As filed with the Securities and Exchange Commission on December 12, 1994
Registration No. 33-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------
HUBCO, INC.
(Exact name of registrant as specified in its charter)
--------
New Jersey
(State or other Jurisdiction of Incorporation or Organization)
--------
6711
(Primary Standard Industrial Classification Code Number)
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22-2405746
(I.R.S. Employer Identification No.)
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
201-348-2300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Kenneth T. Neilson, President
HUBCO, INC.
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.
MICHAEL W. ZELENTY, ESQ. LAURA R. KUNTZ, ESQ.
Pitney, Hardin, Kipp & Szuch Lowenstein, Sandler, Kohl,
P.O. Box 1945 Fisher & Boylan, P.C.
Morristown, New Jersey 07962 65 Livingston Avenue
(201) 966-6300 Roseland, New Jersey 07068
(201) 992-8700
<PAGE>
Approximate date of commencement of proposed sale to the public: At the
Effective Date of the Merger, as defined in the Amended and Restated Agreement
and Plan of Merger dated November 28, 1994 (the "Agreement"), between the
Registrant and Jefferson National 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
================================================================================================================================
<S> <C> <C> <C> <C>
Title of each Proposed Proposed
class of maximum maximum
securities to Amount to be offering aggregate Amount of
be registered registered price per offering registration
unit* price* fee
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, 615,339
No Par Value Shares** $35.25 $21,690,700 $7,480
================================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457(f) under the Securities Act based on the average of bid and asked
prices for Jefferson National Bank Common Stock on December 6, 1994.
** This figure takes into account a 3 for 2 common stock split declared by the
Registrant's Board of Directors and payable on January 14, 1995 to holders of
record on January 3, 1995. The Registrant also registers hereby such additional
shares of its common stock as may be issuable in the Merger pursuant to the
anti-dilution provisions of the Merger Agreement.
--------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
HUBCO, INC.
PART I
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 Prospectus/Proxy Statement of responses to Items 1 through
19 of Part I of Form S-4
Location or Heading
Item in Prospectus/Proxy
No. Caption 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 Inside Front Cover;
Prospectus..................................... AVAILABLE
INFORMATION;
INCORPORATION OF
CERTAIN DOCUMENTS BY
REFERENCE; TABLE OF
CONTENTS
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information
Introduction (S-K 503)......................... SUMMARY
(a)............................................ SUMMARY - Parties to
the Merger
(b)........................................... SUMMARY - Parties to
the Merger
(c)........................................... SUMMARY - Effect of
the Merger; Exchange
of Stock
<PAGE>
Location or Heading
Item in Prospectus/Proxy
No. Caption Statement
- ---- ------- --------------------
(d)........................................... SELECTED FINANCIAL
DATA
(e)........................................... SUMMARY SELECTED PRO
FORMA DATA
(f)........................................... ACTUAL AND PRO FORMA
PER SHARE DATA
(g)........................................... MARKET PRICE AND
DIVIDEND DATA
(h)........................................... SUMMARY - Votes
Required; Record Date
(i)........................................... SUMMARY -
Conditions;
Regulatory Approvals
(j)........................................... SUMMARY - Dissenters'
Rights
(k)........................................... SUMMARY - Certain
Federal Income Tax
Considerations
4. Terms of the Transaction
(a)........................................... THE MERGER;
DESCRIPTION OF
CAPITAL STOCK OF
HUBCO; DESCRIPTION OF
HUBCO COMMON STOCK;
COMPARISON OF THE
RIGHTS OF
STOCKHOLDERS UNDER
THE NATIONAL BANK ACT
AND THE NEW JERSEY
BUSINESS CORPORATION
ACT
(b)........................................... THE MERGER - Opinion
of Jefferson's
Financial Advisor
<PAGE>
Location or Heading
Item in Prospectus/Proxy
No. Caption Statement
- ---- ------- --------------------
(c)........................................... THE MERGER
(Introductory
Paragraph)
5. Pro Forma Financial Information .............. PRO FORMA COMBINED
FINANCIAL INFORMATION
6. Material Contacts with the
Company Being Acquired........................ THE MERGER -
Interests of Certain
Persons in 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........................... LEGAL OPINIONS
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............................... NOT APPLICABLE
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...................... NOT APPLICABLE
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
<PAGE>
Location or Heading
Item in Prospectus/Proxy
No. Caption Statement
- ---- ------- --------------------
16. Information with Respect
to S-2 or S-3 Companies....................... NOT APPLICABLE
17. Information with Respect
to Companies Other than
S-2 or S-3 Companies ......................... BUSINESS OF
JEFFERSON; MARKET
PRICE AND DIVIDEND
DATA; INDEX TO
JEFFERSON'S FINANCIAL
STATEMENTS
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations
are to be Solicited.......................... THE MEETING; THE
MERGER - Interests of
Certain Persons in
the Merger; - Rights
of Dissenting
Stockholders;
INCORPORATION OF
CERTAIN DOCUMENTS BY
REFERENCE
19. Information if Proxies,
Consents or Authorization
Are Not to be Solicited
or in an Exchange Offer...................... NOT APPLICABLE
<PAGE>
JEFFERSON NATIONAL BANK
December ___, 1994
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Jefferson National Bank ("Jefferson"), which will be held at Jefferson's
headquarters, 155 Jefferson Street, Passaic, New Jersey on January __, 1995 at
3:00 p.m., local time (the "Meeting").
The Meeting represents an historic occasion for Jefferson. At the Meeting,
you will be asked to consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Jefferson will merge (the "Merger") with and into Hudson United Bank, a
subsidiary of HUBCO, Inc. ("HUBCO"). Pursuant to the Merger, Jefferson's
stockholders will be entitled to receive 2.865 shares (as adjusted for HUBCO'S
recently announced 3-for-2 stock split) of HUBCO's Common Stock ("HUBCO Common
Stock") in exchange for each share of Jefferson's Common Stock which they own on
the effective date of the Merger, subject to adjustment provisions set forth in
the Merger Agreement and described in the attached Proxy Statement-Prospectus
which, under certain circumstances, could result in a change in the 2.865
exchange ratio. Consummation of the Merger is subject to certain conditions,
including the approval of the Merger by various regulatory agencies and approval
of Jefferson'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.
The enclosed Notice of Special Meeting of Stockholders and Proxy
Statement-Prospectus describe the Merger and provide specific information
concerning the Meeting. Please read the Proxy Statement-Prospectus carefully and
consider the information contained therein. Your vote is of great importance, as
the approval of Jefferson'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
two-thirds of the outstanding shares of Jefferson'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 Meeting. You should not send in certificates for your
Jefferson shares at this time. At a later date you will receive specific
instructions regarding the exchange of your Jefferson shares.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Merger Agreement.
Sincerely,
Raymond Sisco,
Chairman of the Board
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF
JEFFERSON NATIONAL BANK
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, a
Special Meeting of Stockholders of Jefferson National Bank ("Jefferson") will be
held at Jefferson's headquarters, 155 Jefferson Street, Passaic, New Jersey, on
January __, 1995 at 3:00 p.m., local time, for the purpose of considering and
voting upon the following matters:
1. To consider and act upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger, dated November 28, 1994 (the "Merger
Agreement"), attached as Appendix A to the accompanying Proxy
Statement-Prospectus, providing for the merger (the "Merger") of Jefferson
with and into Hudson United Bank, a wholly-owned subsidiary of HUBCO, Inc.
("HUBCO"). Pursuant to the Merger Agreement, stockholders of Jefferson will
be entitled to receive 2.865 shares (as adjusted for HUBCO's recently
announced 3-for-2 stock split) of HUBCO's Common Stock ("HUBCO Common
Stock") in exchange for each share of Jefferson's Common Stock which they
own on the effective date of the Merger, subject to adjustment provisions
set forth in the Merger Agreement which, under certain circumstances, could
result in a change in the 2.865 exchange ratio.
2. To consider and act upon other matters that may properly come
before the Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December __, 1994
as the date for determining the stockholders of record entitled to receive
notice of, and to vote at, the Special Meeting.
Holders of Jefferson'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 12 U.S.C. s.214a, the text of
which is included as Appendix C to the Proxy Statement-Prospectus that is
attached to this Notice of Special Meeting. For a summary of the dissenters'
rights of Jefferson's stockholders, see "THE MERGER--Rights of Dissenting
Stockholders" in the Proxy Statement-Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS
By: Joseph Greco,
President and Assistant Cashier
Passaic, New Jersey
December __, 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.
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<PAGE>
PROXY STATEMENT
JEFFERSON NATIONAL BANK
-----------------------------------------
PROSPECTUS
HUBCO, INC.
COMMON STOCK, NO PAR VALUE
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $6.00 per share ("Jefferson Common Stock"), of Jefferson
National Bank ("Jefferson"), in connection with the solicitation of proxies by
the Board of Directors of Jefferson for use at a Special Meeting of Jefferson's
stockholders to be held at Jefferson's headquarters, 155 Jefferson Street,
Passaic, New Jersey, on January __, 1995 at 3:00 p.m., local time, and at any
adjournments or postponements thereof (the "Meeting").
At the Meeting, the stockholders of record of Jefferson Common Stock as of
the close of business on December __, 1994 will consider and vote upon a
proposal to approve the Amended and Restated Agreement and Plan of Merger, dated
November 28, 1994 (the Merger Agreement"), by and among HUBCO, Inc., a New
Jersey corporation ("HUBCO"), HUBCO's wholly-owned subsidiary, Hudson United
Bank (the "Bank"), and Jefferson, pursuant to which Jefferson will merge with
and into the Bank (the "Merger"). Pursuant to the Merger, Jefferson's
stockholders will be entitled to receive 2.865 shares (as adjusted for HUBCO's
recently announced 3-for-2 stock split) of HUBCO's Common Stock, no par value
(the "HUBCO Common Stock"), in exchange for each share of Jefferson Common Stock
which they own on the effective date of the Merger, subject to adjustment
provisions set forth in the Merger Agreement which, under certain circumstances,
could result in a change in the 2.865 exchange ratio. 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 Jefferson on
or about December __, 1994.
--------------------
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 December ___, 1994.
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<PAGE>
This Proxy Statement-Prospectus also constitutes a prospectus of HUBCO with
respect to the shares of HUBCO Common Stock issuable pursuant to the Merger.
HUBCO Common Stock is quoted on the NASDAQ National Market ("NASDAQ") under
the symbol "HUBC". The closing sale price of HUBCO Common Stock on NASDAQ on
December __, 1994 was $__ per share (or $ __ per share as adjusted for the
3-for-2 stock split described herein).
AVAILABLE INFORMATION
HUBCO is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and, in accordance therewith, files
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 Common Stock issuable pursuant to the Merger. 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 document referred to herein or therein, are not necessarily complete, and
in each instance reference is made to the copy of such 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) 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;
2. HUBCO's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1994, June 30, 1994 and September 30, 1994 (as amended by a Form 10-Q/A
filed on December 7, 1994);
3. The description of HUBCO's Common Stock set forth in HUBCO's
Registration Statement on Form 8-A 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; and
4. HUBCO's Current Reports on Form 8-K filed with the SEC on January
20, March 3, May 10, June 3, July 1 (as amended by a Form 8-K/A filed on
September 16), October 20 and December 7, 1994.
All documents filed by HUBCO pursuant to Sections 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
Statement-Prospectus and a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
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 by reference modifies or supersedes such
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<PAGE>
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
relating to HUBCO which are not presented herein or delivered herewith. Such
documents, 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). In order to ensure timely delivery of the documents,
any request should be made by January __, 1995.
All information contained or incorporated in this Proxy
Statement-Prospectus with respect to HUBCO and the Bank was supplied by HUBCO
and all information contained in this Proxy Statement-Prospectus with respect
to Jefferson was supplied by Jefferson. Although neither HUBCO nor Jefferson
have any knowledge that would indicate that any statements or information
relating to the other party contained or incorporated herein are inaccurate or
incomplete, neither HUBCO nor Jefferson can warrant the accuracy or completeness
of such information or statements as they relate to the other entity or its
subsidiaries.
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 or
Jefferson since the date hereof or that the information herein is correct as of
any time subsequent to the date hereof.
- -------------------------------------------------------------------------------
On October 13, 1994, the Board of Directors of HUBCO approved a 3-for-2
stock split, payable January 14, 1995 to common stockholders of record on
January 3, 1995 (the "Stock Split"). All share and per share data regarding
HUBCO's Common Stock set forth herein has been adjusted to give retroactive
effect to the Stock Split as if the Stock Split occurred prior to the periods
reported herein. Pursuant to provisions in the Merger Agreement which provide
for adjustment to the exchange ratio described therein in the event of
transactions such as the Stock Split, the Merger Agreement has been amended and
restated to give effect to the Stock Split and all references herein to the
exchange ratio have been adjusted to give effect to the Stock Split.
- -------------------------------------------------------------------------------
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<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION...................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 4
SUMMARY.................................................................... 7
RECENT DEVELOPMENTS........................................................ 11
MARKET PRICE AND DIVIDEND DATA............................................. 12
ACTUAL AND PRO FORMA PER SHARE DATA........................................ 14
SELECTED FINANCIAL DATA.................................................... 16
SUMMARY SELECTED PRO FORMA DATA............................................ 19
INTRODUCTION............................................................... 21
General................................................................ 21
Parties to the Merger.................................................. 21
THE MEETING................................................................ 22
The Meeting............................................................ 22
Vote Required.......................................................... 22
Recommendation of the Jefferson Board.................................. 23
THE MERGER................................................................. 23
Background of and Reasons for the Merger............................... 23
Opinion of Jefferson's Financial Advisor............................... 24
Conversion of Jefferson's Shares....................................... 28
No Fractional Shares................................................... 28
Delivery of Shares..................................................... 29
Federal Income Tax Consequences........................................ 30
Effect of the Merger................................................... 30
Effective Time......................................................... 31
Conditions to Consummation of the Merger............................... 31
Regulatory Approvals................................................... 32
Conduct of Jefferson's Business Pending the Merger..................... 32
Fee in the Event of Another Transaction................................ 33
Termination, Waiver and Amendment...................................... 33
Management and Operation of Jefferson Following the Merger............. 34
Interests of Certain Persons in the Merger............................. 34
Accounting Treatment of the Merger..................................... 35
Rights of Dissenting Stockholders ..................................... 35
PRO FORMA COMBINED FINANCIAL INFORMATION................................... 37
BUSINESS OF JEFFERSON...................................................... 46
DESCRIPTION OF CAPITAL STOCK OF HUBCO...................................... 65
COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER
THE NATIONAL BANK ACT AND THE NEW JERSEY BUSINESS
CORPORATION ACT ....................................................... 69
OTHER MATTERS.............................................................. 72
LEGAL OPINION.............................................................. 73
EXPERTS.................................................................... 73
INDEX TO JEFFERSON'S FINANCIAL STATEMENTS.................................. 74
APPENDICES:
Appendix A: Amended and Restated Agreement and Plan of Merger......... A-1
Appendix B: Opinion of Capital Consultants of Princeton, Inc.......... B-1
Appendix C: 12 U.S.C. s.214a.......................................... C-1
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<PAGE>
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding HUBCO, Jefferson 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.
Parties to the Merger
HUBCO. HUBCO is a bank holding company whose principal operating subsidiary
is Hudson United Bank (the "Bank"), a New Jersey-chartered commercial bank.
HUBCO's corporate headquarters are located at 1000 MacArthur Boulevard, Mahwah,
New Jersey 07430. The Bank's corporate headquarters are located at 3100
Bergenline Avenue, Union City, New Jersey 07087. The telephone number of HUBCO
and the Bank is (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 45 branches in Hudson, Bergen, Passaic, Essex, Middlesex and Morris
counties. The deposits of the Bank are insured by the Federal Deposit Insurance
Corporation (the "FDIC"). As of September 30, 1994, HUBCO had consolidated
assets of $1.4 billion, consolidated deposits of $1.2 billion and consolidated
stockholders' equity of $98.7 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
added over 30 branches and approximately $850 million in assets through eight
acquisitions of financial institutions in both government-assisted and private
transactions. As a result, HUBCO's asset base grew to $1.0 billion at December
31, 1993 and to $1.4 billion at September 30, 1994.
Jefferson. Jefferson is a national bank which was organized in 1970. The
main office of Jefferson is located at 155 Jefferson Street, Passaic, New Jersey
07055; telephone: (201) 778-7900. Jefferson conducts business in New Jersey
through four branches located in Passaic County. As of September 30, 1994,
Jefferson had assets of $91.8 million, deposits of $85.3 million and
shareholders' equity of $6.0 million.
Effect of the Merger; Exchange of Stock
Pursuant to the Merger Agreement, Jefferson will merge with and into the
Bank. At the effective time of the Merger, each outstanding share of Jefferson
Common Stock will be converted into 2.865 shares of HUBCO's Common Stock (the
"HUBCO Common Stock"), subject to adjustment provisions set forth in the Merger
Agreement. The exchange ratio, which reflects the number of shares of HUBCO
Common Stock into which each share of Jefferson Common Stock will be converted
at the effective time of the Merger, is referred to in this Proxy
Statement-Prospectus as the "Exchange Ratio." The Merger Agreement provides that
the Exchange Ratio will be adjusted in the event that HUBCO's Median Pre-Closing
Price (as defined) is greater than $17.44 or less than $12.89. In the event that
the Median Pre-Closing Price is greater than $17.44, then the Exchange Ratio
will be reduced to a number determined by multiplying the existing Exchange
Ratio by $17.44 and dividing that product by the Median Pre-Closing Price. In
the event that the Median Pre-Closing Price is less than $12.89, then, unless
HUBCO exercises its right to terminate the Merger Agreement, the Exchange Ratio
will be increased to a number determined by multiplying the existing Exchange
Ratio by $12.89 and dividing that product by the Median Pre-Closing Price. If
the Median Pre-Closing Price is less than $12.89, HUBCO will seriously consider
exercising its right to terminate the Merger Agreement, rather than consummating
the Merger at the increased Exchange Ratio. In making its determination, HUBCO
will consider the Exchange Ratio adjustment and any other factors deemed
relevant to it at such time. The Merger Agreement also contemplates other
circumstances in which the Exchange Ratio could be reduced. Although it is not
anticipated that such circumstances would result in a reduction of more than two
basis points (e.g., from 2.865 to 2.844), no assurances can be given that such a
reduction will not be required. For further information regarding the Exchange
Ratio and potential adjustments, see "THE MERGER-Conversion of Jefferson's
Shares." The "Median Pre-Closing Price" will be calculated based upon the
Closing Price (as
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<PAGE>
defined) of HUBCO Common Stock during the first 20 of the 25 consecutive
trading days immediately preceding the date on which the Merger is consummated.
The "Closing Price" is defined as the closing price of HUBCO Common Stock on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") as published in The Wall Street Journal.
The Median Pre-Closing Price will be determined by taking the price half-way
between the Closing Prices left after discarding the nine lowest and nine
highest Closing Prices in such 20 day period. The Exchange Ratio referred to
above and the minimum and maximum amounts referred to above in the context of
the Median Pre-Closing Price have been adjusted to give effect to the Stock
Split.
Meeting of Stockholders
The Meeting will be held at Jefferson's headquarters, 155 Jefferson Street,
Passaic, New Jersey, on January __, 1995 at 3:00 p.m., local time. The sole
purpose of the Meeting is to consider and vote upon a proposal to approve the
Merger Agreement.
Votes Required; Record Date
Only holders of record of shares of Jefferson Common Stock at the close of
business on December _, 1994 (the "Record Date") will be entitled to vote at the
Meeting. The affirmative vote of the holders of two-thirds of the outstanding
shares of Jefferson Common Stock will be required to approve the Merger
Agreement. As of the Record Date, there were 226,078 shares of Jefferson Common
Stock outstanding and entitled to be voted.
The directors and executive officers of Jefferson and their affiliates
beneficially owned, as of December 1, 1994, 52,751 shares (or approximately
23.30% of the outstanding shares) of Jefferson Common Stock. HUBCO owned, as of
December 1, 1994, 11,300 shares (or approximately 4.99% of the outstanding
shares) of Jefferson Common Stock. As of December 1, 1994, the directors and
executive officers of HUBCO and their affiliates did not beneficially own any
shares of Jefferson Common Stock. Also, as of that date, the Bank did not
beneficially own any shares of Jefferson Common Stock directly or in a fiduciary
capacity. HUBCO and the directors and executive officers of Jefferson intend to
vote their shares in favor of the Merger. See "THE MEETING-Vote Required."
Recommendation of the Jefferson Board of Directors
Jefferson's Board of Directors (the "Jefferson Board") believes that the
Merger will provide significant value to all of Jefferson's stockholders.
ACCORDINGLY, JEFFERSON'S BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT JEFFERSON'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 Jefferson in the
Merger, see "THE MERGER-Interests of Certain Persons in the Merger."
Opinions of Financial Advisor
Capital Consultants of Princeton, Inc. ("Capital Consultants") has served
as the financial advisor to Jefferson in connection with the Merger and has
rendered an opinion to the Jefferson Board that, as of October 7, 1994 (the date
on which the Merger Agreement was originally executed), the consideration to be
received in the Merger is fair to the holders of Jefferson 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-Opinion of Jefferson's Financial
Advisor." The opinion of Capital Consultants dated as of the date of this Proxy
Statement-Prospectus is attached as Appendix B 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.
-8-
<PAGE>
Effective Time
The Merger will become effective at the date and time (the "Effective
Time") specified in a notice from the Bank to the FDIC and in a certification to
be filed by the Bank with the Department of Banking of the State of New Jersey
(the "Department"), both such documents to be submitted after consummation of
the Closing described herein and only with the approval of Jefferson. Jefferson
cannot withhold that approval unreasonably.
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 the Department and the FDIC. There can be no assurance
that such regulatory approvals will be obtained, and, if obtained, there can be
no assurance as to the date of any such approval. 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 Jefferson's Business Pending the Merger."
Termination of the Merger Agreement
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Time, either before or after its approval by Jefferson's
stockholders, (i) by the mutual consent of Jefferson and HUBCO; (ii) by HUBCO if
the Median Pre-Closing Price is less than $12.89 (as adjusted for the Stock
Split); (iii) by Jefferson if Jefferson's Board shall have approved another
transaction (which is not contemplated) through exercise of its fiduciary
obligations; or (iv) by either Jefferson or HUBCO individually under certain
other specified circumstances, including the failure of the Merger to become
effective by June 30, 1995, 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. If the Median Pre-Closing Price is less than $12.89,
HUBCO will seriously consider exercising its right to terminate the Merger
Agreement, rather than consummating the Merger at an increased Exchange Ratio.
In making its determination, HUBCO will consider the Exchange Ratio adjustment
and any other factors deemed relevant to it at such time. See "THE
MERGER-Termination, Waiver and Amendment."
Interests of Certain Persons in the Merger
Certain members of Jefferson's management and the Jefferson Board may be
deemed to have interests in the Merger in addition to their interests, if any,
as stockholders of Jefferson generally. These include, among other things,
provisions in the Merger Agreement relating to indemnification, bonus
arrangements and certain other employee benefits. 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, among other things, 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."
-9-
<PAGE>
Accounting Treatment
The Merger is expected to be accounted for as a pooling of interests for
financial reporting purposes. Under the pooling of interests method of
accounting, the assets, liabilities and shareholders' equity of Jefferson will
be included in the assets, liabilities and shareholders' equity of HUBCO as the
surviving entity. See "PRO FORMA COMBINED FINANCIAL INFORMATION" and "THE
MERGER-Accounting Treatment of the Merger."
Possible Reduction in the Exchange Ratio
If, at the time of the closing of the Merger (the "Closing"), any of
Jefferson's vendors require Jefferson to pay certain termination fees, the
aggregate value of the HUBCO Common Stock issuable pursuant to the Merger will
be reduced by an amount which approximates (i) the amount of such termination
fees, but in no event more than $70,000, plus (ii) legal fees in excess of
$15,000 incurred by Jefferson in connection with resolving the amount of such
termination fees. Assuming that such legal fees do not exceed $15,000 and
assuming that the Median Pre-Closing Price is in the range of $12.89 to $17.44,
the effect of such adjustment would be to reduce the Exchange Ratio by
approximately two basis points (i.e., from 2.865 to 2.844). Jefferson is
currently in a dispute regarding termination fees with one vendor. Accordingly,
no assurances can be given that such a reduction will not be made.
Fee in the Event of Another Transaction
The Merger Agreement provides that if certain events occur, Jefferson or
any successor in interest shall be obligated to pay HUBCO a termination fee (the
"Termination Fee") equal to $250,000, plus any legal fees and expenses incurred
by HUBCO in enforcing its right to obtain the Termination Fee. The events which
must occur before the Termination Fee is payable include the termination of the
Merger Agreement in certain circumstances and the consummation of a merger or
similar transaction by Jefferson and a party unrelated to HUBCO. The Termination
Fee increases the likelihood that the Merger will occur. See "THE MERGER-Fee in
the Event of Another Transaction."
Certain Differences in Stockholders' Rights
At the Effective Time, stockholders of Jefferson (except dissenting
stockholders) will become stockholders of HUBCO. The rights of stockholders of
HUBCO are determined by the New Jersey Business Corporation Act and by HUBCO's
certificate of incorporation and by-laws. The rights of stockholders of HUBCO
differ from the rights of stockholders of Jefferson with respect to certain
important matters, including certain voting requirements. For a summary of these
differences, see "COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER THE NATIONAL
BANK ACT AND THE NEW JERSEY BUSINESS CORPORATION ACT."
Dissenters' Rights
Under applicable law, holders of Jefferson Common Stock who vote against
the Merger Agreement or who comply with certain notice requirements and who
follow other procedures will have the right to dissent from the Merger and to be
paid cash for the fair value of their shares of Jefferson Common Stock. In order
for a holder of Jefferson Common Stock to perfect dissenters' rights, such
holder must vote against the Merger or give notice in writing to Jefferson at or
prior to the Meeting that such holder dissents from the Merger. Such holder must
make a written request to the Bank in its capacity as the surviving bank for the
fair value of his or her shares within 30 days after the Effective Time,
accompanied by the surrender of the holder's Jefferson stock certificates. The
value of such holder's shares will be determined as of the date of the Meeting.
Any deviation from such procedures may result in the forfeiture of dissenters'
rights. Accordingly, holders of Jefferson 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.
-10-
<PAGE>
RECENT DEVELOPMENTS
Shoppers Charge Transaction
On December 7, 1994, the Bank acquired Shoppers Charge Accounts Co.
("Shoppers") of Jersey City, New Jersey, for approximately $16.3 million in
cash. The Shoppers transaction is being accounted for under the purchase method
of accounting. See Note 11 to the Pro Forma Combined Condensed Unaudited
Financial Statements. The Bank recorded approximately $63.4 million in assets
and $46.9 million in liabilities as a result of this acquisition. The difference
reflects the shareholders' equity of Shoppers ($13.2 million) and the tax
impacted purchase accounting adjustments of $3.3 million. HUBCO estimates that
no goodwill will arise from the Shoppers transaction.
Shoppers is among the twenty largest third party private label retail
credit card companies in the United States. Private label revolving credit cards
issued on behalf of retail stores by third party firms accounted for
approximately one-third of outstandings on all retail credit cards at year-end
1992. Shoppers' credit operating system can also be used by the Bank to manage a
traditional credit card portfolio.
Shoppers will become a division of the Bank, and Thomas Nelson, Chief
Operating Officer of Shoppers, is remaining with the Bank with overall
responsibility for the operations of the Shoppers division.
Stock Split and Dividend Announcement
On October 13, 1994, HUBCO announced that its Board of Directors had
approved a 3-for-2 stock split (the "Stock Split") payable January 14, 1995 to
record holders of HUBCO Common Stock on January 3, 1995. HUBCO also announced
its intention to maintain the $.15 per share regular quarterly dividend
following the Stock Split, which would result in a 50% increase in the quarterly
cash dividend for 1995.
All numbers in this Proxy Statement-Prospectus have been adjusted to
reflect the Stock Split, as though the Stock Split had taken place prior to the
date as to which such numbers relate.
Washington Bancorp, Inc. Acquisition
On July 1, 1994, HUBCO acquired Washington Bancorp, Inc. ("Washington") and
its subsidiary, Washington Savings Bank, pursuant to a transaction (the
"Washington Merger") in which Washington was merged into HUBCO and Washington
Savings Bank was merged into the Bank. The Washington Merger has been accounted
for as a purchase. Information regarding Washington and the Washington Merger is
incorporated herein by reference to HUBCO's Current Report on Form 8-K dated
July 1, 1994, as amended by HUBCO's Form 8-K/A dated September 16, 1994, and is
reflected in certain of the pro forma data presented herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA COMBINED FINANCIAL
INFORMATION."
-11-
<PAGE>
MARKET PRICE AND DIVIDEND DATA
HUBCO Common Stock is included for quotation on the National Market System
of NASDAQ. HUBCO'S NASDAQ symbol is HUBC. Prior to March 1, 1993 HUBCO's 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's Common Stock as reported by NASDAQ or AMEX (as adjusted for the Stock
Split), as the case may be, and the equivalent price per share of Jefferson
Common Stock (a "Jefferson Common Share") based on as assumed Exchange Ratio of
2.865.
<TABLE>
<CAPTION>
Equivalent
Price Per
Jefferson
HUBCO Common Share
------------------------------ -----------------------------
High Low High Low
-------- --------- -------- --------
<S> <C> <C> <C> <C>
1992 Quarter Ended:
March 31........................ $ 8.333 $ 5.583 $ 23.874 $ 15.995
June 30......................... 8.417 7.083 24.115 20.293
September 30.................... 8.667 7.583 24.831 21.725
December 31..................... 11.250 8.000 32.231 22.920
1993 Quarter Ended:
March 31........................ 16.417 10.667 47.035 30.561
June 30 ........................ 16.250 12.667 46.556 36.291
September 30.................... 16.833 13.417 48.227 38.440
December 31..................... 16.167 13.333 46.318 38.199
1994 Quarter Ended:
March 31........................ 15.833 13.417 45.362 38.440
June 30......................... 15.000 13.333 42.975 38.199
September 30.................... 15.167 13.133 43.453 37.626
Fourth Quarter through
December __, 1994.............
</TABLE>
The following table sets forth the reported closing price per share of
HUBCO Common Stock (adjusted to give effect to the Stock Split) and the
equivalent price per Jefferson Common Share on (i) October 6, 1994, the last
business day preceding public announcement of the signing of the Merger
Agreement; and (ii) December __, 1994, a date shortly prior to the mailing of
this Proxy Statement-Prospectus:
<TABLE>
<CAPTION>
Equivalent
HUBCO Price Per
Common Jefferson
Stock Common Share
-------- ------------
<S> <C> <C>
October 6, 1994................................... $14.50 $41.543
December __, 1994.................................
</TABLE>
The equivalent price per Jefferson 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 the assumed Exchange
Ratio of 2.865.
If the Median Pre-Closing Price is less than $12.89, HUBCO will seriously
consider exercising its right to terminate the Merger Agreement, rather than
consummating the Merger at an increased Exchange Ratio. In making its
determination, HUBCO will consider the Exchange Ratio adjustment and any other
factors deemed relevant to it at such time.
-12-
<PAGE>
There is no active market for Jefferson Common Stock and management does
not regard the information that it receives regarding particular transactions
involving Jefferson Common Stock as being indicative of an actual "market
price". As of December 1, 1994, there were approximately 335 holders of record
of Jefferson Common Stock.
Jefferson stockholders are advised to obtain current market quotations
for HUBCO Common Stock. Inasmuch as the Exchange Ratio is fixed so long as the
Median Pre-Closing Price is between $12.89 and $17.44 (as adjusted for the Stock
Split), Jefferson stockholders are not assured of receiving any specific market
value of HUBCO Common Stock. 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 December 2, 1994, HUBCO had repurchased 753,122 shares of
its Common Stock. From time to time, HUBCO purchases additional shares under the
stock repurchase plan.
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
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 stockholder constitutes an unsafe or
unsound practice.
Adjusted for stock dividends declared during the period and the Stock
Split, HUBCO declared the following per share cash dividends on HUBCO Common
Stock for the periods indicated below:
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
First Quarter $.06 $ .07 $.08
Second Quarter .06 .07 .08
Third Quarter .06 .07 .10
Fourth Quarter .07 .08 .10*
Special Year-end Dividend .02 .02 --
---- ----- ----
Total $.27 $ .31 $.36
==== ===== ====
<FN>
- ----------------------
* Represents an actual quarterly dividend of $.15 per share prior to adjustment
for the Stock Split.
</FN>
</TABLE>
HUBCO's Board has announced its intention to maintain the $.15 per share
regular quarterly dividend following the Stock Split, which would result in a
50% increase in the quarterly cash dividend for 1995.
Jefferson has not paid any cash dividends since 1992. Since December 1992,
Jefferson has been subject to a Consent Order (the "Order" or "Consent Order")
which requires the approval of the Comptroller of the Currency (the "OCC") prior
to the payment of any cash dividend. Due to the proposed Merger, the terms of
the Merger Agreement and the terms of the Order, Jefferson does not anticipate
declaring a dividend in the forseeable future.
-13-
<PAGE>
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 Jefferson Common Stock, both on
an actual (historical) basis and on a pro forma combined basis, as adjusted for
the Stock Split. The actual per share data has been derived from the
consolidated financial statements of HUBCO incorporated by reference herein and
the financial statements of Jefferson presented elsewhere herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "INDEX TO JEFFERSON'S
FINANCIAL STATEMENTS."
The pro forma dividend and book value per share data and the pro forma net
income per share data for the years ended December 31, 1992 and 1991 have been
derived from the pro forma combined condensed financial statements (appearing
elsewhere herein) of HUBCO and Jefferson and give effect to the Merger,
accounted for as a pooling of interests. The pro forma net income per share data
for the nine months ended September 30, 1994 and the year ended December 31,
1993 has been derived from the pro forma combined condensed financial statements
(appearing elsewhere herein) of HUBCO, Washington and Jefferson, giving effect
to both the Washington Merger (accounted for as a purchase) and the Merger
(accounted for as a pooling of interests). See "PRO FORMA COMBINED FINANCIAL
INFORMATION" for a description of the extent to which Washington's consolidated
results of operations are reflected in the pro forma data presented herein. Pro
forma per share amounts have been determined based on the assumptions set forth
in the pro forma combined condensed unaudited financial statements presented
elsewhere herein, including the assumption that 615,339 shares of HUBCO Common
Stock will be issued in the Merger.
The actual, pro forma and pro forma equivalent per share data included in
the table below should be read in conjunction with the financial statements of
HUBCO, Washington and Jefferson, the pro forma combined condensed financial
statements of HUBCO and Jefferson, the pro forma combined condensed financial
statements of HUBCO, Washington and Jefferson and the related notes accompanying
such financial statements, all of which are either incorporated by reference
herein or appear elsewhere herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE", "INDEX TO JEFFERSON'S FINANCIAL STATEMENTS" and "PRO FORMA COMBINED
FINANCIAL INFORMATION." The pro forma data presented below is not necessarily
indicative of the results that would actually have been attained if the Merger
and/or the Washington Merger had been consummated as of the first day of the
periods described below or results that may be attained in the future.
-14-
<PAGE>
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
------------- -------------------------
1994 1993 1992 1991
------------- ----- ----- -----
<S> <C> <C> <C> <C>
CASH DIVIDENDS DECLARED PER
COMMON SHARE:
HUBCO--Actual(1)....................................... $0.26 $0.31 $0.27 $0.22
Jefferson--Actual(1)................................... -- -- 0.50 0.75
Jefferson, pro forma equivalent(2)..................... 0.74 0.90 0.76 0.61
NET INCOME (LOSS) PER COMMON SHARE:
HUBCO -- Actual:
Primary...................................... 1.22 1.37 1.06 0.68
Fully diluted................................ 1.20 1.37 1.06 0.68
Jefferson -- Actual................................... (0.42) (6.00) (4.95) 1.85
HUBCO, Washington and Jefferson, pro forma:
Primary(3)................................... 0.93 1.07 N.A.* N.A.*
Fully diluted(4)............................. 0.93 1.06 N.A.* N.A.*
HUBCO and Jefferson, pro forma:
Primary (3) ................................. N.A.* N.A.* 0.87 0.68
Fully diluted(4) ............................ N.A.* N.A.* 0.87 0.68
Jefferson, pro forma equivalent:
Primary(5)................................... 2.66 3.07 2.49 1.95
Fully diluted(6)............................. 2.66 3.04 2.49 1.95
As of September 30, As of December 31,
1994 1993
-------------------- ------------------
NET BOOK VALUE PER COMMON SHARE:
HUBCO -- Actual....................................... $ 8.15 $ 7.83
Jefferson -- Actual................................... 26.53 27.32
Jefferson and HUBCO, pro forma(7)..................... 8.18 7.93
Jefferson, pro forma equivalent(8).................... 23.44 22.72
<FN>
------------------------
* Not applicable. See "PRO FORMA COMBINED FINANCIAL INFORMATION."
(1) For information regarding HUBCO's and Jefferson's dividends, and the
market price of HUBCO Common Stock, see "MARKET PRICE AND DIVIDEND DATA."
(2) Represents the dividends declared on HUBCO's Common Stock during the
respective periods multiplied by the assumed 2.865 Exchange Ratio.
(3) Represents primary net income per common share on a pro forma combined
basis (including, for the nine months ended September 30, 1994 and the year
ended December 31, 1993, the pro forma effect of the Washington Merger
accounted for as a purchase). Such amounts have been determined by reducing
pro forma net income amounts by the dividends applicable to HUBCO's Series
A Preferred Stock (which was first issued on July 1, 1994) and dividing
such amount by the sum of (i) the weighted average number of shares of
HUBCO Common Stock outstanding during each period and (ii) 615,339 shares
of HUBCO Common Stock assumed to be issued pursuant to the Merger.
(4) Represents fully diluted net income per common share on a pro forma
combined basis (including, for the nine months ended September 30, 1994 and
the year ended December 31, 1993, the pro forma effect of the Washington
Merger accounted for a a purchase). Such amounts have been determined by
dividing pro forma net income amounts by the sum of (i) the weighted
average number of shares of HUBCO Common Stock outstanding during each
period, (ii) 615,339 shares of HUBCO Common Stock assumed to be issued
pursuant to the Merger and (iii) 1,196,717 shares of HUBCO Common Stock
issuable upon the assumed full conversion of HUBCO's Series A Preferred
Stock.
(5) Represents the amount computed pursuant to Note 3 above multiplied by the
assumed 2.865 Exchange Ratio.
(6) Represents the amount computed pursuant to Note 4 above multiplied by the
assumed 2.865 Exchange Ratio.
(7) Represents the pro forma combined net book value of HUBCO and Jefferson
attributable to common shares, divided by the sum of (i) the number of
shares of HUBCO Common Stock outstanding (adjusted to reflect the Stock
Split) and (ii) 615,339 shares of HUBCO Common Stock assumed to be issued
pursuant to the Merger.
(8) Represents the amount computed pursuant to Note 7 above multiplied by the
assumed 2.865 Exchange Ratio.
</FN>
</TABLE>
-15-
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected consolidated financial and other data
of HUBCO and Jefferson. Results of operations for the nine months ended
September 30, 1994 are derived in part from the unaudited consolidated financial
statements incorporated by reference or included elsewhere in this Proxy
Statement-Prospectus. Such interim data includes all adjustments (consisting
solely of normal recurring accruals) necessary for a fair presentation of the
results for the unaudited periods. The results of operations for the nine months
ended September 30, 1994 for HUBCO and Jefferson are not necessarily indicative
of the results that may be expected for any other period.
-16-
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
Nine Months Ended
September 30, Years Ended December 31,
------------------------ --------------------------------------------------------------
1994(8) 1993 1993 1992 1991 1990 1989
---------- ---------- ---------- --------- -------- -------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income .......................... $ 59,541 $ 50,331 $ 67,759 $ 67,646 $ 51,759 $ 49,809 $ 51,113
Interest expense ......................... 18,355 15,634 20,741 26,633 25,287 26,818 27,820
---------- ---------- ---------- -------- -------- -------- --------
Net interest income ...................... 41,186 34,697 47,018 41,013 26,472 22,991 23,293
Provision for possible loan losses ....... 1,950 2,550 3,600 4,116 2,312 4,150 1,860
---------- ---------- ---------- -------- -------- -------- --------
Net interest income after
provision for possible loan losses ..... 39,236 32,147 43,418 36,897 24,160 18,841 21,433
Other income ............................. 7,392 6,416 8,606 7,657 5,471 4,532 4,196
Other expenses ........................... 26,962 22,618 29,971 34,349 22,274 20,013 19,863
---------- ---------- ---------- -------- -------- -------- --------
Income before income taxes ............... 19,666 15,945 22,053 10,205 7,357 3,360 5,766
Income tax provision ..................... 7,435 5,498 7,851 564 2,336 1,145 2,457
---------- ---------- ---------- -------- -------- -------- --------
Net income ............................... $ 12,231 $ 10,447 $ 14,202 $ 9,641 $ 5,021 $ 2,215 $ 3,309
========== ========== ========== ======== ======== ======== ========
Per Share Data:
Weighted average common shares
outstanding (1) ........................ 9,757 10,382 10,364 9,136 7,432 7,412 7,454
Net income per common share(2):
Primary ............................. $ 1.22 $ 1.01 $ 1.37 $ 1.06 $ 0.68 $ 0.30 $ 0.44
Fully diluted ....................... 1.20 1.01 1.37 1.06 0.68 0.30 0.44
Dividends paid per common share .......... 0.26 0.21 0.31 0.27 0.22 0.22 0.22
Balance Sheet Summary:
Securities ............................... $ 624,942 $ 405,503 $ 426,685 $322,522 $138,915 $150,536 $ 89,177
Loans, net ............................... 661,954 548,022 529,390 513,448 465,883 371,700 369,232
Total assets ............................. 1,406,812 1,038,926 1,041,825 931,911 673,159 595,128 548,132
Deposits ................................. 1,236,109 935,693 935,688 843,226 608,857 512,823 484,192
Stockholders' equity ..................... 98,661 76,737 78,954 68,313 41,099 37,567 37,400
Performance Ratios:
Return on average assets(3) .............. 1.35% 1.44% 1.44% 1.05% 0.82% 0.40% 0.62%
Return on average equity(3) .............. 19.69 19.28 19.34 17.38 12.75 5.89 8.91
Dividend payout .......................... 20.71 21.19 23.01 25.04 33.44 73.63 49.65
Average equity to average assets ......... 6.85 7.46 7.44 6.04 6.45 6.85 7.00
Net interest margin(3)(4) ................ 5.00 5.22 5.20 4.97 4.94 4.72 4.92
Asset Quality Ratios:
Allowance for possible loan
losses to total loans, net(5) .......... 2.16 1.80 2.04 1.48 1.44 1.41 .82
Allowance for possible loan
losses to non-performing loans(6) ...... 85.67 107.07 118.10 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)(7) ....................... 83.90 99.08 107.87 98.04 50.10 39.39 90.40
Non-performing loans to total
loans, net (5)(6) ...................... 2.52 1.68 1.73 1.54 1.90 2.67 1.38
Non-performing assets to total
loans, net and other real
estate(5)(7) ........................... 2.94 2.09 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, and other real estate(5)(7) ....... 2.57 1.80 1.88 1.51 2.84 3.53 0.90
Net charge-offs to average loans, net(3).. 0.46 0.18 0.15 0.91 0.58 0.54 0.28
<FN>
- -------------
(1) For all periods presented other than the nine months ended September 30,
1994, the weighted average common shares outstanding is identical on a
primary and fully diluted basis. For the nine months ended September 30,
1994, the table reflects the weighted average common shares outstanding on
a primary basis; for that period, HUBCO had 10,160,731 weighted average
common shares outstanding on a fully diluted basis.
(2) Income per share and dividends paid per share have been restated to reflect
the Stock Split and a 10% stock dividend paid June 1, 1993.
(3) Interim ratios have been annualized for purposes of comparability with
year-end data.
(4) Computed on a tax equivalent basis.
(5) Total loans are net of unearned income and deferred loan fees.
(6) Non-performing loans include non-accruing loans, renegotiated loans and
loans past due 90 days or more and accruing.
(7) Non-performing assets include non-performing loans plus other real estate.
(8) On July 1, 1994, HUBCO acquired Washington Bancorp, Inc. ("Washington")
pursuant to a merger accounted for as a purchase. On May 6, 1994, HUBCO,
through the Bank, acquired deposits and certain assets of Polifly Federal
Savings and Loan Association ("Polifly") in a transaction accounted for as
a purchase. Under the purchase method of accounting, the consolidated
results of operations of Washington and Polifly are reflected above solely
for periods on and after the dates of acquisition.
</FN>
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA OF JEFFERSON
Nine Months Ended
September 30, Years Ended December 31,
--------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- ---------- --------- --------- -------- -------- -------
(Dollars in thousands, except per share amounts)
Earnings Summary:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income ................................. $ 4,417 $ 4,668 $ 6,119 $ 7,431 $ 9,875 $ 10,401 $ 9,518
Interest expense ................................ 1,580 1,753 2,311 3,454 5,988 6,597 5,944
-------- ---------- ---------- --------- --------- --------- --------
Net interest income ............................. 2,837 2,915 3,808 3,977 3,887 3,804 3,574
Provision for possible loan losses .............. 175 1,006 1,156 1,718 580 534 90
-------- ---------- ---------- --------- --------- --------- --------
Net interest income after provision for
possible loan losses .......................... 2,662 1,909 2,652 2,259 3,307 3,270 3,484
Service charges on deposit accounts
and other income .............................. 378 379 489 324 309 345 244
Other expenses .................................. 3,070 2,937 4,435 3,882 3,108 2,769 2,385
-------- ---------- ---------- --------- --------- --------- --------
Income (loss) before income taxes ............... (30) (649) (1,294) (1,299) 508 846 1,343
Income taxes (benefit) .......................... 64 -0- 62 (181) 93 292 334
-------- ---------- ---------- --------- --------- --------- --------
Net income (loss) ............................... $ (94) $ (649) $ (1,356) $ (1,118) $ 415 $ 554 $ 1,009
======== ========== ========== ========= ======== ======== ========
Per Share Data:
Weighted average common shares
outstanding ................................... 226,078 226,078 226,078 226,078 224,882 214,116 203,921
Net income (loss) per share ..................... $ (0.42) $ (2.87) $ (6.00) $ (4.95) $ 1.85 $ 3.05 $ 4.95
Cash dividends per common share.................. -- -- -- 0.50 0.75 0.85 0.85
Balance Sheet Summary:
Securities ...................................... $ 33,734 $ 23,961 $ 23,925 $ 23,794 $ 16,314 $ 10,682 $ 9,637
Loans, net of unearned income.................... 44,695 50,473 48,564 59,686 65,172 66,040 65,228
Allowance for possible loan losses .............. 1,648 1,959 1,682 2,196 1,117 884 395
Total assets .................................... 91,778 96,628 94,713 101,069 109,335 121,293 109,375
Deposits ........................................ 85,288 89,301 87,959 93,045 99,709 111,401 99,837
Total shareholders' equity ...................... 5,996 6,881 6,174 7,530 8,761 8,399 8,151
Performance Ratios:
Return on average assets(1) ..................... (0.13)% (0.87)% (1.39)% (1.06)% 0.36% 0.48% 1.85%
Return on average equity(1) ..................... (2.05) (11.99) (18.79) (13.30) 4.95 6.69 24.76
Average equity to average assets ................ 6.33 7.28 7.35 7.91 7.25 7.17 7.45
Dividend payout ................................. -- -- -- (10.11) 35.94 31.41 16.45
Net interest margin(1) .......................... 4.25 4.18 4.20 4.02 3.56 NA(5) NA(5)
Asset Quality Ratios:
Allowance for possible loan losses to
total loans, net(2) ......................... 3.69 3.88 3.46 3.68 1.71 1.34 0.61
Allowance for possible loan losses to
non-performing loans(3) ..................... 28.23 23.94 22.13 27.85 13.07 17.83 21.58
Allowance for possible loan losses to non-
performing assets (excluding loans past due
90 days or more and accruing)(4) .............. 36.56 20.70 18.48 20.59 59.70 502.27 --
Non-performing loans to total loans(2)(3) ....... 13.06 16.21 15.65 13.21 13.11 7.51 2.81
Non-performing assets to total loans, net,
and other real estate, net(2)(4) .............. 17.53 15.61 20.32 17.91 14.60 7.77 2.81
Non-performing assets (excluding loans past
due 90 days or more and accruing) to total
loans, net, and other real estate(2)(4) ....... 14.70 17.62 16.92 16.90 13.88 0.27 --
Net charge-offs to average loans, net(1) ........ 0.59 3.03 3.13 1.00 0.53 0.27 0.02
<FN>
--------------------
(1) Interim ratios have been annualized for purposes of comparability with year-end data.
(2) Total loans are net of unearned income and deferred loan fees.
(3) Non-performing loans include non-accruing loans, renegotiated loans and loans past due 90 days or more and accruing.
(4) Non-performing assets include non-performing loans and other real estate.
(5) Not available.
</FN>
</TABLE>
-18-
<PAGE>
SUMMARY SELECTED PRO FORMA DATA
The following table presents certain unaudited combined condensed financial
information from the Pro Forma Combined Condensed Statements of Income for the
nine months ended September 30, 1994 and the years ended December 31, 1993, 1992
and 1991, and the Pro Forma Combined Condensed Balance Sheet at September 30,
1994, in each case giving effect to the acquisition of Jefferson by HUBCO in a
transaction accounted for as a pooling of interests, as if such transaction had
been consummated for statement of income purposes on the first day of the
applicable periods and for balance sheet purposes on September 30, 1994. The
unaudited pro forma statement of income data for the nine months ended September
30, 1994 and the year ended December 31, 1993 also gives effect to the
Washington Merger in a transaction accounted for as a purchase, as if the
Washington Merger had been consummated on the first day of such periods. For
information regarding the extent to which the Washington Merger is reflected in
the pro forma data presented herein, see "PRO FORMA COMBINED FINANCIAL
INFORMATION." The pro forma information is based on the historical financial
statements of HUBCO, Washington and Jefferson. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "INDEX TO JEFFERSON'S FINANCIAL STATEMENTS." The pro
forma financial information assumes an Exchange Ratio of 2.865 shares of HUBCO
Common Stock for each share of Jefferson Common Stock outstanding.
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 is not
necessarily indicative of the results of operations which would have been
achieved had the above transactions been consummated as of the beginning of the
periods for which such data are presented and should not be construed as being
representative of future periods.
-19-
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Unaudited Financial Information
For the Nine Months For the Years
Ended September 30, Ended December 31,
------------------- ------------------------------------
1994 1993 1992 1991
------- ------- ------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net interest income before provision
for possible loan losses ................................ $47,905 $57,609 $44,990 $ 30,359
Provision for possible loan losses ........................ 3,101 5,365 6,256 2,892
------- ------- ------- --------
Net interest income after provision
for possible loan losses ................................ 44,804 52,244 38,734 27,467
Income before income taxes ................................ 17,099 18,266 8,906 7,865
Net income ................................................ 10,483 12,891 8,523 5,436
Income per common share(1):
Primary ................................................. 0.93(2) 1.07(3) 0.87 0.68
Fully diluted ........................................... 0.93 1.06 0.87 0.68
As of
September
30, 1994
----------
BALANCE SHEET:
Total assets ........................................... $1,497,858
Total deposits ......................................... 1,321,397
Total stockholders' equity ............................. 103,925
Book value per common share(1) ......................... 8.18
<FN>
- ------------------------
(1) Adjusted for the Split Stock.
(2) After pro forma payment of Series A Preferred Stock dividends of $861
(representing a dividend of $1.08 per share) for the nine months ended
September 30, 1994.
(3) After pro forma payment of Series A Preferred Stock dividends of $1,149
(representing a dividend of $1.44 per share) for the year ended December
31, 1993.
</FN>
</TABLE>
-20-
<PAGE>
INTRODUCTION
General
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $6.00 per share ("Jefferson Common Stock"), of Jefferson
National Bank ("Jefferson"), in connection with the solicitation of proxies by
the Board of Directors of Jefferson (the "Board") for use at a Special Meeting
of Jefferson's stockholders to be held at Jefferson's headquarters, 155
Jefferson Street, Passaic, New Jersey on January __, 1995 at 3:00 p.m., local
time, and at any adjournments or postponements thereof (the "Meeting"). On
October 13, 1994, the Board of Directors of HUBCO approved a 3-for-2 stock
split, payable January 14, 1995 to common stockholders of record on January 3,
1995 (the "Stock Split"). All share and per share data regarding HUBCO's Common
Stock set forth herein has been adjusted to give retroactive effect to the Stock
Split as if the Stock Split occurred prior to the periods reported herein.
Pursuant to provisions in the Merger Agreement which provide for adjustment to
the exchange ratio described therein in the event of transactions such as the
Stock Split, the Merger Agreement has been amended and restated to give effect
to the Stock Split and all references herein to the exchange ratio have been
adjusted to give effect to the Stock Split.
At the Meeting, the holders of record of Jefferson Common Stock as of the
close of business on December __, 1994 (the "Record Date") will consider and
vote upon a proposal to approve an Amended and Restated Agreement and Plan of
Merger, dated November 28, 1994 (the "Merger Agreement"), by and among HUBCO,
Inc., a New Jersey corporation ("HUBCO"), Hudson United Bank, a New Jersey
commercial bank that is a wholly-owned subsidiary of HUBCO (the "Bank"), and
Jefferson, pursuant to which Jefferson will merge with and into the Bank (the
"Merger"), with the Bank surviving the Merger. Pursuant to the Merger Agreement,
stockholders of Jefferson will be entitled to receive 2.865 shares (as adjusted
for the Stock Split) of HUBCO's Common Stock, no par value ("HUBCO Common
Stock"), for each share of Jefferson Common Stock outstanding at the time that
the Merger is consummated (the "Effective Time"), subject to certain adjustment
provisions set forth in the Merger Agreement and described herein, which
provisions, under certain circumstances, could result in a change in the
Exchange Ratio. See "THE MERGER".
This Proxy Statement-Prospectus also constitutes a prospectus of HUBCO in
respect of the shares of HUBCO Common Stock issuable pursuant to the Merger.
Parties to the Merger
HUBCO. HUBCO is a bank holding company whose principal operating subsidiary
is Hudson United Bank, a state-chartered commercial bank. 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 45 branches in Hudson, Bergen, Passaic, Essex,
Middlesex and Morris counties. The deposits of the Bank are insured by the FDIC.
As of September 30, 1994, HUBCO had consolidated assets of $1.4 billion,
consolidated deposits of $1.2 billion and consolidated stockholders' equity of
$98.7 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
subsidiaries. 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 "MARKET PRICE AND DIVIDEND DATA."
Jefferson. Jefferson is a commercial bank organized in 1970 as a national
banking association. Jefferson conducts business in New Jersey through four
branches located in Passaic County. At September 30, 1994, Jefferson had assets
of $91.8 million, deposits of $85.3 million and shareholders' equity of $6.0
million.
Additional information about HUBCO and HUBCO's subsidiaries is included in
documents incorporated by reference in this Proxy Statement-Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." For additional information
about Jefferson, see "BUSINESS OF JEFFERSON" and "INDEX TO JEFFERSON'S FINANCIAL
STATEMENTS."
-21-
<PAGE>
THE MEETING
The Meeting
Each copy of this Proxy Statement-Prospectus mailed to holders of Jefferson
Common Stock is accompanied by a proxy card furnished in connection with the
Jefferson Board's solicitation of proxies for use at the Meeting. The Meeting is
scheduled to be held at Jefferson's headquarters, 155 Jefferson Street, Passaic,
New Jersey, on January ____, 1995 at 3:00 p.m., local time. Only holders of
record of Jefferson 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 Jefferson Common Stock will consider and vote upon (i) a proposal to
approve the Merger and (ii) such other matters as may properly be brought before
the Meeting. On each matter to be considered at the Meeting by holders of
Jefferson Common Stock, such holders will have one vote for each share of
Jefferson Common Stock held of record on the Record Date.
HOLDERS OF JEFFERSON COMMON STOCK ARE REQUESTED TO PROMPTLY SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD TO JEFFERSON IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE.
Any holder of Jefferson 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 Jefferson National Bank, 155 Jefferson Street, Passaic,
New Jersey 07055, Attention: President, provided that such notice or proxy card
is actually received by Jefferson before the vote of stockholders. A proxy will
not be revoked by the death or supervening incapacity of the stockholder
executing the proxy unless, before the vote, the proxy is revoked by the
personal representative or guardian of the stockholder. Unless contrary
instructions are provided, the shares of Jefferson Common Stock 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. 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 laws. As of the date of this Proxy
Statement-Prospectus, Jefferson is unaware of any other matter to be presented
at the Meeting.
The cost of soliciting proxies from stockholders of Jefferson will be borne
by Jefferson. Such solicitation will be made by mail, but also may be made by
telephone or in person by the directors, officers and employees of Jefferson
(who will receive no additional compensation for doing so). Jefferson will make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals. Jefferson may also retain the
services of a proxy soliciting firm. The cost of such services will depend upon
the volume of usage but is not expected to exceed $10,000 plus the out-of-pocket
expenses of such firm.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
Vote Required
Only holders of record of shares of Jefferson Common Stock on the Record
Date will be entitled to vote at the Meeting. The affirmative vote of the
holders of two thirds of the Jefferson Common Stock outstanding on the Record
Date will be required to approve the Merger Agreement. Therefore, a failure by a
holder of Jefferson Common Stock to return a properly executed proxy card or to
vote in person 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 the Record Date, there were 226,078 shares of Jefferson Common
Stock outstanding and entitled to vote at the Meeting. Each such share is
entitled to one vote.
-22-
<PAGE>
As of December 1, 1994, the following Jefferson directors owned shares of
Jefferson Common Stock as follows: Raymond L. Sisco, 37,680 shares (or 16.66% of
the outstanding shares); Alexander Peto, 680 shares (or 0.30% of the outstanding
shares); George Herman, 4,989 shares (or 2.20% of the outstanding shares);
Joseph Di Donna, 5,706 shares (or 2.52% of the outstanding shares); John Stokes,
2,613 shares (or 1.15% of the outstanding shares); Donald S. Rudbart, 466 shares
(or 0.20% of the outstanding shares); Joseph Greco, 167 shares (or 0.07% of the
outstanding shares); Scott Kudlach, 250 shares (or 0.11% of the outstanding
shares); and Peter Levine, 200 shares (or 0.09% of the outstanding shares). As
of the same date, all directors and executive officers of Jefferson as a group
(11 persons) beneficially owned 52,751 shares (or 23.30% of the outstanding
shares). HUBCO beneficially owned, as of December 1, 1994, 11,300 shares (or
approximately 4.99% of the outstanding shares) of Jefferson Common Stock. As of
December 1, 1994, the directors and executive officers of HUBCO and their
affiliates did not beneficially own any shares of Jefferson Common Stock. Also,
as of that date, the Bank did not beneficially own any shares of Jefferson
Common Stock directly or in a fiduciary capacity. HUBCO and the directors and
executive officers of Jefferson intend to vote their shares in favor of the
Merger Agreement.
Jefferson's management is not aware of any individual or entity that owned
of record or beneficially more than 5% of the outstanding Jefferson Common Stock
as of December 1, 1994, other than Raymond L. Sisco, Jefferson's Chairman of the
Board, who owned 37,680 shares (or approximately 16.66% of the outstanding
shares). Mr. Sisco's business address is c/o Jefferson, 155 Jefferson Street,
Passaic, New Jersey 07055.
Recommendation of the Jefferson Board
The Jefferson Board has approved the Merger Agreement and recommends that
Jefferson stockholders vote FOR approval of the Merger Agreement. The Jefferson
Board believes that the Merger will enable Jefferson stockholders to participate
in opportunities for growth that the Jefferson Board believes the Merger makes
possible. See "THE MERGER-Background of and Reasons for the Merger" and
"-Opinion of Jefferson's Financial Advisor."
THE MERGER
The following information, insofar as it relates to matters contained in
the Merger Agreement, is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and is attached hereto as
Appendix A. Jefferson stockholders are urged to read the Merger Agreement.
Background of and Reasons for the Merger
Jefferson, like many other banks and thrift institutions, was adversely
impacted by the decline in real estate values and weakness in general economic
conditions in the Northeast during the late 1980's and early 1990's. As a result
of these factors, Jefferson suffered net losses for the years ended December 31,
1992 and 1993 and, in 1992, was issued a Consent Order by the OCC requiring
Jefferson to take substantial steps to assure the continued safety and soundness
of the institution. Several steps have been taken and, for the nine months ended
September 30, 1994, the amount of Jefferson's net loss ($94,000) is
substantially less than the losses recorded in the past two fiscal years.
While the Jefferson Board believes that Jefferson has confronted and
resolved the issues that resulted in the 1992 and 1993 losses and the Consent
Order, the Jefferson Board also recognizes that it may be difficult for
Jefferson to return to the levels of profitability once attained by the
institution. Accordingly, when Jefferson was approached by HUBCO in the late
Spring of 1994 regarding a potential merger, the Jefferson Board determined to
pursue discussions with HUBCO and to retain Capital Consultants of Princeton,
Inc. ("Capital Consultants") as a financial advisor and to retain special
counsel for the purpose of assisting the Board in considering its various
alternatives. HUBCO pursued acquisition discussions with Jefferson as part of
HUBCO's ongoing strategy to grow through acquisitions.
At the Jefferson Board's request, Capital Consultants commenced its
engagement by analyzing Jefferson and determining Jefferson's future potential
and the ranges of consideration that Jefferson could attract if it were to be
acquired. As a result of this analysis and recognizing that HUBCO was interested
in acquiring Jefferson, the Board instructed Capital Consultants to identify
those other institutions that would be likely to have an interest in acquiring
Jefferson at a price that would be acceptable to the Jefferson Board. After
Capital Consultants had prepared a list of such institutions and before
Jefferson commenced substantive negotiations with HUBCO, the Jefferson Board
instructed Capital Consultants to contact several institutions recommended by
Capital Consultants as potential
-23-
<PAGE>
merger partners. By September, 1994, Capital Consultants and the Board
determined that of the institutions identified by Capital Consultants, none had
expressed an interest in Jefferson that would provide consideration to
Jefferson's stockholders with value comparable to the value initially proposed
by HUBCO.
Accordingly, in early September, 1994, representatives of Jefferson and
Capital Consultants met with representatives of HUBCO. At that meeting, HUBCO
indicated that if its due diligence investigation did not uncover unexpected
information, HUBCO anticipated that it would be willing to offer, for each share
of Jefferson Common Stock, shares of HUBCO Common Stock having a value, at the
date of execution of the proposed merger agreement, of approximately $43.00. On
the basis of that position, as well as the confidentiality agreement previously
executed by the parties, HUBCO's representatives were permitted to perform a due
diligence examination of Jefferson. At the same time, HUBCO caused its counsel
to prepare and deliver to Jefferson a preliminary draft of a merger agreement.
During the course of the next several weeks, Jefferson responded to certain
issues raised by HUBCO as a result of its investigation and both Jefferson and
HUBCO negotiated various provisions of the merger agreement. During that
process, representatives of Jefferson rejected proposals to reduce the price
first mentioned by HUBCO. Indeed, the Exchange Ratio referenced in the Merger
Agreement is slightly higher than the exchange ratio proposed by HUBCO after it
completed its due diligence investigation.
The Jefferson Board met on several occasions prior to the Board's approval
of the Merger Agreement. At substantially all of those meetings, Capital
Consultants and Jefferson's special counsel were present to answer questions and
to comment upon the proposed transaction and the process undertaken by the Board
to respond to HUBCO's interest in Jefferson. On October 7, 1994, the Board
received an opinion from Capital Consultants (described below) to the effect
that the proposed Merger is fair to the stockholders of Jefferson from a
financial point of view. Based upon its review of the entire situation and the
input that it had received, the Board approved the Merger Agreement on October
7, 1994 and the parties executed the Merger Agreement on the same date. The
Merger Agreement was subsequently amended and restated on November 28, 1994 to
give effect to the Stock Split.
Opinion of Jefferson's Financial Advisor
On June 27, 1994, the Jefferson Board retained Capital Consultants to act
as Jefferson's financial advisor, to assist management of Jefferson 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 financial point of view, to the stockholders of Jefferson
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 Jefferson because of its knowledge of, experience with, and
reputation in the financial services industry. Capital Consultants is not a
market maker in either HUBCO Common Stock or Jefferson Common Stock.
Capital Consultants has delivered to the Jefferson Board its opinion that,
based upon and subject to various items set forth in its written opinion, the
consideration to be received by Jefferson's stockholders pursuant to the Merger
Agreement is fair from a financial point of view to Jefferson's stockholders. In
requesting Capital Consultant's advice and opinion, Jefferson'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.
-24-
<PAGE>
The full text of the written opinion of Capital Consultants, dated as of
December __, 1994, which sets forth assumptions made and matters considered, is
substantially the same as the opinion rendered by Capital Consultants on October
7, 1994, and is attached as Appendix B to this Proxy Statement-Prospectus.
Jefferson stockholders are urged to read this opinion in its entirety. Capital
Consultants' opinion is directed only to the financial terms of the Merger and
does not constitute a recommendation to any Jefferson 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.
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 HUBCO and Jefferson including, for
HUBCO, 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, 1994, and for
Jefferson, annual reports to stockholders for the years ended December 31, 1991
through 1993 and quarterly reports of Consolidated Condition and Income as filed
with the Office of the Comptroller of the Currency for the periods ended March
31, June 30 and September 30, 1994; (iv) certain historical operating and
financial information provided to Capital Consultants by the managements of
Jefferson and HUBCO; (v) historical and current market data for the Jefferson
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 Consultants deemed generally comparable to Jefferson
and HUBCO; (vii) the nature and terms of recent acquisitions and merger
transactions involving banking institutions that Capital Consultants considered
reasonably similar to Jefferson and HUBCO in financial character, operating
character, historical performance, geographic market and economy; and (viii)
such other studies, analyses, inquiries and reports as Capital Consultants
deemed appropriate. In addition, Capital Consultants conducted meetings with
members of senior management of Jefferson and HUBCO for purposes of reviewing
the future prospects of Jefferson and HUBCO. Capital Consultants evaluated the
pro forma ownership of the HUBCO Common Stock by Jefferson's stockholders,
relative to the pro forma contribution of Jefferson'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 Jefferson and HUBCO. Capital
Consultants did not conduct a physical inspection of any of the properties or
assets of Jefferson or HUBCO and has not made any independent evaluation or
appraisal of any properties, assets or liabilities of Jefferson 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 Jefferson 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.
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 Consultants' 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 necessarily
susceptible to partial analyses and summary description.
-25-
<PAGE>
In its analyses, Capital Consultants made numerous assumptions with respect
to Jefferson's and HUBCO's industry performance, business and economic
conditions and other matters, many of which are beyond the control of Jefferson
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 Jefferson and HUBCO. The following is a brief summary
of such analyses, certain of which were presented to the Jefferson Board by
Capital Consultants on or before October 7, 1994.
Valuation Analysis
Using a valuation analysis, Capital Consultants estimated the present value
of theoretical values of Jefferson based on a range of price-to-earnings ("P/E")
multiples between 12.0x and 14.0x and a range of discount rates between 6% and
8%. The range of net present values was based on a range of estimated earnings
for the next three years assuming annual earnings growth rates between 5% and
8%. The results of this analysis indicated a range of theoretical values for
Jefferson between $22.10 per share (5% earnings growth rate; P/E of 12.0x; 8%
discount rate) and $27.99 per share (8% growth rate; P/E of 14.0x; 6% discount
rate). Capital Consultants estimated the present value of the future dividend
streams that Jefferson could produce over a three year period, assuming a payout
ratio from current earnings of 25% starting in 1996. Capital Consultants also
prepared a net present value analysis that indicated theoretical values for
Jefferson based on a range of terminal book value multiples between 1.30x and
1.50x 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
Comparable 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 Jefferson Common Stock in these economic times. The
range of present values per share of Jefferson resulting from the
above-referenced assumptions was $31.35 to $38.27.
Comparable Company Analysis
Capital Consultants compared the operating performance of Jefferson to
publicly traded commercial banks that Capital Consultants deemed to be similar
to Jefferson. The group consists of 13 New Jersey publicly traded commercial
banks with total assets of between $50 million and $100 million with an equity
to assets ratio in excess of 6.8%. Capital Consultants compared Jefferson with
these institutions based on selected operating fundamentals, including capital
adequacy, profitability and asset quality. Using pricing data as of June 30,
1994, the median price to stated book value was 0.81% for the comparable
commercial banks and 0.86% for Jefferson. At June 30, 1994, the median equity to
assets ratio was 9.1% for the group of comparable commercial banks and 6.8% for
Jefferson. The median return on average equity for the twelve months ending June
30, 1994 was 8.1% for the comparable group of commercial banks and (15.3)% for
Jefferson. Assuming a valuation of HUBCO's offer of $43.00 in HUBCO Common Stock
for each share of Jefferson Common Stock (based on an Exchange Ratio of 2.865
shares of HUBCO Common Stock for each share of Jefferson Common Stock at a price
of $15.00 for each share of HUBCO Common Stock, as adjusted for the Stock
Split), the HUBCO offer represented 154% of Jefferson's book value.
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 10 New Jersey publicly traded banks and bank
holding companies having total assets between $260 million and $34 billion. The
analysis also compared returns on average assets and average equity of HUBCO to
those of selected financial institutions and the medians of the comparable
group. The analysis indicated
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that the HUBCO Common Stock traded on June 30, 1994 at a price-to-earnings
multiple of 9.2 times trailing twelve months earnings for the period ended June
30, 1994 as compared to a comparative group median of 11.6 times trailing twelve
months earnings for the period ended June 30, 1994. While the HUBCO Common Stock
traded at a price-to-book value of 1.75%, the comparative group median was
1.48%. HUBCO's financial performance, as measured by returns on average assets
and average equity, was 1.45% and 19.7%, respectively, as compared to the median
of the selected comparable financial institutions which was 1.07% and 14.3%,
respectively. The Capital Consultants' analyses also included summary income
statement and balance sheet data and selected ratio analyses for HUBCO and
various other potential acquirers of Jefferson.
Contribution Analysis
Capital Consultants prepared a contribution analysis showing the percentage
of assets, deposits , net common equity and first six months of 1994 net income
Jefferson would contribute to the combined company on a pro forma basis, and
compared these percentages to the pro forma ownership after the Merger. This
analysis showed that Jefferson would contribute 6.1% of pro forma consolidated
total assets, 6.5% of pro forma consolidated deposits, 5.8% of pro forma
consolidated stockholders' equity, and 0.0% of pro forma consolidated net income
for the first six months of 1994, while Jefferson stockholders would hold 6.2%
of the pro forma ownership of HUBCO.
Impact Analysis
Capital Consultants analyzed the financial implications of the Merger on
HUBCO's earnings per common share and book value per common share. This analysis
was based on June 30, 1994 financial data for HUBCO and Jefferson and indicated
that the acquisition of Jefferson by HUBCO would be (on a pro forma basis for
the six months ended June 30, 1994, assuming the acquisition was effective as of
January 1, 1994) approximately 5.9% dilutive to the earnings per share of HUBCO
Common Stock and approximately 1.4% 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
recently announced commercial bank and bank holding company transactions in the
region. Multiples of earnings and fully diluted book value implied by the
consideration to be received by Jefferson's stockholders in the Merger were
compared with multiples offered in such regional transactions, which included
pending and completed acquisitions announced between January 1, 1993 and October
6, 1994. The median offer price to book value for this regional group of
comparable transactions was 1.56%. The equivalent offer price to book value for
Jefferson was 1.54% based on the assumed HUBCO offer price of $43.00 for each
outstanding share of Jefferson Common Stock and Jefferson's book value as of
June 30, 1994. 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, Jefferson was substantially below 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 was identical to
Jefferson or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather, it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved, 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, Jefferson
has agreed to pay Capital Consultants a fee, if the Merger is consummated, of
approximately $85,000 plus reimbursement for reasonable out-of-pocket expenses.
Jefferson has also agreed to indemnify Capital Consultants against certain
liabilities, including liabilities under the federal securities laws. Jefferson
has paid Capital
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Consultants $25,000 and will pay an additional $10,000 on the mailing of
this Proxy Statement-Prospectus. Such amounts are non-refundable. The balance of
Capital Consultants' fee is due upon consummation of the Merger. The amount of
Capital Consultants' fee was determined by negotiation between Jefferson and
Capital Consultants.
Conversion of Jefferson's Shares
Subject to the rights of stockholders who perfect their rights as
dissenting stockholders, each share of Jefferson Common Stock outstanding at the
Effective Time will be automatically converted into a number of shares of HUBCO
Common Stock equal to the Exchange Ratio. The Exchange Ratio will equal 2.865,
subject to the following potential adjustments (each of which gives effect to
the Stock Split):
* If the Median Pre-Closing Price (as defined below) is greater than $17.44
(or $26.16 prior to the Stock Split), then the Exchange Ratio will be
reduced. In such event, the Exchange Ratio will equal (x) the product of
$17.44 multiplied by 2.865, divided by (y) the Median Pre-Closing Price.
This adjustment has the effect of providing that if the Median Pre-Closing
Price exceeds $17.44, each share of Jefferson Common Stock will be
converted into a number of shares of HUBCO Common Stock having an aggregate
value (based upon the Median Pre-Closing Price) of $49.97.
* Subject to HUBCO's termination rights, if the Median Pre-Closing Price is
less than $12.89 (or $19.34 prior to the Stock Split), then the Exchange
Ratio shall be increased. In such event, the Exchange Ratio will equal (x)
the product of $12.89 multiplied by 2.865, divided by (y) the Median
Pre-Closing Price. This adjustment has the effect of assuring Jefferson
stockholders that if the Median Pre-Closing Price falls below $12.89 and
HUBCO does not terminate the Merger Agreement, then each share of Jefferson
Common Stock will be converted into shares of HUBCO Common Stock having an
aggregate value (based upon the Median Pre-Closing Price) of $36.93. If the
Median Pre-Closing Price is less than $12.89, HUBCO will seriously consider
exercising its right to terminate the Merger Agreement, rather than
consummating the Merger at the increased Exchange Ratio. In making its
determination, HUBCO will consider the Exchange Ratio adjustment and any
other factors deemed relevant to it at such time.
* If, at the time of the closing of the Merger (the "Closing"), any of
Jefferson's vendors require Jefferson to pay certain termination fees, the
aggregate value of the HUBCO Common Stock issuable pursuant to the Merger
will be reduced by an amount which approximates (i) the amount of such
termination fees, but in no event more than $70,000, plus (ii) legal fees
in excess of $15,000 incurred by Jefferson in connection with resolving the
amount of such termination fees. Assuming that such legal fees do not
exceed $15,000 and assuming that the Median Pre-Closing Price is in the
range of $12.89 to $17.44, the effect of such adjustment would be to reduce
the Exchange Ratio by approximately two basis points (i.e., from 2.865 to
2.844). Jefferson is currently in a dispute regarding termination fees with
one vendor. Accordingly, no assurances can be given that such a reduction
will not be made.
The Median Pre-Closing Price will be calculated based upon the Closing
Price of HUBCO Common Stock during the first 20 of the last 25 trading days
prior to the date on which the Effective Time occurs. For purposes of the Merger
Agreement, the term "Closing Price" means the closing sale price of one share of
HUBCO Common Stock on the NASDAQ National Market System as reported in The Wall
Street Journal. Pursuant to the terms of the Merger Agreement, the highest nine
such Closing Prices and the lowest nine such Closing Prices shall be discarded
and the average of the remaining two such Closing Prices shall constitute the
"Median Pre-Closing Price."
No Fractional Shares
No fractional shares of HUBCO Common Stock will be issued in connection
with the Merger, but in lieu thereof each holder of shares of Jefferson Common
Stock otherwise entitled to a fraction of a share of HUBCO Common Stock will be
paid in cash an amount equal to such fraction multiplied by the Median
Pre-Closing Price. No such holder will be entitled to dividends, voting rights
or other rights in respect of any such fractional share.
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Delivery of Shares
Promptly after the Effective Time of the Merger, HUBCO will send to each
holder of record of Jefferson Common Stock as of the Effective Time a letter of
transmittal which should be completed by such holder and returned to the
exchange agent appointed by HUBCO (the "Exchange Agent"), at the address
provided therein, together with stock certificates representing all of such
holder's shares of Jefferson Common Stock. No new certificates will be delivered
to or for the account of any holder of Jefferson Common Stock until the Merger
is consummated and the holder has surrendered to the Exchange Agent the old
certificates representing such holder's Jefferson Common Stock, accompanied by
the duly executed letter of transmittal in proper form.
STOCKHOLDERS OF JEFFERSON ARE URGED NOT TO DELIVER THEIR STOCK CERTIFICATES
TO THE EXCHANGE AGENT UNTIL THE MERGER HAS BEEN COMPLETED AND THEY HAVE RECEIVED
THEIR LETTER OF TRANSMITTAL.
Upon surrender to the Exchange Agent of one or more certificates for
Jefferson Common Stock, together with a properly completed letter of
transmittal, the holder of Jefferson Common Stock surrendering such items will
receive a certificate or certificates representing the number of shares of HUBCO
Common Stock 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.
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 Common Stock will be paid to the holders of any unsurrendered certificates
representing Jefferson Common Stock until the holder duly surrenders such
certificate. Following the surrender of certificates representing Jefferson
Common Stock, there will be paid to those holders of the certificates
representing shares of HUBCO Common 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 Common 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 Common Stock.
No transfer taxes will be payable by Jefferson stockholders in connection
with the exchange of old certificates representing Jefferson Common Stock for
new certificates representing HUBCO Common Stock, except that if any new
certificate is to be issued in a name other than that in which the Jefferson
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, the stock transfer books of Jefferson will be closed
and no transfers of Jefferson Common Stock will thereafter be made. If
certificates representing shares of Jefferson Common Stock are presented for
transfer after the Effective Time, they will be canceled and exchanged for
shares of HUBCO Common Stock, and cash in lieu of fractional shares, deliverable
pursuant to the Merger.
Neither HUBCO nor Jefferson will be liable to any former holder of
Jefferson Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
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Any shares of Jefferson Common Stock as to which the holder has perfected
dissenters' rights will be purchased in accordance with the procedures described
under "Rights of Dissenting Stockholders" and in Appendix C to this Proxy
Statement-Prospectus.
The Closing is expected to occur in the first quarter of 1995, although no
assurances can be given in this regard.
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 HAVE ACQUIRED SHARES OF JEFFERSON COMMON STOCK
AS COMPENSATION. JEFFERSON 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, no gain or loss will be
recognized by HUBCO, Jefferson, the Bank or to the stockholders of Jefferson
upon the exchange of their shares of Jefferson Common Stock solely for shares of
HUBCO Common Stock pursuant to the Merger. Counsel to HUBCO is required, as a
condition of Closing, to provide an opinion to HUBCO and to Jefferson, with
respect to the matters covered by the foregoing sentence. With respect to this
Proxy Statement-Prospectus, HUBCO's 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 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 Common Stock. The basis of HUBCO Common Stock received by a
Jefferson stockholder who receives solely HUBCO Common Stock will be the same
immediately after the exchange, as the basis of such stockholder's Jefferson
Common Stock exchanged therefor. Where a Jefferson stockholder receives both
HUBCO Common Stock and cash, the basis of the HUBCO Common Stock received will
equal (a) the basis of the Jefferson Common Stock exchanged therefor, (b)
decreased by the amount of cash received and (c) increased by the amount of gain
recognized, if any, on the exchange.
Holding Period. The holding period of HUBCO Common Stock received by a
Jefferson stockholder will include the holding period for the Jefferson Common
Stock exchanged therefor.
Effect of the Merger
At the Effective Time, Jefferson will merge with and into the Bank, with
the Bank surviving. In the Merger, each share of Jefferson Common Stock
outstanding immediately prior to the Effective Time will be converted into a
number of shares of HUBCO Common Stock equal to the Exchange Ratio. For
information regarding the calculation of the Exchange Ratio, see "-Conversion of
Jefferson's Shares." Any shares of Jefferson Common Stock held in Jefferson's
treasury or held directly or indirectly by Jefferson or HUBCO (other than shares
held as collateral or in a fiduciary capacity) will be canceled and retired and
no payment will be made with respect thereto.
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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 to be received by
Jefferson's stockholders will be made. Such an adjustment has already been made
in the Merger Agreement and is reflected in this Proxy Statement-Prospectus
with respect to the Stock Split.
For a discussion of the rights of dissenting holders of Jefferson Common
Stock, see "Rights of Dissenting Stockholders."
Effective Time
The "Effective Time" of the Merger will be the date specified in a notice
from the Bank to the FDIC and in a certification filed by the Bank with the New
Jersey Department of Banking (the "Department"). The notice and certification
will be filed after the Closing has been consummated and Jefferson has approved
such filings (such approval not to be unreasonably withheld). The Closing will
be held 10 days (or the first business day thereafter) after the receipt of all
necessary regulatory and governmental approvals and consents and the expiration
of all applicable waiting periods in connection therewith, 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 Jefferson.
Conditions to Consummation of the Merger
Consummation of the Merger by HUBCO and Jefferson 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 the stockholders of Jefferson shall have
been obtained; (b) all necessary regulatory or governmental approvals and
consents required to consummate the Merger and the transactions contemplated by
the Merger Agreement shall have been received without the imposition of
conditions which would materially impair the value of Jefferson 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 Jefferson, 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 Jefferson 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 Jefferson 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
Jefferson set forth in the Merger Agreement shall be true and correct in all
material respects at the closing date; (b) Jefferson shall have complied in all
material respects with its obligations under the Merger Agreement; (c) HUBCO
shall have received certain legal opinions of counsel for Jefferson; (d) HUBCO
shall have received assurances from its accountants that the Merger will be
qualified to be treated by HUBCO as a pooling of interests for accounting
purposes; and (e) Jefferson shall have furnished HUBCO such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions as HUBCO may reasonably request.
In addition to the other conditions set forth above, the obligations of
Jefferson under the Merger Agreement are also subject to the satisfaction of the
following conditions, any one or more of which may be waived by Jefferson: (a)
in general, the representations and warranties of HUBCO set forth in the
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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) Jefferson shall have received
certain legal opinions of counsel for HUBCO; (d) HUBCO shall have received
Jefferson's consent in the event that HUBCO agrees to make other acquisitions
prior to the Effective Time that fail to satisfy certain dilution limitations
specified in the Merger Agreement; and (e) Jefferson 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
Jefferson 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 Merger, HUBCO
must obtain regulatory approvals from the FDIC and the Department. HUBCO has
applied to the FDIC to merge Jefferson into the Bank and has applied to the
Department for approval of the acquisition of Jefferson. Other applications
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 Jefferson 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
Jefferson, 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 June 30, 1995, the Merger Agreement may be
terminated by Jefferson 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 Jefferson's Business Pending the Merger
The Merger Agreement requires Jefferson to conduct its business 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, Jefferson has agreed not to take
certain actions without the prior written consent of HUBCO or unless permitted
by the Merger Agreement, including, among other things, the following: (a)
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 Jefferson, 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) grant any
severance or termination pay (other than pursuant to policies or contracts of
Jefferson 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; (c) 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 as set forth under "Interests of
Certain Persons in the Merger" and employee increases in the ordinary course of
business and consistent with past practices and policies; (d) 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 Jefferson;
(e) make any capital expenditures other than capital expenditures which are
either pursuant to binding commitments existing on the date of the Merger
Agreement or necessary to maintain existing assets in good repair; (f) file any
applications or make any contracts with respect to branching or site location or
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relocation; (g) agree to acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity; (h) make
any material change in its accounting methods or practices, other than changes
required in accordance with generally accepted accounting principles; (i) take
any action that would result in any of Jefferson's representations or warranties
being untrue at the Effective Time in any material respect; (j) change any
provision of the Articles of Association or By-laws of Jefferson ; or (k) agree
to do any of the foregoing.
Under the Merger Agreement, Jefferson cannot, 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, sale of shares or sale of substantial assets or liabilities not in the
ordinary course of business or similar transactions (an "Acquisition
Transaction"); provided, however, that notwithstanding the foregoing, Jefferson
may enter into discussions or negotiations or provide any information in
connection with an unsolicited possible Acquisition Transaction if the Board of
Directors of Jefferson, 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. Jefferson 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.
Fee in the Event of Another Transaction
The Merger Agreement provides that if certain events occur, Jefferson
or any successor in interest will be obligated to pay HUBCO a termination fee
(the "Termination Fee") equal to $250,000, plus any legal fees and expenses
incurred by HUBCO in enforcing its right to obtain the Termination Fee.
The Termination Fee is payable only if all of the following events occur:
First, the Merger Agreement must be terminated by Jefferson as a result of
Jefferson's Board's approving an "Acquisition Transaction" (as defined above in
"-Conduct of Jefferson's Business Pending the Merger") after determining, upon
advice of counsel, that such approval was necessary in the exercise of the
Board's fiduciary duties, or by HUBCO because of a material breach by Jefferson
of any covenant or by HUBCO or Jefferson as a result of the failure of
Jefferson's stockholders to approve the Merger Agreement. Second, prior to the
date of termination of the Merger Agreement, Jefferson must be informed of a
proposal (which proposal has not been withdrawn) to effect an Acquisition
Transaction by a company or person other than HUBCO and its affiliates. Third,
within 12 months after the date of termination of the Merger Agreement,
Jefferson must have entered into an agreement to engage in an Acquisition
Transaction with a person other than HUBCO or Jefferson's Board must have
approved an Acquisition Transaction or must have recommended that the
shareholders of Jefferson approve or accept any Acquisition Transaction other
than pursuant to the Merger Agreement. Finally, an Acquisition Transaction
between Jefferson and another person must have closed (the "Acquisition
Transaction Closing") within 24 months after the termination of the Merger
Agreement. If all of the foregoing occur, then Jefferson or its successor in
interest will be obligated to pay the Termination Fee to HUBCO immediately after
the Acquisition Transaction Closing.
The Termination Fee will make it more costly for another party to acquire
Jefferson. The obligation of a successor in interest to Jefferson to pay the
Termination Fee may be considered a deterrent to other potential acquisitions of
control of Jefferson because it is likely to increase the cost of any such
acquisition.
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 Jefferson: (a) by
the mutual written consent of HUBCO and Jefferson for any reason; or (b) by
either HUBCO or Jefferson (i) if the Merger shall not have been consummated on
or before June 30, 1995 (unless the failure to consummate the Merger is due to
the failure of the terminating party to perform or observe its covenants under
the Merger Agreement) or (ii) if the stockholders of Jefferson fail to approve
the Merger Agreement submitted to them for approval in
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connection with the Merger. The Merger Agreement may also be terminated by HUBCO
or Jefferson 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
such application is approved with conditions which materially impair the value
of Jefferson 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 Jefferson, from that set forth in Jefferson's Call Report for June
30, 1994 or from that set forth in Jefferson's Annual Report to Stockholders for
the year ended December 31, 1993; (b) there shall have been any material breach
of any representation, warranty, covenant, agreement or obligation of Jefferson
under the Merger Agreement which breach shall not have been cured within 30 days
after receipt by Jefferson of notice of such breach; or (c) if the Median
Pre-Closing Price is less than $12.89. If the Median Pre-Closing Price is less
than $12.89, HUBCO will seriously consider exercising its right to terminate the
Merger Agreement, rather than consummating the Merger at an increased Exchange
Ratio. In making its determination, HUBCO will consider the Exchange Ratio
adjustment and any other factors deemed relevant to it at such time. The Merger
Agreement may be terminated by Jefferson 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 quarter ended June 30, 1994 or from that
set forth in HUBCO's Annual Report on Form 10-K for the year ended December 31,
1993, (b) 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 30 days after receipt by HUBCO of
notice of such breach or (c) Jefferson'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.
Either party may terminate the Merger Agreement if the conditions precedent
to its obligations are not satisfied. 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 Jefferson, 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 party under the Merger 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 Jefferson, there may not be, without further approval of the
Merger Agreement by the stockholders of Jefferson, any amendment of the Merger
Agreement which reduces the amount or changes the form of consideration to be
delivered to Jefferson stockholders.
Management and Operation of Jefferson Following the Merger
The Bank will be the surviving bank in the merger transaction contemplated
by the Merger Agreement. At the Effective Time, the present Jefferson directors
shall resign and the Board of Directors of the surviving bank shall consist of
the directors of the Bank.
Interests of Certain Persons in the Merger
The Merger Agreement obligates HUBCO to indemnify Jefferson'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 Jefferson
and/or the Merger. Such indemnification extends to the fullest extent that would
have been permitted under any applicable law, Jefferson's Articles of
Association or Jefferson's By-laws. HUBCO has also agreed, subject to certain
limitations, to provide directors and officers liability insurance for
Jefferson's directors and officers for a period of six years after the Effective
Time.
-34-
<PAGE>
HUBCO has agreed that, to the extent practicable, it will endeavor to
retain all Jefferson's existing employees at similar compensation levels and to
retain all of Jefferson's current officers in similar positions with the Bank.
HUBCO has stated that it intends to make available to all employees and officers
of Jefferson 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 HUBCO's pension and 401(k) plans and for
purposes of the Bank's medical, vacation, sick leave and disability plans,
Jefferson employees who are employed by the Bank will be given credit for prior
service with Jefferson.
In connection with the execution of the Merger Agreement, HUBCO, the Bank
and Joseph J. Greco (Jefferson's President) entered into an employment agreement
which provides for Mr. Greco's employment by HUBCO and the Bank for a one year
period following the Effective Time at a salary of $110,000 per annum. The
employment agreement also provides that Mr. Greco will receive fringe benefits
generally provided to executives of HUBCO and the Bank, although he will not be
entitled to receive any performance bonus during the one year term of the
agreement and incentive awards will be paid only for the amount which exceeds
$22,000 in awards. HUBCO, the Bank and Mr. Greco also entered into a bonus
agreement pursuant to which HUBCO (or the Bank) will pay Mr. Greco a $50,000
bonus on the earlier of (i) the 90th day after the Effective Time or (ii) the
first day following the Effective Time on which Jefferson's general ledger, loan
and mortgage accounts, deposit accounts and other accounts presently on
Jefferson's computer system have been fully converted to the Bank's computer
system (the "Conversion Date"). Mr. Greco will only be entitled to receive the
bonus if he remains employed by Jefferson through the Effective Time and is
employed thereafter by HUBCO or the Bank through the date the bonus is paid
(although he will still be entitled to receive the bonus if he is terminated by
HUBCO or the Bank without cause).
HUBCO and the Bank have also entered into bonus agreements with Carol
D'Auria, Jefferson's Chief Financial Officer, and David Hynes, Jefferson's
Senior Operations Officer, which provide for the payment of bonuses in the
amount of $10,000 to each of these individuals on the earlier of (i) the 90th
day after the Effective Time or (ii) the Conversion Date. Ms. D'Auria and Mr.
Hynes will be entitled to receive these bonuses only if they remain employed by
Jefferson through the Effective Time and are employed thereafter by Hubco or the
Bank through the date the bonuses are paid (although they will still be entitled
to receive the bonuses if they are terminated by HUBCO or the Bank without
cause).
Accounting Treatment of the Merger
HUBCO expects to account for the Merger under the pooling of interests
method of accounting in accordance with generally accepted accounting
principles. See "PRO FORMA COMBINED FINANCIAL INFORMATION" and "-Conditions to
Consummation of the Merger."
Rights of Dissenting Stockholders
Stockholders of Jefferson who vote against the proposed Merger at the
Meeting or give notice of dissent in writing (addressed to Joseph J. Greco, c/o
Jefferson National Bank, 155 Jefferson Street, Passaic, New Jersey 07055) at or
prior to the Meeting will be entitled to receive the value of their shares as of
the date of the Meeting in cash upon written request made to the Bank in its
capacity as the surviving bank (the "Surviving Bank") before the thirtieth
(30th) day after the consummation of the Merger, accompanied by the surrender of
their stock certificates. The value of the shares of any dissenting stockholder
shall be ascertained in accordance with the applicable provisions of 12 U.S.C.
s.214a, by an appraisal made by a committee composed of one person selected by
the majority vote of persons exercising such appraisal rights, one person
selected by the directors of the Surviving Bank, and one person selected by the
two so selected. The valuation agreed upon by any two of the three appraisers
shall govern.
If the valuation so fixed shall not be satisfactory to a dissenting
stockholder who has requested payment, that stockholder may, within five days
after receiving notification of the appraisal value, appeal to the OCC, which
shall cause a reappraisal to be made which shall be final and binding with
respect to
-35-
<PAGE>
the shares of the person appealing the appraisal. If, within 90 days
from the consummation of the Merger, for any reason one or more of the
above-mentioned appraisers is not selected or such appraisers fail to determine
the value of such shares, the OCC shall, upon written request of any interested
party, cause an appraisal to be made which shall be final and binding on all
parties. The expenses of the OCC in making the reappraisal or the appraisal, as
the case may be, shall be paid by the Surviving Bank. Any stockholder of
Jefferson who votes against the proposed Merger, or who gives notice in writing
at or prior to the Meeting to the presiding officer of that Meeting that he
dissents, will be notified in writing of the date of the consummation of the
Merger.
The failure of a dissenting stockholder to vote against the Merger will not
constitute a waiver of appraisal rights if the stockholder gives written notice
of dissent to Jefferson at or prior to the Meeting. Regardless of whether a
stockholder records his or her dissent by voting against the Merger or giving
written notice of dissent, a dissenting stockholder must also make written
request to the Surviving Bank to receive the value of his or her shares at any
time before 30 days after the consummation of the Merger.
A copy of the relevant portions of 12 U.S.C. s.214a is annexed to this
Proxy Statement-Prospectus as Appendix C. Any deviations from such procedures
may result in the forfeiture of dissenters' rights. Accordingly, holders of
Jefferson Common Stock wishing to dissent from the Merger Agreement are urged to
carefully read Appendix C and to consult with their own legal advisors.
-36-
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information takes into account
HUBCO's recently completed acquisition of Washington Bancorp, Inc. (the
"Washington Merger") and HUBCO's pending acquisition of Jefferson. The
Washington Merger, consummated on July 1, 1994, has been accounted for as a
purchase; accordingly, HUBCO's historical financial statements reflect the
consolidated results of operations of Washington Bancorp, Inc. ("Washington")
solely for periods on and after July 1, 1994. In contrast, the Jefferson Merger
is intended to be accounted for as a pooling of interests. Under the pooling of
interests method of accounting, HUBCO's consolidated financial statements will
be retroactively adjusted after the Merger to combine the results of operations
of HUBCO and Jefferson for periods prior to the Effective Time.
The following unaudited Pro Forma Combined Condensed Balance Sheet of HUBCO
and Jefferson at September 30, 1994 gives effect to the Merger as if it had been
consummated on that date, based on adjustments described in the accompanying
Notes to the Pro Forma Combined Condensed Unaudited Financial Statements (the
"Notes"). Inasmuch as the Washington Merger was consummated prior to September
30, 1994, HUBCO's historical balance sheet at September 30, 1994 includes the
assets and liabilities of Washington retained by the merged institution at
September 30, 1994.
This Proxy Statement-Prospectus also presents four separate unaudited Pro
Forma Combined Condensed Statements of Income, covering (i) the nine months
ended September 30, 1994 (the "Interim Pro Forma Statement"), (ii) the year
ended December 31, 1993 (the "1993 Pro Forma Statement"), (iii) the year ended
December 31, 1992 (the "1992 Pro Forma Statement") and (iv) the year ended
December 31, 1991 (the "1991 Pro Forma Statement" and, collectively with the
1992 Pro Forma Statement, the "1991-1992 Pro Forma Statements"). These unaudited
Pro Forma Combined Condensed Statements of Income reflect the following:
-37-
<PAGE>
* The Interim Pro Forma Statement gives effect to the Washington
Merger and the Merger as if such transactions had occurred on January 1,
1994. The Interim Pro Forma Statement combines the results of
operations of (i) HUBCO for the nine months ended September 30, 1994
(including the results of operations of Washington from July 1, 1994 to
September 30, 1994), (ii) Washington for the six months ended June 30, 1994
and (iii) Jefferson for the nine months ended September 30 1994, subject to
the adjustments set forth in the Notes.
* The 1993 Pro Forma Statement gives effect to the Washington Merger
and the Merger as if such transactions had occurred on January 1, 1993 and
combines the results of operations of HUBCO, Washington and Jefferson for
the year ended December 31, 1993, subject to the adjustments set forth in
the Notes.
* Due to differences in the disclosures applicable to the purchase and
pooling of interests methods of accounting, the 1991-1992 Pro Forma
Statements give effect to the Merger as if it had occurred on January 1,
1991 and 1992, but do not give effect to the Washington Merger. Thus, the
1991-1992 Pro Forma Statements combine the results of operations of HUBCO
and Jefferson for the periods presented, but do not include any information
regarding Washington. Any comparison of the 1991-1992 Pro Forma Statements
with pro forma data for other periods presented herein should take into
account that the 1991-1992 Pro Forma Statements do not reflect Washington's
results of operations, while such other pro forma data reflects
Washington's results of operations either in Washington's historical
financial statements (through June 30, 1994) or in HUBCO's historical
financial statements (from July 1, 1994 to September 30, 1994).
The unaudited pro forma information presented herein has been prepared by
HUBCO management based upon the historical financial statements and related
notes thereto of HUBCO, Washington and Jefferson included herein or incorporated
herein by reference. The unaudited pro forma information should be read in
conjunction with such historical financial statements and notes. The Pro Forma
Combined Condensed Statements of Income are not necessarily indicative of the
results of operations which would have been achieved had the Merger and/or
Washington Merger been consummated as of the beginning of such periods for which
such data are presented and should not be construed as being representative of
future periods.
-38-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1994
(Unaudited)
ProForma
Historical ProForma Combined
-------------------------
Adjustments HUBCO and
HUBCO Jefferson Jefferson Jefferson
---------- --------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks ................. $ 56,434 $ 5,039 $ -- $ 61,473
Securities .............................. 576,688 24,805 (24,805)(A) 576,688
Securities available for sale ........... 48,254 8,929 23,737 (B) 80,920
Federal funds sold ...................... 10,845 5,110 -- 15,955
Loans ................................... 661,954 44,695 1,777 (C) 708,426
Allowance for possible loan losses....... (14,310) (1,648) (170)(D) (16,128)
Premises and equipment .................. 30,836 819 -- 31,655
Other real estate ....................... 2,874 2,420 (1,607)(E) 3,687
Intangible assets ....................... 10,204 -- -- 10,204
Other assets ............................ 23,033 1,609 336 (F) 24,978
---------- ------- ------- ----------
Total assets ....................... $1,406,812 $91,778 $ (732) $1,497,858
========== ======= ======= ==========
Liabilities:
Deposits ................................ $1,236,109 $85,288 $ -- $1,321,397
Short term borrowings ................... 40,271 -- -- 40,271
Other liabilities ...................... 6,771 494 -- 7,265
---------- ------- ------- ----------
Total liabilities .................. 1,283,151 85,782 -- 1,368,933
---------- ------- ------- ----------
Subordinated debentures ................. 25,000 -- -- 25,000
---------- ------- ------- ----------
Stockholders' Equity:
Preferred stock ......................... 19,147 -- -- 19,147
Common stock ............................ 18,492 1,357 (262)(G) 19,587
Additional paid-in capital .............. 49,048 1,474 -- 50,522
Retained earnings ....................... 22,239 3,249 -- 25,488
Unrealized holding gain (loss) on
securities available for sale, net of
income taxes .......................... 302 (84) (470)(H) (252)
Treasury stock .......................... (9,343) -- -- (9,343)
Restricted stock awards ................. (1,224) -- -- (1,224)
---------- ------- ------- ----------
Total stockholders' equity ......... 98,661 5,996 (732) 103,925
---------- ------- ------- ----------
Total liabilities and
stockholders' equity ............ $1,406,812 $91,778 $ (732) $1,497,858
========== ======= ======= ==========
</TABLE>
See accompanying notes to pro forma combined
condensed unaudited financial statements.
-39-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the nine months ended September 30, 1994
Washington Pro Forma
Historical Pro Forma Combined
Six Months Pro Forma Combined Pro Forma HUBCO,
HUBCO Ended Adjustments HUBCO and Jefferson Adjustments Washington
Historical June 30,1994 Washington Washington Historical Jefferson and Jefferson
---------- ------------ ----------- ---------- ---------- ----------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans ................................... $35,328 $ 6,728 ($ 452)(a) $41,604 $3,088 $ -- $44,692
Securities .............................. 23,847 2,220 142 (b) 26,261 1,028 -- 27,289
53 (c)
(1)(d)
Federal funds sold ...................... 366 50 -- 416 301 -- 717
------- ------- ------ ------- ------- ---- -------
Total interest income ................... 59,541 8,998 ( 258) 68,281 4,417 -- 72,698
------- ------- ------ ------- ------- ---- -------
Interest expense:
Deposits ................................ 16,690 3,625 793 (e) 21,108 1,580 -- 22,688
Borrowings .............................. 406 10 430 (f) 846 846
Subordinated Debt ....................... 1,259 -- -- 1,259 -- -- 1,259
------- ------- ------ ------- ------- ---- -------
Total interest expense .................. 18,355 3,635 1,223 23,213 1,580 -- 24,793
------- ------- ------ ------- ------- ---- -------
Net interest income before provision for
possible loan losses ................... 41,186 5,363 (1,481) 45,068 2,837 -- 47,905
Provision for possible loan losses ........ 1,950 825 -- 2,775 175 151(I) 3,101
------- ------- ------ ------- ------- ---- -------
Net interest income after provision for
possible loan losses .................. 39,236 4,538 (1,481) 42,293 2,662 (151) 44,804
------- ------- ------ ------- ------- ---- -------
Non-interest income ....................... 7,392 473 -- 7,865 378 -- 8,243
------- ------- ------ ------- ------- ---- -------
Operating expenses:
Salaries and other employee benefits .... 14,509 1,684 -- 16,193 1,188 -- 17,381
Occupancy and equipment expense ......... 4,402 395 18 (g) 4,815 333 -- 5,148
Other operating expenses ................ 8,051 3,470 500 (h) 12,021 1,549 (151)(I) 13,419
------- ------- ------ ------- ------- ---- -------
Total operating expenses ................ 26,962 5,549 518 33,029 3,070 (151) 35,948
------- ------- ------ ------- ------- ---- -------
Income (loss) before income taxes ......... 19,666 (538) (1,999) 17,129 (30) -- 17,099
Income tax provision (benefit) ............ 7,435 (123) (760)(i) 6,552 64 -- 6,616
------- ------- ------ ------- ------- ---- -------
Net income (loss).......................... $12,231 ($415) ($1,239) $10,577 ($94) $ -- $10,483
======= ======= ====== ======= ======= ==== =======
Income per share (x):
Primary(y) .............................. $ 1.22 $1.00 $0.93
Fully diluted ........................... 1.20 0.99 0.93
Book value per common share (x) ........... 8.15 8.15 8.18
Dividends per common share (x)............. 0.26 0.26 0.26
Weighted average number of
common shares outstanding (x) ........... 9,757 9,757 10,373
<FN>
- -----------
(x) Shares issued and outstanding have been adjusted for the Stock Split.
(y) After reduction of $287 ($.36 per share) of Series A Preferred Stock
dividends for the HUBCO historical financial information. After reduction
of $861($1.08 per share) of Series A Preferred Stock dividends for the pro
forma combined HUBCO and Washington financial information and the pro forma
combined HUBCO, Washington and Jefferson financial information.
</FN>
</TABLE>
See accompanying notes to pro forma combined
condensed unaudited financial statements.
-40-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the year ended December 31, 1993
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Combined
Pro Forma Combined Pro Forma HUBCO,
HUBCO Washington Adjustments HUBCO And Jefferson Adjustments Washington
Historical Historical Washington Washington Historical Jefferson and Jefferson
---------- ------------ ----------- ---------- ---------- ----------- -------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans .................................. $43,546 $14,782 ($ 904)(a) $57,424 $4,896 $ -- $62,320
Securities ............................. 23,442 3,604 285 (b) 27,435 781 -- 28,216
105 (c)
(1)(d)
Interest Federal funds sold ............. 771 172 -- 943 442 -- 1,385
------- ------- ------ ------- ------- ---- -------
Total interest income ................... 67,759 18,558 ( 515) 85,802 6,119 -- 91,921
------- ------- ------ ------- ------- ---- -------
Interest expense:
Deposits ................................ 20,379 8,795 1,586 (e) 30,760 2,311 -- 33,071
Borrowings .............................. 362 18 861 (f) 1,241 -- -- 1,241
------- ------- ------ ------- ------- ---- -------
Total interest expense .................. 20,741 8,813 2,447 32,001 2,311 -- 34,312
------- ------- ------ ------- ------- ---- -------
Net interest income before provision for
possible loan losses ................... 47,018 9,745 (2,962) 53,801 3,808 -- 57,609
Provision for possible loan losses ........ 3,600 420 -- 4,020 1,156 189(I) 5,365
------- ------- ------ ------- ------- ---- -------
Net interest income after provision for
possible loan losses .................. 43,418 9,325 (2,962) 49,781 2,652 (189) 52,244
------- ------- ------ ------- ------- ---- -------
Non-interest income ....................... 8,606 949 -- 9,555 489 -- 10,044
------- ------- ------ ------- ------- ---- -------
Operating expenses:
Salaries and other employee benefits .... 16,501 3,468 -- 19,969 1,469 -- 21,438
Occupancy and equipment expense ......... 5,016 797 36 (g) 5,849 412 -- 6,261
Other operating expenses ................ 8,454 4,503 1,001 (h) 13,958 2,554 (189)(I) 16,323
------- ------- ------ ------- ------- ---- -------
Total operating expenses ................ 29,971 8,768 1,037 39,776 4,435 (189) 44,022
------- ------- ------ ------- ------- ---- -------
Income (loss) before income taxes ......... 22,053 1,506 (3,999) 19,560 (1,294) -- 18,266
Income tax provision (benefit) ............ 7,851 (1,018) (1,520)(i) 5,313 62 -- 5,375
------- ------- ------ ------- ------- ---- -------
Net income (loss).......................... $14,202 $2,524 ($2,479) $14,247 ($1,356) $ -- $12,891
======= ======= ====== ======= ======= ==== =======
Income per share (x):
Primary(y) .............................. $ 1.37 $1.26 $1.07
Fully diluted ........................... 1.37 1.23 1.06
Dividends per common share (x) ............ 0.31 0.31 0.31
Weighted average number of
common shares outstanding (x) ........... 10,364 10,364 10,979
<FN>
- -----------
(x) Shares issued and outstanding have been adjusted for the Stock Split.
(y) After reduction of $1,149 ($1.44 per share) of Series A Preferred Stock dividends for the pro forma
combined HUBCO and Washington financial information and the pro forma combined HUBCO, Washington and
Jefferson financial information.
</FN>
</TABLE>
See accompanying notes to pro forma combined
condensed unaudited financial statements.
-41-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the Year Ended December 31, 1992
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Combined
------------------------ Adjustments HUBCO and
HUBCO Jefferson Jefferson Jefferson
---------- ------------ ----------- ----------
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans ................................... $45,406 $ 6,105 $ -- $51,511
Securities .............................. 20,898 908 -- 21,806
Federal funds sold ...................... 1,342 418 -- 1,760
------- ------- ------- -------
Total interest income ................... 67,646 7,431 -- 75,077
------- ------- ------- -------
Interest expense:
Deposits ................................ 26,094 3,454 -- 29,548
Borrowings .............................. 539 -- -- 539
------- ------- ------- -------
Total interest expense .................. 26,633 3,454 -- 30,087
------- ------- ------- -------
Net interest income before provision for
possible loan losses ................... 41,013 3,977 -- 44,990
Provision for possible loan losses ........ 4,116 1,718 422 (I) 6,256
------- ------- ------- -------
Net interest income after provision for
possible loan losses .................. 36,897 2,259 (422) 38,734
------- ------- ------- -------
Non-interest income ....................... 7,657 324 -- 7,981
------- ------- ------- -------
Operating expenses:
Salaries and other employee benefits .... 13,704 1,374 -- 15,078
Occupancy and equipment expense ......... 4,942 383 -- 5,325
Other operating expenses ................ 15,703 2,125 (422)(I) 17,406
------- ------- ------- -------
Total operating expenses ................ 34,349 3,882 (422) 37,809
------- ------- ------- -------
Income (loss) before income taxes ......... 10,205 (1,299) -- 8,906
Income tax provision (benefit) ............ 564 (181) -- 383
------- ------- ------- -------
Net income (loss) ........................ $9,641 ($1,118) $ -- $8,523
======= ======= ======= =======
Income per share (x):
Primary ................................. $ 1.06 $ 0.87
Fully diluted ........................... 1.06 0.87
Dividends per common share (x)............. 0.27 0.27
Weighted average number of
common shares outstanding (x) ........... 9,136 9,752
<FN>
- -----------
(x) Shares issued and outstanding have been adjusted for the Stock Split.
</FN>
</TABLE>
See accompanying notes to pro forma combined
condensed unaudited financial statements.
-42-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the Year Ended December 31, 1991
<TABLE>
<CAPTION>
Pro Forma
Historical Pro Forma Combined
------------------------ Adjustments HUBCO and
HUBCO Jefferson Jefferson Jefferson
---------- ------------ ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans ................................... $40,061 $7,411 $ -- $47,472
Securities .............................. 10,801 742 -- 11,543
Federal funds sold ...................... 897 1,722 -- 2,619
------- ------- ------- -------
Total interest income ................... 51,759 9,875 -- 61,634
------- ------- ------- -------
Interest expense:
Deposits ................................ 24,410 5,988 -- 30,398
Borrowings .............................. 877 -- -- 877
------- ------- ------- -------
Total interest expense .................. 25,287 5,988 -- 31,275
------- ------- ------- -------
Net interest income before provision for
possible loan losses ................... 26,472 3,887 -- 30,359
Provision for possible loan losses ........ 2,312 580 --(I) 2,892
------- ------- ------- -------
Net interest income after provision for
possible loan losses .................. 24,160 3,307 -- 27,467
------- ------- ------- -------
Non-interest income ....................... 5,471 309 -- 5,780
------- ------- ------- -------
Operating expenses:
Salaries and other employee benefits .... 11,290 1,374 -- 12,664
Occupancy and equipment expense ......... 4,111 482 -- 4,593
Other operating expenses ................ 6,873 1,252 --(I) 8,125
------- ------- ------- -------
Total operating expenses ................ 22,274 3,108 -- 25,382
------- ------- ------- -------
Income before income taxes ................ 7,357 508 -- 7,865
Income tax provision....................... 2,336 93 -- 2,429
------- ------- ------- -------
Net income .............................. $5,021 $ 415 $ -- $5,436
======= ======= ======= =======
Income per share (x):
Primary ................................. $ 0.68 $ 0.68
Fully diluted ........................... 0.68 0.68
Dividends per common share (x)............. 0.22 0.22
Weighted average number of
common shares outstanding (x) ........... 7,432 8,047
<FN>
- -----------
(x) Shares issued and outstanding have been adjusted for the Stock Split.
</FN>
</TABLE>
See accompanying notes to pro forma combined
condensed unaudited financial statements.
-43-
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED
UNAUDITED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1) The following is a summary of the adjustments required to the pro forma
combined condensed statements of income of HUBCO and Washington assuming the
adjustments were made as of the beginning of the periods presented:
(a) 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 4.6 years.
(b) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the discount on the
investment portfolio over its estimated life of 1.6 years.
(c) To reflect an increase of interest income from the proceeds of
Washington stock options at 6.25%.
(d) To reflect a loss of interest income for the use of funds for
acquisition expenses at 6.25%.
(e) To record the amortization of the premium on deposits.
(f) To reflect an increase in the cost of funds for cash payments to
Washington shareholders at 4.50%.
(g) To reflect an increase in depreciation expense reflecting the net
increase in carrying value of premises and equipment.
(h) To reflect the increase in expense from the amortization of cost over
fair value of the Washington Merger based on a 5 year life.
(i) To reflect the anticipated tax benefit on the pro forma adjustments.
The following summarizes the acquisition of Jefferson by HUBCO in a pooling of
interests transaction as reflected in the accompanying pro forma combined
condensed financial statements:
2) Securities
Transfer of Jefferson's "Held to
Maturity" portfolio to HUBCO's
"Available for Sale" portfolio........ $(24,805)(A)
========
3) Securities Available for Sale
Transfer of Jefferson's "Held to
Maturity" portfolio to HUBCO's
"Available for Sale" portfolio........ $ 24,805
To record the mark-to-market on
Jefferson's "Held to Maturity" portfolio
transferred to HUBCO's "Available
for Sale" portfolio................... (800)
To eliminate Jefferson's shares
currently owned by HUBCO.............. (268)
--------
$ 23,737 (B)
========
4) Loans
To reclassify Jefferson's
in-substance foreclosures to loans to
conform to HUBCO's implementation of
Statement of Financial Accounting
Standards No. 114, "Accounting by
Creditors for Impairment of a Loan"
("SFAS 114").......................... $ 1,777 (C)
========
5) Allowance for Possible Loan Losses
To reclassify Jefferson's valuation
allowance on in-substance
foreclosures to the allowance for
possible loan losses to conform to
HUBCO's implementation of SFAS 114.... $ (170)(D)
=======
6) Other Real Estate
To reclassify Jefferson's
in-substance foreclosures to loans to
conform to HUBCO's implementation of
SFAS 114.............................. $(1,777)
To reclassify Jefferson's valuation
allowance on in-substance foreclosures
to the allowance for possible loan
losses to conform to HUBCO's
implementation of SFAS 114............ 170
-------
$(1,607)(E)
=======
7) Other Assets
To record the deferred tax adjustment
relating to the mark-to-market on
the Jefferson "Held to Maturity"
portfolio transferred to HUBCO's
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<PAGE>
"Available for Sale" portfolio........ $ 304
To record the deferred tax adjustment
related to the unrealized holding
loss on the Jefferson "Available
for Sale" portfolio transferred to
HUBCO's "Available for Sale"
portfolio............................. 32
-------
$ 336 (F)
=======
8) Common Stock
Retirement of Jefferson's outstanding
common stock.......................... $(1,357)
Issuance of 615,339 shares of HUBCO
Common Stock with a stated value of
$1.78 per share....................... 1,095
-------
$ (262)(G)
=======
9) Unrealized Holding Gain (Loss) on
Securities Available for Sale
Eliminate unrealized holding gain
on Jefferson Common Stock held
by HUBCO ............................. $ (6)
To adjust the unrealized holding
loss on the Jefferson "Available for
Sale" portfolio for the related
deferred taxes resulting from the
transfer to HUBCO's "Available for
Sale" portfolio....................... 32
To record the unrealized holding loss,
net of the related deferred tax
adjustment on the transfer of the
Jefferson "Held to Maturity" portfolio
to HUBCO's "Available for Sale"
portfolio ............................ (496)
-------
$ (470)(H)
=======
10) The Pro Forma Combined Condensed
Statements of Income for the nine
months ended September 30, 1994
and for the years ended December
31, 1993, 1992 and 1991 have been
adjusted to reclassify Jefferson's
ORE valuation reserves on
in-substance foreclosures to HUBCO's
provision for possible loan losses to
conform to HUBCO's implementation of
SFAS 114. Accordingly, the provision
for possible loan losses has been
increased and other operating
expenses decreased by $151, $189,
$422 and $0, respectively. (I)
11) Shopper's Charge Account Transaction
On December 7, 1994, the Bank
acquired Shopper's Charge Accounts
Co. ("Shoppers") for approximately
$16.3 million in cash in a
transaction accounted for under the
purchase method of accounting.
Accordingly, the Bank recorded
approximately $63.4 million in assets
and $46.9 million in liabilities. The
difference reflects the stockholders'
equity of Shoppers of $13.2 million
and the tax impacted purchase
accounting adjustments of $3.3
million. HUBCO estimates that no
goodwill will arise from the
transaction and that the acquisition
of Shoppers will not have a material
effect on the financial condition or
results of operations of HUBCO as of
and for the year ended December 31,
1994.
-45-
<PAGE>
BUSINESS OF JEFFERSON
General
At September 30, 1994, Jefferson had assets, deposits and stockholders'
equity of $91.8 million, $85.3 million, and $6.0 million, respectively.
Jefferson National Bank was organized in 1970 as a national banking
association. Jefferson is a commercial bank, the deposits of which are insured
by the FDIC. Jefferson offers a variety of consumer and commercial services. Its
four branch offices are located in Passaic County, New Jersey.
Commercial Bank Services
Jefferson offers lending, depository, and related financial services to
individuals and small-to medium-sized businesses in its northern New Jersey
market area. In the lending area, these services include short and medium term
loans, lines of credit, letters of credit, inventory and accounts receivable
financing, real estate construction loans and mortgage loans. Depository
products include: demand deposits, savings accounts and time accounts. In
addition, Jefferson offers collection, wire transfer and night depository
services.
Consumer Banking
Jefferson's consumer banking services include checking accounts, savings
accounts, NOW accounts, money market accounts, certificates of deposit, secured
and unsecured loans, consumer installment loans, mortgage loans, safe deposit
services and travelers' checks.
Competition
Jefferson operates in a highly competitive market environment within
northern New Jersey. Several major New Jersey and out-of-state multi-bank
holding companies, large independent banks and large thrift holding companies
operate within Jefferson's market area. These larger institutions have
substantially greater lending capacities and typically offer services which
Jefferson does not offer.
In recent years, the financial services industry has expanded rapidly as
barriers to competition within the industry have become less significant. Within
the banking field, banks must compete not only with other banks and traditional
financial institutions, but also with other business corporations that deliver
financial services.
Employees
At September 30, 1994, there were 50 persons employed by Jefferson on a
full time equivalent basis. Management considers relations with employees to be
satisfactory.
Properties
Jefferson owns its offices at 155 Jefferson Street, Passaic, 985 Paulison
Avenue, Clifton and 309 Lakeview Avenue, Clifton and leases its offices at 391
Broad Street, Clifton. Jefferson has an option to purchase the Broad Street,
Clifton property and intends to exercise such option. During the year ended
December 31, 1993, rental expense relating to such lease aggregated $36,000.
Supervision and Regulation
Jefferson is a national banking association subject to supervision and
examination by the OCC. In addition to banking laws and regulations, Jefferson
is subject to various other laws and regulations, all
-46-
<PAGE>
of which directly or indirectly affect Jefferson's operations, management and
ability to make distributions. The following discussion summarizes certain
aspects of those laws and regulations that affect Jefferson.
Proposals to change the laws and regulations governing the banking industry
are frequently raised in Congress and before the various bank regulatory
agencies. The likelihood and timing of any changes and the impact such changes
might have on Jefferson are difficult to determine.
The operations of Jefferson are subject to requirements and restrictions
under federal law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted, limitations
on the types of investments that may be made and the types of services which may
be offered. Various consumer laws and regulations also affect the operations of
Jefferson. Approval of the OCC is required for branching, for bank mergers in
which the continuing bank is a national bank and in connection with certain
fundamental corporate changes affecting Jefferson.
Provisions of federal banking law restrict the amount of distributions that
can be paid by Jefferson. In addition to the restrictions imposed on Jefferson
by its Consent Order, prior approval of the OCC is required if dividends
declared by Jefferson in any calendar year will exceed its net profits (as
defined) for that year, combined with its retained net profits for the preceding
two years.
The OCC also has authority to prohibit payment of a dividend if such
payment constitutes, in the agency's opinion, an unsafe or unsound practice. In
addition, the ability of Jefferson to pay dividends is affected by the various
minimum capital requirements and the capital and non-capital standards
established under the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), as described below. The rights of Jefferson, its stockholders
and its creditors to participate in any distribution of the assets or earnings
of Jefferson is further subject to the prior claims of creditors of Jefferson.
FDICIA requires the federal banking agencies to take "prompt corrective
action" with respect to banks which do not meet minimum capital requirements.
Among other things, FDICIA requires a bank which does not meet any one of the
capital requirements set by its regulators to submit a capital restoration plan
for improving the capital. In addition, FDICIA prohibits a bank from making a
capital distribution if its fails to meet capital requirements. Critically
undercapitalized banks (which are defined to include banks which still have a
positive net worth) are generally subject to the mandatory appointment of a
receiver in conservation.
The deposits of Jefferson are insured up to applicable limits by the FDIC.
Accordingly, Jefferson is subject to deposit insurance assessments to maintain
the Bank Insurance Fund. Pursuant to FDICIA, the FDIC established a risk-based
insurance assessment system. This approach is designed to ensure that a banking
institution's insurance assessment is based on three factors: the probability
that the applicable insurance fund will incur a loss from the institution; the
likely amount of the loss; and the revenue needs of the insurance fund.
Effective January 1,1993, the FDIC established a risk related premium assessment
system, with assessment rates ranging from .23% of domestic deposits (the same
rate as under the previous flat-rate system) for those banks deemed to pose the
least risk to the insurance fund, to .31% for those banks deemed to pose the
greatest risk (with intermediate rates of .26%, .29% and .30%).
Consent Order
The Consent Order, which was issued in December 1992, provides, among other
things, that Jefferson (i) must take continuing action to protect its interest
with respect to criticized assets, (ii) must adopt and follow policies
concerning non-accrual loans and provide quarterly audits of loan accruals,
(iii) must adopt and follow policies concerning renewals of extension of credit,
loan administration, ORE and the internal loan review system, (iv) must evaluate
the adequacy of its allowance for possible loan losses on a quarterly basis, (v)
must maintain a minimum Tier 1 capital at least equal to 10% of risk-weighted
assets
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<PAGE>
and at least equal to 6% of adjusted total assets, (vi) cannot declare a
dividend without the prior written approval of the OCC and (vii) must adopt and
adhere to a capital and strategic plan.
Jefferson is not in full compliance with the Consent Order, although the
OCC has verbally advised Jefferson that it is in substantial compliance with
such Order. The areas in which Jefferson is not in full compliance are those
sections of the Consent Order which address the internal loan review process and
the methodology used in the establishment of Jefferson's allowance for loan
losses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF JEFFERSON'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of Jefferson's financial condition
and results of operations should be read in conjunction with Jefferson's
financial statements and the accompanying notes presented elsewhere herein. See
"INDEX TO JEFFERSON'S FINANCIAL STATEMENTS."
Results of Operations
Summary
Jefferson has been able to operate at profitable levels through much of its
history. However, weaknesses in the local real estate market and a softening of
the New Jersey economy have led to a dramatic decrease in the value of
collateral held by many New Jersey financial institutions, including Jefferson,
and other difficulties. Such weaknesses resulted in loan defaults and
foreclosure proceedings with respect to several of Jefferson's substantial loans
and generally produced a significant increase in Jefferson's non-performing
assets. As a result, it has been necessary for Jefferson to add substantial
amounts to its allowance for possible loan losses and to incur substantial
expenses relating to property that has been foreclosed or is subject to the
foreclosure process. These factors, among others, caused Jefferson to record
substantial net losses in 1992 and 1993 and materially reduced Jefferson's
capital base.
Net Interest Income
Net interest income is the largest component of Jefferson's operating
income. The following tables reflect the components of net interest income,
setting forth, for the nine months ended September 30, 1994 and 1993 and for
each of the years in the three year period ended December 31, 1993, (i) average
assets, liabilities and shareholders' equity, (ii) interest income earned on
interest-earning assets and interest expense paid on interest-bearing
liabilities, (iii) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, (iv) Jefferson's net interest spread
(i.e., the difference between the average yield earned on interest-earning
assets and the average rate paid on interest-bearing liabilities), (v) the net
interest margin or net yield on interest-earning assets (i.e., net interest
income as a percentage of interest-earning assets) and (vi) the ratio of average
interest-earning assets to average interest-bearing liabilities. Given the
relatively small amount of tax-exempt income typically earned by Jefferson, no
tax equivalent adjustments have been made to the following tables or to any of
the other data presented in this Proxy Statement-Prospectus with respect to
Jefferson.
-48-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------
1994 1993
----------------------------------- -----------------------------------
Interest Average Interest Average
Average Income/ Interest Average Income/ Interest
Balance Expense(1) Rate(2) Balance Expense(1) Rate(2)
------- ---------- -------- ------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-Earning Assets:
Loans (net of unearned income)(3) .... $46,785 $3,088 8.78% $54,711 $3,807 9.25%
Taxable securities .................. 30,852 1,028 4.43 19,976 471 3.14
Tax-exempt securities ................ -- -- -- 2,360 53 2.99
Interest-bearing deposits ............ 153 4 3.40 363 8 2.93
Federal funds sold ................... 10,949 297 3.61 15,240 329 2.87
------- ------ ------- ------ ----
Total interest-earning assets ........ 88,739 4,417 6.62 92,650 4,668 6.70
------- ------ ---- ------- ------ ----
Allowance for possible loan losses ..... (1,710) (1,870)
Noninterest-earning assets ............. 9,624 8,309
------- -------
Total assets ......................... $96,653 $99,089
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits ........................ $11,279 $10,627
------- -------
Interest-Bearing Liabilities:
Demand deposits ...................... 20,302 327 2.14 18,769 331 2.35
Savings deposits ..................... 28,280 541 2.54 27,466 555 2.69
Time deposits ........................ 30,253 712 3.13 34,803 867 3.31
------- ------ -------
Total interest-bearing liabilities.. 78,835 1,580 2.67 81,038 1,753 2.87
------- ------ ---- ------- ------ ----
Total deposits ..................... 90,114 91,665
------- -------
Other liabilities ...................... 417 206
Shareholders' equity ................... 6,122 7,218
------- -------
Total liabilities and shareholders'
equity ............................... $96,653 $99,089
======= =======
Net interest income; net
interest spread ...................... $2,837 3.95% $2,915 3.83%
====== ====== ====== ======
Net yield on interest-earning assets ... 4.25% 4.18%
====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities .......................... 112.56% 114.33%
====== ======
<FN>
- ----------
(1) Includes loan fees, which are not material.
(2) Percentages have been annualized for purposes of comparability with year-end
data.
(3) Includes non-accruing loans, which has the effect of reducing the average
rates earned on Jefferson's loan portfolio.
</FN>
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------
1993 1992 1991
------------------------------ -------------------------------- ---------------------------------
Interest Average Interest Average Interest Average
Average Income/ Interest Average Income/ Interest Average Income/ Interest
Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense(1) Rate
-------- ---------- -------- ------- ---------- -------- ------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-Earning Assets:
Loans (net of
unearned income)(2) .... $53,396 $4,896 9.17% $ 63,994 $6,105 9.54% $ 65,628 $7,411 11.29%
Taxable securities ....... 20,061 727 3.62 16,735 678 4.05 5,413 331 6.11
Tax-exempt securities .... 1,770 53 2.99 5,868 230 3.92 7,545 411 5.45
Interest-bearing deposits 333 9 2.70 271 8 2.95 815 23 2.82
Federal funds sold ....... 15,007 434 2.89 11,952 410 3.43 29,800 1,699 5.70
------- ------ -------- ------ ------- ------
Total interest-earning
assets.................. 90,567 6,119 6.76 98,820 7,431 7.52 109,201 9,875 9.04
------- ------ ---- -------- ------ ---- -------- ------ -----
Allowance for possible
loan losses............... (1,832) (1,517) (943)
Noninterest-earning assets .. 9,479 8,994 7,337
------- -------- --------
Total assets.............. $98,214 $106,297 $115,595
======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Demand deposits.............. $ 9,805 $ 9,994 $ 9,203
------- -------- --------
Interest-Bearing
Liabilities:
Demand deposits .......... 19,048 443 2.33 18,530 588 3.17 18,766 928 4.95
Savings deposits ......... 27,396 743 2.71 24,643 869 3.53 19,375 998 5.15
Time deposits............. 33,988 1,125 3.31 43,077 1,997 4.64 59,202 4,062 6.86
------- ------ -------- ------ -------- ------
Total interest-bearing
liabilities ....... 80,432 2,311 2.87 86,250 3,454 4.00 97,343 5,988 6.15
------- ------ ---- -------- ------ ---- -------- ------ -----
Total deposits ......... 90,237 96,244 106,546
------- -------- --------
Other liabilities ........... 759 1,645 671
------- -------- --------
Shareholders' equity ........ 7,218 8,408 8,378
------- -------- --------
Total liabilities and
shareholders' equity .. $98,214 $106,297 $115,595
======= ======== ========
Net interest income;
net interest spread ...... $3,808 3.89% $3,977 3.52% $3,887 2.89%
====== ==== ====== ==== ====== ====
Net yield on interest-
earning assets............ 4.20% 4.02% 3.56%
==== ==== ====
Ratio of average
interest-earning assets to
average interest-bearing
liabilities............... 112.60% 114.57% 112.18%
====== ====== ======
<FN>
- --------------
(1) Includes loan fees, which are not material.
(2) Includes non-accruing loans, which has the effect of reducing the average
rates earned on Jefferson's loan portfolio.
</FN>
</TABLE>
-50-
<PAGE>
The following table demonstrates the relative impact on net interest income
of changes in the volume of interest-earning assets and interest-bearing
liabilities and of changes in rates earned and paid by Jefferson on such assets
and liabilities. Changes attributable to the interactive effects of volume and
rate (mix variance) have been allocated equally to changes due to volume and
rate. Dollar amounts are in thousands of dollars.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1994
Compared with Nine Months
Ended September 30, 1993 1993 Compared with 1992 1992 Compared with 1991
--------------------------- ------------------------------ ---------------------------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in Due to Change in
----------------- -------------------- ------------------
Total Average Average Total Average Average Total Average Average
Change Volume Rate Change Volume Rate Change Volume Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans (net of
unearned income)...... $(719) $(555) $(164) $(1,209) $(1,002) $(207) $(1,306) $(169) $(1,137)
Taxable securities....... 557 364 193 50 127 (77) 381 631 (250)
Tax-exempt securities ... (53) (27) (26) (178) (143) (35) (199) (87) (112)
Interest-bearing
deposits ............. (4) (5) 1 1 2 (1) (16) (17) 1
Federal funds sold....... (32) (105) 73 24 97 (73) (1,304) (824) (480)
----- ----- ----- ------- ------- ----- ------- ----- ------
Total interest
earning assets ....... (251) (328) 77 (1,312) (919) (393) (2,444) (466) (1,978)
----- ----- ----- ------- ------- ----- ------- ----- ------
Interest expense:
Demand deposits.......... (4) 26 (30) (145) 14 (159) (340) (10) (330)
Savings deposits......... (14) 16 (30) (126) 86 (212) (129) 229 (358)
Time deposits............ (155) (110) (45) (872) (361) (511) (2,065) (927) (1,138)
----- ----- ----- ------- ------- ----- ------- ----- ------
Total interest
bearing liabilities .. (173) (68) (105) (1,143) (261) (882) (2,534) (708) (1,826)
----- ----- ----- ------- ------- ----- ------- ----- ------
Net change in interest
income ................... $ (78) $(260) $ 182 $ (169) $ (658) $ 489 $ 90 $ 242 $ (152)
===== ===== ===== ======= ======= ===== ======= ===== =======
</TABLE>
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<PAGE>
Jefferson's net interest income has shown little, if any, positive
improvement in recent periods. After increasing by only $90,000 from 1991 to
1992, net interest income declined by $169,000 from 1992 to 1993 and by $78,000
from the first nine months of 1993 to the first nine months of 1994. The impact
of non-accrual loans on net interest income has been substantial. Had
Jefferson's non-accrual loans at each period-end continued to pay interest at
their original contract rates, interest income would have increased by $415,000
in 1992, $528,000 in 1993 and $407,000 during the first nine months of 1994. The
actual amounts of income recognized on these loans was not significant.
During the periods presented herein, as a result of the impact of problem
loans, Jefferson has found it necessary to reduce its asset size in order to
assure that its existing capital base conforms to capital ratio requirements
imposed pursuant to the Consent Order and federal banking law. In 1992,
Jefferson effected this reduction in asset size principally by reducing its
reliance on federal funds sold, the average volume of this relatively low
yielding interest-earning asset declining from $29.8 million in 1991 to $12.0
million in 1992. This reduction was effected at the same time that depositors
were moving their funds out of more expensive time deposits into shorter term
deposit products at Jefferson and into other investment vehicles outside of
Jefferson. The resulting decrease in the average volume of funding sources
enabled Jefferson to record the above-mentioned $90,000 increase in net interest
income in 1992, notwithstanding a substantial reduction in interest income
resulting primarily from a decline in yields on Jefferson's interest-earning
assets.
During 1993, a $10.6 million decrease in average loan volume adversely
affected Jefferson's interest income and net interest income. That decrease was
primarily attributable to the weaknesses in the local real estate market, which
led to substantial charge-offs for Jefferson, necessitated the reduction in
Jefferson's asset size and produced relatively few quality loan originations.
These factors were offset in part by the reduction in funding costs resulting
from the declining rate environment and the continuing migration of deposits
into shorter-term, less costly sources of funds.
The trends evident in 1993 have continued during the first nine months of
1994. The $78,000 decrease in net interest income in 1994 is attributable
primarily to a $7.9 million decrease in average loan volume, reflecting
intentional shrinkage of Jefferson's asset size and a lack of quality loan
demand.
During the periods presented herein, Jefferson has been able to attain
improving net interest spreads and net interest margins, primarily as a result
of (i) the fixed rate nature of a substantial portion of Jefferson's loan
portfolio, (ii) the declining interest rate environment in periods prior to 1994
and (ii) the relatively increased contribution of non-interest-bearing funding
sources, which have remained stable (other than the decline in average
shareholders' equity) while average interest-earning assets have declined. As
noted elsewhere herein, the fixed rate nature of a substantial portion of
Jefferson's loan portfolio can be expected to adversely affect net interest
income to the extent that current market rates of interest continue to increase.
Provision for Possible Loan Losses
Management of Jefferson performs an ongoing review of the adequacy of the
allowance for possible loan losses in connection with its review of the loan
portfolio. The review of the allowance includes an evaluation of changes in the
nature and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans, industry experience, collateral value and current
economic conditions. The allowance is reduced by charge-offs and increased by
recoveries on charged-off loans and charges against earnings referred to as
"provisions for possible loan losses". The substantial deterioration in the
local real estate market and the weakening of general economic conditions have
led to historically high provisions for possible loan losses in recent years:
Jefferson's provisions were $0.6 million in 1991, $1.7 million in 1992 and $1.2
million in 1993. Management has been able to reduce the provision for possible
loan losses to $175 thousand during the first nine months of 1994.
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<PAGE>
Other Income
The following table reflects the components of other (i.e., non-interest)
income for the nine months ended September 30, 1994 and 1993, and for each of
the past three years:
Nine Months Ended
September 30, Years Ended December 31,
----------------- --------------------------
(In thousands)
1994 1993 1993 1992 1991
Fees, commissions
and certain charges ....... $288 $228 $313 $241 $211
Other ........................ 90 151 176 83 98
---- ---- ---- ---- ----
Total ..................... $378 $379 $489 $324 $309
==== ==== ==== ==== ====
The improvement in Jefferson's fee and service charge income during 1993
and the first nine months of 1994 reflects a restructuring of Jefferson's fee
structure implemented during 1993. Other non-interest income includes the
settlement of a bond claim resulting in $84.5 thousand of additional income
during the first nine months of 1993.
Other Expenses
The following table reflects the components of other (i.e., non-interest)
expenses for the nine months ended September 30, 1994 and 1993, and for each of
the past three years:
Nine Months Ended
September 30, Years Ended December 31,
----------------- -------------------------
1994 1993 1993 1992 1991
(In thousands)
Salaries and employee benefits.... $1,188 $1,082 $1,469 $1,374 $1,374
Occupancy, furniture and
equipment ...................... 333 312 412 383 433
Other real estate expenses:
Cost of operations ............. 169 122 243 65 29
Valuation adjustments .......... 263 310 555 538 79
Other ............................ 1,117 1,111 1,756 1,522 1,193
------ ------ ------ ------ ------
Total .......................... $3,070 $2,937 $4,435 $3,882 $3,108
====== ====== ====== ====== ======
The increase in salaries and employee benefits during 1993 and the first
nine months of 1994 is primarily attributable to Jefferson's hiring senior
personnel (including its current President) to assist it in responding to the
Consent Order and the problems resulting from the weakened real estate market.
Those problems also produced historically high expenses relating to Jefferson's
"other real estate" (i.e., real estate which has either been foreclosed or is in
substance foreclosed). Such expenses include both the actual expenses of
operating ORE properties (which increased 273% from 1992 to 1993) and charges to
earnings that must be taken as valuation adjustments (which increased 581% from
1991 to 1992) in recognition of market value declines.
For information regarding the increases in "other" non-interest expenses,
see Note 10 of the Notes to Jefferson's Financial Statements. A substantial
portion of the increase in such expenses from 1991 to 1993 is attributable to
professional fees associated with Jefferson's efforts to respond to problem loan
situations and property taxes on non-accrual loans.
-53-
<PAGE>
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes"
(Statement 109). Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on deferred
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Effective January 1, 1993, Jefferson adopted Statement 109. Prior years'
financial statements were not restated to comply with Statement 109. The effects
of adopting Statement 109 in 1993 have not been significant.
Jefferson has recorded provisions for income taxes of $93,000, $62,000 and
$64,000, respectively, for 1991, 1993 and the first nine months of 1994 and
recognized a tax benefit of $181,000 in 1992. In October 1994, Jefferson
received cash refunds aggregating $431,000 resulting from Federal income tax
carryback claims relating to 1990, 1991 and 1992. At September 30, 1994,
Jefferson had a net operating loss carryforward of approximately $95,000 for tax
purposes, expiring in varying amounts through 2008.
For further information regarding tax matters, see Note 8 of the Notes to
Jefferson's Financial Statements.
Financial Condition
Interest Rate Sensitivity
Jefferson analyzes its interest sensitivity position to manage the risks
associated with interest rate movements through the use of "gap analysis."
Interest rate risk arises from mismatches in the repricing of assets and
liabilities within a given period. Gap analysis is an approach used to quantify
these differences. A "positive" gap results when the amount of
interest-sensitive assets exceeds the amount of interest-sensitive liabilities
within a given period. A "negative" gap results when interest-sensitive
liabilities exceed interest-sensitive assets within a given period.
The following table illustrates Jefferson's interest rate gap position as
of September 30, 1994. At that date, Jefferson had a cumulative negative gap on
a 30-day, 90-day, 180-day, and one year basis.
-54-
<PAGE>
<TABLE>
<CAPTION>
Assets and Liabilities Maturing-Repricing in:
1-30 31-90 91-180 181-365
Days Days Days Days Over 1 Year Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investment securities held
to maturity ...................... $ -- $ 2,089 $ 995 $ 5,999 $ 15,723 $ 24,806
Securities available
for sale ......................... 2,997 1,001 -- 5,015 -- 9,013
Interest-bearing deposits .......... 45 -- -- -- -- 45
Federal funds sold ................. 5,110 -- -- -- -- 5,110
Installment loans .................. 110 147 210 377 1,605 2,449
Mortgage loans ..................... 901 308 778 947 22,649 25,583
Commercial loans ................... 5,881 439 33 18 5,761 12,132
-------- -------- -------- -------- -------- --------
Total .......................... 15,044 3,984 2,016 12,356 45,738 79,138
-------- -------- -------- -------- -------- --------
Interest-Bearing Liabilities:
Demand deposits .................... 28,696 -- -- -- -- 28,696
Savings deposits ................... 28,534 -- -- -- -- 28,534
Time deposits ...................... 4,986 7,088 10,556 3,998 -- 26,628
-------- -------- -------- -------- --------
Total ........................... $ 62,216 $ 7,088 $ 10,556 $ 3,998 -- $ 83,858
======== ======== ======== ======== ======== ========
Period gap ............................. $(47,172) $ (3,104) $ (8,540) $ 8,358 $ 45,738 $ (4,720)
Cumulative gap ......................... $(47,172) $(50,276) $(58,816) $(50,458) $ (4,720)
</TABLE>
For many reasons, an interest sensitivity table is not a complete picture of the
possible effect of interest rate changes on Jefferson's net interest income.
First, changes in the general level of interest rates will not affect all
categories of assets and liabilities equally or simultaneously. Second, the
table represents a one-day position; variations occur daily as Jefferson adjusts
its interest sensitivity throughout the year. Third, assumptions must be made to
construct such a table. For example, there are several savings products
categorized as interest sensitive in the 30 day interval; however, they may be
adjusted less frequently than changes in the leading rate indicators. Fourth,
the re-pricing distribution of interest-sensitive assets may not be indicative
of the liquidity of those assets. Finally, since this table is based on
contractual maturities, it does not include estimates of early principal
payments on mortgage and installment loans.
In general, the net interest income of a financial institution will be
benefited if the institution has a negative gap during periods of declining
interest rates and a positive gap during periods of increasing interest rates.
Likewise, net interest income generally will be adversely affected if a
financial institution has a positive gap during periods of declining interest
rates or a negative gap during periods of increasing interest rates. Jefferson's
negative gap, which is attributable in part to the predominance of long-term
mortgage products, can be expected to adversely affect its net interest income
in the future if the current trend of increasing market rates of interest
continues.
-55-
<PAGE>
The following table sets forth certain categories of loans as of September
30, 1994 in terms of maturity and interest rate sensitivity:
<TABLE>
<CAPTION>
Within 1 to 5 After 5
1 Year Years Years Total
---------- --------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Commercial loans.................... $ 6,434 $ 7,112 $118 $13,664
Real estate loans................... 4,788 23,423 371 28,582
Installment loans................... 844 1,538 67 2,449
------- ------- ---- -------
Total.......................... $12,066 $32,073 $556 $44,695
======= ======= ==== =======
Loans with predetermined rates ..... $ 6,770 $31,041 $483 $38,294
Loans with floating rates .......... 5,296 1,032 73 6,401
------- ------- ---- -------
Total.......................... $12,066 $32,073 $556 $44,695
======= ======= ==== =======
</TABLE>
Liquidity and Funding
Cash and cash equivalents are Jefferson's most liquid assets. At September
30,1994, cash and cash equivalents totaled $10.2 million, as compared with $18.2
million at December 31, 1993. The bulk of this decrease resulted from net
purchases of securities in the amount of $10.0 million and a $2.8 million net
decrease in deposits, partially offset by a $3.7 million net decrease in loans.
The following table provides information concerning deposit categories
which were in excess of 10% of average total deposits.
-56-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended Year Ended
September 30, December 31, December 31,
----------------- ------------ ------------
1994 1993 1992
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Non-interest bearing demand deposits:
Average amount...................... $11,279 $ 9,805 $ 9,994
Average rate paid................... -- -- --
Interest bearing demand deposits:
Average amount...................... $20,302 $19,048 $18,530
Average rate paid................... 2.15% 2.33% 3.17%
Savings deposits:
Average amount...................... $28,280 $27,396 $24,643
Average rate paid................... 2.55% 2.71% 3.53%
Time deposits:
Average amount...................... $30,253 $33,988 $43,077
Average rate paid................... 3.14% 3.31% 4.64%
</TABLE>
At September 30, 1994 time deposits in amounts of $100,000 and over matured
as follows (in thousands):
September 30,
1994
-------------
Three months or less.......................................... $1,112
Over three months through six months ......................... 763
Over six months through twelve months ........................ 200
Over twelve months............................................ 125
------
Total.................................................. $2,200
======
Securities
The amortized cost, gross unrealized gains and losses and estimated market
values of Jefferson's securities at September 30, 1994 and December 31, 1993 and
1992 are summarized as follows:
-57-
<PAGE>
<TABLE>
<CAPTION>
September 30, 1994
---------------------------------------------------------------------------------------------
Carrying Gross Gross Market
Value Unrealized Gains Unrealized Losses Value
-------- ---------------- ----------------- ------
(In thousands)
<S> <C> <C> <C> <C>
Securities Available for Sale
- -----------------------------
U.S. Treasury Notes ............ $ 9,013 $ -- $ (84) $ 8,929
Securities held to Maturity ======= ===== ===== =======
- ---------------------------
U.S. Treasury Notes and
Obligations of U.S.
Government Agencies .......... $21,025 $ -- $(542) $20,483
Mortgage Backed Securities
of U.S. Government
Agencies...................... 3,695 -- (258) 3,437
Federal Reserve Bank Stock...... 85 -- -- 85
------- ----- ----- -------
Total securities held to
maturity ................ $24,805 $ -- $(800) $24,005
======= ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------------------------------------------
Carrying Gross Gross Market
Value Unrealized Gains Unrealized Losses Value
-------- ---------------- ----------------- ------
(In thousands)
<S> <C> <C> <C> <C>
U.S.Treasury Notes and
Obligations of U.S.
Government Agencies............... $19,966 $ 27 $ (7) $19,986
Mortgage Backed Securities of
U.S. Government Agencies.......... 3,874 31 (23) 3,882
Federal Reserve Bank Stock.......... 85 -- -- 85
------- ----- ----- -------
$23,925 $ 58 $ (30) $23,953
======= ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
---------------------------------------------------------------------------------------------
Carrying Gross Gross Market
Value Unrealized Gains Unrealized Losses Value
-------- ---------------- ----------------- ------
(In thousands)
<S> <C> <C> <C> <C>
U.S.Treasury Notes and
Obligations of U.S.
Government Agencies............... $17,859 $ 3 $(14) $17,848
Mortgage Backed Securities of
U.S. Government Agencies.......... 5,850 1 (1) 5,850
Federal Reserve Bank Stock.......... 85 -- -- 85
------- ---- ---- -------
$23,794 $ 4 $(15) $23,783
======= ==== ==== =======
</TABLE>
The following table sets forth the maturity distribution and weighted
average yields of Jefferson's investment securities held to maturity and
securities available for sale as of September 30, 1994. No tax equivalent
adjustments have been made in the following table.
-58-
<PAGE>
<TABLE>
<CAPTION>
Within 1 - 5 5 - 10
1 Year Years Years Total
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Investment securities held to maturity:
U.S. Treasury:
Book value........................... $8,998 $ 8,027 -- $17,025
Yield................................ 4.02% 5.30% -- 4.62%
U.S. Agencies:
Book value........................... -- $ 2,000 $2,000 $ 4,000
Yield................................ -- 4.40% 5.27% 4.84%
Mortgage Backed Securities:
Book value........................... -- $ 1,825 $1,870 $ 3,695
Yield................................ -- 5.20% 5.57% 5.39%
Other Securities:
Book value........................... $ 85 -- -- $ 85
Yield................................ 5.88% -- -- 5.88%
Total book value......................... $9,083 $11,852 $3,870 $24,805
====== ======= ====== =======
Weighted average yield................... 4.02% 5.13% 5.42% 4.77%
==== ==== ==== ====
Securities available for sale:
U.S. Treasury:
Book value........................... $5,996 $ 2,933 $ -- $ 8,929
Yield................................ 3.82% 4.69% -- 4.11%
</TABLE>
-59-
<PAGE>
For additional information regarding Jefferson's securities portfolio, including
information regarding a recent accounting pronouncement, see Notes 1 and 3 of
the Notes to Jefferson's Financial Statements.
Loan Portfolio
Loans are the most significant component of Jefferson's interest-earning
assets. Real estate loans account for a substantial portion of Jefferson's total
loans. Commercial lending activities are focused primarily on lending to small
to mid-sized family-owned businesses.
-60-
<PAGE>
The following table sets forth the classification of Jefferson's loans by
major category as of the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Commercial........................................ $ 334 $ 1,956 $ 700
Real estate loans secured by:
Construction and land development........ -- 328 119
First mortgages.......................... 25,136 28,034 35,514
Second mortgages......................... 3,957 6,133 9,260
Nonresidential properties................ 13,618 9,833 11,128
------- ------- -------
42,711 44,328 56,021
Installment....................................... 1,650 2,280 2,965
Total loans.............................. 44,695 48,564 59,686
------- ------- -------
Less: Allowance for possible loan losses 1,648 1,682 2,196
------- ------- -------
Net loans................................. $43,047 $46,882 $57,490
======= ======= =======
</TABLE>
Credit Risk
One measure of credit risk is the extent to which a financial institution's
loans have ceased to perform in accordance with the terms initially agreed upon
by the institution and its borrowers. The following table sets forth information
regarding restructured loans, non-accrual loans, other past due loans and other
real estate as of September 30, 1994 and December 31, 1993 and 1992:
-61-
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
------------- ---------------------
1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Non-performing loans:
Restructured loans(1)........................ $ 134 $ -- $ --
Nonaccrual loans(2).......................... 4,373 5,768 7,251
Past due 90 days or more and still
accruing interest(3)...................... 1,330 1,832 634
------- ------- -------
Total.................................... 5,837 7,600 7,885
------- ------- -------
Other real estate (4):
Repossessed properties - residential......... 671 1,023 439
Repossessed properties - commercial.......... 369 480 736
In-substance foreclosure - residential....... 802 1,296 1,695
In-substance foreclosure - commercial........ 976 975 1,082
Less: Valuation allowance........................ (398) (438) (538)
------- ------- -------
Net other real estate.................... 2,420 3,336 3,414
------- ------- -------
Total non-performing assets....................... $ 8,257 $10,936 $11,299
======= ======= =======
Non-performing loans as a percent of
total loans (net of unearned income)............ 13.06% 15.65% 13.21%
Non-performing assets as a percent of
total loans (net of unearned income)............ 18.47% 22.52% 18.93%
<FN>
- --------------
(1) Generally represents loans characterized as "troubled debt," as defined in
Statement of Financial Accounting Standards No. 15, "Accounting by Debtors
and Creditors for Troubled Debt Restructurings."
(2) Generally represents those loans as to which management has determined that
the borrowers may be unable to meet contractual principal and/or interest
obligations or where interest or principal is in arrears for a period of
more than 90 days (except when such loans are believed to be fully
collectible and adequately secured). Interest previously accrued on these
loans during the current year and not yet paid is reversed and charged
against income; interest accrued during prior years and not yet paid is
charged against the allowance for possible loan losses. Interest earned
thereafter is only included in income to the extent that it is collected.
(3) Primarily represents those loans in which payments of interest or principal
are contractually past due 90 days or more but which are currently accruing
income at the contractually stated rates, based on a determination that such
loans are believed to be fully collectible and adequately secured.
(4) Consists of assets acquired in foreclosure and assets considered to be in an
in-substance foreclosure status. A loan is treated as in-substance
foreclosure when the borrower has little or no equity in the underlying
property and Jefferson can reasonably expect repayment to come only from the
operation or sale of the underlying real estate.
</FN>
</TABLE>
-62-
<PAGE>
Credit Losses
Loans are typically charged-off when they are identified by management or
classified by regulatory authorities as a "loss". Charge-offs of loans are made
when they are determined to be uncollectible. In certain instances, partial
charge-offs are made to recognize the effect of declining collateral values, as
compared to the carrying value of the loan. Net charge-offs increased in 1993 as
compared to the prior year, primarily as a result of continuing weakness in the
Bank's primary lending area.
The following table sets forth information regarding Jefferson's provision
and allowance for possible loan losses and charge-off experience:
<TABLE>
<CAPTION>
September 30, December 31,
------------------- -------------------
1994 1993 1993 1992
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for Possible Loan Losses:
Balance at beginning of period .................... $1,682 $2,196 $2,196 $1,117
Provisions (charged to expense) ................... 175 1,006 1,156 1,718
Charge-offs........................................ (270) (1,273) (1,707) (655)
Recoveries of charged-off loans ................... 61 30 37 16
------ ------ ------ ------
Balance at end of period........................... $1,648 $1,959 $1,682 $2,196
====== ====== ====== ======
Ratio of net charge-offs to average
loans outstanding(1)............................. 0.59% 3.03% 3.13% 1.00%
Allowance for possible loan losses as a
percent of total loans (net of unearned
income).......................................... 3.69 3.88 3.46 3.68
Allowance for possible loan losses as a
percent of non-performing loans ................. 28.23 23.94 22.13 27.85
<FN>
- -------------------
(1) The interim data has been annualized for purposes of comparability with
year-end data.
</FN>
</TABLE>
The allowance for possible loan losses is established through a provision
for possible loan losses charged to expense. Losses on loans are charged against
the allowance when management believes the collectibility of the principal is
unlikely. 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 such 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, industry
experience, collateral value and current economic conditions that may affect the
borrower's ability to pay. Management believes that the allowance for possible
loan losses at September 30, 1994 is adequate. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, the OCC, as
an integral part of its examination process, periodically reviews Jefferson's
allowance for possible loan losses. The OCC may require Jefferson to recognize
additions to the allowance based on its judgment of information available to the
OCC at the time of its examination.
-63-
<PAGE>
The principal risk elements in Jefferson's loan portfolio relate to the
value of real estate collateral underlying Jefferson's mortgage loans and the
economic strength of Jefferson's borrowers and guarantors. Jefferson analyzes
these factors as part of its analysis of the allowance for possible loan losses.
While net charge-offs are not expected to reach 1993 levels during the year
ending December 31, 1995, no assurances can be given in this regard.
Recent Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 114, "Accounting by Creditors for the Impairment of a Loan." SFAS 114 is
effective for financial statements issued for fiscal years beginning after
December 15, 1994. This statement amends SFAS 5, "Accounting for Contingencies,"
and SFAS 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings." It prescribes the recognition criteria for loan impairment and
the measurement methods for certain impaired loans and loans whose terms are
modified in troubled debt restructurings. See Note 1 of the Notes to Jefferson's
Financial Statements.
Also in May 1992, the FASB issued SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS 115 addresses the accounting
and reporting requirements for investments in equity securities that have
readily determinable values and all investments in debt securities. This
statement is effective for fiscal years beginning after December 15, 1993. See
Note 1 of the Notes to Jefferson's Financial Statements.
Capital
The OCC has adopted minimum risk-based and leverage capital guidelines. The
minimum required ratio of qualifying total capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
is 8%, of which at least 4% must consist of Tier 1 capital. As of September 30,
1994, Jefferson's total risk-based capital ratio was 15.9%, and its Tier 1
risk-based capital ratio was 14.6%. Under the Consent Order, Jefferson is
required to maintain a Tier 1 risk-based capital ratio of at least 10.0%. Tier 1
capital consists of common equity and qualifying perpetual preferred stock (less
certain intangibles). Total capital consists of Tier 1 capital, mandatory
convertible debt securities, qualifying subordinated debt, other preferred stock
and a portion of the allowance for loan losses up to 1.25% of total calculated
assets. The minimum required leverage ratio (Tier 1 capital to average total
assets) is 3% for banking organizations that meet certain specified criteria,
including that they have the highest regulatory rating. All other banking
organizations are required to maintain a leverage ratio of 3% plus an additional
cushion of at least 100 to 200 basis points. As of September 30, 1994,
Jefferson's leverage capital ratio was 6.3%. Under the Consent Order, Jefferson
is required to maintain a leverage capital ratio of at least 6.0%.
-64-
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF HUBCO
General
All numbers in this Proxy Statement-Prospectus have been adjusted to
reflect the 3-for-2 common stock split declared by the HUBCO Board of Directors
and payable on January 14, 1995 to stockholders of record as of January 3, 1995,
as though the Stock Split had taken place prior to the date as to which such
numbers relate. Without limiting the foregoing, all statements in this
"DESCRIPTION OF CAPITAL STOCK OF HUBCO" regarding the number of shares of HUBCO
Common Stock authorized, issued and outstanding, and regarding the number of
shares of HUBCO Common Stock into which the HUBCO Series A Preferred Stock may
be converted, reflect the Stock Split. See "RECENT DEVELOPMENTS" for a more
complete description of the Stock Split.
The authorized capital stock of HUBCO consists of 19,800,000 shares of
HUBCO Common Stock (which number includes 6,600,000 shares which will be
authorized upon consummation of the Stock Split) and 3,300,000 shares of
preferred stock. As of November 21, 1994, 10,400,041 shares of HUBCO Common
Stock were issued, 9,769,374 shares of HUBCO Common Stock were outstanding,
781,978 shares of HUBCO's Series A Preferred Stock ("HUBCO Series A Preferred
Stock") were issued and outstanding and 15,832 shares of HUBCO Series A
Preferred Stock were issuable upon submission of shares of Washington Bancorp,
Inc. common stock in exchange therefor. Of the authorized but unissued shares of
HUBCO Common Stock, (i) 257,700 shares of HUBCO Common Stock were reserved for
issuance under HUBCO's restricted stock plan, (ii) 7,875 shares of HUBCO Common
Stock were reserved for issuance pursuant to a director stock option plan that
has been terminated and (iii) 1,196,717 shares of HUBCO Common Stock were
reserved for issuance upon conversion of shares of HUBCO Series A Preferred
Stock.
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 authorized
but unissued shares of 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. The HUBCO Series A Preferred Stock was issued pursuant to such
authority in connection with HUBCO's acquisition of Washington Bancorp, Inc.
("Washington").
Description of HUBCO Series A Preferred Stock
The following description of the HUBCO Series A Preferred Stock sets forth
certain general terms and provisions of the HUBCO Series A Preferred Stock.
The HUBCO Series A Preferred Stock is a series of cumulative convertible
preferred stock designated "Series A Preferred Stock" which was issued to
previous stockholders of Washington in connection with HUBCO's acquisition of
Washington. The HUBCO Series A Preferred Stock has a stated value of $24.00 per
share. The shares issued are fully paid and non-assessable. As of November 21,
1994, HUBCO had issued 781,978 shares of the HUBCO Series A Preferred Stock and
15,832 shares of HUBCO Series A Preferred Stock were issuable upon submission of
shares of Washington common stock in exchange therefor. Upon the reacquisition
of any of the HUBCO Series A 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. The HUBCO Series A Preferred
Stock has the dividend, liquidation, redemption, voting and conversion rights
set forth below.
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.
-65-
<PAGE>
Dividends
The holders of HUBCO Series A Preferred Stock, in preference to the holders
of HUBCO Common Stock and any other class or series of preferred stock, are
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 of $1.44, payable in quarter-annual installments on the 15th day
of February, May, August and November in each year, from the date of issuance.
Liquidation Preference
Upon the voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of HUBCO, the holders of HUBCO Series A Preferred Stock are
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 amounts are paid to the holders of HUBCO
Common Stock or any other class or series of preferred stock of HUBCO. Such
dividends 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, is not deemed to be a dissolution, liquidation or winding up
for purposes of such distribution preference.
Redemption
Outstanding shares of HUBCO 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 HUBCO by vote of its Board of Directors at any time
from and after the later of (i) July 1, 1995 and (ii) the date on which the
market price for the HUBCO Common Stock is $16.00 (as adjusted for the Stock
Split) or more for twenty (20) consecutive business days. The $16.00 market
price will be adjusted each time the conversion ratio applicable to the HUBCO
Series A Preferred Stock is required to be adjusted for certain capital changes
as described below under "Conversion Into Common Stock." As a consequence, the
$16.00 price reflects the Stock Split and will be adjusted for subsequent stock
splits or stock dividends effected with respect to the HUBCO Common Stock. The
HUBCO Series A 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 Series A Preferred Stock. See
"Voting Rights." Less than all the outstanding shares of the HUBCO Series A
Preferred Stock may be redeemed in such manner as the Board of Directors of
HUBCO prescribes. The redemption price for shares of the HUBCO Series A
Preferred Stock is $16.00 per share, plus all accrued and unpaid dividends
through the date fixed for redemption. Such dividends accrue on a daily basis.
HUBCO cannot redeem any other class or series of preferred stock unless and
until all shares of the HUBCO Series A Preferred Stock have been redeemed. HUBCO
cannot redeem any shares of HUBCO Series A Preferred Stock without the approval
of the Federal Reserve Board (the "FRB"). There are no restrictions on HUBCO's
ability to redeem while there is an arrearage in the payment of dividends.
However, HUBCO may repurchase in the market or in private transactions shares of
its HUBCO Common Stock or shares of HUBCO Series A Preferred Stock at any time
while the HUBCO Series A Preferred Stock is outstanding.
HUBCO is not obligated to make payments into or to maintain any sinking
fund for the redemption of HUBCO Series A Preferred Stock.
Conversion Into Common Stock
Subject to the adjustment provisions described herein, the holder of any
shares of HUBCO Series A Preferred Stock at any time prior to the date fixed for
any redemption of the HUBCO Series A Preferred Stock will have the right to
surrender the certificates evidencing such shares and receive, in conversion of
each share of HUBCO Series A Preferred Stock, 1.5 shares (the "Conversion
Ratio") of HUBCO Common Stock, as adjusted to give effect to the Stock Split.
-66-
<PAGE>
The conversion privilege may be exercised at any time. HUBCO will not
deliver fractional shares of HUBCO Common Stock upon conversion of shares of
HUBCO Series A 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 is the
closing price per share of HUBCO Common Stock on 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 Series A Preferred Stock is subject to
adjustment 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 is made if (i) HUBCO takes the same action with respect to
the HUBCO Series A Preferred Stock in the same proportion as if each share of
HUBCO Series A 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 Series A
Preferred Stock have no voting rights.
Under the New Jersey Business Corporation Act (the "BCA"), holders of HUBCO
Series A 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 Series A 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
Series A Preferred Stock, holders of HUBCO Series A 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.
If, in connection with such a transaction, the HUBCO Series A 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 Series A Preferred
Stock would not be required and any vote by the HUBCO Series A Preferred Stock
holders may be disregarded. Also, in general, under the terms of HUBCO's
Certificate of Incorporation creating the HUBCO Series A Preferred Stock, any
amendment to the provisions of HUBCO's Certificate of Incorporation creating the
HUBCO Series A Preferred Stock would require the affirmative vote of a majority
of the outstanding shares of HUBCO Series A 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 Series A
Preferred Stock, the holders of the HUBCO Series A Preferred Stock 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 stockholders (the
"Preferred Directors"). A dividend default with respect to the HUBCO Series A
Preferred Stock, giving rise to the right to elect the Preferred Directors, is
deemed to continue to exist until all accrued dividends on all outstanding
shares of the HUBCO Series A 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 meeting of stockholders after which the dividend
default has been fully cured. HUBCO has not failed to pay any quarter-annual
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<PAGE>
dividends due to the holders of the HUBCO Series A Preferred Stock as of the
date of this Proxy Statement-Prospectus.
Description of HUBCO Common Stock
The following description of the HUBCO Common Stock sets forth certain
general terms of the HUBCO 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 THE NATIONAL BANK ACT
AND THE NEW JERSEY BUSINESS CORPORATION ACT."
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 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 FRB policies which may, in certain
circumstances, limit its ability to pay dividends. The FRB policies require,
among other things, that a bank holding company maintain a minimum capital base.
The FRB would most likely seek to prohibit any dividend payment which would
reduce a holding company's capital below these minimum amounts.
At September 30, 1994, the Bank had $79 million available for the payment
of dividends to HUBCO. At September 30, 1994, HUBCO had $46 million available
for stockholder dividends, the payment of which would not reduce any of its
capital ratios below the minimum regulatory requirements.
Voting Rights
At meetings of stockholders, holders of HUBCO Common Stock are entitled to
one vote per share. The quorum for stockholders' 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
stockholders 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. Stockholders may remove any director from office for cause. The
affirmative vote of at least three-quarters of the shares of HUBCO
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<PAGE>
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 (i) the proposed transaction is
first approved by a majority of HUBCO's Board of Directors, and (ii) the
stockholders 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 stockholders, 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. HUBCO 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.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS
UNDER THE NATIONAL BANK ACT AND
THE NEW JERSEY BUSINESS CORPORATION ACT
Jefferson is a national bank incorporated under the National Bank Act, as
amended (the "National Bank Act"), and HUBCO is a business corporation
incorporated in New Jersey under the BCA. The rights of Jefferson stockholders
are currently governed by federal banking law applicable to national banks. At
the Effective Time, each Jefferson stockholder will become a stockholder of
HUBCO and the rights of stockholders of HUBCO are governed by New Jersey
corporate law. The following is a comparison of certain provisions of New Jersey
corporate law and federal law applicable to national banks. This summary does
not purport to be complete and is qualified in its entirety by reference to the
National Bank Act and the BCA, which statutes may change from time to time, and
the Certificate of Incorporation of HUBCO, which also may be changed.
Voting Requirements
The National Bank Act generally provides that an amendment to the articles
of association of a national bank requires the affirmative vote of a majority of
the outstanding stock entitled to vote thereon. The National Bank Act provides
that a national bank conversion into, merger into, or consolidation with, a
state bank or another national bank requires the affirmative vote of two-thirds
of each class of the bank's
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<PAGE>
capital stock. Jefferson's Articles of Association do not contain greater vote
provisions than those required by the National Bank Act.
Under the BCA, 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 CAPITAL STOCK - Description of HUBCO
Common Stock - Voting Rights."
Under the BCA, 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 designations, preferences, limitations or
relative rights of any such series, or authorize the board to take any such
action. The National Bank Act has no similar provisions regarding class voting
on amendments to a national bank's articles of association.
All stockholder voting rights of Jefferson are vested in the holders of
Jefferson Common Stock. All stockholder voting rights of HUBCO are vested in the
holders of HUBCO Common Stock, except that the holders of HUBCO Series A
Preferred Stock have certain limited voting rights pursuant to the BCA and the
terms of HUBCO's Certificate of Incorporation creating the HUBCO Series A
Preferred Stock. See "DESCRIPTION OF HUBCO CAPITAL STOCK - Description of HUBCO
Series A Preferred Stock - Voting Rights." In addition, the Board of Directors
of HUBCO is authorized, pursuant to HUBCO's Certificate of Incorporation, to
issue additional classes and series of preferred stock, with such voting rights
as the Board of Directors shall designate, without shareholder approval.
Cumulative Voting
Under the BCA, stockholders of a New Jersey corporation do not have
cumulative voting rights in the election of directors unless the certificate of
incorporation so provides, and HUBCO's Certificate of Incorporation does not
presently provide for cumulative voting. Under the National Bank Act, in
electing directors, each national bank shareholder has the right to cast a
number of votes equal to the number of shares owned by such shareholder times
the number of directors to be elected and such shareholder may cumulate all such
votes for one nominee for director or distribute such votes among any two or
more such nominees.
Classified Board of Directors
The Certificate of Incorporation of HUBCO provides for a classified Board
of Directors, with one-third of the entire Board being elected each year and
with directors serving for terms of up to three years. The National Bank Act and
the By-laws of Jefferson provide for the election of the entire Jefferson Board
of Directors annually.
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<PAGE>
Rights of Dissenting Stockholders
Generally, stockholders of a national bank who dissent from a conversion,
merger or consolidation of the bank are entitled to appraisal rights. The
stockholders of Jefferson 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
The National Bank Act contains no provision for shareholder voting by
written consent in lieu of a meeting.
Except as otherwise provided by the certificate of incorporation (and
HUBCO's Certificate of Incorporation presently is silent on this issue), the BCA
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. Under
the BCA, a stockholder vote on a plan of merger or consolidation, if not
conducted at a stockholders' meeting, may only be effected by either: (i)
unanimous written consent of all stockholders entitled to vote on the issue with
advance notice to any other stockholders, or (ii) written consent of
stockholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other stockholders.
Dividends
Subject to any restrictions contained in a national bank's articles of
association (and Jefferson's Articles of Association presently contain none),
the National Bank Act provides that a national bank may declare and pay
dividends on its outstanding stock so long as, among other restrictions, no
dividends are paid out of the bank's capital (defined as the amount of
unimpaired common stock plus the amount of preferred stock outstanding and
unimpaired), no dividends are paid if losses have been sustained at any time
equal to or exceeding the bank's undivided profits then on hand, and no
dividends are paid in an amount greater than net profits then on hand less
losses and bad debts. See "BUSINESS OF JEFFERSON-Supervision and Regulation" and
"-Consent Order" for a more complete description of existing restrictions on
Jefferson's ability to pay dividends.
Unless there are other restrictions contained in its certificate of
incorporation (and HUBCO's Certificate of Incorporation presently contains
none), the BCA 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. 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. For a
description of the regulatory restrictions on dividend payments by the Bank, see
"DESCRIPTION OF HUBCO CAPITAL STOCK - Description of HUBCO Common Stock -
Dividend Rights." At September 30, 1994, the Bank had $79 million available for
the payment of dividends to HUBCO. At September 30, 1994, HUBCO had $46 million
available for stockholder dividends, the payment of which would not reduce any
of its capital ratios below the minimum regulatory requirements.
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<PAGE>
Preemptive Rights
Under the BCA, stockholders of HUBCO have only such preemptive rights as
may be provided in the articles of association or certificate of incorporation,
as the case may be. HUBCO's Certificate of Incorporation does not provide
stockholders with preemptive rights. Pursuant to Jefferson's Articles of
Association, holders of Jefferson Common Stock have preemptive rights to
subscribe for a pro rata portion of any additional shares of Jefferson Common
Stock authorized for sale.
Stockholder Protection Legislation
The New Jersey Shareholder Protection Act (the "NJSPA") 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 NJSPA 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. The National Bank Act contains no provisions similar to those set
forth in the NJSPA.
Liquidation Rights
In the event of liquidation, the holders of Jefferson Common Stock are
entitled to receive pro-rata any assets distributable to stockholders. Holders
of HUBCO Common Stock are entitled to receive pro-rata any assets distributable
to stockholders, after distribution to holders of outstanding shares, if any,
having prior rights upon liquidation.
Assessments and Redemption
Shares of Jefferson Common Stock are fully paid and non-assessable, except
that if the capital of Jefferson has been impaired by losses or otherwise, each
holder of Jefferson Common Stock is required by law, within three months after
receiving notice thereof from the OCC, to pay his pro-rata share of the
resulting capital deficiency. Shares of HUBCO Common Stock issued and delivered
to the stockholders of Jefferson upon the consummation of the Merger will be
fully paid and non-assessable. Such shares will also be registered under the
Securities Act of 1933. Neither Jefferson Common Stock nor HUBCO Common Stock is
redeemable at the option of the issuers or holders thereof.
OTHER MATTERS
The management of Jefferson is not aware of any business to come before the
Meeting other than the matters described above in this Proxy
Statement-Prospectus. However, if any other matters
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<PAGE>
should come before the 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 Common Stock issuable in connection with the
Merger will be passed upon for HUBCO by Pitney, Hardin, Kipp & Szuch,
Morristown, New Jersey. Attorneys in such law firm beneficially owned 780 shares
of HUBCO Common Stock as of November 15, 1994.
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 LLP,
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 financial statements of Jefferson as of and for the years ended
December 31, 1993, 1992 and 1991 included in this Proxy Statement-Prospectus
have been audited by Arthur Andersen LLP (with respect to 1993 and 1992) and
Barry N. Rein & Associates (with respect to 1991), independent public
accountants, as indicated in their respective reports with respect thereto
(which contain explanatory paragraphs with respect to certain regulatory
matters), and are included herein in reliance upon the authority of said firms
as experts in giving said reports.
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<PAGE>
INDEX TO JEFFERSON'S FINANCIAL STATEMENTS
Page
----
Reports of Independent Public Accountants.................................. F-1
Statements of Condition at December 31, 1993 and 1992 and
September 30, 1994 (Unaudited)........................................... F-5
Statements of Operations for the Years Ended December 31, 1993,
1992 and 1991 and the Nine Months Ended
September 30, 1994 and 1993 (Unaudited).................................. F-7
Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991 and the Nine Months
Ended September 30, 1994 (Unaudited)..................................... F-9
Statements of Cash Flows for the Years Ended December 31, 1993,
1992 and 1991 and the Nine Months Ended
September 30, 1994 and 1993 (Unaudited).................................. F-10
Notes to Financial Statements.............................................. F-12
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jefferson National Bank:
We have audited the accompanying statements of condition of Jefferson National
Bank (the Bank) as of December 31, 1993 and 1992 and the related statements of
operations, changes in shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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 opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferson National Bank as of
December 31, 1993 and 1992, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, the Bank has entered into a
Consent Order with the Office of the Comptroller of the Currency (OCC) which
requires, among other things, that the Bank maintain Tier I capital ratios of
10% and 6% of risk weighted assets and adjusted total assets, respectively, and
enhance its lending, loan review and asset/liability management policies and
procedures. Although the Bank is in compliance with the foregoing capital ratios
at December 31, 1993, it is not in full compliance with certain other provisions
of the Consent Order. In addition, it has
F-1
<PAGE>
experienced high amounts of nonperforming assets, as well as significant
operating losses during 1992 and 1993 that have reduced its capital base. The
Bank may be subject to further regulatory actions should it be unable to reduce
its nonperforming assets and operating losses and meet the requirements of the
Consent Order. The financial impact, if any, of regulatory actions that may
result from not meeting these requirements is unknown. The accompanying
financial statements do not include any adjustments that may result from actions
that may be taken by regulatory authorities.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 28, 1994
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jefferson National Bank:
We have audited the accompanying statements of operations, changes in
shareholders' equity and cash flows of Jefferson National Bank for the year
ended December 31, 1991. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Jefferson
National Bank for the year ended December 31, 1991 in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the Financial Statements, the Bank entered into a
Formal Agreement (the Agreement) with the Office of the Comptroller of the
Currency. The Agreement states that the Bank shall operate in compliance with
the articles included in the Agreement. Criticized were various practices of the
Bank and violations of certain laws, rules and regulations, primarily related to
lending policies and procedures and the formulation of profit, capital and
strategic plans. The Board of
F-3
<PAGE>
Directors has agreed to comply with each article cited in the Agreement. Failure
to comply with the Agreement can lead to regulatory sanctions. The financial
statement impact, if any, of regulatory sanctions that may result from the
failure of the Bank to comply with the articles and requests made by the Office
of the Comptroller of the Currency cannot presently be determined. Accordingly,
no adjustments that may result from the ultimate resolution of these
uncertainties have been made in the accompanying 1991 financial statements.
BARRY N. REIN & ASSOCIATES
Livingston, New Jersey
January 10, 1992
F-4
<PAGE>
JEFFERSON NATIONAL BANK
STATEMENTS OF CONDITION
(in thousands)
<TABLE>
<CAPTION>
September 30,
1994 December 31
----------------------------------
ASSETS (Unaudited) 1993 1992
------------------------ ----------------- -------------------
<S> <C> <C> <C>
CASH AND DUE FROM BANKS $ 5,039 $ 3,377 $ 3,374
FEDERAL FUNDS SOLD 5,110 14,790 10,184
------- ------- --------
Total cash and cash equivalents 10,149 18,167 13,558
------- ------- --------
SECURITIES (Notes 1 and 3):
Available for sale, at fair value 8,929 0 0
Held to maturity (aggregate market value of
$24,005, $23,953 and $23,783, respectively) 24,805 23,925 23,794
------- ------- --------
Total securities 33,734 23,925 23,794
------- ------- --------
LOANS (Notes 1, 4 and 5) 44,695 48,564 59,686
Less-
Allowance for possible loan losses 1,648 1,682 2,196
------- ------- --------
Net loans 43,047 46,882 57,490
------- ------- --------
PREMISES AND EQUIPMENT, net (Notes 1 and 6) 819 839 872
------- ------- --------
ACCRUED INTEREST RECEIVABLE 931 880 1,289
------- ------- --------
OTHER REAL ESTATE, net of valuation allowance
of $398 at September 30, 1994 and $438 and $538
at December 31, 1993 and 1992, respectively
(Notes 1 and 7) 2,420 3,336 3,414
------- ------- --------
OTHER ASSETS (Note 8) 678 684 652
------- ------- --------
Total assets $91,778 $94,713 $101,069
======= ======= ========
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
September 30,
1994 December 31
----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1993 1992
------------------------ ----------------- -------------------
<S> <C> <C> <C>
LIABILITIES:
Deposits-
Demand-
Interest bearing $19,561 $19,769 $18,837
Noninterest bearing 9,093 9,581 10,029
Savings 28,534 27,168 25,639
Time 28,100 31,441 38,540
------- ------- --------
Total deposits 85,288 87,959 93,045
Accrued interest payable 290 336 470
Accrued expenses and other liabilities 204 244 24
------- ------- --------
Total liabilities 85,782 88,539 93,539
------- ------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY (Note 2):
Common stock $6.00 par value, 500 shares authorized,
226 shares issued and outstanding 1,357 1,357 1,357
Additional paid-in capital 1,474 1,474 1,474
Retained earnings 3,249 3,343 4,699
Unrealized holding losses on securities
available for sale (84) 0 0
------- ------- --------
Total shareholders' equity 5,996 6,174 7,530
------- ------- --------
Total liabilities and shareholders' equity $91,778 $94,713 $101,069
======= ======= ========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-6
<PAGE>
JEFFERSON NATIONAL BANK
STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30
(Unaudited) For the Years Ended December 31
------------------------ ------------------------------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $3,088 $3,808 $4,896 $6,105 $7,411
Securities 1,028 524 781 908 742
Federal funds sold 301 336 442 418 1,722
------ ------ ------ ------ ------
Total interest income 4,417 4,668 6,119 7,431 9,875
------ ------ ------ ------ ------
INTEREST EXPENSE --
DEPOSIT ACCOUNTS 1,580 1,753 2,311 3,454 5,988
------ ------ ------ ------ ------
Net interest income 2,837 2,915 3,808 3,977 3,887
PROVISION FOR POSSIBLE
LOAN LOSSES 175 1,006 1,156 1,718 580
------ ------ ------ ------ ------
Net interest income
after provision for
possible loan losses 2,662 1,909 2,652 2,259 3,307
------ ------ ------ ------ ------
OTHER INCOME:
Service charges on deposit accounts 288 228 313 241 211
Other income 90 151 176 83 98
------ ------ ------ ------ ------
Total other income 378 379 489 324 309
------ ------ ------ ------ ------
OTHER EXPENSES:
Salaries and employee benefits 1,188 1,082 1,469 1,374 1,374
Occupancy and equipment expense 333 312 412 383 433
Other real estate expenses-
Cost of operations 169 122 243 65 29
Valuation adjustments 263 310 555 538 79
Other operating expenses (Note 10) 1,117 1,111 1,756 1,522 1,193
------ ------ ------ ------ ------
Total other expenses 3,070 2,937 4,435 3,882 3,108
------ ------ ------ ------ ------
Income (loss) before
income taxes (30) (649) (1,294) (1,299) 508
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30
(Unaudited) For the Years Ended December 31
-------------------------- -----------------------------------------
1994 1993 1993 1992 1991
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PROVISION (BENEFIT) FOR INCOME
TAXES (Notes 1 and 8) .................... $ 64 $ 0 $ 62 ($ 181) $ 93
--------- --------- --------- --------- ---------
Net income (loss) ............. ($ 94) ($ 649) ($ 1,356) ($ 1,118) $ 415
========= ========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING .............................. 226,078 226,078 226,078 226,078 224,882
========= ========= ========= ========= =========
Net income (loss) per share ... ($ 0.42) ($ 2.87) ($ 6.00) ($ 4.95) $ 1.85
========= ========= ========= ========= =========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-8
<PAGE>
JEFFERSON NATIONAL BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Holding
Losses on
Additional Securities
Common Paid-in Retained Available for
Stock Capital Earnings Sale Total
--------- ---------- --------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1990 ...................... $ 1,292 $ 1,409 $ 5,806 $ 0 $ 8,507
0
Net income -- 1991 ........................... 415 0 415
Cash dividend ($.75 per share) ............... (161) 0 (161)
Stock dividend ............................... 65 65 (130) 0 0
------- ------- ------- ------- -------
BALANCE, December 31, 1991 ...................... 1,357 1,474 5,930 0 8,761
Net loss -- 1992 ............................. 0 0 (1,118) 0 (1,118)
Cash dividend ($.50 per share) ............... 0 0 (113) 0 (113)
------- ------- ------- ------- -------
BALANCE, December 31, 1992 ...................... 1,357 1,474 4,699 0 7,530
Net loss -- 1993 ............................. 0 0 (1,356) 0 (1,356)
------- ------- ------- ------- -------
BALANCE, December 31, 1993 ...................... 1,357 1,474 3,343 0 6,174
------- ------- ------- ------- -------
Net loss -- nine months ended ................ 0 0 (94) 0 (94)
September 30, 1994
Unrealized holding losses on
securities available for sale .............. 0 0 0 (84) (84)
------- ------- ------- ------- -------
BALANCE, September 30, 1994 ..................... $ 1,357 $ 1,474 $ 3,249 ($ 84) $ 5,996
======= ======= ======= ======= =======
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-9
<PAGE>
JEFFERSON NATIONAL BANK
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
(Unaudited) For the Years Ended December 31
-------------------------- --------------------------------------
1994 1993 1993 1992 1991
---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ................................. ($ 94) ($ 649) ($ 1,356) ($ 1,118) $ 415
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities--
Provision for possible loan losses ............ 175 1,006 1,156 1,718 580
Provision for losses on other real
estate ...................................... 263 310 555 538 0
Depreciation .................................. 62 82 110 113 (19)
Deferred income tax provision
(benefit) ................................... 64 0 292 (282) (159)
Accretion of securities, net .................. 223 (256) (328) (657) (310)
Unrealized holding loss on
securities available for sale ............... (84) 0 0 0 0
Decrease (increase) in accrued
interest receivable ......................... (51) 302 409 697 (144)
(Increase) decrease in other assets ........... (115) (260) (324) 271 146
Decrease in accrued interest payable .......... (46) (105) (134) (354) (346)
Increase (decrease) in other liabilities ...... (40) 57 220 (217) (83)
-------- -------- -------- -------- --------
Net cash provided by
operating activities ........................ 357 487 600 709 80
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Maturities of securities--
Available for sale .............................. 3,000 0 0 0 0
Held to maturity ................................ 4,000 26,495 29,847 40,301 19,698
Purchases of securities--
Available for sale .............................. (6,995) 0 0 0 0
Held to maturity ................................ (10,046) (26,406) (29,650) (47,124) (25,019)
Net decrease in loans ............................. 3,660 7,970 9,452 4,847 521
Net decrease (increase) in other real estate ...... 841 (791) (477) (2,814) (962)
Capital expenditures .............................. (42) (67) (77) (52) (17)
-------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities ........... (5,582) 7,201 9,095 (4,842) (5,779)
-------- -------- -------- -------- --------
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
(Unaudited) For the Years Ended December 31
----------------------- --------------------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Net decrease in deposits ....................... ($ 2,793) ($ 3,744) ($ 5,086) ($ 6,664) ($11,692)
Cash dividend .................................. 0 0 0 (113) (161)
-------- -------- -------- -------- --------
Net cash used in financing
activities ...................... (2,793) (3,744) (5,086) (6,777) (11,853)
Net increase (decrease) in
cash and cash equivalents ....... (8,018) 3,944 4,609 (10,910) (17,552)
CASH AND CASH EQUIVALENTS,
beginning of period ............................ 18,167 13,558 13,558 24,468 42,020
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS,
end of period .................................. $ 10,149 $ 17,502 $ 18,167 $ 13,558 $ 24,468
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for--
Interest ..................................... $ 1,626 $ 1,678 $ 2,445 $ 3,808 $ 6,334
Taxes ........................................ 0 110 110 105 191
======== ======== ======== ======== ========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-11
<PAGE>
JEFFERSON NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
(data with regard to September 30, 1994 and 1993
and for the nine months then ended is unaudited)
(1) ORGANIZATION AND
SIGNIFICANT ACCOUNTING POLICIES:
Organization-
Jefferson National Bank (Passaic, New Jersey) is a national banking
institution that provides community banking services primarily to
residents and businesses in the greater Passaic area.
Securities-
The Bank prospectively adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115), effective January 1, 1994. SFAS 115
requires the Bank to classify its investment securities as: (1) held to
maturity, (2) available for sale and (3) trading.
Securities which the Bank has the ability and intent to hold until
maturity are classified as held to maturity. These securities are
carried at cost adjusted for amortization of premiums and accretion of
discounts.
Securities which are held for an indefinite period of time which
management intends to use as part of its asset/liability strategy, or
that may be sold in response to changes in interest rates, changes in
prepayment risk, increased capital requirements or other similar
factors, are classified as available for sale and are carried at market
value. Differences between a security's amortized cost and market value
is charged/credited directly to shareholders' equity, net of income
taxes. The cost of securities sold is determined on a specific
identification basis. Gains and losses on sales of securities are
recognized in the statements of operations on the date of sale.
The Bank has not classified any of its securities as trading. The Bank
does not engage in any investment trading activity and has not sold any
securities during 1994, 1993, 1992 or 1991. The Bank meets its liquidity
requirements primarily by maintaining Federal Funds sold and certain
short-term securities.
Loans-
Loans are stated at the principal amount outstanding. Interest income on
loans is credited to income as earned. The accrual of interest generally
is discontinued when a loan becomes 90 days past due as to principal or
interest. When interest accruals are discontinued, accrued but
uncollected interest credited to income in the current year is generally
reversed, and any
F-12
<PAGE>
interest accrued in prior years is charged to the allowance for possible
loan losses. Accrued interest on certain residential mortgage loans
placed on nonaccrual is not charged off if the accrued interest is
deemed to be recoverable based on management's analysis of the
underlying collateral.
Allowance for Possible Loan Losses-
The allowance for possible loan losses is maintained at a level believed
adequate by management to absorb loan losses on loans currently
outstanding. The allowance is increased by provisions charged to expense
and reduced by net charge-offs. The level of the allowance is based on
management's evaluation of the inherent risks in the portfolio after
consideration of prevailing and anticipated economic conditions. Credit
reviews of the loan portfolio are made on an ongoing basis. Ultimate
losses may vary from current estimates as a result of many factors,
including the difficult and unpredictable economic conditions in the
region. These uncertainties have and may continue to result in increased
levels of nonperforming assets, provisions for possible loan losses and
charge-offs, as well as a decline in net interest income.
Premises and Equipment-
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of each type of asset.
Other Real Estate (ORE)-
Other real estate includes real estate acquired in satisfaction of a
loan and in-substance foreclosures. In-substance foreclosures are
properties in which the borrower has little or no equity in the
collateral, where repayment of the loan is expected only from the
operation or sale of the collateral, and the borrower has either
effectively abandoned control of the property or the borrower has
retained control of the property but its ability to rebuild equity based
on current financial conditions is considered doubtful. Properties
acquired by foreclosure or deed in lieu of foreclosure and properties
classified as in-substance foreclosures are transferred to ORE and
recorded at the lower of carrying value or fair value of the properties,
reduced by estimated costs to sell. Subsequent provisions that result
from ongoing periodic evaluations of these ORE properties are charged to
expense in the period in which they are identified. ORE is carried at
the lower of cost or fair value, less estimated costs to sell. Carrying
costs, such as maintenance and property taxes, are charged to expense as
incurred.
Income Taxes-
Effective January 1, 1993, the Bank adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
The standard requires a change from the deferred method to an asset and
liability method of computing deferred income taxes. Deferred income
taxes are recognized for tax consequences of "temporary differences" by
applying enacted statutory tax rates, applicable to future years, to
differences between the financial reporting and the tax basis of
existing assets and liabilities. Prior years' financial statements have
not been restated to comply with the provisions of SFAS 109. The effect
of adopting SFAS 109 in 1993 was not significant.
F-13
<PAGE>
Statements of Cash Flows-
For the purpose of reporting cash flows, cash and cash equivalents
include cash on hand, noninterest bearing amounts due from banks and
Federal Funds sold. Generally, Federal Funds sold are for a one-day
period.
New Financial Accounting Standards-
The Financial Accounting Standards Board issued Statement No. 114,
"Accounting by Creditors for Impairment of a Loan" (SFAS 114), in May
1993. The Bank is not required to adopt this statement until its fiscal
year ended December 31, 1995. As defined in SFAS 114, a loan is impaired
when, based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. SFAS 114 requires that the
impairment of a loan be based on the present value of expected future
cash flows net of estimated costs to sell discounted at the loan's
effective interest rate. Impairment can also be measured based on a
loan's observable market price or the fair value of collateral, if the
loan is collateral dependent. If the measure of the impaired loan is
less than the recorded investment in the loan, the Bank will be required
to establish a valuation allowance, or adjust existing valuation
allowances, with a corresponding charge or credit to the provision for
possible loan losses. Management of the Bank believes that the effect of
SFAS 114 will not be significant.
Reclassifications-
Certain reclassifications have been reflected in the 1992 and 1991
statements in order to conform to the current presentation.
(2) REGULATORY PROCEEDINGS:
In September 1991, the Bank entered into a Formal Agreement (the
Agreement), with the Office of the Comptroller of the Currency (OCC). The
Agreement stated that the Bank shall operate in compliance with the
articles included in the Agreement. Criticized were various practices of
the Bank and violations of certain laws, rules and regulations, primarily
related to lending policies and procedures and the formulation of profit,
capital and strategic plans. The Board of Directors agreed to comply with
each article cited in the Agreement. Failure to comply with the Agreement
can lead to regulatory sanctions. The financial statement impact, if any,
of regulatory sanctions that may result from the failure of the Bank to
comply with the articles and requests made by the OCC cannot presently be
determined. Accordingly, no adjustments that may result from the ultimate
resolution of these uncertainties have been made in the accompanying 1991
financial statements.
In December 1992, as a result of a regulatory examination, the Board of
Directors of the Bank entered into a Consent Order (the Order) with the
OCC. The Order, which superseded the Formal Agreement referred to above,
requires, among other things, that the Bank maintain Tier I capital
ratios of at least 10% and 6% of risk weighted assets and adjusted total
assets, respectively; submit capital, profit and strategic plans; enhance
the Bank's loan administration, internal loan review, allowance for
possible loan loss and appraisal policies and procedures, as well as
F-14
<PAGE>
implement a written program designed to eliminate the basis of criticism
of criticized assets. In addition, the Bank is restricted from declaring
dividends without prior approval from the OCC. As of December 31, 1993
and September 30, 1994, the Bank is not in full compliance with all of
the provisions in the Consent Order.
The regulatory capital ratios of the Bank are as follows at the dates
indicated-
<TABLE>
<CAPTION>
Actual
-----------------------------
December 31
September 30, ---------------
1994 1993 1992 Required
--------- ----- ----- --------
<S> <C> <C> <C> <C>
Tier I risk-based capital............... 14.6%* 13.2%* 13.9%* 10.0%
===== ===== ===== =====
Tier I capital/adjusted total assets
(leverage ratio) .................... 6.3%* 6.5% 7.3% 6.0%
===== ===== ===== =====
</TABLE>
* Unaudited
While management of the Bank has taken certain actions to achieve full
compliance with the Order, the Bank may be subject to further regulatory
actions should it be unable to reduce its nonperforming assets and
operating losses and meet the requirements of the Consent Order. The
financial impact, if any, of regulatory actions that may result from not
meeting these requirements is unknown. The accompanying financial
statements do not include any adjustments that may result from actions
that may be taken by regulatory authorities.
(3) SECURITIES:
Information relative to the Bank's securities portfolio is as follows (in
thousands)-
<TABLE>
<CAPTION>
September 30, 1994 (Unaudited)
--------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- ------- ------- -------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
-- U. S. Treasury Notes ............ $ 9,013 $ 0 ($ 84) $ 8,929
======= ======= ======= =======
HELD TO MATURITY
U. S. Treasury Notes and obligations
of U. S. Government Agencies ....... $21,025 $ 0 ($ 542) $20,483
Mortgage backed securities of
U. S. Government Agencies .......... 3,695 0 (258) 3,437
Federal Reserve Bank stock ............ 85 0 0 85
------- ------- ------- -------
Securities held to maturity ........... $24,805 $ 0 ($ 800) $24,005
======= ======= ======= =======
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
U. S. Treasury Notes
and obligations of
U. S. Government Agencies ...... $ 19,966 $ 27 ($ 7) $ 19,986
Mortgage backed securities
of U. S. Government Agencies ... 3,874 31 (23) 3,882
Federal Reserve Bank stock ........ 85 0 0 85
-------- -------- -------- --------
Totals ............ $ 23,925 $ 58 ($ 30) $ 23,953
======== ======== ======== ========
December 31, 1992
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- --------- --------- ---------
U. S. Treasury Notes ............... $17,859 $ 3 ($ 14) $ 17,848
Obligations of states and political
subdivisions .................... 5,850 1 (1) 5,850
Federal Reserve Bank stock ......... 85 0 0 85
------- ------- ------- --------
Totals ............. $23,794 $ 4 ($ 15) $23,783
======= ======= ======= ========
</TABLE>
The amortized cost and estimated market value of investment securities at
September 30, 1994 and December 31, 1993 by contractual maturity are
shown below. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with
or without call or repayment penalties.
<TABLE>
<CAPTION>
September 30, 1994
(Unaudited)
------------------------
Estimated
Amortized Market
Cost Value
--------- ---------
(in thousands)
<S> <C> <C>
AVAILABLE FOR SALE
Due in one year or less .................... $6,017 $5,996
Due after one year through five years ...... 2,996 2,933
------ ------
$9,013 $8,929
====== ======
</TABLE>
F-16
<PAGE>
September 30, 1994
(Unaudited)
-------------------------------
Estimated
Amortized Market
Cost Value
--------- ---------
HELD TO MATURITY (in thousands)
Due in one year or less $ 8,998 $ 8,924
Due after one year through five years 10,028 9,760
Due after five years 2,000 1,800
------- -------
21,026 20,484
Mortgage backed securities of U. S. Government
Agencies 3,694 3,436
Federal Reserve Bank stock 85 85
------- -------
$24,805 $24,005
======= =======
December 31, 1993
---------------------------
Due in one year or less $ 6,936 $ 6,935
Due after one year through five years 11,030 11,046
Due after five years 2,000 2,005
------- -------
19,966 19,986
Mortgage backed securities of
U. S. Government Agencies 3,874 3,882
Federal Reserve Bank stock 85 85
------- -------
$23,925 $23,953
======= =======
As of September 30, 1994 and December 31, 1993, securities having a book value
of $2.001 million and $1.995 million, respectively, were pledged to secure
public deposits and for other purposes as required by law.
(4) LOANS:
Loans outstanding by classification are as follows (in thousands)-
<TABLE>
<CAPTION>
September 30, December 31
1994 ------------------------------------------
(Unaudited) 1993 1992
------------------------ ---------------------- ----------------------
<S> <C> <C> <C>
Loans secured by real estate-
Construction and land development $ 0 $ 328 $ 119
Secured by first mortgages 25,136 28,034 35,514
Secured by secondary mortgages 3,957 6,133 9,260
Secured by nonresidential properties 13,618 9,833 11,128
Demand loans -- secured commercial and
industrial loans 334 1,956 700
Installment loans 1,650 2,280 2,965
------- ------- -------
$44,695 $48,564 $59,686
======= ======= =======
</TABLE>
F-17
<PAGE>
As of September 30, 1994 and December 31, 1993, approximately 84% and 91%,
respectively, of the Bank's loans were secured by real estate. As such, a
substantial portion of the Bank's borrowers' ability to repay their loans is
dependent on the economic environment of the real estate industry in the Bank's
market area.
Activity related to loans to directors, executive officers and their affiliated
interests is as follows (in thousands)-
<TABLE>
<CAPTION>
For the Nine For the Years Ended
Months Ended December 31
September 30, 1994 ------------------------------------------
(Unaudited) 1993 1992
------------------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Balance, beginning of period $1,233 $1,433 $1,253
Loans granted 290 47 624
Repayments of loans (455) (247) (444)
------ ------ ------
Balance, end of period $1,068 $1,233 $1,433
====== ====== ======
</TABLE>
All such loans are current as to principal and interest payments as of September
30, 1994 and December 31, 1993 and 1992.
The following table details information concerning nonperforming loans for the
applicable periods (in thousands)-
<TABLE>
<CAPTION>
September 30, December 31
1994 ------------------------------------------
(Unaudited) 1993 1992
------------------------ ---------------------- ---------------------
<S> <C> <C> <C>
Nonaccrual loans $4,373 $5,768 $7,251
Additional loans past due 90 days or more 1,330 1,832 634
Restructured loans 134 0 0
------ ------ ------
Total nonperforming loans $5,837 $7,600 $7,885
====== ====== ======
</TABLE>
If the nonaccrual loans had continued to pay interest at the original contract
rate, interest income for the nine months ended September 30, 1994 and 1993 and
the years ended December 31, 1993 and 1992 would have been increased by $407
thousand, $424 thousand, $528 thousand and $415 thousand, respectively, while
the actual amount recognized as income for the nine months ended September 30,
1994 and 1993 and the years ended December 31, 1993 and 1992, respectively, was
not significant.
(5) ALLOWANCE FOR
POSSIBLE LOAN LOSSES:
The allowance for possible loan losses is based upon estimates and ultimate
losses may vary from the current estimates. These estimates are reviewed
periodically and, as adjustments become necessary, they are reported in
operations in the periods in which they become known.
F-18
<PAGE>
An analysis of the allowance for possible loan losses is as follows (in
thousands)-
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30
------------------------------- For the Years Ended December 31
1994 1994 ----------------------------------------
(Unaudited) (Unaudited) 1993 1992 1991
----------- ----------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $1,682 $2,196 $2,196 $1,117 $ 884
Provision charged to expense 175 1,006 1,156 1,718 580
Loans charged off (270) (1,273) (1,707) (655) (354)
Recoveries on loans charged off 61 30 37 16 7
------ ------ ------ ------ ------
Balance, end of period $1,648 $1,959 $1,682 $2,196 $1,117
====== ====== ====== ====== ======
</TABLE>
(6) PREMISES AND EQUIPMENT:
Premises and equipment consists of the following (in thousands)-
<TABLE>
<CAPTION>
September December 31
30, 1994 --------------------------------
(Unaudited) 1993 1992
----------------------- ---------------- -----------------
<S> <C> <C> <C>
Land $ 249 $ 249 $ 249
Building and improvements 1,008 1,008 990
Furniture, fixtures and equipment 1,145 1,073 1,027
------ ------ ------
2,402 2,330 2,266
Less-Accumulated depreciation (1,583) (1,491) (1,394)
------ ------ ------
$ 819 $ 839 $ 872
====== ====== ======
</TABLE>
Depreciation and amortization expense charged to operations for the nine months
ended September 30, 1994 and 1993 and the years ended December 31, 1993, 1992
and 1991 amounted to $62 thousand, $82 thousand, $110 thousand, $113 thousand
and $106 thousand, respectively.
(7) OTHER REAL ESTATE:
Other real estate consists of the following (in thousands)-
September 30, December 31
1994 ----------------------------
(Unaudited) 1993 1992
------------ ---------- ----------
Repossessed collateral-
Residential properties $672 $1,023 $439
Commercial properties 369 480 736
----- ------ -----
1,041 1,503 1,175
----- ------ -----
F-19
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31
1994 ------------------------------
(Unaudited) 1993 1992
----------- -------- --------
<S> <C> <C> <C>
In-substance foreclosures
Residential properties $ 802 $1,296 $1,695
Commercial properties 975 975 1,082
------ ------ ------
1,777 2,271 2,777
Less-Valuation allowance (398) (438) (538)
------ ------ ------
$2,420 $3,336 $3,414
====== ====== ======
</TABLE>
An analysis of the valuation allowance is as follows (in thousands)-
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30 For the Years Ended
---------------------------------- December 31
1994 1993 --------------------------------------
(Unaudited) (Unaudited) 1993 1992 1991
------------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $438 $538 $538 $ 0 $0
Valuation adjustments charged
to expense 263 310 555 538 0
Amounts charged off (303) (189) (655) 0 0
---- ---- ---- ---- --
Balance, end of period $398 $659 $438 $538 $0
==== ==== ==== ==== ==
</TABLE>
(8) INCOME TAXES:
The provision (benefit) for income taxes includes the following components (in
thousands)-
<TABLE>
<CAPTION>
September December 31
30, 1994 ------------------------------------------
(Unaudited) 1993 1992 1991
---------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Federal-
Current provision (benefit) $ 0 ($230) $101 $204
Deferred provision (benefit) 64 292 (282) (159)
State provision 0 0 0 48
--- ---- ----- ----
Balance, end of period $64 $ 62 ($181) $ 93
=== ==== ===== ====
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Bank's assets and
liabilities. The components of the net deferred tax asset at September 30, 1994
and December 31, 1993 are as follows-
F-20
<PAGE>
September 30,
1994 December 31,
(Unaudited) 1993
------------- ------------
Provision for possible loan losses $ 560 $602
Interest on nonaccrual loans 494 356
Other real estate 110 166
Depreciation (104) (100)
Net operating loss carryforwards 32 0
----- -----
1,092 1,024
Less-Valuation allowance (1,092) (729)
----- -----
$ 0 $ 295
===== =====
The Bank received cash refunds aggregating $431 thousand in October, 1994, as a
result of Federal income tax carryback claims related to the years 1990, 1991
and 1992. During the nine months ended September 30, 1994, the Bank provided for
$64 thousand in Federal income taxes, representing the amount of net deferred
tax assets recorded that were not refunded. This effectively increased the
valuation allowance to 100% of net deferred tax assets at September 30, 1994, as
all available net operating loss carrybacks have been refunded in October, 1994.
At September 30, 1994, the Bank had a net operating loss carryforward of
approximately $95 thousand for tax purposes. This carryforward expires in
varying amounts through 2008.
A reconciliation of the provision (benefit) for income taxes, as reported, with
the Federal income tax at the statutory rate of 34% is as follows (in
thousands)-
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30 For the Years Ended December 31
1994 1993 ---------------------------------
(Unaudited) (Unaudited) 1993 1992 1991
----------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Provision (benefit) at
statutory rate ($10) ($221) ($440) ($442) $173
Tax exempt income, net
of interest expense
disallowance 0 (10) (14) (64) (113)
State income taxes, net
of Federal tax benefit 0 0 0 0 33
Unrecognized benefit
of net operating loss
carryforward to future
years 10 231 454 325 0
Recognition of provision
to increase valuation
allowance on deferred
tax assets 64 0 62 0 0
--- ---- ---- ---- ----
Provision (benefit) for
income taxes $64 $ 0 $ 62 ($181) $ 93
=== ==== ==== ==== ====
</TABLE>
F-21
<PAGE>
(9) COMMITMENTS AND CONTINGENCIES:
In March 1988, the Bank entered into a 20 year lease agreement for the rental of
one of its branches. As of September 30, 1994, future minimum rental payments
under this lease are as follows (in thousands)-
Three months ending December 31, 1994 $9
Years Ending-
1995 36
1996 36
1997 36
1998 36
Thereafter 330
====
The above amounts represent minimum rentals not adjusted for possible future
increases due to escalation provisions.
Pursuant to a lease agreement for the Bank's Broad Street branch, the Bank has
the option to purchase the branch at a price of $356 thousand which management
intends to exercise.
The statements of condition do not reflect various commitments relating to
financial instruments which are used in the normal course of business.
Management does not anticipate that the settlement of those financial
instruments will have a material adverse effect on the Bank's financial
position. These instruments include commitments to extend credit and letters of
credit. These financial instruments carry various degrees of credit risk, which
is defined as the possibility that a loss may occur from the failure of another
party to perform according to the terms of the contract.
Commitments to extend credit are legally binding loan commitments with set
expiration dates. They are intended to be disbursed, subject to certain
conditions, upon request of the borrower. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the customer. The Bank was committed to advance
$1,201 thousand and $1,081 thousand, respectively, to its borrowers as of
September 30, 1994 and December 31, 1993, which commitments generally expire
within one year.
Standby letters of credit are provided to customers to guarantee their
performance, generally in the production of goods and services or under
contractual commitments in the financial markets. The Bank has entered into
standby letters of credit contracts with its customers totaling $10 thousand as
of September 30, 1994 and December 31, 1993, which generally expire within one
year.
The Bank may, in the ordinary course of business, become a party to litigation
involving collection matters, contract claims and other legal proceedings
relating to the conduct of its business. In management's judgment, the financial
position and results of operations of the Bank will not be affected materially
by the final outcome of any present legal proceedings.
F-22
<PAGE>
(10) OTHER OPERATING EXPENSES:
Other operating expenses consist of the following (in thousands)-
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30 For the Years Ended December 31
-------------------------------------- ----------------------------------------------
1994 1993
(Unaudited) (Unaudited) 1993 1992 1991
------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Insurance expense $ 278 $ 260 $ 356 $ 298 $ 287
Professional fees 340 319 594 192 174
Data processing 127 134 185 180 186
Communication expense 62 52 73 70 72
Other expense 310 346 548 782 474
------ ------ ------ ------ ------
Other operating expenses $1,117 $1,111 $1,756 $1,522 $1,193
====== ====== ====== ====== ======
</TABLE>
(11) SUBSEQUENT EVENT -- MERGER AGREEMENT:
Subsequent to September 30, 1994, the Bank entered into an Agreement and Plan of
Merger (subsequently amended) with HUBCO, Inc., whereby each share of common
stock of the Bank would be exchanged for 2.865 shares of HUBCO, subject to
certain adjustment provisions in the Agreement. Upon closing of the transaction,
the Bank will be merged into HUBCO's banking subsidiary, Hudson United Bank. The
proposed transaction is subject to approval by the Bank's shareholders and
certain regulatory authorities.
F-23
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated November 28, 1994
("Agreement"), 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, and Jefferson
National Bank, a national banking association ("Jefferson").
WHEREAS, Hubco desires to acquire Jefferson and Jefferson's Board of
Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Jefferson and its
stockholders. The acquisition will be accomplished by merging Jefferson with and
into the Bank with the Bank surviving,
WHEREAS, the Boards of Directors of Jefferson, Hubco and the Bank have duly
adopted and approved this Agreement and the Board of Directors of Jefferson has
directed that it be submitted to Jefferson's shareholders for approval,
WHEREAS, this Agreement was originally entered into on October 7, 1994, and
the parties desire to amend and restate this Agreement to take into account the
3 for 2 common stock split declared by Hubco's Board of Directors and payable on
January 14, 1995 to shareholders of record on January 3, 1995 (the "January
Stock Split"),
NOW, THEREFORE, intending to be legally bound, and intending for this
Agreement to supersede the agreement executed and by the parties on October 7,
1994, the parties hereto hereby agree as follows:
<PAGE>
-2-
ARTICLE I - THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), Jefferson shall be merged with and
into the Bank (the "Merger") in accordance with the New Jersey Banking Act of
1948, as amended, and the National Bank Act and the Bank shall be the surviving
bank (the "Surviving Corporation"), the name of which shall be Hudson United
Bank. The principal office of the Surviving Corporation shall be the principal
office of the Bank. Exhibit 1 to this Agreement lists (i) the locations of the
principal offices of and branch offices of Jefferson and the Bank; (ii) the
locations of all branch offices and the main office of the Surviving
Corporation; and (iii) the amount of the capital stock, the number of shares,
the par value and the amount of surplus of 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 the Bank
and Jefferson and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of the Bank and Jefferson 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 the Bank and Jefferson 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, liabilities, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of the Bank or
Jefferson 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
the Bank or Jefferson 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 the Bank or Jefferson as
if the Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time, the
certificate of incorporation of the Bank 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.
<PAGE>
-3-
1.4. By-laws. As of the Effective Time, the By-laws of the Bank 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 the Bank shall become the directors and officers of the Surviving
Corporation. The names of the current directors and officers of the Bank are
listed on Exhibit 1.
1.6. Effective Time and Closing. The Merger shall become effective (and be
consummated) upon the date specified in a notice from the Bank to the Federal
Deposit Insurance Corporation ("FDIC") and in the date specified in the
certification required by Section 137 of the New Jersey Banking Act of 1948, as
amended, to be filed with the New Jersey Department of Banking (the
"Department") after approval by the Commissioner of the Department (the
"Commissioner") (the "Effective Time"). The notice from the Bank to the FDIC and
the certification filed with the Department specifying the Effective Time shall
require the approval of Jefferson, which approval will not be unreasonably
withheld, and shall be consistent with this section. 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 Pitney, Hardin,
Kipp & Szuch, 200 Campus Drive, Florham Park, New Jersey, or at such other
place, time or date as Hubco and Jefferson may mutually agree upon. The notice
from the Bank to the FDIC and the certification filed with the Department shall
specify as the Effective Time of the Merger a date, immediately following the
Closing, agreed to by the Bank and Jefferson. Following the execution of this
Agreement, the Bank and Jefferson shall, if required or advised to do so by
applicable regulatory authorities, execute and deliver a simplified bank merger
agreement, both in form and substance reasonably satisfactory to the parties
hereto and consistent with the terms hereof, for delivery to the Commissioner,
the FDIC and the Comptroller of the Currency (the "Comptroller") in connection
with the approval of the Merger by the regulatory authorities.
ARTICLE II - CONVERSION OF JEFFERSON SHARES
2.1. Conversion of Jefferson Common Stock. Each share of common stock, par
value $6.00 per share, of Jefferson ("Jefferson Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Section 2.4) shall, by virtue of the Merger and without
<PAGE>
-4-
any action on the part of the holder thereof, be converted as
follows:
(a) Exchange Ratio. Subject to the provisions of this Section 2.1, each
share of Jefferson 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 the right to
receive 2.865 shares (the "Exchange Ratio") of common stock, without par value,
of Hubco ("Hubco Common Stock"). In the event that prior to Closing a dispute
arises between Jefferson and one or more of Jefferson's vendors pursuant to
which such vendors assert in writing that their contractual arrangements with
Jefferson extend for a period of time beyond the time that Jefferson's counsel
had advised Hubco (prior to the date hereof) that such arrangements extend, the
Exchange Ratio set forth in this Section 2.1(a) shall be adjusted such that the
Exchange Ratio pursuant to this Section 2.1(a) shall equal (i) the excess of
$43.00 over the Per Share Reduction (as hereafter defined) divided by (ii)
$15.01 (the number in item (ii) is referred to as the "Per Share Reduction
Denominator"). The "Per Share Reduction" shall equal the Dollar Amount (as
hereinafter defined) divided by the number of outstanding shares of Jefferson
Common Stock at the Effective Time. The "Dollar Amount" shall equal the Excess
Legal Fees (as hereinafter defined) plus the lesser of (but not less than zero)
(a) $70,000.00 or (b) the dollar amount of expenses, beyond the expenses that
Jefferson has advised Hubco (prior to the date hereof) that Jefferson must incur
in order to terminate such contractual arrangements, that Jefferson is
"required" to pay in order to terminate such contracts. For purposes of the
preceding sentence of this Agreement, Jefferson shall be deemed to be required
to pay the following amount upon termination: (w) if a court of competent
jurisdiction (prior to any appeal unless such appeal is concluded prior to the
Effective Time) determines that Jefferson is required to pay a specific amount
(which amount may be zero) in order to terminate such arrangements, such amount,
or (x) in the absence of such court order, the amount that Jefferson and such
vendors agree Jefferson is required to pay to terminate such arrangements or (y)
in the absence of such order or agreement, the amount which an authorized
representative of such vendors indicates in writing (on or before the Closing)
Jefferson must pay in order to terminate such arrangements, or (z), in the
absence of the conditions specified in clauses "w", "x" and "y", the amount of
$70,000.00. "Excess Legal Fees" means all attorneys' fees and expenses in excess
of $15,000.00 incurred by Jefferson after the date hereof and prior to the
Effective Time in an effort to resolve such disputes.
(b) Capital Changes. This Agreement has been amended and restated to
reflect adjustment of the Exchange Ratio, the Per Share Reduction Denominator
and the Upper and Lower Adjustment Prices (as hereinafter defined) to account
for the January Stock
<PAGE>
-5-
Split. 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 (other than the January Stock Split), reclassification,
recapitalization, combination or exchange of shares, or if during such period
the January Stock Split is rescinded or modified by the Hubco Board of
Directors, the Exchange Ratio, the Per Share Reduction Denominator and the Upper
and Lower Adjustment Prices shall be correspondingly adjusted to reflect such
stock dividend, stock split, reclassification, recapitalization, combination,
exchange of shares, rescission or modification.
(c) Exchange Ratio Adjustments. The Exchange Ratio shall be adjusted upward
if the Median Pre-Closing Price (as hereinafter defined) of Hubco Common Stock
is less than $12.89 per share (the "Lower Adjustment Price"). The Exchange Ratio
shall be adjusted downward if the Median Pre-Closing Price exceeds $17.44 per
share (the "Upper Adjustment Price"). In the event the Exchange Ratio is
adjusted in accordance with the prior sentences, the new Exchange Ratio shall be
calculated as follows: (1) if the Median Pre-Closing Price is less than $12.89
per share, the new Exchange Ratio shall be determined by (a) multiplying the
Lower Adjustment Price by the old Exchange Ratio and (b) dividing that number by
the Median Pre-Closing Price; or (2) if the Median PreClosing Price is more than
$17.44, the new Exchange Ratio shall be determined by (a) multiplying the Upper
Adjustment Price by the old Exchange Ratio and (b) dividing that number by the
Median PreClosing Price. In either case, the new Exchange Ratio shall be rounded
to the nearest one-thousandth.
The Median Pre-Closing Price of Hubco Common Stock shall mean the Median
Price (as hereinafter defined) calculated based upon the Closing Price (as
hereinafter defined) of Hubco Common Stock during the first 20 of the 25
consecutive trading days immediately preceding the date of the Closing. The
Closing Price shall mean the closing price of Hubco Common Stock as supplied by
the National Association of Securities Dealers Automated Quotation System and
published in The Wall Street Journal during the first 20 of the 25 consecutive
trading days immediately preceding the date of the Closing. The Median Price
shall be determined by taking the price half-way between the Closing Prices left
after discarding the 9 lowest and 9 highest Closing Prices in the 20 day period.
A trading day shall mean a day for which a Closing Price is so supplied and
published.
(d) Cancellation of Jefferson Certificates. After the Effective Time, all
such shares of Jefferson Common Stock (other than those cancelled pursuant to
Section 2.1(e)) 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 (other than Dissenting Shares and those cancelled
<PAGE>
-6-
pursuant to Section 2.1(e)) 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 Jefferson Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Jefferson Common Stock except as otherwise
provided herein or by law. Such certificates previously evidencing such shares
of Jefferson Common Stock (other than Dissenting Shares and those cancelled
pursuant to Section 2.1(e)) shall be exchanged for certificates evidencing
shares of Hubco Common Stock issued pursuant to this Article II, upon the
surrender of such certificates in accordance with this Article II. No fractional
shares of Hubco Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.2(e).
(e) Treasury Shares. All shares of Jefferson Common Stock held by Jefferson
in its treasury or owned by Hubco or the Bank (other than shares held as trustee
or in a fiduciary capacity and shares held as collateral on or in lieu of a debt
previously contracted) immediately prior to the Effective Time shall be
cancelled.
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 Jefferson Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
evidencing shares of Hubco Common Stock and cash in such amount such that the
Exchange Agent possesses such number of shares of Hubco Common 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 Common 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 Common 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 Jefferson Common Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of transmittal (which
is reasonably agreed to by Hubco and Jefferson and shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon
<PAGE>
-7-
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 Common Stock. 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 Common Stock which such holder has the right to receive
in respect of the shares of Jefferson Common Stock formerly evidenced by such
Certificate in accordance with Section 2.1, (B) cash in lieu of fractional
shares of Hubco Common Stock to which such holder may be entitled pursuant to
Section 2.2(e) and (C) any dividends or other distributions to which such holder
is entitled pursuant to Section 2.2(c) (the shares of Hubco Common Stock,
dividends, distributions and cash described in clauses (A), (B) and (C) 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 Jefferson Common Stock which is not registered in the transfer records of
Jefferson, a certificate evidencing the proper number of shares of Hubco Common
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 Jefferson 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 Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of Hubco Common Stock.
No dividends or other distributions declared or made after the Effective Time
with respect to Hubco Common 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 Common 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 Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Hubco Common 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 Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions,
with a record date after the Effective Time but
<PAGE>
-8-
prior to surrender and a payment date occurring after surrender, payable with
respect to such shares of Hubco Common Stock. No interest shall be paid on the
Merger Consideration.
(d) No Further Rights in Jefferson Common Stock. All shares of Hubco Common
Stock issued and cash paid upon conversion of the shares of Jefferson 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 Jefferson
Common Stock.
(e) No Fractional Shares. No certificates or scrip evidencing fractional
shares of Hubco Common 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 Common Stock, based upon the Median
Pre-Closing Price of Hubco Common Stock (as previously defined).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Jefferson Common Stock for two years
after the Effective Time shall be delivered to Hubco, upon demand, and any
holders of Jefferson 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 Jefferson Common Stock for any such shares of Hubco Common 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
Jefferson 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
(as defined in Section 3.8), 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 Jefferson 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 Jefferson shall be closed and there shall be no further registration of
transfers of shares of Jefferson Common Stock thereafter on the records of
Jefferson. On or after the Effective Time, any Certificates presented to the
Exchange
<PAGE>
-9-
Agent or Hubco for transfer shall be converted into the Merger Consideration.
2.4. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, any holder of Jefferson Common Stock shall have the right to dissent
in the manner provided in the National Bank Act, 12 U.S.C. 214a(b), and if all
necessary requirements of the National Bank Act are met, such shares shall be
entitled to payment in cash from the Bank of the fair value of such shares as
determined in accordance with the National Bank Act. All shares of Jefferson
Common Stock as to which the holder properly exercises dissenters' rights in
accordance with the National Bank Act shall constitute "Dissenting Shares"
unless and until such rights are waived, by the party initially seeking to
exercise such rights.
2.5. Bank Common Stock. The shares of common stock of the Bank outstanding
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 JEFFERSON
References herein to the "Jefferson Disclosure Schedule" 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 Jefferson to
Hubco. Jefferson hereby represents and warrants to Hubco and the Bank as
follows:
3.1. Corporate Organization.
(a) Jefferson is a national banking association duly organized, validly
existing and in good standing under the laws of the United States. Jefferson 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 Jefferson.
(b) Except as set forth in the Jefferson Disclosure Schedule, Jefferson has
no Subsidiaries. When used with reference to Jefferson, the term "Subsidiary"
means any corporation, partnership, joint venture or other legal entity in which
Jefferson, directly or indirectly, owns at least a 50 percent stock or other
equity interest or for which Jefferson, directly or
<PAGE>
-10-
indirectly, acts as a general partner. All eligible accounts of depositors
issued by Jefferson are insured by the FDIC to the fullest extent permitted by
law. The Jefferson Disclosure Schedule sets forth true and complete copies of
the Articles of Association and By-laws of Jefferson, as in effect on the date
hereof.
(c) Any Subsidiary is a corporation incorporated under the laws of the
State of New Jersey. Any Subsidiary has not engaged in business or undertaken
any activities (other than the activity of incorporating itself).
3.2. Capitalization. The authorized capital stock of Jefferson consists of
500,000 shares of Jefferson Common Stock. As of the date hereof, there are
226,078 shares of Jefferson Common Stock issued and outstanding. All issued and
outstanding shares of Jefferson Common Stock have been duly authorized and
validly issued, are fully paid and no assessment has been made on such shares.
Jefferson has not granted and is not 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 Jefferson 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 Jefferson, Jefferson has 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 Jefferson in accordance with the Articles of Association
of Jefferson and applicable laws and regulations. Except for such approval, no
other corporate proceedings on the part of Jefferson are necessary to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Jefferson and constitutes the valid and binding
obligation of Jefferson, enforceable against Jefferson in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by Jefferson, nor
the consummation by Jefferson of the transactions contemplated hereby in
accordance with the terms hereof, or compliance by Jefferson with any of the
terms or provisions hereof, will (i) violate any provision of Jefferson's
Articles of Association or By-laws, (ii) assuming that the consents and
approvals set forth below are duly obtained, violate any statute,
<PAGE>
-11-
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Jefferson or any of its properties or assets, or (iii) except as
set forth in the Jefferson Disclosure Schedule, 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 properties or assets of Jefferson 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 Jefferson is a
party, or by which it or any of its 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 Jefferson 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 or required by the FDIC, the Commissioner, the Department, the Comptroller,
the New Jersey Department of Environmental Protection and Energy ("DEPE"), the
Securities and Exchange Commission ("SEC"), state blue sky authorities or other
applicable governmental authorities, and the stockholders of Jefferson, 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 Jefferson
in connection with (x) the execution and delivery by Jefferson of this Agreement
and (y) the consummation by Jefferson of the Merger and the other transactions
contemplated hereby, except such as are listed in the Jefferson Disclosure
Schedule and as individually or in the aggregate will not (if not obtained) have
a material adverse effect on the business, operations, assets or financial
condition of Jefferson or prevent or delay the consummation of the transactions
contemplated hereby. To the best of Jefferson's knowledge, no fact or condition
exists which Jefferson has reason to believe will prevent it from obtaining the
aforementioned consents or approvals.
3.4. Financial Statements.
(a) The Jefferson Disclosure Schedule sets forth copies of the statements
of condition of Jefferson as of December 31, 1993 and 1992, and the related
statements of operations, changes in shareholders' equity and cash flows for the
periods ended December 31, in each of the three years 1991 through 1993, in each
case accompanied by the audit report (which report includes explanatory
paragraphs relating to certain regulatory matters) of Arthur Andersen & Co. or
Barry N. Rein & Associates, independent public accountants with respect to
Jefferson, and the unaudited statements of condition of Jefferson as of March
31, 1994 and June 30, 1994 as filed with the Comptroller (collectively, the
"Jefferson Financial Statements"). Except for the absence of notes with respect
to
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interim financial statements, the Jefferson 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 financial position of Jefferson as of the respective dates set forth
therein, and the related statements of operations, changes in shareholders'
equity and cash flows fairly present the results of operations, changes in
stockholders' equity and cash flows of Jefferson for the respective fiscal
periods set forth therein.
(b) The books and records of Jefferson 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 Jefferson Financial Statements (including the notes thereto), as of June 30,
1994, Jefferson had no liabilities, whether absolute, accrued, contingent or
otherwise, material to the business, operations, assets or financial condition
of Jefferson which were required by GAAP (consistently applied) to be disclosed
in Jefferson's statement of condition as of June 30, 1994. Since June 30, 1994,
Jefferson has 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.
3.5. Broker's and Other Fees. Except for Capital Consultants of Princeton,
Inc., neither Jefferson 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. The agreement with Capital Consultants of Princeton, Inc. is set
forth in the Jefferson Disclosure Schedule. There are no fees (other than time
charges billed at usual and customary rates) payable to any consultants,
including lawyers 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 Jefferson.
3.6. Absence of Certain Changes or Events.
(a) Except as set forth in the Jefferson Disclosure schedule, there has not
been any material adverse change in the business, operations, assets or
financial condition of Jefferson since June 30, 1994 and to the best of
Jefferson's knowledge, no facts or condition exists which Jefferson believes
will cause such a material adverse change in the future.
(b) Except as set forth in the Jefferson Disclosure Schedule, Jefferson has
not taken or permitted any of the actions set forth in Section 5.2 hereof
between June 30, 1994 and the date
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hereof and, except for execution of this Agreement and the agreement described
in Section 3.5, Jefferson has conducted its business only in the ordinary
course, consistent with past practice.
3.7. Legal Proceedings. Except as disclosed in the Jefferson Disclosure
Schedule, and except for ordinary routine litigation incidental to the business
of Jefferson, Jefferson is not a party to any, and there are no pending or, to
the best of Jefferson's knowledge, threatened legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of any nature
against Jefferson which, if decided adversely to Jefferson, would have a
material adverse effect on the business, operations, assets or financial
condition of Jefferson. Except as disclosed in the Jefferson Disclosure
Schedule, Jefferson is not a party to any order, judgment or decree entered in
any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Jefferson has duly filed (and until the Effective Time will so file)
all returns, declarations, reports, information returns and statements
("Returns") required to be filed by it 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). Jefferson has established (and until
the Effective Time will establish) on its 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 Jefferson through such date. The
Jefferson Disclosure Schedule identifies the federal income tax returns of
Jefferson 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 Jefferson
Disclosure Schedule identifies the applicable state income tax returns of
Jefferson 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 Jefferson,
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 Jefferson, nor has Jefferson 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 Jefferson Disclosure Schedule, Jefferson (i)
has not requested any extension of time within which to file any Return which
Return has not since been
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filed, (ii) is not a party to any agreement providing for the allocation or
sharing of taxes, (iii) is not 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
Jefferson (nor does Jefferson have any knowledge that the IRS has proposed any
such adjustment or change of accounting method) and (iv) has not 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 Jefferson Disclosure Schedule, Jefferson
does not maintain or contribute to any "employee pension benefit plan" (the
"Jefferson Pension Plans"), within the meaning of Section 3(2)(A) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA (the
"Jefferson Welfare Plans"), stock option plan, stock purchase plan, deferred
compensation plan, severance plan, bonus plan, employment agreement or other
similar plan, program or arrangement. Jefferson has not, since September 2,
1974, contributed to any "Multiemployer Plan", as such term is defined in
Section 3(37) of ERISA.
(b) Except as disclosed in the Jefferson Disclosure Schedule, Jefferson has
delivered to Hubco in the Jefferson Disclosure Schedule a complete and accurate
copy of each of the following with respect to each of the Jefferson Pension
Plans and Jefferson Welfare Plans, if any: (1) plan document, summary plan
description, and summary of material modifications (if not available, a detailed
description of the foregoing); (ii) trust agreement or insurance contract, if
any; (iii) most recent IRS determination letter, if any; (iv) most recent
actuarial report, if any; and (v) most recent annual report on Form 5500.
(c) The present value of all accrued benefits under each of the Jefferson
Pension Plans subject to Title IV of ERISA, based upon the actuarial assumptions
used for purposes of the most recent actuarial valuation prepared by such
Jefferson Pension Plan's actuary, did not exceed the then current value of the
assets of such plans allocable to such accrued benefits.
(d) During the last five years, the Pension Benefit Guaranty Corporation
("PBGC") has not asserted any claim for liability against Jefferson or any of
its Subsidiaries which has not been paid in full.
(e) All premiums (and interest charges and penalties for late payment, if
applicable) due to the PBGC with respect to each Jefferson Pension Plan have
been paid. All contributions required to be made to each Jefferson Pension Plan
under the terms thereof,
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ERISA or other applicable law have been timely made, and all amounts properly
accrued to date as liabilities of Jefferson which have not been paid have been
properly recorded on the books of Jefferson.
(f) Except as disclosed in the Jefferson Disclosure Schedule, each of the
Jefferson Pension Plans, the Jefferson Welfare Plans and each other plan and
arrangement identified on the Jefferson Disclosure Schedule 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. Furthermore, if Jefferson
maintains any Jefferson Pension Plan, Jefferson intends to apply, if necessary,
for, or the IRS has issued, a favorable determination letter with respect to
such Jefferson Pension Plan and, except as disclosed in the Jefferson Disclosure
Schedule, Jefferson is not aware of any fact or circumstance which would
disqualify any plan, that could not be retroactively corrected (in accordance
with the procedures of the IRS).
(g) To the best knowledge of Jefferson, no non-exempt prohibited
transaction, within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any of the Jefferson Welfare Plans or
Jefferson Pension Plans.
(h) No Jefferson Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events", within the meaning of
Section 4034(b) of ERISA, with respect to any of the Jefferson Pension Plans.
(i) No "accumulated funding deficiency", within the meaning of Section 412
of the Code, has been incurred with respect to any of the Jefferson Pension
Plans.
(j) There are no pending or, to the best knowledge of Jefferson, threatened
or anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Jefferson Pension Plans or the Jefferson Welfare Plans,
any trusts created thereunder or any other plan or arrangement identified in the
Jefferson Disclosure Schedule.
(k) Except as disclosed in the Jefferson Disclosure Schedule, no Jefferson
Pension Plan or Jefferson Welfare Plan provides medical or death benefits
(whether or not insured) beyond an employee's retirement or other termination of
service, other than (i) coverage mandated by law, or (ii) death benefits under
any Jefferson Pension Plan.
(l) Except with respect to customary health, life and disability benefits
or as disclosed in the Jefferson Disclosure Schedule, there are no unfunded
benefit obligations which are not
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accounted for by reserves shown on the financial statements and established
under GAAP or otherwise noted on such financial statements.
(m) With respect to each Jefferson Pension Plan and Jefferson Welfare Plan
that is funded wholly or partially through an insurance policy, there will be no
liability of Jefferson as of the Effective Time under any such insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Effective Time.
(n) Except as set forth in the Jefferson Disclosure Schedule or as agreed
to by Hubco in writing either pursuant to this Agreement or otherwise, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee of Jefferson to severance pay,
unemployment compensation or any similar payment, (ii) accelerate the time of
payment, vesting, or increase the amount, of any compensation due to any current
employee or former employee under any Jefferson Pension Plan or Jefferson
Welfare Plan, or (iii) result in payments not deductible by reason of Section
280G of the Code.
3.10. Reports.
(a) The Jefferson Disclosure Schedule lists, and Jefferson has previously
delivered to Hubco a complete copy of, each communication (other than general
advertising materials and press releases) mailed by Jefferson to its
stockholders as a class since September 30, 1991, and each such communication,
as of its date, complied in all material respects with all applicable statutes,
rules and regulations 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) Jefferson has, since January 1, 1992, duly filed with the Comptroller
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 (provided that information as of a later date shall be deemed to
modify information as of an earlier date), and, subject to permission from such
regulatory authorities, Jefferson promptly will deliver or make available to
Hubco accurate and complete copies of such reports. The Jefferson Disclosure
Schedule lists all examinations of Jefferson conducted by either the Comptroller
or the FDIC since January 1, 1992 and the dates of any responses thereto
submitted by Jefferson.
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3.11. Jefferson Information. The information relating to Jefferson to be
contained in the Proxy Statement/Prospectus (as defined in Section 5.6(a)
hereof) to be delivered to stockholders of Jefferson in connection with the
solicitation of their approval of the Merger, as of the date the Proxy
Statement/Prospectus is mailed to stockholders of Jefferson, 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 Jefferson
Disclosure Schedule, Jefferson holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its business and since
January 1, 1992 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 Jefferson (other than
where such default or noncompliance will not result in a material adverse effect
on the business, operations, assets or financial condition of Jefferson) and
Jefferson 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 hereof, contracts described
in Section 3.5 hereof, arrangements described in Section 5.12 hereof and as
disclosed in the Jefferson Disclosure Schedule, (i) Jefferson is not 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
Jefferson to any officer, employee, director or consultant thereof. The
Jefferson Disclosure Schedule sets forth true and correct copies of any
severance or employment agreements with officers, directors, employees, agents
or consultants to which Jefferson is a party.
(b) Except as disclosed in the Jefferson Disclosure Schedule and except for
loan agreements made and loan commitments issued in the ordinary course of
business, (i) as of the date of this Agreement, Jefferson is not a party to or
bound by any commitment, agreement or other instrument which is material to the
business, operations, assets or financial condition of Jefferson (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
Jefferson is a party or by which it is
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bound limits the freedom of Jefferson to compete in any line of business or with
any person, and (iii) Jefferson is not a party to any collective bargaining
agreement.
(c) Except as disclosed in the Jefferson Disclosure Schedule, neither
Jefferson nor, to the best knowledge of Jefferson, 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 Jefferson 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 Jefferson.
3.14. Properties and Insurance.
(a) Jefferson has good and, as to owned real property, marketable title to
all material assets and properties, whether real or personal, tangible or
intangible, reflected in Jefferson's statement of condition as of December 31,
1993, 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, 1993), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items that secure
liabilities that are reflected in said statement of condition or the notes
thereto or that secure liabilities incurred in the ordinary course of business
after the date of such statement of condition, (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 Jefferson 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, Jefferson as lessee has the right under valid and
subsisting leases to occupy, use, possess and control all real property leased
by Jefferson in all material respects as presently occupied, used, possessed and
controlled by Jefferson.
(b) The business operations and all insurable properties and assets of
Jefferson are insured for its benefit against all risks which, in the reasonable
judgment of the management of Jefferson, 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 Jefferson adequate for the business engaged in by
Jefferson. As of the date hereof, Jefferson has not received any notice of
cancellation or notice of a material amendment of any such insurance policy or
bond and, to the best of its knowledge, is not in default under any such policy
or bond, no
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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 Jefferson contain accurate records
of all meetings and other corporate action held of the stockholders and Board of
Directors (including committees of the Board 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 Jefferson.
3.16. Environmental Matters. Except as disclosed in the Jefferson
Disclosure Schedule, Jefferson has not received any written notice, citation,
claim, assessment, proposed assessment or demand for abatement alleging that
Jefferson (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 Jefferson. Except as disclosed in the Jefferson Disclosure
Schedule, Jefferson has no actual 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 Jefferson, or owned or leased by
Jefferson in the three years prior to the date of this Agreement in any manner
that violated any applicable 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 Jefferson. Except as disclosed in the Jefferson Disclosure
Schedule, all property owned or leased by Jefferson 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 by Jefferson.
3.17. Reserves. As of June 30, 1994, the allowance for possible loan losses
in the Jefferson Financial Statements was adequate based upon all factors
required to be considered by Jefferson at that time in determining the amount of
such allowance. Except as set forth in the Jefferson Disclosure Schedule, the
methodology used to compute the allowance for possible loan losses complies in
all material respects with all applicable policies of the Comptroller. As of
June 30, 1994, the valuation allowance for OREO properties in the Jefferson
Financial Statements was adequate based upon all factors required to be
considered by Jefferson at that time in determining the amount of such
allowance.
3.18. No Parachute Payments. No officer, director, employee or agent (or
former officer, director, employee or agent)
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of Jefferson 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 Jefferson, 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. Agreements with Bank Regulators. Except as set forth in the Jefferson
Disclosure Schedule, Jefferson is not 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, nor has Jefferson 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 set forth in the Jefferson Disclosure Schedule, Jefferson
is not 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.
3.20. 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.
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 Jefferson.
Hubco hereby represents and warrants to Jefferson 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
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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 Bank Holding Company Act of 1956, as
amended.
(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 percent 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 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. All figures in this Section 4.2 are adjusted to take
into account the January Stock Split as though the January Stock Split had
occurred prior to the date as to which the figures relate. The authorized
capital stock of Hubco consists solely of 19,800,000 shares of Hubco Common
Stock and 3,300,000 shares of preferred stock ("Hubco Authorized Preferred
Stock"). As of September 1, 1994, there were 9,752,304 shares of Hubco Common
Stock issued and outstanding, excluding 647,738 shares of treasury stock. Since
such date, and from time to time hereafter, Hubco may sell or repurchase shares
of Hubco Common Stock. As of September 1, 1994, there are 769,410 shares of
Hubco Authorized Preferred Stock outstanding, all of which are designated as
Series A Preferred Stock. Except for 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 Hubco Authorized
Preferred 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
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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 shares issuable upon the conversion of Hubco's Series A
Preferred Stock, 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 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. This
Agreement has been duly and validly executed and delivered by Hubco and the Bank
and constitutes the 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
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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 Commissioner, the Department, the
Comptroller, the Board of Governors of the Federal Reserve System, if required,
the SEC, state blue sky authorities or other applicable governmental
authorities, 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 or the Bank in connection with (x) the execution and delivery by
Hubco and the Bank of this Agreement, and (y) the consummation by Hubco and the
Bank of the Merger and the other transactions contemplated hereby except such as
are listed in the Hubco Disclosure Schedule or in the aggregate will not (if
obtained) have a material adverse effect on the business, operations, assets or
financial condition of Hubco. 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, 1993 and 1992, the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the periods ended December 31, in each of the three fiscal years
1991 through 1993, in each case accompanied by the audit report of Arthur
Andersen & Co., independent public accountants with respect to Hubco, and the
unaudited consolidated statements of condition of Hubco as of June 30, 1994 and
June 30, 1993 and the related unaudited consolidated statements of income, 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 cash flows (including the related
notes, where applicable) fairly present the consolidated results of operations,
changes in stockholders' equity and 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.
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(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,
1994 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, 1994 or the notes thereto.
Except for the acquisition of Washington Bancorp, Inc. and any other proposed
acquisitions by Hubco since June 30, 1994, neither Hubco nor any of its
Subsidiaries have incurred any liabilities, except in the ordinary course of
business and consistent with prudent banking practice.
4.5. Brokerage Fees. 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. Except for the effects of the
acquisition of Washington Bancorp Inc. on July 1, 1994, which effects have been
reflected in the Hubco S-4 Registration Statement for the Washington Bancorp
Inc. acquisition and the Form 8-K filed with respect to the acquisition, 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, 1994 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 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 reports that it was required to file with the SEC
under the Securities Exchange Act of 1934, as amended (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
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dates, each such report and each registration statement, proxy statement, form
or other document filed by Hubco with the SEC, 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, 1992, 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 Jefferson 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 Securities
Act of 1933, as amended (the "1933 Act"), the 1934 Act and the rules and
regulations promulgated thereunder.
4.10. Funding and Capital Adequacy. At the Effective Time, Hubco will have
sufficient capital to satisfy all applicable regulatory capital requirements.
4.11. Hubco Common Stock. At the Effective Time, the Hubco Common Stock
issued hereunder 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
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liability attaching to the ownership thereof. The Hubco Common Stock to be
issued pursuant to the Merger 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, the Bank and Hubco's other Subsidiaries have duly filed all
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
have duly paid all such taxes due and payable, other than taxes or other charges
which are being contested in good faith (and disclosed to Jefferson in writing).
Hubco, the Bank and Hubco's other Subsidiaries 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, the Bank and Hubco's other Subsidiaries which have
been examined by 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, the Bank and Hubco's other Subsidiaries 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, the Bank or Hubco's
other Subsidiaries, nor has Hubco, the Bank or Hubco's other Subsidiaries given
any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any taxes or Returns.
(b) 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 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) Hubco and its Subsidiaries maintain or contribute to certain "employee
pension benefit plans" (the "Hubco Pension
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Plans"), as such term is defined in Section 3(2)(A) of ERISA, and "employee
welfare benefit plans" (the "Hubco Welfare Plans"), as such term is defined in
Section 3(1) of ERISA. Since September 2, 1974, neither Hubco nor its
Subsidiaries have contributed to any "Multiemployer Plan", as such term is
defined in Section 3(37) of ERISA.
(b) 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.
Hubco is not aware of any fact or circumstance which would disqualify any plan
that could not be retroactively corrected (in accordance with the procedures of
the IRS).
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, 1993, 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, 1993), 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.
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(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, the Bank or any other Subsidiary of Hubco (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 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 June 30, 1994, the allowance for possible loan losses
in the Hubco Financial Statements was adequate based upon all factors required
to be considered by Hubco at that time in determining the amount of such
allowance. The methodology used to compute the allowance for possible loan
losses complies in all material respects with all applicable FDIC and Department
policies. As of June 30, 1994, the valuation allowance for OREO properties in
the Hubco Financial Statements was adequate based upon all factors required to
be considered by Hubco at that time in determining the amount of such allowance.
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
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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 Government 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 Jefferson 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 Jefferson 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 Jefferson by Hubco prior to the date of this Agreement.
4.19. 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 Jefferson. During the period from the date
of this Agreement to the Effective Time, Jefferson shall conduct its business
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. Jefferson also shall use all
reasonable efforts to (i) preserve its business organization intact, (ii) keep
available to itself the present services of its employees and (iii) preserve for
itself and Hubco the goodwill of its customers and others with whom business
relationships exist.
5.2. Negative Covenants.
(a) Jefferson 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:
(i) change any provision of its Articles of Association or By-laws or
any similar governing documents of Jefferson;
(ii) change the number of shares of its authorized or issued capital
stock or issue or grant any subscription,
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option, warrant, call, commitment, right to purchase or agreement of
any character relating to the authorized or issued capital stock of
Jefferson 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) grant any severance or termination pay (other
than pursuant to policies or contracts of Jefferson in effect on the
date hereof or disclosed to Hubco pursuant hereto) to, or enter into or
amend any employment or severance agreement with, any of its directors,
officers or employees, except as specified in the Jefferson Disclosure
Schedule; 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;
(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 Jefferson;
(v) except as set forth in the Jefferson Disclosure
Schedule, 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) except as set forth in the Jefferson Disclosure
Schedule, 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
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(x) agree to do any of the foregoing.
5.3. No Solicitation. Jefferson 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 Jefferson (an "Acquisition Transaction"). Notwithstanding the
foregoing, Jefferson may enter into discussions or negotiations or provide
information in connection with an unsolicited possible Acquisition Transaction
if the Board of Directors of Jefferson, 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. Jefferson 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 Jefferson 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, Jefferson agrees to
provide Hubco, and Hubco agrees to provide Jefferson, 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, 1994, Jefferson will deliver
to Hubco and Hubco will deliver to Jefferson their respective quarterly reports.
As soon as reasonably available, but in no event more than 90 days after the end
of each calendar year, Jefferson will deliver to Hubco and Hubco will deliver to
Jefferson their respective Annual Reports.
5.5. Access to Properties and Records; Confidentiality.
(a) Jefferson shall permit Hubco and its representatives, and Hubco and the
Bank shall permit Jefferson and its representatives, reasonable access to their
respective properties, and shall disclose and make available to Hubco and its
representatives, or Jefferson 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
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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 Jefferson 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, Jefferson acknowledges that Hubco may be involved in discussions
concerning other potential acquisitions and Hubco shall not be obligated to
disclose such information to Jefferson 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
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federal and state securities laws the Hubco Common Stock to be issued to
Jefferson stockholders in connection with the Merger, the parties hereto shall
cooperate in the preparation and filing by Hubco or Jefferson (as applicable) 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, and the rules
and regulations of the Comptroller (such proxy statement and prospectus in the
form mailed by Jefferson to the Jefferson 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 Common Stock for sale, including the
Proxy Statement/Prospectus, are referred to herein as the "Registration
Statement").
(b) Hubco shall furnish Jefferson 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 Jefferson if at any time
prior to the Jefferson 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 Jefferson with
the information needed to correct such inaccuracy or omission. Hubco shall
furnish Jefferson with such 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
Jefferson shareholders.
(c) Jefferson shall furnish Hubco with such information concerning
Jefferson as is necessary in order to cause the Proxy Statement/Prospectus,
insofar as it relates to Jefferson, to comply with Section 5.6(a) hereof.
Jefferson agrees promptly to advise Hubco if at any time prior to the Jefferson
shareholders' meeting referred to in Section 5.6(a) hereof, any information
provided by Jefferson 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. Jefferson shall furnish Hubco
with such supplemental information as may be necessary in order to cause the
Proxy Statement/Prospectus, insofar as it relates to Jefferson, to comply with
Section 5.6(a) after the mailing thereof to Jefferson shareholders.
(d) Hubco shall as promptly as practicable make such filings as are
necessary in connection with the offering of the Hubco Common Stock 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. Jefferson shall promptly furnish Hubco with such
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information regarding the Jefferson shareholders as Hubco requires to enable it
to determine what filings are required hereunder. Jefferson authorizes Hubco to
utilize in such filings the information concerning Jefferson provided to Hubco
in connection with, or contained in, the Proxy Statement/Prospectus. Hubco shall
furnish Jefferson's counsel with copies of all such filings and keep Jefferson
advised of the status thereof. Hubco shall as promptly as practicable file the
Registration Statement containing the Proxy Statement/Prospectus with the SEC,
Jefferson shall as promptly as practicable file the Proxy Statement/Prospectus
with the Comptroller, and each of Hubco and Jefferson shall promptly notify the
other of all communications, oral or written, with the SEC and the Comptroller
concerning the Registration Statement and the Proxy Statement/Prospectus.
(e) Hubco shall cause the Hubco Common Stock issuable pursuant to the
Merger to be listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System at the Effective Time.
(f) The parties hereto will cooperate with each other and use their
reasonable 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 Comptroller, the FDIC, the
Commissioner, 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, if any,
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.
(g) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective Subsidiaries,
if any, from, or delivered by any of the foregoing to, any governmental body in
respect of the transactions contemplated hereby with respect to the Merger.
(h) Jefferson acknowledges that Hubco is in or may be in the process of
acquiring other banks and financial institutions and that in connection with
such acquisitions, information concerning Jefferson may be required to be
included in the registration statements, if any, for the sale of securities of
Hubco or in SEC reports in connection with such acquisitions. Jefferson agrees
to provide Hubco with any information, certificates, documents or other
materials about Jefferson as are reasonably necessary to be included in such
other SEC reports or registration statements, including registration statements
which may be filed by Hubco prior to the Effective Time. Jefferson shall use its
reasonable efforts
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to cause its attorneys and accountants to provide Hubco and any underwriters for
Hubco with any consents, comfort letters, opinion letters, reports or
information which are necessary to complete the registration statements and
applications or any such acquisition or issuance of securities. Hubco shall
reimburse Jefferson for expenses thus incurred by Jefferson should this
transaction be terminated for any reason other than Section 7.1(i). Hubco shall
not file with the SEC any registration statement or amendment thereto or
supplement thereof containing information regarding Jefferson unless Jefferson
shall have consented to such filing. Jefferson shall not unreasonably delay or
withhold any such consent.
(i) The parties shall use all reasonable efforts to cause the filings with
the SEC of the Proxy Statement/Prospectus, and all regulatory filings with the
FDIC, the Commissioner and the Comptroller, to be made by December 1, 1994.
5.7. Approval of Stockholders. Jefferson will (a) take all steps necessary
duly to call, give notice of, convene and hold a meeting of the stockholders of
Jefferson (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 Jefferson the
approval of this Agreement and the transactions contemplated hereby and use its
reasonable efforts to obtain, as promptly as practicable, such approvals, and
(c) cooperate and consult with Hubco with respect to each of the foregoing
matters.
5.8. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions 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 reasonable 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
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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 Jefferson 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 Jefferson 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 Jefferson 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 Jefferson
determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to June 30,
1995 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, Jefferson and Hubco will promptly inform the other of
any facts applicable to Jefferson 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.
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 Jefferson or any Subsidiary of Jefferson
or serves or has served at the request of Jefferson in any capacity with any
other person (collectively, the "Indemnitees") 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
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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 Jefferson, or by any present or
former shareholder of Jefferson (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 Jefferson'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 Jefferson's Board of
Directors or any committee of Jefferson'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, Jefferson's Articles of Association 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 Jefferson immediately prior to the Effective Time with respect to
the indemnification of the Indemnitees arising out of Jefferson's Articles of
Association 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 have Jefferson's officers and directors covered under
either Jefferson's existing officers' and directors' liability insurance policy
or a rider to Hubco's then current officers' and directors' liability insurance
("D&O Insurance") policy for periods of at least six years after the Effective
Time. However, Hubco only shall be required to insure such persons upon terms
and for coverages substantially similar to Jefferson's existing D&O insurance.
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(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 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 liable for settlement of any
claim, action or proceeding hereunder unless such settlement is effected with
its prior written consent; provided 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 and Officers of Jefferson.
(a) Following consummation of the Merger, to the extent practicable, Hubco
will endeavor to cause the Bank to retain and the Bank will, to the extent
practical, retain all of Jefferson's existing employees at similar compensation
levels.
(b) Following consummation of the Merger, to the extent practicable, Hubco
will endeavor to cause the Bank to retain and the Bank will, to the extent
practical, retain Jefferson's current officers in similar positions with the
Bank.
(c) To the extent any officer or employee of Jefferson is terminated
following consummation of the Merger, such officer or employee shall be covered
by Hubco's severance policy as described in the Hubco Disclosure Schedule with
respect to retrenchment or reduction in force and be given credit under such
policy for their years of service with Jefferson.
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(d) Following consummation of the Merger, Hubco intends to make available
to all employees and officers of Jefferson 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. Jefferson 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 Jefferson and
Jefferson's employees shall be granted credit for prior service with Jefferson
toward eligibility and vesting under Hubco's pension and 401(k) plans.
(e) Prior to the Closing, Hubco shall offer an employment agreement and a
bonus agreement to Joseph Greco and bonus agreements to the chief financial
officer and senior operating officer of Jefferson in the form previously
provided to Jefferson.
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 Schedule 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 Disclosure Schedule or which is necessary to correct any
information in such Disclosure Schedule 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
Disclosure Schedule 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 Jefferson. Jefferson shall advise Hubco
monthly of all out-of-pocket expenses which Jefferson has incurred in connection
with this transaction. Jefferson shall mutually agree with Hubco about printing
arrangements for the Proxy Statement/Prospectus before entering into any binding
contract for such expenses.
5.15. Compliance with Antitrust Laws. Each of Hubco and Jefferson shall use
its best efforts to resolve such objections, if any, which may be asserted with
respect to the Merger under 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 antitrust laws, each of Hubco and
Jefferson shall use its best efforts to avoid the filing of, resist or resolve
such suit. Hubco and Jefferson shall use their best efforts to take such action
as may be required: (a) by the Antitrust 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 antitrust laws, or (b)
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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
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
Jefferson, 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 antitrust laws, of an order or decree permitting the
Merger, but requiring that any of the businesses, product lines or assets of
Hubco or Jefferson 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
Jefferson with less than $20 million in assets shall not be considered to have a
material adverse effect on Hubco.
5.16. Comfort Letters. Hubco shall cause Arthur Andersen LLP, its
independent public accountants, to deliver to Jefferson, and Jefferson shall
cause Arthur Andersen LLP, 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/Prospectus for the
Stockholders Meeting of Jefferson, 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, Jefferson shall deliver to Hubco (a) a
letter identifying all persons who, to the knowledge of Jefferson, may be deemed
to be affiliates of Jefferson under Rule 145 of the 1933 Act and the
pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of Jefferson 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 Jefferson agreeing to comply with
Rule 145 and to refrain from transferring shares as required by the
pooling-of-interests accounting rules. Hubco hereby agrees to publish, or file a
Form 8-K, Form 10-K or Form 10-Q containing financial results covering at least
30 days of combined operations of Hubco and Jefferson as soon as practicable but
in no event later than 20
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days after the last day of the first full calendar month following the Effective
Time.
5.18. Pooling in Tax-Free Reorganization Treatment. Prior to the date
hereof, Hubco has not taken any action or failed to take any action which would
disqualify the Merger for pooling of interests accounting treatment, and before
the Effective Time, neither Hubco nor Jefferson shall intentionally take, fail
to take, or cause to be taken or not taken any action within its control, which
would disqualify the Merger as a "pooling-of-interests" unless Hubco agrees to
waive the condition contained in Section 6.2(c) for accounting purposes or as a
"reorganization" within the mean of Section 368(a) of the Code.
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 Jefferson Stockholders; SEC Registration. This Agreement
and the transactions contemplated hereby shall have been approved by the
requisite vote of the stockholders of Jefferson. The Jefferson proxy statement
shall have been cleared for distribution by the Comptroller. 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 Common 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
Comptroller, the Commissioner, the FDIC 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 Jefferson 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
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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 Jefferson determines in good faith, 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 Jefferson shall each have received an opinion,
dated as of the Effective Time, of Pitney, Hardin, Kipp & Szuch, reasonably
satisfactory in form and substance to Jefferson and its counsel Lowenstein,
Sandler, Kohl, Fisher & Boylan and to Hubco, based upon representation letters
reasonably required by Pitney, Hardin, Kipp & Szuch, 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 Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code; (ii) no gain or loss will be recognized
by Jefferson; (iii) no gain or loss shall be recognized upon the
exchange of Jefferson Common Stock solely for Hubco Common Stock; (iv)
the basis of any Hubco Common Stock received in exchange for Jefferson
Common Stock shall equal the basis of the recipient's Jefferson 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 (v) the holding period for any
Hubco Common Stock received in exchange for Jefferson Common Stock will
include the period during which the Jefferson Common Stock surrendered
on the exchange was held, provided such stock was held as a capital
asset on the date of the exchange.
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
Jefferson. Except for those representations which are made as of a particular
date, the representations and warranties of Jefferson 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. Jefferson
shall have performed in all material respects the agreements, covenants and
obligations to be performed by it prior
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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 Jefferson
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 Jefferson 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 Jefferson
Disclosure Schedule, materially adversely affect the representation as to which
the supplement or amendment relates.
(b) Opinion of Counsel to Jefferson. Hubco shall have received an opinion
of counsel to Jefferson, dated the Closing Date, in form and substance
reasonably satisfactory to Hubco, covering the matters set forth on Exhibit 6.2
hereto.
(c) Pooling of Interests. Hubco shall have received assurances from its
accountants, Arthur Andersen LLP, to the effect that the Merger shall be
qualified to be treated by Hubco as a pooling-of-interests for accounting
purposes.
(d) Certificates. Jefferson 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.
6.3. Conditions to the Obligations of Jefferson Under this Agreement. The
obligations of Jefferson 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 and the Bank 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 Hubco 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
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Hubco Disclosure Schedule, materially adversely affect the representation as to
which the supplement or amendment relates.
(b) Opinion of Counsel to Hubco. Jefferson shall have received an opinion
of counsel to Hubco, dated the Closing Date, in form and substance reasonably
satisfactory to Jefferson , covering the matters set forth on Exhibit 6.3
hereto.
(c) Fairness Opinion. Jefferson shall have received an opinion from Capital
Consultants of Princeton, Inc., dated as of the date the Proxy
Statement/Prospectus is mailed to Jefferson's stockholders, to the effect that,
in its opinion, the consideration to be paid to stockholders of Jefferson
hereunder is fair to such stockholders from a financial point of view ("Fairness
Opinion").
(d) No Acquisition by Hubco Causing 15% Dilution. Hubco shall have obtained
the written consent of Jefferson if, between the date hereof and the Effective
Time, Hubco or the Bank (i) enters into one or more definitive acquisition
agreements to acquire other banks, thrifts or other financial institutions (or
the assets and/or liabilities of such institutions) and (ii) the cumulative
impact on Hubco's earnings per share from such additional acquisitions
reasonably is projected to dilute by fifteen percent (15%) or more the estimates
prepared by analysts of earnings per share of Hubco for the year following the
consummation of such acquisition. If the parties cannot agree concerning this
matter, they agree to submit any dispute to a mutually satisfactory investment
banker whose opinion shall be final and binding.
(e) Certificates. Hubco shall have furnished Jefferson 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 Jefferson 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
Jefferson:
(a) by mutual written consent of the parties hereto;
(b) (i) by Jefferson or Hubco if the Effective Time shall not have occurred
on or prior to June 30, 1995 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) by Hubco or Jefferson if a vote
of the stockholders of Jefferson is taken and such stockholders fail to approve
this Agreement at the meeting (or any adjournment thereof) held for such
purpose;
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(c) by Hubco or Jefferson 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 Jefferson if any
such application is approved with conditions which materially impair the value
of Jefferson to Hubco;
(d) by Hubco if (i) there shall have occurred a material adverse change in
the business, operations, assets, or financial condition of Jefferson from that
disclosed by Jefferson in Jefferson's Call Report for June 30, 1994 and
Jefferson's Annual Report to Shareholders for the year ended December 31, 1993;
or (ii) there was a material breach in any representation, warranty, covenant,
agreement or obligation of Jefferson hereunder and such breach shall not have
been remedied within 30 days after receipt by Jefferson of notice in writing
from Hubco to Jefferson specifying the nature of such breach and requesting that
it be remedied;
(e) by Jefferson, 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, 1994 and Hubco's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993, except
for the effects of the acquisition of Washington Bancorp Inc. on July 1, 1994,
the effects of which have been reflected in the Hubco S-4 Registration Statement
for the Washington Bancorp Inc. acquisition and the Form 8-K filed with respect
to the acquisition; 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 Jefferson 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 Jefferson if the conditions set forth in Section 6.3 are not
satisfied;
(h) by Hubco upon written notice to Jefferson prior to the Effective Time
if the Median Pre-Closing Price is less than the Lower Adjustment Price; and
(i) by Jefferson, if Jefferson'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.
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7.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement by either Hubco or Jefferson pursuant to Section 7.1, this
Agreement (other than Section 5.5(b), the third from the last sentence of
Section 5.6(h), this Section 7.2 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 Jefferson but, after any such adoption, no amendment shall be
made which reduces the amount or changes the form of the consideration to be
delivered to the stockholders of Jefferson 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) Subject to Section 5.6(h) and Section 8.1(c) hereof, 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.
(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.
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(c) If
(i) this Agreement is terminated by Jefferson
pursuant to Section 7.1(i), or by Hubco pursuant to Section 7.1(d)(ii)
because of a breach by Jefferson of any covenant, or by Hubco or
Jefferson pursuant to Section 7.1(b)(ii) because of an action taken by
Jefferson or Jefferson's Board of Directors, and
(ii) after the execution of this Agreement and prior
to the date of termination of this Agreement Jefferson is informed
orally or in writing of a proposal to effect an Acquisition Transaction
which proposal is not fully withdrawn prior to the date of termination
and which proposal is made by a company or person other than Hubco and
its affiliates; and
(iii) before or within 12 months after the date of
the termination of this Agreement (a) Jefferson shall have entered into
an agreement to engage in an Acquisition Transaction with any person
other than Hubco, or (b) the Board of Directors of Jefferson shall have
approved an Acquisition Transaction or shall have recommended that the
shareholders of Jefferson approve or accept any Acquisition
Transaction, in each case, other than as contemplated by this
Agreement, and
(iv) an Acquisition Transaction between Jefferson and
another person shall have closed ("Acquisition Transaction Closing")
within 24 months after the termination of this Agreement;
then Jefferson or its successor in interest shall pay to Hubco immediately after
the Acquisition Transaction Closing, a termination fee (the "Termination Fee")
equal to $250,000, plus the legal fees and expenses of Hubco incurred in
enforcing its right to the Termination Fee.
8.2. Survival. Except for the provisions of Article II, Section 5.8,
Section 5.11, and Section 5.17 hereof, 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.
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:
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(a) If to Hubco, to:
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn.: Kenneth T. Neilson, President
Copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Attn.: Ronald H. Janis, Esq.
(b) If to Jefferson, to:
Jefferson National Bank
155 Jefferson Street
Passaic, New Jersey 07055
Attn.: Raymond L. Sisco, 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. 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, except for the Indemnitees covered by Section 5.11 hereof and
the persons signing letter agreements pursuant to Section 5.17 hereof who shall
be entitled to the benefits of such Section 5.17.
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.
<PAGE>
-49-
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.
IN WITNESS WHEREOF, Hubco, the Bank and Jefferson 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: HUDSON UNITED BANK
By:________________________ By:__________________________
, Secretary Kenneth T. Neilson, President
ATTEST: JEFFERSON NATIONAL BANK
By:________________________ By:__________________________
, Cashier Raymond L. Sisco, Chairman
<PAGE>
EXHIBIT 5.17
FORM OF JEFFERSON AFFILIATE LETTER
October __, 1994
HUBCO, Inc.
3100 Bergenline Avenue
Union City, NJ 07087
Gentlemen:
I am delivering this letter to you in connection with the proposed merger
(the "Merger") of Jefferson National Bank, a national banking association (the
"Company") with and into Hudson United Bank, a New Jersey chartered commercial
banking corporation, pursuant to the Agreement and Plan of Merger dated October
7, 1994, (the "Agreement") among the Company, HUBCO, Inc. ("Hubco"), and Hudson
United Bank. I currently own shares of the Company's common stock, par value
$6.00 per share ("Jefferson Common Stock"). As a result of the Merger, I will
receive shares of Hubco's common stock, no par value ("Hubco Common Stock") in
exchange for my Jefferson Common Stock.
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of the Company, as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
promulgated under the Securities Act of 1933, as amended (the "1933 Act") by the
Securities and Exchange Commission ("SEC") and as the term "affiliate" is used
for purposes of the SEC's rules and regulations applicable to the determination
of whether a merger can be accounted for as a "pooling of interests" as
specified in the SEC's Accounting Series Release 135, as amended by Staff
Accounting Bulletins Nos. 65 and 76 ("ASR 135").
I represent to and agree with Hubco that:
A. Transfer Review Restrictions. During the period beginning on the date
hereof and ending 30 days prior to the consummation of the Merger, I shall not
sell, transfer or otherwise dispose of ("transfer") any Jefferson Common Stock
owned by me, and I shall not permit any relative who shares my home, or any
person or entity who or which I control, to transfer any Jefferson Common Stock
owned by such person or entity, without notifying Hubco in advance of the
proposed transfer and giving Hubco a reasonable opportunity to review the
transfer before it is consummated. Hubco, if advised to do so by its independent
public accountants, may instruct me not to make or permit the transfer because
it may interfere with the "pooling of interests" treatment of the Merger. I
shall abide by any such instructions.
<PAGE>
-2-
B. Transfer Restrictions During Merger Consummation Period. I shall not
transfer any Jefferson Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any Jefferson Common Stock owned by such person or entity during the
period beginning 30 days prior to the consummation of the Merger and ending
immediately after financial results covering at least 30 days of post-Merger
combined operations have been published by Hubco by means of the filing of a
Form 10-Q or Form 8-K under the Securities Exchange Act of 1934, as amended, the
issuance of a quarterly earnings report, or any other public issuance which
satisfies the requirements of ASR 135. For purposes of this paragraph only,
"Jefferson Common Stock" includes Hubco Common Stock into which my Jefferson
Common Stock is converted.
C. Compliance with Rule 145. I have been advised that the issuance of Hubco
Common Stock to me pursuant to the Merger will be registered with the SEC under
the 1933 Act on a Registration Statement on Form S-4. However, I have also been
advised that, since I may be deemed to be an affiliate of the Company at the
time the Merger is submitted for a vote of the Company's stockholders, any
transfer by me of Hubco Common Stock is restricted under Rule 145 promulgated by
the SEC under the 1933 Act. I agree not to transfer the Hubco Common Stock
received by me or any of my affiliates unless (i) such transfer is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
SEC under the 1933 Act, (ii) in the opinion of Hubco's counsel or counsel
reasonably acceptable to Hubco, such transfer is otherwise exempt from
registration under the 1933 Act or (iii) such transfer is registered under the
1933 Act.
D. Stop Transfer Instructions; Legend on Certificates. I also understand
and agree that stop transfer instructions will be given to Hubco's transfer
agents with respect to the Hubco Common Stock received by me and any of my
affiliates and that there will be placed on the certificates of the Hubco Common
Stock issued to me and any of my affiliates, or any substitutions therefor, a
legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED OCTOBER
__, 1994 BETWEEN THE REGISTERED HOLDER HEREOF AND HUBCO, INC., A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF HUBCO, INC."
E. Consultation with Counsel. I have carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon my ability to transfer Hubco Common Stock to the extent I felt
necessary with my counsel or counsel for the Company.
<PAGE>
-3-
Execution of this letter is not an admission on my part that I am an
"affiliate" of the Company as described in the second paragraph of this letter,
or a waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
-----------------------------
Name:
Accepted this _____ day of
October, 1994 by
HUBCO, INC.
By:_________________________
<PAGE>
EXHIBIT 6.2
FORM OF OPINION OF COUNSEL TO JEFFERSON
TO BE DELIVERED TO HUBCO ON THE EFFECTIVE TIME
(a) Jefferson National Bank ("Jefferson") is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States. Jefferson 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 Jefferson.
(b) The deposit accounts of depositors in Jefferson are insured up to
applicable limits by the Federal Deposit Insurance Corporation.
(c) The authorized capital stock of Jefferson consists of ___________
shares of common stock, _____ par value per share (the "Jefferson Shares"). The
stockholders of Jefferson have preemptive rights with respect to shares of the
capital stock of Jefferson pursuant to the Articles of Association of Jefferson
or otherwise. Jefferson does not have any authorized class of capital stock
other than shares of its common stock and, to the best of our actual knowledge
after inquiry, there are no outstanding subscription rights, options, conversion
rights, warrants or other agreements or commitments of any nature whatsoever
(either firm or conditional) obligating Jefferson to issue, deliver or sell,
cause to be issued, delivered or sold, or restricting Jefferson from selling any
additional Jefferson Shares or obligating Jefferson to grant, extend or enter
into any such agreement or commitment.
(d) The Agreement has been duly authorized, executed and delivered by
Jefferson, and constitutes the valid and binding obligation of Jefferson
enforceable in accordance with its terms, except that the enforceability of the
obligations of Jefferson may be limited by bankruptcy, fraudulent conveyance,
insolvency, moratorium, reorganization or other laws heretofore or hereafter
enacted relating to or affecting the rights of creditors generally and by
equitable principles limiting the right to obtain specific performance or other
similar equitable relief (regardless of whether such enforceability is
considered in a proceeding in equity or at law). In addition, certain remedial
and other provisions of the Agreement may be limited by implied covenants of
good faith, fair dealing, and commercially reasonable conduct, by judicial
discretion in the instance of equitable remedies, and by applicable public
policies and laws.
<PAGE>
-2-
(e) The execution and delivery of the Agreement and the consummation of the
transactions contemplated thereby will not (i) conflict with or violate any
provision of, or result in the breach of any provision of, the Articles of
Association or the by-laws of Jefferson; (ii) to our actual knowledge after
inquiry, conflict with or violate in any material respect or result in a
material breach or violation of the terms or provisions of, or constitute a
material default under, or result in or entitle any party to the acceleration of
(whether upon or after the giving of notice or lapse of time or both) any
material obligation under, any material indenture, mortgage, deed of trust or
loan agreement or any other material agreement, instrument, judgment, order,
arbitration award or decree to which Jefferson is a party or by which Jefferson
is bound; or (iii) cause Jefferson to violate any statute, rule, regulation or
order known to us applicable to Jefferson, except with respect to (ii) and (iii)
above, such as in the aggregate will not have a material adverse effect on the
ability of Jefferson to consummate this transaction.
(f) All actions required by law, the Articles of Association of Jefferson
or its By-laws to be taken by the directors and stockholders of Jefferson to
authorize the execution, delivery and performance of the Agreement and
consummation of the Merger and the actions contemplated thereby have been duly
taken.
(g) Assuming that there has been due authorization of the Merger by all
necessary corporate and governmental proceedings on the part of HUBCO, Inc.
("Hubco") and that Hubco has taken all action required to be taken by it prior
to the Effective Time, upon the appropriate filings with the bank regulatory
authorities in respect of the Merger in accordance with Section 1.6 of the
Agreement, the Merger will become effective and each of the Jefferson Shares
will be extinguished and converted as provided in Article II of the Agreement.
(h) All approvals, authorizations, consents or other actions and all
filings under federal law and any applicable state law required to be obtained
by Jefferson ("Approvals") in order to permit the execution and delivery of the
Agreement and the performance of the transactions contemplated therein in
connection with the Merger have been obtained. No Approval of any other party or
entity (other than Hubco and Approvals required to be obtained by Hubco) is
required in connection with the execution, delivery and performance by Jefferson
of its obligations under the Agreement except for Approvals not required or
necessary to be obtained on the date hereof, and except for approvals the
failure to obtain which individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of Jefferson, and which will not prevent or delay the consummation of
the transactions contemplated by the Agreement.
<PAGE>
-3-
(i) We are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement/Prospectus and make no representation that we have independently
verified the accuracy, completeness or fairness of such statements, but from our
examination of the Proxy Statement/Prospectus and our general familiarity with
the affairs of Jefferson, no facts have come to our attention that caused us to
believe that (except for financial statements, other tabular financial
information, and other financial and statistical data and information, as to
which we do not express any belief) the Proxy Statement/Prospectus on the date
of the mailing thereof and on the date of the meeting of stockholders of
Jefferson at which the Agreement was approved, contained any untrue statement of
a material fact regarding Jefferson or the Merger or omitted to state a material
fact regarding Jefferson or the Merger necessary in order to make the statements
regarding Jefferson or the Merger therein, in light of the circumstances under
which they were made, not misleading.
(j) To our actual knowledge after inquiry and except as set forth in the
Jefferson Disclosure Schedule, and other than ordinary routine litigation
incidental to the business of Jefferson there are no actions, suits or
proceedings or investigations pending or threatened against or affecting the
business, operations, property or financial condition of Jefferson, at law or in
equity, in any court or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
except those which, if decided adversely to Jefferson, would not have a material
adverse effect on the business, operations, assets or financial condition of
Jefferson. Except as disclosed in the Jefferson Disclosure Schedule, to our
actual knowledge after inquiry, Jefferson is not in default with respect to any
order, writ, injunction or decree of any court or of any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
authority, to which they or their properties are subject.
(k) To our actual knowledge after inquiry, Jefferson has all material
permits, licenses, orders and approvals of all governmental or regulatory bodies
required to conduct its business under applicable Federal and state laws and
regulations, except for those permits, licenses, orders and approvals as to
which the failure to obtain would not have a material adverse effect on the
business, operations, assets or financial condition of Jefferson.
In rendering their opinion, such counsel may rely, (A) as to matters
involving the application of laws of any jurisdiction other than New Jersey and
the United States, to the extent such counsel deems proper and specifies in such
opinion, upon the opinion of other counsel of good standing believed by such
counsel to be reliable (providing that such counsel states that Hubco is
justified in relying upon such specified opinion or opinions) and
<PAGE>
-4-
(B) as to matters of fact to the extent such counsel deems proper, upon
certificates of responsible officers of Jefferson and public officials; provided
copies of any such opinions or certificate are delivered to Hubco together with
the opinion to be rendered hereunder by counsel to Jefferson. Such counsel may
assume that any agreement is a valid and binding obligation of any parties to
such agreement other than Jefferson. Such counsel may also rely, as to facts,
upon the representations and warranties made by Jefferson in the Agreement and
on the genuineness of signatures and the authenticity of copies.
<PAGE>
EXHIBIT 6.3
FORM OF OPINION OF COUNSEL TO HUBCO
TO BE DELIVERED TO JEFFERSON ON THE EFFECTIVE TIME
(a) HUBCO, Inc. ("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 and the
Bank, taken as a whole. Hubco is registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended.
(b) Hudson United Bank (the "Bank") is a commercial bank duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
The Bank 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 the
Bank, taken as a whole.
(c) The authorized capital stock of Hubco consists of ___________ shares of
common stock, no par value per share ("Common Stock") and __________ shares of
preferred stock (the "Authorized Preferred Stock"). The stockholders of Hubco
have no preemptive rights with respect to such shares pursuant to the
Certificate of Incorporation of Hubco or otherwise. Hubco represents that it
presently has outstanding ______ shares of Series A Preferred Stock, which
constitutes all of the outstanding Authorized Preferred Stock. Except for any
Common Stock issuable upon exercise of outstanding stock options granted
pursuant to the Hubco Director Stock Option Plan, to the best of our actual
knowledge after inquiry, there are no outstanding subscription rights, options,
conversion rights, warrants or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating Hubco to issue, deliver or
sell, cause to be issued, delivered or sold, or restricting Hubco from selling
any additional Common Stock or Authorized Preferred Stock or obligating Hubco to
grant, extend or enter into any such agreement or commitment, except as may be
provided in any acquisition agreement Hubco may
<PAGE>
-2-
enter into after the date of execution of the Agreement. The outstanding shares
of capital stock of each Hubco subsidiary represented by Hubco to be all of the
outstanding shares of such subsidiary have been validly authorized and issued
and are fully paid and, to the best of our knowledge after due inquiry, are
owned by Hubco free and clear from any liens, claims, equities, restrictions or
encumbrances created by or through Hubco.
(d) The Agreement has been duly authorized, executed and delivered by Hubco
and the Bank, and constitutes the valid and binding obligations of Hubco and the
Bank enforceable in accordance with its terms, except that the enforceability of
the obligations of Hubco and the Bank may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, or other laws heretofore or
hereafter enacted relating to or affecting the enforcement of creditors' rights
generally and by principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). In addition, certain
remedial and other provisions of the Agreement may be limited by implied
covenants of good faith, fair dealing, and commercially reasonable conduct, by
judicial discretion, in the instance of equitable remedies, and by applicable
public policies and laws.
(e) The execution and delivery of the Agreement and the consummation of the
transactions contemplated thereby will not (i) conflict with or violate any
provision of or result in the breach of any provision of the respective
Certificate of Incorporation, or the By-laws of Hubco or the Bank; (ii) to our
actual knowledge after inquiry, conflict with or violate in any material respect
or result in a material breach or violation of the terms or provisions of, or
constitute a material default under, or result in (whether upon or after the
giving of notice or lapse of time or both) any material obligation under, any
material indenture, mortgage, deed of trust or loan agreement or any other
material agreement, instrument, judgment, order, arbitration award or decree to
which Hubco or the Bank is a party, or by which Hubco or the Bank is bound; or
(iii) cause Hubco or the Bank to violate any law, ordinance, rule or regulation
applicable to Hubco or the Bank, except with respect to (ii) and (iii) above,
such as in the aggregate will not have a material adverse effect on the ability
of Hubco and the Bank to consummate this transaction.
(f) All actions of the directors and stockholders of Hubco and the Bank
required by law, the respective Certificate of Incorporation of Hubco or the
Bank or their respective by-laws to be taken by Hubco or the Bank to authorize
the execution, delivery and performance of the Agreement and consummation of the
Merger have been duly taken.
(g) Assuming that there has been due authorization of the Merger by all
necessary corporate and governmental proceedings on the part of Jefferson and
that Jefferson has taken all action
<PAGE>
-3-
required to be taken by it prior to the Effective Time, upon the appropriate
filings with the bank regulatory authorities in respect of the Merger in
accordance with Section 1.6 of the Agreement, the Merger will become effective
and each of the Jefferson Shares will be extinguished and converted as provided
in Article II of the Agreement and the shares of Hubco Common Stock to be issued
thereby will have been validly issued by Hubco and fully paid.
(h) All approvals, authorizations, consents or other actions and all
filings under federal law and any applicable state law required to be obtained
by Hubco or the Bank ("Approvals") in order to permit the execution and delivery
of the Agreement and the performance of the transactions contemplated therein in
connection with the Merger have been obtained. No consent of any other party or
entity (other than Jefferson and approvals, authorizations, consents and other
actions required to be obtained by Jefferson) is required in connection with the
execution, delivery and performance by Hubco or the Bank of their obligations
under the Agreement, except for Approvals not required or necessary to be
obtained on the date hereof.
(i) We are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement/Prospectus and make no representation that we have independently
verified the accuracy, completeness or fairness of such statements, but from our
examination of the Proxy Statement/Prospectus and our general familiarity with
Hubco (i) we are of the opinion that the Proxy Statement/Prospectus and any
supplements or amendments thereto (except for financial statements and other
tabular financial information, and other financial and statistical data and
information, as to which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act of 1933, as amended, and
the applicable laws and regulations thereunder (the "1933 Act"), (ii) no facts
have come to our attention that caused us to believe that (except for financial
statements and other tabular financial information, as to which we do not
express any belief) the Proxy Statement/Prospectus on the date of the mailing
thereof and on the date of the meeting of stockholders of Jefferson at which the
Agreement was approved, contained any untrue statement of a material fact
regarding Hubco, the Bank, or the Merger or omitted to state a material fact
regarding Hubco, the Bank, or the Merger necessary in order to make the
statement regarding Hubco, the Bank, or the Merger therein, in light of the
circumstances under which they were made, not misleading.
(j) To our actual knowledge after inquiry and except as set forth in the
Hubco Disclosure Schedule, and other than ordinary routine litigation incidental
to the business of Hubco or its subsidiaries, there is no material action, suit
or proceeding or investigation pending or threatened against or affecting the
<PAGE>
-4-
business, operations, property or financial condition of Hubco or the Hubco
Subsidiaries, at law or in equity, in any court or before any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, except those which, if decided adversely to Hubco or its
subsidiaries, would not have a material adverse effect on the business,
operations, assets or financial condition of Hubco and the Bank, taken as a
whole; provided, however, we are not counsel to Hubco or the Bank in any
litigation and with respect to any such litigation we are relying upon the
opinions of general counsel to Hubco with respect to such litigation. To our
knowledge, Hubco and the Bank are not in default with respect to any order,
writ, injunction or decree of any court or of any federal, state, municipal or
other governmental department, commission, board, bureau, agency or authority,
to which their properties are subject.
(k) To our actual knowledge after inquiry, each of Hubco and the Bank have
all material permits, licenses, orders and approvals of all governmental or
regulatory bodies required for it to conduct its business under applicable state
and Federal laws and regulations, except for those permits, licenses, orders and
approvals as to which the failure to obtain would not have a material adverse
effect on the business, operations, assets or financial condition of Hubco and
the Bank taken as a whole. None of such material permits, licenses, orders or
approvals will be adversely affected by the consummation of the transactions
contemplated by the Agreement except for such permits, licenses, orders or
approvals, the loss of which would not have a material adverse effect on the
business, financial condition or results of operations of Hubco and the Bank
taken as a whole.
(l) The registration statement of Hubco has been declared effective by the
Securities and Exchange Commission ("SEC") under the 1933 Act and, to our actual
knowledge, no stop order suspending the effectiveness has been issued under the
1933 Act or proceedings therefor initiated or threatened by the SEC.
In rendering their opinion, such counsel may rely, (A) as to matters
involving the application of laws of any jurisdiction other than the United
States or the State of New Jersey, to the extent such counsel deems proper and
specifies in such opinion, upon the opinion of other counsel of good standing
believed by such counsel to be reliable (providing that such counsel states that
Jefferson is justified in relying upon such specified opinion or opinions) and
(B) as to matters of fact, to the extent such counsel deems proper, upon
certificates of responsible officers of Hubco, the Bank and public officials;
provided copies of any such opinions or certificate are delivered to Jefferson
together with the opinion to be rendered hereunder by counsel to Hubco. Such
counsel may assume that any agreement is the valid and binding obligation of any
parties to such agreement other than Hubco. Such counsel may also rely as to
facts, upon the representations and warranties made
<PAGE>
-5-
by Hubco in the Agreement and the genuineness of signatures and the
authenticity of copies.
<PAGE>
APPENDIX B
CAPITAL CONSULTANTS OF PRINCETON, INC.
- -------------------------------------------------------------------------------
INVESTMENT BANKERS & BANK/THRIFT CONSULTANTS
1000 Herrontown Road
Princeton, NJ 08540-7716
609-921-3293
December __, 1994
Board of Directors
Jefferson National Bank
155 Jefferson Street
Passaic, New Jersey 07055
Members of the Board:
Jefferson National Bank, ("JEFFERSON") has entered into an Agreement and Plan of
Merger dated October 7, 1994, as amended ("AGREEMENT") with HUBCO, Inc.
("HUBCO") and Hudson United Bank ("HUDSON") which provides for the merger of
JEFFERSON with and into HUDSON ("MERGER").
If the MERGER is approved and consummated, subject to the provisions of the
AGREEMENT, each share of JEFFERSON Common Stock issued and outstanding
(excluding shares held by HUBCO and any dissenting shares) shall be converted at
the Effective Time into the right to receive 2.865 shares (as adjusted for
HUBCO's announced 3-for-2 stock split) ("EXCHANGE RATIO") of common stock,
without par value, of HUBCO. The EXCHANGE RATIO is subject to adjustment upward
and downward if the Median Pre-Closing Price, as defined in the AGREEMENT, of
HUBCO Common Stock is less than $12.89 per share or exceeds $17.44 per share.
In lieu of the issuance of applicable fractional shares, HUBCO will make a cash
payment therefor equal to the product of (1) the fractional interest which a
JEFFERSON shareholder would otherwise receive and (2) the HUBCO Common Stock
Median Pre-Closing Price.
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
JEFFERSON.
Capital Consultants of Princeton, Inc., as a customary part of its investment
banking business, is engaged in the valuation 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 the Registration Statement on
Form S-4 of HUBCO of which this Proxy Statement-Prospectus is a part; (b)
reviewed a copy of the AGREEMENT; (c) reviewed the most recent proxy materials
of JEFFERSON and HUBCO; (d) reviewed and analyzed the historical financial
statements of
<PAGE>
December , 1994
Page Two
JEFFERSON and HUBCO; (e) reviewed certain publicly available information
relating to JEFFERSON and HUBCO; (f) met with and discussed the business and
prospects with the senior managements of JEFFERSON and HUBCO; (g) compared
operating results and other financial statement information for JEFFERSON 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 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 bank 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 attempted to
verify same. We have not made or obtained any independent evaluations or
appraisals of the assets or liabilities of JEFFERSON 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 JEFFERSON.
Very truly yours,
<PAGE>
APPENDIX C
12 U.S.C. S.214a
(b) Rights of dissenting stockholders
A shareholder of a national banking association who votes against the
conversion, merger, or consolidation, or who has given notice in writing to the
bank at or prior to such meeting that he dissents from the plan, shall be
entitled to receive in cash the value of the shares held by him, if and when the
conversion, merger, or consolidation is consummated, upon written request made
to the resulting State bank at any time before thirty days after the date of
consummation of such conversion, merger, or consolidation, accompanied by the
surrender of his stock certificates. The value of such shares shall be
determined as of the date on which the shareholders' meeting was held
authorizing the conversion, merger, or consolidation, by a committee of three
persons, one to be selected by majority vote of the dissenting shareholders
entitled to receive the value of their shares, one by the directors of the
resulting State bank, and the third by the two so chosen. The valuation agreed
upon by any two of three appraisers thus chosen shall govern; but, if the value
so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within five days
after being notified of the appraised value of his shares appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares of the appellant. If,
within ninety days from the date of consummation of the conversion, merger or
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party, cause an
appraisal to be made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the appraisal as the
case may be, shall be paid by the resulting State bank. The plan of conversion,
merger, or consolidation shall provide the manner of disposing of the shares of
the resulting State bank not taken by the dissenting shareholders of the
national banking association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
(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
attorneys' 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.
II-1
<PAGE>
Item 21.
A. Exhibits
Exhibit No. Description
----------- -----------
2(a)* Amended and Restated Agreement and Plan of Merger,
dated November 28, 1994, by and among HUBCO, Inc.,
Hudson United Bank and Jefferson National Bank
(included as Appendix A to the Proxy
Statement/Prospectus).
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the
legality of the securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as
to certain tax consequences of the Merger.
10(a) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and Carol D'Auria dated October 12, 1994.
10(b) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and Joseph Greco dated October 12, 1994.
10(c) Employment Agreement between HUBCO, Inc., Hudson
United Bank and Joseph Greco dated October 12, 1994.
10(d) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and David Hynes dated October 12, 1994.
10(e) Stock Purchase Agreement, dated as of December 7, 1994,
by and among Hudson United Bank, Bernard Eichenbaum,
David Leff and Shoppers Charge Accounts Co. (is
incorporated by reference to Exhibit 10 to HUBCO,
Inc.'s Current Report on Form 8-K filed with the SEC on
December 7, 1994).
23(a) Consent of Arthur Andersen LLP with respect to
Jefferson National Bank.
23(b) Consent of Arthur Andersen LLP with respect to
HUBCO, Inc.
23(c) Consent of Barry N. Rein & Associates.
23(d) Consent of Pitney, Hardin, Kipp & Szuch (included
in Exhibit 5 hereto).
23(e) Consent of Capital Consultants of Princeton, Inc.
23(f) Consent of Coopers & Lybrand LLP.
99(a) Form of Proxy Card to be utilized by the Board of
Directors of Jefferson National Bank.
- -----------------------------------
* Included elsewhere in this registration statement.
II-2
<PAGE>
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 therein.
C. Report, Opinion or Appraisals
Form of Fairness Opinion of Capital Consultants of Princeton, Inc. is
included as Appendix B to Proxy Statement/Prospectus.
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 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 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for 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-3
<PAGE>
4. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is 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 a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
6. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
becomes effective.
II-4
<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 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Union City, State of New Jersey, on the 9th day of
December, 1994.
HUBCO, Inc.
By: 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 by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
JAMES E. SCHIERLOH
___________________________ Chairman of the December 9, 1994
(James E. Schierloh) Board and Director
KENNETH T. NEILSON
___________________________ President and December 9, 1994
(Kenneth T. Neilson) Director (Chief
Executive Officer)
ROBERT J. BURKE
___________________________ Director December 9, 1994
(Robert J. Burke)
JOAN DAVID
___________________________ Director December 9, 1994
(Joan David)
THOMAS R. FARLEY
___________________________ Director December 9, 1994
(Thomas R. Farley)
HENRY G. HUGELHEIM
___________________________ Director December 9, 1994
(Henry G. Hugelheim)
II-5
<PAGE>
Signature Title Date
--------- ----- ----
___________________________ Director __________, 1994
(Harry J. Leber)
CHARLES F.X. POGGI
___________________________ Director December 9, 1994
(Charles F.X. Poggi)
SISTER GRACE FRANCES STRAUBER
___________________________ Director December 9, 1994
(Sister Grace Frances
Strauber)
EDWIN WACHTEL
___________________________ Director December 9, 1994
(Edwin Wachtel)
EUGENE V. MALINOWSKI
___________________________ Chief Financial December 9, 1994
(Eugene V. Malinowski) Officer
(Principal Financial
Officer)
CHRISTINA L. MAIER
___________________________ Assistant Treasurer December 9, 1994
(Christina L. Maier) (Principal
Accounting Officer)
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
A. 2(a)* Amended and Restated Agreement and Plan of Merger,
dated November 28, 1994, by and among HUBCO, Inc.,
Hudson United Bank and Jefferson National Bank
(included as Appendix A to the Proxy
Statement/Prospectus).
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the
legality of the securities to be registered.
8 Opinion of Pitney, Hardin, Kipp & Szuch as
to certain tax consequences of the Merger.
10(a) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and Carol D'Auria dated October 12, 1994.
10(b) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and Joseph Greco dated October 12, 1994.
10(c) Employment Agreement between HUBCO, Inc., Hudson
United Bank and Joseph Greco dated October 12, 1994.
10(d) Bonus Agreement between HUBCO, Inc., Hudson United
Bank and David Hynes dated October 12, 1994.
10(e) Stock Purchase Agreement, dated as of December 7, 1994,
by and among Hudson United Bank, Bernard Eichenbaum,
David Leff and Shoppers Charge Accounts Co. (is
incorporated by reference to Exhibit 10 to HUBCO,
Inc.'s Current Report on Form 8-K filed with the SEC on
December 7, 1994).
23(a) Consent of Arthur Andersen LLP with respect to
Jefferson National Bank.
23(b) Consent of Arthur Andersen LLP with respect to
HUBCO, Inc.
23(c) Consent of Barry N. Rein & Associates.
23(d) Consent of Pitney, Hardin, Kipp & Szuch (included
in Exhibit 5 hereto).
23(e) Consent of Capital Consultants of Princeton, Inc.
23(f) Consent of Coopers & Lybrand LLP.
99(a) Form of Proxy Card to be utilized by the Board of
Directors of Jefferson National Bank.
- -----------------------------------
* Included elsewhere in this registration statement.
II-7
EXHIBIT 5
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
December 9, 1994
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
We have acted as counsel to HUBCO, Inc. ("HUBCO") in connection with the
merger of Jefferson National Bank ("Jefferson") with HUBCO's wholly-owned
subsidiary, Hudson United Bank (the "Bank") pursuant to an Amended and Restated
Agreement and Plan of Merger (the "Agreement") dated November 28, 1994, by and
among HUBCO, Jefferson and the Bank.
We have examined the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by HUBCO with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of shares of common stock of HUBCO, no par value (the "Shares") to
be issued pursuant to the Agreement.
We have also examined originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement, of the Certificate of
Incorporation and By-laws of HUBCO, as currently in effect, and relevant
resolutions of the Board of Directors of HUBCO; and we have examined such other
documents as we deemed necessary in order to express the opinion hereinafter set
forth.
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.
Based on 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 Agreement and the Registration Statement, including the
Prospectus relating to the Shares (the "Prospectus"), the Shares will be
<PAGE>
HUBCO, Inc.
Page 2
December 8, 1994
legally issued, fully paid and non-assessable.
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.
We consent to use of this opinion as an Exhibit to the Registration
Statement and to the reference to this firm under the heading "Legal Opinions"
in the Prospectus.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
EXHIBIT 8
PITNEY, HARDIN, KIPP & SZUCH
MAIL P.O. BOX 1945
MORRISTOWN, NEW JERSEY 07962-1945
December 9, 1994
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn: Mr. Kenneth T. Neilson, President
Jefferson National Bank
155 Jefferson Street
Passaic, New Jersey 07055
Attn: Mr. Raymond L. Sisco, Chairman
Re: Merger of Jefferson National Bank into Hudson
United Bank
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 state chartered commercial banking corporation which is a wholly owned
subsidiary of Hubco, in connection with the proposed merger of Jefferson
National Bank ("Jefferson"), a national bank, into the Bank (the "Merger"). The
Merger shall be effected pursuant to the provisions of an Amended and Restated
Agreement and Plan of Merger dated November 28, 1994 among Hubco, Jefferson and
the Bank (the "Merger Agreement"). This 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.
In connection with such representation, we have reviewed the Registration
Statement (Form S-4) filed with the Securities and Exchange Commission
pertaining to the Merger
<PAGE>
(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 the Merger. In addition, annexed hereto is a form of opinion of this firm
regarding federal income tax matters applicable to the Merger (the "Closing Tax
Opinion"), the delivery of which is a condition precedent to the consummation of
the Merger pursuant to the Merger Agreement. At this time, we expect to deliver
such opinion at the closing of the Merger.
We hereby consent to our being designated as an expert in the Registration
Statement with respect to federal income tax consequences of the Merger and to
the inclusion of this letter as an exhibit to the Registration Statement.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
<PAGE>
[Effective Date of Merger]
HUBCO, Inc.
3100 Bergenline Avenue
Union City, New Jersey 07087
Attn: Mr. Kenneth T. Neilson, President
Jefferson National Bank
155 Jefferson Street
Passaic, New Jersey 07055
Attn: Mr. Raymond L. Sisco, Chairman
Re: Merger of Jefferson National Bank into Hudson
United Bank
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 state chartered commercial banking corporation which is a wholly owned
subsidiary of HUBCO, in connection with the proposed merger of Jefferson
National Bank ("Jefferson"), a national bank, into the Bank (the "Merger"). The
Merger shall be effected pursuant to the provisions of an Amended and Restated
Agreement and Plan of Merger dated November 28, 1994 among HUBCO, Jefferson and
the Bank (the "Merger Agreement"). This 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 Merger shall be
effected by the merger of Jefferson into the Bank, pursuant to federal and New
Jersey state law, with the Bank surviving.
Pursuant to the Merger Agreement, at the Effective Time, each outstanding
share of Jefferson Common Stock (other than Dissenting Shares and shares of
Jefferson Common Stock owned by HUBCO or the Bank in a non-fiduciary capacity)
shall be converted into the right to receive 2.865 (the "Exchange Ratio") shares
of HUBCO Common Stock, subject to adjustment as set forth in the Merger
Agreement. No fractional shares of HUBCO Common Stock shall be issued, and in
lieu thereof, any holder of Jefferson Common Stock who otherwise would be
entitled to receive a fractional interest will receive an amount in cash
determined by multiplying such fractional interest by the Median Pre-Closing
Price of HUBCO Common Stock.
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 Merger and have authorized us to rely on such representations in
expressing the within opinions:
<PAGE>
HUBCO, Inc.
Jefferson National Bank
[Effective Date of Merger]
Page 2
1. The fair market value of the HUBCO Common Stock received by each
Jefferson shareholder in connection with the Merger will be approximately equal
to the fair market value of the Jefferson Common Stock surrendered in the
exchange.
2. To the best knowledge of the management of Jefferson, there is no plan
or intention on the part of the shareholders of Jefferson on the date hereof to
sell, exchange or otherwise dispose of a number of shares of HUBCO Common Stock
received in the Merger that would reduce such Jefferson shareholders' ownership
of HUBCO Common Stock to a number of shares having a value, as of the date of
the Merger, of less than 51 percent of the value of all of the formerly
outstanding Jefferson Common Stock as of the same date. For purposes of this
representation, shares of Jefferson Common Stock surrendered by dissenters,
exchanged for cash in lieu of fractional shares of HUBCO Common Stock or owned
by HUBCO or the Bank in a non-fiduciary capacity will be treated as outstanding
Jefferson Common Stock on the date of the Merger. Jefferson has considered, in
making this representation, any shares of Jefferson Common Stock that have been
sold, redeemed or otherwise disposed of by shareholders who own 5 percent or
more of Jefferson Common Stock, or by shareholders who are officers or directors
of Jefferson, after the announcement of the Merger and prior to the Effective
Time to the extent the management of Jefferson has knowledge on the date hereof
of any such sales, redemptions or dispositions.
3. Following the Merger, HUBCO has no present intention to 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 (the "Code"). (Hereafter, "Section" references
shall be references to Sections of the Code.).
4. None of the compensation received by any shareholder-employees of
Jefferson will be separate consideration for, or allocable to, any of their
shares of Jefferson Common Stock.
5. HUBCO has no plan or intention to redeem or otherwise reacquire any of
its stock issued in the Merger.
6. The payment of cash in lieu of fractional shares of HUBCO Common Stock
is solely for the purpose of avoiding the expense and inconvenience to HUBCO of
issuing fractional shares of HUBCO Common Stock and does not represent
separately bargained-for consideration.
<PAGE>
HUBCO, Inc.
Jefferson National Bank
[Effective Date of Merger]
Page 3
7. Following the Merger, HUBCO and the Bank will continue the historic
business of Jefferson or use a significant portion of Jefferson's business
assets in the business of the Bank.
8. There is no intercorporate indebtedness existing between HUBCO and
Jefferson, or between the Bank and Jefferson, that was issued, acquired, or will
be settled at a discount.
9. No parties to the Merger are investment companies as defined in Sections
368(a)(2)(F)(iii) and (iv).
10. Jefferson is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A).
11. HUBCO and the Bank have no plan or intention to liquidate the Bank or
merge the Bank with and into another entity, or sell or otherwise dispose of any
of the assets of Jefferson acquired in the Merger, except for dispositions made
in the ordinary course of business, or transfers described in Section
368(a)(2)(c).
12. The liabilities of Jefferson assumed by the Bank and the liabilities to
which the transferred assets of Jefferson are subject were incurred by Jefferson
in the ordinary course of its business and are associated with the assets to be
transferred.
13. The fair market value of the aggregate assets of Jefferson transferred
to the Bank in the Merger will equal or exceed the sum of the liabilities
assumed by the Bank plus the amount of liabilities, if any, to which the
transferred assets are subject.
14. Jefferson and the shareholders of Jefferson will pay their respective
expenses, if any, incurred in connection with the Merger.
15. There is no larger integrated transaction of which the Merger
constitutes only one step.
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 Merger delivered by the parties thereto. In such examination,
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us. As to any facts material to our opinions expressed
herein, we have relied on representations of the parties to the 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:
<PAGE>
HUBCO, Inc.
Jefferson National Bank
[Effective Date of Merger]
Page 4
1. The Merger qualifies as a "reorganization" within the meaning of Section
368(a)(1)(A). The Bank and Jefferson each are a "party to a reorganization"
within the meaning of Section 368(b)(2).
2. No gain or loss will be recognized by the Bank or Jefferson in
connection with the Merger. Sections 361(a) and 1032.
3. No gain or loss will be recognized by the shareholders of Jefferson
whose Jefferson Common Stock is converted solely into HUBCO Common Stock in
connection with the Merger. Section 354(a).
4. Jefferson shareholders receiving cash in lieu of fractional shares of
HUBCO Common 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 Jefferson shareholders in lieu of fractional shares will be treated as
having been received as full payment in exchange for the 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 HUBCO Common Stock considered
to have been redeemed.
5. The basis of any HUBCO Common Stock received by a shareholder of
Jefferson in connection with the Merger shall equal the adjusted basis of the
shareholder's Jefferson 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 or capital gain income).
6. The holding period of the Hubco Common Stock received by the
shareholders of Jefferson in connection with the Merger will include the period
during which their Jefferson Common Stock converted in the transaction was held,
provided such stock was held as a capital asset on the date of the Merger.
Section 1223(1).
Very truly yours,
EXHIBIT 10(a)
October 12, 1994
Ms. Carol D'Auria
23-02 Maple Avenue
Fair Lawn, N.J. 07410
Re: Bonus Agreement
Dear Ms. D'Auria:
This Agreement (the "Agreement") reflects our mutual understanding
regarding the payment to you of a bonus as specified below for your continued
employment with Jefferson National Bank ("Jefferson") and thereafter with HUBCO,
Inc. ("HUBCO") and/or its subsidiary, Hudson United Bank (the "Bank") in
connection with the merger of Jefferson into the Bank (the "Merger"), pursuant
to the Agreement and Plan of Merger dated October 7, 1994, among HUBCO, the Bank
and Jefferson (the "Merger Agreement"). This Agreement shall become effective on
the Effective Date, as such term is defined in paragraph 5 below. For purposes
of this Agreement, the term "Company" refers to both HUBCO and the Bank.
1. Bonus. Subject to all the terms and conditions of this Agreement, the
Company agrees to pay you a bonus of $10,000 (the "Bonus") on the Payment Date.
The Bonus is subject to applicable withholding and taxes.
2. Payment Date. Subject to the terms hereof, the Bonus shall be paid to
you (the "Payment Date") on the earlier of (i) 90 days after the Effective Date
of the Merger, or (ii) the first day following the Effective Date on which
Jefferson's general ledger, loan and mortgage accounts, deposit accounts and
other accounts presently on Jefferson's computer system have been fully
converted to the Bank's computer system. For these purposes, the computer
conversion shall be considered fully converted when Jefferson's accounts are run
only on the Bank system and the resolution of conversion problems is
substantially completed.
3. Entitlement to Bonus. You will be entitled to be paid the Bonus only if
you are employed (i) by Jefferson through the Effective Date and (ii) thereafter
by the Company through the Payment Date; provided that you will still be
entitled to the Bonus if you are not employed by the Company through the Payment
Date if you are terminated without cause by the Company between the
<PAGE>
Ms. Carol D'Auria
October 12, 1994
Page 2
Effective Date and prior to the Payment Date. "Without cause" shall mean
termination by the Company of your employment as a result of an event or
condition other than the following: (i) your death; (ii) your failure
substantially to perform your employment duties as a result of physical
incapacity (any dispute as to your incapacitation shall be resolved by an
independent physician, reasonably acceptable to you and the Company, whose
determination will be final and binding); (iii) your conviction for theft or
public drunkenness; (iv) your commission of repeated acts of material
misconduct; (v) your conviction of a felony; and (vi) your material breach of
your employment duties, which remain uncured for 3 days after written notice
from the Company. Without limiting the foregoing, you will not be entitled to
the Bonus if your employment with Jefferson terminates prior to the Effective
Date for any reason or if after the Effective Date but prior to the Payment Date
your employment with the Company is terminated due to your resignation.
4. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior or contemporaneous understandings and agreements, written
or oral, between us or between Jefferson and you respecting such subject matter.
The subject matter hereof includes any bonus payment, severance payment, stock
options, performance award or grant or similar paymnet or incentive, to be paid
to you by Jefferson or the Company for any period from the date of your
employment by Jefferson through the Payment Date. However, you shall continue to
be entitled to severance pay under the Bank's severance plan for all employees,
if your employment is terminated after the Effective Date for any reason.
b. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey.
5. Effective Date. This Agreement shall become effective on the effective
date (the "Effective Date") of the Merger. In the event the Merger Agreement is
terminated prior to the Effective Date, this Agreement shall be of no force and
effect.
<PAGE>
Ms. Carol D'Auria
October 12, 1994
Page 3
If this letter sets forth our agreement on the subject matter hereof,
kindly sign, date and return to HUBCO, Inc. the enclosed copy of this letter
which will then constitute our binding agreement on the subject.
Sincerely,
HUBCO, Inc.
By:____________________
Kenneth T. Neilson,
President and Chief
Executive Officer
HUDSON UNITED BANK
By: ___________________
Kenneth T. Neilson,
President and Chief
Executive Officer
AGREED TO THIS_____ DAY
OF OCTOBER, 1994
_______________________
Carol D'Auria
EXHIBIT 10(b)
October 12, 1994
Mr. Joseph J. Greco
9 Richmond Hill Drive
Sparta, N.J. 07871
Re: Bonus Agreement
Dear Mr. Greco:
This Agreement (the "Agreement") reflects our mutual understanding
regarding the payment to you of a bonus as specified below for your continued
employment with Jefferson National Bank ("Jefferson") and thereafter with HUBCO,
Inc. ("HUBCO") and/or its subsidiary, Hudson United Bank (the "Bank") in
connection with the merger of Jefferson into the Bank (the "Merger"), pursuant
to the Agreement and Plan of Merger dated October 7, 1994, among HUBCO, the Bank
and Jefferson (the "Merger Agreement"). This Agreement shall become effective on
the Effective Date, as such term is defined in paragraph 5 below. For purposes
of this Agreement, the term "Company" refers to both HUBCO and the Bank.
1. Bonus. Subject to all the terms and conditions of this Agreement, the
Company agrees to pay you a bonus of $50,000 (the "Bonus") on the Payment Date.
The Bonus is subject to applicable withholding and taxes.
2. Payment Date. Subject to the terms hereof, the Bonus shall be paid to
you (the "Payment Date") on the earlier of (i) 90 days after the Effective Date
of the Merger, or (ii) the first day following the Effective Date on which
Jefferson's general ledger, loan and mortgage accounts, deposit accounts and
other accounts presently on Jefferson's computer system have been fully
converted to the Bank's computer system. For these purposes, the computer
conversion shall be considered fully converted when Jefferson's accounts are run
only on the Bank system and the resolution of conversion problems is
substantially completed.
3. Entitlement to Bonus. You will be entitled to be paid the Bonus only if
you are employed (i) by Jefferson through the Effective Date and (ii) thereafter
by the Company through the Payment Date; provided that you will still be
entitled to the Bonus if you are not employed by the Company through the Payment
Date if you are terminated without cause by the Company between the
<PAGE>
Mr. Joseph J. Greco
October 12, 1994
Page 2
Effective Date and prior to the Payment Date. "Without cause" shall mean
termination by the Company of your employment as a result of an event or
condition other than the following: (i) your death; (ii) your failure
substantially to perform your employment duties as a result of physical
incapacity (any dispute as to your incapacitation shall be resolved by an
independent physician, reasonably acceptable to you and the Company, whose
determination will be final and binding); (iii) your conviction for theft or
public drunkenness; (iv) your commission of repeated acts of material
misconduct; (v) your conviction of a felony; and (vi) your material breach of
your employment duties, which remain uncured for 3 days after written notice
from the Company. Without limiting the foregoing, you will not be entitled to
the Bonus if your employment with Jefferson terminates prior to the Effective
Date for any reason or if after the Effective Date but prior to the Payment Date
your employment with the Company is terminated due to your resignation.
4. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior or contemporaneous understandings and agreements, written
or oral, between us or between Jefferson and you respecting such subject matter.
The subject matter hereof includes any bonus payment, severance payment, stock
options, performance award or grant or similar payment or incentive, to be paid
to you by Jefferson or the Company for any period from the date of your
employment by Jefferson through the Payment Date. However, you shall continue to
be entitled to severance pay under the Bank's severance plan for all employees,
if your employment is terminated after the Effective Date for any reason.
b. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey.
5. Effective Date. This Agreement shall become effective on the effective
date (the "Effective Date") of the Merger. In the event the Merger Agreement is
terminated prior to the Effective Date, this Agreement shall be of no force and
effect.
<PAGE>
Mr. Joseph J. Greco
October 12, 1994
Page 3
If this letter sets forth our agreement on the subject matter hereof,
kindly sign, date and return to HUBCO, Inc. the enclosed copy of this letter
which will then constitute our binding agreement on the subject.
Sincerely,
HUBCO, Inc.
By: _____________________
Kenneth T. Neilson,
President and Chief
Executive Officer
HUDSON UNITED BANK
By: ______________________
Kenneth T. Neilson,
President and Chief
Executive Officer
AGREED TO THIS_____ DAY
OF OCTOBER, 1994
_____________________
Joseph J. Greco
EXHIBIT 10(c)
October 12, 1994
Mr. Joseph Greco
9 Richmond Hill Drive
Sparta, N.J. 07871
Re: Employment Agreement
Dear Mr. Greco:
This Agreement (the "Agreement") reflects our mutual understanding
regarding your employment with HUBCO, Inc. ("HUBCO") and/or its subsidiary,
Hudson United Bank (the "Bank") for a period of one year immediately following
the merger of Jefferson National Bank ("Jefferson") into the Bank (the
"Merger"), pursuant to the Agreement and Plan of Merger, dated October 7, 1994,
among HUBCO, the Bank and Jefferson (the "Merger Agreement"). This Agreement
shall become effective on the Effective Date, as such term is defined in
paragraph 5 hereof. For purposes of this Agreement, the term "Company" means
both HUBCO and the Bank.
1. Employment Term. The Company hereby agrees to employ you, and you hereby
accept such continuing employment, on the terms and conditions set forth herein
from the Effective Date, continuing for one year (the "Term").
2. Title and Duties. During your employment by the Company, you shall be
employed as a Senior Vice President of Hudson United Bank with the title and
duties of a Regional President of the Bank, or such substantially similar
position as shall be assigned to you by the Chief Executive Officer of the Bank.
You shall devote your full business time and attention to the duties assigned to
you.
3. Compensation. As compensation for your services to the Company
hereunder, the Company shall pay you at the weekly rate of $110,000 per annum
for the Term. You shall be eligible for normal fringe benefits provided to the
executives of the Company, including four weeks of paid vacation, medical
insurance and participation in other fringe benefits, so long as you are
employed by the Company hereunder. No performance bonus will be paid during this
contract term and incentive awards will be paid only for the amount which
exceeds $22,000 in awards.
4. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior or contemporaneous understandings and agreements, written
or oral, between us respecting such subject matter.
<PAGE>
Mr. Joseph J. Greco
October 12, 1994
Page 2
b. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey.
5. Effective Date. This Agreement shall become effective on the effective
date (the "Effective Date") of the Merger. In the event the Merger Agreement is
terminated prior to the Effective Date, this Agreement shall be of no force and
effect.
6. Continuation After Term. Your employment by the Company may be continued
after the end of the Term, but in such event your employment shall not be
governed by this Agreement. Rather, you shall be an employee-at-will with such
compensation as shall be offered by the Company.
7. Resignation. You may resign at any time during the term or therefore on
30 days written notice. If you resign, you shall not be entitled to any further
compensation after the date of your resignation.
If this letter sets forth our agreement on the subject matter hereof,
kinldy sign, date and return to HUBCO, Inc. the enclosed copy of this letter
which will then constitute our binding agreement on the subject.
Sincerely,
HUBCO, Inc.
By:_______________________
Kenneth T. Neilson,
President and Chief
Executive Officer
HUDSON UNITED BANK
By: ______________________
Kenneth T. Neilson,
President and Chief
Executive Officer
AGREED TO THIS _____ DAY
OF OCTOBER, 1994
_________________________
Joseph Greco
EXHIBIT 10(d)
October 12, 1994
Mr. David Hynes
301 Gettysburg Court
Medford, N.J. 08055
Re: Bonus Agreement
Dear Mr. Hynes:
This Agreement (the "Agreement") reflects our mutual understanding
regarding the payment to you of a bonus as specified below for your continued
employment with Jefferson National Bank ("Jefferson") and thereafter with HUBCO,
Inc. ("HUBCO") and/or its subsidiary, Hudson United Bank (the "Bank") in
connection with the merger of Jefferson into the Bank (the "Merger"), pursuant
to the Agreement and Plan of Merger dated October 7, 1994, among HUBCO, the Bank
and Jefferson (the "Merger Agreement"). This Agreement shall become effective on
the Effective Date, as such term is defined in paragraph 5 below. For purposes
of this Agreement, the term "Company" refers to both HUBCO and the Bank.
1. Bonus. Subject to all the terms and conditions of this Agreement, the
Company agrees to pay you a bonus of $10,000 (the "Bonus") on the Payment Date.
The Bonus is subject to applicable withholding and taxes.
2. Payment Date. Subject to the terms hereof, the Bonus shall be paid to
you (the "Payment Date") on the earlier of (i) 90 days after the Effective Date
of the Merger, or (ii) the first day following the Effective Date on which
Jefferson's general ledger, loan and mortgage accounts, deposit accounts and
other accounts presently on Jefferson's computer system have been fully
converted to the Bank's computer system. For these purposes, the computer
conversion shall be considered fully converted when Jefferson's accounts are run
only on the Bank system and the resolution of conversion problems is
substantially completed.
3. Entitlement to Bonus. You will be entitled to be paid the Bonus only if
you are employed (i) by Jefferson through the Effective Date and (ii) thereafter
by the Company through the Payment Date; provided that you will still be
entitled to the Bonus if you are not employed by the Company through the Payment
Date if you are terminated without cause by the Company between the Effective
Date and prior to the Payment Date. "Without cause" shall mean termination by
the Company of your employment as a
<PAGE>
Mr. David Hynes
October 12, 1994
Page 2
result of an event or condition other than the following: (i) your death; (ii)
your failure substantially to perform your employment duties as a result of
physical incapacity (any dispute as to your incapacitation shall be resolved by
an independent physician, reasonably acceptable to you and the Company, whose
determination will be final and binding); (iii) your conviction for theft or
public drunkenness; (iv) your commission of repeated acts of material
misconduct; (v) your conviction of a felony; and (vi) your material breach of
your employment duties, which remain uncured for 3 days after written notice
from the Company. Without limiting the foregoing, you will not be entitled to
the Bonus if your employment with Jefferson terminates prior to the Effective
Date for any reason or if after the Effective Date but prior to the Payment Date
your employment with the Company is terminated due to your resignation.
4. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes any prior or contemporaneous understandings and agreements, written
or oral, between us or between Jefferson and you respecting such subject matter.
The subject matter hereof includes any bonus payment, severance payment, stock
options, performance award or grant of the Company for any period from the date
of your employment by Jefferson through the Payment Date. However, you shall
continue to be entitled to severance plan for all employees, if your employment
is terminated after the Effective Date for any reason.
b. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey.
5. Effective Date. This Agreement shall become effective on the effective
date (the "Effective Date") of the Merger. In the event the Merger Agreement is
terminated prior to the Effective Date, this Agreement shall be of no force and
effect.
<PAGE>
Mr. David Hynes
October 14, 1994
Page 3
If this letter sets forth our agreement on the subject matter hereof,
kindly sign, date and return to HUBCO, Inc. the enclosed copy of this letter
which will then constitute our binding agreement on the subject.
Sincerely,
HUBCO, Inc.
By:____________________
Kenneth T. Neilson,
President and Chief
Executive Officer
HUDSON UNITED BANK
By:____________________
Kenneth T. Neilson,
President and Chief
Executive Officer
AGREED TO THIS _____DAY
OF OCTOBER, 1994
________________________
David Hynes
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Jefferson National Bank:
As independent public accountants, we hereby consent to the use of our report
dated January 28, 1994 and to all references to our firm included in this proxy
statement-propectus.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 8, 1994
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To HUBCO, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this proxy statement-propectus of our report dated February 1, 1994
incorporated by reference in HUBCO, Inc.'s Form 10-K for the year ended
December 31, 1993 and to all references to our firm included in this proxy
statement-propectus.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 8, 1994
EXHIBIT 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To Jefferson National Bank:
As independent public accountants, we hereby consent to the use of our report
dated January 10, 1992 and to all references to our firm included in this proxy
statement-propectus.
BARRY N. REIN & ASSOCIATES
Livingston, New Jersey
December 8, 1994
EXHIBIT 23(e)
CAPITAL CONSULTANTS OF PRINCETON, INC.
- -------------------------------------------------------------------------------
Investment Bankers & Bank/Thrift Consultants
1000 Herrontown Road
Princeton, NJ 08540-7716
609-921-3293
December 8, 1994
To Whom It May Concern:
We hereby consent to the use of our opinion letter attached as Appendix B and to
the reference to our firm under the heading "Opinion of Jefferson's Financial
Advisor" in the Registration Statement filed by HUBCO, Inc., with the Securities
and Exchange Commission in connection with the proposed merger of Jefferson
National Bank with and into Hudson United Bank, HUBCO, Inc.'s wholly-owned
subsidiary.
Very truly yours,
CAPITAL CONSULTANTS OF PRINCETON, INC.
EXHIBIT 23(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We consent to the incorporation by reference, in this Registration Statement
on Form S-4 of our report 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 HUBCO, Inc.'s
Form 8-K, filed with the Securities and Exchange Commission on July 1, 1994,
as amended by Form 8-K/A filed with the Securities and Exchange Commission
on September 16, 1994. Our report 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.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
December 6, 1994
EXHIBIT 99(a)
JEFFERSON NATIONAL BANK
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF STOCKHOLDERS, JANUARY ___, 1995.
The undersigned hereby appoints Jessie Campos, Elizabeth Meneghin and
Donald Peto, and each of them, with full power of substitution, to act as
attorneys and proxies for the undersigned and to vote all shares of Common Stock
of Jefferson National Bank, which the undersigned is entitled to vote, at the
Special Meeting of Stockholders to be held January __, 1995, or at any
adjournment thereof, upon matters properly coming before the meeting as set
forth in the related Notice of Meeting and Proxy Statement Prospectus, both of
which have been received by the undersigned. Without otherwise limiting the
general authorization given hereby, said attorneys and proxies are instructed to
vote as set forth on the reverse side.
(The Board of Directors recommends a vote "FOR")
1. Approval of an Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement") which provides for the merger of Jefferson
National Bank with and into Hudson United Bank, a wholly-owned
subsidiary of HUBCO, Inc.
[] FOR [] AGAINST [] ABSTAIN
The undersigned further gives the proxies authority in their discretion to vote
upon such other business as may properly come before the Special Meeting.
The proxy is revocable and, when properly executed, will be voted in the manner
directed herein by the undersigned. IF NO DIRECTIONS ARE MADE, THIS PROXY (IF
SIGNED) WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT. Please sign exactly
as your name appears hereon. When signing in a representative capacity, please
give full title.
Signature(s)__________________________________________________Date ______, 19__
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING
THE ENCLOSED ENVELOPE
