- --------------------------------------------------------------------------------
As filed with the Securities and Exchange Commission
on April 12, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------
HUBCO, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey
(State or Other Jurisdiction of Incorporation or Organization)
6711
(Primary Standard Industrial Classification Code Number)
22-2405746
(I.R.S. Employer Identification Number)
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
201-236-2640
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Kenneth T. Neilson, President
HUBCO, INC.
1000 MacArthur Boulevard, Mahwah, New Jersey 07430
201-236-3631
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Agent for Service)
Please send copies of all communications to:
MICHAEL M. HORN, ESQ. FRANK E. LAWATSCH, JR.
McCarter & English Crummy, DelDeo, Dolan,
Four Gateway Center Griffinger & Vecchione
100 Mulberry Street One Riverfront Plaza
Newark, New Jersey 07102 Newark, NJ 07102-5497
(201) 622-4444 (201) 596-4637
Approximate date of commencement of proposed sale to the public: At the
Effective Date of the Merger, as defined in the Amended and Restated Agreement
and Plan of Merger dated as of February 14, 1995 (the "Agreement"), between the
Registrant, Hudson United Bank and Urban
<PAGE>
National Bank, attached as Appendix A to the Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of each Class Amount Offering Aggregate Amount of
of Securities to be to be Price Per Offering Registration
Registered Registered Unit* Price* Fee
------------------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Common Stock, no par value ......... 2,500,000** $11.98 $29,950,000 $10,328
<FN>
- ----------
(*) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act based on the book value of
Urban National Bank Common Stock as of December 31, 1994.
(**) 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.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
HUBCO, INC.
PART I
INFORMATION REQUIRED IN PROSPECTUS
CROSS REFERENCE SHEET
Item 1. Cross Reference Sheet
Pursuant to Item 501 of Regulation S-K, this cross-reference sheet shows
the location in the Prospectus/Proxy Statement of responses to Items 1 through
19 of Part I of Form S-4.
<TABLE>
<CAPTION>
Item
No. Caption Location or Heading in Prospectus/Proxy Statement
---- ------- -------------------------------------------------
<S> <C>
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;
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information....................................................
Introduction (S-K 503)......................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS
(a) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--PRINCIPAL
BUSINESS
(b) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--PRINCIPAL
BUSINESS
(c) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--DESCRIPTION
OF MERGER; CONSIDERATION
(d) ........................................................... FINANCIAL SUMMARY AND SELECTED PER SHARE DATA FOR
HUBCO; FINANCIAL SUMMARY AND SELECTED PER SHARE
DATA FOR URBAN
(e) ........................................................... SUMMARY SELECTED PRO FORMA DATA
(f) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--
COMPARATIVE PER SHARE DATA
(g) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--COMPARATIVE
PER SHARE DATE
(h) ........................................................... INTRODUCTORY STATEMENT--Vote Required; Shares
Entitled to Vote
(i) ........................................................... THE PROPOSED MERGER--Conditions to the Merger;
Regulatory Approvals
(j) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--Dissenters'
Rights
(k) ........................................................... SUMMARY OF PROXY STATEMENT/PROSPECTUS--Federal
Income Tax Consequences
4. Terms of the Transaction
(a) ........................................................... THE PROPOSED MERGER--General Description, Reasons
for the Merger; Description of HUBCO Capital Stock;
Description of HUBCO Common Stock; COMPARISON OF
THE RIGHTS OF STOCKHOLDERS UNDER THE NATIONAL BANK
ACT AND THE NEW JERSEY BUSINESS CORPORATION ACT;
Federal Income Tax Consequences; Accounting
Treatment of the Merger
(b) ........................................................... THE PROPOSED MERGER--Opinions of Urban's Financial
Advisor
(c) ........................................................... THE PROPOSED MERGER--General Description
5. Pro Forma Financial Information................................ PRO FORMA COMBINED FINANCIAL INFORMATION
6. Material Contacts with the Company Being Acquired.............. THE PROPOSED MERGER--Interests of Management in the
Merger
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7. Additional Information Required for Reoffering by Persons
and Parties Deemed to be Underwriters ......................... NOT APPLICABLE
8. Interests of Named Experts and Counsel......................... NOT APPLICABLE
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities .................................... NOT APPLICABLE
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.................... NOT APPLICABLE
11. Incorporation of Certain Information by Reference.............. INFORMATION DELIVERED AND 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 ..................................................... BUSINESS OF URBAN; URBAN NATIONAL BANK; COMPARATIVE
PER SHARE DATA; COMPARATIVE MARKET PRICES OF HUBCO
AND URBAN COMMON STOCK; URBAN NATIONAL BANK FINANCIAL
SUMMARY AND SELECTED PER SHARE DATA; INDEX TO
FINANCIAL STATEMENTS OF URBAN NATIONAL BANK
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are to be
Solicited..................................................... MEETING OF URBAN SHAREHOLDERS; THE MERGER--Vote
Required for Approval of Merger, Interests of
Management in the Transaction, and Rights of
Dissenting Shareholders; INTRODUCTORY STATEMENT--Vote
Required, Shares Entitled to Vote, Solicitation,
Voting and Revocation of Proxies; MANAGEMENT OF URBAN;
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
19. Information if Proxies, Consents or Authorizations are
Not to be Solicited or in an Exchange Offer .................. NOT APPLICABLE
</TABLE>
<PAGE>
URBAN NATIONAL BANK
805 FRANKLIN LAKE ROAD
FRANKLIN LAKES, NEW JERSEY 07417
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 1, 1995
-------------------------------
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Meeting") of Urban National Bank ("Urban") will be held at
_____________________________________________, on June 1, 1995 at ____ P.M., for
the purpose of considering and voting upon the following matters:
1. A proposal to approve an Amended and Restated Agreement and Plan of
Merger, dated as of February 14, 1995 (as amended and restated, the
"Agreement") and among Urban, HUBCO, Inc. ("HUBCO"), and HUBCO's New Jersey
commercial bank subsidiary, Hudson United Bank (the "Bank") providing for
the merger (the "Merger") of Urban with and into the Bank, pursuant to
which each share of Urban common stock outstanding on the effective date of
the Merger will be exchanged for a number of shares of HUBCO common stock,
as more fully set forth in the Agreement.
2. A proposal to ratify Urban's 1990 two-for-one stock split and to
amend Urban's Articles of Association to increase the authorized capital
stock of Urban to 984,372 shares of common stock of the par value of one
dollar and twenty-five cents ($1.25) each; approval of proposal 2 is a
requirement for consummation of the Merger.
3. Such other business as may properly come before the Meeting or any
adjournment thereof.
Only those shareholders of record as of the close of business on
___________, 1995 will be entitled to notice of, and to vote at, the Meeting. A
list of such shareholders will be available at the Meeting.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger by the affirmative vote at the Meeting of at least
two-thirds of the issued and outstanding shares of Urban common stock, whether
in person or by proxy. Your vote is important regardless of the number of shares
that you own. Whether or not you plan to
<PAGE>
attend the Meeting, please mark, date and sign the enclosed proxy and return it
as soon as possible in the enclosed stamped envelope. You may revoke the proxy
at any time prior to its exercise.
By Order of the Board of Directors,
Robert F. Mangano
President and Chief Executive Officer
Franklin Lakes, New Jersey
April __, 1995
THE ATTACHED PROXY STATEMENT/PROSPECTUS SHOULD BE READ CAREFULLY.
STOCKHOLDERS ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED
BY GIVING WRITTEN NOTICE TO THE SECRETARY OF URBAN. IF YOU ATTEND THE MEETING,
YOU MAY SUPERSEDE YOUR EXECUTED PROXY BY VOTING IN PERSON.
<PAGE>
URBAN NATIONAL BANK
PROXY STATEMENT
for
Special Meeting of Stockholders
of Urban National Bank
to be held on
June 1, 1995
------------------------------------------
HUBCO, INC.
PROSPECTUS
for
Common Stock of HUBCO, Inc.
to be issued in connection with
the Merger of Urban National Bank
with and into Hudson United Bank,
HUBCO, Inc.'s bank subsidiary
------------------------------------------
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Directors of Urban National Bank
("Urban") to be used at the special meeting of its stockholders to be held on
June 1, 1995. The purpose of the meeting is (i) to consider and vote upon an
Amended and Restated Agreement and Plan of Merger dated as of February 14, 1995
(as amended and restated, the "Agreement") by and among Urban, HUBCO, Inc.
("HUBCO") and HUBCO's New Jersey commercial bank subsidiary, Hudson United Bank
(the "Bank"), pursuant to which Urban will be merged with and into the Bank, and
(ii) to ratify Urban's 1990 two-for-one stock split (the "Stock Split") and
amend Urban's Articles of Association (the "Amendment") to increase Urban's
authorized capital stock to 984,372 shares of common stock of the par value of
one dollar and twenty-five cents ($1.25) each. A copy of the Agreement is
attached as Appendix A to this Proxy Statement/Prospectus.
In accordance with the terms of the Agreement, upon approval of the
Agreement by the stockholders of Urban and HUBCO and receipt of all necessary
regulatory approvals and the
<PAGE>
satisfaction or waiver of all conditions including approval of the Stock
Split by the shareholders of Urban, Urban will merge (the "Merger") into the
Bank, which will be the surviving entity in the Merger. In connection with the
Merger, each share of common stock of Urban, issued and outstanding immediately
prior to the Effective Time (as hereinafter defined) (the "Urban Common Stock"),
will be exchanged for 2.17 shares of common stock of HUBCO, subject to certain
adjustments more fully described in this Proxy Statement/Prospectus.
HUBCO has filed a Registration Statement pursuant to the Securities Act of
1933, as amended, covering shares of common stock of HUBCO, no par value (the
"HUBCO Common Stock") which will be issued in connection with the Merger. In
addition to constituting the Urban Proxy Statement for the Meeting, this
document constitutes a Prospectus of HUBCO with respect to the HUBCO Common
Stock to be issued if the transaction described herein is consummated.
Urban Common Stock certificates should not be returned to Urban with the
enclosed proxy and should not be forwarded until after receipt of a letter of
transmittal which will be provided to Urban stockholders upon consummation of
the Merger.
HUBCO HAS FILED A REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE
COMMISSION COVERING THE SHARES OF COMMON STOCK TO BE ISSUED BY HUBCO IN
CONNECTION WITH THE MERGER. THE ATTACHED PROXY STATEMENT ALSO CONSTITUTES A
PROSPECTUS OF HUBCO FILED AS PART OF SUCH REGISTRATION STATEMENT. THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO SELL, TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME, NOR ANY
DISTRIBUTION OF SHARES OF HUBCO COMMON STOCK, SHALL UNDER ANY CIRCUMSTANCES
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
The date of this Proxy Statement/Prospectus is April __, 1995.
-2-
<PAGE>
AVAILABLE INFORMATION
HUBCO is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Information as of particular dates concerning HUBCO's directors
and officers, their remuneration, options granted to them and any material
interests of affiliated persons in transactions with HUBCO and its subsidiaries
is set forth in proxy statements for annual meetings of stockholders distributed
to stockholders of HUBCO and filed with the Commission. Such reports, proxy
statements and other information filed by HUBCO 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 at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and 7 World Trade Center, 15th 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.
HUBCO has filed with the Commission a Registration Statement on Form S-4
under the Securities Act of 1933, as amended (the "Act") (together with all
amendments and supplements thereto, the "Registration Statement"), 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.
For your convenience, a copy of HUBCO's Annual Report on Form 10-K for the
year ended December 31, 1994 is being provided along with this Proxy
Statement/Prospectus.
-3-
<PAGE>
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
The following documents filed by HUBCO with the Commission are incorporated
herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Proxy Statement delivered to HUBCO's shareholders for Annual Meeting
to be held June 1, 1995.
3. HUBCO's current reports on Form 8-K filed with the Commission on July
1, 1994 (as amended by a Form 8-K/A filed on September 16, 1994),
February 23 and March 6, 1995.
4. Form 8-A registering the common stock of HUBCO.
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 to be incorporated by reference into
this Proxy Statement/Prospectus and to be a 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. These documents are available
upon written or oral request from D. Lynn Van Borkulo-Nuzzo, Esq., Corporate
Secretary, HUBCO, Inc., 1000 MacArthur Boulevard, Mahwah, NJ 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 at least five business days prior to the date of the Meeting.
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<PAGE>
PROXY STATEMENT/PROSPECTUS
URBAN NATIONAL BANK
Meeting of Shareholders to be held on June 1, 1995
-----------------------------------------
TABLE OF CONTENTS
AVAILABLE INFORMATION...................................................... 3
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE........................ 4
SUMMARY OF PROXY STATEMENT/PROSPECTUS...................................... 7
MEETING OF URBAN SHAREHOLDERS.............................................. 7
PROPOSAL I--THE MERGER..................................................... 8
PROPOSAL II--RATIFICATION OF STOCK SPLIT AND APPROVAL OF
THE AMENDMENT OF URBAN'S ARTICLES OF ASSOCIATION ........................ 19
COMPARATIVE PER SHARE DATA................................................. 21
PRINCIPAL BUSINESSES....................................................... 26
CERTAIN INFORMATION REGARDING HUBCO........................................ 27
HUBCO, INC. FINANCIAL SUMMARY AND SELECTED PER SHARE DATA.................. 29
INTRODUCTORY STATEMENT..................................................... 32
PROPOSAL I--THE PROPOSED MERGER............................................ 33
BACKGROUND OF THE MERGER................................................... 33
GENERAL DESCRIPTION........................................................ 36
CONSIDERATION.............................................................. 37
REASONS FOR THE MERGER..................................................... 38
INTERESTS OF MANAGEMENT IN THE MERGER...................................... 39
OPINIONS OF URBAN'S FINANCIAL ADVISOR...................................... 40
VALUATION ANALYSIS......................................................... 43
COMPARABLE COMPANY ANALYSIS................................................ 43
CONTRIBUTION ANALYSIS...................................................... 44
IMPACT ANALYSIS............................................................ 44
COMPARABLE TRANSACTION ANALYSIS............................................ 45
RESALE CONSIDERATIONS WITH RESPECT TO THE HUBCO COMMON STOCK .............. 46
CONDITIONS TO THE MERGER................................................... 46
REGULATORY APPROVALS....................................................... 47
RESTRICTIONS ON OPERATIONS PENDING THE MERGER.............................. 47
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................. 48
EXCHANGE OF CERTIFICATES................................................... 48
EFFECTIVE DATE; AMENDMENTS; TERMINATION.................................... 49
FEES IN THE EVENT OF ANOTHER TRANSACTION; LIMITATION ON
SOLICITATION OF OTHER TRANSACTIONS ...................................... 50
ACCOUNTING TREATMENT OF THE MERGER......................................... 51
FEDERAL INCOME TAX CONSEQUENCES............................................ 51
RIGHTS OF DISSENTING STOCKHOLDERS.......................................... 52
DESCRIPTION OF HUBCO CAPITAL STOCK......................................... 53
DESCRIPTION OF HUBCO SERIES A PREFERRED STOCK.............................. 54
-5-
<PAGE>
COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER THE NATIONAL
BANK ACT AND THE NEW JERSEY BUSINESS CORPORATION ACT .................... 60
COMPARATIVE MARKET PRICES OF HUBCO AND URBAN COMMON STOCK.................. 65
PRO FORMA COMBINED FINANCIAL INFORMATION................................... 67
URBAN NATIONAL BANK........................................................ 85
URBAN NATIONAL BANK--FINANCIAL SUMMARY AND SELECTED PER
SHARE DATA .............................................................. 88
SUMMARY COMPENSATION TABLE--CASH AND CASH EQUIVALENT FORMS
OF REMUNERATION ......................................................... 112
PROPOSAL II--RATIFY THE 1990 TWO-FOR-ONE STOCK SPLIT AND
AMEND URBAN'S ARTICLES OF ASSOCIATION ................................... 115
INDEX TO FINANCIAL STATEMENTS OF URBAN NATIONAL BANK....................... 118
APPENDICES:
Appendix A ............. Amended and Restated Agreement and Plan of Merger
by and among HUBCO, Inc., Hudson United Bank and
Urban National Bank dated as of February 14, 1995
Appendix B ............. Opinion of Capital Consultants of Princeton, Inc.
Appendix C ............. Section 214a of the National Bank Act
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<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following information is a brief summary, for the convenience of Urban
shareholders, 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 in the
Proxy Statement/Prospectus. Shareholders should read carefully the details of
the Proxy Statement/Prospectus. Certain capitalized terms used in this Summary
and in the Notice of Meeting of Shareholders are defined elsewhere in the Proxy
Statement/Prospectus.
MEETING OF URBAN SHAREHOLDERS
Date, Time and Place
of Meeting.................. Thursday, June 1, 1995, ____ P.M.,
at ____________________, New Jersey.
Record Date................... _______________, 1995
Shares Outstanding on
Record Date and Entitled
to Vote..................... 984,372 shares of Urban Common Stock
(assuming approval of Proposal II).
Purpose of Meeting............ (1) To consider and vote upon a proposal to
approve an Amended and Restated Agreement and
Plan of Merger dated February 14, 1995 (as
amended and restated, the "Agreement") by and
among Urban, HUBCO and the Bank, providing
for the merger (the "Merger") of Urban with
and into the Bank, with each share of Urban
Common Stock being exchanged for a number of
shares (the "Exchange Ratio") of HUBCO common
stock, no par value (the "HUBCO Common
Stock") as determined pursuant to the
Agreement, (2) to ratify Urban's 1990
two-for-one stock split (the "Stock Split")
and amend Urban's Articles of Association
(the "Amendment")
)
-7-
<PAGE>
to increase Urban's authorized capital stock
to 984,372 shares of Urban Common Stock,
thereby providing sufficient authorized
shares for the Stock Split; and (3) to
transact any other business that properly may
be brought before the Meeting.
PROPOSAL I - THE MERGER
Description of the Merger..... At the time the Merger becomes effective (the
"Effective Time"), Urban will be merged with
and into the Bank, with the Bank as the
surviving entity. See "The Proposed
Merger--General Description."
Consideration................. The Agreement provides for an exchange ratio
(the "Exchange Ratio") of 2.17 shares of
HUBCO Common Stock for each share of Urban
Common Stock, subject to certain adjustments
more fully described in the Proxy
Statement/Prospectus. In the event Urban's
Closing Shareholders Equity (as defined in
the Agreement) is less than $11,795,000, the
Exchange Ratio will be adjusted downward to
reflect the amount by which Urban's Closing
Shareholders Equity is less than $11,795,000.
In addition, outstanding options to acquire
Urban Common Stock will be converted into
options to acquire HUBCO Common Stock. See
"Proposal I--The Merger--Consideration." In
lieu of receiving fractional shares of HUBCO
Common Stock, Urban shareholders will be
entitled to receive, without interest, a cash
payment equal to the value of any fractional
share
-8-
<PAGE>
interest to which they would otherwise be
entitled. All shares of HUBCO Common Stock to
be issued to each Urban shareholder will be
aggregated to constitute as many whole shares
as possible before determining such
shareholder's fractional share interest.
Vote Required for Approval
of The Merger............... The affirmative vote, in person or by proxy,
of two-thirds of the issued and outstanding
shares of Urban Common Stock is required to
approve the Merger. See "Introductory
Statement--Vote Required; Shares Entitled to
Vote". Approximately 21.43% of the
outstanding shares of Urban Common is
beneficially owned by executive officers and
directors of Urban and their affiliates. The
Board of Directors of Urban has unanimously
approved the Agreement and the Merger and
urges the shareholders to vote in favor of
the Agreement and the Merger. See "Management
of Urban--Principal Shareholders;
Shareholdings of Directors and Executive
Officers; The Proposed Merger--Interests of
Management in the Merger".
Certain Federal Income
Tax Consequences............ The Merger will constitute a tax-free
reorganization for Urban shareholders who
receive only HUBCO Common Stock in exchange
for Urban Common Stock; provided, however,
that any shareholder who receives cash in
lieu of fractional shares, may incur a gain
or loss for that portion. In addition, any
Urban shareholder who exercises his or her
dissenters rights and
-9-
<PAGE>
receives cash for their shares of Urban
Common Stock may incur a gain or loss,
depending upon their tax basis in their
shares of Urban Common Stock. See "The
Proposed Merger--Federal Income Tax
Consequences" for a description of the
federal income tax consequences of the Merger
for Urban shareholders.
Required Regulatory
Approvals................... Consummation of the Merger requires the
approval of the Federal Deposit Insurance
Corporation (the "FDIC") and the Commissioner
of the New Jersey Department of Banking (the
"Commissioner"). Applications for such
approvals have been filed and are pending.
While HUBCO and Urban anticipate receiving
the approvals, 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 or Urban. See "The
Proposed Merger--Regulatory Matters".
Conditions to the
Merger...................... Consummation of the Merger is contingent
upon a number of conditions, including
receiving all necessary regulatory approvals;
the approval of the Merger and the Stock
Split by the shareholders of Urban and
approval of the Merger by the shareholders of
HUBCO; receipt by the parties of an opinion
of McCarter & English, counsel to HUBCO, to
the effect that the Merger will result in a
tax free reorganization; receipt by Urban of
an opinion of Capital Consultants of
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<PAGE>
Princeton, Inc. ("Capital Consultants"),
advisors to Urban, that the Merger is fair to
the shareholders of Urban; and receipt by the
parties of an opinion of Arthur Andersen LLP
that the transaction will qualify as a
pooling of interests for accounting purposes.
See "The Proposed Merger--Fairness
Opinion;--Regulatory Matters;--Conditions to
the Merger".
Termination Rights............ The Agreement may be terminated by either
party if the Effective Time has not occurred
by September 30, 1995, if any application for
regulatory approval of the Merger has been
denied or if either party breaches the
Agreement. In addition, Urban may terminate
the Agreement if the Average Closing Price
(as defined in the Agreement) of the HUBCO
Common Stock is less than $12.75 per share,
if the Exchange Ratio is adjusted downward
below 2.0, if the Exchange Ratio multiplied
by the Average Closing Price yields an amount
less than $26.65, or if HUBCO enters into or
publicly announces its intention to enter
into a transaction which results in a Change
in Control of HUBCO (as defined in the
Agreement). No assurances can be given that
Urban shareholders will receive in the Merger
at least $26.25 per share of Urban Common
Stock since, although Urban will have the
right to terminate the Agreement if the
Exchange Ratio multiplied by the Average
Closing Price yields an amount less than
$26.25, Urban could decide not to exercise
this right and
-11-
<PAGE>
proceed with the Merger, depending upon,
among other factors, then current market
conditions. In any event, the market price of
the HUBCO Common Stock could decline between
the time the Average Closing Price is
determined and the time the Merger is
consummated. See "The Proposed
Merger-Effective Date; Termination;--
Conditions to the Merger".
Urban's Reasons for the
Merger..................... The Board of Directors of Urban approved the
Merger because of (i) the premium being
offered by HUBCO for shares of Urban Common
Stock based upon the market value of the
HUBCO Common Stock and the Urban Common
Stock; (ii) the greater liquidity of HUBCO
Common Stock, which is traded on the NASDAQ
National Market System versus the Urban
Common Stock, which is not traded on any
recognized exchange or the NASDAQ; (iii) the
fact that HUBCO has consistently paid cash
dividends and that Urban has suspended its
cash dividend; and (iv) the greater resources
of the combined financial institution
resulting from the Merger.
HUBCO's Reasons for the
Merger...................... The Board of Directors of HUBCO approved the
Agreement because it believes that the
acquisition of Urban will expand HUBCO's
presence in the affluent western Bergen
County and northern Passaic County, New
Jersey market places currently served by
Urban. Urban has established a significant
presence among consumers and small businesses
-12-
<PAGE>
in its trade area, which HUBCO believes it
can expand through its greater resources.
Accounting Treatment.......... The Merger is to be accounted for under the
pooling of interests method of accounting.
Effective Time................ The Effective Time will occur upon the
satisfaction or waiver of all conditions
precedent, including receipt of all necessary
regulatory approvals, or at such other time
agreed to by HUBCO and Urban. See "The
Proposed Merger--Effective Date;
Termination;--Regulatory Matters."
Opinion of Urban's Financial
Advisor.................... The Board of Directors of Urban has retained
Capital Consultants of Princeton, Inc.
("Capital Consultants") to evaluate the terms
of the Merger. Capital Consultants has
delivered a written opinion dated February
14, 1995 to the Board of Directors of Urban
to the effect that the consideration to be
received by the Urban shareholders pursuant
to the Agreement is, as of the date of such
opinion, fair to such shareholders. Such
opinion was reissued on _____________, 1995
and is attached as Exhibit B to this Proxy
Statement/Prospectus. It is a condition to
consummation of the Merger that Capital
Consultants reissue its opinion dated as of
the Closing. For information concerning the
matters reviewed, assumptions made and
factors considered by Capital
-13-
<PAGE>
Consultants, see "The Merger--Opinions of
Urban's Financial Advisor" and Appendix B to
the Proxy Statement/ Prospectus, which sets
forth the Capital Consultants opinion in
its entirety.
Interests of Management
in the Transaction.......... As of April 7, 1995, the directors and
executive officers of Urban beneficially
owned in the aggregate 210,956 shares of
Urban Common Stock, or 21.43% of the then
issued and outstanding shares of Urban Common
Stock. The Board of Directors of Urban
unanimously approved the Agreement and the
Merger and urges the shareholders to vote in
favor of the Agreement and the Merger. In
addition, the Agreement provides that HUBCO
will enter into an Employment Agreement with
Mr. Robert Mangano, President of Urban, which
will provide that he will join the Bank as an
Executive Vice President. The Employment
Agreement will have a term of 3 years and
will provide that Mr. Mangano will be paid an
annual salary equal to, at the minimum,
$175,000, his current salary, and will
provide Mr. Mangano certain other benefits
such as participation in benefit plans of
HUBCO or the Bank available to executives of
HUBCO or the Bank. Certain severance benefits
are also provided in the event of termination
of Mr. Mangano's employment by HUBCO other
than for Cause (as defined in the Employment
Agreement), his death, disability, retirement
or termination by Mr. Mangano of his
employment for good reason
-14-
<PAGE>
(as defined in the Employment Agreement).
HUBCO has also agreed to assume certain
options to acquire Urban Common Stock granted
to Mr. Mangano during his employment with
Urban. HUBCO has also agreed to assume
certain Severance Agreements with certain
officers of Urban which provide for benefits
to such officers in the event that a change
in control of Urban occurs and such
employees' employment is subsequently
terminated or the conditions of such
employees' employment are materially altered.
The Merger would constitute a change in
control of Urban under these agreements. In
addition, the Agreement provides that Messrs.
Bryant D. Malcolm and W. Peter McBride,
currently directors of Urban, will become
members of the Board of Directors of HUBCO.
Messrs. Malcolm, McBride and Joseph Pfeifer,
also a director of Urban, will also join the
Board of Directors of the Bank. HUBCO has
also agreed to indemnify the officers,
directors and employees of Urban as provided
in the Agreement and to advance expenses as
incurred to the extent permitted by law and
to purchase directors and officers liability
insurance for the officers, directors and
employees of Urban, for a period of six (6)
years after the Effective Time of the Merger.
Payment in the Event of
Another Transaction;
Limitation on Solicitation
-15-
<PAGE>
of Other Transactions......... The Agreement prohibits Urban from
soliciting, encouraging or entering into
negotiations with any third party, other than
HUBCO, with respect to any possible
transaction pursuant to which Urban will be
acquired, sell substantially all of its
assets, or undertake a transaction having
substantially similar effect (an "Acquisition
Transaction"), unless the Board of Directors
of Urban, in consultation with counsel,
determines that, in the exercise of its
fiduciary duty, such steps should be taken.
The Agreement provides that in the event
Urban thereafter terminates the Agreement and
subsequently within twelve (12) months enters
into an agreement with a third party for an
Acquisition Transaction, such third party
will be required to pay HUBCO a fee equal to
$1,000,000 upon consummation of such
Acquisition Transaction. In the event Urban
terminates the Agreement under certain
circumstances and fails to enter into such an
Acquisition Transaction within twelve months
of such termination, Urban will be required
to reimburse HUBCO all of its actual
out-of-pocket expenses expended on
negotiating and attempting to consummate the
Merger, up to $200,000. The Board of
Directors of Urban agreed to these provisions
to induce HUBCO to enter in the Agreement and
the Board of Directors of Urban believes
these payments may increase the likelihood
that
-16-
<PAGE>
the Merger will occur. See "The Merger--Fee
in the Event of Another Transaction.
Restrictions on Activities
Pending the Merger......... Pursuant to the Agreement, Urban is
prohibited, pending the Merger, from taking
certain actions including amending its
Articles of Association, changing its
capitalization (other than in connection with
the issuance of shares of Urban Common Stock
upon the exercise of outstanding options and
in connection with ratification of the Stock
Split), selling or disposing of its assets,
conducting its business in any manner other
than in the ordinary course or paying any
cash dividends; provided, however, that in
the event that the Effective Time has not
occurred prior to the record date for HUBCO's
second quarter 1995 cash dividend, Urban has
the right under the Agreement to declare and
pay a cash dividend to its shareholders in an
amount up to $0.26 per share, provided that
payment of the dividend does not cause
Urban's shareholders' equity on the date the
dividend is declared to fall below Urban's
shareholders' equity as of December 31, 1994.
The Agreement also prohibits HUBCO, prior to
the Effective Time, from entering into any
agreement which would require it to issue
shares of HUBCO Common Stock or other
securities convertible into HUBCO Common
Stock if, as a result of such transaction,
the indicated dilution of HUBCO's book value
or the
-17-
<PAGE>
earnings per share of HUBCO Common Stock will
be greater than 10%.
Dissenters' Rights............ Under applicable law, holders of Urban Common
Stock who vote against the Merger or who
comply with certain notice requirements and
who follow other procedures will have the
right to dissent from the Merger and to be
paid cash for the fair value of their shares
of Urban Common Stock. In order for a holder
of Urban Common Stock to perfect dissenters'
rights, such holder must vote against the
Merger or give notice in writing to Urban at
or prior to the Meeting that such holder
dissents from the Merger. Such holder must
make a written request to the Bank in its
capacity as the surviving bank for the fair
market value of his or her shares within 30
days after the Effective Time, accompanied by
the surrender of the holder's certificates
representing the Urban Common Stock. The
value of such holder's shares will be
determined as of the date of the Meeting. Any
deviation from such procedure may result in
the forfeiture of dissenter's rights.
Accordingly, holders of Urban Common Stock
wishing to dissent from the Merger are urged
to read carefully "The Merger--Rights of
Dissenting Stockholders" and Section 214a of
the National Bank Act, which is attached as
Appendix C to this Proxy Statement/Prospectus
and to consult with their own legal advisors.
-18-
<PAGE>
Recommendation of the
Board of Directors of
Urban....................... The Board of Directors of Urban has
unanimously approved the Merger and
recommends that shareholders vote "FOR" the
Merger. See "Introductory Statement--Purpose
of the Meeting; The Proposed Merger--Reasons
for the Merger".
PROPOSAL II
RATIFICATION OF STOCK SPLIT AND APPROVAL OF
THE AMENDMENT OF URBAN'S ARTICLES OF ASSOCIATION
Stock Split.................. On June 12, 1990, the Board of Directors of
Urban approved a two-for-one stock split (the
"Stock Split") effective as of July 30, 1990.
Prior to the Stock Split, Urban had 492,186
shares of common stock outstanding, $2.50 par
value. Pursuant to the Stock Split, Urban
issued an additional 492,186 shares of
common stock, which caused Urban's
outstanding shares to exceed its authorized
share capitalization as specified in its
Articles of Association. In connection with
the Stock Split, Urban inadvertently failed
to make certain filings with the Comptroller
of the Currency to give effect to the Stock
Split and the issuance of the additional
shares and failed to obtain shareholder
approval of the Stock Split. Shareholders are
now being asked to ratify the Stock Split
and, in ratifying the Stock Split, amend
Urban's Articles of Association to increase
its authorized capital stock to 984,372
-19-
<PAGE>
shares, $1.25 par value per share. In
ratifying the Stock Split, shareholders will
merely be approving Urban's current
capitalization, and will not be providing for
additional authorized but unissued shares or
changing Urban's capitalization in any other
way.
Vote Required for Approval
of Proposal II............ The affirmative vote, in person or by proxy,
of a majority of the issued and outstanding
shares of Urban Common Stock is required for
approval of Proposal II.
Recommendation of the Board
of Directors of Urban..... The Board of Directors of Urban has
unanimously approved Proposal II and
recommends that the shareholders vote "FOR"
Proposal II.
-20-
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth per share data relating to dividends, net
income and book value of HUBCO Common Stock and Urban Common Stock, both on a
historical basis and on a pro forma combined basis. The historical per share
data has been derived from the consolidated financial statements of HUBCO
incorporated by reference herein and the financial statements of Urban presented
elsewhere herein. See "Incorporation of Certain Documents by Reference" and
"Index to Urban's Financial Statements."
The pro forma dividend and book value per share data and the pro forma net
income per share data for the year ended December 31, 1992 have been derived
from the pro forma combined condensed financial statements (appearing elsewhere
herein) of HUBCO and Urban and give effect to the Merger, accounted for as a
pooling of interests. The pro forma net income per share data for the years
ended December 31, 1994 and 1993 has been derived from the pro forma combined
condensed financial statements of HUBCO, Washington Bancorp, Jefferson National
Bank, and Urban, giving effect to HUBCO's acquisition of Washington Bancorp
(accounted for as a purchase), HUBCO's acquisition of Jefferson National Bank
(accounted for as a pooling of interests) 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 Bancorp's consolidated results of
operations are reflected in the pro forma data presented herein.
The actual, pro forma and pro forma equivalent per share data included in
the table below should be read in conjunction with financial statements of HUBCO
and Urban, the pro forma combined condensed financial statements of HUBCO and
Urban, the pro forma combined condensed financial statements of HUBCO and Urban
and their related notes accompanying such financial statements, all of which are
either incorporated by reference herein or appear elsewhere herein. See
"Incorporation of Certain Documents by Reference," "Index to Urban Financial
Statements" and "Pro Forma Combined Financial Information." The pro forma data
presented below is not necessarily indicative of the results that would actually
have been obtained if the Merger and/or HUBCO's acquisition of Washington
Bancorp, Jefferson National Bank and Urban had been consummated as of the
first day of the period described below or results that may be obtained in the
future.
-21-
<PAGE>
For the Years Ended
December 31,
------------------------
1994 1993 1992
---- ---- ----
CASH DIVIDENDS DECLARED PER COMMON SHARE:
HUBCO-Actual (1) .................................. $0.36 $0.31 $0.27
Jefferson-Actual (1)............................... - - 0.50
Urban-Actual (1) .................................. - - -
Urban, pro forma equivalent (2) ................... 0.78 0.67 0.59
NET INCOME (LOSS) PER COMMON SHARE:
HUBCO-Actual:
Primary ......................................... 1.69 1.37 1.06
Fully Diluted ................................... 1.64 1.37 1.06
Jefferson-Actual................................... (4.08) (6.00) (4.95)
Urban-Actual....................................... 1.51 1.04 0.46
HUBCO, Washington and Jefferson, pro forma:
Primary (3) ..................................... 1.27 1.07 N.A.*
Fully diluted (4) ............................... 1.24 1.06 N.A.*
HUBCO, Washington, Jefferson and Urban, pro forma:
Primary (5) ..................................... 1.17 0.97 N.A.*
Fully diluted (6) ............................... 1.15 0.97 N.A.*
HUBCO and Jefferson, pro forma
Primary (3) ..................................... N.A.* N.A.* 0.87
Fully diluted (4) ............................... N.A.* N.A.* 0.87
HUBCO, Jefferson and Urban, pro forma
Primary (5) ..................................... N.A.* N.A.* 0.75
Fully diluted (6) ............................... N.A.* N.A.* 0.75
Urban, pro forma equivalent
Primary (7) ................................... 2.54 2.10 1.63
Fully diluted (8) ............................. 2.50 2.10 1.63
NET BOOK VALUE PER COMMON SHARE:
HUBCO-Actual .................................... 8.33 7.83 7.25
Jefferson-Actual ................................ 22.76 27.31 33.31
Urban-Actual .................................... 11.98 12.97 11.93
HUBCO and Jefferson, pro forma (9)............... 8.24 7.87 7.46
HUBCO, Jefferson and Urban, pro forma (10) ...... 7.77 7.55 7.11
Urban, pro forma equivalent (11)................. 16.86 16.38 15.43
- ---------
* Not applicable. See "PRO FORMA COMBINED FINANCIAL INFORMATION."
(1) For information regarding HUBCO's and Urban's dividends, and the market
price of HUBCO Common Stock, see "MARKET AND DIVIDEND DATA."
-22-
<PAGE>
(2) Represents the dividend declared on HUBCO's Common Stock during the
respective periods multiplied by the Exchange Ratio of 2.17.
(3) Reflects primary net income per common share on a pro forma combined basis
(including for the years ended December 31, 1994 and 1993, the pro forma
effect of HUBCO's acquisition of Washington Bancorp accounted for as a
purchase). Such amounts have been determined by reducing pro forma net
income amounts by the dividend applicable to HUBCO's Series A Preferred
Stock (which was first issued on July 1, 1994) and dividing such amount by
the sum of (i) the weighted average number of shares of HUBCO Common Stock
outstanding during each period and (ii) 610,829 shares of HUBCO Common
Stock issued pursuant to HUBCO's acquisition of Jefferson National Bank.
(4) Reflects fully diluted net income per common share on a pro forma combined
basis (including for the years ended December 31, 1994 and 1993, the pro
forma effect of HUBCO's acquisition of Washington Bancorp accounted for as
a purchase). Such amounts have been determined by dividing pro forma net
income amounts by the sum of (i) the weighted average number of shares of
HUBCO Common Stock outstanding during each period, (ii) 610,829 shares of
HUBCO Common Stock issued pursuant to HUBCO's acquisition of Jefferson
National Bank and (iii) 1,183,217 in 1994 and 1,196,717 in 1993 shares of
HUBCO Common Stock issuable upon the assumed full conversion of HUBCO's
Series A Preferred Stock.
(5) Reflects primary net income per common share on a pro forma combined basis
(including for the years ended December 31, 1994 and 1993, the pro forma
effect of HUBCO's acquisition of Washington Bancorp accounted for as a
purchase). Such amounts have been determined by reducing pro forma net
income amounts by the dividend applicable to HUBCO's Series A Preferred
Stock (which was first issued on July 1, 1994) and dividing such amount by
the sum of (i) the weighted average number of shares of HUBCO Common Stock
outstanding during each period, (ii) 610,829 shares of HUBCO Common Stock
issued pursuant to HUBCO's acquisition of Jefferson National Bank and (iii)
2,135,002 shares of HUBCO Common Stock assumed to be issued pursuant to the
Merger.
(6) Reflects fully diluted net income per common share on a pro forma combined
basis (including for the years ended December 31, 1994 and 1993, the pro
forma effect of HUBCO's acquisition of Washington Bancorp accounted for as
a purchase). Such amounts have been determined by dividing pro forma net
income amounts by the sum of (i) the weighted average number of shares of
HUBCO Common Stock outstanding during each period, (ii) 610,829 shares of
HUBCO Common Stock issued pursuant to HUBCO's acquisition of Jefferson
National Bank, (iii) 1,183,217 in 1994 and 1,196,717 in 1993 shares of
HUBCO Common Stock issuable upon the assumed full conversion of HUBCO's
Series A Preferred Stock and (iv)
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<PAGE>
2,135,002 shares of HUBCO Common Stock assumed to be issued pursuant to the
Merger.
(7) Represents the amount computed pursuant to Note 5 above multiplied by the
Exchange Ratio of 2.17.
(8) Represents the amount computed pursuant to Note 6 above multiplied by the
Exchange Ratio of 2.17.
(9) Represents the pro forma combined net book value of HUBCO and Jefferson
National Bank attributable to common shares, divided by the sum of (i) the
number of shares of HUBCO Common Stock outstanding and (ii) 610,829 shares
of HUBCO Common Stock issued pursuant to HUBCO's acquisition of Jefferson
National Bank.
(10) Represents the pro forma combined net book value of HUBCO, Jefferson
National Bank and Urban attributable to common shares, divided by the sum
of (i) number of shares of HUBCO Common Stock outstanding, (ii) 610,829
shares of HUBCO Common Stock issued pursuant to HUBCO's acquisition of
Jefferson National Bank and (iii) 2,135,002 shares of HUBCO Common Stock
assumed to be issued pursuant to the Merger.
(11) Represents the amount computed pursuant to Note 10 above multiplied by the
assumed 2.17 Exchange Ratio.
The following sets forth the reported closing price per share of HUBCO
Common Stock and the pro forma equivalent price per share of Urban Common Stock
on (i) February 13, 1995, the last business day preceding the public
announcement of the signing of the Agreement; and (ii) ________, 1995, a date
shortly prior to the mailing of this Proxy Statement/Prospectus.
Pro Forma
Equivalent Price
per
HUBCO Urban Common Share(1)
------------- ---------------------
High Low High Low
---- --- ----- ---
Market Price
February 13, 1995 $16.25 $16.00 $35.26 $34.72
Market Price
___________, 1995
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<PAGE>
(1) The Urban Common Stock is not traded on any established securities market.
Therefore, equivalent High and Low information has been provided. The Urban
pro forma equivalent price has been determined solely by multiplying the
Hubco High and Low prices by the Exchange Ratio of 2.17.
-25-
<PAGE>
PRINCIPAL BUSINESSES
HUBCO................................ HUBCO 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. HUBCO has
one banking subsidiary, Hudson United
Bank, a New Jersey chartered commercial
bank, which operates 45 offices located in
Bergen, Passaic, Essex, Hudson, Middlesex
and Morris Counties, New Jersey. At
December 31, 1994 HUBCO had consolidated
assets of approximately $1.4 billion.
HUBCO's principal executive offices are
located at 1000 MacArthur Boulevard,
Mahwah, New Jersey 07430, and its
telephone number is (201) 236-2641. See
"Certain Information Regarding HUBCO";
"Available Information"; "Information
Delivered and Incorporated by Reference".
Urban.............................. Urban is a national bank which operates
nine offices located in Bergen and Passaic
Counties of New Jersey. At December 31,
1994 Urban had total assets of
approximately $240 million. Urban's
principal executive offices are located at
805 Franklin Lakes Road, Franklin Lakes,
New Jersey 07417, and its telephone number
is (201) 891-6113. See "Business of
Urban".
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<PAGE>
CERTAIN INFORMATION REGARDING HUBCO
General
HUBCO is a bank holding company registered under the Bank Holding Act of
1956, as amended (the "BHCA") subject to examination by the Board of Governors
of the Federal Reserve System (the "Board"). As of December 31, 1994, HUBCO had
total consolidated assets of $1.4 billion.
HUBCO has a single bank subsidiary, Hudson United Bank, which is a New
Jersey chartered commercial bank. The Bank, which was incorporated in 1890, is a
full service commercial bank which primarily serves small and mid-sized
businesses and consumers in Northern New Jersey, its primary market area. The
Bank has 45 full service offices and serves markets primarily in Bergen,
Passaic, Essex, Hudson, Middlesex and Morris Counties of New Jersey. The Bank
provides a full range of commercial and retail bank services. The deposits of
the Bank are insured by the FDIC up to applicable legal limits. Based on assets,
at December 31, 1994, HUBCO was the eighth largest commercial bank holding
company headquartered in New Jersey. HUBCO's strategy is to enhance
profitability and build market share both through internal growth and
acquisitions. Since October, 1990, HUBCO has added over thirty branches and
approximately $750 million in assets through eight acquisitions of financial
institutions in both government assisted and private transactions. As a result,
HUBCO's asset base has grown by over $800 million since October, 1990.
HUBCO's acquisition program has continued during 1994.
On December 7, 1994, the Bank acquired Shoppers Charge Accounts Co.
("Shoppers") of Jersey City, New Jersey, for approximately $16.3 million in
cash. The Shoppers transaction was accounted for under the purchase method of
accounting. The Bank recorded approximately $63.4 million in assets and $46.9
million in liabilities as a result of this acquisition.
Shoppers is among the twenty largest third party private label retail
credit card companies in the United States. Private label revolving credit cards
issued on behalf of retail stores by third party firms accounted for
approximately one-third of outstandings on all retail credit cards at year-end
1992. Shoppers' credit operating system can also be used by the Bank to manage a
traditional credit card portfolio.
-27-
<PAGE>
On July 1, 1994, HUBCO acquired Washington Bancorp, Inc. ("Washington") and
its subsidiary, Washington Savings Bank, pursuant to a transaction (the
"Washington Merger") in which Washington was merged into HUBCO and Washington
Savings Bank was merged into the Bank. The Washington Merger has been accounted
for as a purchase. Information regarding Washington and the Washington Merger is
reflected in certain of the pro forma data presented herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA COMBINED FINANCIAL
INFORMATION."
For complete information about HUBCO, see "INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE."
Recent Developments
On April 5, 1995, HUBCO completed its acquisition of Jefferson National
Bank ("Jefferson"). The acquisition was accomplished through the merger of
Jefferson into the Bank. Jefferson adds four offices, all located in Passaic
County, New Jersey, to the Bank's branch system. At December 31, 1994, Jefferson
had total assets of $91.3 million, total loans of $42.9 million and total
liabilities of $85.4 million. Under the terms of the agreement for the
acquisition of Jefferson, shareholders of Jefferson received 2.844 shares of
HUBCO Common Stock for each share of Jefferson National Bank Common Stock.
At the annual meeting of shareholders of HUBCO, to be held simultaneously
with the Meeting, HUBCO shareholders will be asked to approve, among other
things, an amendment to HUBCO's Certificate of Incorporation increasing HUBCO's
authorized capital stock to 29,500,000 shares from 23,100,000 shares, including
an increase in HUBCO's Common Stock to 25,000,000 authorized shares from the
presently authorized 19.8 million shares and an increase in authorized preferred
stock to 4.5 million shares from the presently authorized 3.3 million shares.
The Board of Directors of HUBCO believes that the proposed increase in
authorized capital stock may assist HUBCO in achieving future acquisitions and
in meeting other corporate needs. Except for the issuance of shares pursuant to
HUBCO's restricted stock plan, HUBCO's 1995 Stock Option Plan (which is also
being presented for approval to HUBCO's shareholders at HUBCO's annual meeting)
the issuance of shares upon conversion of HUBCO's Series A Preferred Stock and
the issuance of shares pursuant to the Merger, HUBCO has no specific
agreements, commitments or plans at this time for the sale or use of additional
shares of common or preferred stock. See "Information Incorporated by
Reference."
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<PAGE>
<TABLE>
HUBCO, INC.
FINANCIAL SUMMARY AND SELECTED PER SHARE DATA
(in thousands, except per share data)
<CAPTION>
(1) Years Ended December 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF INCOME DATA:
Interest income ..................... $ 83,903 $ 67,759 $ 67,646 $ 51,759 $ 49,809
Interest expense .................... 25,882 20,741 26,633 25,287 26,818
Net interest Income ................. 58,021 47,018 41,013 26,472 22,991
Provision for possible loan losses... 3,000 3,600 4,116 2,312 4,150
Net interest income after provision
for possible loan losses ........... 55,021 43,418 36,897 24,160 18,841
Other income ........................ 9,990 8,606 7,657 5,471 4,532
Other expenses ...................... 38,004 29,971 34,349 22,274 20,013
Income before income taxes .......... 27,007 22,053 10,205 7,357 3,360
Income taxes provision .............. 10,076 7,851 564 2,336 1,145
Net income .......................... 16,931 14,202 9,641 5,021 2,215
PER SHARE DATA:
Weighted average shares(2) .......... 10,354 10,364 9,136 7,432 7,411
Net income per common share(2):
Primary ........................... $ 1.69 $ 1.37 $ 1.06 $ 0.68 $ 0.30
Fully diluted ..................... 1.64 1.37 1.06 0.68 0.30
Dividends paid per common share ..... 0.36 0.31 0.27 0.22 0.22
BALANCE SHEET SUMMARY:
Securities .......................... $ 537,229 $ 426,685 $322,522 $138,915 $150,536
Loans, net .......................... 729,174 529,390 513,448 465,883 371,700
Total assets ........................ 1,377,122 1,041,825 931,911 673,159 595,128
Deposits. ........................... 1,199,733 935,688 843,226 608,857 512,823
Stockholders' equity ................ 99,020 78,954 68,313 41,099 37,567
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
(1) Years Ended December 31,
------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets ............ 1.35% 1.44% 1.05% 0.82% 0.40%
Return on average equity ............ 19.44 19.34 17.38 12.75 5.89
Dividend payout ..................... 20.74 23.01 25.04 33.44 73.63
Average equity to average assets .... 6.93 7.44 6.04 6.45 6.85
Net interest margin(4) .............. 5.09 5.20 4.97 4.94 4.72
ASSET QUALITY RATIOS:
Allowance for possible loan losses
to total loans, net(5) ............. 1.81 2.04 1.48 1.44 1.41
Allowance for possible loan losses to
non-performing loans(6) ............ 126.51 140.20 96.10 75.53 52.71
Allowance for possible loan losses
to non-performing assets (excluding
loans past due 90 days or more and
accruing)(7) ....................... 96.91 107.87 98.04 50.10 39.39
Non-performing loans to total loans,
net (5)(6) ......................... 1.74 1.73 1.54 1.90 2.67
Non-performing assets to total loans,
net, and other real estate (5)(7) .. 2.16 2.16 1.78 3.09 3.77
Non-performing assets (excluding
loans past due 90 days or more
and accruing) to total loans,
net, and other real estate (5)(7) .. 1.86 1.88 1.51 2.84 3.53
Net charge-offs to
average loans, net ............... .88 .15 .91 .58 .54
</TABLE>
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(1) The HUBCO, Inc. Financial Summary and Selected Per Share Data has not been
restated to reflect the acquisition of Jefferson National Bank on April 5,
1995. See "Recent Developments--Acquisition of Jefferson National Bank."
(2) For 1994 and 1993, the weighted average shares have been adjusted to
reflect the conversion of the Hubco Series A Preferred Stock.
(3) Income per share and dividends paid per share have been restated to reflect
the January 14, 1995 stock split and a 10% stock dividend paid June 1,
1993.
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(4) Computed on a tax equivalent basis.
(5) Total loans are net of unearned income and deferred loans fees.
(6) Non-performing loans include non-accruing loans, renegotiated loans and
loans past due 90 days or more and accruing.
(7) Non-performing assets include non-performing loans plus other real estate.
(8) On July 1, 1994, HUBCO acquired Washington pursuant to a merger accounted
for as a purchase. On May 6, 1994, HUBCO, through the Bank, acquired
deposits and certain assets of Polifly Federal Savings and Loan Association
("Polifly") in a transaction accounted for as a purchase. Under the
purchase method of accounting, the consolidated results of operations of
Washington and Polifly are reflected above solely for periods on and after
the dates of acquisition.
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INTRODUCTORY STATEMENT
All information contained in this Proxy Statement/Prospectus with respect
to Urban was supplied by Urban for inclusion herein. All information contained
herein or incorporated by reference herein 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 shareholders of Urban is on or about April
__, 1995.
This Proxy Statement/Prospectus does not cover any resales of shares of
HUBCO Common Stock to be received by shareholders of Urban upon consummation of
the transactions described herein. No person is authorized to make use of this
Proxy Statement/Prospectus in connection with any such resales, although such
shares may be traded freely and without use of this Proxy Statement/Prospectus
by those shareholders of Urban not deemed to be affiliates of Urban or HUBCO.
Purpose of Meeting
At the Meeting the Urban shareholders will consider and vote upon (1) a
proposal to approve an Amended and Restated Agreement and Plan of Merger, dated
as of February 14, 1995 by and among Urban, HUBCO and the Bank, providing for
the merger of Urban with and into the Bank on the terms and subject to the
conditions set forth in the Agreement, and (2) ratification of Urban's 1990
two-for-one stock split and an amendment to Urban's Articles of Association
increasing Urban's authorized capital stock to 984,372 shares of common stock,
$1.25 per share par value.
The Board of Directors of Urban unanimously recommends that Urban
shareholders vote in favor of the Merger and in favor of ratification of the
Stock Split and approval of the Amendment.
Vote Required; Shares Entitled to Vote
Only holders of record of Urban Common Stock at the close of business on
________, 1995 (the "Record Date") are entitled to notice of and to vote at the
Meeting. The number of shares of Urban Common Stock issued, outstanding and
entitled to vote at the close of business on the Record Date was 984,372. Each
share of Urban Common Stock is entitled to one vote on each matter to come
before the Meeting. The Merger must be approved by the affirmative vote at the
Meeting, either in person or by proxy, of the holders of at least two-thirds of
Urban's issued and outstanding shares. Ratification of the Stock Split and
approval of the Amendment must be approved by the affirmative
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vote at the meeting, either in person or by proxy, of the holders of at least a
majority of Urban's issued and outstanding shares.
Solicitation, Voting and Revocation of Proxies
The enclosed proxy is designed to permit each shareholder of record to vote
on all matters to come before the Meeting. This proxy is solicited by the Board
of Directors of Urban. Any proxy may be revoked at any time before its exercise
by giving written notice of revocation to the Secretary of Urban, at the main
office of Urban at 805 Franklin Lake Road, Franklin Lakes, New Jersey 07417. A
subsequently dated and duly executed proxy will, if properly presented, revoke a
prior proxy. Any shareholder entitled to vote who has previously executed a
proxy may attend the Meeting and vote in person, provided he has filed a written
notice of revocation of such proxy with the Secretary of the Meeting prior to
the voting of such proxy. Where a shareholder specifies a choice in the form of
proxy with respect to a matter being voted upon, the shares represented by the
proxy will be voted in accordance with such specification. If no such
specification is made, the shares will be voted in favor of the Merger and in
favor of ratification of the Stock Split and approval of the Amendment.
The cost of soliciting proxies for the Meeting will be borne by Urban,
except that filing and registration fees in connection with this Proxy
Statement/Prospectus and printing costs will be paid by HUBCO. In addition to
the use of the mails, proxies may be solicited personally, by telephone and
telegram, and by directors, officers and employees of Urban acting without
additional compensation. Arrangements may also be made with brokers, dealers,
nominees and other custodians for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and such persons may
be reimbursed by Urban for reasonable out-of-pocket expenses.
PROPOSAL I--THE PROPOSED MERGER
Background of the Merger
In late 1991, Urban's former president resigned and by mid-year 1992 the
Urban Board of Directors had appointed a new management team. The new management
team began to address Urban's problem loans and for the year ended December 31,
1993 Urban's net income increased to $1,025,000, an increase of 128% over net
income reported for the year ended December 31, 1992. Although substantial
improvement in profitability had been achieved by year end 1993, Urban was not
performing, in the Board's opinion, up to industry standards. This was primarily
a result of Urban's level of nonperforming assets and the fact that
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Urban began to address its problem loans later in the economic cycle. On or
about March 21, 1994, Urban was advised by Valley National Bancorp, a New Jersey
based bank holding company, ("Valley") that Valley had acquired 4.9% of the
outstanding shares of Urban Common Stock and had entered into a stock purchase
agreement to purchase up to 11.8% of the outstanding shares of Urban Common
Stock, subject to the approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). Valley filed its application with the Federal
Reserve on March 21, 1994 to acquire up to 24.9% of the outstanding Urban Common
Stock. During this time period Urban's Board of Directors had approved several
proposals for consideration by Urban shareholders at the 1994 Annual Meeting of
Shareholders, held on May 24, 1994. The proposals included eliminating
preemptive rights for existing shareholders of Urban, increasing the authorized
capital stock of Urban and adopting stock based compensation plans for officers
and directors of Urban. On April 21, 1994, Valley formally approached Urban to
voice its objection to the preemptive rights proposal and offered to acquire
Urban for $26.00 per share of Urban Common Stock in a combination of cash and
Valley common stock. On May 2, 1994 Valley, through their attorneys, withdrew
their application with the Federal Reserve to acquire additional shares of Urban
Common Stock. Shortly thereafter on May 9, 1994, Valley advised the Federal
Reserve that it had also terminated its stock purchase agreement to acquire any
additional shares of Urban Common Stock and advised the Federal Reserve that it
intended to communicate with all shareholders of Urban the offer to acquire
Urban at $26.00 per share. Valley notified the Urban shareholders of its offer
by letter dated May 12, 1994. Valley also indicated it would oppose the
preemptive rights issue being presented at the Urban 1994 Annual Shareholders
Meeting and would solicit proxies in opposition to Urban's proposals. The Board
of Directors advised Valley that the proposal to acquire Urban was inadequate
and rejected it accordingly.
None of the measures presented to shareholders of Urban by Urban management
was approved at the 1994 Annual Shareholder Meeting. This determination by
shareholders, when coupled with the rapid consolidation being experienced in the
banking industry in New Jersey and the acquisition proposal made by Valley,
caused the Board to decide to explore the possibility of a sale of Urban.
Urban's Board asked its president, Robert F.Mangano, to begin this process. With
the approval of the Board, Urban retained Capital Consultants as a financial
advisor and also retained legal counsel to advise Urban.
At the request of Urban's Board, Capital Consultants commenced its
engagement by analyzing Urban and determining Urban's future potential and the
ranges of consideration that
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Urban could attract if it were to be acquired. See "Proposed Merger--Opinions of
Urban's Financial Advisor." As a result of this analysis, the Board identified
those institutions, including Valley, that would be likely to have an interest
in acquiring Urban. By October 1994, Capital Consultants and the Board
determined that of the institutions identified, four had expressed an interest
in Urban that were deemed by the Board to be worthy of further consideration.
Urban entered into confidentiality agreements with all four institutions
which permitted preliminary due diligence. All four institutions made
non-binding preliminary bids on or before October 17, 1994. After consideration
by the Board of a number of issues, the four bids were reduced to three. The
Board chose to commence negotiation with the bidder offering the highest price
prior to carrying on any substantial discussion with the remaining two financial
institutions. This bidder's preliminary bid provided for the shareholders of
Urban to receive approximately $35 in the bidder's common stock, valued at the
time of the offer, for each share of Urban Common Stock. Urban and the bidder
each performed due diligence examinations of each other. At the same time, Urban
delivered to the bidder a preliminary draft of legal documentation to reflect
the proposed merger. During the course of the next several weeks, Urban
responded to certain issues raised by the bidder as a result of its due
diligence process and negotiated various provisions of a form of definitive
merger agreement. After considerable negotiations with the bidder, the Board
concluded, after consultation with its accountant and legal counsel, that there
was a risk that the proposed transaction might not qualify for the pooling of
interest method of accounting, which was a requirement to complete the merger.
Negotiations with the bidder were thereafter deferred while other prospective
bidders' offers were pursued. The lead bidder later submitted a bid based upon a
merger accounted for as a purchase, where each share of Urban Common Stock would
be converted into $27.00 worth of the bidder's common stock and a warrant to
purchase 1/2 share of the bidder's common stock at a specific price to be
determined. This offer was rejected by the Board at a special meeting which took
place on January 9, 1995. Subsequent to the offer being rejected, the bidder
increased its price to $28.00 per share of Urban Common Stock without warrant
considerations. By letter dated January 18, 1995, the bidder increased its offer
to one share of its common stock for each share of Urban Common Stock, valued by
the bidder at $28.75 per share of Urban Common Stock. The offer had an
expiration date of January 25, 1995 and, based on the exchange ratio, was
unacceptable to the Board.
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In December 1994, Capital Consultants was instructed by the Board to make
contact with the remaining two interested financial institutions, which was done
on a simultaneous basis. After preliminary discussion with one of the financial
institutions, the Board concluded that conditions required by the bidder to have
its offer confirmed were, in the view of the Board, too stringent and required
an extended time period to conclude. That bidder's preliminary offer expired by
its terms on December 23, 1994. The Board directed Capital Consultants to
continue negotiations with the remaining financial institution, HUBCO. Beginning
in January 1995, Urban permitted due diligence to be continued with HUBCO, which
reestablished their willingness to offer for each share of Urban Common Stock,
shares of HUBCO Common Stock having a value of approximately $35.00. On the
basis of that preliminary offer, HUBCO and Urban representatives performed due
diligence examinations of each other.
During the course of the next several weeks, both HUBCO and Urban responded
to certain issues raised by each other as a result of the due diligence process
and negotiated definitive legal documents to reflect the transaction. Urban's
Executive Committee met on January 3, 1995 to discuss this matter, the full
Board met on January 9, 1995 together with its legal counsel and Capital
Consultants, and again on January 17, 1995, and on February 7, 1995 the full
Board and the Executive Committee met respectively. Reports on negotiations with
HUBCO were provided at these meetings, along with supplementary financial
information which was reviewed by Capital Consultants at the meetings which they
attended. On February 14, 1995, the Board received an opinion from Capital
Consultants to the effect that the proposed merger was fair to the shareholders
of Urban from a financial point of view. Based upon its review of the
circumstances and in view of the absence of any other active offers, the Board
approved the Agreement on the same date. The following day, Urban and HUBCO
jointly announced the Merger.
General Description
The Agreement is attached as Appendix A to this Proxy Statement.
Descriptions of the Merger and the Agreement are qualified in their entirety by
reference to the Agreement and its exhibits, all of which are hereby
incorporated in this Proxy Statement by reference.
The Agreement provides that, at the Effective Time, Urban will be merged
with and into the Bank and the Bank shall be the surviving bank (the "Surviving
Bank") and all the property, rights, powers and franchises of each of Urban and
the Bank shall vest in the Surviving Bank. The Surviving Bank shall continue to
operate as a wholly-owned subsidiary of HUBCO. At the Effective Time of the
Merger, each share of Urban Common Stock outstanding
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immediately prior to the Effective Time will be converted into 2.17 shares of
newly issued HUBCO Common Stock, subject to certain adjustments as more fully
described under "--Consideration".
Consideration
At the Effective Time of the Merger, each share of Urban Common Stock
outstanding will automatically be converted into a number of shares of HUBCO
Common Stock at the Exchange Ratio.
The Agreement provides for an Exchange Ratio of 2.17 shares of HUBCO Common
Stock for each whole share of Urban Common Stock. The Exchange Ratio is subject
to adjustment in certain circumstances described below.
The Exchange Ratio will be adjusted if Urban's Closing Shareholders Equity
(as defined in the Agreement) does not equal or exceed $11,795,000 as of the
month end preceding the Effective Time. In such event, the Exchange Ratio will
be adjusted downward by multiplying the Exchange Ratio by a fraction, the
denominator of which is $11,795,000 and the numerator of which is Urban's
Closing Shareholder Equity.
Urban's Closing Shareholders Equity will be calculated in accordance with
generally accepted accounting principals ("GAAP") subject to certain adjustments
and addbacks provided for in the Agreement. The Agreement provides that in
calculating Urban Closing Shareholders Equity, net securities gains and other
extraordinary gains realized by Urban from January 1, 1995 through the Effective
Time will be deducted. In addition, the Agreement provides that the following
items will be added back to Urban's Closing Shareholders Equity as determined by
GAAP: (i) any deductions from shareholders' equity to account for unrealized
holding losses on securities available for sale in Urban's securities portfolio
in accordance with Statement of Financial Accounting Standards No. 115; (ii)
certain expenses of Urban's financial, accounting and legal professionals
incurred in connection with the Merger; (iii) certain expenses incurred by Urban
in connection with Urban's compliance with the New Jersey Industrial Site
Recovery Act with regard to the Merger; and (iv) up to $25,000 in legal and
professional fees expended by Urban in connection with maintaining a claim under
Urban's banker's blanket bond in connection with the activities of Urban's
former president.
All adjustments and additions made in calculating Urban's Closing
Shareholders Equity will be calculated so as to take into account the tax
effects of such adjustments and deductions.
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The Exchange Ratio will also be adjusted to take into account any stock
split, stock dividend, stock combination, reclassification or similar
transaction by HUBCO with respect to the HUBCO Common Stock.
No holder of Urban Common Stock will be entitled to receive any fractional
shares of HUBCO Common Stock, 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 holders fractional interest by the
Average Closing Price of the HUBCO Common Stock. All shares of HUBCO Common
Stock that individual Urban shareholders are entitled to receive in exchange for
each share of Urban 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.
Reasons for the Merger
Urban
The Board of Directors of Urban has approved the Merger, believes it to be
in the best interests of the shareholders of Urban and unanimously recommends
that Urban shareholders vote "FOR" the Agreement.
The Board of Directors believes that the proposed transaction with HUBCO is
in the best interests of Urban shareholders for several reasons. First, the
Board believes that HUBCO is offering a premium over the current market value of
the Urban Common Stock, based upon the market value of the HUBCO Common Stock at
the time the Agreement was entered into. See "Opinion of Urban's Financial
Advisor." In addition, the HUBCO Common Stock is a more liquid investment than
is an investment in the Urban Common Stock. The HUBCO Common Stock is traded on
the NASDAQ National Market System. The Urban Common Stock is not actively traded
on any established securities market. The Board of Directors also took into
account the fact that HUBCO has historically paid cash dividends, while Urban
has not been able to pay cash dividends for the past several years. See
"Comparative Market Prices of HUBCO Common Stock and Urban Common Stock." The
Board of Directors also believes that the financial institution resulting from
the Merger will have greater resources with which to serve Urban's local
community and greater potential for future growth.
The Board of Directors of Urban believes that the terms of the Merger are
fair to, and in the best interests of, Urban shareholders. After an evaluation
of the business, financial and market factors and consultation with its
financial advisor, the
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members of the Board of Directors of Urban unanimously voted to approve the
Agreement.
HUBCO
HUBCO's Board of Directors has approved the Merger, and believes it to be
in the best interests of the shareholders of HUBCO, because it believes that the
acquisition of Urban will expand HUBCO's presence into the affluent western
Bergen County and northern Passaic County, New Jersey market places served by
Urban, it believes that the acquisition of Urban will complement its past
acquisitions and the marketplaces currently served by HUBCO, and because it
believes that through HUBCO's ability to offer expanded services to Urban's
customers, and through cost savings through consolidation of duplicative
administrative functions, the Merger will enhance Urban's earnings capacity and
contribute to HUBCO's consolidated earnings.
Interests of Management in the Merger
As of April 7, 1995, the directors and officers of Urban beneficially owned
in the aggregate 210,956 shares of Urban Common Stock, or 21.43% of the then
issued and outstanding shares of Urban Common Stock. The Board of Directors of
Urban unanimously approved the Agreement and urges the shareholders of Urban to
vote in favor of the Agreement and the Merger. In addition, pursuant to the
Agreement, Mr. Robert Mangano, President of Urban, will join Hudson United Bank
as an Executive Vice President pursuant to an Employment Agreement. The
Employment Agreement will provide that Mr. Mangano will be employed by the Bank
for a period of 3 years at a minimum annual salary of $175,000, his current
salary as President of Urban, and that Mr. Mangano will participate in any
employee benefit plans and stock based compensation programs established for
senior management of HUBCO and/or the Bank and also provides for certain other
benefits such as use of an automobile and payment of certain country club
expenses. In the event of the termination of Mr. Mangano's employment by HUBCO
other than for cause (as defined in the Employment Agreement) or if Mr. Mangano
terminates his employment for good cause (as defined in the Employment
Agreement), Mr. Mangano is entitled to certain severance benefits, including
payment of his then current salary for a period of at least 24 months. The
Employment Agreement will provide for termination of Mr. Mangano's employment
without the payment of the above described benefits in the event of Mr.
Mangano's death, disability or retirement, or in the event his employment is
terminated for cause or if Mr. Mangano terminates his employment without good
reason. The Agreement further provides that HUBCO will assume certain options to
acquire Urban Common Stock granted to Mr. Mangano during his employment with
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Urban, and that HUBCO will assume certain Severance Agreements with certain
officers of Urban which provide for certain benefits to such officers if their
employment is terminated or the conditions of their employment are materially
altered after a change in control of Urban. The Merger would constitute a change
in control of Urban under these Severance Agreements. The Agreement also
provides that Messrs. Bryant D. Malcolm and W. Peter McBride, currently
directors of Urban, will become members of the Board of Directors of HUBCO and
that Messrs. Malcolm, McBride and Joseph Pfeifer, also a director of Urban, will
join the Board of Directors of the Bank. The Agreement also requires HUBCO to
indemnify the officers, directors and employees of Urban in a manner equivalent
to the manner in which they are currently indemnified under Urban's Articles of
Association and under the New Jersey Business Act and to advance expenses as
incurred to the extent permitted by law, in each case for six (6) years, subject
to extension, and to purchase officers' and directors' liability insurance
covering the officers, directors and employees of Urban, for a period of six (6)
years after the Effective Time of the Merger.
Opinions of Urban's Financial Advisor
On September 6, 1994 the Urban Board retained Capital Consultants to act as
Urban's financial advisor and to render its opinion with respect to the
fairness, from a financial point of view, to the shareholders of Urban of the
consideration to be received in a potential merger.
Capital Consultants is regularly engaged in the valuation of banks, bank
holding companies, savings and loan associations, and thrift holding companies
in connection with mergers, acquisitions and other securities transactions.
Capital Consultants has knowledge of, and experience with, the New Jersey
banking and thrift market and financial organizations operating in that market
and was selected by Urban because of its knowledge of, experience with, and
reputation in the financial services industry. Capital Consultants is not a
market maker in either HUBCO Common or Preferred Stocks or Urban Common Stock.
On February 14, 1995, the date the Board of Directors of Urban approved the
Merger, Capital Consultants delivered to the Board of Directors its opinion
that, based on and subject to various items set forth in its written opinion,
the consideration to be received by Urban's shareholders pursuant to the
Agreement is fair from a financial point of view to Urban's shareholders. In
requesting Capital Consultants' advice and opinion, Urban's Board did not impose
any limitations upon Capital Consultants with respect to the investigations made
or procedures followed by it in rendering its opinion.
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Capital Consultants reissued its opinion as of the date of this Proxy
Statement/Prospectus.
The full text of the written opinion of Capital Consultants, which sets
forth assumptions made and matters considered, is attached as Appendix B to this
Proxy Statement/Prospectus. Urban shareholders are urged to read this opinion in
its entirety. Capital Consultants' opinion is directed only to the financial
terms of the merger and does not constitute a recommendation to any Urban
shareholder as to how such shareholder should vote at the Meeting. The summary
information regarding Capital Consultants' opinion and the procedures followed
in rendering such opinion set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, Capital Consultants reviewed and analyzed,
among other things: (i) the Agreement; (ii) the HUBCO Registration Statement on
Form S-4 of which this Proxy Statement/Prospectus is a part; (iii) publicly
available information relating to HUBCO and Urban including, for HUBCO, annual
reports to shareholders and Annual Reports on Form 10-K filed with the SEC for
the years ended December 31, 1991 through 1994, the Consolidated Statement of
Financial Condition as of December 31, 1994, 1993 and 1992, and the related
Consolidated Statements of Income, Changes in Shareholders Equity and Cash Flows
for the three year period ended December 31, 1994 included therein, and the
quarterly reports to shareholders and Quarterly Reports on Form 10-Q filed with
the SEC for the periods ended March 31, June 30 and September 30, 1994, and for
Urban, annual reports to shareholders for the years ended December 31, 1991
through 1993, Consolidated Statements of Financial Condition as of December 31,
1994, 1993 and 1992 and related Consolidated Statements of Income, Changes in
Stockholders Equity and Cash Flows for the three year period ended December 31,
1994, together with the Reports of Independent Public Accountants and quarterly
Reports of Condition and Income as filed with the Federal Deposit Insurance
Corporation for the periods ended March 31, June 30, September 30, and December
31, 1994; (iv) certain historical operating and financial information provided
to Capital Consultants by the managements of Urban and HUBCO; (v) historical and
current market data for the Urban Common Stock and the HUBCO Common and
Preferred Stock; (vi) the publicly available financial data and stock market
performance data of publicly traded banking and thrift institutions which
Capital Consultants deemed generally comparable to Urban and HUBCO; (vii) the
nature and terms of recent acquisitions and merger transactions involving
banking institutions and bank and thrift holding companies that Capital
Consultants considered reasonably similar to Urban and HUBCO in financial
character, operating character, historical performance, geographic market and
economy; and (viii) such other
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studies, analyses, inquiries and reports as Capital Consultants deemed
appropriate. In addition, Capital Consultants conducted meetings with members of
senior management of Urban and HUBCO for purposes of reviewing the future
prospects of Urban and Hubco. Capital Consultants evaluated the pro forma
ownership of the HUBCO Common Stock by Urban's shareholders, relative to the pro
forma contribution of Urban's assets, deposits, equity and earnings to the pro
forma resulting company in the Merger. Capital Consultants also took into
account its experience in other transactions, as well as its knowledge of the
banking and thrift industries and its experience in securities valuations.
In rendering its opinion, Capital Consultants assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations provided to it by Urban and HUBCO. Capital
Consultants did not conduct a physical inspection of any of the properties or
assets of Urban or HUBCO and has not made any independent evaluations or
appraisal of any properties, assets or liabilities of Urban or HUBCO. Capital
Consultants has assumed and relied upon the accuracy and completeness of the
publicly available financial and other information provided to it, has relied
upon the representations and warranties of Urban and HUBCO made pursuant to the
Agreement, and has not independently attempted to verify any of such
information.
In rendering its opinion, Capital Consultants assumed that in the course of
obtaining the necessary regulatory approvals for the Merger, no conditions will
be imposed that will have a material adverse effect on the contemplated benefits
of the Merger on a pro forma basis to Urban.
In arriving at its opinion, Capital Consultants performed a variety of
financial analyses. Capital Consultants believes that its analyses must be
considered as a whole and that consideration of portions of such analyses and
the factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and the process underlying
Capital Consultants' opinion. The preparation of an opinion with respect to
fairness, from a financial point of view, of the consideration to be received by
shareholders is a complex process involving judgments and is not necessarily
susceptible to partial analyses and summary description.
In its analyses, Capital Consultants made numerous assumptions with respect
to Urban's and HUBCO's industry performance, business and economic conditions
and other matters, many of which are beyond the control of Urban and/or HUBCO.
Any estimates reflected in Capital Consultants analyses are not necessarily
indicative of future results or values, which may be significantly more or less
favorable than such estimates.
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Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
In connection with its opinion, Capital Consultants performed various
analyses with respect to Urban and HUBCO. The following is a brief summary of
such analyses, certain of which were presented to the Urban Board by Capital
Consultants.
Valuation Analysis
Using a valuation analysis, Capital Consultants estimated the present value
of theoretical values of Urban based on a range of price-to-earnings ("P/E")
multiples between 14.0x and 15.0x and a range of discount rates between 6% and
8%. The range of values were based on a range of estimated earnings for the next
three years assuming annual earnings growth rates between 5% and 8%. The results
of this analysis indicated a range of theoretical values for Urban between
$29.35 per share (5% earnings growth rate; P/E of 14.0x; 8% discount rate) and
$33.54 per share (8% growth rate; P/E of 15.0x; 6% discount rate). Capital
Consultants prepared a net present value analysis that indicated theoretical
values for Urban based on range of terminal book value multiples between 2.0x
and 2.5x and a range of discount rates between 6% and 8%. Capital Consultants
determined the range of terminal multiples of selected comparable companies.
Such comparable companies are referred to in the Comparable Company Analysis and
Transaction Analysis set forth below. The terminal values were discounted to
present value using discount rates which reflect assumptions regarding the
required rates of return of the current and prospective shareholders of Urban
Common Stock in these economic times. The range of present values per share of
Urban resulting from the above-references assumptions were $27.01 to $35.73.
Comparable Company Analysis
Capital Consultants compared the operating performance of Urban to publicly
traded commercial banks that Capital Consultants deemed to be similar to Urban.
The group consists of fifteen publicly traded New Jersey based commercial banks
with total assets of between $150 million and $380 million. Capital Consultants
compared Urban with these institutions based on selected operating fundamentals,
including capital adequacy, profitability and asset quality. Using pricing data
as of December 30, 1994, the median price to stated book value was 1.16% for the
comparable commercial banks. The median equity to assets ratio was 7.0% for the
group of comparable commercial banks and 4.9% for Urban. The median return on
average assets
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for the twelve months ending September 30, 1994 was 1.04% for the comparable
group of commercial banks and 0.62% for Urban. The median return on average
equity for the twelve months ending September 30, 1994 was 12.6% for the
comparable group of commercial banks and 11.2% for Urban. Assuming a valuation
of HUBCO's offer of $35.26 (2.17 shares of HUBCO at a market price of $16.25,
the closing price of HUBCO Common Stock on February 14, 1995) in HUBCO Common
Stock for each share of Urban Common Stock, the HUBCO offer represented 294% of
Urban's book value.
Finally, Capital Consultants compared the market price, market-to-book
value and price-to-earnings multiples of the HUBCO Common Stock with individual
market multiples and medians of twenty publicly traded New Jersey based banks
and bank holding companies having total assets between $185 million and $34
billion. The analysis also compared returns on average assets and average equity
of HUBCO to those of selected financial institutions and the medians of the
comparable group. The analysis indicated that the HUBCO Common Stock traded on
December 30, 1994 at a price-to-earnings multiple of 9.4 times trailing twelve
months earnings for the period ended September 30, 1994 as compared to a
comparative group medium of 10.5 times trailing twelve months earnings for the
period ended September 30, 1994. While the HUBCO Common Stock traded at a
price-to-book value of 1.63%, the comparative group median was 1.36%. HUBCO's
financial performance, as measured by returns on average assets and average
equity, was 1.37% and 19.7%, respectively, as compared to the median of the
selected comparable financial institutions which was 0.88% and 13.7%,
respectively. The Capital Consultants analyses also included summary income
statement and balance sheet data and selected ratio analyses for HUBCO and
various other potential acquirers of Urban.
Contribution Analysis
Capital Consultants prepared a contribution analysis showing the percentage
of assets, deposits, net common equity and 1994 net income Urban would
contribute to the combined company (including the Jefferson Merger as if such
transaction had occurred on January 1, 1994) on a pro forma basis, and compared
these percentages to the pro forma ownership after the Merger. This analysis
showed that Urban would contribute 14.1% of pro forma consolidated total assets,
13.8% of pro forma consolidated deposits, 10.1% of pro forma consolidated
shareholders' equity and 8.3% of pro forma consolidated net income for 1994,
while Urban shareholders would hold 17.1% of the pro forma ownership of HUBCO.
Impact Analysis
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Capital Consultants analyzed the financial implications of the Merger on
HUBCO's earnings per common share and book value per common share. This analysis
was based on December 31, 1994 financial data for HUBCO and Urban and indicated
that the acquisition of Urban by HUBCO would be (on a pro forma basis for the
twelve months ended December 31, 1994, assuming the acquisition was effective as
of January 1, 1994 and assuming HUBCO's pending acquisition of Jefferson was
effective as of January 1, 1994) approximately 7.3% dilutive to the earnings per
share of HUBCO Common Stock and approximately 5.7% dilutive to tangible book
value per share of HUBCO Common Stock on a fully diluted basis.
Comparable Transaction Analysis
Capital Consultants performed an analysis of prices and premiums offered in
recently announced commercial bank and bank holding company transactions in the
region. Multiples of earnings and fully diluted book value implied by the
consideration to be received by Urban's shareholders in the Merger were compared
with multiples offered in such regional transactions, which included pending and
completed acquisitions announced between January 1, 1993 and February 13, 1994.
The median offer price to book value for this regional group of comparable
transactions was 157%. The equivalent offer price to book value for Urban was
294% based on the assumed HUBCO offer price of $35.26 for each outstanding share
of Urban Common Stock and Urban's book value as of December 31, 1994. Capital
Consultants also reviewed the core capital ratio to total assets of the
comparative group and non-performing assets as a percentage of total assets and
in both analyses, Urban was substantially below the median of the comparative
group.
It is important to note that while Capital Consultants took into account
the values shown in the comparables used in connection with the rendering of its
opinion, no company or transaction used in these analyses was identical to Urban
or the Merger. Accordingly, an analysis of the results in the foregoing is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies involved, the timing of the transactions and prospective buyer
interest, the earnings trends and prospects for the future, as well as other
factors that could affect the public trading values of the companies included in
the comparisons.
For Capital Consultants' services in connection with the Merger, Urban has
agreed to pay Capital Consultants a fee of approximately $45,000 plus
reimbursement for reasonable out-of-pocket expenses. Urban has also agreed to
indemnify Capital
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Consultants against certain liabilities, including liabilities under the
federal securities laws. Urban has paid Capital Consultants $10,000 at the time
Capital Consultants was retained and paid an additional $10,000 on the mailing
of this Proxy Statement/Prospectus. Urban will pay the balance on consummation
of the Merger. The amount of Capital Consultants fee was determined by
negotiation between Urban and Capital Consultants.
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 of 1933 (the
"Securities Act") and will be freely transferable, except for shares received by
persons, including directors and executive officers of Urban, who may be deemed
to be "affiliates" of Urban 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 to control 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.
Conditions to the Merger
Consummation of the Merger is conditioned on, among other things, (i)
approval of the Agreement and the Merger by the shareholders of Urban and HUBCO
and approval of the Stock Split by the shareholders of Urban; (ii) the receipt
of all approvals and authorizations of all necessary federal government
authorities and expiration of all required waiting periods necessary for the
consummation of the Merger (see "The Proposed Merger--Regulatory Matters"); and
(iii) the effectiveness of the registration statement covering the shares of
HUBCO Common Stock to be issued to Urban shareholders. In addition, consummation
of the Merger is conditioned upon receipt by the parties of an opinion of Arthur
Andersen LLP to the effect that the transaction will qualify as a pooling of
interests for accounting purposes, and an opinion of McCarter & English, counsel
to HUBCO, to the effect that the exchange of Urban Common Stock for HUBCO Common
Stock is a tax-free reorganization within the meaning of Section 368 of the
Internal Revenue Code (the "Code"). See "Federal Income Tax Consequences".
Consummation of the Merger is further conditioned on, among other things,
(i) the continued accuracy in all material
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respects of the representations and warranties of Urban and HUBCO, respectively,
contained in the Agreement; (ii) the performance by Urban or HUBCO, as the case
may be, in all material respects, of all obligations under the Agreement; (iii)
the absence of any order, ruling or consent decree of a court of competent
jurisdiction that would restrain or prohibit the consummation of the Merger;
(iv) receipt by the Board of Directors of Urban of the Opinions of Capital
Consultants (see "Opinions of Urban's Financial Advisor"); (v) HUBCO entering
into an Employment Agreement with Mr. Mangano and assuming certain options to
purchase Urban Common Stock granted to Mr. Mangano in connection with his
employment with Urban; and (vi) HUBCO assuming Urban's obligations under those
certain change of control agreements with certain Urban employees.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior receipt
of all necessary regulatory approvals. On March 16, 1995, HUBCO submitted an
application to the FDIC seeking approval of the Merger under the Bank Merger
Act. On March 16, 1995, HUBCO filed an application with the Commissioner for
approval of the Merger under the New Jersey Banking Act of 1948 (the "Banking
Act"). The approval of the FDIC and the Commissioner are required in order for
the Merger to be consummated. While both HUBCO and Urban anticipate receiving
the required approvals, there can be no assurance that the approvals will be
granted, or that they will be granted on a timely basis and without conditions
that HUBCO or Urban find unacceptable.
Restrictions on Operations Pending the Merger
Pending consummation of the Merger, the Agreement imposes several
restrictions on Urban's operations. Pursuant to the Agreement, Urban may not
amend its Articles of Association, issue additional securities, other than upon
the exercise of outstanding stock options, repurchase stock, or, except as
described below, pay any cash dividends. In the event that the Effective Time
has not occurred prior to or on the record date established by HUBCO's Board of
Directors for HUBCO's second quarter 1995 cash dividend, Urban is permitted to
declare and pay a cash dividend to its shareholders in the amount of up to $0.26
per share, provided that such dividend does not cause Urban's shareholders'
equity on the date the dividend is declared to fall below the amount of Urban's
shareholders' equity as of December 31, 1994. Urban is also required to conduct
its business only in the ordinary course as conducted through the date of the
Agreement, and is further prohibited from granting any additional severance or
termination pay or otherwise changing the terms or
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conditions of employment of any employees or from selling or disposing of any of
its assets other than in the ordinary course.
Under the Agreement, HUBCO is prohibited from entering into any agreement
which will require it to issue additional shares of HUBCO Common Stock or
securities convertible into HUBCO Common Stock if the indicated dilution of book
value or earnings per share of HUBCO caused by such proposed transaction is
greater than 10%.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, Urban will be merged into
the Bank, which will be the surviving entity in the Merger. The Bank will
continue to operate as a subsidiary of HUBCO. Other than the appointment of Mr.
Mangano as an Executive Vice President, the Bank does not intend to make any
changes in its executive officers in connection with the Merger.
Exchange of Certificates
At the Effective Time, holders of certificates formerly representing shares
of Urban Common Stock will cease to have any rights as Urban shareholders and
their certificates automatically will represent the shares of HUBCO Common Stock
into which their shares of Urban Common Stock will have been converted by the
Merger. As soon as practicable after the Effective Time, HUBCO will send written
notice to each holder of Urban Common Stock immediately prior to the Effective
Time, indicating the number of shares of HUBCO Common Stock for which such
holder's shares of Urban Common Stock have been exchanged.
Holders of outstanding certificates of Urban 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 Urban Common Stock previously represented
by the surrendered certificates have been converted. At the time of issuance of
the new stock certificates each shareholder so entitled will receive a check for
the amount of the fractional share interest, if any, to which he may be
entitled.
Each share of HUBCO Common Stock for which shares of Urban Common Stock are
exchanged will be deemed to have been issued at the Effective Time. Accordingly,
Urban shareholders 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
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distribution will actually be paid with respect to any shares of HUBCO Common
Stock until the certificate or certificates formerly representing shares of
Urban 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 "The Proposed Merger--Consideration".
Holders of Urban Common Stock should not send in their certificates until
they receive instructions from HUBCO.
Effective Date; Amendments; Termination
The Effective Time of the Merger will be the time and date specified in a
certification required to be filed with the Commissioner and specified in a
notice filed with the FDIC. The Closing will occur ten (10) days after all the
conditions precedent to the Merger have been satisfied or waived, or at such
other time agreed to by HUBCO and Urban. (See "The Proposed Merger--Conditions
to the Merger"). At the Closing, documents required to satisfy the conditions to
the Merger of the respective parties will be exchanged.
The Agreement may be amended, modified or supplemented with respect to any
of its terms by the mutual consent of HUBCO, the Bank and Urban at any time
prior to the Effective Time.
The Agreement may be terminated by either party at any time prior to the
Effective Time if: (a) any representation or warranty of either party to the
Agreement is not true and correct in all material respects, (b) either party
breaches any covenant or agreement made by it in the Agreement, or (c) the
Effective Time has not occurred on or prior to September 30, 1995. In addition,
Urban may terminate the Agreement if: (a) the Exchange Ratio, as adjusted, is
less than 2.0, (b) the Average Closing Price of HUBCO Common Stock is less than
$12.75 per share, or (c) if the Exchange Ratio multiplied by the Average Closing
Price of the HUBCO Common Stock yields an amount less than $26.65. No assurance
can be given that Urban shareholders will receive $26.65 or more for their
shares of Urban Common Stock because, although Urban will have the right to
terminate the Agreement if the Exchange Ratio multiplied by the Average Closing
Price yields less than $26.65, Urban could elect to proceed with the Merger
based on, among other things, then current market conditions. In addition, the
market price of the HUBCO Common Stock may decline between the time the Average
Closing Price is determined and consummation of the Merger. In addition, Urban
may have the right to terminate the Agreement in the event the Urban Board of
Directors approves an Acquisition Transaction after determining, upon advice of
counsel, that such approval is necessary in the exercise of the Board's
fiduciary duty or in the event HUBCO enters into or publicly announces its
intention to enter into a
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transaction which would result in a Change in Control of HUBCO. The Agreement
provides that a Change in Control will be deemed to have occurred if any person,
with certain exceptions, is or becomes the beneficial owner of securities of
HUBCO representing 25% or more of the combined voting power of all of HUBCO's
then outstanding securities, or in the event that the individuals constituting
HUBCO's Board of Directors as of the date of the Agreement, and individuals
subsequently elected to the Board with the approval of at least two-thirds of
the Board of Directors as of the date of this Agreement, cease to constitute a
majority of HUBCO's Board of Directors.
Upon a termination of the Agreement, the transactions contemplated thereby
will be abandoned without further action by any party and each party will bear
its own expenses, except in certain circumstances in which Urban may be required
to reimburse HUBCO for its out of pocket expenses. See "--Fee In The Event of
Another Transaction." In the event of a termination, each party will retain all
rights and remedies it may have at law or equity under the Agreement.
Fees in the Event of Another Transaction;
Limitation on Solicitation of Other Transactions
Pursuant to the Agreement, Urban is prohibited from encouraging, soliciting
or negotiating a proposal for an Acquisition Transaction, subject to fulfillment
by Urban's Board of Directors of its fiduciary duty, as provided in the
Agreement. However, as discussed above, Urban may have the right to terminate
the Agreement and pursue an Acquisition Transaction. In that event, any third
party entering into an Acquisition Transaction with Urban may be obligated to
make a payment to HUBCO in the amount of $1,000,000 (the "Termination Fee"). In
addition, in certain circumstances, if Urban terminates the Agreement and does
not enter into an Acquisition Transaction with a third party within twelve (12)
months of such termination, Urban may be obligated to reimburse HUBCO for its
out of pocket expenses incurred in negotiating and consummating the Merger, up
to a maximum of $200,000 (the "Reimbursement Fee").
Either the Termination Fee or the Reimbursement Fee will only be payable in
the event Urban terminates the Agreement as a result of a determination by
Urban's Board of Directors, upon advise of counsel, that in the exercise of the
Board's fiduciary duties, Urban must pursue a potential Acquisition Transaction
with a third party. If Urban enters into a binding agreement to undertake an
Acquisition Transaction within twelve (12) months of the termination of the
Agreement, the terms of the transaction with the third party must provide that
the third party will pay HUBCO the Termination Fee upon the closing of the
Acquisition Transaction. In the event that Urban does not enter
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into an agreement with the third party providing for an Acquisition Transaction
within twelve (12) months of the termination of the Agreement, Urban must pay
HUBCO the Reimbursement Fee.
The Termination Fee and Reimbursement Fee may make it more costly for
another party to attempt to acquire Urban. These provisions of the Agreement may
be considered a deterrent to other potential acquirers of Urban because it is
likely to increase the cost of any such transaction.
Accounting Treatment of the Merger
The Merger will 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" and "--Conditions to
the Merger."
Federal Income Tax Consequences
McCarter & English, counsel to HUBCO, will deliver to HUBCO and Urban prior
to or at the Effective Time its opinion that, with respect to the Merger, for
Federal income tax purposes: (i) the Merger will be a tax-free reorganization
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code; (ii) no
taxable gain or loss will be recognized to shareholders of Urban whose Urban
Common Stock is exchanged solely for HUBCO Common Stock in connection with the
Merger, (iii) each former Urban shareholder's basis for the shares of HUBCO
Common Stock received by him in the exchange will be the same as such
shareholder's basis for the shares of Urban Common Stock exchanged therefor; and
(iv) each shareholder's holding period for the HUBCO Common Stock received will
include his holding period for the Urban Common Stock exchanged therefor,
provided that his Urban Common Stock was held as a capital asset on the
Effective Date.
The opinion of McCarter & English shall also provide that a shareholder of
Urban who receives cash in lieu of fractional shares of HUBCO Common Stock will
be treated as having received a distribution pursuant to Section 302 of the Code
in redemption of the fractional share interest. Pursuant to Section 302 of the
Code, cash payments received in lieu of a fractional share will be treated as
amounts received in exchange for the fractional share interest, giving rise to
the recognition of capital gain or loss measured by the difference between the
amount realized on the distribution and the recipient shareholder's adjusted
basis in his fractional share interest; provided, however, in the event that any
such cash payment is not deemed to be in redemption of a former shareholder's
Urban Common
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Stock, such payment shall be treated as a dividend, a return of capital and/or
gain from the sale of property as provided in Section 301(c) of the Code.
The foregoing opinions do not apply to any Urban shareholders who exercise
their dissenter's rights and receive a cash payment for the fair value of their
shares of Urban Common Stock. Such shareholders will recognize either a gain or
a loss, depending upon their tax basis in their shares of Urban Common Stock.
The tax consequences for any particular shareholder may be affected by
matters not discussed herein. Urban shareholders should consult with their
personal tax advisors as to the consequences of the Merger to them, including
the consequences of the application of state and local taxes, if any.
This description of the tax consequences is based upon the facts existing
at the time of this Proxy Statement/Prospectus and upon federal income tax laws
currently in effect.
Rights of Dissenting Stockholders
Stockholders of Urban who vote against the Merger at the Meeting or give
notice of dissent in writing (addressed to the President of Urban, Urban
National Bank, 805 Franklin Lake Road, Franklin Lakes, New Jersey 07417) at or
prior to the Meeting will be entitled to receive the value of their shares as of
the date of the Meeting in cash upon written request made to the Bank in its
capacity as the surviving bank (the "Surviving Bank") before the thirtieth
(30th) day after the consummation of the Merger, accompanied by the surrender of
their stock certificates. The value of the shares of any dissenting stockholder
shall be ascertained in accordance with the applicable provisions of 12 U.S.C.
ss.214a, by an appraisal made by a committee composed of one person selected by
the majority vote of persons exercising such appraisal rights, one person
selected by the directors of the Surviving Bank, and one person selected by the
two so selected. The valuation agreed upon by any two of the three appraisers
shall govern.
If the valuation so fixed shall not be satisfactory to a dissenting
stockholder who has requested payment, that stockholder may, within five days
after receiving notification of the appraisal value, appeal to the OCC, which
shall cause a reappraisal to be made which shall be final and binding with
respect to the shares of the person appealing the appraisal. If, within 90 days
from the consummation of the Merger, for any reason one or more of the
above-mentioned appraisers is not selected or such appraisers fail to determine
the value of such shares, the OCC shall, upon written request of any interested
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party, cause an appraisal to be made which shall be final and binding on all
parties. The expenses of the OCC in making the reappraisal or the appraisal, as
the case may be, shall be paid by the Surviving Bank.
The failure of a dissenting stockholder to vote against the Merger will not
constitute a waiver of appraisal rights if the stockholder gives written notice
of dissent to Urban at or prior to the Meeting. Regardless of whether a
stockholder records his or her dissent by voting against the Merger or giving
written notice of dissent, a dissenting stockholder must also make written
request to the Surviving Bank to receive the value of his or her shares at any
time before 30 days after the consummation of the Merger.
A copy of the relevant portions of 12 U.S.C. ss.214a is annexed to this
Proxy Statement-Prospectus as Appendix C. Any deviations from such procedure may
result in the forfeiture of dissenters' rights. Accordingly, holders of Urban
Common Stock wishing to dissent from the Merger are urged to carefully read
Appendix C and to consult with their own legal advisors.
Description of HUBCO Capital Stock
General. The authorized capital stock of HUBCO consists of 19,800,000
shares of HUBCO Common Stock and 3,300,000 shares of preferred stock. At HUBCO's
annual meeting, to be held simultaneously with the Meeting, HUBCO shareholders
will be asked to increase HUBCO's authorized capitalization. See "Certain
Information Regarding HUBCO--Recent Developments." As of February 13, 1995,
10,400,042 shares of HUBCO Common Stock were issued, 9,610,374 shares of HUBCO
Common Stock were outstanding, and 797,811 shares of HUBCO's Series A Preferred
Stock were issued and 786,811 were outstanding. Of the authorized and unissued
shares of HUBCO Common Stock, (i) 183,088 shares of HUBCO Common Stock were
reserved for issuance under HUBCO's restricted stock plan, (ii) 525,000 shares
of HUBCO Common Stock were reserved for issuance pursuant to HUBCO's stock
option plan and (iii) 390,549 shares of HUBCO Common Stock were reserved for
issuance upon conversion of shares of HUBCO Series A Preferred Stock.
Under the terms of HUBCO's Certificate of Incorporation, the Board of
Directors has authority at any time (i) to divide any or all of the authorized
but unissued shares of preferred stock into series and determine the
designations, number of shares, relative rights, preferences and limitations of
any such series and (ii) to increase the number of shares of any such series
previously determined by it and to decrease such
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previously determined number of shares to a number not less than that of the
shares of such series then outstanding.
Description of HUBCO Series A Preferred Stock
The following description of the HUBCO Series A Preferred Stock sets forth
certain general terms and provisions of the HUBCO Series A Preferred Stock.
The HUBCO Series A Preferred Stock is a series of cumulative convertible
preferred stock designated "Series A Preferred Stock" which was issued to
previous stockholders of Washington Bancorp ("Washington") in connection with
HUBCO's acquisition of Washington. The HUBCO Series A Preferred Stock has a
stated value of $24.00 per share. The shares issued are fully paid and
non-assessable. As of February 13, 1995, HUBCO had issued 797,811 shares of the
HUBCO Series A Preferred Stock and 786,811 shares were outstanding. Upon the
reacquisition of any of the HUBCO Series A Preferred Stock, through redemption,
conversion or otherwise, such reacquired shares will be canceled and will become
part of the authorized and unissued preferred stock of HUBCO. The HUBCO Series A
Preferred Stock has the dividend, liquidation, redemption, voting and conversion
rights set forth below.
Rank
The HUBCO Series A Preferred Stock will be senior to any other class or
series of preferred stock in respect of (1) payment of dividends, (2) payment
upon dissolution, liquidation or winding up and (3) redemption.
Dividends
The holders of HUBCO Series A Preferred Stock, in preference to the holders
of HUBCO Common Stock and any other class or series of preferred stock, are
entitled to receive, when and if declared by the Board of Directors of HUBCO,
out of funds legally available therefor, cumulative cash dividends at the annual
rate per share of $1.44, payable in quarter-annual installments on the 15th day
of February, May, August and November in each year, from the date of issuance.
Liquidation Preference
Upon the voluntary or involuntary liquidation, dissolution, or winding up
of the affairs of HUBCO, the holders of HUBCO Series A Preferred Stock are
entitled to receive out of the assets of HUBCO $24.00 per share, together with
cumulative dividends accrued and unpaid to the date of payment of such
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$24.00 distribution preference, before any amounts are paid to the holders of
HUBCO Common Stock or any other class or series of preferred stock of HUBCO.
Such dividends accrue on a daily basis. The merger or consolidation of HUBCO
into or with any other corporation, or the merger of any other corporation into
HUBCO, or the sale, lease or conveyance of all or substantially all of the
property or business of HUBCO, is not deemed to be a dissolution, liquidation or
winding up for purposes of such distribution preference.
Redemption
Outstanding shares of HUBCO Series A Preferred Stock may be redeemed, as a
whole (or in part but only with the consent of the holder of the shares to be
redeemed), at the option of HUBCO by vote of its Board of Directors at any time
from and after the later of (i) July 1, 1995 and (ii) the date on which the
market price for the HUBCO Common Stock is $16.00 or more for twenty (20)
consecutive business days. The $16.00 market price will be adjusted each time
the conversion ratio applicable to the HUBCO Series A Preferred Stock is
required to be adjusted for certain capital changes as described below under
"Conversion Into Common Stock." The HUBCO Series A Preferred Stock may also be
redeemed in connection with a merger, consolidation or sale of all or
substantially all the assets of HUBCO which otherwise requires a vote of the
holders of HUBCO Series A Preferred Stock. See "Voting Rights." Less than all
the outstanding shares of the HUBCO Series A Preferred Stock may be redeemed in
such manner as the Board of Directors of HUBCO prescribes. The redemption price
for shares of the HUBCO Series A Preferred Stock is $24.00 per share, plus all
accrued and unpaid dividends through the date fixed for redemption. Such
dividends accrue on a daily basis.
HUBCO cannot redeem any other class or series of preferred stock unless and
until all shares of the HUBCO Series A Preferred Stock have been redeemed. HUBCO
cannot redeem any shares of HUBCO Series A Preferred Stock without the approval
of the Federal Reserve Board (the "FRB"). There are no restrictions on HUBCO's
ability to redeem while there is an arrearage in the payment of dividends. HUBCO
may repurchase in the market or in private transactions shares of its HUBCO
Common Stock or shares of HUBCO Series A Preferred Stock at any time while the
HUBCO Series A Preferred Stock is outstanding.
HUBCO is not obligated to make payments into or to maintain any sinking
fund for the redemption of HUBCO Series A Preferred Stock.
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Conversion Into Common Stock
Subject to the adjustment provisions described herein, the holder of any
shares of HUBCO Series A Preferred Stock at any time prior to the date fixed for
any redemption of the HUBCO Series A Preferred Stock will have the right to
surrender the certificates evidencing such shares and receive, in conversion of
each share of HUBCO Series A Preferred Stock, 1.5 shares (the "Conversion
Ratio") of HUBCO Common Stock.
The conversion privilege may be exercised at any time. HUBCO will not
deliver fractional shares of HUBCO Common Stock upon conversion of shares of
HUBCO Series A Preferred Stock. In lieu of any fractional share of HUBCO Common
Stock that would otherwise be deliverable upon conversion, HUBCO will pay an
amount in cash equal to the current market value of the fractional share,
computed on the basis of the market price on the last business day before the
conversion date. For this purpose, the "market price" on any business day is the
closing price per share of HUBCO Common Stock on the NASDAQ National Market
System or, if the shares of HUBCO Common Stock are then listed or admitted to
trading on any national securities exchange, the reported closing price per
share of HUBCO Common Stock on such exchange on such day.
The Conversion Ratio for the HUBCO Series A Preferred Stock is subject to
adjustment from time to time in certain circumstances upon a stock dividend,
stock split, dividend payment (other than a cash dividend), combination,
reclassification or issuance of rights or warrants with respect to HUBCO Common
Stock. No adjustment is made if (i)HUBCO takes the same action with respect to
the HUBCO Series A Preferred Stock in the same proportion as if each share of
HUBCO Series A Preferred Stock had been converted into shares of HUBCO Common
Stock at the then applicable Conversion Ratio immediately before the record date
for the determination of holders of HUBCO Common Stock entitled to receive the
dividends, rights, warrants, or distributions or (ii) such adjustment would not
require a change of at least 1% to the Conversion Ratio, except that any change
of less than 1% shall be carried forward to any subsequent change.
Voting Rights
Except as otherwise required by New Jersey corporate law and as otherwise
provided in HUBCO's certificate of incorporation, the holders of HUBCO Series A
Preferred Stock have no voting rights.
Under the New Jersey Business Corporation Act (the "BCA"), holders of HUBCO
Series A Preferred Stock are entitled to vote as a class on certain amendments
to HUBCO's certificate of
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incorporation, including any amendment which subordinates or otherwise adversely
affects the rights or preferences of the HUBCO Series A Preferred Stock and upon
any merger which requires a shareholder vote and would effect such an amendment
to the certificate of incorporation.
Under the terms of HUBCO's Certificate of Incorporation creating the HUBCO
Series A Preferred Stock, holders of HUBCO Series A Preferred Stock are entitled
to vote as a separate class on any merger, consolidation or sale of all or
substantially all of the assets of HUBCO if the transaction requires the
approval of the holders of the HUBCO Stock, except as explained below. If, in
connection with such a transaction, the HUBCO Series A Preferred Stock will be
redeemed prior to or simultaneously with the consummation of any such
transaction, then the approval of the holders of the HUBCO Series A Preferred
Stock would not be required and any vote by the HUBCO Series A Preferred Stock
holders may be disregarded. Also, in general, under the terms of HUBCO's
Certificate of Incorporation creating the HUBCO Series A Preferred Stock, any
amendment to the provisions of HUBCO's Certificate of Incorporation creating the
HUBCO Series A Preferred Stock would require the affirmative vote of a majority
of the outstanding shares of HUBCO Series A Preferred Stock.
Finally, if at any time HUBCO fails to pay for two quarters, whether or not
consecutive, the full quarter-annual dividends payable on the HUBCO Series A
Preferred Stock, the holders of the HUBCO Series A Preferred Stock have the
right, voting as a separate class, to elect a total of two directors to the
class of directors elected at the next annual meeting of stockholders (the
"Preferred Directors"). A dividend default with respect to the HUBCO Series A
Preferred Stock, giving rise to the right to elect the Preferred Directors, is
deemed to continue to exist until all accrued dividends on all outstanding
shares of the HUBCO Series A Preferred Stock have been paid to the end of the
past preceding quarterly dividend period. The Preferred Directors will continue
to serve only until the first meeting of stockholders after which the dividend
default has been fully cured. HUBCO has not failed to pay any quarter-annual
dividends due to the holders of the HUBCO Series A Preferred Stock as of the
date of this Proxy Statement-Prospectus.
Description of HUBCO Common Stock
The following description of the HUBCO Common Stock sets forth certain
general terms of the HUBCO Common Stock. The following summary does not purport
to be complete. For an additional description relating to the HUBCO Common
Stock, see "COMPARISON OF THE RIGHTS OF STOCKHOLDERS UNDER THE NATIONAL BANK ACT
AND THE NEW JERSEY BUSINESS CORPORATION ACT."
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Dividend Rights
The holders of HUBCO Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors of HUBCO out of funds legally
available therefor, subject to the preferential dividend rights of any preferred
stock that may be outstanding. The only statutory limitation is that such
dividends may not be paid when HUBCO is insolvent. Because funds for the payment
of dividends by HUBCO must come primarily from the earnings of the Bank, as a
practical matter, any restrictions on the ability of the Bank to pay dividends
act as restrictions on the amount of funds available for the payment of
dividends by HUBCO.
As a New Jersey chartered commercial bank, the Bank is subject to the
restrictions on the payment of dividends contained in the 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. In
addition, the FDIC has the authority to prohibit a state-chartered bank from
engaging in conduct which, in the FDIC's opinion, constitutes an unsafe or
unsound banking practice. Under certain circumstances, the FDIC could claim that
the payment of a dividend or other distribution by the Bank to HUBCO constitutes
an unsafe or unsound practice.
HUBCO is also subject to certain FRB policies which may, in certain
circumstances, limit its ability to pay dividends. The FRB policies require,
among other things, that a bank holding company maintain a minimum capital base.
The FRB would most likely seek to prohibit any dividend payment which would
reduce a holding company's capital below these minimum amounts.
At December 31, 1994, the Bank had $33 million available for the payment of
dividends to HUBCO. At December 31, 1994, HUBCO had $49 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.
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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 Common Stock
entitled to vote thereon is required to amend or repeal the provisions of
HUBCO's Certificate of Incorporation relating to the classification of the Board
of Directors and the removal of directors.
HUBCO's Certificate of Incorporation contains a "minimum price" provision.
In the event a "related person" (defined in the Certificate of Incorporation to
include persons who, together with their affiliates, own 10% or more of HUBCO's
Common Stock) propose to enter into a Business Combination (as defined in the
Certificate of Incorporation) with HUBCO, the proposed transaction will require
the affirmative vote of at least three-quarters of the outstanding shares
entitled to vote on the transaction, unless (i) the proposed transaction is
first approved by a majority of HUBCO's Board of Directors, and (ii) the
stockholders of HUBCO are offered consideration in an amount equal to or in
excess of an amount determined in accordance with a formula contained in the
Certificate of Incorporation. If both these tests are met, the proposed
transaction need only be approved by a majority of the outstanding shares
entitled to vote.
Liquidation Rights
In the event of liquidation, holders of HUBCO Common Stock are entitled to
receive ratably any assets distributed to stockholders, except that if shares of
preferred stock of HUBCO are outstanding at the time of liquidation, such shares
of preferred stock may have prior rights upon liquidation.
Assessment and Redemption
All outstanding shares of HUBCO Common Stock are fully paid and
nonassessable. HUBCO Common Stock is not redeemable at the option of the issuer
or the holders thereof.
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Preemptive and Conversion Rights
Holders of HUBCO Common Stock do not have conversion rights or preemptive
rights with respect to any securities of HUBCO.
Other Matters
HUBCO can (except in connection with certain business combinations) issue
new shares of authorized but unissued Common Stock or preferred stock without
shareholder approval.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS
UNDER THE NATIONAL BANK ACT AND
THE NEW JERSEY BUSINESS CORPORATION ACT
Urban is national bank incorporated under the National Bank Act, as amended
(the "National Bank Act"), and HUBCO is a business corporation incorporated in
New Jersey under the BCA. The rights of Urban stockholders are currently
governed by federal banking law applicable to national banks. At the Effective
Time, each Urban stockholder will become a stockholder of HUBCO and the rights
of stockholders of HUBCO are governed by New Jersey corporate law. The following
is a comparison of certain provisions of New Jersey corporate law and federal
law applicable to national banks. This summary does not purport to be complete
and is qualified in its entirety by reference to the National Bank Act and the
BCA, which statutes may change from time to time, and the Certificate of
Incorporation of HUBCO, which also may be changed.
Voting Requirements
The National Bank Act generally provides that an amendment to the articles
of association of a national bank requires the affirmative vote of a majority of
the outstanding stock entitled to vote thereof. The National Bank Act provides
that a national bank conversion into, merger into, or consolidation with, a
state bank or another national bank requires the affirmative vote of two-thirds
of each class of the bank's capital stock. Urban's Articles of Association do
not contain greater vote provisions than those required by the National Bank
Act.
Under the BCA, unless a greater vote is specified in the certificate of
incorporation, any amendment to a New Jersey corporation's certificate of
incorporation, the voluntary dissolution of the corporation, or the sale or
other disposition of all or substantially all of a corporation's assets
otherwise
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than in the ordinary course of business or the merger or consolidation of the
corporation with another corporation, requires in each case the affirmative vote
of a majority of the votes cast by stockholders of the corporation entitled to
vote thereon. HUBCO's Certificate of Incorporation presently does contain
provisions specifying a greater vote in certain circumstances. See "DESCRIPTION
OF CAPITAL STOCK OF HUBCO--Description of HUBCO Common Stock--Voting Rights."
Under the BCA, the holders of a class or series of shares are entitled to
vote as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the provisions of the certificate of
incorporation, if the amendment would exclude or limit their right to vote on
any matter, limit or deny their preemptive rights, cancel or otherwise adversely
affect their dividends which have accrued but have not been declared, create a
new class or series having or convertible into shares having rights or
preferences superior to the class or increase the rights or preference of any
class or series. In addition, notwithstanding any provision of the certificate
of incorporation, the holders of a class or series of shares whose rights or
preferences would be subordinated or otherwise adversely affected by a proposed
amendment are entitled to vote as a class if the amendment would affect their
shares in the following manner: (i) decrease the par value; (ii) effect a
conversion, exchange or reclassification of their shares; (iii) effect a
conversion or exchange of any shares of another class or series into their class
or series; (iv) change the designation or preferences, limitations or relative
rights of their shares; (v) change the shares into a different number of shares,
or into the same number of another class or series; or (vi) divide their shares
into a series or determine the designations, preferences, limitations or
relative rights of any such series, or authorize the board to take any such
action. The National Bank Act has no similar provisions regarding class voting
on amendments to a national bank's articles of association.
All stockholder voting rights of Urban are vested in the holders of Urban
Common Stock. All stockholder voting rights of HUBCO are vested in the holders
of HUBCO Common Stock, except that the holders of HUBCO Series A Preferred Stock
have certain limited voting rights pursuant to the BCA and the terms of HUBCO's
Certificate of Incorporation creating the HUBCO Series A Preferred Stock. See
"DESCRIPTION OF CAPITAL STOCK OF HUBCO--Description of HUBCO Series A Preferred
Stock--Voting Rights." In addition, the Board of Directors of HUBCO is
authorized, pursuant to HUBCO's Certificate of Incorporation, to issue
additional classes and series of preferred stock, with such voting rights as the
Board of Directors shall designate, without shareholder approval.
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Cumulative Voting
Under the BCA, stockholders of a New Jersey corporation do not have
cumulative voting rights in the election of directors unless the certificate of
incorporation so provides, and HUBCO's Certificate of Incorporation does not
presently provide for cumulative voting. Under the National Bank Act, in
electing directors, each national bank shareholder has the right to cast a
number of votes equal to the number of shares owned by such shareholder times
the number of directors to be elected and such shareholder may cumulate all such
votes for one nominee for director or distribute such votes among any two or
more such nominees.
Classified Board of Directors
The Certificate of Incorporation of HUBCO provides for a classified Board
of Directors, with one-third of the entire Board being elected each year and
with directors serving for terms of up to three years. The National Bank Act and
the By-laws of Urban provide for the election of the entire Urban Board of
Directors annually.
Rights of Dissenting Stockholders
Generally, stockholders of a national bank who dissent from a conversion,
merger or consolidation of the bank are entitled to appraisal rights. The
stockholders of Urban have statutory rights of appraisal with respect to the
Merger. See "THE MERGER--Rights of Dissenting Stockholders."
Stockholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, when the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) held of
record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
Stockholders Consent to Corporate Action
The National Bank Act contains no provision for shareholder voting by
written consent in lieu of a meeting.
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Except as otherwise provided by the certificate of incorporation (and
HUBCO's Certificate of Incorporation presently is silent on this issue), the BCA
permits any action required or permitted to be taken at any meeting of a
corporation's stockholders, other than the annual election of directors, to be
taken without a meeting upon the written consent of stockholders who would have
been entitled to cast the minimum number of votes necessary to authorize such
action at a meeting of stockholders at which all stockholders entitled to vote
were present and voting. The annual election of directors, if not conducted at a
stockholders' meeting, may only be effected by unanimous written consent. Under
the BCA, a stockholder vote on a plan of merger or consolidation, if not
conducted at a stockholders' meeting, may only be effected by either: (i)
unanimous written consent of all stockholders entitled to vote on the issue with
advance notice to any other stockholders, or (ii) written consent of
stockholders who would have been entitled to cast the minimum number of votes
necessary to authorize such action at a meeting, together with advance notice to
all other stockholders.
Dividends
The approval of the Comptroller of the Currency is required if dividends
declared in any year by a national bank exceed the bank's net profits for that
year combined with the retained profits of that bank for the two immediately
preceding years. A national bank is prohibited by law from declaring dividends
when the bank has losses equal to or exceeding the bank's undivided profits and
no dividends can be paid in an amount greater than the bank's net profits then
on hand after deducting losses and bad debts. However, the Comptroller of the
Currency is authorized to prohibit a national bank from paying dividends which
would constitute an unsafe and unsound banking practice. The Office of the
Comptroller of the Currency has indicated that it would generally be an unsafe
and unsound banking practice for national banks to pay dividends except out of
current operating earnings.
Unless there are other restrictions contained in its certificate of
incorporation (and HUBCO's Certificate of Incorporation presently contains
none), the BCA generally provides that a New Jersey corporation may declare and
pay dividends on its outstanding stock so long as the corporation is not
insolvent and would not become insolvent as a consequence of the dividend
payment. Because funds for the payment of dividends by HUBCO must come primarily
from the earnings of the Bank, as a practical matter, any restrictions on the
ability of the Bank to pay dividends act as restrictions on the amount of funds
available for the payment of dividends by HUBCO. For a description of the
regulatory restrictions on dividend payments
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by the Bank, see "DESCRIPTION OF CAPITAL STOCK OF HUBCO--Description of HUBCO
Common Stock--Dividend Rights."
Preemptive Rights
Under the BCA, stockholders of a corporation have only such preemptive
rights as may be provided in the articles of association or certificate of
incorporation, as the case may be. HUBCO's Certificate of Incorporation does not
provide stockholders with preemptive rights. Pursuant to Urban's Articles of
Association, holders of Urban Common Stock have preemptive rights to subscribe
for a pro rata portion of any additional shares of Urban Common Stock authorized
for sale.
Stockholder Protection Legislation
The New Jersey Shareholder Protection Act (the "NJSPA") prohibits certain
transactions involving an "interested shareholder" and a "resident domestic
corporation." An "interested shareholder" is one that is directly or indirectly
a beneficial owner of 10% or more of the voting power of the outstanding voting
stock of a resident domestic corporation. The NJSPA prohibits certain business
combinations between an interested shareholder and a resident domestic
corporation for a period of five years after the date the interested shareholder
acquired its stock, unless the business combination was approved by the resident
domestic corporation's board of directors prior to the stock acquisition date.
After the five-year period expires, the prohibition on certain business
combinations continues unless the combination is approved by the affirmative
vote of two-thirds of the voting stock not beneficially owned by the interested
stockholder, the combination is approved by the board prior to the interested
stockholder's stock acquisition date or certain fair price provisions are
satisfied. The National Bank Act contains no provisions similar to those set
forth in the NJSPA.
Liquidation Rights
In the event of liquidation, the holders of Urban Common Stock are entitled
to receive pro-rata any assets distributable to stockholders. Holders of HUBCO
Common Stock are entitled to receive pro-rata any assets distributable to
stockholders, after distribution to holders of outstanding shares, if any,
having prior rights upon liquidation.
Assessments and Redemption
Shares of Urban Common Stock are fully paid and non-assessable, except that
if the capital of Urban has been impaired
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by losses or otherwise, each holder of Urban Common Stock is required by law,
within three months after receiving notice thereof from the OCC, to pay his
pro-rata share of the resulting capital deficiency. Shares of HUBCO Common Stock
issued and delivered to the stockholders of Urban upon the consummation of the
Merger will be fully paid and non-assessable. Neither Urban Common Stock nor
HUBCO Common Stock is redeemable at the option of the issuers or holders
thereof.
COMPARATIVE MARKET PRICES OF HUBCO
AND URBAN COMMON STOCK
There is no established public trading market for the common stock of
Urban. As a result, no market prices are presented for the Urban Common Stock.
The HUBCO Common Stock is quoted on the NASDAQ--National Market System (NASDAQ
Symbol:HUBC). Prior to March 1, 1993, the HUBCO Common Stock was traded in the
American Stock Exchange ("AMEX"). The following table sets forth, for the
indicated periods, the high and low closing prices per share of HUBCO's Common
Stock as reported by NASDAQ or AMEX, as the case may be. On February 13, 1995,
the last full trading day before public announcement of the signing of the
Agreement, the high and low prices for the HUBCO Common Stock were $16.25 and
$16.00. As of February 27, 1995 HUBCO had approximately 1,694 shareholders of
record and Urban had approximately 332 shareholders of record.
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HUBCO
High Low Dividends
---- --- ---------
1993:
- -----
1st Quarter ................ $16.42 $10.67 $.07
2nd Quarter ................ 16.25 12.67 .07
3rd Quarter ................ 16.83 13.42 .07
4th Quarter ................ 16.17 13.33 .10
1994:
- -----
1st Quarter ................ 15.83 13.42 .08
2nd Quarter ................ 15.00 13.33 .08
3rd Quarter ................ 15.17 13.13 .10
4th Quarter ................ 15.00 12.50 .10
1995:
- -----
1st Quarter ................ 17.38 14.67 .15
2nd Quarter
(through ________, 1995)...
HUBCO maintains a stock repurchase program pursuant to which HUBCO is
authorized to repurchase up to 10% of the outstanding HUBCO capital stock per
year. HUBCO commenced this program in 1993. Purchases may be made from time to
time in the open market or in privately negotiated transactions, depending upon
market conditions and subject to regulatory considerations. The timing, price,
quantity and manner of purchases are at the discretion of HUBCO's officers. The
shares acquired by HUBCO may be held in treasury to be used for conversion of
the HUBCO Series A Preferred Stock, in satisfaction of stock options and grants
of restricted stock and in connection with the issuance of common stock in
acquisitions.
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PRO FORMA COMBINED FINANCIAL INFORMATION
Pro Forma Combined Financial Information
The following unaudited pro forma financial information takes into account
HUBCO's recently completed acquisitions of Washington Bancorp, Inc. (the
"Washington Merger") and Jefferson National Bank ("Jefferson") and the Merger.
The Washington Merger, consummated on July 1, 1994, has been accounted for as a
purchase; accordingly, HUBCO's historical financial statements reflect the
consolidated results of operations of Washington Bancorp, Inc. ("Washington")
solely for periods on and after July 1, 1994. In contrast, the Jefferson merger,
consummated on April 5, 1995, has been accounted for as a pooling of interests
and the Merger is intended to be accounted for as pooling of interests. Under
the pooling of interests method of accounting, HUBCO's consolidated financial
statements will be retroactively adjusted after the mergers to combine the
results of the operations of HUBCO, Jefferson and Urban for periods prior to the
consummation of the mergers.
The following unaudited Pro Forma Combined Condensed Balance Sheet of
HUBCO, Jefferson and Urban at December 31, 1994 gives effect to the Urban and
Jefferson mergers as if they had been consummated on that date, based on
adjustments described in the accompanying Notes to the Pro Forma Combined
Condensed Unaudited Financial Statements (the "Notes").
Also presented are three separate unaudited Pro Forma Combined Condensed
Statements of Income, covering each of the years ended December 31, 1994 (the
"1994 Pro Forma Statement"), December 31, 1993 (the "1993 Pro Forma Statement"),
and December 31, 1992 (the "1992 Pro Forma Statement"). These unaudited Pro
Forma Combined Condensed Statements of Income reflect the following:
o The 1994 Pro Forma Statement gives effect to the Washington Merger and
the Jefferson and Urban mergers as if such transactions had occurred
on January 1, 1994 and combines the results of operations of Hubco,
Washington, Jefferson and Urban for the year ended December 31, 1994,
subject to the adjustments set forth in the Notes.
o The 1993 Pro Forma Statement gives effect to the Washington Merger and
the Jefferson and Urban mergers as if such transactions had occurred
on January 1, 1993 and combines the results of operations of HUBCO,
Washington, Jefferson and Urban for the year ended December 31, 1993,
subject to the adjustments set forth in the Notes.
o Due to differences in the disclosures applicable to the purchase and
pooling of interests methods
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of accounting, the 1992 Pro Forma Statements give effect to the
Jefferson and Urban mergers as if they had occurred on January 1,
1992, but do not give effect to the Washington Merger. Thus, the 1992
Pro Forma Statements combine the results of operations of HUBCO,
Jefferson and Urban for the periods presented, but do not include any
information regarding Washington. Any comparison of the 1992 Pro Forma
Statements with pro forma data for other periods 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.
The unaudited pro forma information presented herein has been prepared by
HUBCO management based upon the historical financial statements and related
notes thereto of Hubco, Washington, Jefferson and Urban. The Pro Forma Combined
Condensed Statements of Income are not necessarily indicative of the results of
operations which would have been achieved had these transactions 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.
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For the Years Ended
December 31,
------------------------
1994 1993 1992
---- ---- ----
CASH DIVIDENDS DECLARED PER
COMMON SHARE:
HUBCO--Actual (1) ........................ $ 0.36 $ 0.31 $ 0.27
Jefferson--Actual (1) .................... -- -- 0.50
Urban--Actual (l) ........................ -- -- --
Urban, pro forma equivalent (2) .......... 0.78 0.67 0.59
NET INCOME (LOSS) PER COMMON
SHARE:
HUBCO--Actual:
Primary ............................ 1.69 1.37 1.06
Fully diluted ...................... 1.64 1.37 1.06
Jefferson--Actual ........................ (4.08) (6.00) (4.95)
Urban--Actual ............................ 1.51 1.04 0.46
HUBCO, Washington and Jefferson,
pro forma:
Primary (3) ........................ 1.27 1.07 N.A.*
Fully diluted (4) .................. 1.24 1.06 N.A.*
HUBCO, Washington, Jefferson
and Urban, pro forma:
Primary (5) ........................ 1.17 0.97 N.A.*
Fully diluted (6) .................. 1.15 0.97 N.A.*
HUBCO and Jefferson, pro forma
Primary (3) ........................ N.A.* N.A.* 0.87
Fully diluted (4) .................. N.A.* N.A.* 0.87
HUBCO, Jefferson and Urban, pro forma
Primary (5) ........................ N.A.* N.A.* 0.75
Fully diluted (6) .................. N.A.* N.A.* 0.75
Urban, pro forma equivalent
Primary (7) ........................ 2.54 2.10 1.63
Fully diluted (8) .................. 2.50 2.10 1.63
NET BOOK VALUE PER COMMON SHARE:
HUBCO--Actual............................. 8.33 7.83 7.25
Jefferson--Actual ........................ 22.76 27.31 33.31
Urban--Actual ............................ 11.98 12.97 11.93
HUBCO and Jefferson, pro forma (9) ....... 8.24 7.87 7.46
HUBCO, Jefferson and Urban, .............. 7.77 7.55 7.11
pro forma (10)
Urban, pro forma equivalent (11) ......... 16.86 16.38 15.43
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* Not applicable. See "PRO FORMA COMBINED FINANCIAL INFORMATION."
(1) For information regarding HUBCO's, Jefferson's and Urban's dividends, and
the market price of HUBCO Common Stock, see "MARKET AND DIVIDEND DATA".
(2) Represents the dividend declared on HUBCO's Common Stock during the
respective periods multiplied by the assumed 2.17 Exchange Ratio.
(3) Reflects primary net income per common share on a pro forma combined basis
(including for 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
dividend applicable to HUBCO's Series A Preferred Stock (which was first
issued on July 1, 1994) and dividing such amount by the sum of (i) the
weighted average number of shares of HUBCO Common Stock outstanding during
each period and (ii) 610,829 shares of HUBCO Common Stock assumed to be
issued pursuant to the Jefferson Merger.
(4) Reflects fully diluted net income per common share on a pro forma combined
basis (including for 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 dividing pro forma net income amounts by the
sum of (i) the weighted average number of shares of HUBCO Common Stock
outstanding during each period, (ii) 610,829 shares of HUBCO Common Stock
assumed to be issued pursuant to the Jefferson Merger and (iii) 1,183,217 in
1994 and 1,196,717 in 1993 shares of HUBCO Common Stock issuable upon the
assumed full conversion of HUBCO's Series A Preferred Stock.
(5) Reflects primary net income per common share on a pro forma combined basis
(including for 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
dividend applicable to HUBCO's Series A Preferred Stock (which was first
issued on July 1, 1994) and dividing such amount by the sum of (i) the
weighted average number of shares of HUBCO Common Stock outstanding during
each period, (ii) 610,829 shares of HUBCO Common Stock assumed to be issued
pursuant to the Jefferson Merger and (iii) 2,135,002 shares of HUBCO Common
Stock assumed to be issued pursuant to the Urban Merger.
(6) Reflects fully diluted net income per common share on a pro forma combined
basis (including for 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 dividing pro forma net income amounts by the
sum of (i) the weighted average
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number of shares of HUBCO Common Stock outstanding during each period, (ii)
610,829 shares of HUBCO Common Stock assumed to be issued pursuant to the
Jefferson Merger, (iii) 1,183,217 in 1994 and 1,196,717 in 1993 shares of
HUBCO Common Stock issuable upon the assumed full conversion of HUBCO's
Series A Preferred Stock and (iv) 2,135,002 shares of HUBCO Common Stock
assumed to be issued pursuant to the Urban Merger.
(7) Represents the amount computed pursuant to Note 5 above multiplied by the
assumed 2.17 Exchange Ratio.
(8) Represents the amount computed pursuant to Note 6 above multiplied by the
assumed 2.17 Exchange Ratio.
(9) Represents the pro forma combined net book value of HUBCO and Jefferson
attributable to common shares, divided by the sum of (i) the number of
shares of HUBCO Common Stock outstanding (adjusted to reflect the Stock
Split) and (ii) 610,829 shares of HUBCO Common Stock assumed to be issued
pursuant to the Jefferson Merger.
(10) Represents the pro forma combined net book value of HUBCO, Jefferson and
Urban attributable to common shares, divided by the sum of (i) number of
shares of HUBCO Common Stock outstanding (adjusted to reflect the Stock
Split), (ii) 610,829 shares of HUBCO Common Stock assumed to be issued
pursuant to the Jefferson Merger and (iii) 2,135,002 shares of HUBCO Common
Stock assumed to be issued pursuant to the Urban Merger.
(11) Represents the amount computed pursuant to Note 10 above multiplied by the
assumed 2.17 Exchange Ratio.
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<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1994
(Unaudited)
Pro Forma
Historical Pro Forma Combined Historical Pro Forma
-------------------- Adjustments HUBCO and ---------- Adjustments Pro Forma
HUBCO Jefferson Jefferson Jefferson Urban Urban Combined
----- --------- ----------- --------- ---------- ----------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks ............. $ 52,832 $ 3,916 $ -- $ 56,748 $ 14,750 $-- $ 71,498
Securities .......................... 478,498 27,672 (27,672)(A} 478,498 66,287 -- 544,785
Securities available for sale ....... 58,731 4,987 26,228 (B) 89,946 48,289 (12)(AA) 138,223
Federal funds sold .................. -- 9,640 -- 9,640 14,000 -- 23,640
Loans ............................... 729,174 42,862 1,624 (C) 773,660 90,347 399 (BB) 864,406
Allowance for possible loan losses .. (13,228) (1,845) (254)(D) (15,327) (1,486) (46)(CC) (16,859)
Premises and equipment .............. 32,734 805 -- 33,539 1,791 -- 35,330
Other real estate ................... 3,194 2,207 (1,370)(E) 4,031 3,127 (353)(DD) 6,805
Intangible assets ................... 9,645 -- -- 9,645 -- -- 9,645
Other assets ........................ 25,542 1,103 486 (F) 27,131 4,219 1 (EE} 31,351
---------- ------- --------- ---------- -------- ---- ----------
Total Assets ........... $1,377,122 $91,347 ($ 958) $1,467,511 $241,324 ($11) $1,708,824
========== ======= ========= ========== ======== ==== ==========
</TABLE>
-72-
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1994
(Unaudited)
<CAPTION>
Pro Forma
Historical Pro Forma Combined Historical Pro Forma
---------------------- Adjustments HUBCO and -------- Adjustments Pro Forma
HUBCO Jefferson Jefferson Jefferson Urban Urban Combined
---------- --------- --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Deposits ....................................... $1,199,733 $85,376 $-- $1,285,109 $206,435 $ -- $1,491,544
Short term borrowings .......................... 30,353 -- -- 30,353 20,305 -- 50,658
Other liabilities .............................. 23,016 826 -- 23,842 2,789 -- 26,631
---------- ------- ----- ---------- -------- -------- ----------
Total Liabilities ........................ 1,253,102 86,202 -- 1,339,304 229,529 -- 1,568,833
---------- ------- ----- ---------- -------- -------- ----------
Subordinated debentures ........................ 25,000 -- -- 25,000 -- -- 25,000
---------- ------- ----- ---------- -------- -------- ----------
Stockholders' Equity:
Preferred stock ................................ 19,147 -- -- 19,147 -- -- 19,147
Common stock ................................... 18,492 1,357 (271)(G) 19,578 1,230 2,566 (FF) 23,374
Additional paid in capital ..................... 49,048 1.474 10 (H) 50,532 1,329 (2,573)(GG) 49,288
Retained earnings .............................. 25,647 2,420 -- 28,067 11,692 -- 39,759
Unreallzed holding gain (loss) on
securities available for sale,
net of Income taxes .......................... (325) (106) (697)(I) (1,128) (2,456) (4)(HH) (3,588)
Treasury stock ................................. (11,723) -- -- (11,723) -- -- (11,723)
Restricted stock awards ........................ (1,266) -- -- (1,266) -- -- (1,266)
---------- ------- ----- ---------- -------- -------- ----------
Total stockholders' equity ............... 99,020 5,145 (958) 103,207 11,795 (11) 114,991
---------- ------- ----- ---------- -------- -------- ----------
Total liabilities and
stockholders' equity .................... $1,377,122 $91,347 ($958) $1,467,511 $241,324 ($ 11) $1,708,824
========== ======= ===== ========== ======== ======== ==========
See accompanying notes to pro forma combined condensed unaudited financial statements.
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31, 1994
Washington
Historical Pro Forma
Six Months Pro Forma Combined Pro Forma
HUBCO Ended Adjustments HUBCO and Jefferson Adjustments
Historical June 30, 1994 Washington Washington Historical Jefferson
---------- ------------- ----------- ---------- ---------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans ......................................... $50,125 $6,728 ($452)(a) $56,401 $4,110 --
Securities .................................... 33,302 2,220 142 (b) 35,716 1,426 --
53 (c]
(1)(d)
Federal funds sold ............................ 476 50 -- 526 420 --
------- ----- ------- ------- ----- ----
Total interest income ....................... 83,903 8,998 (258) 92,643 5,956 --
------- ----- ------- ------- ----- ----
Interest expense:
Deposits ...................................... 23,474 3,625 793 (e) 27,892 2,121 --
Borrowings .................................... 672 10 430 (f) 1,112 -- --
Subordinated debt ............................. 1,736 -- -- 1,736 -- --
------- ----- ------- ------- ----- ----
Total interest expense ...................... 25,882 3,635 1,223 30,740 2,121 --
------- ----- ------- ------- ----- ----
Net interest income before provision for
possible loan losses ...................... 58,021 5,363 (1,481) 61,903 3,835 --
Provision for possible loan losses............... 3,000 825 -- 3,825 425 235 (J}
------- ----- ------- ------- ----- ----
Net interest income after provision for
possible loan losses....................... 55,021 4,538 (1,481) 58,078 3,410 (235)
------- ----- ------- ------- ----- ----
Non-interest income 9,990 473 -- 10,463 471 --
------- ----- ------- ------- ----- ----
Operating expenses:
Salaries and other employee benefits .......... 19,891 1,684 -- 21,575 1,572 --
Occupancy and equipment expense ............... 6,435 395 18 (g) 6,848 450 --
Other operating expenses ...................... 11,678 3,470 500 (h) 15,648 2,718 (235}(J)
------- ----- ------- ------- ----- ----
Total operating expenses .................... 38,004 5,549 518 44,071 4,740 (235)
------- ----- ------- ------- ----- ----
Income (loss) before income taxes ........... 27,007 (538) (1,999) 24,470 (859) --
Income tax provision (benefit) .................. 10,076 (123) (760)(i) 9,193 64 --
------- ----- ------- ------- ----- ----
Net Income (loss) ........................... $16,931 ($415) ($1,239) $15,277 ($923) $--
======= ===== ======= ======= ===== ====
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Combined
HUBCO, Pro Forma
Washington Urban Adjustments Pro Forma
and Jefferson Historical Urban Combined
------------- ---------- ----------- ---------
(In thousands, except per share amounts)
Interest income:
<S> <C> <C> <C> <C>
Loans ......................................... $ 60,511 $ 7,796 $ -- $ 68,307
Securities .................................... 37,142 5,565 -- 42,707
Federal funds sold ............................ 946 193 -- 1,139
-------- -------- ----- --------
Total interest income ....................... 98,599 13,554 -- 112,153
-------- -------- ----- --------
Interest expense:
Deposits....................................... 30,013 3,673 -- 33,686
Borrowings .................................... 1,112 581 -- 1,693
Subordinated debt ............................. 1,736 -- -- 1,736
-------- -------- ----- --------
Total interest expense ...................... 32,861 4,254 -- 37,115
-------- -------- ----- --------
Net interest income before provision for
possible loan losses ...................... 65,738 9,300 -- 75,038
Provision for possible loan losses .............. 4,485 125 50(II) 4,660
-------- -------- ----- --------
Net interest income after provision for
possible loan losses ...................... 61,253 9,175 (50) 70,378
-------- -------- ----- --------
Non-interest income ............................. 10,934 1,367 -- 12,301
-------- -------- ----- --------
Operating expenses:
Salaries and other employee benefits........... 23,147 4,210 -- 27,357
Occupancy and equipment expense ............... 7,298 1,430 -- 8,728
Other operating expenses ...................... 18,131 2,716 (50)(II) 20,797
-------- -------- ----- --------
Total operating expenses .................... 48,576 8,356 (50) 56,882
-------- -------- ----- --------
Income (loss) before income taxes ........... 23,611 2,186 -- 25,797
Income tax provision (benefit) .................. 9,257 752 -- 10,009
-------- -------- ----- --------
Net Income (loss) ........................... $ 14,354 $ 1,434 $ -- $ 15,788
======== ======== ===== ========
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31, 1994
Washington
Historical Pro Forma
Six Months Pro Forma Combined Pro Forma
HUBCO Ended Adjustments HUBCO and Jefferson Adjustments
Historical June 30, 1994 Washington Washington Historical Jefferson
---------- ------------- ---------- ---------- ---------- -----------
<S> <C> <C>
Income per share (x):
Primary (y} ........................... $1.69 $1.45
Fully diluted ......................... 1.64 1.40
Book Value per common share (x) ......... 8.33 8.33
Dividends per common share (x) .......... 0.36 0.36
Weighted average number of
common shares outstanding (x) ......... 9,751 9,751
Weighted average number of
fully diluted common
shares outstanding (x) ................ 10,353 10,948
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Combined
HUBCO, Pro Forma
Washington Urban Adjustments Pro Forma
and Jefferson Historical Urban Combined
------------- ---------- ----------- ---------
<S> <C> <C>
Income per share (x):
Primary (y} $1.27 $1.17
Fully diluted 1.24 1.15
Book Value per common share (x) 8.24 7.77
Dividends per common share (x) 0.36 0.36
Weighted average number of
common shares outstanding (x) 10,362 12,497
Weighted average number of
fully diluted common
shares outstanding (x) 11,559 13,694
</TABLE>
(x) Shares Issued and outstanding have been adjusted for the Stock Split.
(y) After reduction of $431 ($.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 Jefferson financlal information and the pro
forma combined HUBCO, Washington, Jefferson and Urban financial information.
See accompanying notes to pro forma combined condensed unaudited financial
statements.
-75-
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31. 1993
<CAPTION>
Pro Forma
Pro Forma Combined
HUBCO Washington Adjustments HUBCO and Jefferson
Historical Historical Washington Washington Historical
---------- ---------- ----------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans ..................................... $43,546 $14,782 ($ 904)(a) $57,424 $4,896
Securities ................................ 23,442 3,604 285 (b) 27,435 781
105 (c)
(1)(d)
Federal funds sold ........................ 771 172 -- 943 442
------- ------- ------- ------- -------
Total interest income ................... 67,759 18,558 (515) 85,802 6,119
------- ------- ------- ------- -------
Interest expense:
Deposits .................................. 20,379 8,795 1,586 (e) 30,760 2,311
Borrowings ................................ 362 18 861 (f) 1,241 --
------- ------- ------- ------- -------
Total interest expense .................. 20,741 8,813 2,447 32,001 2,311
------- ------- ------- ------- -------
Net interest income before
provision for possible loan losses .... 47,018 9,745 (2,962) 53,801 3,808
Provision for possible loan losses .......... 3,600 420 -- 4,020 1,156
------- ------- ------- ------- -------
Net interest Income after
provision for possible loan losses .... 43,418 9,325 (2,962) 49,781 2,652
------- ------- ------- ------- -------
Non-interest income ......................... 8,606 949 -- 9,555 489
------- ------- ------- ------- -------
Operating expenses:
Salaries and other employee benefits ...... 16,501 3,468 -- 19,969 1,469
Occupancy and equipment expense ........... 5,016 797 36 (g) 5,849 412
Other operating expenses .................. 8,454 4,503 1,001 (h) 13,958 2,554
------- ------- ------- ------- -------
Total operating expenses ................ 29,971 8,768 1,037 39,776 4,435
------- ------- ------- ------- -------
Income (loss) before income taxes ....... 22,053 1,506 (3,999) 19,560 (1,294)
Income tax provision (benefit) .............. 7,851 (1,018) (1,520)(i) 5,313 62
------- ------- ------- ------- -------
Net income (loss) ....................... $14,202 $ 2,524 ($2,479) $14,247 ($1,356)
======= ======= ======= ======= =======
Income per share(x):
<CAPTION>
Pro Forma
Combined
Pro Forma HUBCO. Pro Forma
Adjustments Washingloft Urban Adjustments Pro Forma
Jefferson and Jefferson Historical Urban Combined
----------- ------------- ---------- ----------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Interest income:
Loans ..................................... -- $62,320 $ 7,698 $-- $ 70,018
Securities ................................ -- 28,216 4,780 -- 32,996
Federal funds sold ........................ -- 1,385 194 -- 1,579
----- ------- ------- ---- --------
Total interest income ................... -- 91,921 12,672 -- 104,593
----- ------- ------- ---- --------
Interest expense:
Deposits .................................. -- 33,071 3,914 -- 36,985
Borrowings ................................ -- 1,241 545 -- 1,786
----- ------- ------- ---- --------
Total interest expense .................. -- 34,312 4,459 -- 38,771
----- ------- ------- ---- --------
Net interest income before
provision for possible loan losses .... -- 57,609 8,213 -- 65,822
Provision for possible loan losses .......... 189 (J) 5,365 118 75 (II) 5,558
----- ------- ------- ---- --------
Net interest income after
provision for possible loan losses .... (189) 52,244 8,095 (75} 60,264
----- ------- ------- ---- --------
Non-interest income ......................... -- 10,044 1,484 -- 11,528
----- ------- ------- ---- --------
Operating expenses:
Salaries and other employee benefits ...... -- 21,438 3,698 -- 25,136
Occupancy and equipment expense ........... -- 6,261 1,340 -- 7,601
Other operating expenses .................. (189) (J) 16,323 2,869 (75)(II) 19,117
----- ------- ------- ---- --------
Total operating expenses ................ (189} 44,022 7,907 (75) 51,854
----- ------- ------- ---- --------
Income (loss) before income taxes ....... -- 18,266 1,672 -- 19,938
Income tax provision (benefit) .............. -- 5,375 647 -- 6,022
----- ------- ------- ---- --------
Net income (loss) ........................... $ -- $12,891 $ 1,025 $-- $ 13,916
===== ======= ======= ==== ========
Income per share (x):
</TABLE>
-76-
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31, 1993
<CAPTION>
Pro Forma
Pro Forma Combined
HUBCO Washington Adjustments HUBCO and Jefferson
Historical Historical Washington Washington Historical
---------- ---------- ----------- ----------- ----------
<S> <C> <C>
Primary (y) ............................... $1.37 $1.26
Fully diluted ............................. 1.37 1.23
Dividends per common share (x) .............. 0.31 0.31
Weighted average number of
common shares outstanding (x) ............. 10,364 10,364
Weighted average number of
fully diluted common
shares outstanding (x) .................... 10,364 11,560
<CAPTION>
Pro Forma
Combined
Pro Forma HUBCO. Pro Forma
Adjustments Washington Urban Adjustments Pro Forma
Jefferson and Jefferson Historical Urban Combined
----------- ------------- ---------- ----------- ---------
<S> <C> <C>
Primary (y) ............................... $1.07 $0.97
Fully diluted ............................. 1.06 0.97
Dividends per common share (x) .............. 0.31 0.31
Weighted average number of
common shares outstanding (x) ............. 10,975 13,110
Weighted average number of
fully diluted common
shares outstanding (x) .................... 12,171 14,306
(x) Shares issued and outstanding have been adjusted for the Stock Split.
(y) After reduction of $1,149 ($1.44 per share) of Series A Preferred Stock dividends for the pro forma combined HUBCO and
Washington financial information and the pro forma combined HUBCO, Washington and Jefferson financial information and the
pro forma combined HUBCO, Washington, Jefferson and Urban financial information.
See accompanying notes to pro forma combined condensed unaudited financial statements.
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31, 1992
Pro Forma
Historical Pro Forma Combined Pro Forma
------------------ Adjustments HUBCO and Urban Adjustments Pro Forma
Hubco Jefferson Jefferson Jefferson Historical Urban Combined
----- --------- ----------- --------- ---------- ----------- ---------
(In thousands, except per share amounts)
Interest income:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans ........................................ $45,406 $ 6,1O5 $ -- $51,511 $ 9,432 $-- $60,943
Securities ................................... 20,898 908 -- 21,806 3,517 -- 25,323
Federal funds sold ........................... 1,342 418 -- 1,760 270 -- 2,030
------- ------- ----- ------- ------- ---- -------
Total interest income ...................... 67,646 7,431 -- 75,077 13,219 -- 88,296
------- ------- ----- ------- ------- ---- -------
Interest expense:
Deposits ..................................... 26,094 3,454 -- 29,548 5,068 -- 34,616
Borrowings ................................... 539 -- -- 539 206 -- 745
------- ------- ----- ------- ------- ---- -------
Total interest expense ..................... 26,633 3,454 -- 30,087 5,274 -- 35,361
------- ------- ----- ------- ------- ---- -------
Net interest income before provision
for possible loan losses ................. 41,013 3,977 -- 44,990 7,945 -- 52,935
Provision for possible loan losses ............. 4,116 1,718 422 (J) 6,256 1,598 90 (II) 7,944
------- ------- ----- ------- ------- ---- -------
Net interest income after provision
for possible loan losses .................. 36,897 2,259 (422) 38,734 6,347 (90) 44,991
------- ------- ----- ------- ------- ---- -------
Non-interest income ............................. 7,657 324 -- 7,981 2,736 -- 10,717
------- ------- ----- ------- ------- ---- -------
Operating expenses:
Salaries and other employee benefits .......... 13,704 1,374 -- 15,078 3,884 -- 18,962
Occupancy and equipment expense ............... 4,942 383 -- 5,325 1,351 -- 6,676
Other operating expenses ...................... 15,703 2,125 (422)(J) 17,406 3,146 (90)(II) 20,462
------- ------- ----- ------- ------- ---- -------
Total operating expenses .................... 34,349 3,882 (422) 37,809 8,381 (90) 46,100
------- ------- ----- ------- ------- ---- -------
Income (loss) before income taxes ........... 10,205 (1,299) -- 8,906 702 -- 9,608
Income tax provision (benefit) .................. 564 (181) -- 383 254 -- 637
------- ------- ----- ------- ------- ---- -------
Net Income (loss) ........................... $ 9,641 $(1,118) $ -- $ 8,523 $ 448 $-- $ 8,971
======= ======= ===== ======= ======= ==== =======
Income per share (x):
</TABLE>
-78-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
For the year ended December 31, 1992
Pro Forma
Historical Pro Forma Combined Pro Forma
------------------ Adjustments HUBCO and Urban Adjustments Pro Forma
Hubco Jefferson Jefferson Jefferson Historical Urban Combined
----- --------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C>
Primary ............................. $1.06 $0.87 $0.75
Fully diluled ....................... 1.06 0.87 0.75
Dividends per common share (x) ........ 0.27 0.27 0.27
Weighted average number of
common shares outstanding (x} ........ 9,136 9,747 11,882
Weighted average number of
fully diluted common
shares outstanding (x) ............... 9,136 9,747 11,882
</TABLE>
(x) Shares issued and outstanding have been adjusted for the Stock Split.
See accompanying notes to pro forma combined condensed financial statements.
-79-
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED
UNAUDITED FINANCIAL STATEMENTS
1) The following is a summary of the adjustments required to the pro forma
combined condensed statements of income of HUBCO and Washington assuming the
adjustments were made as of the beginning of the periods presented:
(a) To record the amortization on a straight line basis (which is not
materially different than the level yield basis) of the premium on the
loan potfolio 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 it estimated life of 1.6 years.
(c) To reflect an increase of interest income from the proceeds of
Washington stock options at 6.25%.
(d) To reflect a loss of interest income for the use of funds for
acquisition expenses at 6.25%.
(e) To record the amortization of the premium on deposits.
(f) To reflect an increase in the cost of funds for cash payments to
Washington shareholders at 4.50%.
(g) To reflect an increase in depreciation expense reflecting the net
increase in carrying value of premises and equipment.
(h) To reflect the increase in expense from the amortization of cost over
fair value of the Washington Merger based on a 5 year life.
(i) To reflect the anticipated tax benefit on the pro forma adjustments.
The following summarizes the acquisition of Jefferson by HUBCO in a pooling of
interest transaction as reflected in the accompanying pro forma combined
condensed unaudited financial statements.
2) Securities
Transfer of Jefferson's "Held to Maturity" portfolio
to HUBCO's "Available for Sale" portfolio .................. ($27,672)(A)
=======
3) Securities Available for Sale
Transfer of Jefferson's "Held to Maturity" portfolio
to HUBCO's "Available for Sale" portfolio .................... $27,672
To record the mark-to-market on Jefferson's "Held to
Maturity" portfolio transferred to HUBCO's "Available
for Sale" portfolio .......................................... (1,054)
To eliminate Jefferson's shares currently owned
by HUBCO ..................................................... (390)
-------
$262,228 (B)
=======
4) Loans
To reclassify Jefferson's in-substance foreclosures
to loans to conform to HUBCO's implementation
of Statement of financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan."
("SFAS 114") ................................................. $ 1,624 (C)
=======
-80-
<PAGE>
5) Allowance for Possible Loan Losses
To reclassify Jefferson's valuation allowance on
in-substance foreclosures to the allowance for possible
loan losses to conform to HUBCO's implementation of
SFAS 114 ..................................................... ($254}(D)
====
6) Other Real Estate
To reclassify Jefferson's in-substance foreclosures
to loans to conform to HUBCO's implementation of
SFAS 114 .................................................... ($1,624)
To reclassify Jefferson's valuation allowance on
in-substance foreclosures to the allowance for possible
loan losses to conform to HUBCO's implementation of
SFAS 114 ..................................................... 254
------
($1,370)(E)
======
7) Other Assets
To record the deferred tax adjustment relating to
the mark-to-market on the Jefferson "Held to Maturity"
portfolio transferred to HUBCO's "Available for
Sale" potfolio ................................................ $401
To record the deferred tax adjustment related to the
unrealized holding loss on the Jefferson "Available for
Sale" portfolio transferred to HUBCO's "Available for
Sale" portfolio ............................................... 40
To eliminate the deferred tax gain on Jefferson stock
currently owned by HUBCO ...................................... 45
----
$486 (F)
====
8) Common Stock
Retirement of Jefferson's outstanding common stock ........... ($1,357}
Issuance of 610,829 shares of HUBCO Common Stock with a
stated value of $1.78 per share .............................. 1,086
------
($271)(G)
====
-81-
<PAGE>
9) Additional Paid in Surplus
To transfer excess common stock to additional paid
in surplus .................................................. $271
To eliminate Jefferson's shares currently owned
by HUBCO .................................................... (261)
---
S10 (H)
===
10) Unrealized Holding Gain (Loss) on Securities
Available for Sale
Eliminate unrealized holding gain on Jefferson Common
Stock held by HUBCO ......................................... ($84)
To record the unrealized holding loss on the Jefferson
"Available for Sale" portfolio for the related deferred
taxes resulting from the transfer to HUBCO's "Available
for Sale" portfolio ......................................... 40
To record the unrealized holding loss, net of the
related deferred tax adjustment on the transfer of the
Jefferson "Held to Maturity" portfolio to HUBCO's
"Available for Sale" portfolio. ............................... (653)
----
($697)(I)
====
11) Other Real Estate
The Pro Forma Combined Condensed Statements of Income
for the years ended December 31, 1994, 1993 and 1992 have
been adjusted to reclassify Jefferson's ORE valuation
reserves on in-substance foreclosures to HUBCO's provision
for possible loan losses to conform to HUBCO's implementation
of SFAS 114. Accordingly the provision for possible loan
losses has been increased and other operating expenses
decreased by $235, $189 and $422, respectively .............. (J)
12} Shopper's Charge Account Transaction
On December 7, 1994, the Bank acquired Shopper's Charge Accounts
Co. ("Shoppers") for approximately $16.3 million in cash
in a transaction accounted for under the purchase method of
accounting. Accordingly, the Bank recorded approximately $63.4
million in assets and $46.9 million in liabilities. The
difference reflects the stockholders' equity of Shoppers of $13.2
million and the purchase accounting adjustments of
$3.3 million. HUBCO estimates that no goodwill will arise from
the transaction and that the acquisition of Shoppers will not
have a material effect on the financial condition or results
of operations of HUBCO as of and for the year ended
December 31, 1994.
-82-
<PAGE>
The following summarizes the acquisition of Urban by HUBCO
in a pooling of interest transaction as reflected in the
accompanying pro forma combined condensed unaudited
financial statements.
13) Securities Available for Sale
To eliminate Urban shares currently owned by HUBCO .......... ($12) (AA)
===
14) Loans
To reclassify Urban's in-substance foreclosures
to loans to conform to HUBCO's implementation of
SFAS 114 .................................................... $399 (BB)
====
15) Allowance for Possible Loan Losses
To reclassify Urban's valuation allowance on
in-substance foreclosures to the allowance for possible
loan losses to conform to HUBCO's implementation of
SFAS 114 .................................................... ($46} (CC}
===
16) Other Real Estate
To reclassify Urban in-substance foreclosures
to loans to conform to HUBCO's implementation of
SFAS 114 .................................................... ($399)
To reclassify Urban's valuation allowance on
in-substance foreclosures to the allowance for possible
loan losses to conform to HUBCO's implementation of
SFAS 114 .................................................... 46
----
($353) (DD)
====
17) Other Assets
To eliminate the deferred tax gain on Urban stock
currently owned by HUBCO .................................... $1 (EE}
===
-83-
<PAGE>
18) Common Stock
Retirement of Urban's outstanding common stock .............. ($1,230)
Issuance of 2,135,002 shares of HUBCO Common Stock
with a stated value of $1.778 per share ..................... 3,796
-----
$2,566 (FF)
=====
19) Additional Paid in Capital
To eliminate Urban shares currently owned
by HUBCO .................................................... ($7)
To transfer paid in capital to common stock for
the issuance of 2,135,002 shares of HUBCO stock,
net of Urban's capital ...................................... (2,566}
-----
($2,573) (GG)
======
20) Unrealized Holding Gain (Loss) on Securities
Available for Sale
Eliminate unrealized holding gain on Urban Common
Stock held by HUBCO ......................................... ($4) (HH)
==
21) Other Real Estate
The Pro Forma Combined Condensed Statements of Income
for the years ended December 31,1994, 1993 and 1992 have
been adjusted to reclassify Urban's ORE valuation
reserves on in-substance foreclosures to HUBCO's
provision for possible loan losses to conform to HUBCO's
implementation of SFAS 114. Accordingly, the provisions
for possible loan losses has been increased and other
operating expenses decreased by $50, $75 and $90,
respectively. ............................................... (II)
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<PAGE>
URBAN NATIONAL BANK
General
Urban is a national bank headquartered in Franklin Lakes, New Jersey. Urban
was organized in 1962 and operates as a commercial bank, the deposits of which
are insured by the FDIC. Urban offers a variety of consumer and commercial
services through its nine branch offices in western Bergen County and northern
Passaic County, New Jersey. At December 31, 1994, Urban had total assets, total
deposits and total shareholders' equity of $241.3 million, $206.4 million and
$11.8 million, respectively.
Urban offers lending, depository, and related financial services to
individuals and small-to-medium sized businesses in its northern New Jersey
market area. In the commercial lending area, Urban's services include short and
medium term loans, lines of credit, letters of credit, inventory and accounts
receivable financing, real estate construction loans and first mortgages.
Deposit products include demand deposits, savings accounts, time deposit
accounts and rent security. Urban also offers collection, wire transfer and
night depository services.
Consumer Banking
Urban's consumer banking services include checking accounts, NOW accounts,
money market accounts, savings accounts, certificates of deposits, and
individual retirement accounts. Urban also offers a variety of services to
senior citizens, which are geared to the mature market. Urban provides consumer
installment loans consisting of home equity loans and lines of credit, personal
loans, automobile financing, residential mortgages, and secured and unsecured
loan products. Urban offers safe deposit services at many of its branch offices,
the sale of travelers checks, and holiday clubs.
Competition
Urban operates in a highly competitive market within northern New Jersey.
Several major bank holding companies headquartered in New Jersey and other
out-of-state multi-bank holding companies operate within Urban's market areas.
Urban is also faced with competition from other independent banks, large
thrifts, and credit unions. These larger institutions have substantially greater
lending capacities and typically provide services which Urban does not offer.
In recent years, the financial industry has expanded rapidly as barriers to
competition within the industry have become less significant. Within the
financial service industry,
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<PAGE>
banks must compete not only with other banks and traditional financial
institutions, but also with other business corporations that deliver financial
services.
Employees
At December 31, 1994, there were 114 persons employed by Urban on a full
time equivalent basis. Management considers relations with employees to be
satisfactory.
Properties
Urban owns its offices at 195 Franklin Turnpike, Mahwah and 418 Belmont
Avenue, Haledon and lease its offices at 805 Franklin Lake Road, Franklin Lakes,
840 Franklin Avenue, Franklin Lakes, 193 Rock Road, Glen Rock, 22 Lakeside
Avenue, Pompton Lakes, 145 East Main Street, Ramsey, Skyline Drive, Ringwood,
and 690 Wyckoff Avenue, Wyckoff. During the year ended December 31, 1994, rental
expense relating to such leases aggregated $453,000 thousand.
Supervision and Regulations
Urban is a national banking association subject to supervision and
examination by the Office of the Comptroller of the Currency ("OCC"). In
addition to banking laws and regulations, Urban is subject to various other laws
and regulations, all of which directly or indirectly affect Urban's operations,
management and ability to make distributions. The following discussion
summarizes certain aspects of those laws and regulations that affect Urban.
Proposals to change the laws and regulations governing the banking industry
are frequently raised in Congress and before the various bank regulatory
agencies. The likelihood and timing of any changes and the impact such changes
might have on Urban are difficult to determine.
The operations of Urban are subject to requirements and restrictions under
federal law, including requirements to maintain reserves against deposits,
restrictions on the types and amounts of loans that may be granted, limitations
on the types of investments that may be made and the types of services which may
be offered. Various consumer laws and regulations also affect the operations of
Urban. Approval of the OCC is required to establish branches, for bank mergers
in which the continuing bank is a national bank, and in connection with certain
fundamental corporate changes affecting Urban.
Provisions of federal banking law restrict the amount of dividends that can
be paid by Urban to its shareholders. See
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<PAGE>
"Comparison of the Rights of Stockholders under the National Bank Act and
the New Jersey Corporation Act-Dividends." In addition, the ability of Urban to
pay dividends is affected by the various minimum capital requirements and the
capital and non-capital standards established under the Federal Deposition
Insurance Corporation Improvement Act of 1991 ("FDICIA"), as described below.
The rights of Urban's stockholders and creditors to participate in any
distribution of the assets or earnings of Urban is further subject to the prior
claims of creditors of Urban.
FDICIA requires the federal banking agencies to take "prompt corrective
action" with respect to banks which do not meet minimum capital requirements.
Among other things, FDICIA requires a bank which does not meet any one of the
capital requirements set by its regulators to submit a capital restoration plan
for improving the capital. In addition, FDICIA prohibits a bank from making a
capital distribution if it fails to meet capital requirements. Critically
undercapitalized banks (which are defined to include banks which still have a
positive net worth) are generally subject to the mandatory appointment of a
receiver in conservation.
The deposits of Urban are insured up to applicable limits by the FDIC.
Accordingly, Urban is subject to deposit insurance assessments to maintain the
Bank Insurance Fund. Pursuant to FDICIA, the FDIC established a risk-based
insurance assessment system. This approach is designed to ensure that a banking
institution's insurance assessment is based on three factors: the probability
that the applicable insurance fund will incur a loss from the institution; the
likely amount of the loss; and the revenue needs of the insurance fund. Under
the FDIC's risk related premium assessment system, assessment rates currently
range from .23% of domestic deposits (the same rate as under the previous
flat-rate system) for those banks deemed to pose the least risk to the insurance
fund, to .31% for those banks deemed to pose the greatest risk (with
intermediate rates of .26%, .29% and .30%).
Legal Proceedings
Urban is involved in legal proceedings from time to time, ordinarily in
connection with loan collection matters. At present, Urban has made a claim
against its fidelity bond carrier in the amount of $2.2 million relating to
certain lending activities which took place during the years 1985 through 1987
involving a prior officer of Urban. The claim may result in the commencement of
legal proceedings, the outcome of which cannot presently be predicted.
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<PAGE>
URBAN NATIONAL BANK
FINANCIAL SUMMARY AND SELECTED PER SHARE DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
As of December 31
---------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Total Interest Income .......... $ 13,554 $ 12,672 $ 13,219 $ 15,253 $ 15,540
Total interest expense ......... 4,254 4,459 5,274 7,569 7,908
Net interest income ............ 9,300 8,213 7,945 7,684 7,632
Provision for possible loan
and lease losses ............. 125 118 1,598 780 990
Net interest income after
provision for possible loan
and lease losses ............. 9,175 8,095 6,347 6,904 6,642
Other income ................... 1,367 1,484 2,736 1,790 1,237
Other expenses ................. 8,356 7,907 8,381 7,635 7,847
Income before provision for
income taxes and cumulative
effect of accounting change .. 2,186 1,672 702 1,059 32
Provision (benefit) for
income taxes ................. 752 647 254 217 (120)
Income before cumulative
effect of accounting change .. 1,434 1,025 448 842 152
Cumulative effect of change
in accounting ................ 50 -- -- -- --
Net income ..................... $ 1,484 $ 1,025 $ 448 $ 842 $ 152
PER SHARE DATA:
Income before extraordinary
item ......................... $ 1.46 $ 1.04 $ .46 $ .86 $ .15
Cumulative effect of change
in accounting ................ .05 -- -- -- --
Net income ..................... $ 1.51 $ 1.04 $ .46 $ .86 $ .15
Book Value ..................... $ 11.98 $ 12.97 $ 11.93 $ 11.47 $ 11.22
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
As of December 31
---------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
CONDITION DATA:
Total assets ................... $241,324 $227,377 $200,930 $198,803 $180,127
Securities held to maturity 56,397 48,869 51,406 43,614 28,732
Securities available for sale .. 48,212 56,816 15,430 -- --
Federal funds sold ............. 14,000 9,000 14,100 17,300 8,400
Loans (net of unearned income).. 90,080 84,715 93,007 110,894 118,020
Allowance for possible loan
and lease losses ............. 1,486 1,616 1,553 1,366 1,006
Deposits ....................... 206,435 189,679 175,410 178,859 157,166
Securities sold under agreements
to repurchase and other
borrowings ................... 20,305 23,145 13,026 7,248 10,907
Shareholders' equity ........... 11,795 12,767 11,742 11,294 11,042
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</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Urban
This financial review presents management's discussion and analysis of operating
results and financial condition of Urban. It should be read in conjunction with
Urban's consolidated financial statements and the accompanying notes included in
this Proxy Statement/Prospectus. Unless otherwise noted, all dollar amounts are
presented in thousands.
OVERVIEW
During 1994, improving asset quality, an improved net interest margin and an
increase in average interest earning assets resulted in significant increases in
net income. Net income rose 45% to a level of $1.5 million in 1994 from $1.0
million in 1993; assets increased by 6.1% to $241.3 million at December 31, 1994
from $227.3 million at year-end 1993; and deposits reached $206.4 million, an
8.8% increase over the 1993 level of $189.7 million.
Highlights of Urban's 1994 financial accomplishments include:
o Return on average assets was .67%, up from .48% in 1993 and .23% in 1992.
o Return on average shareholders' equity was 12.21% for 1994. This compares
to 8.46% in 1993 and 3.90% in 1992.
o Net interest margin increased to 4.55% in 1994 from 4.32% in 1993 primarily
as a result of a 38% increase in average net interest earning assets. The
net interest margin was 4.69% in 1992.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Urban earned net income of $1,484 or $1.51 per share in 1994 compared to $1,025
or $1.04 per share in 1993 and $448 or $.46 per share in 1992. A key factor
contributing to Urban's earnings improvement in 1994 was increased net interest
income of $1,087, or 13.2%. Partially offsetting the 1994 gains was an increase
in other expenses of $449 and an increase in the provision for income taxes of
$105.
For the year ended December 31, 1993, the reported earnings of $1,025
represented an increase of $577 or 128.8% compared with 1992. The increase was
primarily attributable to an increase of $268 in net interest income, a
reduction in other expenses of $474, and a decrease in the provision for
possible loan losses of $1,480. The 1993 gains were partially offset by a
decrease in other income of $1,252 and an increase in the provision for income
taxes of $393.
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<PAGE>
URBAN NATIONAL BANK
Consolidated Financial Summary
For Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
STATEMENTS of INCOME (Thousands)
Net Interest Income ................. $ 9,300 $ 8,213 $ 7,945
Net Income .......................... $ 1,484 $ 1,025 $ 448
-------- -------- --------
STATEMENTS OF CONDITION (Thousands)
Total Assets ........................ $241,324 $227,377 $200,930
Loans, Net .......................... 90,080 84,715 91,454
Deposits ............................ 206,435 189,689 175,410
Allowance for Possible Loan Losses .. 1,486 1,616 1,553
Shareholders' Equity ................ 11,795 12,767 11,742
-------- -------- --------
NET INCOME PER SHARE DATA
Net Income Per Share ................ $1.51 $1.04 $0.46
Average Number of Shares Outstanding. 984,372 984,372 984,372
-------- -------- --------
KEY RATIOS
Return on Average Assets ............ 0.67% 0.48% 0.23%
Return on Average Equity ............ 12.21% 8.46% 3.90%
Allowance for Possible Loan Losses
to Total Loans .................... 1.64% 1.89% 1.67%
Shareholders' Equity to
Total Assets ...................... 4.89% 5.62% 5.84%
-------- -------- --------
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<PAGE>
NET INTEREST INCOME
Urban's principal source of revenue is its net interest income, which is the
difference between the interest earned on assets and interest paid on the funds
acquired to support those assets. The principal interest earning assets are
loans made to businesses and individuals, income from investment securities, and
federal funds sold in the inter-bank market. Net interest income is affected by
the balances and mix of interest-earning assets and interest-bearing liabilities
and changes in their corresponding yield and costs, and by the volume of
interest earning assets funded by non-interest bearing deposits.
The tables presented on the following page show, for the three years ended
December 31, 1994, 1993 and 1992 the average distribution of assets, liabilities
and shareholders' equity and the interest earned or paid on related items, as
well as Urban's net yield on interest earning assets (i.e., net interest income
divided by average interest earning assets).
In 1994, net interest income increased to $9,300 from $8,213 in 1993, an
increase of $1,087 or 13.2%. The improvement in net income was due to an
increase of $11,790, or 38% in net average interest earning assets (average
interest earning assets less average interest paying liabilities), and a greater
decline in interest rates on interest bearing liabilities (17 basis points) than
the corresponding decline in yield on interest earning assets (3 basis points).
Interest income increased by $882 or 7% during 1994 due to an increase of
$14,013 in average interest earning asset volume. This was partially offset by a
decrease in yield on total interest earning assets from 6.66% in 1993 to 6.63%
in 1994. However, the increase in the average securities portfolio of $19,456 or
22.1% more than offset the decreased average yield on the portfolio resulting in
a net increase to pre-tax earnings of $766. During 1993, an average increase of
$34,193, or 63.4% in the securities portfolio also contributed to increased
interest income. The exceptionally large increase in the securities portfolio in
1993 was due to a decrease of $14,940 or 14.4% in the average loan portfolio,
and an increase of $17,640 or 12.5% in average interest bearing liabilities. The
yield on Urban's taxable investment portfolio decreased to 5.22% in 1994 from
5.34% in 1993 and 6.64% in 1992. The yield on the non-taxable investment
securities portfolio declined to 3.11% in 1994 from 3.57% in 1993 and 5.78% in
1992. The decreases in the investment portfolio yields from 1992 to 1994 were
attributable to lower market interest rates on instruments purchased to replace
higher yielding securities which matured, or were sold. The increase in the
average loan portfolio yield of 20 basis points during 1994 was enough to offset
the decreased average loan volume of $932. During 1993, the reduction in
interest income from loans was due to a decrease in the loan portfolio of
$14,940, or 14.4% combined with a 42 basis point loss in average loan portfolio
yield. The average yield on Urban's loan portfolio increased to 8.85% in 1994
from 8.65% in 1993, and decreased from 9.07% in 1992. These changes in yields
were a result of general increases and decreases in market interest rates. In
1994, the interest income impact of non-performing loans lowered the yield on
loans by 33 basis points, as compared to 43 basis points in 1993 and 38 basis
points in 1992.
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<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1994 1993 1992
------------------------------ ----------------------------- ----------------------------
Interest Average Interest Average Interest Average
Average Income/ Interest Average Income/ Interest Average Income/ Interest
Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense(1) Rate
------- ---------- -------- -------- ---------- -------- ------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-Earning Assets:
Loans (net of unearned
income)(2) .................... $ 88,081 $ 7,796 8.85% $ 89,010 $ 7,698 8.65% $103,950 $ 9,432 9.07%
Taxable securities .............. 96,811 5,057 5.22% 83,424 4,458 5.34% 46,475 3,085 6.64%
Tax-exempt securities ........... 10,776 335 3.11% 4,707 168 3.57% 7,463 431 5.78%
Interest-bearing deposits ....... 4,029 173 4.29% 4,942 154 3.12% 20 1 5.00%
Federal funds sold .............. 4,589 193 4.21% 8,190 194 2.37% 11,536 270 2.34%
-------- -------- ---- -------- ------- ---- -------- -------
Total interest-earning
assets ...................... 204,286 13,554 6.63% 190,273 12,672 6.66% 169,444 13,219 7.80%
-------- -------- ---- -------- ------- ---- -------- -------
Allowance for possible loan
losses .......................... (1,568) (1,762) (1,630)
Noninterest-earning assets ........ 18,969 22,154 22,881
-------- -------- --------
Total assets .................. $221,687 $210,665 $190,695
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits ................... $ 47,190 $ 37,093 $ 36,830
-------- -------- --------
Interest-Bearing Liabilities:
Demand deposits ................. 73,165 1,476 2.02% 71,234 1,603 2.25% 64,902 2,052 3.16%
Savings deposits ................ 30,763 692 2.25% 26,247 692 2.64% 20,906 623 2.98%
Time deposits ................... 41,609 1,505 3.62% 43,000 1,619 3.77% 49,605 2,393 4.82%
-------- -------- ---- -------- ------- ---- -------- ------- ------
Total interest-bearing
deposits .................... 145,537 3,673 2.52% 140,481 3,914 2.79% 135,413 5,068 3.74%
-------- -------- ---- -------- ------- ---- -------- ------- ------
Total deposits ................ 192,727 3,673 1.91% 177,574 3,914 2.20% 172,243 5,068 2.94%
-------- -------- ---- -------- ------- ---- -------- ------- ------
Borrowings ........................ 15,946 581 3.64% 18,779 545 2.90% 6,207 206 3.32%
-------- -------- ---- -------- ------- ---- -------- ------- ------
Total interest-bearing
liabilities ................. 161,483 4,254 2.63% 159,260 4,459 2.80% 141,620 5,274 3.72%
Other liabilities ................. 863 2,195 749
Shareholders' Equity .............. 12,151 12,117 11,496
-------- -------- --------
Total liabilities and
shareholders' equity ........ $221,687 $210,665 $190,695
======== ======== ========
Net interest income;
net interest spread ............. $ 9,300 4.00% $ 8,213 3.86% $ 7,945 4.08%
======= ====== ======= ==== ======= ======
Net yield on
interest-earning assets ......... 4.55% 4.32% 4.69%
====== ====== ======
Ratio of average
interest-earning assets
to average interest-bearing
liabilities ..................... 126.51% 119.47% 119.65%
====== ====== ======
- --------------
<FN>
(1) Includes loan fees, which are not material.
(2) Includes non-accruing loans, which have the effect of reducing the average rates earned on Urban's loan portfolio.
</FN>
</TABLE>
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 Urban on such assets and
liabilities. Changes attributable to the interactive effects of volume and rate
(mix variance) have been allocated equally to changes due to volume and rate.
Dollar amounts are in thousands of dollars.
<TABLE>
<CAPTION>
1994 Compared with 1993 1993 Compared with 1992
----------------------------------- -----------------------------------
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
--------------------- ----------------------
Total Average Average Total Average Average
Change Volume Rate Change Volume Rate
------- -------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans (net of unearned
income) .................. $ 98 ($ 80) $178 ($1,734) ($1,358) ($ 376)
Taxable securities ......... 599 715 (116) 1,373 2,456 (1,083)
Tax-exempt securities ...... 167 217 (50) (263) (159) (104)
Interest-bearing deposits .. 19 (28) 47 153 246 (93)
Federal funds sold ......... (1) (85) 84 (76) (78) 2
------- ----- ---- ------- ------- -------
Total interest
earning assets ......... 882 739 143 (547) 1,107 (1,654)
------- ----- ---- ------- ------- -------
Interest expense:
Demand deposits ............ (127) 42 (169) (449) 200 (649)
Savings deposits ........... 0 120 (120) 69 159 (90)
Time deposits .............. (114) (52) (62) (774) (320) (454)
Borrowings ................. 36 (82) 118 339 417 (78)
------- ----- ---- ------- ------- -------
Total interest bearing
liabilities ............ (205) 28 (233) (815) 456 (1,271)
------- ----- ---- ------- ------- -------
Net change in interest
income ..................... $1,087 $711 $376 $ 268 $ 651 ($ 383)
====== ==== ==== ====== ====== =======
</TABLE>
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<PAGE>
Interest expense decreased by $205, or 4.6% during 1994. Although the volume of
interest bearing liabilities increased by $2,223 or 1.4%, the decrease of 17
basis points in the cost of funds was sufficient to generate a reduction in
interest expense. In 1993, a significant decline (92 basis points) in the cost
of funds was enough to offset the additional expense generated by an increased
volume of $17,640 or 12.5%. Non-interest bearing deposits, which had decreased
slightly to 20.9% of total average deposits during 1993, rose to 24.5% of
average deposits during 1994.
The net interest margin, which measures net interest income as a percent of
average earning assets, was 4.55% for 1994. This is an improvement over the 1993
level of 4.32%, but a decline from the 1992 net interest margin of 4.69%.
The table on the previous page sets forth the changes in interest income and
interest expense as they relate to changes in volume and changes in rate for the
years 1994, 1993, and 1992.
During 1994, interest income rose $882 due to a $739 increase from volume and an
increase of $143 in yield. Interest expense decreased by $205 in 1994 due to a
$28 increase from volume which was more than offset by a $233 savings from rate
reductions. During 1993, interest income decreased by a net $547 as a $1,654
reduction in yield was only partially offset by a $1,107 increase in volume. In
1993 an increase in interest expense of $456 due to volume was offset by a
$1,271 savings from rate, producing a net decrease of $815 in interest expense
compared to 1992. The rate/volume combinations resulted in increased net
interest income of $1,087 and $268, respectively, for 1994 and 1993.
PROVISION FOR POSSIBLE LOAN LOSSES
Urban maintains an allowance for possible loan losses at a level considered by
management to be adequate to cover the inherent risks of loss associated with
its loan portfolio. The allowance for possible loan losses is based on
estimates, and ultimate losses may vary from the current estimates. Management
formally reviews the loan portfolio and evaluates credit risk on a quarterly
basis throughout the year. Such review endeavors to take into consideration,
among other things, the financial condition of the borrowers, fair market value
of collateral, level of delinquencies, historical loss experience by portfolio,
industry trends and the impact of local and national economic conditions.
See"Asset Quality".
During 1992, the provision for possible loan losses was $1,598 compared to $118
in 1993, a decrease of $1,480 or 93%. The $1,598 loan loss provision in 1992 was
taken to reflect the significant increase in criticized loans which were
identified by management. This action, in management's view, resulted for the
most part in adjusting the level of criticized loans to the underlying
collateral values supporting these loan transactions. The reduction in the loan
loss provision in 1993 from 1992 was determined after a further review of the
loan portfolio, which indicated decreasing levels of criticized loans, and a
review of the allowance for possible loan losses which was deemed to be
adequate. The provision for possible loan losses in 1994 was $125 compared to
$118 reported in 1993. During 1993 and through the end of 1994, criticized loans
and delinquent loans decreased significantly, which when coupled with an
improved local economy, led to modest loan loss revisions for both years.
-94-
<PAGE>
OTHER INCOME
Total other income decreased $117 or 7.9% in 1994. The decrease in total other
income in 1993 from 1992 was $1,252 or 45.8%, for the year.
Securities gains (losses) for the three years ended December 31, 1994, 1993 and
1992 were ($83), $158, and $1,309. The 1992 gains were a result of Urban's
portfolio being restructured in order to take advantage of favorable interest
rates.
Urban derived $1,161 in service charges on deposit accounts during 1994, an
increase from 1993 of $27 or 2.4%. In 1993, income from service charges on
deposit accounts had decreased by $38 or 3.2%, from 1992. The minimal changes in
service charges on deposit accounts resulted from a decrease in overdraft
accounts during the 1992 to 1994 period, offsetting increases in service charges
on non-business accounts.
Other income increased slightly from $255 in 1992 to $267 in 1993 and to $289 in
1994. Other income includes miscellaneous gains and losses, which includes gains
or losses booked on the sale of loans, bank premises and equipment. Also
included are the sales of travelers checks, other miscellaneous items, late
charges and other loan charges.
OTHER EXPENSES
Total other expenses increased by $449, or 5.7% to $8,356 during 1994 from
$7,907 in 1993. Salaries increased by $365 or 11.9%, as a result of the Pompton
Lakes branch opening, new programs in the mutual fund/annuity and mortgage
origination areas, and annual salary increases of approximately 4.0%. Pension
and other employee benefits increased by $147 or 23.2% primarily due to
salary-related increases in payroll taxes of $36 or 13.7%, insurance increases
of $39 or 14.1%, due to increased costs relating to Urban's self-funded group
insurance program, and increases in the retirement plan contribution expense for
1994 of $67 or 50%. An actuarial adjustment lowered the 1993 retirement plan
expense to $67 from $143 in 1992.
Despite the opening of a new branch in Pompton Lakes, New Jersey, occupancy and
equipment expense increased during 1994 by only $90 or 6.7%. This was achieved
through the renegotiation of several leases and a significant reduction in
equipment depreciation expense. This was partially offset by an increase in bank
maintenance of $27 or 19.3%, due principally to additional snowplowing expense
experienced during the winter of 1994. During 1993, there was a slight decrease
in occupancy and equipment expense when compared to the 1992 figures.
The reduction of $312, or 40.3% in the net cost to operate other real estate
during 1994 is the result of being able to dispose, in most circumstances, of
OREO properties at or close to their carrying value. The market valuation
adjustments were $1,046, $488, and $135, respectively for 1992, 1993 and 1994.
During 1994, deposit insurance costs increased in general by $27, or 6.2%,
compared with $56, or a 14.7% increase in 1993. Increases were primarily related
to additional FDIC insurance
-95-
<PAGE>
premiums due to the increased deposit size of the bank. Legal fees increased
from $201 in 1993 to $260 in 1994, an increase of $59, or 29.4%. This was due
principally to the workout process relating to non-performing assets, the
settlement of certain litigation and other legal matters. Other expenses
increased during 1994 by $73, or 5.0% due primarily to the following: an
increase of $12, or 12.0% in telephone expense relating to installation costs;
an increase of $24, or 27.3% in outside service costs relating to expenses from
the 1994 shareholders meeting; increased sales taxes in the amount of $23; an
increase in supplies of $27, or 32.5% relating to the new branch opening; and an
increase of $27, or 29.0% in the marketing of bank products. This was partially
offset by reductions of $37, or 16.4% in insurance costs due to competitive
renegotiation and a reduction of $15 or 20.3% in correspondent bank service
charges due to higher earnings on compensatory balances.
INCOME TAXES
The income tax provision of $752 in 1994 compares with $647 in 1993 and $254 in
1992. The 1994 increase of $105 and the 1993 increase of $393 relate principally
to the increase in income before provision for income taxes in those years. The
effective income tax rates for 1994, 1993 and 1992 were 34%, 39%, and 36%,
respectively.
FINANCIAL CONDITION
Total assets at December 31, 1994 increased by $13,947, or 6.1% over the prior
year-end. The most significant change is reflected in the increase of $13,268,
or 52.3% in cash and equivalents. Cash and Cash equivalents consists of Cash and
Due from Banks, Interest-Bearing Deposits with Banks, and Federal Funds Sold.
Federal Funds Sold increased to $14,000 at December 31, 1994 from $9,000 at
December 31, 1993. Interest-Bearing Deposits with Banks increased by $4,179, or
73.1%. Cash and Due From Banks increased by $4,090, or 38.4%, due to new deposit
accounts and to the increase in the target balance and reserves required to be
maintained at the Federal Reserve Bank to support the increased deposit levels.
Total net loans increased by $5,495, or 6.6%. Premises and equipment decreased
by $65 or 3.5%. Accrued interest receivable increased by $164 as a result of
higher interest rates in the loan and securities portfolios. Most of the deposit
increase of $16,746, or 8.8%, represents non-interest bearing demand deposits
which grew $15,606 to $58,855. Treasury, Tax and Loan deposit notes and
securities sold under agreements to repurchase decreased by $2,840 due to normal
business cycle balance fluctuations.
At December 31, 1993, total assets had increased $26,476 over December 31, 1992.
The increase was funded primarily by a $14,280 increase in deposits and a
$10,119 increase in treasury, tax, and loan deposit notes and securities sold
under agreements to repurchase. Urban's investment portfolio increased by
$38,825, or 58.2% during 1992, while the loan portfolio decreased by $8,292, or
8.9%.
-96-
<PAGE>
LOAN PORTFOLIO
Urban's loan portfolio at December 31, 1994 totalled $90,080, an increase of
$5,365, or 6.3% over year-end 1993. The increase in the loan portfolio related
to an expanded business development effort, coupled with increases in
advertising and marketing retail products. Additionally, many criticized loans
reached a level where rehabilitation was possible, therefore eliminating the
need to take further action which would have resulted in lower outstandings
within the loan portfolio. Urban's loans are primarily to businesses and
individuals located in Bergen and Passaic County, New Jersey. The following
table sets forth certain categories of loans as of December 31, 1994 in terms of
maturity and interest sensitivity.
Within 1 to 5 After 5
1 Year Years Years Total
------- ------- ------- -------
(In thousands)
Commercial loans ................ $ 8,958 $ 8,117 $ 3,457 $20,532
Real estate loans ............... 7,181 23,611 31,890 62,682
Installment loans ............... 1,256 5,544 66 6,866
------- ------- ------- -------
Total ......................... $17,395 $37,272 $35,413 $90,080
======= ======= ======= =======
Loans with predetermined rates .. $ 8,239 $25,850 $22,804 $56,893
Loans with floating rates ....... 9,156 11,422 12,609 33,187
------- ------- ------- -------
Total ......................... $17,395 $37,272 $35,413 $90,080
======= ======= ======= =======
At December 31, 1994, residential mortgage loans, including home equity loans,
amounted to $42,807, or 47.5% of Urban's total loan portfolio. Residential loans
are predominantly secured by one to four family properties in Urban's primary
market area of northern New Jersey. Residential first mortgages kept for Urban's
portfolio are primarily underwritten with loan to value ratios that generally do
not exceed 75% and terms not exceeding seven years. Fixed and floating rate home
equity loans having various terms up to fifteen years are generally advanced at
a loan to value ratio of 75%. During the year, residential mortgage loans
increased by $1,171, or 2.8%, as a result of an increase in home equity loans.
From 1992 to 1993, residential mortgage loans decreased by $5,260, or 11.2%, due
to repayments and refinances.
Construction loans are generally made to well-established local developers.
Construction loans are primarily made on buildings which are for the most part
under contract before being built. Urban inspects properties prior to advances
being made and during the course of construction. Construction loans increased
by $1,759, or 279.2% in 1994 from 1993, as a result of new lending in the local
trade area due to an improved economy. There was a moderate increase in
construction loans during 1993.
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<PAGE>
Commercial mortgage loans are generally made to local property owners and are
written under the following underwriting standards; generally, debt service
coverage must be at least 125%, and the loan to value ratio may not exceed 67%
of the lesser of the purchase price or appraised value. Most of Urban's
commercial mortgage loans are for a maximum term of 15 years requiring fixed
principal plus interest payments under which the borrower pays off an equal
amount of the principal balance of the loan each month. For example, a borrower
with a loan maturing in five years would pay off 1/60 of the principal balance
of the loan plus interest each month. The effect of such payment is to reduce
the principal balance of the loan more rapidly than a traditional amortization
schedule or balloon loan. Commercial mortgage loans increased by $1,781, or
11.3%, from 1993 to 1994. Commercial mortgage loans decreased from 1992 to 1993
by $2,879, or 15.5%. The decrease is primarily attributable to principal
payments of commercial mortgages and a decline in activity for this type of
loan. The commercial mortgage portfolio is comprised primarily of owner occupied
properties.
Commercial loans generally are made to companies located within Urban's market
area and consist of loans to light manufacturers, wholesalers, distributors,
professional groups, and retailers. Commercial borrowers must provide three
years of financial statements along with financial statements of the individual
owners of the borrowing entity. These loans are generally collateralized and
personally guaranteed by such owners. Commercial loans are made for various
purposes including working capital, capital purchases, or expansion. Working
capital loans generally are made for a term of one year. Loans for capital
purchases and expansion are generally extended for three to seven years.
Commercial and industrial loans decreased by $1,846, or 8.2% during 1994 as a
result of increased competition and limited customer borrowing needs. From 1992
to 1993, commercial and industrial loans decreased by $299, or 1.3%.
Loans to individuals are installment loans made to individuals, primarily for
automobiles. These loans are underwritten to predetermined income and debt
ratios and are secured by taking a first security interest in the automobile
being acquired. Loans to individuals increased $1,581, or 29.9%, as a result of
an effective advertising program and competitive interest rate offerings. Loans
to individuals increased from 1992 to 1993 by $968, or 22.4% for similar
reasons.
December 31,
-------------------------------
1994 1993 1992
------- ------- -------
(In Thousands)
Commercial ............................... $20,532 $22,378 $22,677
Real estate loans secured by:
Construction and land development ...... 2,389 630 533
First mortgages ........................ 21,511 23,610 29,566
Second mortgage ........................ 21,296 17,107 17,330
Non-residential properties ............. 17,486 15,705 18,584
------- ------- -------
Total Real estate loans .............. 83,214 79,430 88,690
Installment .............................. 6,866 5,285 4,317
------- ------- -------
Total loans .......................... 90,080 84,715 93,007
Less: Allowance for possible loan losses . 1,486 1,616 1,553
------- ------- -------
Net loans ............................ $88,594 $83,099 $91,454
======= ======= =======
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<PAGE>
ASSET QUALITY
Urban's principal earning assets are its loans, which are primarily to
businesses and individuals located in New Jersey. Inherent in the lending
function is the risk of deterioration in borrowers' ability to repay loans under
existing loan agreements. Risk elements include nonaccrual, past due and
restructured loans, potential problem loans, loan concentrations and other real
estate.
Although Urban actively solicits creditworthy borrowers, prevailing market
conditions have required a strict monitoring process for credit risk. This
process requires scrutiny at all levels -- the initial application, analysis of
on-going ability to pay according to terms, determination of the appropriateness
of collateral, periodic loan review and the periodic review of the adequacy of
the allowance for possible loan losses.
At December 31, 1994, loans past due 90 days or more and still accruing and the
applicable asset quality ratios were as follows:
December 31,
-------------------------------
1994 1993 1992
------ ------ -------
(In Thousands)
Non-performing loans
Non-accrual loans(1) ...................... $3,355 $3,942 $ 3,869
Past due 90 days or more and
accruing interest(2) .................... 375 285 2,122
------ ------ -------
Total ................................... 3,730 4,227 5,991
------ ------ -------
Other real estate (3)
Repossessed properties - residential ...... 2,165 1,579 3,013
Repossessed properties - commercial ....... 884 1,104 960
In-substance foreclosure - residential .... 254 1,698 4,300
In-substance foreclosure - commercial ..... 144 144 404
Less: Valuation allowance .................. (320) (406) (459)
------ ------ -------
Net other real estate ....................... 3,127 4,119 8,218
------ ------ -------
Total non-performing assets ............. $6,857 $8,346 $14,209
====== ====== =======
Non-performing loans as a percent of
total loans (net of unearned income) ...... 4.13% 4.99% 6.44%
Non-performing assets as a percent of
total loans (net of unearned income) ...... 7.59% 9.85% 15.28%
The amount of interest income on non-performing loans which would have been
recorded had these loans continued to perform under their original terms was
$294, $387, and $388 for the years ended December 31, 1994, 1993, and 1992,
respectively. The amount of interest income recorded on such loans was $72, $70,
and $129 for the years ended December 31, 1994, 1993, and 1992, respectively.
Urban does not have any outstanding commitments to advance additional funds to
borrowers having loans identified as non-performing.
Nonaccruing loans consist of commercial, real estate and installment loans on
which the bank has ceased accruing interest. The majority of nonaccruing loans
are secured and have been assigned to an attorney working with a loan officer,
in an effort to bring the matter to resolution. Nonaccruing loans decreased by
$587, or 14.9%, in 1994 as a result of collection efforts and charge-offs.
During 1993, non-accruing loans increased by $73, or 1.9% as Urban continued to
take appropriate action to identify loan transactions of this nature.
-99-
<PAGE>
Other real estate ("ORE") consists of property on which Urban has completed or
substantially completed foreclosure proceedings. Before a property is placed in
ORE, a current appraisal is ordered to determine current market value. Loans are
written down to market value before being moved to ORE, at which time the
difference is charged off.
The decrease of $992, or 24.1%, in ORE from 1993 to 1994 and the decrease in ORE
from 1992 to 1993 of $4,099, or 49.9%, is due to the disposal of four properties
in 1994 and six properties in 1993. Urban sold the properties in open market
sales.
All costs associated with the holding and maintaining of ORE properties are
expensed as incurred.
Total non-performing loans decreased from $4,227 at December 31, 1993 to $3,730
at December 31, 1994, a decrease of $497, or 11.8%. As a percentage of total
loans, non-performing loans decreased from 4.99% in 1993 to 4.13% in 1994.
Total non-performing loans decreased from $5,991 in 1992 to $4,227 in 1993, a
decrease of $1,764, or 29.4%. Total non-performing loans as a percentage of
loans decreased from 6.44% in 1992 to 4.99% in 1993. The reductions in
non-performing loans are attributable to payments and payoffs made through
collection efforts and charge-offs. Efforts to control and improve the level of
non-performing loans are continuing. Identification of slow paying loans and the
initiation of collection efforts, where appropriate, is part of an on-going
process. After identification, steps are taken to understand the deficiencies in
the loan transaction and action steps are established to assist the borrower
toward resolving the deficiency, if practicable. Continuing collection efforts
are a priority of Urban.
Loans past due 90 days or more and still accruing consist of commercial, real
estate and installment loans, which are experiencing temporary difficulties.
Such loans are categorized as accruing if the bank believes that the delinquency
is temporary and the loan is adequately collateralized and in the process of
collection. Loans which are not expected to be resolved on a timely basis are
put on nonaccrual status and collection efforts are begun. The increase in loans
past due 90 days or more from 1993 to 1994 was $90 or 31.6%. For the most part,
the increased level of past due loans is as a result of an increase in the
backlog of performing loans which are in the process of renewal, rather than
from trends of increased past due accounts over 90 days. Loans past due 90 days
or more decreased by $1,837, or 86.6%, from 1992 to 1993.
Loan concentrations are considered to exist when there are amounts loaned to
separate borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. At December 31, 1994, 1993,
and 1992 there were no concentrations of loans exceeding 10% of total loans
which are not otherwise disclosed as a category in the notes to financial
statements.
-100-
<PAGE>
The allowance for possible loan losses at year-end 1994 was $1,486, a decrease
of $130 compared to year-end 1993. The allowance at year-end 1994 represents
1.64% of total loans outstanding, compared to 1.89% at year-end 1993. Management
formally reviews the loan portfolio and evaluates credit risk on at least a
quarterly basis throughout the year. Such review takes into consideration, among
other things, the financial condition of the borrowers, fair market value of
collateral, level of delinquencies, historical loss experience by category,
industry trends and the impact of local and national economic conditions.
The following is a summary of the activity in the allowance for possible loan
losses:
December 31,
------------------------------
1994 1993 1992
------ ------ ------
(In Thousands)
Allowance for Possible Loan Losses:
Balance at beginning of period .......... $1,616 $1,553 $1,366
Provisions (charged to expense) ......... 125 118 1,598
Charge-offs ............................. (353) (186) (1,525)
Recoveries of charged-off loans ......... 98 131 114
------ ------ ------
Balance at end of period .............. $1,486 $1,616 $1,553
====== ====== ======
Ratio of net charge-offs to average
loans outstanding(1)..................... 0.29% 0.06% 1.36%
Allowance for possible loan losses
as a percent of total loans (net
of unearned income) ..................... 1.64 1.89 1.67
Allowance for possible loan losses as
a percent of non-performing loans ....... 39.84 38.23 25.92
SECURITIES PORTFOLIO
Urban maintains a securities portfolio to provide earnings and liquidity to fund
loans or deposit requirements. The portfolio is composed of securities that
Urban believes are suitable for Urban and which it believes will perform
reasonably well under various interest rate scenarios.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). SFAS 115 requires entities to classify
their securities into either a held-to-maturity, available for-sale or trading
category. Each of these classifications requires a different basis of
accounting. Held-to-maturity securities are accounted for at amortized cost with
fair value changes not recognized. Available-for-sale securities are accounted
for at fair value with fair value changes reported as a net of tax amount in a
separate component of shareholders' equity. Trading securities are accounted for
at fair value with fair value changes reported in the income statement. SFAS 115
is effective for fiscal years beginning after December 15, 1993. Urban has
adopted this standard as of January 1, 1994. The adoption of SFAS 115 in 1994
resulted in unrealized holding losses on securities available for sale, net of
taxes of $2,456, as of December 31, 1994. This amount reduced shareholder's
equity at December 31, 1994.
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<PAGE>
The following table summarizes the composition of the portfolios as of December
31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- ---- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Securities Available for Sale
U.S. Treasury Notes ........................ $ 13,251 $ -- ($ 455) $ 12,796
Obligations of U.S. Government Agencies .... 21,089 -- (1,539) 19,550
Collateralized Mortgage Obligations
of U.S. Government Agencies .............. 15,575 -- (1,500) 14,075
Mortgage Backed Securities ................. 1,803 -- (12) 1,791
-------- ---- -------- --------
$ 51,718 $ -- ($3,506) $ 48,212
======== ---- ======= ========
Securities held to Maturity
U.S. Treasury Notes ........................ $ 1,018 $ -- ($ 13) $ 1,005
Obligations of U.S. Government Agencies .... 10,684 -- (1,208) 9,476
Mortgage Backed Securities of
U.S. Government Agencies ................. 32,693 3 (2,793) 29,903
State, county, and municipal securities .... 10,834 8 (273) 10,569
Other securities ........................... 1,168 -- (48) 1,120
-------- ---- ------- --------
$ 56,397 $ 11 ($4,335) $ 52,073
======== ==== ======= ========
<CAPTION>
December 31, 1993
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------- ---- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Notes .......................... $ 12,480 $125 ($ 125) $ 12,480
Obligations of U.S. Government Agencies ...... 31,825 119 (82) 31,862
Mortgage Backed Securities of
U.S. Government Agencies ................... 30,086 28 (502) 29,612
Collateralized Mortgage Obligations
of U.S. Government Agencies ................ 18,624 68 (87) 18,605
Privately issued Collateralized
Mortgage Obligations ....................... 3,136 19 -- 3,155
State, county, and municipal securities ...... 9,509 61 (59) 9,511
Other securities ............................. 100 -- -- 100
-------- ---- ------- --------
$105,760 $420 ($ 855) $105,325
======== ==== ======= ========
<CAPTION>
December 31, 1992
--------------------------------------------------
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
-------- ---- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Notes .......................... $ 15,430 $337 $ -- $ 15,767
Obligations of U.S. Government Agencies ...... 33,622 75 (431) 33,266
Mortgage Backed Securities of
U.S. Government Agencies ................... 3,867 -- (29) 3,838
Collateralized Mortgage Obligations
of U.S. Government Agencies ................ 11,753 73 (60) 11,766
State, county, and municipal securities ...... 2,087 -- -- 2,087
-------- ---- ------ --------
$ 66,759 $485 ($ 520) $ 66,724
======== ==== ====== ========
</TABLE>
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<PAGE>
The following table sets forth the maturity distribution and weighted average
yields of Urban's securities held to maturity and securities available for sale
as of December 31, 1994. No tax equivalent adjustments have been made in the
following table.
<TABLE>
<CAPTION>
More
Within 1 to 5 5-10 Than 10
1 Year Years Years Years Total
------ ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Investment securities held to maturity:
U.S. Treasury:
Book value .......................... $ 0 $ 0 $ 1,018 $ 0 $ 1,018
Yield ............................... 0% 0% 5.35% 0% 5.35%
U.S. Agencies:
Book value .......................... $ 0 $ 4,283 $ 6,401 $ 0 $10,684
Yield ............................... 0% 4.33% 5.43% 0% 4.99%
Mortgage Backed Securities:
Book value .......................... $ 0 $ 8,862 $11,181 $12,649 $32,692
Yield ............................... 0% 6.31% 5.81% 5.74% 5.92%
State, County, and Municipal:
Book value .......................... $ 4,958 $ 5,047 $ 829 $ 0 $10,834
Yield ............................... 3.29% 3.93% 4.05% 0.00% 3.64%
Other Securities:
Book value .......................... $ 0 $ 1,000 $ 0 $ 169 $ 1,169
Yield ............................... 0.00% 5.25% 0.00% 7.38% 5.56%
Total book value .................. $ 4,958 $19,192 $19,429 $12,818 $56,397
======= ======= ======= ======= =======
Weighted average yield ............ 3.29% 5.19% 5.59% 5.76% 5.29%
======= ======= ======= ======= =======
Securities available for sale:
U.S. Treasury:
Amortized Cost ...................... $ 4,961 $ 7,265 $ 1,025 $ 0 $13,251
Yield ............................... 5.5% 4.50% 4.22% 0.00% 4.85%
U.S. Agencies:
Amortized Cost ...................... $ 0 $14,413 $ 6,676 $ 0 $21,089
Yield ............................... 0% 5.2% 5.34% 0.00% 5.25%
Mortgage Backed Securities:
Amortized Cost ...................... $ 453 $ 1,350 $ 0 $ 0 $ 1,803
Yield ............................... 7.04% 7.48% 0.00% 0.00% 7.37%
Collaterallized Mortgage Obligations:
Amortized Cost ...................... $ 0 $ 2,237 $ 2,801 $10,537 $15,575
Yield ............................... 0% 6.38% 5.78% 5.86% 5.92%
Total Amortized Cost .............. $ 5,414 $25,265 $10,502 $10,537 $51,718
======= ======= ======= ======= =======
Weighted average yield ............ 5.63% 5.23% 5.35% 5.86% 5.42%
======= ======= ======= ======= =======
</TABLE>
Securities decreased by $1,075 or 1.0% from $105,684 at December 31, 1993 to
$104,609 at December 31, 1994. The decrease in securities was used to fund part
of the increase in loans. In keeping with Urban's investment policy, most new
purchases were in U.S. Governments and Agency Securities. Maturities of bonds
during 1994 were reinvested in an effort to increase yields with terms generally
not exceeding two years.
Securities increased by $38,925, or 58.3%, from $66,759 at December 31, 1992 to
$105,684 at December 31, 1993. The large increase was attributable to the
significant amount of cash received from the decrease in the loan portfolio
which, in the absence of loan demand, was reinvested in the securities
portfolio. Investments were predominantly in government securities with
maturities greater than one year and less than ten years, consistent with
Urban's internal policy on structuring its investment portfolio. Municipal
securities increased by $7,422 or 355.6% as Urban sought to increase its yields
through tax-exempt holdings. Holdings of other securities, which consist
primarily of privately issued mortgage backed securities, increased by $3,236.
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<PAGE>
DEPOSITS
Urban's branch system includes 9 branch offices located in Bergen and Passaic
Counties, New Jersey. Each branch operates as a retail sales and service unit
offering a complete line of deposit and loan products.
Despite increased competition from mutual funds and credit unions, and other
banks and financial institutions, Urban's deposits have grown consistently as a
result of the emphasis placed on customer service, competitive product
offerings, and increased marketing efforts. Total Deposits increased from
$175,410 in 1992 to $189,678 in 1993, an increase of $14,268, or 8.1% and to
$206,435 in 1994, an increase of $16,757 or 8.8%.
The following table summarizes Urban's deposit base:
At December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
Demand Deposits ......................... $ 58,855 $ 43,238 $ 41,350
NOW Accounts ............................ 33,950 34,719 31,347
Money Market Deposit Accounts ........... 37,680 41,228 36,163
Other Savings Deposits .................. 31,420 29,199 23,077
Time Certificates of Deposit
of $100,000 or more ................... 8,128 5,687 3,937
Other Time Deposits ..................... 36,402 35,607 39,536
-------- -------- --------
Total Deposits ................... $206,435 $189,678 $175,410
======== ======== ========
At December 31, 1994 time deposits in amounts of $100,000 and over matured as
follows (in thousands):
Three months or less .......................... $5,791
Over three months through twelve months ....... 2,137
Over twelve months ............................ 200
------
Total .................................. $8,128
======
Non-interest bearing demand deposits, for which all financial institutions
compete, increased to $58,855 at December 31, 1994, a growth of $15,617, or
36.1%. The increase was due to internal growth provided by Urban's customer
calling program. Demand deposits had increased by $1,888, or 4.6% during 1993.
NOW accounts decreased in 1994 by $769, or 2.2%. During 1993, NOW accounts
increased by $3,372, or 10.8% due to shifts from other deposit accounts.
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<PAGE>
Money market deposit accounts decreased by $3,548, or 8.6%, due to higher
interest rates which led depositors to shift to time deposits and other deposit
vehicles. During 1993, money market deposit accounts increased by $5,065 or
14.0%, as depositors shifted from less flexible time deposits.
Other savings deposits increased by $2,221, or 7.6%, primarily due to movement
out of money market accounts and other time deposits. During 1993, savings
deposits increased by $6,122, or 26.5%, due to shifts from other deposit
accounts.
Time certificates of deposit of $100,000 or more increased during 1994 and 1993
by $2,126, or 37.4%, and $1,750, or 44.5%, due to higher municipal deposits, and
the anticipation by customers of receiving a premium interest rate on time
certificates of deposit of $100,000 or more. Other time deposits increased by
$1,110, or 3.1%, during 1994. During 1993, other time deposits decreased by
$3,929, or 9.9%. While some of the decline is attributable to movement into
demand deposit and savings accounts, other time deposits were also reduced as
high-yielding certificates matured and depositors sought alternative investment
products outside of the banking industry where a greater return could be
obtained.
INTEREST RATE SENSITIVITY
Interest rate movements and deregulation of interest rates have made managing
Urban's interest rate sensitivity increasingly important. Urban's Asset and
Liability Committee is responsible for managing Urban's exposure to changes in
market interest rates. The Committee attempts to maintain stable net interest
margins by generally matching the volume of assets and liabilities maturing, or
subject to repricing, and by adjusting rates in relation to market conditions to
influence volumes and spreads.
The difference between the volume of assets and liabilities that reprice in a
given period is the interest sensitivity gap. A "positive" gap results when more
assets than liabilities mature or are repriced in a given time frame.
Conversely, a "negative" gap results when there are more liabilities than assets
maturing or being repriced during a given period of time. The smaller the gap,
the less the effect of market volatility on net interest income. Asset/liability
management is the utilization of this information to develop strategies to
allocate funds to certain types of assets and offer different liability products
to achieve a certain asset-liability balance and to produce the desired profit
margins.
In certain instances, where a trend in market interest rates is determined, it
may be advantageous to selectively mismatch asset and liability repricing to
take advantage of short-term interest rate movements and the shape of the yield
curve. The percentage of rate sensitive assets to rate sensitive liabilities was
approximately 55% on December 31, 1994, based on contractual maturities and
asset prepayment assumptions for the next 12 months. Because of weak loan demand
in 1993, Urban's excess funds were invested in fixed rate bonds. The effect of
this investment strategy is a negative gap position which in a declining
interest rate environment will increase Urban's net interest spread as the cost
of Urban's deposits and other liabilities may be expected to fall faster than
the interest received on its earning assets. Conversely, if interest rates
increase, the negative gap means that interest received on earning assets may be
expected to increase more slowly than the interest paid on Urban's liabilities,
therefore decreasing the net interest spread. The negative gap is evaluated
together with the magnitude of change anticipated in different asset and
liability categories. Because most deposits are core (checking and savings), the
magnitude of interest rate change in these core accounts
-105-
<PAGE>
is estimated to be less than 50% of any prime rate change and the effect of a
rate change on the net interest margin should be minimal.
Urban has managed its overall asset/liability sensitivity through on-balance
sheet pricing strategies. In the past, Urban has not used derivative products to
limit interest rate risk. Urban could consider using interest rate swaps,
covered call option contracts and future contracts to limit bank interest rate
risk.
Interest rate swaps generally involve the exchange of fixed and floating rate
interest payments between two parties without the exchange of the related
notional amount. A covered call option contract requires the maker to deliver,
upon exercise, an underlying security at a fixed "strike" price. Future
contracts can also limit interest rate sensitivity by hedging underlying assets
and liabilities from adverse movement of interests rates.
The following table shows the GAP position of Urban at December 31, 1994.
<TABLE>
<CAPTION>
Assets and Liabilities Maturing-Repricing in:
--------------------------------------------------------------------
1-30 31-90 91-180 181-365
Days Days Days Days Over 1 Year Total
-------- ------- ------- ------- ----------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Securities held to maturity ... $ 3,080 $ 3,206 $ 1,375 $ 3,530 $ 45,206 $ 56,397
Securities available for sale . 1,525 3,360 2,981 1,973 38,373 48,212
Federal funds sold ............ 14,000 -- -- -- -- 14,000
Interest-bearing deposits ..... 90 -- -- 100 -- 190
Term deposits at FHLB ......... 2,900 4,800 2,000 -- -- 9,700
Federal Reserve Bank Stock .... -- -- -- -- 77 77
Installment loans ............. 781 67 86 284 5,648 6,866
Mortgage loans ................ 17,398 403 1,754 1,019 42,375 62,949
Commercial loans .............. 18,567 -- -- 338 1,627 20,532
-------- ------- ------- ------- -------- --------
Total ....................... 58,341 11,836 8,196 7,244 133,306 218,923
-------- ------- ------- ------- -------- --------
Interest-Bearing Liabilities:
Treasury Tax Deposits ......... 1,693 -- -- -- -- 1,693
Demand deposits ............... 71,630 -- -- -- -- 71,630
Savings deposits .............. 31,150 -- -- 270 -- 31,420
Time deposits ................. 6,289 7,838 6,371 13,202 10,830 44,530
Repurchase agreements ......... 12,212 4,400 2,000 -- -- 18,612
-------- ------- ------- ------- -------- --------
Total ....................... $122,974 $12,238 $ 8,371 $13,472 $ 10,830 $167,885
======== ======= ======= ======= ======== ========
Period gap ...................... ($ 64,633) ($ 402) ($ 175) ($ 6,228) ($122,476) $ 51,038
Cumulative gap .................. ($ 64,633) ($65,035) ($65,210) ($71,438) ($ 51,038)
</TABLE>
-106-
<PAGE>
LIQUIDITY
Liquidity is a measure of Urban's ability to generate sufficient cash flow in
order to meet all current and future financial obligations and commitments as
they arise. One source of cash flow for liquidity purposes is provided by
maturing loans and investments. However, the primary source of liquidity is the
ability to attract new deposits and to renew deposit obligations as they mature.
Urban utilizes its branch banking system to access retail customers who provide
a highly stable source of "core funds." These funds are comprised of demand
deposits, savings accounts and certificates of deposit.
Urban has expanded its core deposit base through an increased emphasis on
customer service, reemphasized as Urban competed for deposit funds.
The following table compares the average amount of each deposit category and the
average rate paid for each period.
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
(Dollars in thousands)
Non-interest bearing demand deposits:
Average amount ..................... $47,217 $37,093 $36,830
Average rate paid .................. -- -- --
Interest bearing demand deposits:
Average amount ..................... $73,165 $71,234 $64,902
Average rate paid .................. 2.02% 2.25% 3.16%
Savings deposits:
Average amount ..................... $30,763 $26,247 $20,906
Average rate paid .................. 2.25% 2.63% 2.98%
Time deposits:
Average amount ..................... $41,609 $43,000 $49,605
Average rate paid .................. 3.62% 3.77% 4.82%
Urban may also purchase federal funds or arrange other short term borrowings for
specific purposes as necessary, including to effect its interest rate
sensitivity management.
Urban actively manages its liquidity position under the direction of both the
Asset and Liability Committee and the Investment Committee. Periodic review
under prescribed policies and procedures is intended to ensure that Urban will
maintain adequate levels of available funds. At December 31, 1994, Urban's
liquidity ratios were well above stated policy.
-107-
<PAGE>
The following is a summary of Short Term Borrowings for the years ending
December 31, 1992, 1993, and 1994.
Short-Term Borrowings 1994 1993 1992
--------------------- ------- ------- ------
Securities Sold Under Agreements to Repurchase:
Current Amount ............................... $18,611 $17,145 $6,553
Weighted Average Interest Rate Year-To-Date .. 3.69% 2.92% 3.39%
Maximum Amount Of Borrowings At Month-End .... $21,915 $22,336 $6,553
Average Balance Year-To-Date ................. $14,343 $16,779 $4,217
Federal Funds Purchased And Other Borrowings:
Current Amount ............................... $ 0 $ 0 $ 0
Weighted Average Interest Rate Year-To-Date .. 3.81% 3.00% 0.00%
Maximum Amount Of Borrowings At Month-End .... $ 0 $ 0 $ 0
Average Balance Year-To-Date ................. $ 21 $ 3 $ 0
Treasury, Tax, & Loan Note Option:
Current Amount ............................... $ 1,693 $ 6,000 $6,473
Weighted Average Interest Rate Year-To-Date .. 3.22% 2.76% 3.17%
Maximum Amount Of Borrowings At Month-End .... $ 2,669 $ 7,122 $6,000
Average Balance Year-To-Date ................. $ 1,582 $ 1,996 $1,990
Securities Sold Under Agreements To Repurchase are generally for terms from one
to 364 days, while borrowings under the Treasury, Tax & Loan Program are
generally for periods which do not exceed ninety days.
CAPITAL
The Office of the Comptroller of the Currency has issued regulations to redefine
the adequacy of bank capital based upon the sensitivity of assets and
off-balance sheet exposures to risk factors. Four categories of risk weights
(0%, 20%, 50% and 100%) were established to be applied to different types of
balance sheet assets and off-balance sheet exposures. The aggregate of the risk
weighted items (risk-based assets) is the denominator of the ratio, the
numerator of which is a newly defined risk-based capital. Under the regulations,
risk-based capital has been classified into two categories. Tier 1 capital
includes common and qualifying perpetual preferred stockholders' equity
(including capital surplus and retained earnings), less goodwill. Tier 2 capital
includes mandatory convertible debt, allowance for possible loan losses, subject
to certain limitations, and certain subordinated and term debt securities. Total
qualifying capital consists of Tier 1 capital and Tier 2 capital; however, the
amount of Tier 2 capital may not exceed the amount of Tier 1 capital in the
computation of total qualifying capital. At December 31, 1994, the minimum
capital ratio required under the above formula was 4.0% for Tier 1 capital and
8.0% for total qualifying capital. Urban at December 31, 1994 exceeded the 1994
requirements with Tier 1 capital of 14.0% and total capital of 15.2%.
Leverage capital adequacy standards have also been established. Under these
standards, in addition to the risk-based capital ratios, a bank must also
maintain a ratio of Tier 1 capital (using the risk-based capital definitions) to
total assets of at least 3%. Institutions which are not "top-rated" will be
expected to maintain a ratio 100 to 200 basis points above this ratio. Urban's
leverage ratio as of December 31, 1994 was 6.3%.
-108-
<PAGE>
The following table summarizes the capital ratios as of December 31, 1994.
1994 MINIMUM RATIOS AT DECEMBER 31, 1994
CAPITAL RATIOS REQUIREMENTS* URBAN NATIONAL BANK
- -------------- ------------- ---------------------------
Tier 1 Capital 6.0% 14.0%
Total Capital 10.0% 15.2%
Leverage 5.0% 6.3%
- -------------
*For qualification as a well-capitalized institution.
At the end of the reported period, there were no known uncertainties that will
have or that are reasonably likely to have a material effect on Urban's
liquidity, capital resources or operations; nor is Urban aware of any current
recommendations by the regulatory authorities which, if they were to be
implemented would have such an effect.
Urban had no material commitments for capital expenditures as of December 31,
1994.
-109-
<PAGE>
MANAGEMENT OF URBAN
Beneficial Ownership
The following table sets forth certain information concerning the ownership
of the Urban Common Stock by (i) each person who is known by Urban to
beneficially own more than five percent (5%) of the issued and outstanding
shares of Urban Common Stock, (ii) each director of Urban, and (iii) all
directors and executive officers of Urban as a group.
<TABLE>
<CAPTION>
Name of Directors and Number of Shares Percent of
Executive Officers Beneficially Owned(1) Class
--------------------- --------------------- ----------
<S> <C> <C>
William Botz ............................................ 3,420(2) *
Robert F. Mangano ....................................... 24,779(3) 2.52%
Bryant D. Malcolm ....................................... 8,316(4) *
W. Peter McBride ........................................ 1,800 *
Edward S. O'Connor ...................................... 28,811(3) 2.93
Joseph Pfeifer .......................................... 27,413 2.78%
William R. Stott ........................................ 134,184(5) 13.63%
Roger Van Schoyck ....................................... 4,684 *
Harold J. Galenkamp, Jr. ................................ 1,304(6) *
------- ----
All Executive Officers and Directors as a Group
(9 Persons) ............................................. 210,956 21.43%
<FN>
- ----------
* Less than 1% of the outstanding shares of Urban Common Stock.
</FN>
</TABLE>
-110-
<PAGE>
(1) Ownership consists of sole voting and investment power unless otherwise
indicated.
(2) Includes 1,920 shares of Urban Common Stock held by Mr. Botz' spouse.
(3) Includes 23,755 shares of Urban Common Stock held in trust under the Urban
National Bank 401(k) Plan. Messrs. Mangano and O'Connor are trustees of the
trust with shared power to vote and dispose of these shares.
(4) Includes 460 shares of Urban Common Stock held by Mr. Malcolm's spouse and
1,000 shares held by the B. D. Malcolm Company Profit Sharing Plan Trust, a
trust for which Mr. Malcolm, his spouse and a third person are trustees. Mr.
Malcolm has shared voting and investment power with respect to such shares.
(5) Includes 3,600 shares of Urban Common Stock held by the William R. Stott
Trust, a trust which is controlled by Mr. Stott, and 8,088 shares of Urban
Common Stock held by the Susan M. Stott Trust, a trust which is also
controlled by Mr. Stott.
(6) Includes 256 shares of Urban Common Stock held by Mr. Galenkamp's spouse.
Certain Information About Directors and Executive Officers
The following table presents certain information regarding Messrs. McBride
and Malcolm, who will become directors of HUBCO, and Mr. Mangano, who will
become an executive officer of the Bank:
<TABLE>
<CAPTION>
Name, Age and Position Principal Occupation Director
with Urban for Past 5 Years Since
---------------------- --------------------- --------
<S> <C> <C>
Robert F. Mangano, 49,
President and CEO .................. President of Urban (1992-Present); 1992
formerly Senior Vice President, Midlantic
National Bank (1988-1992)
Bryant D. Malcolm, 60 ................ President of B. D. Malcolm Company, Inc. 1974
(general contractors)
Peter W. McBride, 49 ................. President of McBride Enterprises, Inc. 1977
(real estate development and construction)
and President, Urban Farms, Inc.
(residential real estate owner/developer)
</TABLE>
-111-
<PAGE>
Executive Compensation
The following tables set forth certain information regarding the cash and
non-cash compensation awarded to Mr. Mangano for the past three (3) years:
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
<TABLE>
<CAPTION>
Long Term
Compensation
Name and Principal Annual Annual Securities All Other
Position Year Salary Bonus Underlying Options Compensation(1)
-------- ---- ------ ----- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert F. Mangano, ...... 1994 $155,000 $20,000 0 $13,278
President and CEO 1993 135,000 10,000 10,000 11,181
1992 71,538(2) 5,000 5,000 5,800
<FN>
- ----------
(1) Includes fees for serving as a director of Urban ($10,400 in 1994, $9,600 in
1993 and $5,800 in 1992) and contributions by Urban for the account of Mr.
Mangano pursuant to Urban's 401(k) Plan.
(2) Mr. Mangano joined Urban in May 1992. On an annualized basis, his salary
was $120,000.
</FN>
</TABLE>
The following table sets forth certain information about Mr. Mangano's
stock options:
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options
Underlying Unexercised at FY-End (based
Shares Value Options at FY-End on $20 per share)
Acquired on Realized (#) Exercisable/ Exercisable/
Name Exercise # $ Unexercisable Unexercisable (1)
---- ---------- -------- -------------- -----------------
<S> <C> <C> <C> <C>
Robert F. Mangano ............... 0 0 15,000/0 $250,000/0
<FN>
- ---------
(1) Since the Urban Common Stock is not traded on any established securities
market, the value of the Urban Common Stock for purposes of this table is
based upon a good faith estimate by the management of Urban.
</FN>
</TABLE>
-112-
<PAGE>
Change in Control Agreement
Urban entered into a Change in Control Agreement with Mr. Mangano which
became effective as of April 19, 1994 (the "Severance Agreement"). Mr. Mangano
is entitled to benefits under the Severance Agreement after a change in control
of Urban (as defined in the Severance Agreement) in the event that his
employment is terminated by Urban other than for "cause," death, "disability" or
"retirement" or by Mr. Mangano other than for "good reason" (as each such term
is defined in the Severance Agreement) at any time during the period beginning
April 19, 1994 and ending on December 31, 1996; provided, however that
commencing January 1, 1995 and each succeeding January thereafter the term of
the Severance Agreement is extended automatically for one additional year unless
Urban notifies Mr. Mangano that such extension will not be made as provided on
the Severance Agreement. No such notice has been given to Mr. Mangano. Upon a
change of control of Urban (as defined), and for three years thereafter, the
Severance Agreement provides for certain benefits upon certain terminations of
Mr. Mangano's employment.
Benefits payable under the Severance Agreement generally include, subject
to certain limitations, (i) 15 months of base salary and (ii) upon retirement,
an amount of total retirement benefits equal to that which Mr. Mangano would
have received from Urban's retirement plans if Mr. Mangano's employment had
continued for 15 months and his rights were fully vested. In addition, under
limited circumstances Mr. Mangano's benefits may be reduced if the payment would
be subject to Section 280(G) or 162(m) of the Code. The Severance Agreement will
be triggered by the Merger. However, the Severance Agreement will be terminated
if Mr. Mangano enters into the Employment Agreement with HUBCO. (See "The
Proposed Merger--Interests of Management in the Merger").
Pension Plan
Urban maintains a defined benefit plan, The Urban National Bank Pension
Plan, for employees of Urban. The following table contains estimated annual
benefits payable upon retirement in specified compensation and years of service
classifications.
Remuneration Years of Service
- ------------ --------------------------------------------------------------
15 20 25 30 35
-- -- -- -- --
$125,000 ..... 23,880 31,839 39,799 47,759 55,719
$150,000 ..... 29,130 38,839 48,549 58,259 67,969
$175,000 ..... 29,130 38,839 48,549 58,259 67,969
$200,000 ..... 29,130 38,839 48,549 58,259 67,969
-113-
<PAGE>
$225,000 ..... 29,130 38,839 48,549 58,259 67,969
$250,000 ..... 29,130 38,839 48,549 58,259 67,969
The Urban National Bank Pension Plan benefits are based upon total compensation.
Mr. Mangano's credited years of service under the Urban National Bank Pension
Plan are 2 years. Benefits are calculated on a straight life annuity basis.
Director Compensation
Directors currently receive $600 for attending each board meeting and $200
for attending an executive committee meeting. The board received $1,000 in 1994
for attending special meetings related to merger activities for which the
directors did not receive meeting fees. The board had twelve regular meetings in
1994 and the executive committee had twelve regular meetings in 1994.
Salary Review Committee Report
The Board of Directors has formed a Salary Review Committee which meets
annually to review the compensation of employees of Urban. With respect to the
Chief Executive Officer of Urban, Robert F. Mangano, the Committee reviews
Urban's return on equity, return on assets and growth in net income and assets
for the year as compared with the prior year and with an industry peer group.
The Committee also reviews a compensation survey prepared by an independent
third party. The Committee has determined to compensate the chief executive
officer in the top quartile of chief executive officer compensation for banks in
Urban's peer group if Urban's performance meets standards the Committee deems
acceptable. Members of the Committee are William R. Stott, Bryant D. Malcolm,
Roger Van Schoyck, W. Peter McBride and Robert F. Mangano. Mr. Mangano does not
vote on his compensation.
William R. Stott
Bryant D. Malcolm
Roger Van Schoyck
W. Peter McBride
Robert F. Mangano
Compensation Committee Interlocks and Insider Participation
Robert F. Mangano, a member of the Salary Review Committee is an officer of
Urban. W. Peter McBride is Chairman of the Board of Urban and is an executive
officer and shareholder of a corporation which had transactions with Urban. See
"--Transactions With Management."
-114-
<PAGE>
Transactions with Management
Some of Urban's current directors and executive officers, corporations of
which they are executive officers or shareholders and partnerships of which they
are members or limited partners, have had transactions with Urban, including
borrowings, all of which were made in the ordinary course of business on
substantially the same terms, including interests rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectability or present other
unfavorable features.
Urban presently leases 8,441 square feet for its corporate headquarters in
Franklin Lakes, New Jersey from Urban Farms Shopping Center, Inc., a New Jersey
corporation of which W. Peter McBride is the Present and a shareholder. The
lease was originally entered into in 1979 and was most recently extended for a
term which began on November 1, 1994 and expires on October 31, 1999. Urban also
rents space in an adjacent office building from Urban Farms Shopping Center,
Inc., consisting of approximately 4,222 sq. ft. The lease term on this space
began on February 1, 1993 and ends on January 31, 1996. Management of Urban
believes the terms and conditions of these leases are similar to those it would
receive from an independent third party. The annual lease payment under these
leases was $78,238.68 for the year ended December 31, 1994.
PROPOSAL II
RATIFY THE 1990 TWO-FOR-ONE STOCK SPLIT AND
AMEND URBAN'S ARTICLES OF ASSOCIATION
On June 12, 1990 the Board of Directors of Urban approved the Stock Split.
Prior to the Stock Split, 492,186 shares of capital stock, par value $2.50 per
share were issued and outstanding and under Article Fifth of Urban's Articles of
Association, Urban was authorized to issue up to 492,186 shares of capital stock
with a par value $2.50. As a result of the Stock Split, the number of shares of
Urban issued and outstanding increased to 984,372 with a par value of $1.25 per
share.
In connection with the Stock Split, however, Urban failed to obtain the
approval of the stockholders of Urban to amend the Articles of Association of
Urban. Because of these failures, the Stock Split never became legally
effective.
In order to give legal effect to the Stock Split, the stockholders must
ratify the actions taken by the Board on June 12, 1990 by a vote of stockholders
holding at least a majority of the common stock of Urban. Stockholder
ratification of the
-115-
<PAGE>
Stock Split would have the simple effect of approving Urban's current
capitalization. It is a condition to the Merger that the Stock Split be ratified
by the stockholders.
The Stock Split automatically increased the number of shares authorized to
be issued under Article Fifth of Urban's Articles of Association from 492,186
shares of capital stock, par value $2.50 per share to 984,372 shares, par value
$1.25 per share. The Board has approved a resolution to amend Article Fifth of
the Articles of Association to reflect this increase in capitalization of Urban
as a result of the Stock Split. As so amended the first paragraph of Article
Fifth of the Articles of Association will read as follows:
"FIFTH. The authorized amount of capital stock of this
association shall be 948,372 with a par value of one dollar and
twenty-five cents ($1.25) each; but said capital stock may be
increased or decreased from time to time, according to the
provisions of the laws of the United States."
The Board of Directors recommends that shareholders vote FOR the
ratification of the Stock Split and the amendment to Article Fifth of Urban's
Articles of Association.
Legal Opinion
Certain legal matters relating to the issuance of the shares of HUBCO
Common Stock offered hereby will be passed upon by McCarter & English, counsel
to HUBCO.
Experts
The consolidated financial statements of Urban as of and for the years
ended December 31, 1994 included in this Proxy Statement/Prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated financial statements of Urban as of and for the year ended
December 31, 1993 and for each of the two years in the period ended December 31,
1993 included in this Proxy Statement/Prospectus and elsewhere in this
registration statement have been audited by Stephen P. Radics & Co., Inc.,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts.
-116-
<PAGE>
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,
incorporated by reference herein, have been incorporated by reference herein in
reliance upon the report of Arthur Andersen LLP, independent public accountants,
incorporated by reference herein and upon the authority of said firm as experts
in giving said reports.
-117-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF URBAN NATIONAL BANK
Reports of Independent Public Accountants .......................... F-1
Consolidated Statements of Condition
-- December 31, 1994 and 1993 .................................... F-3
Consolidated Statements of Income
for the Years Ended December 31, 1994,
1993 and 1992 .................................................... F-4
Consolidated Statements of Changes in
Shareholders' Equity for the Years
Ended December 31, 1994, 1993 and 1992 ........................... F-6
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1994,
1993 and 1992 .................................................... F-7
Notes to Consolidated Financial Statements ......................... F-8
All financial statements schedules are omitted because the required
information is either not applicable or not required, or the required
information is shown in the financial statements or in the notes thereto.
-118-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Urban National Bank:
We have audited the accompanying consolidated balance sheet of Urban National
Bank and subsidiary as of December 31, 1994 and the related statements of
income, changes in shareholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of Urban National Bank and
subsidiary as of December 31, 1993 and for the years ended December 31, 1993 and
1992 were audited by other auditors whose report dated January 14, 1994
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Urban National Bank as of
December 31, 1994, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1994, the Bank changed its method of accounting for securities.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 12, 1995 (except with respect
to the matter discussed in Note 15, as
to which the date is February 14, 1995)
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
URBAN NATIONAL BANK
We have audited the consolidated statements of financial condition of Urban
National Bank (the "Bank") and Subsidiary as of December 31, 1993 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the years in the two year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the Bank'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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the second
preceding paragraph present fairly, in all material respects, the financial
position of Urban National Bank and Subsidiary at December 31, 1993 and the
results of their operations and cash flows for each of the years in the two year
period ended December 31, 1993 in conformity with generally accepted accounting
principles.
STEPHEN P. RADICS CO.
Haledon, New Jersey
January 14, 1994
F-2
<PAGE>
<TABLE>
URBAN NATIONAL BANK
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(in thousands)
<CAPTION>
ASSETS 1994 1993
-------- --------
<S> <C> <C>
CASH AND DUE FROM BANKS (Note 2) ............................. $ 14,750 $ 10,660
INTEREST BEARING DEPOSITS WITH BANKS ......................... 9,890 5,612
FEDERAL FUNDS SOLD ........................................... 14,000 9,000
-------- --------
Total cash and cash equivalents (Note 1) .............. 38,640 25,272
-------- --------
MORTGAGE LOANS HELD FOR SALE, at market value (Note 1) ....... 267 919
SECURITIES (Notes 1, 3 and 4):
Available for sale, at market value in 1994 and the lower of
aggregate amortized cost or market value in 1993 ......... 48,212 56,816
Held to maturity (market value of $52,062 in
1994 and $48,510 in 1993) ................................ 56,397 48,869
-------- --------
Total securities ..................................... 104,609 105,685
-------- --------
FEDERAL RESERVE BANK STOCK, AT COST .......................... 77 77
-------- --------
LOANS (Notes 1 and 5) ........................................ 90,080 84,715
Less--allowance for possible loan losses (Notes 1 and 6) .. 1,486 1,616
-------- --------
Net loans ........................................... 88,594 83,099
-------- --------
BANK PREMISES AND EQUIPMENT, net (Notes 1 and 7) ............. 1,791 1,856
-------- --------
OTHER REAL ESTATE, net (Notes 1 and 8) ....................... 3,127 4,119
-------- --------
OTHER ASSETS (Notes 10 and 11) ............................... 4,219 6,350
-------- --------
Total assets ........................................ $241,324 $227,377
======== ========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
--------- ---------
<S> <C> <C>
DEPOSITS:
Noninterest bearing demand .............................. $ 58,855 $ 43,239
Interest-bearing demand ................................. 71,630 75,947
Savings ................................................. 31,420 29,199
Time of $100,000 or more ................................ 7,813 5,687
Other time .............................................. 36,717 35,607
--------- ---------
Total deposits ............................. 206,435 189,679
--------- ---------
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
AND TREASURY, TAX AND LOAN DEPOSITS (Note 9) ............. 20,305 23,145
OTHER LIABILITIES .......................................... 2,789 1,786
--------- ---------
Total liabilities .......................... 229,529 214,610
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY (Notes 1, 3 and 12):
Common stock, par value $1.25; 984,372 shares authorized,
issued and outstanding ................................ 1,230 1,230
Additional paid-in capital .............................. 1,329 1,329
Retained earnings ....................................... 11,692 10,208
Unrealized holding loss on securities available for sale,
net of income taxes ................................... (2,456) 0
--------- ---------
Total shareholders' equity ................. 11,795 12,767
--------- ---------
Total liabilities and shareholders' equity . $ 241,324 $ 227,377
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<PAGE>
<TABLE>
URBAN NATIONAL BANK
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<CAPTION>
1994 1993 1992
-------- -------- --------
INTEREST INCOME (Notes 1 and 6):
<S> <C> <C> <C>
Loans ..................................................... $ 7,796 $ 7,698 $ 9,432
Securities--
Taxable ................................................. 4,895 4,343 2,919
Tax-exempt .............................................. 335 168 431
Federal funds sold ........................................ 193 194 270
Other interest-earning assets ............................. 335 269 167
-------- -------- --------
Total interest income ........................ 13,554 12,672 13,219
-------- -------- --------
INTEREST EXPENSE:
Deposits .................................................. 3,673 3,914 5,068
Securities sold under agreements to repurchase
and treasury, tax and loan deposits ..................... 581 545 206
-------- -------- --------
Total interest expense ....................... 4,254 4,459 5,274
-------- -------- --------
Net interest income .......................... 9,300 8,213 7,945
Provision for possible loan losses ........................ 125 118 1,598
-------- -------- --------
Net interest income after provision for
possible loan losses ....................... 9,175 8,095 6,347
-------- -------- --------
OTHER INCOME:
Service charges on deposit accounts ....................... 1,161 1,134 1,172
Gains (losses) on sales of securities, net (Note 1) ....... (83) 158 1,309
Unrealized losses on securities available for sale (Note 1) 0 (75) 0
Other income, net ......................................... 289 267 255
-------- -------- --------
Total other income ........................... 1,367 1,484 2,736
OTHER EXPENSES:
Salaries and benefits (Note 11) ........................... 4,210 3,698 3,884
Occupancy and equipment (Note 7) .......................... 1,430 1,340 1,351
Other real estate, net (Note 8) ........................... 462 774 1,220
Deposit insurance ......................................... 465 438 382
Legal ..................................................... 260 201 253
Other expenses ............................................ 1,529 1,456 1,291
-------- -------- --------
Total other expenses ......................... 8,356 7,907 8,381
-------- -------- --------
Income before provision for income taxes ..... 2,186 1,672 702
</TABLE>
F-5
<PAGE>
1994 1993 1992
------ ------ ----
PROVISION FOR INCOME TAXES (Note 10) ............. $ 752 $ 647 $254
------ ------ ----
Income before cumulative effect of
accounting change .............. 1,434 1,025 448
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR CERTAIN DEBT AND EQUITY SECURITIES, net of
related income taxes (Note 1) ................ 50 0 0
------ ------ ----
Net income ....................... $1,484 $1,025 $448
====== ====== ====
NET INCOME PER SHARE:
Before cumulative effect of accounting change . $ 1.46 $ 1.04 $.46
Cumulative effect of accounting change ........ .05 0 0
------ ------ ----
$ 1.51 $ 1.04 $.46
====== ====== ====
The accompanying notes to consolidated financial
statements are an integral part of these statements.
F-6
<PAGE>
URBAN NATIONAL BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
Unrealized
Holding Loss Total
Additional on Securities Share-
Common Paid-in Retained Available holders'
Stock Capital Earnings For Sale Equity
-------- --------- -------- ------------- --------
BALANCE,
December 31, 1991 ......... $1,230 $1,329 $ 8,735 $ 0 $11,294
Net income--1992 .......... 0 0 448 0 448
------ ------ ------- ------- -------
BALANCE,
December 31, 1992 ......... 1,230 1,329 9,183 0 11,742
Net income--1993 ........ 0 0 1,025 0 1,025
------ ------ ------- ------- -------
BALANCE,
December 31, 1993 ......... 1,230 1,329 10,208 0 12,767
Cumulative effect of
change in accounting
for certain debt and
equity securities, net of
related income taxes .... 0 0 0 (50) (50)
Unrealized holding
loss on securities
available for sale,
net of income taxes ..... 0 0 0 (2,406) (2,406)
Net income--1994 ........ 0 0 1,484 0 1,484
------ ------ ------- ------- -------
BALANCE,
December 31, 1994 ......... $1,230 $1,329 $11,692 ($2,456) $11,795
====== ====== ======= ======= =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE>
<TABLE>
URBAN NATIONAL BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 1,484 $ 1,025 $ 448
Adjustments to reconcile net income to net cash provided
by operating activities--
Net amortization of premiums on investments .................. 772 464 224
Depreciation and amortization ................................ 398 437 491
Provision for possible loan losses ........................... 125 118 1,598
Provision for possible losses on other real estate ........... 135 488 1,047
(Gains) losses on sales of securities, net ................... 83 (158) (1,309)
Unrealized losses on securities available for sale ........... 0 75 0
(Gains) losses on sales of premises and equipment ............ (11) 0 (1)
Losses on sales of loans, net ................................ 21 0 0
(Gains) losses on sales of other real estate ................. (26) (79) 41
Net (increase)decrease in mortgage loans held for sale ..... 631 (919) 0
Deferred income taxes (benefit) .............................. 18 (430) (143)
(Increase) decrease in other assets .......................... (758) (380) 329
Increase (decrease) in other liabilities ..................... 501 62 (506)
-------- -------- --------
Net cash provided by operating activities ........... 3,373 703 2,219
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities available for sale--
Proceeds from sales ............................................ 17,089 25,873 41,853
Purchases ...................................................... (15,127) (60,402) (42,766)
Proceeds from principal repayments and maturities .............. 7,165 0 0
Securities held to maturity--
Proceeds from sales ............................................ 0 26,661 7,201
Purchases ...................................................... (14,790) (53,738) (37,231)
Proceeds from principal repayments and maturities .............. 6,711 19,612 8,804
Loan participations sold ......................................... 450 350 0
Net (increase) decrease in loans ................................. (6,070) 8,398 11,956
Proceeds from the sale of premises and equipment ................. 11 0 5
Capital expenditures ............................................. (333) (227) (129)
Decrease in other real estate, net ............................... 883 3,194 593
-------- -------- --------
Net cash used in investing activities ............... (4,011) (30,279) (9,714)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits .............................. 16,746 14,269 (3,450)
Net increase (decrease) in securities sold under agreements
to repurchase and treasury, tax and loan deposits .............. (2,840) 10,119 5,778
-------- -------- --------
Net cash provided by financing activities ........... 13,906 24,388 2,328
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 13,268 (5,188) (5,167)
-------- -------- --------
</TABLE>
F-8
<PAGE>
1994 1993 1992
------- ------- -------
CASH AND CASH EQUIVALENTS, beginning of year ...... $25,372 $30,460 $35,627
------- ------- -------
CASH AND CASH EQUIVALENTS, end of year ............ $38,640 $25,272 $30,460
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest .......................... $ 4,167 $ 4,492 $ 5,457
Cash paid for federal and state income taxes .... 1,044 1,175 346
======= ======= =======
The accompanying notes to consolidated financial
statements are an integral part of these statements.
F-9
<PAGE>
URBAN NATIONAL BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(amounts in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and practices within the banking
industry. The significant accounting policies are summarized as follows--
Principles of Consolidation--
The consolidated financial statements include the accounts of Urban
National Bank (the "Bank") and its wholly-owned subsidiary, UNB
Holdings, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Cash and Cash Equivalents--
Cash and cash equivalents include cash and due from banks,
interest-bearing deposits with banks having original maturities of
three months or less and federal funds sold. Generally, federal funds
sold are sold for one-day periods.
Securities--
The Bank prospectively adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115), effective January 1, 1994. SFAS 115
requires the Bank to classify its securities as: (1) held to maturity,
(2) available for sale and (3) trading.
Securities which the Bank has the ability and intent to hold until
maturity are classified as held to maturity. These securities are
carried at cost adjusted for amortization of premiums and accretion of
discounts.
Securities which are held for an indefinite period of time which
management intends to use as part of its asset/liability strategy, or
that may be sold in response to changes in interest rates, changes in
prepayment risk, increased capital requirements or other similar
factors, are classified as available for sale and are carried at market
value. Differences between a security's amortized cost and market value
is charged/credited directly to shareholders' equity, net of income
taxes. The cost of securities sold is determined on a specific
identification basis. Gains and losses on sales of securities are
recognized in the statement of income on the date of sale. The Bank has
not classified any of its securities as trading.
F-10
<PAGE>
The initial application of SFAS 115 increased net income in 1994 by
$50, but had no effect on shareholders' equity. The $50 represents
write-downs on securities (net of related income tax effects)
previously carried at the lower of aggregate amortized cost or market
value that have been classified as available for sale as of January 1,
1994.
Securities available for sale at December 31, 1993 are carried at the
lower of aggregate amortized cost or market value.
Mortgage Loans Held For Sale--
Mortgage loans held for sale are reflected at the lower of cost or
market value. Valuation computations are made in the aggregate by type
of loan and rate of interest.
Loans--
Loans are stated at the amount of unpaid principal less deferred loan
fees. Interest on substantially all loans is credited to interest
income based upon the principal amount outstanding. The general policy
of the Bank is to discontinue the accrual of interest income on loans
where the principal or interest is past due 90 days or more and timely
collection thereof is doubtful. A loan is returned to accrual status
when factors indicating doubtful collectibility no longer exist. The
Bank defers loan origination fees and certain direct loan origination
costs and amortizes such amounts, using the level-yield method, as an
adjustment of yield over the contractual life of the loan.
Allowance for Possible Loan Losses--
The allowance for possible loan losses is maintained at a level
considered adequate to provide for potential losses. The allowance is
increased by provisions charged to expense and reduced by net
charge-offs. The level of the allowance is based on management's
evaluation of potential losses in the portfolio after consideration of
appraised collateral values, financial condition of the borrower as
well as prevailing and anticipated economic conditions. Management
evaluates the adequacy of the allowance for possible loan losses on a
regular basis throughout the year.
Bank Premises and Equipment--
Bank premises and equipment are comprised of land, at cost, and
buildings and improvements, furniture, fixtures and equipment and
leasehold improvements, at cost, less accumulated depreciation and
amortization. Depreciation and amortization charges are computed on the
straight-line method over the following estimated useful lives--
Buildings and improvements ........................... 5 to 37 years
Furniture, fixtures and equipment .................... 3 to 10 years
Leasehold improvements ............................... Term of lease
Rental income is netted against occupancy costs in the consolidated
statements of income.
F-11
<PAGE>
Other Real Estate--
Other real estate (ORE) includes real estate acquired in satisfaction
of a loan and in-substance foreclosures. In-substance foreclosures are
properties in which the borrower has little or no equity in the
collateral, where repayment of the loan is expected only from the
operation or sale of the collateral, and the borrower has either
effectively abandoned control of the property or the borrower has
retained control of the property but its ability to rebuild equity
based on current financial conditions is considered doubtful.
Properties acquired by foreclosure or deed in lieu of foreclosure and
properties classified as in-substance foreclosures are transferred to
ORE and recorded at the lower of carrying value or fair value of the
properties, reduced by estimated costs to sell. Subsequent provisions
that result from ongoing periodic evaluations of these ORE properties
are charged to expense in the period in which they are identified. ORE
is carried at the lower of cost or fair value, less estimated costs to
sell. Carrying costs, such as maintenance and property taxes, are
charged to expense as incurred.
During fiscal 1993, the Financial Accounting Standards Board issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." This
statement requires that impaired loans that are within the scope of
statement No. 114 be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or
at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. This statement is
effective for fiscal 1995. Management of the Bank expects that
implementation of the new standard will not have a material effect on
the Bank's financial position.
Federal Income Taxes--
The bank adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), effective January 1, 1993.
Deferred income taxes are recognized for tax consequences of "temporary
differences" by applying enacted statutory tax rates to differences
between the financial reporting and the tax basis of existing assets
and liabilities. Adoption of the new standard did not have a material
effect on the consolidated financial position or results of operations
of the Bank.
Net Income Per Share--
Net income per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the
periods.
Reclassifications--
Certain amounts in the 1993 and 1992 financial statements have been
reclassified to conform to the current year's presentation.
F-12
<PAGE>
(2) CASH AND DUE FROM BANKS:
Cash balances restricted for purposes of maintaining required reserve
balances in accordance with Federal Reserve Bank regulations amounted to
approximately $2,381 and $2,407 at December 31, 1994 and 1993, respectively.
The level of such reserves is based principally upon deposits.
(3) SECURITIES AVAILABLE FOR SALE:
Information relative to the Bank's securities available for sale portfolio
is as follows--
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------
Gross
Amortized Unrealized Estimated
Cost Losses Fair Value
--------- ---------- ----------
<S> <C> <C> <C>
U. S. Government (including agencies)--
Due in one year or less ............................. $ 3,958 ($ 12) $ 3,946
Due after one year through five years ............... 21,676 (1,427) 20,249
Due after five years through ten years .............. 8,706 (555) 8,151
------- ------- -------
34,340 (1,994) 32,346
Mortgage-backed securities ............................ 17,378 (1,512) 15,866
------- ------- -------
Total ............................... $51,718 ($3,506) $48,212
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. Government (including agencies)--
Due in one year or less .............. $ 3,014 $ 5 $ 0 $ 3,018
Due after one year through five years 17,056 84 (67) 17,073
Due after five years through ten years 5,541 124 0 5,666
------- ---- ----- -------
25,611 213 (67) 25,757
Mortgage-backed securities ............. 31,280 51 (272) 31,059
------- ---- ----- -------
Total ................ $56,891 $264 ($339) $56,816
======= ==== ===== =======
</TABLE>
Year Ended December 31,
---------------------------
1994 1993 1992
------- ------- -------
Proceeds from sales ............ $12,960 $29,665 $41,853
Gross gains .................... 7 271 1,341
Gross losses ................... (90) (92) (27)
======= ======= =======
Securities available for sale with carrying values aggregating approximately
$941 and $1,038 were pledged to secure public deposits at December 31, 1994
and 1993, respectively.
F-13
<PAGE>
(4) SECURITIES HELD TO MATURITY:
Information relative to the Bank's securities held to maturity portfolio is
as follows--
<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------
Gross Gross
Carrying Unrealized Unrealized Estimated
Value Gains Losses Fair Value
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. Government (including agencies)--
Due after one year through five years .... $ 5,283 $ 0 ($ 387) $ 4,896
Due after five years through ten years ... 7,418 0 (876) 6,542
------- --- ------- -------
12,701 0 (1,263) 11,438
------- --- ------- -------
Obligations of states and political
subdivisions--
Due in one year or less ................ 4,958 0 (35) 4,923
Due after one year through five years... 5,047 8 (170) 4,885
Due after five years through ten years.. 829 0 (67) 762
------- --- ------- -------
10,834 8 (272) 10,570
------- --- ------- -------
Mortgage-backed securities ................. 32,862 3 (2,800) 30,065
------- --- ------- -------
Total .................... $56,397 $11 ($4,335) $52,073
======= === ======= =======
<CAPTION>
December 31, 1994
------------------------------------------------
Gross Gross
Carrying Unrealized Unrealized Estimated
Value Gains Losses Fair Value
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. Government (including agencies)--
Due after one year through five years ... $ 6,984 $ 11 ($ 20) $ 6,974
Due after five years through ten years .. 11,710 20 (119) 11,612
------- ---- ----- -------
18,694 31 (139) 18,586
------- ---- ----- -------
Obligations of states and political
subdivisions--
Due in one year or less ................. 2,164 0 (6) 2,158
Due after one year through five years ... 6,060 48 (39) 6,068
Due after five years through ten years .. 1,168 8 (14) 1,162
Due after ten years ..................... 117 6 0 123
------- ---- ----- -------
9,509 62 (59) 9,511
------- ---- ----- -------
Mortgage-backed securities ................. 20,566 64 (317) 20,313
Certificate of deposit due after one
year through five years .................. 100 0 0 100
------- ---- ----- -------
Total ...................... $48,869 $157 ($515) $48,510
======= ==== ===== =======
</TABLE>
F-14
<PAGE>
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
Proceeds from sales ........................... $0 $26,661 $7,201
Gross gains ................................... 0 135 15
Gross losses .................................. 0 (156) (20)
(5) LOANS:
Loans outstanding by classification are as follows--
December 31,
-------------------
1994 1993
------- -------
Commercial--
Demand ....................................... $ 2,995 $ 5,254
Time and term ................................ 17,557 17,124
Consumer ....................................... 6,866 5,285
Mortgage--
First ........................................ 39,091 39,389
Second ....................................... 21,296 17,107
Construction ................................... 2,389 630
------- -------
90,194 84,789
Less--deferred loan fees ................... (114) (74)
------- -------
$90,080 $84,715
======= =======
Nonperforming loans include nonaccrual loans, troubled debt restructurings
and loans which are contractually past due 90 days or more as to interest
and principal payments but have not been classified as nonaccrual since the
loans are well secured and in the process of collection. Non-performing
loans are summarized as follows--
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
Nonaccrual loans .............................. $3,355 $3,942 $3,869
Loans past due 90 days or more
and still accruing interest ................. 375 285 2,122
------ ------ ------
$3,730 $4,227 $5,991
====== ====== ======
The total amount of interest received on nonaccrual loans outstanding
amounted to approximately $72, $70 and $129 for the years ended December 31,
1994, 1993 and 1992, respectively. Had such loans performed in accordance
with their original contract terms, interest income of approximately $294,
$387 and $388 would have been recognized during the years ended December 31,
1994, 1993 and 1992, respectively.
F-15
<PAGE>
The Bank has lending transactions in the ordinary course of business with
directors, executive officers and their affiliates on the same terms as
those prevailing for comparable transactions with other borrowers. A
summary of these loans, which were current as to principal and interest
payments at December 31, 1994 is as follows--
Year Ended
December 31,
----------------
1994 1993
------ ------
Balance, beginning of year ........................ $2,600 $2,774
New loans ......................................... 890 736
Repayments ........................................ (1,136) (910)
------ ------
Balance, end of year .............................. $2,354 $2,600
====== ======
At December 31, 1994 and 1993, loans serviced for the benefit of others
totaled approximately $443 and $347, respectively.
(6) ALLOWANCE FOR POSSIBLE LOAN LOSSES:
The allowance for possible loan losses is based on estimates, and
ultimate losses may vary from current estimates. These estimates are
reviewed periodically and as adjustments become known, they are reflected
in operations in the periods in which they become known.
An analysis of the allowance for possible loan losses is as follows--
Year Ended December 31,
--------------------------
1994 1993 1992
------ ------ ------
Balance, beginning of year ......................... $1,616 $1,553 $1,366
Provision charged to operations .................... 125 118 1,598
Recoveries of loans previously charged off ......... 98 131 114
Loans charged off .................................. (353) (186) (1,525)
------ ------ ------
Balance, end of year ............................... $1,486 $1,616 $1,553
====== ====== ======
(7) PREMISES AND EQUIPMENT:
Premises and equipment consist of the following--
December 31,
----------------
1994 1993
------ ------
Land ............................................... $ 113 $ 113
Buildings and improvements ......................... 1,836 1,832
Leasehold improvements ............................. 587 455
Furniture and equipment ............................ 1,971 1,721
Construction in progress ........................... 3 78
------ ------
4,510 4,199
Less--accumulated depreciation and amortization .... 2,719 2,343
------ ------
$1,791 $1,856
====== ======
F-16
<PAGE>
Depreciation and amortization charged to expense amounted to
approximately $398, $397 and $410 for the years ended December 31, 1994,
1993 and 1992, respectively.
(8) OTHER REAL ESTATE:
Other real estate consists of the following--
December 31,
---------------
1994 1993
------ -----
Real estate acquired in settlement of loans ......... $3,048 $2,683
In-substance foreclosures ........................... 399 1,842
------ ------
3,447 4,525
Less--allowance for possible losses ................. (320) (406)
------ ------
$3,127 $4,119
====== ======
The following is an analysis of the allowance for possible losses--
Year Ended
December 31,
--------------------
1994 1993 1992
---- ---- ------
Balance, beginning of year ...................... $406 $459 $ 0
Provision charged to operations ................. 135 488 1,046
Charge-off ...................................... (221) (541) (587)
---- ---- ------
Balance, end of year ............................ $320 $406 $ 459
==== ==== ======
The following is an analysis of other real estate expense, net--
Year Ended
December 31,
--------------------
1994 1993 1992
---- ---- ------
Provision for possible losses ................... $135 $488 $1,046
Operating expenses, net of rental income ........ 353 365 83
(Gains) losses on sales of other real estate .... (26) (79) 41
Depreciation expense ............................ 0 0 50
---- ---- ------
$462 $774 $1,220
==== ==== ======
(9) SECURITIES SOLD UNDER
AGREEMENTS TO REPURCHASE AND
TREASURY, TAX AND LOAN DEPOSITS:
Securities sold under agreements to repurchase and treasury, tax and
loan deposits are as follows--
Year Ended
December 31,
----------------
1994 1993
------- -------
Securities sold under agreements to repurchase ...... $18,612 $17,145
Treasury, tax and loan deposits ..................... 1,693 6,000
------- -------
$20,305 $23,145
======= =======
F-17
<PAGE>
Securities sold under agreements to repurchase are generally for terms
from one to 364 days, while borrowings on treasury, tax and loan
deposits are generally for periods which do not exceed ninety days.
The carrying values of the securities available for sale and held to
maturity pledged to secure the above borrowings were approximately
$19,957 and $18,948, respectively, at December 31, 1994 and
approximately $19,599 and $10,525, respectively at December 31, 1993.
In addition to the above, the Bank has pledged securities with a
carrying value of $2,500 with the Federal Reserve Bank in return for
the ability to borrow up to $2,000. Interest on such borrowings would
be assessed at the Federal Reserve Bank's discount rate. There were no
borrowings under this facility as of December 31, 1994 or 1993.
(10) INCOME TAXES:
The components of the provision for income taxes are as follows--
Year Ended
December 31,
--------------------
1994 1993 1992
---- ---- ----
Current federal tax expense ................... $586 $910 $252
Deferred federal tax expense (benefit) ........ 18 (430) (143)
State ......................................... 148 167 145
---- ---- ----
$752 $647 $254
==== ==== ====
The following table presents a reconciliation between the reported
income taxes and the income taxes which would be computed by applying
the statutory federal income tax rate (34%) to income before income
taxes--
Year Ended
December 31,
--------------------
1994 1993 1992
---- ---- ----
Federal income taxes at statutory rate ........ $743 $568 $239
Nontaxable interest income, net ............. (90) (50) (134)
State income taxes, net of federal income
tax effect .................................. 98 110 96
Other 1 19 53
---- ---- ----
Provision for income taxes ...... $752 $647 $254
==== ==== ====
F-18
<PAGE>
The components of the net deferred tax asset, included in other assets
in the accompanying consolidated balance sheets, are as follows--
December 31,
--------------
1994 1993
------ ----
Allowance for loan and real estate losses .......... $ 173 $276
Unrealized losses on securities .................... 1,265 26
Nonaccrual interest ................................ 256 134
Depreciation ....................................... 14 14
Deferred fees ...................................... 43 34
Pension ............................................ (103) (88)
Other .............................................. 0 5
------ ----
Total .................................. $1,648 $401
====== ====
(11) BENEFIT PLANS:
The Bank has a non-contributory pension plan covering substantially all
of its employees. The plan is a defined benefit plan which provides
benefits based on a participant's years of service and average
compensation. Annual contributions are made to the plan equal to the
maximum amount deductible for federal income tax purposes.
The following table sets forth the plan's funded status and components
of net periodic pension cost--
1994 1993
------ ----
Actuarial present value of benefit obligation
including vested benefits of $730 and $682
in 1994 and 1993, respectively ................... ($ 777) ($709)
------ ----
Projected benefit obligation ....................... (984) (865)
Plan assets at fair value .......................... 1,080 981
------ ----
Plan assets in excess of projected benefit
obligation ....................................... 96 116
Unrecognized net obligation at January 1, 1990
being amortized over fifteen years ............... 167 184
Unrecognized net (gain) loss ....................... 88 (42)
------ ----
Prepaid pension costs included in other assets ..... $ 351 $258
====== ====
Year Ended
December 31,
-------------------
1994 1993 1992
---- ---- ----
Net periodic pension cost includes the
following components--
Service cost ................................ $82 $62 $75
Interest cost ............................... 63 58 69
Actual return on plan assets ................ (27) (67) (113)
Net amortization and deferral ............... (31) 20 65
--- --- ---
Net periodic pension cost ........................ $87 $73 $96
=== === ===
F-19
<PAGE>
Assumptions used in accounting for the plan are as follows--
Discount rate ............................ 7.5% 7.5% 7.5%
Rate of increase in compensation .... .... 4.5% 4.5% 4.5%
Long-term rate of return on plan assets .. 7.5% 7.5% 7.5%
The Bank has a non-contributory profit-sharing plan covering all
eligible employees. Contributions are determined by the Bank's Board of
Directors and are allocated to participants based on the ratio of the
participant's compensation to the compensation of all participants. No
contributions were made to the profit sharing plan for the years ended
December 31, 1994, 1993 and 1992.
Effective January 1, 1993, the Bank implemented a 401(k) plan within
the existing profit-sharing plan. Under the 401(k) plan, which covers
all eligible employees, participants may elect to contribute up to 10%
of their salaries, not to exceed the applicable limitations as per the
Internal Revenue Code. The Bank, on an annual basis, may elect to match
a specified percentage of the employees' contribution, not to exceed 6%
of applicable compensation. Total 401(k) expense for the year ended
December 31, 1994 was approximately $31.
(12) REGULATORY MATTERS:
On January 14, 1992, the Bank's Board of Directors entered into a
Formal Agreement with the Comptroller of the Currency (the OCC) wherein
the Bank agreed to develop and implement various policies and
procedures relating to operations and management of the Bank, update
its capital plan, maintain a leverage capital ratio of at least 5% and
pay dividends only when certain requirements, including obtaining prior
permission of the OCC, are met. On August 24, 1994 the OCC notified the
Board of Directors that the Bank had achieved full compliance with the
Formal Agreement and that the Formal Agreement had been terminated.
Subsequent to the termination of the Formal Agreement, the Bank's Board
of Directors adopted a resolution which requires, among other things,
that the Bank consult with the OCC prior to paying any dividends.
Banking regulations provide that the Bank must adhere to three minimum
capital requirements. These regulations require, at a minimum, Tier 1
capital to risk-weighted assets of at least 4%, total capital of at
least 8% of risk-weighted assets, and a leverage ratio of at least 3%
of adjusted assets. At December 31, 1994, the Bank had Tier 1 capital,
total capital and leverage ratios of 14.0% (unaudited), 15.2%
(unaudited) and 6.3%, respectively.
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<PAGE>
(13) COMMITMENTS AND CONTINGENCIES:
Rentals under long-term operating leases for the main office and
certain branch offices amounted to approximately $453, $423 and $409
for the years ended December 31, 1994, 1993 and 1992, respectively. At
December 31, 1994, the minimum rental commitments under noncancellable
leases with initial or remaining terms of more than one year are as
follows--
Year Ending December 31
1995 ............................................. $ 398
1996 ............................................. 341
1997 ............................................. 312
1998 ............................................. 259
1999 ............................................. 188
Thereafter ....................................... 247
------
$1,745
======
The Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement the Bank
has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of noncompliance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit written is represented by the contractual
notional amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
At December 31, 1994, commitments under standby letters of credit
aggregated approximately $784 of which $638 were fully secured primarily
by cash, marketable securities or mortgages. Standby letters of credit
written are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. All
such guarantees expire in 1995. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loan facilities to customers. The Bank holds collateral supporting those
commitments for which collateral is deemed necessary.
Undisbursed funds from approved lines of credit at December 31, 1994
aggregated $15,968.
The Bank, at December 31, 1994, has commitments, all of which expire
within one year, to originate approximately $3,660 in loans.
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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. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income producing commercial
properties.
In addition to the foregoing, in the conduct of the Bank's business, it
is involved in normal litigation matters. In the opinion of management,
the ultimate disposition of such litigation should not have a material
adverse effect on the financial position or results of operations of the
Bank.
(14) ESTIMATED FAIR VALUE OF
FINANCIAL INSTRUMENTS:
The fair value of a financial instrument is defined as the amount at
which the instrument could be exchanged in a current transaction
between willing parties, other than a forced or liquidation sale.
Significant estimations are used by the Bank for the purposes of this
disclosure. Estimated fair values have been determined by the Bank
using the best available data and estimation methodology suitable for
each category of financial instruments. For those loans and deposits
with floating interest rates, it is presumed that estimated fair values
generally approximate their recorded book balances. The estimation
methodologies used and the estimated fair values and carrying values of
the Bank's financial instruments are set forth below--
Cash and Cash Equivalents
and Accrued Interest Receivable--
The carrying amounts for cash and cash equivalents and accrued
interest receivable approximate fair value.
Securities--
The fair values for securities are based on quoted market prices
or dealer prices.
Loans--
The fair value of loans is estimated by discounting the future
cash flows, using the current rates at which similar loans with
similar remaining maturities would be made to borrowers with
similar credit ratings.
Deposits--
For demand and savings accounts, fair value is the carrying amount
reported in the consolidated financial statements. For
certificates of deposit, fair value is estimated using the rates
currently offered for deposits of similar remaining maturities.
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Securities Sold Under Agreements to
Repurchase and Treasury, Tax and Loan Deposits--
Fair value is estimated using rates currently offered for
liabilities of similar remaining maturities, or when available,
quoted market prices.
Commitments to Extend Credit, Standby Letters
of Credit, and Financial Guarantees Written--
The fair value of commitments is not significant as of December
31, 1994 and 1993.
The carrying values and estimated fair values of the Bank's
financial instruments are as follows--
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------
1994 1993
------------------------ -------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets--
Cash and cash equivalents ........ $ 38,640 $ 38,640 $ 25,272 $ 25,272
Securities available for sale .... 48,212 48,212 56,816 56,816
Securities held to maturity ...... 56,397 52,073 48,869 48,510
Mortgage loans held for sale ..... 267 267 919 924
Loans ............................ 88,594 85,463 83,099 84,503
Accrued interest receivable ...... 1,769 1,769 1,584 1,584
Financial liabilities--
Deposits ......................... $206,435 $206,490 $189,678 $189,855
Securities sold under
agreements to repurchase
and treasury, tax and loan
deposits ....................... 20,305 20,305 23,145 23,145
</TABLE>
Limitations--
Fair value estimates are made at a specific point in time based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the entire
holdings of a particular financial instrument. Because no market
value exists for a significant portion of the financial
instruments, fair value estimates are based on judgments regarding
expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other
factors. These estimates are subjective in nature, involve
uncertainties and matters of judgment and, therefore, cannot be
determined with precision. Changes in assumptions could
significantly affect the estimates.
F-23
<PAGE>
In addition, fair value estimates are based on existing financial
instruments without attempting to estimate the value of
anticipated future business, and exclude the value of assets and
liabilities that are not considered financial instruments. Other
significant assets and liabilities that are not considered
financial assets and liabilities include premises and equipment
and other real estate. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been
considered in any of the estimates.
Finally, reasonable comparability between financial institutions
may not be likely due to the wide range of permitted valuation
techniques and numerous estimates which must be made given the
absence of active secondary markets for many of the financial
instruments. This lack of uniform valuation methodologies
introduces a greater degree of subjectivity of these estimated
fair values.
(15) SUBSEQUENT EVENT--
MERGER AGREEMENT:
On February 14, 1995, the Bank entered into an Amended and Restated
Agreement and Plan of Merger with HUBCO, Inc. ("HUBCO"), whereby each
share of common stock of the Bank would be exchanged for 2.17 shares of
HUBCO common stock, subject to certain adjustment provisions in the
Agreement. Upon closing of the transaction, the Bank will be merged
into HUBCO's banking subsidiary, Hudson United Bank. The proposed
transaction is subject to approval by the Bank's shareholders and
certain regulatory authorities.
F-24
<PAGE>
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
February 14, 1995 ("Agreement"), is by and among HUBCO, INC., a New Jersey
corporation and registered bank holding company ("Holding Company"), HUDSON
UNITED BANK, a New Jersey chartered commercial bank ("Bank") and URBAN NATIONAL
BANK, a national banking association ("Urban").
Holding Company desires to acquire Urban and Urban's Board of Directors has
determined, based upon the terms and conditions hereinafter set forth, that the
acquisition is in the best interests of Urban and its stockholders. The
acquisition will be accomplished by merging Urban into Bank with Bank as the
surviving Bank and Urban shareholders receiving the consideration hereinafter
set forth. The Boards of Directors of Holding Company, Bank and Urban have duly
adopted and approved this Agreement and the Board of Directors of Urban has
directed that it be submitted to its shareholders for approval.
Accordingly, the parties hereto 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), Urban shall be merged with and into
Bank (the "Merger") in accordance with the provisions of the New Jersey Banking
Act of 1948, as amended (the "Banking Act") and the National Bank Act and Bank
shall be the surviving bank (the "Surviving Bank").
1.2. Effect of the Merger. At the Effective Time (as hereinafter defined)
the separate existence of Urban shall cease and the Surviving Bank shall be
considered the same business and corporate entity as each of Urban and Bank and
all of the property, rights, powers and franchises of each of Urban and 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 Urban
and Bank and shall have succeeded to all of 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. In connection with the execution of this Agreement, Urban and
Bank shall execute and deliver a separate merger agreement (the "Bank Merger
Agreement") in the form of Appendix A, annexed hereto.
1.3. Certificate of Incorporation. The Certificate of Incorporation of Bank
as it exists immediately prior to the
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Effective Time shall not be amended by the Merger, but shall continue as the
Certificate of Incorporation of the Surviving Bank until otherwise amended as
provided by law.
1.4. Bylaws. The bylaws of Bank as they exist immediately prior to the
Effective Time shall continue as the by-laws of the Surviving Bank until
otherwise amended as provided by law.
1.5. Directors and Officers. The directors and officers of Bank as of the
Effective Date shall continue as the directors and officers of the Surviving
Bank, except as otherwise provided herein.
1.6. Effective Time and Closing. The Merger shall become effective (and be
consummated) upon the date specified in a notice from the Bank to the Federal
Deposit Insurance Corporation ("FDIC") and on the date specified in the
certification required by Section 137 of the Banking Act, to be filed with the
New Jersey Department of Banking (the "Department") after approval by the
Commissioner of the Department (the "Commissioner") (the "Effective Time"). The
notice from the Bank to the FDIC and the certification filed with the Department
specifying the Effective Time shall require the approval of Urban, which
approval will not be unreasonably withheld, and shall be consistent with this
section. A closing (the "Closing") shall take place prior to the Effective Time
at 10:00 a.m., 10 days (or the first business day thereafter) following the
receipt of all necessary regulatory and governmental approvals and consents and
the expiration of all statutory waiting periods in respect thereof and the
satisfaction or waiver of all of the conditions to the consummation of the
Merger specified in Article VI hereof (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing), at
the offices of McCarter & English, Four Gateway Center, 100 Mulberry Street,
Newark, New Jersey, or at such other place, time or date as HUBCO and Urban may
mutually agree upon. The notice from Bank to the FDIC and the certification
filed with the Department shall specify as the Effective Time of the Merger a
date, immediately following the Closing, agreed to by the Bank and Urban.
ARTICLE II
CONVERSION OF URBAN SHARES
2.1. Conversion of Urban Shares and Options. Each share of common stock,
$1.25 par value, of Urban ("Urban Common Stock"), issued and outstanding
immediately prior to the Effective Time, and each outstanding option to purchase
Urban Common Stock listed in the Urban Disclosure Schedule
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<PAGE>
(collectively, the "Urban Options" or singly, an "Urban Option"), shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted, paid or canceled as follows:
(a) Urban Common Stock. Each share of Urban Common Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined below) shall be converted into and represent the right to
receive 2.17 (the "Exchange Ratio") shares of Holding Company's common stock, no
par value ("Holding Company Common Stock"), subject to adjustments as set forth
in this subsection 2.1(a) without any action on the part of the holder of Urban
Common Stock.
(i) The Exchange Ratio, the Average Closing Price and the Upset Price
(as defined in Section 7.1(d) hereof), shall be appropriately adjusted for any
stock split, stock dividend, stock combination, reclassification or similar
transaction ("Capital Change") effected by Holding Company with respect to
Holding Company Common Stock between the date hereof and the Effective Date. The
parties shall mutually agree upon such adjustment in writing or, if unable to
agree, this Agreement shall terminate.
(ii) The Exchange Ratio shall be adjusted downward to the extent that
the Closing Shareholders Equity of Urban (as defined below) falls below
$11,795,000 in accordance with the following formula. If the Closing
Shareholders Equity is less than $11,795,000 (the "Target Equity"), the reduced
Exchange Ratio shall be determined by multiplying the Exchange Ratio (first
adjusted under subparagraph (i), if necessary) by a fraction, the numerator of
which shall be the Closing Shareholders Equity and the denominator of which
shall be the Target Equity. The lower Exchange Ratio so determined shall be
rounded to the nearest one-thousandth.
The Closing Shareholders Equity of Urban shall mean Urban's
Shareholders Equity calculated, except as set forth below, in accordance with
generally accepted accounting principles, consistently applied and including all
normal recurring adjustments. Such amount shall be calculated as of the close of
the month preceding the month in which Closing occurs, taking into account all
necessary provisions for possible loan and lease losses, even if the close of
such month is not the end of a calendar quarter. Deducted from the Shareholders
Equity so calculated shall be net securities gains realized and other
extraordinary gains realized by Urban from January 1, 1995 through the Closing.
Added back into the Shareholders Equity so calculated shall be (i) any
deductions from Shareholders Equity to account for unrealized holding losses on
securities available for sale in Urban's securities portfolio in accordance with
Statement of Financial Accounting Standards No. 115; (ii) Urban's expenses for
financial advisory services, legal services and
A-3
<PAGE>
accounting services incurred in connection with this transaction, other than in
satisfaction of Urban's obligations under Section 5.19 hereof; (iii) the first
$150,000 expended by Urban in satisfaction of its obligations under Section 5.19
hereof; and (iv) up to $25,000 in legal and professional fees expended by Urban
in connection with its claim under Urban's Bankers Blanket Bond with Federal
Insurance Company disclosed on Schedule 3.14 hereof and related litigation. The
deductions from and additions to Shareholders Equity shall be calculated so as
to take into account the tax effects of such deductions or additions.
The amount of the Closing Shareholders Equity of Urban shall be
mutually agreed to by Urban and HUBCO, but if Urban and HUBCO cannot so agree,
Urban and HUBCO each hereby appoint Arthur Andersen, LLP to determine the amount
of the Closing Shareholders Equity and each hereby agrees that Arthur Andersen
LLP's determination shall be binding and non-appealable.
(iii) No fractional shares of Holding Company Common Stock will be
issued, and in lieu thereof, each holder of Urban Common Stock who would
otherwise be entitled to a fractional interest will receive an amount in cash
determined by multiplying such fractional interest by the Average Closing Price.
(b) Urban Options. At the Effective Time, each Urban Option then
outstanding shall be converted into an option to acquire Holding Company Common
Stock ("Replacement Options") wherein (x) the right to purchase shares of Urban
Common Stock pursuant to the Urban Options shall be converted into the right to
purchase that same number of shares of Holding Company Common Stock multiplied
by the Exchange Ratio (as may be adjusted as set forth above), (y) the option
exercise price per share of Holding Company Common Stock subject to the
Replacement Options shall be the previous option exercise price per share of the
Urban Common Stock divided by the Exchange Ratio (as may be adjusted as set
forth above) and (z) the Replacement Options shall be subject to the terms and
conditions of an option agreement substantially in the form of Exhibit 2.1(b)
hereto. Holding Company shall not be obligated to obtain shareholder approval
for such options. At the Closing, Holding Company shall execute option
agreements reflecting the Replacement Options in favor of the optionee listed on
the Urban Disclosure Schedule to the extent the Urban Options have not been
exercised prior to the Effective Time.
2.2. Exchange of Shares.
(a) Urban and Holding Company hereby appoint Hudson United Bank, Trust
Department (the "Exchange Agent") as the Exchange Agent for purposes of
effecting the conversion of Urban Common Stock. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record (a
"Record Holder") of a certificate or certificates which, immediately
A-4
<PAGE>
prior to the Effective Time represented outstanding shares of Urban Common Stock
(other than Dissenting Shares as defined in Section 2.3 hereof) (the
"Certificates"), a mutually agreed upon letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent), and instructions for use in effecting the surrender of the Certificates
in exchange for Holding Company Common Stock (and cash in lieu of fractional
shares) as provided in Section 2.1. Upon surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the Record Holder shall be entitled to promptly
receive in exchange for such Certificate the consideration as provided in
Section 2.1 hereof and the Certificates so surrendered shall be canceled. The
Exchange Agent shall not be obligated to deliver or cause to be delivered to any
Record Holder the consideration to which such Record Holder would otherwise be
entitled until such Record Holder surrenders the Certificate for exchange or, in
default thereof, an appropriate Affidavit of Loss and Indemnity Agreement and/or
a bond as may be reasonably required in each case by Holding Company.
Notwithstanding the time of surrender of the Certificates, Record Holders shall
be deemed shareholders of Holding Company for all purposes from the Effective
Time, except that Holding Company may withhold the payment of dividends from any
Record Holder until such Record Holder effects the exchange of Certificates for
Holding Company Common Stock. Such Record Holder shall receive such withheld
dividends, without interest, upon effecting the share exchange. With respect to
each outstanding Urban Option, the Holding Company shall, after the Effective
Time distribute to the optionee a Replacement Option evidencing the conversion
of the grant to an option to purchase Holding Company Common Stock in accordance
with Section 2.1 hereof.
(b) After the Effective Time, there shall be no transfers on the stock
transfer books of Urban of the shares of Urban Common Stock which were
outstanding immediately prior to the Effective Time and, if any Certificates
representing such shares are presented for transfer, they shall be canceled and
exchanged for the Merger consideration.
(c) If payment of the consideration pursuant to Section 2.1 hereof is to be
made in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such payment shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the payment to a
person other than that of the registered holder of
A-5
<PAGE>
the Certificate surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) The Exchange Agent shall not charge holders for the exchange of a
Certificate except as provided herein. Cash held by the Exchange Agent pursuant
to the terms hereof shall be held in trust for the persons entitled to receipt
thereof and shall not be used for any other purpose.
2.3. Dissenters' Rights. Notwithstanding anything in this Agreement to the
contrary, any holder of Urban Common Stock shall have the right to dissent in
the manner provided in the National Bank Act, 12 U.S.C. 214a(b), and if all
necessary requirements of the National Bank Act are met, such shares shall be
entitled to payment in cash from Bank of the fair value of such shares as
determined in accordance with the National Bank Act. All shares of Urban Common
Stock as to which the holder properly exercises dissenters' rights in accordance
with the National Bank Act constitute "Dissenting Shares" unless and until such
rights are waived, by the party initially seeking to exercise such rights.
2.4. Bank Shares. The shares of Bank common stock outstanding at the
Effective Time shall not be affected by the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF URBAN
References herein to "Urban Disclosure Schedule" shall mean all of the
disclosure schedules required by this Article III, dated as of the date hereof
and referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered on the date hereof by Urban to Holding
Company; provided, however, a disclosure referenced to a section or subsection
of Article III, shall be deemed to qualify any other such section or subsection
to which such disclosure may be applicable. Except as set forth in the Urban
Disclosure Schedule, Urban hereby represents and warrants to Holding Company as
follows:
3.1. Corporate Organization.
(a) Urban is a national banking association duly organized and validly
existing in good standing under the laws of the United States of America. Urban
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 neither
does any business nor owns any property in any jurisdiction of
A-6
<PAGE>
such a nature as would require it to qualify to do business therein. Deposits
maintained at Urban are insured by the Bank Insurance Fund of the FDIC to the
fullest extent permitted by law.
(b) Each of the subsidiaries of Urban are listed in the Urban Disclosure
Schedule. The term "Subsidiary", when used in this Agreement with respect to
Urban, means any corporation of which Urban owns, directly or indirectly at
least 50% of the outstanding common stock. Each Subsidiary of Urban is duly
organized, validly existing and in good standing under the laws of its state of
incorporation. Each Subsidiary of Urban 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 Urban and its Subsidiaries. The Urban Disclosure Schedule sets
forth true and complete copies of the Articles of Association and Bylaws of
Urban and the Certificate of Incorporation and Bylaws of each Urban Subsidiary
as in effect on the date hereof. Except as set forth in the Urban Disclosure
Schedule, Urban does not own or control, directly or indirectly, any equity
interest in any corporation, company, association, partnership, joint venture or
other entity except for shares of the Federal Reserve Bank of New York and
shares held by Urban in a fiduciary or custodial capacity in the normal course
of its business (which, except as disclosed on the Urban Disclosure Schedule, do
not in the aggregate constitute more than 5% of the voting shares or interests
in any such corporation, company, association, partnership, joint ventures or
other entity) and except that which it holds pursuant to satisfaction of
obligations due to Urban and which are disclosed on the Urban Disclosure
Schedule. Urban owns no real estate, except real estate used for its banking
premises or acquired pursuant to satisfaction of obligations due to Urban. All
such real estate is listed on the Urban Disclosure Schedule.
3.2. Capitalization. The outstanding capital stock of Urban consists of
984,372 shares of Urban Common Stock, par value $1.25 per share. As of the date
hereof, there were 15,000 shares of Urban Common Stock issuable upon exercise of
outstanding Urban Options. The Urban Disclosure Schedule sets forth true and
complete copies of each outstanding Urban Option. All issued and outstanding
shares of Urban Common Stock, and all issued and outstanding shares of capital
stock of each Urban Subsidiary, have been duly authorized and validly issued,
are fully paid, and nonassessable except (i) as provided in section 5205 of the
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Revised Statutes of the United States with respect to Urban Common Stock and
(ii) as to those shares of Urban Common Stock issued pursuant to a June 12, 1990
two-for-one stock split (the "Urban Stock Split") prior to Urban stockholder
approval and OCC approval thereof. As of December 31, 1994, there was no
impairment of the Urban Capital Stock, as provided for under Section 5205 of the
Revised Statutes of the United States. All of the outstanding shares of capital
stock of each Urban Subsidiary are owned by Urban and are free and clear of any
liens, encumbrances, charges, restrictions or rights of third parties. Except
for the Urban Options, neither Urban nor any Urban Subsidiary has 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 Urban or any Urban Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of such
capital stock or any securities convertible into or representing the right to
purchase or subscribe for any such shares, and there are no agreements or
understandings with respect to voting of any such shares binding on Urban (other
than preemptive rights).
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the transactions
contemplated hereby and the ratification of the Urban Stock Split by the
stockholders of Urban, and subject to the parties hereto obtaining all bank
regulatory approvals required to effectuate the Merger and approve the Urban
Stock Split and the other approvals listed in paragraph (b) below and the
approval of Urban's stockholders as contemplated herein, Urban has 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 has been duly and validly approved by the Board
of Directors of Urban in accordance with its Articles of Association and Bylaws
and applicable laws and regulations. Except for the approvals described in
paragraph (b) below and the approval of Urban's stockholders as contemplated
herein, no other corporate proceedings on the part of Urban are necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Urban, and, subject to approval of this
Agreement by its stockholders, constitutes the valid and binding obligation of
Urban, enforceable against Urban in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by Urban, nor the
consummation by Urban of the transactions contemplated hereby in accordance with
the terms hereof, nor compliance by Urban with any of the terms or provisions
hereof, will (i) violate any provision of Urban's
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Charter, Articles of Association or Bylaws, (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 Urban or any of its respective properties or assets, or (iii)
except as set forth in the Urban 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 Urban 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 Urban is a
party, or by which it or any of its properties or assets may be bound or
affected except, with respect to (ii) and (iii) above, such as individually or
in the aggregate will not have a material adverse effect on the financial
condition of Urban and its Subsidiaries on a consolidated basis, and which will
not prevent or delay in any material respect 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 Office
of Comptroller of the Currency ("OCC"), the registration of Holding Company
Common Stock with the Securities and Exchange Commission ("SEC") and state
securities and blue sky authorities, and other consents, authorizations,
approvals or exemptions under the Environmental Laws (as defined in Section 3.16
hereof) or any notices and filings with the IRS or PBGC with respect to employee
benefit plans, and approval of the stockholders of Urban, 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 Urban in connection with
(x) the execution and delivery by Urban of this Agreement, (y) the consummation
by Urban of transactions contemplated hereby and (z) the execution and delivery
by Urban of the Bank Merger Agreement.
3.4. Financial Statements.
(a) The Urban Disclosure Schedule sets forth copies of Urban's consolidated
statement of financial condition as of December 31, 1993 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the periods ended December 31st in each of the two years 1992 and
1993, accompanied by the audit report of Stephen P. Radics & Co., independent
public accountants with respect to Urban during those periods. The Urban
Disclosure Schedule also sets forth copies of a draft consolidated statement of
financial condition of Urban as of December 31, 1994 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the period ended December 31, 1994 and December 31, 1993 (the "Draft
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Urban Financial Statements"). Urban has retained Arthur Andersen, LLP,
independent public accountants, to audit the Draft Urban Financial Statements
and issue an audit opinion thereon. (All of the foregoing financial information,
including the Draft Urban Financial Statements both prior to the time Arthur
Andersen, LLP renders its audit report and thereafter, collectively referred to
herein as the "Urban Financial Statements"). Urban is aware of no facts or
circumstances which would lead Arthur Andersen, LLP to require changes to the
Draft Urban Financial Statements referred to above. The Urban Financial
Statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, and fairly present the consolidated financial condition of Urban and
its Subsidiaries as of the respective dates set forth therein, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows fairly present the results of the consolidated operations, changes in
shareholders' equity and cash flows of Urban and its Subsidiaries for the
respective periods set forth therein (subject to any exceptions as to
consistency specified in the Urban Financial Statements).
(b) The books and records of Urban and its Subsidiaries have been and are
being maintained in material compliance with applicable legal and accounting
requirements, and reflect in all material respects only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the Urban Financial Statements (including the notes thereto), as of December 31,
1994 neither Urban nor any of its Subsidiaries had any liabilities, whether
absolute, accrued, contingent or otherwise material to the financial condition
of Urban or any of its Subsidiaries on a consolidated basis which were required
to be so disclosed under generally accepted accounting principals. Since
December 31, 1994 and to the date hereof, neither Urban nor any of its
Subsidiaries have incurred any liabilities except in the ordinary course of
business, except as specifically contemplated by this Agreement.
3.5. Broker's and Other Fees. Neither Urban nor any of its Subsidiaries 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. Other than fees payable to its attorneys,
accountants and its financial advisors (the names and terms of retention of
which are set forth in the Urban Disclosure Schedule) there are no fees payable
by Urban to its financial advisors, attorneys and accountants, in connection
with this Agreement or the transactions contemplated thereby or which would be
triggered by consummation of the Merger or the termination of the services of
such consultants by Urban or any of its Subsidiaries.
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3.6. Absence of Certain Changes or Events.
(a) There has not been any material adverse change in the
consolidated financial condition of Urban and its Subsidiaries since December
31, 1994.
(b) Except as set forth in the Urban Disclosure Schedule, neither Urban nor
any of its Subsidiaries has taken or permitted any of the actions set forth in
Section 5.2 hereof between December 31, 1994 and the date hereof and Urban and
its Subsidiaries have conducted their business only in the ordinary course,
consistent with past practice.
3.7. Legal Proceedings. Except as disclosed in the Urban Disclosure
Schedule, as of the date hereof neither Urban nor any of its Subsidiaries is a
defendant in any, and there are no pending or, to the best of Urban's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental investigations of any nature against Urban or any of its
Subsidiaries. As of the date hereof Urban is not otherwise a party to any legal,
administrative, arbitral or other proceedings which could have a material effect
on Urban's financial condition or earnings. Except as disclosed in the Urban
Disclosure Schedule, as of the date hereof Urban is not a party to any order,
judgment or decree entered against Urban in any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Except where such failure would not be material to the financial
condition of Urban and its Subsidiaries on a consolidated basis, Urban and each
of its Subsidiaries 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 each 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 Holding Company in writing). Urban and its
Subsidiaries have established on a consolidated basis as of December 31, 1994,
on their books and records reserves in accordance with generally accepted
accounting principles consistently applied that are adequate in the opinion of
management of Urban for the payment of all federal, state and local taxes not
yet due and payable, but are incurred in respect of Urban or any of its
Subsidiaries through such date. Except as set forth in the Urban Disclosure
Schedule, the federal income tax returns of Urban and its Subsidiaries have been
examined by the IRS (or are closed to examination due to the expiration of the
applicable statute of limitations) and no deficiencies were asserted as a result
of such examinations which have not been
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resolved and paid in full. Except as set forth in the Urban Disclosure Schedule,
the applicable state income tax returns of Urban and its Subsidiaries have been
examined by the applicable authorities (or are closed to examination due to the
expiration of the statute of limitations) and no deficiencies were asserted as a
result of such examinations which have not been resolved and paid in full. To
the best knowledge of Urban, there are no audits or other administrative or
court proceedings presently pending nor any other disputes pending, or claims
asserted for, taxes or assessments upon Urban or any of its Subsidiaries, nor
has Urban or any of its Subsidiaries given any currently outstanding waivers or
comparable consents regarding the application of the statute of limitations with
respect to any taxes or tax Returns.
(b) Except as set forth in the Urban Disclosure Schedule, neither Urban nor
any of its Subsidiaries (i) has requested any extension of time within which to
file any tax Return which Return has not since been filed, (ii) is a party to
any agreement providing for the allocation or sharing of taxes, (iii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a voluntary
change in accounting method initiated by Urban or any of its Subsidiaries (nor
does Urban have any knowledge that the IRS has proposed any such adjustment or
change of accounting method) or (iv) has filed a consent pursuant to Section
341(f) of the Code or agreed to have section 341(f) (2) of the Code apply.
3.9. Employee Benefit Plans.
(a) Except as disclosed in the Urban Disclosure Schedule, neither Urban nor
any of its Subsidiaries maintains or contributes to any "employee pension
benefit plan", within the meaning of section 3(2) (A) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (the "Urban Pension Plans"),
"employee welfare benefit plan", within the meaning of Section 3(l) of ERISA
(the "Urban Welfare Plans"), stock option plan, stock purchase plan, deferred
compensation plan, severance plan, bonus plan, employment agreement or other
similar plan, program or arrangement. Neither Urban nor any of its Subsidiaries
has contributed to any "multiemployer plan", within the meaning of sections
3(37) and 4001(a) (3) of ERISA.
(b) Urban has delivered to Holding Company a complete and accurate copy of
each of the following with respect to each of the Urban Pension Plans and Urban
Welfare Plans: (i) plan document, summary plan description, and summary of
material modifications (if not available, a detailed description of the
foregoing); (ii) trust agreement or insurance contract, if any; (iii) most
recent IRS determination letter, if any; (iv) most
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recent actuarial report, if any; and (v) most recent annual report on Form 5500.
(c) At December 31, 1994, the fair value of plan assets of Urban Pension
Plans subject to Title IV of ERISA, exceeds the then projected benefit
obligation of such Urban Pension Plans based upon the actuarial assumptions used
for purposes of the preparation of the Urban Financial Statements for the year
ended December 31, 1994.
(d) During the last five years, the PBGC has not asserted any claim for
liability against Urban or any of its Subsidiaries which has not been paid in
full.
(e) All premiums (and interest charges and penalties for late payment, if
applicable) due to the PBGC with respect to each Urban Pension Plan have been
paid. All contributions required to be made to each Urban Pension Plan under the
terms thereof, ERISA or other applicable law have been timely made, and all
amounts properly accrued to date as liabilities of Urban and its Subsidiaries
which have not been paid have been properly recorded on the books of Urban and
its Subsidiaries.
(f) Except as disclosed in the Urban Disclosure Schedule, each of the Urban
Pension Plans, the Urban Welfare Plans and each other plan and arrangement
identified on the Urban Disclosure Schedule has been operated in compliance in
all material respects with the provisions of ERISA, the Code, all regulations,
rulings and announcements promulgated or issued thereunder, and all other
applicable governmental laws and regulations. Furthermore, except as disclosed
on the Urban Disclosure Schedule, the IRS has issued a favorable determination
letter with respect to each of the Urban Pension Plans and, except as disclosed
in the Urban Disclosure Schedule, Urban is not aware of any fact or circumstance
which would disqualify any such plan, that could not be retroactively corrected
(in accordance with the procedures of the IRS).
(g) Except as disclosed on the Urban Disclosure Schedule, to the best
knowledge of Urban, no non-exempt prohibited transaction, within the meaning of
Section 4975 of the Code or 406 of ERISA, has occurred with respect to any of
the Urban Welfare Plans or Urban Pension Plans.
(h) No Urban Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events", within the meaning of
Section 4034(b) of ERISA, with respect to any of the Urban Pension Plans.
(i) No "accumulated funding deficiency", within the meaning of Section 412
of the Code, has been incurred with respect to any of the Urban Pension Plans.
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(j) Except as disclosed in the Urban Disclosure Schedule, there are no
pending, or, to the best knowledge of Urban, threatened or anticipated claims
(other than routine claims for benefits) by, on behalf of or against any of the
Urban Pension Plans or the Urban Welfare Plans, any trusts related thereto or
any other plan or arrangement identified in the Urban Disclosure Schedule.
(k) Except as disclosed in the Urban Disclosure Schedule, no Urban Pension
Plan or Urban Welfare Plan provides medical or death benefits (whether or not
insured) beyond an employee's retirement or other termination of service, other
than (i) coverage mandated by law, or (ii) death benefits under any Urban
Pension Plan.
(l) Except with respect to customary health, life and disability benefits
or as disclosed in the Urban Disclosure Schedule, there are no unfunded benefits
obligations which are not accounted for by reserves shown on the Urban Financial
Statements and established under generally accepted accounting principles, or
otherwise noted on the Urban Financial Statements.
(m) With respect to each Urban Pension Plan and Urban Welfare Plan that is
funded wholly or partially through an insurance policy, there will be no
liability of Urban or any of its Subsidiaries as of the Effective Time under any
such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Effective Time.
(n) Except as disclosed in the Urban Disclosure Schedule, the consummation
of the transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Urban or any of its Subsidiaries to severance pay,
unemployment compensation or any similar payment, or (ii) accelerate the time of
payment, vesting, or increase the amount, of any compensation due to any current
employee or former employee under any Urban Pension Plan or Urban Welfare Plan.
3.10. Reports.
(a) Except as disclosed in the Urban Disclosure Schedule, Urban has since
January 1, 1993, duly filed with the FDIC and the OCC in correct form in all
material respects the consolidated reports of condition and income reports
required to be filed under applicable federal banking laws and regulations, and
Urban promptly will deliver or make available to Holding Company accurate and
complete copies of such reports. The Urban Disclosure Schedule lists all
examinations of Urban conducted by
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either the FDIC or the OCC since January 1, 1991 and the dates of any responses
thereto submitted by Urban.
3.11. Urban Information.
(a) Except as Urban shall notify Holding Company in writing prior to the
dates set forth below, the information relating to Urban to be contained in the
Proxy Statement/Prospectus (as defined in Section 5.6(a) hereof) to be delivered
to stockholders of Urban in connection with the solicitation of their approval
of this Agreement and the transactions contemplated hereby, as of the date the
Proxy Statement/Prospectus is mailed to stockholders of Urban, and up to and
including the date of the meeting of stockholders of Urban to which such Proxy
Statement/Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Except as Urban shall notify Holding Company in writing prior to the
filing date thereof, information concerning Urban to be contained in Bank's
applications to the FDIC and the Department is accurate in all material
respects. Urban is not aware of any facts or circumstances with respect to Urban
which could cause any regulatory agency having jurisdiction over the Merger to
disapprove the Merger or approve the Merger subject to any term or condition
which would materially impair the value of Urban, taken as a whole, to Holding
Company.
3.12. Compliance with Applicable Law.
(a) General. Except as set forth in the Urban Disclosure Schedule, each of
Urban and its Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business under and
pursuant to each, and each of Urban and its Subsidiaries 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 Urban or its Subsidiaries (other than where
such defaults or non-compliances will not, alone or in the aggregate, materially
adversely affect the financial condition of Urban and its Subsidiaries on a
consolidated basis) and except as disclosed to in the Urban Disclosure Schedule,
Urban has not received notice of violation of, and does not know of any such
violations of, any of the above which are or are likely to be material adversely
the financial condition of Urban and its Subsidiaries on a consolidated basis.
(b) CRA. Without limiting the foregoing, Urban has complied in all material
respects with the Community Reinvestment
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Act ("CRA") and Urban has no reason to believe that any person or group would
object successfully to the consummation of this Merger due to the CRA
performance of or rating of Urban. Except as listed on the Urban Disclosure
Statement, no person or group has adversely commented in writing to Urban in a
manner requiring recording in a file of CRA communications upon Urban's CRA
performance.
3.13. Certain Contracts.
(a) Except as disclosed in the Urban Disclosure Schedule (i) neither Urban
nor any of its Subsidiaries is a party to or bound by any contract or
understanding (whether written or oral) with respect to the employment or
termination of any present or former officers, employees, directors or
consultants. The Urban Disclosure Schedule sets forth true and correct copies of
all employment agreements or termination agreements with officers, employees,
directors, or consultants to which Urban or any of its Subsidiaries is a party.
(b) Except as disclosed in the Urban Disclosure Schedule, (i) as of the
date of this Agreement, neither Urban nor any of its Subsidiaries is a party to
or bound by any commitment, agreement or other instrument which is material to
the financial condition of Urban and its Subsidiaries on a consolidated basis,
(ii) no commitment, agreement or other instrument to which Urban or any of its
Subsidiaries is a party or by which any of them is bound limits the freedom of
Urban or any of its Subsidiaries to compete in any line of business or with any
person, and (iii) neither Urban nor any of its Subsidiaries is a party to any
collective bargaining agreement. For purposes of subparagraph (i) above, any
contract with a remaining term of greater than one (1) year or involving the
payment of more than $10,000 (other than contracts governing banking
transactions in the ordinary course) shall be deemed material.
(c) Except as disclosed in the Urban Disclosure Schedule, neither Urban nor
any of its Subsidiaries, nor to the best knowledge of Urban, 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 Urban will be the creditor) or arrangement to which
Urban is a party, except for defaults which individually or in the aggregate
would not have a material adverse effect on the financial condition or earnings
of Urban and its Subsidiaries on a consolidated basis.
(d) Neither the entering into of this Agreement nor the consummation of the
transactions contemplated hereunder will cause Urban or Holding Company to
become obligated to make any payment of any kind to any party, including but not
limited to, any termination fee, breakup fee or reimbursement fee, pursuant
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to any agreement or understanding between Urban and such party, other than the
payments contemplated by this Agreement.
3.14. Properties and Insurance.
(a) Except with respect to property obtained in satisfaction of
indebtedness and not now used by Urban in its business, Urban and its
Subsidiaries 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 Urban's Financial Statements 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 incurred in the ordinary
course of business after the date of such Urban Financial Statements, (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
financial condition of Urban and its Subsidiaries on a consolidated basis and
(iv) with respect to owned real property, title imperfections noted in title
reports delivered to Holding Company prior to the date hereof. Urban and its
Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by them in all material
respects as presently occupied, used, possessed and controlled by them.
(b) The Urban Disclosure Schedule lists all policies of insurance covering
business operations and all insurable properties and assets of Urban and its
Subsidiaries showing all risks insured against, in each case under valid,
binding and enforceable policies or bonds, with such amounts and such
deductibles as are specified. As of the date hereof and except as disclosed in
the Urban Disclosure Schedule, neither Urban nor any of its Subsidiaries has
received any notice of cancellation or notice of a material amendment of any
such insurance policy or bond or is in default under 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 Urban accurately record in all
material respects all meetings of its stockholders and Board of Directors
(including committees of its Board of Directors) since December 31, 1991.
3.16. Environmental Matters. Except as disclosed in the Urban Disclosure
Schedule, neither Urban nor any of its Subsidiaries has received any written
notice, citation, claim, assessment, proposed assessment or demand for abatement
alleging
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that Urban or any of its Subsidiaries (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) has
violated any Environmental Laws or is otherwise responsible for the correction
or clean-up under Environmental Laws which is reasonably expected to be material
to the financial condition of Urban or its Subsidiaries on a consolidated basis.
Except as disclosed in the Urban Disclosure Schedule, Urban has no knowledge
that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored in violation of any Environmental Laws on any
property owned or leased by Urban or any of its Subsidiaries in any manner that
violates or, after the lapse of time will violate, any presently existing
Environmental Laws governing or pertaining to such substances and materials, the
violation of which would have a material adverse effect on the financial
condition of Urban and its Subsidiaries on a consolidated basis.
Environmental Laws means all federal, state and local laws governing
environmental matters, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., New Jersey's
Underground Storage Tank Act, N.J.S.A. 58:10A-21 et seq., New Jersey's Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. and New Jersey's
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., and all rules and
regulations promulgated under any of the foregoing.
3.17. Reserves. The allowance for loan losses in the Urban Financial
Statement as of December 31, 1994 was adequate as of December 31, 1994 to
provide for losses that were inherent in the loan portfolio at that date.
3.18. Parachute Payments. Other than as disclosed in the Urban Disclosure
Schedule, no officer, director, employee or agent (or former officer, director,
employee or agent) of Urban or any Subsidiary is entitled now, or will be or may
be entitled to as a consequence of this Agreement or the Merger any payment or
benefit from Urban, HUBCO or the Bank which if paid or provided would constitute
and "Excess Parachute Payment," as defined in Section 280G of the Code or
regulations promulgated thereunder.
3.19 Disclosure. There are no material facts concerning the business,
operations, assets or financial condition of Urban which have not been disclosed
to HUBCO and which could have a material adverse effect on the business,
operations or financial condition of Urban on a consolidated basis.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF HOLDING COMPANY
References herein to the "Holding Company 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 Holding
Company or Bank; provided, however, a disclosure referenced to a section or
subsection of Article IV shall be claimed to qualify any other such section or
subjection to which such disclosure may be applicable. Except as set forth in
the Holding Company Disclosure Schedule, Holding Company hereby represents and
warrants to Urban as follows:
4.1. Corporate Organization.
(a) Holding Company is a corporation duly organized and validly existing
and in good standing under the laws of the State of New Jersey. Holding Company
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 financial condition of Holding Company or its Subsidiaries (as defined
below) on a consolidated basis. Holding Company is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended.
(b) Each of the Subsidiaries of Holding Company are listed in the Holding
Company Disclosure Schedule. The term "Subsidiary" when used in this Agreement
with reference to Holding Company, means any corporation, in which Holding
Company owns, directly or indirectly, at least a 50% of the outstanding common
stock. Each Subsidiary of Holding Company is duly organized and validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
Bank is a New Jersey state chartered commercial bank, the deposits of which are
insured either by the Bank Insurance Fund and/or the Savings Association
Insurance Fund of the FDIC to the fullest extent permitted by law. Each
Subsidiary of Holding Company 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
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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 financial condition of Holding Company and its Subsidiaries on a
consolidated basis. The Holding Company has obtained appropriate approvals from
bank regulatory authorities to hold the shares of each of its Subsidiaries.
4.2. Capitalization.
(a) The authorized capital stock of Holding Company consists solely of
19,800,000 shares of Holding Company Common Stock and 3,300,000 shares of
preferred stock. As of the date hereof, there were 792,811 shares of HUBCO
Series A Preferred Stock outstanding and 10,400,371 shares of Holding Company
Common Stock issued and outstanding, including 789,997 treasury shares. Except
as disclosed in the Holding Company Disclosure Schedule, as of December 31,
1994, except for 450,000 shares of Holding Company Common Stock (adjusted for
the January 14, 1995 three for two stock split) issuable upon exercise of
outstanding stock options granted pursuant to the Holding Company Stock Plan,
shares issuable upon conversion of the Holding Company's Series A Preferred
Stock and shares issuable pursuant to that certain Amended and Restated
Agreement and Plan of Merger, dated November 28, 1994 by and among the Holding
Company, Bank and Jefferson National Bank ("Jefferson") (the "Jefferson
Agreement"), there were no shares of Holding Company Common Stock otherwise
issuable. All issued and outstanding shares of Holding Company Common Stock, and
all issued and outstanding shares of capital stock of its Subsidiaries, have
been duly authorized and validly issued, are fully paid and nonassessable and
free of preemptive rights. All of the outstanding shares of capital stock of
Holding Company's Subsidiaries are owned by Holding Company free and clear of
any liens, encumbrances, charges, restrictions or rights of third parties.
Except as mentioned above, neither Holding Company nor Holding Company's
Subsidiaries had 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 Holding Company
or its Subsidiaries or any securities representing the right to purchase or
otherwise receive any shares of such capital stock or any securities convertible
into or representing the right to purchase or subscribe for any such shares, and
there are no agreements or understandings with respect to voting of any such
shares.
4.3. Authority; No Violation.
(a) Holding Company and 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
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of Holding Company and Bank.
No other corporate proceedings on the part of Holding Company and Bank are
necessary to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Holding Company and Bank and
constitutes the valid and binding obligation of Holding Company and Bank,
enforceable against Holding Company and Bank in accordance with its terms.
(b) Neither the execution or delivery of this Agreement nor the
consummation by Holding Company and Bank of the transactions contemplated hereby
in accordance with the terms hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Holding Company or the Certificate of
Incorporation or Bylaws of 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 Holding
Company or Bank or any of the Subsidiaries of Holding Company 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 properties or assets of Holding Company or Bank or any Subsidiary of the
Holding Company 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 Holding Company or Bank or any other
Subsidiary of Holding Company is a party, or by which Holding Company or Bank or
any Subsidiary of Holding Company or any of their respective properties or
assets may be bound or affected, except, with respect to (ii) and (iii) above,
such as in the aggregate will not have a material adverse effect on the
financial condition of Holding Company and its Subsidiaries on a consolidated
basis, or the ability of Holding Company and Bank to consummate the transactions
contemplated hereby. Except for consents and approvals of or filings or
registrations with or notices to the FDIC, the Department, the SEC, applicable
state securities or blue sky authorities, or as required by compliance with the
rules of NASDAQ and other than consents, authorizations, approvals or exemptions
required under the Environmental Laws, or notices to, or filings with the IRS or
the PBGC with respect to any employee benefit plans, and the approval of the
stockholders of Holding Company, 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 Holding Company or Bank in connection with (a) the
execution and delivery by Holding Company or Bank of this Agreement, (b) the
consummation by Holding Company or Bank of the Merger and the other transactions
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contemplated hereby and (c) the execution and delivery by Bank of the Bank
Merger Agreement and the consummation by Bank of the Merger and other
transactions contemplated thereby. To the best of Holding Company's knowledge,
no fact or condition exists which Holding Company has reason to believe will
prevent it or Bank from obtaining the aforementioned consents and approvals.
4.4. Financial Statements.
(a) The Holding Company Disclosure Schedule sets forth copies of Holding
Company's Consolidated Statement of Financial Condition as of December 31, 1993
and the related consolidated statements of income, changes in shareholders'
equity and cash flows for the periods ended December 31st in each of the two
years 1992 and 1993, accompanied by the audit report of Arthur Andersen, LLP,
independent public accountants with respect to Holding Company. The Holding
Company Disclosure Schedule also sets forth copies of a draft consolidated
statement of financial Condition of Holding Company as of December 31, 1994 and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the period ended December 31, 1994 and December 31, 1993 (the
"Draft Holding Company Financial Statements"). Holding Company has retained
Arthur Andersen, LLP, independent public accountants, to audit the Draft Holding
Company Financial Statements and issue an audit opinion thereon. (All of the
foregoing financial information, including the Draft Holding Company Financial
Statements both prior to the time Arthur Andersen, LLP renders its audit report
and thereafter, collectively referred to herein as the "Holding Company
Financial Statements"). Holding Company is aware of no facts or circumstances
which would lead Arthur Andersen, LLP to require changes to the Draft Holding
Company Financial Statements referred to above. The Holding Company Financial
Statements (including the related notes), have been prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, and fairly present the consolidated financial position of Holding
Company and its Subsidiaries 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 shareholders' equity
and of cash flows of Holding Company and its Subsidiaries for the respective
fiscal periods set forth therein.
(b) The books and records of Holding Company and its Subsidiaries have been
and are being maintained in material compliance with applicable legal and
accounting requirements, and reflect in all material respects only actual
transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the Holding Company Financial Statements
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(including the notes thereto), as of December 31, 1994 neither Holding Company
nor any of its Subsidiaries had or has, as the case may be, any obligation or
liability, whether absolute, accrued, contingent or otherwise, material to the
financial condition of Holding Company or any of its Subsidiaries which is
required to be so disclosed pursuant to generally accepted accounting
principals. Since December 31, 1994, neither Holding Company nor any of its
Subsidiaries have incurred any liabilities, except in the ordinary course of
business and except as specifically contemplated by this Agreement.
4.5. Brokerage Fees. Neither Holding Company nor Bank nor any other
Subsidiary of the Holding Company 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 financial condition of Holding Company and its
Subsidiaries on a consolidated basis since December 31, 1994.
4.7. Holding Company Information.
(a) Except with respect to information with respect to Urban and its
Subsidiaries provided by Urban to Holding Company for inclusion therein, the
information 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 Urban to which such Proxy Statement/Prospectus relates, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and the Registration Statement and Proxy
Statement/Prospectus will comply as to form with the requirements of the
Securities Act of 1933, as amended and the rules and regulations promulgated
thereunder (the "1933 Act").
(b) Except with respect to information with respect to Urban, information
contained in the application of Bank to the FDIC and the Department and
applications, notices and documents filed by Holding Company or Bank with
governmental authorities (except as covered by 4.6(a) above) to be contained
therein regarding the Merger or matters related thereto will be accurate and
responsive in all material respects to the requirements thereof. Holding Company
is not aware of any facts or circumstances with respect to Holding Company which
could cause any regulatory agency having jurisdiction over the Merger to
disapprove the Merger or approve the Merger subject to any term
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or condition which would materially impair the value of Urban, taken as a whole,
to Holding Company.
4.8. Capital Adequacy. At the Effective Time, after taking into effect the
Merger and the transactions contemplated hereunder, Holding Company and Bank
will each have sufficient capital to satisfy all applicable regulatory capital
requirements.
4.9. Holding Company Common Stock. At the Effective Time, the Holding
Company Common Stock to be issued pursuant to the terms of Section 2.1, when so
issued, shall be duly authorized, validly issued, fully paid, and
non-assessable, free of preemptive rights and free and clear of all liens,
encumbrances or restrictions created by or through Holding Company, with no
personal liability attaching to the ownership thereof. The Holding Company
Common Stock to be issued shall be free of any restrictions imposed by Holding
Company except those imposed under Section 5.18 and will be listed on
NASDAQ/National Market System.
4.10. Legal Proceedings. Except as disclosed in the Holding Company
Disclosure Schedule, neither Holding Company nor its Subsidiaries is a party to
any, and there are no material pending or, to the best of Holding Company's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against Holding
Company or any of its Subsidiaries which, if decided adversely to Holding
Company, or any of its Subsidiaries, would have a material adverse effect on the
financial condition of Holding Company and its Subsidiaries on a consolidated
basis. Except as disclosed in the Holding Company Disclosure Schedule, neither
Holding Company nor any of its Subsidiaries is a party to any order, judgment or
decree entered against Holding Company or any of its Subsidiaries in any lawsuit
or proceeding which is material to the financial condition of Holding Company
and its Subsidiaries on a consolidated basis.
4.11. Taxes and Tax Returns. Except where such failure would not be
material to the financial condition of Holding Company and its Subsidiaries on a
consolidated basis, Holding Company and its Subsidiaries have duly filed (and
until the Effective Time will so file) all Returns required to be filed by them
in respect of any federal, state and local taxes (including withholding taxes,
penalties or other payments required) and have duly paid (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. Holding Company and its
Subsidiaries have established as of December 31, 1994 on their books and records
reserves in accordance with generally accepted accounting principles
consistently applied that are adequate in the opinion of management of Holding
Company for the payment of
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all federal, state and local taxes not yet due and payable, but which have been
incurred in respect of Holding Company and its Subsidiaries through such date.
No deficiencies exist or have been asserted based upon the federal income tax
returns of Holding Company.
4.12. Employee Benefit Plans.
(a) Holding Company and its Subsidiaries maintain or contribute to certain
"employee pension benefit plans" (the "Holding Company Pension Plans"), as such
term is defined in Section 3(2)(A) of ERISA, and "employee welfare benefit
plans" (the "Holding Company Welfare Plans"), as such term is defined in Section
3(1) of ERISA. Neither Holding Company nor its Subsidiaries have contributed to
any "multiemployer plan", as such term is defined in Sections 3(37) and
4001(a)(3) of ERISA.
(b) Each of the Holding Company Pension Plans and each of the Holding
Company 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. Furthermore, except as disclosed in the
Holding Company Disclosure Schedule, the IRS has issued a favorable
determination letter with respect to each of the Holding Company Pension Plans
and except as disclosed in the Holding Company Disclosure Schedule Holding
Company is not aware of any fact or circumstance which would disqualify any such
plan, that could not be retroactively corrected in accordance with the
procedures of the IRS.
(c) All premiums (and interest charges and penalties for late payment, if
applicable) due to the PBGC with respect to each Holding Company Pension Plan
have been paid. All contributions required to be made to each Holding Company
Pension Plan under the terms thereof, ERISA or other applicable law have been
timely made, and all amounts properly accrued to date as liabilities of Holding
Company and its Subsidiaries which have not been paid have been properly
recorded on the books of Holding Company and its Subsidiaries.
(d) During the last five years, the PBGC has not asserted any claim for
liability against Holding Company or any of its Subsidiaries which has not been
paid in full.
(e) Except as disclosed in the Holding Company Disclosure Schedule, to the
best knowledge of Holding Company, no non-exempt prohibited transaction, within
the meaning of Section 4975 of the Code or 406 of ERISA, has occurred with
respect to any of the Holding Company Welfare Plan or Holding Company Pension
Plans.
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(f) At December 31, 1994, except as disclosed in the Holding Company
Disclosure Schedule, the fair value of plan assets of the Holding Company
Pension Plans subject to Title IV of ERISA exceeds the then accumulated benefit
obligation of the Holding Company Pension Plans allocable to such accrued
benefits based upon the actuarial assumptions used for purposes of the
preparation of the Holding Company Financial Statements for the year ended
December 31, 1994.
(g) No Holding Company Pension Plan or any trust created thereunder has
been terminated, nor have there been any "reportable events", within the meaning
of Section 4034(b) of ERISA, with respect to any of the Holding Company Pension
Plans.
(h) No "accumulated funding deficiency", within the meaning of Section 412
of the Code, has been incurred with respect to any of the Holding Company
Pension Plans.
(i) Except as disclosed in the Holding Company Disclosure Schedule, there
are no pending, or, to the best knowledge of Holding Company, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Holding Company Pension Plans or the Holding Company Welfare
Plans, any trusts related thereto or any other plan or arrangement identified in
the Holding Company Disclosure Schedule.
(j) Except with respect to customary health, life and disability benefits
or as disclosed in the Holding Company Disclosure Schedule, there are no
unfunded benefits obligations which are not accounted for by reserves shown on
the financial statements and established under generally accepted accounting
principles, or otherwise noted on such financial statements.
4.13. Reports.
(a) Holding Company has filed all reports, registration statements and
filings, together with any amendments or supplements required to be made
thereto, required to be filed with the SEC under the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "34 Act") since January 1, 1989, including
but not limited to Forms 10-K, 10-Q, 8-K and proxy statements, and will file all
such reports, statements and filings required after the date hereof.
(b) Each communication mailed by Holding Company to its stockholders since
January 1, 1989, and each annual, quarterly or special report, 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
applicable regulatory agency and did not contain any untrue statement of a
material fact or omit to state
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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 disclosures as of a later date shall be
deemed to modify disclosures as of an earlier date.
(c) Holding Company and Bank have, since January 1, 1992, duly filed with
the FDIC, the Department and the FRB in correct form the monthly, quarterly and
annual reports required to be filed under applicable laws and regulations, and
Holding Company, upon written request from Urban, promptly will deliver or make
available to Urban accurate and complete copies of such reports.
4.14. Compliance with Applicable Law.
(a) General. Except as set forth in the Holding Company Disclosure
Schedule, each of Holding Company and its Subsidiaries hold all material
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business under and pursuant to each, and each 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 Holding Company or its Subsidiaries (other
than where such defaults or non-compliances will not, alone or in the aggregate,
materially adversely effect the financial condition of Holding Company and its
Subsidiaries on a consolidated basis) and except as disclosed in the Holding
Company Disclosure Schedule, Holding Company has not received notice of
violation of, and does not know of any such violations of, any of the above.
(b) CRA. Without limiting the foregoing, Subsidiaries of Holding Company
which are subject to CRA have complied in all material respects with CRA, and
Holding Company has no reason to believe that any person or group would object
successfully to the consummation of this Merger due to the CRA performance of or
rating of any of these Subsidiaries. Except as listed on the Holding Company
Disclosure Statement, no person or group has adversely commented in writing to a
Holding Company Subsidiary subject to CRA in a manner requiring recording in a
file of CRA communications upon such Subsidiary's CRA performance.
4.15. Properties and Insurance.
(a) Except with respect to property obtained in satisfaction of
indebtedness and not now used by Holding Company or any of its Subsidiaries in
their respective businesses, Holding Company and its Subsidiaries 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
Holding Company's consolidated balance sheet as of
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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). Holding Company and
its Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by them in all material
respects as presently occupied, used, possessed and controlled by them.
(b) The business operations and all insurable properties and assets of
Holding Company and its Subsidiaries are insured for their benefit against all
risks which, in the reasonable judgment of the management of Holding Company
should be insured against, in each case under valid, binding and enforceable
policies or bonds, with such deductibles and against such risks and losses as
are in the opinion of the management of Holding Company adequate for the
business engaged in by Holding Company and its Subsidiaries.
4.16. Minute Books. The minute books of Holding Company and its
Subsidiaries 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).
4.17. Environmental Matters. Except as disclosed in the Holding Company
Disclosure Schedule, neither Holding Company nor any of its Subsidiaries has
received any written notice, citation, claim, assessment, proposed assessment or
demand for abatement alleging that Holding Company or any of its Subsidiaries
(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) has violated any Environmental Laws or is otherwise
responsible for the correction or cleanup under Environmental Laws which is
reasonably expected to be material to the financial condition of Holding Company
or its Subsidiaries on a consolidated basis. Except as disclosed in the Holding
Company Disclosure Schedule, Holding Company has no knowledge that any toxic or
hazardous substances or materials have been emitted, generated, disposed of or
stored in violation of any Environmental Laws on any property owned (except in
satisfaction of indebtedness) or leased by Holding Company or any of its
Subsidiaries in any manner that violates or, after the lapse of time may
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 financial condition of Holding
Company and its Subsidiaries on a consolidated basis.
4.18. Reserves. The allowance for possible loan losses in the Holding
Company Financial Statements as of December 31,
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1994 was adequate as of that date to provide for losses that were
inherent in the loan portfolio at that date.
4.19. Disclosures. Except for other acquisition transactions which HUBCO
may not yet have publicly disclosed, there are no material facts concerning the
business, operations, assets or financial condition of HUBCO which could have a
material adverse effect on the business, operations or financial condition of
HUBCO which have not been disclosed to Urban directly or indirectly by access to
any filing by HUBCO under the 1934 Act.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Conduct of the Business of Urban. During the period from the date of
this Agreement to the Effective Time, Urban shall, and shall cause each of its
Subsidiaries to, conduct its respective business and engage in transactions
permitted hereunder only in the ordinary course and consistent with prudent
banking practice, except with the prior written consent of Holding Company,
which consent will not be unreasonably withheld. Urban also shall use its best
efforts to (i) preserve its business organization and that of each of its
subsidiaries intact, (ii) keep available to itself the present services of its
employees and those of its Subsidiaries, provided that neither Urban nor any of
its Subsidiaries shall be required to take any unreasonable or extraordinary act
or any action which would conflict with any other term of this Agreement, and
(iii) preserve for itself and Holding Company the goodwill of its customers and
those of its Subsidiaries and others with whom business relationships exist.
5.2. Negative Covenants and Dividend Covenants.
(a) Urban agrees that from the date hereof to the Effective Time, except as
otherwise approved by Holding Company in writing or as permitted or required by
this Agreement, it will not, nor will it permit any of its Subsidiaries to:
(i) except as contemplated by this Agreement, change any provision of
its Articles of Association or Bylaws or any similar governing documents;
(ii) except for the issuance of Urban Common Stock pursuant to the
present terms of the Urban Options, change the number of shares of its
authorized or issued common or preferred 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 Urban or
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any of its Subsidiaries or any securities convertible into shares of such stock,
or split, combine or reclassify any shares of its capital stock, or, other than
as provided below, 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, or redeem or otherwise acquire any shares of such capital
stock, except that Urban may obtain the ratification of the Urban Stock Split by
its stockholders; provided, however, that in the event that the Effective Time
and the Closing do not occur prior to or on the record date for Holding
Company's second quarter 1995 cash dividend, as determined by Holding Company's
Board of Directors and publicly announced, Urban shall have the one time right
to declare and pay a cash dividend to its shareholders in an amount of up to
$0.26 per share; further provided, however, that no such dividend shall be paid
in an amount which would cause Urban's shareholders equity at the time the
dividend is declared, calculated solely in accordance with generally accepted
accounting principals, to fall below that disclosed on the Urban Financial
Statements as of December 31, 1994.
(iii) grant any severance or termination pay (other than pursuant to
policies or agreements of Urban in effect on the date hereof and disclosed to
Holding Company in the Urban Disclosure Schedule or as agreed to by Holding
Company in writing; and further provided that Holding Company hereby agrees that
the Board of Directors of Urban need not give notice of non-renewal to employees
having Change of Control Agreements with Urban provided that such Change in
Control Agreements have been disclosed to Holding Company on the Urban
Disclosure Schedule) to, or enter into or amend any employment agreement with,
any of its directors, officers or employees; adopt any new employee benefit plan
or arrangement of any type or amend any such existing benefit plan or
arrangement except as required to continue the qualification of such plan or
arrangement under the Code or ERISA; or award any increase in compensation or
benefits to its directors, officers or employees except with respect to salary
increases in the ordinary course of business and consistent with past practices
and policies; provided, however, that this provision shall not prevent Urban
from accruing the bonuses described in Section 5.15(b) hereto consistent with
the manner in which such bonuses have been previously accrued;
(iv) sell or dispose of any substantial amount of assets or incur any
significant liabilities other than in the ordinary course of business consistent
with past practices and policies;
(v) make any capital expenditures outside of the ordinary course of
business other than pursuant to binding commitments existing on the date hereof
and other than
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expenditures necessary to maintain existing assets in good repair;
(vi) file any applications or make any contract with respect to
branching or site location or relocation;
(vii) agree to acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity;
(viii) make any material change in its accounting methods or
practices, other than changes required in accordance with generally accepted
accounting principles;
(ix) take any action that would result in any of the representations
and warranties contained in Article III of this Agreement not being true and
correct in any material respect at the Effective Time; or
(x) agree to do any of the foregoing.
(b) Holding Company intends to continue its present dividend declaration
date and payment date practices between the date hereof and the Effective Time.
5.3. No Solicitation. Urban 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 Holding Company) 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 Urban
(an "Acquisition Transaction"). Notwithstanding the foregoing, Urban may enter
into discussions or negotiations or provide information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of Urban,
after consulting with legal counsel, determines that such discussions or
negotiations should be commenced in the exercise of its fiduciary
responsibilities or such information should be furnished in the exercise of its
fiduciary responsibilities. Urban will promptly communicate to Holding Company
that it has received a proposal, whether written or oral, in respect of any
Acquisition Transaction and the fact that it is having discussions or
negotiations with, or supplying information to, a third party in connection with
a possible Acquisition Transaction.
5.4. Current Information. During the period from the date of this Agreement
to the Effective Time, Urban will cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Holding Company regarding Urban's business, operations,
properties, assets and financial condition and matters relating to the
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completion of the transactions contemplated herein. Without limiting the
foregoing, after granting any loan or extension of credit by renewal or
otherwise, Urban will send to Holding Company a description (i.e., a copy of the
loan offering) for each new loan or extension of credit, and each renewal of an
existing loan or extension of credit, in excess of $500,000. As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the last fiscal quarter of each fiscal year) ending
after the date of this Agreement, Urban will deliver to Holding Company Urban's
call reports filed with the OCC and FDIC, and Holding Company will deliver to
Urban Holding Company's quarterly reports on Form 10-Q, annual reports on Form
10-K (including any proxy statements and annual reports to shareholders
incorporated therein) and current reports on Form 8-K, 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 fiscal year, Urban will deliver to Holding Company
and Holding Company will deliver to Urban their respective audited year end
Financial Statements included in their respective Annual Reports to
Shareholders, in the case of Holding Company as filed on Form l0-K with the SEC
under the 1934 Act.
5.5. Access to Properties and Records; Confidentiality.
(a) Urban shall permit Holding Company and its representatives, and Holding
Company and Bank shall permit Urban and its representatives reasonable access to
their respective properties, and shall disclose and make available to Holding
Company and its representatives or Urban and its representatives as the case may
be, all books, papers and records relating to their respective assets, stock
ownership, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and stockholders' meetings, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, independent auditors' work papers (subject to the receipt
by such auditors of a standard access representation letter), litigation files
(so long as such access does not waive attorney-client privilege), plans
affecting employees, and any other business activities or prospects in which
Holding Company and its representatives or Urban 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 or would contravene any law, rule,
regulation, order or judgment. The parties will use their best efforts to obtain
waivers of any such restriction and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Urban acknowledges that Holding Company may be
involved in discussions concerning
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other potential acquisitions and Holding Company shall not be obligated to
disclose such information to Urban except as such information is publicly
disclosed by Holding Company or as required by this Agreement.
(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. This 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 meeting of Urban stockholders referred
to in section 5.7 hereof and registering or otherwise qualifying under
applicable federal and state securities laws Holding Company Common Stock to be
issued to Record Holders and optionees in connection with the Merger, the
parties hereto shall cooperate in the preparation and filing by Holding Company
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 and applicable state
securities laws and the rules and regulations thereunder. (Such proxy statement
and prospectus in the form mailed by Urban to the Urban stockholders and
optionees together with any and all amendments or supplements thereto, is herein
referred to as the "Proxy Statement/Prospectus" and the various documents to be
filed by Holding Company under the 1933 Act with the SEC to register for offer
and sale the Holding Company Common Stock to be issued to Record Holders and
optionees, including the Proxy
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Statement/Prospectus, as the same may be amended or supplemented, are referred
to herein as the "Registration Statement").
(b) Holding Company shall furnish information concerning Holding Company,
the Merger and other matters except with respect to Urban as is necessary in
order to cause the Proxy Statement/Prospectus, insofar as it relates to Holding
Company, to comply with Section 5.6(a) hereof. Holding Company agrees promptly
to advise Urban if at any time prior to the Urban stockholders' meeting referred
to in Section 5.7 hereof, any information provided by Holding Company in the
Proxy Statement/Prospectus becomes incorrect or incomplete in any material
respect and to provide Urban with the information needed to correct such
inaccuracy or omission. Holding Company shall furnish Urban with such
supplemental information as may be necessary in order to cause the Proxy
Statement/Prospectus (except as it relates to Urban), to comply with Section
5.6(a) after the mailing thereof to Urban stockholders.
(c) Urban shall furnish Holding Company with such information concerning
Urban as is necessary in order to cause the Registration Statement, insofar as
it relates to Urban, to comply with Section 5.6(a) hereof. Urban agrees promptly
to advise Holding Company if, at any time prior to the effective date of the
Registration Statement referred to in Section 5.6(a) hereof, information
provided by Urban in the Registration Statement becomes incorrect or incomplete
in any material respect and to provide Holding Company with the information
needed to correct such inaccuracy or omission. Urban shall furnish Holding
Company with such supplemental information as may be necessary in order to cause
the Registration Statement, insofar as it relates to Urban, to comply with
Section 5.6(a) after the mailing thereof to Urban stockholders.
(d) Holding Company shall as promptly as practicable make such filings as
are necessary in connection with the offering of the Holding Company Common
Stock with applicable state securities authorities and shall use all reasonable
efforts to qualify the offering of the Holding Company Common Stock under
applicable state securities laws at the earliest practicable date. Urban shall
promptly furnish Holding Company with such information regarding Urban
stockholders as Holding Company requires to enable it to determine what filings
are required hereunder. Urban authorizes Holding Company to utilize in such
filings the information concerning Urban provided to Holding Company in
connection with, or contained in, the Registration Statement. Holding Company
shall furnish Urban with copies of all such filings and keep Urban advised of
the status thereof. Holding Company shall as promptly as practicable file the
Registration Statement containing the Proxy Statement/Prospectus with the SEC,
and Holding Company shall promptly notify Urban of
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all communications, oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement/Prospectus.
(e) Holding Company shall cause the Holding Company Common Stock to be
issued in connection with the Merger to be listed on NASDAQ/National Market
System.
(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 and the Department. The parties
shall each have the right to review in advance 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. Holding Company and Bank shall cause an actual application to
the FDIC and the Department to be filed within 45 days of the date hereof, so
long as Urban provides all information necessary to complete the application
within 30 days of the date hereof.
(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.
(h) Urban and Holding Company agree that in the event either of them are
approached by or deem it appropriate to enter into discussions in connection
with the Merger with any community group regarding the performance of either
party or the Surviving Bank under the Community Reinvestment Act of 1978, as
amended (the "CRA"), the parties shall mutually conduct such discussions and
shall mutually approve any agreements entered into in connection therewith.
5.7. Approval of Stockholders. Each of Urban and Holding Company will take
all steps necessary to duly call, give notice of, convene and hold meetings of
their stockholders as soon as reasonably practicable for the purpose of securing
the approval by such stockholders of this Agreement. Subject to the
qualification set forth in Section 5.3 hereof, Urban will recommend to its
stockholders approval of this Agreement and the transactions contemplated
hereby. Urban and Holding Company shall cooperate and consult with each other
with respect to their respective meetings.
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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 actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to the 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. 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
otherwise 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.
5.9. Public Announcements. The parties hereto shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures with respect to this Agreement or any of the transactions
contemplated hereby, and no party shall make any such public disclosure without
the consent of the other party, except as may be otherwise required by law or
regulation or as to which the party releasing such information has used its best
efforts to discuss with the other party in advance.
5.10. Failure to Fulfill Conditions. In the event that Holding Company or
Urban determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to September
30, 1995 and that it will not waive that condition, it will promptly notify the
other party. Urban and Holding Company will promptly inform the other of any
facts applicable to Urban or Holding Company, 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. 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
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be set forth or described in such disclosure schedules or which is necessary to
correct any information in such schedules which has been rendered materially
inaccurate thereby. For the purpose of determining satisfaction of the
conditions set forth in Article VI, no supplement or amendment to such
disclosures schedules shall correct or cure any representation or warranty which
was untrue when made, but supplements or amendments may be used to disclose
subsequent facts or events to maintain the truthfulness of any representation or
warranty.
5.12. Printing of Registration Statement and Proxy Statement/Prospectus.
Holding Company shall be responsible for the costs of printing of the
Registration Statement and the Proxy Statement/Prospectus, filing fees related
thereto paid to the SEC and fees to be paid to and filing with state blue sky
and securities authorities in connection with registration, offer and sale of
the Holding Company Common Stock in the Merger.
5.13. Closing. The parties hereto shall cooperate and use reasonable
efforts to try to cause the Effective Time to occur on or before June 30, 1995.
5.14. Indemnification. Holding Company agrees that it will, and will cause
Bank to, after the Effective Time, and to the fullest extent permitted by
applicable law and the corporate documents of Holding Company and Bank, provide
to the directors and officers of Urban indemnification equivalent to that
provided by or available under the Articles of Association and By-laws of Urban
or permissible to the fullest extent permitted under the New Jersey Business
Corporation Act 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 matters occurring prior to the
Effective Time which have not been resolved prior to the sixth anniversary of
the Effective Time, until such matters are finally resolved. To the extent
permitted by applicable law, Holding Company or Bank shall advance expenses as
incurred for legal counsel and otherwise in connection with the foregoing
indemnification. In order to satisfy this obligation, Holding Company will
procure continuing director and officer liability coverage for officers,
directors and employees of Urban and its Subsidiaries 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 Urban's existing
directors' and officers' insurance policy.
5.15. Employment Matters.
(a) Holding Company will make every effort to continue the employment of
all officers and employees of Urban, and to
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the extent possible, at the same location, with the same or equivalent salary
and benefits. To the extent any Urban officer or employee is terminated upon or
within one (1) year of the consummation of the Merger, such employee shall be
entitled to severance in accordance with the terms set forth in Exhibit 5.15(a)
hereto. After such one (1) year period, former Urban employees shall have
whatever rights may be available to employees of Holding Company under Holding
Company's severance plans as in effect from time to time, with credit given for
prior service to Urban to the extent time served is a factor under such
severance plans. Holding Company intends to merge Urban's Pension Plans, other
than the Urban National Bank Profit Sharing Plan and its 401(k) thrift plan
component, into Holding Company Pension Plans. It is the intention of the
parties that participants in the Urban 401(k) thrift plan not be adversely
affected by the transactions contemplated by this Agreement. Employees who
continue to be employed by Holding Company or Bank will be credited for purposes
of vesting and eligibility under Holding Company Pension Plans for prior service
at Urban and will receive full credit for prior service with Urban under Bank's
other plans (including medical, vacation, sick leave, disability, severance and
similar plans) and no prior existing condition limitations will be imposed with
respect to any medical coverage plans.
As of the Effective Time, Holding Company will assume and become obligated
under those change of control agreements between Urban and certain of its
officers which are listed in the Urban Disclosure Schedule (the "Change of
Control Agreements"), provided such officer is an officer of Urban as of the
Effective Time. In addition, Holding Company shall enter into an employment
agreement at the Effective Time, substantially in the form of Exhibit 5.15(a)
hereto, with Robert F. Mangano if he is an employee of Urban at the Effective
Time. Such employment agreement and Change of Control Agreements being referred
to herein as the "Employment Agreements". Holding Company confirms that it will
not challenge any benefits payable to a former officer of Urban under a Change
of Control Agreement with Urban disclosed in the Urban Disclosure Statement.
(b) HUBCO agrees that within ninety (90) days of the end of the fiscal year
in which the Merger is consummated, HUBCO shall pay to each person who was an
employee of Urban at the Effective Time a portion of the bonus pool for which
Urban shall have accrued an expense on its books and records as of the Effective
Time; the allocation of this bonus pool shall be made in accordance with an
allocation schedule which Urban shall deliver to Holding Company at the Closing.
From and after the Effective Time and for the remainder of 1995, the Urban
employees who become employees of the Holding Company or the Bank shall be
entitled to participate in whatever bonus programs Holding Company or the Bank
may maintain for similarly situated
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employees, on a pro rata basis based upon the time of such employee's actual
service with Holding Company or the Bank during 1995. Thereafter, the former
Urban employees shall be treated as similarly situated Holding Company or Bank
employees.
5.16. Pooling and Tax-Free Reorganization Treatment. Neither Holding
Company nor Urban shall intentionally take, fail to take or cause to be taken or
not be taken, any action within its control, whether before or after the
Effective Time, which would disqualify the Merger as a "pooling of interests"
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code.
5.17 Urban Options. From and after the Effective Time, each Urban Option
which is converted to an option to purchase Holding Company Common Stock under
Section 2.1(b) (i) shall be administered, operated and interpreted by a
committee comprised of members of the Board of Directors of Holding Company
appointed by the Board of Directors of Holding Company. Holding Company shall
reserve for issuance the number of shares of Holding Company Common Stock
necessary to satisfy Holding Company's obligations. Holding Company shall also
register promptly after the Effective Time, if not previously registered
pursuant to the 1933 Act, the shares of Holding Company Common Stock authorized
for issuance under the Urban Options so converted.
5.18. Affiliates.
(a) Promptly, but in any event within two weeks after the execution and
delivery of this Agreement, (i) Urban shall deliver to Holding Company (x) a
letter identifying all persons who, to the knowledge of Urban, may be deemed to
be affiliates of Urban under Rule 145 of the 1933 Act, including without
limitation all directors and executive officers of Urban and (y) a letter
identifying all persons who, to the knowledge of Urban, may be deemed to be
affiliates of Urban as that term (affiliate) is used for purposes of qualifying
for "pooling of interests" accounting treatment; and (ii) Holding Company shall
identify to Urban all persons who, to the knowledge of Holding Company, may be
deemed affiliates of Holding Company as that term is used for purposes of
qualifying for "pooling of interests" accounting treatment.
(b) Each person who may be deemed an affiliate of Urban (under either Rule
415 of the 1933 Act or the accounting treatment rules) shall execute a letter
substantially in the form of Exhibit 5.18 hereto agreeing to be bound by the
restrictions of Rule 145, as set forth in Exhibit 5.18 and agreeing to be bound
by the rules which permit the Merger to be treated as a "pooling of interests"
for accounting purposes. In addition, Holding Company shall cause its affiliates
(as that term is used for purposes of qualifying for pooling of interests) to
execute a
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letter substantially in the form of Exhibit 5.18(a) hereto within two weeks of
the date hereof, in which such persons agree to be bound by the rules which
permit the Merger to be treated as a "pooling of interests" for accounting
treatment.
(c) Holding Company agrees to publish financial results covering at least
30 days of combined operations of Holding Company and Urban as soon as
practicable after the Effective Time.
5.19. Compliance with the Industrial Site Recovery Act.
(a) For each non-residential property owned by Urban or any of its
Subsidiaries, Urban, at its sole cost and expense, shall obtain prior to the
Effective Time, either:
(i) a Letter of Non-Applicability ("LNA") from the New Jersey
Department of Environmental Protection ("NJDEP") stating that none of the
properties located in New Jersey owned or operated by Urban or any of its
Subsidiaries (each, a "Facility") is an "industrial establishment," as such term
is defined under the Industrial Site Recovery Act ("ISRA");
(ii) a Remediation Agreement issued by the NJDEP pursuant to ISRA
authorizing the consummation of the transactions contemplated by this Agreement;
or
(iii) a Negative Declaration approval, Remedial Action Workplan
approval, No Further Action letter or other document or documents issued by the
NJDEP advising that the requirements of ISRA have been satisfied with respect to
each Facility subject to ISRA. In the event Urban obtains a Remediation
Agreement, Urban will post or have posted an appropriate Remediation Funding
Source or will have obtained the NJDEP's approval to self-guaranty any
Remediation Funding Source required under any such Remediation Agreement.
(b) If Urban reasonably believes that its cost to comply with ISRA,
including without limitation the cost of any Remediation Funding Source, shall,
in the aggregate exceed $300,000, Urban shall consult with Holding Company and
the parties shall jointly determine whether to so comply, terminate the Merger
or take some other action. Thereafter, in the event Holding Company requests
Urban to comply with ISRA, Urban will take all such steps as are reasonably
necessary to so comply and the amounts expended by Urban on such compliance
shall not be deemed to be expenses of Urban or funds otherwise disbursed by
Urban in determining Urban's Closing Shareholder's Equity, whether Urban has
breached any representation or warranty or complied with any covenant contained
herein. Urban shall keep Holding Company informed of all amounts it is required
to expend in order to comply with ISRA.
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(c) Urban's exclusive obligation with respect to any environmental
conditions, whether known or unknown, at, on or under any real property owned or
leased by Urban or any of its Subsidiaries, shall be to obtain the approvals
required by paragraphs 5.19(a) (i) through (iii) above, and Holding Company
agrees that it shall accept any such approval(s) in complete satisfaction of all
obligations which Urban or any of its Subsidiaries may have pursuant to ISRA or
any applicable Environmental Laws.
5.20 Provision of Additional Information. Urban acknowledges that in
connection with consummation of the transactions contemplated by the Jefferson
Agreement, HUBCO may be required to provide information to the Jefferson
shareholders with regard to Urban and the Merger. Urban agrees to comply as
promptly as possible with all requests for information by the Holding Company to
be included in the proxy statement to be used by the shareholders of Jefferson,
and to take such steps as Holding Company may reasonably request in order for
Holding Company to ensure that the shareholders of Jefferson have been supplied
with all appropriate information.
5.21 Transactions Causing 10% Dilution. Holding Company shall not enter
into any agreement after the date hereof which requires it to issue Holding
Company Common Stock or securities convertible into Holding Company Common Stock
where the indicated dilution of book value or earnings per share of Holding
Company Common Stock is greater than 10%, as determined in good faith by Urban's
investment banker after consultation with Holding Company.
5.22 Delivery of Audited Financial Statements. Each of Holding Company and
Urban shall deliver to the other copies of their respective consolidated
statements of financial condition as of December 31, 1994 and their related
consolidated statements of income, changes in shareholders' equity and cash
flows for the period ended December 31, 1994, in each case accompanied by the
audit report of each party's independent public accountants, Arthur Andersen,
LLP. Each of Holding Company and Urban shall deliver such certified Financial
Statements within five (5) days of such party's receipt of their respective
audited Financial Statements. Such audited Financial Statement shall show no
material change from the Draft Financial Statement previously provided to each
party pursuant to Sections 3.4 and 4.4 hereof, respectively.
5.23 Expenses of the Merger. All of Urban's expenses in connection with the
Merger, including financial advisory fees, legal fees and accounting fees shall
be reasonable. Urban shall monthly provide HUBCO with a summary of all expenses
incurred to date. For purposes of the foregoing, payments of financial advisory
fees, legal fees and accounting fees in accordance with
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arrangements disclosed in the Urban Disclosure Schedule shall be deemed
reasonable.
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 Urban Stockholders; SEC Registration. This Agreement and
the transactions contemplated hereby shall have been approved by the requisite
vote of the stockholders of Urban and the stockholders of Holding Company. In
addition, the stockholders of Urban shall have approved the Urban Stock Split.
The 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 no
proceeding for such purpose shall be pending before the SEC, and the issuance of
the Holding Company Common Stock shall have been qualified in every state where
such qualification is required under the applicable state, blue sky, securities
or legal investments laws. The Holding Company Common Stock to be issued in
connection with the Merger, including Holding Company Common Stock to be issued
for the Urban Options, shall have been approved for listing on NASDAQ/National
Market System.
(b) Regulatory Filings. All necessary regulatory or governmental approvals
and consents (including without limitation any required approval of the FDIC and
the Department) required to consummate the transactions contemplated hereby, and
the approval by the Comptroller of the Currency of the Urban Stock Split shall
have been obtained without any unusual term or condition which would materially
impair the value of Urban, taken as a whole, to Holding Company. 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 shall have expired.
(c) Suits and Proceedings. Neither Holding Company nor Urban nor Bank shall
be prohibited by any order, ruling, consent decree, judgment or injunctions of a
court or regulatory agency of competent jurisdiction from consummating the
Merger or the other transactions contemplated by this Agreement, and the
consummation of the Merger and the other transactions contemplated hereby, shall
be legally permissible pursuant to applicable law.
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(d) Pooling of Interests. Holding Company and Urban shall have received
letters, dated within thirty days of the date of this Agreement and dated the
Closing Date, from Arthur Andersen, LLP, certified public accountants, to the
effect that, based upon facts known to such accountants, as of such date, the
Merger shall be qualified to be treated by Holding Company as a pooling of
interests for accounting purposes if closed and consummated in accordance with
this Agreement.
(e) Tax Certificate. Each party hereto shall have delivered to McCarter &
English, tax counsel, a certificate, dated as of the Effective Time, signed by
its Chief Executive Officer and by its Treasurer, to the effect that, to the
best knowledge and belief of such officers, the statement of facts and
representations made on behalf of its management and presented to the legal
counsel delivering the tax opinions provided for in Section 6.1(f) were as of
the date of such requests or presentation and of any such supplement true,
correct and complete, and are on the date of such certificate, to the extent
contemplated by the request or presentation and any such supplemental requests,
true, correct and complete, as though such request or presentation and any such
supplemental requests had been made on the date of such certificate.
(f) Tax Opinion. The parties shall have received an opinion of McCarter &
English, counsel to Holding Company, reasonably satisfactory in form and
substance to each of them, to the effect that the transactions contemplated
hereby will result in a reorganization (as defined in Section 368(a) of the
Code), and accordingly no gain or loss will be recognized for federal income tax
purposes to Holding Company, Urban, or Bank or to the stockholders of Urban who
exchange their shares of Urban Common Stock for Holding Company Common Stock
(except to the extent that cash is received in lieu of fractional shares of
Holding Company Common Stock with respect to Dissenting Shares).
6.2. Conditions to the Obligations of Holding Company Under this Agreement.
The obligations of Holding Company 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 Urban.
The representations and warranties of Urban contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time, except with
respect to changes permitted hereby and for any such representations and
warranties waived in writing by it and except for any such representations and
warranties made as of a specific date which shall be true and correct in all
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material respects as of such date. Urban shall have performed in all
material respects the agreements, covenants and obligations necessary to be
performed by it prior to the Closing Date pursuant to the terms of this
Agreement and the Bank Merger Agreement, except as waived in writing by Holding
Company. With respect to any representation or warranty which as of the Closing
Date has required a supplement or amendment to the Urban Disclosure Schedule to
render such representation or warranty true and correct 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 Urban 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 Urban Disclosure Schedule, materially adversely effect the
representation as to which the supplement or amendment relates.
(b) Opinion of Counsel. Holding Company shall have received an opinion of
counsel to Urban, dated the date of the Closing, in form and substance
reasonably satisfactory to Holding Company, covering the matters set forth on
Schedule 6.2 hereto and any other matters reasonably requested by Holding
Company.
(c) Certificates. Urban shall have furnished Holding Company with such
certificates of its officers or others and such other documents evidencing
fulfillment of the conditions set forth in this Section 6.2 as Holding Company
may reasonably request.
(d) Litigation. Urban shall have provided Holding Company with a list of
all litigation to which Urban or its Subsidiaries is a party, listing the
caption of the litigation, the Docket Number of the litigation, the Court in
which such litigation is pending and the name and telephone number of the
attorney handling such litigation.
6.3. Conditions to the Obligations of Urban Under this Agreement. The
obligations of Urban 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 Holding
Company. The representations and warranties of Holding Company contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time with the same effect as though all
such representations and warranties had been made on and as of the Effective
Time, except with respect to changes permitted hereby and for any such
representations and warranties waived in writing by Urban and except for any
such representations and warranties made as of a specific date which
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shall be true and correct in all material respects as of such date. Holding
Company shall have performed in all material respects, the agreements, covenants
and obligations to be performed by it prior to the Closing Date pursuant to the
terms of this Agreement and the Bank Merger Agreement, except as waived in
writing by Urban. With respect to any representation or warranty which as of the
Closing Date has required a supplement or amendment to the Holding Company
Disclosure Schedule to render such representation or warranty true and correct
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 Holding Company 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 Holding Company Disclosure
Schedule, materially adversely effect the representation as to which the
supplement or amendment relates.
(b) Opinion of Counsel to Holding Company. Urban shall have received an
opinion of counsel to Holding Company, dated the date of the Closing, in form
and substance reasonably satisfaction to Urban, covering the matters set forth
on Schedule 6.3 hereto and any other matters reasonably requested by Urban.
(c) Fairness Opinion. Urban shall have received opinions from Capital
Consultants of Princeton, Inc. as of the date the Proxy Statement/Prospectus is
mailed to Urban's stockholders and as of the Closing Date, to the effect that,
in its opinion, the consideration to be paid to stockholders of Urban hereunder
is fair to such stockholders from a financial point of view.
(d) Certificates. Holding Company shall have furnished Urban 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 Urban shall
reasonably require.
(g) Election of Directors. Messrs. Bryant D. Malcolm, W. Peter McBride and
Joseph Pfeifer shall have been appointed as members of the Board of Directors of
Bank effective as of the Effective Time and, Messrs. Malcolm and McBride shall
also have been appointed as members of the Board of Directors of Holding
Company. In the event any of the foregoing listed individuals is unwilling or
unable to serve as a director of the Holding Company or the Bank, Urban shall
appoint a substitute, with the concurrence of Holding Company.
(h) Employment Agreements and Replacement Options. The Employment
Agreements shall have been assumed or entered into
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by Holding Company and Replacement Options shall have been executed by Holding
Company and delivered by it to the appropriate employees of Urban.
(i) Plan Mergers. Forms of documents reflecting the merger of Urban Pension
Plans with Holding Company Pension Plans shall have been approved by Holding
Company and, if required, by the Bank Board of Directors and the Urban Board of
Directors.
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
Urban:
(a) By mutual written consent of the parties hereto.
(b) By Urban (i) if the Effective Time shall not have occurred on or prior
to September 30, 1995 or (ii) by Holding Company or Urban if a vote of the
stockholders of Urban is taken and such stockholders fail to approve this
Agreement at the meeting (or any adjournment thereof) held for such purpose,
unless in each case the failure of such occurrence shall be due to the failure
of the party seeking to terminate this Agreement to perform or observe its
agreement set forth herein to be performed or observed by such party at or
before the Effective Time.
(c) By Holding Company or Urban 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 Holding Company upon written notice to Urban if
any such application is approved with conditions which materially impair the
value of Urban, taken as a whole, to Holding Company.
(d) By Urban, if (i) the Exchange Ratio is not adjusted pursuant to Section
2.1(a)(i), (ii) the Exchange Ratio, as adjusted pursuant to Section 2.1(a)(ii)
hereof is less than 2.0, (iii) the Exchange Ratio, as adjusted pursuant to
Section 2.1(a)(ii) multiplied by the Average Closing Price of Holding Company
Common Stock is less than $26.65, or (iv) Holding Company enters into a written
agreement or letter of intent with a third party which would result in a Change
of Control of Holding Company (as defined below), Holding Company publicity
announces its intention to enter into a transaction which would result in a
Change in Control of Holding Company, or the Board of
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Directors of Holding Company approves or consents to a Change in Control or
recommends to its shareholders any transaction or transactions which would cause
a Change in Control of Holding Company. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred if (X) any "person" (as
such term is used in Sections 13(d) and 14(d) of the 1934 Act), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
Holding Company or a person engaging in a transaction of the type described in
clause (Z) of this subsection but which does not constitute a Change in Control
under such clause, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of Holding
Company representing 25% or more of the combined voting power of Holding
Company's then outstanding securities; or (Y) after the date of this Agreement,
(i) individuals at the date of this Agreement constitute the Board and (ii) any
new director (other than a director designated by a person who has entered into
an agreement with Holding Company to effect a transaction described in clauses
(X) or (Z) of this Subsection) whose election by the Board or nomination for
election by Holding Company shareholders was approved by a vote of at least
two-thirds (2/3) of the directors in office at the date of this Agreement or
whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; or (Z) the shareholders of Holding
Company or, if no shareholder approval is required or obtained, Holding Company
or any of its Subsidiaries completes a merger, consolidation or similar
transaction of Holding Company or such a Subsidiary with or into any other
corporation, or a binding share exchange involving the Holding Company, other
than any such transaction which would result in the voting securities of Holding
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 75% of the combined voting power of the voting
securities of Holding Company or such surviving entity outstanding immediately
after such transaction, or the shareholders of Holding Company approve a plan of
complete liquidation of Holding Company or an agreement for the sale or
disposition by Holding Company of all or substantially all Holding Company
assets.
(e) By Urban, upon written notice to Holding Company on the fifth business
day prior to the scheduled Closing Date (the "Price Evaluation Date"), if the
Average Closing Price of the Holding Company Common Stock is less than $12.75
per share (the "Upset Price"). The "Average Closing Price" shall mean the
average price of Holding Company Common Stock calculated based upon the closing
price during the first 10 of the 15 consecutive trading days immediately
preceding the Closing. The Average Closing Price shall be determined by (x)
first, recording the closing price (the "Daily Price") of Holding Company Common
Stock reported by NASDAQ/National Market System (as published in The
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Wall Street Journal) during the first 10 of the 15 consecutive trading days
immediately preceding the Closing (trading day meaning any day that Holding
Company Common Stock shall be reported as traded on NASDAQ/National Market
System) and (y) second, computing the average of the Daily Prices in the 10 day
period. If the actual Closing Date is different by more than three (3) business
days from the Scheduled Closing Date, a recalculation of the Average Closing
Price shall be undertaken to take into account such revised Closing Date.
(f) By Holding Company if (i) there shall have occurred a material adverse
change in the financial condition of Urban and its Subsidiaries on a
consolidated basis from that disclosed by Urban on the date of this Agreement in
the Urban Financial Statements, (adjusted to remove expenses associated with the
Merger) or (ii) there was a material breach in any representation, warranty,
covenant, agreement or obligation of Urban hereunder which if susceptible of
being cured within the following period, is not cured within 10 days after
notice by Holding Company of its intent to terminate.
(g) By Urban, if (i) there shall have occurred a material adverse change in
the financial condition of Holding Company or Bank from that disclosed by
Holding Company and its Subsidiaries on a consolidated basis on the date of this
Agreement in the Holding Company Financial Statements; or (ii) there was a
material breach in any representation, warranty, covenant, agreement or
obligation of Holding Company hereunder, which if susceptible of being cured
within the following period is not cured within 10 days after notice by Urban of
its intent to terminate.
(h) By Holding Company or Urban if any condition to Closing specified under
Article VI hereof applicable to such party cannot reasonably be met after giving
the other party a reasonable opportunity to cure any such condition.
(i) By Urban if Urban'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 obligation under
applicable laws.
7.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement by either Holding Company or Urban pursuant to Section 7.1,
this Agreement (other than Section 5.5(b) and Section 8.1 hereof) 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; provided, however, that in the event Urban breaches Section 3.3(a)
hereof because a court of competent jurisdiction, through no effort of Urban,
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finds Section 8.1(b) unenforceable, Holding Company shall not be entitled to any
monetary damages from Urban or its officers or directors, and such shall not, in
and of itself, be a cause for Holding Company's failure to close.
7.3. Amendment. This Agreement may be amended by mutual action taken by the
parties hereto at any time before or after adoption of this Agreement by the
stockholders of Urban 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 stockholders of Urban without the approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of Holding Company, Bank and Urban.
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.
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ARTICLE VIII
MISCELLANEOUS
8.1. Expenses.
(a) Subject to Sections 8.1(b) and 5.12 hereof, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including legal, accounting and investment Holding Company fees and
expenses) shall be borne by the party incurring such costs and expenses.
(b) (i) If (a) this Agreement is terminated by Urban pursuant to Section
7.1(i) hereof, and (b) within twelve (12) months after the date of the
termination of this Agreement, the Board of Directors of Urban shall have
recommended that the shareholders of Urban approve or accept any Acquisition
Transaction or Urban shall have entered into a definitive written agreement
proposing such Acquisition Transaction, in each case other than as contemplated
by this Agreement, then, in any such case, Urban shall cause the definitive
written agreement with any such third party governing such Acquisition
Transaction to provide that such third party will pay to HUBCO a fee (the
"Termination Fee") equal to $1,000,000. Urban will further cause such definitive
written agreement to provide that such payment shall be made by such third party
at the closing of the Acquisition Transaction. Such payment shall be made by
wire transfer to HUBCO of immediately available funds.
(ii) In the event Urban terminates this Agreement pursuant to Section
7.1(i) hereof and within twelve (12) months after such termination the Board of
Directors of Urban has not recommended that the shareholders of Urban approve or
accept any Acquisition Transaction or Urban has not entered into a definitive
written agreement proposing an Acquisition Transaction, or, if Urban has entered
into a definitive written agreement for an Acquisition Transaction or the Urban
Board has recommended to the Shareholders that they approve or accept an
Acquisition Transaction but such Acquisition Transaction is abandoned by a party
prior to closing, then Urban shall pay to HUBCO a fee (the "Reimbursement Fee")
equal to the amount of HUBCO's actual out-pocket expenses expended on
negotiating this Agreement and attempting to consummate the transactions
contemplated hereby, such payment not to exceed $200,000. Such payment shall be
made by Urban by wire transfer of immediately available funds within five (5)
days of the twelve (12) month anniversary of the termination of this Agreement.
8.2. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by telecopier with
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confirming copy sent the same day by registered or certified mail, postage
prepaid, as follows:
(a) If to Holding Company, to:
HUBCO, Inc.
3100 Bergenline Avenue
Union City, NJ 07087
Attn: Kenneth Neilson,
President and Chief Executive Officer
Telecopier No. (201) 348-3493
Copy to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn: D. Lynn Van Borkulo-Nuzzo, Esq.
Telecopier No. (201) 236-2639
and
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102
Attn: Michael M. Horn, Esq.
Telecopier No. (201) 624-7070
(b) If to Urban, to:
Urban National Bank
805 Franklin Lake Road
Franklin Lakes, NJ 07416
Attn: Robert F. Mangano
President and Chief Executive Officer
Telecopier No. (201) 891-4941
Copy to:
Crummy, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Drive
Newark, NJ 07102
Attn: Frank E. Lawatsch, Jr., Esq.
Telecopier No. (201) 596-0545
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to
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have been given as of the date so delivered or telecopied and mailed.
8.3. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns and no person not a party hereto shall have any rights or
benefits under this Agreement, either as a third party beneficiary or otherwise
except that directors, officers and employees shall have the right to enforce
Section 5.14. No assignment of this Agreement may be made except upon the
written consent of the other parties hereto.
8.4. 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.
8.5. 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.
8.6. 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.
8.7. 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.
8.8. Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or the Bank Merger
Agreement or in the instruments or certificates delivered pursuant hereto or
thereto by any party hereto shall expire, on, and be terminated and extinguished
at, the earlier of (A) the termination of this Agreement in accordance with
Section 7.1(a), (b), (c), (e), (f)(i) or (ii), (g)(i), (h) and (i) or (B) the
Effective Time; provided however, that, in the event that the Merger is
consummated, no representation or warranty of Holding Company or Urban provided
for herein, shall be deemed to be terminated or extinguished so as to deprive
Holding Company or Urban of any defense, at law or in equity which it otherwise
would have to any claim against it by any such person, including, without
limitation, any shareholder or former shareholder of Holding Company or Urban,
the representations and warranties aforesaid (except to the extent that they
shall have been waived in accordance herewith)
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being material inducements to the consummation by Urban and Holding Company of
the Merger and other transactions contemplated hereby.
8.9. Survival of Certain Covenants. In the event the Merger is consummated,
only then, agreements set forth herein, that by their context are intended to do
so, shall survive such consummation and the performance of this Agreement and
the Bank Merger Agreement.
IN WITNESS WHEREOF, Holding Company, Bank, and Urban 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
Secretary President and Chief
Executive Officer
ATTEST: URBAN NATIONAL BANK
By:/s/ EILEEN R. LOPRESTO By:/s/ ROBERT MANGANO
----------------------------- -------------------------
Eileen R. Lopresto Robert Mangano
Secretary President 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
Secretary President and Chief
Executive Officer
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<PAGE>
EXHIBIT A
AGREEMENT TO MERGE BETWEEN
HUDSON UNITED BANK
AND
URBAN NATIONAL BANK
THIS AGREEMENT made as of this ___ day of January, 1995 between Hudson
United Bank (hereinafter referred to as "Bank"), a New Jersey chartered
commercial bank, being located at 3100 Bergenline Avenue, Union City, County of
Hudson, in the State of New Jersey, and Urban National Bank (hereinafter
referred to as "Urban"), a national banking association organized under the laws
of the United States, being located at 805 Franklin Lakes Road, Franklin Lakes,
County of Bergen, in the State of New Jersey. The parties hereto agree as
follows:
Section 1. Urban shall be merged with and into Bank with Bank as the
surviving institution (the "Receiving Bank").
Section 2. The name of the Receiving Bank shall be Hudson United Bank.
Section 3. The amount of capital stock of the Receiving Bank shall be
$__________ , divided into [_____] shares of common stock, each of $___________
par value, and at the time merger shall become effective, the Bank shall have a
surplus of $_____________.
Section 4. All assets of each of the merging banks, as they exist at the
effective time of the merger, shall pass to and vest in the Receiving Bank
without any conveyance or other transfer. The Receiving Bank shall be
responsible for all of the liabilities of every kind and description, including
liabilities arising from the operation of their respective trust departments, of
each of the merging banks existing as of the effective time of the merger.
Section 5. Exhibit A-1 hereto lists the location of each branch of Bank and
Urban which will become or remain branches of the Receiving Bank.
Section 6. The stockholder of Bank shall retain its rights in the capital
stock presently outstanding, which shall remain [_________] shares of common
stock of the association, each with $_____ par value, and the stockholders of
Urban in exchange for their shares of Urban shall be entitled to receive shares
of the common stock of HUBCO, Inc., each of no par value, on the terms and
subject to the conditions contained in that certain Agreement and Plan of Merger
by and among Urban, Bank and HUBCO, Inc. dated as of February __, 1995 (the
"Merger Agreement").
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Section 7. The present board of directors of Bank with the addition of
Messrs. __________________________________________, __________________________
and _____________________________________________ shall serve as the board of
directors of the Receiving Bank until the next annual meeting or until such time
as their successors have been elected and have qualified.
Section 8. This Agreement shall be terminated automatically if
the Merger Agreement is terminated as provided in the Merger Agreement.
Section 9. This Agreement shall be ratified and confirmed by the
affirmative vote of the stockholders of each of the merging banks owning at
least two-thirds of its capital stock outstanding, at a meeting to be held on
the call of the directors; and the merger shall become effective at the time
specified in the Merger Agreement.
WITNESS, the signatures and seals of the merging banks this ______ day of
_____________ , 1995, each set by its president or a vice president and attested
to by its cashier or secretary, pursuant to a resolution of its board of
directors, acting by a majority, and witness the signature of a majority of each
of the board of directors.
ATTEST: HUDSON UNITED BANK
_________________________ By:_____________________________
Secretary KENNETH T. NEILSON, President
ATTEST: URBAN NATIONAL BANK
_________________________ By:_____________________________
Cashier Robert Mangano, President
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<PAGE>
STATE OF NEW JERSEY )
)ss.
COUNTY OF )
On this ______________ day of ___________ , 199 , before me, a Notary
Public for this state and county, personally came ___________ as president, and
___________ as cashier of Hudson United Bank, and each of his/her capacity
acknowledged this instrument to the act and deed of the association and the seal
affixed to it to be its seal.
WITNESS my official seal and signature this day and year.
_______________________________________
(Seal of Notary)
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<PAGE>
STATE OF NEW JERSEY )
)ss.
COUNTY OF )
On this __________ day of __________, 1995, before me, a Notary Public for
this state and county, personally came Robert F. Mangano as president, and
__________ as cashier of URBAN NATIONAL BANK, and each of his/her capacity
acknowledged this instrument to the act and deed of the association and the seal
affixed to it to be its seal.
WITNESS my official seal and signature this day and year.
_______________________________________
(Seal of Notary)
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<PAGE>
EXHIBIT 2.1(a)
NON-QUALIFIED STOCK OPTION
GRANTED BY HUBCO, INC.
Hubco, Inc. (the "Company") hereby evidences the grant, on
______________________, 1995 (the "Date of Grant"), to Robert F. Mangano, (the
"Optionee") as part of the Optionee's compensation, the Non-Qualified Stock
Options set forth below on the terms and subject to the conditions of this
Agreement.
BACKGROUND
WHEREAS, Optionee has been employed as the President and Chief Executive
Officer of Urban National Bank;
WHEREAS, in such capacity, Optionee was awarded Options from Urban National
Bank in 1992 and 1993;
WHEREAS, pursuant to that certain Agreement and Plan of Merger, Urban
National Bank is being acquired by Hubco, Inc. and merged into Hudson United
Bank; and
WHEREAS, Hubco, Inc. wishes to assume the obligations of Urban National
Bank with regard to the Optionee's Options on the terms set forth herein.
1. THE OPTIONS
The Company hereby grants the Optionee the following options: (1) an option
to purchase _______________________(1) shares of the Common Stock of the Company
(the "A Option"); and (2) an option to purchase ____________________________(2)
shares of the Common Stock of the Company (the "B Option"). The A Option and the
B Option referred to herein as the "Options", and the shares issued upon
exercise of the Options referred to as the "Optioned Shares".
______________________________________
(1) 5,000 x Exchange Ratio
(2) 10,000 x Exchange Ratio
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<PAGE>
2. OPTION PRICE
The price at which the Optioned Shares may be purchased is as follows: for
the A Options,___________(3) per share, and for the B Options,
_______________________(4) per share.
3. OPTION TERMS
Subject to Paragraph 3 hereof, the right to exercise the Options shall
commence on ___________________________________________,(5) and shall expire on
June 1, 2002, for the A Options and September 13, 2003 for the B Options, except
that:
(a) In the Event of Retirement. If the Optionee's employment terminates by
reason of his retirement (other than retirement for permanent and total
disability as defined in Section 105(d)(4) of the Internal Revenue Code)
pursuant to the terms of a pension or retirement plan, an Option may thereafter
be exercised to the extent it was exercisable at the time of such retirement but
may not be exercised after the expiration of the period of three years from the
date of such termination of employment or of the stated period of the Option,
whichever period is the shorter; provided, however, that if the Optionee dies
within three years after such termination of employment, any unexercised portion
of an Option, to the extent to which it was exercisable at the time of the
Optionee's death may thereafter be exercised by the legal representative of the
estate or by the legatee of the Option under a last will for a period of twelve
months from the date of the Optionee's death or until the expiration of the
stated period of the Option, whichever period is shorter.
(b) In the Event of Disability. If the Optionee's employment terminates by
reason of permanent and total disability (as defined in Section 105(d)(4) of the
Internal Revenue Code), an Option may thereafter be exercised in full but an A
Option may not be exercised after the expiration of the period of twelve months
from the date of such termination of employment or of the stated period of the
Option, whichever period is the shorter and a B Option may not be exercised
after the expiration of the period of thirty-six months from the date of such
termination of employment or of the stated period of the Option, whichever
period is shorter; provided, however, that if the Optionee dies within twelve
months after such termination of employment, any unexercised portion of an
Option, to the extent to which it was
- --------------------------
(3) $10.00
----------------------
Exchange Ratio
(4) $9.00
----------------------
Exchange Ration
(5) Effective Time
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exercisable at the time of the Optionee's death may thereafter be exercised by
the legal representative of the estate or by the legatee of the Optionee under a
last will for a period of twelve months from the date of the Optionee's death or
until the expiration of the stated period of the Option, whichever period is the
shorter.
(c) In the Event of Death. If the Optionee's employment terminates by
reason of the Optionee's death, an Option may thereafter be exercised in full by
the legal representative of the estate or by the legatee of the Optionee under a
last will, but may not be exercised after expiration of a period of twelve
months from the date of the Optionee's death or of the stated period of the
Option, whichever period is the shorter.
(d) Other Termination. If the Optionee's employment terminates for any
reason other than death, retirement or such permanent and total disability, the
A Option shall thereupon immediately terminate and the B Option shall terminate
upon the earlier to occur of the expiration of the Option term or thirty (30)
days after the termination of Optionee's employment.
4. RESTRICTIONS ON OPTION EXERCISE
In no event may any Option be exercised, in whole or in part:
(a) after the expiration of its terms;
(b) if exercise would constitute a violation of any applicable federal or
state securities or other law or valid regulation.
5. NONTRANSFERABLE OPTION
During the Optionee's lifetime the Options may be exercised only by the
Optionee, or by his duly appointed legal guardian in the event of the legal
disability of the Optionee. The Options may not be assigned, transferred,
alienated, pledged, encumbered or subject to a lien in any manner otherwise than
by will or the laws of descent and distribution.
6. NOTICE OF EXERCISE AND PAYMENT FOR OPTIONED SHARES
(a) An Option may be exercised by delivering to the Secretary of the
Committee of the Board of Directors administering the Option (the "Committee") a
completed Option exercise form, copies of which may be obtained from the
Committee, stating the number of optioned shares for which the Option is being
exercised and accompanied by the total Option
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price therefor (including any applicable taxes). Payment of the Option price
shall be made as follows: in cash or by certified check payable to the Company
in U.S. funds.
(b) An Option may not be exercised for less than 50 optioned shares or the
full number of optioned shares for which the Option is then exercisable,
whichever amount is less. The Optionee shall not have any rights to dividends or
other rights of a shareholder with respect to the optioned shares, except for
optioned shares for which he has exercised his Option, and paid the Option
price.
7. ADJUSTMENTS
In the event of any change in the outstanding Common Stock of Company by
reason of any stock split, stock dividend, split-up, split-off, spin-off,
recapitalization, merger, consolidation, rights offering, reorganization,
combination or exchange of shares, a sale by Company of all or part of its
assets, any distribution to shareholders other than a normal cash dividend, or
other extraordinary or unusual event, the number or kind of shares subject to,
and the option price per share hereunder, shall be automatically adjusted so
that the proportionate interest of the Optionee shall be maintained as before
the occurrence of such event; such adjustment in this Option shall be made
without change in the total option exercise price applicable to the unexercised
portion of this Option and with a corresponding adjustment in the exercise price
per share, and such adjustment shall be conclusive and binding on the Optionee.
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8. OPTION RECEIPT
The Options are granted as an incentive for employment. The Optionee
acknowledges receipt of a copy of the Option, confirms that he has reviewed the
terms and conditions of the Option.
HUBCO, INC.
By: __________________________
Accepted and agreed to
as of the date of grant.
_________________________________
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<PAGE>
EXHIBIT 5.15(A)
SEVERANCE PLAN
FOR FORMER EMPLOYEES OF
URBAN NATIONAL BANK
Bank will offer the following severance benefits to persons whose
employment is terminated except if such employment is terminated for good
reason: Two weeks pay for each year in the aggregate of employment with a
minimum of four weeks pay and a maximum of twenty-four weeks pay. Good reason
for termination of employment means: (1) death of employee; (ii) retirement of
employee under Bank's retirement plan; (iii) physical or mental disability of
employee; (iv) failure by employee to perform employee's duties at Bank
substantially in accordance with Bank's prevailing standards after employee is
given written notice by Bank of deficiencies and an opportunity to cure
deficiencies; (v) conviction of employee for a crime involving moral turpitude;
or (vi) the issuance of an order by any regulatory authority having jurisdiction
of employee, Holding Company or Bank ordering such employee's employment
terminated or suspended.
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<PAGE>
EXHIBIT 5.15(a)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the_________day of _____________, 1995 (the
"Commencement Date") by and between HUBCO, Inc., a New Jersey corporation (the
"Company"), and ROBERT F. MANGANO, URBAN NATIONAL BANK, 11 Sutton Way,
Washington Township, New Jersey 07675 ("Employee");
WHEREAS, Employee is an executive with experience in the banking business;
and
WHEREAS, the Company desires to employ Employee as Employee of Hudson
United Bank ("Bank") and Employee is desirous of and wishes to enter into such
an employment arrangement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, it is agreed as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "Affiliate" shall mean a corporation which, directly or indirectly,
controls, is controlled by or is under common control with the Company, and for
purposes hereof, "control" shall mean the ownership of 20% or more of the Voting
Stock of the corporation in question.
1.2 "Basic Salary" shall have the meaning assigned to it in Section 5 of
this Agreement.
1.3 "Board" shall mean the Board of Directors of the Company or the Bank as
duly constituted from time to time.
1.4 "Cause" shall mean:
(a) The conviction of Employee for a felony, or the willful commission by
Employee of a criminal or other act that in the judgment of the Board causes or
will probably cause substantial economic damage to the Company or a Subsidiary
or substantial injury to the business reputation of the Company or a Subsidiary;
(b) The commission by Employee of an act of fraud in the performance of
such Employee's duties on behalf of the Company or a Subsidiary;
(c) The continuing willful failure of Employee to perform the duties of
such Employee to the Company or a Subsidiary (other than any such failure
resulting from Employee's
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incapacity due to physical or mental illness) after written notice thereof
(specifying the particulars thereof in reasonable detail) and a reasonable
opportunity to be heard and cure such failure are given to Employee by the
Board; or
(d) The order of a federal or state regulatory agency or a court of
competent jurisdiction requiring the termination or suspension of Employee's
employment.
For purposes of this subparagraph, no act, or failure to act, on Employee's
part shall be considered "willful" unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action or omission was
in the best interests of the Company or a Subsidiary.
1.5 "Change of Control" with respect to the Company shall mean (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or a person engaging in a transaction of the type described in clause
(iii) of this subsection but which does not constitute a change in control under
such clause, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive years
during the term of this Agreement, individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clauses (i) or (iii) of this Subsection) whose
election by the Board or nomination for election by the Company shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (iii) the shareholders of the
Company approve or, if no shareholder approval is required or obtained, the
Company or a Subsidiary completes a merger, consolidation or similar transaction
of the Company or a Subsidiary with or into any other corporation, or a binding
share exchange involving the Company's securities, other than any such
transaction which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 75% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such transaction, or the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
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1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules, regulations and interpretations issued thereunder.
1.7 "Commencement Date" shall be _______________________________ , 1995.
1.8 "Confidential Information" shall include, without limitation by reason
of specification, any information, including, without limitation, trade secrets,
vendor and customer lists, pricing policies, operational methods, methods of
doing business, technical processes, formulae, designs and design projects,
inventions, research projects, strategic plans, product information, production
know-how and other business affairs of the Company or its Affiliates, which (i)
is or are designed to be used in or are or may be useful in connection with the
business of the Company, any Subsidiary or any Affiliate of any thereof, or
which, in the case of any of these entities, results from any of the research or
development activities of any such entity, which (ii) is private or confidential
in that it is not generally known or available to the public, except as the
result of unauthorized disclosure by or information supplied by Employee, or
(iii) which gives the Company or a Subsidiary or any Affiliate an opportunity or
the possibility of obtaining an advantage over competitors who may not know or
use such information or who are not lawfully permitted to use the same.
1.09 "Date of Termination" shall have the meaning assigned to it in Section
6.
1.10 "Disability" shall mean the inability of Employee to perform
Employee's duties of employment for the Bank, if, pursuant to the terms of this
Agreement as hereinafter provided, because of physical or mental disability,
where such disability shall have existed for a period of more than 90
consecutive days or an aggregate of 120 days in any 365 day period, and Employee
is entitled to receive long term disability payments under a long term
disability plan of the Company or any Subsidiary which employs Employee. The
fact of whether or not a Disability exists hereunder shall be determined by
appropriate medical experts selected by the Board. The existence of a Disability
means that, Employee's mental and/or physical condition substantially interferes
with Employee's performance of his duties for the Company, and/or its
Subsidiaries as specified in this Agreement.
1.11 "Employment Year" shall mean each twelve-month period, or part
thereof, during which Employee is employed hereunder, commencing on the
Commencement Date and on the same day of any subsequent calendar year, the first
such subsequent Employment Year being the twelve-month period which will begin
on the first anniversary of the Commencement Date.
1.12 "Good Reason" shall have the meaning assigned to that term in Section
7.5.
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1.13 "Notice of Termination" shall have the meaning assigned to that term
in Section 7.6.
1.14 "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether Federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.15 "Retirement" shall mean that Employee shall have reached age 65 and
shall retire under the Company's or a Subsidiary's retirement plans (if any)
applicable to him or any earlier actual voluntary retirement by Employee from
his employment with the Company and its Subsidiaries.
1.16 "Subsidiary" shall mean a corporation of which more than 50% of the
Voting Stock is owned, directly or indirectly, by the Company.
1.17 "Term" shall mean the term of employment of Employee under this
Agreement.
1.18 "Voting Stock" shall mean capital stock of a corporation which gives
the holder the right to vote in the election of directors for such corporation
in the ordinary course of business and not as the result of, or contingent upon,
the happening of any event.
Wherever from the context it appears appropriate, each word or phrase
stated in either the singular or the plural shall include the singular and the
plural, and each pronoun stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
2. EMPLOYMENT AND DUTIES OF EMPLOYEE
2.1 Employment; Title; Duties. The Company hereby employs Employee, and
Employee hereby accepts appointment as Executive Vice President of the Bank. The
principal duty of Employee shall be to perform those services set forth on
Exhibit A attached hereto and incorporated herein, and to render services as are
necessary and desirable to protect and advance the best interests of the Company
and its Subsidiaries, acting, in all instances, in accordance with the policies
set by the Board. Without further compensation, Employee agrees to serve (if
requested to do so) as an officer and/or director of any Subsidiary.
Employee shall report to and be under the supervision of the chief
executive officer and chief operating officer of Bank, as well as such other
officers whom the Board shall from time to time appoint (the "Senior Officers").
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2.2 Performance of Duties. Employee shall devote substantially all his full
working time and efforts to the performance of his duties as an executive of the
Bank and to the performance of such other duties as are assigned him from
time-to-time by the Board or a Senior Officer. During the Term, Employee shall
not engage in or become employed, directly or indirectly, in a business which
competes with the business of the Company and its Subsidiaries, without the
prior written consent of the Board, nor shall he act as a consultant to or
provide any services to, whether on a remunerative basis or otherwise, the
commercial or professional business of any other Person which competes with the
Business of the Company and its Subsidiaries, without such written consent,
which, in both instances, may be given or withheld by the Board in its absolute
discretion.
3. TERM OF EMPLOYMENT
The employment of Employee pursuant to this Agreement shall commence as of
the Commencement Date and end three years thereafter, unless sooner terminated
pursuant to Section 7 of this Agreement.
4. COMPENSATION AND BENEFITS
The Company and/or its Subsidiaries shall pay Employee as compensation for
all of the services to be rendered by him hereunder during the Term, and in
consideration of the various restrictions imposed upon Employee during the Term
and the Restricted Period, and otherwise under this Agreement, the Basic Salary
and other benefits as provided for and determined pursuant to Sections 5 to 7,
inclusive, of this Agreement.
5. BASIC SALARY/BONUS
5.1 The Company shall pay or cause Bank to pay Employee, as compensation
for all of the services to be rendered by him hereunder during each Employment
Year, a salary of $175,000 per Employment Year (as may be adjusted upward by the
Board from time to time) (the "Basic Salary"), payable in substantially equal
weekly, bi-weekly, semi-monthly or monthly payments to be determined consistent
with pay practices of Bank, less such deductions or amounts as are required to
be deducted or withheld by applicable laws or regulations, deductions for
employee contributions to welfare benefits provided by the Company or a
Subsidiary to Employee and less such other deductions or amounts, if any, as are
authorized by Employee. The Basic Salary shall be prorated for the month in
which employment by the Company or a Subsidiary commences or terminates, and for
any Employment Year which is less than 12 months in duration. The Basic Salary
may be increased from time-to-time by the Board and once increased, shall not
thereafter be reduced.
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5.2 Employee will participate in any bonus programs of the Bank for its
executive officers, whether currently existing or hereinafter established.
6. ADDITIONAL BENEFITS AND REIMBURSEMENT FOR EXPENSES
6.1 Additional Benefits. The Company shall provide the following additional
benefits to Employee during the Term:
(i) participation on an equitable basis in any employee benefit plans
established for senior management employees of the Company and Bank.
(ii) four (4) weeks vacation with pay in each Employment Year. Employee
shall also be entitled to all holiday privileges approved by the Board during
the Term.
(iii) participation by Employee in such stock-based compensation programs
for senior management of the Company and Bank as shall currently exist or
hereinafter be established.
(iv) the lease or financing by the Company or Bank for use by Employee of a
late model automobile, including payments by the Company of insurance and other
expenses thereof which shall be paid by the Company in addition to the lease
payment.
(v) payment of annual country club dues at Hackensack Golf Club.
6.2 Reimbursement for Expenses. The Company or Bank shall pay or reimburse
Employee for all reasonable expenses actually incurred or paid by him during the
Term in the performance of his services under this Agreement, upon presentation
of such bills, expense statements, vouchers or such other supporting information
as the Board may reasonably require. In the event the Company requires Employee
to travel on business during the Term, Employee shall be reimbursed for any
travel expenses in accordance with this Section 6.2.
7. TERMINATION OF EMPLOYMENT
7.1 Death. If Employee dies during the Term, on the date of his death this
Agreement shall terminate.
7.2 Disability. If, during the Term, Employee has a Disability, the Company
may, at any time after Employee has a Disability, terminate Employee's
employment by written notice to him.
7.3 Retirement. The Agreement will be terminated by Employee's Retirement
at the date of such Retirement.
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7.4 Termination for Cause. The Company may terminate Employee's employment
hereunder for Cause at any time by written notice given to Employee by the
Board.
7.5 Good Reason Termination of Employment by Employee. Employee may
terminate his employment hereunder at any time for Good Reason by providing
written notice to the Company. Good Reason shall mean:
(a) (i) The assignment by the Company to Employee of duties without
Employee's express written consent, which (x) are materially diminished from or
require travel significantly more time consuming or extensive than Employee's
duties or business travel obligations at the Commencement Date, or (y) result,
in either a significant reduction in Employee's authority and responsibility as
a senior corporate executive of Bank when compared to the highest level of
authority and responsibility assigned to Employee, or (ii) without Employee's
express written consent, the removal of Employee from, or any failure to
reappoint or reelect Employee to, the highest title held by Employee with
Company or Bank during the term of this Agreement, except in connection with a
termination of Employee's employment by the Company for Cause, or by reason of
Employee's death, Disability or Retirement;
(b) A reduction by the Company of Employee's Basic Salary or non-payment of
Basic Salary when due;
(c) The Company's requiring Employee to be based anywhere other than
northern New Jersey except for required travel on the Company's or a
Subsidiary's business to an extent substantially consistent with Employee's
present business travel obligations, or in the event of any relocation of
Employee with the Employee's express written consent, the failure by the Company
or a Subsidiary to pay (or reimburse Employee for) all reasonable moving
expenses of Employee relating to a change of principal residence in connection
with such relocation and to indemnify Employee against any loss realized in the
sale of Employee's principal residence in connection with any such change of
residence, all to the effect that Employee shall incur no loss upon such sale on
an after tax basis;
(d) The failure by the Company or a Subsidiary to continue to provide
Employee with substantially the same welfare benefits (which for purposes of
this Agreement shall mean benefits under all welfare plans as that term is
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended), and perquisites, including participation on a comparable basis in
the Company's or a Subsidiary's retirement plans, stock based compensation, and
other plans in which executives of the Company or a Subsidiary of comparable
title and salary participate, or with a package of welfare benefits and
perquisites, that, although any one or more of such benefits or perquisites may
vary from those available to other executives of
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Company of Subsidiary of comparable title and salary, is substantially
comparable in all material respects to such welfare benefits and perquisites; or
(e) The failure of the Company to obtain the express written assumption of
and agreement to perform this Agreement by any successor as contemplated in
Section 13 hereof; or
(f) A Change of Control shall occur.
7.6 Notice of Termination. Any purported termination of employment by the
Company or a Subsidiary by reason of Employee's Disability or for Cause, or by
Employee for Good Reason shall be communicated by written Notice of Termination
to the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice given by Employee or the Company or a
Subsidiary, as the case may be, which shall indicate the specific basis for
termination and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for determination of any payments under this
Agreement. Employee shall not be entitled to give a Notice of Termination that
Employee is terminating his employment with the Company or a Subsidiary for Good
Reason, based upon subsection 7.5(a) after a Change of Control, more than six
(6) months following the occurrence of the event alleged to constitute Good
Reason.
7.7 Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean the date of termination of employment specified in the
Notice of Termination, which shall not be more than ninety (90) days after such
Notice of Termination is given; provided, however, that in the event such Notice
of Termination is for Cause involving activities set forth in Section 1.4(a),
(b) or (d) hereof, the Date of Termination shall be immediately upon delivery of
the Notice of Termination to Employee. If within thirty (30) days after any
Notice of Termination is given, the party who receives such Notice of
Termination notifies the other party that a Dispute exists (a "Notice of
Dispute"), the Date of Termination shall be the date on which the Dispute is
finally determined, either by mutual written agreement of the parties, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided that the Date of Termination shall be extended by a Notice of Dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such Dispute with reasonable diligence and provided
further that pending the resolution of any such Dispute, the Company or a
Subsidiary shall continue to pay Employee the same Basic Salary and to provide
Employee with the same or substantially comparable medical, dental and life
insurance benefits that Employee was paid or received. The Company may
immediately cease all other welfare benefits and perquisites, including
participation in the Company's or a Subsidiary's retirement plans, profit
sharing plans, stock option plans and
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stock award plans. Should a Dispute ultimately be determined in favor of the
Company or a Subsidiary, then all sums (net of tax withholdings by the Company
or a Subsidiary from such sums) paid by the Company or a Subsidiary to Employee
from the Date of Termination specified in the Notice of Termination until final
resolution of the Dispute pursuant to this paragraph shall be repaid promptly by
Employee to the Company or a Subsidiary, with interest at 70% of the prime rate
charged from time to time by the Bank. Employee shall not be obligated to pay to
the Company or a Subsidiary the cost of providing Employee with welfare benefits
for such period unless the final judgment, order or decree of a court or other
body resolving the Dispute determines that Employee acted in bad faith in giving
a Notice of Dispute. Should a Dispute ultimately be determined in favor of
Employee, then Employee shall be entitled to retain all sums paid to Employee
under this subparagraph pending resolution of the Dispute and shall be entitled
to receive, in addition, the payments and other benefits provided for in Section
7.8 to the extent not previously paid hereunder and the payment of Employee's
reasonable legal fees incurred as a result of such Dispute upon submission to
the Company of a detailed statement of fees from Employee's attorneys.
7.8 Payments on Termination. (i) Upon termination of employment of Employee
by the Company other than by reason of Employee's death, Disability, Retirement
or for Cause, or (ii) if the Employee shall terminate his employment for Good
Reason, then:
(a) The Company or a Subsidiary will pay to Employee as compensation for
services rendered, (subject to any applicable payroll or other taxes required to
be withheld), one-twelfth (1/12) of the Basic Salary of Employee payable monthly
for a period covering thirty-six months reduced by the number of months elapsing
since the Commencement Date, but not less than twenty-four months.
(b) Employee will be entitled to receive "Special Retirement Benefits" as
provided herein, so that the total retirement benefits Employee receives from
the Company will approximate the total retirement benefits Employee would have
received under all retirement plans (which shall not include severance plans)
and other employment contracts of the Company and its Subsidiaries in which
Employee participates were Employee fully vested under such retirement plans and
entitled to all benefits payable under such other employment contracts as if
Employee continued in the employ of the Company or a Subsidiary for thirty-six
months in the absence of early termination or until his Retirement, if earlier
(provided that such additional period shall be inclusive of and shall not be in
addition to any period of service credited under any severance plan of the
Company or a Subsidiary). The benefits specified in this subparagraph will
include all ancillary benefits, such as early retirement and survivor rights and
benefits available at
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retirement. The amount payable to Employee or his beneficiaries under this
subparagraph shall equal the excess of (1) the benefits that would be paid to
Employee or his beneficiaries, under all retirement plans and other employment
contracts of the Company and its Subsidiaries in which Employee participates if
(A) Employee were fully vested under such plans and entitled to all benefits
payable under such other employment contracts, (B) thirty-six months, in the
absence of early termination (or the period until his Retirement, if less) were
added to his credited service under such plans and contracts, (C) such plans
were not amended after the Notice of Termination in a way that adversely affects
Employee, and (D) Employee's highest average annual compensation as defined
under such retirement plans and other employment contracts were calculated as if
Employee had been employed by the Company or a Subsidiary for thirty-six months
in the absence of early termination (or the period until his Retirement, if
earlier) and had Employee's salary been included in compensation for purposes of
such retirement plans and other employment contracts (if applicable) during such
period been equal to Employee's Basic Salary; over (2) the benefits that are
payable to Employee or his beneficiaries under all retirement plans and other
employment contracts of the Company and its Subsidiaries in which Employee
participates. These Special Retirement Benefits are provided on an unfunded
basis, are not intended to meet the qualification requirements of Section 401 of
the Code and shall be payable solely from the general assets of the Company.
These Special Retirement Benefits shall be payable at the times and in the
manner provided in the applicable retirement plans and other employment
contracts to which they relate.
(c) To the extent an excise tax under section 4999 of the Code is imposed
on compensation of the Employee because of the difference between the actual
taxable compensation of the Employee and the deemed compensation, the Company
shall pay to the Employee an amount of money equal to the amount of such section
4999 excise tax plus an amount of money to cover all of the increase in federal,
state and local income and excise taxes generated by this payment so as to make
the Employee whole for such excise tax (the "gross-up"). The gross-up shall be
calculated by the formula (0.2(P-B))/(0.8-R) in which P is the total initial
taxable payment under subsection 7.8 of this Agreement, B is the "base amount"
under section 280G of the Code, and R is the aggregate effective income tax rate
taking into account the highest applicable federal, state and local income tax
rates.
7.9 Termination by the Company for Cause. In the event of the termination
of Employee's employment by the Company or Bank for Cause, Employee or his
estate or beneficiary, as the case may be, shall receive his Basic Salary to the
Date of Termination and no other amount except as required by law or by the
terms of employee welfare plans in which Employee was a participant.
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7.10 Termination by Death, Retirement or Disability. In the event of the
termination of Employee's employment by Retirement, Death or Disability,
Employee or his estate or beneficiary, as the case may be, shall receive his
Basic Salary through the Date of Termination, to the extent then unpaid and a
Bonus to the extent then unpaid where the Date of Termination occurs after the
period with respect of which the Bonus is to be paid has expired, and in the
event the Date of Termination occurs during a period with respect to which a
Bonus is to be paid, the Bonus which is budgeted for such period on a pro rata
basis, based upon the period of Employee's service hereunder during the Bonus
measurement period prior to the Date of Termination and the Bonus measurement
period. In the event of termination upon Retirement, Death or Disability of
Employee, all benefits provided in Section 6 shall be terminated on the Date of
Termination, except that employee welfare benefits shall continue, or be
discontinued, in accordance with their terms, and Employee shall also be
reimbursed for expenses in accordance with Section 6.2 properly incurred prior
to the Date of Termination and then remaining unpaid by the Company.
8. CONFIDENTIAL INFORMATION AND PROPRIETARY INTERESTS
8.1 Acknowledgement of Confidentiality. Employee understands and
acknowledges that he may obtain Confidential Information during the course of
his employment by the Company and Bank. Employee further acknowledges that the
services to be rendered by him are of a special, unique and extraordinary
character and that, in connection with such services, he will have access to
Confidential Information vital to the Company's and Affiliates' business.
Accordingly, Employee agrees that he shall not, either during the Term or at any
time within one year after the Date of Termination, (i) use or disclose any such
Confidential Information outside the Company and Affiliates; or (ii), except as
required in the proper performance of his services hereunder, remove or aid in
the removal from the premises of the Company or any Affiliate, of any
Confidential Information or any property or material relating thereto.
The foregoing confidentiality provisions shall cease to be applicable to
any Confidential Information which becomes generally available to the public
(except by reason of or as a consequence of a breach by Employee of his
obligations under this Section 8).
In the event Employee is required by law or a court order to disclose any
such Confidential Information, he shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which in his opinion requires such disclosure and, if the Company so elects,
permit the Company an adequate opportunity, at its own expense, to contest such
law or court order.
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8.2 Delivery of Material. Employee shall promptly, and without charge,
deliver to the Company on the termination of his employment hereunder, or at any
other time the Company may so request, all memoranda, notes, records, reports,
manuals, computer disks, videotapes, drawings, blueprints and other documents
(and all copies thereof) relating to the business of the Company and the
Affiliates, and all property associated therewith, which he may then possess or
have under his control.
9. DISPUTES AND REMEDIES
9.1 Injunctive Relief. If Employee commits a breach, or threatens to commit
a breach, of any of the provisions of Section 8, the Company shall have the
following rights and remedies (each of which shall be independent of the other,
and shall be severally enforceable, and all of which shall be in addition to,
and not in lieu of, any other rights and remedies available to the Company at
law or in equity):
(i) the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged by Employee that any such breach or threatened breach will or may
cause irreparable injury to the Company and that money damages will or may not
provide an adequate remedy to the Company; and
(ii) the right and remedy to require Employee to account for and pay over
to the Company all compensation, profits, monies, increments, things of value or
other benefits, derived or received by Employee as the result of any acts or
transactions constituting a breach of any of the provisions of Section 8 of this
Agreement, and Employee hereby agrees to account for and pay over all such
compensation, profits, monies, increments, things of value or other benefits to
the Company.
9.2 Partial Enforceability. If any provision contained in Section 8, or any
part thereof, is construed to be invalid or unenforceable, the same shall not
affect the remainder of Employee's agreements, covenants and undertakings, or
the other restrictions which he has accepted, in Section 8, and the remaining
such agreements, covenants, undertakings and restrictions shall be given the
fullest possible effect, without regard to the invalid parts.
9.3 Intention of Parties. It is distinctly understood and agreed that the
confidentiality, proprietary right, and restrictive covenant provisions of this
Agreement have been accepted, and agreed to by Employee in contemplation of this
Agreement. It is therefore the specific intention of the parties, any general
considerations of public policy to the contrary notwithstanding, that the
provisions of Section 8 of this Agreement shall be enforced as written and to
the fullest extent possible.
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9.4 Adjustment of Restrictions. Despite the prior provisions of this
Section 9, if any covenant or agreement contained in Section 8, or any part
thereof, is held by any court of competent jurisdiction to be unenforceable
because of the duration of such provision, the court making such determination
shall have the power to reduce the duration of such provision and, in its
reduced form, such provision shall be enforceable.
9.5 Attorneys Fees and Expenses. In the event that any action, suit or
other proceeding at law or in equity is brought to enforce the provisions of
this Agreement, or to obtain money damages for the breach thereof, and such
action results in the award of a judgment for money damages or in the granting
of any injunction in favor of Employee, then all reasonable expenses, including
but not limited to, reasonable attorney's fees and disbursements (including
those incurred on appeal) of Employee in such action, suit or other proceeding
shall (on demand of Employee) forthwith be paid by the Company.
10. SURVIVAL
The provisions of Sections 7, 8 and 9 and this Section 10 shall survive
termination of this Agreement and remain enforceable according to their terms.
11. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
in no way affect the validity or enforceability of any other provisions hereof.
12. NOTICES
All notices, demands and requests required or permitted to be given under
the provisions of this Agreement shall be deemed duly given if made in writing
and delivered personally or mailed by postage prepaid certified or registered
mail, return receipt requested, accompanied by a second copy sent by ordinary
mail, which notices shall be addressed as follows:
If to the Company:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn: Chairman of the Compensation
Committee
If to Employee:
Robert F. Mangano
11 Sutton Way
Washington Township, NJ 07675
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By notifying the other parties in writing, given as aforesaid, any party
may from time-to-time change its address or the name of any person to whose
attention notice is to be given, or may add another person, to whose attention
notice is to be given, in connection with notice to any party.
13. ASSIGNMENT AND SUCCESSORS
Neither this Agreement nor any of his rights or duties hereunder may be
assigned or delegated by Employee. This Agreement is not assignable by the
Company except to any successor in interest which takes over all or
substantially all of the business of the Company, as it is conducted at the time
of such assignment. Any corporation into or with which the Company is merged or
consolidated or which takes over all or substantially all of the business of the
Company shall be deemed to be a successor of the Company for purposes hereof.
This Agreement shall be binding upon and, except as aforesaid, shall inure to
the benefit of the parties and their respective successors and permitted
assigns. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by written agreement in form and
substance satisfactory to Employee, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
14. ENTIRE AGREEMENT, WAIVER AND OTHER
14.1 Integration. This Agreement contains the entire agreement of the
parties hereto on its subject matter and supersedes all previous agreements
between the parties hereto, written or oral, express or implied, covering the
subject matter hereof. No representations, inducements, promises or agreements,
oral or otherwise, not embodied herein, shall be of any force or effect.
14.2 No Waiver. No waiver or modification of any of the provisions of this
Agreement shall be valid unless in writing and signed by or on behalf of the
party granting such waiver or modification. No waiver by any party of any breach
or default hereunder shall be deemed a waiver of any repetition of such breach
or default or shall be deemed a waiver of any other breach or default, nor shall
it in any way affect any of the other terms or conditions of this Agreement or
the enforceability thereof. No failure of the Company to exercise any power
given it hereunder or to insist upon strict compliance by Employee with any
obligation hereunder, and no custom or practice at variance with the terms
hereof, shall constitute a waiver of the right of the Company to demand strict
compliance with the terms hereof.
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Employee shall not have the right to sign any waiver or modification of any
provisions of this Agreement on behalf of the Company, nor shall any action
taken by Employee reduce his obligations under this Agreement.
This Agreement may not be supplemented or rescinded except by instrument in
writing signed by all of the parties hereto after the Commencement Date. Neither
this Agreement nor any of the rights of any of the parties hereunder may be
terminated except as provided herein.
14.3 Obligations of Company. All amounts payable by the Company hereunder
shall be paid without notice or demand. Except as expressly provided herein, the
Company waives all rights which it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement
in whole or in part. Unless Employee is terminated for Cause, the Company's
obligation to pay Employee the compensation and to make the arrangements
provided herein shall be absolute and unconditional and shall not be affected by
any circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company or any of its Subsidiaries
may have against Employee or anyone else; provided, however, that the foregoing
shall not apply to any personal obligations owed Company by Employee not in
connection with Employee's employment with Company. By way of example, and not
as a limitation, the limitation provided in the foregoing sentence shall not
prohibit Company from setting off any amounts owed Company by Employee pursuant
to any personal or mortgage loan, overdraft, or any other banking transaction.
Employee shall not be required to mitigate the amount of any payment or other
benefit provided for in this Agreement by seeking other employment or otherwise.
14.4 Rights of Beneficiaries of Employee. If Employee should die while any
amounts would still be payable to Employee hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Employee's devisee, legatee or
other designee or, if there be no such designee, to the Employee's estate.
15. GOVERNING LAW
This Agreement shall be governed by and construed, and the rights and
obligations of the parties hereto enforced, in accordance with the laws of the
State of New Jersey.
16. HEADINGS
The Section and Subsection headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above, which shall be deemed to be the Commencement Date.
HUBCO, INC.
By:
------------------------------------
KENNETH T. NEILSON,
President and Chief Executive
Officer
------------------------------------
ROBERT F. MANGANO
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EXHIBIT A
The principal duty of Employee as Executive Vice President of Bank shall be
to perform the services set out below:
A.
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EXHIBIT 5.18
______________, 1995
HUBCO, Inc.
Gentlemen:
I am delivering this letter to you in connection with the proposed merger
(the "Merger") of Urban National Bank, a national banking association, ("Urban")
with and into Hudson United Bank, a New Jersey chartered commercial bank
("Bank"), pursuant to the Agreement and Plan of Merger dated as of ____________,
1995 (the "Agreement") among Urban, HUBCO, Inc., a New Jersey corporation
("Holding Company") and Bank. I currently own shares of Urban's common stock,
par value $1.25 per share ("Urban Common Stock"). As a result of the Merger, I
will receive shares of Holding Company's common stock, without par value
("Holding Company Securities") in exchange for my Urban Common Stock. In
addition, to the extent I own options to acquire Urban Common Stock, those
options will be converted in the Merger into options to acquire Holding Company
Securities.
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Urban, as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Regulations") promulgated under the Securities Act of 1933, as amended (the
"Act") by the Securities and Exchange Commission (the "Commission") and as the
term "affiliate" is used for purposes of the Commission's rules and regulations
applicable to the determination of whether a merger can be accounted for as a
"pooling of interests" as specified in the Commission's Codification of
Financial Reporting Policies, Section 201.01, as interpreted by the staff of the
Commission, including Staff Accounting Bulletins Nos. 65 and 76.
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I represent to, and covenant with Holding Company that:
A. Transfer Restrictions Prior to Merger Consummation. During the period
beginning on the date hereof and ending 30 days prior to the consummation of the
Merger, I shall not sell, transfer or otherwise dispose of ("transfer") any
Urban Common Stock owned directly or indirectly by me, without notifying Holding
Company in advance of the proposed transfer and giving Holding Company a
reasonable opportunity to object to the transfer before it is consummated. Only
if Holding Company is advised in writing by its independent public accountants
that such sale could jeopardize, or is likely to jeopardize, "pooling of
interests" accounting treatment of the Merger, may Holding Company instruct me
not to make or permit the transfer. In such event, Holding Company will provide
me with a letter from its independent public accountant as to the reasons why
such transfer of any Urban Common Stock is being denied. I shall abide by any
such instructions. However, Holding Company undertakes to take all reasonable
measures to avoid restricting transfers of Urban Common Stock during this
period.
B. Post-Consummation Transfer Restrictions. During the period beginning 30
days prior to the consummation of the Merger and ending immediately after
financial results covering at least 30 days of post Merger combined operations
have been published by Holding Company by means of the filing of a Form 10-Q or
Form 8-K under the Securities Exchange Act of 1934, the issuance which satisfies
the requirements of Section 201.01, I shall not transfer any Urban Common Stock
owned directly or indirectly by me, unless such transfers are approved by
Holding Company, which approval will not be withheld if such transfers are de
minimis (as provided in Topic 2, Section E of Staff Accounting Bulletins of the
Commission) or unreasonably withheld in any other circumstances where Holding
Company's independent public accountants believe such transfer would not
jeopardize the "pooling of interests" treatment accorded the Merger.
C. Need for Registration or Exemption in Connection with Transfers. I have
been advised that the issuance of Holding Company Securities to me pursuant to
the Merger will be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
since I may be deemed to be an affiliate of Urban at the time
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the Merger is submitted for a vote of Urban's stockholders, any transfer by
me of Holding Company Securities is restricted under Rule 145 promulgated by the
Commission under the Act. I may not transfer Holding Company Securities unless
(i) such transfer is registered under the Act, (ii) such transfer is made in
conformity with Rule 145 promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to Holding Company or a
no-action letter from the staff of the Commission, such transfer is otherwise
exempt form registration under the Act.
D. Stop Transfer Instructions; Legend on Certificates. I also understand
that stop transfer instructions will be given to Holding Company's transfer
agents with respect to the Holding Company Securities and that there will be
placed on the certificates of the Holding Company Securities issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AGREEMENT DATED _________, 1994 BETWEEN THE
REGISTERED HOLDER HEREOF AND HOLDING COMPANY, A COPY OF WHICH IS AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF HOLDING COMPANY."
Holding Company agrees to take all reasonable measures to allow me to avail
myself of the resale provisions contained in Rule 145(d), including providing
information with respect to Holding Company as provided in Rule 144(c).
E. Consultation with Counsel. I have carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon my ability to transfer Holding Company Securities to the extent
I felt necessary with my counsel or counsel for Bank.
Execution of this letter is not an admission on my part that I am an
"affiliate" of Urban as described in the second paragraph of this letter, or a
waiver of any rights I may have
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to object to any claim that I am such an affiliate on or after the date of this
letter. This letter shall terminate concurrently with any termination of the
Agreement in accordance with its terms.
Very truly yours,
_______________________________
Name:
Accepted this ____ day of
_______________, 1995 by
HUBCO, INC.
By:________________________
Name:
Title:
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EXHIBIT 5.18(a)
_____________, 1995
HUBCO, Inc.
_______________________
_______________________
Gentlemen:
I am delivering this letter to you in connection with the proposed merger
(the "Merger") of Urban National Bank, a national banking association ("Urban")
with and into Hudson United Bank, a New Jersey chartered commercial bank
("Bank"), pursuant to the Agreement and Plan of Merger dated as of
_______________, 1995 (the "Agreement") by and among Urban, Bank and HUBCO, Inc.
("Holding Company"). I currently own securities issued by Holding Company
("Holding Company Securities").
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Holding Company, as the term "affiliate" is used for
purposes of the Commission's rules and regulations applicable to the
determination of whether a merger can be accounted for as a "pooling of
interests" as specified in the commission's Codification of Financial Reporting
Policies Section 201.01, as interpreted by the staff of the Commission,
including Staff Accounting Bulletins Nos. 65 and 76
I represent to and covenant with Holding Company that:
A. Transfer Restrictions Prior to Merger Consummation. During the period
beginning on the date hereof and ending 30 days prior to the consummation of the
Merger, I shall not sell, transfer or otherwise dispose of ("transfer") any
Holding Company Securities owned directly or indirectly by me, without notifying
Holding Company in advance of the proposed transfer and giving Holding Company a
reasonable opportunity to object to the transfer before it is consummated. Only
if Holding Company is advised in writing by its independent public accountants
that such sale could jeopardize, or is likely to jeopardize "pooling of
interests" accounting treatment of the
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Merger, may Holding Company instruct me not to make or permit the transfer.
In such event, Holding Company will provide me with a letter from its
independent public accountant as to the reasons why such transfer of any Holding
Company Securities is being denied. I shall abide by any such instructions.
However, Holding Company undertakes to take all reasonable measures to avoid
restricting transfers of Holding Company Securities during this period.
B. Post-Consummation Transfer Restrictions. During the period beginning 30
days prior to the consummation of the Merger and ending immediately after
financial results covering at least 30 days of post Merger combined operations
have been published by Holding Company by means of the filing of a Form 10-Q or
Form 8-K under the Securities Exchange Act of 1934, the issuance of a quarterly
earnings report, or any other public issuance which satisfies the requirements
of Section 201.01, I shall not transfer any Holding Company Securities owned
directly or indirectly by me, unless such transfers are approved by Holding
Company, which approval will not be withheld if such transfers are de minimus
(as provided in Topic 2, Section E of Staff Accounting Bulletins of the
Commission) or unreasonably withheld in any other circumstances where Holding
Company's independent public accountants believe such transfer would not
jeopardize the "pooling of interests" treatment accorded the Merger.
C. Stop Transfer Instructions; Legend on Certificates. I also understand
that stop transfer instructions will be given to Holding Company's transfer
agent with respect to the Holding Company Securities owned directly or
indirectly by me during the periods referred to in paragraphs A and B above.
D. Consultation with Counsel. I have carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon my ability to transfer Holding Company Securities to the extent
I felt necessary with my counsel or counsel for Holding Company.
Execution of this letter is not an admission on my part that I am
"affiliate" of Holding Company as described in the second paragraph of this
letter, or a waiver of any rights I may
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have to object to any claim that I am such an affiliate on or after the date of
this letter. This letter shall terminate concurrently with any termination of
the Agreement in accordance with its terms.
Very truly yours,
_______________________________
Name:
Accepted this ____ day of
_________________, 1995 by
HUBCO, INC.
By:________________________
Name:
Title:
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SCHEDULE 6.2
FORM OF OPINION OF COUNSEL TO
URBAN TO BE DELIVERED TO
HOLDING COMPANY AT THE EFFECTIVE TIME
(Capitalized terms used herein and not otherwise defined have the meanings
given them in the Agreement)
(a) Urban is a national banking association validly existing and in good
standing under the laws of the United States. Urban has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as described in the Proxy Statement/Prospectus on page ___ under the
caption ______________.
(b) Each Subsidiary of Urban listed as such in the Urban Disclosure
Schedule is validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(c) Urban has the authorized capitalization as set forth in the Proxy
Statement/Prospectus under the caption ______________ and to our actual
knowledge, other than Urban Common Stock issuable upon exercise of outstanding
Urban Options disclosed in the Urban Disclosure Schedule, there are no
outstanding subscription rights, options, conversion rights, warrants or other
agreements or commitments of any nature whatsoever (either firm or conditional)
obligating Urban to issue, deliver or sell, cause to be issued, delivered or
sold, or restricting Urban from selling any additional Urban Common Stock or
obligating Urban to grant, extend or enter into any such agreement or commitment
(other than preemptive rights). All of the outstanding shares of capital stock
of each subsidiary of Urban listed as such in the Urban Disclosure Schedule have
been validly authorized and issued and to our actual knowledge there are no
liens, claims, restrictions or encumbrances created by Urban on Urban's
ownership thereof.
(d) The Agreement and the Bank Merger Agreement have been duly authorized,
executed and delivered by Urban and, assuming due authorization, execution and
delivery by Holding Company and Bank, as the case may be, constitute the valid
and binding obligation of Urban, enforceable in accordance with its terms except
as such enforcement may be limited by bankruptcy, insolvency, receivership,
reorganization or other laws of general application relating to creditors'
rights, laws relating to the
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insolvency, safety and soundness, receivership or liquidation of national banks
and general equitable principles. [Counsel may take an exception regarding
Section 8.1(b).]
(e) The execution and delivery of the Agreement and the Bank Merger
Agreement and the consummation of the transactions contemplated thereby will not
(i) violate the Charter, Articles of Association or By-laws of Urban; (ii)
breach or result in a default under, any agreement or court order disclosed in
the Urban Disclosure Schedule delivered to Holding Company pursuant to the
Agreement; or (iii) cause Urban to violate applicable provisions of statutory
law or regulations; except with respect to (ii) and (iii) above, such as in the
aggregate will not have a material adverse effect on the ability of Urban to
consummate the transactions contemplated by the Agreement.
(f) All actions required by law, the Articles of Association and By-laws of
Urban, and the directors and stockholders of Urban to authorize the execution,
delivery and performance of the Agreement and consummation of the Merger have
been duly taken.
(g) Assuming that there has been due authorization of the Merger by all
necessary corporate and governmental proceedings on the part of Urban and that
Urban has taken all action required to be taken by it prior to the Effective
Time, upon the appropriate filing of the Certificate required by Section 137 of
the New Jersey Banking Act of 1948, as amended (the "Banking Act"), N.J.S.A.
17:9A-137 with the Commissioner, the Merger will become effective, and upon
effectiveness of the Merger each share of Urban Common Stock will be converted
as provided in Article II of the Agreement.
(h) No approvals, authorizations, consents or other actions or filings
under federal law or applicable state law (the "Approvals") are required to be
obtained by Urban in order to permit the execution and delivery of the Agreement
by Urban and the performance by Urban of the transactions contemplated thereby
other than the Approvals [list approvals which have been obtained], which have
been obtained, approvals, authorizations, consents or other actions or filings
under federal law or applicable state law either required to be obtained by
Holding Company or Bank or not required or necessary to be obtained on the date
hereof.
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(i) We are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement/Prospectus and make no representation that we have independently
verified the accuracy, completeness or fairness or such statements, but, without
in any way limiting the generality of the foregoing, based upon our examination
of the Proxy Statement/Prospectus (i) the Proxy Statement/Prospects (except for
financial statements and other tabular financial information, and other
financial and statistical data and information, and all information concerning
Holding Company, Bank and the Merger as to which we express no opinion) with
respect to information concerning Urban and its subsidiaries under the captions
[list] (the "Urban Information") complies as to form in all material respects
with the 1933 Act and the applicable laws and regulations thereunder as it
relates to Urban, (ii) no facts have come to our attention that caused us to
believe that (except for financial statements and other tabular financial
information, other financial and statistical data and information and all
information concerning Holding Company, Bank and the Merger, as to which we
express no belief) the Proxy Statement/Prospectus on the date of the mailing
thereof and on the date of the meeting of stockholders of Urban at which the
Agreement was approved, contained any untrue statement of a material fact
concerning the Urban Information or omitted to state a material fact concerning
the Urban Information necessary in order to make the statements therein, in
light or the circumstances under which they were made, not misleading.
We hereby confirm to you that to our actual knowledge and except as set
forth in the Urban Disclosure Schedule [and in the opinion], and other than
ordinary routine litigation incidental to the business of Urban or its
Subsidiaries, there are no material actions, suits or proceedings pending or
overtly threatened in writing against Urban or any or its Subsidiaries, at law
or in equity, in any court or before any federal, state, municipal or other
governmental, commission, board, bureau, agency, except those which, if decided
adversely to Urban or any of its Subsidiaries, would not have a material adverse
on the consolidated financial condition of Urban and its Subsidiaries.
A-90
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SCHEDULE 6.3
FORM OF OPINION OF COUNSEL TO
HOLDING COMPANY TO BE DELIVERED TO
URBAN AT THE EFFECTIVE TIME
(Capitalized terms used herein and not otherwise defined have the meanings
given them in the Agreement)
This opinion shall be governed by and interpreted in accordance with the
Legal Opinion Accord of the ABA Section of the Business Law (1991).
(a) Holding Company is a corporation validly existing and in good standing
under the laws of the State of New Jersey. Holding Company has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as described in [the Proxy Statement/Prospectus on page
_____ under the caption ________________] [in specified documents incorporated
by reference]. Holding Company is registered as a bank holding company under the
Bank Holding Company Act.
(b) Each Subsidiary of Holding Company listed as such in the Holding
Company Disclosure Schedule is validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Bank is a New Jersey chartered
commercial bank. Holding Company and each of its Subsidiaries have the corporate
power and authority to own or lease all of their respective properties and
assets and to carry on their respective businesses as described in [the Proxy
Statement/Prospectus on page _____ under the caption __________________] [in
specified documents incorporated by reference].
(c) The authorized capital stock of Holding Company consists of __________
shares of common stock, without par value ("Holding Company Common Stock").
Except for any Holding Company Common Stock issuable upon exercise of
outstanding stock options and stock appreciation rights granted pursuant to the
Holding Company Option Plan, we are not aware of any outstanding subscription
rights, options, conversion rights, warrants or other agreements or commitments
of any nature whatsoever (either firm or conditional) obligating Holding Company
to issue, deliver or sell, cause to be issued, delivered or sold, or restricting
Holding Company from selling any additional Holding Company Common Stock or
obligating Holding Company to grant, extend or
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enter into any such agreement or commitment [except as may be provided in
any acquisition agreement Holding Company may have entered into after the date
of execution of the Agreement]. All of the outstanding shares of capital stock
of each Subsidiary of Holding Company listed as such in the Holding Company
Disclosure Schedule have been validly authorized and issued and are fully paid,
and nonassessable, and all outstanding shares of capital stock of each
Subsidiary of Holding Company is owned directly or indirectly by the Holding
Company and we are not aware of any liens, claims, equities, restrictions or
encumbrances created by Holding Company on Holding Company's ownership thereof.
The Holding Company Common Stock to be issued in connection with the Merger in
accordance with Article II of the Agreement, when so issued in accordance
therewith, will be duly authorized, validly issued, fully paid and
non-assessable, free of preemptive rights and free and clear of all liens,
encumbrances or restrictions created by Holding Company. Holding Company has
received all necessary regulatory approvals necessary to own the shares of
capital stock of its Subsidiaries.
(d) The Agreement has been duly authorized, executed and delivered by
Holding Company and Bank and Bank Merger Agreement has been duly authorized,
executed and delivered by Bank and, assuming due authorization, execution and
delivery by Urban, constitutes the valid and binding obligations of Holding
Company and Bank, as the case may be, enforceable in accordance with their
respective terms.
(e) The execution and delivery of the Agreement and the Bank Merger
Agreement and the consummation of the transactions contemplated thereby will not
(i) violate the Constituent Documents of Holding Company or the Bank; (ii)
breach or result in a default under any agreement or Court Order disclosed in
the Holding Company Disclosure Schedule delivered to Urban pursuant to the
Agreement, or (iii) cause Holding Company or Bank to violate applicable
provisions of Statutory Law or Regulations; except with respect to (ii) and
(iii) above, such as in the aggregate will not have a material adverse effect on
the ability of Holding Company and Bank to consummate the transactions
contemplated by the Agreement.
(f) All actions of the directors and stockholders of Holding Company and of
Bank required by Law, or by the Constituent Documents of Holding Company or
Bank, to be taken by Holding Company or Bank to authorize the execution,
delivery and
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performance of the Agreement and the Bank Merger Agreement and consummation
of the Merger have been duly taken.
(g) Assuming that there has been due authorization of the Merger by all
necessary corporate and governmental proceedings on the part of Urban and that
Urban has taken all action required to be taken by it prior to the Effective
Time, upon the appropriate filing of the certificate required by Section 137 of
the New Jersey Banking Act of 1948, as amended (the "Banking Act"), N.J.S.A.
17:9A-137 with the Commissioner, the Merger will become effective, and upon
effectiveness of the Merger each share of Urban Common Stock will be converted
as provided in Article II of the Agreement.
(h) No approvals, authorizations, consents or other actions or filings
under federal law or applicable state law ("Approvals") are required to be
obtained by Holding Company or Bank in order to permit the execution and
delivery of the Agreement and the Bank Merger Agreement by Holding Company and
Bank and the performance by Holding Company and Bank of the transactions
contemplated thereby other than [list Approvals which have been obtained], which
have been obtained and are in full effect, Approvals or consents required to be
obtained by Urban, and Approvals not required or necessary to be obtained on the
date hereof.
(i) We are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Proxy
Statement/Prospectus and make no representation that we have independently
verified the accuracy, completeness or fairness of such statements, but, without
in any way limiting' the generality of the foregoing, based upon our examination
of the Proxy Statement/Prospectus (i) the Proxy Statement/Prospectus (except for
financial statements and other tabular financial information, and other
financial and statistical data and information, as to which we express no
opinion) complies as to form in all material respects with the 1933 Act and the
applicable laws and regulations thereunder, (ii) no facts have come to our
attention that caused us to believe that (except for financial statements and
other tabular financial information, and all information concerning Urban, as to
which we do not express any belief) the Proxy Statement/Prospectus on the date
of the mailing thereof and on the date of the meeting of stockholders of Urban
at which the Agreement was approved, contained any untrue statement of a
material fact or omitted to state a material fact necessary in
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order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(j) The Registration Statement has been declared effective by the SEC under
the 1933 Act and we are not aware that any stop order suspending the
effectiveness has been issued under the 1933 Act or proceedings therefor
initiated or threatened by the SEC.
(k) The Urban Options have been converted to options to purchase Holding
Company Common Stock. The Replacement Options and the Employment Agreements have
been duly authorized, executed and delivered by Holding Company and constitute
valid, legal and binding obligations of Holding Company enforceable in
accordance with their terms except as such enforcement may be limited by
bankruptcy, insolvency, receivership, reorganization or other laws of general
application relating to creditors' rights and general equitable principles.
We hereby confirm to you that to our Actual Knowledge and except as set
forth on Holding Company Disclosure Schedule, as amended through the date
hereof, and other than ordinary routine litigation incidental to the business of
Holding company or its Subsidiaries, there are no material actions, suits or
proceedings pending or overtly threatened in writing against Holding Company or
any of its Subsidiaries, at law or in equity, in any court or before any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, except those which, if decided adversely to
Holding Company or any of its Subsidiaries, would not have a material adverse
effect on Holding Company and its Subsidiaries, taken as a whole.
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APPENDIX B
CAPITAL CONSULTANTS of PRINCETON, INC.
--------------------------------------
Investment Bankers & Bank/Thrift Consultants
1000 Herrontown Road
Princeton, N.J. 08540-7716
609-921-3293
April ____________, 1995
DRAFT
-----
Board of Directors
Urban National Bank
805 Franklin Lake Road
Franklin Lakes, New Jersey 07417
Members of the Board:
Urban National Bank ("URBAN") has entered into an Agreement and Plan of Merger,
as amended, ("AGREEMENT") with HUBCO, Inc. ("HUBCO") and Hudson United Bank
which provides for the merger of URBAN with and into Hudson United Bank
("MERGER").
If the MERGER is approved and consummated, subject to the provisions of
AGREEMENT, each share of URBAN Common Stock issued and outstanding (excluding
shares held by HUBCO and any dissenting shares) shall be converted at the
Effective Time into the right to receive 2.17 shares ("EXCHANGE RATIO") of
common stock, no par value, of HUBCO.
In lieu of the issuance of fractional shares, HUBCO will make a cash payment
therefore equal to the product determined by multiplying such fractional
interest by the Average Closing Price, as defined in AGREEMENT.
You have requested our opinion as to whether the consideration to be offered in
the MERGER is fair, from a financial point of view, to the shareholders of
URBAN.
Capital Consultants of Princeton, Inc., as a customary part of its investment
banking business, is engaged in the valuation of commercial banking and thrift
institutions and their securities in connection with mergers and acquisitions,
private placements and valuations for estate, corporate and other purposes.
B-1
<PAGE>
In arriving at our opinion, we have reviewed and analyzed, among other things:
(i) the AGREEMENT; (ii) the HUBCO Registration Statement of Form S-4, filed with
respect to the securities to be issued in the MERGER; (iii) publicly available
information relating to HUBCO and URBAN including, for HUBCO, annual reports to
shareholders and annual reports on Form 10-K filed with the SEC for the years
ended December 31, 1991 through 1994, the Consolidated Financial Statements of
December 31, 1994, 1993 and 1992, and the quarterly reports to shareholders and
quarterly reports on Form 10-Q filed with the SEC for the periods ended March
31, June 30 and September 30, 1994, and for URBAN annual reports to shareholders
for the years ended December 31, 1991 through 1993, Consolidated Financial
Statements as of December 31, 1994, 1993 and 1992 together with the Report of
Independent Public Accountants and quarterly reports of Consolidated Conditions
and Income as filed with the Federal Deposit Insurance Corporation for the
periods ended March 31, June 30, September 30, and December 31, 1994; (iv)
certain historical operating and financial information provided to Capital
Consultants by the managements of URBAN and HUBCO; (v) historical and current
market data for the URBAN Common Stock and the HUBCO Common and Preferred Stock;
(vi) the publicly available financial data and stock market performance data of
publicly traded banking and thrift institutions which Capital Consultants deemed
generally comparable to URBAN and HUBCO; (vii) the nature and terms of recent
acquisitions and merger transactions involving banking institutions and bank and
thrift holding companies that Capital Consultants considered reasonably similar
to URBAN and HUBCO in financial character, operating character, historical
performance, geographic market and economy; and (viii) such other studies,
analyses, inquiries and reports as Capital Consultants deemed appropriate. In
addition, Capital Consultants conducted meetings with members of senior
management of URBAN and HUBCO for purposes of reviewing the future prospects of
URBAN and HUBCO. Capital Consultants evaluated the pro forma ownership of the
HUBCO Common Stock by URBAN shareholders, relative to the pro forma contribution
of URBAN assets, deposits, equity and earnings to the pro forma resulting
company in the MERGER. Capital Consultants also took into account its experience
in other transactions, as well as its knowledge of the banking and thrift
industries and its experience in securities valuations.
B-2
<PAGE>
While we have taken care in our investigation and analysis, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us or publicly available, and have not attempted to
verify same. We have not made or obtained any independent evaluations or
appraisals of the assets or liabilities of URBAN or HUBCO.
In conducting our analysis and arriving at our opinion, we have considered such
financial and other factors as we have deemed appropriate in the circumstances.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary regulatory approvals for the proposed MERGER, no conditions will be
imposed that will have a material adverse effect on the contemplated benefits of
MERGER. Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
Based upon and subject to the foregoing, it is our opinion as investment bankers
that the consideration to be paid in the MERGER is fair, from a financial point
of view, to the shareholders of URBAN.
Very truly yours,
Capital Consultants of Princeton, Inc.
B-3
<PAGE>
APPENDIX C
ss.214a(b) Rights of dissenting stockholders
A shareholder of a national banking association who votes against the
conversion, merger, or consolidation, or who has given notice in writing to the
bank at or prior to such meeting that he dissents from the plan, shall be
entitled to receive in cash the value of the shares held by him, if and when the
conversion, merger, or consolidation is consummated, upon written request made
to the resulting State bank at any time before thirty days after the date of
consummation of such conversion, merger, or consolidation, accompanied by the
surrender of his stock certificates. The value of such shares shall be
determined as of the date on which the shareholders' meeting was held
authorizing the conversion, merger, or consolidation, by a committee of three
persons, one to be selected by majority vote of the dissenting shareholders
entitled to receive the value of their shares, one by the directors of the
resulting State bank, and the third by the two so chosen. The valuation agreed
upon by any two of three appraisers thus chosen shall govern; but, if the value
so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment as provided herein, such shareholder may within five days
after being notified of the appraised value of his shares appeal to the
Comptroller of the Currency, who shall cause a reappraisal to be made, which
shall be final and binding as to the value of the shares of the appellant. If,
within ninety days from the date of consummation of the conversion, merger, or
consolidation, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such shares,
the Comptroller shall upon written request of any interested party, cause an
appraisal to be made, which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal, or the appraisal as the
case may be, shall be paid by the resulting State bank. The plan of conversion,
merger, or consolidation shall provide the manner of disposing of the shares of
the resulting State bank not taken by the dissenting shareholders of the
national banking association.
C-1
<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 any 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. Article X of 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 VI of its Certificate of Incorporation, HUBCO must, to the fullest
extent permitted by law, indemnify its directors, officers, employees and
agents. Section 14A:3-5 of the New Jersey Business Corporation Act provides that
a corporation may indemnify its directors, officers, employees and agents
against judgments, fines, penalties, amounts paid in settlement and expenses,
including attorneys' fees, resulting from various types of legal actions or
proceedings if the actions of the party being indemnified meet the standards of
conduct specified therein. Determinations concerning whether or not the
applicable standard of conduct has been met can be made by (a) a disinterested
majority of the Board of Directors, (b) independent legal counsel, or (c) an
affirmative vote of a majority of shares held by the shareholders. No
indemnification is permitted to be made to or on behalf of a corporate director,
officer, employee or agent if a judgment or other final adjudication adverse to
such person establishes that his acts or omissions (a) were in breach of his
duty of loyalty to the corporation or its shareholders, (b) were not in good
faith or involved a knowing violation of law or (c) resulted in receipt by such
person of an improper personal benefit.
(iii) Insurance. HUBCO's directors and officers are insured against losses
arising from any claim against them such as wrongful acts or omissions, subject
to certain limitations.
II-1
<PAGE>
Item 21.
A. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2* Amended and Restated Agreement and Plan of Merger,
dated as of February 14, 1995, by and among HUBCO,
Inc., Hudson United Bank and Urban National Bank
(included an Appendix A to the Proxy Statement/Prospectus).
5 Opinion of McCarter & English as to the legality of the
securities to be registered.
8 Form of Opinion of McCarter & English as to certain tax
consequences of the Merger.
10(a) Form of Employment Agreement for Robert F. Mangano (included
as Exhibit 5.15 to Appendix A to Proxy Statement/Prospectus.)
23(a) Consent of Arthur Andersen LLP with respect to Urban National
Bank.
23(b) Consent of Arthur Andersen LLP with respect to HUBCO, Inc.
23(c) Consent of McCarter & English (included in Exhibit 5 hereto).
23(d) Consent of Capital Consultants of Princeton, Inc.
23(e) Consent of Stephen P. Radics & Co. Inc.
23(f) Consent of Coopers & Lybrand.
23(g) Consent of Bryant D. Malcolm.
23(h) Consent of W. Peter McBride.
24 Power of Attorney
<FN>
* Included Elsewhere in this registration statement.
</FN>
</TABLE>
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.
II-2
<PAGE>
Form of Opinion of Capital Consultants of Princeton, Inc. is included as
Appendix B to Proxy Statement/Prospectus.
Item 22. Undertakings
5. 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.
6. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of
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.
7. The registrant undertakes that every prospectus (i) that is filed pursuant to
paragraph 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
8. 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
II-3
<PAGE>
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.
9. 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.
10. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
becomes effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mahwah, State of New Jersey, on the 11th day of
April, 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
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*JAMES E. SCHIERLOH Chairman of the Board April 11, 1995
- ---------------------------- and Director
(James E. Schierloh)
KENNETH T. NEILSON President and Director April 11, 1995
- ---------------------------- (Chief Executive Officer)
(Kenneth T. Neilson)
*ROBERT J. BURKE Director April 11, 1995
- ----------------------------
(Robert J. Burke)
*JOAN DAVID Director April 11, 1995
- ----------------------------
(Joan David)
*THOMAS R. FARLEY Director April 11, 1995
- ----------------------------
(Thomas R. Farley)
*HENRY G. HUGELHEIM Director April 11, 1995
- ----------------------------
(Henry G. Hugelheim)
II-5
<PAGE>
*HARRY J. LEBER Director April 11, 1995
- ----------------------------
(Harry J. Leber)
*CHARLES F.X. FOGGI Director April 11, 1995
- ----------------------------
(Charles F.X. Foggi)
*SISTER GRACE FRANCE STRAUBER Director April 11, 1995
- ----------------------------
(Sister Grace Frances
Strauber)
*EDWIN WACHTEL Director April 11, 1995
- ----------------------------
(Edwin Wachtel)
*CHRISTINA L. MAIER Assistant Treasurer April 11, 1995
- ---------------------------- (Principal Financial
(Christina L. Maier) Officer and Principal
Accounting Officer)
- ----------
*Executed pursuant to a Power of Attorney in favor of Kenneth T. Neilson
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2* Amended and Restated Agreement and Plan of Merger,
dated as of February 14, 1995, by and among HUBCO,
Inc., Hudson United Bank and Urban National Bank
(included an Appendix A to the Proxy
Statement/Prospectus).
5 Opinion of McCarter & English as to the legality of the
securities to be registered.
8 Form of Opinion of McCarter & English as to certain tax
consequences of the Merger.
10(a) Form of Employment Agreement for Robert F. Mangano (included
as Exhibit 5.15 to Appendix A to Proxy Statement/Prospectus.)
23(a) Consent of Arthur Andersen LLP with respect to Urban National
Bank.
23(b) Consent of Arthur Andersen LLP with respect to HUBCO, Inc.
23(c) Consent of McCarter & English (included in Exhibit 5 hereto).
23(d) Consent of Capital Consultants of Princeton, Inc.
23(e) Consent of Stephen P. Radics & Co. Inc.
23(f) Consent of Coopers & Lybrand.
23(g) Consent of Bryant D. Malcolm.
23(h) Consent of W. Peter McBride.
24 Power of Attorney
<FN>
* Included Elsewhere in this registration statement.
</FN>
</TABLE>
EXHIBIT 5
McCARTER & ENGLISH
ATTORNEYS AT LAW
FOUR GATEWAY CENTER
100 MULBERRY STREET
P.O. BOX 652
NEWARK, NJ 07101-0652
CHERRY HILL, NJ (201) 622-4444
NEW YORK, NY TELECOPIER (201) 624-7070
BOCA RATON, FL CABLE "McCARTER" NEWARK
WILMINGTON, DE
April 11, 1995
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Gentlemen:
We have acted as counsel to HUBCO, Inc. ("HUBCO") in connection with the
merger of Urban National Bank ("Urban") with HUBCO's wholly-owned subsidiary,
Hudson United Bank (the "Bank") pursuant to an Amended and Restated Agreement
and Plan of Merger (the "Agreement") dated as of February 14, 1995, by and among
HUBCO, Urban and the Bank.
We have examined the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by HUBCO with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of shares of common stock of HUBCO, no par value (the "Shares") to
be issued pursuant to the Agreement.
We have also examined originals, or copies certified or otherwise
identified to our satisfaction, of the Agreement, of the Certificate of
Incorporation and By-laws of HUBCO, as currently in effect, and relevant
resolutions of the Board of Directors of HUBCO; and we have examined such other
documents as we deemed necessary in order to express the opinion hereinafter set
forth.
In our examination of such documents and records, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, and conformity with the originals of all documents submitted to us
as copies.
Based on the foregoing, it is our opinion that when, as and if the
Registration Statement shall have become effective pursuant to the provisions of
the Act, and the Shares shall have
<PAGE>
been duly issued and delivered in the manner contemplated by the Agreement and
the Registration Statement, including the Prospectus relating to the Shares (the
"Prospectus"), the Shares will be legally issued, fully paid and non-assessable.
The foregoing opinion is limited to the federal laws of the United States
and the laws of the State of New Jersey, and we are expressing no opinion as to
the effect of the laws of any other jurisdiction.
We consent to use of this opinion as an Exhibit to the Registration
Statement and to the reference to this firm under the heading "Legal Opinion" in
the Prospectus.
Very truly yours,
McCARTER & ENGLISH
EXHIBIT 8
FORM OF McCARTER & ENGLISH
TAX OPINION
Re: Merger of Urban National Bank with
and into Hudson United Bank
Urban National Bank HUBCO, Inc.
805 Franklin Lake Road 1000 MacArthur Boulevard
Franklin Lakes, NJ 07416 Mahwah, NJ 07430
Ladies and Gentlemen:
We have acted as counsel to HUBCO, Inc. (the "Holding Company"), a New
Jersey corporation and registered bank holding company, and to Hudson United
Bank (the "Bank"), a New Jersey chartered commercial banking corporation which
is a wholly-owned subsidiary of the Holding Company, in connection with the
Holding Company's proposed acquisition of Urban National Bank ("Urban"), a
banking corporation chartered under the laws of the United States, by means of a
merger of Urban with and into the Bank, with the Bank as the surviving
corporation (the "Merger"). The Merger will be effected pursuant to the
provisions of an Amended and Restated Agreement and Plan of Merger dated as of
February 14, 1995 by and among the Holding Company, the Bank and Urban (the
"Agreement"). This opinion is delivered pursuant to Section 6.1(f) of the
Agreement. Capitalized terms used herein not otherwise defined shall have the
meanings ascribed to such terms in the Agreement.
Pursuant to the Agreement, at the Effective Time, the Merger shall be
effected by the merger of Urban with and into the Bank pursuant to New Jersey
law, with the Bank as the surviving corporation. Pursuant to the Agreement at
the Effective Time, each share of Urban Common Stock shall be converted into the
right to receive 2.17 (the "Exchange Ratio") shares of HUBCO Common Stock. No
fractional shares of HUBCO Common Stock will be issued, and in lieu thereof, any
holder of Urban Common Stock who would otherwise be entitled to receive a
fractional interest will receive an amount in cash determined by multiplying
such fractional interest by the Average Closing Price.
In addition to the foregoing facts, you have made the following additional
representations with respect to the Merger
-1-
<PAGE>
and have authorized us to rely on such representations in expressing the
opinions set forth below:
1. The fair market value of HUBCO Common Stock and other consideration
received by each Urban shareholder in connection with the Merger will be
approximately equal to the fair market value of the Urban stock surrendered in
the transaction.
2. There is no plan or intention by the shareholders of Urban who own one
percent (1%) or more of the Urban stock, and to the best of the knowledge of the
management of Urban, there is no plan or intention on the part of the remaining
shareholders of Urban, to sell, exchange, or otherwise dispose of a number of
shares of HUBCO Common Stock received in the Merger that would reduce the Urban
shareholders' ownership of HUBCO Common Stock to a number of shares having a
value, as of the date of the Merger, of less than fifty percent (50%) of the
value of all of the formerly outstanding stock of Urban as of the same date. For
purposes of this representation, shares of Urban stock exchanged for cash in
lieu of fractional shares of HUBCO Common Stock, as well as shares of Urban
common stock held by Urban shareholders which are sold, redeemed or disposed of
prior or subsequent to the Merger as contemplated by the Merger Agreement, will
be considered in making this representation.
3. The Holding Company has no plan or intention to reacquire any of its
stock issued in the Merger.
4. The Holding Company has no plan or intention to sell or otherwise
dispose of any of the assets of Urban acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Internal Revenue Code of 1986, as amended (the
"Code").
5. The payment of cash in lieu of fractional shares of the Holding Company
is solely for the purpose of avoiding the expense and inconvenience to the
Holding Company of issuing fractional shares and does not represent separately
bargained for consideration. The total cash consideration that will be paid in
the Merger to Urban shareholders in lieu of fractional shares of the HUBCO
Common Stock will not exceed one percent (1%) of the aggregate consideration
that will be issued to Urban shareholders with respect to their Urban stock
surrendered in the transaction.
6. The liabilities of Urban assumed by the Bank (if any) in the Merger and
the liabilities to which the transferred assets of Urban are subject (if any)
were incurred by Urban in the ordinary course of its business.
7. Following the Merger, the Holding Company and the Bank will continue the
historic business of Urban or use a
-2-
<PAGE>
significant portion of Urban's historic business assets in a business.
8. The Holding Company, the Bank, Urban, and the shareholders of Urban will
pay their respective expenses, if any, incurred in connection with the Merger.
9. There is no intercorporate indebtedness existing between Urban and the
Holding Company or the Bank that was issued, acquired, or will be settled at a
discount in connection with the Merger.
10. No parties to the Merger are investment companies as defined in Code
Section 368(a)(2)(F)(iii).
11. Urban is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Code Section 368(a)(3)(A).
12. The fair market value of the assets of Urban transferred to the Bank in
the Merger will equal or exceed the sum of the liabilities assumed by the Bank
as a consequence of the Merger, plus the amount of liabilities, if any, to which
the transferred assets are subject.
13. The Merger is based on valid business purposes unrelated to the
avoidance of Federal income taxes and will comply in all respects with the laws
of the states of incorporation of the corporations involved in the Merger.
14. Pursuant to the Merger, the Bank will acquire ninety percent (90%) or
more of the fair market value of Urban's net assets and seventy percent (70%) or
more of the fair market value of Urban's gross assets and the Bank will retain
ninety percent (90%) or more of the fair market value of its net assets and
seventy percent (70%) or more of the fair market value of its gross assets as
determined under Revenue Ruling 77-307, 1977-2 C.B. 117.
15. There have been no redemptions, spin-offs or other extraordinary
distributions by Urban to its shareholders or former shareholders prior to and
in contemplation of the Merger which, if considered a part of and precondition
to the Merger and treated as a step in the integrated Merger transaction, would
cause the representation set forth in paragraph 14, above, to be inaccurate.
16. The Bank is a first-tier subsidiary of the Holding Company.
17. The Holding Company owns stock of the Bank which possesses at least
eighty percent (80%) of the total combined
-3-
<PAGE>
voting power of all classes of stock of the Bank entitled to vote and at least
eighty percent (80%) of the total number of shares of all classes of stock of
the Bank.
18. Pursuant to and in connection with the Merger, the shareholders of
Urban will not receive any stock of the Bank.
19. The Merger would have qualified as a reorganization under Code Section
368(a)(1)(A) if it had been effected directly between the Holding Company and
Urban.
As counsel to the Holding Company and the Bank, we have examined the
Agreement and copies of ancillary documents, certificates, instruments and
documents pertaining to the Merger delivered by the parties thereto. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us. As to any facts material to our
opinions expressed herein, we have relied on representations of the parties to
the Merger without undertaking to verify the same by independent investigation.
The following opinions are based on our analysis of the Code, Treasury
Regulations promulgated thereunder and relevant interpretive authorities in
effect as of the date hereof.
Based on and subject to the foregoing, we are of the opinion that:
1. The Merger qualifies as a "reorganization" within the meaning of Code
Section 368(a)(1)(A) by reason of Code Section 368(a)(2)(D). The Holding
Company, the Bank and Urban will each be considered a "party to a
reorganization" within the meaning of Code Section 368(b)(2).
2. No gain or loss will be recognized by the Holding Company, the Bank or
Urban in connection with the Merger. Code Section 361(a).
3. No gain or loss will be recognized by the shareholders of Urban whose
common stock of Urban is converted solely into common stock of the Holding
Company in connection with the Merger. Code Section 354(a).
4. The Urban shareholders receiving cash in lieu of fractional shares of
the stock of the Holding Company will be treated as if such fractional shares
had been issued by the Holding Company and then subsequently redeemed by the
Holding Company. The cash received by the Urban shareholders in lieu of
fractional shares will be treated as having been received as full payment in
exchange for the fractional shares redeemed as provided in Code Section 302(a).
-4-
<PAGE>
5. The basis of the HUBCO Common Stock received by the shareholders of
Urban in connection with the Merger will be the same as the adjusted basis of
the Urban stock surrendered by such shareholders in exchange therefore. Code
Section 358(a).
6. The holding period of the HUBCO Common Stock received by the
shareholders of Urban in connection with the Merger will include the period
during which the Urban stock surrendered in exchange therefore was held,
provided such stock was held as a capital asset on the date of the Merger. Code
Section 1223(1).
This opinion is solely for your benefit and may not be relied upon by, nor
may copies be delivered to, any other person without our prior written consent.
Very truly yours,
-5-
EXHIBIT 23(a)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Urban National Bank:
As independent public accountants, we hereby consent to the use of our report
dated January 12 (except with respect to the matter discussed in Note 15, as to
which the date is February 14, 1995) and to all references to our firm included
in this proxy statement/prospectus.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 11, 1995
EXHIBIT 23(b)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HUBCO, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this proxy statement-prospectus of our report dated January 12,
1995 (except for Note 21 to the financial statements as to which the date is
February 14, 1995) incorporated by reference in HUBCO, Inc.'s Form 10-K for the
year ended December 31, 1994 and to all references to our firm included in this
proxy statement/prospectus.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 10, 1995
EXHIBIT 23(d)
CAPITAL CONSULTANTS OF PRINCETON, INC.
- --------------------------------------------------------------------------------
Investment Bankers & Bank/Thrift Consultants
1000 Herrontown Road
Princeton, NJ 08540-7716
609-921-3293
April 10, 1995
To Whom It May Concern:
We hereby consent to the use of our opinion letter attached as Appendix B and to
the reference to our firm under the heading "Opinion of Urban's Financial
Advisor" in the Registration Statement filed by HUBCO, Inc., with the Securities
and Exchange Commission in connection with the proposed merger of Urban National
Bank with and into Hudson United Bank, HUBCO, Inc.'s wholly-owned subsidiary.
Very truly yours,
CAPITAL CONSULTANTS OF PRINCETON, INC.
EXHIBIT 23(e)
STEPHEN P. RADICS & CO.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HUBCO, INC.:
We hereby consent to the use, in the Registration Statement on Form S-4 of
HUBCO, Inc., of our report dated January 14, 1994 on our audits of the
consolidated financial statements of Urban National Bank and Subsidiaries as of
December 31, 1993 and for each of the two years in the period ended December 31,
1993.
STEPHEN P. RADICS & CO.
Haledon, New Jersey
April 10, 1995
EXHIBIT 23(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
April 10, 1995
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07437
Gentlemen:
We consent to the incorporation by reference, in this Registration Statement on
Form S-4 of our report dated January 28, 1994, on our audits of the consolidated
financial statements of Washington Bancorp, Inc. and Subsidiary as of December
31, 1993, and for each of the two years in the period ended December 31, 1993
which report is included in HUBCO, Inc.'s Form 8-K, filed with the
Securities and Exchange Commission on July 1, 1994, as amended by Form 8-K/A
filed with the Securities and Exchange Commission on September 16, 1994 and to
all references to our firm included in the Proxy Statement/Prospectus. Our
report includes an explanatory paragraph regarding changes in accounting
principles and includes an explanatory paragraph regarding an action seeking
unspecified damages and alleging violations of state securities laws, certain
banking laws and state common law and a lawsuit filed by a former Bank officer
which alleges wrongful termination and seeks unspecified damages.
COOPERS & LYBRAND, L.L.P.
Parsippany, New Jersey
April 10, 1995
EXHIBIT 23(g)
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
April 10, 1995
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07437
Gentlemen:
I hereby consent to being named as a person about to become a director of HUBCO,
Inc. in the Registration Statement of HUBCO, Inc. on Form S-4.
Very truly yours,
BRYANT D. MALCOLM
EXHIBIT 23(h)
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
April 10, 1995
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07437
Gentlemen:
I hereby consent to being named as a person about to become a director of HUBCO,
Inc. in the Registration Statement of HUBCO, Inc. on Form S-4.
Very truly yours,
W. PETER MCBRIDE
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth T. Neilson as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments and post-effective amendments to that certain Registration
Statement of HUBCO, Inc. on Form S-4, and to file the same with all exhibits
thereto, and grants unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
This Power of Attorney may be executed in one or more counterparts.
The foregoing Power of Attorney was prepared in conjunction with the
Registration Statement on Form S-4 and has been duly signed by the following
persons in the capacities and dates indicated.
Signature Title Date
--------- ----- -----
JAMES E. SCHIERLOH Chairman of the March 29, 1995
- ----------------------------- Board and Director
James E. Schierloh
ROBERT J. BURKE Director March 29, 1995
- -----------------------------
Robert J. Burke
JOAN DAVID Director March 29, 1995
- -----------------------------
Joan David
THOMAS R. FARLEY Director March 29, 1995
- -----------------------------
Thomas R. Farley
HENRY G. HUGELHEIM Director March 29, 1995
- -----------------------------
Henry G. Hugelheim
<PAGE>
HARRY J. LEBER Director April 1, 1995
- -----------------------------
Harry J. Leber
CHARLES F.X. POGGI Director March 29, 1995
- -----------------------------
Charles F.X. Poggi
SISTER GRACE FRANCES STRAUBER Director March 29, 1995
- -----------------------------
Sister Grace Frances Strauber
EDWIN WACHTEL Director March 29, 1995
- -----------------------------
Edwin Wachtel
CHRISTINA L. MAIER Assistant Treasurer March 29, 1995
- ----------------------------- (Principal Accounting
Christina L. Maier Officer)
