As filed with the Securities and Exchange Commission on November 7,
1995
REGISTRATION NO. 33-63619
====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT No. 1
to
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 of Organization)
--------------------
6711
(Primary Standard Industrial Classification Code Number)
--------------------
22-2405746
(I.R.S. Employer Identification No.)
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
201-236-2200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Kenneth T. Neilson, President
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
201-236-2200
(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. JOHN BRUNO, ESQ.
MICHAEL W. ZELENTY, ESQ. Muldoon, Murphy & Faucette
Pitney, Hardin, Kipp & Szuch 5101 Wisconsin Avenue, N.W.
P.O. Box 1945 Washington, D.C. 20016
Morristown, New Jersey 07962 (202) 362-0840
(201) 966-6300
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: At the Effective Date of the Merger, as defined in the
Agreement and Plan of Merger dated August 18, 1995 (the "Agree-
ment"), between the Registrant, Hudson United Bank, Growth
Financial Corp and Growth 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. [ ]
CALCULATION OF REGISTRATION FEE
======================================================================
Title of each Proposed Proposed
class of maximum Maximum
securities offering aggregate Amount of
to be Amount to be price per offering registration
registered registered unit<F1> price<F1> fee
- ----------------------------------------------------------------------
Common Stock 1,499,541 $17.052469 $25,570,877 $8,818<F3>
No Par Value Shares<F2>
======================================================================
[FN]
<F1> Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(f) under the Securities Act
based on the maximum exchange ratio of 0.81 and the last reported sales
price ($13.8125) for Growth Financial Corp Common Stock as of October 18,
1995.
<F2> 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.
<F3> Previously paid.
--------------------
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration 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.
=====================================================================
<PAGE>
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:
Item Caption Location or Heading
No. ------- in Proxy Statement-
---- Prospectus
-------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus . . . . . Cross Reference
Sheet; Cover Page of
Proxy Statement-
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . Inside Front Cover;
AVAILABLE
INFORMATION;
INFORMATION
INCORPORATED BY
REFERENCE; TABLE OF
CONTENTS
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information
Introduction (S-K 503) . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
(a) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- Principal
Businesses
(b) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- Principal
Businesses
(c) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- The Merger
(d) . . . . . . . . . . . . . . . . SELECTED FINANCIAL
DATA
(e) . . . . . . . . . . . . . . . . SUMMARY SELECTED PRO
FORMA DATA
(f) . . . . . . . . . . . . . . . . ACTUAL AND PRO FORMA
PER SHARE DATA
(g) . . . . . . . . . . . . . . . . COMPARATIVE MARKET
PRICE AND DIVIDEND
DATA
(h) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- Meeting of Growth
Stockholders
(i) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- The Merger
(j) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- The Merger
(k) . . . . . . . . . . . . . . . . SUMMARY OF PROXY
STATEMENT-PROSPECTUS
-- The Merger
4. Terms of the Transaction
(a) . . . . . . . . . . . . . . . . THE PROPOSED MERGER;
DESCRIPTION OF HUBCO
CAPITAL STOCK;
COMPARISON OF RIGHTS
OF HUBCO AND GROWTH
STOCKHOLDERS
(b) . . . . . . . . . . . . . . . . THE PROPOSED MERGER -
Opinion of Financial
Advisor to Growth
Financial Corp
(c) . . . . . . . . . . . . . . . THE PROPOSED MERGER
(Introductory
Paragraph)
5. Pro Forma Financial Information PRO FORMA COMBINED
FINANCIAL INFORMATION
6. Material Contacts with the
Company Being Acquired . . . . . . THE MERGER --
Background and
Reasons for 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 OPINION
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 . . . . . INFORMATION
INCORPORATED 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
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 . . . . . . . COMPARATIVE MARKET
PRICE AND DIVIDEND
DATA; SELECTED
FINANCIAL DATA;
BUSINESS OF GROWTH;
MANAGEMENT'S
DISCUSSION AND
ANALYSIS OF GROWTH
FINANCIAL CORP'S
FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS; INDEX TO
FINANCIAL STATEMENTS
OF GROWTH FINANCIAL
CORP
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations
are to be Solicited . . . . . . . . INFORMATION
INCORPORATED BY
REFERENCE; THE
MEETING; THE PROPOSED
MERGER -- No
Dissenters' Rights;
-- Interests of
Certain Persons in
the Merger
19. Information if Proxies,
Consents or Authorization
Are Not to be Solicited
or in an Exchange Offer . . . . . . NOT APPLICABLE
<PAGE>
[LOGO]
[GROWTH FINANCIAL CORP]
November ____, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(the "Meeting") of Growth Financial Corp ("Growth"), which will be held at
the Basking Ridge Country Club, 185 Madisonville Road (off North Maple
Avenue) Basking Ridge, New Jersey on Wednesday, December 20, 1995 at 11:00
a.m., local time.
At the Meeting, you will be asked to consider and vote upon a proposal
to approve an Agreement and Plan of Merger (the "Merger Agreement") dated as
of August 18, 1995, among HUBCO, Inc. ("HUBCO"), Hudson United Bank ("HUB"),
Growth, and Growth Bank pursuant to which Growth will merge (the "Merger")
with and into HUBCO. Pursuant to a related Bank Merger Agreement, it is
intended that immediately following the Merger, Growth Bank, a wholly owned
subsidiary of Growth, will be merged with and into HUB, a wholly owned
subsidiary of HUBCO. If the proposed Merger is consummated, each share of
common stock of Growth, par value $1.00 ("Growth Common Stock") will be
converted into and be exchangeable for the number of shares (the "Exchange
Ratio") of common stock of HUBCO, without par value ("HUBCO Common Stock"),
equal to a fraction, the numerator of which will be $14.64 and the
denominator of which will be the Median Pre-Closing Price of HUBCO Common
Stock (a term defined in the Merger Agreement generally as the median closing
price of HUBCO Common Stock during the first 20 of the 25 trading days prior
to the closing of the Merger), with a minimum Exchange Ratio of 0.69 and a
maximum Exchange Ratio of 0.81, subject to adjustment provisions set forth in
the Merger Agreement and described in the attached Proxy Statement-
Prospectus. Consummation of the Merger is subject to certain conditions,
including the approval of the merger by various regulatory agencies and
approval of Growth's stockholders as described below.
YOUR BOARD OF DIRECTORS HAS 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 Growth's stockholders of the Merger Agreement
is required to consummate the Merger.
It is very important that your shares be represented at the Meeting,
regardless of whether you plan to attend in person. The affirmative vote of
a majority of votes cast by the holders of Growth Common Stock entitled to
vote at the Meeting will be required to approve the Merger Agreement.
THEREFORE, WE 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 any stock
certificates for your Growth shares at this time. At a later date you will
receive specific instructions regarding the exchange of your Growth shares.
On behalf of the Board of Directors, we urge you to vote "FOR" approval
of the Merger Agreement.
Sincerely,
-------------------------- --------------------------
Richard S. Van Cleave III Dale G. Potter
Chairman of the Board President and Chief
Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF
GROWTH FINANCIAL CORP
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of Growth Financial Corp ("Growth"), will be held at the Basking
Ridge Country Club, 185 Madisonville Road (off North Maple Avenue) Basking
Ridge, New Jersey on Wednesday, December 20, 1995 at 11:00 a.m., local time,
for the purpose of considering and voting upon the following matters:
1. To approve and adopt the Agreement and Plan of Merger (the "Merger
Agreement") dated as of August 18, 1995, among HUBCO, Inc. ("HUBCO"),
Hudson United Bank, Growth Financial Corp ("Growth"), and Growth Bank,
attached as Appendix A to the accompanying Proxy Statement-Prospectus
and the transactions contemplated thereby, including the merger of
Growth with and into HUBCO (the "Merger").
2. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof including, without
limitation, a motion to adjourn or postpone the Meeting to another time
and/or place for the purpose of soliciting additional proxies in order
to approve the Merger Agreement.
The Board of Directors has fixed the close of business on November 3,
1995 as the date for determining the stockholders of record entitled to
receive notice of and to vote at the Meeting and any adjournments or
postponements thereof. Only holders of Growth Common Stock of record at the
close of business on that date will be entitled to notice of and to vote at
the Meeting or any adjournments or postponements thereof. In the event there
are not sufficient votes for a quorum or to approve the Merger Agreement or
otherwise at the time of the Meeting, the Meeting may be adjourned in order
to permit further solicitation of proxies by Growth.
BY ORDER OF THE BOARD OF DIRECTORS
By:_________________________________
Richard G. Whitehead
Assistant Secretary
Harding Township, New Jersey
November ___, 1995
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING IN PERSON. IF YOU
DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
<PAGE>
PROXY STATEMENT
GROWTH FINANCIAL CORP
---------------------
PROSPECTUS
HUBCO, INC.
COMMON STOCK, NO PAR VALUE
---------------------
This Proxy Statement-Prospectus is being furnished to the holders of
common stock, par value $1.00 per share ("Growth Common Stock"), of Growth
Financial Corp ("Growth"), in connection with the solicitation of proxies by
the Board of Directors of Growth for use at a Special Meeting of Growth's
stockholders to be held at the Basking Ridge Country Club, 185 Madisonville
Road (off North Maple Avenue) Basking Ridge, New Jersey on Wednesday,
December 20, 1995 at 11:00 a.m., local time, and any adjournments or
postponements thereof (the "Meeting"). Only stockholders of record at the
close of business on November 3, 1995 (the "Record Date") will be entitled to
vote at the Meeting or at any adjournments thereto either in person or by
proxy.
At the Meeting, the stockholders of Growth as of the Record Date will be
asked to consider and vote upon a proposal to approve an Agreement and Plan
of Merger (the "Merger Agreement") dated as of August 18, 1995, among HUBCO,
Inc. ("HUBCO"), Hudson United Bank ("HUB"), Growth and Growth Bank pursuant
to which Growth will merge with and into HUBCO (the "Merger"). Pursuant to a
related Bank Merger Agreement, it is intended that immediately following the
Merger, Growth Bank, a wholly owned subsidiary of Growth, will be merged with
and into HUB, a wholly owned subsidiary of HUBCO. If the proposed Merger is
consummated, each share of Growth Common Stock will be converted into and be
exchangeable for the number of shares (the "Exchange Ratio") of common stock,
no par value, of HUBCO ("HUBCO Common Stock") equal to a fraction, the
numerator of which will be $14.64 and the denominator of which will be the
Median Pre-Closing Price of HUBCO Common Stock (a term defined in the Merger
Agreement generally as the median closing price of HUBCO Common Stock during
the first 20 of the 25 trading days prior to the closing of the Merger), with
a minimum Exchange Ratio of 0.69 (which will apply if the Median Pre-Closing
Price of HUBCO Common Stock is above $21.23) and a maximum Exchange Ratio of
0.81 (which will apply if the Median Pre-Closing Price of HUBCO Common Stock
is below $18.07), subject to adjustment provisions set forth in the Merger
Agreement and described in this Proxy Statement-Prospectus. 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 Growth on or about November__, 1995.
Based on the last reported sales price per share of HUBCO Common Stock
on November __, 1995 of $___ (assuming that this is the Median Pre-Closing
Price of HUBCO Common Stock as described above), each share of Growth Common
Stock would be exchanged for _____ shares of HUBCO Common Stock having a
value of $____.
HUBCO has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), covering the shares of HUBCO
Common Stock which will be issued in connection with the Merger. In addition
to constituting the Growth Proxy Statement for the Meeting, this document
constitutes a Prospectus of HUBCO with respect to the HUBCO Common Stock to
be issued in connection with the Merger.
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 November __, 1995
<PAGE>
PROXY STATEMENT-PROSPECTUS
GROWTH FINANCIAL CORP
Special Meeting of Stockholders to be held on December 20, 1995
-----------------------------------------
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INFORMATION INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . .
SUMMARY OF PROXY STATEMENT-PROSPECTUS . . . . . . . . . . . . . . . . . . . .
Meeting of Growth Stockholders . . . . . . . . . . . . . . . . . . . . .
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Businesses . . . . . . . . . . . . . . . . . . . . . . . . . .
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPARATIVE MARKET PRICE AND DIVIDEND DATA . . . . . . . . . . . . . . . . .
ACTUAL AND PRO FORMA PER SHARE DATA . . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY SELECTED PRO FORMA DATA . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parties to the Merger . . . . . . . . . . . . . . . . . . . . . . . . .
THE MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE PROPOSED MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Description . . . . . . . . . . . . . . . . . . . . . . . . . .
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of Stock Options . . . . . . . . . . . . . . . . . . . . . .
Background of and Reasons for the Merger . . . . . . . . . . . . . . . .
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . .
Opinion of Financial Advisor to Growth Financial Corporation
. . . . . . . . . . . . . . . . . . . . .
Resale Considerations with Respect to the HUBCO Common Stock . . . . . .
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . .
Management and Operations After the Merger . . . . . . . . . . . . . . .
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . .
Effective Time; Amendments; Termination . . . . . . . . . . . . . . . .
Accounting Treatment of the Merger . . . . . . . . . . . . . . . . . . .
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . .
Stock Option for Shares of Growth Common Stock . . . . . . . . . . . . .
PRO FORMA COMBINED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . .
BUSINESS OF GROWTH . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT'S DISCUSSION AND ANALYSIS OF GROWTH FINANCIAL CORP'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . .
DESCRIPTION OF HUBCO CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of HUBCO Common Stock . . . . . . . . . . . . . . . . . . .
COMPARISON OF RIGHTS OF HUBCO AND GROWTH STOCKHOLDERS . . . . . . . . . . . .
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEX TO FINANCIAL STATEMENTS OF GROWTH FINANCIAL CORP . . . . . . . . . . .
APPENDIXES:
Appendix A - Merger Agreement . . . . . . . . . . . . . . . . . . . A-1
Appendix B - Stock Option Agreement . . . . . . . . . . . . . . . . B-1
Appendix C - Fairness Opinion of McConnell, Budd & Downes, Inc. . . C-1
<PAGE>
AVAILABLE INFORMATION
HUBCO and Growth are both subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith they file reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, HUBCO Common Stock is listed on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq") Stock Market and Growth Common Stock is listed on the Nasdaq
Small-Cap Market and such material as to HUBCO and Growth can be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
HUBCO has filed with the Commission a Registration Statement on Form S-4
(together with all amendments and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the securities being
offered by this Proxy Statement-Prospectus. As permitted by the rules and
regulations of the Commission, this Proxy Statement-Prospectus omits certain
information, exhibits and undertakings contained in the Registration
Statement. For further information with respect to HUBCO and the securities
offered hereby, reference is made to the Registration Statement, including
the exhibits thereto.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, OR
INCORPORATED BY REFERENCE HEREIN, IN CONNECTION WITH THE SOLICITATION OF
PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY HUBCO OR GROWTH. THIS PROXY STATEMENT-PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION
OF THE SECURITIES OFFERED PURSUANT TO THIS PROXY STATEMENT-PROSPECTUS SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF HUBCO OR GROWTH OR THE INFORMATION HEREIN OR THE DOCUMENTS
OR REPORTS INCORPORATED BY REFERENCE HEREIN SINCE THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by HUBCO (or, where noted, filed by
Washington Bancorp, Inc. ("Washington") which was merged into HUBCO on July
1, 1994) with the Commission are incorporated herein by reference:
1. Annual Report of HUBCO on Form 10-K for the year ended December 31,
1994.
2. Quarterly Reports of HUBCO on Form 10-Q for the quarters ended
March 31 and June 30, 1995.
3. Current Reports of HUBCO on Form 8-K: (a) dated February 14, 1995
and filed with the Commission on February 23, 1995, as amended by a
Form 8-K/A filed September 27, 1995, (b) dated February 14, 1995
and filed March 2, 1995, (c) dated April 5, 1995 and filed April
19, 1995, as amended by a Form 8-K/A filed April 25, 1995,
(d) dated April 18, 1995 and filed April 21, 1995, (e) dated June
30, 1995 and filed July 3, 1995, (f) dated August 14, 1995 and
filed August 24, 1995, (g) dated October 16, 1995 and filed
October 19, 1995, and (h) dated October 20, 1995 and filed October
23, 1995.
4. The description of HUBCO 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 such description.
5. The audited financial statements of Washington set forth in the
Annual Report of Washington on Form 10-K for the year ended
December 31, 1993.
6. The unaudited financial statements of Washington set forth in the
Quarterly Report of Washington on Form 10-Q for the quarter ended
June 30, 1994.
All documents filed by HUBCO pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement-
Prospectus and prior to the Meeting shall be deemed incorporated by reference
into this Proxy Statement-Prospectus and part hereof from the date of filing
of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Those documents are
available upon written or oral request from D. Lynn Van Borkulo-Nuzzo,
Corporate Secretary, HUBCO, Inc., 1000 MacArthur Boulevard, Mahwah, New
Jersey 07430; telephone number (201) 236-2641. Copies will be furnished
(without exhibits) free of charge. In order to insure timely delivery of the
documents, any request should be made by at least five business days prior to
the date of the Meeting.
<PAGE>
SUMMARY OF PROXY STATEMENT-PROSPECTUS
The following information is a brief summary of certain information with
respect to the matters to be considered at the Meeting. This summary is
necessarily incomplete and is qualified in its entirety by the more detailed
information contained elsewhere in this Proxy Statement-Prospectus.
Stockholders should read carefully the details of this Proxy Statement-
Prospectus.
MEETING OF GROWTH STOCKHOLDERS
Date, Time and Place
of Meeting........ The Meeting will be held at the Basking Ridge
Country Club, 185 Madisonville Road (off North Maple
Avenue) Basking Ridge, New Jersey on Wednesday,
December 20, 1995 at 11:00 a.m., local time.
Record Date.......... November 3, 1995
Shares Outstanding on
Record Date and
Entitled to Vote.. 1,694,081 shares of common stock, $1.00 par value per
share ("Growth Common Stock") of Growth Financial
Corp ("Growth").
Purpose of Meeting... (1) To consider and vote upon a proposal to approve
the Merger Agreement and Plan of Merger dated as of
August 18, 1995 (the "Merger Agreement") by and
among Growth, Growth's wholly-owned subsidiary,
Growth Bank, HUBCO, Inc. ("HUBCO"), and HUBCO's
wholly-owned subsidiary, Hudson United Bank ("HUB"),
providing for the merger (the "Merger") of Growth
with and into HUBCO, and (2) to transact such other
business as may properly come before the Meeting or
any adjournments or postponements thereof including,
without limitation, a motion to adjourn or postpone
the Meeting to another time and/or place for the
purpose of soliciting additional proxies in order to
approve the Merger Agreement.
Vote Required for
Approval of the
Merger............. The affirmative vote, in person or by proxy, of a
majority of the shares of Growth Common Stock cast
at the Meeting is required to approve the Merger.
See "THE MEETING--Vote Required; Shares Entitled to
Vote". Approximately 39.9% of the outstanding
shares of Growth Common Stock is beneficially owned
by executive officers and directors of Growth and
their affiliates as of November 3, 1995. In
connection with the execution of the Merger
Agreement, each director of Growth and Growth Bank
agreed, in his or her individual capacity, to vote
or cause to be voted all shares of Growth Common
Stock held by such person, or over which such person
exercises full voting control, in favor of the
Merger. In addition, each non-director executive
officer of Growth has indicated his or her
intention, in his or her individual capacity, to
vote in favor of the Merger.
Recommendation of
the Board of
Directors of Growth... The Board of Directors of Growth recommends that
stockholders vote "FOR" approval of the Merger
Agreement. See "THE MEETING--Purpose of the
Meeting; THE PROPOSED MERGER--Background of and
Reasons for the Merger".
THE MERGER
Description of the
Merger............. At the time the Merger becomes effective (the
"Effective Time"), Growth will be merged into HUBCO
with HUBCO as the surviving corporation. Pursuant
to a related Bank Merger Agreement, it is intended
that immediately following the Merger, Growth Bank,
the wholly owned subsidiary of Growth, will be
merged with and into HUB, the wholly owned
subsidiary of HUBCO, which will be the surviving
entity and which will continue to operate as a
subsidiary of HUBCO. Each share of Growth Common
Stock issued and outstanding at the Effective Time
(other than "Non-Converted Shares" -- shares owned
by HUBCO or HUB (other than shares held in a
fiduciary capacity or as collateral on or in lieu of
a debt previously contracted) and shares held by
Growth in its treasury) will automatically be
converted into the right to receive the merger
consideration described below under
"Consideration." See "THE PROPOSED MERGER--General
Description".
Consideration........ Each share of Growth Common Stock issued and
outstanding at the Effective Time (other than Non-
Converted Shares) will be converted into and be
exchangeable for the number of shares (the "Exchange
Ratio") of HUBCO Common Stock equal to a fraction,
the numerator of which will be $14.64 and the
denominator of which will be the Median Pre-Closing
Price of HUBCO Common Stock (a term defined in the
Merger Agreement generally as the median closing
price of HUBCO Common Stock during the first 20 of
the 25 trading days prior to the closing of the
Merger), with a minimum Exchange Ratio of 0.69
(which will apply if the Median Pre-Closing Price of
HUBCO Common Stock is above $21.23) and a maximum
Exchange Ratio of 0.81 (which will apply if the
Median Pre-Closing Price of HUBCO Common Stock is
below $18.07), subject to adjustment provisions set
forth in the Merger Agreement and described in this
Proxy Statement-Prospectus. In addition, each
outstanding option to purchase shares of Growth
Common Stock (a "Growth Option") granted under
Growth's existing stock option plans will be
assigned a value (the "Option Value") equal to (a)
the Median Pre-Closing Price of HUBCO Common Stock
multiplied by the Exchange Ratio (b) minus the
stated exercise price for the Growth Option, (c)
such difference then multiplied by the number of
shares of Growth Common Stock for which the option
may be exercised. At the Effective Time each Growth
Option will be converted into that number of shares
of HUBCO Common Stock equal to the Option Value
divided by the Median Pre-Closing Price of HUBCO
Common Stock, as more fully described elsewhere in
this Proxy Statement-Prospectus. No fractional
shares of HUBCO Common Stock will be issued in
exchange for either Growth Common Stock or Growth
Options. Instead, holders of Growth Common Stock or
Growth Options will receive cash equal to the
fractional share interest multiplied by the Median
Pre-Closing Price of HUBCO Common Stock, without
interest. See "THE PROPOSED MERGER --
Consideration; and -- Conversion of Stock Options".
Certain Federal
Income Tax
Consequences....... The Merger is conditioned upon the receipt of an
opinion of Pitney, Hardin, Kipp & Szuch, counsel to
HUBCO, to the effect that the Merger will constitute
a tax-free reorganization as defined in Section
368(a)(1) of the Internal Revenue Code of 1986, as
amended. For information regarding certain federal
income tax matters, see "THE PROPOSED MERGER--
Federal Income Tax Consequences."
Accounting Treatment
of the Merger...... 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, Growth's historical basis of assets,
liabilities and stockholders equity will be retained
by HUBCO as the surviving entity. For a discussion
of the effects of pooling of interests accounting,
see "PRO FORMA COMBINED FINANCIAL INFORMATION" and
"THE PROPOSED MERGER - Accounting Treatment of the
Merger."
No Dissenters'
Rights............. Under New Jersey law, Growth stockholders are
not entitled to dissenter's rights of appraisal
in connection with the Merger.
Required Regulatory
Approvals.......... Consummation of the Merger requires the approval or
waiver of the Board of Governors of the Federal
Reserve System (the "FRB"), the approval of the
Department of Banking of the State of New Jersey
(the "Department of Banking"), and the approval of
the Federal Deposit Insurance Corporation (the
"FDIC"). Applications for such approvals or waivers
have been filed. There can be no assurance that
they will be granted, or that they will be granted
on a timely basis without conditions unacceptable to
HUBCO. See "THE PROPOSED MERGER--Regulatory
Approvals".
Conditions to the
Merger............. Consummation of the Merger is contingent upon a
number of conditions, including receiving all
necessary regulatory approvals or waivers; the
approval of the Merger by at least a majority of the
shares of Growth Common Stock voting at the Meeting;
an opinion of Pitney, Hardin, Kipp & Szuch, counsel
to HUBCO, to the effect that the Merger will result
in a tax free reorganization; and an opinion of
McConnell, Budd & Downes, Inc. ("MB&D"), advisors to
Growth, that the Merger is fair to the stockholders
of Growth from a financial point of view. MB&D's
written opinion is included as Appendix C. Growth's
obligation to consummate the Merger is also
conditioned on, among other things, the Median Pre-
Closing Price of HUBCO Common Stock being no less
than $14.75. See "THE PROPOSED MERGER --Opinion of
Financial Advisor to Growth Financial Corporation; -
-Regulatory Approvals; and --Conditions to the
Merger."
Termination Rights... The Merger Agreement may be terminated by either
party if the Effective Time has not occurred by June
30, 1996, if required stockholder or regulatory
approval is not obtained or if there occurs a
material adverse change in the other party's
business, operations, assets, or financial
condition, as further defined in the Merger
Agreement. The Merger Agreement may be terminated
by Growth if Growth's Board of Directors approves
another acquisition transaction after determining,
upon advice of counsel, that approval is necessary
in the exercise of its fiduciary obligations under
applicable laws. For a more complete description of
the foregoing termination rights, and for a
description of other termination rights available to
Growth and HUBCO, see "THE PROPOSED MERGER-Effective
Time; Amendments; Termination; --Conditions to the
Merger."
Effective Time....... A closing under the Merger Agreement (the "Closing")
will occur on a date as soon as practicable
following receipt of all necessary regulatory
approvals, or at such other date as is agreed to by
HUBCO and Growth. The Closing will not occur prior
to January 15, 1996 unless both parties agree. A
Certificate of Merger will be filed with the New
Jersey Secretary of State immediately following the
Closing. The time of such filing will be the
"Effective Time." See "THE PROPOSED MERGER--
Effective Time; Amendments; Termination; --
Regulatory Approvals".
Interests of Certain
Persons in the
Merger........ Certain members of Growth's management and the
Growth Board of Directors may be deemed to have
interests in the Merger in addition to their
interests, if any, as stockholders of Growth
generally. These interests include, among other
things, employment agreements which were entered
into as of August 18, 1995 and which clarify the
terms of certain previous employment arrangements,
and provisions in the Merger Agreement obligating
HUBCO to provide certain indemnification and
liability insurance to directors and officers of
Growth and Growth Bank following the Merger. See
"THE MERGER -- Interests of Certain Persons in the
Merger."
Fairness Opinion..... The Board of Directors of Growth has retained MB&D
to evaluate the terms of the Merger. MB&D has
delivered a written opinion dated as of the date of
this Proxy Statement-Prospectus, to the Board of
Directors of Growth to the effect that the
consideration to be received by the Growth
stockholders pursuant to the Merger Agreement is, as
of the date of such opinion, fair to such
stockholders from a financial point of view. For
information concerning the matters reviewed,
assumptions made and factors considered by MB&D, see
"THE PROPOSED MERGER--Opinion of Financial Advisor
to Growth Financial Corporation" and Appendix C to
this Proxy Statement-Prospectus, which sets forth
the MB&D fairness opinion in its entirety.
Stock Option to
HUBCO for
Growth Shares..... HUBCO and Growth entered into a Stock Option Agreement
dated as of August 18, 1995 (the "Stock Option
Agreement") in connection with the negotiation by
HUBCO and Growth of the Merger Agreement. Pursuant
to the Stock Option Agreement, Growth has granted to
HUBCO an option (the "Option"), exercisable only under
certain limited and specifically defined
circumstances, to purchase up to 336,850 authorized
but unissued shares of Growth Common Stock,
representing approximately 19.9% of the currently
outstanding shares of Growth Common Stock for an
exercise price of $12.25 per share. HUBCO does not
have any voting rights with respect to the shares of
Growth Common Stock subject to the Option prior to
exercise of the Option.
A copy of the Stock Option Agreement is attached as
Appendix B to this Proxy Statement-Prospectus. In the
event that certain specifically enumerated "Triggering
Events" occur and the Merger is not consummated, HUBCO
would recognize a gain on the sale of the shares of
Growth Common Stock received pursuant to the exercise
of the Option if such shares of Growth Common Stock
were sold at prices exceeding $12.25 per share. The
ability of HUBCO to exercise the Option and to cause
up to an additional 336,850 shares of Growth Common
Stock to be issued may be considered a deterrent to
other potential acquisitions of control of Growth,
as it is likely to increase the cost of an acquisition
of all of the shares of Growth Common Stock which
would then be outstanding. The exercise of the option
by HUBCO may also make a "pooling of interests"
accounting treatment unavailable to a subsequent
acquiror. See "THE PROPOSED MERGER - Stock Option
for Shares of Growth Common Stock."
PRINCIPAL BUSINESSES
HUBCO................ HUBCO is a bank holding company whose principal
operating subsidiary is HUB, a New Jersey-chartered
commercial bank. HUBCO's corporate headquarters are
located at 1000 MacArthur Boulevard, Mahwah, New
Jersey 07430. HUB's corporate headquarters are
located at 3100 Bergenline Avenue, Union City, New
Jersey 07087. The telephone number of HUBCO and HUB
is (201) 236-2200. HUB is a full service commercial
bank which primarily serves small and mid-sized
businesses and consumers through over 50 branches in
Northern New Jersey. As of June 30, 1995, HUBCO had
consolidated assets of $1.6 billion, consolidated
deposits of $1.4 billion and consolidated
stockholders' equity of $121 million. Based on
assets, at June 30, 1995, HUBCO was among the ten
largest commercial bank holding companies
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 40 branches and
approximately $1.1 billion in assets through ten
acquisitions of financial institutions in both
government-assisted and private transactions. HUBCO
EXPECTS TO CONTINUE ITS ACQUISITION STRATEGY FOR THE
FORESEEABLE FUTURE. FUTURE ACQUISITIONS MAY BE
EXPECTED TO AFFECT HUBCO'S EARNINGS AND THE MARKET
PRICE OF HUBCO COMMON STOCK. See "INTRODUCTION --
Parties to the Merger"; "AVAILABLE INFORMATION"; and
"INFORMATION INCORPORATED BY REFERENCE."
Growth.................. Growth is a bank holding company organized under the
laws of the State of New Jersey and registered under
the Bank Holding Company Act of 1956, as amended.
Growth has one banking subsidiary, Growth Bank, with
three branches serving Morris and Somerset Counties,
New Jersey. Growth anticipates opening an
additional branch in Mendham, New Jersey in early
1996 and also is in the process of applying to the
FRB and the Department of Banking to open another
branch in Morristown, New Jersey. At June 30, 1995,
Growth had total assets of approximately $130
million. Growth's principal executive offices are
located at 1500 Route 202, Harding Township, New
Jersey, its mailing address is P.O. Box 401, Basking
Ridge, New Jersey 07920-0401, and its telephone
number is (201) 425-2500. See "INTRODUCTION --
Parties to the Merger"; "AVAILABLE INFORMATION";
"BUSINESS OF GROWTH"; "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF GROWTH FINANCIAL CORP'S FINANCIAL
CONDITION AND RESULTS OF OPERATIONS"; and "INDEX TO
FINANCIAL STATEMENTS OF GROWTH FINANCIAL CORP."
RECENT DEVELOPMENTS
Growth
On October 30, 1995, Growth reported earnings for the third quarter
and first nine months of 1995. After-tax earnings for the third quarter of
1995 were $216,000 or $.11 per share, as compared to $326,000 or $.19 per
share for the same period in 1994. For the first nine months of 1995, Growth
had after-tax earnings of $715,000 or $.39 per share as compared to $889,000
or $.53 per share for the same period in 1994. During the twelve-month period
from September 30, 1994 to September 30, 1995, Growth's total assets grew by
20% to $127.4 million, total loans grew by 17% to $97.2 million and total
deposits grew by 21% to $110.5 million.
HUBCO
On October 17, 1995 HUBCO announced its regular quarterly cash
dividend of $.15 per common share, payable December 1, 1995, to stockholders
of record November 17, 1995. HUBCO has paid a cash dividend every year since
1982.
On October 16, 1995 HUBCO reported earnings for the third quarter
and first nine months of 1995. Earnings per share for the third quarter of
1995 increased 35% to $.46 per share ($5,973,000), from $.34 per share
($4,704,000) the third quarter of 1994. All prior period amounts and per
share data have been restated to reflect the acquisitions completed during
the second quarter of 1995 of Jefferson National Bank and Urban National Bank
accounted for as pooling of interests and for the three for two stock split
issued by HUBCO in January, 1995. HUBCO's return on average equity for the
third quarter 1995 was 19.25% and the return on average assets was 1.48%.
For the nine months ended September 30, 1995 HUBCO's earnings per
share increased 28% to $1.31 ($17,377,000), from $1.02 per share
($13,167,000) for the nine months ended September 30, 1994. HUBCO's return
on average equity for the nine month period ended September 30, 1995 was
19.44% and the return on average assets was 1.42%.
For the third quarter of 1995, HUBCO's net interest income
increased 5% over the prior year's third quarter to $20,047,000 and for the
first nine months of 1995 was $60,760,000, an increase of 19% over the same
period during the prior year. HUBCO's net interest margin was 5.43% for the
third quarter of 1995 and 5.44% for the first nine months of 1995.
HUBCO's Non-interest income totaled $4,872,000 for the third
quarter of 1995 and $13,141,000 for the nine month period ended September 30,
1995. This represents increases of 48% and 50% respectively over the same
periods in the prior year.
HUBCO's third quarter 1995 other income includes approximately
$1,000,000 representing income from the settlement of an insurance claim.
Third quarter 1995 results also included one time acquisition related
expenses recorded in non-interest expense of approximately $.9 million.
HUBCO's overhead expenses for the third quarter of 1995 increased
to $14,331,000 from $13,510,000 during the same period in the prior year.
For the nine month period ended September 30, 1995, overhead expenses
increased to $46,122,000 from $36,232,000 for the nine month period ended
September 30, 1994. These increases are attributable to HUBCO's growth and
the acquisition expenses incurred to achieve this growth.
HUBCO's non-performing assets of $22,977,000 (1.4% of assets) at
September 30, 1995 were down from $31,499,000 a year prior and from
$28,290,000 at December 31, 1994. At September 30, 1995, non-accruing loans
totaled $15,368,000 (1.8% of loans) and were down from $21,813,000 a year
prior and $18,488,000 at December 31, 1994. HUBCO's Allowance for Possible
Loan and Lease Losses at September 30, 1995 totalled $16,678,000, which
represented 100% of non-performing loans and 109% of non-accruing loans.
HUBCO's total assets at September 30, 1995 were $1.6 billion, loans
totaled $848 million and deposits were $1.4 billion. HUBCO's stockholders
equity was $125 million at September 30, 1995. Capital ratios for HUBCO were
as follows: Tier I - 12.98%, total Risk Based - 17.06% and the Leverage
Capital Ratio was 7.21%. These ratios all exceed the applicable regulatory
requirements of 6%, 10% and 5% respectively.
COMPARATIVE MARKET PRICE AND DIVIDEND DATA
Pursuant to the Merger Agreement, the Exchange Ratio will equal a
fraction, the numerator of which will be $14.64 and the denominator of which
will be the Median Pre-Closing Price of HUBCO Common Stock (a term defined in
the Merger Agreement generally as the median closing price of HUBCO Common
Stock during the first 20 of the 25 trading days prior to the closing of the
Merger), with a Minimum Exchange Ratio of 0.69 (which will apply if the
Median Pre-Closing Price of HUBCO Common Stock is above $21.23) and a maximum
Exchange Ratio of 0.81 (which will apply if the Median Pre-Closing Price of
HUBCO Common Stock is below $18.07), subject to adjustment provisions set
forth in the Merger Agreement and more fully described in this Proxy
Statement-Prospectus. The calculation of the Exchange Ratio called for by
the Merger Agreement was intended by HUBCO and Growth to result in
stockholders of Growth receiving in the Merger HUBCO Common Stock with a
value of $14.64 for each share of Growth Common Stock, provided that the
initial Exchange Ratio calculation (before taking into effect the Minimum and
Maximum Exchange Ratios) results in an Exchange Ratio which is neither below
the Minimum Exchange Ratio nor above the Maximum Exchange Ratio (i.e.,
provided the Median Pre-Closing Price of HUBCO Common Stock is between $21.23
and $18.07). However, because of the Minimum Exchange Ratio and Maximum
Exchange Ratio, and because the price of HUBCO Common Stock at the Effective
Time may not be the same as the Median Pre-Closing Price of HUBCO Common
Stock, Growth stockholders are not assured of receiving any specific market
value of HUBCO Common Stock. The price of HUBCO Common Stock at the
Effective Time may be higher or lower than the Median Pre-Closing Price of
HUBCO Common Stock, and may be higher or lower than the market price at the
time of entering into the Merger Agreement, the time of mailing this Proxy
Statement-Prospectus or at the time of the Meeting. Growth stockholders are
urged to obtain current market quotations for the HUBCO and Growth Common
Stock.
HUBCO Common Stock is quoted on the Nasdaq Stock Market (formerly
known as the Nasdaq National Market System). HUBCO's Nasdaq symbol is HUBC.
Prior to March 1, 1993, HUBCO Common Stock was listed on the American Stock
Exchange ("AMEX"). The following quotations for HUBCO Common Stock reflect
the high and low closing prices per share of HUBCO Common Stock as reported
by Nasdaq or AMEX, as the case may be, adjusted to reflect the 3-for-2 stock
split (the "Stock Split") paid January 14, 1995 to record holders of HUBCO
Common Stock on January 3, 1995. Growth Common Stock is quoted on the Nasdaq
Small-Cap Market. Growth's Nasdaq symbol is GrFC. The following quotations
for Growth Common Stock reflect the high and low closing prices per share of
Growth Common Stock as reported by Nasdaq, and do not reflect retail mark-up,
mark-down or commission. The minimum and maximum equivalent prices per share
of Growth Common Stock shown on the following tables are calculated by
multiplying the prices per share of HUBCO Common Stock by the Minimum
Exchange Ratio (0.69) and the Maximum Exchange Ratio (0.81), respectively.
As of September 30, 1995, HUBCO had approximately 2,275 stockholders of
record and Growth had approximately 477 stockholders of record.
Equivalent Price Per Share
Price Per Share Price Per Share of Growth Common Stock
of HUBCO of Growth --------------------------
Common Stock Common Stock (Maximum) (Minimum
--------------- --------------- Exchange Ratio Exchange Ratio)
------------------------------
High Low High Low High Low High Low
------ ------ ------ ------ ------ ------ ------ -----
1993:
1st Quarter $16.42 $10.67 $9.06 $ 6.27 $13.30 $ 8.64 $11.33 $7.36
2nd Quarter 16.25 12.67 8.84 7.03 13.16 10.26 11.21 8.74
3rd Quarter 16.83 13.41 8.55 7.03 13.63 10.86 11.61 9.25
4th Quarter 16.17 13.33 8.05 6.80 13.10 10.80 11.16 9.20
1994:
1st Quarter 15.83 13.42 8.09 6.80 12.82 10.87 10.92 9.26
2nd Quarter 15.00 13.33 10.00 7.63 12.15 10.80 10.35 9.20
3rd Quarter 15.17 13.13 11.42 9.28 12.29 10.64 10.47 9.06
4th Quarter 15.00 12.50 11.67 10.00 12.15 10.13 10.35 8.63
1995
1st Quarter 17.38 14.67 12.00 10.23 14.08 11.88 11.99 10.12
2nd Quarter 17.88 15.50 12.38 11.25 14.48 12.56 12.34 10.70
3rd Quarter 21.13 17.25 15.38 12.00 17.12 13.97 14.58 11.90
4th Quarter
(through
November __, 1995
The following table sets forth the reported closing price per share
of HUBCO Common Stock and Growth Common Stock, the minimum and maximum
equivalent price per share of Growth Common Stock, and the equivalent price
per share of Growth Common Stock if the Median Pre-Closing Price of HUBCO
Common Stock were equal to the closing price per share of HUBCO Common Stock
on the date listed, on (i) August 18, 1995, the last full trading day before
public announcement of the signing of the Merger Agreement, and (ii)
November __, 1995, a date shortly prior to the mailing of this Proxy
Statement-Prospectus:
<TABLE>
<CAPTION>
Equivalent Price Per Share of Growth Common Stock
----------------------------------------------------------------------------
HUBCO Growth
Common Common (Maximum (Minimum Exchange Ratio if Median Pre-Closing
Stock Stock Exchange Ratio) Exchange Ratio) Price equals closing price on this date)
------- ------- --------------- --------------- ----------------------------------------
<S> <C> <C> <C> <C>
August 18, 1995 $19.50 $15.38 $15.80 $13.46 $14.64
_________, 1995
</TABLE>
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 HUB to HUBCO is regulated. Under the New Jersey
Banking Act of 1948, as amended, HUB may pay dividends only out of retained
earnings, and only 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 below:
1993 1994 1995
---- ---- ----
First Quarter . . . . . . . . . . $ .07 $ .08 $ .15
Second Quarter . . . . . . . . . . .07 .08 .15
Third Quarter . . . . . . . . . . .07 .10 .15
Fourth Quarter . . . . . . . . . . .08 .10<F1>
Special Year-end Dividend . . . . . . . . .02 --
------ ------ ------
Total . . . . . . . . $ .31 $ .36
====== ====== ======
- -------------------
[FN]
<F1> Represents an actual quarterly dividend of $.15 per share prior to
adjustment for the Stock Split.
The Merger Agreement prohibits Growth from declaring,
setting aside or paying any dividend or other distribution in respect of its
capital stock, except that from the date of the Merger Agreement to the
Effective Time of the Merger, Growth may declare, set aside and pay cash
dividends per share of Growth Common Stock at the same time or promptly after
cash dividends with respect to the same period are declared, set aside or
paid by HUBCO, provided that the record date for Growth dividends is no
earlier than the record date for the associated HUBCO dividends and the
dividends per share of Growth Common Stock do not exceed $.12 per calendar
quarter and do not exceed $.36 in the aggregate from the date of the Merger
Agreement through the Effective Time. Pursuant to this provision, Growth
declared and paid a $.12 cash dividend to stockholders of record on September
5, 1995. Other than the foregoing dividend, Growth has not paid cash
dividends since its formation, but Growth has previously paid 5% stock
dividends to its stockholders in March 1995, 1994 and 1993.
<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 Growth 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 have been
derived from the consolidated financial statements of HUBCO incorporated by
reference herein and the consolidated financial statements of Growth
presented elsewhere herein. See "INFORMATION INCORPORATED BY REFERENCE" and
"INDEX TO FINANCIAL STATEMENTS OF GROWTH FINANCIAL CORP."
The pro forma dividend and book value per share data and
the pro forma net income per share data for the six months ended June 30,
1995 and for the year ended December 31, 1992 have been derived from the pro
forma combined condensed financial statements (appearing elsewhere herein) of
HUBCO and Growth and give effect to the Merger, accounted for as a pooling of
interests. The pro forma net income per share data for the six months ended
June 30, 1994 and the years ended December 31, 1994 and 1993 have been
derived from the pro forma combined condensed financial statements (appearing
elsewhere herein) of HUBCO, Washington Bancorp, Inc. ("Washington") and
Growth, giving effect to both the merger of Washington into HUBCO on July 1,
1994 (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 1,499,541 shares of HUBCO Common Stock will be issued in the Merger if
the Exchange Ratio is 0.81, the Maximum Exchange Ratio.
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 Growth, the pro forma combined
condensed financial statements of HUBCO and Growth, the pro forma combined
condensed financial statements of HUBCO, Washington and Growth and the
related notes accompanying such financial statements, all of which are either
incorporated by reference herein or appear elsewhere herein. See
"INFORMATION INCORPORATED BY REFERENCE," "INDEX TO FINANCIAL STATEMENTS OF
GROWTH FINANCIAL CORP" and "PRO FORMA COMBINED FINANCIAL INFORMATION." The
pro forma data presented below are 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.
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30 For the Year Ended December 31
1995 1994 1994 1993 1992
------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
CASH DIVIDENDS DECLARED PER COMMON SHARE:
HUBCO - Actual<F1> $0.30 $0.16 $0.36 $0.31 $0.27
Growth - Actual<F1> - - - - -
Growth - pro forma equivalent, maximum<F2> 0.24 0.13 0.29 0.25 0.22
Growth - pro forma equivalent, minimum<F3> 0.21 0.11 0.25 0.21 0.19
NET INCOME PER COMMON SHARE:
HUBCO - Actual:
Primary 0.88 0.68 1.36 1.06 0.76
Fully diluted 0.85 0.68 1.33 1.06 0.76
Growth - Actual, after extraordinary item 0.27 0.33 0.66 0.18 0.19
HUBCO, Washington and Growth, pro forma:
Primary<F4> N.A.* 0.49 1.13 0.90 N.A.*
Fully diluted<F5> N.A.* 0.48 1.11 0.90 N.A.*
HUBCO and Growth, pro forma:
Primary<F4> 0.82 N.A.* N.A.* N.A.* 0.68
Fully diluted<F5> 0.80 N.A.* N.A.* N.A.* 0.68
Growth, pro forma equivalent:
Primary, maximum<F6> 0.66 0.40 0.92 0.73 0.55
Fully diluted, maximum<F7> 0.65 0.39 0.90 0.73 0.55
Primary, minimum<F8> 0.56 0.34 0.78 0.62 0.47
Fully diluted, minimum<F9> 0.55 0.33 0.77 0.62 0.47
</TABLE>
As of As of
June 30, December 31,
1995 1994
----------- ----------
NET BOOK VALUE PER COMMON SHARE:
HUBCO - Actual $9.11 $7.80
Growth - Actual 8.12 7.80
HUBCO and Growth, pro forma<F10> 9.12 7.91
Growth, pro forma equivalent, maximum<F11> 7.39 6.41
Growth, pro forma equivalent, minimum<F12> 6.29 5.46
* Not applicable. See "PRO FORMA COMBINED FINANCIAL INFORMATION."
- ------------------------
[FN]
<F1>For information regarding HUBCO's and Growth's dividends, and the market
price of HUBCO and Growth Common Stock, see "MARKET PRICE AND DIVIDEND
DATA."
<F2>Represents the dividends declared on HUBCO Common Stock during the
respective periods multiplied by the .81 Maximum Exchange Ratio.
<F3>Represents the dividends declared on HUBCO Common Stock during the
respective periods multiplied by the .69 Minimum Exchange Ratio.
<F4>Represents primary net income per share on a pro forma combined basis
(including, for the six months ended June 30, 1994 and the years ended
December 31, 1994 and 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 Series A Preferred Stock (which was first issued on July 1, 1994)
and dividing such amounts by the sum of (i) the weighted average number
of shares of HUBCO Common Stock outstanding during each period and (ii)
1,499,541 shares of HUBCO Common Stock assumed to be issued pursuant to
the Merger, representing the maximum number of shares that may be issued
in the Merger.
<F5>Represents fully diluted net income per common share on a pro forma basis
(including, for the six months ended June 30, 1994 and the years ended
December 31, 1994 and 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 Series A Preferred Stock (which was first issued on July 1, 1994)
and dividing such amounts by the sum of (i) the weighted average number
of shares of HUBCO Common Stock outstanding during each period, (ii)
1,499,541 shares of HUBCO Common Stock assumed to be issued pursuant to
the Merger, representing the maximum number of shares that may be issued
in the Merger and (iii) where applicable, shares of HUBCO Common Stock
issuable upon the full conversion of the HUBCO Series A Preferred Stock.
<F6>Represents the amount computed pursuant to Note 4 above multiplied by
the .81 Maximum Exchange Ratio.
<F7>Represents the amount computed pursuant to Note 5 above multiplied by
the .81 Maximum Exchange Ratio.
<F8>Represents the amount computed pursuant to Note 4 above multiplied by
the .69 Minimum Exchange Ratio.
<F9>Represents the amount computed pursuant to Note 5 above multiplied by
the .69 Minimum Exchange Ratio.
<F10>Represents the pro forma combined net book value of HUBCO and Growth
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) 1,499,541 shares of HUBCO Common Stock assumed to be
issued pursuant to the Merger.
<F11>Represents the amount computed in Note 10 above multiplied by the
.81 Maximum Exchange Ratio.
<F12>Represents the amount computed in Note 10 above multiplied by the
.69 Minimum Exchange Ratio.
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected financial and other data of
HUBCO and Growth. Results of operations for the six months ended June 30,
1995 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
six months ended June 30, 1995 for HUBCO and Growth are not necessarily
indicative of the results that may be expected for any other period.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
Six Months Ended June 30, Years Ended December 31,
------------------------- ----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
Interest income $61,024 $45,603 $103,353 $86,550 $88,296 $76,887 $75,750
Interest expense 20,186 13,844 32,257 27,511 35,361 38,844 41,323
--------- --------- --------- --------- --------- --------- ---------
Net interest income 40,838 31,759 71,096 59,039 52,935 38,043 34,427
Provision for possible loan losses 2,100 1,115 3,550 4,874 7,432 3,672 5,674
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for
possible loan losses 38,738 30,644 67,546 54,165 45,503 34,371 28,753
Other income 8,144 5,503 11,878 10,579 10,717 7,570 6,114
Other expenses 31,791 22,722 51,100 42,313 46,612 33,017 30,629
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes 15,091 13,425 28,324 22,431 9,608 8,924 4,238
Income tax provision 3,687 4,962 10,892 8,560 637 2,646 1,317
--------- --------- --------- --------- --------- --------- ---------
Net income $11,404 $8,463 $17,432 $13,871 $8,971 $6,278 $2,921
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Weighted average common shares outstanding 13,054 12,506 13,098 13,109 11,881 10,177 10,156
Net income per share $0.85 $0.68 $1.33 $1.06 $0.76 $0.62 $0.29
Cash dividends per common share $0.23 $0.12 $0.27 $0.25 $0.22 $0.24 $0.25
BALANCE SHEET SUMMARY:
Securities held to maturity $511,100 $564,355 $562,567 $368,824 $397,722 $198,843 $189,950
Securities available for sale 99,180 118,981 111,604 187,204 15,430 - -
Loans, net 855,530 658,211 862,384 663,588 666,141 641,949 555,760
Total assets 1,611,441 1,486,644 1,709,384 1,363,674 1,233,910 981,297 896,548
Deposits 1,416,970 1,326,737 1,491,544 1,213,336 1,111,681 887,425 781,390
Stockholders' equity 121,710 94,639 115,551 97,654 87,585 61,154 57,008
PERFORMANCE RATIOS:
Return on average assets<F1> 1.38% 1.19% 1.11% 1.07% 0.74% 0.69% 0.35%
Return on average equity<F1> 19.38 17.94 16.57 14.95 11.90 10.66 5.05
Dividend payout 26.33 17.73 20.29 23.63 29.14 38.90 86.92
Average equity to average assets 7.14 6.64 6.69 7.16 6.20 6.49 6.95
Net interest margin<F1> 5.42 4.88 4.95 5.00 4.88 4.73 4.74
ASSET QUALITY RATIOS:
Allowance for possible loan losses
to total loans, net<F2> 1.95 2.10 1.92 2.13 1.70 1.43 1.28
Allowance for possible loan losses to
non-performing loans 73.57 57.94 77.55 67.25 52.11 39.72 37.40
Allowance for possible loan losses to non-
performing assets (excluding loans past
due 90 days or more and accruing) 68.50 52.38 62.03 51.90 37.22 38.95 42.16
Non-performing loans to total loans, net 2.66 3.62 2.48 3.16 3.27 3.60 3.43
Non-performing assets to total loans, net
plus other real estate 3.31 4.49 3.43 4.57 5.11 5.44 4.62
Non-performing assets (excluding loans past
due 90 days or more and accruing) to total
loans, net plus other real estate 2.83 3.97 3.06 4.04 4.49 3.60 3.00
Net charge-offs to average loans, net 0.45 0.43 0.79 0.38 0.99 0.53 0.50
</TABLE>
- --------------------------
[FN]
<F1>Interim ratios have been annualized for purposes of comparability with
year-end data.
<F2>Total loans, net, are net of unearned income and deferred loan fees.
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF GROWTH
Six Months
Ended June 30, Years Ended December 31,
---------------- ------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, expect for per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
Interest income $ 4,739 $ 3,506 $ 7,659 $ 5,854 $ 5,078 $ 3,986 $ 1,801
Interest expense 1,725 1,059 2,361 2,142 2,187 2,027 501
----- ----- ----- ------ ----- ----- -----
Net interest income 3,014 2,447 5,298 3,712 2,891 1,959 1,300
Provision for loan losses 150 203 634 653 180 376 650
----- ----- ----- ----- ----- ----- -----
Net interest income after provision
for loan losses 2,864 2,244 4,664 3,059 2,711 1,583 650
Other income 167 165 327 302 220 126 19
Other expenses 2,188 1,876 3,871 3,309 2,606 2,184 1,785
----- ----- ----- ----- ----- ----- -----
Income (loss) before income tax expense
(benefit) 843 533 1,120 52 325 (475) (1,116)
Income tax expense (benefit) 344 (30) - (260) 136 10 10
--------- --------- -------- -------- -------- --------- ---------
Net income before extraordinary item 499 563 1,120 312 189 (486) (1,126)
--------- --------- -------- -------- -------- --------- ---------
Extraordinary item:
Reduction of tax attributable to
prior years' loss carryforwards - - - - 136 - -
--------- --------- -------- -------- -------- --------- ---------
Net income (loss) $ 499 $ 563 $ 1,120 $ 312 $ 325 $ (486) $ (1,126)
--------- --------- -------- --------- -------- --------- ---------
PER SHARE DATA:
Weighted average common shares
outstanding <F1> 1,825 1,693 1,693 1,693 1,693 1,693 1,693
Net income (loss) per share $ 0.27 $ 0.33 $ 0.66 $ 0.18 $ 0.19 $ (0.29) $ (0.67)
Cash dividend per common share - - - - - - -
BALANCE SHEET SUMMARY:
Securities available for sale $ 21,199 $ 14,029 $ 20,080 $ 18,321 $ - $ - $ -
Investment securities - - - - 24,022 20,833 4,867
Loans, net 93,380 81,449 82,844 70,860 49,366 32,079 16,901
Allowance for loan losses 1,497 1,131 1,427 977 917 972 650
Total assets 127,339 104,628 114,823 97,683 81,813 61,546 29,978
Deposits 108,752 89,342 99,088 83,193 68,342 48,422 17,159
Total stockholders' equity 13,751 12,728 13,208 12,497 12,165 11,840 12,326
PERFORMANCE RATIOS:
Return on average assets <F2> 0.85% 1.12% 1.08% 0.35% 0.27% -1.01% -5.64%
Return on average equity <F2> 7.40% 8.93% 8.70% 2.53% 2.72% -4.02% -8.63%
Average equity to average assets 11.47% 12.58% 12.39% 13.97% 17.16% 25.19% 65.37%
Dividend payout - - - - - - -
Net interest margin <F2> 4.90% 4.84% 5.02% 4.05% 3.86% 3.03% 2.83%
ASSET QUALITY RATIOS:
Allowance for loan losses to
total loans, net <F3> 1.58% 1.37% 1.69% 1.36% 1.82% 2.94% 3.70%
Allowance for loan losses to
non-performing loans <F4> 313.18% 106.50% 340.57% 62.19% 196.78% 325.08% N/A
Non-performing loans to total loans <F3><F4> 0.50% 1.29% 0.50% 2.19% 0.93% 0.91% 0.00%
Net charge-offs to average loans, net <F2> 0.18% 0.13% 0.23% 1.07% 0.00% 0.00% 0.00%
</TABLE>
- ---------------------------
[FN]
<F1> The weighted shares outstanding for the period ended June 30, 1995
include the effect of outstanding options for Growth Common Stock.
For the period ended June 30, 1994 and for each year in the five year
period ended December 31, 1994, the weighted shares outstanding do not
include the effect of such options as the options did not result in
material dilution.
<F2> Interim ratios have been annualized for purposes of comparability
with year-end data.
<F3> Total loans are net of unearned income and deferred loan fees.
<F4> Non-performing loans include non-accruing loans and loans past due 90
days or more and accruing.
<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 six month periods ended June 30, 1995 and 1994 and the years ended
December 31, 1994, 1993 and 1992, and the Pro Forma Combined Condensed
Balance Sheet at June 30, 1995, in each case giving effect to the acquisition
of Growth 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
June 30, 1995. The unaudited pro forma statements of income for the six
months ended June 30, 1994 and the years ended December 31, 1994 and 1993
also give 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. 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 assumption of the Maximum Exchange Ratio of 0.81
shares of HUBCO Common Stock for each share of Growth common Stock.
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 Growth, the pro forma combined condensed financial
statements of HUBCO and Growth, the pro forma combined condensed financial
statements of HUBCO, Washington and Growth and the related notes accompanying
such financial statements, all of which are either incorporated by reference
herein or appear elsewhere herein. See "INFORMATION INCORPORATED BY
REFERENCE," "INDEX TO FINANCIAL STATEMENTS OF GROWTH FINANCIAL CORP" and "PRO
FORMA COMBINED FINANCIAL INFORMATION." The pro forma data presented below
are 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.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Unaudited Financial Information
For the Six Months Ended June 30 For the Year Ended December 31
1995 1994 1994 1993 1992
----------- ---------- ------------------------------
RESULTS OF OPERATIONS: (In Thousands, Except Per
Share Amounts)
<S> <C> <C> <C> <C> <C>
Net interest income before provision
for possible loan losses $43,852 $38,088 $80,336 $69,534 $55,826
Provision for possible loan losses 2,250 2,143 5,294 6,211 8,124
Net interest income after provision
for possible loan losses 41,602 35,945 75,042 63,324 47,702
Income before income taxes 15,934 11,421 26,917 19,990 9,933
Net income 11,903 7,372 16,908 14,228 9,160
PER SHARE DATA: (1)
Earnings per common share :
Primary <F2> $0.82 $0.49 $1.13 $0.90 $0.68
Fully diluted 0.80 0.48 1.11 0.90 0.68
</TABLE>
As of
June 30,
1995
-----------
BALANCE SHEET :
Total assets $1,738,780
Total deposits 1,525,722
Total stockholders' equity 135,461
Book Value per common share<F1> 9.12
- ----------------------
[FN]
<F1>Adjusted for the Stock Split.
<F2>After pro forma payments of Series A Preferred Stock dividends of $525,
$574, $1149, $1149 and $0 for the six month periods ending June 30, 1995
and 1994 and the years ended December 31, 1994, 1993 and 1992,
respectively. This represents $.72, $.72, $1.44, $1.44 and $0 per
share, respectively.
<PAGE>
INTRODUCTION
GENERAL
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $1.00 per share ("Growth Common Stock"), of Growth Financial
Corp ("Growth"), in connection with the solicitation of proxies by the Board
of Directors of Growth for use at a Special Meeting of Growth's stockholders
to be held at the Basking Ridge Country Club, 185 Madisonville Road (off
North Maple Avenue) Basking Ridge, New Jersey on Wednesday, December 20, 1995
at 11:00 a.m., local time, and any adjournments or postponements thereof (the
"Meeting"). Only stockholders of record at the close of business on November
3, 1995 (the "Record Date") will be entitled to vote at the Meeting or at any
adjournments thereto either in person or by proxy.
At the Meeting, the stockholders of Growth will be asked to consider and
vote upon a proposal to approve an Agreement and Plan of Merger (the "Merger
Agreement") dated as of August 18, 1995, among HUBCO, Inc. ("HUBCO"), Hudson
United Bank ("HUB"), Growth and Growth Bank pursuant to which Growth will
merge with and into HUBCO (the "Merger"). Pursuant to a related Bank Merger
Agreement, it is intended that immediately following the Merger, Growth Bank,
a wholly owned subsidiary of Growth, will be merged with and into HUB, a
wholly owned subsidiary of HUBCO. If the proposed Merger is consummated,
each share of Growth Common Stock will be converted into and be exchangeable
for the number of shares (the "Exchange Ratio") of common stock, no par
value, of HUBCO ("HUBCO Common Stock") equal to a fraction, the numerator of
which will be $14.64 and the denominator of which will be the Median Pre-
Closing Price of HUBCO Common Stock (a term defined in the Merger Agreement
generally as the median closing price of HUBCO Common Stock during the first
20 of the 25 trading days prior to the closing of the Merger), with a minimum
Exchange Ratio of 0.69 (which will apply if the Median Pre-Closing Price of
HUBCO Common Stock is above $21.23) and a maximum Exchange Ratio of 0.81
(which will apply if the Median Pre-Closing Price of HUBCO Common Stock is
below $18.07), subject to adjustment provisions set forth in the Merger
Agreement and described in this Proxy Statement-Prospectus. 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 Growth on or about November __, 1995.
HUBCO has filed a Registration Statement pursuant to the Securities Act of
1933, as amended (the "Securities Act"), covering the shares of HUBCO Common
Stock which will be issued in connection with the Merger. In addition to
constituting the Growth Proxy Statement for the Meeting, this document
constitutes a Prospectus of HUBCO with respect to the HUBCO Common Stock to
be issued if the Merger is consummated.
All information contained in this Proxy Statement-Prospectus with respect
to Growth was supplied by Growth. All information contained in or
incorporated by reference in this Proxy Statement-Prospectus with respect to
HUBCO was supplied by HUBCO. The first date on which this Proxy Statement-
Prospectus and the enclosed form of proxy are being sent to the stockholders
of Growth is on or about November __, 1995.
This Proxy Statement-Prospectus does not cover any resales of shares of
HUBCO Common Stock to be received by stockholders of Growth upon consummation
of the transactions described herein. Affiliates of Growth will be subject
to restrictions on their ability to resell the HUBCO Common Stock received by
them in the Merger. See "THE PROPOSED MERGER--Resale Considerations with
Respect to HUBCO Common Stock."
PARTIES TO THE MERGER
HUBCO. HUBCO, Inc. ("HUBCO") is a bank holding company whose principal
operating subsidiary is Hudson United Bank ("HUB"), a New Jersey-chartered
commercial bank. HUBCO's corporate headquarters are located at 1000
MacArthur Boulevard, Mahwah, New Jersey 07430. HUB's corporate headquarters
are located at 3100 Bergenline Avenue, Union City, New Jersey 07087. The
telephone number of HUBCO and HUB is (201) 236-2200. Incorporated in 1890,
HUB is a full service commercial bank which primarily serves small and mid-
sized businesses and consumers in Northern New Jersey, its primary market
area. HUB currently operates over 50 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 June 30,
1995, HUBCO had consolidated assets of $1.6 billion, consolidated deposits of
$1.4 billion and consolidated stockholders' equity of $121 million. Based on
assets, at June 30, 1995, HUBCO was among the ten largest commercial bank
holding companies 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 40 branches and
approximately $1.1 billion in assets through ten acquisitions of financial
institutions in both government-assisted and private transactions. As a
result, HUBCO's asset base grew to $1.6 billion at June 30, 1995. HUBCO
EXPECTS TO CONTINUE ITS ACQUISITION STRATEGY FOR THE FORESEEABLE FUTURE.
FUTURE ACQUISITIONS MAY BE EXPECTED TO AFFECT HUBCO'S EARNINGS AND THE
MARKET PRICE OF HUBCO COMMON STOCK. 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 fund to HUBCO. Additional
information about HUBCO and HUB is included in documents incorporated by
reference in this Proxy Statement-Prospectus. See "AVAILABLE INFORMATION"
and "INFORMATION INCORPORATED BY REFERENCE."
Growth. Growth Financial Corp ("Growth") is a bank holding company
organized under the laws of the State of New Jersey and registered under the
Bank Holding Company Act of 1956, as amended. Growth has one banking
subsidiary, Growth Bank, with three branches serving Morris and Somerset
Counties, New Jersey. At June 30, 1995, Growth had total assets of
approximately $130 million. Growth anticipates opening an additional branch
in Mendham, New Jersey in early 1996 and also is in the process of applying
to the FRB and the Department of Banking to open another branch in
Morristown, New Jersey. Growth's principal executive offices are located at
1500 Route 202, Harding Township, New Jersey, its mailing address is P.O. Box
401, Basking Ridge, New Jersey 07920-0401, and its telephone number is (201)
425-2500. See "AVAILABLE INFORMATION"; "BUSINESS OF GROWTH"; "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF GROWTH FINANCIAL CORP'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS"; and "INDEX TO FINANCIAL STATEMENTS OF GROWTH
FINANCIAL CORP."
THE MEETING
THE MEETING
Each copy of this Proxy Statement-Prospectus mailed to holders of Growth
Common Stock is accompanied by a proxy card furnished in connection with the
Growth Board of Directors' solicitation of proxies for use at the Meeting.
The Meeting is scheduled to be held at the Basking Ridge Country Club, 185
Madisonville Road (off North Maple Avenue), Basking Ridge, New Jersey, on
Wednesday, December 20, 1995 at 11:00 a.m., local time. Only holders of
record of Growth 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 Growth Common Stock will consider and vote upon (i) a proposal to
approve the Merger Agreement and (ii) such other matters as may properly be
brought before the Meeting, or any adjournment or postponements thereof,
including, without limitation, a motion to adjourn or postpone the Meeting to
another time and/or place for the purpose of soliciting additional proxies in
order to approve the Merger Agreement. On each matter to be considered at
the Meeting by holders of Growth Common Stock, such holders will have one
vote for each share of Growth Common Stock held of record on the Record Date.
HOLDERS OF GROWTH COMMON STOCK ARE REQUESTED TO PROMPTLY SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD TO GROWTH IN THE ENCLOSED POSTAGE-PAID,
ADDRESSED ENVELOPE.
Any holder of Growth 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 Assistant
Secretary of Growth or (iii) submitting a signed proxy card, bearing a later
date than the proxy last received, to the Assistant Secretary of Growth,
provided that such notice or proxy card is actually received by Growth 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
GROWTH 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,
Growth is unaware of any other matter to be presented at the Meeting.
KPMG Peat Marwick LLP has served as Growth's independent certified public
accountants since Growth's inception. KPMG Peat Marwick LLP will have a
representative at the Meeting who will have an opportunity to make a
statement if such representative desires, and who will be available to
respond to appropriate questions.
SOLICITATION OF PROXIES
The enclosed proxy is being solicited by the Growth Board of Directors for
use in connection with the Meeting. Growth will bear its own expenses in
connection with solicitation of proxies for its Meeting. In addition to
solicitation of proxies by use of the mail, directors, officers and
employees of Growth may also make solicitation of proxies of stockholders
either personally, or by telephone, telegram or other forms of communication.
These persons will not be specifically compensated for soliciting proxies.
Brokerage houses, custodians, nominees and fiduciaries will be requested to
forward the proxy solicitation materials to the beneficial owners of shares
of Growth Common Stock held of record by such persons, and Growth will
reimburse them for their expenses.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
VOTE REQUIRED
Only holders of record of shares of Growth Common Stock on the Record Date
will be entitled to vote at the Meeting. Each holder of record of shares of
Growth Common Stock on the Record Date will be entitled to one vote for each
share registered in his or her name on each matter presented to a vote of the
stockholders at the Meeting. On the Record Date, 1,694,081 shares of Growth
Common Stock were issued and outstanding. Approximately 790,135 shares
(constituting approximately 39.9% of the outstanding shares of Growth Common
Stock excluding currently exercisable options) were beneficially owned by
directors and executive officers of Growth and their affiliates on the Record
Date. In connection with the execution of the Merger Agreement, each
director of Growth and Growth Bank agreed, in his or her individual capacity,
to vote or cause to be voted all shares of Growth Common Stock held by such
person, or over which such person exercises full voting control, in favor of
the Merger. In addition, each non-director executive officer of Growth has
indicated his or her intention, in his or her individual capacity, to vote in
favor of the Merger. As of November 3, 1995, the directors and executive
officers beneficially owned shares of Growth Common Stock as follows:
NAME OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY PERCENT OF
OWNED<F1> CLASS<F2>
------------------
William B. Bradbury, Jr.<F3> 44,817 2.6%
Lawrence P. Brady, Jr.<F4> 47,516 2.8%
Henry A. Collins<F5> 53,227 3.1%
Robert J. DiQuollo<F6> 13,735 0.8%
John P. Horton<F7> 70,820 4.1%
A. Richard Lanyi<F8> 14,695 0.9%
Barry R. Mandelbaum 9,259 0.5%
George J. McGuinness<F9> 24,653 1.5%
Dale G. Potter<F10> 242,632 13.3%
Alan T. Schiffman<F11> 7,554 0.4%
Arthur R. Schmauder<F12> 33,521 2.0%
Herbert Smilowitz<F13> 55,714 3.3%
Richard S. Van Cleave III<F14> 54,888 3.2%
John D. Welch, Jr.<F15> 77,931 4.5%
Richard G. Whitehead<F16> 39,173 2.3%
Total Aggregate
Ownership of
Directors and
Executive Officers
as a Group (15 persons) 790,135<F17> 39.9%
-------
- -----------------------
[FN]
<F1> The number of shares of Common Stock owned and the number of shares
subject to options have been adjusted to reflect the Company's 5%
stock dividend which was distributed on March 15, 1995.
<F2> Percent of common stock beneficially owned reflects percentage of
ownership if options were exercised.
<F3> Includes 4,839 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F4> Includes 7,103 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F5> Includes 11,550 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F6> Includes 6,135 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F7> Includes 26,850 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F8> Includes 9,950 shares that may be acquired upon the exercise of
options granted and presently exercisable.
<F9> Includes 5,789 shares that may be acquired upon the exercise of
options granted and presently exercisable. Also includes 399
shares owned by his wife as custodian for his son as to which he
disclaims beneficial ownership. Includes 11,896 shares
beneficially owned as Co-trustee of the Growth Bank 401(k) Plan.
<F10>Includes 44,653 shares that may be acquired upon the exercise of options
granted and presently exercisable. Includes 84,638 shares subject to
options which may be acquired pursuant to an Agreement with Growth. See
Interests of Certain Persons in the Merger. Also includes 464 shares
owned by his stepdaughter as to which he disclaims beneficial ownership.
Includes 11,896 shares beneficially owned as Co-trustee of the Growth
Bank 401(k) Plan.
<F11>Includes 1,765 shares that may be acquired upon the exercise of options
granted and presently exercisable.
<F12>Includes 8,053 shares that may be acquired upon the exercise of options
granted and presently exercisable.
<F13>Includes 1,886 shares that may be acquired upon the exercise of options
granted and presently exercisable. Also includes 43,410 shares owned by
his company's Profit Sharing Plan.
<F14>Includes 20,954 shares that may be acquired upon the exercise of options
granted and presently exercisable.
<F15>Includes 38,340 shares that may be acquired upon the exercise of options
granted and presently exercisable. Also includes 811 shares owned by
his wife as to which he disclaims beneficial ownership.
<F16>Includes 11,577 shares that may be acquired upon the exercise of options
granted and presently exercisable. Also includes 5,094 shares owned as
custodian for his children as to which he disclaims beneficial
ownership. Includes 11,896 shares beneficially owned as Co-trustee of
the Growth Bank 401(k) Plan.
<F17>Includes 288,314 shares that may be acquired upon the exercise of
options granted and presently exercisable.
As of the Record Date, HUBCO beneficially owned 55,778 shares (approximately
3.3% of the outstanding shares) of Growth Common Stock. As of the Record Date,
the directors and executive officers of HUBCO and their affiliates did not
beneficially own any shares of Growth Common Stock. Growth management is not
aware of any individual or entity that owned, of record or beneficially, as
of the Record Date, more than 5% of the outstanding Common Stock of Growth,
except as follows:
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED<F1> PERCENT OF CLASS<F2>
------------------- ---------------- --------------------
The Summit 167,571 9.9%
Bancorporation<F3>
One Main Street
Chatham, NJ 07928
Dale G. Potter, President and 246,864 13.3%
Chief Executive Officer of
Growth and Growth Bank,
1500 Route 202
Harding Township, NJ
- --------------
[FN]
<F1> The number of shares of Common Stock owned and the number of shares
subject to options have been adjusted to reflect the Company's 5%
stock dividend which was distributed on March 15, 1995.
<F2> Percent of common stock beneficially owned reflects percentage of
ownership if options were exercised.
<F3> This represents 116,793 shares of Growth Common Stock owned by The
Summit Bancorporation ("Summit"), plus 50,778 shares of Common Stock
which Summit may acquire pursuant to an option granted by Growth to
Summit entitling Summit to acquire the shares at a current
exercise price of $9.93 per share. By agreement, Summit at no
time shall be permitted to exercise options which would have the
effect of increasing Summit's ownership over 9.9%.
The presence, in person or by proxy, of holders of Growth Common Stock
entitled to cast a majority of votes at the Meeting, is necessary to
constitute a quorum of the stockholders in order to take action at the
Meeting. Once a quorum is established, approval of the Merger Agreement
requires the affirmative vote of the majority of votes cast by the holders of
Growth Common Stock entitled to vote at the Meeting.
<PAGE>
THE PROPOSED MERGER
GENERAL DESCRIPTION
A copy of the Merger Agreement is attached as Appendix A to this Proxy
Statement. Descriptions of the Merger and the Merger Agreement are qualified
in their entirety by reference to the Merger Agreement which is hereby
incorporated in this Proxy Statement-Prospectus by reference.
The Merger Agreement provides that, at the Effective Time, Growth will be
merged with and into HUBCO, with HUBCO as the surviving corporation (the
"Surviving Corporation"), and all the property, rights, powers and franchises
of each of Growth and HUBCO will vest in the Surviving Corporation.
Immediately following the Effective Time, Growth Bank will be merged into HUB
(the "Bank Merger"), with HUB as the surviving bank (the "Surviving Bank").
The separate identity and existence of Growth Bank will cease upon
consummation of the Bank Merger and all property, rights, powers and
franchises of each of Growth Bank and HUB will vest in the Surviving Bank and
the Surviving Bank will continue to operate as a wholly owned subsidiary of
HUBCO. At the Effective Time of the Merger, each share of Growth Common
Stock outstanding immediately prior to the Effective Time will be converted
into shares and be exchangeable for newly issued shares of HUBCO Common
Stock, subject to certain adjustments as more fully described under "--
Consideration".
CONSIDERATION
At the Effective Time of the Merger, each share of Growth Common Stock
issued and outstanding immediately prior to the Effective Time will be
converted into and exchangeable for a number (the "Exchange Ratio") of shares
of HUBCO Common Stock equal to $14.64 divided by the Median Pre-Closing Price
(as defined below) of HUBCO Common Stock, with a minimum Exchange Ratio of
0.69 (the "Minimum Exchange Ratio") and a maximum Exchange Ratio of 0.81 (the
"Maximum Exchange Ratio"). The Minimum Exchange Ratio will apply if the
Median Pre-Closing Price of HUBCO Common Stock is above $21.23 and the
Maximum Exchange Ratio will apply if the Median Pre-Closing Price of HUBCO
Common Stock is below $18.07. The Exchange Ratio, the Minimum Exchange Ratio
and the Maximum Exchange Ratio are each subject to adjustment to take into
account any stock split, stock dividend, stock combination, reclassification
or similar transaction by HUBCO with respect to the HUBCO Common Stock.
The "Median Pre-Closing Price" is defined in the Merger Agreement as the
Median Price of HUBCO Common Stock calculated based upon the Closing Price of
HUBCO Common Stock during the first 20 of the 25 consecutive trading days
immediately preceding the date of the Closing. The "Closing Price" is
defined in the Merger Agreement as the closing price of HUBCO Common Stock as
supplied by Nasdaq 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" is defined in the Merger Agreement as the
average of the Closing Prices left after discarding the 9 lowest and 9
highest Closing Prices in the 20 day period. A trading date is defined as a
day for which a Closing Price is supplied and published.
No holder of Growth Common Stock will be entitled to receive any fractional
shares of HUBCO Common Stock pursuant to the Merger, but instead will be
entitled to receive (without interest) a cash payment in the amount of the
value of such fractional share interest, determined by multiplying such
holder's fractional interest by the Median Pre-Closing Price of HUBCO Common
Stock. All shares of HUBCO Common Stock that individual Growth stockholders
are entitled to receive in exchange for each share of Growth Common Stock
held will be aggregated to constitute as many whole shares of HUBCO Common
Stock as possible before determining the amount of a cash payment for
fractional shares.
NO DISSENTERS' RIGHTS
Under New Jersey law, holders of Growth Common Stock are not entitled to
dissenter's rights of appraisal in connection with the Merger.
CONVERSION OF STOCK OPTIONS
The Merger Agreement provides that each outstanding option to purchase
shares of Growth Common Stock (a "Growth Option") granted under Growth's
existing stock option plans will be assigned a value (the "Option Value")
equal to (a) the Median Pre-Closing Price of HUBCO Common Stock multiplied by
the Exchange Ratio (b) minus the stated exercise price for the Growth Option,
(c) such difference then multiplied by the number of shares of Growth Common
Stock for which the option may be exercised. At the Effective Time each
Growth Option will be converted into that number of shares of HUBCO Common
Stock equal to the Option Value divided by the Median Pre-Closing Price of
HUBCO Common Stock. No fractional shares of HUBCO Common Stock will be
issued in exchange for Growth Options. Instead, holders of Growth Options
will receive cash equal to the fractional share interest multiplied by the
Median Pre-Closing Price of HUBCO Common Stock. Growth maintains one non-
qualified stock option plan for both the incorporators and the Board of
Directors, and an Employee Stock Option Plan which has issued incentive stock
options. Options are outstanding under both plans. In addition, Dale Potter
and The Summit Bancorporation each hold outstanding Growth Options. See "THE
MEETING -- Vote Required" and "THE PROPOSED MERGER -- Interests of Certain
Persons in the Merger" for further information about the Growth Options owned
by Dale Potter and The Summit Bancorporation.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
------------------------
Growth was incorporated under the laws of the State of New Jersey on
October 27, 1988 and received approval from the Federal Reserve Board on
October 4, 1989 to become a bank holding company with respect to Growth Bank.
Growth completed its initial public offering on November 14, 1989 after the
sale of 1,462,149 shares of Growth Common Stock at $10.00 per share. Growth
Bank commenced banking operations on February 12, 1990. The period
subsequent to Growth Bank's inception has been one of continued and
substantial change in the banking industry, characterized by heightened
regulatory scrutiny and intensifying competition and consolidation.
Management of Growth and the Growth Board focused on these changes and sought
to best position Growth and its stockholders to enhance the value of Growth
Common Stock, including reviewing the possibilities of remaining independent,
being acquired or making acquisitions.
Beginning in April 1994, Growth management began to receive several
unsolicited verbal indications of interest to acquire Growth. None of these
verbal indications of interest were presented by the interested parties in a
written or detailed form to Growth, and none of the potential acquirors
pursued further these indications of interest. Partially in response to
these indications of interest as well as the changes in the banking industry,
Growth revised and expanded a five-year business plan for 1995 through 1999,
which included various financial objectives and projections for Growth. In
January 1995, Growth invited McConnell, Budd & Downes, Inc. ("MB&D") an
investment banking firm, to render general advisory services as well as
merger and acquisition services to Growth. Although the Growth Board was not
actively soliciting offers to sell Growth, it was the consensus of the Growth
Board that it would be prudent to determine a fair price for Growth should an
indication of interest be presented. MB&D assisted the Growth Board in
establishing the process to adequately evaluate any such indication of
interest. In May 1995, Growth formally engaged the investment advisory firm
of MB&D.
In March 1995, the Chief Executive Officer of HUBCO contacted the Chief
Executive Officer of Growth to discuss the possibility of pursuing a business
combination. This contact was informal and preliminary in nature and the
Growth Chief Executive Officer suggested that HUBCO present any preliminary
indication of interest in writing to the Growth Board. Shortly thereafter,
HUBCO did present a written preliminary indication of interest to Growth,
which led to further discussions between the parties relative to the
possibility of a merger. Both sides determined that sufficient interest
existed to execute a confidentiality agreement, which was executed on May 2,
1995. HUBCO began an extensive due diligence examination of Growth in mid-
May.
From April through June of 1995, Growth received several additional
preliminary indications of interest from other financial institutions
concerning the possibility of pursuing a merger with or an acquisition of
Growth. On April 26, 1995 the Growth Board established an Ad Hoc Committee of
five members to review each of these preliminary indications of interest,
with the assistance of MB&D. Informal discussions were held with each of
these parties at the senior management level concerning valuation and
structure of a potential transaction. Growth entered into a confidentiality
agreement with two of these parties and allowed each to conduct limited due
diligence examinations. Following this examination, one party withdrew its
indication of interest and the other party indicated that it was considering
an offer in the range of the then current market value of Growth Common
Stock, which would have been approximately $13.00 per share.
In June 1995, HUBCO reaffirmed its interest in acquiring Growth and
indicated that it would be willing to acquire Growth whereby each share of
Growth Common Stock would be converted to .81 shares of HUBCO. This exchange
ratio meant that Growth Common Stock would have a value at the date of
execution of the proposed merger agreement of approximately $14.00. On the
basis of that position as well as the extent to which HUBCO had conducted its
due diligence examination of Growth, the Growth Board, at its June 28, 1995
Board Meeting, instructed MB&D to continue negotiating the price and
structure of a possible merger with HUBCO and to determine whether any of the
other interested parties would be in a position to make a comparable offer to
Growth. One party presented an indication of interest to Growth which was of
lesser value than the HUBCO offer, and this party declined the invitation to
increase its offer.
The Growth Board and Ad Hoc Committee thereof held a substantial number of
special and regular meetings beginning in April 1995 to review and consider
the various indications of interest and to give direction to Growth
management as to how to proceed with each indication of interest. At
substantially all of the meetings, MB&D was present to answer questions and
present analyses of the various proposals. In late July and early August
1995, Growth management conducted its due diligence of HUBCO, assisted by its
investment advisors and special counsel, and reported its findings to the
Growth Board. On August 1, 1995, the Ad Hoc Committee again reviewed the
HUBCO proposal with MB&D, which indicated that the proposal was fair to
Growth shareholders from a financial point of view. The Ad Hoc Committee
voted to present the HUBCO proposal to the entire Growth Board.
The Growth Board met on August 3, 1995 to review and consider the terms of
HUBCO's offer. MB&D made a presentation regarding the proposal, including a
review of specific terms and conditions of the offer. The presentation
addressed each of the following: the terms and conditions of the proposed
acquisition, including its substantially tax-deferred exchange; the proposed
exchange ratio and proposed cash dividend payments by Growth; the recent
price movements of HUBCO Common Stock and the effect of such on the exchange
ratio; a financial summary of the proposed merger; a summary of the
discounted value of the future sale of the Growth franchise; the financial
implications of the proposed merger as it related to Growth as an independent
entity as compared to a pro forma combined entity; an analysis of Growth's
required earnings to eliminate the anticipated earnings per share dilution of
the merger; a discounted cash flow analysis; and a comparison of the HUBCO
proposal to numerous other recent transactions involving New York and New
Jersey commercial banks. In addition, Growth's special counsel made a
presentation regarding the fiduciary duties of the Growth Board. Following
the presentations, the Growth Board expressed its preliminary view that the
HUBCO proposal, as it then existed, appeared to be in the best interests of
Growth and its shareholders and therefore the Board authorized senior
management to pursue further discussions with HUBCO to finalize a definitive
agreement.
During this period, both parties completed their due diligence examinations
as well as continued to negotiate the terms and conditions of the proposed
merger. On August 17, 1995, Growth's Chief Executive Officer received an
unsolicited oral preliminary indication of interest from a Pennsylvania bank
holding company at an approximate cash price of up to $15.00 per share. This
preliminary indication of interest was subject to a due diligence examination
and did not contemplate the existence of the various outstanding options
(equal to approximately 20% of the pro forma outstanding shares) to acquire
Growth Common Stock which may have significantly decreased the value of the
Growth Common Stock to the potential acquiror. On August 18, 1995, the
Growth Board held a special meeting, with representatives of MB&D and special
counsel in attendance, to consider the HUBCO offer and the oral preliminary
indication of interest. The Growth Board was presented with the proposed
HUBCO-Growth Merger Agreement and Stock Option Agreement which set forth the
terms and conditions of the proposed Merger, as well as an analysis by MB&D
of the implication of any volatility in HUBCO Common Stock as it effected the
Exchange Ratio. Growth's special counsel reviewed the Merger Agreement,
Stock Option Agreement and other exhibits and responded to questions from
directors. At such time MB&D issued an oral opinion as to the fairness of
the range of exchange ratios, including the minimum or maximum, from a
financial point of view, to be paid to holders of Growth Common Stock. The
Growth Board determined that the oral preliminary indication of interest from
the Pennsylvania bank holding company was too tentative and conditional in
nature to delay voting on the HUBCO proposal, which was subject to
expiration. Following a lengthy discussion, the Growth Board determined that
acceptance of the HUBCO proposal was in the best interest of holders of
Growth Common Stock and unanimously approved with two abstentions the Merger
Agreement and the Stock Option Agreement and authorized their execution.
Subsequently, the Merger Agreement and the Stock Option Agreement were
executed.
Growth's Reasons for the Merger
-------------------------------
The Growth Board, with the assistance of outside financial and legal
advisors, has evaluated the financial, legal and market conditions bearing on
the decision to recommend the Merger. The terms of the Merger, including the
price, are a result of arm's length negotiations between representatives of
Growth and HUBCO. In reaching its determination that the Merger and Stock
Option Agreements are fair to, and in the best interests of Growth and
holders of Growth Common Stock, the Growth Board considered a number of
factors, both from a short and long term perspective, including, without
limitation, the following:
(i) the Growth Board's familiarity with and review of Growth's business,
financial condition, results of operations, management, prospects,
including, but not limited to, its potential growth, development,
productivity and profitability, and the business risks associated
therewith;
(ii) the current and prospective environment in which Growth operates,
including national and local economic conditions, the competitive
environment for financial institutions generally, the increased
regulatory burden on financial institutions generally and the trend
toward consolidation in the financial services industry, particularly in
Growth's market area;
(iii) information concerning the business, operations, asset quality and
prospects of HUBCO, including its recent acquisitions and the recent
performance of HUBCO Common Stock;
(iv) the oral and written presentations and the oral and written
opinions of Growth's financial advisor, MB&D, that the consideration was
fair to the holders of Growth Common Stock from a financial point of
view;
(v) the Growth Board's belief that the terms of the proposed form of
Merger Agreement with HUBCO were attractive in that it would allow
Growth shareholders to receive stock in the Merger, thus permitting
shareholders to defer any tax liability associated with the increase in
the value of their stock as a result of the Merger, and to become
shareholders in HUBCO, an institution with strong operations,
management, earnings performance and stock liquidity;
(vi) the expectation that HUBCO will continue to provide quality service
to the community and customers served by Growth and the expectation that
HUBCO would likely maintain Growth Bank's branches as branches of HUB.
HUB has no overlapping branches with Growth (HUB currently has no branch
locations in Somerset County and one branch located in Northern Morris
County).
(vii) the compatibility of the respective businesses of Growth and
HUBCO;
(viii) the addition of products and services, as well as greater
convenience through additional locations, which will be afforded Growth
customers as a result of the Merger; and
(ix) the alternative strategic courses available to Growth, including
remaining independent or exploring other indications of interest from
other potential acquirors.
THE IMPORTANCE OF THESE FACTORS RELATIVE TO ONE ANOTHER CANNOT PRECISELY BE
DETERMINED OR STATED HEREIN. THE GROWTH BOARD UNANIMOUSLY APPROVED THE
MERGER AGREEMENT WITH TWO ABSTENTIONS AND RECOMMENDS THAT GROWTH STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Recommendation of the Growth Board
----------------------------------
THE GROWTH BOARD HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT
GROWTH STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT. THE GROWTH
BOARD BELIEVES THAT THE MERGER WILL ENABLE GROWTH STOCKHOLDERS TO PARTICIPATE
IN OPPORTUNITIES FOR GROWTH THAT THE BOARD BELIEVES THE MERGER MAKES
POSSIBLE. See "THE MERGER Background of the Merger;" " Reasons for the
Merger" and " Opinion of Growth's Financial Advisor."
HUBCO's Reasons for the Merger
------------------------------
HUBCO's Board of Directors has approved the Merger, and believes the Merger
is in the best interests of HUBCO's stockholders. HUBCO management expects
that the acquisition of Growth and Growth Bank will expand HUBCO's presence
in the affluent markets of Morris and Somerset Counties, New Jersey, which
are presently served by Growth. HUBCO management believes that the
acquisition of Growth will complement HUBCO's past acquisitions and will
result in a natural extension of the market places currently served by HUBCO.
HUBCO management anticipates that the Merger will enhance the earnings
capacity of the Growth Bank branches and contribute positively to HUBCO's
consolidated earnings, through HUBCO's ability to offer expanded services to
Growth Bank's current customers and through cost savings and efficiencies to
be achieved by consolidating duplicative administrative functions. No
assurance can be given that HUBCO will realize its revenue enhancement, cost
savings or other post-merger goals.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stock Ownership
---------------
As of November 3, 1995, the executive officers and directors of Growth
beneficially owned 790,135 shares of Growth Common Stock, or approximately
39.9% of the issued and outstanding shares of Growth Common Stock. All
options to purchase Growth Common Stock outstanding at the Effective Time,
including options to purchase 288,314 shares of Growth Common Stock held by
executive officers and directors of Growth, will be converted into HUBCO
Common Stock by virtue of the Merger. See " -- Conversion of Stock
Options." In connection with the execution of the Merger Agreement, each
director of Growth and Growth Bank agreed, in his or her individual
capacity, to vote or cause to be voted all shares of Growth Common Stock
held by such person, or over which such person exercises full voting
control, in favor of the Merger. In addition, each non-director executive
officer of Growth has indicated his or her intention, in his or her
individual capacity, to vote in favor of the Merger.
Employment Arrangements
-----------------------
On April 27, 1994, Growth and Growth Bank issued a Memorandum (the
"Memorandum") concerning, among other things, the terms and conditions of the
continued employment by Growth and Growth Bank of Dale G. Potter, Maria
Armstrong, Richard Whitehead and George McGuinness (the "Executives"). The
Memorandum provided for employment of Mr. Potter on an "at will" basis at
compensation and benefit levels at least equal to those he was receiving on
March 20, 1994. The Memorandum provided that in the event of a "change of
control," Mr. Potter would be issued stock options to purchase 5% of the then
issued and outstanding shares of Growth Common Stock at an exercise price
equal to the closing Nasdaq bid price of the Growth Common Stock on December
31 of the year immediately preceding the change of control, and that upon any
termination of employment Mr. Potter would be entitled to continuation of
compensation and benefits through April 26, 1996. Also, in the event of a
"change of control," Ms. Armstrong, Mr. Whitehead and Mr. McGuinness would be
guaranteed 24 months employment, or severance benefits equal to 24 months, at
their then current level of salary and benefits. The Memorandum defined
"change of control" to include a person or group becoming the holder of 51%
of the outstanding stock of Growth or a majority of the stock owned by the
Board of Directors of Growth agreeing to be acquired by a person or group
under circumstances which would require Exchange Act reporting.
On August 18, 1995, Growth and Growth Bank (the "Employer") entered into
separate agreements with each of the Executives clarifying the terms of their
employment. Such agreements supersede all prior agreements with the
Executives, except for a certain release given by Mr. Potter to the Employer
which remains in effect, and the agreements cannot be amended without HUBCO's
consent.
The agreement with Mr. Potter provides for Growth to issue him options for
84,638 shares of Growth Common Stock (5% of the shares of Growth outstanding
on August 18, 1995) at an exercise price of $10.77 per share (the closing
price of Growth Common Stock on December 31, 1994). The Employer will employ
Mr. Potter from August 18, 1995 until the earlier of the Closing of the
Merger or April 26, 1996, at a monthly salary of $12,500 and benefits with a
value of at least $2,517 per month, which salary and benefits are equal to
the level received by Mr. Potter as of March 20, 1994. If the Closing occurs
prior to April 26, 1996, the Employer will cause Mr. Potter to be provided
with the same level of salary and benefits through April 26, 1996. Each of
the Employer and Mr. Potter have the right to terminate his employment with
or without cause on 30 days' notice. If his employment is terminated by the
Employer prior to the end of the contract period, the Employer will continue
to provide Mr. Potter with his compensation through April 26, 1996, as
severance. If Mr. Potter terminates his employment prior to the end of the
contract period, he will receive no post-termination compensation except as
required by COBRA or similar laws. The compensation for Mr. Potter set forth
in the employment agreement is in lieu of any other severance policy of the
Employer. The agreement does not give Mr. Potter any rights as an employee
of HUBCO or HUB. Mr. Potter acknowledges that his employment will end at the
Closing if not terminated earlier.
Each agreement with the other Executives provides that, no later than 30
days prior to the Closing of the Merger, the Executive will enter into one of
two alternative employment agreements. One alternative employment agreement
provides for an employment term through the second anniversary of the
Closing. If the Executive terminates his or her employment for any reason
(other than a reduction in title, responsibility, authority or compensation)
or the Employer terminates for cause, the Executive will be entitled to no
post-termination compensation except as required by COBRA or similar laws.
If the Employer terminates the Executive's employment without cause or if the
Executive elects to terminate due to a reduction in title, responsibility,
authority or compensation, the Employer must provide compensation through the
end of the contract period. The other alternative employment agreement
provides an employment term through August 18, 1997 (the second anniversary
of the execution of the Merger Agreement), subject to extension. When the
conversion of Growth's and Growth Bank's computer systems into the computer
systems of HUBCO and HUB is completed (the "Conversion Date"), if the
Executive is employed by the Employer and there is less than 18 months
remaining on the contract period, the contract period will be extended until
18 months after the Conversion Date. If the Executive's employment is
terminated by either party for any reason following the Conversion Date, but
prior to the expiration of the contract period, the Employer will provide the
Executive with compensation through the end of the contract period. If the
Executive's employment is terminated by the Executive for any reason or by
the Employer for cause prior to the Conversion Date, the Executive will be
entitled to no post-termination compensation except as required by COBRA or
similar federal or state laws. If the Executive's employment by the Employer
is terminated by the Employer without cause prior to the Conversion Date, the
Employer will continue to provide the Executive with compensation through the
end of the (unextended) contract period.
Both versions of the agreements provide for a salary and benefit package
with a value no less than the base salary and benefits being paid to the
Executive as of August 18, 1995. For Ms. Armstrong, Mr. Whitehead and Mr.
McGuinness, that base salary is $6,625, $7,500 and $6,750 per month,
respectively, and those benefits have a value of $1,463, $1,642 and $1,719
per month, respectively. The compensation for the Executive set forth in the
agreement is in lieu of any other severance policy of the Employer. Prior to
the Closing, the Executive will have the same title and duties as on August
18, 1995. After the Closing, the Executive's title and duties will be
determined by the Employer in its sole discretion. The Executive may
terminate employment upon two weeks' prior written notice to the Employer.
The Employer may terminate the Executive's employment upon notice to the
Executive, which notice may (in the Employer's sole discretion) be given at
any time including immediately prior to the termination. Each of the
agreements will be binding on HUBCO and HUB as successors to Growth and
Growth Bank.
Indemnification and Insurance
-----------------------------
In addition to the foregoing, the Merger Agreement requires HUBCO to
provide the directors and officers of Growth with indemnification equivalent
to that provided by the current Certificate of Incorporation and Bylaws of
Growth with respect to acts or omissions occurring prior to the Effective
Time, for a period of six years from the Effective Time or, in the case of
claims made prior to the end of such six year period, until such matters are
finally resolved. In order to satisfy this obligation, HUBCO is required to
procure continuing director and officer liability coverage for officers,
directors and employees of Growth and Growth Bank for a period of six years
after the Effective Time from a reputable insurance company issuing such
policies, with terms and conditions (other than the amount of premiums)
substantially similar to or better than those in effect under Growth's
existing directors' and officers' insurance policy.
OPINION OF FINANCIAL ADVISOR TO GROWTH FINANCIAL CORPORATION
Since May 15, 1995, MB&D has formally acted as financial advisor to Growth
on a contractual basis. Prior to that time, MB&D acted as an informal
investment advisor to Growth since January, 1995. The scope of MB&D's
assignment encompassed a specific facet of Growth's strategic planning
process: the evaluation of the options of either remaining independent or
pursuing a possible upstream affiliation with another banking organization.
MB&D advised Growth throughout the process leading up to execution of the
Merger Agreement. Representatives of MB&D participated in numerous meetings
with Growth management and attended many meetings of the Growth Board of
Directors during the process. MB&D periodically advised Growth of progress
made and repeatedly analyzed Growth's options. MB&D was retained based on
its qualifications and experience in the financial analysis of financial
institutions and its extensive experience with merger and acquisition
transactions involving financial institutions. MB&D, based in Morristown,
New Jersey, is a financial consulting and investment banking firm
specializing exclusively in the banking and thrift industries. MB&D is also
a Nasdaq broker-dealer specializing in the securities of banking and thrift
entities and produces equity research for institutional and high net-worth
investors in the securities of financial institutions. In the ordinary
course of business, MB&D may trade the equity securities of Growth and HUBCO
for its own account and for the account of its customers and, accordingly, at
any time may hold a long or short position in such securities. MB&D has also
served as a market maker in Growth Common Stock since 1992.
MB&D delivered its oral opinion to the Board of Directors of Growth as of
August 18, 1995, and delivered its written opinion to the Board of Directors
of Growth, dated as of the date of this Proxy Statement-Prospectus, that
subject to the limitations set forth in the written opinion, as of the
respective dates of such oral and written opinion, the Exchange Ratio
(including the Maximum and Minimum Exchange Ratios permitted) provided for in
the Merger Agreement is fair to the holders of Growth Common Stock from a
financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF MB&D DATED THE DATE OF THIS PROXY
STATEMENT SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN AND IS ATTACHED HERETO AS APPENDIX C. GROWTH'S
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. MB&D'S OPINION
IS DIRECTED TO THE POSSIBLE RANGE OF EXCHANGE RATIOS WHICH MAY BE OBTAINED IN
THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF GROWTH
COMMON STOCK AS TO HOW SUCH HOLDER SHOULD VOTE AT THE MEETING. THE SUMMARY
OF THE OPINION OF MB&D SET FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION
ITSELF. THE CONCLUSION OF THE ORAL OPINION OF AUGUST 18, 1995 IS
SUBSTANTIALLY THE SAME AS THE CONCLUSION OF THE OPINION WHICH APPEARS IN
APPENDIX C.
In arriving at its opinion, MB&D reviewed publicly available business and
financial information related to HUBCO and Growth. MB&D also reviewed the
Merger Agreement and the Stock Option Agreement, a draft of this Proxy
Statement-Prospectus, and certain other information including internal
reports and documents of Growth and management-prepared financial forecasts
and projections provided to it by Growth. Additionally, MB&D reviewed
certain information provided to it by HUBCO. MB&D met with and had
discussions with members of the senior management of Growth and HUBCO
regarding their respective past and current business operations including
financial condition and future prospects in general. The discussions
included a review of asset quality trends being experienced by both
institutions.
MB&D considered certain financial and stock market data of HUBCO and
compared that information with similar information for other publicly held
bank holding companies. In addition, MB&D reviewed a number of other recently
announced transactions involving the acquisition of banking institutions.
MB&D's opinion takes into account its assessment of general economic, market
and financial conditions, its experience in other transactions, as well as
its experience in securities valuation and its knowledge of the banking and
thrift industries generally. For purposes of reaching its opinion, MB&D
assumed and relied upon the accuracy and completeness of the information
provided to it by Growth and HUBCO, and did not assume any responsibility for
the independent verification of such information or any independent valuation
or appraisal of any of the assets or liabilities of either Growth or HUBCO.
With respect to the financial projections reviewed by MB&D in the course of
rendering its opinion, MB&D assumed that such projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of each of Growth and HUBCO as to the most
likely future performance of their respective companies. MB&D was not
furnished with any independent appraisals of the assets or liabilities of
either Growth or HUBCO.
In connection with rendering its opinion to the Board of Directors of
Growth, MB&D informed the Board that it performed and refined a number of
financial analyses that are summarized and discussed below. The analyses
summarized below should be considered as a whole and no reliance on any
single portion should be accorded. MB&D also informed the Growth Board of
Directors that: (i) the preparation of a fairness opinion is an involved
process employing both objective and subjective judgments, the evaluation of
numerous factors and varies as to the steps involved based on the structure
and form of the specific transaction and the identities and historical
performances of the parties to the transaction; (ii) estimates which comprise
a part of MB&D's analysis are not necessarily indicative of future results or
values; and (iii) estimates of values referenced in any such analysis are
not intended to be appraisals and may not reflect the price at which the
companies or their securities may actually be sold.
The following is a summary, prepared by MB&D, of the analyses completed by
MB&D in connection with rendering and reaffirming its opinion:
Analysis of the Merger
----------------------
MB&D analyzed the terms of the proposed Merger as reflected in the Merger
Agreement. Since the proposed Merger is expected to be accounted for as a
pooling of interests, MB&D analyzed the anticipated impact of the Merger on
the projected future results of HUBCO and on its projected consolidated pro
forma balance sheet. MB&D concluded that, due to the relative size of HUBCO
and Growth, the Merger would have very little affect on HUBCO's future
results. The consideration to be received in the Merger per share of Growth
Common Stock will be a number of shares of HUBCO Common Stock with a market
value (based on the Median Pre-Closing Price of HUBCO Common Stock) of
$14.64, constrained by a Minimum Exchange Ratio of 0.69 shares of HUBCO
Common Stock and a Maximum Exchange Ratio of 0.81 shares of HUBCO Common
Stock. The Merger Agreement allows Growth to pay, under certain
circumstances, a cash dividend per share of Growth Common Stock that shall
not exceed $.12 per calendar quarter and shall not exceed $.36 in the
aggregate from the date of the Merger Agreement through the Effective Time.
In conjunction with the execution of the Merger Agreement, Growth commenced a
cash dividend payment. As of the date of this Proxy Statement-Prospectus,
Growth had declared and paid one dividend of $.12 per share.
Assuming that the shares of HUBCO Common Stock to be exchanged for each
share of Growth Common Stock in the Merger have a value of $14.64 (which
would be the case if the value of each share is equal to the Median Pre-
Closing Price of HUBCO Common Stock and the Median Pre-Closing Price of HUBCO
Common Stock falls within a range which does not trigger the constraints
imposed by either the Minimum Exchange Ratio or the Maximum Exchange Ratio),
MB&D determined that the following ratios result:
MULTIPLE OF EARNINGS
(a) 22.18 times reported earnings of Growth for the fiscal year ended
December 31, 1994.
(b) 24.40 times reported earnings of Growth for the trailing 12 months
ending June 30, 1995.
(c) 28.15 times estimated earnings of Growth for the fiscal year ending
December 31, 1995.
MULTIPLE OF BOOK VALUE
(a) 1.80 times tangible common equity of Growth as of June 30, 1995.
(b) 2.16 times ADJUSTED tangible common equity of Growth as of June 30,
1995. (see text below).
MULTIPLE OF MARKET VALUE
The consideration of HUBCO Common Stock with a value of $14.64 per share
of Growth's common stock represented a 6% premium to the market price
reported by Nasdaq as of the close of business on August 17, 1995 (the day
prior to execution of the Merger Agreement).
The above ratios do not ascribe any value associated with dividends to
be paid or delivered by Growth or HUBCO.
Adjusted Capital Concept
------------------------
The tangible equity capital of Growth at June 30, 1995 was $13.8 million,
or 10.80% of total tangible assets of $127.3 million. Assuming that the
maximum amount of capital that would be required (from either a regulatory or
a management perspective) to conservatively operate Growth, while
accommodating anticipated organic growth, would not exceed 7.50%, the
notional capital necessary to provide that capitalization level would be
approximately $9.6 million. This would leave "notionally excess capital" of
approximately $4.2 million. If one views the notionally excess capital of
$4.2 million of the $24.8 million estimated value of the consideration to be
received in the Merger as the equivalent of a dollar-for-dollar return of
notionally excess capital, and one views the remaining $20.6 million value of
the Merger consideration in terms of its relationship to the $9.6 million in
"notionally required capital", the implicit multiple of adjusted equity on
such a basis is: 2.16 times. It is the opinion of MB&D that the concepts of
"notionally required" and "notionally excess" capital provide a useful basis
on which to compare this proposed transaction to other transactions in which
the entities acquired did not display the above average capitalization levels
of Growth.
Exchange Analysis
-----------------
MB&D considered the effect of the Exchange Ratio collar (i.e., the Minimum
and Maximum Exchange Ratios) contained in the Merger Agreement. The effect
of the collar is that stockholders of Growth could receive HUBCO Common Stock
valued at less than $14.64 per share of Growth if the Median Pre-closing
Price of HUBCO Common Stock is less than $18.074. The Exchange Ratio at this
price level is 0.81 shares of HUBCO Common Stock for every share of Growth
Common Stock. Contractually this is the greatest number of HUBCO shares that
will be exchanged for each share of Growth Common Stock. If the Median
Pre-closing Price of HUBCO Common Stock is $18.074 or less, the Exchange
Ratio becomes fixed at 0.81 shares of HUBCO Common Stock. Growth
shareholders are subject to price risk below this Median Pre-closing Price
level. Conversely, a stockholder of Growth could receive HUBCO Common Stock
valued at greater than $14.64 per share of Growth Common Stock if the Median
Pre-closing Price of HUBCO Common Stock is greater than $21.217. The
Exchange Ratio at this price level is 0.69 shares of HUBCO Common Stock for
every share of Growth Common Stock. Contractually, this is the minimum
number of shares of HUBCO Common Stock that will be exchanged for each share
of Growth Common Stock. If the Median Pre-closing Price of HUBCO is $21.217
or greater the Exchange Ratio becomes fixed at 0.69 shares of HUBCO Common
Stock for each share of Growth Common Stock. If the Median Pre-closing Price
of HUBCO Common Stock is greater than $21.217, then the value of the 0.69
shares of HUBCO Common Stock to be exchanged for each share of Growth Common
Stock will be greater than $14.64. Assuming HUBCO continues to declare
quarterly dividends, pro-forma dividend income per share of Growth will be
effected by the Exchange Ratio. If HUBCO's $0.15 per share dividend is
continued (MB&D knows of no reason why HUBCO would decrease its current
dividend), quarterly dividend income per share of Growth would fall within a
range of $0.1035 (Exchange Ratio of 0.69) and $0.1215 (Exchange Ratio of
0.81).
Discussions with other potential Merger Partners
------------------------------------------------
As part of its assignment, MB&D was directed by Growth's Board of Directors
to analyze other hypothetical merger partners. Using publicly available
information and without contacting any other banking institution, MB&D
analyzed hypothetical transactions with 16 institutions which it believed
would conceivably have had an interest in Growth. As part of the analysis,
MB&D reviewed deal structure, pricing capabilities, projected pro-forma
results and compatibility of franchises. For proposed pooling transactions,
MB&D evaluated the market value and liquidity of the hypothetical acquirors'
common stock, anticipated dividend income, and capital adequacy. MB&D
presented its findings to Growth's Board of Directors for consideration, and
recommended that Growth approach two institutions, who had previously
approached Growth, in addition to HUBCO. All three institutions signed
confidentiality agreements and were provided due diligence materials. Each
institution was asked to render non-binding indications of interest. In
addition, one banking institution which was already a substantial shareholder
of Growth was approached as negotiations with HUBCO continued and upon
learning of the likely price level at which negotiations were taking place
expressed no interest in participation. None of these contacts resulted in
an indication of interest superior in value to that of HUBCO.
Discounted Cash Flow Analysis
-----------------------------
MB&D completed a discounted cash flow analysis to permit the conceptual
examination of the present discounted values of future results employing
selected assumptions and discount rates. The analysis examines a five year
period, beginning in January 1995 and ending in December 1999. The
assumptions and projections that were used in the analysis were developed by
Growth's management and discussed with the Board of Directors of Growth and
provided to MB&D. The assumptions and projections employed by management are
summarized below:
1. A control sale is possible currently at a P/E ratio (using
estimated 1995 earnings) of 28.15 times or $24,781,860.
2. Growth's rate of growth for assets will average 15.95% per annum
for the five year period.
3. Growth's average return on assets over the five year period will be
0.76%. Average return on assets for fiscal year 1999 is projected
to be 0.92%.
4. Growth is projected to start paying a cash dividend on its common
stock during the 1997 fiscal year. The dividend payout ratio is
projected to grow to 33.78% in 1999.
5. A discount rate of 12% was applied to all cash flows.
The last variable needed to project a present value per share is a terminal
Price/Earnings ("P/E") multiple. MB&D employed a hypothetical terminal control
transaction with P/E multiples ranging from 14 times to 20 times. It is MB&D's
opinion that the P/E multiple for a transaction in 1999 would likely fall
within this range, although MB&D pointed out the risk to Growth that the
range for future terminal multiples could decrease to historically lower
levels. This opinion is based on an evaluation of historical transactions
within New Jersey and takes into account the reported transaction P/E
multiples of the last 18 months. The resulting discounted present values
fell within a range of $11.04 (P/E multiple of 14) to $15.50 (P/E multiple of
20).
The assumptions employed and the viability of maintaining such growth rates
were then discussed with Growth's management. Within this context both
external and internal factors were discussed. Consideration was given to the
present health and future prospects of the banking environment within the
State of New Jersey.
NOTE: THE DISCOUNT FACTORS EMPLOYED EMBODY BOTH THE CONCEPT OF THE TIME
VALUE OF MONEY AND RISK FACTORS THAT REFLECT THE UNCERTAINTY OF THE FORECAST
CASH FLOWS AND TERMINAL P/E MULTIPLES. USE OF HIGHER DISCOUNT RATES WOULD
RESULT IN LOWER DISCOUNTED PRESENT VALUES.
Analysis of Other Comparable Transactions
-----------------------------------------
MB&D reviewed 15 publicly announced transactions involving a commercial
bank as the target in the New York metropolitan area (two have been
terminated prior to completion). These transactions were announced between
March of 1994 and August of 1995.
MB&D is reluctant to place undue emphasis on "comparables analysis" as a
methodology due to what it considers to be inherent limitations of the
practice. MB&D has observed that such analysis may fail to adequately
consider such factors as: material differences in the underlying
capitalization of the institutions which are being compared; differences in
the long-term historic earnings (or loss) patterns recorded by the
institutions being compared; non-recurring profit or loss items which can
distort apparent earnings multiples; differences in the form or forms of
consideration used to complete the transaction; differences between the
planned method of accounting for a transaction; and other factors including
the relative population demographics of the institutions being compared.
Comparables analysis also infrequently considers the degree of facilities
overlap between the acquiror's market and that of the target or the absence
of such overlap and the resulting cost savings differentials between two
otherwise apparently comparable transactions. MB&D consequently believes
that comparables analysis is problematic at best.
Nevertheless, in August 1995 MB&D reviewed the publicly available
information concerning the sample of transactions described above. Within
this universe the average (mean) multiple of book value paid by the acquiror
was 2.20 times and the maximum multiple paid was 2.94 times, while the
minimum multiple was 1.58 times. These statistics can be compared to a
multiple of 1.80 which can be derived for the Merger. With respect to
trailing 12 months earnings multiples for this same data sample, the average
P/E multiple paid was 17.38 times and the maximum multiple (excluding the
acquisition of institutions with negative return on assets for the trailing
12 months) was 24.9 times, while the minimum multiple was 11.58 times. These
statistics can be compared to a multiple of 24.40 which can be derived for
the Merger.
Compensation of MB&D
--------------------
Pursuant to a letter agreement with Growth dated May 15, 1995, Growth has
paid MB&D a fee of $5,000 for advising Growth on responding to and
negotiating with HUBCO, and an additional fee of $5,000 for advising and
assisting Growth in contacting and negotiating with additional parties. Also
pursuant to the letter agreement, Growth paid MB&D a fee of $75,000 upon
execution of the definitive Merger Agreement, and Growth is required to pay
MB&D a fee of $50,000 promptly after the mailing of this Proxy Statement-
Prospectus, which contains MB&D's written opinion. In addition, Growth has
agreed to pay MB&D a cash fee equivalent to 1.00% of the fair market value of
the consideration received by Growth stockholders (including in-the-money
options) upon closing of the Merger, less $125,000 of the fees which will have
been previously paid to MB&D as described above.
In addition, Growth has agreed to reimburse MB&D for its reasonable
out-of-pocket expenses incurred in connection with the Merger, and to
indemnify MB&D and its directors, officers and employees against certain
losses, claims, damages and liabilities relating to or arising out of MB&D's
engagement, including liabilities under federal securities laws.
MB&D has filed a written consent with the Commission relating to the
inclusion of its fairness opinion and the references to such opinion and to
MB&D in the Registration Statement in which this Proxy Statement-Prospectus
is included. In giving such consent, MB&D did not admit that it comes within
the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations thereunder.
RESALE CONSIDERATIONS WITH RESPECT TO THE HUBCO COMMON STOCK
The shares of HUBCO Common Stock that will be issued if the Merger is
consummated have been registered under the Securities Act and will be freely
transferable, except for shares received by persons, including directors and
executive officers of Growth, who may be deemed to be "affiliates" of Growth
under Rule 145 promulgated under the Securities Act. An "affiliate" of an
issuer is defined generally as a person who "controls" the issuer.
Directors, executive officers and 10% stockholders are presumed by the
Securities and Exchange Commission (the "Commission") to be affiliates of the
issuer. Affiliates may not sell their shares of HUBCO Common Stock acquired
pursuant to the Merger, except pursuant to an effective registration
statement under the Securities Act covering the HUBCO Common Stock or in
compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act.
Persons who may be deemed to be "affiliates" of Growth have delivered
letters to HUBCO in which they have agreed to certain restrictions on their
ability to sell, transfer or otherwise dispose of ("transfer") any Growth
Common Stock owned by them and any HUBCO Common Stock acquired by them in the
Merger. Pursuant to the accounting rules governing a pooling of interests,
the affiliates of Growth have agreed not to transfer the shares during a
period commencing with the period beginning 30 days prior to the Effective
Time and ending on the date on which financial results covering at least 30
days of post-merger combined operations of HUBCO and Growth have been
published by HUBCO or filed by HUBCO on a Form 8-K, 10-Q or other appropriate
public filing. Also, in connection with the pooling of interests rules, the
affiliates have agreed not to transfer their Growth Common Stock in the
period prior to 30 days before the Effective Time without giving HUBCO
advance notice and an opportunity to object if the transfer would interfere
with pooling of interests accounting for the Merger. Pursuant to Rule 145,
the affiliates have also agreed to refrain from transferring HUBCO Common
Stock acquired by them in the Merger, except in compliance with certain
restrictions imposed by Rule 145.
Persons who may be deemed "affiliates" of HUBCO have also agreed with HUBCO
not to transfer HUBCO Common Stock beneficially owned by them in violation of
the pooling of interests restrictions set forth above with respect to Growth.
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to satisfaction or waiver of certain
conditions, including (i) approval by the affirmative vote of a majority of
the shares of Growth Common Stock voting at the Meeting, whether in person or
by proxy; (ii) the receipt of all consents, approvals and authorizations of
all necessary federal government authorities and expiration of all required
waiting periods, necessary for the consummation of the Merger (see "--
Regulatory Approvals"); (iii) the effectiveness of the registration statement
covering the shares of HUBCO Common Stock to be issued to Growth
stockholders; (iv) the continued accuracy in all material respects of the
representations and warranties of Growth and HUBCO, respectively, contained
in the Merger Agreement; (v) the performance by Growth or HUBCO, as the case
may be, in all material respects, of all obligations under the Merger
Agreement; (vi) the absence of any litigation that would restrain or prohibit
the consummation of the Merger; and (vii) receipt by the parties of an
opinion of Pitney, Hardin, Kipp & Szuch to the effect that the exchange of
Growth Common Stock for HUBCO Common Stock is a tax-free reorganization
within the meaning of Section 368 of the Internal Revenue Code. See "--
Federal Income Tax Consequences".
Growth's obligation to consummate the Merger is also conditioned on, among
other things, (i) the Median Pre-Closing Price of HUBCO Common Stock being no
less than $14.75 (provided, that if Growth chooses not to consummate the
Merger due to the failure of this condition, then Growth will be obligated to
reimburse HUBCO and HUB for all of their expenses in connection with the
Merger Agreement and the transactions contemplated thereby); and (ii) receipt
by the Board of Directors of Growth of a Fairness Opinion of MB&D (see
"--Opinion of Financial Advisor to Growth Financial Corporation").
HUBCO's obligation to consummate the Merger is also conditioned on, among
other things, (i) Growth's merger related expenses being reasonable; and (ii)
qualification of the Merger to be treated by HUBCO as a pooling of interests
for accounting purposes.
REGULATORY APPROVALS
Consummation of the Merger is subject, among other things, to prior receipt
of all necessary regulatory approvals or waivers. In order to consummate the
Merger and the Bank Merger, HUBCO must obtain regulatory approvals from the
FDIC and the New Jersey Department of Banking (the "Department of Banking")
and an approval or waiver from the FRB. HUBCO has applied to the FDIC to
merge Growth Bank into HUB, has applied to the FRB for approval or a waiver
to acquire Growth under the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and has applied to the Department of Banking for approval of the
acquisition of Growth Bank. 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 or waivers. Although neither HUBCO nor Growth is aware of any
basis for disapproving the Merger or the Bank Merger, there can be no
assurance that all such approvals or waivers will be obtained, that such
approvals and waivers will be obtained on a timely basis, or that such
approvals and waivers will not impose conditions which would materially
impair the value of Growth and Growth Bank, taken as a whole, to HUBCO. If
any such condition is imposed, HUBCO would have the right to terminate the
Merger Agreement.
No assurance can be given as to when, or if, necessary regulatory approvals
or waivers 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
the Merger is not effected on or before June 30, 1996, the Merger Agreement
may be terminated by Growth 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.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
At the Effective Time, as a result of the Merger, Growth will be merged
into HUBCO, which will be the surviving entity in the Merger. In addition,
Growth Bank will merge into HUB, with HUB as the surviving entity. HUB will
continue to operate as a subsidiary of HUBCO.
The location of the principal office of HUBCO will remain unchanged -- 1000
MacArthur Boulevard, Mahwah, New Jersey 07430. The branch offices of Growth
Bank will serve as branch offices of HUB.
EXCHANGE OF CERTIFICATES
At the Effective Time, holders of certificates formerly representing shares
of Growth Common Stock will cease to have any rights as Growth stockholders
and their certificates automatically will represent the shares of HUBCO
Common Stock into which their shares of Growth Common Stock will have been
converted by the Merger. As soon as practicable after the Effective Time,
HUBCO will send written instructions and a letter of transmittal to each
holder of Growth Common Stock, indicating the method for exchanging such
holder's stock certificates for the certificates representing those shares of
HUBCO Common Stock into which such holder's shares of Growth Common Stock
have been exchanged. HOLDERS OF GROWTH COMMON STOCK SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE INSTRUCTIONS FROM HUBCO.
Holders of outstanding certificates for Growth Common Stock, upon proper
surrender of such certificates to HUBCO, will receive, promptly after the
Effective Time, a certificate representing the full number of shares of HUBCO
Common Stock into which the shares of Growth Common Stock previously
represented by the surrendered certificates have been converted. At the time
of issuance of the new stock certificate each stockholder so entitled will
receive a check for the amount of the fractional share interest, if any, to
which the stockholder may be entitled.
Each share of HUBCO Common Stock for which shares of Growth Common Stock
are exchanged will be deemed to have been issued at the Effective Time.
Accordingly, Growth stockholders who receive HUBCO Common Stock in the Merger
will be entitled to receive any dividend or other distribution which may be
payable to holders of record of HUBCO Common Stock as of dates on or after
the Effective Time. However, no dividend or other distribution will actually
be paid with respect to any shares of HUBCO Common Stock until the
certificate or certificates formerly representing shares of Growth Common
Stock have been surrendered, at which time any accrued dividends and other
distributions on such shares of HUBCO Common Stock will be paid without
interest. See "--Consideration".
EFFECTIVE TIME; AMENDMENTS; TERMINATION
A closing under the Merger Agreement (the "Closing") will occur on a date
as soon as practicable following receipt of all necessary regulatory
approvals, or at such other date as is agreed to by HUBCO and Growth. At the
Closing, documents required to satisfy the conditions to the Merger of the
respective parties will be exchanged. The Closing will not occur prior to
January 15, 1996 unless both parties agree. A Certificate of Merger will be
filed with the Secretary of State of the State of New Jersey immediately
following the Closing. The time of such filing will be the "Effective Time."
The Merger Agreement may be amended, modified or supplemented with respect
to any of its terms by the mutual consent of HUBCO, HUB, Growth and Growth
Bank at any time prior to the Effective Time.
The Merger Agreement may be terminated at any time prior to the Effective
Time: (a) by mutual written consent of Growth and HUBCO, (b) by either Growth
or HUBCO if the Effective Time has not occurred by June 30, 1996 or if the
required stockholder approval or regulatory approval of the Merger is not
obtained, (c) by HUBCO if regulatory approval is obtained with conditions
which materially impair the value of Growth and Growth Bank, taken as a
whole, to HUBCO, or if a material adverse change occurs in the business,
operations, assets, or financial condition of Growth and Growth Bank, taken
as a whole, from that disclosed by Growth in Growth's Quarterly Report on
Form 10-QSB for the six months ended June 30, 1995 and Growth's Annual Report
on Form 10-KSB for the year ended December 31, 1994 or if there is a material
breach in any representation, warranty, covenant, agreement or obligation of
Growth contained in the Merger Agreement and the breach is not remedied
within 30 days after written notice thereof, (d) by Growth, if a material
adverse change occurs 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, 1995 and HUBCO's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 or if there is a material breach in any
representation, warranty, covenant, agreement or obligation of HUBCO
contained in the Merger Agreement and the breach is not remedied within 30
days after written notice thereof, (e) by either HUBCO or Growth if the
conditions to its obligations to close the Merger are not satisfied and are
not capable of being satisfied by June 30, 1996, or (f) by Growth, if
Growth's Board of Directors approves another acquisition transaction after
determining, upon advice of counsel, that approval was necessary in the
exercise of its fiduciary obligations under applicable laws. Growth also has
the right to terminate the Merger Agreement if the Median Pre-Closing Price
of HUBCO Common Stock is less than $14.75. No assurances can be given that
the conditions precedent to consummation of the Merger will be met or waived
by June 30, 1996, the date after which either party may terminate the Merger
Agreement if such conditions are not met or waived. See "-- Conditions to
the Merger."
Upon a termination of the Merger Agreement, the transactions contemplated
thereby will be abandoned without further action by any party and each party
will bear its own expenses, except that if Growth chooses to terminate the
Merger Agreement due to the Median Pre-Closing Price of HUBCO Common Stock
being less than $14.75 then Growth will be obligated to reimburse HUBCO and
HUB for all of their expenses in connection with the Merger Agreement and the
transactions contemplated thereby. In the event of a termination, each party
will retain all rights and remedies it may have at law or equity under the
Merger Agreement.
ACCOUNTING TREATMENT OF THE MERGER
The Merger is expected to be accounted for by HUBCO under the pooling of
interests method of accounting in accordance with generally accepted
accounting principles. See "PRO FORMA COMBINED FINANCIAL INFORMATION."
FEDERAL INCOME TAX CONSEQUENCES
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL
INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF TAXPAYERS,
INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS,
FOREIGN PERSONS AND PERSONS WHO ACQUIRED SHARES OF GROWTH COMMON STOCK
PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR OTHERWISE AS
COMPENSATION. GROWTH 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, Growth, HUB or Growth Bank or by the
stockholders of Growth upon the exchange of their shares of Growth Common
Stock solely for shares of HUBCO Common Stock pursuant to the Merger. It is
a condition of closing that counsel to HUBCO provide an opinion to HUBCO and
to Growth with respect to the matter covered by the foregoing sentence. With
respect to this Proxy Statement, Pitney, Hardin, Kipp & Szuch, counsel to
HUBCO, has provided an opinion that, based upon the circumstances as they
presently exist, counsel expects to be able to render the required opinion.
CONSEQUENCES OF RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES. Cash paid to
Growth stockholders in lieu of fractional share interests will be 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).
BASIS OF HUBCO COMMON STOCK. The basis of HUBCO Common Stock received by a
Growth stockholder who receives solely HUBCO Common Stock will be the same
immediately after the exchange, as the basis of such stockholder's Growth
Common Stock exchanged therefor. Where a Growth stockholder receives both
HUBCO Common Stock and cash, the basis of the HUBCO Common Stock received
will equal (a) the basis of the Growth 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
Growth stockholder will include the holding period for the Growth Common
Stock exchanged therefor.
HOLDERS OF GROWTH OPTIONS (WHICH ARE INCENTIVE STOCK OPTIONS) WILL RECEIVE
HUBCO COMMON STOCK AND CASH IN LIEU OF FRACTIONAL SHARES IN CANCELLATION OF
THEIR GROWTH OPTIONS. SUCH PERSONS WILL BE TREATED AS HAVING RECEIVED
COMPENSATION TAXABLE AS ORDINARY INCOME EQUAL TO THE AMOUNT BY WHICH THE
AMOUNT OF CASH OR THE VALUE OF THE HUBCO COMMON STOCK RECEIVED EXCEEDS THEIR
ADJUSTED BASIS IN THEIR INCENTIVE STOCK OPTIONS, IF ANY.
STOCK OPTION FOR SHARES OF GROWTH COMMON STOCK
HUBCO and Growth entered into the Stock Option Agreement, in connection
with the execution of the Merger Agreement. Pursuant to the terms of the
Stock Option Agreement, Growth has granted to HUBCO an Option to purchase up
to 336,850 authorized but unissued shares of Growth Common Stock,
representing approximately 19.9% of the currently outstanding shares of
Growth Common Stock, at a price of $12.25 per share. HUBCO does not have any
voting rights with respect to shares of Growth Common Stock subject to the
Option prior to exercise of the Option. A copy of the Stock Option Agreement
is set forth as Appendix B hereto.
In the event that certain specifically enumerated "Triggering Events"
occur, as defined below, including but not limited to the acquisition of
beneficial ownership of at least 20% of the outstanding Growth shares by a
person or group other than HUBCO or an affiliate of HUBCO, HUBCO may exercise
the Option in whole or in part. The ability of HUBCO to exercise the Option
and to cause up to an additional 336,850 shares of Growth Common Stock to be
issued may be considered a deterrent to other potential acquisitions of
control of Growth because it is likely to increase the cost of an acquisition
of all of the shares of Growth Common Stock that would be outstanding. In
the event that a Triggering Event occurs and the Merger is not consummated,
HUBCO would recognize a gain on the sale of the shares of Growth Common Stock
received pursuant to the exercise of the Option if such shares of Growth
Common Stock were sold at prices exceeding $12.25 per share.
Upon or after the occurrence of certain "Triggering Events" (as hereinafter
defined), the Option may be exercised by HUBCO in whole or in part. The term
"Triggering Event" is defined to mean the occurrence of any of the following
events: a person or group, as such terms are defined in the Exchange Act and
the rules and regulations thereunder, other than HUBCO or an affiliate of
HUBCO, (a) acquires beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of at least 20% of the then
outstanding shares of Growth Common Stock; (b) subsequent to the date of the
Stock Option Agreement enters into a written letter of intent or an agreement
with Growth pursuant to which such person would (i) merge or consolidate, or
enter into any similar transaction, with Growth, (ii) acquire all or a
significant portion of the assets or liabilities of Growth, or (iii) acquire
beneficial ownership of securities representing, or the right to acquire the
beneficial ownership or to vote securities representing, 10% or more of the
then outstanding shares of Growth Common Stock; or (c) makes a filing with
bank regulatory authorities or publicly announces a bona fide proposal for
(i) any merger, consolidation or acquisition of all or a significant portion
of all the assets or liabilities of Growth or any other business combination
involving Growth, or (ii) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 20% or more of the outstanding
shares of Growth Common Stock (a "Proposal"), and thereafter, if such
Proposal has not been publicly withdrawn (as defined in the Stock Option
Agreement) at least 15 days prior to the Growth stockholders' meeting called
to vote on the Merger, Growth stockholders fail to approve the Merger by the
vote required by applicable law at such meeting; or (d) makes a bona fide
Proposal and thereafter, but before such Proposal has been publicly
withdrawn, Growth willfully breaches any of its covenants contained in the
Merger Agreement in a manner that would materially interfere with its ability
to consummate the Merger or materially reduce the value of the transaction to
HUBCO. The term "Triggering Event" is further defined as the taking of any
direct or indirect action by Growth or any of its directors, officers or
agents to invite or solicit any Proposal which has as its purpose a tender
offer for the shares of Growth Common Stock, a merger, consolidation, plan of
exchange, plan of acquisition or reorganization of Growth, or a sale of
shares of Growth Common Stock or any significant portion of its assets or
liabilities. Under the Stock Option Agreement, a significant portion means
25% of the assets or liabilities of Growth. "Publicly withdrawn" for
purposes of the Stock Option Agreement means an unconditional bona fide
withdrawal of the Proposal coupled with a public announcement of no further
interest in pursuing such Proposal or acquiring any controlling influence
over Growth or in soliciting or inducing any other person (other than HUBCO
or any affiliate) to do so.
HUBCO may not sell, assign or otherwise transfer its rights and obligations
under the Stock Option Agreement in whole or in part to any person or any
group of persons other than to an affiliate of HUBCO, except upon the
occurrence of a Triggering Event. Growth is not obligated to issue shares of
Growth Common Stock upon exercise of the Option (i) in the absence of any
required governmental or regulatory approval or consent necessary for Growth
to issue the Growth Common Stock subject to the Option or HUBCO to exercise
the Option or prior to the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Growth Common Stock
subject to the Option.
The Stock Option Agreement further provides that after the occurrence of a
Triggering Event and upon receipt of a written request from HUBCO, Growth
will prepare and file a registration statement with the Commission, covering
the Option and such number of shares subject thereto as HUBCO specify in
order to permit the sale or other disposition of the Option and the shares
subject thereto; provided, however, that in no event will HUBCO have the
right to have more than one such registration statement become effective, and
provided further, that Growth will not be required to prepare and file any
such registration statement in connection with any proposed sale to which
Growth's counsel delivers to Growth and to HUBCO an opinion to the effect
that no filing is required under applicable laws and regulations.
The exercise of the Option by HUBCO may also make "pooling of interests"
accounting treatment unavailable to a subsequent acquiror.
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma financial information takes into account
HUBCO's completed acquisition (the "Washington Merger") of Washington
Bancorp, Inc. ("Washington") and HUBCO's completed acquisitions of Jefferson
National Bank ("Jefferson") and Urban National Bank ("Urban"). 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 solely for the periods on or
after July 1, 1994. The Jefferson acquisition, consummated on April 5, 1995
and the Urban acquisition, consummated on June 30, 1995 were accounted for as
poolings of interest; accordingly, HUBCO's historical financial information
reflects these acquisitions for all periods presented. The Merger is also
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 restated after the Merger to combine the results of
operations of HUBCO and Growth for periods prior to consummation.
The following unaudited Pro Forma Combined Condensed Balance Sheet of HUBCO
and Growth at June 30, 1995 gives effect to the Merger as if it had been
consummated on that date, based on adjustments described in accompanying
Notes to the Pro Forma Combined Condensed Financial Statements (the "Notes").
Inasmuch as the Washington Merger was consummated prior to June 30, 1995,
HUBCO's historical balance sheet at June 30, 1995 includes the assets and
liabilities of Washington retained by the merged institution at June 30,
1995.
This Proxy Statement-Prospectus also presents five separate unaudited Pro
Forma Combined Condensed Statements of Income, covering (i) the six months
ended June 30, 1995 (the "1995 Pro Forma Statements"), (ii) the six months
ended June 30, 1994 (the "1994 Interim Pro Forma Statements"), (iii) the year
ended December 31, 1994 (the "1994 Pro Forma Statements"), (iv) the year
ended December 31, 1993 (the "1993 Pro Forma Statements" and, collectively
with the 1994 Pro Forma Statements, the "1993-1994 Pro Forma Statements"),
and (v) the year ended December 31, 1992 (the "1992 Pro Forma Statements").
These unaudited Pro Forma Combined Condensed Statements of Income reflect the
following:
* The 1994 Interim Pro Forma Statement gives effect to the Washington Merger
and the Merger as if such transactions had occurred on January 1, 1994. The
1994 Interim Pro Forma Statements combine the results of operations of (i)
HUBCO for the six months ended June 30, 1994, (ii) Washington for the six
months ended June 30, 1994, subject to the adjustments set forth in the
Notes.
* Due to the differences in the disclosures applicable to the purchase and
pooling of interests methods of accounting, the 1993-1994 Pro Forma
Statements give effect to the Washington Merger as if such transaction had
occurred on January 1, 1993 and 1994, respectively, and combine the results
of operations of HUBCO, Washington and Growth for the years ended December
31, 1993 and 1994, subject to the adjustments set forth in the Notes.
* The 1992 Pro Forma Statements do not give effect to the Washington Merger.
Thus, the 1992 Pro Forma Statements combine the results of operations of
HUBCO and Growth for the period presented, but do not include any information
regarding Washington. Any comparison of the 1992 Pro Forma Statements with
pro forma data for other periods (except the June 30, 1995 Pro Forma
Statements) presented herein should take into account that the 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 June 30, 1995).
The unaudited pro forma information presented herein has been prepared by
HUBCO's management based upon the historical financial statements and related
notes thereto of HUBCO, Washington and Growth 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 the 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.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Balance Sheet
(Unaudited)
In Thousands
As of June 30, 1995
Pro Forma
Historical Pro Forma Combined
-------------------------- Adjustments HUBCO and
ASSETS Hubco Growth Growth Growth
- ------ ------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Cash and Due From Banks $69,453 $3,151 $- $72,604
Securities 511,100 - - 511,100
Securities Available for Sale 99,180 21,469 - 120,649
Federal Funds Sold 17,900 5,600 - 23,500
Loans, Net 855,530 94,877 - 950,407
Allowance for Possible Loan Losses (16,718) (1,497) - (18,215)
Premises and Equipment 33,638 2,129 - 35,767
Other Real Estate 5,828 - - 5,828
Intangible Assets 8,555 - - 8,555
Other Assets 26,975 1,610 - 28,585
------------ --------- --------- ------------
Total Assets $1,611,441 $127,339 $- $1,738,780
============ ========= ========= ============
LIABILITIES
- -----------
Deposits $1,416,970 $108,752 $- $1,525,722
Short Term Borrowings 41,356 - - 41,356
Other Liabilities 6,405 4,836 - 11,241
------------ --------- --------- ------------
Total Liabilities 1,464,731 113,588 - 1,578,319
------------ --------- --------- ------------
Subordinated Debentures 25,000 - - 25,000
------------ --------- --------- ------------
STOCKHOLDERS' EQUITY
- --------------------
Preferred Stock 2,141 - - 2,141
Common Stock 23,330 1,693 973 (A) 25,996
Additional Paid in Capital 50,014 14,664 (973)(B) 63,705
Retained Earnings (Deficit) 47,335 (2,261) - 45,074
Unrealized Gain (Loss) on
securities available for sale,
net of income taxes 125 (345) - (220)
Treasury Stock (261) - - (261)
Restricted Stock Awards (974) - - (974)
------------ --------- --------- ------------
Total Stockholders' Equity 121,710 13,751 - 135,461
------------ --------- --------- ------------
Total Liabilities and
Stockholders' Equity $1,611,441 $127,339 $- $1,738,780
============ ========= ========= ============
See accompanying notes to proforma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income
(Unaudited)
(In Thousands, Except for Per Share Amounts)
For the Six Months Ended June 30, 1995
Pro Forma
Pro Forma Combined
Historical Adjustments HUBCO and
Hubco Growth Growth Growth
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Interest Income:
Loans $40,507 $4,018 $- $44,525
Securities 19,943 613 - 20,556
Federal Funds Sold 574 108 - 682
------------ --------- --------- ------------
Total Interest Income 61,024 4,739 - 65,763
------------ --------- --------- ------------
Interest Expense:
Deposits 17,725 1,724 - 19,449
Borrowings 1,477 1 - 1,478
Subordinated Debt 984 - - 984
------------ --------- --------- ------------
Total Interest Expense 20,186 1,725 - 21,911
------------ --------- --------- ------------
Net Interest Income Before
Provision for Possible Loan Losses 40,838 3,014 - 43,852
Provision for Possible Loan Losses 2,100 150 - 2,250
------------ --------- --------- ------------
Net Interest Income After
Provision for Possible Loan Losses 38,738 2,864 - 41,602
------------ --------- --------- ------------
Non-Interest Income 8,144 167 - 8,311
------------ --------- --------- ------------
Operating Expenses:
Salaries and Other Employee Benefits 16,346 1,037 - 17,383
Occupancy and Equipment Expense 5,346 406 - 5,752
Other Operating Expenses 10,099 745 - 10,844
------------ --------- --------- ------------
Total Operating Expenses 31,791 2,188 - 33,979
------------ --------- --------- ------------
Income Before Income taxes 15,091 843 - 15,934
Income Taxes 3,687 344 - 4,031
------------ --------- --------- ------------
Net Income $11,404 $499 $- $11,903
============ ========= ========= ============
Earnings per Share : (a)
Primary(b) $0.88 $0.82
Fully Diluted 0.85 0.80
Book Value per Common share (a) 9.11 9.12
Dividends per Common Share (a) 0.30 0.30
Weighted Average Number of
Common Shares Outstanding (a) 12,371 13,871
Weighted Average Number of
Fully Diluted Shares Outstanding (a) 13,395 14,895
(a) Shares issued and outstanding have been adjusted for a 3 - for - 2 HUBCO Common Stock split
which was effective January 14, 1995, to stockholders of record on January 3, 1995.
(b) After reduction of $575 (.72 per share) of Series A Preferred Stock dividends for the pro
forma HUBCO historical financial information and the pro forma combined HUBCO and Growth
financial information.
See accompanying notes to pro forma combined condensed financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income
(Unaudited)
(In Thousands, Except for Per Share Amounts)
For the Six Months Ended June 30, 1994
Pro Forma
Pro Forma Combined
Pro Forma Combined Pro Forma HUBCO,
Historical Adjustments HUBCO and Historical Adjustments Washington
Hubco Washington Washington Washington Growth Growth and Growth
------------ --------- --------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $27,376 $6,728 ($452)(a) $33,652 $3,076 $- $36,728
Securities 17,656 2,220 142 (b) 20,070 388 - 20,458
53 (c)
(1)(d)
Federal Funds Sold 571 50 - 621 42 - 663
------------ --------- --------- ------------ --------- --------- ---------
Total Interest Income 45,603 8,998 (258) 54,343 3,506 - 57,849
------------ --------- --------- ------------ --------- --------- ---------
Interest Expense:
Deposits 12,527 3,625 793 (e) 16,945 1,054 - 17,999
Borrowings 1,317 10 430 (f) 1,757 5 - 1,762
Subordinated Debt - - - 0 - - 0
------------ --------- --------- ------------ --------- --------- ---------
Total Interest Expense 13,844 3,635 1,223 18,702 1,059 - 19,761
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income Before
Provision for Possible Loan Losses 31,759 5,363 (1,481) 35,641 2,447 - 38,088
Provision for Possible Loan Losses 1,115 825 - 1,940 203 - 2,143
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income After
Provision for Possible Loan Losses 30,644 4,538 (1,481) 33,701 2,244 - 35,945
------------ --------- --------- ------------ --------- --------- ---------
Non-Interest Income 5,503 473 - 5,976 165 - 6,141
------------ --------- --------- ------------ --------- --------- ---------
Operating Expenses:
Salaries and Other Employee Benefits 12,136 1,684 - 13,820 838 - 14,658
Occupancy and Equipment Expense 3,670 395 18 (g) 4,083 358 - 4,441
Other Operating Expenses 6,916 3,470 500 (h) 10,886 680 - 11,566
------------ --------- --------- ------------ --------- --------- ---------
Total Operating Expenses 22,722 5,549 518 28,789 1,876 - 30,665
------------ --------- --------- ------------ --------- --------- ---------
Income Before Income taxes 13,425 (538) (1,999) 10,888 533 - 11,421
Income Taxes 4,962 (123) (760)(i) 4,079 (30) - 4,049
------------ --------- --------- ------------ --------- --------- ---------
Net Income (Loss) $8,463 ($415) ($1,239) $6,809 $563 $- $7,372
============ ========= ========= ============ ========= ========= =========
Earnings per Share : (a)
Primary (b) $0.68 $0.50 $0.49
Fully Diluted 0.68 0.50 0.48
Book Value per Common share (a) 7.55 7.55 7.65
Dividends per Common Share (a) 0.16 0.16 0.16
Weighted Average Number of
Common Shares Outstanding (a) 12,506 12,506 14,006
Weighted Average Number of
Fully Diluted Shares Outstanding (a) 12,506 13,703 15,203
(a) Shares issued and outstanding have been adjusted for a 3 - for - 2 HUBCO Common Stock split
which was effective January 14, 1995, to stockholders of record on January 3, 1995.
(b) After reduction of $574 ($.72 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 Growth financial information.
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income
(Unaudited)
(In Thousands, Except for Per Share Amounts)
For the Year Ended December 31, 1994
Washington Pro Forma
Historical Pro Forma Combined
Six Months Pro Forma Combined Pro Forma HUBCO,
Historical Ended Adjustments HUBCO and Historical Adjustments Washington
Hubco June 30,1994 Washington Washington Growth Growth and Growth
------------ ----------- --------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $62,031 $6,728 ($452)(a) $68,307 $6,697 $- $75,004
Securities 40,293 2,220 142 (b) 42,707 810 - 43,517
53 (c)
(1)(d)
Federal Funds Sold 1,089 50 - 1,139 152 - 1,291
------------ --------- --------- ------------ --------- --------- ---------
Total Interest Income 103,413 8,998 (258) 112,153 7,659 - 119,812
------------ --------- --------- ------------ --------- --------- ---------
Interest Expense:
Deposits 29,268 3,625 793 (e) 33,686 2,352 - 36,038
Borrowings 1,253 10 430 (f) 1,693 9 - 1,702
Subordinated Debt 1,736 - - 1,736 - - 1,736
------------ --------- --------- ------------ --------- --------- ---------
Total Interest Expense 32,257 3,635 1,223 37,115 2,361 - 39,476
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income Before
Provision for Possible Loan Losses 71,156 5,363 (1,481) 75,038 5,298 - 80,336
Provision for Possible Loan Losses 3,835 825 - 4,660 634 - 5,294
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income After
Provision for Possible Loan Losses 67,321 4,538 (1,481) 70,378 4,664 - 75,042
------------ --------- --------- ------------ --------- --------- ---------
Non-Interest Income 11,828 473 - 12,301 327 - 12,628
------------ --------- --------- ------------ --------- --------- ---------
Operating Expenses:
Salaries and Other Employee Benefits 25,673 1,684 - 27,357 1,690 - 29,047
Occupancy and Equipment Expense 8,315 395 18 (g) 8,728 702 - 9,430
Other Operating Expenses 16,827 3,470 500 (h) 20,797 1,479 - 22,276
------------ --------- --------- ------------ --------- --------- ---------
Total Operating Expenses 50,815 5,549 518 56,882 3,871 - 60,753
------------ --------- --------- ------------ --------- --------- ---------
Income Before Income taxes 28,334 (538) (1,999) 25,797 1,120 - 26,917
Income Taxes 10,892 (123) (760)(i) 10,009 - - 10,009
------------ --------- --------- ------------ --------- --------- ---------
Net Income (Loss) $17,442 ($415) ($1,239) $15,788 $1,120 $- $16,908
============ ========= ========= ============ ========= ========= =========
Earnings per Share : (a)
Primary $1.36 $1.17 $1.13
Fully Diluted (b) 1.33 1.15 1.11
Book Value per Common share (a) 7.80 7.80 7.91
Dividends per Common Share (a) 0.36 0.36 0.36
Weighted Average Number of
Common Shares Outstanding (a) 12,496 12,496 13,996
Weighted Average Number of
Fully Diluted Shares Outstanding (a) 13,098 13,693 15,193
(a) Shares issued and outstanding have been adjusted for a 3 - for - 2 HUBCO Common Stock split
which was effective January 14, 1995, to stockholders of record on January 3, 1995.
(b) After reduction of $447 ($.54 per share) of Series A Preferred Stock dividends for the HUBCO
historical financial information. 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 Growth financial information.
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income
(Unaudited)
(In Thousands, Except for Per Share Amounts)
For the Year Ended December 31, 1993
Pro Forma
Pro Forma Combined
Pro Forma Combined Pro Forma HUBCO,
Historical Historical Adjustments HUBCO and Historical Adjustments Washington
HUBCO Washington Washington Washington Growth Growth and Growth
------------ --------- --------- ------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $56,140 $14,782 ($904)(a) $70,018 $4,472 $- $74,490
Securities 29,003 3,604 285 (b) 32,996 1,219 - 34,215
105 (c)
(1)(d)
Federal Funds Sold 1,407 172 1,579 163 - 1,742
------------ --------- --------- ------------ --------- --------- ---------
Total Interest Income 86,550 18,558 (515) 104,593 5,854 - 110,447
------------ --------- --------- ------------ --------- --------- ---------
Interest Expense:
Deposits 26,604 8,795 1,586 (e) 36,985 2,142 - 39,127
Borrowings 907 18 861 (f) 1,786 - - 1,786
Total Interest Expense ------------ --------- --------- ------------ --------- --------- ---------
27,511 8,813 2,447 38,771 2,142 - 40,913
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income Before
Provision for Possible Loan Losses 59,039 9,745 (2,962) 65,822 3,712 - 69,534
Provision for Possible Loan Losses 5,138 420 - 5,558 653 - 6,211
------------ --------- --------- ------------ --------- --------- ---------
Net Interest Income After
Provision for Possible Loan Losses 53,901 9,325 (2,962) 60,264 3,059 - 63,323
------------ --------- --------- ------------ --------- --------- ---------
Non-Interest Income 10,579 949 - 11,528 302 - 11,830
------------ --------- --------- ------------ --------- --------- ---------
Operating Expenses:
Salaries and Other Employee Benefits 21,668 3,468 - 25,136 1,436 - 26,572
Occupancy and Equipment Expense 6,768 797 36 (g) 7,601 638 - 8,239
Other Operating Expenses 13,613 4,503 1,001 (h) 19,117 1,235 - 20,352
------------ --------- --------- ------------ --------- --------- ---------
Total Operating Expenses 42,049 8,768 1,037 51,854 3,309 - 55,163
------------ --------- --------- ------------ --------- --------- ---------
Income Before Income taxes 22,431 1,506 (3,999) 19,938 52 - 19,990
Income Taxes (benefit) 8,560 (1,018) (1,520)(i) 6,022 (260) - 5,762
------------ --------- --------- ------------ --------- --------- ---------
Net Income (loss) $13,871 $2,524 ($2,479) $13,916 $312 $- $14,228
============ ========= ========= ============ ========= ========= =========
Earnings per Share : (a)
Primary $1.06 $0.97 $0.90
Fully Diluted (b) 1.06 0.97 $0.90
Book Value per Common share (a) 7.61 7.61 7.69
Dividends per Common Share (a) 0.31 0.31 0.31
Weighted Average Number of
Common Shares Outstanding (a) 13,109 13,109 14,609
Weighted Average Number of
Fully Diluted Shares Outstanding (a) 13,109 14,306 15,806
(a) Shares issued and outstanding have been adjusted for a 3 - for - 2 HUBCO Common Stock split
which was effective January 14, 1995, to stockholders of record on January 3, 1995.
(b) 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 Growth financial information.
See accompanying notes to pro forma combined condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Combined Condensed Statement of Income
(Unaudited)
(In Thousands, Except for Per Share Amounts)
For the Year Ended December 31, 1992
Pro Forma
Historical Pro Forma Combined
-------------------------- Adjustments HUBCO and
Hubco Growth Growth Growth
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Interest Income:
Loans $60,943 $3,660 $- $64,603
Securities 25,323 1,280 - 26,603
Federal Funds Sold 2,030 138 - 2,168
------------ --------- --------- ------------
Total Interest Income 88,296 5,078 - 93,374
------------ --------- --------- ------------
Interest Expense:
Deposits 34,616 2,187 - 36,803
Borrowings 745 - - 745
------------ --------- --------- ------------
Total Interest Expense 35,361 2,187 - 37,548
------------ --------- --------- ------------
Net Interest Income Before
Provision for Possible Loan Losses 52,935 2,891 - 55,826
Provision for Possible Loan Losses 7,944 180 - 8,124
------------ --------- --------- ------------
Net Interest Income After
Provision for Possible Loan Losses 44,991 2,711 - 47,702
------------ --------- --------- ------------
Non-Interest Income 10,717 220 - 10,937
------------ --------- --------- ------------
Operating Expenses:
Salaries and Other Employee Benefits 18,962 1,082 - 20,044
Occupancy and Equipment Expense 6,676 583 - 7,259
Other Operating Expenses 20,462 941 - 21,403
------------ --------- --------- ------------
Total Operating Expenses 46,100 2,606 - 48,706
------------ --------- --------- ------------
Income Before Income taxes 9,608 325 - 9,933
Income Taxes 637 136 - 773
------------ --------- --------- ------------
Net Income $8,971 $189 $- $9,160
============ ========= ========= ============
Earnings per Share : (a)
Primary $0.76 $0.68
Fully Diluted 0.76 0.68
Book Value per Common share (a) 7.20 7.30
Dividends per Common Share (a) 0.27 0.27
Weighted Average Number of
Common Shares Outstanding (a) 11,881 13,381
Weighted Average Number of
Fully Diluted Shares Outstanding (a) 11,881 13,381
(a) Shares issued and outstanding have been adjusted for a 3 - for - 2 HUBCO Common Stock split
which was effective January 14, 1995, to stockholders of record on January 3, 1995.
See accompanying notes to pro forma combined condensed financial statements
</TABLE>
<PAGE>
Notes to Pro Forma Combined Condensed
Financial Statements
(In Thousands, except per share amounts)
The following summarizes the acquisition of Growth Financial Corp by HUBCO in
a pooling of interests transaction as reflected in the accompanying pro forma
combined condensed financial statements.
1) Common Stock
Retirement of Growth's outstanding common stock. ($1,693)
Issuance of 1,449,541 shares of Hubco common stock
with an implied stated value of $1.778. 2,666
------
$ 973 (A)
======
2) Additional Paid in Capital
Transfer paid in capital to Common Stock. ($973)(B)
======
3) 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.
<PAGE>
BUSINESS OF GROWTH
GROWTH FINANCIAL CORP
Growth is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). Growth was
incorporated under the laws of the State of New Jersey on October 27, 1988
and received approval from the Federal Reserve Board on October 4, 1989, to
become a bank holding company with respect to Growth Bank (the wholly owned
subsidiary of Growth). Growth completed its initial public offering on
November 14, 1989 after a sale of 1,462,149 shares of its Common Stock at
$10.00 per share. Growth provides banking services through Growth Bank and
owns investment securities. Growth does not have any non-banking
subsidiaries. The principal executive offices of Growth are located at the
Main Office of Growth Bank, 1500 Route 202, Harding Township, New Jersey
(mailing address: P.O. Box 401, Basking Ridge, N.J., 07920-0401).
GROWTH BANK
On June 21, 1989, Growth Bank received, subject to certain
conditions, approval from the New Jersey Department of Banking (the
"Department of Banking") to become a commercial bank. On October 4, 1989,
Growth Bank received approval from the Federal Reserve Board to be a member
of the Federal Reserve System and have its deposits insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Growth Bank commenced banking
operations on February 12, 1990.
Growth Bank conducts retail and commercial banking through its
Main Office in Harding Township, its Convent Station Branch Office in Morris
Township, and its Bernardsville Office, and offers a broad range of
commercial banking services with emphasis on serving the needs of
individuals, small and medium sized businesses, executives, professionals and
professional organizations in these areas. Growth anticipates opening an
additional branch in Mendham, New Jersey in early 1996 and also is in the
process of applying to the FRB and the Department of Banking to open another
branch in Morristown, New Jersey.
Growth Bank offers a high level of personalized service to
both its commercial and consumer customers. Growth Bank offers both
commercial and consumer deposit accounts including checking accounts,
interest bearing NOW accounts, insured money market accounts, certificates of
deposit, savings accounts and individual retirement accounts.
Growth Bank offers a broad range of loan and credit facilities
to the businesses and residents of its service area including secured and
unsecured loans, home improvement loans, mortgages, home equity lines of
credit, overdraft lines of credit and commercial loans. Growth Bank actively
solicits non-interest and interest-bearing deposits from its borrowers.
Management attempts to minimize Growth Bank's credit risk through loan
application evaluation, approval, and post-funding monitoring procedures.
In addition, Growth Bank offers other services, including
travelers checks, access to the MAC(TM) Automated Teller Network and safe
deposit box facilities at its Main Office.
Growth Bank's primary service area is in the Morris
County/Somerset County area of New Jersey. The location of Growth Bank's
Main Office, a few hundred yards from an intersection on Route 287, makes it
easily accessible to its customers throughout the area. Growth Bank's other
two branch offices are located on well traveled state highways in
southeastern Morris County and northern Somerset County.
EMPLOYEES
As of the date hereof, Growth had four officers, three of whom
were also officers and employees of Growth Bank. At June 30, 1995, Growth
Bank had a total of 36 full time and 13 part time employees.
COMPETITION
There is substantial competition among financial institutions
in Growth Bank's service area. Growth Bank competes with established local
commercial banks as well as savings institutions. In addition to traditional
banking facilities, Growth Bank competes directly or indirectly with finance
companies, credit unions, factors, mortgage brokers, insurance companies,
securities brokerage firms, mutual funds and money market funds, private
lenders and other institutions for deposits, mortgages and consumer and
commercial loans as well as other services. Competition among financial
institutions is based on a number of factors, including but not limited to
the quality of services rendered, interest rates offered on deposit accounts,
interest rates charged on loans and other credits, service charges,
convenience of banking facilities, locations and hours of operation and, in
the case of loans to larger commercial borrowers, relative lending limits.
Many of the banks with which Growth Bank competes have more
established existing depositor/borrowing relationships and greater financial
resources than Growth Bank and offer a wider range of deposit and lending
instruments. Growth Bank is subject to potential additional competition from
branches which could open in its trade area.
In addition there are banks and other financial institutions
which serve surrounding areas and additional out-of-state financial
institutions which currently, or in the future, may compete in Growth Bank's
market. Growth Bank competes to attract deposits and loan applications from
customers of existing institutions and for customers new to its service area.
REGULATION AND SUPERVISION
Regulation of Growth
--------------------
Growth is subject to regulation and supervision by the Board
of Governors of the Federal Reserve System (the "FRB") under the BHCA and the
Department of Banking. Growth is also subject to the reporting requirements
of the Securities and Exchange Commission (the "SEC") .
Regulation of Growth Bank
-------------------------
Growth Bank is a commercial bank organized under the laws of
the State of New Jersey. It is a member of the Federal Reserve System and
its deposits are insured by the FDIC. Growth Bank derives its lending,
investment and other powers from the applicable provisions of New Jersey law
and the regulations of the Department of Banking, subject to limitations or
other modifications under applicable federal laws and regulations of such
agencies as the FDIC and the FRB. Growth Bank's status as a member of the
Federal Reserve System results in certain additional federal restrictions on
its activities that would not otherwise apply. Generally, Growth Bank is
subject to comprehensive regulation of its business, including, but not
limited to, lending practices, permissible investments, branching and
non-banking activities. Growth Bank is subject to periodic examination by
and reporting to the Department of Banking and the FRB. The Department of
Banking, the FRB and the FDIC maintain significant enforcement authority to
prevent violations of law and unsafe and unsound practices, including
authority for the appointment of a conservator or receiver for Growth Bank.
The Department of Banking regulates Growth Bank's internal
organization as well as its business activities. The Commissioner of the
Department of Banking must approve changes to Growth Bank's Certificate of
Incorporation, the establishment or relocation of branch offices, and
mergers. Most areas regulated by the Department of Banking are subject to
similar regulation by the FRB.
Insurance of Deposit Accounts
-----------------------------
Growth Bank's deposit accounts are insured by the Bank
Insurance Fund of the FDIC up to applicable limits, generally $100,000 per
insured depositor. The FDIC has developed a risk-based assessment system for
the insurance of deposit accounts under which the assessment rate for an
insured depository institution varies according to its level of perceived
risk to the insurance fund. An institution's risk category is based upon
whether the institution is well capitalized, adequately capitalized or less
than adequately capitalized and the institution's "supervisory subgroup"
which is assigned by the FDIC after reviewing examination reports and other
pertinent data. Based on its capital category and supervisory subgroups,
each institution is assigned an annual FDIC assessment rate.
In 1994, Growth Bank paid an insurance assessment rate of
.23% of deposits. The FDIC recently adopted a reduction in the BIF insurance
assessment for well capitalized, financially sound institutions from the
previous rate of .23% to .04% of deposits. Growth Bank has been notified
that its insurance assessment has been reduced to .04% of deposits.
Federal Reserve System
----------------------
Growth, as a bank holding company, and Growth Bank, as a
member of the Federal Reserve System, are subject to examination and
regulation by and periodic reporting to the FRB.
Capital Standards
-----------------
The FRB has formal capital guidelines that bank holding
companies such as Growth are required to meet, including a "risk-based"
requirement and a "leverage" requirement. The guidelines are generally
applied on a consolidated basis except with respect to holding companies of
less than $150 million in assets, which are subject to the requirements on a
bank-only basis. Under the risk-based guidelines, assets and off-balance
sheet items are assigned to broad risk categories based on the regulators'
assessment of the risk inherent in the asset or off-balance sheet item
involved. The resulting risk-based capital ratios represent capital as a
percentage of total risk weighted assets and off-balance sheet items.
The guidelines currently require all bank holding companies to
maintain a minimum risk-based capital ratio of total capital to risk-weighted
assets of 8.0%, including a minimum ratio of Tier I capital, defined below,
to risk-weighted assets of 4.0%. The minimum leverage capital ratio
requirement is a ratio of Tier I capital to adjusted total assets of 3.0% for
holding companies that meet certain specified criteria (including having the
highest regulatory examination rating) and at least 4.0% to 5.0% for all
other banking companies.
Tier I or "core" capital consists of common equity, qualifying
perpetual preferred equity and minority interests in the equity accounts of
consolidated subsidiaries, less goodwill and other non-qualifying
intangibles, investments in certain unconsolidated subsidiaries and certain
deferred tax assets. Elements of Tier II or "supplementary" capital, which
is limited overall to 100% of Tier I capital, include perpetual preferred
equity not qualifying for Tier 1, mandatory convertible and subordinated
debt, and other qualifying securities. The allowance for loan losses
qualifies as supplementary capital but only to the extent of 1.25% of total
risk-weighted assets. As of June 30, 1995, Growth's total risk-based capital
ratio was 15.3%, and its Tier 1 risk-based capital ratio was 14.2%. As of
June 30, 1995, Growth's leverage capital ratio was 12.0%. These levels
exceeded FRB requirements.
The FRB also has separate capital regulations that member
banks, such as Growth Bank, are required to meet. The requirements are
similar to those imposed on bank holding companies. The definitions of Tier
1 and supplementary capital for purposes of the FRB's regulations applicable
to member banks are generally the same as for bank holding companies except
that only noncumulative perpetual preferred equity may be included in Tier 1
capital at the bank level. As of June 30, 1995, Growth Bank was in
compliance with the FRB capital regulations.
Prompt Corrective Action
------------------------
Federal law requires the federal banking regulators to take
"prompt corrective action" to resolve the problems of insured depository
institutions that do not meet certain capital standards. The law establishes
five capital categories: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized."
A depository institution is prohibited from making any capital
distribution (including payment of a dividend) or paying any management fee
to its holding company if the depository institution would thereafter be
undercapitalized, i.e., not in compliance with all applicable capital
requirements. In addition, undercapitalized depository institutions are
subject to growth and activity limitations and are required to submit capital
restoration plans to their primary federal regulatory agency. Such a plan
will not be accepted by the regulator unless, among other things, the
institution's holding company guarantees the capital plan, up to an amount
equal to the lesser of 5% of the depository institution's assets at the time
it becomes undercapitalized or the amount of the capital deficiency as of the
time the institution fails to comply with the plan. The federal banking
agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to
succeed in restoring the depository institution's capital. If an institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
A significantly undercapitalized depository institution (i.e.,
an undercapitalized institution whose capital falls to certain specified
levels) may be subject to a number of additional requirements and
restrictions, including orders to sell sufficient voting stock to become
adequately capitalized, more stringent requirements to reduce total assets,
cessation of receipt of deposits from correspondent banks and limits on
deposit interest rates paid, dismissal of directors or officers, a
prohibition on paying dividends by its holding company, and requirements that
the institution divest itself of certain subsidiaries or that its holding
company divest itself of the institution or of any non-depository institution
affiliate, in certain instances. Subject to certain exceptions, critically
undercapitalized depository institutions (i.e., those with a ratio of
tangible capital to assets of 2% or less) must have a conservator or receiver
appointed for them within 90 days after becoming critically undercapitalized.
Dividends
---------
Current FRB supervisory policy provides that a bank holding
company such as Growth should only pay dividends consistent with the
organization's net income over the past year and where the prospective rate
of earnings retention appears consistent with the organization's capital
needs, asset quality and overall financial condition. Also, the regulations
of the FRB require prior notice to, and non-objection by, that agency under
certain circumstances before a bank holding company may purchase or redeem
its securities.
A principle source of Growth's funding is dividends from
Growth Bank, and there are various legal and regulatory limitations under
federal and state law on the extent to which Growth Bank can supply funds to
Company. Under federal law, a depository institution is prohibited from
paying a dividend if the depository institution would thereafter be
"undercapitalized." New Jersey law provides that Growth Bank may generally
only pay dividends out of retained earnings and surplus to the extent that
surplus exceeds 50% of stated capital. Dividend payments by member banks
such as Growth Bank are also subject to additional restrictions under the
regulations of the FRB.
The relevant federal and state regulatory agencies have
authority to prohibit a bank or bank holding company from engaging in what,
in the opinion of such regulatory body, constitutes an unsafe or unsound
practice in conducting its business. The payment of dividends could,
depending upon the financial condition of Growth Bank, be deemed to
constitute such an unsafe or unsound practice. Growth believes that its
payment of a cash dividend was within the parameters of federal and state
law.
Reserve Requirements
--------------------
Under FRB regulations, Growth Bank is required to maintain
reserves against its transaction accounts (primarily checking and NOW
accounts), non-personal money market deposit accounts and non-personal time
deposits. Because reserves generally must be maintained in cash or in non-
interest bearing accounts, the effect of the reserve requirements is to
increase Growth Bank's cost of funds. At June 30, 1995 Growth Bank complied
with its reserve requirements.
Bank Holding Company Act
------------------------
Growth is required to obtain the prior approval of the FRB to
acquire all, or substantially all, of the assets of any bank or bank holding
company. Prior FRB approval is also required for Growth to acquire direct or
indirect ownership or control of any voting securities of any bank or bank
holding company if, after giving effect to such acquisition, it would,
directly or indirectly, own or control more than 5% of any voting shares of
such bank or bank holding company.
In addition, a bank holding company, such as Growth, is
generally prohibited from engaging in, or acquiring direct or indirect
control of any company engaged in, non-banking activities. One of the
principal exceptions to this prohibition is for activities found by the FRB
to be so closely related to banking or managing or controlling banks as to be
a proper incident thereto. Notice or application to the FRB is generally
required to commence new permissible activities or to accomplish acquisitions
of companies engaged in such activities.
Monetary Policy and Legislation
-------------------------------
Growth and its subsidiary Growth Bank are affected by the
monetary and fiscal policies of various agencies of the United States
Government, including the Federal Reserve System. In view of the changing
conditions in the national economy and in the money markets, it is not
possible for the management of Growth to accurately predict future changes in
monetary policy or the effect of such changes on the business or financial
condition of Growth. It is also impossible to predict the impact that future
legislation, either at the Federal or New Jersey level, could have on Growth
or Growth Bank.
PROPERTIES
Growth Bank conducts its business through three full-service
offices in Morris County and Somerset County, New Jersey. The net book value
of Growth's premises and equipment at June 30, 1995 was $2.129 million.
There were no material encumbrances upon the owned property listed below as
of June 30, 1995.
Year Expiration Lease
Facility Date of Renewal
Location Opened Owned Leased Lease Option
-------- ------ ----- ------ ------- ------
Main Office 1991 X 2000 Three 5
1500 Route 202 year
Harding options
Township, NJ
Convent Station 1990 X
Branch
221 Madison Avenue
Morris Township,
NJ
Bernardsville 1992 X 2002 One 5 year
Depot option
Railroad Plaza
Bernardsville,
NJ 07924
Growth anticipates opening an additional branch in Mendham,
New Jersey in early 1996 and also has an application pending before the FRB
and the Department of Banking to open another branch in Morristown, New
Jersey. On June 23, 1995, Growth Bank executed a lease relating to the
Mendham branch, which is anticipated to be opened in early 1996 following
completion of construction. The lease is for a twenty year term, with two
five-year renewable options at Growth Bank's discretion. The annual rent
for the first ten years of the lease is $140,000 and $149,500 for the second
ten years. The property contains approximately 8,500 gross rentable square
feet.
LEGAL PROCEEDINGS
Growth Bank is involved in routine legal proceedings occurring
in the ordinary course of business, which in the aggregate are believed by
management of Growth to be immaterial to Growth or Growth Bank's financial
condition.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
GROWTH FINANCIAL CORP'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of Growth Financial
Corp's consolidated financial condition and results of operations should be
read in conjunction with Growth Financial Corp's financial statements and
the accompanying notes presented elsewhere herein. References to Growth,
except where specifically indicated, are to the consolidated financial
information of Growth and Growth Bank. See "INDEX TO FINANCIAL STATEMENTS
OF GROWTH FINANCIAL CORP."
FINANCIAL CONDITION
Total assets of Growth on June 30, 1995 totaled $127.3 million
representing an increase of $12.5 million, or 10.9% when compared to
December 31, 1994. Total assets of Growth on December 31, 1994 totaled
$114.8 million representing an increase of $17.1 million, or 17.5% when
compared to December 31, 1993. Total assets at December 31, 1993, when
compared with December 31, 1992, increased $15.9 million or 19.4%.
Stockholders' equity increased by $543,000 from December 31, 1994 to June
30, 1995 primarily due to net income of $499,000. Stockholders' equity
totaled $13.2 million at December 31, 1994 compared to $12.5 million at
December 31, 1993, representing a increase of $710,000 or 5.7%. This
increase is primarily attributable to net income of $1.1 million during
1994 offset by net unrealized losses on securities available for sale of
$389,000 at December 31, 1994. At December 31, 1993 stockholders' equity
had increased by $332,000 from $12.2 million at December 31, 1992 which was
attributable to net income of $312,000 during 1993 plus net unrealized
gains of $20,000 on securities available for sale at December 31, 1993.
Growth's book value was $8.12 at June 30, 1995 and $7.80 and $7.38 at
December 31, 1994 and 1993, respectively, which reflects the effects of a
5% stock dividend declared on December 21, 1994.
The primary liabilities of Growth Bank consist of deposits of
individuals, corporations and partnerships in the form of checking
accounts, savings accounts, money market accounts, and certificates of
deposits. Deposits totaled $108.8 million at June 30, 1995 compared to
$99.1 million and $83.2 million at December 31, 1994 and 1993,
respectively. The increase in deposits during the first six months of 1995
is primarily due to the increase in certificates of deposit accounts,
primarily due to an increase in rates offered. The increase in deposits
during 1994 was due in part to the continued aggressive pricing of Growth
Bank's products with an emphasis on building consumer and business core
deposits. The $15.9 million increase in deposits during 1994 reflected the
community's confidence in Growth Bank's strength and service levels.
Demand deposits, or non-interest bearing demand deposits, increased from
$16.5 million at December 31, 1993 to $17.2 million at December 31, 1994.
Deposits at December 31, 1992 were $68.3 million. At June 30, 1995,
December 31, 1994 and December 31, 1993 Growth and Growth Bank had no other
liabilities in the form of borrowings or advances.
The cash inflows from deposits have been primarily invested in loans
and investment securities. Loans are the most significant component of
Growth's interest-earning assets. Growth Bank primarily makes commercial
and consumer loans to borrowers in northern and central New Jersey. Real
Estate loans account for a substantial portion of Growth Bank's total
loans. Commercial lending activities are focused primarily on lending to
small family-owned businesses. Loan production can be impacted by changes
in market interest rates. Other factors, such as the strength of local and
regional economies, consumer confidence and residential and commercial real
estate values can also impact loan demand. For additional information
regarding Growth's loans see Note 4 of the Notes to Growth's Financial
Statements.
Net loans amounted to $93.4 million at June 30, 1995, and $82.8
million and $70.9 million at December 31, 1994 and 1993, respectively. Net
loans increased by $10.6 million or 13% during the first six months of
1995. Net loans increased by $11.9 million or 17% during 1994 compared to
the net increase in gross loans of $21.5 million or 43% during 1993. The
decrease in the net loan growth rate during the first six months of 1995
and all of 1994 compared to 1993 is due to a variety of factors. Growth
Bank has concentrated primarily on originating loans of less than $1
million, a market which many large regional banks have begun to
reemphasize. Increases in the prime and other market interest rates is
another contributing factor to the decline in net loan growth in 1994
compared to 1993. The directors and members of the advisory board of
Growth Bank as well as customers of Growth Bank have been a positive factor
in loan growth by referring potential borrowers to Growth Bank.
Cash and cash equivalents are Growth's most liquid assets. At June
30, 1995, cash and cash equivalents totaled $8.8 million, as compared to
$8.3 million at December 31, 1994. Management believes that liquidity is
sufficient to meet present and future financial obligations and commitments
on a timely basis.
The following table provides information concerning deposit categories
which were in excess of 10% of average total deposits.
SIX MONTHS
ENDED Year Ended December 31,
June 30, 1994 1993
1995
(Dollars in thousands)
Non-interest bearing
demand deposits:
Average amount . . . . $15,883 $15,430 $11,481
Average rate paid . . - - -
NOW and savings accounts:
Average amount . . . . 24,024 21,760 16,685
Average rate paid . . 2.21% 2.03% 2.15%
Money market accounts:
Average amount . . . . 24,586 21,425 17,317
Average rate paid . . 3.73% 2.79% 2.78%
Certificates of deposit:
Average amount . . . . 37,497 30,920 29,349
Average rate paid . . 5.34% 4.25% 4.44%
At June 30, 1995, certificates of deposit in amounts of $100,000 and
over mature as follows:
JUNE 30, 1995 DECEMBER 31,
1994
(in thousands)
Three months or less . . . $5,916 $1,348
Over three months through 1,790 1,238
six months . . . . . . . .
Over six months through 2,275 1,816
twelve months . . . . . . .
Over twelve months . . . . 2,624 2,981
----- -----
Total . . . . . . . . . . . $12,605 $7,383
======= ======
<PAGE>
Securities Available for Sale
-----------------------------
The following table sets forth the maturity distribution and weighted
average yields of Growth's securities available for sale as of June 30, 1995
and December 31, 1994. No tax equivalent adjustments have been made in the
following table.
<TABLE>
<CAPTION>
June 30, 1995
Total Securities
Less Than 1 to 5 5 to 10 Over 10 Available
One Year Years Years Years for Sale
Market Average Market Average Market Average Market Average Market Average
Value Yield Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States Government and $3,001 5.97% $13,778 5.64%$ -- -- $ -- -- $16,779 5.71%
Government Agencies
Mortgage-backed Securities<F1> 1,336 6.30% 1,990 5.48% -- -- -- -- 3,326 5.81%
Municipal Securities . . . . 594 4.33% 255 4.10% 849 4.26%
Marketable Equity Securities -- -- -- -- -- -- 245 -- 245 --
------ ------ ------ ------ ------ ------ --- ------ --- ----
Total Securities Available
for Sale . . . . . . . $4,931 5.87% $16,023 5.59% $ -- -- $245 -- $21,199 5.60%
====== ======= ======= ==== =======
December 31, 1994
Total Securities
Less Than 1 to 5 5 to 10 Over 10 Available
One Year Years Years Years for Sale
Market Average Market Average Market Average Market Average Market Average
Value Yield Value Yield Value Yield Value Yield Value Yield
(Dollars in thousands)
United States Government and $3,446 5.89% $9,605 5.64% $2,618 5.24% $ -- -- $15,669 5.63%
Government Agencies . .
Mortgage-backed Securities<F1> 1,653 6.35% 2,016 5.47% -- -- -- -- 3,669 5.87%
Municipal Securities . . . . 90 4.20% 407 4.29% -- -- -- -- 497 4.27%
Marketable Equity Securities -- -- -- -- -- -- 245 -- 245 --
------ ----- ------ ----- ------ ------ ----- ------ ----- ------
Total Securities Available
for Sale . . . . . . . $5,189 6.01% $12,028 5.57% $2,618 5.24% $245 -- $20,080 5.57%
====== ======= ====== ==== =======
</TABLE>
- ------------------------
[FN]
<F1> The maturities for mortgage-backed securities are based on certain
prepayment assumptions.
For additional information regarding Growth's securities portfolio
see Note 3 of the Notes to Growth's Financial Statements.
<PAGE>
RESULTS OF OPERATIONS
General
-------
The earnings of Growth depend primarily on interest rate spread,
represented by the excess of the average yield on interest-earning assets,
consisting principally of loans and investment securities, over the average
rate paid on interest-bearing liabilities, consisting principally of deposits
and borrowings. Interest rate spread is affected by many factors, including
economic, competitive and regulatory factors that influence interest rates,
loan demand and deposit flow. Interest rate spread is also affected by the
composition of Growth's assets and liabilities and by the repricing of such
assets and liabilities as they mature. Earnings of Growth are also affected
by provisions for loan losses, income from service charges, operating
expenses, income taxes and gains or losses on sales of investments.
Net Income
----------
Income before income tax expense increased from $533,000 for the six
months ended June 30, 1994 to $843,000, or 58%, for the six months ended June
30, 1995. Income tax expense was $344,000 for the first six months of 1995
compared to an income tax benefit of $30,000 for the first six months of
1994. For the six months ended June 30, 1995 Growth recorded net income of
$499,000 compared to net income of $563,000 for the six months ended June 30,
1994. Net income was $1.1 million, $312,000 and $325,000 for the years ended
December 31, 1994, 1993 and 1992. The earnings performance of Growth in 1994
was marked by increases in net interest income and service fee income and
decreases in provisions for loan losses, offset by increases in non-interest
expenses. Overall earnings in 1994 were favorably impacted by strong loan
demand in the first half of 1994.
Net Interest Income
-------------------
Net interest income is the largest component of Growth's operating
income. The following tables reflect the components of net interest income,
setting forth, (i) average assets, liabilities and stockholders' 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 costs of interest-bearing liabilities,
(iv) Growth's interest spread, and (vi) the ratio of average interest-earning
assets to average interest-bearing liabilities. Given the relative small
amount of tax-exempt income earned by Growth, no tax equivalent adjustments
have been made to the following tables.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
Interest Interest
Average Income Yield/ Average Income Yield/
Balance Expense<F1> Cost<F2> Balance Expense<F1> Cost<F2>
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-bearing assets:
Federal funds sold . . . . . . . . . . . . . . $3,977 $ 108 5.43% $2,502 $ 42 3.36%
Securities . . . . . . . . . . . . . . . . . . 20,972 613 5.85 16,112 388 4.82
Loans receivable<F1><F4> . . . . . . . . . . . 89,001 4,018 9.03 77,648 3,076 7.92
------- ------ ---- ------- ------ ----
Total interest-earning assets . . . . . . . . 113,950 4,739 8.32 96,262 3,506 7.28
Non-interest assets . . . . . . . . . . . . . . 3,518 3,974
------- -------
Total assets . . . . . . . . . . . . . . . . $117,468 $100,236
======== ========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW and savings accounts . . . . . . . . . . . $ 24,024 $ 265 2.2% $ 20,543 $ 203 1.98%
Money market accounts . . . . . . . . . . . . 24,586 458 3.73 20,829 263 2.53
Certificates of deposit . . . . . . . . . . . 37,497 1,001 5.34 29,758 588 3.95
Borrowed money . . . . . . . . . . . . . . . . 38 1 5.26 235 5 4.26
------- -------- ---- ------- ------ ----
Total interest-bearing liabilities . . . . . 86,145 1,725 4.00 71,365 1,059 2.97
Non-interest-bearing liabilities<F5> . . . . . . 15,883 15,071
Other liabilities . . . . . . . . . . . . . . . 1,961 1,187
------- -------
Total liabilities . . . . . . . . . . . . . 103,989 87,623
Stockholders equity . . . . . . . . . . . . . . 13,479 12,613
------- -------
Total liabilities and
stockholders' equity . . . . . . . . . . $117,468 $100,236
======== ========
Net interest income . . . . . . . . . . . . . . . $3,014 $2,447
====== ======
Interest rate spread<F6> . . . . . . . . . . . . 4.32% 4.31%
Effect of non-interest-bearing funds . . . . . . 0.58% 0.53%
---- ----
Net interest margin<F6> . . . . . . . . . . . . . 4.90% 4.84%
==== ====
Net yield on interest-earning assets<F7>. . . . . 5.29% 5.08%
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities . . . . . . . . 132.28% 134.88%
====== ======
</TABLE>
- ------------------
[FN]
<F1> Includes net amortized loan origination costs, which are not material.
<F2> Percentages have been annualized for purposes of comparability with
year-end criteria.
<F3> The net yield on interest-bearing assets represents net interest
income as a percentage of average interest-earning assets.
<F4> Interest income reflects the effect of nonaccrual loans, which has the
effect of reducing yields.
<F5> Consists primarily of non-interest bearing demand deposits, official
checks and certified checks.
<F6> Interest rate spread represents the difference between the average
yield on interest-earning assets and average cost of interest-bearing
liabilities.
<F7> The excess of the yield on average interest-earning assets over the
costs of all deposits and borrowings.
<PAGE>
<TABLE>
<CAPTION> Year Ended December 31,
1994 1993 1992
Interest Interest Interest
Average Income Yield/ Average Income Yield/ Average Income Yield/
Balance Expense<F1> Cost<F2> Balance Expense<F1> Cost<F2> Balance Expense<F1> Cost(2)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Federal funds sold . . . . . $3,635 $ 152 4.18% $5,369 $ 163 3.04% $3,480 $139 3.96%
Securities . . . . . . . . . 16,017 810 5.06 24,094 1,220 5.06 21,537 1,280 5.95
Loans receivable<F1><F4> . . 80,408 6,697 8.33 55,211 4,471 8.10 39,999 3,659 9.15
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest-earning assets 100,060 7,659 7.65 84,674 5,854 6.91 65,016 5,078 7.81
Non-interest earning assets . 3,843 3,644 4,712
------- ------- -------
Total assets . . . . . . . $103,903 $88,318 $69,728
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
NOW and savings accounts . . $ 21,760 $ 441 2.03% $16,685 $ 359 2.15% $ 12,669 $ 350 2.77%
Money market accounts . . . 21,425 598 2.79 17,317 481 2.78 12,488 485 3.88
Certificates of deposit . . 30,920 1,313 4.25 29,349 1,302 4.44 25,040 1,352 5.40
Borrowed money . . . . . . . 201 9 4.48 -- -- -- -- -- --
------- ------- ---- ------- ------- ------ ------- ------- ------
Total interest-bearing
liabilities . . . . . . . . 74,306 2,361 3.18 63,351 2,142 3.38 50,197 2,187 4.36
Non-interest-bearing
liabilities <F5> . . . . . . . 15,430 11,481 6,978
Other liabilities . . . . . . 1,306 1,150 590
------- ------- -------
Total liabilities . . . . 91,042 75,982 57,765
Stockholders equity . . . . . 12,875 12,336 11,963
------- ------- -------
Total liabilities and
stockholders' equity . $103,917 $88,318 $69,728
======== ======= =======
Net interest income . . . . . . $5,298 $3,712 $2,891
====== ====== ======
Interest rate spread <F2> . . . 4.47% 3.53% 3.45%
Effect of non-interest-bearing
funds . . . . . . . . . . . . . 0.55% 0.52% 0.53%
---- ---- ----
Net interest margin <F6>. . . . 5.02% 4.05% 3.98%
==== ==== ====
Net yield on interest-earning
assets <F3> . . . . . . . . . . 5.29% 4.38% 4.45%
==== ==== ====
Ratio of interest-earning assets
to interest-bearing liabilities 134.66% 133.66% 129.52%
====== ====== ======
</TABLE>
- ------------------
[FN]
<F1> Includes net amortized loan origination costs, which are not material.
<F2> Interest rate spread represents the difference between the average yield
on interest-bearing assets and average cost of interest-bearing
liabilities.
<F3> The net yield on interest-bearing assets represents net interest income
as a percentage of average interest-earning assets.
<F4> Interest income reflects the effect of nonaccrual loans.
<F5> Consists primarily of non-interest bearing demand deposits, official
checks and certified checks.
<F6> The excess of the yield on average interest-earning assets over the costs
of all deposits and borrowings.
<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 Growth on such assets and liabilities.
Changes attributable to the interactive effects of volume and
rate (mix variance) have been allocated proportionately to
changes due to volume and rate. Dollar amounts are in thousands
of dollars.
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended
June 30, 1995 December 31, 1994 December 31, 1993
Compared with Six Compared with Compared with
Months Year Ended Year Ended
Ended June 30, 1994 December 31, 1993 December 31, 1992
Volume Rate Net Volume Rate Net Volume Rate Net
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interests-earning assets:
Loans . . . . . . . $493 $449 $942 $2,095 $130 $2,225 $1,163 ($351) $812
Securities . . . . 132 93 225 (410) - (410) 233 (294) (61)
Federal funds sold 32 34 66 (45) 34 (11) 34 (8) 26
---- ---- ---- ----- ---- ----- ------ ------ ----
Total income on
interest-earning
assets 657 576 1,233 1,640 164 1,804 1,430 (653) 777
---- ---- ----- ------ --- ----- ------ ------ ----
Interest-bearing liabilities:
NOW and savings
accounts . . . . . 37 25 62 100 (18) 82 29 (21) 8
Money market
accounts . . . . . 54 141 195 114 2 116 115 (118) (3)
Certificates of
deposits . . . . . 176 237 413 60 (48) 12 234 (284) (50)
Borrowings . . . . . (3) (1) (4) 9 - 9 - - -
----- ---- ---- --- ---- ---- ----- ----- -----
Total expense on
interest-bearing
liabilities . . . 264 402 666 283 (64) 219 378 (423) (45)
---- ---- ---- ---- ---- ---- ---- ----- ----
Net interest income . $393 $174 $567 $1,357 $228 $1,585 $1,052 ($230) $822
==== ==== ==== ====== ==== ====== ====== ===== ====
</TABLE>
Net interest income increased from $2.4 million to $3.0 million for the
six months June 30, 1995 compared to the same period in the prior year. The
primary factor for the $567,000 increase in net interest income was the
average interest earning assets increasing from $96.2 million for the six
month period ending June 30, 1994 to $114.0 million for the six month period
ending June 30, 1995. The net interest margin, which represents the excess
of the yield on average interest-earning assets over the costs of all
deposits and borrowings, improved from 4.84% to 4.90% for the six month
periods ending June 30, 1995 compared to the same period in the prior year.
Net interest income increased by $1.6 million, or 42.7% to a level of $5.3
million in 1994, as compared to $3.7 million 1993, which in turn represents
an increase of $821,000 or 28.4% over 1992. Average yearly balances of
interest earning assets increased from $84.7 million in 1993 to $100.1
million in 1994, and the yields on these assets increased from 6.91% to 7.65%
for the years 1993 and 1994, respectively, due to increases in the prime and
other market interest rates in 1994. Although the average yearly balance of
interest bearing liabilities increased by $11.0 million, or 17.3%, from 1993
to 1994, the overall interest expense increased by only $.2 million,
primarily due to many interest bearing liabilities lagging market rate
increases. The net interest margin was 5.02%, 4.05% and 3.86% for the years
ending December 31, 1994, 1993 and 1992, respectively.
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 June 30, 1995 and December
31, 1994 and 1993.
June 30, December 31,
1995 1994 1993
(In thousands)
Non-performing loans:
Nonaccrual loans<F1> . . . . . $478 $419 $1,105
Past due more than 90 days and
still accruing interest<F2>
- - 466
------ ------ ------
Total . . . . . . . . . . . . $478 $419 $1,571
====== ====== ======
Impaired loans<F3>. . . . . . . . $2,000 N/A N/A
- ---------------------------------
[FN]
<F1> Generally represents loans as to which management has determined that
the borrowers may be unable to meet contractual principal and/or
interest obligations or there were interest or principal 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 is
collected.
<F2> 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, including interest accrued, are believed
to be fully collectible and adequately secured.
<F3> Represents loans characterized as "impaired loans," as defined in
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for the
Impairment of a Loan" ("FAS 114") and Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for the Impairment of
Loan-Income Recognition and Disclosures" ("FAS 118"). Growth adopted
FAS 114, as amended, on January 1, 1995.
Provision for Loan Losses
-------------------------
The purpose of the allowance for loan losses is to absorb the impact of
losses inherent in the loan portfolio. Additions to the allowance are made
through provisions charged against current earnings and through recoveries
made on loans previously charged off. During the first six months of 1995,
the provision for loan losses was $150,000 compared to $203,000 for the first
six months of 1994. Provisions for loan losses were $634,000, $653,000, and
$180,000, for the years 1994, 1993 and 1992, respectively. Management
considered these provisions necessary, to a certain degree, to increase the
allowance for loan losses to reflect the increase in loans during 1995, 1994,
1993 and 1992.
The allowance for loan losses at June 30, 1995 was $1.5 million compared to
$1.4 million at December 31, 1994. At June 30, 1995, non-performing loans,
i.e., loans on non-accrual status or loans delinquent for more than 90 days
and still accruing income, totaled $478,000 or .50% of total loans. At
December 31, 1994, $419,000 or 0.50% of total loans were considered
non-performing loans. Growth adopted Financial Accounting Standards No. 114,
"Accounting by Creditors for the Impairment of a Loan" ("FAS 114") and
Financial Accounting Standards No. 118, "Accounting by Creditors for the
Impairment of Loan-Income Recognition and Disclosures" ("FAS 118") on January
1, 1995. At June 30, 1995, Growth has determined that loans totaling
approximately $2 million were impaired and the related allowance for losses
for these loans was approximately $423,000. It is anticipated that Growth
will be acquiring a property through foreclosure to be classified as Other
Real Estate Owned in the amount of approximately $2 million prior to
September 30, 1995.
The following table shows the allocation of the allowance for loan losses
and the percent of loans in each category to total loans at June 30, 1995,
and December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994 1993 1992
Percent of Percent of Percent of Percent of
loans to loans to loans to loans to
Amount total loans Amount total loans Amount total loans Amount total loans
------ ----------- ------ ----------- ------ ----------- ------ -----------
Allocated to: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer Real Estate . . . . $392 27.13% $171 25.91% $148 25.37% $93 24.71%
Other Consumer . . . . . . . 146 9.04% 128 9.19% 162 11.02% 71 11.26%
Residential Construction . . 62 3.44% 57 1.93% 3 0.39% 6 1.19%
Commercial Real Estate . . . 654 44.88% 807 47.35% 502 47.65% 533 47.30%
Other Commercial &
Business . . . . . . . . . 243 15.51% 253 15.62% 149 15.56% 127 15.38%
Leases . . . . . . . . . . . - 0% - 0% 1 0.01% 1 .16%
Unallocated . . . . . . . . . - - 11 - 12 - 86 -
------ ------ ----- -----
Total . . . . . . . . . . $1,497 100% $1,427 100% $977 100% $917 100%
====== ====== ==== ====
</TABLE>
Loans are typically charged-off when thy are identified by management or
classified by regulatory authorities as a "loss." Charge-offs are made when
they are determine to be uncollectible. In certain instances, partial
charge-offs are made to recognize the effect of declining collateral values,
a compared to the carrying value of the loan. For information regarding the
charge-offs and recoveries of Growth's loans, see Note 4f the Notes to
Growth's Financial Statements
The following table sets forth certain ratios regarding Growth's
provision and allowance for loan losses, non-performing loans and charge-off
experience.
June 30, December 31,
1995 1994 1994 1993
Ratio of net charge-offs to
average loans outstanding . . 0.18% 0.13% 0.23% 1.07%
Allowance for loan losses as
a percent of total loans . . 1.58% 1.37% 1.69% 1.36%
Allowance for loan losses as
a percent of non-performing
loans . . . . . . . . . . . . 313.18% 106.50% 340.57% 62.19%
Non-performing loans as a
percent of total loans 0.50% 1.29% 0.50% 2.19%
Loans totaling $106,000 were charged-off for the period ending June 30,
1995 compared charge-offs in the amount of $69,000 for the period ending June
30, 1994. Recoveries totaled $26,000 and $20,000 for the six months ended
June 30, 1995 and 1994, respectively. Loans charged off as losses during
1994, 1993 and 1992 amounted to $241,000, $670,000, and $249,000,
respectively. Recoveries of charged off loans were $57,000, $77,000 and
$14,000 for 1994, 1993 and 1992, respectively. The allowance for loan losses
was $1.4 million and $977,000 at December 31, 1994 and 1993, respectively,
and $1.5 million at June 30, 1995. The ratio of the allowance for loan
losses to total loans was 1.58% and 1.37% at June 30, 1995 and 1994. The
ratio of the allowance for loan losses to total loans was 1.69%, 1.36% and
1.82% at December 31, 1994, 1993 and 1992, respectively.
Management monitors the loan portfolio on a regular and ongoing basis
and makes additions to the allowance for loan losses based upon the results
of such evaluations, economic conditions and other factors that warrant
consideration. Specific loan reserves are established for identified loans
based on a review of a combination of factors, including but not limited to,
underlying collateral, delinquency status, size of loan and the financial
condition of the borrower. Although management considers the allowance for
loan losses to be adequate, the continued monitoring of the loan portfolio,
combined with future economic conditions, and changes in the nature and
volume of the loan portfolio, could warrant increases in the allowance for
loan losses.
At June 30, 1995, non-performing loans, i.e., loans on non-accrual
status or loans delinquent for more than 90 days and still accruing income,
totaled $478,000 or .50% of total loans. At December 31, 1994, $419,000 or
0.50% of total loans were considered non-performing loans. During the six
months ending June 30, 1995 and 1994 there were no loans transferred to other
real estate owned.
Growth had one loan in the amount of $419,000 on non-accrual status at
December 31, 1994. There were two loans totaling $1.1 million on non-accrual
status at December 31, 1993. At December 31, 1992 there were no loans on
non-accrual status. Non-performing loans totaled $419,000, or .50% of total
loans, at December 31, 1994 compared to $1.6 million, or 2.19% of total
loans, at December 31, 1993 and $466,000, or .93% of total loans at December
31, 1992. During the years ending December 31, 1994, 1993 and 1992 there
were no loans transferred to other real estate owned.
The following table sets forth certain categories of loans as of June
30, 1995 in terms of maturity and interest rate sensitivity:
Within 1 to 5 After 5
1 Year Years Years Total
------ ----- ----- -----
(in thousands)
Business loans $10,580 $3,358 $817 $14,755
Real estate loans 23,767 26,419 21,585 71,771
Loans to individuals 4,386 3,454 511 8,351
-------- -------- -------- -----
Total $38,733 $33,231 $22,913 $94,877
======= ======= ======= =======
Loans with fixed rates 2,798 14,231 22,506 39,535
Loans with floating rates 35,935 19,000 407 55,342
-------- ------- -------- -------
Total $38,733 $33,231 $22,913 $94,877
======= ======= ======= =======
Other Income
-------------
The following table reflects the components of other income (i.e.,
non-interest income) for the six months ended June 30, 1995 and 1994 and for
each of the past three years:
Six Months Ended
June 30 Years Ended
December 31,
1995 1994 1994 1993 1992
------ ------ ----- ------ ------
( in thousands)
Service fee income $140 $136 $263 $222 $135
Gain on the sale of
securities . . . . - - - 19 39
Other income. . . 27 29 64 61 46
----- ----- ----- ----- -----
Total . . . . . $167 $165 $327 $302 $220
==== ==== ==== ==== ====
Total other income, consisting primarily of fees on deposit accounts,
increased from $165,000 to $167,000 for the six month periods ending June 30,
1994 and 1995. There were no gain or losses on securities sales for the six
month periods ending June 30, 1994 and 1995. Service fee income totaled
$263,000, $222,000 and $135,000 for the years ended December 31, 1994, 1993
and 1992. The yearly increases are primarily due to fees on a larger base
of deposit accounts. There were no gains or losses on the sale of securities
for 1994. Gains on the sale of securities totaled $19,000 in 1993 and
$39,000 in 1992.
Other Expenses
---------------
Other non-interest expenses for the six months of 1995 were $2.2 million
compared to $1.9 million for the first six months of 1994. The ratio of
non-interest expenses to average assets was 3.73% for the first six months of
1995 compared to 3.74% for the first six months of 1994. Increases in
salaries and employee benefits expenses of $199,000 for the comparable six
month periods is primarily due to, other than normal compensation increases,
expanded operations which required increases in staff size from 32 full time
and 9 part-time staff to 36 full time and 13 part-time staff at June 30, 1994
and June 30, 1995, respectively. Increases for premises and equipment,
marketing and promotion, office supplies, insurance, data processing service
bureaus and other expenses were due to increased volumes and operation levels
in the first six months of 1995 compared to the similar period in 1994.
Consulting and professional fees decreased by $57,000 for the comparable six
month periods because of the approximately $57,000 related to the arbitration
of employment agreements with executive officers of Growth Bank incurred in
1994.
Other non-interest expenses were $3.9 million, $3.3 million, and $2.6
million, for the years ended December 31, 1994, 1993 and 1992, respectively.
The ratio of non-interest expense to average assets was 3.73% in 1994
compared to 3.75% and 3.73% in 1993 and 1992, respectively. Salaries and
employee benefits, the largest component of non-interest expense, accounted
for 43.6% of total non-interest expense in 1994 compared to 43.4% and 41.5%
for 1993 and 1992, respectively. The increase in salary and employee benefit
costs of $254,000 from 1993 to 1994 was primarily due to increases in
staffing, due in part to increased business volumes, and higher costs of
benefits and payroll taxes. Salary and employee benefit cost increased
$354,000 from 1992 to 1993.
Annual insurance assessments imposed by the FDIC increased by $31,000 or
20% during 1994 to $157,000. For 1993, the FDIC increased the assessment
rates during the second semi-annual assessment filing to 23 cents per $100 of
deposits. Under the FDIC's recently adopted risk-based guidelines Growth
Bank's assessment will remain at 23 cents per $100 of deposits for the first
semi-annual assessment filing in 1995. Growth Bank has been notified that
its insurance assessment has been reduced to .04% of deposits for the second
semi-annual assessment filing in 1995.
Premises and equipment, consulting and professional fees, marketing,
insurance (including FDIC assessments), and data processing service bureaus
increased by $64,000, $111,000, $76,000, $34,000 and $50,000 respectively,
from 1993 to 1994 which were partially offset by decreases in office supplies
and other expenses. From 1992 to 1993, premises and equipment, consulting
and professional fees, office supplies, insurance, data processing service
bureaus, and other expenses increased by $55,000, $16,000, $38,000, $16,000,
$71,000 and $171,000, respectively, while marketing and promotion, and losses
on fixed assets decreased.
Income Taxes
------------
Income tax expense was $344,000 for the first six months of 1995
compared to an income tax benefit of $30,000 for the first six months of
1994. The increase in expense was due largely to the complete utilization of
existing net operating losses during 1994. The provision for income taxes
was zero, $(260,000) and $136,000 for the years ended December 31, 1994, 1993
and 1992, respectively. Effective January 1, 1993, Growth adopted SFAS No.
109, "Accounting for Income Taxes." The cumulative effect of the adoption
was not material to Growth's consolidated statement of operations. During
1994, Growth reduced its valuation allowance for the deferred tax asset by
$419,000. At December 31, 1994, Growth has a valuation allowance for the net
deferred tax assets of $101,000 which represents approximately 13% of the net
deferred tax asset before deducting the valuation allowance. This asset is
predicated on Growth generating sufficient taxable income to utilize the
deferred tax assets in future years. Management believes it is more likely
than not that Growth will realize the benefit of the net deductible temporary
differences and that such net deductible temporary differences will reverse
during future periods in which Growth generates net taxable income. Prior to
1993, Growth made income tax provisions pursuant to Accounting Principles
Board Opinion No. 11. A tax benefit in the form of a reduction of taxes for
prior years losses in the amount of $136,000 was recognized in 1992.
For further information regarding tax matters, see Note 7 of the Notes
to Growth's Financial Statements.
Interest Rate Sensitivity
-------------------------
Growth 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 one 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 tables illustrate Growth's interest rate gap position as
of June 30, 1995 and December 31, 1994. At June 30, 1995 and December 31,
1994, Growth had a cumulative negative gap on a six month and one year basis
and a cumulative positive gap on a five year and over five year basis. 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.
<TABLE>
<CAPTION>
June 30, 1995
Assets and Liabilities Maturing/Repricing in:
6 More than More than
months 6 months 1 year to Over 5
or less to 1 year 5 years years Total
------- --------- ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold . . . . . . . . . . $ 5,600 $ -- $ -- $ -- $ 5,600
Securities available for sale . . . . 2,818 2,622 15,514 245 21,199
Loans:
Fixed rate . . . . . . . . . . . . . 1,939 859 14,231 22,506 39,535
Variable rate . . . . . . . . . . . . 35,317 618 19,000 407 55,342
------- ----- ------- ------ -------
Total interest-earning assets . . . . $45,674 $4,099 $48,745 $23,158 $121,676
======= ====== ======= ======= ========
Interest-bearing liabilities:
NOW accounts . . . . . . . . . . . . 6,770 -- 2,500 2,500 11,770
Regular savings accounts . . . . . . . 6,368 -- 3,000 3,000 12,368
Money market accounts . . . . . . . . 24,540 -- -- -- 24,540
Certificates of deposit . . . . . . . 13,244 7,968 20,341 -- 41,553
Borrowings . . . . . . . . . . . . . .
-- -- -- -- --
------- ------ ------- ------ -------
Total interest-bearing liabilities . $50,922 $7,968 $25,841 $5,500 $90,231
======= ====== ======= ====== =======
Interest sensitivity gap per period . . . (5,248) (3,869) 22,904 17,658 31,445
Cumulative interest sensitivity gap (5,248) (9,117) 13,787 31,445
Cumulative gap as a percentage of
total assets . . . . . . . . . . . . (4.1%) (7.2%) 10.8% 24.7%
Cumulative interest-sensitive assets as
a percentage of interest sensitive
liabilities . . . . . . . . . . . . 89.7% 84.5% 116.3% 134.8%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Assets and Liabilities Maturing/Repricing in:
6 More than 6 More than 1
months months to year to Over 5
or less 1 year 5 years years Total
------- ------ ------- ----- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold . . . . . . . . . . . $ 4,250 $ -- $ -- $ -- $ 4,250
Securities available for sale . . . . . 10,926 2,722 6,187 245 20,080
Loans:
Fixed rate . . . . . . . . . . . . . . 1,751 1,707 20,762 10,740 34,960
Variable rate . . . . . . . . . . . . . 32,246 -- 16,650 415 49,311
------- ------ ------- ------ -------
Total interest-earning assets . . . . . $49,173 $4,429 $43,599 $11,400 $108,601
======= ====== ======= ======= ========
Interest-bearing liabilities:
NOW accounts . . . . . . . . . . . . . 6,751 -- 3,000 2,000 11,751
Regular savings accounts . . . . . . . . 9,227 -- 3,000 1,000 13,227
Money market accounts . . . . . . . . . 24,752 -- -- -- 24,752
Certificates of deposit . . . . . . . . 10,389 4,786 17,029 -- 32,204
Borrowings . . . . . . . . . . . . . . . -- -- -- -- --
------ ------- ------- ------ -------
Total interest-bearing liabilities . . $51,119 $4,786 $23,029 $3,000 $81,934
======= ======= ======= ====== =======
Interest sensitivity gap per period . . . . (1,946) (357) 20,570 8,400 26,667
Cumulative interest sensitivity gap (1,946) (2,303) 18,267 26,667
Cumulative gap as a percentage of
total assets . . . . . . . . . . . . . (1.7%) (2.0%) 15.9% 23.2%
Cumulative interest-sensitive assets as
a percentage of interest sensitive
liabilities . . . . . . . . . . . . . 96.1% 95.8% 123.1% 132.5%
</TABLE>
Notes:
- ------
The preceding tables set forth the earlier of the scheduled maturities
or repricing of assets and liabilities at June 30, 1995 and December 31,
1994. No adjustments have been made to reflect prepayments or scheduled
amortization of loans. Money market deposit accounts, because of their
repricing characteristics are included in the six months or less category.
Based on historical experience, a significant portion of regular savings and
NOW accounts are considered core deposits and are included in the table in
the 1 to 5 years and over 5 years categories. Management believes that such
deposits represent a stable source of funds.
The above tables do not necessarily indicate the impact of general
interest rate movements on net interest income because the repricing of
certain categories of assets and liabilities is discretionary and is subject
to competitive and other pressures. As a result, certain assets and
liabilities indicated as repricing within a stated period may in fact reprice
at different rate levels.
CAPITAL RESOURCES
Under banking policies issued by the FRB, Growth and Growth Bank must
maintain an adequate level of capital sufficient to meet leverage and risk
based capital ratios. At December 31, 1992 the minimum capital guidelines
were increased to 3% for Leverage (Tier I) capital ratio, 4% for Tier I risk
based capital and 8% for total risk based capital, from previous transitional
guidelines which were in effect since August 1990. The following chart
compares the regulatory minimum capital ratios with Growth Bank's and
Growth's capital ratios at June 30, 1995 and December 31, 1994.
CAPITAL RATIOS
June 30, 1995
Regulatory
Minimum Growth Growth
Bank
Leverage Tier 1 3.00% 10.0% 12.0%
Tier 1 Risk Based 4.00% 11.6% 14.2%
Total Risk Based 8.00% 12.9% 15.3%
CAPITAL RATIOS
December 31, 1994
Regulatory
Minimum Growth Growth
Bank
Leverage Tier 1 3.00% 10.6% 12.7%
Tier 1 Risk Based 4.00% 11.9% 14.4%
Total Risk Based 8.00% 13.2% 15.6%
DESCRIPTION OF HUBCO CAPITAL STOCK
GENERAL
The authorized capital stock of HUBCO consists of 25,000,000 shares
of HUBCO Common Stock and 4,500,000 shares of preferred stock. As of
September 30, 1995, 13,145,203 shares of HUBCO Common Stock were issued,
13,111,482 shares of HUBCO Common Stock were outstanding, and no shares of
HUBCO preferred stock were outstanding. Of the authorized but unissued
shares of HUBCO Common Stock, 236,955 shares are reserved for issuance under
HUBCO's restricted stock plan and 92,500 shares are reserved for issuance
pursuant to stock option plans.
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. HUBCO Series A Preferred Stock was issued
pursuant to such authority in connection with HUBCO's acquisition of
Washington; no HUBCO Series A Preferred Stock remains outstanding as of
September 30, 1995.
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 RIGHTS OF HUBCO AND GROWTH
STOCKHOLDERS."
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 therefore, 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 form
the earnings of HUBCO's bank subsidiary, as a practical matter, any
restrictions on the ability of HUB 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, HUB 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 form 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 HUB to HUBCO constitutes an unsafe or unsound practice.
HUBCO is also subject to certain FRB policies which amy, 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, 1995, HUB had $108 million available for the
payment of dividends to HUBCO. At September 30, 1995, HUBCO had $36 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 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 affiliate, 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 either (i) the proposed transaction is first approved by a majority of
HUBCO's Board of Directors, or (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
either of these tests are met, the proposed transaction need only be approved
by the vote otherwise required by law, the Certificate of Incorporation and
any agreement with a national securities exchange.
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 stockholder approval.
COMPARISON OF RIGHTS OF HUBCO AND GROWTH STOCKHOLDERS
General
-------
HUBCO and Growth are both New Jersey general business corporations
governed by the New Jersey Business Corporation Act and registered bank
holding companies under the BHCA. Therefore, there are no material
differences in the legal rights of holders of shares of Growth Common Stock
and HUBCO Common Stock under the New Jersey Business Corporation Act. The
following is a comparison of certain provisions of the respective
certificates of incorporation and bylaws of each of Growth and HUBCO. This
summary does not purport to be complete and is qualified in its entirety by
reference to the certificates of incorporation and bylaws of each of Growth
and HUBCO, which may be changed from time to time.
Voting Requirements
-------------------
Under the New Jersey Business Corporation Act, 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 its assets other 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 contains a "minimum price" provision which
requires the affirmative vote of 75% of the outstanding shares entitled to
vote on certain transactions involving "related persons" unless the proposed
transaction is either first approved by a majority of HUBCO's Board of
Directors or 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. (See "DESCRIPTION OF HUBCO
CAPITAL STOCK -- Description of HUBCO Common Stock; Voting Rights.")
Growth's Certificate of Incorporation contains a different form of "minimum
price" provision. In the event an "Interested Shareholder" (defined in the
Growth Certificate of Incorporation to include any person who, together with
affiliates, beneficially owns 10% or more of the outstanding Growth Common
Stock) proposes to enter into a Business Combination (as defined in the
Growth Certificate of Incorporation) with Growth, the proposed transaction
will require the affirmative vote of 80% of the outstanding shares entitled
to vote thereon, unless either (i) the proposed transaction is first approved
by three-fourths of Growth's "Continuing Directors (defined generally as
Growth directors who are unaffiliated with the Interested Shareholder), or
(ii) the stockholders of Growth are offered consideration in an amount equal
to or in excess of an amount determined in accordance with a formula
contained in the Growth Certificate of Incorporation and the Business
Combination is approved by a majority of the entire Growth Board of Directors
prior to the Interested Shareholder's acquisition date. If either of these
tests are met, the proposed transaction need only be approved by a majority
of the outstanding shares entitled to vote.
Growth's Certificate of Incorporation also contains a provision
that requires, for any merger or consolidation of Growth or the disposition
of all or substantially all of the assets of Growth, the affirmative vote of
80% of the outstanding shares of Growth entitled to vote thereon, unless the
transaction was approved by not less than the greater of (i) three-fourths of
the "Disinterested Directors" (as defined in the Growth Certificate of
Incorporation) or (ii) three "Disinterested Directors." This provision does
not apply to "Business Combinations" with "Interested Shareholders" governed
by Growth's "minimum price" provision discussed above. HUBCO's Certificate
of Incorporation currently contains no similar provision.
Preferred Stock
---------------
The authorized capital stock of HUBCO consists of 25,000,000 shares
of HUBCO Common Stock and 4,500,000 shares of preferred stock. As of
September 30, 1995, 13,145,203 shares of HUBCO Common Stock were issued,
13,111,482 shares of HUBCO Common Stock were outstanding, and no shares of
HUBCO preferred stock were outstanding. Under the terms of HUBCO's
Certificate of Incorporation, the Board of Directors has authority at any
time to divide any or all of the authorized but unissued shares of preferred
stock into series, determine the designations, number of shares, relative
rights, preferences, and limitations of any such series and authorize the
issuance of such series. HUBCO Series A Preferred Stock was issued pursuant
to such authority in connection with HUBCO's acquisition of Washington, but
is no longer outstanding. (See "DESCRIPTION OF HUBCO CAPITAL STOCK --
General.") The authorized capital stock of Growth consists of 5,000,000
shares of Growth Common Stock and 2,000,000 shares of preferred stock. As of
the date of this Proxy Statement-Prospectus, no shares of Growth preferred
stock were issued or outstanding. Under the terms of Growth's Certificate of
Incorporation, the Board of Directors has authority at any time to divide any
or all of the authorized but unissued shares of preferred stock into series,
determine the designations, number of shares, relative rights, preferences,
and limitations of any such series and authorize the issuance of such series.
STOCKHOLDER PROPOSALS
If the Merger has not been consummated prior to Growth's 1996
Annual Meeting, which is presently scheduled for May 1, 1996, any proposal
which a Growth stockholder wishes to have included in the proxy solicitation
materials of Growth to be used in connection with the 1996 Annual Meeting
must be presented to Growth no later than November 30, 1995.
OTHER MATTERS
The management of Growth is not aware of any other business to come
before the Meeting other than the matters described above in this Proxy
Statement-Prospectus. However, if any other matters 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
Certain legal matters relating to the issuance of the shares of
HUBCO Common Stock offered hereby will be passed upon by Pitney, Hardin, Kipp
& Szuch, Morristown, New Jersey. Attorneys in such firm beneficially owned
1,860 shares of Growth Common Stock and no shares of HUBCO Common Stock as of
October 13, 1995.
EXPERTS
The consolidated financial statements of Growth Financial Corp as
of December 31, 1994 and 1993 and for each of the years in the three-year
period ended December 31, 1994 included herein have been included in this
Proxy Statement-Prospectus in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein and
upon the authority of such firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP refers to a change during 1993 in the method
of accounting for income taxes and certain investments in debt and equity
securities.
The consolidated financial statements of HUBCO as of December 31,
1994 and 1993 and for each of the years in the three-year period ended
December 31, 1994 have been incorporated by reference herein in reliance upon
the report of Arthur Andersen LLP, independent public accountants, and are
incorporated by reference herein upon the authority of said firm as experts
in giving said report. The report of Arthur Andersen LLP refers to a change
during 1992 in the method of accounting for income taxes and a change during
1993 in the method of accounting for certain investments in debt and equity
securities.
The consolidated financial statements of Urban National Bank and
the financial statements of Jefferson National Bank as of Decmeber 31, 1994
incorporated by reference in this registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
The reports of Arthur Andersen LLP with respect to each of Urban National
Bank and Jefferson National Bank refer to a change during 1994 in the method
of accounting for certain investments in debt and equity securities.
The consolidated financial statements of Washington as of December
31, 1993 and for each of the years in the two-year period ended December 31,
1993 have been incorporated by reference herein in reliance upon the report
of Coopers & Lybrand LLP, independent public accountants, and are
incorporated by reference herein upon the authority of said firm as experts
in giving said report.
INDEX TO GROWTH FINANCIAL CORP FINANCIAL STATEMENTS
Independent Auditors' Report . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets at June 30, 1995
(Unaudited) and December 31, 1994 and 1993 . . . . . . . F-2
Consolidated Statements of Income for the Six
Months Ended June 30, 1995 and 1994 (Unaudited)
and the Years Ended December, 1994, 1993 and 1992 . . . . F-3
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1994, 1993 and 1992
and the Six Months Ended June 30, 1995 (Unaudited) . . . F-4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1995 and 1994 (Unaudited)
and the Years Ended December 31, 1994, 1993 and 1992 . . F-5
Notes to Consolidated Financial Statements . . . . . . . . F-6
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Growth Financial Corp:
We have audited the consolidated balance sheets of Growth Financial Corp and
subsidiary as of December 31, 1994 and 1993 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1994. These consolidated
financial statements are the responsibility of Growth's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Growth
Financial Corp and subsidiary at December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1994 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993
Growth Financial Corp and subsidiary changed their method of accounting for
income taxes and certain investments in debt and equity securities.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
January 27, 1995
<PAGE>
<TABLE>
<CAPTION>
GROWTH FINANCIAL CORP
CONSOLIDATED BALANCE SHEETS
June 30, 1995 December 31,
--------------- --------------------
(Unaudited) 1994 1993
(In thousands)
<S>
Assets:
<C> <C> <C>
Cash and due from banks (note 2) $ 3,151 $ 4,002 $ 1,666
Federal funds sold 5,600 4,250 3,675
------ ------ ------
Cash and cash equivalents 8,751 8,252 5,341
Federal Reserve Bank stock, at cost 270 270 270
Securities available for sale (note 3) 21,199 20,080 18,321
Loans receivable (note 4) 94,877 84,271 71,837
Less: Allowance for loan losses 1,497 1,427 977
Loans, net 93,380 82,844 70,860
Premises and equipment (note 5) 2,129 2,157 1,975
Interest and dividends receivable 740 605 517
Other assets (note 7) 870 615 399
------- ------- --------
Total assets $127,339 $114,823 $ 97,683
======== ======== ========
Liabilities and stockholders' equity:
Due to depositors (note 6):
Non-interest bearing 18,521 17,154 16,533
Interest bearing 90,231 81,934 66,660
------- ------- -------
Total deposits 108,752 99,088 83,193
Accrued expenses and other liabilities (note 7) 4,836 2,527 1,993
------- ------- -------
Total liabilities 113,588 101,615 85,186
======= ======= =======
Stockholders' equity (notes 8 and 14):
Preferred stock; par value $5; 2,000
shares authorized; none issued -- -- --
Common Stock; par value $1; 5,000
shares authorized; issued and outstanding,
1,693 at June 30, 1995 and
1,612 at December 31, 1994 and
1,535 at December 31, 1993 1,693 1,612 1,535
Paid-in-capital 14,664 13,822 13,284
Accumulated deficit (2,261) (1,837) (2,342)
Net unrealized gain (loss) on securities
available for sale (345) (389) 20
------- ------- -------
Total stockholders' equity 13,751 13,208 12,497
------- ------- -------
Commitments and contingencies
(notes 10, 11, 12 and 13) -- -- --
Total liabilities and stockholders' equity $127,339 $114,823 $97,683
======== ======== =======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GROWTH FINANCIAL CORP
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share items
Six Months Ended
----------------------
June 30, June 30, Years Ended December 31,
-------- -------- ----------------------------
1995 1994 1994 1993 1992
(Unaudited) ------- ------- -------
-----------
<S> <C> <C> <C> <C> <C>
Interest income:
Loans receivable $ 4,018 $ 3,076 $ 6,697 $ 4,472 $ 3,660
Deposits in other banks and federal funds sold 108 42 152 163 138
Securities available for sale 613 388 810 -- --
Investment securities -- -- -- 1,219 1,280
------ ------ ------ ----- -----
Total interest income 4,739 3,506 7,659 5,854 5,078
----- ----- ----- ----- -----
Interest expense:
Deposits (note 6) 1,724 1,054 2,352 2,142 2,187
Short-term borrowings 1 5 9 -- --
- - - -- --
Total interest expense 1,725 1,059 2,361 2,142 2,187
----- ----- ----- ----- -----
Net interest income 3,014 2,447 5,298 3,712 2,891
Provision for loan losses (note 4) 150 203 634 653 180
----- ----- ----- ----- -----
Net interest income after provision for loan losses 2,864 2,244 4,664 3,059 2,711
----- ----- ----- ----- -----
Other income:
Service fee income 140 136 263 222 135
Gains on sale of securities -- -- -- 19 39
Other income 27 29 64 61 46
--- --- --- --- ---
Total other income 167 165 327 302 220
--- --- --- --- ---
Other expenses:
Salaries and employee benefits (notes 8 and 13) 1,037 838 1,690 1,436 1,082
Premises and equipment (notes 5 and 10) 406 358 702 638 583
Consulting and professional fees 70 127 229 119 103
Marketing and promotion 85 56 174 98 113
Office supplies 78 41 87 102 64
Insurance 140 127 263 229 213
EDP service bureau 148 124 258 209 137
Other 224 205 468 478 311
---- ---- ---- ----- -----
Total other expenses 2,188 1,876 3,871 3,309 2,606
----- ----- ----- ----- -----
Income before income tax expense 843 533 1,120 52 325
Income tax expense (benefit) (note 7) 344 (30) -- (260) 136
---- ----- ----- ----- -----
Net income before extraordinary item 499 563 1,120 312 189
Extraordinary item:
Reduction of tax attributable to prior year's loss
carryforwards -- -- -- -- 136
----- ----- ----- ----- ----
Net income after extraordinary item $ 499 $ 563 $ 1,120 $ 312 $ 325
====== ======== ======== ===== ========
Income per share before extraordinary item<F1> $ 0.27 $ 0.33 $ 0.66 $0.18 $ 0.11
Extraordinary item per share<F1> -- -- -- -- $ 0.08
------ -------- -------- ----- --------
Net income per common share<F1> $ 0.27 $ 0.33 $ 0.66 $0.18 $ 0.19
====== ======== ======== ===== ========
Average common shares outstanding 1,825 1,693 1,693 1,693 1,693
===== ===== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
[FN]
<F1> The weighted average number of shares outstanding and the related
income per share amount for all periods presented have been retroactively
adjusted to give effect to a 5% stock dividend declared on December 21,
1994 and paid on March 15, 1995.
<PAGE>
<TABLE>
<CAPTION>
GROWTH FINANCIAL CORP
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited for the six month
period ended June 30, 1995)
Unrealized
Gain/(Loss)
Common on Securities Total
Stock Paid-In Accumulated available Stockholders'
Shares Amount Capital Deficit for sale Equity
------- ------- ------- ------------ ------------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 1,462 $1,462 $12,654 $(2,276) $ -- $11,840
Net income for the year ended
December 31, 1992 -- -- -- 325 -- 325
------- ------- ------- ------ ------- ------
Balance at December 31, 1992 1,462 1,462 12,654 (1,951) -- 12,165
Stock dividend 73 73 630 (703) -- --
Unrealized gain on securities
available for sale -- -- -- -- 20 20
Net income for the year ended
December 31, 1993 -- -- -- 312 -- 312
------- ------- ------- ------ ------- ------
Balance at December 31, 1993 1,535 1,535 13,284 (2,342) 20 12,497
Stock dividend 77 77 538 (615) -- --
Net change in unrealized gain (loss)
on securities available for sale -- -- -- -- (409) (409)
Net income for the year ended
December 31, 1994 -- -- -- 1,120 -- 1,120
------- ------- ------- ------ ----- ------
Balance at December 31, 1994 1,612 1,612 13,822 (1,837) (389) 13,208
Stock dividend 81 81 842 (923) -- --
Net change in unrealized gain (loss)
on securities available for sale 44 44
Net income for the six months ended
June 30, 1995 499 499
Balance at June 30, 1995 (Unaudited) 1,693 $1,693 $14,664 $(2,261) $ (345) $13,751
===== ====== ======= ======== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
GROWTH FINANCIAL CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months
Ended June 30, Years Ended December 31,
---------------------- -----------------------------------
1995 1994 1994 1993 1992
-------- -------- ---------- ---------- ----------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $ 499 $ 563 $ 1,120 $ 312 $ 325
Net income
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Provision for loan losses 150 203 634 653 180
Deferred tax expense (benefit) 245 (30) (185) (260) --
Depreciation of premises and equipment 122 118 244 227 180
Decrease (increase) in accrued interest receivable (134) (44) (89) (37) 51
Increase (decrease) in accrued expenses and other 2,308 (435) 534 687 22
liabilities
Decrease (increase) in other assets (519) 37 204 (51) 9
Net amortization and accretion 70 28 14 (20) (102)
(Increase) decrease in deferred loan costs (32) 39 11 (19) 12
Loss on disposal of fixed assets -- -- -- -- 3
Gain on sale of securities -- -- -- (19) (39)
------ ------ ------ -------- --------
Net cash provided by operating activities 2,709 479 2,487 1,473 641
------ ------ ------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans receivable (9,748) (9,186) (10,983) (18,923) (12,937)
Loans purchased (907) (1,645) (1,645) (3,204) (4,542)
Purchases of securities -- -- -- (22,161) (48,591)
Maturities of securities -- -- -- 15,080 43,011
Proceeds from sale of securities -- -- -- 742 2,530
Purchases of securities available for sale (5,100) (2,288) (11,596) (17,463) --
Maturities of securities available for sale 3,500 4,650 6,900 21,812 --
Paydowns on mortgage backed securities 475 1,410 2,278 7,759 --
Net purchases of premises and equipment (94) (25) (451) (168) (273)
Proceeds from disposals of premises and -- -- 26 -- 1
equipment -------- -------- ------- ------- -------
Net cash used in investing activities (11,874) (7,084) (15,471) (16,526) (20,801)
-------- -------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 9,664 6,149 15,895 14,851 19,920
Increases in short-term borrowings -- 1,000 -- -- --
------- ------ ------ ------- -------
Net cash provided by financing activities 9,664 7,149 15,895 14,851 19,920
------- ------ ------ ------- -------
Net increase (decrease) in cash and cash 499 544 2,911 (202) (240)
equivalents
Cash and cash equivalents at beginning of year 8,252 5,341 5,341 5,543 5,783
------- ------ ------ ------- -------
Cash and cash equivalents at end of year $ 8,751 $ 5,885 $ 8,252 $ 5,341 $ 5,543
======= ====== ====== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid on deposits $ 1,724 $ 1,054 $ 1,991 $ 2,138 $ 2,152
Income taxes paid 344 -- -- -- --
Securities transferred to securities available for sale -- -- -- 10,918 11,666
Loan charge-offs 106 69 241 670 249
===== ===== ===== ===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Growth Financial Corp (Growth) is a bank holding company incorporated on
October 27, 1988 under the laws of the State of New Jersey to engage in the
business of commercial banking through its wholly-owned subsidiary, Growth
Bank. Growth Bank is a commercial bank chartered under the applicable laws of
the State of New Jersey which commenced commercial banking activities on
February 12, 1990. Information as of June 30, 1995 and the six month periods
ended June 30, 1995 and 1994 is unaudited.
Growth Bank is in the business of providing financial services to
individuals and businesses with primary emphasis on depository services,
commercial and consumer lending through three branch offices. Growth Bank is
subject to competition from other financial institutions and to the
regulations of certain regulatory agencies and undergoes periodic examination
by those regulatory authorities.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are comprised of the accounts of
Growth and its wholly-owned subsidiary, Growth Bank. All significant
intercompany transactions and balances have been eliminated from the
accompanying consolidated financial statements.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the dates of the
balance sheets and results of operations for the periods. Actual results
could differ significantly from those estimates and assumptions. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the determination of the allowance for loan losses. The
consolidated balance sheet at June 30, 1995, the consolidated statements of
income for the six month periods ended June 30, 1995 and 1994, and the
consolidated statements of cash flows for the six month periods ended June
30, 1995 and 1994, have been prepared by Growth on an accrual basis without
audit. In the opinion of Growth management, all adjustments necessary to
present fairly the financial condition at June 30, 1995 and the results of
operation, and cash flows for the six month periods ended June 30, 1995 and
1994 have been made. The results of operations for the six month periods
ended June 30, 1995 are not necessarily indicative of the operating results
of the full year.
CASH AND CASH EQUIVALENTS
For the purpose of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks and Federal funds sold.
Generally, Federal funds sold are sold for one day to one month periods.
SECURITIES
On December 31, 1993, Growth adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
Securities that cannot be categorized as either investment securities or
trading securities are classified as securities available for sale. Such
securities include debt securities to be held for indefinite periods of time
and not intended to be held to maturity, as well as marketable equity
securities. Securities held for indefinite periods of time include
securities that may be sold in response to changes in interest rates,
resultant prepayment risk and other factors related to interest rate and
resultant prepayment risk changes. Securities available for sale at June 30,
1995, December 31, 1994 and 1993 are carried at fair value and unrealized
holding gains and losses (net of tax effects) on such securities are included
in stockholders equity. Upon realization, such gains or losses are included
in earnings using the specific identification method. On December 31, 1992,
Growth established an available for sale securities classification which such
securities were accounted for at the lower of cost or market using the
aggregate method.
Securities held for investment, net, are stated at cost, adjusted for
amortization of premiums and accretion of discounts using the level yield
method. Where securities are carried at cost it is because Growth has the
ability, and management has the intention, to hold securities to maturity.
Growth had no held to maturity securities at June 30, 1995, or December 31,
1994 or 1993.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the principal amount outstanding, net of deferred
loan origination fees and costs and the allowance for loan losses. Interest
on loans is accrued and credited to income as earned. Loan origination fees
and certain direct loan origination costs are deferred and amortized to
interest income over the life of the loan as an adjustment to the loan s
yield.
The accrual of income on loans is generally discontinued when a loan
becomes more than 90 days delinquent or when certain factors indicate
reasonable doubt as to the timely collectibility of such income. Loans on
which the accrual of income has been discontinued are designated as
non-accrual loans. Unless the loan is well collateralized or in the process
of collection all previously accrued interest is reversed and income is
recognized subsequently only in the period collected. A non-accrual loan is
not returned to an accrual status until factors indicating doubtful
collection no longer exist.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that 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 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 loan losses 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, various regulatory agencies, as an integral part of their
examination process, periodically review Growth Bank's allowance for loan
losses. Such agencies may require growth to recognize additions to the
allowance based on their judgments of information available to them at the
time of their examination.
PREMISES AND EQUIPMENT
Land is carried at cost. Buildings and improvements, leasehold
improvements, furniture, fixtures and equipment are carried at cost, net of
accumulated depreciation. Depreciation on buildings and improvements is
provided for using the straight line method over estimated useful lives up to
30 years. Growth Bank depreciates most of its furniture, fixtures and
equipment using the straight line method over the estimated useful lives of 1
to 7 years.
INCOME TAXES
Growth and Growth Bank file a consolidated Federal income tax return.
State income tax returns are filed on a separate basis.
Effective January 1, 1993, Growth adopted 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 amounts 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 those temporary
differences are expected to be recovered or settled. Under Statement 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Growth has not separately reported the cumulative effect of that change
in the method of accounting for income taxes in the accompanying consolidated
statement of operations, as such effect is not material.
Pursuant to the deferred method under APB Opinion 11, which was applied
in 1992 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year
of the calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
NET INCOME PER COMMON SHARE
Net income per common share is computed based upon the average number of
shares of common stock and common stock equivalents outstanding during the
period except for the six month period ended June 30, 1995. The effect of
outstanding stock options has not been included as such options do not result
in material dilution.
The weighted average of shares outstanding for all periods presented
have been retroactively adjusted to give effect to stock dividends.
RECLASSIFICATIONS
Certain amounts relating to the years ended December 31, 1993 and 1992
have been restated to conform to the current year's presentation.
(2) CASH AND DUE FROM BANKS
Growth Bank is required to maintain a cash reserve balance based upon
its deposits in accordance with regulations. The average amount of the
reserve was approximately $845,000 for the first six months of 1995, $733,000
in 1994 and $672,000 in 1993.
(3) SECURITIES
The fair value, gross unrealized gains, gross unrealized losses and
amortized cost of securities available for sale at June 30, 1995, December
31, 1994 and December 31, 1993 are as follows:
June 30, 1995
(Unaudited)
---------------------------------------------
Gross Gross
Fair Unrealized Unrealized Amortized
Value Gains Losses Cost
------- ---------- ---------- ---------
(In thousands)
U.S. Treasury Securities $ 496 $ -- $ 1 $ 497
U.S. Government Agencies 16,283 90 608 16,801
Mortgage-backed
securities . . . . . . . 3,326 -- 40 3,366
Marketable equity
securities . . . . . . . 245 -- -- 245
Municipal bonds . . . . . 849 4 -- 845
------- -------- ------- -------
Total . . . . . . . $21,199 $ 94 $ 649 $21,754
======= ======== ======= =======
December 31, 1994
---------------------------------------------
Gross Gross
Fair Unrealized Unrealized Amortized
Value Gains Losses Cost
------- ---------- ---------- ---------
(In thousands)
U.S. Treasury Securities $ 485 $ -- $ 9 $ 494
U.S. Government Agencies 15,184 -- 411 15,595
Mortgage-backed securities 3,670 -- 169 3,839
Marketable equity
securities . . . . . . . 245 -- -- 245
Municipal bonds . . . . . 496 1 2 497
------- -------- ------- -------
Total . . . . . . . $20,080 $ 1 $ 591 $20,670
======= ======== ======= =======
December 31, 1993
---------------------------------------------
Gross Gross
Fair Unrealized Unrealized Amortized
Value Gains Losses Cost
------- ---------- ---------- ----------
(In thousands)
U.S. Government Agencies . $11,448 $ 11 $ 31 $11,468
Mortgage-backed securities 6,220 45 1 6,176
Corporate bonds . . . . . . 250 1 -- 249
Marketable equity securities 245 -- -- 245
Municipal bonds . . . . . . 158 5 -- 153
------- -------- ------- -------
Total . . . . . . . . $18,321 $ 62 $ 32 $18,291
======= ======== ======= =======
The fair value and amortized cost of debt securities available for sale
at June 30, 1995 and December 31, 1994 are shown below by maturity. Expected
maturities will differ from contractual maturities because borrowers have the
right to call or prepay obligations with or without prepayment penalties.
June 30, 1995 December 31, 1994
(Unaudited)
--------------------- --------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
------- ---------- -------- ---------
(In thousands)
Due in one year or less . . . . $ 3,595 $ 3,559 $ 3,536 $ 3,550
Due after one year through five
years . . . . . . . . . . . . . 14,033 14,583 10,012 10,226
Due after five years through
ten years . . . . . . . . . . . -- -- 2,618 2,810
Mortgage-backed securities . . 3,326 3,367 3,669 3,839
------- ------- ------- -------
Total . . . . . . . . . . $20,954 $21,509 $19,835 $20,425
======= ======= ======= =======
No securities were sold during 1994 or for the first six months of 1995.
Proceeds for the sales of securities during 1993 and 1992 were $742,000 and
$2.5 million, respectively, resulting in gross realized gains of $19,000 in
1993 and $39,000 in 1992.
At June 30, 1995, December 31, 1994 and 1993 investment securities
with a carrying value of $376,000, $169,000 and $2 million, respectively,
were pledged to secure certain public fund deposits and for other purposes
required by law.
(4) LOANS RECEIVABLE, NET
Major classifications of loans receivable are as follows:
June 30, December 31,
(Unaudited)
----------- -----------------------
1995 1994 1993
----------- ---------- ---------
(In thousands)
Commercial loans . . . . . . . . . $57,265 $53,049 $45,391
Residential construction . . . . 3,261 1,628 280
Residential mortgages . . . . . . . 7,214 4,415 1,889
Consumer . . . . . . . . . . . . 22,348 20,054 18,767
Home equity lines of credit . . . . 4,739 5,107 5,481
-------- -------- --------
94,827 84,253 71,808
------- ------- -------
Less deferred loan origination costs (50) (18) (29)
-------- -------- --------
Allowance for loan losses . . . . . 1,497 1,427 977
-------- -------- --------
Total . . . . . . . . . . . . $93,380 $82,844 $70,860
======== ======== ========
At June 30, 1995 Growth had $478,000 in nonaccrual loans. At December
31, 1994 Growth had one nonaccrual loan in the amount of $419,000. There
were two nonaccrual loans which totaled $1.1 million at December 31, 1993.
Foregone interest income for nonaccrual loans and loans charged off was
approximately $30,000 for the first six months of 1995 and $74,000 and
$138,000 for the years ending December 31, 1994 and 1993. Growth had one
loan more than 90 days past due and still accruing totaling $466,000 at
December 31, 1993. There were no loans more than 90 days past due and still
accruing interest at June 30, 1995 and December 31, 1994.
An analysis of the allowance for loan losses follows:
June 30, December 31,
(Unaudited)
------------------ -------------------
1995 1994 1994 1993
------- -------- -------- --------
(In thousands)
Allowance for possible loan losses:
Balance beginning of year . $1,427 $ 977 $ 977 $917
Provision . . . . . . . . . 150 203 634 653
Charge-offs . . . . . . . . (106) (69) (241) (670)
Recoveries . . . . . . . . 26 20 57 77
------ ------ ------ ----
Balance end of period . . . $1,497 $1,131 $1,427 $977
====== ====== ====== ====
The activity for the first six months of 1995, and for the years ended
December 31, 1994 and 1993 with respect to loans to directors and principal
officers and their affiliates, which are made in the ordinary course of
business and on substantially the same terms and rates as loans to other
persons, is as follows:
(Unaudited for
the six month
period ended
June 30, 1995)
(In thousands)
Balance, December 31, 1992 . . . . $1,748
New loans . . . . . . . . . . . . . 1,143
Repayments . . . . . . . . . . . . (1,486)
-------
Balance, December 31, 1993 1,405
=======
New loans . . . . . . . . . . . . . 2,630
Repayments . . . . . . . . . . . . (1,175)
-------
Balance, December 31, 1994 . . . . 2,860
=======
New loans . . . . . . . . . . . . . 911
Repayments . . . . . . . . . . . . (954)
-------
Balance, June 30, 1995 . . . . . . $2,817
=======
(5) PREMISES AND EQUIPMENT, NET
A summary of the net carrying value of premises and equipment follows:
June 30, December 31,
(Unaudited)
--------------- ---------------------
1995 1994 1993
--------------- -------- --------
(In thousands)
Land . . . . . . . . . . . . . . . $ 378 $ 378 $ 378
Buildings and improvements . . . 1,018 950 952
Furniture, fixtures and equipment . 1,472 1,598 1,188
----- ----- -----
2,868 2,926 2,518
Less accumulated depreciation . . . 739 769 543
------ ------ ------
$2,129 $2,157 $1,975
====== ====== ======
Depreciation and amortization expense charged to operations amounted to
$140,000 for the first six months of 1995 and $244,000, $227,000 and $180,000
for the years ended in 1994, 1993 and 1992, respectively.
(6) DEPOSITS
A summary of deposit balances follows:
June 30, December 31,
(Unaudited)
--------------- ----------------------
1995 1994 1993
--------------- -------- --------
(In thousands)
Regular Checking . . . . . . . . . $18,521 $17,154 $16,533
NOW accounts . . . . . . . . . . . 11,770 11,750 8,193
Money market deposit accounts . . . 24,540 24,752 20,070
Regular savings accounts . . . . . 12,368 13,227 11,315
Certificates of deposit . . . . . . 41,553 32,205 27,082
-------- -------- --------
$108,752 $99,088 $83,193
======== ======== ========
At June 30, 1995, approximately $12.6 million and at December 31, 1994
and 1993 approximately $7.4 million and $7.0 million, respectively, in
certificates of deposit in denominations of $100,000 or more were
outstanding. Interest expense on certificates of deposit in denominations of
$100,000 or more amounted to approximately $302,000 for the first six months
of 1995 and $356,000, $298,000 and $321,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
(7) INCOME TAXES
The components of income tax expense (benefit) are as follows:
Six Months
Ended
June 30,
(Unaudited) Years Ended December 31,
------------- ---------------------------
1995 1994 1993 1992
------------- ---------------------------
(In thousands)
Current:
Federal . . . . . . . . . $281 $169 $ -- $ --
State . . . . . . . . . . 71 16 -- --
--- --- ----- -----
Total Current . . . . . 352 185 -- --
--- --- ----- -----
Deferred:
Federal . . . . . . . . . (8) (169) (260) --
State . . . . . . . . . . -- (16) -- --
----- ----- ----- -----
Total Deferred . . . . . (8) (185) (260) --
----- ----- ----- -----
Charge in lieu of federal and
state income tax expense -- -- -- 136
Total . . . . . . . . . $344 $ -- $(260) $136
==== ====== ====== ====
In addition to income tax expense (benefit) presented above is a benefit
of $211,000 and taxes of $10,000 related to unrealized gains and losses on
securities available for sale at December 31, 1994 and 1993, respectively,
and taxes of $23,000 for the six months ended June 30, 1995.
In 1992, the charge in lieu of Federal and State income taxes is
equivalent to the provision for tax that would have been required in the
absence of net operating loss carryforwards. The tax benefit arising from
the utilization of net operating loss carryforwards for financial reporting
purposes is included as an extraordinary item.
Total income tax (benefit) expense for the six months ended June 30,
1995 and 1994 and years ended December 31, 1994, 1993 and 1992 differed from
the "expected" tax expense (computed by applying the U.S. Federal income tax
rate of 34%) as follows:
Six Months Ended
June 30, Years Ended December 31,
---------------- ------------------------
(Unaudited)
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
Computed "expected" tax expense (benefit) $286 $181 $381 $ 17 $110
State tax expense, net of Federal
income tax benefit . . . . . . . 47 48 69 -- 28
Change in beginning-of-year balance
of the valuation allocated to income
tax provision . . . . . . . . . . . -- (210) (420) (280) --
Other, net . . . . . . . . . . . . . . 11 (49) (30) 3 (2)
----- ----- ------ ------ ----
Total . . . . . . . . . . . . . . $344 $(30) $ -- $(260) $136
===== ===== ====== ====== ====
The significant components of deferred income tax benefit for the six
months ended June 30, 1994 and the years ended December 31, 1994 and 1993
were due to changes in temporary differences between tax and financial
reporting purposes and the change in the beginning-of-year balance of the
valuation allowance for deferred tax assets.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as
follows:
Six Months
Ended
June 30,
(Unaudited) Years Ended December 31,
----------- ------------------------
1995 1994 1993
----------- ----------- ------------
(In thousands)
Deferred tax asset:
Pre-opening expenses . . . . . . $ -- $ -- $ 44
Allowance for loan losses . . . 467 465 306
Deferred compensation . . . . . . 77 69 56
Contributions . . . . . . . . . . -- -- 18
Net operating loss carryforwards
-- -- 370
Nonaccrual interest . . . . . . . 86 76 40
Unrealized loss on securities 178 201 --
available for sale . . . . . . . .
Other . . . . . . . . . . . . . . -- 12 18
----- ----- -----
Total gross deferred tax assets
$808 $823 $852
===== ===== =====
Valuation allowance . . . . . . . . (101) (101) (520)
----- ----- -----
Net deferred tax assets . . . . 707 722 332
Deferred tax liabilities:
Securities, principally due to 79 77 72
accretion of discounts . . . . . .
Unrealized gain on securities -- -- 10
available for sale . . . . . . . .
Total gross deferred tax 79 77 82
---- ---- ----
liabilities . . . . . . . . . . . .
Net deferred tax asset . . . . $628 $645 $250
==== ==== ====
There was no change in the total valuation allowance during the six
months ended June 30, 1995. The valuation allowance for deferred tax assets
as of January 1, 1994 was $520,000. The net change in the total valuation
allowance for the year ended December 31, 1994 was a decrease of $419,000.
Except for the effects of the reversal of net deductible temporary
differences, Growth is not currently aware of any factors which would cause
any significant differences between taxable income and pretax book income in
future years. However, there can be no assurances that there will be no
significant differences in the future between taxable income and pretax book
income if circumstances change (such as, for example, changes in tax laws or
Growth's financial condition or performance). In order to fully realize the
net deferred tax asset, Growth will need to generate future taxable income.
Management believes it is more likely than not that Growth will realize the
benefit of net deductible temporary differences and that such net deductible
temporary differences will reverse during periods in which Growth generates
net taxable income. Management has projected Growth will generate sufficient
taxable income to utilize the deferred tax asset. There can be no
assurances, however, that Growth will generate any earnings or any specific
level of continuing earnings.
(8) STOCK OPTION PLANS
Growth has adopted Non-qualified Option Plans for the incorporators and
for the Board of Directors under which a total of 169,275 shares of Growth's
common stock may be issued. The exercise price under which options to
purchase a total of 169,275 shares of Growth's common stock were issued is
$9.93.
An Employee Stock Option Plan under which options to purchase a total of
84,638 shares of Growth's common stock may be issued, was ratified by the
stockholders at the annual stockholders' meeting held on April 25, 1990. The
exercise price of the Employee Stock Option Plan is the fair market value of
the common stock at the date the option is granted. Both Plans are
administered by a committee designated by the Board of Directors of Growth
and Growth Bank. At June 30, 1995 all outstanding options under the stock
option plans were exercisable. At June 30, 1995 and December 31, 1994,
253,913 common shares were reserved for stock options outstanding or
available to be granted under the aforementioned plans.
The number of options outstanding in all Plans is as follows:
Number Exercise
of Price
Shares Per Share
--------- ---------------
Balance December 31, 1991 (100% exercisable) 167,812
Granted . . . . . . . . . . . . . . . . . . 53,386 $4.75 - $5.47
Exercised . . . . . . . . . . . . . . . . . . -
Expired during 1991 . . . . . . . . . . . . . (6,369)
--------
Balance December 31, 1992 (100% exercisable) 214,829
--------
Granted . . . . . . . . . . . . . . . . . . . 31,962 $8.07 - $8.69
Exercised . . . . . . . . . . . . . . . . . . -
Expired during 1993 . . . . . . . . . . . . . -
--------
Balance December 31, 1993 (100% exercisable) 246,791
Granted . . . . . . . . . . . . . . . . . . . 6,371 $7.26 - $10.00
Exercised . . . . . . . . . . . . . . . . . . -
Expired during 1994 . . . . . . . . . . . . . -
--------
Balance December 31, 1994 (100% exercisable) 253,162 $4.31 - $10.00
Granted . . . . . . . . . . . . . . . . . . . -
Exercised . . . . . . . . . . . . . . . . . . -
Expired during 1995 . . . . . . . . . . . . . -
--------
Balance June 30, 1995 (100% exercisable) . . 253,162 $4.31 - $10.00
The Summit Bancorporation (Summit), a New Jersey bank holding company,
purchased 167,571 shares of Growth's common stock during its initial public
offering. Growth has granted Summit an option to purchase additional shares
of common stock of up to 3% of the total number of shares of common stock
outstanding at an exercise price of $9.93 per share. This option is not
reflected in the above chart. The option expires on November 12, 1999.
Summit shall have the right, once during the term of the option, to demand
that Growth register all or part of the stock reserved for exercise of the
option. Growth shall bear the cost of preparing and filing such registration
statement. In addition, if Growth decides to make a subsequent public
offering during the term of the option, Growth will, at Summit's request, be
required to include in such offering all or a portion of the shares reserved
for the exercise of Summit's option. At June 30, 1995 and December 31, 1994,
a total of 50,778 shares were reserved for the Summit stock option.
(9) RELATED PARTY TRANSACTIONS
Various directors, including organizations in which they are officers or
have significant ownership, provided services to Growth and Growth Bank in
the ordinary course of business during 1995, 1994, 1993 and 1992. Such
services included rental of office space, legal, consulting, accounting,
insurance, interior decorating and construction management. Total amounts
paid to these related parties amounted to approximately $324,000 for the
first six months of 1995, and $407,000, $352,000 and $398,000 for the years
ending December 31, 1994, 1993 and 1992, respectively.
Certain of Growth's directors and other stockholders have formed a
partnership, Growth Realty Associates, which owns and operates a building in
which Growth and Growth Bank leased permanent office space beginning in
September 1991 at a base annual rate of $175,000 plus expenses. The base
annual lease is subject to increases based on the cost of living index. For
six months ended 1995, the annual rent including operating lease expenses,
was approximately $328,000. Management is of the opinion that the terms and
conditions of these related party transactions are not more favorable than
such terms and conditions would be with unrelated parties.
(10) LEASES
The future minimum rental commitments required under operating leases
that have initial or remaining noncancellable lease terms in excess of one
year are as follows:
(in thousands) Year June 30, 1995 December 31, 1994
------ ------------- -----------------
(unaudited)
1995 $368 $390
1996 531 398
1997 523 390
1998 516 384
1999 515 383
Thereafter: 2,632 376
----- -----
$5,085 $2,321
====== ======
Rental amounts under operating leases charged to premises and equipment
expense amounted to $199,000 for the first six months of 1995 and $338,000,
$311,000 and $298,000 for the years ended December 31, 1994, 1993 and 1992.
(11) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
Growth is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These instruments expose Growth to credit risk in excess of the
amount recognized on the balance sheet.
Growth's maximum exposure to credit loss in the event of nonperformance
by the borrower under commitments to extend credit is represented by the
contractual amount of those commitments, if funded. Growth uses the same
credit policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments. Total credit exposure related to these
items at June 30, 1995 and December 31, 1994 is summarized below:
Contractual Amount
-----------------------------------
Loan Commitments
- ---------------- June 30, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
(in thousands)
Loan commitments . . . . . . . . . . . $14,328 $12,651
Unused portion of commercial and
working capital lines of credit . . . 9,324 12,214
Unused portion of home equity lines of
credit and overdraft lines . . . . 5,359 4,668
Unused portion of standby letters of
credit . . . . . . . . . . . . . . . . 363 128
-------- --------
$29,374 $29,661
======== ========
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Growth Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by Growth Bank, upon extension of
credit is based on management's credit evaluation of the counterparty.
Collateral held is generally real estate.
Standby performance letters of credit are conditional commitments issued
by Growth Bank to guarantee the performance of an act of a customer to a
third party. The most common purpose is for the payment of imports from
foreign countries.
Interest rates on the above commitments are generally of a variable
nature.
(12) CONCENTRATION OF CREDIT RISK
Growth Bank grants primarily commercial, consumer and other loans
generally fully or partially collateralized by real estate located in
northern and central New Jersey. Accordingly, as with most financial
institutions in the market area, the ultimate collectibility of a substantial
portion of the loan portfolio is susceptible to changes in market conditions.
At June 30, 1995, 55 borrowers represented approximately 42% of the total
loans outstanding and $5.6 million or 6.0% of the loan portfolio consisted of
loans that were unsecured. At December 31, 1994, 53 borrowers represented
approximately 43% of the total loans outstanding. At December 31, 1994,
approximately $5.8 million or 6.9% of the loan portfolio consisted of loans
that were unsecured.
(13) CONTINGENCIES
On April 27, 1994, the Boards of Growth and Growth Bank entered into an
Agreement (the "Agreement") with the President and other members of
management which guaranteed them certain benefits in the event of a change of
control during the period from April 27, 1994 to April 26, 1996. Among other
things, the President's employment shall not be terminated in anticipation of
change of control, and he would receive continuation of all compensation,
medical and other insurances, perquisites, retirement plans and options
through April 26, 1996. In addition, Growth shall issue to the President an
additional number of noncancellable stock options equal to 5% of the then
issued and outstanding shares of Growth at an exercise price per share equal
to the closing NASDAQ "bid" price of December 31st of the year immediately
preceding the change of control. In the Agreement, Growth and Growth Bank
also guaranty twenty-four months employment, or severance benefits equal to
twenty-four months, at their then current level of salary, benefits,
perquisites and retirement plans to Growth Bank's Executive Vice President,
Chief Financial Officer and Vice President Lending. These agreements were
subsequently clarified by the Agreement and Plan of Merger by and among
HUBCO, Inc., Hudson United Bank, Growth and Growth Bank.
At June 30, 1995 and December 31, 1994, Growth Bank had unsecured lines
of credit with other financial institutions totaling $1.5 million, which are
available for short term financing. These lines of credit may be drawn upon
as needed. At June 30, 1995 and December 31, 1994 Growth Bank had not drawn
down on these lines of credit.
Management of Growth is not aware of any outstanding pending or
threatened litigation which would materially affect its financial position or
its results of operations at June 30, 1995 and December 31, 1994.
(14) DIVIDENDS AND OTHER RESTRICTIONS
The payment of dividends by Growth Bank to Growth is restricted. Under
the New Jersey Banking Act of 1948, as amended, Growth Bank may pay dividends
only out of retained earnings, and out of paid-in-capital to the extent that
paid-in-capital exceeds 50% of stated capital. The Federal Reserve will also
prohibit dividends by Growth Bank until Growth Bank has satisfied certain
regulatory thresholds.
On August 23, 1995 Growth's Board of Directors declared a $.12 cash
dividend per common share with a payment date of September 15, 1995 to
stockholders of record on September 5, 1995.
On December 21, 1994 Company's Board of Directors declared a 5% stock
dividend with a payment date of March 15, 1995 to stockholders of record on
February 15, 1995. Net income (loss) per common share for all periods
presented have been retroactively adjusted to give effect to the stock
dividend.
(15) ADOPTION OF SFAS NO. 114, AS AMENDED
On May 31, 1993 the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 114, "Accounting by Creditors for the Impairment of a Loan."
A subsequent amendment, SFAS No. 118, "Accounting by Creditors for the
Impairment of a Loan Income Recognition and Disclosures," was issued in
October 1994. Adoption of SFAS No. 114, as amended, is required for financial
statements issued for fiscal years beginning after December 15, 1994. It
prescribes the recognition criteria for loan impairment and the measurement
methods for certain impaired loans whose terms are modified in troubled debt
restructurings and amends SFAS No. 5, "Accounting for Contingencies", and
SFAS No. 15 "Accounting for Debtors and Creditors for Troubled Debt
Restructurings." Growth's adoption in the first quarter of 1995 of SFAS No.
114, as amended, did not have a material effect on its financial position or
results of operations. At June 30, 1995 Growth determined that loans
totalling approximately $2 million were impaired and the related allowance
for losses on these loans was approximately $423,000.
(16) GROWTH FINANCIAL CORP (PARENT COMPANY ONLY)
Growth Financial Corp operates a wholly owned subsidiary, Growth Bank.
The earnings of Growth Bank are recognized by Growth using the equity method
of accounting. Accordingly, earnings of Growth Bank are recorded as
increases or decreases, respectively, in Growth's investment in Growth Bank
and any dividends would reduce Growth's investment in Growth Bank. For
purposes of reporting cash flows, cash equivalents include cash and cash due
from bank. Certain salaries, occupancy and overhead expenses are allocated
from Growth Bank to the Parent Company. Federal income taxes are not
provided on a separate company basis. The Parent Company files a
consolidated federal income tax return with Growth Bank. Condensed
statements of the Parent Company only follow (in thousands):
CONDENSED BALANCE SHEETS
June 30, December 31,
(Unaudited)
----------- ----------------------
1995 1994 1993
----------- --------- ---------
(In thousands)
Assets:
Cash and cash equivalents . . . . $ 349 $ 256 $ 116
Securities, available for sale 1,609 1,707 2,347
Loans receivable . . . . . . . . 492 494 --
Investment in subsidiary . . . 11,558 10,758 10,095
Accrued interest receivable . . . 11 1 6
Other assets . . . . . . . . . . 50 4 5
-- - -
Total assets . . . . . . . . . $14,069 $13,220 $12,569
======= ======= =======
Liabilities & stockholders' equity:
Accrued expenses and other
liabilities . . . . . . . . . . . $ 25 $ 12 $ 72
Stockholders' equity . . . . . . 14,044 13,208 12,497
------ ------ ------
Total liabilities and
stockholders' equity . . . . . $14,069 $13,220 $12,569
======= ======= =======
CONDENSED STATEMENTS OF INCOME
Six Months Ended
June 30, Years Ended December 31,
------------------------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(Unaudited)
-----------
Interest income . . . . . $ 68 $ 66 $ 131 $ 132 $ 170
Other income . . . . . . -- -- -- -- 17
Gain on sale of securities -- -- -- -- 32
Operating expenses . . . -- 17 38 175 346
------ ------ ------- ----- -----
Income (loss) before 68 49 93 (43) (127)
Income tax expense . . . 24 -- -- -- --
------ ------- ------- ------ ------
Net income (loss) before
equity in loss of
subsidiary . . . . . . . 44 49 93 (43) (127)
Equity in earnings of 455 514 1,027 355 452
----- ----- ------ ----- -----
Net income . . . . . . . $ 499 $ 563 $1,120 $ 312 $ 325
====== ====== ====== ====== ======
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30, Years Ended December 31,
(Unaudited)
----------------- -------------------------
1995 1994 1994 1993 1992
---------- ------ -------- ------- -------
Cash flows from operating activities:
Net income . . . . . . . . . . $ 499 $ 563 $ 1,120 $ 312 $ 325
Adjustments to reconcile net
income to net cash provided
(used) in operating activities
- changes in operating assets
and liabilities:
Increase (decrease) in
accrued interest receivable. (9) (7) 5 3 82
Increase in other assets . . . (45) -- (4) --
(Increase) decrease in
accrued expenses and
other liabilities . . . . . 12 (43) (36) (129) (64)
Equity in undistributed
(income) loss of subsidiary (455) (514) (1,027) (355) (452)
Net amortization and 1 4 7 (15) 1
accretion . . . . . . . . .
Gain on sale of securities . . -- -- -- -- (32)
----- ------- ------- -------- --------
Net cash provided (used) in
operating activities . . . . . 3 3 69 (188) (140)
----- ------ ------ -------- --------
Cash flows from investing activities:
Net decreases (increase) in
loans receivable . . . . . . . 2 (480) (494) -- --
Maturities of securities . . . . -- -- -- -- 1,345
Sales of securities . . . . . . -- -- -- -- 2,047
Purchases of investment securities -- -- -- -- (1,054)
Principal paydown on securities. -- -- -- -- 829
Purchases of securities
available for sale . . . . . . -- (300) (300) (1,854) --
Maturities of securities
available for sale . . . . . . 88 716 865 1,339 --
Purchases of premises and
equipment . . . . . . . . . . -- -- -- -- (26)
Proceeds from transfer of
premises and equipment
to subsidiary . . . . . . . . -- -- -- -- 412
Equity investment in subsidiary. -- -- -- -- (3,000)
----- ------- --------- ------- -------
Net cash provided (used) in
investing activities . . . . . 90 (64) 71 (515) 553
----- ------ -------- ------ ------
Net increase (decrease) in
cash and cash equivalents . . . . 93 (61) 140 (703) 413
Cash and cash equivalents at
beginning of period . . . . . . 256 116 116 819 406
----- ------ ------ ------ ------
Cash and cash equivalents at
end of period . . . . . . . . $ 349 $ 55 $ 256 $ 116 $ 819
====== ======= ======= ======= =======
(17) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected quarterly financial data for the first two quarters of 1995 and
all of 1994 and 1993 follow:
1st qtr. 2nd qtr. 3rd qtr. 4th qtr.
(in thousands except per share data)
1995:
Total interest income $2,304 $2,435
Net interest income 1,510 1,504
Provision for loan losses 75 75
Income before income taxes 413 430
Income tax expense 167 177
Net income 246 253
Net income per common share $0.14 $0.13
1994:
Total interest income $1,640 $1,866 $2,025 2,128
Net interest income 1,135 1,311 1,390 1,462
Provision for loan losses 60 143 206 225
Income before income taxes 225 308 316 270
Income tax expense (benefit) (15) (15) (10) 40
Net income 240 323 326 230
Net income per common share $0.14 $0.19 $0.19 $0.14
1993:
Total interest income $1,401 $1,450 $1,402 $1,601
Net interest income 870 905 861 1,076
Provision for loan losses 45 45 338 225
Income/(loss) before income
taxes 104 108 (234) 74
Income tax benefit (15) (15) (15) (215)
Net income/(loss) 119 123 (219) 289
Net income/(loss) per common
share $0.07 $0.07 $(0.13) $0.17
Earnings per share data are computed giving retroactive effect to stock
dividends.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 18, 1995
("Agreement"), is among HUBCO, Inc. ("Hubco"), a New Jersey corporation and
registered bank holding company, Hudson United Bank (the "Bank"), a New
Jersey chartered commercial banking corporation, wholly-owned by Hubco,
Growth Financial Corp., a New Jersey corporation ("GFC") and registered bank
holding company, and Growth Bank, a New Jersey chartered bank, wholly owned
by GFC ("Growth").
WHEREAS, Hubco desires to acquire GFC and GFC's Board of Directors
has determined, based upon the terms and conditions hereinafter set forth,
that the acquisition is in the best interests of GFC and its stockholders.
The acquisition will be accomplished by merging GFC with and into Hubco with
Hubco surviving and GFC shareholders receiving the consideration hereinafter
set forth. Immediately after the merger of GFC into Hubco, Growth shall be
merged with and into the Bank with the Bank surviving; and
WHEREAS, the Boards of Directors of GFC, Hubco, the Bank and Growth
have duly adopted and approved this Agreement and the Board of Directors of
GFC has directed that it be submitted to GFC's shareholders for approval; and
WHEREAS, simultaneously with the execution of this Agreement, GFC
is issuing an option to Hubco to purchase 336,850 shares of the authorized
and unissued GFC Common Stock (as hereinafter defined) at an option price of
$12.25 per share, subject to adjustment and subject to the terms and
conditions set forth in the Option Agreement;
NOW, THEREFORE, intending to be legally bound, the parties hereto
hereby agree as follows:
ARTICLE I - THE MERGER
1.1. THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereafter defined), GFC shall be merged
with and into Hubco (the "Merger") in accordance the New Jersey Business
Corporation Act ("NJBCA") and Hubco shall be the surviving corporation (the
"Surviving Corporation").
1.2. EFFECT OF THE MERGER. At the Effective Time, the Surviving
Corporation shall be considered the same business and corporate entity as
each of Hubco and GFC and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of Hubco and GFC shall vest in the
Surviving Corporation and the Surviving Corporation shall be subject to and
be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of Hubco and GFC and shall have succeeded to all of each of
their relationships, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of Hubco and GFC
in any contract or document, whether executed or taking effect before or
after the Effective Time, shall be considered a reference to the Surviving
Corporation if not inconsistent with the other provisions of the contract or
document; and any pending action or other judicial proceeding to which either
of Hubco or GFC is a party, shall not be deemed to have abated or to have
discontinued by reason of the Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Merger had not been
made; or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for
or against it that might have been rendered for or against either of Hubco or
GFC if the Merger had not occurred.
1.3. CERTIFICATE OF INCORPORATION. As of the Effective Time, the
certificate of incorporation of Hubco as it exists at the Effective Time
shall be the certificate of incorporation of the Surviving Corporation and
shall not be amended by this Agreement or the Merger but thereafter may be
amended as provided by law.
1.4. BY-LAWS. As of the Effective Time, the By-laws of Hubco
shall be the By-laws of the Surviving Corporation until otherwise amended as
provided by law.
1.5. DIRECTORS AND OFFICERS. As of the Effective Time, the
directors and officers of Hubco shall become the directors and officers of
the Surviving Corporation.
1.6. EFFECTIVE TIME AND CLOSING. The Merger shall become
effective (and be consummated) upon the filing of a certificate of merger
(the "Certificate of Merger"), in form and substance satisfactory to Hubco
and GFC, with the Secretary of State of the State of New Jersey. The term
"Effective Time" shall mean the close of business on the first day when the
Certificate of Merger has been so filed. A closing (the "Closing") shall
take place prior to the Effective Time at 10:00 a.m., on a date mutually
agreeable and as soon as practicable following the receipt of all necessary
regulatory, governmental and shareholder 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 GFC may mutually agree upon. Notwithstanding the foregoing, the
Closing shall not occur prior to January 15, 1996 without the consent of each
party hereto. Immediately following the Closing, the Certificate of Merger
shall be filed with the New Jersey Secretary of State.
1.7 THE BANK MERGER. Immediately following the Effective Time,
Growth shall be then merged with and into the Bank (the "Bank Merger") in
accordance with the provisions of the New Jersey Banking Act of 1948, as
amended (the "Banking Act"). In the Bank Merger the Bank shall be the
surviving bank (the "Surviving Bank"), except that at the Effective Time,
Growth may be operated as "Hudson United Bank, Growth Division". Upon the
consummation of the Bank Merger, the separate existence of Growth shall cease
and the Surviving Bank shall be considered the same business and corporate
entity as each of Growth and the Bank and all of the property, rights,
privileges, powers and franchises of each of Growth and the Bank shall vest
in the Surviving Bank and the Surviving Bank shall be deemed to have assumed
all of the debts, liabilities, obligations and duties of each of Growth and
the Bank and shall have succeeded to all or each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Bank. Upon the consummation of the Bank Merger, the certificate of
incorporation and by-laws of the Bank shall become the certificate of
incorporation and by-laws of the Surviving Bank and the officers and
directors of the Bank shall be the officers and directors of the Surviving
Bank. Following the execution of this Agreement, Growth and the Bank shall
execute and deliver a merger agreement (the "Bank Merger Agreement"), both in
form and substance reasonably satisfactory to the parties hereto,
substantially as set forth in Exhibit 1.7 hereto, for delivery to the
Commissioner of Banking of the State of New Jersey and the Federal Deposit
Insurance Corporation (the "FDIC") for approval of the Bank Merger.
ARTICLE II - CONVERSION OF GFC SHARES
2.1. CONVERSION OF GFC COMMON STOCK. Each share of common stock,
par value $1.00 per share, of GFC ("GFC Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares defined in Section 2.4) shall, by virtue of the Merger and without 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 GFC 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 that number of shares (the "Exchange Ratio") of common
stock, without par value, of HUBCO ("Hubco Common Stock") as shall equal the
quotient (rounded to the nearest one-thousandth) of $14.64 (the "Intended
Value Per Share") divided by the Median Pre-Closing Price of Hubco Common
Stock; PROVIDED, HOWEVER, that if such quotient is less than 0.69 then the
Exchange Ratio shall be 0.69 (the "Minimum Exchange Ratio") and if such
quotient is greater than 0.81 the Exchange Ratio shall be 0.81 (the "Maximum
Exchange Ratio"), and PROVIDED, FURTHER, that the Exchange Ratio determined
as set forth above shall be further adjusted pursuant to Section 2.1(b)
hereto.
(b) EXCHANGE RATIO ADJUSTMENTS. If between the date of this
Agreement and the Effective Time the outstanding shares of Hubco Common Stock
shall have been changed into a different number of shares or a different
class, by reason of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares, the Exchange Ratio, the
Minimum Exchange Ratio and Maximum Exchange Ratio shall each be
correspondingly adjusted to reflect such stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares.
(c) MEDIAN PRE-CLOSING PRICE. The determination of the Exchange
Ratio in Exhibit 2.1 is based on the "Median Pre-Closing Price" of Hubco
Common Stock. The Median Pre-Closing Price shall mean the Median Price (as
hereinafter defined) of Hubco Common Stock 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 average of 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 GFC CERTIFICATES. After the Effective Time,
all shares of GFC 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 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 GFC Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of GFC Common Stock except as
otherwise provided herein or by law. Certificates previously evidencing
shares of GFC 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 GFC Common Stock held by GFC
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 GFC 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 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 GFC
Common Stock (other than Dissenting Shares) (the "Certificates"), (i) a
letter of transmittal (which is reasonably agreed to by Hubco and GFC and
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other provisions
as Hubco may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates evidencing
shares of Hubco 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 GFC 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 Certificates so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of GFC Common Stock which is not registered in the
transfer records of GFC, a certificate evidencing the proper number of shares
of Hubco Common Stock may be issued in accordance with this Article II to a
transferee if the Certificate evidencing such shares of GFC 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. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent, the posting by such person of a bond in such
amount as the Exchange Agent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
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 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 GFC COMMON STOCK. All shares of Hubco
Common Stock issued upon conversion of the shares of GFC Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of GFC 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 per whole share of Hubco Common Stock.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of GFC Common Stock for two
years after the Effective Time shall be delivered to Hubco, upon demand, and
any holders of GFC 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 GFC Common Stock for any such shares of Hubco Common
Stock (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 GFC 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 Internal Revenue Code of 1986 as amended (the "Code"), or any
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Hubco, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of GFC
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 GFC shall be closed and there shall be no further
registration of transfers of shares of GFC Common Stock thereafter on the
records of GFC. On or after the Effective Time, any Certificates presented
to the Exchange Agent or Hubco for any reason shall be converted into the
Merger Consideration.
2.4. GFC STOCK OPTIONS. Hubco agrees to honor each Stock Option
(as defined in Section 3.2) to purchase shares of GFC Common Stock, in
accordance with the terms set forth in Section 3.2 of the GFC Disclosure
Schedule with respect to the optionee, number of shares subject to option and
exercise price. At the Effective Time, each option shall be converted into
Hubco Common Stock in accordance with the following formula:
(a) Each outstanding Stock Option shall be valued on the basis of
The Median Pre-Closing Price for Hubco multiplied by the Exchange Ratio and
subtracting the stated exercise price for each Stock Option from the product
therefrom (the "Option Value"), and
(b) Shares of Hubco Common Stock shall be issued in exchange for
Stock Options on the basis of a fraction, the numerator of which shall be the
Option Value and the denominator of which shall be The Median Pre-Closing
Price of Hubco Common Stock.
(c) Cash shall be paid in lieu of fractional shares.
2.5. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, any holder of GFC Common Stock shall have the
right to dissent in the manner provided in N.J.S.A. 14A:11-1 et seq. of the
New Jersey Business Corporation Act (the "BCA"), and if all necessary
requirements of the BCA are met, such shares shall be entitled to payment of
the fair value of such shares in accordance with the provisions of the BCA
("Dissenting Shares"), provided, however, that (i) if any holder of
Dissenting Shares shall subsequently withdraw his demand for appraisal of
such shares within 60 days of the Effective Time, or, with the written
consent of the Surviving Corporation, any time thereafter, or (ii) if any
holder fails to follow the procedures for establishing his entitlement to
appraisal rights as provided in the BCA, the right to appraisal of such
shares shall be forfeited and such shares shall thereupon be deemed to have
been converted into the right to receive and to have become exchangeable for,
as of the Effective Time, the Merger Consideration.
2.6. HUBCO COMMON STOCK. The shares of Hubco Common Stock
outstanding or held in treasury immediately prior to the Effective Time shall
not be effected by the Merger but shall be the same number of shares of the
Surviving Corporation.
2.7 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 GFC
References herein to "GFC Disclosure Schedules" shall mean all of
the disclosure schedules required by this Article III, dated as of the date
hereof and referenced to the specific sections and subsections of Article III
of this Agreement, which have been delivered on the date hereof by GFC to
Hubco. GFC hereby represents and warrants to Hubco as follows:
3.1. CORPORATE ORGANIZATION.
(a) GFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. GFC 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
GFC and its Subsidiary (as defined below), taken as a whole. GFC is
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHCA").
(b) Growth is the only Subsidiary of GFC. When used with
reference to GFC, the term "Subsidiary" means any corporation, partnership,
joint venture or other legal entity in which GFC, directly or indirectly,
owns at least a 50% stock or other equity interest or for which GFC, directly
or indirectly, acts as a general partner. Growth is a state chartered
commercial bank duly organized and validly existing in stock form and in good
standing under the laws of the State of New Jersey. All eligible accounts of
depositors issued by Growth are insured by the Bank Insurance Fund of the
FDIC to the fullest extent permitted by law. Growth 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 GFC and Growth, taken
as a whole. The GFC Disclosure Schedule sets forth true and complete copies
of the Certificate of Incorporation and By-laws, as in effect on the date
hereof, of GFC and Growth. Except as set forth in Disclosure Schedule 3.1(b)
Growth and GFC does not own or control, directly or indirectly, any equity
interest in any corporation, company, association, partnership, joint venture
or other entity.
3.2. CAPITALIZATION. The authorized capital stock of GFC consists
of 5,000,000 shares of GFC Common Stock, par value $1.00 per share ("GFC
Common Stock") and 2,000,000 shares of preferred stock, par value $5.00 per
share ("GFC Preferred Stock"). As of the date hereof, there are 1,692,750
shares of GFC Common Stock issued and outstanding. No shares of GFC
Preferred Stock are issued and outstanding. As of the date hereof, there are
388,589 shares of GFC Common Stock issuable upon exercise of outstanding
stock options of which 50,778 shares are issuable to The Summit
Bancorporation. GFC Disclosure Schedule 3.2 sets forth all options which may
be exercised for issuance of GFC Common Stock and the terms upon which the
options may be exercised. (such Options are referred to in the aggregate as
the outstanding "Stock Options"). The GFC Disclosure Schedule sets forth
true and complete copies of the GFC Option Plans and Option Grants and a true
and complete list of each outstanding Stock Option issued pursuant thereto.
GFC has previously provided to Hubco copies of all grant agreements or
written evidence of such grants reflecting all Options granted. All issued
and outstanding shares of GFC Common Stock, and all issued and outstanding
shares of capital stock of Growth, have been duly authorized and validly
issued, are fully paid, and nonassessable. The authorized capital stock of
Growth consists of 2,500,000 shares of common stock, $5.00 par value per
share. All of the outstanding shares of capital stock of Growth are owned by
GFC and are free and clear of any liens, encumbrances, charges, restrictions
or rights of third parties. Except for the Options issued and disclosed
herein and the Option granted to Hubco pursuant to the Stock Option Agreement
dated the date hereof, neither GFC nor Growth has granted nor is bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase, subscription
or issuance of any shares of capital stock of GFC or Growth 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 all applicable regulatory authorities and by the
stockholders of GFC, GFC and Growth have the full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of GFC in accordance with the certificate of
incorporation of GFC and applicable laws and regulations and by the Board of
Directors of the Bank in accordance with its certificate of incorporation and
applicable laws and regulations. Except for such approvals, no other
corporate proceedings on the part of GFC or Growth are necessary to
consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by GFC and Growth, and constitutes valid
and binding obligations of GFC and Growth, enforceable against GFC and Growth
in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by GFC or
Growth, nor the consummation by GFC or Growth of the transactions
contemplated hereby in accordance with the terms hereof, or compliance by GFC
or Growth with any of the terms or provisions hereof, will (i) violate any
provision of GFC's or Growth's Certificate of Incorporation or By-laws, (ii)
assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to GFC, Growth or any of their
respective properties or assets, or (iii) except as set forth in the GFC
Disclosure Schedule, violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of GFC or Growth 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 GFC or Growth is a party, or by which they or any of their respective
properties or assets may be bound or affected except, with respect to (ii)
and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of GFC and Growth, taken as a whole, and which will not prevent or
delay the consummation of the transactions contemplated hereby. Except for
consents and approvals of or filings or registrations with or notices to the
Board of Governors of the Federal Reserve System (the "FRB"), the FDIC, the
New Jersey Department of Banking ("Department"), the New Jersey Department of
Environmental Protection the ("DEP"), the SEC, other applicable government
authorities, and the stockholders of GFC, 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 GFC or Growth in connection with
(x) the execution and delivery by GFC of this Agreement and (y) the
consummation by GFC of the Merger and the other transactions contemplated
hereby.
3.4. FINANCIAL STATEMENTS.
(a) The GFC Disclosure Schedule sets forth copies of: (i) the
consolidated statements of condition of GFC as of December 31, 1993 and 1994,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the periods ended December 31, in each of the three
years 1992 through 1994, in each case accompanied by the audit report of KPMG
Peat Marwick LLP, independent public accountants with respect to GFC, and the
unaudited consolidated statements of condition of GFC as of June 30, 1995 and
June 30, 1994 and (ii) the unaudited consolidated statements of income and
cash flows for the six months ended June 30, 1995 as reported in GFC's
Quarterly Report on Form 10-Q, filed with the SEC under the Securities
Exchange Act of 1934, as amended ("1934 Act") (collectively, the "GFC
Financial Statements"). The GFC Financial Statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved (except
as may be indicated therein or in the notes thereto), and fairly present the
consolidated financial condition of GFC as of the respective dates set forth
therein, and the related consolidated statements of income, changes in
stockholders' equity and cash flows fairly present the results of the
consolidated operations, changes in stockholders' equity and cash flows of
GFC for the respective periods set forth therein.
(b) The books and records of GFC and Growth are being maintained
in material compliance with applicable legal and accounting requirements.
(c) Except as and to the extent reflected, disclosed or reserved
against in the GFC Financial Statements (including the notes thereto), as of
June 30, 1995, neither GFC nor Growth had any liabilities, whether absolute,
accrued, contingent or otherwise, material to the business, operations,
assets or financial condition of GFC and Growth, taken as a whole which were
required by GAAP (consistently applied) to be disclosed in GFC's consolidated
statement of condition as of June 30, 1995 or the notes thereto. Since June
30, 1995, GFC and Growth have not incurred any liabilities except in the
ordinary course of business and consistent with prudent banking practice,
except as related to the transactions contemplated by this Agreement.
3.5. BROKER'S AND OTHER FEES. Except for McConnell, Budd &
Downes, Inc., neither GFC or Growth nor any of their directors or officers
has employed any broker or finder or incurred any liability for any broker's
or finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement. The agreement with McConnell, Budd & Downes,
Inc., is set forth in the GFC 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 GFC or Growth.
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Section 3.6 of the GFC Disclosure
Schedule, there has not been any material adverse change in the business,
operations, assets or financial condition of GFC and Growth, taken as a
whole, since June 30, 1995 and to the best of GFC's knowledge, no facts or
condition exists which GFC believes will cause such a material adverse change
in the future.
(b) Except as set forth in the GFC Disclosure Schedule, neither
GFC nor Growth has taken or permitted any of the actions set forth in Section
5.2 hereof between June 30, 1995 and the date hereof and, except for
execution of this Agreement, GFC has conducted its business only in the
ordinary course, consistent with past practice.
3.7. LEGAL PROCEEDINGS. Except as disclosed in the GFC Disclosure
Schedule, and except for ordinary routine litigation incidental to the
business of GFC or Growth, neither GFC nor Growth is a party to any, and
there are no pending or, to the best of GFC's knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against GFC or Growth. Except as
disclosed in the GFC Disclosure Schedule, neither GFC nor Growth is a party
to any order, judgment or decree entered in any lawsuit or proceeding.
3.8. TAXES AND TAX RETURNS.
(a) GFC and Growth have duly filed (and until the Effective Time
will so file) all returns, declarations, reports, information returns and
statements ("Returns") required to be filed by them in respect of any
federal, state and local taxes (including withholding taxes, penalties or
other payments required) and has duly paid (and until the Effective Time will
so pay) all such taxes due and payable, other than taxes or other charges
which are being contested in good faith (and disclosed to Hubco in writing).
GFC and Growth have established (and until the Effective Time will establish)
on their books and records reserves that are adequate for the payment of all
federal, state and local taxes not yet due and payable, but are incurred in
respect of GFC or Growth through such date. None of the federal or state
income tax returns of GFC or Growth have been examined by the Internal
Revenue Service (the "IRS") or the New Jersey Division of Taxation within the
past six years. To the best knowledge of GFC, 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
GFC or Growth, nor has GFC or Growth 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 GFC Disclosure Schedule, neither
GFC nor Growth (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 of
1986 Code, as amended (the "Code"), by reason of a voluntary change in
accounting method initiated by GFC or Growth (nor does GFC have any knowledge
that the IRS has proposed any such adjustment or change of accounting method)
or (iv) has filed a consent pursuant to Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply.
3.9. EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed in Section 3.9 of the GFC Disclosure
Schedule, neither GFC nor Growth maintains or contributes to any "employee
pension benefit plan" (the "GFC Pension Plans"), as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), "employee welfare benefit plan" (the "GFC Welfare Plans"), as such
term is defined in Section 3 of ERISA, stock option plan, stock purchase
plan, deferred compensation plan, severance plan, bonus plan, employment
agreement or other similar plan, program or arrangement. Neither GFC nor
Growth has, since September 2, 1974, contributed to any "Multiemployer Plan",
as such term is defined in Section 3(37) of ERISA.
(b) Except as set forth in Section 3.9 of the GFC Disclosure
Schedule, each of the GFC Pension Plans is intended to be a qualified plan
within the meaning of Section 401(a) of the Code and has been determined by
the IRS to be so qualified, and GFC is not aware of any fact or circumstance
which would adversely affect the qualified status of any such plan.
(c) Each of the GFC Pension Plans and each of the GFC 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.
(d) Neither GFC nor Growth, nor, to the best knowledge of GFC, any
trustee, fiduciary or administrator of any GFC Pension Plan or GFC Welfare
Plan or any trust created thereunder, has engaged in a prohibited
transaction, as such term is defined in Section 4975 of the Code, which could
subject GFC or Growth, or, to the best knowledge of GFC, any trustee,
fiduciary or administrator thereof, to the tax or penalty on prohibited
transactions imposed by said Section 4975.
(e) No GFC Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events" for which the 30 day
notice has not been waived with respect to any GFC Pension Plan, as that term
is defined in Section 4043(b) of ERISA.
(f) Except as disclosed in Section 3.9 of the GFC Disclosure
Schedule, there are no pending, or, to the best knowledge of GFC, threatened
or anticipated claims (other than routine claims for benefits) by, on behalf
of or against any of the GFC Pension Plans or the GFC Welfare Plans or any
trusts related thereto.
3.10. REPORTS.
(a) The GFC Disclosure Schedule lists, and GFC has previously
delivered to Hubco a complete copy of, each (i) final registration statement,
prospectus, annual, quarterly or special report and definitive proxy
statement filed by GFC since January 1, 1991 pursuant to the Securities Act
of 1933, as amended ("1933 Act"), or the 1934 Act and (ii) communication
(other than general advertising materials and press releases) mailed by GFC
to its stockholders as a class since January 1, 1991, and each such final
registration statement, prospectus, annual, quarterly or special report,
definitive proxy statement or communication, as of its date, complied in all
material respects with all applicable statutes, rules and regulations
enforced or promulgated by the SEC and, as of said dates, 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) GFC and Growth has, since January 1, 1991, duly filed with the
FDIC, the FRB and the Department in form and substance which was correct in
all material respects the monthly, quarterly and annual financial reports
required to be filed under applicable laws and regulations, and, subject to
permission from such regulatory authorities, GFC promptly will deliver or
make available to Hubco accurate and complete copies of such reports. The
GFC Disclosure Schedule lists all examinations of GFC or Growth conducted by
either the FRB, the FDIC or the Department since January 1, 1991 and the
dates of any responses thereto submitted by GFC or Growth.
3.11. GFC AND GROWTH INFORMATION. The information relating to GFC
and Growth to be contained in the Proxy Statement/Prospectus (as defined in
Section 5.6(a) hereof) to be delivered to stockholders of GFC in connection
with the solicitation of their approval of the Merger, as of the date the
Proxy Statement/Prospectus is mailed to stockholders of GFC, 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
GFC Disclosure Schedule, each of GFC and Growth 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
GFC or Growth (other than where such default or noncompliance will not result
in a material adverse effect on the business, operations, assets or financial
condition of GFC and Growth taken as a whole) and GFC has not received notice
of violation of, and does not know of any violations of, any of the above.
3.13. CERTAIN CONTRACTS.
(a) Except for plans referenced in Section 3.9 and as disclosed in
the GFC Disclosure Schedule, (i) neither GFC nor Growth is a party to or
bound by any written contract or understanding (whether written or oral) with
respect to the employment of any officers, employees, directors or
consultants, and (ii) the consummation of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from GFC or Growth to any officer, employee, director
or consultant thereof. The GFC Disclosure Schedule sets forth true and
correct copies of all severance or employment agreements with officers,
directors, employees, agents or consultants to which GFC or Growth is a
party.
(b) Except as disclosed in the GFC Disclosure Schedule and except
for loan commitments, loan agreements and loan instruments entered into or
issued in the ordinary course of business, (i) as of the date of this
Agreement, neither GFC nor Growth is a party to or bound by any commitment,
agreement or other instrument which is material to the business, operations,
assets or financial condition of GFC and Growth taken as a whole, (ii) no
commitment, agreement or other instrument to which GFC or Growth is a party
or by which either of them is bound limits the freedom of GFC or Growth to
compete in any line of business or with any person, and (iii) neither GFC nor
Growth is a party to any collective bargaining agreement.
(c) Except as disclosed in the GFC Disclosure Schedule, neither
GFC nor Growth or, to the best knowledge of GFC, 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 Growth 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
GFC and Growth, taken as a whole.
3.14. PROPERTIES AND INSURANCE.
(a) GFC and Growth 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 GFC's consolidated balance
sheet as of December 31, 1994, 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, 1994),
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 GFC and Growth taken
as a whole and (iv) with respect to owned real property, title imperfections
noted in title reports delivered to Hubco prior to the date hereof. Except
as affected by the transactions contemplated hereby, GFC and Growth as
lessees have the right under valid and subsisting leases to occupy, use,
possess and control all real property leased by GFC and Growth in all
material respects as presently occupied, used, possessed and controlled by
GFC and Growth.
(b) The business operations and all insurable properties and
assets of GFC and Growth are insured for their benefit against all risks
which, in the reasonable judgment of the management of GFC, 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 GFC adequate
for the business engaged in by GFC and Growth. As of the date hereof,
neither GFC nor Growth has received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default
under any such policy or bond, no coverage thereunder is being disputed and
all material claims thereunder have been filed in a timely fashion.
3.15. MINUTE BOOKS. The minute books of GFC and Growth contain
accurate records of all meetings and other corporate action held of their
respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
3.16. ENVIRONMENTAL MATTERS. Except as disclosed in the GFC
Disclosure Schedule, neither GFC nor Growth has received any written notice,
citation, claim, assessment, proposed assessment or demand for abatement
alleging that GFC or Growth (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, other than corrections or cleanups which, in the aggregate, are
immaterial to GFC and Growth. Except as disclosed in the GFC Disclosure
Schedule, GFC has no knowledge that any toxic or hazardous substances or
materials have been emitted, generated, disposed of or stored on any non-
residential property currently owned or leased by GFC or Growth, or owned or
leased in the five years prior to the date of this Agreement in any manner
that violates any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials, other
than violations which, in the aggregate, are immaterial to GFC and Growth.
Except as disclosed in the GFC Disclosure Schedule, all property formerly
owned or leased by GFC or Growth which was subject to the provisions of the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. as amended ("ISRA"),
complied with all applicable provisions of ISRA at the time such property was
sold or transferred.
3.17. RESERVES. As of June 30, 1995, each of the allowance for
loan losses and the reserve for OREO properties in the GFC Financial
Statements was adequate pursuant to GAAP (consistently applied), and the
methodology used to compute each of the loan loss reserve and the reserve for
OREO properties complies in all material respects with GAAP (consistently
applied).
3.18. NO PARACHUTE PAYMENTS. No officer, director, employee or
agent (or former officer, director, employee or agent) of GFC or Growth 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 GFC, Growth, 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. Neither GFC nor Growth is
a party to any agreement or memorandum of understanding with, or a party to
any commitment letter, board resolution submitted to a regulatory authority
or similar undertaking to, or is subject to any order or directive by, or is
a recipient of any extraordinary supervisory letter from, any court,
governmental authority or other regulatory or administrative agency or
commission, domestic or foreign ("Governmental Entity") which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit or reserve policies or its management, except
for those the existence of which has been disclosed in writing to Hubco by
GFC prior to the date of this Agreement, nor has GFC 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 Hubco by GFC prior to the date of this Agreement. Neither GFC nor
Growth 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 Hubco by GFC
prior to the date of this Agreement.
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
GFC. Hubco hereby represents and warrants to GFC as follows:
4.1. CORPORATE ORGANIZATION.
(a) Hubco is a corporation duly organized and validly existing and
in good standing under the laws of the State of New Jersey. Hubco has the
corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing would not have a material
adverse effect on the business, operations, assets or financial condition of
Hubco or its subsidiaries (defined below), taken as a whole. Hubco is
registered as a bank holding company under the BHCA.
(b) Each of the subsidiaries of Hubco are listed in the Hubco
Disclosure Schedule. The term "subsidiary", when used with reference to
Hubco, means any corporation, partnership, joint venture or other legal
entity in which Hubco directly or indirectly, owns at least a 50% stock or
other equity interest or for which Hubco, directly or indirectly, acts as a
general partner. Each subsidiary of Hubco is duly organized and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. The Bank is a state-chartered commercial bank whose deposits
are insured by the Bank Insurance Fund of the FDIC to the fullest extent
permitted by law. Each subsidiary has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business as
it is now being conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing
would not have a material adverse effect on the business, operations, assets
or financial condition of Hubco and its subsidiaries, taken as a whole. The
Hubco Disclosure Schedule sets forth true and complete copies of the
certificate of incorporation and by-laws of Hubco as in effect on the date
hereof.
4.2. CAPITALIZATION. The authorized capital stock of Hubco
consists of 25,000,000 shares of Hubco Common Stock, without par value, and
4,500,000 shares of preferred stock ("Hubco Preferred Stock"). There are no
shares of Hubco Preferred Stock outstanding. As of July 31, 1995, there were
13,110,947 shares of Hubco Common Stock issued and outstanding and 432,500
shares of Hubco Common Stock issuable upon the exercise of outstanding
options. Since such date, and from time to time hereafter, Hubco may sell or
repurchase shares of its Common Stock; PROVIDED, that between such date and
the date of this Agreement, Hubco has not repurchased any shares of its
Common Stock except for purchases which may have been made for the benefit of
Hubco dividend reinvestment, ESOP or other plans which provide for stock
purchases with respect to which Hubco management does not influence the
timing or amount ("Automatic Repurchases"), and provided further that Hubco
agrees not to repurchase any of its stock, except for Automatic Repurchases,
during the ten day period immediately preceding the 25-trading day period in
which the Median Pre-Closing Price is determined. Except for shares issuable
under the Hubco, Inc. 1995 Stock Option Plan (the "Hubco Options") and shares
issuable to Robert F. Mangano pursuant to a grant of non-qualified options
("Non-Qualified Option Plan"), there are no shares of Hubco Common Stock
issuable upon the exercise of outstanding stock options or otherwise. All
issued and outstanding shares of Hubco Common Stock, and all issued and
outstanding shares of capital stock of Hubco's subsidiaries, have been duly
authorized and validly issued, are fully paid, nonassessable and free of
preemptive rights, and are free and clear of all liens, encumbrances,
charges, restrictions or rights of third parties. All of the outstanding
shares of capital stock of Hubco's subsidiaries are owned by Hubco free and
clear of any liens, encumbrances, charges, restrictions or rights of third
parties. Except for the Hubco Options, Hubco's obligations under the Non-
Qualified Option Plan and Hubco's agreement to sell 50% of the outstanding
shares of HUB Financial Services, Inc., 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, except if shareholder approval
of Hubco shall be required for any reason. As of the date hereof, the
approval of Hubco's shareholders is not required in order for Hubco to
consummate the Merger; should such shareholder approval be required in the
future for any reason, Hubco will use its best efforts to promptly cause such
shareholder approval to be obtained. Without limiting the preceding
sentence, the Board of Directors of Hubco will: promptly call a meeting of
Hubco shareholders to vote on the Merger; recommend that Hubco shareholders
approve the Merger; and vote their shares of Hubco Common Stock in favor of
the Merger. This Agreement has been duly and validly executed and delivered
by Hubco and the Bank and constitutes valid and binding obligations of Hubco
and the Bank, enforceable against Hubco and the Bank in accordance with its
terms.
(b) Neither the execution or delivery of this Agreement by Hubco
or the Bank, nor the consummation by Hubco or the Bank of the transactions
contemplated hereby in accordance with the terms hereof or compliance by
Hubco or the Bank with any of the terms or provisions hereof will (i) violate
any provision of the Certificate of Incorporation or By-laws of Hubco or the
Bank, (ii) assuming that the consents and approvals set forth below are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Hubco or the Bank or any of
their respective properties or assets, or (iii) violate, conflict with,
result in a breach of any provision of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of, accelerate the performance required by,
or result in the creation of any lien, security interest, charge or other
encumbrance upon any of the respective properties or assets of Hubco or the
Bank under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Hubco or the Bank is a party, or by which
Hubco or the Bank or any of their properties or assets may be bound or
affected, except, with respect to (ii) and (iii) above, such as individually
or in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Hubco and Hubco's subsidiaries,
taken as a whole, and which will not prevent or delay the consummation of the
transactions contemplated hereby. Except for consents and approvals of or
filings or registrations with or notices to the FDIC, the Department, the
FRB, the Secretary of State of New Jersey, the SEC, applicable state
securities bureaus or commissions, and any approval of Hubco's shareholders,
no consents or approvals of or filings or registrations with or notices to
any third party or any public body or authority are necessary on behalf of
Hubco in connection with (a) the execution and delivery by Hubco and the Bank
of this Agreement, and (b) the consummation by Hubco of the Merger and the
other transactions contemplated hereby. To the best of Hubco's knowledge, no
fact or condition exists which Hubco has reason to believe will prevent it
from obtaining the aforementioned consents and approvals.
4.4. FINANCIAL STATEMENTS.
(a) The Hubco Disclosure Schedule sets forth copies of (i) the
consolidated statements of financial condition of Hubco as of December 31,
1993 and 1994, the related consolidated statements of income, changes in
stockholders' equity and of cash flows for the periods ended December 31, in
each of the three fiscal years 1992 through 1994, in each case accompanied
by the audit report of Arthur Andersen LLP, independent public accountants
with respect to Hubco and the unaudited consolidated statements of condition
of Hubco as of June 30, 1994 and June 30, 1995 and (ii) the unaudited
consolidated statements of income and cash flows for the six months then
ended as reported in Hubco's Quarterly Report on Form 10-Q, filed with the
SEC under the 1934 Act (collectively, the "Hubco Financial Statements"). The
Hubco Financial Statements (including the related notes) have been prepared
in accordance with GAAP consistently applied during the periods involved
(except as may be indicated therein or in the notes thereto), and fairly
present the consolidated financial condition of Hubco as of the respective
dates set forth therein, and the related consolidated statements of income,
changes in stockholders' equity and of cash flows (including the related
notes, where applicable) fairly present the results of the consolidated
operations and changes in stockholders' equity and of cash flows of Hubco for
the respective periods set forth therein.
(b) The books and records of Hubco and the Bank are being
maintained in material compliance with applicable legal and accounting
requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved
against in the Hubco Financial Statements (including the notes thereto), as
of June 30, 1995 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,
1995 or the notes thereto. Since June 30, 1995, 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. 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,
1995 and to the best of Hubco's knowledge, no facts or condition exists which
Hubco believes will cause such a material adverse change in the future.
4.7. LEGAL PROCEEDINGS. Except as disclosed in the Hubco
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of Hubco or its subsidiaries, neither Hubco nor any of its
subsidiaries is a party to any, and there are no pending or, to the best of
Hubco's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against Hubco or any of its subsidiaries which, if decided adversely to Hubco
or its subsidiaries, would have a material adverse effect on the business,
operations, assets or financial condition of Hubco or its subsidiaries.
Except as disclosed in the Hubco Disclosure Schedule, neither Hubco nor
Hubco's subsidiaries is a party to any order, judgment or decree entered in
any lawsuit or proceeding which is material to Hubco or its subsidiaries.
4.8. COMPLIANCE WITH APPLICABLE LAW.
(a) Since January 1, 1991, Hubco has filed all reports,
registration statements and filings that it was required to file with the SEC
under the 1933 Act and the 1934 Act, all of which complied in all material
respects with all applicable requirements of the 1933 Act or the 1934 Act, as
the case may be, and the rules and regulations adopted thereunder. As of
their respective dates, each such report, registration statement, form or
other document, including without limitation, any financial statements or
schedules included therein, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. Since January 1, 1991, Hubco and the Bank have duly filed all
material forms, reports and documents which they were required to file with
each agency charged with regulating any aspect of their business.
(b) Hubco and the Bank have, since January 1, 1991, duly filed
with the FDIC and the Department in form and substance which was correct in
all material respects the monthly, quarterly and annual financial reports
required to be filed under applicable laws and regulations, and, subject to
permission from such regulatory authorities, Hubco promptly will deliver or
make available to GFC accurate and complete copies of such reports. The
Hubco Disclosure Schedule lists all examinations of Hubco or the Bank
conducted by either the FRB, the FDIC or the Department since January 1, 1991
and the dates of any responses thereto submitted by Hubco or the Bank.
(c) 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 AND BANK 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 GFC to which such Proxy Statement/Prospectus relates, will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement shall comply as to form in all
material respects with the provisions of the 1933 Act and the rules and
regulations promulgated thereunder.
4.10. FUNDING AND CAPITAL ADEQUACY. At the Effective Time, after
taking into account the transactions contemplated hereby, Hubco and the Bank
will have sufficient capital to satisfy all applicable regulatory capital
requirements.
4.11. HUBCO COMMON STOCK. At the Effective Time, the Hubco Common
Stock to be issued pursuant to the Merger will be duly authorized and
validly issued, fully paid, nonassessable, free of preemptive rights and free
and clear of all liens, encumbrances or restrictions created by or through
Hubco, with no personal liability attaching to the ownership thereof. The
Hubco 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 and will be listed on the NASDAQ National
Market.
4.12. TAXES AND TAX RETURNS.
(a) Hubco and the Bank 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 has duly paid
all such taxes due and payable, other than taxes or other charges which are
being contested in good faith (and disclosed to GFC in writing). Hubco and
the Bank have established on their books and records reserves that are
adequate for the payment of all federal, state and local taxes not yet due
and payable, but are incurred in respect of Hubco or the Bank through such
date. The Hubco Disclosure Schedule identifies the federal income tax
returns of Hubco and the Bank which have been examined by IRS within the past
six years. No deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. The Hubco Disclosure Schedule
identifies the applicable state income tax returns of Hubco and the Bank
which have been examined by the applicable authorities 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 Hubco,
there are no audits or other administrative or court proceedings presently
pending nor any other disputes pending with respect to, or claims asserted
for, taxes or assessments upon Hubco or the Bank, nor has Hubco or the Bank
given any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any taxes or
Returns.
(b) Except as set forth in the Hubco Disclosure Schedule, neither
Hubco nor the Bank nor any other subsidiary of Hubco (i) has requested any
extension of time within which to file any Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes, (iii) is required to include in income any adjustment
pursuant to Section 481(a) of the 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. 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.
4.14. 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, 1994, 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, 1994),
subject to no encumbrances, liens, mortgages, security interests or pledges,
except (i) those items that secure liabilities that are reflected in said
balance sheet or the notes thereto or that secure liabilities incurred in the
ordinary course of business after the date of such balance sheet, (ii)
statutory liens for amounts not yet delinquent or which are being contested
in good faith, (iii) such encumbrances, liens, mortgages, security interests,
pledges and title imperfections that are not in the aggregate material to the
business, operations, assets, and financial condition of Hubco and the Bank
taken as a whole and (iv) with respect to owned real property, title
imperfections noted in title reports. Except as disclosed in the Hubco
Disclosure Schedule, Hubco and the Bank as lessees have the right under valid
and subsisting leases to occupy, use, possess and control all property leased
by Hubco or the Bank in all material respects as presently occupied, used,
possessed and controlled by Hubco and the Bank.
(b) The business operations and all insurable properties and
assets of Hubco and the Bank are insured for their benefit against all risks
which, in the reasonable judgment of the management of Hubco, should be
insured against, in each case under policies or bonds issued by insurers of
recognized responsibility, in such amounts with such deductibles and against
such risks and losses as are in the opinion of the management of Hubco
adequate for the business engaged in by Hubco and the Bank. As of the date
hereof, neither Hubco nor the Bank has received any notice of cancellation or
notice of a material amendment of any such insurance policy or bond or is in
default under any such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely
fashion.
4.15. ENVIRONMENTAL MATTERS. Except as disclosed in the Hubco
Disclosure Schedule, neither Hubco nor the Bank has received any written
notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that Hubco or the Bank (either directly or as a successor-
in-interest in connection with the enforcement of remedies to realize the
value of properties serving as collateral for outstanding loans) is
responsible for the correction or cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters which correction or cleanup would be material 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. Except as
disclosed in the Hubco Disclosure Schedule, all property formerly owned or
leased by Hubco or the Bank which was subject to the provisions of ISRA,
complied with all applicable provisions of ISRA at the time such property was
sold or transferred.
4.16. RESERVES. As of June 30, 1995, the allowance for loan losses
in the Hubco Financial Statements was adequate based upon all factors
required to be considered by Hubco in determining the amount of such
allowance. The methodology used to compute the loan loss reserve complies in
all material respects with all applicable FDIC and Department policies. As
of June 30, 1995, the reserve for OREO properties in the Hubco Financial
Statements was adequate based upon all factors required to be considered by
Hubco in determining the amount of such reserve.
4.17. AGREEMENTS WITH BANK REGULATORS. Neither Hubco nor the Bank
is a party to any agreement or memorandum of understanding with, or a party
to any commitment letter, board resolution submitted to a regulatory
authority or similar undertaking to, or is subject to any order or directive
by, or is a recipient of any extraordinary supervisory letter from, any
court, governmental authority or other regulatory or administrative agency or
commission, domestic or foreign ("Governmental Entity") which restricts
materially the conduct of its business, or in any manner relates to its
capital adequacy, its credit or reserve policies or its management, except
for those the existence of which has been disclosed in writing to GFC 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 GFC 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 GFC by Hubco
prior to the date of this Agreement.
4.18. OWNERSHIP OF GFC COMMON STOCK. Excluding the shares which
Hubco may acquire pursuant to the Stock Option Agreement of even date
herewith by and between Hubco and GFC, neither Hubco nor any of its
subsidiaries, directly or indirectly, beneficially owns, or has any
agreement, arrangement or understanding for the purposes of acquiring,
holding, voting or disposing of, any shares of GFC Common Stock.
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 GFC. During the period from the
date of this Agreement to the Effective Time, GFC shall, and shall cause
Growth to, conduct their respective businesses only in the ordinary course
and consistent with prudent banking practice, except for transactions
permitted hereunder or with the prior written consent of Hubco, which consent
will not be unreasonably withheld. GFC also shall use its best efforts to
(i) preserve its business organization and that of Growth intact, (ii) keep
available to itself the present services of its employees and those of
Growth, and (iii) preserve for itself and Hubco the goodwill of its customers
and those of Growth and others with whom business relationships exist.
5.2. NEGATIVE COVENANTS.
(a) GFC agrees that from the date hereof to the Effective Time,
except as otherwise approved by Hubco in writing or as permitted or required
by this Agreement, it will not, nor will it permit Growth to:
(i) change any provision of its Certificate of Incorporation
or By-laws or any similar governing documents of GFC or Growth;
(ii) 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 GFC or Growth, 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; PROVIDED,
HOWEVER, that from the date hereof to the Effective Time, GFC may
declare, set aside and pay cash dividends per share of GFC Common Stock
at the same time or promptly after cash dividends with respect to the
same period are declared, set aside or paid by Hubco, provided that the
record date for GFC dividends shall be no earlier than the record date
for the associated Hubco dividends and the amount of dividends per share
of GFC Common Stock shall not exceed $.12 per calendar quarter and shall
not exceed $.36 in the aggregate from the date hereof through the
Effective Time;
(iii) grant any severance or termination pay (other than
pursuant to policies or contracts of GFC in effect on the date hereof
and disclosed to Hubco pursuant hereto) to, or enter into or amend any
employment or severance agreement with, any of its directors, officers
or employees; adopt any new employee benefit plan or arrangement of any
type; or award any increase in compensation or benefits to its
directors, officers or employees except with respect to employee
increases in the ordinary course of business and consistent with past
practices and policies, and except that GFC may pay bonuses to its
employees as specified in Section 5.2(a)(iii) of the GFC Disclosure
Schedule (but not in excess of the amounts set forth therein);
(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 GFC or
Growth;
(v) make any capital expenditures other than pursuant to
binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(vi) file any applications or make any contract with respect
to branching or site location or relocation, except with respect to the
proposed Morristown branch, about which GFC shall keep Hubco fully and
promptly informed;
(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 or regulatory authorities;
(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;
(x) without Hubco's prior consent which shall not be
unreasonably withheld, make or commit to make any new loan or other
extension of credit in an amount of $500,000 or more, renew for a period
in excess of one year any existing loan or other extension of credit in
an amount of $500,000 or more, or increase by $500,000 or more the
aggregate credit outstanding to any borrower or group of affiliated
borrowers; or
(xi) agree to do any of the foregoing.
5.3. NO SOLICITATION. GFC and Growth 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 GFC or Growth (an "Acquisition Transaction").
Notwithstanding the foregoing, GFC may enter into discussions or negotiations
or provide any information in connection with an unsolicited possible
Acquisition Transaction if the Board of Directors of GFC, 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. GFC 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 GFC 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, GFC
agrees to provide Hubco, and Hubco agrees to provide GFC, 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, 1995, GFC will
deliver to Hubco and Hubco will deliver to GFC their respective quarterly
reports on Form 10-Q, as filed with the SEC under the 1934 Act. As soon as
reasonably available, but in no event more than 90 days after the end of each
calendar year, GFC will deliver to Hubco and Hubco will deliver to GFC their
respective Annual Reports on Form 10-K as filed with the SEC under the 1934
Act.
5.5. ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
(a) GFC and Growth shall permit Hubco and its representatives, and
Hubco and the Bank shall permit GFC and its representatives, reasonable
access to their respective properties, and shall disclose and make available
to Hubco and its representatives, or GFC and its representatives as the case
may be, all books, papers and records relating to its assets, stock
ownership, properties, operations, obligations and liabilities, including,
but not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and stockholders' meetings,
organizational documents, by-laws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files,
plans affecting employees, and any other business activities or prospects in
which Hubco and its representatives or GFC 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,
GFC acknowledges that Hubco may be involved in discussions concerning other
potential acquisitions and Hubco shall not be obligated to disclose such
information to GFC 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 two years
from the date the proposed Merger is abandoned but shall not apply to (i) any
information which (A) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof to it by the other party; (B) was then generally known to the public;
(C) became known to the public through no fault of the party receiving such
information; or (D) was disclosed to the party receiving such information by
a third party not bound by an obligation of confidentiality; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of
a court of competent jurisdiction.
5.6. REGULATORY MATTERS.
(a) For the purposes of holding the Stockholders Meeting referred
to in Section 5.7 hereof and qualifying under applicable federal and state
securities laws the Hubco Common Stock to be issued to GFC stockholders in
connection with the Merger, the parties hereto shall cooperate in the
preparation and filing by Hubco of a Registration Statement with the SEC
which shall include an appropriate proxy statement and prospectus satisfying
all applicable requirements of applicable state and federal laws, including
the 1933 Act, the 1934 Act and applicable state securities laws and the rules
and regulations thereunder (such proxy statement and prospectus in the form
mailed by GFC to the GFC 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 GFC 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 GFC if at any
time prior to the GFC 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 GFC
with the information needed to correct such inaccuracy or omission. Hubco
shall furnish GFC 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 GFC shareholders.
(c) GFC shall furnish Hubco with such information concerning GFC
and Growth to cause the Proxy Statement/Prospectus, insofar as it relates to
such corporations, to comply with Section 5.6(a) hereof. GFC agrees promptly
to advise Hubco if at any time prior to the GFC shareholders' meeting,
referred to in Section 5.6(a) hereof, any information provided by GFC 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. GFC shall furnish Hubco with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to GFC and Growth to comply with
Section 5.6(a) after the mailing thereof to GFC 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. GFC shall promptly furnish Hubco with such
information regarding the GFC shareholders as Hubco requires to enable it to
determine what filings are required hereunder. GFC authorizes Hubco to
utilize in such filings the information concerning GFC and Growth provided to
Hubco in connection with, or contained in, the Proxy Statement/Prospectus.
Hubco shall furnish GFC's counsel with copies of all such filings and keep
GFC advised of the status thereof. Hubco and GFC shall as promptly as
practicable file the Registration Statement containing the Proxy
Statement/Prospectus with the SEC, and each of Hubco and GFC shall promptly
notify the other of all communications, oral or written, with the SEC
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 best efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals
and authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement as soon as
possible, including, without limitation, those required by the FDIC, the FRB,
the Department and the DEP. 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, 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 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) GFC 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 GFC 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. GFC agrees to
provide Hubco with any information, certificates, documents or other
materials about GFC 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. GFC shall use its
reasonable efforts 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 GFC for reasonable expenses thus
incurred by GFC 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 GFC unless GFC shall have consented to such filing. GFC shall not
unreasonably delay or withhold any such consent. GFC acknowledges that Hubco
shareholder approval may be required for the Merger in the event another
acquisition is announced prior to the Closing Date.
5.7. APPROVAL OF STOCKHOLDERS. GFC will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of the
stockholders of GFC (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 GFC the approval of this Agreement and the
transactions contemplated hereby and use its best efforts to obtain, as
promptly as practicable, such approvals, and (c) cooperate and consult with
Hubco with respect to each of the foregoing matters.
To the extent Hubco or its counsel deems it necessary, Hubco shall
take all steps necessary to obtain the approval of its shareholders as
promptly as possible. In connection therewith, Hubco shall take all steps
necessary to duly call, give notice and convene a meeting of its shareholders
for such purpose.
5.8. FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations
to satisfy the conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated by this Agreement and using its best
efforts to prevent the breach of any representation, warranty, covenant or
agreement of such party contained or referred to in this Agreement and to
promptly remedy the same. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Nothing in this section shall be
construed to require any party to participate in any threatened or actual
legal, administrative or other proceedings (other than proceedings, actions
or investigations to which it is a party or subject or threatened to be made
a party or subject) in connection with consummation of the transactions
contemplated by this Agreement unless such party shall consent in advance and
in writing to such participation and the other party agrees to reimburse and
indemnify such party for and against any and all costs and damages related
thereto.
Hubco agrees that from the date hereof to the Effective Time,
except as otherwise approved by GFC 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 or that would constitute a breach or default of
its obligations under this Agreement or which is reasonably likely to delay
or jeopardize the receipt of any of the regulatory approvals required hereby
(except that any delay in the receipt of any regulatory approval required
hereby arising from an action taken by HUBCO or the Bank with respect to the
possible acquisition of any other banking or financial institutions shall not
give rise to a claim by GFC that Hubco has breached this provision).
From and after the execution and delivery of this Agreement and
until the Effective Time, HUBCO and the Bank will:
(a) Conduct their business and operate only in the usual ordinary
course of business and maintain their properties, books,
contracts, business, operations, commitments, records, loans,
investments and any trust operations in accordance with
generally accepted accounting principles;
(b) conduct their business and operate only in accordance with
sound business and banking practices; and
(c) remain in good standing with all applicable banking regulatory
authorities.
5.9. PUBLIC ANNOUNCEMENTS. Hubco and GFC 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 GFC 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
GFC determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to June 30,
1996 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, GFC and Hubco will promptly inform the other
of any facts applicable to GFC 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. RETENTION OF EMPLOYEES, CERTAIN EXECUTIVE OFFICERS OF
GROWTH; BENEFITS.
(a) Following consummation of the Merger, to the extent
practicable, the Bank will use its best efforts to retain Growth's existing
officers and employees ("employees"), with levels of aggregate total
compensation (salary plus benefits) similar to those currently provided by
Growth.
(b) Following consummation of the Merger, the Bank intends to make
available to all employees of Growth employed by the Bank coverage under the
benefit plans generally available to the Bank's employees (including pension
and health and hospitalization) on the terms and conditions available to the
Bank's newly hired employees. At Hubco's option, GFC's 401(k) plan will
either be terminated or rolled over into Hubco's 401(k) plan; in either
event, all employer and employee contributions to GFC's 401(k) plan will
become fully vested as of the Effective Time. Employees of Growth employed
by the Bank will not receive credit for prior employment by GFC or Growth,
except that credit for prior service will be given for the sole purpose of
determining whether such employees are eligible to participate in the Bank's
medical, vacation, sick leave, disability, 401(k), pension, and other
employee benefit plans. No prior existing condition limitation shall be
imposed with respect to any medical coverage plan of the Bank.
(c) Following consummation of the Merger, Hubco shall honor those
written employment, change in control and termination agreements by and
between GFC and/or Growth and certain employees set forth in Section 5.11(c)
of the GFC Disclosure Schedule and shall honor the calculations as to
payments set forth in Section 5.11(c) of the GFC Disclosure Schedule.
(d) At or prior to the Effective Time, all employee participants
in GFC's "SERP" plan described in Section 5.11(d) of the GFC Disclosure
Schedule shall become 100% vested in all rights and benefits under such plan,
such plan shall be terminated by GFC at or prior to the Effective Time, and
all amounts due to participants under such plan shall be paid out to the
participants by GFC.
5.12. DISCLOSURE SUPPLEMENTS. From time to time prior to the
Effective Time, each party hereto will promptly supplement or amend (by
written notice to the other) its respective Disclosure Schedules delivered
pursuant hereto with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Schedules or which is necessary
to correct any information in such Schedules which has been rendered
materially inaccurate thereby. For the purpose of determining satisfaction
of the conditions set forth in Article VI and subject to Sections 6.2(a) and
6.3(a), no supplement or amendment to such Schedules shall correct or cure
any warranty which was untrue when made, but shall enable the disclosure of
subsequent facts or events to maintain the truthfulness of any warranty.
5.13. TRANSACTION EXPENSES OF GFC AND HUBCO. GFC shall advise
Hubco monthly of all out-of-pocket expenses which GFC has incurred in
connection with this transaction. Hubco shall make all arrangements with
respect to the printing and mailing of the Proxy Statement/Prospectus and,
subject to Section 8.1(b) hereof, Hubco shall pay all expenses related to
such printing and mailing. In addition, Hubco shall pay all expenses and
fees related to filing of the Proxy Statement/Prospectus and related
documents with the SEC and filings pursuant to state "blue sky" laws and
regulations in connection with the Merger.
5.14. AFFILIATES. Simultaneous with the execution and delivery of
this Agreement, GFC shall deliver to Hubco copies of letter agreements, each
substantially in the form of Exhibit 5.14, executed by all directors and
executive officers of GFC. Promptly, but in any event within two weeks,
after the execution and delivery of this Agreement, GFC shall deliver to
Hubco (a) a letter identifying all persons who, to the knowledge of GFC, may
be deemed to be affiliates of GFC under Rule 145 of the Securities Act,
including, without limitation, all directors and executive officers of GFC
and (b) copies of letter agreements, each substantially in the form of
Exhibit 5.14, executed by each such person so identified as an affiliate of
GFC, for whom a signed "affiliate's letter" has not previously been delivered
to Hubco.
5.15. POOLING AND 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 GFC 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
"reorganization" within the meaning of Section 368(a) of the Code, or as a
"pooling-of-interests" for accounting purposes unless Hubco agrees to waive
the condition contained in Section 6.2(c).
5.16. COMPLIANCE WITH THE INDUSTRIAL SITE RECOVERY ACT. GFC, at
its sole cost and expense, shall obtain prior to the Effective Time, either:
(a) a Letter of Non-Applicability from the DEP stating that none of the
facilities located in New Jersey owned or operated by GFC (each, a
"Facility") is an "industrial establishment," as such term is defined under
ISRA; (b) a Remediation Agreement issued by the DEP pursuant to ISRA
authorizing the consummation of the transactions contemplated by this
Agreement; (c) a Negative Declaration approval, Remedial Action Workplan
approval, No Further Action letter or other document or documents issued by
the DEP advising that the requirements of ISRA have been satisfied with
respect to each Facility subject to ISRA; or (d) an opinion of counsel, in
form and substance reasonably satisfactory to Hubco, that ISRA is
inapplicable to, or has been complied with in respect of, each Facility. In
the event GFC obtains a remediation Agreement, GFC will post or have posted
an appropriate Remediation Funding Source or will have obtained the DEP's
approval to self- guaranty any Remediation Funding Source required under any
such Remediation Agreement.
5.17. INDEMNIFICATION. Hubco agrees that it will, and will cause
the Bank to, after the Effective Time, and to the fullest extent permitted by
applicable law and the corporate documents of Hubco and the Bank, provide to
the directors and officers of GFC indemnification equivalent to that provided
by or available under the Certificate of Incorporation and Bylaws of GFC or
permissible to the fullest extent permitted under the BCA with respect to
acts or omissions occurring prior to the Effective Time, including without
limitation the authorization of this Agreement and the transactions
contemplated hereby, for a period of six years from the Effective Time, or in
the case of claims made prior to the end of such six year period, until such
claims are finally resolved. To the extent permitted by applicable law,
Hubco or the Bank shall advance expenses as incurred for legal counsel and
otherwise in connection with the foregoing indemnification. In order to
satisfy this obligation, Hubco will procure continuing director and officer
liability coverage for officers, directors and employees of GFC and Growth
for a period of six years after the Effective Time from a reputable insurance
company issuing such policies, with terms and conditions (other than the
amount of premiums) substantially similar to or better than those in effect
under GFC's existing directors' and officers' insurance policy.
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 GFC STOCKHOLDERS; SEC REGISTRATION. This
Agreement and the transactions contemplated hereby shall have been approved
by the requisite vote of the stockholders of GFC and, if necessary in the
opinion of Hubco's counsel, the stockholders of Hubco. The Hubco
Registration Statement shall have been declared effective by the SEC and
shall not be subject to a stop order or any threatened stop order, and the
issuance of the Hubco 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 FDIC, the Department, the FRB and the DEP) required to consummate the
transactions contemplated hereby shall have been obtained without any term or
condition which would materially impair the value of GFC and Growth, taken as
a whole, to Hubco. All conditions required to be satisfied prior to the
Effective Time by the terms of such approvals and consents shall have been
satisfied; and all statutory waiting periods in respect thereof (including
the Hart-Scott-Rodino waiting period if applicable) shall have expired.
(c) SUITS AND PROCEEDINGS. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action or other
proceeding shall be pending or threatened by any governmental body in which
it is sought to restrain or prohibit the Merger; and no suit, action or other
proceeding shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit the Merger or obtain other substantial
monetary or other relief against one or more parties hereto in connection
with this Agreement and which Hubco or GFC 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 GFC each shall have received an
opinion of Pitney, Hardin, Kipp & Szuch dated as of the Closing Date, in form
and substance reasonably satisfactory to Hubco and to GFC and its counsel,
based, in each case, upon representation letters substantially in the form of
Exhibit 6.1 and as otherwise required by Pitney, Hardin, Kipp & Szuch, that
for federal and state income tax purposes, the Merger will qualify as a tax-
free reorganization under Section 368(a) of the Code, and except with regard
to cash received in exchange for fractional shares, that no gain or loss will
be recognized by the holders of GFC Common Stock in exchange for their shares
of Hubco Common Stock.
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
GFC AND GROWTH. Except for those representations which are made as of a
particular date, the representations and warranties of GFC 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.
GFC 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 GFC Disclosure Schedule to render
such representation or warranty true and correct in all material respects as
of the Closing Date, the representation and warranty shall be deemed true and
correct as of the Closing Date only if (i) the information contained in the
supplement or amendment to the Disclosure Schedule related to events
occurring following the execution of this Agreement and (ii) either (x) the
facts disclosed in such supplement or amendment would not either alone, or
together with any other supplements or amendments to the GFC Disclosure
Schedule, materially adversely effect the representation as to which the
supplement or amendment relates or (y) such supplement or amendment remedied
any material breach in accordance with Section 7.1(d)(ii).
(b) OPINION OF COUNSEL. Hubco shall have received an opinion of
counsel to GFC, 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 Anderson LLP, to the effect that the Merger
shall be qualified to be treated by Hubco as a pooling-of-interest for
accounting purposes.
(d) CERTIFICATES. GFC shall have furnished Hubco with such
certificates of its officers or other documents to evidence fulfillment of
the conditions set forth in this Section 6.2 as Hubco may reasonably request.
(e) NO PARACHUTE PAYMENTS. No payments under any Severance
Agreement or any other plan or arrangement with GFC or Growth will constitute
an "excess parachute payment," as defined in Section 280G of the Code or
regulations promulgated thereunder.
(f) LEGAL FEES. GFC shall have furnished Hubco with letters from
all attorneys representing GFC and Growth in any matters certifying that all
legal fees have been paid in full for services rendered as of the Effective
Time.
(g) MERGER RELATED EXPENSE. GFC shall have provided Hubco with an
accounting of all merger related expenses incurred by it through the Closing
Date, including a good faith estimate of such expenses incurred but as to
which invoices have not been submitted as of the Closing Date. The merger
related expenses of GFC shall be reasonable.
(h) DISSENTING SHARES. As of the Closing Date, the number of
shares of GFC Common Stock as to which dissenters' rights shall have been
demanded and not withdrawn or voided pursuant to operation of law shall be
less than 10% of the number of shares of GFC Common Stock issued and
outstanding.
6.3. CONDITIONS TO THE OBLIGATIONS OF GFC UNDER THIS AGREEMENT.
The obligations of GFC under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS OF
HUBCO. Except for those representations which are made as of a particular
date, the representations and warranties of Hubco contained in this
Agreement shall be true and correct in all material respects on the Closing
Date as though made on and as of the Closing Date. Hubco shall have
performed in all material respects, the agreements, covenants and obligations
to be performed by it prior to the Closing Date. With respect to any
representation or warranty which as of the Closing Date has required a
supplement or amendment to the Hubco Disclosure Schedule to render such
representation or warranty true and correct in all material respects as of
the Closing Date, the representation and warranty shall be deemed true and
correct as of the Closing Date only if (i) the information contained in the
supplement or amendment to the Disclosure Schedule related to events
occurring following the execution of this Agreement and (ii) the facts
disclosed in such supplement or amendment would not either alone, or together
with any other supplements or amendments to the Hubco Disclosure Schedule,
materially adversely effect the representation as to which the supplement or
amendment relates.
(b) OPINION OF COUNSEL TO HUBCO. GFC shall have received an
opinion of counsel to Hubco, dated the Closing Date, in form and substance
reasonably satisfactory to GFC, covering the matters set forth on Exhibit 6.3
hereto.
(c) FAIRNESS OPINION. GFC shall have received an opinion from
McConnell, Budd & Downes, Inc., dated no more than three days prior to the
date the Proxy Statement/Prospectus is mailed to GFC's stockholders, to the
effect that, in its opinion, the consideration to be paid to stockholders of
GFC hereunder is fair to such stockholders from a financial point of view
("Fairness Opinion"), and Hubco shall not have taken any action (including
the announcement of any other proposed acquisition) which causes McConnell,
Budd & Downes, Inc. to withdraw its Fairness Opinion prior to the Closing.
(d) MINIMUM MEDIAN PRE-CLOSING PRICE. The Median Pre-Closing
Price shall be no less than $14.75; PROVIDED, that if GFC chooses not to
consummate the Merger due to the failure of this condition, then GFC shall be
obligated to reimburse Hubco and the Bank for all of their expenses in
connection with this Agreement and the transactions contemplated hereby,
including without limitation legal, accounting and printing fees and
expenses.
(e) CERTIFICATES. Hubco shall have furnished GFC 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 GFC 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 GFC:
(a) by mutual written consent of the parties hereto;
(b) by Hubco or GFC (i) if the Effective Time shall not have
occurred on or prior to June 30, 1996 unless the failure of such occurrence
shall be due to the failure of the party seeking to terminate this Agreement
to perform or observe its agreements set forth herein to be performed or
observed by such party at or before the Effective Time, or (ii) if a vote of
the stockholders of GFC is taken and such stockholders fail to approve
this Agreement at the meeting (or any adjournment thereof) held for such
purpose, or (iii) if a vote of the stockholders of Hubco is taken and such
stockholders fail to approve this Agreement at the meeting (or any
adjournment thereof) held for such purpose.
(c) by Hubco or GFC 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 GFC if any such application is approved with conditions which materially
impair the value of GFC and Growth, taken as a whole, to Hubco.
(d) by Hubco if (i) there shall have occurred a material adverse
change in the business, operations, assets, or financial condition of GFC and
Growth, taken as a whole, from that disclosed by GFC in GFC's Quarterly
Report on Form 10-Q for the six months ended June 30, 1995 and GFC's Annual
Report on Form 10-K for the year ended December 31, 1994; or (ii) there was a
material breach in any representation, warranty, covenant, agreement or
obligation of GFC hereunder and such breach shall not have been remedied
within 30 days after receipt by GFC of notice in writing from Hubco to GFC
specifying the nature of such breach and requesting that it be remedied.
(e) by GFC, 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, 1995 and
Hubco's Annual Report on Form 10-K for the fiscal year ended December 31,
1994; 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 GFC 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 and are not capable of being satisfied by June 30, 1996.
(g) by GFC if the conditions set forth in Section 6.3 are not
satisfied; and are not capable of being satisfied by June 30, 1996; PROVIDED,
that if GFC chooses to terminate this Agreement due to the failure of the
condition set forth in Section 6.3(d), then GFC shall be obligated to
reimburse Hubco and the Bank for all of their expenses in connection with
this Agreement and the transactions contemplated hereby, including without
limitation legal, accounting and printing fees and expenses.
(h) by GFC, if GFC's Board of Directors shall have approved an
Acquisition Transaction after determining, upon advice of counsel, that such
approval was necessary in the exercise of its fiduciary obligations under
applicable laws.
7.2. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement by either Hubco or GFC pursuant to Section
7.1, this Agreement (other than Section 5.5(b) 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 GFC but, after any such adoption, no amendment shall be
made which reduces or changes the amount or form of the consideration to be
delivered to the shareholders of GFC without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties hereto.
7.4. EXTENSION; WAIVER. The parties may, at any time prior to the
Effective Time of the Merger, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of
any party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party against which the
waiver is sought to be enforced.
ARTICLE VIII - MISCELLANEOUS
8.1. EXPENSES.
(a) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including legal, accounting and investment banking fees
and expenses) shall be borne by the party incurring such costs and expenses.
Notwithstanding the foregoing, Hubco may bear the expenses of the Bank and
GFC may bear the expenses of Growth.
(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.
8.2. SURVIVAL. The respective representations, warranties,
covenants and agreements of the parties to this Agreement shall not survive
the Effective Time, but shall terminate as of the Effective Time, except for
this Section 8.2 and the provisions of Section 5.5(b).
8.3. NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered personally or by reputable overnight courier or sent by registered
or certified mail, postage prepaid, as follows:
(a) If to Hubco, to:
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, President
and Chief Executive Officer
Copy to:
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to:
Pitney, Hardin, Kipp & Szuch
(Delivery) 200 Campus Drive
Florham Park, New Jersey
(Mail) P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Michael W. Zelenty, Esq.
(b) If to GFC, to:
Growth Financial Corp.
(Delivery) 1500 Route 202
Harding Township, New Jersey
(Mail) P.O. Box 401
Basking Ridge, New Jersey 07920
Attn.: President and Chief Executive Officer
Copy to:
John Bruno, Esq.
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20015
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 actually received.
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.
8.5. ENTIRE AGREEMENT. This Agreement, which includes the
Disclosure Schedules hereto and the other documents, agreements and
instruments executed and delivered pursuant to or in connection with this
Agreement, contains the entire Agreement between the parties hereto with
respect to the transactions contemplated by this Agreement and supersedes all
prior negotiations, arrangements or understandings, written or oral, with
respect thereto.
8.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.7. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New Jersey, without giving effect to the principles of
conflicts of laws thereof.
8.8. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, Hubco, the Bank, GFC and Growth 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: /s/ D. LYNN VAN BORKULO-NUZZO By: /s/ KENNETH T. NEILSON
----------------------------- -----------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, President
Secretary and Chief Executive Officer
ATTEST: GROWTH FINANCIAL CORP.
By: /s/ RICHARD G. WHITEHEAD By: /s/ DALE G. POTTER
----------------------------- -------------------------
Richard G. Whitehead, Dale G. Potter, President
Assistant Secretary and Chief Executive Officer
ATTEST: HUDSON UNITED BANK
By: /s/ D. LYNN VAN BORKULO-NUZZO By: /s/ KENNETH T. NEILSON
----------------------------- -----------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, President
Secretary and Chief Executive Officer
ATTEST: GROWTH BANK
By: /s/ RICHARD G. WHITEHEAD By: /s/ DALE G. POTTER
----------------------------- -------------------------
Richard G. Whitehead, Dale G. Potter, President
Assistant Secretary and Chief Executive Officer
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated August 18,
1995, is by and between HUBCO, Inc., a New Jersey corporation and registered
bank holding company ("HUBCO") for Hudson United Bank ("HUB"), and Growth
Financial Corp., a New Jersey corporation and registered bank holding company
("GFC") for Growth Bank (the "Bank").
BACKGROUND
1. HUBCO, HUB, GFC and the Bank have executed an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which HUBCO will acquire
GFC through a merger of GFC with and into HUBCO (the "Merger").
2. As an inducement to HUBCO to enter into the Merger Agreement
and in consideration for such entry, GFC desires to grant to HUBCO an option
to purchase authorized but unissued shares of common stock of GFC in an
amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, HUBCO and GFC,
intending to be legally bound hereby, agree:
1. GRANT OF OPTION. GFC hereby grants to HUBCO the option to
purchase 336,850 shares of common stock, $1.00 par value (the "Common Stock")
of GFC at an exercise price of $12.25 per share (the "Option Price"), on the
terms and conditions set forth herein (the "Option").
2. EXERCISE OF OPTION. This Option shall not be exercisable until
the occurrence of a Triggering Event (as such term is hereinafter defined).
Upon or after the occurrence of a Triggering Event (as such term is
hereinafter defined), HUBCO may exercise the Option, in whole or in part, at
any time or from time to time until the termination of this Agreement in
accordance with Section 19 and in accordance with the terms and conditions
hereof.
The term "Triggering Event" means the occurrence of any of the
following events:
A person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than HUBCO or an affiliate of HUBCO, without
HUBCO's prior written consent:
a. acquires beneficial ownership (as such term is defined in
Rule 13d-3 as promulgated under the Exchange Act) of at least 20% of the then
outstanding shares of Common Stock;
b. subsequent to the date hereof enters into a written
letter of intent or an agreement with GFC pursuant to which such person or
any affiliate of such person would (i) merge or consolidate, or enter into
any similar transaction with GFC, (ii) acquire all or a significant portion
of the assets or liabilities of GFC, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to
vote securities representing 10% or more of the then outstanding shares of
Common Stock;
c. makes a filing with any bank or thrift regulatory
authorities or publicly announces a bona fide proposal (a "Proposal") for (i)
any merger, consolidation or acquisition of all or a significant portion of
all the assets or liabilities of GFC or any other business combination
involving GFC, or (ii) a transaction involving the transfer of beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 20% or more of the outstanding
shares of Common Stock, and thereafter, if such Proposal has not been
Publicly Withdrawn (as such term is hereinafter defined) at least 15 days
prior to the meeting of stockholders of GFC called to vote on the Merger and
GFC stockholders fail to approve the Merger by the vote required by
applicable law at the meeting of stockholders called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before
such Proposal has been Publicly Withdrawn, GFC willfully takes any action in
any manner which would materially interfere with its desire or ability to
enter into a definitive Merger Agreement or its ability to consummate the
Merger or materially reduce the value of the transaction to HUBCO.
The term "Triggering Event" also means the taking of any direct or
indirect action by GFC or any of its directors, officers or agents to invite
or solicit any proposal which has as its purpose a tender offer for the
shares of GFC Common Stock, a merger, consolidation, plan of exchange, plan
of acquisition or reorganization of GFC, or a sale of shares of GFC Common
Stock or any significant portion of its assets or liabilities.
The term "significant portion" means 25% of the assets or
liabilities of GFC.
"Publicly Withdrawn", for purposes of clauses (c) and (d) above,
shall mean an unconditional bona fide withdrawal of the Proposal coupled with
a public announcement of no further interest in pursuing such Proposal or in
acquiring any controlling influence over GFC or in soliciting or inducing any
other person (other than HUBCO or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at
any time (i) in the absence of any required governmental or regulatory
approval or consent necessary for GFC to issue the Option Shares or HUBCO to
exercise the Option or prior to the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order,
decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares.
GFC shall notify HUBCO promptly in writing of the occurrence of any
Triggering Event known to it, it being understood that the giving of such
notice by GFC shall not be a condition to the right of HUBCO to exercise the
Option. GFC will not take any action which would have the effect of
preventing or disabling GFC from delivering the Option Shares to HUBCO upon
exercise of the Option or otherwise performing its obligations under this
Agreement.
In the event HUBCO wishes to exercise the Option, HUBCO shall send
a written notice to GFC (the date of which is hereinafter referred to as the
"Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date for the closing of such a purchase (a
"Closing"); provided, however, that a Closing shall not occur prior to two
days after the later of receipt of any necessary regulatory approvals and the
expiration of any legally required notice or waiting period, if any.
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing hereunder
(a) HUBCO will make payment to GFC of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by GFC, (b) GFC will deliver to HUBCO a stock certificate
or certificates representing the number of Option Shares so purchased, free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever created by or through GFC, registered in the name of HUBCO
or its designee, in such denominations as were specified by HUBCO in its
notice of exercise and bearing a legend as set forth below and (c) HUBCO
shall pay any transfer or other taxes required by reason of the issuance of
the Option Shares so purchased.
Unless a registration statement is filed and declared effective
under Section 4 hereof, a legend will be placed on each stock certificate
evidencing Option Shares issued pursuant to this Agreement, which legend will
read substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933
Act"). These shares may not be sold, transferred or otherwise
disposed of unless a registration statement with respect to the
sale of such shares has been filed under the 1933 Act and declared
effective or, in the opinion of counsel reasonably acceptable to
Growth Financial Corp., said transfer would be exempt from
registration under the provisions of the 1933 Act and the
regulations promulgated thereunder.
4. REGISTRATION RIGHTS. Upon or after the occurrence of a
Triggering Event and upon receipt of a written request from HUBCO, GFC shall
prepare and file a registration statement with the Securities and Exchange
Commission, covering the Option and such number of Option Shares as HUBCO
shall specify in its request, and GFC shall use its best efforts to cause
such registration statement to be declared effective in order to permit the
sale or other disposition of the Option and the Option Shares, provided that
HUBCO shall in no event have the right to have more than one such
registration statement become effective.
In connection with such filing, GFC shall use its best efforts to
cause to be delivered to HUBCO such certificates, opinions, accountant's
letters and other documents as HUBCO shall reasonably request and as are
customarily provided in connection with registrations of securities under the
Securities Act of 1933, as amended. All expenses incurred by GFC in
complying with the provisions of this Section 4, including without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for GFC and blue sky fees and expenses shall be paid
by HUBCO. Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel to HUBCO and
any other expenses incurred by HUBCO in connection with such registration
shall be borne by HUBCO. In connection with such filing, GFC shall indemnify
and hold harmless HUBCO against any losses, claims, damages or liabilities,
joint or several, to which HUBCO may become subject, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement with respect to GFC or alleged untrue
statement with respect to GFC of any material fact with respect to GFC
contained in any preliminary or final registration statement or any amendment
or supplement thereto, or arise out of a material fact with respect to GFC
required to be stated therein or necessary to make the statements therein
with respect to GFC not misleading; and GFC will reimburse HUBCO for any
legal or other expense reasonably incurred by HUBCO in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that GFC will not be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement of omission or alleged omission
made in such preliminary or final registration statement or such amendment or
supplement thereto in reliance upon and in conformity with written
information furnished by or on behalf of HUBCO specifically for use in the
preparation thereof. HUBCO will indemnify and hold harmless GFC to the same
extent as set forth in the immediately preceding sentence but only with
reference to written information specifically furnished by or on behalf of
HUBCO for use in the preparation of such preliminary or final registration
statement or such amendment or supplement thereto; and HUBCO will reimburse
GFC for any legal or other expense reasonably incurred by GFC in connection
with investigating or defending any such loss, claim, damage, liability or
action.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the
like, then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
Subject to the last sentence of this paragraph, in the event any
capital reorganization or reclassification of the Common Stock, or any
consolidation, merger or similar transaction of GFC with another entity, or
in the event any sale of all or substantially all of the assets of GFC shall
be effected in such a way that the holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for
Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions (in form
reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive upon
the basis and upon the terms and conditions specified herein and in lieu of
the Common Stock immediately theretofore purchasable and receivable upon
exercise of the rights represented by this Option, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon exercise of the rights represented by this
Option had such reorganization, reclassification, consolidation, merger or
sale not taken place; provided, however, that if such transaction results in
the holders of Common Stock receiving only cash, the holder hereof shall be
paid the difference between the Option Price and such cash consideration
without the need to exercise the Option. Notwithstanding the foregoing, if
the holder hereof is given reasonable notice and opportunity to exercise
this option and receive the Option Shares prior to any merger of GFC, then
the holder's rights with respect to this option shall be limited to such
right to exercise the option and receive the Option Shares prior to the
merger and it shall not required as a condition to the merger that provision
be made to convert this into an option to acquire the consideration payable
or issuable in the merger.
6. FILINGS AND CONSENTS. Each of HUBCO and GFC will use its best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to
compliance with all applicable laws including, in the event HUBCO is the
holder hereof, approval of the Board of Governors of the Federal Reserve
System and GFC agrees to cooperate with and furnish to the holder hereof such
information and documents as may be reasonably required to secure such
approvals.
7. REPRESENTATIONS AND WARRANTIES OF GFC. GFC hereby represents
and warrants to HUBCO as follows:
a. DUE AUTHORIZATION. GFC has full corporate power and
authority to execute, deliver and perform this Agreement and all corporate
action necessary for execution, delivery and performance of this Agreement
has been duly taken by GFC.
b. AUTHORIZED SHARES. GFC has taken and, as long as the
Option is outstanding, will take all necessary corporate action to authorize
and reserve for issuance all shares of Common Stock that may be issued
pursuant to any exercise of the Option.
c. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby (assuming
all appropriate regulatory approvals) will violate or result in any violation
or default of or be in conflict with or constitute a default under any term
of the certificate of incorporation or by-laws of GFC or, to its knowledge,
any agreement, instrument, judgment, decree, statute, rule or order
applicable to GFC.
8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
Notwithstanding the foregoing, HUBCO shall have the right to seek money
damages against GFC for a breach of this Agreement.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
10. ASSIGNMENT OR TRANSFER. HUBCO may not sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part,
to any person or group of persons other than to an affiliate of HUBCO. HUBCO
represents that it is acquiring the Option for HUBCO's own account and not
with a view to or for sale in connection with any distribution of the Option.
HUBCO is aware that presently neither the Option nor the Option Shares are
being offered by a registration statement filed with, and declared effective
by, the Securities and Exchange Commission, but instead are being offered in
reliance upon the exemption from the registration requirements pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
11. AMENDMENT OF AGREEMENT. By mutual consent of the parties
hereto, this Agreement may be amended in writing at any time, for the purpose
of facilitating performance hereunder or to comply with any applicable
regulation of any governmental authority or any applicable order of any court
or for any other purpose.
12. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provisions of this Agreement, which shall remain in full force and
effect.
13. NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall
be deemed to have been duly given when delivered personally, by express
service, cable, telegram or telex, or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
If to HUBCO:
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, NJ 07430
Attn.: Kenneth T. Neilson
President & C.E.O.
With copies to:
D. Lynn Van Borkulo-Nuzzo, Esq.
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
and
Pitney, Hardin, Kipp & Szuch
(Delivery) 200 Campus Drive
Florham Park, New Jersey 07932-0950
(Mail) P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Michael W. Zelenty, Esq.
If to GFC:
Growth Financial Corp.
(Delivery) 1500 Route 202
Harding Township, New Jersey
(Mail) P.O. Box 401
Basking Ridge, New Jersey 07920
Attn.: President and Chief Executive Officer
With a copy to:
John Bruno, Esq.
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20015
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
15. CAPTIONS. The captions in the Agreement are inserted for
convenience and reference purposes, and shall not limit or otherwise affect
any of the terms or provisions hereof.
16. WAIVERS AND EXTENSIONS. The parties hereto may, by mutual
consent, extend the time for performance of any of the obligations or acts of
either party hereto. Each party may waive (i) compliance with any of the
covenants of the other party contained in this Agreement and/or (ii) the
other party's performance of any of its obligations set forth in this
Agreement.
17. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement, except as provided in Section 10 permitting HUBCO to assign its
rights and obligations hereunder only to an affiliate of HUBCO.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
19. TERMINATION. This Agreement shall terminate upon either (i)
the termination of the Merger Agreement as provided therein or (ii) the
consummation of the transactions contemplated by the Merger Agreement;
provided, however, that if termination of the Merger Agreement occurs after
the occurrence of a Triggering Event, this Agreement shall not terminate
until 18 months after the later of the date of the termination of the Merger
Agreement or the consummation of any proposed transactions which constitute
the Triggering Event.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Agreement to
be executed by its duly authorized officer, all as of the day and year first
above written.
GROWTH FINANCIAL CORP.
By: /s/ DALE G. POTTER
-----------------------------
Dale Potter, President and
Chief Executive Officer
HUBCO, Inc.
By: /s/ D. LYNN VAN BORKULO-NUZZO
-----------------------------
D. Lynn Van Borkulo-Nuzzo
Executive Vice President
<PAGE>
APPENDIX C
McCONNELL, BUDD & DOWNES, INC.
365 SOUTH STREET
MORRISTOWN, NEW JERSEY 07960
201-538-7800
FAX: 201-538-0522
November 6, 1995
The Board of Directors
Growth Financial Corp
1500 Route 202
P.O. Box 401
Basking Ridge, New Jersey 07920
Members of the Board:
You have requested our opinion as to the fairness from a financial
point of view to the holders of the outstanding shares of common stock, par
value $1.00 per share (the "GRFC Common Stock") of Growth Financial Corp
("GRFC"), of the consideration to be received for each issued and outstanding
share of the GRFC Common Stock in the merger (the "Merger") of GRFC with and
into HUBCO, Inc. ("HUBC") pursuant to the Agreement and Plan of Merger dated
August 18, 1995 (the "Agreement") between HUBC and GRFC. As is more
specifically set forth in the Agreement, pursuant to the Merger, each issued
and outstanding share of GRFC Common Stock will be converted into the right
to receive the number of shares of HUBC Common Stock with a market value of
$14.64, with market value determined by the Median Pre-Closing Price of HUBC
Common Stock (as that term is defined in the Agreement), constrained by a
minimum exchange ratio of 0.69 shares of HUBC Common Stock and a maximum
exchange ratio of 0.81 shares of HUBC Common Stock.
McConnell, Budd & Downes, Inc., as part of its investment banking
business is continually engaged in the valuation of bank holding companies,
banks, thrift holding companies and thrifts and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, market making as a NASD market maker, secondary
distributions of listed securities, private placements and valuations for
corporate, estate and other purposes. We have acted as financial advisor to
GRFC on a contractual basis since May 15, 1995. We have had an informal
relationship with GRFC since January 1995. Advice and assistance to GRFC in
connection with the process and negotiations leading up to the Merger with
HUBC were part of the contractual relationship. In the course of our role as
financial advisor to GRFC in conjunction with the Merger we have received
fees for our services and will receive additional fees contingent on certain
occurrences. While the payment of all or a significant portion of fees
related to financial advisory services provided in connection with arm's-
length mergers and other business combination transactions upon consummation
of such transactions, as is the case with the Merger, might be viewed as
giving such financial advisors a financial interest in the successful
completion of such transactions, such compensation arrangements are standard
and customary for transactions of the size and type of the Merger. We will
receive a fee for rendering this opinion. In the ordinary course of our
business, we trade the equity securities of GRFC for our own account, for the
accounts of our customers and for the accounts of individual employees of
McConnell, Budd & Downes, Inc. Accordingly we may from time to time hold a
long or short position in the equity securities of GRFC. McConnell, Budd &
Downes, Inc. also covers GRFC in certain of its equity research products.
In arriving at our opinion, we have reviewed publicly available
business, financial and shareholder information relating to GRFC and its
subsidiaries and certain publicly available financial information relating
the HUBC. We have also reviewed the Agreement. In addition, we have
reviewed certain other information, including internal reports and documents
from both GRFC and HUBC and certain management-prepared financial information
provided to us by both GRFC and HUBC. We have also met with and had
discussions with members of the senior management of both GRFC and HUBC to
discuss their past and current business operations, current financial
condition and future prospects. In addition, we have reviewed the press
release announcing GRFC's results for the interim periods ended March 31,
1995 and June 30, 1995. We have reviewed and studied the historical stock
prices and trading volumes of the common stock of both GRFC and HUBC as well
as the terms and material conditions of a number of recent acquisition
transactions involving publicly traded banks which we deem to be comparable
to the proposed acquisition of GRFC by HUBC. We have also conducted such
other studies, analyses and investigations as we deem appropriate under the
circumstances surrounding the proposed transaction.
In the course of our review and analysis we have relied upon and
assumed, without independent verification, the accuracy and completeness of
the financial information provided to us by GRFC and HUBC or otherwise
publicly obtainable. In reaching our opinion, we have not performed or
obtained from any other source, any independent appraisals of the assets of
GRFC or HUBC. We have also relied on the management of both GRFC and HUBC as
to the reasonableness of various financial and operating forecasts and of the
assumptions on which they are based, which were provided to us for use in our
analyses.
In the course of rendering this opinion, which is being rendered
prior to the receipt of certain required regulatory approvals necessary
before consummation of the Merger, we have assumed that no conditions will be
imposed by any regulatory agency in connection with its approval of the
Merger that will have a material adverse effect on the amount or form of
consideration or on the results of operations, the financial condition or the
prospects of GRFC.
Based upon and subject to the foregoing, it is our opinion, that as
of the date of this letter, the consideration to be received of the number of
shares of HUBC Common Stock with a market value of $14.64, with market value
determined by the Median Pre-Closing Price of HUBC Common Stock (as that term
is defined in the Agreement), constrained by a minimum exchange ratio of 0.69
shares of HUBC Common Stock and a maximum exchange ratio of 0.81 shares of
HUBC Common Stock pursuant to the Merger is fair to the holders of GRFC
Common Stock, $1.00 par value, from a financial point of view.
Very truly yours,
McCONNELL, BUDD & DOWNES, INC.
<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.
<PAGE>
ITEM 21.
A. Exhibits
Exhibit
Number Description
------- -----------
2(a)<F1> Agreement and Plan of Merger, dated August 18, 1995, by
and among HUBCO, Inc., Hudson United Bank, Growth
Financial Corp ("Growth") and Growth Bank (included as
Appendix A to the Proxy Statement-Prospectus).
2(b)<F1> Stock Option Agreement, dated August 18, 1995, by and
between HUBCO, Inc. and Growth (included as Appendix B
to the Proxy Statement-Prospectus).
5<F2> Opinion of Pitney, Hardin, Kipp & Szuch as to the
legality of the securities to be registered.
8<F2> Form of Opinion of Pitney, Hardin, Kipp & Szuch as to
certain tax consequences of the Merger.
10(a)<F2> Agreement dated as of August 18, 1995 among Dale G.
Potter, Growth and Growth Bank.
10(b)<F2> Agreement dated as of August 18, 1995 among Maria
Armstrong, Growth and Growth Bank.
10(c)<F2> Agreement dated as of August 18, 1995 among Richard
Whitehead, Growth and Growth Bank.
10(d)<F2> Agreement dated as of August 18, 1995 among George
McGuinness, Growth and Growth Bank.
23(a)<F2> Consent of Arthur Andersen LLP.
23(b)<F2> Consent of KPMG Peat Marwick LLP.
23(c)<F2> Consent of Coopers & Lybrand LLP.
23(d) Consent of McConnell, Budd & Downes, Inc.
23(e)<F2> Consent of Pitney, Hardin, Kipp & Szuch (included in
Exhibits 5 and 8 hereto).
24 Power of Attorney of directors of HUBCO, Inc., in
favor of Kenneth T. Neilson.
99(a) Form of Proxy Card to be utilized by the Board of
Directors of Growth.
_________________________________
[FN]
<F1> Included elsewhere in this registration statement.
<F2> Previously filed.
<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 McConnell, Budd & Downes, 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 amend-
ment 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.
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.
<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 Amendment No. 1 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Township of Mahwah, State of New Jersey, on
the 7th day of November, 1995.
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 Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the November 7, 1995
------------------------ Board and Director
(James E. Schierloh)
* President and November 7, 1995
------------------------ Director (Chief
(Kenneth T. Neilson) Executive Officer)
*
------------------------ Director November 7, 1995
(Robert J. Burke)
*
------------------------ Director November 7, 1995
(Joan David)
* Director November 7, 1995
------------------------
(Thomas R. Farley)
* Director November 7, 1995
------------------------
(Henry G. Hugelheim)
*
------------------------ Director November 7, 1995
(Bryant Malcolm)
*
------------------------ Director November 7, 1995
(W. Peter McBride)
*
------------------------ Director November 7, 1995
(Harry J. Leber)
*
------------------------ Director November 7, 1995
(Charles F.X. Poggi)
*
------------------------ Director November 7, 1995
(Sister Grace Frances
Strauber)
*
------------------------ Director November 7, 1995
(Edwin Wachtel)
* Treasurer and Chief
------------------------ Financial Officer November 7, 1995
(Richard Linhart) (Principal Financial
Officer)
* Assistant Treasurer
------------------------ (Principal November 7, 1995
(Christina L. Maier) Accounting Officer)
KENNETH T. NEILSON
- --------------------------------
* By Kenneth T. Neilson,
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
2(a)<F1> Agreement and Plan of Merger, dated August 18, 1995, by
and among HUBCO, Inc., Hudson United Bank, Growth
Financial Corp ("Growth") and Growth Bank (included as
Appendix A to the Proxy Statement-Prospectus).
2(b)<F1> Stock Option Agreement, dated August 18, 1995, by and
between HUBCO, Inc. and Growth (included as Appendix B
to the Proxy Statement-Prospectus).
5<F2> Opinion of Pitney, Hardin, Kipp & Szuch as to the
legality of the securities to be registered.
8<F2> Form of Opinion of Pitney, Hardin, Kipp & Szuch as to
certain tax consequences of the Merger.
10(a)<F2> Agreement dated as of August 18, 1995 among Dale G.
Potter, Growth and Growth Bank.
10(b)<F2> Agreement dated as of August 18, 1995 among Maria
Armstrong, Growth and Growth Bank.
10(c)<F2> Agreement dated as of August 18, 1995 among Richard
Whitehead, Growth and Growth Bank.
10(d)<F2> Agreement dated as of August 18, 1995 among George
McGuinness, Growth and Growth Bank.
23(a)<F2> Consent of Arthur Andersen LLP.
23(b)<F2> Consent of KPMG Peat Marwick LLP.
23(c)<F2> Consent of Coopers & Lybrand LLP.
23(d) Consent of McConnell, Budd & Downes, Inc.
23(e)<F2> Consent of Pitney, Hardin, Kipp & Szuch (included in
Exhibits 5 and 8 hereto).
24 Power of Attorney of directors of HUBCO, Inc., in
favor of Kenneth T. Neilson.
99(a) Form of Proxy Card to be utilized by the Board of
Directors of Growth.
---------------------------------
[FN]
<F1> Included elsewhere in this registration statement.
<F2> Previously filed.
EXHIBIT 23(d)
McCONNELL, BUDD & DOWNES, INC.
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of our opinion dated November
6, 1995 as an Annex to the Proxy Statement/Prospectus filed as part of the
Form S-4 Registration Statement (Registration No. 33-63619) of Growth
Financial Corp. and to the references to our firm as Financial Advisor to
Growth Financial Corp. in the text of said Proxy Statement/Prospectus. In
giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act
of 1933 or the rules and regulations of the Securities and Exchange Commission.
McConnell, Budd & Downes, Inc.
By: MICHAEL RASMUSSEN
------------------------
Michael Rasmussen
Vice President
HUBCO, INC.
POWER OF ATTORNEY
FORM S-4
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kenneth T. Neilson, his
attorney-in-fact, with power of substitution, for him in any and all
capacities, to sign any and all amendments (whether pre- or post-effective),
to this Registration Statement on Form S-4 of HUBCO, Inc. (SEC File No.
33-63619) and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933,
as amended, 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 October 17, 1995
----------------------- Board and Director
(James E. Schierloh)
KENNETH T. NEILSON
----------------------- President and October 17, 1995
(Kenneth T. Neilson) Director (Chief
Executive Officer)
ROBERT J. BURKE
----------------------- Director October 17, 1995
(Robert J. Burke)
JOAN DAVID
----------------------- Director October 17, 1995
(Joan David)
THOMAS R. FARLEY
----------------------- Director October 17, 1995
(Thomas R. Farley)
HENRY G. HUGELHEIM
----------------------- Director October 17, 1995
(Henry G. Hugelheim)
BRYANT MALCOLM
----------------------- Director October 17, 1995
(Bryant Malcolm)
W. PETER McBRIDE
----------------------- Director October 17, 1995
(W. Peter McBride)
HARRY J. LEBER
----------------------- Director October 17, 1995
(Harry J. Leber)
CHARLES F.X. POGGI
----------------------- Director October 17, 1995
(Charles F.X. Poggi)
GRACE FRANCES STRAUBER
----------------------- Director October 17, 1995
(Sister Grace Frances
Strauber)
EDWIN WACHTEL
----------------------- Director October 17, 1995
(Edwin Wachtel)
RICHARD LINHART
----------------------- Treasurer and Chief October 17, 1995
(Richard Linhart) Financial Officer
(Principal Financial
Officer)
CHRISTINA L. MAIER
----------------------- Assistant Treasurer October 17, 1995
(Christina L. Maier) (Principal
Accounting Officer)
EXHIBIT 99(a)
REVOCABLE PROXY
GROWTH FINANCIAL CORP
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF GROWTH FINANCIAL CORP FOR
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER __, 1995
The undersigned hereby appoints Richard G. Whitehead and George J.
McGuinness, and each of them, proxies and agents with full power of
substitution to vote for and on behalf of the undersigned at the Special
Meeting of Stockholders of Growth Financial Corp ("Growth") to be held at the
Basking Ridge Country Club, 185 Madisonville Road (off North Maple Avenue),
Basking Ridge, New Jersey on , December , 1995 at p.m., and
at any adjournments thereof (the "Meeting"), all shares of Growth Common
Stock which the undersigned would be entitled to vote if personally present
for the following matters. The undersigned hereby revokes any and all
proxies heretofore given with respect to the Meeting.
____
/_X_/ PLEASE MARK VOTES AS IN THIS EXAMPLE
The Board of Directors recommends a vote
FOR approval of the Merger Agreement.
----------------------------------------
1. Approval of the Agreement and Plan of Merger (the "Merger Agreement")
dated as of August 18, 1995, among HUBCO, Inc. ("HUBCO"), Hudson United Bank,
Growth, and Growth Bank, pursuant to which Growth will merge with and into
HUBCO, all as more fully set forth in the Proxy Statement-Prospectus relating
to the Meeting.
____
/___/ FOR
____
/___/ AGAINST
____
/___/ ABSTAIN
2. To transact such other business as may properly be brought before the
meeting. In their discretion, the proxies are authorized to vote upon such
other business as may properly be brought before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE THIS PROXY
WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING
AND THE RELATED PROXY STATEMENT-PROSPECTUS.
Date: __________________
_____________________________________________
Signature
_____________________________________________
Signature
Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized official. If a partnership, please sign in partnership name by an
authorized person.
