date, such gain shall be treated as capital gain (long-term or short-term,
depending on the shareholders' respective holding periods for their Washington
common stock), except in the case of any stockholder as to which the
conversion has the effect of a the distribution of a dividend within the
meaning of Section 356(a)(2) by reason of the applicability of the stock
attribution rules of Section 318(a). The applicability of such attribution
rules is dependent upon each shareholder's particular factual circumstances.
5. Washington shareholders receiving cash in lieu of fractional
shares of Series A Preferred stock will be treated as if such fractional
shares had been received from Hubco and then subsequently redeemed by Hubco.
The cash received by the Washington shareholder in lieu of fractional shares
will be treated as having been received as full payment in exchange for the<PAGE>
-8-
<PAGE>
fractional shares deemed to have been redeemed as provided in Section 302(a).
Rev. Rul. 66-365, 1966-2 C.B. 116, Rev. Proc. 77-41, 1977-2 C.B. 574.
Accordingly, such shareholders will recognize gain or loss on the receipt of
such cash measured by the difference between the amount of such cash and the
respective adjusted basis of such shareholders in their fractional shares of
Series A Preferred stock considered to have been redeemed.
6. The basis of any Series A Preferred stock received by a
shareholder of Washington in connection with the Hubco Merger equal shall the
adjusted basis of the shareholder's Washington common stock converted in the
transaction, reduced by the amount of cash received, if any, on the
conversion, and increased by the amount of gain recognized, if any, on the
conversion (whether characterized as dividend as capital gain income).
Section 358(a).
7. The holding period of the Series A Preferred stock received by
the shareholders of Washington in connection with the Hubco Merger will
include the period during which their Washington common stock converted in the
transaction was held, provided such stock was held as a capital asset on the
date of the Hubco Merger. Section 1223(1).
8. The Bank Merger qualifies as a "reorganization" within the
meaning of Section 368(a)(1)(A). The Bank and the Savings Bank each are a
"party to a reorganization" within the meaning of Section 368(b)(2).
9. No gain or loss will be recognized by the Bank or the Savings
Bank in connection with the Bank Merger. Section 361(a).
Very truly yours,
CLAPP & EISENBERG
A Professional Corporation
Exhibit 12.1
HUBCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on deposits ...................... 20,379 26,094 24,410 25,746 26,423
Interest on borrowings .................... 670 825 1,006 1,179 1,566
------ ------ ------ ------ ------
Total fixed charges ..................... 21,049 26,919 25,146 26,925 27,989
====== ====== ====== ====== ======
Earnings plus fixed charges:
Consolidated income before provision
for income taxes ......................... 22,053 10,205 7,357 3,360 5,766
Total fixed charges ..................... 21,049 26,919 25,416 26,925 27,989
------ ------ ------ ------ ------
43,102 37,124 32,773 30,285 33,755
====== ====== ====== ====== ======
Ratio of earnings to fixed charges:
Including interest on deposits ............. 2.05x 1.38x 1.29x 1.12x 1.21x
====== ====== ====== ====== ======
Excluding interest on deposits ............. 33.91x 13.37x 8.31x 3.85x 4.68x
====== ====== ====== ====== ======
</TABLE>
EXHIBIT 12.2
EARNINGS + FIXED CHARGES
FIXED CHARGES
<TABLE>
<CAPTION>
HUBCO
HUBCO HUBCO Washington
HUBCO Proforma Washington Statewide
------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Pretax Income ....................................... 22,503 21,263 22,171 33,683
------ ------ ------ ------
Interest Expense..................................... 20,741 22,712 30,813 44,209
Rental Expense ...................................... 308 308 332 392
Preferred Stock Dividend (Assume 1.44) .............. 0 0 1,195 1,195
------ ------ ------ ------
21,049 23,020 32,340 45,796
------ ------ ------ ------
43,552 44,283 54,511 79,479
====== ====== ====== ======
2.07 1.92 1.69 1.74
WITHOUT INTEREST ON DEPOSITS
Pretax Income ....................................... 22,503 21,263 22,171 33,683
------ ------ ------ ------
Interest Expense .................................... 362 2,333 2,351 2,605
Rental Expense ...................................... 308 308 332 392
Preferred Stock Dividend (Assume 1.44) .............. 0 0 1,195 1,195
------ ------ ------ ------
670 2,641 3,878 4,192
------ ------ ------ ------
23,173 23,904 26,049 37,875
====== ====== ====== ======
34.59 9.05 6.72 9.04
====== ====== ====== ======
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-4 (File No. ) of our report which includes an explanatory
paragraph regarding changes in accounting principles and includes an explanatory
paragraph regarding an action seeking unspecified damages and alleging
violations of state securities laws, certain banking laws and state common law
and a lawsuit filed by a former Bank officer which alleges wrongful termination
and seeks unspecified damages, dated January 28, 1994, on our audits of the
consolidated financial statements of Washington Bancorp, Inc. and Subsidiary as
of December 31, 1993 and 1992 and for each of the three years in the period
ended December 31, 1993, which report is included in Washington's Annual Report
on Form 10-K for the year ended December 31, 1993. We also consent to the
reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand
Coopers & Lybrand
Parcippany, New Jersey
April 20, 1994
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our firm included in or made part of this
registration statement.
/s/ Arthur Andersen & Co.
Arthur Andersen & Co.
Roseland, New Jersey
April 20, 1994
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the usein this Registration Statement of HUBCO, Inc. on
Form S-4 dated on or about April 20, 1994 of our report (which expresses an
unqualified opinion and includes explanatory paragraphs regarding restatement
of 1993 and 1992 financial statements and matters regarding regulatory capital
compliance) dated on June 11, 1993 (February 15, 1994 as to Note 22) relating
to the consolidated financial statements of Statewide Savings Bank, S.L.A.,
appearing in the Prospectus, which is part of this Registration Statement, and
the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche
Deloitte & Touche
Parsippany, New Jersey
April 15, 1994
EXHIBIT 23.5
To Whom It May Concern:
We hereby consent to the use of our opinion letter attached as Appendix
D and to the reference to our firm under the heading "Opinions of Financial
Advisor" in the Registration Statement filed by HUBCO, Inc., with the
Securities and Exchange Commission in connection with the proposed merger of
Washington Bancorp, Inc., with and into HUBCO, Inc.
Very truly yours,
/s/ Capital Consultants of Princeton, Inc.
Capital Consultants of Princeton, Inc.
Princeton, New Jersey
April 21, 1994
