[THE BANK OF SOUTHINGTON LOGO]
November 12, 1997
To the Shareholders of The Bank of Southington:
You are cordially invited to attend a special meeting of shareholders
(the "Meeting") of The Bank of Southington ("Southington") to be held at the
Radisson Inn, 42 Century Drive, Bristol, Connecticut on Tuesday, December 16,
1997 at 9:00 a.m.
At the Meeting, you will be asked to approve an Agreement and Plan of
Merger, dated August 18, 1997 (the "Merger Agreement"), by and among HUBCO, Inc.
("HUBCO"), HUBCO's Connecticut banking subsidiary, Lafayette American Bank and
Trust Company ("Lafayette"), and Southington, which provides for Southington to
be merged with and into Lafayette (the "Merger"). A copy of the Merger Agreement
is included as Appendix A to the accompanying Proxy Statement-Prospectus. If the
proposed Merger is consummated, each share of common stock of Southington, par
value $6.00 ("Southington Common Stock"), will be converted into a number of
shares (the "Exchange Ratio") of common stock of HUBCO, without par value
("HUBCO Common Stock"), equal to a fraction, the numerator of which will be
$21.00 and the denominator of which will be the Median Pre-Closing Price of
HUBCO Common Stock (a term defined in the Merger Agreement generally as the
median closing price of HUBCO Common Stock during a 10 trading day period
shortly prior to the closing of the Merger), with a minimum Exchange Ratio of
.618 (which will apply if the Median Pre-Closing Price is at or above $33.98)
and a maximum Exchange Ratio of .787 (which will apply if the Median Pre-Closing
Price is at or below $26.70), subject to adjustment provisions set forth in the
Merger Agreement and described in the Proxy Statement-Prospectus, with cash paid
in lieu of fractional shares. If the Median Pre-Closing Price is less than
$21.36, the Board of Directors of Southington will have certain rights to
terminate the Merger Agreement unless HUBCO agrees to increase the Exchange
Ratio to a fraction with a numerator of $16.81 and a denominator equal to the
Median Pre-Closing Price.
Consummation of the Merger is subject to certain conditions, including
the receipt of certain regulatory approvals and approval of the Merger Agreement
by the affirmative vote, in person or by proxy, of at least two-thirds of the
outstanding shares of Southington Common Stock.
Your Board of Directors has unanimously approved the Merger Agreement
and recommends that you vote "FOR" approval of the Merger Agreement.
You are urged to read the Proxy Statement-Prospectus, which provides
you with a description of the terms of the Merger. It is very important that
your shares be represented at the Meeting. Whether or not you plan to attend the
Meeting, you are requested to complete, date and sign the proxy card and return
it as soon as possible in the enclosed postage paid envelope. Failure to return
a properly executed proxy card or to vote at the Meeting will have the same
effect as a vote against the Merger Agreement.
Sincerely,
Bryan P. Bowerman Roman F. Garbacik
President and Chief Chairman
Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 16, 1997
To the Shareholders of The Bank of Southington:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Meeting") of The Bank of Southington ("Southington") will be held on Tuesday,
December 16, 1997, at 9:00 a.m., at the Radisson Inn, 42 Century Drive, Bristol,
Connecticut, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated August 18, 1997 (the
"Merger Agreement"), by and among HUBCO, Inc. ("HUBCO"),
HUBCO's Connecticut banking subsidiary, Lafayette American
Bank and Trust Company ("Lafayette"), and Southington, which
provides for Southington to be merged with and into Lafayette
(the "Merger"). A copy of the Merger Agreement is included as
Appendix A to the accompanying Proxy Statement-Prospectus. If
the proposed Merger is consummated, each share of common stock
of Southington, par value $6.00 ("Southington Common Stock"),
will be converted into the number of shares (the "Exchange
Ratio") of common stock of HUBCO, without par value ("HUBCO
Common Stock"), equal to a fraction, the numerator of which
will be $21.00 and the denominator of which will be the Median
Pre-Closing Price of HUBCO Common Stock (a term defined in the
Merger Agreement generally as the median closing price of
HUBCO Common Stock during a 10 trading day period shortly
prior to the closing of the Merger), with a minimum Exchange
Ratio of .618 (which will apply if the Median Pre-Closing
Price is at or above $33.98) and a maximum Exchange Ratio of
.787 (which will apply if the Median Pre-Closing Price is at
or below $26.70), subject to adjustment provisions set forth
in the Merger Agreement and described in the Proxy
Statement-Prospectus, with cash paid in lieu of fractional
shares. If the Median Pre-Closing Price is less than $21.36,
the Board of Directors of Southington will have certain rights
to terminate the Merger Agreement unless HUBCO agrees to
increase the Exchange Ratio to a fraction with a numerator of
$16.81 and a denominator equal to the Median Pre-Closing
Price.
(2) To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
If the Merger Agreement is approved, adopted and consummated, each
holder of Southington Common Stock will have the right to dissent and demand
payment of the fair value of his or her shares. This right is contingent upon
strict compliance with the procedures set forth in the applicable statute. The
full text of this statute is included as Appendix D to the accompanying Proxy
Statement-Prospectus.
The Board of Directors has fixed the close of business on October 15,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting. Only shareholders of record at the close of
business on the record date will be entitled to notice of and to vote at the
Meeting or any adjournments or postponements thereof.
All shareholders are urged to attend the Meeting in person. It is
important that proxies be returned promptly. Therefore, whether or not you plan
to be present in person at the Meeting, please date, sign and complete the
enclosed proxy and return it in the enclosed envelope, which requires no postage
if mailed in the United States. If you decide to attend the Meeting, you may
revoke your proxy and vote your shares in person.
Southington, Connecticut
November 12, 1997
By Order of the Board of Directors
Peter G. Pfau
Corporate Secretary
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
<PAGE>
PROXY STATEMENT OF PROSPECTUS OF HUBCO, INC.
THE BANK OF SOUTHINGTON for its Common Stock to be issued in
for its Special Meeting of Shareholders connection with the merger of The
to be held on December 16, 1997 Bank of Southington with and into
and all adjournments or postponements HUBCO's subsidiary, Lafayette
thereof American Bank and Trust Company
This Proxy Statement-Prospectus (sometimes referred to as this "Proxy
Statement") is first being furnished to the shareholders of The Bank of
Southington ("Southington") on or about November 12, 1997 in connection with the
solicitation of proxies by the Board of Directors of Southington to be used at
the Special Meeting of its shareholders (the "Meeting") to be held on Tuesday,
December 16, 1997. The purpose of the Meeting is for holders of Southington
common stock, $6.00 par value per share ("Southington Common Stock"), to
consider and vote upon an Agreement and Plan of Merger, dated August 18, 1997
(the "Merger Agreement"), by and among HUBCO, Inc., a New Jersey corporation
("HUBCO"), HUBCO's Connecticut banking subsidiary, Lafayette American Bank and
Trust Company ("Lafayette"), and Southington. In accordance with the terms of
the Merger Agreement, upon approval of the Merger Agreement by the shareholders
of Southington, receipt of all requisite regulatory approvals, and the
satisfaction or waiver of all other conditions, Southington will be merged with
and into Lafayette, with Lafayette as the surviving entity in the Merger. In
connection with the Merger, each share of Southington Common Stock will be
converted into the right to receive a number of shares (the "Exchange Ratio") of
common stock of HUBCO , without par value ("HUBCO Common Stock"), equal to a
fraction, the numerator of which will be $21.00 and the denominator of which
will be the Median Pre-Closing Price of HUBCO Common Stock (a term defined in
the Merger Agreement generally as the median closing price of HUBCO Common Stock
during a 10 trading day period shortly prior to the closing of the Merger), with
a minimum Exchange Ratio (the "Minimum Exchange Ratio") of .618 (which will
apply if the Median Pre-Closing Price is at or above $33.98) and a maximum
Exchange Ratio (the "Maximum Exchange Ratio") of .787 (which will apply if the
Median Pre-Closing Price is at or below $26.70), subject to adjustment
provisions set forth in the Merger Agreement and more fully described in this
Proxy Statement, with cash paid in lieu of fractional shares. If the Median
Pre-Closing Price is less than $21.36, the Board of Directors of Southington
will have certain rights to terminate the Merger Agreement unless HUBCO agrees
to increase the Exchange Ratio to a fraction with a numerator of $16.81 and a
denominator equal to the Median Pre-Closing Price. In addition, each option to
purchase a share of Southington Common Stock pursuant to Southington's existing
stock option plans and agreements will be converted in the Merger into the right
to receive shares of HUBCO Common Stock with a value (based on the Median
Pre-Closing Price) equal to the difference between the per share option exercise
price and the product of the Exchange Ratio multiplied by the Median Pre-Closing
Price, all as more fully described in this Proxy Statement. A copy of the Merger
Agreement is attached as Appendix A to this Proxy Statement.
HUBCO has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), covering the shares of HUBCO Common
Stock which will be issued in connection with the Merger. In addition to
constituting the Proxy Statement for the Meeting, this document constitutes a
Prospectus of HUBCO with respect to the HUBCO Common Stock to be issued if the
Merger is consummated.
Certificates representing Southington stock or options (together,
"Southington Securities") should not be returned to Southington with the
enclosed proxy and should not be forwarded to HUBCO until after receipt of a
letter of transmittal which will be provided to holders of Southington
Securities following consummation of the Merger.
This Proxy Statement does not serve as a prospectus to cover any
resales of HUBCO Common Stock to be received by holders of Southington
Securities upon consummation of the Merger. Affiliates of Southington will be
subject to restrictions on their ability to resell the HUBCO Common Stock
received by them in the Merger.
See "THE PROPOSED MERGER -- Resale Considerations with Respect to the HUBCO
Common Stock".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("THE COMMISSION"), THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"), THE CONNECTICUT DEPARTMENT OF BANKING (THE
"CTDOB"), OR THE NEW JERSEY DEPARTMENT OF BANKING (THE "NJDB"), NOR HAS THE
COMMISSION, THE FDIC, THE CTDOB, OR THE NJDB PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
ALL INFORMATION AND STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
HEREIN WITH RESPECT TO SOUTHINGTON WERE SUPPLIED BY SOUTHINGTON. ALL INFORMATION
AND STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE HEREIN WITH RESPECT TO
HUBCO WERE SUPPLIED BY HUBCO.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY. NEITHER HUBCO NOR ANY OF ITS BANK
SUBSIDIARIES GUARANTEE THE SECURITIES OFFERED HEREUNDER. THE INVESTMENT IN THE
SECURITIES IS SUBJECT TO RISK OF LOSS.
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 November 12, 1997.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION..........................................................
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE............................
SUMMARY OF PROXY STATEMENT-PROSPECTUS..........................................
General...............................................................
The Meeting...........................................................
The Companies ........................................................
The Merger............................................................
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO..................................
SELECTED CONSOLIDATED FINANCIAL DATA OF SOUTHINGTON............................
MARKET PRICE AND DIVIDEND MATTERS..............................................
Market Price and Dividend History.....................................
Limitations on Dividends Under the Merger Agreement...................
Dividend Limitations on HUBCO.........................................
SUMMARY PRO FORMA FINANCIAL INFORMATION........................................
ACTUAL AND PRO FORMA PER SHARE DATA............................................
INTRODUCTION ..................................................................
CERTAIN INFORMATION REGARDING HUBCO ...........................................
General...............................................................
Recent Developments...................................................
CERTAIN INFORMATION REGARDING SOUTHINGTON......................................
General......................................................
Recent Developments..........................................
THE MEETING ...................................................................
Purpose of the Meeting................................................
Record Date; Voting Rights; Proxies...................................
Solicitation of Proxies...............................................
Quorum................................................................
Required Vote.........................................................
THE PROPOSED MERGER............................................................
General Description...................................................
Closing; Determination Date...........................................
Consideration ........................................................
Conversion of Southington Options.....................................
Cash in Lieu of Fractional Shares ....................................
Dissenters' Rights of Appraisal.......................................
Background of and Reasons for the Merger..............................
Interests of Certain Persons in the Merger ...........................
Opinion of Financial Advisor..........................................
Resale Considerations with Respect to the HUBCO Common Stock..........
Conditions to the Merger..............................................
Conduct of Business Pending the Merger................................
Customary Representations, Warranties and Covenants...................
Regulatory Approvals..................................................
Management and Operations After the Merger............................
Exchange of Certificates, Issuance of Shares for Options..............
Effective Time; Amendments; Termination ..............................
Accounting Treatment of the Merger....................................
Federal Income Tax Consequences ......................................
PRO FORMA FINANCIAL INFORMATION................................................
RIGHTS OF DISSENTING SOUTHINGTON SHAREHOLDERS .................................
DESCRIPTION OF HUBCO CAPITAL STOCK.............................................
General ..............................................................
Description of HUBCO Common Stock.....................................
Description of HUBCO Series B Preferred Stock.........................
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF SOUTHINGTON AND HUBCO..............
General ..............................................................
Voting Requirements...................................................
Preferred Stock.......................................................
Classified Board of Directors ........................................
Rights of Dissenting Shareholders.....................................
Shareholder Consent to Corporate Action...............................
Dividends ............................................................
By-laws...............................................................
Shareholder Protection Legislation....................................
Limitations of Liability of Directors or Officers.....................
SHAREHOLDER PROPOSALS..........................................................
OTHER MATTERS..................................................................
LEGAL OPINION..................................................................
EXPERTS........................................................................
APPENDIX A Agreement and Plan of Merger by and among HUBCO, Lafayette and
Southington .....................................................A-1
APPENDIX B Stock Option Agreement by and between HUBCO and Southington .....B-1
APPENDIX C Fairness Opinion of Endicott Financial Advisors, LLC.............C-1
APPENDIX D Sections 36a-125(h) and 33-855 through 33-872, inclusive,
of the General Statutes of Connecticut...........................D-1
<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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (such as HUBCO). The address of the
Commission's web site is http://www.sec.gov. In addition, HUBCO Common Stock is
listed on The Nasdaq Stock Market, and certain material as to HUBCO can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Southington is also subject to the information requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements and
other information with the Federal Deposit Insurance Corporation (the "FDIC").
Such reports, proxy statements and other information with respect to Southington
can be inspected and copied at the public reference facilities maintained by the
FDIC. Copies of such materials can be obtained, at prescribed rates, from the
Registration, Disclosure and Securities Operations Unit, 550 17th Street, N.W.,
Room F640, Washington, D.C. 20429, or by calling the FDIC at (202) 899-8911 or
(202) 898-8913 or faxing the FDIC at (202) 898-3909 and may be examined at the
Federal Reserve Bank of Boston, Bank Examination Department T-21, 600 Atlantic
Avenue, Boston, Massachusetts 02106. In addition, Southington Common Stock is
listed on The American Stock Exchange (the "AMEX"), and certain material as to
Southington can be inspected at the offices of the AMEX, 86 Trinity Place, New
York, New York, 10006-1881.
HUBCO has filed with the Commission a Registration Statement on Form
S-4 under the Securities 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.
Statements contained in this Proxy Statement-Prospectus or in any
document incorporated by reference herein, as to the contents of any document
referred to herein or therein, are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
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, 1996.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997.
3. Current Reports on Form 8-K filed with the Commission on August 21,
1997, September 9, 1997 and October 23, 1997.
4. Form 8-A filed by HUBCO to register its Common and Preferred Stock
pursuant to Section 12(g) of the Exchange Act.
A copy of HUBCO's Annual Report to Shareholders for the year ended
December 31, 1996 (HUBCO's Annual Report") and HUBCO's Proxy Statement for its
Annual Meeting dated March 13, 1996 ("HUBCO's Proxy Statement") are available to
any holder of Southington Common Stock, including any beneficial owner, free of
charge upon written or oral request as set forth hereinafter.
A copy of Southington's Annual Report to Shareholders for the year
ended December 31, 1996 ("Southington's Annual Report") and Southington's Form
F-4 filed with the FDIC for the quarter ended June 30, 1997 ("Southington's
Quarterly Report") accompany each copy of this Proxy Statement-Prospectus
delivered to holders of Southington Common Stock. Additional copies of both of
these documents as well as Southington's Form F-4 (to be filed with the FDIC by
mid-November) for the quarter ended September 30, 1997, are available to any
holder of Southington Common Stock, including any beneficial owner, free of
charge upon written or oral request as set forth hereinafter.
The following documents, or portions thereof indicated, initially filed
by Southington with the FDIC and subsequently filed by HUBCO with the
Commission, are incorporated herein by reference:
1. Annual Report on Form F-2 filed with the FDIC for the year ended
December 31, 1996. The Form F-2 is included as Exhibit 13(a), to this
Registration Statement.
2. Quarterly Reports on Form F-4 filed with the FDIC for the quarters
ended March 31, 1997 and June 30, 1997 and included as Exhibits 13(b)
and 13(c), respectively, to this Registration Statement.
3. Current Reports on Form F-3 filed with the FDIC on August 13, 1997 and
August 20, 1997 and included as Exhibits 20(a) and 20(b), respectively,
to this Registration Statement.
All documents filed by HUBCO pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the earlier of (i) the date of the Meeting or (ii) the termination of the
Merger Agreement, are hereby incorporated by reference into this Proxy Statement
and shall be deemed a part hereof from the date of filing of such documents.
Documents filed by Southington subsequent to the date hereof and incorporated
herein by reference shall also be filed by HUBCO on Forms 8-K.
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 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.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. These documents (not including exhibits
thereto, unless such exhibits are specifically incorporated by reference into
the information incorporated herein) are available free of charge to any holder
of Southington Common Stock, including any beneficial owner, upon written or
oral request with respect to HUBCO materials, to the office of the HUBCO
Corporate Secretary, D. Lynn Van Borkulo-Nuzzo, Esq., HUBCO, Inc., 1000
MacArthur Boulevard, Mahwah, New Jersey 07430; telephone (201) 236-2641.
Additional copies of Southington's Annual Report and Southington's Quarterly
Report are available free of charge to any holder of Southington Common Stock,
including any beneficial owner, upon written or oral request to the office of
The Bank of Southington Corporate Secretary, Peter G. Pfau, The Bank of
Southington, 130 North Main Street, Southington, Connecticut 06489-0670;
telephone (860) 620-5000. Responses to any such request will be made within one
business day by sending the requested documents by first class mail or other
equally prompt means. In order to ensure timely delivery of the documents in
advance of the Meeting, any request should be made by December 1, 1997.
On October 8, 1997, the Board of Directors of HUBCO approved a 3% stock
dividend, payable December 1, 1997 to common stockholders of record on November
13, 1997 (the "Stock Dividend"). All share and per share data regarding HUBCO's
Common Stock set forth herein has been adjusted to give retroactive effect to
the Stock Dividend as if the Stock Dividend occurred prior to the periods
reported herein. Pursuant to the Merger Agreement, which provides for adjustment
to the exchange ratio described therein in the event of transactions such as the
Stock Dividend, all references herein to the exchange ratio have been adjusted
to give effect to the Stock Dividend, but the Merger Agreement has not been
adjusted because the Merger Agreement was signed prior to the Stock Dividend.
<PAGE>
SUMMARY OF PROXY STATEMENT-PROSPECTUS
The following is a summary of certain information regarding the matters
to be considered at the Meeting. This summary is necessarily incomplete and is
qualified by the more detailed information contained elsewhere in this Proxy
Statement. Holders of Southington common stock and options (together,
"Southington Securities") should carefully read the entire Proxy Statement.
General
This Proxy Statement solicits, on behalf of the Board of Directors of
The Bank of Southington ("Southington"), approval by the holders of shares of
common stock of Southington, $6.00 par value per share ("Southington Common
Stock"), of the Agreement and Plan of Merger, dated August 18, 1997 (the "Merger
Agreement"), by and among HUBCO, Inc., a New Jersey corporation ("HUBCO"),
HUBCO's Connecticut banking subsidiary, Lafayette American Bank and Trust
Company ("Lafayette"), and Southington. Pursuant to the Merger Agreement,
Southington will be merged with and into Lafayette (the "Merger"), with
Lafayette as the surviving entity. As more fully described elsewhere in this
Proxy Statement, upon consummation of the Merger each outstanding share of
Southington Common Stock, except for Excluded Shares (as defined below), will be
converted into the right to receive a number of shares (the "Exchange Ratio") of
common stock of HUBCO, without par value ("HUBCO Common Stock"), equal to a
fraction, the numerator of which will be $21.00 and the denominator of which
will be the "Median Pre-Closing Price" of HUBCO Common Stock (a term defined in
the Merger Agreement generally as the median closing price of HUBCO Common Stock
during a 10 trading day period shortly prior to the closing of the Merger), with
a Minimum Exchange Ratio of .618 (which will apply if the Median Pre-Closing
Price is at or above $33.98) and a Maximum Exchange Ratio of .787 (which will
apply if the Median Pre-Closing Price is at or below $26.70), subject to
adjustment provisions set forth in the Merger Agreement and more fully described
in this Proxy Statement, with cash paid in lieu of fractional shares. If the
Median Pre-Closing Price is less than $21.36, the Board of Directors of
Southington will have certain rights to terminate the Merger Agreement unless
HUBCO agrees to increase the Exchange Ratio to a fraction with a numerator of
$16.81 and a denominator equal to the Median Pre-Closing Price. See "THE
PROPOSED MERGER".
On October 8, 1997, the Board of Directors of HUBCO approved a 3% stock
dividend, payable December 1, 1997 to common stockholders of record on November
13, 1997 (the "Stock Dividend"). All share and per share data regarding HUBCO's
Common Stock set forth herein has been adjusted to give retroactive effect to
the Stock Dividend as if the Stock Dividend occurred prior to the periods
reported herein. Pursuant to the Merger Agreement, which provides for adjustment
to the exchange ratio described therein in the event of transactions such as the
Stock Dividend, all references herein to the exchange ratio have been adjusted
to give effect to the Stock Dividend, but the Merger Agreement has not been
adjusted because the Merger Agreement was signed prior to the Stock Dividend.
The Meeting
Time, Date, Place and Purpose
The Special Meeting of Shareholders of Southington (the "Meeting") will
be held on Tuesday, December 16, 1997 at 9:00 a.m. at the Radisson Inn, 42
Century Drive, Bristol, Connecticut. At the Meeting, holders of shares of
Southington Common Stock will be asked to approve the Merger Agreement. See "THE
MEETING" and "THE PROPOSED MERGER".
Record Date, Quorum, Vote Required
Only holders of record of Southington Common Stock at the close of
business on October 15, 1997 (the "Record Date") are entitled to notice of and
to vote at the Meeting. At such date, there were 1,246,128 shares of Southington
Common Stock outstanding held by approximately 839 holders of record. The
presence, in person or by proxy, of at least a majority of Southington Common
Stock issued and outstanding and entitled to be voted at the Meeting is
necessary to constitute a quorum. The affirmative vote, in person or by proxy,
of at least two-thirds of the outstanding shares of Southington Common Stock
entitled to be voted at the Meeting is required in order to approve and adopt
the Merger Agreement. As of the Record Date, the directors and executive
officers of Southington beneficially owned (excluding shares which could be
acquired upon the exercise of options) an aggregate of 322,185 shares of
Southington Common Stock (25.85% of the issued and outstanding shares). The
Southington directors have agreed to vote the shares of Southington Common Stock
that they beneficially own in favor of the Merger Agreement. As of the Record
Date, HUBCO owned 34,400 shares of Southington Common Stock (2.8% of the issued
and outstanding shares). See "THE MEETING".
Recommendation of the Southington Board of Directors
The Southington Board of Directors has unanimously approved the Merger
Agreement and unanimously recommends that holders of Southington Common Stock
vote FOR the Merger Agreement.
The Companies
HUBCO
HUBCO is a bank holding company whose principal operating subsidiaries
are Hudson United Bank ("HUB"), a New Jersey-chartered commercial bank, and
Lafayette, a Connecticut chartered bank and trust company. HUBCO's corporate
headquarters are located at 1000 MacArthur Boulevard, Mahwah, New Jersey 07430.
HUB's corporate headquarters are located at 3100 Bergenline Avenue, Union City,
New Jersey 07087. Lafayette's corporate headquarters are located at 1000
Lafayette Boulevard, Bridgeport, Connecticut 06604. The telephone number of
HUBCO is (201) 236-2600. HUB is a full-service commercial bank which primarily
serves small and mid-sized businesses and consumers through 57 branches in
Northern New Jersey. Lafayette is a full-service commercial bank which serves
small-to-medium-sized business firms as well as individuals through 27 banking
offices located mainly in Fairfield and New Haven counties in Connecticut.
Lafayette is a state non-member bank insured by the FDIC. As of June 30, 1997,
HUBCO had consolidated assets of $3.0 billion, consolidated deposits of $2.4
billion and consolidated stockholders' equity of $212 million. Based on assets
as of June 30, 1997, HUBCO was the fourth largest commercial banking company
headquartered in New Jersey.
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Since October, 1990, HUBCO has
added over 70 branches and approximately $2.5 billion in assets through 17
acquisitions of financial institutions in both government-assisted and private
transactions. HUBCO expects to continue its acquisition strategy.
See "CERTAIN INFORMATION REGARDING HUBCO"; "AVAILABLE INFORMATION"; and
"INFORMATION DELIVERED AND INCORPORATED BY REFERENCE".
Southington
Southington is a Connecticut-chartered bank and trust company, which is
headquartered at 130 North Main Street, Southington, Connecticut 06489-0670. The
telephone number of Southington is (860) 620-5000. Southington is engaged
primarily in the business of attracting deposits from the public and using such
deposits, with other funds to make various types of loans and investments.
Deposits at Southington are FDIC insured up to the maximum legal limits.
As of June 30, 1997, Southington reported total assets of $135 million,
total deposits of $122 million and stockholders' equity of $11 million.
Southington, which was originally chartered in 1985, operates from its main
office in Southington, Connecticut and from two branch offices located in
Bristol, Connecticut. See "CERTAIN INFORMATION REGARDING SOUTHINGTON";
"AVAILABLE INFORMATION"; AND "INFORMATION DELIVERED AND INCORPORATED BY
REFERENCE".
The Merger
Description of the Merger
At the Effective Time, (as defined hereinafter) Southington will be
merged with and into Lafayette, with Lafayette as the surviving entity. See "THE
PROPOSED MERGER -- General Description". A copy of the Merger Agreement is
attached as Appendix A to this Proxy Statement.
Consideration
At the Effective Time, each outstanding share of Southington Common
Stock (except for Excluded Shares, as defined below) will be converted into the
right to receive a number of shares (the "Exchange Ratio") of HUBCO Common Stock
equal to a fraction, the numerator of which will be $21.00 and the denominator
of which will be the Median Pre-Closing Price of HUBCO Common Stock (a term
defined in the Merger Agreement generally as the median closing price of HUBCO
Common Stock during a 10 trading day period shortly prior to the closing of the
Merger), with a Minimum Exchange Ratio of .618 (which will apply if the Median
Pre-Closing Price is at or above $33.98) and a Maximum Exchange Ratio of .787
(which will apply if the Median Pre-Closing Price is at or below $26.70),
subject to adjustment provisions set forth in the Merger Agreement and more
fully described in this Proxy Statement, with cash paid in lieu of fractional
shares. If the Median Pre-Closing Price is less than $21.36, the Board of
Directors of Southington will have certain rights to terminate the Merger
Agreement unless HUBCO agrees to increase the Exchange Ratio to a fraction with
a numerator of $16.81 and a denominator equal to the Median Pre-Closing Price.
"Excluded Shares" are those shares of Southington Common Stock which (i) are
held by Southington as treasury shares, (ii) are held by HUBCO or any of its
subsidiaries (other than shares held as trustee or in a fiduciary capacity and
shares held as collateral on or in lieu of a debt previously contracted), or as
to which dissenters' rights have been validly exercised ("Dissenting Shares").
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and Southington to result in stockholders of
Southington receiving in the Merger HUBCO Common Stock with a value of $21.00
for each share of Southington Common Stock, provided that the initial Exchange
Ratio calculation (before taking into effect the Minimum and Maximum Exchange
Ratios) results in an Exchange Ratio which is neither below the Minimum Exchange
Ratio nor above the Maximum Exchange Ratio (i.e., provided the Median
Pre-Closing Price of HUBCO Common Stock is between $33.98 and $26.70). However,
because of the Minimum Exchange Ratio and Maximum Exchange Ratio, and because
the price of HUBCO Common Stock at the Effective Time may not be the same as the
Median Pre-Closing Price, Southington stockholders are not assured of receiving
any specific market value of HUBCO Common Stock. The price of HUBCO Common Stock
at the Effective Time may be higher or lower than the Median Pre-Closing Price,
and may be higher or lower than the market price at the time of entering into
the Merger Agreement, the time of mailing this Proxy Statement-Prospectus or at
the time of the Meeting. Southington stockholders are urged to obtain current
market quotations for the HUBCO Common Stock and Southington Common Stock.
Conversion of Southington Options
Pursuant to the Merger Agreement, each outstanding option to purchase a
share of Southington Common Stock (a "Southington Option") granted under
Southington's existing stock option plans and agreements will be assigned a
value (the "Option Value") equal to (a) the Median Pre-Closing Price of a share
of HUBCO Common Stock, multiplied by the Exchange Ratio minus (b) the stated
exercise price for the Southington Option. At the Effective Time, each
Southington Option will be converted into that number of shares of HUBCO Common
Stock equal to the Option Value divided by the Median Pre-Closing Price of HUBCO
Common Stock. See "THE PROPOSED MERGER -- Conversion of Southington Options".
Cash in Lieu of Fractional Shares
No fractional shares of HUBCO Common Stock will be issued in exchange
for Southington Securities. Instead, holders of Southington Securities will
receive cash equal to the fractional share interest multiplied by the Median
Pre-Closing Price of HUBCO Common Stock, without interest. All shares of HUBCO
Common Stock to be issued to each holder of Southington Securities will be
aggregated to constitute as many whole shares as possible before determining
such person's fractional share interest. See "THE PROPOSED MERGER -- Cash in
Lieu of Fractional Shares".
Dissenters' Rights of Appraisal
Under the provisions of the Banking Law of Connecticut (the "CBL") and
the Connecticut Business Corporation Act (the "CBCA"), Southington shareholders
are entitled to dissenters' rights of appraisal in connection with the Merger
with respect to their shares of Southington Common Stock. See "RIGHTS OF
DISSENTING SOUTHINGTON SHAREHOLDERS" and Appendix D to this Proxy Statement,
which set forth the steps that need to be taken by a holder of Southington
Common Stock who wishes to exercise the right to dissent. These steps include
the requirements that each dissenting shareholder: (1) give written notice to
the Secretary of Southington before the taking of the vote on the adoption of
the Merger at the Meeting, of such shareholder's intent to demand payment for
his shares if the Merger is effectuated; and (2) not vote for the approval and
adoption of the Merger.
Certain Federal Income Tax Consequences
The Merger is conditioned upon the receipt of an opinion of counsel to
HUBCO to the effect that the Merger will qualify as a tax-free reorganization as
defined in Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"). See "THE PROPOSED MERGER -- Federal Income Tax Consequences".
Accounting Treatment of the Merger
The Merger is expected to be accounted for as a pooling of interests
for financial reporting purposes and HUBCO's obligation to consummate the Merger
is conditioned upon HUBCO's receipt of assurances from its independent
accountants that the Merger will be so treated. Under the pooling of interests
method of accounting, Southington's historical basis of assets, liabilities and
shareholders' equity will be retained by HUBCO as the surviving entity and the
combined entity's consolidated financial statements will be restated
retroactively to reflect the combined financial condition, results of operations
and cash flows as if HUBCO and Southington had been combined for all periods
presented. See "PRO FORMA FINANCIAL INFORMATION" and "THE PROPOSED MERGER --
Accounting Treatment of the Merger".
Required Regulatory Approvals
Consummation of the Merger is subject to prior receipt of approval of
the Merger by the Commissioner (the "Commissioner") of the Connecticut
Department of Banking (the "CTDOB") and the FDIC and the approval of the Merger
Agreement and the transactions contemplated thereby or waiver of such approval
by the Board of Governors of the Federal Reserve System (the "FRB").
Applications for these approvals have been filed and HUBCO and Southington
anticipate receiving such approvals. However, there can be no assurance that the
approvals will be granted, that they will be granted on a timely basis, or that
they will be granted without conditions unacceptable to HUBCO or Southington.
See "THE PROPOSED MERGER -- Regulatory Approvals".
Conditions to the Merger
Consummation of the Merger is contingent upon a number of conditions,
including the receipt of necessary regulatory approvals; the approval of the
Merger Agreement and the transactions contemplated thereby, by the requisite
vote of the shareholders of Southington; an opinion of Pitney, Hardin, Kipp &
Szuch, counsel to HUBCO, that the Merger will result in a tax-free
reorganization; and assurances to HUBCO from its independent accountants that
the Merger will be accounted for as a pooling of interests. See "THE PROPOSED
MERGER -- Regulatory Approvals" and "-- Conditions to the Merger".
Termination Rights
The Merger Agreement may be terminated by either Southington or HUBCO
if, among other reasons, the Effective Time has not occurred by March 31, 1998
other than due to failure of the terminating party to perform its obligations
under the Merger Agreement. In addition, Southington may terminate the Merger
Agreement if the Median Pre-Closing Price of HUBCO Common Stock is less than
$21.36, unless HUBCO elects to increase the Exchange Ratio to a fraction with a
numerator of $16.81 and a denominator equal to the Median Pre-Closing Price. The
Merger Agreement may be terminated by Southington if Southington's Board of
Directors approves another acquisition transaction after determining, upon
advice of counsel, that approval is necessary in the exercise of its fiduciary
obligations under applicable laws. For a more complete description of the
foregoing termination rights, and for a description of other termination rights
available to Southington and HUBCO, see "THE PROPOSED MERGER -- Effective Time;
Amendments; Termination"; and "-- Conditions to the Merger".
Effective Time
A closing under the Merger Agreement (the "Closing") will occur on a
date (the "Closing Date") to be determined by HUBCO and set forth in a notice
(the "Closing Notice") to Southington. The Closing Date specified by HUBCO in
the Closing Notice must be at least five business days after the date of the
Closing Notice, but not more than 15 business days after receipt of all
necessary approvals and consents, the expiration of all statutory waiting
periods and the satisfaction or waiver of the other conditions to consummation
of the Merger, (other than the delivery of documents to be delivered at the
Closing). The Closing may also be set for another day mutually agreed to by
HUBCO and Southington. The parties currently anticipate closing in December
1997. Immediately following the Closing, HUBCO will file a certificate of merger
with the Secretary of State of the State of Connecticut, which will specify the
effective time of the Merger (the "Effective Time"), which HUBCO and Southington
anticipate will be the close of business on the Closing Date. The exact Closing
Date is dependent upon satisfaction of all conditions precedent, some of which
are not under the control of HUBCO or Southington. See "THE PROPOSED MERGER --
Effective Time; Amendments; Termination"; and "-- Regulatory Approvals".
Fairness Opinion
The Southington Board of Directors has retained Endicott Financial
Advisors, LLC ("Endicott") to evaluate the terms of the Merger. Endicott has
delivered a written opinion to the Southington Board of Directors dated on or
about the date of this Proxy Statement to the effect that, as of the date of
such opinion, the terms of the Merger Agreement are fair to the Southington
shareholders from a financial point of view. Holders of Southington Common Stock
are urged to, and should, read such opinion in its entirety. For information
concerning the matters reviewed, assumptions made and factors considered by
Endicott, see "THE PROPOSED MERGER -- Opinion of Financial Advisor" and Appendix
C to this Proxy Statement, which sets forth a draft of Endicott's fairness
opinion. Southington's obligation to consummate the Merger is subject to its
receipt of such fairness opinion and HUBCO not having taken any action which
causes Endicott to withdraw its fairness opinion prior to the Closing.
Stock Option to HUBCO for Southington Shares
HUBCO and Southington entered into a Stock Option Agreement dated
August 18, 1997 (the "Stock Option Agreement") in connection with the
negotiation by HUBCO and Southington of the Merger Agreement. Pursuant to the
Stock Option Agreement, Southington has granted to HUBCO an option (the
"Option"), exercisable only under certain limited and specifically defined
circumstances, to purchase up to 275,000 authorized but unissued shares of
Southington Common Stock, representing upon issuance approximately 18.2 % of the
shares of Southington Common Stock which would be outstanding immediately
following the exercise of the Option, for an exercise price of $16.00 per share.
HUBCO does not have any voting rights with respect to the shares of Southington
Common Stock subject to the Option prior to exercise of the Option.
The Stock Option Agreement is attached to this Proxy Statement as
Appendix B hereto. In the event that certain specifically enumerated "Triggering
Events" occur and the Merger is not consummated, HUBCO would recognize a gain on
the sale of the shares of Southington Common Stock received pursuant to the
exercise of the Option if such shares of Southington Common Stock were sold at
prices exceeding $16.00 per share. The ability of HUBCO to exercise the Option
and to cause up to an additional 275,000 shares of Southington Common Stock to
be issued may be considered a deterrent to other potential acquisitions of
control of Southington, as it is likely to increase the cost of an acquisition
of all of the shares of Southington Common Stock which would then be
outstanding. The exercise of the option by HUBCO may also make pooling of
interests accounting treatment unavailable to a subsequent acquiror. See "THE
PROPOSED MERGER -- Stock Option for Shares of Southington Common Stock."
Interests of Certain Persons in the Merger
Pursuant to a Change in Control Agreement between Southington and Bryan
P. Bowerman, its President and CEO, Mr. Bowerman will have the right to receive
a severance payment of $312,500 payable in 30 equal monthly installments upon
consummation of the Merger, as well as continued coverage under Southington's
medical benefits plan during such 30-month period. Other Southington executive
officers and employees are covered by Southington's severance policy, pursuant
to which they could receive payments based on their years of service with
Southington as a consequence of the Merger if their employment is terminated or
constructively terminated following the Merger. Southington, with HUBCO's
consent, has also agreed that certain officers and other key employees may
receive stay-on bonuses to assure their continuation with Southington through
the Effective Time and for a period of time thereafter.
Certain executive officers of Southington have stock options which will
become vested by virtue of the Merger. For information regarding the treatment
of Southington Options, see "THE PROPOSED MERGER--Conversion of Southington
Options".
In addition to the foregoing, the Merger Agreement requires HUBCO to
indemnify each director, officer, employee or agent of Southington or any of its
subsidiaries to the fullest extent which Southington would have been permitted
under applicable law and Southington's Articles of Incorporation and By-laws had
the Merger not occurred, with respect to any claims made against such person
because he or she is or was serving in such capacity. The Merger Agreement also
requires HUBCO to provide Southington's officers and directors with directors'
and officers' liability insurance for at least six years after the Effective
Time. See "THE PROPOSED MERGER -- Conversion of Southington Options"; and "--
Interests of Certain Persons in the Merger."
Differences in Shareholders' Rights
Southington is a bank and trust company organized under the CBL and
HUBCO is a business corporation incorporated under the New Jersey Business
Corporation Act (the "NJBCA"). The rights of Southington shareholders are
currently governed by the CBL, CBCA and Southington's articles of incorporation
and by-laws. At the Effective Time, each Southington shareholder will become a
shareholder of HUBCO. The rights of HUBCO shareholders are governed by the NJBCA
and HUBCO's certificate of incorporation and by-laws. The CBL and the NJBCA, and
the rights of shareholders thereunder, differ with respect to voting
requirements and various other matters. See "COMPARISON OF THE RIGHTS OF
SHAREHOLDERS OF SOUTHINGTON AND HUBCO."
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
Years Ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 204,182 $ 203,651 $ 170,929 $ 149,528 $ 164,348
Interest expense 72,828 70,440 53,126 50,771 67,749
------------ ------------- ------------ ------------- ------------
Net interest income 131,354 133,211 117,803 98,757 96,597
Provision for possible loan losses 12,295 9,515 9,309 31,917 26,320
------------ ------------- ------------ ------------- ------------
Net interest income after
provision for possible loan losses 119,059 123,696 108,494 66,840 70,277
Other income 30,276 28,223 22,420 24,571 25,530
Other expenses 116,239 102,842 94,931 97,098 93,764
----------- ------------- ------------ ------------- ------------
Income before income taxes 33,096 49,077 35,983 (5,887) 2,043
Income tax provision 11,599 14,512 12,595 321 (6,441)
----------- ------------- ------------ ------------- ------------
Net income 21,497 34,565 23,388 (6,008) 8,484
----------- ------------- ------------ ------------- ------------
Per Share Data:
Weighted average
shares outstanding 23,225 24,116 22,945 18,708 14,678
Net income per share $ 0.93 $ 1.44 $ 1.02 $ (0.32 ) $ 0.58
Cash dividend per common share $ 0.68 $ 0.58 $ 0.35 $ 0.30 $ 0.26
Balance Sheet Summary:
Securities held to maturity 280,914 294,057 715,509 599,587 456,709
Securities available for sale 655,492 502,381 213,815 179,267 130,789
Loans 1,884,355 1,652,022 1,569,059 1,303,397 1,373,631
Total assets 3,115,687 2,778,416 2,770,667 2,322,713 2,219,105
Deposits 2,592,092 2,446,273 2,414,999 2,103,895 2,021,029
Stockholders' equity 206,333 216,796 187,305 117,965 122,406
Performance Ratios:
Return on average assets 0.76 % 1.27 % 0.91 % -0.27 % 0.38 %
Return on average equity 10.44 % 17.31 % 15.77 % -5.01 % 7.57 %
Dividend payout 73.12 % 40.28 % 34.31 % -93.75 % 44.83 %
Average equity to average assets 7.25 % 7.35 % 5.79 % 5.39 % 5.02 %
Net interest margin 5.05 % 5.34 % 5.03 % 4.75 % 4.81 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 1.87 % 1.82 % 1.97 % 2.57 % 2.39 %
Allowance for possible loan losses
to non-performing loans 111 % 118 % 74 % 44 % 42 %
Non-performing loans to
total loans 1.69 % 1.55 % 2.65 % 5.78 % 5.64 %
Non-performing assets to total
loans, plus other real estate 1.98 % 2.23 % 3.62 % 7.39 % 7.54 %
Net charge-offs to average loans 0.69 % 0.66 % 1.28 % 1.84 % 1.76 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
For Six Months Ended June 30,
-------------------------------------------------------------
1997 1996
------------------------------- -----------------------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income 110,701 99,771
------------ ------------
Net interest income 70,440 65,011
Provision for possible loan losses 3,102 4,996
------------ ------------
Net interest income after
provision for possible loan losses 67,338 60,015
Other income 18,499 14,677
Other expenses 47,138 48,522
------------ ------------
Income before income taxes 38,699 28,170
Income tax provision 15,174 10,121
------------ ------------
Net income 23,525 16,049
------------ ------------
Per Share Data:
Weighted average
shares outstanding 22,832 23,540
Net income per share 1.03 0.68
Cash dividend per common share 0.38 0.34
Balance Sheet Summary:
Securities held to maturity 240,923 265,144
Securities available for sale 633,471 586,908
Loans 1,835,905 1,684,821
Total assets 3,001,823 2,788,248
Deposits 2,368,261 2,393,647
Stockholders' equity 211,721 204,319
Performance Ratios(1):
Return on average assets 1.56 % 1.16 %
Return on average equity 22.85 % 15.56 %
Dividend payout 36.89 % 50.00 %
Average equity to average assets 6.72 % 7.48 %
Net interest margin 5.14 % 5.21 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 2.03 % 1.83 %
Allowance for possible loan losses
to non-performing loans 125 % 92 %
Non-performing loans to
total loans 1.63 % 1.99 %
Non-performing assets to total
loans, plus other real estate 1.78 % 2.39 %
Net charge-offs to average loans 0.18 % 0.25 %
</TABLE>
(1) The Performance Ratios percentages are presented on an annualized basis.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE BANK OF SOUTHINGTON
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 9,327 $ 8,607 $ 7,123 $ 6,217 $ 6,206
Interest expense 3,343 2,945 2,058 2,299 2,619
------------ ------------- ------------ ------------- ------------
Net interest income 5,984 5,662 5,065 3,918 3,587
Provision for possible loan losses 225 759 760 602 504
------------ ------------- ------------ ------------- ------------
Net interest income after
provision for possible loan losses 5,759 4,903 4,305 3,316 3,083
Other income 535 416 632 297 276
Other expenses 4,507 3,706 3,977 2,908 2,398
------------ ------------- ------------ ------------- ------------
Income before income taxes 1,787 1,613 960 705 961
Income tax provision 649 570 236 200 340
------------ ------------- ------------ ------------- ------------
Net income 1,138 1,043 724 505 621
------------ ------------- ------------ ------------- ------------
Per Share Data:
Weighted average
shares outstanding (000) 1,230 1,216 1,193 1,190 1,188
Net income per share $ 0.93 $ 0.86 $ 0.61 $ 0.42 $ 0.52
Cash dividend per common share $ 0.25 $ 0.24 $ 0.20 $ 0.13 $ 0.06
Balance Sheet Summary:
Investment Securities (Mkt Value) -- -- -- -- 13,410
Securities held to maturity (Mkt value) $ -- $ -- $ 17,995 $ 17,333 $ --
Securities available for sale (Mkt value) 35,473 27,078 1,095 2,467 --
Loans (net of deferred fees &
allowance for loan losses) 79,290 72,623 72,120 67,239 60,943
Total assets 128,014 112,825 102,446 95,256 85,821
Deposits 116,278 101,404 92,643 86,396 77,348
Stockholders' equity 11,065 10,220 9,230 8,656 8,240
Performance Ratios:
Return on average assets 0.95 % 0.97 % 0.72 % 0.56 % 0.77 %
Return on average equity 10.77 % 10.75 % 8.08 % 5.92 % 7.78 %
Dividend payout 26.88 % 24.41 % 32.78 % 30.95 % 11.54 %
Average equity to average assets 8.90 % 9.03 % 8.93 % 9.38 % 9.93 %
Net interest margin 5.48 % 5.71 % 5.51 % 4.73 % 4.83 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 1.90 % 2.24 % 1.75 % 2.07 % 2.03 %
Allowance for possible loan losses
to non-performing loans 66 % 69 % 102 % 67 % 121 %
Non-performing loans to
total loans 3.14 % 3.66 % 1.90 % 3.50 % 2.24 %
Non-performing assets to total
loans, plus other real estate 3.62 % 3.66 % 1.89 % 3.49 % 2.20 %
Net charge-offs to average loans 0.47 % 0.52 % 1.30 % 0.70 % 0.42 %
</TABLE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE BANK OF SOUTHINGTON
<TABLE>
<CAPTION>
For Six Months Ended June 30,
-------------------------------------------------------------
1997 1996
------------------------------- -----------------------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income 5,168 4,511
Interest expense 1,804 1,651
----------- -----------
Net interest income 3,364 2,860
Provision for possible loan losses 403 95
----------- -----------
Net interest income after
provision for possible loan losses 2,961 2,765
Other income 219 228
Other expenses 2,451 2,063
----------- -----------
Income before income taxes 729 930
Income tax provision 271 333
----------- -----------
Net Income 458 597
Per Share Data:
Weighted average
shares outstanding (000) 1,243 1,230
Net income per share 0.37 0.49
Cash dividend per common share 0.14 0.12
Balance Sheet Summary:
Securities available for sale (Mkt value) 37,810 31,461
Loans (net deferred fees &
allowance for loan losses) 83,313 74,333
Total assets 135,279 120,458
Deposits 122,158 109,334
Stockholders' equity 11,432 10,339
Performance Ratios(1):
Return on average assets 0.71 % 1.01 %
Return on average equity 8.19 % 11.31 %
Dividend payout 37.84 % 24.48 %
Average equity to average assets 8.64 % 8.93 %
Net interest margin 5.70 % 5.39 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 1.66 % 2.09 %
Allowance for possible loan losses
to non-performing loans 86.08 % 54.63 %
Non-performing loans to
total loans 1.18 % 3.82 %
Non-performing assets to total
loans, plus other real estate 1.92 % 3.86 %
Net charge-offs to average loans 0.62 % 0.22 %
</TABLE>
(1) The Performance Ratios percentages are presented on an annualized basis.
<PAGE>
MARKET PRICE AND DIVIDEND MATTERS
Market Price and Dividend History
HUBCO Common Stock is quoted on The Nasdaq Stock Market (formerly known as the
"Nasdaq National Market System") under the symbol "HUBC" and Southington Common
Stock is quoted on the AMEX under the symbol "BSO". The following tables set
forth, for the periods indicated, the high and low closing prices per share of
HUBCO Common Stock and Southington Common Stock, as reported by The Nasdaq Stock
Market and by the AMEX, and quarterly dividends per share.
All stock prices shown in the tables below have been rounded to
the nearest cent and all stock prices and dividends shown in the tables below
have been adjusted for a 3-for-2 HUBCO Common Stock split effective January 14,
1995 and the HUBCO Stock Dividend payable to shareholders of record on November
13, 1997.
<TABLE>
<CAPTION>
Equivalent Pro Forma Market Price Per
Market Market Share of Southington Common Stock(1)
Price Per Share Price Per Share Maximum Minimum
of HUBCO of Southington Exchange Exchange
Common Stock Common Stock Ratio (.787) Ratio (.618)
------------------ ------------------- ------------------- --------------------
High Low High Low High Low High Low
------ ------- -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
First Quarter........ $ 16.38 $ 13.83 $ 7.00 $ 6.63 $ 12.89 $ 10.88 $ 10.12 $ 8.54
Second Quarter....... $ 16.97 $ 14.58 $ 8.38 $ 6.88 $ 13.35 $ 11.48 $ 10.49 $ 9.01
Third Quarter........ $ 19.91 $ 16.26 $ 9.25 $ 7.50 $ 15.67 $ 12.80 $ 12.31 $ 10.05
Fourth Quarter....... $ 20.85 $ 18.15 $ 9.63 $ 8.50 $ 16.41 $ 14.28 $ 12.89 $ 11.21
1996:
First Quarter........ $ 21.33 $ 18.32 $ 19.38 $ 9.50 $ 16.79 $ 14.42 $ 13.18 $ 11.32
Second Quarter....... $ 20.50 $ 17.32 $ 16.38 $ 13.00 $ 16.14 $ 13.63 $ 12.67 $ 10.70
Third Quarter........ $ 20.39 $ 18.61 $ 16.38 $ 11.88 $ 16.04 $ 14.65 $ 12.60 $ 11.50
Fourth Quarter....... $ 24.15 $ 19.56 $ 15.25 $ 13.25 $ 19.00 $ 15.39 $ 14.92 $ 12.09
1997:
First Quarter........ $ 25.85 $ 21.84 $ 14.50 $ 13.75 $ 20.35 $ 17.19 $ 15.98 $ 13.50
Second Quarter....... $ 28.52 $ 21.12 $ 16.50 $ 13.13 $ 22.45 $ 16.62 $ 17.63 $ 13.05
Third Quarter........ $ 32.04 $ 26.94 $ 20.63 $ 20.63 $ 25.22 $ 21.20 $ 19.80 $ 16.65
Fourth Quarter.......
(through 11/7/97) $ 35.56 $ 30.95 $ 21.00 $ 21.00 $ 27.99 $ 24.36 $ 21.98 $ 19.13
</TABLE>
- -------------
(1) Equivalent pro forma market price per share of Southington Common Stock
represents the high and low closing prices per share of HUBCO Common Stock,
multiplied by the Exchange Ratio.
<PAGE>
<TABLE>
<CAPTION>
Equivalent Pro Forma Dividends Per
HUBCO Southington Share of Southington Common Stock(1)
Common Stock Common Stock Maximum Minimum
Dividends Dividends Exchange Exchange
Per Share Per Share Ratio (.787) Ratio (.618)
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
1995:
First Quarter......... $ 0.141 $ 0.055 $ 0.111 $ 0.087
Second Quarter........ $ 0.141 $ 0.060 $ 0.111 $ 0.087
Third Quarter......... $ 0.141 $ 0.060 $ 0.111 $ 0.087
Fourth Quarter........ $ 0.141 $ 0.060 $ 0.111 $ 0.087
1996:
First Quarter......... $ 0.160 $ 0.060 $ 0.126 $ 0.099
Second Quarter........ $ 0.160 $ 0.060 $ 0.126 $ 0.099
Third Quarter......... $ 0.160 $ 0.060 $ 0.126 $ 0.099
Fourth Quarter........ $ 0.184 $ 0.070 $ 0.145 $ 0.114
1997:
First Quarter......... $ 0.184 $ 0.070 $ 0.145 $ 0.114
Second Quarter........ $ 0.184 $ 0.070 $ 0.145 $ 0.114
Third Quarter $ 0.184 $ 0.070 $ 0.145 $ 0.114
</TABLE>
- -------------
(1) Equivalent pro forma cash dividends per share of Southington Common Stock
represents HUBCO historical dividend rates per share, multiplied by the Exchange
Ratio, rounded to the nearest hundredth of a cent. The current annualized
dividend rate per share of HUBCO Common Stock, based upon the most recently
declared quarterly dividend rate of $.184 per share of HUBCO Common Stock
payable on March 1, June 1, September 1 and December 1, would be $.74. On an
equivalent pro forma basis, such current annualized HUBCO dividend per share of
Southington Common Stock would be $.58, based on the Maximum Exchange Ratio
(.787), or $.46, based on the Minimum Exchange Ratio (.618), in each case
rounded to the nearest hundredth of a cent. No assurance can be given as to
future HUBCO dividend rates. Future HUBCO dividends are dependent upon the
earnings and financial condition of HUBCO, as well as government regulations and
policies and other factors.
The following table presents for (i) August 15, 1997, the last full
trading day before public announcement of the signing of the Merger Agreement,
and (ii) a recent trading date prior to the date of this Proxy Statement on
which such stock traded, the reported closing price per share of HUBCO Common
Stock and Southington Common Stock on The Nasdaq Stock Market and the AMEX,
respectively, and the equivalent price per share of Southington Common Stock
computed by multiplying the closing price of HUBCO Common Stock on each of the
dates specified by the Maximum Exchange Ratio (.787) and the Minimum Exchange
Ratio (.618), respectively.
<TABLE>
<CAPTION>
Equivalent Price Per Share of
Southington Common Stock(1)
Maximum Minimum
HUBCO Southington Exchange Exchange
Common Stock Common Stock Ratio (.787) Ratio (.618)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
August 15, 1997............ $30.10 $21.00 $23.68 $18.60
November 7, 1997........... $33.01 $21.00 $25.98 $20.40
</TABLE>
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and Southington to result in stockholders of
Southington receiving in the Merger HUBCO Common Stock with a value of $21.00
for each share of Southington Common Stock, provided that the initial Exchange
Ratio calculation (before taking into effect the Minimum and Maximum Exchange
Ratios) results in an Exchange Ratio which is neither below the Minimum Exchange
Ratio nor above the Maximum Exchange Ratio (i.e., provided the Median
Pre-Closing Price of HUBCO Common Stock is between $33.98 and $26.70). However,
because of the Minimum Exchange Ratio and Maximum Exchange Ratio, and because
the price of HUBCO Common Stock at the Effective Time may not be the same as the
Median Pre-Closing Price, Southington stockholders are not assured of receiving
any specific market value of HUBCO Common Stock. The price of HUBCO Common Stock
at the Effective Time may be higher or lower than the Median Pre-Closing Price,
and may be higher or lower than the market price at the time of entering into
the Merger Agreement, the time of mailing this Proxy Statement-Prospectus or at
the time of the Meeting. SOUTHINGTON STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE HUBCO COMMON STOCK AND SOUTHINGTON COMMON STOCK.
Limitations on Dividends Under the Merger Agreement
The Merger Agreement prohibits Southington from declaring, setting
aside or paying any dividend or other distribution in respect of its capital
stock, except that Southington may declare, set aside or pay regular quarterly
cash dividends of up to $0.07 per share for the third quarter of 1997 (up to
$0.08 per share for the fourth quarter of 1997 and thereafter). Southington is
expected to pay the maximum permissible dividends on Southington Common Stock
each quarter until the Merger is consummated.
Dividend Limitations on HUBCO
The holders of HUBCO Common Stock are entitled to receive dividends
when and if declared by HUBCO's Board of Directors out of funds legally
available therefor. HUBCO has paid regular cash dividends on its common stock
since its inception in 1982. The HUBCO Preferred Stock also is entitled to
receive dividends when and if declared by HUBCO's Board of Directors out of
funds legally available therefor. HUBCO has no obligation to pay dividends on
the HUBCO Preferred Stock regardless of any dividends which may be paid on the
HUBCO Common Stock. The primary source for HUBCO's dividends is dividends from
HUBCO's banking subsidiaries to HUBCO, the payment of which is regulated. Under
the New Jersey Banking Act of 1948, as amended (the "NJBA"), HUB may pay
dividends only out of retained earnings, and only out of surplus to the extent
that surplus exceeds 50% of stated capital. Under the Banking Law of Connecticut
(the "CBL"), Lafayette may pay dividends only from its net profits, and the
total of all dividends in any calendar year may not (unless specifically
approved by the Commissioner) exceed the total of its net profits of that year
combined with its retained net profits of the preceding two years. The FDIC has
the authority to prohibit a state-chartered bank from engaging in conduct which,
in the FDIC's opinion, constitutes an unsafe or unsound banking practice. Under
certain circumstances, the FDIC could claim that the payment of a dividend or
other distribution by a bank to its sole shareholder constitutes an unsafe or
unsound practice.
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following tables present certain unaudited combined condensed
financial information from the Pro Forma Unaudited Combined Condensed Statements
of Income for the six month period ended June 30, 1997 and for the years ended
December 31, 1996, 1995 and 1994, and the Pro Forma Unaudited Combined Condensed
Balance Sheet as of June 30, 1997 and as of December 31, 1996. The HUBCO and
Southington Pro Forma combined financial information gives effect to HUBCO's
proposed acquisition of Southington in a transaction accounted for as a pooling
of interests, as if such transaction had been consummated for statement of
income purposes on the first day of the applicable periods and for balance sheet
purposes on June 30, 1997. The Pro Forma information is based on the historical
financial statements of HUBCO and Southington, certain of which are incorporated
by reference herein. The Pro Forma financial information assumes the Maximum
Exchange Ratio of .787 shares of HUBCO Common Stock for each share of
Southington Common Stock outstanding unless otherwise noted.
The summary unaudited Pro Forma financial information should be read in
conjunction with the Pro Forma Financial Information and the related notes
thereto presented elsewhere in the Proxy Statement and the consolidated
financial statement and related notes incorporated by reference in the Proxy
Statement. The Pro Forma information does not address the possible effects of
any cost savings or expense reductions which might occur in connection with the
Merger, nor does it take into account HUBCO's pending acquisitions of Security
National Bank & Trust Company of New Jersey and Poughkeepsie Financial Corp. See
"CERTAIN INFORMATION REGARDING HUBCO - Recent Developments." The Pro Forma
information is not necessarily indicative of the results of operations which
would have been achieved had the Merger been consummated as of the beginning of
the periods for which such data are presented and should not be construed as
being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Unaudited Combined Financial Information
(In thousands, except for per share data)
For the Six
Months Ended For the Years Ended December 31,
June 30, 1997 1996 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Results of Operations:
Net interest income before provision for possible loan losses $ 73,805 $137,338 $138,873 $122,868
Provision for possible loan losses.......................... 3,505 12,520 10,274 10,069
Net interest income after provision for possible loan losses 70,300 124,818 128,599 112,799
Income before income taxes................................ 39,428 34,883 50,692 36,943
Net income ............................................... 23,983 22,635 35,608 24,112
Earnings per common share
Primary - maximum......................................... $ .98 $ 0.91 $ 1.39 $ 0.99
Primary - minimum......................................... .99 0.92 1.40 1.00
Fully diluted - maximum................................... .98 0.91 1.38 .98
Fully diluted - minimum................................... .99 0.92 1.39 .99
As of June 30, 1997 As of December 31, 1996
-------------------------- ---------------------------
Balance Sheet:
Total assets................................................ $ 3,136,698 $ 3,243,297
Total deposits.............................................. 2,490,419 2,708,371
Total stockholders' equity.................................. 222,749 216,994
Book value per common and common equivalent share
maximum.................................................. $ 9.10 $ 8.82
minimum.................................................. 9.18 8.89
</TABLE>
ACTUAL AND PRO FORMA PER SHARE DATA
The following table sets forth per share data relating to
dividends, net income and book value of HUBCO Common Stock and Southington
Common Stock, both on an actual (historical) basis and on a pro forma combined
basis, as adjusted for the HUBCO Stock Split. The actual per share data have
been derived from the consolidated financial statements of HUBCO and Southington
incorporated by reference herein. See "INFORMATION DELIVERED AND INCORPORATED BY
REFERENCE".
The Pro Forma unaudited book value per share data for the six
months ended June 30, 1997 and the Pro Forma unaudited net income per share data
at June 30, 1997 and for the years ended December 31, 1996, 1995 and 1994 have
been derived from the Pro Forma unaudited combined condensed financial
statements of HUBCO and Southington, giving effect to HUBCO's acquisition of
Southington accounted for as a pooling of interests. Pro Forma unaudited per
share amounts have been determined based on the assumptions set forth in the pro
forma combined condensed unaudited financial statements presented elsewhere
herein.
The actual, pro forma and pro forma equivalent per share data
included in the table below should be read in conjunction with the financial
statements of HUBCO and Southington incorporated by reference herein and the pro
forma combined condensed financial statements of HUBCO and Southington presented
elsewhere herein. See "INFORMATION DELIVERED AND INCORPORATED BY REFERENCE" and
"PRO FORMA FINANCIAL INFORMATION". The Pro Forma information does not address
the possible effects of any cost savings or expense reductions which might occur
in connection with the Merger, nor does it take into account HUBCO's pending
acquisitions of Security National Bank & Trust Company of New Jersey and
Poughkeepsie Financial Corp. See "CERTAIN INFORMATION REGARDING HUBCO - Recent
Developments." The pro forma data presented below is not necessarily indicative
of the results that would actually have been attained if the Merger had been
consummated as of the first day of the periods described below or results that
may be attained in the future.
<PAGE>
<TABLE>
<CAPTION>
For the Six Months For the Year Ended December 31,
Ended June 30, 1997 1996 1995 1994
------------------- ---- ---- ----
<S> <C> <C> <C> <C>
CASH DIVIDENDS DECLARED PER COMMON SHARE:
HUBCO - Actual (1) $0.37 $0.66 $0.56 $0.34
HUBCO and Southington, pro forma (maximum)) 0.37 0.66 0.56 0.34
HUBCO and Southington, pro forma (minimum) 0.37 0.66 0.56 0.34
Southington- Actual (1) 0.14 0.25 0.24 0.20
Southington- pro forma equivalent (maximum)(2) 0.29 0.52 0.44 0.27
Southington- pro forma equivalent (minimum)(3) 0.23 0.41 0.35 0.21
NET INCOME (LOSS) PER COMMON SHARE:
HUBCO - Actual:
Primary 1.00 0.90 1.41 1.00
Fully diluted 1.00 0.90 1.40 .99
Southington- Actual:
Primary 0.37 0.93 0.86 0.61
Fully diluted 0.37 0.93 0.86 0.61
HUBCO and Southington, pro forma
Primary, maximum .98 0.91 1.39 0.99
Primary, minimum .99 0.92 1.40 1.00
Fully diluted, maximum .98 0.91 1.38 .98
Fully diluted, minimum .99 0.92 1.39 .99
Southington, pro forma equivalent:
Primary, maximum (4) 0.77 0.72 1.09 0.78
Primary, minimum(5) 0.61 0.57 0.87 0.62
Fully diluted. maximum(6) 0.77 0.72 1.09 0.77
Fully diluted, minimum(7) 0.61 0.57 0.86 0.61
As of June 30, As of December 31,
1997 1996
--------------- -------------
NET BOOK VALUE PER COMMON AND COMMON EQUIVALENT SHARE:
HUBCO - Actual $9.01 $8.73
Southington- Actual 9.17 8.94
HUBCO and Southington, pro forma - maximum 9.10 8.82
HUBCO and Southington, pro forma - minimum 9.18 8.89
Southington, pro forma equivalent - maximum (8) 7.16 6.94
Southington, pro forma equivalent - minimum (9) 5.67 5.49
</TABLE>
(1) For information regarding HUBCO's and Southington's dividends, and the
market price of HUBCO and Southington Common Stock, see "MARKET PRICE AND
DIVIDEND MATTERS".
(2) Represents HUBCO's Actual Dividends Declared Per Common Shares multiplied
by the .787 Maximum Exchange Ratio.
(3) Represents HUBCO's Actual Dividends Declared Per Common Shares multiplied
by the .618 Minimum Exchange Ratio.
(4) Represents HUBCO and Southington, pro forma Primary Net Income Per Common
Share multiplied by the .787 Maximum Exchange Ratio.
(5) Represents HUBCO and Southington, pro forma Primary Net Income Per Common
Share multiplied by the .618 Minimum Exchange Ratio.
(6) Represents HUBCO and Southington, pro forma Fully Diluted Net Income Per
Common Share multiplied by the .787 Maximum Exchange Ratio.
(7) Represents HUBCO and Southington, pro forma Fully Diluted Net Income Per
Common Share multiplied by the .618 Minimum Exchange Ratio.
(8) Represents HUBCO and Southington, pro forma Net Book Value Per Common Stock
multiplied by the .787 Maximum Exchange Ratio.
(9) Represents HUBCO and Southington, pro forma Net Book Value Per Common Stock
multiplied by the .618 Minimum Exchange Ratio.
<PAGE>
INTRODUCTION
This Proxy Statement solicits, on behalf of the Board of Directors of
The Bank of Southington ("Southington"), approval by the holders of shares of
common stock of Southington, $6.00 par value per share ("Southington Common
Stock"), of the Agreement and Plan of Merger, dated August 18, 1997 (the "Merger
Agreement"), by and among HUBCO, Inc. ("HUBCO"), Lafayette American Bank and
Trust Company ("Lafayette") and Southington. Pursuant to the Merger Agreement,
Southington will be merged with and into Lafayette (the "Merger") with Lafayette
as the surviving entity. A copy of the Merger Agreement is attached as Appendix
A to this Proxy Statement. Upon consummation of the Merger, each outstanding
share of Southington Common Stock, except for Excluded Shares (as defined
below), will be converted into the right to receive a number of shares (the
"Exchange Ratio") of common stock of HUBCO , without par value ("HUBCO Common
Stock"), equal to a fraction, the numerator of which will be $21.00 and the
denominator of which will be the Median Pre-Closing Price of HUBCO Common Stock
(a term defined in the Merger Agreement generally as the median closing price of
HUBCO Common Stock during a 10 trading day period shortly prior to the closing
of the Merger), with a minimum Exchange Ratio (the "Minimum Exchange Ratio") of
.618 (which will apply if the Median Pre-Closing Price is at or above $33.98)
and a maximum Exchange Ratio (the "Maximum Exchange Ratio") of .787 (which will
apply if the Median Pre-Closing Price is at or below $26.70), subject to
adjustment provisions set forth in the Merger Agreement and more fully described
in this Proxy Statement, with cash paid in lieu of fractional shares. If the
Median Pre-Closing Price is less than $21.36, the Board of Directors of
Southington will have certain rights to terminate the Merger Agreement unless
HUBCO agrees to increase the Exchange Ratio to a fraction with a numerator of
$16.81 and a denominator equal to the Median Pre-Closing Price. In addition,
each option to purchase a share of Southington Common Stock pursuant to
Southington's existing stock option plans and agreements will be converted in
the Merger into the right to receive shares of HUBCO Common Stock with a value
(based on the Median Pre-Closing Price) equal to the difference between the per
share option exercise price and the product of the Exchange Ratio multiplied by
the Median Pre-Closing Price, all as more fully described in this Proxy
Statement. See "THE PROPOSED MERGER".
All information and statements contained or incorporated by reference
herein with respect to Southington were supplied by Southington and all
information and statements contained or incorporated by reference herein with
respect to HUBCO were supplied by HUBCO.
On October 8, 1997, the Board of Directors of HUBCO approved a 3% stock
dividend, payable December 1, 1997 to common stockholders of record on November
13, 1997 (the "Stock Dividend"). All share and per share data regarding HUBCO's
Common Stock set forth herein has been adjusted to give retroactive effect to
the Stock Dividend as if the Stock Dividend occurred prior to the periods
reported herein. Pursuant to the Merger Agreement, which provides for adjustment
to the exchange ratio described therein in the event of transactions such as the
Stock Dividend, all references herein to the exchange ratio have been adjusted
to give effect to the Stock Dividend, but the Merger Agreement has not been
adjusted because the Merger Agreement was signed prior to the Stock Dividend.
CERTAIN INFORMATION REGARDING HUBCO
General
HUBCO is a New Jersey corporation and registered bank holding company
whose principal operating subsidiaries are Hudson United Bank ("HUB"), a New
Jersey-chartered commercial bank, and Lafayette American Bank and Trust Company
("Lafayette"), a Connecticut chartered bank and trust company. HUBCO's corporate
headquarters are located at 1000 MacArthur Boulevard, Mahwah, New Jersey 07430.
HUB'S corporate headquarters are located at 3100 Bergenline Avenue, Union City,
New Jersey 07084. Lafayette's corporate headquarters are located at 1000
Lafayette Boulevard, Bridgeport, Connecticut 06604. The telephone number of
HUBCO is (201) 236-2600. HUB is a full-service commercial bank which primarily
serves small and mid-sized businesses and consumers through 57 branches in
Northern New Jersey. Lafayette is a full-service commercial bank which serves
small-to-medium-sized business firms as well as individuals through 27 banking
offices located mainly in Fairfield and New Haven counties in Connecticut. As of
June 30, 1997, HUBCO had consolidated assets of $3.0 billion, consolidated
deposits of $2.4 billion and consolidated stockholders' equity of $212 million.
Based on assets as of June 30, 1997, HUBCO was the fourth largest commercial
banking company headquartered in New Jersey.
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Since October, 1990, HUBCO has
added over 70 branches and approximately $2.5 billion in assets through 17
acquisitions of financial institutions in both government-assisted and private
transactions. HUBCO expects to continue its acquisition strategy. HUBCO is
continually evaluating acquisition opportunities and frequently conducts
discussions, certain financial analyses and diligence activities in connection
with possible acquisitions. As a result, acquisition discussions and, in some
cases, negotiations frequently take place and future acquisitions involving
cash, debt or equity securities can be expected. Acquisitions typically involve
the payment of a premium over book and market values, and therefore some
dilution of HUBCO's book value and net income per common share may occur in
connection with any future transactions. From time to time, HUBCO may issue new
equity or debt securities to fund its acquisition plans or for other purposes.
For additional information regarding HUBCO, including management, principal
shareholders, and business, see "AVAILABLE INFORMATION" and "INFORMATION
DELIVERED AND INCORPORATED BY REFERENCE" and "PRO FORMA INFORMATION".
Recent Developments
On August 27, 1997, HUB and Security National Bank & Trust Company of
New Jersey ("Security National") signed a definitive agreement to merge Security
National into HUB. In the merger, shareholders of Security National will receive
$34.00 in cash for each share of Security National common stock. Security
National is an $86 million asset bank and trust company headquartered in Newark,
New Jersey with branches in Nutley and Kearny, New Jersey. The transaction will
be accounted for by HUBCO as a purchase.
Simultaneously with execution of the merger agreement between HUB and
Security National, HUBCO and an acquisition subsidiary entered into a parallel
merger agreement with Fiduciary Investment Company of New Jersey ("FIC"), a
closely-held corporation which owns approximately 79.6% of the outstanding
shares of Security National. Consummation of both mergers are subject to
approval by federal and New Jersey bank regulatory authorities and approval by
the shareholders of Security National and FIC, as well as other customary
conditions.
On October 22, 1997 HUBCO and Poughkeepsie Financial Corp.
("Poughkeepsie") signed a definitive agreement (the "Poughkeepsie Agreement") to
merge Poughkeepsie into HUBCO. Poughkeepsie is the holding company for Bank of
the Hudson ("BTH"), an $880 million asset institution headquartered in
Poughkeepsie, New York, formerly known as Poughkeepsie Savings Bank, FSB. BTH
operates 15 branches in three counties of New York. BTH will be maintained by
HUBCO as its New York banking subsidiary.
In the merger, each share of Poughkeepsie common stock, $0.01 par
value, will be exchanged for HUBCO Common Stock valued at $10.00, provided that
the median pre-closing price (as that term is defined in the Poughkeepsie
Agreement) of HUBCO Common Stock during a pricing period prior to closing is
between $31.25 and $33.33. If the median pre-closing price of HUBCO Common Stock
during the pricing period is at or above $33.33, Poughkeepsie shareholders will
receive .30 of a share of HUBCO Common Stock for each share of Poughkeepsie
common stock. If the median pre-closing price of HUBCO Common Stock during the
pricing period is at or below $31.25, Poughkeepsie shareholders will receive .32
of a share of HUBCO Common Stock for each share of Poughkeepsie common stock.
The Poughkeepsie Board of Directors have certain rights to terminate the deal if
the median pre-closing price of HUBCO Common Stock during the pricing period is
below $25.75. However, the HUBCO Board of Directors have certain rights to
reinstitute the deal with an exchange ratio equal to the quotient obtained by
dividing $8.24 by the median pre-closing price.
The Poughkeepsie transaction is expected to be treated as a tax-free
merger and accounted for as a pooling of interests. Consummation of the merger
is subject to approval by bank regulatory authorities and the shareholders of
Poughkeepsie, as well as other customary conditions.
Third Quarter Earnings
HUBCO reported on October 16, 1997, that it earned $12.9 million or
$.55 per common share compared with $10.6 million or $.45 per share excluding
merger related restructuring and SAIF recapitalization charges during the
comparable quarter last year, representing 21% increase in earnings per share.
HUBCO's third quarter's earnings of $12.9 million resulted in a return
on average assets of 1.75% and a return on average equity of 24.6%. HUBCO
amortizes acquisition costs including goodwill and core deposit intangibles
rapidly (generally over a five to ten year period) and as a result these
non-cash charges totaled $.05 per share for the third quarter of 1997.
HUBCO's net interest margin for the third quarter of 1997 was 5.38%
versus 5.02% for the comparable quarter last year. Other income, excluding
security gains, for the third quarter of 1997 increased 14% to $8.2 million from
$7.1 million in the third quarter of 1996. The increase in other income arose
primarily from merchant discounts on Shoppers Charge Accounts Co. and fees for
international services and trust services.
HUBCO's overhead expenses during the third quarter of 1997 decreased as
a result of various initiatives to $23.0 million from $24.1 million in last
quarter. HUBCO's efficiency ratio (a ratio of overhead expense to recurring tax
equivalent income) was 48.3% for the third quarter of 1997.
HUBCO's total non-performing assets of $36.0 million (1.2% of assets)
at September 20, 1997 were down from $41.5 million on September 30, 1996 and
$37.5 million at December 31, 1996. The Allowance for Possible Loan Losses
totaled $37.6 million which covered 116% of HUBCO's non-performing loans and
2.11% of the loan portfolio at September 30, 1997.
HUBCO's stockholders' equity was $211.9 million at September 30, 1997.
Capital ratios were: Tier 1 Risk-Based Capital Ratio of 12.26%, Total Risk-Based
Capital Ratio of 19.88% and a Leverage Capital Ratio of 7.81%.
CERTAIN INFORMATION REGARDING SOUTHINGTON
General
Southington is a Connecticut-chartered bank and trust company,
headquartered in Southington, Connecticut. Southington is engaged primarily in
the business of attracting deposits from the public and using such deposits,
with other funds, to make various types of loans and investments. Deposits at
Southington are FDIC insured. As of June 30, 1997, Southington reported total
assets of $135 million, total deposits of $122 million and stockholders' equity
of $11 million. Southington, which was originally chartered in 1985, operates
from its home office in Southington, Connecticut and from two branch offices
located in Bristol, Connecticut. For additional information regarding
Southington, management, principal shareholders, and business, see "AVAILABLE
INFORMATION" AND "INFORMATION DELIVERED AND INCORPORATED BY REFERENCE".
Recent Developments
Southington reported on October 23, 1997, that its net
earnings for the nine months ended September 30, 1997 were $611,945 or $0.49 per
share while during the same period in 1996 Southington earned $916,557 or $0.72
per share. Southington earned $153,945 in the third quarter of 1997 or $0.12 per
share which is down from the third quarter 1996 reported earnings of $281,478 or
$0.23 per share. Southington ended the quarter with $134 million in assets, an
increase of $12 million over September 30, 1996 when Southington had $122
million in assets.
Southington's provision for loan losses was $300,000 in the third
quarter of 1997 compared to $145,000 in the third quarter of 1996. For the nine
months ending September 30, 1997, the provision for loan losses was $703,000 up
$588,000 over the provision of $145,000 for the same period in 1996.
Southington reported net interest income of $1.7 million for the third
quarter of 1997 compared to $1.5 million for the third quarter of 1996.
The Board of Directors of Southington declared a $0.08 dividend on
September 24, 1997, for shareholders of record on October 31, 1997, payable on
December 1, 1997.
<PAGE>
THE MEETING
Purpose of the Meeting
This Proxy Statement-Prospectus is first being mailed to the holders of
Southington Common Stock on or about November 12, 1997 and is accompanied by a
proxy card furnished in connection with the solicitation of proxies by the
Southington Board of Directors for use at the Meeting. The Meeting is scheduled
to be held on Tuesday, December 16, 1997 at 9:00 a.m. at the Radisson Inn, 42
Century Drive, Bristol, Connecticut. At the Meeting, the holders of Southington
Common Stock will consider and vote upon the approval of the Merger Agreement
and any other matters as may properly be brought before the Meeting and at any
adjournments or postponements thereof.
The Board of Directors of Southington has unanimously approved the
Merger Agreement and recommends a vote "FOR" approval and adoption of the Merger
Agreement.
Record Date; Voting Rights; Proxies
The Board of Directors of Southington has fixed the close of business
on October 15, 1997 as the record date for determining the holders of
Southington Common Stock entitled to receive notice of and to vote at the
Meeting (the "Record Date"). Only holders of record of Southington Common Stock
at the close of business on that date will be entitled to vote at the Meeting or
at any adjournment or postponement thereof.
At the close of business on the Record Date, there were 1,246,128
shares of Southington Common Stock issued and outstanding and entitled to vote
at the Meeting. Each share of Southington Common Stock will be entitled to one
vote upon each matter properly submitted at the Meeting or at any adjournment or
postponement thereof.
All properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated thereon, such shares will be
voted "FOR" approval of the Merger Agreement. The Board of Directors of
Southington is not aware of any matters other than as described in the Notice of
Special Meeting that are to come before the Meeting. If any other matter or
matters are properly presented for action before the Meeting, the persons named
in the enclosed form of proxy will have discretion to vote on such matters in
accordance with their best judgment, unless such authorization is withheld.
The presence of a shareholder at the Meeting will not automatically
revoke such shareholder's proxy. A shareholder may revoke any proxy that he or
she has given any time prior to its exercise. To do so, the shareholder must
file a written notice of revocation with, or deliver a duly executed proxy
bearing a later date to, Peter Pfau, Secretary, The Bank of Southington, 130
North Main Street, Southington, Connecticut 06489-0670, or attend the Meeting
and vote in person.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting, who will determine whether or
not a quorum is present. Where, as to any matter submitted to a vote of the
Southington shareholders, proxies are marked as abstentions (or shareholders
appear in person but abstain from voting) or a broker indicates on a proxy that
it does not have discretionary authority with respect to certain shares, such
abstentions and "broker non-votes" will be treated as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
SOUTHINGTON SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE
DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL
WHICH WOULD BE SENT TO SOUTHINGTON SHAREHOLDERS BY THE EXCHANGE AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of Southington may solicit proxies for the Meeting from shareholders personally,
by telephone or by telegraph. These officers, directors and employees will not
be specifically compensated for their services. Southington will also make
arrangements with brokerage firms and other custodians, nominees and fiduciaries
to send proxy materials to their principals and will reimburse such parties for
their expenses in doing so. The cost of soliciting proxies for the Meeting will
be borne by Southington.
Quorum
The presence, in person or by proxy, of at least a majority of
Southington Common Stock issued and outstanding and entitled to be voted at the
Meeting is necessary to constitute a quorum.
Required Vote
Each share of Southington Common Stock will be entitled to one vote
upon each matter properly submitted at the Meeting or at any adjournment or
postponement thereof. The affirmative vote, in person or by proxy, of at least
two-thirds of the outstanding shares of Southington Common Stock entitled to be
voted at the Meeting is required in order to approve and adopt the Merger
Agreement.
THE REQUIRED VOTE OF THE SOUTHINGTON SHAREHOLDERS ON THE MERGER
AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF SOUTHINGTON
STOCK AND NOT UPON THE NUMBER OF SHARES WHICH ARE ACTUALLY VOTED. ACCORDINGLY,
THE FAILURE TO SUBMIT A PROXY CARD, TO VOTE IN PERSON AT THE MEETING, ABSTENTION
FROM VOTING BY A SHAREHOLDER AND ANY BROKER NON-VOTE WILL HAVE THE SAME EFFECT
AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT.
As of the Record Date, the directors and executive officers of
Southington beneficially owned (excluding shares which could be acquired upon
exercise of options) an aggregate of 322,185 shares of Southington Common Stock
(25.85% of the issued and outstanding shares). The Southington directors have
agreed to vote the shares of Southington Common Stock that they beneficially own
in favor of the Merger Agreement. No consideration was paid to any of the
directors for this agreement. HUBCO required that the directors enter into this
agreement as a condition to HUBCO entering into the Merger Agreement.
The obligations of Southington and HUBCO to consummate the Merger
Agreement are subject, among other things, to the condition that the Merger
Agreement and the transactions contemplated thereby be approved by the requisite
vote of the shareholders of Southington. See "THE PROPOSED MERGER -- Conditions
to the Merger".
THE MATTERS TO BE CONSIDERED AT THE MEETING ARE OF GREAT IMPORTANCE TO
THE SHAREHOLDERS OF SOUTHINGTON. ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT-PROSPECTUS,
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
THE PROPOSED MERGER
A copy of the Merger Agreement is attached as Appendix A to this Proxy
Statement and is incorporated by reference herein. Descriptions of the Merger
and the Merger Agreement are qualified in their entirety by reference to the
Merger Agreement.
General Description
The Merger Agreement provides that, at the Effective Time, Southington
will be merged into Lafayette, with Lafayette as the surviving entity (the
"Surviving Entity"). The separate identity and existence of Southington will
cease upon consummation of the Merger and all property, rights, powers and
franchises of each of Southington and Lafayette will vest in the Surviving
Entity.
Closing; Determination Date
A closing under the Merger Agreement (the "Closing") will occur on a
date (the "Closing Date") to be determined by HUBCO and set forth in a notice
(the "Closing Notice") to Southington. The Closing Date specified by HUBCO in
the Closing Notice must be at least five business days after the date of the
Closing Notice, but not more than 15 business days after receipt of all
necessary approvals and consents, the expiration of all statutory waiting
periods and the satisfaction or waiver of the other conditions to consummation
of the Merger, (other than the delivery of documents to be delivered at the
Closing). The Closing may also be set for another day mutually agreed to by
HUBCO and Southington. The parties currently anticipate closing in December
1997. Immediately following the Closing, HUBCO will file a certificate of merger
with the Secretary of State of the State of Connecticut, which will specify the
effective time of the Merger (the "Effective Time"), which HUBCO and Southington
anticipate will be the close of business on the Closing Date. The exact Closing
Date is dependent upon satisfaction of all conditions precedent, some of which
are not under the control of HUBCO or Southington. In the Closing Notice, HUBCO
is also required to specify the "Determination Date," which is used in
determining the Median Pre-Closing Price. The Determination Date is to be not
more than ten business days prior to the Closing Date set forth in the Closing
Notice.
Consideration
At the Effective Time, each outstanding share of Southington Common
Stock (except for Excluded Shares, as defined below) will be converted into the
right to receive a number of shares (the "Exchange Ratio") of HUBCO Common
Stock, equal to a fraction, the numerator of which will be $21.00 and the
denominator of which will be the Median Pre-Closing Price (as defined below) of
HUBCO Common Stock, with a Minimum Exchange Ratio of .618 (which will apply if
the Median Pre-Closing Price is at or above $33.98) and a Maximum Exchange Ratio
of .787 (which will apply if the Median Pre-Closing Price is at or below
$26.70). "Excluded Shares" are those shares of Southington Common Stock which
(i) are held by Southington as treasury shares, (ii) are held by HUBCO or any of
its subsidiaries (other than shares held as trustee or in a fiduciary capacity
and shares held as collateral on or in lieu of a debt previously contracted), or
(iii) as to which dissenters' rights have been validly exercised ("Dissenting
Shares").
Under the Merger Agreement, the "Median Pre-Closing Price" will be
determined by taking the price half-way between the Closing Prices left after
discarding the 4 lowest and 4 highest Closing Prices in the 10 consecutive
trading day period which ends on (and includes) the Determination Date. The
"Closing Price" means the closing price of HUBCO Common Stock as supplied by the
NASDAQ Stock Market and published in The Wall Street Journal. A "trading day"
means a day for which a Closing Price is so supplied and published.
The Exchange Ratio is subject to adjustment to take into account any
stock split, stock dividend, reclassification, recapitalization, merger,
combination or exchange or similar transaction by HUBCO with respect to the
HUBCO Common Stock occurring subsequent to August 18, 1997. The Exchange Ratio
may also be subject to adjustment in connection with provisions relating to the
termination of the Merger Agreement described below.
The Merger Agreement may be terminated by Southington if the Median
Pre-Closing Price is less than $21.36. However, Southington is obligated to
provide notice of such termination to HUBCO, which may then elect, at its sole
option, to increase the Exchange Ratio to a fraction with a numerator of $16.81
and a denominator equal to the Median Pre-Closing Price. If HUBCO so elects and
increases the Exchange Ratio, the Merger Agreement will not be terminated. There
can be no assurance that Southington will exercise its right to terminate the
Merger Agreement if the conditions described above exist (a "Termination
Event"), and if Southington does exercise its right to terminate the Merger
Agreement, there can be no assurance that HUBCO will elect to increase the
Exchange Ratio as provided in the Merger Agreement and as described above.
The effects of the above provisions on the Exchange Ratio may be
illustrated as follows:
<TABLE>
<CAPTION>
Median Pre-Closing Price of HUBCO
Common Stock as of the Determination Date Exchange Ratio
- ------------------------------------------ ---------------
<S> <C>
Equal to or greater than $33.98.......................... .618
Less than $33.98 but greater than $26.70................. $21.00 / the Median Pre-Closing Price
Equal to or less than $26.70 and greater than or
equal to $21.36........................................ .787
Less than $21.36......................................... .787; provided, that the Southington Board of
Directors will have the right to terminate the
Merger Agreement and HUBCO will have the right to
nullify that termination by agreeing to an Exchange
Ratio of $16.81 / the Median Pre-Closing Price.
</TABLE>
For illustrative purposes, if, hypothetically, the Median Pre-Closing
Price of HUBCO Common Stock were $31.50, the Exchange Ratio would be 0.667
($21.00 / 31.50, with the result rounded to the nearest one-thousandth) and the
holder of 100 shares of Southington Common Stock would receive 66 whole shares
of HUBCO Common Stock and $22.05 (0.7 x $31.50) in respect of the fractional
share.
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and Southington to result in stockholders of
Southington receiving in the Merger, HUBCO Common Stock with a value of $21.00
for each share of Southington Common Stock, provided that the initial Exchange
Ratio calculation (before taking into effect the Minimum and Maximum Exchange
Ratios) results in an Exchange Ratio which is neither below the Minimum Exchange
Ratio nor above the Maximum Exchange Ratio (i.e., provided the Median
Pre-Closing Price of HUBCO Common Stock is between $33.98 and $26.70). However,
there can be no assurance that the Median Pre-Closing Price will fall between
$33.98 and $26.70 or, even if it does, that the number of shares of HUBCO Common
Stock issued in exchange per share of Southington Common Stock in the Merger
will have a value of $21.00 on the Effective Time or the date on which
certificates representing such shares of HUBCO Common Stock are issued or
delivered to Southington shareholders. The Median Pre-Closing Price of HUBCO
Common Stock will be based on the median closing prices of HUBCO Common Stock
during a 10-day period ending on the Determination Date (as hereinafter
defined). The price of HUBCO Common Stock at the Effective Time may be higher or
lower than the Median Pre-Closing Price, and may be higher or lower than the
market price at the time of entering into the Merger Agreement, the time of
mailing this Proxy Statement, the time of the Meeting or the time certificates
representing shares of HUBCO Common Stock are delivered in exchange for shares
of Southington Common Stock following consummation of the Merger. Thus, the
value of the HUBCO Common Stock actually received by holders of Southington
Common Stock may be more or less than (i) the Median Pre-Closing Price, or (ii)
the value of the HUBCO Common Stock on the Effective Time resulting from the
Exchange Ratio or any possible adjustment to the Exchange Ratio as illustrated
above. Southington stockholders are urged to obtain current market quotations
for the HUBCO Common Stock and the Southington Common Stock.
The Merger Agreement provides that the Exchange Ratio will be fixed as
of the "Determination Date." Unless HUBCO and Southington agree to a different
date, the Determination Date will be any date selected by HUBCO which is not
more than ten business days prior to the Closing Date set forth in HUBCO's
Closing Notice to Southington (which Closing Date, in turn, may be any date
selected by HUBCO which is at least five business days after the date of the
Closing Notice, but not more than 15 business days after receipt of all
necessary approvals and consents, the expiration of all statutory waiting
periods and the satisfaction or waiver of the other conditions to consummation
of the Merger, other than the delivery of documents to be delivered at the
Closing). Because of the Minimum Exchange Ratio and the Maximum Exchange Ratio,
and because the price of HUBCO Common Stock at the Effective Time may not be the
same as the Median Pre-Closing Price, Southington stockholders are not assured
of receiving any specific market value of HUBCO Common Stock. Southington
shareholders will be required to vote on the proposal to approve the Merger
Agreement prior to knowing the Exchange Ratio.
It is not possible to know whether a Termination Event will occur until
after the Determination Date. The Southington Board of Directors has made no
decision as to whether it would exercise its right to terminate the Merger
Agreement if there is a Termination Event. In considering whether to exercise
its termination right in such situation, the Southington Board of Directors
would, consistent with its fiduciary duties, take into account all relevant
facts and circumstances that exist at such time and would consult with its
financial advisors and legal counsel. Approval of the Merger Agreement by the
stockholders of Southington at the Meeting will confer on the Southington Board
of Directors the power, consistent with its fiduciary duties, to elect to
consummate the Merger in the event of a Termination Event whether or not there
is any increase in the Exchange Ratio and without any further action by, or
resolicitation of, the stockholders of Southington. If Southington elects to
exercise its termination right, Southington must give HUBCO prompt notice of
that decision by 11:59 p.m. on the third business day following the
Determination Date (or the third business day following receipt by Southington
of the Closing Notice, if later). During a three business-day period commencing
with its receipt of such notice from the Southington Board of Directors, HUBCO
has the option, in its sole discretion, to increase the Exchange Ratio in the
manner set forth in the Merger Agreement and as illustrated above and thereby
avoid such termination of the Merger Agreement. HUBCO is under no obligation to
increase the Exchange Ratio, and there can be no assurance that HUBCO would
elect to increase the Exchange Ratio if Southington were to exercise its right
to terminate the Merger Agreement as set forth above. Any such decision would be
made by HUBCO in light of the circumstances existing at the time HUBCO has the
opportunity to make such an election. If HUBCO elects to increase the Exchange
Ratio as set forth in the Merger Agreement and as illustrated above, it must
give Southington notice of that election by 11:59 p.m. on the third business day
following receipt of the notice of termination from Southington, in which case
no termination of the Merger Agreement would occur as a result of a Termination
Event.
The foregoing discussion is qualified in its entirety by reference to
the applicable provisions in the Merger Agreement (a copy of which is set forth
as Appendix A to this Proxy Statement) relating to calculation of the Exchange
Ratio and a possible increase of the Exchange Ratio as the result of a
Termination Event.
Conversion of Southington Options
At the Effective Time, each option to purchase a share of Southington
Common Stock (a "Southington Option") granted under Southington's existing stock
option plans and agreements will be converted into the right to receive one or
more shares of HUBCO Common Stock. Each Southington Option will be assigned a
value (the "Option Value") equal to (a) the Median Pre-Closing Price multiplied
by the Exchange Ratio, minus (b) the stated exercise price for the Southington
Option. At the Effective Time, each Southington Option will be converted into
that number of shares of HUBCO Common Stock equal to the Option Value,
multiplied by the number of shares of Southington Common Stock for which the
option may be exercised, divided by the Median Pre-Closing Price. Southington
currently has options outstanding under The Bank of Southington 1995 Incentive
Stock Option Plan and the Bank of Southington 1997 Employee Stock Option Plan.
Cash in Lieu of Fractional Shares
No fractional shares of HUBCO Common Stock will be issued in exchange
for either Southington Common Stock or Southington Options. Instead, holders of
Southington Securities will receive cash equal to the fractional share interest
multiplied by the Median Pre-Closing Price of HUBCO Common Stock, without
interest. All shares of HUBCO Common Stock to be issued to each holder of
Southington Securities will be aggregated to constitute as many whole shares as
possible before determining such person's fractional share interest.
Dissenters' Rights of Appraisal
Holders of Southington Common Stock who follow the procedures specified
in Section 36a-125(h) of the CBL and 33-855 through 33-872, inclusive, of the
Connecticut General Statutes will be entitled to the rights and remedies of
dissenting shareholders. Pursuant to Section 36a-125(h), Southington
shareholders have the right to dissent from the Merger and to obtain payment of
the fair value of their shares of Southington Common Stock if the Merger is
consummated. Necessary procedural steps are set forth in Sections 36a-125(h) and
33-855 through 33-872, inclusive, of the Connecticut General Statutes. See
"RIGHTS OF DISSENTING SOUTHINGTON SHAREHOLDERS" and Appendix D to this Proxy
Statement, which set forth the steps to be taken by a holder of Southington
Common Stock who wishes to exercise the right to dissent.
Background of and Reasons for the Merger
Background of the Merger
Southington was formed as a state chartered bank in 1985. The period
since the organization of Southington has been one of continuous and significant
change in the financial services industry, marked by steadily increasing
competition and widespread consolidation. These issues were even more pronounced
in Connecticut which was particularly impacted by the recession which began in
1989, and its devastating impact on the banking sector. In light of the
Southington Board's belief that continued consolidation and competition in the
financial services industry would make it increasingly difficult for smaller
banks like Southington to maintain their competitive position and market share,
the Southington Board has from time to time considered and analyzed
Southington's strategic alternatives.
In November 1996, Southington hired Endicott to help Southington
prepare a three year strategic plan. Endicott met with management and the Board
of Directors to discuss the operations, prospects and valuation of Southington.
Pursuant to these discussions, the Southington Board became increasingly
concerned with Southington's ability to provide a reasonable rate of return to
its shareholders given (1) the bank's size, (2) the capital investment necessary
to keep up with technology change, (3) the increasingly complex regulatory
environment, and (4) the rapid consolidation in the industry generally and
Connecticut in particular.
In April 1997, the Southington Board discussed Southington's prospects
regarding mergers and acquisitions. In May 1997, Southington engaged Endicott to
advise the Board of Directors on these issues. Endicott reviewed for the Board
of Directors various alternatives involving continued independence or a merger
or acquisition transaction. The Southington Board met numerous times to discuss
(1) the ongoing review of Southington's strategic alternatives as part of the
development of the strategic plan; (2) a review of potential acquisition, merger
and sale candidates; (3) a review of the financial institutions merger and
acquisition market and recent regional transactions which could impact
Southington's ability to compete and Southington's acquisition value; and (4)
detailed reviews of certain potential merger candidates and analyses of the pro
forma impact of a business combination with such candidates on Southington's
shareholders.
In June 1997, the Southington Board of Directors met to further discuss
analyses of selected potential merger candidates, to review the general merger
and acquisition environment and to further discuss strategic alternatives. Based
on these discussions, the Board of Directors authorized Endicott to contact
certain selected financial institutions on a discreet basis to discuss their
potential interest in engaging in a business combination transaction with
Southington. The institutions were selected by the Board of Directors based on
their suitability in light of certain characteristics including size, location,
performance, operating strategy, share value pro forma impact, ability to
service local consumers and small businesses and the possibility that a merger
with Southington and any such institution could be followed by the acquisition
of the combined entity by another, larger financial institution. In these
discussions, Endicott was instructed to ascertain the level of preliminary
interest that such potential merger partners might have in Southington. The
Board of Directors wanted this information so that it might evaluate the
difference, if any, between the value it could provide to its shareholders by
remaining independent versus a business combination.
In June 1997, Endicott contacted seven institutions concerning their
interest in a business combination transaction with Southington. Of these, five
expressed interest in pursuing discussions while two were not interested. Each
of the five interested parties met with a representative of Endicott or
Southington, or both, to discuss the nature of a possible transaction and to
answer questions that such interested party might have. These preliminary
indications implied a range of value per share of Southington Common Stock of
$17 - $20.25, and implied a range of structures including 100% stock-for-stock
merger, stock-cash mix, or a 100% cash transaction. On July 29, 1997, the Board
of Directors reviewed these preliminary indications of interest and instructed
Endicott to meet with HUBCO and to ascertain their interest in a transaction at
$21.00 per share in stock, to discuss the prospects for employees and customers
of Southington and to discuss the manner in which HUBCO would approach managing
the transition process of such transaction.
Endicott and Southington management reviewed with the Board of
Directors the results of this meeting and HUBCO's willingness to meet
Southington's requests. Given this, the Board of Directors authorized entering
into a confidentiality agreement with HUBCO, providing confidential information
to HUBCO, and continuing confidential discussions to determine if an agreeable
structure could be negotiated to effect an acquisition of Southington by HUBCO.
Over the next several days, Southington's management and representatives of
Endicott held meetings and discussions with HUBCO's management concerning the
proposed transaction and the terms of a definitive merger agreement.
On August 13, 1997, due to unusual volume in the trading of its stock
and unusual share appreciation, Southington publicly released a statement that
Southington was in receipt of an acquisition proposal and that there could be no
assurances that a transaction would be negotiated. Following this press release,
Southington received telephone calls from two additional institutions interested
in a potential acquisition of Southington. A representative of Endicott reviewed
with these institutions the nature of the discussions which had taken place to
date, and provided guidance in the manner in which to inform Southington of any
interest such institution would have in a transaction. Over the following few
days, each party indicated interest in a stock-for-stock transaction, one at
$20.00 and one in a range of $20.00-$22.00.
Endicott reviewed these additional indications of interest with
Southington. Principally due to the advanced stage of negotiations with HUBCO
and the fact that the additional indications of interest were preliminary,
Endicott was instructed to continue in the discussions with HUBCO under the
terms which had been previously outlined by the Board of Southington. The
representatives of HUBCO conducted on-sight due diligence of Southington.
Representatives of Southington conducted documentary due diligence of HUBCO and
held interviews with HUBCO's senior management. On August 16, 1997, the
Southington Board of Directors met to review presentations by both Endicott and
Tyler Cooper & Alcorn, LLP, special legal counsel to Southington. Members of
executive management, together with its financial and legal advisors, reviewed
the background of the proposed transaction, the potential benefits of the
transaction, a summary of the due diligence investigation of HUBCO and financial
and valuation analyses of the proposed transaction. Endicott reviewed the
financial analyses performed by it in connection with the preparation of its
fairness opinion (See "Opinion of Southington Financial Advisor"). Counsel
reviewed the terms of the proposed agreements and discussed the obligations of
the Southington Board of Directors in its consideration of the proposed merger
with HUBCO, including the specific statutory considerations required by
Connecticut General Statutes Section 33-756(d).
Following review by the Southington Board of Directors of the foregoing
matters and the delivery by Endicott of its oral opinion that, as of such date,
the Exchange Ratio was fair to Southington shareholders from a financial point
of view, the Southington Board of Directors unanimously approved the Merger
Agreement and related agreements and the Merger, and the definitive Agreement
and Plan of Merger was executed. Public announcement of the proposed merger was
made before the opening of the AMEX on August 18, 1997.
Recommendation of the Southington Board of Directors and Reasons for
the Merger
The Southington Board of Directors has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, Southington and its shareholders. The Southington Board therefore
unanimously recommends that holders of Southington Common Stock vote to approve
and adopt the Merger Agreement. The Southington Board believes that the Merger
will enable holders of Southington's Common Stock to realize increased value due
to the premium over net income per share and book value per share of
Southington's Common Stock. The Board also believes that the Merger may enable
Southington Shareholders to participate in opportunities for appreciation of
HUBCO Common Stock. In reaching its decision to approve the Merger Agreement,
the Southington Board consulted with its outside counsel regarding legal terms
of the Merger and the Southington Board's fiduciary obligations in its
consideration of the proposed Merger, its financial advisor, Endicott, regarding
the financial aspects and fairness of the proposed Merger Agreement, as well as
with management of Southington, and, without assigning any relative or specific
weight, considered the following material factors, both from a short-term and
long-term perspective:
(i) The Southington Board's familiarity with, and review of, the
business, financial condition, results of operations and prospects of
Southington, including, but not limited to, its potential growth, development,
productivity and profitability and the business risks associated therewith;
(ii) The current and prospective environment in which Southington
operates, including national and local economic conditions, the highly
competitive environment for financial institutions generally, the increased
regulatory burden on financial institutions, and the trend toward consolidation
in the financial services industry;
(iii) The potential appreciation in market and book value of
Southington's Common Stock on both a short- and long-term basis, as a stand
alone entity;
(iv) Information concerning the business, financial condition, result
of operations, asset quality and prospects of HUBCO including the long-term
growth potential of HUBCO Common Stock, the future growth prospects of HUBCO
combined with Southington following the proposed Merger, and the potential
synergies expected from the Merger and the business risks associated therewith;
(v) The fact that HUBCO's offer of HUBCO Common Stock in exchange for
Southington's Common Stock can be effected on a tax-free basis for Southington
shareholders, and the potential for appreciation and growth for the market and
book value of HUBCO Common Stock following the proposed Merger;
(vi) The oral presentation and opinion of Endicott that the terms of
the Merger Agreement are fair to the holders of Southington's Common Stock from
a financial point of view (see "Opinion of Financial Advisor" below);
(vii) The advantages and disadvantages of Southington remaining as an
independent institution or affiliating with a larger institution; and
(viii) The short- and long-term interests of Southington and its
shareholders, the interests of the employees, customers, creditors and suppliers
of Southington, and the interests of the Southington community that may be
served to advantage by an appropriate affiliation with a larger institution with
increased economies of scale, and with a greater capacity to serve all of the
banking needs of the community.
HUBCO's Reasons
HUBCO entered into the Merger Agreement with Southington as part of
HUBCO's ongoing strategy of growth through acquisitions.
HUBCO's acquisition strategy consists of identifying financial
institutions with business philosophies that are similar to HUBCO's, which
operate in markets that are geographically within or close to those of HUBCO,
and which provide an ability to enhance earnings per share over an acceptable
period after the acquisition, while providing acceptable rates of return.
Acquisitions are also evaluated in terms of asset quality, interest rate risk,
core deposit base stability, potential operating efficiencies and management
abilities.
In the view of the HUBCO Board, the Merger constitutes an acquisition
that is in line with HUBCO's strategy and provides a complement to its existing
franchise. Upon completion of the Merger, HUBCO expects to have a network of 30
branch banking offices through central and southwestern Connecticut. The HUBCO
Board believes that Southington's earnings capacity will be enhanced as a result
of the Merger -- through cost savings from HUBCO's provision of back-office and
support services to Southington, HUBCO's ability to offer expanded services to
Southington customers and HUBCO's financial strength -- thereby positively
contributing to HUBCO's earnings.
Interests of Certain Persons in the Merger
In considering the recommendation of the Southington Board of Directors
with respect to the Merger, holders of Southington Common Stock should be aware
that certain members of the Board of Directors and management of Southington
have certain interests in the Merger in addition to their interests generally as
stockholders of Southington. All of such additional interests are described
below, to the extent material, and except as described below such persons have,
to the best knowledge of Southington, no material interest in the Merger apart
from those of stockholders generally. The Southington Board of Directors was
aware of these interests of its directors and officers and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
Beneficial Ownership of Southington Common Stock
As of the Record Date, the directors and executive officers of
Southington and its affiliates beneficially owned (excluding shares which could
be acquired upon the exercise of options) an aggregate of 322,185 shares of the
Southington Common Stock (25.85% of the issued and outstanding shares). The
Southington directors have agreed to vote the shares of Southington Common Stock
that they beneficially own in favor of the Merger Agreement. No consideration
was paid to any of the directors for this agreement. HUBCO required that the
directors enter into this agreement as a condition to HUBCO entering into the
Merger Agreement. See "THE MEETING -- Required Vote".
Lafayette Board Membership
The Merger Agreement provides that one nominee designated by
Southington and acceptable to HUBCO will be appointed to Lafayette's Board of
Directors, effective at the Effective Time. Such nominee is to be Roman F.
Garbacik, currently Southington's Chairman. The Merger Agreement also provides
that any current director of Southington who is not elected to the Board of
Directors of Lafayette will be invited to become a member of a Lafayette
advisory board for one year from the Effective Time and as such will be paid an
annual retainer of $1,000. Thus, all such persons will continue to receive
compensation from Lafayette for a period of time after the Merger.
Indemnification
In the Merger Agreement, HUBCO has agreed to indemnify, defend and hold
harmless each person who is, has been, or becomes prior to the Effective Time, a
director, officer, employee or agent of Southington, or who serves or has served
at the request of Southington in any capacity with any other entity
(collectively, the "Indemnitees"), to the fullest extent which Southington would
have been permitted under applicable law and Southington's Articles of
Incorporation and By-laws had the Merger not occurred, with respect to any
claims made against such person because he or she is or was a director, officer,
employee or agent of Southington or serves or has served at the request of
Southington in any capacity with any other entity. In the Merger Agreement,
HUBCO has also agreed to cover Southington's officers and directors under either
an extension of Southington's existing directors' and officers' liability
insurance policy or a rider to HUBCO's then current policy for a period of at
least six years after the Effective Time.
Change in Control Agreements, Severance Policy and Option Acceleration
Pursuant to a Change in Control Agreement between Southington and Bryan
P. Bowerman, its President and CEO, Mr. Bowerman will have the right to receive
a severance payment of $312,500 payable in 30 equal monthly installments upon
consummation of the Merger, as well as continued coverage under Southington's
medical benefits plan during such 30-month period. Other Southington executive
officers and employees are covered by Southington's severance policy, pursuant
to which they could receive substantial payments as a consequence of the Merger
if their employment is terminated or constructively terminated following the
Merger. Southington, with HUBCO's consent, has also agreed that certain officers
and other key employees may receive stay-on bonuses to assure their continuation
with Southington through the Effective Time and for a period of time thereafter.
New employment arrangements for Mr. Bowerman and possibly other officers may be
entered into after consummation of the Merger.
Certain executive officers of Southington have stock options which will
become vested by virtue of the Merger. For information regarding the treatment
of Southington Options, see "--Conversion of Southington Options".
Opinion of Southington's Financial Advisor
Pursuant to a letter agreement dated as of May 27, 1997, (the "Endicott
Agreement"), Southington retained Endicott as its financial advisor in
connection with strategic planning and merger and acquisition transactions.
Pursuant to the Endicott Agreement, Endicott assisted Southington in negotiating
and structuring the terms of the Merger, particularly the terms of the Merger
described under the caption "The Proposed Merger - Consideration."
The investment banking business of Endicott includes the valuation of
financial institutions and their securities in connection with mergers and
acquisitions and other corporate transactions. The Southington Board chose
Endicott because of its expertise, experience and familiarity with the financial
institutions industry.
In connection with its acting as financial advisor to Southington, at
the August 16, 1997 meeting at which the Southington Board approved the merger
agreement, Endicott delivered its oral opinion to the Southington Board, that,
as of such date, the Exchange Ratio was fair, from a financial point of view, to
the holders of shares of Southington Common Stock. Endicott has delivered to
Southington a written opinion (the "Endicott Opinion") dated the date of this
Proxy Statement that, as of the date of such opinion, the Exchange Ratio is
fair, from a financial point of view, to the holders of Southington Common
Stock. The full text of the Endicott Opinion is attached as Appendix C to this
Proxy Statement and is incorporated herein by reference. The description of such
opinion set forth herein is qualified in its entirety by reference to Appendix
C. Holders of Southington Common Stock are urged to read the Endicott Opinion in
its entirety for a description of the procedures followed, assumptions made,
matters considered and qualifications on the review undertaken by Endicott in
connection herewith. The Endicott Opinion is directed only to the Exchange Ratio
and does not constitute a recommendation to any shareholder of Southington as to
how such shareholder should vote at the Meeting.
No limitations were imposed on Endicott by the Southington Board with
respect to the investigation made or procedures followed by Endicott in
rendering its fairness opinion. In connection with rendering such fairness
opinion to the Southington Board, Endicott performed a variety of financial
analyses. The following is a summary of the material financial analyses
performed by Endicott, but does not purport to be a complete description of
Endicott's analyses or presentation at the August 16, 1997 meeting of the
Southington Board. Endicott believes that its analyses must be considered as a
whole and that selecting 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 processes underlying the fairness
opinion of Endicott. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or summary description. In its analyses, Endicott made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which are beyond the control of
Southington and HUBCO. Any estimates contained in Endicott's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which the
companies or their securities may be sold.
Analyses of Selected Merger Transactions
Endicott reviewed merger and acquisition transactions announced since
January 1, 1990 involving public commercial banking institutions as acquirees
and having a transaction value over $15 million (each a "Transaction"). Among
those reviewed were: (i) Transactions announced between January 1, 1996 and
December 31, 1996 ("1996 Nationwide Transactions"), (ii) Transactions announced
between January 1, 1997 and August 9, 1997 ("1997 Nationwide Transactions"), and
(iii) Transactions involving institutions located in the New England States
announced between January 1, 1997 and August 9, 1997 ("1997 Regional
Transactions"). Endicott reviewed the price to last twelve months earnings,
price to book value, price to tangible book value, price to deposits, price to
assets, and deposit premium paid in each such transaction and computed high,
low, mean and median ratios and premiums for the respective groups of
transactions. Endicott also computed the foregoing ratios for the Merger
assuming a price per share of Southington Common Stock in the Merger of $21.00.
Endicott's computations yielded the following median multiples for the 1996
Nationwide Transactions, the 1997 Nationwide Transactions and the 1997 Regional
Transactions, respectively, as compared with the following indicated multiples
for the Merger: (i) price to last twelve months earnings multiples of 17.05x,
18.69x, and 14.02x, compared with 22.68x for the Merger; (ii) price to book
value multiples of 203.4%, 224.5% and 214.5% as compared with 234.83% for the
Merger; (iii) price to tangible book value of 207.5%, 229.4% and 222.3% as
compared with 234.83% for the Merger; and (iv) core deposit premiums of 13.3%,
15.6% and 11.5% as compared with 13.47% for the Merger. Based upon the median
multiples for 1996 Nationwide Transactions, Endicott derived an imputed range of
values per share of Southington Common Stock of $15.35 to $21.13. Based upon the
median multiples for 1997 Nationwide Transactions, Endicott derived an imputed
range of values per share of Southington Common Stock of $12.62 to $19.63.
Discounted Earnings and Dividend Stream and Terminal Value Analysis
Using a discounted earnings dividend stream and terminal value
analysis, Endicott estimated the future stream of earnings flows that
Southington could be expected to produce through 1999 under various
circumstances, assuming Southington performed in accordance with the earnings
forecasts of Southington's management. To approximate the terminal value of
Southington Common Stock at the end of the three year period (December 31,
1999), Endicott applied price to earnings multiples ranging from 8 to 20 and
applied multiples of tangible book value ranging from 100% to 250%. The net
income streams and terminal values were then discounted to present values using
different discount rates (ranging from 10% to 12%) chosen to reflect different
assumptions regarding the required rates of return holders or prospective buyers
of Southington Common Stock would expect. This analysis assumed that Southington
will continue its current cash dividends policy and indicated a reference range
of between $7.89 and $22.16 per share. When an 11.5% discount rate was applied
to the median merger market multiples for Nationwide Transactions, the analysis
indicated a reference range of $13.55 to $19.09 per share.
Pro Forma Merger Analysis
Endicott performed pro forma merger analyses that combined
Southington's and HUBCO's current and projected income statement and balance
sheets based on earnings forecasts of Southington and HUBCO management,
respectively. Assumptions and analyses of the accounting treatment, acquisition
adjustments, operating efficiencies and other adjustments were made to arrive at
a base case pro forma analysis to determine the effect of the transaction on
both Southington and HUBCO. Endicott noted that, based on the $21.00 per share
price for each share of Southington Common Stock, the impact of the Merger on
HUBCO's earnings per share and tangible book value per share based on such
forecasts did not appear to be material.
Analysis of Publicly Traded Companies
In preparing its presentation, Endicott used publicly available
information to compare selected financial and market information, including book
value, tangible book value, earnings, asset quality ratios, loan loss reserve
levels, profitability and capital adequacy for HUBCO and other publicly traded
regional commercial banks located in the Mid-Atlantic United States. This peer
group consisted of institutions ranging in assets from 1 billion to 5 billion.
Endicott used similar data for nationwide high-performing commercial banks in
the same asset size range that had a return on equity for the last fiscal
quarter of greater than 15% and a price-to-tangible book value greater than
175%. Endicott reviewed the historical financial information for HUBCO and the
median value for each group since December 1992. Endicott calculated a range of
stock market valuation of the selected peer groups based on their valuation
multiples at December 31, 1996, June 30, 1997, and at August 5, 1997. The range
for December 31, 1996 was $15.53 to $30.26, for June 30, 1997 was $16.76 to
$32.16, and for August 5, 1997 was $18.96 to $34.70.
In connection with rendering its opinion, Endicott reviewed and
considered, among other things: (a) the Merger Agreement; (b) audited
consolidated financial statements and management's discussion and analysis of
financial condition and results of operations for Southington for the three
fiscal years ended December 31, 1994, December 31, 1995, and December 31, 1996
and the unaudited consolidated financial statements of Southington for the
periods ending March 31, 1997 and June 30, 1997; (c) audited consolidated
financial statements and management's discussion and analysis of financial
condition and results of operations for HUBCO for the three fiscal years ended
December 31, 1994, December 31, 1995, and December 31, 1996 and the unaudited
consolidated financial statements of HUBCO for the periods ending March 31, 1997
and June 30, 1997; (d) financial analyses and forecasts for Southington and
HUBCO prepared by and/or reviewed with the respective managements of Southington
and HUBCO; (e) the views of senior management of Southington and HUBCO of their
respective past and current business operations, results thereof, financial
condition and future prospects; (f) certain reported price and trading activity
for Southington Common Stock and HUBCO Common Stock, including a comparison of
certain financial and stock market information for Southington and HUBCO with
similar information for certain other companies the securities of which are
publicly traded; (g) the financial terms of recent business combinations in the
banking industry; (h) the pro forma impact of the transaction on HUBCO; (i) the
current market environment generally and the banking environment in particular;
and (j) such other information, financial studies, analyses and investigations
and financial, economic and market criteria which Endicott considered relevant.
Pursuant to the Endicott Agreement, Southington retained Endicott to
act as independent financial advisor, to render general advisory services and
also to specifically advise Southington in connection with its strategic
planning and merger and acquisition activities. Pursuant to the Endicott
Agreement, Southington paid Endicott a fee of $25,000 for rendering its fairness
opinion relating to the Merger at the August 16, 1997 meeting of the Southington
Board. Also pursuant to the Endicott Agreement, Southington is obligated to pay
Endicott quarterly retainer fees of $5,000 for the quarters ending June 30, 1997
and thereafter. Southington has paid such fees through the quarter ending
September 31, 1997. In addition, and pursuant to the terms of the Endicott
Agreement, Southington will pay Endicott a transaction fee equal to 0.75% of the
aggregate transaction value of the consideration to be paid by HUBCO in the
Merger, (calculated at the Effective Time), of which approximately 25% was paid
upon the signing of the Merger Agreement and the remaining portion is payable at
the closing of the Merger. Pursuant to the Endicott Agreement, the $25,000
fairness opinion fee and the $5000 quarterly retainer payments (up to a maximum
of four such quarterly payments) will be credited against the transaction fee.
Based upon the Merger closing as contemplated in the Merger Agreement and
assuming a market price for HUBCO Common Stock of $31.625, (the closing price
for HUBCO Common Stock on September 28, 1997) Endicott would be paid a total
transaction fee of approximately $200,000 for its services in connection with
the Merger. Southington has also agreed to reimburse Endicott for its reasonable
out-of-pocket expense in connection with its engagement and to indemnify
Endicott and its affiliates and their respective partners, directors, officers,
employees, agents and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
THE FULL TEXT OF ENDICOTT'S FAIRNESS OPINION IS ATTACHED AS APPENDIX C
TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION
OF THE FAIRNESS OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX C. HOLDERS OF SOUTHINGTON STOCK ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS OF THE REVIEW UNDERTAKEN
BY ENDICOTT IN CONNECTION THEREWITH. ENDICOTT'S OPINION IS DIRECTED SOLELY TO
THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE TERMS OF THE MERGER
AGREEMENT AND DOES NOT CONSTITUTE ANY RECOMMENDATION TO THE BOARD OF DIRECTORS
OF SOUTHINGTON OR TO THE HOLDERS OF SOUTHINGTON STOCK WITH RESPECT TO ANY VOTE
AT THE MEETING.
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, as amended
(the "Securities Act") and will be freely transferable, except for shares
received by persons, including directors and executive officers of Southington,
who may be deemed to be "affiliates" of Southington 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%
shareholders may be deemed 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.
Persons who may be deemed to be "affiliates" of Southington have
delivered letters to HUBCO in which they have agreed to certain restrictions on
their ability to sell, transfer or otherwise dispose of ("transfer") any
Southington Common Stock owned by them and any HUBCO Common Stock acquired by
them in the Merger. Pursuant to the accounting rules governing a pooling of
interests, such persons have agreed not to transfer the shares during the period
beginning 30 days prior to the Effective Time and ending on the date on which
financial results covering at least 30 days of post-merger combined operations
of HUBCO and Southington have been published or filed by HUBCO. Also, in
connection with the pooling of interests rules, such persons have agreed not to
transfer their Southington Common Stock in the period prior to 30 days before
the Effective Time without giving HUBCO advance notice and an opportunity to
object if the transfer would interfere with pooling of interests accounting for
the Merger. Pursuant to Rule 145, such persons have also agreed to refrain from
transferring HUBCO Common Stock acquired by them in the Merger, except in
compliance with certain restrictions imposed by Rule 145. Certificates
representing the shares of HUBCO Common Stock acquired by each such person
pursuant to the Merger will bear a legend reflecting that the shares are
restricted in accordance with the letter signed by such person and may not be
transferred except in compliance with such restrictions.
Persons who may be deemed "affiliates" of HUBCO have also delivered
letters to HUBCO in which they have agreed not to transfer HUBCO Common Stock
beneficially owned by them in violation of the pooling of interests restrictions
set forth above with respect to Southington.
Conditions to the Merger
The obligation of each party to consummate the Merger is subject to
satisfaction or waiver of certain conditions, including (i) approval of the
Merger Agreement and the transactions contemplated thereby by the requisite vote
of the holders of Southington Common Stock; (ii) the receipt of all consents,
approvals and authorizations of all necessary federal and state government
authorities and expiration of all required waiting periods, necessary for the
consummation of the Merger (see "-- Regulatory Approvals"); (iii) the
effectiveness of the registration statement covering the shares of HUBCO Common
Stock to be issued to Southington shareholders, and the qualification of the
issuance of HUBCO Common Stock in every state where such qualification is
required under applicable state securities laws; (iv) the absence of any
litigation that would restrain or prohibit the consummation of the Merger; (v)
the receipt of a letter from HUBCO's independent accountants that the Merger
will qualify to be treated by HUBCO as a pooling of interests for accounting
purposes; and (vi) receipt by the parties of an opinion of Pitney, Hardin, Kipp
& Szuch to the effect that the exchange of Southington Common Stock for HUBCO
Common Stock is a tax-free reorganization within the meaning of Section 368 of
the Code. See "-- Federal Income Tax Consequences".
The obligation of HUBCO to consummate the Merger is also conditioned
on, among other things, (i) the continued accuracy in all material respects of
the representations and warranties of Southington contained in the Merger
Agreement; and (ii) the performance by Southington, in all material respects, of
all its obligations under the Merger Agreement.
The obligation of Southington to consummate the Merger is also
conditioned on, among other things, (i) the continued accuracy in all material
respects of the representations and warranties of HUBCO contained in the Merger
Agreement; and (ii) the performance by HUBCO, in all material respects, of all
its obligations under the Merger Agreement.
Conduct of Business Pending the Merger
The Merger Agreement requires Southington to conduct its business prior
to the Effective Time only in the ordinary course of business and consistent
with prudent banking practices, except as permitted under the Merger Agreement
or with the written consent of HUBCO. Under the Merger Agreement, Southington
has agreed not to take certain actions without the prior written consent of
HUBCO or unless permitted by the Merger Agreement, including, among other
things, the following: (a) change any provision of its Articles of Incorporation
or By-laws; (b) change the number of shares of its authorized or issued capital
stock other than as disclosed to HUBCO or issue or grant any option, warrant,
call, commitment, subscription, right to purchase or agreement of any character
relating to its authorized or issued capital stock, or any securities
convertible into shares of such stock, or split, combine or reclassify any
shares of its capital stock, or declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, except for the equivalent quarterly cash dividend
on Southington Common Stock of up to $.07 per share (up to $.08 per share for
the fourth quarter of 1997 and thereafter) described under "MARKET PRICE AND
DIVIDEND MATTERS -- Limitations on Dividends Under the Merger Agreement"; (c)
grant any severance or termination pay (other than pursuant to written policies
or contracts of Southington in effect on the date of the Merger Agreement and
disclosed to HUBCO) to, or enter into or amend any employment or severance
agreement with, any of its directors, officers or employees; (d) adopt any new
employee benefit plan or arrangement of any type, or award any increase in
compensation or benefits to its directors, officers or employees; (e) sell or
dispose of any substantial amount of assets or voluntarily incur any significant
liabilities other than in the ordinary course of business consistent with past
practices and policies or in response to substantial financial demands upon its
business; (f) make any capital expenditures other than capital expenditures
which are either pursuant to binding commitments existing on the date of the
Merger Agreement or necessary to maintain existing assets in good repair and
expenditures described in business plans or budgets previously furnished to
HUBCO; (g) file any applications or make any contracts with respect to branching
or site location or relocation; (h) agree to acquire in any manner whatsoever
(other than to realize upon collateral for a defaulted loan) any business or
entity (i) make any material change in its accounting methods or practices,
other than changes required in accordance with generally accepted accounting
principles or regulatory authorities; (j) take any action that would result in
any of Southington's representations or warranties being untrue or incorrect at
the Effective Time in any material respect or that would cause any of its
conditions to closing not to be satisfied; or (k) agree to do any of the
foregoing.
Under the Merger Agreement, Southington cannot, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than HUBCO) concerning any
merger, sale of shares of capital stock or sale of substantial assets or
liabilities not in the ordinary course of business or similar transactions (an
"Acquisition Transaction"); provided, however, that notwithstanding the
foregoing, Southington may enter into discussions or negotiations or provide any
information in connection with an unsolicited possible Acquisition Transaction
if the Board of Directors of Southington, after consulting with counsel,
determines in the exercise of its fiduciary responsibilities that such
discussions or negotiations should be commenced or such information should be
furnished. Southington has agreed to promptly communicate to HUBCO the terms of
any proposal, whether written or oral, which it may receive with respect to any
such Acquisition Transaction, and the fact that it is having discussions or
negotiations with a third party about an Acquisition Transaction.
Customary Representations, Warranties and Covenants
The Merger Agreement contains customary mutual representations and
warranties, as well as covenants, relating to, among other things, (a) corporate
organization and similar corporate matters; (b) the capital structures of each
of HUBCO and Southington; (c) authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (d) documents
filed by each of HUBCO and Southington with the Commissioner and the FDIC,
respectively, and the accuracy of information contained therein; (e) the
accuracy of information supplied by each of HUBCO and Southington in connection
with the Registration Statement and this Proxy Statement; (f) compliance with
applicable laws; (g) the absence of material litigation; (h) filing of tax
returns and payment of taxes; (i) matters relating to certain material
contracts; (j) director and officer contracts and retirement and other employee
plans and matters relating to the Employee Retirement Income Security Act of
1974, as amended; (k) insurance matters; (l) certain bank regulatory matters;
(m) absence of certain material changes or events from June 30, 1997; (n) the
absence of actions that would prevent there being a tax-free reorganization or
the use of the "pooling of interests" method to account for the Merger; (o)
title to properties; (p) the adequacy of loan loss reserves; (q) environmental
compliance; (r) brokers' and finders' fees; (s) cooperation on applications and
filings; and (t) the absence of an agreement with bank regulators which
restricts materially the conduct of HUBCO's or any of its subsidiaries' or
Southington's business.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior
receipt of all necessary regulatory approvals. Consummation of the Merger
requires approval of the Merger by the Commissioner under the CBL, and the FDIC
under the Bank Merger Act (the "Bank Merger Act"), and the approval of the
Merger or waiver of the need for such approval by the FRB. Approval by the
Commissioner or the FDIC does not constitute an endorsement of the Merger or a
determination by any such regulator that the terms of the Merger are fair to the
shareholders of Southington. Applications for approval were filed on September
12, 1997 with the Commissioner and on September 12, 1997 with the FDIC. While
HUBCO and Southington anticipate receiving all such approvals, there can be no
assurance that they will be granted, or that they will be granted on a timely
basis or that they will be granted without conditions unacceptable to HUBCO or
Southington.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, Southington will be
merged with and into Lafayette, with Lafayette as the Surviving Entity.
Following the Merger, Lafayette will continue to operate as a wholly-owned
subsidiary of HUBCO. At the Effective Time, one person designated by Southington
and acceptable to HUBCO who is to be Roman F. Garbacik will become a director of
Lafayette.
Exchange of Certificates, Issuance of Shares for Options
At the Effective Time, holders of certificates formerly representing
shares of Southington Common Stock will cease to have any rights as Southington
shareholders and their certificates automatically will represent the shares of
HUBCO Common Stock into which their shares of Southington Common Stock will have
been converted by the Merger. As soon as practicable after the Effective Time,
HUBCO will send written instructions and a letter of transmittal to each holder
of Southington Common Stock, indicating the method for exchanging such holder's
stock certificates for the certificates representing those shares of HUBCO
Common Stock into which such holder's shares of Southington Common Stock have
been exchanged. Holders of Southington Common Stock should not send in their
stock certificates until they receive instructions from HUBCO.
Each share of HUBCO Common Stock for which shares of Southington Common
Stock or Southington Options are exchanged will be deemed to have been issued at
the Effective Time. Accordingly, holders of Southington Securities 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 such HUBCO
Common Stock as of dates on or after the Effective Time. However, no dividend or
other distribution will actually be paid with respect to any shares of HUBCO
Common Stock until the certificate or certificates formerly representing shares
of Southington Common Stock have been surrendered, at which time any accrued
dividends and other distributions on such shares of HUBCO Common Stock will be
paid without interest. See "-- Consideration".
Holders of outstanding certificates for Southington 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 Southington Common Stock previously
represented by the surrendered certificates have been converted. At the time of
issuance of the new stock certificate, each shareholder so entitled will receive
a check for the amount of the fractional share interest, if any, to which the
shareholder may be entitled.
Holders of Southington Options will receive, promptly after the
Effective Time, a certificate representing the full number of shares of HUBCO
Common Stock into which the Southington Options have been converted. At the time
of issuance of the stock certificates, each holder of a Southington Option will
receive a check for the amount of the fractional share interest, if any, to
which the holder of the Southington Option may be entitled.
Effective Time; Amendments; Termination
The Closing will occur on the Closing Date to be determined by HUBCO
and set forth in the Closing Notice to Southington. The Closing Date specified
by HUBCO in the Closing Notice must be at least five business days after the
date of the Closing Notice, but not more than 15 business days after receipt of
all necessary approvals and consents, the expiration of all statutory waiting
periods and the satisfaction or waiver of the other conditions to consummation
of the Merger, (other than the delivery of documents to be delivered at the
Closing). The Closing may also be set for another day mutually agreed to by
HUBCO and Southington. The parties currently anticipate closing in December
1997. Immediately following the Closing, HUBCO will file a certificate of merger
with the Secretary of State of the State of Connecticut, which will specify the
Effective Time of the Merger, which HUBCO and Southington anticipate will be the
close of business on the Closing Date. The exact Closing Date is dependent upon
satisfaction of all conditions precedent, some of which are not under the
control of HUBCO or Southington. In the Closing Notice, HUBCO is also required
to specify the "Determination Date," which is used in determining the Median
Pre-Closing Price. The Determination Date is to be not more than ten business
days prior to the Closing Date set forth in the Closing Notice. See "--
Conditions to the Merger" and "-- Regulatory Approvals".
The Merger Agreement may be amended, modified or supplemented with
respect to any of its terms by the mutual consent of HUBCO and Southington at
any time prior to the Effective Time. However, after approval of the Merger
Agreement by the shareholders of Southington, no amendment can be made which
reduces the amount or changes the form of consideration to be delivered to the
shareholders of Southington without the approval of such shareholders.
The Merger Agreement may be terminated by the mutual consent of
Southington and HUBCO. The Merger Agreement may also be terminated by
Southington or HUBCO if, among other things, (i) the Effective Time has not
occurred on or before March 31, 1998 (the "Cutoff Date") unless the failure of
such occurrence is due to the failure of the party seeking to terminate to
perform or observe its covenants in the Merger Agreement; (ii) a vote of the
stockholders of Southington to approve the Merger Agreement is taken and such
stockholders fail to approve the Merger Agreement at their meeting; or (iii) any
regulatory approvals necessary to consummate the transaction have been denied or
withdrawn at the request of the regulatory agency or such approval is given with
conditions which materially impair the value of Southington, taken as a whole,
to HUBCO (but then only by HUBCO).
HUBCO may terminate the Merger Agreement if there has been a material
adverse change in the business, operations, assets or financial condition of
Southington, taken as a whole, from that disclosed by Southington to HUBCO in
its Quarterly Report on Form F-4 for the six months ended June 30, 1997 and
Southington's Annual Report to shareholders for the year ended December 31,
1996, or Southington breaches in a material respect any representation, warranty
or covenant, agreement or obligation under the Merger Agreement and does not
cure such breach within 30 days after receipt by Southington of a notice of
breach. HUBCO may also terminate the Merger Agreement if the conditions to
HUBCO's obligations to close are not satisfied and are not capable of being
satisfied by the Cutoff Date.
Southington may terminate the Merger Agreement if there has been a
material adverse change in the business, operations, assets or financial
condition of HUBCO and its subsidiaries taken as a whole from that disclosed by
HUBCO in its Quarterly Report on Form 10-Q for the six months ended June 30,
1997 and its Annual Report on Form 10-K for the fiscal year ended December 31,
1996, or HUBCO and its subsidiaries, taken as a whole, breaches in a material
respect any representation, warranty or covenant, agreement or obligation under
the Merger Agreement and does not cure such breach within 30 days after receipt
by HUBCO of a notice of breach, or if Southington's Board of Directors approves
another acquisition transaction after determining, upon advice of counsel, that
approval was necessary in the exercise of its fiduciary obligations under
applicable laws. Southington may also terminate the Merger Agreement if the
conditions for Southington to close are not satisfied and are not capable of
being satisfied by the Cutoff Date.
In addition, the Merger Agreement may be terminated by Southington upon
occurrence of a Termination Event, as described above under the caption "THE
PROPOSED MERGER -- Consideration."
In the event of a termination, each party will retain all rights and
remedies it may have at law or equity under the Merger Agreement. Upon a
termination of the Merger Agreement, the transactions contemplated thereby will
be abandoned without further action by any party and each party will bear its
own expenses.
Accounting Treatment of the Merger
The Merger is expected to be accounted for by HUBCO under the pooling
of interests method of accounting in accordance with generally accepted
accounting principles. HUBCO's obligation to consummate the Merger is
conditioned upon HUBCO's receipt of assurances from its independent public
accountants, Arthur Andersen LLP, that the Merger will be so treated. As
required by generally accepted accounting principles, under pooling of interests
accounting, as of the Effective Time the assets and liabilities of Southington
would be added to those of HUBCO at their recorded book values and the
stockholders' equity accounts of HUBCO and Southington would be combined on
HUBCO's consolidated balance sheet. On a pooling of interests accounting basis,
income and other financial statements of HUBCO issued after consummation of the
Merger would be restated retroactively to reflect the consolidated combined
financial position and results of operations of HUBCO and Southington as if the
Merger had taken place prior to the periods covered by such financial
statements. The pro forma financial information contained in this Proxy
Statement has been prepared using the pooling of interests accounting basis to
account for the Merger. See "PRO FORMA FINANCIAL INFORMATION."
Federal Income Tax Consequences
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR
GENERAL INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF
TAXPAYERS, INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL
INSTITUTIONS, FOREIGN PERSONS AND PERSONS WHO ACQUIRED SHARES OF SOUTHINGTON
COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR
OTHERWISE AS COMPENSATION. SOUTHINGTON SHAREHOLDERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX
LAWS.
General. It is intended that the Merger will be treated as a tax-free
reorganization as defined in Section 368(a)(1)(A) of the Code and that,
accordingly, no gain or loss will be recognized by HUBCO or Southington or by
the shareholders of Southington upon the exchange of their shares of Southington
Common Stock solely for shares of HUBCO Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional share interest in
HUBCO Common Stock). Counsel to HUBCO is required, as a condition of Closing, to
provide an opinion to HUBCO and to Southington, with respect to the matter
covered by the foregoing sentence. With respect to this Proxy Statement, Pitney,
Hardin, Kipp & Szuch, counsel to HUBCO, has provided an opinion that, based upon
the circumstances as they presently exist, it expects to be able to render the
required opinion to both HUBCO and Southington. An opinion of counsel is not
binding on the Internal Revenue Service ("IRS") and the IRS could disagree with
the opinion. HUBCO did not seek a ruling with respect to the aforementioned tax
consequences from the IRS.
Consequences of Receipt of Cash in Lieu of Fractional Shares. Cash
received by a Southington shareholder in lieu of any fractional share interest
will be treated as having been received as a payment in exchange for such
fractional share interest, and, provided the fractional share would have
constituted a capital asset in the hands of such shareholder, the shareholder
should in general recognize capital gain or loss in an amount equal to the
difference between the amount of cash received and the portion of the adjusted
basis in Southington Common Stock allocable to the fractional share interest.
Basis of HUBCO Common Stock. The basis of HUBCO Common Stock received
by a Southington shareholder who receives solely HUBCO Common Stock will be the
same as the basis of such shareholder's Southington Common Stock surrendered in
exchange therefor.
Holding Period. The holding period of shares of HUBCO Common Stock
received in the Merger by holders of Southington Common Stock will include the
period during which such shares of Southington Common Stock surrendered in
exchange therefor were held by the holder thereof, provided such shares of
Southington Common Stock were held as capital assets.
Holders of Southington Options. Holders of Southington Options will
receive HUBCO Common Stock and cash in lieu of fractional shares in cancellation
of their Southington Options. Such persons will be treated as having received
compensation taxable as ordinary income in an amount equal to the sum of the
cash and the value of the HUBCO Common Stock received by them in exchange for
their Southington Options. Holders of Southington Options will be required to
deposit an amount for withholding taxes with HUBCO upon receipt of the HUBCO
Common Stock.
Consequences to Dissenting Southington Shareholders. Holders of
Southington Common Stock who perfect their dissenters' rights will receive only
cash for their shares of Southington Common Stock and should in general
recognize capital gain or loss equal to the difference, if any, between the
amount of cash received and the shareholder's basis in the Southington Common
Stock surrendered therefor. The gain or loss will be characterized as a capital
gain or loss if (a) the holder's shares of Southington Common Stock are held as
capital assets and (b) the holder receives cash with respect to all shares of
Southington Common Stock which the holder owns actually and constructively
(pursuant to the attribution rules of Section 318 of the Code). If the
Southington Common Stock is not held as a capital asset it will be treated as
ordinary income. If a shareholder is not considered as having disposed of all of
his or her stock by reason of the attribution rules, the distribution of cash
may be determined to have the "effect of the distribution of a dividend," in
which case the distribution will be taxed as a dividend. The determination is
made on a shareholder-by-shareholder basis.
PRO FORMA FINANCIAL INFORMATION
Pro Forma Unaudited Combined Balance Sheet
of HUBCO and Southington
The following pro forma unaudited combined condensed balance sheet
combines the historical consolidated balance sheets of HUBCO and Southington
giving effect to the Merger which will be accounted for as a pooling of
interests, as if the Merger had been effective on June 30, 1997. The information
set forth below should be read in conjunction with the historical consolidated
financial statements of HUBCO and Southington, including their respective notes
thereto, certain of which are incorporated by reference in this Proxy Statement
(see "INFORMATION DELIVERED AND INCORPORATED BY REFERENCE"), and in conjunction
with the condensed consolidated historical financial information, including the
notes thereto, appearing elsewhere in this Proxy Statement. The pro forma
financial information does not give effect to any anticipated cost savings or
merger-related expenses and restructuring charges in connection with the Merger,
nor does it take into account HUBCO's pending acquisitions of Security National
Bank & Trust Company of New Jersey and Poughkeepsie Financial Corp. See "CERTAIN
INFORMATION REGARDING HUBCO - Recent Developments." The pro forma financial data
are not necessarily indicative of the actual financial position that would have
occurred had the Merger been consummated on June 30, 1997 or that may be
obtained in the future.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Balance Sheet
As of June 30, 1997
($ in thousands, except per share data)
Pro forma Pro forma
HUBCO Southington Adjustments Combined
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks 167,539 8,230 -- 175,769
Federal funds sold -- 1,000 1,000
Securities 874,394 37,810 (404) 911,800
Loans 1,835,905 84,723 1,920,628
Less: Allowance for loan losses (37,281) (1,410) (38,691)
- - -
------------- ---------- -------- ------------
Net loans 1,798,624 83,313 1,881,937
------------- ----------- --------- -------------
Other assets 134,443 4,926 139,369
Intangibles, net of amortization 26,823 -- 26,823
============= =========== ========= =============
Total Assets 3,001,823 135,279 (404) 3,136,698
============= =========== ========= =============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 599,782 $ 27,054 $ -- $ 626,836
Interest bearing 1,768,479 95,104 1,863,583
------------- ----------- --------- -------------
Total Deposits 2,368,261 122,158 2,490,419
------------- ----------- --------- -------------
Borrowings 233,320 1,000 234,320
Other liabilities 38,521 689 39,210
------------- ----------- --------- -------------
Total Liabilities 2,640,102 123,847 -- 2,763,949
------------- ----------- --------- -------------
Subordinated debt 100,000 -- 100,000
Capital Trust Securities 50,000 -- 50,000
Stockholders' Equity:
Preferred stock 3,585 -- -- 3,585
Common stock 38,448 7,475 (5,712) 40,211
Additional paid in capital 96,797 1,057 5,308 103,162
Retained earnings 71,861 3,002 74,863
Other 1,030 (102) 928
------------- ----------- --------- -------------
Total Capital 211,721 11,432 (404) 222,749
============= =========== ========= =============
Total Liabilities and Capital 3,001,823 135,279 (404) 3,136,698
============= =========== ========= =============
Common and common equivalent shares outstanding
- maximum 23,493 24,484
- minimum 23,493 24,271
Book value per common and common
equivalent share - maximum 9.01 9.10
- minimum 9.01 9.18
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Pro Forma Unaudited Combined Statements of Income of
HUBCO and Southington
The following pro forma unaudited combined condensed statements of
income combine the historical consolidated statements of income of HUBCO and
Southington giving effect to the Merger which will be accounted for as a pooling
of interests, as if the Merger had occurred on the first day of the applicable
periods indicated herein, and the pro forma adjustments described in the notes
to the pro forma combined financial statements. The information set forth below
should be read in conjunction with the condensed consolidated historical and
other pro forma financial information, including the notes thereto, incorporated
by reference or appearing elsewhere in this Proxy Statement. The pro forma
financial information does not give effect to any anticipated cost savings or
Merger related expenses and restructuring charges in connection with the Merger,
nor does it take into account HUBCO's pending acquisitions of Security National
Bank & Trust Company of New Jersey and Poughkeepsie Financial Corp. See "CERTAIN
INFORMATION REGARDING HUBCO - Recent Developments." The pro forma financial
information is not necessarily indicative of the results that actually would
have occurred had the Merger been consummated on the dates indicated or that may
be obtained in the future.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Six Months Ended June 30, 1997
($ in thousands, except per share data)
Pro forma
HUBCO SOUTHINGTON Combined
---------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 80,294 $ 3,921 $ 84,215
Interest on securities 29,913 1,191 31,104
Other interest income 494 57 551
---------- -------- -----------
Total Interest Income 110,701 5,169 115,870
---------- -------- -----------
Interest on deposits 28,036 1,790 29,826
Interest on borrowings 12,225 14 12,239
---------- -------- -----------
Total Interest Expense 40,261 1,804 42,065
---------- -------- -----------
Net Interest Income 70,440 3,365 73,805
Provision for loan losses 3,102 403 3,505
Noninterest income 18,499 219 18,718
Noninterest expense 47,138 2,452 49,590
---------- -------- -----------
Pre-Tax Income 38,699 729 39,428
Income tax provision 15,174 271 15,445
---------- -------- -----------
Net Income $ 23,525 $ 458 $ 23,983
========== ======== ===========
Earnings per share:
Primary-maximum $ 1.00 $ .98
Primary-minimum $ 1.00 $ .99
Fully Diluted - maximum $ 1.00 $ .98
Fully Diluted - minimum $ 1.00 $ .99
Weighted Average Shares Outstanding:
Primary - maximum 23,479 24,467
Primary - minimum 23,479 24,260
Fully Diluted - maximum 23,479 24,467
Fully Diluted - minimum 23,479 24,260
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1996
($ in thousands, except per share data)
Pro forma
HUBCO SOUTHINGTON Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 149,548 $ 7,224 $ 156,772
Interest on securities 53,581 1,914 55,495
Other interest income 1,053 189 1,242
---------- -------- -----------
Total Interest Income 204,182 9,327 213,509
---------- -------- -----------
Interest on deposits 62,704 3,342 66,046
Interest on borrowings 10,124 1 10,125
---------- -------- -----------
Total Interest Expense 72,828 3,343 76,171
---------- -------- -----------
Net Interest Income 131,354 5,984 137,338
Provision for loan losses 12,295 225 12,520
Noninterest income 30,276 535 30,811
Noninterest expense 116,239 4,507 120,746
---------- -------- -----------
Pre-Tax Income 33,096 1,787 34,883
Income tax provision 11,599 649 12,248
---------- -------- -----------
Net Income $ 21,497 $ 1,138 $ 22,635
========== ======== ===========
Earnings per share:
Primary-maximum $ 0.90 $ 0.91
Primary-minimum $ 0.90 $ 0.92
Fully Diluted - maximum $ 0.90 $ 0.91
Fully Diluted - minimum $ 0.90 $ 0.92
Weighted Average Shares Outstanding:
Primary - maximum 23,882 24,870
Primary - minimum 23,882 24,662
Fully Diluted - maximum 23,882 24,870
Fully Diluted - minimum 23,882 24,662
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1995
($ in thousands, except per share data)
Pro forma
HUBCO SOUTHINGTON Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 147,087 $ 7,064 $ 154,151
Interest on securities 54,929 1,243 56,172
Other interest income 1,635 300 1,935
---------- -------- -----------
Total Interest Income 203,651 8,607 212,258
---------- -------- -----------
Interest on deposits 61,677 2,921 64,598
Interest on borrowings 8,763 24 8,787
---------- -------- -----------
Total Interest Expense 70,440 2,945 73,385
---------- -------- -----------
Net Interest Income 133,211 5,662 138,873
Provision for loan losses 9,515 759 10,274
Noninterest income 28,225 452 28,677
Noninterest expense 102,842 3,742 106,584
---------- -------- -----------
Pre-Tax Income 49,079 1,613 50,692
Income tax provision 14,514 570 15,084
-------- ------- ---------
Net Income $ 34,565 $ 1,043 $ 35,608
========== ======== ===========
Earnings per share:
Primary - maximum $ 1.41 $ 1.39
Primary - minimum $ 1.41 $ 1.40
Fully Diluted - maximum $ 1.40 $ 1.38
Fully Diluted - minimum $ 1.40 $ 1.39
Weighted Average Shares Outstanding:
Primary - maximum 24,274 25,262
Primary - minimum 24,274 25,054
Fully Diluted - maximum 24,797 25,785
Fully Diluted - minimum 24,797 25,578
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1994
($ in thousands, except per share data)
Pro forma
HUBCO SOUTHINGTON Combined
---------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 116,593 $ 6,072 $ 122,665
Interest on securities 52,488 935 53,423
Other interest income 1,848 116 1,964
---------- -------- -----------
Total Interest Income 170,929 7,123 178,052
---------- -------- -----------
Interest on deposits 47,853 2,058 49,911
Interest on borrowings 5,273 -- 5,273
---------- -------- -----------
Total Interest Expense 53,126 2,058 55,184
---------- -------- -----------
Net Interest Income 117,803 5,065 122,868
Provision for loan losses 9,309 760 10,069
Noninterest income 22,420 608 23,028
Noninterest expense 94,931 3,953 98,884
---------- -------- -----------
Pre-Tax Income 35,983 960 36,943
Income tax provision 12,595 236 12,831
---------- -------- -----------
Net Income $ 23,388 $ 724 $ 24,112
========== ======== ===========
Earnings per share:
Primary - maximum $ 1.00 $ .99
Primary - minimum $ 1.00 $ 1.00
Fully Diluted - maximum $ .99 $ .98
Fully Diluted - minimum $ .99 $ .99
Weighted Average Shares Outstanding:
Primary - maximum 22,969 23,957
Primary - minimum 22,969 23,750
Fully Diluted - maximum 23,589 24,577
Fully Diluted - minimum 23,589 24,370
</TABLE>
Notes to Pro Forma Financial Information
(1) It is assumed that the Merger will be accounted for on a pooling of
interests accounting basis, and accordingly, the related pro forma adjustments
herein reflect, where applicable, a maximum exchange ratio of .787 shares and a
minimum exchange ratio of .618 shares of HUBCO Common Stock for each of the
1,245,833 shares of Southington Common Stock which were outstanding on June 30,
1997.
The pro forma financial information presented herein gives effect to
the cancellation of 15,897 shares of HUBCO Common Stock. This adjustment is the
result of HUBCO's ownership, as of September 12, 1997, of 20,200 shares of
Southington Common Stock at a cost of $404,256.
The pro forma financial information presented herein has been adjusted
to give retroactive effect to a 3% stock dividend approved by the Board of
Directors of HUBCO on October 8, 1997 payable on December 1, 1997 to holders of
HUBCO Common Stock of record on November 13, 1997.
In summary, the pro forma information was adjusted for the Merger by
the (i) addition of 980,471 shares of HUBCO Common Stock with a stated value of
$1.778 per share amounting to $1,743,277; (ii) elimination of 1,245,833 shares
of Southington Common Stock with a par value of $6.00 per share amounting to
$7,474,998; (iii) cancellation of 15,897 shares of HUBCO Common Stock amounting
to $28,264; (iv) addition of 26,972 shares of HUBCO Common Stock amounting to
$47,956 in exchange for Southington's stock options; and (v) recording of the
remaining net amount of 5,307,773 as a reduction of additional paid in capital
of June 30, 1997.
(2) Earnings per share data has been computed based on the combined historical
net income applicable to common stockholders of HUBCO using the historical
weighted average shares outstanding of HUBCO Common Stock and the weighted
average shares outstanding, adjusted to equivalent shares of HUBCO Common Stock,
as of the earliest applicable period presented.
(3) The pro forma information presented above does not reflect HUBCO's pending
acquisitions of Security National Bank & Trust Company of New Jersey and
Poughkeepsie Financial Corp. See "CERTAIN INFORMATION REGARDING HUBCO - Recent
Developments" Security National is an $86 million asset bank the shareholders of
which are to be paid $34.00 in cash for each share of Security National common
stock (a total purchase price of $127 million.) Poughkeepsie is an $880 million
asset bank holding company the shareholders of which are to receive 0.30 to 0.32
of a share of HUBCO common stock for each share of Poughkeepsie common stock
(Poughkeepsie had 12,700,325 shares of common stock issued and outstanding on
the date of announcement of the transaction). Poughkeepsie had total capital of
$73,631,000 at June 30, 1997, and net income of $ 1,202,000 for the six months
ended June 30, 1997.
RIGHTS OF DISSENTING SOUTHINGTON SHAREHOLDERS
Holders of Southington Common Stock who follow the procedures specified
in Section 36a-125(h), which in turn incorporates the provisions of Sections
33-855 through 33-872, inclusive, of the Connecticut General Statues (the "CGS")
will be entitled to the rights and remedies of dissenting shareholders. Section
33-856 of the CGS provides that, in connection with a merger for which
shareholder approval is required by Section 33-817 of the CGS, any shareholder
of a constituent bank who dissents from the merger is entitled to assert
dissenters' rights under Section 33-855 to 33-872, inclusive, of the CGS
(collectively such rights, "Dissenters' Rights"). In accordance with Sections
33-855 through 33-872, inclusive, of the CGS, if the proposed Merger is approved
and consummated, holders of shares of Southington's Common Stock who do not vote
in favor of the Merger will have the right to demand the purchase of their
shares at the "fair value" immediately before effectuation of the Merger
(exclusive of any appreciation or depreciation in anticipation of the Merger) if
they fully comply with the provisions of Sections 33-855 through 33-872 of the
CGS.
The following is a brief summary of the procedures set forth in
Sections 33-855 through 33-872 which are required to be followed by holders of
shares of Southington's Common Stock who wish to dissent from the Merger and
demand the purchase of their shares at their fair value. This summary is
qualified in its entirety by reference to Sections 33-855 through 33-872,
inclusive, the complete texts of which are attached to this Proxy
Statement/Prospectus as Appendix D. Dissenting shareholders are advised to seek
independent counsel with respect to exercising their dissenters' rights. This
Proxy Statement/Prospectus constitutes notice to holders of shares of
Southington's Common Stock concerning the availability of Dissenters' Rights
under Sections 33-855 through 33-872 of the CGS.
Dissenting shareholders must satisfy all of the conditions of Sections
33-855 through 33-872. Each dissenting shareholder must, before the taking of
the vote on the adoption of the Merger at the Meeting, give written notice to
the Secretary of Southington of such shareholder's intent to demand payment for
his shares if the Merger is effectuated. This notice must be in addition to and
separate from any abstention or any vote, in person or by proxy, cast against
approval of the Merger.
NEITHER VOTING "AGAINST," ABSTAINING FROM VOTING, OR FAILING TO VOTE ON
THE ADOPTION OF THE MERGER WILL CONSTITUTE NOTICE OF INTENT TO DEMAND PAYMENT OR
DEMAND FOR PAYMENT OF FAIR VALUE WITHIN THE MEANING OF SECTIONS 33-855 THROUGH
33-872, INCLUSIVE.
A dissenting shareholder must NOT vote for approval and adoption of the
Merger. If a holder of shares of Southington's Common Stock returns a signed
proxy but does not specify therein a vote "AGAINST" adoption of the Merger
Agreement and the Merger provided for therein or an instruction to abstain, the
proxy will be voted "FOR" adoption of the Merger Agreement and the Merger, which
will have the effect of waiving the rights of that holder of Southington Common
Stock to have his shares purchased at fair value. Abstaining from voting or
voting against the adoption of the Merger Agreement and the Merger will NOT
constitute a waiver of such shareholder's rights.
After the vote is taken at the Meeting, if the Merger is approved, and
in any event no later than 10 days after consummation of the Merger, a
"Dissenters' Notice" shall be sent to each dissenting shareholder who has given
the written notice described above and did not vote in favor of the Merger. The
Dissenters' Notice will state the results of the vote on the Merger Agreement,
where the payment demand must be sent, where and when certificates must be
deposited and will set a date, not fewer than thirty nor more than sixty days
after delivery of such notice, by which the payment demand must be received from
the dissenting shareholders. Such notice will include a form for demanding
payment that will require that the dissenting shareholder certify whether or not
such shareholder acquired beneficial ownership of the shares before August 18,
1997. (PLEASE NOTE THAT SHARES ACQUIRED AFTER AUGUST 18, 1997 ("AFTER ACQUIRED
SHARES"), MAY BE SUBJECT TO DIFFERENT TREATMENT IN ACCORDANCE WITH SECTION
33-867 OF THE CGS THAN ARE SHARES ACQUIRED PRIOR TO SUCH DATE). The Dissenters'
Notice will also include a copy of Sections 33-855 through 33-872, inclusive, of
the CGS. A dissenting shareholder who receives a Dissenters' Notice must comply
with the terms of such notice. A dissenting shareholder who does so by demanding
payment, depositing his certificates in accordance with the terms of the notice
and certifying that beneficial ownership was acquired before August 18, 1997
will retain all other rights of a shareholder until such rights are canceled or
modified by the Merger. A dissenting shareholder who receives a Dissenters'
Notice and does not comply with the terms therein is not entitled to payment for
his shares under Sections 33-855 through 33-872 of the CGS.
Dissenters' Rights under Sections 33-855 through 33-872, inclusive, may
be asserted by either a beneficial shareholder or record shareholder. A record
shareholder may assert Dissenters' Rights as to fewer than every share
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person. A beneficial shareholder may assert
Dissenters' Rights as to shares held on his behalf only if he submits the record
shareholder's written consent prior to or at the time he asserts Dissenters'
Rights and he does so with respect to all shares of which he is beneficial owner
or over which he has the power to direct the vote.
After the Merger is consummated, or upon receipt of a payment demand,
the Corporation shall pay each dissenting shareholder who complied with the
terms of the Dissenters' Notice the amount the Corporation estimates to be the
fair value of the shares, plus accrued interest. Within 30 days of such payment,
if a dissenting shareholder believes that the amount paid is less than the fair
value of the shares or that the interest due is incorrectly calculated, such
shareholder may notify the Corporation in writing of his own estimate of the
fair value of the shares and interest due. If such a claim is made by a
dissenting shareholder, and it cannot be settled, the Corporation will within 60
days after receiving the payment demand, petition the court to determine the
fair value of the shares and accrued interest.
The costs and expenses of any such court proceeding shall be determined
by the court and shall be assessed against the Corporation, but such costs and
expenses may be assessed as the court shall deem equitable against any or all
dissenting shareholders who are parties to the proceeding if the court finds the
action of such dissenting shareholders in failing to accept the Corporation's
offer was arbitrary or vexatious or not in good faith. Such expenses may include
the fees and expenses of counsel and experts employed by the respective parties.
All written notices of intent to demand payment of fair value should be
sent or delivered to Peter Pfau, The Bank of Southington, 130 North Main Street,
Southington, Connecticut 06489-0670. Southington suggests that shareholders use
registered or certified mail, return receipt requested, for this purpose.
HOLDERS OF SHARES OF SOUTHINGTON'S COMMON STOCK CONSIDERING DEMANDING
THE PURCHASE OF THEIR SHARES AT FAIR VALUE SHOULD KEEP IN MIND THAT THE FAIR
VALUE OF THEIR SHARES DETERMINED UNDER SECTIONS 33-855 THROUGH 33-872,
INCLUSIVE, COULD BE MORE, THE SAME, OR LESS THAN THE MERGER CONSIDERATION THEY
ARE ENTITLED TO RECEIVE PURSUANT TO THE MERGER IF THEY DO NOT DEMAND THE
PURCHASE OF THEIR SHARES AT FAIR VALUE.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE STATEMENT
OF THE PROVISIONS OF THE CGS RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
OF SHARES OF SOUTHINGTON'S COMMON STOCK AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTIONS 33-855 THROUGH 33-872 OF THE CGS, WHICH ARE INCLUDED AS
APPENDIX D TO THIS PROXY STATEMENT/PROSPECTUS. HOLDERS OF SHARES OF
SOUTHINGTON'S COMMON STOCK INTENDING TO DEMAND THE PURCHASE OF THEIR SHARES AT
FAIR VALUE ARE URGED TO REVIEW CAREFULLY APPENDIX D AND TO CONSULT WITH LEGAL
COUNSEL AS TO BE IN STRICT COMPLIANCE THEREWITH.
DESCRIPTION OF HUBCO CAPITAL STOCK
General
The authorized capital stock of HUBCO presently consists of 51,500,000
shares of HUBCO Common Stock and 10,300,000 shares of preferred stock. As of
June 30, 1997, 21,624,468 shares of HUBCO Common Stock were issued, 21,619,164
shares of HUBCO Common Stock were outstanding, and 35,850 shares of HUBCO
preferred stock were outstanding. Of the authorized but unissued shares of HUBCO
Common Stock, 232,162 shares are reserved for issuance under HUBCO's Restricted
Stock Plan, 506,942 shares are reserved for issuance upon exercise of stock
options and 66,693 are reserved for issuance upon exercise of warrants.
Under the terms of HUBCO's Certificate of Incorporation, the Board of
Directors has authority at any time (i) to divide any or all of the authorized
but unissued shares of preferred stock into series and determine the
designations, number of shares, relative rights, preferences and limitations of
any such series and (ii) to increase the number of shares of any such series
previously determined by it and to decrease such previously determined number of
shares to a number not less than that of the shares of such series then
outstanding. HUBCO Series A Convertible Preferred Stock was issued pursuant to
such authority in connection with HUBCO's acquisition of Washington Bancorp,
Inc. on July 1, 1994; no HUBCO Series A Preferred Stock remains outstanding. In
December, 1996, as part of the Westport Acquisition, HUBCO issued HUBCO Series B
Convertible Preferred Stock; 35,850 shares of HUBCO Series B Convertible
Preferred Stock remain outstanding as of June 30, 1997. See " -- Description of
HUBCO Preferred Stock".
HUBCO's Certificate of Incorporation authorizes the Board of Directors
of HUBCO (except in connection with certain business combinations), from time to
time and without further shareholder action, to issue new shares of authorized
but unissued HUBCO Common Stock or preferred stock. Because of its broad
discretion with respect to the creation and issuance of HUBCO Common Stock or
preferred stock without shareholder approval, the Board of Directors could
adversely affect the voting power of holders of HUBCO Common Stock or preferred
stock and, by issuing shares of preferred stock with certain voting, conversion
and/or redemption rights, could discourage any attempt to gain control of HUBCO.
Description of HUBCO Common Stock
The following description of the HUBCO Common Stock sets forth certain
general terms of the HUBCO Common Stock. For an additional description relating
to the HUBCO Common Stock, see "COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF
SOUTHINGTON AND HUBCO".
Dividend Rights
The holders of HUBCO Common Stock are entitled to receive dividends,
when, as and if declared by the Board of Directors of HUBCO out of funds legally
available therefore subject to the preferential dividend rights of any preferred
stock that may be outstanding. The only statutory limitation is that such
dividends may not be paid when HUBCO is insolvent. Because funds for the payment
of dividends by HUBCO come primarily from the earnings of HUBCO's bank
subsidiaries, as a practical matter, restrictions on the ability of HUB and
Lafayette to pay dividends act as restrictions on the amount of funds available
for the payment of dividends by HUBCO.
As a New Jersey chartered commercial bank, HUB is subject to the
restrictions on the payment of dividends contained in the NJBA. Under the NJBA,
HUB may pay dividends only out of retained earnings, and out of surplus to the
extent that surplus exceeds 50% of stated capital. Under the CBL, Lafayette may
pay dividends only from its net profits, and the total of all dividends in any
calendar year may not (unless specifically approved by the Commissioner) exceed
the total of its net profits of that year combined with its retained net profits
of the preceding two years. Under the Financial Institutions Supervisory Act,
the FDIC has the authority to prohibit a state-chartered bank from engaging in
conduct which, in the FDIC's opinion, constitutes an unsafe or unsound banking
practice. Under certain circumstances, the FDIC could claim that the payment of
a dividend or other distribution by HUB or Lafayette 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 June 30, 1997, HUB had $123.2 million available for the payment of
dividends to HUBCO, and as of June 30, 1997 Lafayette had $16.2 million
available for the payment of dividends to HUBCO. At June 30, 1997, HUBCO had
$114.5 million available for shareholder dividends, the payment of which would
not reduce any of its capital ratios below the minimum regulatory requirements.
Voting Rights
At meetings of shareholders, holders of HUBCO Common Stock are entitled
to one vote per share. The quorum for shareholders' meetings is a majority of
the outstanding shares entitled to vote represented in person or by proxy.
Except as indicated below, all actions and authorizations to be taken or given
by shareholders require the approval of a majority of the votes cast by holders
of HUBCO Common Stock at a meeting at which a quorum is present.
The Board of Directors is divided into three classes of directors, each
class being as nearly equal in number of directors as possible. Approximately
one-third of the entire Board of Directors is elected each year and the
directors serve for terms of up to three years, and, in all cases, until their
respective successors are duly elected and qualified.
The exact number of directors and the number constituting each class is
fixed from time to time by resolution adopted by a majority of the entire Board
of Directors. Shareholders may remove any director from office for cause. The
affirmative vote of at least three-quarters of the shares of HUBCO entitled to
vote thereon is required to amend or repeal the provisions of HUBCO's
Certificate of Incorporation relating to the classification of the Board of
Directors and the removal of directors.
HUBCO's Certificate of Incorporation contains a "minimum price"
provision. In the event a "related person" (defined in the Certificate of
Incorporation to include persons who, together with their affiliates, own 10% or
more of HUBCO's Common Stock) proposes to enter into a Business Combination (as
defined in the Certificate of Incorporation) with HUBCO, the proposed
transaction will require the affirmative vote of at least three-quarters of the
outstanding shares entitled to vote on the transaction, unless either (i) the
proposed transaction is first approved by a majority of HUBCO's Board of
Directors, or (ii) the shareholders of HUBCO are offered consideration in an
amount equal to or in excess of an amount determined in accordance with a
formula contained in the Certificate of Incorporation. If either of these tests
are met, the proposed transaction need only be approved by the vote otherwise
required by law, the Certificate of Incorporation and any agreement with a
national securities exchange.
Liquidation Rights
In the event of liquidation, holders of HUBCO Common Stock are entitled
to receive ratably any assets distributed to shareholders, except that if shares
of preferred stock of HUBCO are outstanding at the time of liquidation, such
shares of preferred stock may have prior rights upon liquidation.
Assessment and Redemption
All outstanding shares of HUBCO Common Stock are fully paid and
nonassessable. HUBCO Common Stock is not redeemable at the option of the issuer
or the holders thereof.
Preemptive and Conversion Rights
Holders of HUBCO Common Stock do not have conversion rights or
preemptive rights with respect to any securities of HUBCO.
Description of HUBCO Series B Preferred Stock
Dividend Rights
The holders of HUBCO Series B Convertible Preferred Stock (the "HUBCO
Series B Preferred Stock") are entitled to receive, when, as and if declared by
the Board of Directors of HUBCO out of funds legally available therefore,
dividends at a rate to be determined by the Corporation's Board of Directors.
All dividends declared on the HUBCO Series B Preferred Stock are pro rata per
share and noncumulative. The only statutory limitation is that such dividends
may not be paid when HUBCO is insolvent.232205A01082597
Liquidation Rights
The holders of HUBCO Series B Preferred Stock are entitled to receive
$100.00 per share in the event of any liquidation, dissolution or winding up of
HUBCO, subject to the rights of creditors. In the event of liquidation,
dissolution or winding up, the preferential amounts with respect to the HUBCO
Series B Preferred Stock and any stock on parity with HUBCO Series B Preferred
Stock, shall be distributed pro rata in accordance with the aggregate
preferential amounts of the HUBCO Series B Preferred Stock and such stock on
parity, if any, out of or to the extent of the net assets of HUBCO legally
available for such distribution before any distributions are made with respect
to any stock junior to the rights of HUBCO Series B Preferred Stock.
Redemption
The HUBCO Series B Preferred Stock is not redeemable at the option of
the issuer or the holders thereof.
Preemptive and Conversion Rights
Holders of HUBCO Series B Preferred Stock have an option to convert
such stock into fully paid and nonassessable shares of HUBCO Common Stock. As of
June 30, 1997, the conversion rate was 33.2175 shares of Common Stock for each
share of HUBCO Series B Preferred Stock (the "Conversion Ratio"). The Conversion
Ratio is subject to adjustment upon certain events, including the issuance of
HUBCO Common Stock as a dividend with respect to the outstanding HUBCO Common
Stock, subdivision or combinations of HUBCO Common Stock, the issuance to
holders of HUBCO Common Stock generally of rights or warrants to subscribe for
HUBCO Common Stock, or the distribution to holders of HUBCO Common Stock
generally of evidences of indebtedness, assets (excluding dividends in cash out
of retained earnings) or rights or warrants to subscribe for securities of HUBCO
other than those mentioned herein. Notwithstanding the foregoing, the Conversion
Ratio is not subject to adjustment to the extent HUBCO issues any HUBCO Common
Stock in connection with any employee compensation and benefits plans, employee
agreements and contracts.
Voting Rights
Holders of shares of HUBCO Series B Preferred Stock vote together as a
class with holders of HUBCO Common Stock for the election of directors and all
other matters to which holders of HUBCO Common Stock are entitled to vote. Each
share of HUBCO Series B Preferred Stock is entitled to a number of votes equal
to the Conversion Ratio as the same may be adjusted from time to time.
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
OF SOUTHINGTON AND HUBCO
General
Southington is a Connecticut bank and trust company (sometimes referred
to as a "capital stock bank") incorporated under the CBL and HUBCO is a business
corporation incorporated in New Jersey under the NJBCA. The rights of
Southington shareholders are currently governed by Connecticut banking law and
with respect to corporate administration and procedure, to the extent not
inconsistent or inapplicable by its terms, Connecticut corporate law. At the
Effective Time, each Southington shareholder will become a shareholder of HUBCO
and the rights of shareholders of HUBCO are governed by New Jersey corporate
law. The following is a comparison of certain provisions of New Jersey corporate
law and Connecticut law and the respective certificates of incorporation and
by-laws of each of Southington and HUBCO. This summary does not purport to be
complete and is qualified in its entirety by reference to the CBL, the
Connecticut Business Corporation Act (the "CBCA"), and the NJBCA, which statutes
may change from time to time, and the respective certificates of incorporation
and by-laws of HUBCO and Southington, which also may be changed. Effective
January 1, 1997, the Stock Corporation Act (the "SCA") was repealed and replaced
by the CBCA, which represents a substantial rewriting and recodification of
Connecticut corporate law.
Voting Requirements
Under the New Jersey Business Corporation Act, unless a greater vote is
specified in the certificate of incorporation, any amendment to a New Jersey
corporation's certificate of incorporation, the voluntary dissolution of the
corporation, or the sale or other disposition of all or substantially all of its
assets other than in the ordinary course of business or the merger or
consolidation of the corporation with another corporation, requires in each case
the affirmative vote of a majority of the votes cast by shareholders of the
corporation entitled to vote thereon. The HUBCO Certificate contains a "minimum
price" provision which requires the affirmative vote of 75% of the outstanding
shares entitled to vote on certain transactions involving "related persons"
unless the proposed transaction is either first approved by a majority of the
HUBCO Board or the shareholders of HUBCO are offered consideration in an amount
equal to or in excess of an amount determined in accordance with a formula
contained in the HUBCO Certificate. (See "DESCRIPTION OF HUBCO CAPITAL STOCK --
Description of HUBCO Common Stock -- Voting Rights.")
Applicable Connecticut law provides that a bank may amend its
certificate of incorporation, generally, if more shareholders vote for the
amendment than vote against. Higher voting requirements are necessary in the
event of a proposed change of name, merger, voluntary dissolution, or sale of
all or substantially all assets (two-thirds of outstanding shares of each class
entitled to vote thereon) or where dissenters' rights are thereby created (a
majority of the votes cast). The proportional shareholder vote required by such
law for approval of the foregoing transactions may, within limits, be varied by
the bank's certificate of incorporation; however, Southington's Articles of
Incorporation presently contain no such variations.
All shareholder voting rights of Southington presently are vested in
the holders of Southington Common Stock. All shareholder voting rights of HUBCO
presently are vested in the holders of the HUBCO Common Stock.
Preferred Stock
The authorized capital stock of HUBCO consists of 51,500,000 shares of
HUBCO Common Stock and 10,300,000 shares of preferred stock. As of June 30,
1997, 21,624,468 shares of HUBCO Common Stock were issued, 21,619,164 shares of
HUBCO Common Stock were outstanding, and 35,850 shares of HUBCO Series B
Convertible Preferred Stock were outstanding. Under the terms of the HUBCO
Certificate, the HUBCO Board has authority at any time to divide any or all of
the authorized but unissued shares of preferred stock into series, determine the
designations, number of shares, relative rights, preferences, and limitations of
any such series and authorize the issuance of such series. (See "DESCRIPTION OF
HUBCO CAPITAL STOCK -- General.")
Southington does not have authorized preferred stock.
Classified Board of Directors
The NJBCA permits a New Jersey corporation to provide for a classified
board. HUBCO currently has a classified Board of Directors. The Board is divided
into three classes, with one class of directors generally elected for a
three-year term at each annual meeting.
Applicable Connecticut law permits a capital stock Connecticut bank to
provide for the classification of directors in its certificate of incorporation.
Southington's Articles of Incorporation contain such a provision and divides the
Southington Board into three classes, to be as nearly equal in number of
directors as possible, and with one class of directors generally elected for a
three-year term at each annual meeting.
Rights of Dissenting Shareholders
Shareholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) is held
of record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
HUBCO's shares are presently held by more than 1,000 holders.
Generally, shareholders of a capital stock Connecticut bank who dissent
from a merger or consolidation of the bank are entitled to appraisal rights. The
shareholders of Southington have statutory rights of appraisal with respect to
the Merger. See "RIGHTS OF DISSENTING SOUTHINGTON SHAREHOLDERS."
Shareholder Consent to Corporate Action
Except as otherwise provided by the certificate of incorporation (and
the HUBCO Certificate presently is silent on this issue), the NJBCA permits any
action required or permitted to be taken at any meeting of a corporation's
shareholders, other than the annual election of directors, to be taken without a
meeting upon the written consent of shareholders who would have been entitled to
cast the minimum number of votes necessary to authorize such action at a meeting
of shareholders at which all shareholders entitled to vote were present and
voting. The annual election of directors, if not conducted at a shareholders'
meeting, may only be effected by unanimous written consent. Under the NJBCA, a
shareholder vote on a plan of merger or consolidation, if not conducted at a
shareholders' meeting, may only be effected by either: (i) unanimous written
consent of all shareholders entitled to vote on the issue with advance notice to
any other shareholders, or (ii) written consent of shareholders 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 shareholders.
The CBCA permits any action which may be taken at a meeting of
shareholders to be taken without a meeting as follows: (i) by consent in
writing, setting forth the action so taken or to be taken, signed by all of the
persons who would be entitled to vote upon such action at a meeting, or by their
duly authorized attorneys; or (ii) if the certificate of incorporation so
provides, by consent in writing, setting forth the action to be taken, signed by
persons holding such designated proportion, not less than a majority, of the
voting power of shares, or of the shares of any particular class, entitled to
vote thereon or to take such action, as may be provided in the certificate of
incorporation, or their duly authorized attorneys; except that directors may not
be elected by action of shareholders without a meeting of shareholders other
than by unanimous written consent, or pursuant to a plan of merger. The
Southington Articles of Incorporation are silent on this issue of shareholder
consent to corporate action.
Dividends
Unless there are other restrictions contained in its certificate of
incorporation (and the HUBCO Certificate presently contains none), the NJBCA
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 come primarily from the earnings of HUBCO's
bank subsidiaries, as a practical matter, restrictions on the ability of HUB or
Lafayette to pay dividends act as restrictions on the amount of funds available
for the payment of dividends by HUBCO. At June 30, 1997, HUBCO had approximately
$114.5 million available for shareholder dividends. For a description of the
regulatory restrictions on dividend payments by HUB and Lafayette, see
"DESCRIPTION OF HUBCO CAPITAL STOCK -- Description of HUBCO Common Stock --
Dividend Rights."
Under applicable Connecticut law, the amount of cash dividends that
Southington may declare in any calendar year is limited to the current year's
"net profits" and the prior two years' retained "net profits," as defined. At
June 30, 1997, Southington had approximately $2,234,313 available for
shareholder dividends.
By-laws
Under the NJBCA, the board of directors of a New Jersey corporation has
the power to adopt, amend, or repeal the corporation's by-laws, unless such
powers are reserved in the certificate of incorporation to the shareholders
(which the HUBCO Certificate presently does not do).
Under applicable Connecticut law and Southington's Articles of
Incorporation and By-Laws, Southington's By-Laws may be amended or repealed and
new by-laws may be adopted (subject to limited exceptions) by either the vote of
a majority of the Southington Board or the vote of the majority of the
outstanding shares of Southington entitled to vote thereon.
Shareholder Protection Legislation
The New Jersey Shareholders Protection Act (the "NJSPA") limits 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 interested shareholder's
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 shareholder, the combination is approved by the board prior to
the interested shareholder's stock acquisition date or certain fair price
provisions are satisfied. The NJSPA is not applicable to Southington
shareholders because Southington is not a "resident domestic corporation" (as
that term is defined in the NJSPA).
Under applicable Connecticut law, certain "business combinations"
between a "resident domestic corporation" and an "interested shareholder" are
prohibited. An "interested shareholder" is any person that is the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
outstanding shares of a resident domestic corporation or is an "affiliate" or
"associate" (as such terms are defined in the statute) of a resident domestic
corporation and, at any time within the previous two years, has been a
beneficial owner of 10% of the voting shares of such corporation. Such business
combinations are prohibited for a period of five years from the date on which
the shareholder became an interested shareholder of the resident domestic
corporation in question, unless such combination was approved both by the board
of directors of such resident domestic corporation and by a majority of such
corporation's nonemployee directors (of which there shall be at least two),
prior to the date on which the interested shareholder first became an interested
shareholder under the applicable definition.
Applicable Connecticut law also contains so-called "fair price"
provisions that prohibit certain business combinations between a target
corporation and an "interested shareholder", being defined for these purposes as
a person, other than the target corporation or any of its subsidiaries, that (i)
is the beneficial owner, directly or indirectly, of 10% or more of the voting
power of the outstanding shares of voting stock of the target corporation or
(ii) is an affiliate of the target corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the then
outstanding shares of voting stock of the target corporation. Under such
provisions, the board of directors of the target corporation can approve a
business combination at any time prior to the time the interested shareholder
first became an interested shareholder. In the absence of such pre-approval,
however, the proposed business combination must first be approved by the board
of directors of the target corporation and, unless complex fair price and other
conditions are met, thereafter, by the affirmative vote of a specified super
majority of shareholders of the target corporation, i.e., 80% of the voting
power of shares of the target corporation and two-thirds of the voting power of
shares other than those held by the interested shareholder and his affiliates
and associates.
Limitations of Liability of Directors and Officers
Under New Jersey law, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit directors' or officers' liability to the corporation
or its shareholders for monetary damage for breaches of their fiduciary duty as
a director. A similar provision under Delaware law applies to directors, but not
officers.
Under New Jersey law, a director or officer cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the corporation or
its shareholders, (ii) not in good faith or involving a knowing violation of
law, or (iii) resulting in receipt by such person of an improper personal
benefit. HUBCO's Certificate of Incorporation contains a provision which limits
a director's or officer's liability to the full extent permitted by New Jersey
law.
Under Connecticut law, unless a corporation's certificate of
incorporation provides otherwise (Southington's does not), a corporation shall
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
is or was a director or officer of the corporation against reasonable expenses
incurred by him in connection with the proceeding. A corporation may indemnify
an individual made a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if: (i) he conducted
himself in good faith; and (ii) he reasonably believed (a) in the case of
conduct in his official capacity with the corporation, that his conduct was in
its best interests, and (b) in all other cases, that his conduct was at least
not opposed to its best interests; and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Southington's Articles of Incorporation provide that to the extent
permitted by applicable law, the personal liability of the directors to
Southington or its shareholders for monetary damages for breach of duty as a
director shall be limited to an amount equal to the compensation received by the
director for serving the institution during the year of violation. Certain
exceptions to this limitation apply by law.
SHAREHOLDER PROPOSALS
Any proposal which a Southington shareholder wishes to have included in
the proxy materials of Southington if Southington has a 1998 Annual Meeting of
Shareholders must be presented to Southington no later than January 23, 1998.
OTHER MATTERS
As of the date of this Proxy Statement, the Southington Board of
Directors knows of no other matters to be presented for action by the
stockholders at the Meeting. If any other matters are properly presented,
however, it is the intention of the persons named in the enclosed proxy to vote
in accordance with their best judgment on such matters.
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of HUBCO
Common Stock offered hereby will be passed upon by Pitney, Hardin, Kipp & Szuch,
counsel to HUBCO. Attorneys in the law firm of Pitney, Hardin, Kipp & Szuch,
beneficially owned 627 shares of HUBCO Common Stock as of September 15, 1997.
EXPERTS
The financial statements of Southington as of December 31, 1996 and
1995 and for each of the years in the three year period ended December 31, 1996,
incorporated herein by reference, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as indicated in their report with
respect thereto, incorporated by reference herein and given upon the authority
of said firm as experts in accounting and auditing. The aforementioned report of
KPMG Peat Marwick LLP refers to an uncertainty in connection with a lawsuit in
which Southington is a defendant.
The consolidated financial statements of HUBCO as of December 31, 1996
and 1995 and for each of the years in the three year period ended December 31,
1996, incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
KPMG Peat Marwick LLP will have a representative at the Meeting who
will have an opportunity to make a statement if such representative desires, and
who will be available to respond to appropriate questions.
<PAGE>
Appendix A
On October 8, 1997, the Board of Directors of HUBCO approved a 3% stock
dividend, payable December 1, 1997 to common stockholders of record on November
13, 1997 (the "Stock Dividend"). All share and per share data regarding HUBCO's
Common Stock set forth in the Proxy Statement/Prospectus has been adjusted to
give retroactive effect to the Stock Dividend as if the Stock Dividend occurred
prior to the periods reported in the Proxy Statement/Prospectus. The Merger
Agreement reproduced below, provides for adjustment to the exchange ratio in the
event of transactions such as the Stock Dividend. While references in the Proxy
Statement/Prospectus to the exchange ratio have been adjusted to give effect to
the Stock Dividend, the Merger Agreement has not been adjusted because the
Merger Agreement was signed prior to the Stock Dividend.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated August 18, 1997 (this
"Agreement"), among HUBCO, INC. ("HUBCO"), a New Jersey corporation and
registered bank holding company, LAFAYETTE AMERICAN BANK AND TRUST COMPANY, a
state bank and trust company organized under the laws of Connecticut and a
wholly-owned subsidiary of HUBCO ("Lafayette"), and THE BANK OF SOUTHINGTON, a
state bank and trust company organized under the laws of Connecticut
("Southington").
RECITALS
HUBCO desires to acquire Southington and Southington's Board
of Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Southington and its
shareholders. The acquisition will be accomplished by merging Southington with
and into Lafayette, with Lafayette surviving.
As a condition for HUBCO to enter into this Agreement, HUBCO
has required that it receive an option on certain authorized but unissued shares
of Southington Common Stock (as hereinafter defined) and, simultaneously with
the execution of this Agreement, Southington is issuing an option to HUBCO to
purchase 275,000 shares of the authorized and unissued Southington Common Stock
at an option price of $16.00 per share, subject to adjustment and subject to the
terms and conditions set forth in the agreement governing such option.
The Boards of Directors of Southington, HUBCO and Lafayette
have duly adopted and approved this Agreement and the Board of Directors of
Southington has directed that it be submitted to Southington's shareholders for
approval.
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I - THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), Southington shall be
merged with and into Lafayette (the "Merger") in accordance with Section 36a-125
of the Banking Law of Connecticut (the "Connecticut Banking Act"), and Lafayette
shall be the surviving bank (the "Surviving Bank"), the name of which shall
continue to be Lafayette American Bank and Trust Company. The principal office
of the Surviving Bank shall be the principal office of Lafayette. Exhibit 1 to
this Agreement lists (i) the locations of the principal offices of and branch
offices of Southington and Lafayette; (ii) the locations of all branch offices
and the main office of the Surviving Bank; and (iii) the amount of the capital
stock, the number of shares, the par value and the amount of surplus of the
Surviving Bank.
1.2. Effect of the Merger. At the Effective Time, the
Surviving Bank shall be considered the same business and corporate entity as
each of Lafayette and Southington and thereupon and thereafter, all the
property, rights, privileges, powers and franchises of each of Lafayette and
Southington shall vest in the Surviving Bank and the Surviving Bank shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of Lafayette and Southington and shall have
succeeded to all of each of their relationships, as fully and to the same extent
as if such property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships had been originally acquired, incurred or
entered into by the Surviving Bank. In addition, any reference to either of
Lafayette or Southington in any contract or document, whether executed or taking
effect before or after the Effective Time, shall be considered a reference to
the Surviving Bank if not inconsistent with the other provisions of the contract
or document; and any pending action or other judicial proceeding to which either
of Lafayette or Southington is a party, shall not be deemed to have abated or to
have discontinued by reason of the Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Merger had not been made,
or the Surviving Bank may be substituted as a party to such action or
proceeding, and any judgment, order or decree may be rendered for or against it
that might have been rendered for or against either of Lafayette or Southington
as if the Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time,
the certificate of incorporation of Lafayette as it exists at the Effective Time
shall be the certificate of incorporation of the Surviving Bank and shall not be
amended by this Agreement or the Merger but thereafter may be amended as
provided by law.
1.4. By-laws. As of the Effective Time, the By-laws of
Lafayette shall be the By-laws of the Surviving Bank until otherwise amended as
provided by law.
1.5. Directors and Officers. As of the Effective Time, the
directors and officers of Lafayette shall become the directors and officers of
the Surviving Bank. The names of the current directors and officers of Lafayette
are listed on Exhibit 1.
1.6. Closing Date, Closing and Effective Time. Unless a
different date, time and/or place are agreed to by the parties hereto, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m., at the
offices of Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham Park, New
Jersey, on a date determined by HUBCO on at least five business days notice (the
"Closing Notice") given to Southington, which date (the "Closing Date") shall be
not later than 15 business days 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). In the Closing Notice, HUBCO
shall specify the "Determination Date" for purposes of determining the Median
Pre-Closing Price (as hereinafter defined), which date shall be not more than
ten business days prior to the Closing Date set forth in the Closing Notice. The
Merger shall become effective (and be consummated) upon the date specified in a
certificate executed by HUBCO, Lafayette and Southington filed with the
Connecticut Secretary of State after the approval of the Connecticut
Commissioner of Banking (the "Commissioner"). Southington shall not unreasonably
withhold its approval of the Effective Time, which shall be consistent with this
section. The certificate filed with the Secretary of State shall specify as the
"Effective Time" of the Merger a date, immediately following the Closing, agreed
to by HUBCO and Southington. Following the execution of this Agreement, HUBCO
and Southington shall, if required or advised to do so by applicable regulatory
authorities, execute and deliver a simplified or supplemental merger agreement,
both in form and substance reasonably satisfactory to the parties hereto and
consistent with the terms hereof, for delivery to the Secretary of State and the
Commissioner in connection with the approval of the Merger by the regulatory
authorities.
1.7. Assurance by HUBCO. HUBCO shall provide the Commissioner
with such assurances as the Commissioner reasonably shall require that after the
Effective Time, Lafayette will comply with applicable minimum capital
requirements.
ARTICLE II - CONVERSION OF SOUTHINGTON SHARES
2.1. Conversion of Southington Common Stock. Each share of
common stock, par value $6.00 per share, of Southington ("Southington Common
Stock"), issued and outstanding immediately prior to the Effective Time (other
than Dissenting Shares as defined in Section 2.4) shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted as
follows:
(a) Exchange Ratio. Subject to the provisions of this Section
2.1, each share of Southington Common Stock issued and outstanding immediately
prior to the Effective Time (excluding Dissenting Shares and shares to be
cancelled pursuant to Section 2.1(d)) shall be converted at the Effective Time
into the number of shares of Common Stock, no par value, of HUBCO ("HUBCO Common
Stock") equal to the exchange ratio (the "Exchange Ratio") determined as
follows:
(i) If the Median Pre-Closing Price (as hereinafter
defined) is equal to or greater than $35.00, the Exchange Ratio shall be 0.600;
(ii) If the Median Pre-Closing Price is less than
$35.00 but greater than $27.50, the Exchange Ratio shall be equal to the
quotient obtained by dividing $21.00 by the Median Pre-Closing Price and
rounding the result to the nearest one-thousandth; and
(iii) If the Median Pre-Closing Price is equal to or
less than $27.50, the Exchange Ratio shall be 0.764; provided, however, that if
the Median Pre-Closing Price is less than $22.00, the Board of Directors of
Southington shall have the right, exercisable only until 11:59 p.m. on the third
business day following the Determination Date (or the third business day
following receipt by Southington of the Closing Notice, if later), to terminate
this Agreement by giving HUBCO notice of such termination, referring to this
Section 2.1, and this Agreement shall be terminated pursuant to such notice,
subject to Section 7.1, effective as of 11:59 p.m. on the third business day
following receipt of such notice by HUBCO, unless prior to 11:59 p.m. on the
third business day following receipt of such termination notice, HUBCO sends
notice to Southington agreeing that the Exchange Ratio shall be equal to the
quotient obtained by dividing $16.81 by the Median Pre-Closing Price.
The "Median Pre-Closing Price" shall be determined by taking
the price half-way between the Closing Prices left after discarding the 4 lowest
and 4 highest Closing Prices in the 10 consecutive trading day period which ends
on (and includes) the Determination Date. The "Closing Price" shall mean the
closing price of HUBCO Common Stock as supplied by the NASDAQ Stock Market and
published in The Wall Street Journal. A "trading day" shall mean a day for which
a Closing Price is so supplied and published.
(b) Conversion of Southington Certificates. At the Effective
Time, all shares of Southington Common Stock (other than those cancelled
pursuant to Section 2.1(d)) shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously evidencing any such shares (other than Dissenting Shares
and those cancelled pursuant to Section 2.1(d)) shall thereafter represent the
right to receive the Merger Consideration (as defined in Section 2.2(b)). The
holders of such certificates previously evidencing such shares of Southington
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Southington Common Stock except
as otherwise provided herein or by law. Certificates previously evidencing
shares of Southington Common Stock (other than Dissenting Shares and those
cancelled pursuant to Section 2.1(d)) shall be exchanged for certificates
evidencing shares of HUBCO Common Stock issued pursuant to this Article II, upon
the surrender of such certificates in accordance with this Article II. No
fractional shares of HUBCO Common Stock shall be issued, and, in lieu thereof, a
cash payment shall be made pursuant to Section 2.2(e).
(c) Capital Changes. If between the date hereof and the
Effective Time the outstanding shares of HUBCO Common Stock shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, stock split, reclassification, recapitalization, merger,
combination or exchange of shares, the Exchange Ratio and the definition of
Closing Price (as set forth in Section 2.1(a)) shall be correspondingly adjusted
to reflect such stock dividend, stock split, reclassification, recapitalization,
merger, combination or exchange of shares.
(d) Cancelled Shares. All shares of Southington Common Stock
held by Southington in its treasury or held immediately prior to the Effective
Time by HUBCO or any of its subsidiaries (other than shares held by it as
trustee or in a fiduciary capacity or held as collateral on or in lieu of a debt
previously contracted) shall be cancelled.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, HUBCO shall
deposit, or shall cause to be deposited, with a bank or trust company designated
by HUBCO, which may be the Trust Department of Lafayette or of another banking
subsidiary of HUBCO (the "Exchange Agent"), for the benefit of the holders of
shares of Southington Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, certificates evidencing shares of HUBCO Common
Stock and cash in such amount such that the Exchange Agent possesses such number
of shares of HUBCO Common Stock and such amount of cash as are required to
provide all of the consideration required to be exchanged by HUBCO pursuant to
the provisions of this Article II (such certificates for shares of HUBCO Common
Stock, together with any dividends or distributions with respect thereto, and
cash being hereinafter referred to as the "Exchange Fund"). The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the HUBCO Common Stock and
cash out of the Exchange Fund in accordance with Section 2.1. Except as
contemplated by Section 2.2(f) hereof, the Exchange Fund shall not be used for
any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable
either before or after the Effective Time, HUBCO will instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time evidenced outstanding shares of
Southington Common Stock (other than Dissenting Shares and shares cancelled
pursuant to Section 2.1(d)) (the "Certificates"), (i) a letter of transmittal
(which is reasonably agreed to by HUBCO and Southington and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as HUBCO may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates evidencing shares of HUBCO Common
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificate shall be entitled to receive in exchange therefor (A)
certificates evidencing that number of whole shares of HUBCO Common Stock which
such holder has the right to receive in respect of the shares of Southington
Common Stock formerly evidenced by such Certificate in accordance with Section
2.1, (B) cash in lieu of fractional shares of HUBCO Common Stock to which such
holder may be entitled pursuant to Section 2.2(e) and (C) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c) (the
shares of HUBCO Common Stock, dividends, distributions and cash described in
clauses (A), (B) and (C) being collectively, the "Merger Consideration") and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of shares of Southington Common Stock which is not
registered in the transfer records of Southington, a certificate evidencing the
proper number of shares of HUBCO Common Stock and/or cash may be issued and/or
paid in accordance with this Article II to a transferee if the Certificate
evidencing such shares of Southington Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to evidence only the right
to receive upon such surrender the Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares of HUBCO
Common Stock. No dividends or other distributions declared or made after the
Effective Time with respect to HUBCO Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of HUBCO Common Stock evidenced thereby, and no other part
of the Merger Consideration shall be paid to any such holder, until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates evidencing shares of HUBCO Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of HUBCO Common Stock to which
such holder may have been entitled pursuant to Section 2.2(e) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such shares of HUBCO Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions,
with a record date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such shares of HUBCO
Common Stock. No interest shall be paid on the Merger Consideration.
(d) No Further Rights in Southington Common Stock. All shares
of HUBCO Common Stock issued and cash paid upon conversion of the shares of
Southington Common Stock in accordance with the terms hereof shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to such
shares of Southington Common Stock.
(e) No Fractional Shares. No certificates or scrip evidencing
fractional shares of HUBCO Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of HUBCO. Cash shall
be paid in lieu of fractional shares of HUBCO Common Stock, in an amount
determined by multiplying the fraction by the Median Pre-Closing Price.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Southington Common Stock for
two years after the Effective Time shall be delivered to HUBCO, upon demand, and
any holders of Southington Common Stock who have not theretofore complied with
this Article II shall thereafter look only to HUBCO for the Merger Consideration
to which they are entitled.
(g) No Liability. Neither HUBCO nor Lafayette nor the Exchange
Agent shall be liable to any holder of shares of Southington Common Stock for
any such shares of HUBCO Common Stock or cash (or dividends or distributions
with respect thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Withholding Rights. HUBCO shall be entitled to deduct and
withhold, or cause the Exchange Agent to deduct and withhold, from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Southington Common Stock, the minimum amounts (if any) that HUBCO is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
HUBCO, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Southington Common Stock in
respect of which such deduction and withholding was made by HUBCO.
2.3. Stock Transfer Books. At the Effective Time, the stock
transfer books of Southington shall be closed and there shall be no further
registration of transfers of shares of Southington Common Stock thereafter on
the records of Southington. On or after the Effective Time, any Certificates
presented to the Exchange Agent or HUBCO for transfer shall be converted into
the Merger Consideration.
2.4. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any holder of Southington Common Stock shall have the
right to dissent in the manner provided in the Connecticut Banking Act, and if
all necessary requirements of the Connecticut Banking Act are met, such shares
shall be entitled to payment in cash from the Surviving Bank of the fair value
of such shares as determined in accordance with the Connecticut Banking Act. All
shares of Southington Common Stock as to which the holder properly exercises
dissenters' rights in accordance with the Connecticut Banking Act shall
constitute "Dissenting Shares" unless and until such rights are waived, by the
party initially seeking to exercise such rights.
2.5. Lafayette Common Stock. The shares of common stock of
Lafayette outstanding immediately prior to the Effective Time shall not be
effected by the Merger but shall be the same number of shares of the Surviving
Bank.
2.6 Southington Stock Options.
At the Effective Time, each option (each, a "Stock Option")
outstanding pursuant to either the Southington 1995 Incentive Stock Option Plan
or the Southington 1997 Employee Stock Option Plan (collectively, the
"Southington Stock Option Plan") shall be converted into HUBCO Common Stock in
accordance with the following formula:
(i) Each outstanding Stock Option shall be valued at
an amount (the "Option Value") determined by multiplying the Median
Pre-Closing Price by the Exchange Ratio and then subtracting the stated
exercise price for the Stock Option.
(ii) Each holder of Stock Options shall receive, at
the Effective Time, a number of shares of HUBCO Common Stock equal to
the aggregate Option Value for all of such holder's Stock Options,
divided by the Median Pre-Closing Price.
(iii) Cash shall be paid in lieu of fractional
shares, in an amount determined by multiplying the fraction by the
Median Pre-Closing Price.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SOUTHINGTON
References herein to the "Southington 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
Southington to HUBCO. Southington hereby represents and warrants to HUBCO and
Lafayette as follows:
3.1. Corporate Organization.
(a) Southington is a state bank and trust company duly
organized, validly existing and in good standing under the laws of the State of
Connecticut. Southington 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
Southington. Southington is a state-chartered bank and trust company whose
deposits are insured by the Bank Insurance Fund of the Federal Deposit Insurance
Corporation (the "FDIC") to the fullest extent permitted by law. The Southington
Disclosure Schedule sets forth true and complete copies of the Certificate of
Incorporation and By-Laws of Southington, as in effect on the date hereof.
(b) Except as set forth in the Southington Disclosure
Schedule, Southington has no subsidiaries. When used with reference to
Southington, the term "subsidiary" means any corporation, partnership, joint
venture or other legal entity in which Southington, directly or indirectly, owns
at least a 50 percent stock or other equity interest or for which Southington,
directly or indirectly, acts as a general partner.
3.2. Capitalization. The authorized capital stock of
Southington consists of 4,000,000 shares of Southington Common Stock. As of the
date hereof, there are 1,246,012 shares of Southington Common Stock issued and
outstanding. All issued and outstanding shares of Southington Common Stock have
been duly authorized and validly issued, are fully paid and no assessment has
been made on such shares. Except as set forth in the Southington Disclosure
Schedule, Southington has not granted and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the transfer, purchase, subscription or issuance of any
shares of capital stock of Southington or any securities representing the right
to purchase, subscribe or otherwise receive any shares of such capital stock or
any securities convertible into any such shares, and there are no agreements or
understandings with respect to voting of any such shares. Each Stock Option
which will be outstanding on the Closing Date is now, or on the Closing Date
will be automatically by virtue of the Merger and without further action on the
part of Southington or the holder thereof, fully vested.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by the shareholders of Southington, Southington
has the full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby in accordance with the
terms hereof. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Southington in accordance with the Certificate of
Incorporation of Southington and applicable laws and regulations. Except for
such approval, no other corporate proceedings on the part of Southington are
necessary to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Southington and constitutes the
valid and binding obligation of Southington, enforceable against Southington in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
Southington, nor the consummation by Southington of the transactions
contemplated hereby in accordance with the terms hereof, or compliance by
Southington with any of the terms or provisions hereof, will (i) violate any
provision of Southington's Certificate of Incorporation or By-laws, (ii)
assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Southington or any of its properties or
assets, or (iii) except as set forth in the Southington Disclosure Schedule,
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Southington 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 Southington is a party, or by which it or any
of its properties or assets may be bound or affected, except, with respect to
(ii) and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of Southington and which will not prevent or delay the consummation of
the transactions contemplated hereby. Except for consents and approvals of or
filings or registrations with or notices to or required by the FDIC, the
Commissioner, the Connecticut Department of Banking (the "Department"), the
Connecticut Department of Environmental Protection (the "DEP"), the Securities
and Exchange Commission (the "SEC"), state blue sky authorities or other
applicable governmental authorities, and the shareholders of Southington, 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
Southington in connection with (x) the execution and delivery by Southington of
this Agreement and (y) the consummation by Southington of the Merger and the
other transactions contemplated hereby, except such as are listed in the
Southington Disclosure Schedule and as individually or in the aggregate will not
(if not obtained) have a material adverse effect on the business, operations,
assets or financial condition of Southington or prevent or delay the
consummation of the transactions contemplated hereby. To the best of
Southington's knowledge, no fact or condition exists which Southington has
reason to believe will prevent it from obtaining the aforementioned consents or
approvals.
3.4. Financial Statements.
(a) The Southington Disclosure Schedule sets forth copies of
the balance sheets of Southington as of December 31, 1996 and 1995, and the
related income statements, statements of changes in stockholders' equity and
cash flow statements for the periods ended December 31, in each of the three
years 1994 through 1996, in each case accompanied by the audit report (which
report includes explanatory paragraphs relating to certain regulatory matters)
of KPMG Peat Marwick, LLP ("KPMG"), independent public accountants with respect
to Southington, and the unaudited balance sheets of Southington as of March 31,
1997 and June 30, 1997, and the related unaudited income statements, unaudited
statements of changes in stockholders' equity and unaudited cash flow statements
of Southington for the periods ended March 31, 1997 and June 30, 1997 as
reported in HUBCO's Quarterly Report on Form F-4, filed with the FDIC
(collectively, the "Southington Financial Statements"). The Southington
Financial Statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved (except as may be indicated therein or in
the notes thereto), and fairly present the financial position of Southington as
of the respective dates set forth therein, and the related income statements,
statements of changes in stockholders' equity and cash flow statements fairly
present the results of operations, changes in stockholders' equity and cash
flows of Southington for the respective fiscal periods set forth therein.
(b) The books and records of Southington are being maintained
in material compliance with applicable legal and accounting requirements, and
reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or
reserved against in the Southington Financial Statements (including the notes
thereto), as of June 30, 1997, Southington had no liabilities, whether absolute,
accrued, contingent or otherwise, material to the business, operations, assets
or financial condition of Southington which were required by GAAP (consistently
applied) to be accrued in Southington's balance sheet as of June 30, 1997 or
disclosed in the footnotes to the financial statements in accordance with FSAS
No. 5. Since June 30, 1997, Southington has not incurred any liabilities except
in the ordinary course of business and consistent with prudent banking practice,
except as related to the transactions contemplated by this Agreement.
3.5. Broker's and Other Fees. Except for Endicott Financial
Advisors LLC ("Endicott"), neither Southington nor any of its directors or
officers has employed any broker or finder or incurred any liability for any
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement. Southington's agreement with
Endicott is set forth in the Southington Disclosure Schedule. There are no fees
(other than time charges billed at usual and customary rates) payable to any
consultants, including lawyers and accountants, in connection with this
transaction or which would be triggered by consummation of this transaction or
the termination of the services of such consultants by Southington.
3.6. Absence of Certain Changes or Events.
(a) Except as set forth in the Southington Disclosure
schedule, there has not been any material adverse change in the business,
operations, assets or financial condition of Southington since June 30, 1997 and
to the best of Southington's knowledge, no facts or condition exists which
Southington believes will cause such a material adverse change in the future.
(b) Except as set forth in the Southington Disclosure
Schedule, Southington has not taken or permitted any of the actions set forth in
Section 5.2 hereof between June 30, 1997 and the date hereof and, except for
execution of this Agreement and the agreement described in Section 3.5,
Southington has conducted its business only in the ordinary course, consistent
with past practice.
3.7. Legal Proceedings. Except as disclosed in the Southington
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of Southington, Southington is not a party to any, and there are no
pending or, to the best of Southington's knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Southington which, if decided adversely to
Southington, individually or in the aggregate could have a material adverse
effect on the business, operations, assets or financial condition of
Southington. Except as disclosed in the Southington Disclosure Schedule,
Southington is not a party to any order, judgment or decree entered in any
lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Southington has duly filed (and until the Effective Time
will so file) all returns, declarations, reports, information returns and
statements ("Returns") required to be filed by it in respect of any federal,
state and local taxes (including withholding taxes, penalties or other payments
required) and has duly paid (and until the Effective Time will so pay) all such
taxes due and payable, other than taxes or other charges which are being
contested in good faith (and disclosed to HUBCO in writing). Southington has
established (and until the Effective Time will establish) on its books and
records reserves that are adequate for the payment of all federal, state and
local taxes not yet due and payable, but are incurred in respect of Southington
through such date. The Southington Disclosure Schedule identifies the federal
income tax returns of Southington which have been examined by the Internal
Revenue Service (the "IRS") within the past six years. No deficiencies were
asserted as a result of such examinations which have not been resolved and paid
in full. The Southington Disclosure Schedule identifies the applicable state
income tax returns of Southington which have been examined by the applicable
authorities within the past six years. No deficiencies were asserted as a result
of such examinations which have not been resolved and paid in full. To the best
knowledge of Southington, there are no audits or other administrative or court
proceedings presently pending nor any other disputes pending with respect to, or
claims asserted for, taxes or assessments upon Southington, nor has Southington
given any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any taxes or Returns.
(b) Except as set forth in the Southington Disclosure
Schedule, Southington (i) has not requested any extension of time within which
to file any Return which Return has not since been filed, (ii) is not a party to
any agreement providing for the allocation or sharing of taxes, (iii) is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by
Southington (nor does Southington have any knowledge that the IRS has proposed
any such adjustment or change of accounting method) and (iv) has not filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.9. Employee Benefit Plans.
(a) Except as disclosed in the Southington Disclosure
Schedule, Southington does not maintain or contribute to any "employee pension
benefit plan" (the "Southington Pension Plans"), within the meaning of Section
3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), "employee welfare benefit plan" within the meaning of Section 3(1) of
ERISA (the "Southington Welfare Plans"), stock option plan, stock purchase plan,
deferred compensation plan, severance plan, bonus plan, employment agreement or
other similar plan, program or arrangement. Southington has not, since September
2, 1974, contributed to any "Multiemployer Plan", as such term is defined in
Section 3(37) of ERISA.
(b) Except as disclosed in the Southington Disclosure
Schedule, Southington has delivered to HUBCO in the Southington Disclosure
Schedule a complete and accurate copy of each of the following with respect to
each of the Southington Pension Plans and Southington Welfare Plans, if any: (1)
plan document, summary plan description, and summary of material modifications
(if not available, a detailed description of the foregoing); (ii) trust
agreement or insurance contract, if any; (iii) most recent IRS determination
letter, if any; (iv) most recent actuarial report, if any; and (v) most recent
annual report on Form 5500.
(c) The present value of all accrued benefits under each of
the Southington Pension Plans subject to Title IV of ERISA, based upon the
actuarial assumptions used for purposes of the most recent actuarial valuation
prepared by such Southington Pension Plan's actuary, did not exceed the then
current value of the assets of such plans allocable to such accrued benefits.
(d) During the last five years, the Pension Benefit Guaranty
Corporation (the "PBGC") has not asserted any claim for liability against
Southington 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 Southington Pension
Plan have been paid. All contributions required to be made to each Southington
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
Southington which have not been paid have been properly recorded on the books of
Southington.
(f) Except as disclosed in the Southington Disclosure
Schedule, each of the Southington Pension Plans, the Southington Welfare Plans
and each other plan and arrangement identified on the Southington Disclosure
Schedule has been operated in compliance in all material respects with the
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder, and all other applicable governmental laws and
regulations. Furthermore, if Southington maintains any Southington Pension Plan,
Southington intends to apply, if necessary, for, or the IRS has issued, a
favorable determination letter with respect to such Southington Pension Plan
and, except as disclosed in the Southington Disclosure Schedule, Southington is
not aware of any fact or circumstance which would disqualify any plan, that
could not be retroactively corrected (in accordance with the procedures of the
IRS).
(g) To the best knowledge of Southington, no non-exempt
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, has occurred with respect to any of the Southington
Welfare Plans or Southington Pension Plans.
(h) No Southington 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
Southington 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
Southington Pension Plans.
(j) There are no pending or, to the best knowledge of
Southington, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Southington Pension Plans or
the Southington Welfare Plans, any trusts created thereunder or any other plan
or arrangement identified in the Southington Disclosure Schedule.
(k) Except as disclosed in the Southington Disclosure
Schedule, no Southington Pension Plan or Southington 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 Southington Pension Plan.
(l) Except with respect to customary health, life and
disability benefits or as disclosed in the Southington Disclosure Schedule,
Southington has no unfunded benefit obligations which are not accounted for by
reserves shown on the financial statements and established under GAAP or
otherwise noted on such financial statements.
(m) With respect to each Southington Pension Plan and
Southington Welfare Plan that is funded wholly or partially through an insurance
policy, there will be no liability of Southington as of the Effective Time under
any such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Effective Time.
(n) Except as set forth in the Southington Disclosure Schedule
or as agreed to by HUBCO in writing either pursuant to this Agreement or
otherwise, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee of Southington to severance
pay, unemployment compensation or any similar payment, (ii) accelerate the time
of payment, vesting, or increase the amount, of any compensation due to any
current employee or former employee under any Southington Pension Plan or
Southington Welfare Plan, or (iii) result in payments not deductible by reason
of Section 280G of the Code.
3.10. Reports.
(a) The Southington Disclosure Schedule lists, and Southington
has previously delivered to HUBCO a complete copy of, each communication (other
than general advertising materials and press releases) mailed by Southington to
its shareholders as a class since January 1, 1995, and each such communication,
as of its date, complied in all material respects with all applicable statutes,
rules and regulations and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
(b) Southington has, since January 1, 1995, duly filed with
the FDIC in form which was correct in all material respects the quarterly and
annual financial reports required to be filed under applicable laws and
regulations (provided that information as of a later date shall be deemed to
modify information as of an earlier date), and, subject to permission from such
regulatory authorities, Southington promptly will deliver or make available to
HUBCO accurate and complete copies of such reports. The Southington Disclosure
Schedule lists all examinations of Southington conducted by either the
Department or the FDIC since January 1, 1995 and the dates of any responses
thereto submitted by Southington.
3.11. Southington Information. The information relating to
Southington to be contained in the Proxy Statement/Prospectus (as defined in
Section 5.6(a) hereof) to be delivered to shareholders of Southington in
connection with the solicitation of their approval of the Merger, as of the date
the Proxy Statement/Prospectus is mailed to shareholders of Southington, and up
to and including the date of the meeting of shareholders to which such Proxy
Statement/Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.12. Compliance with Applicable Law. Except as set forth in
the Southington Disclosure Schedule, Southington holds all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of its
business and since January 1, 1995 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 Southington (other than where such defaults or noncompliances, individually
or in the aggregate, will not result in a material adverse effect on the
business, operations, assets or financial condition of Southington) and
Southington has not received notice of violation of, and does not know of any
violations of, any of the above.
3.13. Certain Contracts.
(a) Except for plans referenced in Section 3.9 hereof,
contracts described in Section 3.5 hereof and as disclosed in the Southington
Disclosure Schedule, (i) Southington is not a party to or bound by any written
contract or understanding (whether written or oral) with respect to the
employment of any officers, employees, directors or consultants, and (ii) the
consummation of the transactions contemplated by this Agreement will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from Southington to
any officer, employee, director or consultant thereof. The Southington
Disclosure Schedule sets forth true and correct copies of each severance or
employment agreement with officers, directors, employees, agents or consultants
to which Southington is a party.
(b) Except as disclosed in the Southington Disclosure Schedule
and except for loan agreements made and loan commitments issued in the ordinary
course of business, (i) as of the date of this Agreement, Southington is not a
party to or bound by any commitment, agreement or other instrument which is
material to the business, operations, assets or financial condition of
Southington (but in no event shall a contract for less than $50,000 a year be
deemed material under this paragraph) (ii) no commitment, agreement or other
instrument to which Southington is a party or by which it is bound limits the
freedom of Southington to compete in any line of business or with any person,
and (iii) Southington is not a party to any collective bargaining agreement.
(c) Except as disclosed in the Southington Disclosure
Schedule, neither Southington nor, to the best knowledge of Southington, 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 Southington is or will be the creditor) or
arrangement, except for defaults which individually or in the aggregate would
not have a material adverse effect on the business, operations, assets or
financial condition of Southington.
3.14. Properties and Insurance.
(a) Southington has good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in Southington's statement of
condition as of December 31, 1996, 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, 1996), subject
to no encumbrances, liens, mortgages, security interests or pledges, except (i)
those items that secure liabilities that are reflected in said statement of
condition or the notes thereto or that secure liabilities incurred in the
ordinary course of business after the date of such statement of condition, (ii)
statutory liens for amounts not yet delinquent or which are being contested in
good faith, (iii) such encumbrances, liens, mortgages, security interests,
pledges and title imperfections that are not in the aggregate material to the
business, operations, assets, and financial condition of Southington and (iv)
with respect to owned real property, title imperfections noted in title reports
delivered to HUBCO prior to the date hereof. Except as affected by the
transactions contemplated hereby, Southington as lessee has the right under
valid and subsisting leases to occupy, use, possess and control all real
property leased by Southington in all material respects as presently occupied,
used, possessed and controlled by Southington.
(b) The business operations and all insurable properties and
assets of Southington are insured for its benefit against all risks which, in
the reasonable judgment of the management of Southington, should be insured
against, in each case under policies or bonds issued by insurers of recognized
responsibility, in such amounts with such deductibles and against such risks and
losses as are in the opinion of the management of Southington adequate for the
business engaged in by Southington. As of the date hereof, Southington has not
received any notice of cancellation or notice of a material amendment of any
such insurance policy or bond and, to the best of its knowledge, is not in
default under any such policy or bond, no 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 Southington contain
accurate records of all meetings and other corporate action held of the
shareholders and Board of Directors (including committees of the Board of
Directors), except where the failure to so maintain such records would not have
a material adverse effect on the business, operations, assets or financial
condition of Southington.
3.16. Environmental Matters.
(a) Except as disclosed in the Southington Disclosure
Schedule, Southington has not received any written notice, citation, claim,
assessment, proposed assessment or demand for abatement alleging that
Southington (either directly or, as a trustee or fiduciary, or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters which correction or cleanup would be material to the
business, operations, assets or financial condition of Southington. Except as
disclosed in the Southington Disclosure Schedule, Southington has no knowledge
that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any Properties (as hereinafter defined) in
any manner that violates any presently existing federal, state or local law or
regulation governing or pertaining to any toxic or hazardous substances and
materials, the violation of which would have a material adverse effect on the
business, operations, or assets or financial condition of Southington.
(b) Southington has no knowledge that any of the Properties
have been operated in any manner in the three years prior to the date of this
Agreement that violated any applicable federal, state or local law or regulation
governing or pertaining to such substances and materials, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of Southington.
(c) Except as set forth on the Southington Disclosure
Schedule, (i) Southington has no knowledge that any of the real property owned
or leased by Southington, as other real estate owned ("OREO") or otherwise, or
owned or controlled by Southington as a trustee or fiduciary (the "Properties"),
meets the statutory criteria of an "Establishment" as that term is defined
pursuant to the Connecticut Transfer of Establishments Act, P.A. 95-183 (the
"Connecticut Transfer Act"), and (ii) to the best of Southington `s knowledge,
Southington and any and all of its tenants or subtenants have all necessary
permits and have filed all necessary registrations material to permit the
operation of the Properties in the manner in which the operations are currently
conducted under all applicable federal, state or local environmental laws,
excepting only those permits and registrations the absence of which would not
have a material adverse effect upon the operations requiring the permit or
registration.
(d) Except as set forth in the Southington Disclosure
Schedule, to the knowledge of Southington, there are no underground storage
tanks on, in or under any of the Properties and no underground storage tanks
have been closed or removed from any of the Properties while the property was
owned, operated or controlled by Southington.
3.17. Reserves. As of June 30, 1997, the allowance for
possible loan losses in the Southington Financial Statements was adequate based
upon all factors required to be considered by Southington at that time in
determining the amount of such allowance. Except as set forth in the Southington
Disclosure Schedule, the methodology used to compute the allowance for possible
loan losses complies in all material respects with all applicable policies of
the FDIC. As of June 30, 1997, the valuation allowance for OREO properties in
the Southington Financial Statements was adequate based upon all factors
required to be considered by Southington at that time in determining the amount
of such allowance.
3.18. No Parachute Payments. No officer, director, employee or
agent (or former officer, director, employee or agent) of Southington is
entitled now, or will or may be entitled to as a consequence of this Agreement
or the Merger, to any payment or benefit from Southington, HUBCO or Lafayette
which if paid or provided would constitute an "excess parachute payment", as
defined in Section 280G of the Code or regulations promulgated thereunder.
3.19. Agreements with Bank Regulators. Except as set forth in
the Southington Disclosure Schedule, Southington is not a party to any
commitment letter, board resolution submitted to a regulatory authority or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any court, governmental
authority or other regulatory or administrative agency or commission, domestic
or foreign ("Governmental Entity") which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies or its management, nor has Southington been advised by any
Governmental Entity that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Except as set forth in the
Southington Disclosure Schedule, Southington is not required by Section 32 of
the Federal Deposit Insurance Act to give prior notice to a Federal banking
agency of the proposed addition of an individual to its board of directors or
the employment of an individual as a senior executive officer.
3.20. Disclosure. No representation or warranty contained in
Article III of this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements herein not
misleading.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF HUBCO
References herein to the "HUBCO Disclosure Schedule" shall
mean all of the disclosure schedules required by this Article IV, dated as of
the date hereof and referenced to the specific sections and subsections of
Article IV of this Agreement, which have been delivered on the date hereof by
HUBCO to Southington. HUBCO hereby represents and warrants to Southington as
follows:
4.1. Corporate Organization.
(a) HUBCO is a corporation duly organized and validly existing
and in good standing under the laws of the State of New Jersey. HUBCO has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of HUBCO or its subsidiaries (defined
below), taken as a whole. HUBCO is registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended.
(b) Each of the subsidiaries of HUBCO are listed in the HUBCO
Disclosure Schedule. The term "subsidiary", when used with reference to HUBCO,
means any corporation, partnership, joint venture or other legal entity in which
HUBCO directly or indirectly, owns at least a 50 percent stock or other equity
interest or for which HUBCO, directly or indirectly, acts as a general partner.
Each subsidiary of HUBCO is duly organized and validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Lafayette is a
state bank and trust company whose deposits are insured by the FDIC to the
fullest extent permitted by law. Each subsidiary has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, operations, assets or
financial condition of HUBCO and its subsidiaries, taken as a whole. The HUBCO
Disclosure Schedule sets forth true and complete copies of the Certificate of
Incorporation and By-laws of each of HUBCO and Lafayette as in effect on the
date hereof.
4.2. Capitalization. The authorized capital stock of HUBCO
consists of 51,500,000 shares of HUBCO Common Stock and 10,300,000 shares of
preferred stock ("HUBCO Authorized Preferred Stock"). As of June 30, 1997, there
were 21,624,468 shares of HUBCO Common Stock issued and outstanding, excluding
5,304 shares of treasury stock. Since such date, and from time to time
hereafter, HUBCO may sell or repurchase shares of HUBCO Common Stock. As of June
30, 1997, there were 35,580 shares of HUBCO Authorized Preferred Stock
outstanding, all of which are designated Series B, no par value, Convertible
Preferred Stock. Except as described in the HUBCO Disclosure Schedule, there are
no shares of HUBCO Common Stock issuable upon the exercise of outstanding stock
options or otherwise. All issued and outstanding shares of HUBCO Common Stock
and HUBCO Authorized Preferred Stock, and all issued and outstanding shares of
capital stock of HUBCO's subsidiaries, have been duly authorized and validly
issued, are fully paid, nonassessable and free of preemptive rights, and are
free and clear of all liens, encumbrances, charges, restrictions or rights of
third parties. All of the outstanding shares of capital stock of HUBCO's
subsidiaries are owned by HUBCO free and clear of any liens, encumbrances,
charges, restrictions or rights of third parties. Except as described in the
HUBCO Disclosure Schedule, neither HUBCO nor HUBCO's subsidiaries has granted or
is bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the transfer, purchase or issuance of
any shares of capital stock of HUBCO or HUBCO's subsidiaries or any securities
representing the right to purchase, subscribe or otherwise receive any shares of
such capital stock or any securities convertible into any such shares, and there
are no agreements or understandings with respect to voting of any such shares.
4.3. Authority; No Violation.
(a) Each of HUBCO and Lafayette 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 have been duly and validly approved by the
respective Boards of Directors of HUBCO and Lafayette in accordance with their
respective Certificates of Incorporation and applicable laws and regulations. No
other corporate proceedings on the part of HUBCO or Lafayette are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of HUBCO and Lafayette and constitutes
the valid and binding obligations of each of HUBCO and Lafayette, enforceable
against each of them in accordance with its terms.
(b) Neither the execution or delivery of this Agreement by
HUBCO or Lafayette, nor the consummation by HUBCO or Lafayette of the
transactions contemplated hereby in accordance with the terms hereof or
compliance by HUBCO or Lafayette with any of the terms or provisions hereof will
(i) violate any provision of the respective Certificates of Incorporation or
By-laws of HUBCO or Lafayette, (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 either
HUBCO or Lafayette or any of their respective properties or assets, or (iii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the respective properties or
assets of HUBCO or Lafayette 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 either HUBCO or Lafayette is a party,
or by which either HUBCO or Lafayette or any of their respective properties or
assets may be bound or affected, except, with respect to (ii) and (iii) above,
such as individually or in the aggregate will not have a material adverse effect
on the business, operations, assets or financial condition of HUBCO and HUBCO's
subsidiaries, taken as a whole, and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the FDIC, the
Commissioner, the Department, the Board of Governors of the Federal Reserve
System (the "FRB"), if required, the SEC, state blue sky authorities or other
applicable governmental authorities, no consents or approvals of or filings or
registrations with or notices to any third party or any public body or authority
are necessary on behalf of HUBCO or Lafayette in connection with (x) the
execution and delivery by HUBCO and Lafayette of this Agreement, and (y) the
consummation by HUBCO and Lafayette of the Merger and the other transactions
contemplated hereby, except such as are listed in the HUBCO Disclosure Schedule
or in the aggregate will not (if not obtained) have a material adverse effect on
the business, operations, assets or financial condition of HUBCO and its
subsidiaries, taken as a whole. To the best of HUBCO's knowledge, no fact or
condition exists which HUBCO has reason to believe will prevent HUBCO or
Lafayette from obtaining the aforementioned consents and approvals.
4.4. Financial Statements.
(a) The HUBCO Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of HUBCO as of December 31, 1996
and 1995, the related consolidated statements of income, changes in
stockholders' equity and cash flows for the periods ended December 31, in each
of the three fiscal years 1994 through 1996, in each case accompanied by the
audit report of Arthur Andersen LLP ("Arthur Andersen"), independent public
accountants with respect to HUBCO, and the unaudited consolidated statements of
condition of HUBCO as of June 30, 1997 and June 30, 1996 and the related
unaudited consolidated statements of income, cash flows for the six months then
ended as reported in HUBCO's Quarterly Report on Form 10-Q, filed with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act")
(collectively, the "HUBCO Financial Statements"). The HUBCO Financial Statements
(including the related notes) have been prepared in accordance with GAAP
consistently applied during the periods involved (except as may be indicated
therein or in the notes thereto), and fairly present the consolidated financial
position of HUBCO as of the respective dates set forth therein, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows (including the related notes, where applicable) fairly present the
consolidated results of operations, changes in stockholders' equity and cash
flows of HUBCO for the respective fiscal periods set forth therein.
(b) The books and records of HUBCO and Lafayette are being
maintained in material compliance with applicable legal and accounting
requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or
reserved against in the HUBCO Financial Statements (including the notes
thereto), as of June 30, 1997 neither HUBCO nor any of its subsidiaries had any
obligation or liability, whether absolute, accrued, contingent or otherwise,
material to the business, operations, assets or financial condition of HUBCO or
any of its subsidiaries which were required by GAAP (consistently applied) to be
accrued in HUBCO's consolidated statement of condition as of June 30, 1997 or
disclosed in the footnotes to the financial statements in accordance with FSAS
No. 5. Neither HUBCO nor any of its subsidiaries have incurred any liabilities,
except in the ordinary course of business and consistent with prudent banking
practice.
4.5. Brokerage Fees. Neither HUBCO nor any of its directors or
officers has employed any broker or finder or incurred any liability for any
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
4.6. Absence of Certain Changes or Events. There has not been
any material adverse change in the business, operations, assets or financial
condition of HUBCO and HUBCO's subsidiaries taken as a whole since June 30, 1997
and to the best of HUBCO's knowledge, no facts or condition exists which HUBCO
believes will cause such a material adverse change in the future.
4.7. Legal Proceedings. Except for ordinary routine litigation
incidental to the business of HUBCO or its subsidiaries, neither HUBCO nor any
of its subsidiaries is a party to any, and there are no pending or, to the best
of HUBCO's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against HUBCO or any of its subsidiaries which, if decided adversely to HUBCO or
its subsidiaries, would have a material adverse effect on the business,
operations, assets or financial condition of HUBCO or its subsidiaries. Except
as disclosed in the HUBCO Disclosure Schedule, neither HUBCO nor any of HUBCO's
subsidiaries is a party to any order, judgment or decree entered in any lawsuit
or proceeding which is material to HUBCO and its subsidiaries, taken as a whole.
4.8. Compliance With Applicable Law.
(a) HUBCO has filed all reports that it was required to file
with the SEC under the 1934 Act, all of which complied in all material respects
with all applicable requirements of the 1934 Act and the rules and regulations
adopted thereunder. As of their respective dates, each such report and each
registration statement, proxy statement, form or other document filed by HUBCO
with the SEC, including without limitation, any financial statements or
schedules included therein, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, provided that information as of a later date
shall be deemed to modify information as of an earlier date. Since January 1,
1995, HUBCO and Lafayette have duly filed all material forms, reports and
documents which they were required to file with each agency charged with
regulating any aspect of their business.
(b) Except as set forth in the HUBCO Disclosure Schedule, each
of HUBCO and HUBCO's subsidiaries holds all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of its business, and
has complied with and is not in default in any respect under any applicable law,
statute, order, rule, regulation, policy and/or guideline of any federal, state
or local governmental authority relating to HUBCO or HUBCO's subsidiaries (other
than where such default or noncompliance will not result in a material adverse
effect on the business, operations, assets or financial condition of HUBCO and
its subsidiaries taken as a whole) and HUBCO has not received notice of
violation of, and does not know of any violations of, any of the above.
4.9. HUBCO Information. The information relating to HUBCO and
Lafayette (including, without limitation, information regarding other
transactions which HUBCO is required to disclose), this Agreement and the
transactions contemplated hereby in the Registration Statement and Proxy
Statement/Prospectus (as defined in Section 5.6(a) hereof), as of the date of
the mailing of the Proxy Statement/Prospectus, and up to and including the date
of the meeting of shareholders of Southington to which such Proxy
Statement/Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Registration Statement shall
comply as to form in all material respects with the provisions of the Securities
Act of 1933, as amended (the "1933 Act"), the 1934 Act and the rules and
regulations promulgated thereunder.
4.10. Funding and Capital Adequacy. At the Effective Time,
each of HUBCO and Lafayette will have sufficient capital to satisfy all
applicable regulatory capital requirements.
4.11. HUBCO Common Stock. At the Effective Time, the HUBCO
Common Stock issued hereunder will be duly authorized and validly issued, fully
paid, nonassessable, free of preemptive rights and free and clear of all liens,
encumbrances or restrictions created by or through HUBCO, with no personal
liability attaching to the ownership thereof. The HUBCO Common Stock to be
issued pursuant to the Merger will be registered under the 1933 Act and issued
in accordance with all applicable state and federal laws, rules and regulations.
4.12. Taxes and Tax Returns.
(a) HUBCO and HUBCO's subsidiaries have duly filed all Returns
required to be filed by them in respect of any federal, state and local taxes
(including withholding taxes, penalties or other payments required) and have
duly paid all such taxes due and payable, other than taxes or other charges
which are being contested in good faith (and disclosed to Southington in
writing). HUBCO and HUBCO's subsidiaries have established on their books and
records reserves that are adequate for the payment of all federal, state and
local taxes not yet due and payable, but are incurred in respect of HUBCO or
Lafayette through such date. The HUBCO Disclosure Schedule identifies the
federal income tax returns of HUBCO, Lafayette and HUBCO's other subsidiaries
which have been examined by the IRS within the past six years. No deficiencies
were asserted as a result of such examinations which have not been resolved and
paid in full. The HUBCO Disclosure Schedule identifies the applicable state
income tax returns of HUBCO, Lafayette and HUBCO's other subsidiaries which have
been examined by the applicable authorities. No deficiencies were asserted as a
result of such examinations which have not been resolved and paid in full. To
the best knowledge of HUBCO, there are no audits or other administrative or
court proceedings presently pending nor any other disputes pending with respect
to, or claims asserted for, taxes or assessments upon HUBCO, Lafayette or
HUBCO's other subsidiaries, nor has HUBCO, Lafayette or HUBCO's other
subsidiaries given any currently outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
taxes or Returns.
(b) Except as set forth in the HUBCO Disclosure Schedule,
neither HUBCO nor Lafayette nor any other subsidiary of HUBCO (i) has requested
any extension of time within which to file any Return which Return has not since
been filed, (ii) is a party to any agreement providing for the allocation or
sharing of taxes, (iii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code, by reason of a voluntary change in accounting
method initiated by HUBCO or Lafayette (nor does HUBCO have any knowledge that
the IRS has proposed any such adjustment or change of accounting method) or (iv)
has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply.
4.13. Employee Benefit Plans.
(a) HUBCO and its subsidiaries maintain or contribute to
certain "employee pension benefit plans" (the "HUBCO Pension Plans"), as such
term is defined in Section 3(2)(A) of ERISA, and "employee welfare benefit
plans" (the "HUBCO Welfare Plans"), as such term is defined in Section 3(1) of
ERISA. Since September 2, 1974, neither HUBCO nor its subsidiaries have
contributed to any "Multiemployer Plan", as such term is defined in Section
3(37) of ERISA.
(b) Each of the HUBCO Pension Plans and each of the HUBCO
Welfare Plans has been operated in compliance in all material respects with the
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder, and all other applicable governmental laws and
regulations. HUBCO is not aware of any fact or circumstance which would
disqualify any plan that could not be retroactively corrected (in accordance
with the procedures of the IRS).
(c) The present value of all accrued benefits under each of
the HUBCO Pension Plans subject to Title IV of ERISA, based upon the actuarial
assumptions used for purposes of the most recent actuarial valuation prepared by
such HUBCO Pension Plan's actuary, did not exceed the then current value of the
assets of such plans allocable to such accrued benefits.
(d) During the last five years, the PBGC has not asserted any
claim for liability against HUBCO 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 HUBCO Pension Plan
have been paid. All contributions required to be made to each HUBCO 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 HUBCO which have not
been paid have been properly recorded on the books of HUBCO.
(f) No "accumulated funding deficiency", within the meaning of
Section 412 of the Code, has been incurred with respect to any of the HUBCO
Pension Plans.
(g) There are no pending or, to the best knowledge of HUBCO,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the HUBCO Pension Plans or the HUBCO Welfare Plans,
any trusts created thereunder or any other plan or arrangement identified in the
HUBCO Disclosure Schedule.
(h) Except with respect to customary health, life and
disability benefits or as disclosed in the HUBCO Disclosure Schedule, HUBCO has
no unfunded benefit obligations which are not accounted for by reserves shown on
the financial statements and established under GAAP or otherwise noted on such
financial statements.
4.14. Contracts. Except as disclosed in the HUBCO Disclosure
Schedule, neither HUBCO nor any of its subsidiaries, or to the best knowledge of
HUBCO, 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 a banking subsidiary of HUBCO is or
will be the creditor) or arrangement, except for defaults which individually or
in the aggregate would not have a material adverse effect on the business,
operations, assets or financial condition of HUBCO and its subsidiaries, taken
as a whole.
4.15. Properties and Insurance.
(a) HUBCO 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 HUBCO's consolidated balance
sheet as of December 31, 1996, 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, 1996), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or that secure liabilities incurred in the ordinary course of
business after the date of such balance sheet, (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of HUBCO and its subsidiaries taken
as a whole and (iv) with respect to owned real property, title imperfections
noted in title reports. Except as disclosed in the HUBCO Disclosure Schedule,
HUBCO and its subsidiaries as lessees have the right under valid and subsisting
leases to occupy, use, possess and control all property leased by HUBCO or its
subsidiaries in all material respects as presently occupied, used, possessed and
controlled by HUBCO and its subsidiaries.
(b) The business operations and all insurable properties and
assets of HUBCO and its subsidiaries are insured for their benefit against all
risks which, in the reasonable judgment of the management of HUBCO, should be
insured against, in each case under policies or bonds issued by insurers of
recognized responsibility, in such amounts with such deductibles and against
such risks and losses as are in the opinion of the management of HUBCO adequate
for the business engaged in by HUBCO and its subsidiaries. As of the date
hereof, neither HUBCO 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 any such policy or bond, no coverage thereunder is
being disputed and all material claims thereunder have been filed in a timely
fashion.
4.16. Environmental Matters. Except as disclosed in the HUBCO
Disclosure Schedule, neither HUBCO nor any of its subsidiaries has received any
written notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that HUBCO 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) is
responsible for the correction or cleanup of any condition resulting from the
violation of any law, ordinance or other governmental regulation regarding
environmental matters which correction or cleanup would be material to the
business, operations, assets or financial condition of HUBCO and its
subsidiaries taken as a whole. Except as disclosed in the HUBCO Disclosure
Schedule, HUBCO has no knowledge that any toxic or hazardous substances or
materials have been emitted, generated, disposed of or stored on any property
currently owned or leased by HUBCO or any of its subsidiaries in any manner that
violates or, after the lapse of time is reasonably likely to violate, any
presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials, the violation of which would have a
material adverse effect on the business, operations, assets or financial
condition of HUBCO and its subsidiaries, taken as a whole.
4.17. Reserves. As of June 30, 1997, the allowance for
possible loan losses in the HUBCO Financial Statements was adequate based upon
all factors required to be considered by HUBCO at that time in determining the
amount of such allowance. The methodology used to compute the allowance for
possible loan losses complies in all material respects with all applicable FDIC,
Department and New Jersey Department of Banking policies. As of June 30, 1997,
the valuation allowance for OREO properties in the HUBCO Financial Statements
was adequate based upon all factors required to be considered by HUBCO at that
time in determining the amount of such allowance.
4.18. Agreements with Bank Regulators. Neither HUBCO nor any
of its subsidiaries is a party to any agreement or memorandum of understanding
with, or a party to any commitment letter, board resolution submitted to a
regulatory authority or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
any Government Entity which restricts materially the conduct of its business, or
in any manner relates to its capital adequacy, its credit or reserve policies or
its management, except for those the existence of which has been disclosed in
writing to Southington by HUBCO prior to the date of this Agreement, nor has
HUBCO been advised by any Governmental Entity that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission, except as disclosed
in writing to Southington by HUBCO prior to the date of this Agreement. Neither
HUBCO nor any of its subsidiaries is required by Section 32 of the Federal
Deposit Insurance Act to give prior notice to a Federal banking agency of the
proposed addition of an individual to its board of directors or the employment
of an individual as a senior executive officer, except as disclosed in writing
to Southington by HUBCO prior to the date of this Agreement.
4.19. Disclosures. No representation or warranty contained in
Article IV of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements herein not
misleading.
ARTICLE V - COVENANTS OF THE PARTIES
5.1. Conduct of the Business of Southington . During the
period from the date of this Agreement to the Effective Time, Southington shall
conduct its business only in the ordinary course and consistent with prudent
banking practice, except for transactions permitted hereunder or with the prior
written consent of HUBCO, which consent will not be unreasonably withheld.
Southington also shall use all reasonable efforts to (i) preserve its business
organization intact, (ii) keep available to itself the present services of its
employees and (iii) preserve for itself and HUBCO the goodwill of its customers
and others with whom business relationships exist.
5.2. Negative Covenants.
(a) Southington agrees that from the date hereof to the
Effective Time, except as otherwise approved by HUBCO in writing or as permitted
or required by this Agreement, it will not:
(i) change any provision of its Certificate of
Incorporation or By-laws or any similar governing documents of
Southington;
(ii) change the number of shares of its authorized or
issued capital stock or issue or grant any subscription, option,
warrant, call, commitment, right to purchase or agreement of any
character relating to the authorized or issued capital stock of
Southington or any securities convertible into shares of such stock, or
split, combine or reclassify any shares of its capital stock, or
declare, set aside or pay any dividend, or other distribution (whether
in cash, stock or property or any combination thereof) in respect of
its capital stock, other than regular quarterly cash dividends in per
share amounts not in excess of $0.07 (or, for the fourth quarter of
1997 or thereafter, not in excess of $0.08);
(iii) grant any severance or termination pay (other
than pursuant to policies or contracts of Southington in effect on the
date hereof and disclosed to HUBCO pursuant hereto) to, or enter into
or amend any employment or severance agreement with, any of its
directors, officers or employees, except as specified in the
Southington Disclosure Schedule; adopt any new employee benefit plan or
arrangement of any type; or award any increase in compensation or
benefits to its directors, officers or employees except with respect to
employee increases in the ordinary course of business and consistent
with past practices and policies; or employ any new senior officers,
whether or not pursuant to written agreements;
(iv) sell or dispose of any substantial amount of
assets or voluntarily incur any significant liabilities other than in
the ordinary course of business consistent with past practices and
policies or in response to substantial financial demands upon the
business of Southington;
(v) except as set forth in the Southington Disclosure
Schedule and except for other capital expenditures not exceeding
$20,000 individually or $50,000 in the aggregate, make any capital
expenditures other than pursuant to binding commitments existing on the
date hereof and other than expenditures necessary to maintain existing
assets in good repair;
(vi) except as set forth in the Southington
Disclosure Schedule, file any applications or make any contract with
respect to branching or site location or relocation;
(vii) agree to acquire in any manner whatsoever
(other than to realize upon collateral for a defaulted loan) any
business or entity;
(viii) make any material change in its accounting
methods or practices, other than changes required in accordance with
GAAP;
(ix) take any action that would result in any of its
representations and warranties contained in Article III of this
Agreement not being true and correct in any material respect at the
Effective Time or that would cause any of its conditions to Closing not
to be satisfied; or
(x) agree to do any of the foregoing.
5.3. No Solicitation. Southington shall not, directly or
indirectly, encourage or solicit or hold discussions or negotiations with, or
provide any information to, any person, entity or group (other than HUBCO)
concerning any merger or sale of shares of capital stock or sale of substantial
assets or liabilities not in the ordinary course of business, or similar
transactions involving Southington (an "Acquisition Transaction").
Notwithstanding the foregoing, Southington may enter into discussions or
negotiations or provide information in connection with an unsolicited possible
Acquisition Transaction if the Board of Directors of Southington, after
consulting with counsel, determines in the exercise of its fiduciary
responsibilities that such discussions or negotiations should be commenced or
such information should be furnished. Southington will promptly communicate to
HUBCO the terms of any proposal, whether written or oral, which it may receive
in respect of any such Acquisition Transaction and the fact that it is having
discussions or negotiations with a third party about an Acquisition Transaction.
5.4. Current Information. During the period from the date of
this Agreement to the Effective Time, each of Southington and HUBCO will cause
one or more of its designated representatives to confer with representatives of
the other party on a monthly or more frequent basis regarding its business,
operations, properties, assets and financial condition and matters relating to
the completion of the transactions contemplated herein. On a monthly basis,
Southington agrees to provide HUBCO, and HUBCO agrees to provide Southington,
with internally prepared profit and loss statements no later than 15 days after
the close of each calendar month. As soon as reasonably available, but in no
event more than 45 days after the end of each fiscal quarter (other than the
last fiscal quarter of each fiscal year) ending on or after September 30, 1997,
Southington will deliver to HUBCO and HUBCO will deliver to Southington their
respective quarterly reports. As soon as reasonably available, but in no event
more than 90 days after the end of each calendar year, Southington will deliver
to HUBCO and HUBCO will deliver to Southington their respective Annual Reports.
5.5. Access to Properties and Records; Confidentiality.
(a) Southington shall permit HUBCO and its representatives,
and HUBCO and Lafayette shall permit Southington and its representatives,
reasonable access to their respective properties, and shall disclose and make
available to HUBCO and its representatives, or Southington and its
representatives, as the case may be, all books, papers and records relating to
its assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, by-laws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files, plans affecting employees, and any other business activities or prospects
in which HUBCO and its representatives, or Southington and its representatives,
may have a reasonable interest. Neither party shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of any customer, would contravene any law, rule,
regulation, order or judgment or would waive any privilege. The parties will use
their best efforts to obtain waivers of any such restriction (other than waivers
of the attorney-client privilege) and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Notwithstanding the foregoing, Southington
acknowledges that HUBCO may be involved in discussions concerning other
potential acquisitions and HUBCO shall not be obligated to disclose such
information to Southington except as such information is disclosed to HUBCO's
shareholders generally.
(b) All information furnished by the parties hereto previously
in connection with transactions contemplated by this Agreement or pursuant
hereto shall be used solely for the purpose of evaluating the Merger
contemplated hereby and shall be treated as the sole property of the party
delivering the information until consummation of the Merger contemplated hereby
and, if such Merger shall not occur, each party and each party's advisors shall
return to the other party all documents or other materials containing,
reflecting or referring to such information, will not retain any copies of such
information, shall use its best efforts to keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purposes. In the event that the Merger
contemplated hereby does not occur, all documents, notes and other writings
prepared by a party hereto or its advisors based on information furnished by the
other party shall be promptly destroyed. The obligation to keep such information
confidential shall continue for five years from the date the proposed Merger is
abandoned but shall not apply to (i) any information which (A) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof to it by the other party; (B) was
then generally known to the public; (C) became known to the public through no
fault of the party receiving such information; or (D) was disclosed to the party
receiving such information by a third party not bound by an obligation of
confidentiality; or (ii) disclosures pursuant to a legal requirement or in
accordance with an order of a court of competent jurisdiction.
5.6. Regulatory Matters.
(a) For the purposes of holding the Shareholders Meeting
referred to in Section 5.7 hereof and qualifying under applicable federal and
state securities laws the HUBCO Common Stock to be issued to Southington
shareholders in connection with the Merger, the parties hereto shall cooperate
in the preparation and filing by HUBCO or Southington (as applicable) of a
Registration Statement with the SEC which shall include an appropriate proxy
statement and prospectus satisfying all applicable requirements of applicable
state and federal laws, including the 1933 Act, the 1934 Act and applicable
state securities laws and the rules and regulations thereunder, and the rules
and regulations of the FDIC (such proxy statement and prospectus in the form
mailed by Southington to the Southington shareholders together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement/Prospectus" and the various documents to be filed by HUBCO under the
1933 Act with the SEC to register the HUBCO Common Stock for sale, including the
Proxy Statement/Prospectus, are referred to herein as the "Registration
Statement").
(b) HUBCO shall furnish Southington with such information
concerning HUBCO and its subsidiaries as is necessary in order to cause the
Proxy Statement/Prospectus, insofar as it relates to such corporations, to
comply with Section 5.6(a) hereof. HUBCO agrees promptly to advise Southington
if at any time prior to the Shareholders Meeting referred to in Section 5.7
hereof, any information provided by HUBCO in the Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect and to provide
Southington with the information needed to correct such inaccuracy or omission.
HUBCO shall furnish Southington with such supplemental information as may be
necessary in order to cause the Proxy Statement/Prospectus, insofar as it
relates to HUBCO and its subsidiaries, to comply with Section 5.6(a) after the
mailing thereof to Southington shareholders.
(c) Southington shall furnish HUBCO with such information
concerning Southington as is necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Southington, to comply with
Section 5.6(a) hereof. Southington agrees promptly to advise HUBCO if at any
time prior to the Shareholders Meeting referred to in Section 5.6(a) hereof, any
information provided by Southington in the Proxy Statement/Prospectus becomes
incorrect or incomplete in any material respect and to provide HUBCO with the
information needed to correct such inaccuracy or omission. Southington shall
furnish HUBCO with such supplemental information as may be necessary in order to
cause the Proxy Statement/Prospectus, insofar as it relates to Southington, to
comply with Section 5.6(a) after the mailing thereof to Southington
shareholders.
(d) HUBCO shall as promptly as practicable make such filings
as are necessary in connection with the offering of the HUBCO Common Stock with
applicable state securities agencies and shall use all reasonable efforts to
qualify the offering of such stock under applicable state securities laws at the
earliest practicable date. Southington shall promptly furnish HUBCO with such
information regarding the Southington shareholders as HUBCO requires to enable
it to determine what filings are required hereunder. Southington authorizes
HUBCO to utilize in such filings the information concerning Southington provided
to HUBCO in connection with, or contained in, the Proxy Statement/Prospectus.
HUBCO shall furnish Southington's counsel with copies of all such filings and
keep Southington advised of the status thereof. HUBCO shall as promptly as
practicable file the Registration Statement containing the Proxy
Statement/Prospectus with the SEC, Southington shall as promptly as practicable
file the Proxy Statement/Prospectus with the FDIC, and each of HUBCO and
Southington shall promptly notify the other of all communications, oral or
written, with the SEC and the FDIC concerning the Registration Statement and the
Proxy Statement/Prospectus.
(e) HUBCO shall cause the HUBCO Common Stock issuable pursuant
to the Merger to be listed on the NASDAQ Stock Market at the Effective Time.
(f) The parties hereto will cooperate with each other and use
their reasonable efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement as soon as possible,
including, without limitation, those required by the FDIC, the Commissioner, the
Department and the DEP. The parties shall each have the right to review in
advance all filings with, including all information relating to the other, as
the case may be, and any of their respective subsidiaries, if any, which appears
in any filing made with, or written material submitted to, any third party or
governmental body in connection with the transactions contemplated by this
Agreement.
(g) Each of the parties will promptly furnish each other with
copies of written communications received by them or any of their respective
subsidiaries, if any, from, or delivered by any of the foregoing to, any
governmental body in respect of the transactions contemplated hereby with
respect to the Merger.
(h) Southington acknowledges that HUBCO is in or may be in the
process of acquiring other banks and financial institutions and that in
connection with such acquisitions, information concerning Southington may be
required to be included in the registration statements, if any, for the sale of
securities of HUBCO or in SEC reports in connection with such acquisitions.
Southington agrees to provide HUBCO with any information, certificates,
documents or other materials about Southington as are reasonably necessary to be
included in such other SEC reports or registration statements, including
registration statements which may be filed by HUBCO prior to the Effective Time.
Southington shall use its reasonable efforts to cause its attorneys and
accountants to provide HUBCO and any underwriters for HUBCO with any consents,
comfort letters, opinion letters, reports or information which are necessary to
complete the registration statements and applications or any such acquisition or
issuance of securities. HUBCO shall reimburse Southington for expenses thus
incurred by Southington should this transaction be terminated for any reason
other than Section 7.1(i). HUBCO shall not file with the SEC any registration
statement or amendment thereto or supplement thereof containing information
regarding Southington unless Southington shall have consented to such filing.
Southington shall not unreasonably delay or withhold any such consent.
(i) The parties shall use all reasonable efforts to cause the
filings with the SEC and FDIC of the Proxy Statement/Prospectus, and all
regulatory filings with the FDIC, the Commissioner and the FRB, to be made by
October 31, 1997.
5.7. Approval of Shareholders. Southington will (a) take all
steps necessary duly to call, give notice of, convene and hold a meeting of the
shareholders of Southington (the "Shareholders Meeting") for the purpose of
securing the approval of shareholders of this Agreement, (b) subject to the
qualification set forth in Section 5.3 hereof and the right not to make a
recommendation or to withdraw a recommendation if its investment banker
withdraws its fairness opinion prior to the Shareholders Meeting, recommend to
the shareholders of Southington the approval of this Agreement and the
transactions contemplated hereby and use its reasonable efforts to obtain, as
promptly as practicable, such approvals, and (c) cooperate and consult with
HUBCO with respect to each of the foregoing matters.
5.8. Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated by this Agreement and using its reasonable efforts to
prevent the breach of any representation, warranty, covenant or agreement of
such party contained or referred to in this Agreement and to promptly remedy the
same. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary action. Nothing in this section shall be construed to require any
party to participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is a
party or subject or threatened to be made a party or subject) in connection with
consummation of the transactions contemplated by this Agreement unless such
party shall consent in advance and in writing to such participation and the
other party agrees to reimburse and indemnify such party for and against any and
all costs and damages related thereto.
HUBCO agrees that from the date hereof to the Effective Time,
except as otherwise approved by Southington in writing or as permitted or
required by this Agreement, it will not, nor will it permit Lafayette to take
any action that would result in any of its representations and warranties
contained in Article IV of this Agreement not being true and correct in any
material respect at the Effective Time or that would cause any of its conditions
to Closing not to be satisfied.
5.9. Public Announcements. HUBCO and Southington shall
cooperate with each other in the development and distribution of all news
releases and other public filings and disclosures with respect to this Agreement
or the transactions contemplated hereby, and HUBCO and Southington agree that
unless approved mutually by them in advance, they will not issue any press
release or written statement for general circulation relating primarily to the
transaction contemplated hereby, except as may be otherwise required by law or
regulation in the opinion of counsel.
5.10. Failure to Fulfill Conditions. In the event that HUBCO
or Southington determines that a material condition to its obligation to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to March 31, 1998 (the "Cutoff Date") and that it will not waive that condition,
it will promptly notify the other party. Except for any acquisition or merger
discussions HUBCO may enter into with other parties, Southington and HUBCO will
promptly inform the other of any facts applicable to Southington or HUBCO,
respectively, or their respective directors or officers, that would be likely to
prevent or materially delay approval of the Merger by any governmental authority
or which would otherwise prevent or materially delay completion of the Merger.
5.11. Indemnification and Insurance.
(a) For a period of six years after the Effective Time, HUBCO
shall indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date hereof or who becomes prior to the Effective Time, a
director, officer, employee or agent of Southington or any subsidiary of
Southington or serves or has served at the request of Southington in any
capacity with any other person (collectively, the "Indemnitees") against any and
all claims, damages, liabilities, losses, costs, charges, expenses (including,
without limitation, reasonable costs of investigation, and the reasonable fees
and disbursements of legal counsel and other advisers and experts as incurred),
judgments, fines, penalties and amounts paid in settlement, asserted against,
incurred by or imposed upon any Indemnitee, in connection with, arising out of
or relating to (i) any threatened, pending or completed claim, action, suit or
proceeding (whether civil, criminal, administrative or investigative),
including, without limitation, any and all claims, actions, suits, proceedings
or investigations by or on behalf of or in the right of or against Southington,
or by any present or former shareholder of Southington (each a "Claim" and
collectively, "Claims"), including, without limitation, any Claim which is based
upon, arises out of or in any way relates to the Merger, the Proxy
Statement/Prospectus, this Agreement, any of the transactions contemplated by
this Agreement, the Indemnitee's service as a member of Southington's Board of
Directors or any committee of Southington's Board of Directors, the events
leading up to the execution of this Agreement, any statement, recommendation or
solicitation made in connection therewith or related thereto and any breach of
any duty in connection with any of the foregoing, and (ii) the enforcement of
the obligations of HUBCO set forth in this Section 5.11, in each case to the
fullest extent which Southington would have been permitted under any applicable
law, Southington's Certificate of Incorporation and its By-Laws had the Merger
not occurred (and HUBCO shall also advance expenses as incurred to the fullest
extent so permitted). Notwithstanding the foregoing, HUBCO shall not provide any
indemnification or advance any expenses with respect to any Claim which relates
to a personal benefit improperly paid or provided, or alleged to have been
improperly paid or provided, to the Indemnitee, but HUBCO shall reimburse the
Indemnitee for costs incurred by the Indemnitee with respect to such Claim when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the Indemnitee was
not improperly paid or provided with the personal benefit alleged in the Claim.
(b) From and after the Effective Time, HUBCO shall assume and
honor any obligation of Southington immediately prior to the Effective Time with
respect to the indemnification of the Indemnitees arising out of Southington's
Certificate of Incorporation or By-Laws as if such obligations were pursuant to
a contract or arrangement between HUBCO and such Indemnitees.
(c) In the event HUBCO or any of its successors or assigns (i)
reorganizes or consolidates with or merges into or enters into another business
combination transaction with any other person or entity and is not the
resulting, continuing or surviving corporation or entity of such consolidation,
merger or transaction, or (ii) liquidates, dissolves or transfers all or
substantially all of its properties and assets to any person or entity, then,
and in each such case, proper provision shall be made so that the successors and
assigns of HUBCO assume the obligations set forth in this Section 5.11.
(d) HUBCO shall have Southington's officers and directors
covered under either Southington's existing officers' and directors' liability
insurance policy or a rider to HUBCO's then current officers' and directors'
liability insurance ("D&O Insurance") policy for periods of at least six years
after the Effective Time. However, HUBCO only shall be required to insure such
persons upon terms and for coverages substantially similar to Southington's
existing D&O Insurance.
(e) Any Indemnitee wishing to claim indemnification under
Section 5.11, upon learning of any such claim, action, suit or proceeding, shall
promptly notify HUBCO thereof, but the failure to so notify shall not relieve
HUBCO of any liability it may have to such Indemnitee if such failure does not
materially prejudice HUBCO. In the event of any such claim, action, suit or
proceeding (whether arising before or after the Effective Time) as to which
indemnification under this Section 5.11 is applicable, (a) HUBCO shall have the
right to assume the defense thereof and HUBCO shall not be liable to such
Indemnitees for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnitees in connection with the defense
thereof, except that if HUBCO elects not to assume such defense or counsel for
the Indemnitees advises that there are issues which raise conflicts of interest
between HUBCO and the Indemnitees, the Indemnitees may retain counsel
satisfactory to them, and HUBCO shall pay the reasonable fees and expenses of
such counsel for the Indemnitees as statements therefor are received; provided,
however, that HUBCO shall be obligated pursuant to this paragraph (e) to pay for
only one firm of counsel for all Indemnitees in any jurisdiction with respect to
a matter unless the use of one counsel for such Indemnitees would present such
counsel with a conflict of interest that is not waived and (b) the Indemnitees
will cooperate in the defense of any such matter. HUBCO shall not be liable for
settlement of any claim, action or proceeding hereunder unless such settlement
is effected with its prior written consent; provided, however, that HUBCO shall
not have any obligation hereunder to any Indemnitee when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that the indemnification of such Indemnitee
in the manner contemplated hereby is prohibited by applicable law or public
policy.
5.12. Employee Matters; Directors.
(a) Following consummation of the Merger, HUBCO shall honor
the existing written contracts with officers and employees of Southington that
are included in the Southington Disclosure Schedule.
(b) Immediately following consummation of the Merger, HUBCO
will cause Lafayette to elect as a director of Lafayette one person selected by
the current Board of Directors of Southington from among its members and
reasonably acceptable to HUBCO. Any Southington director who is not elected to
the Board of Directors of Lafayette will become a member of a Lafayette advisory
board for one year from the Effective Time and as such will be paid an annual
retainer of $1,000.
(c) Following consummation of the Merger, HUBCO shall make
available to all employees and officers of Southington employed by the Surviving
Bank coverage under the benefit plans generally available to Lafayette's
employees and officers (including pension and health and hospitalization) on the
terms and conditions available to Lafayette's employees and officers, and shall
honor the severance policies of Southington previously disclosed to HUBCO in
writing. After the Effective Time, HUBCO may terminate, merge or change existing
Southington benefit plans. Employees of Southington employed by Lafayette will
receive credit for prior employment by Southington for the sole purpose of
determining whether such employees are eligible to participate in or be vested
under Lafayette's medical, vacation, sick leave, disability, pension, and other
employee benefit plans. Credit for prior service will not be given for purposes
of benefit accrual under any defined benefit pension plan of HUBCO. No prior
existing condition limitation shall be imposed with respect to any medical
coverage plan of Lafayette.
5.13. Disclosure Supplements. From time to time prior to the
Effective Time, each party hereto will promptly supplement or amend (by written
notice to the other) its respective Disclosure Schedule delivered pursuant
hereto with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Disclosure Schedule or which is necessary to
correct any information in such Disclosure Schedule which has been rendered
materially inaccurate thereby. For the purpose of determining satisfaction of
the conditions set forth in Article VI, no supplement or amendment to such
Disclosure Schedule shall correct or cure any warranty which was untrue when
made, but shall enable the disclosure of subsequent facts or events to maintain
the truthfulness of any warranty.
5.14. Transaction Expenses of Southington.
(a) For planning purposes, Southington shall, within 15 days
from the date hereof, provide HUBCO with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by Southington
in connection with this transaction, including the fees and expenses of counsel,
accountants, investment bankers and other professionals. Southington shall
promptly notify HUBCO if or when it determines that it will expect to exceed its
budget.
(b) Promptly after the execution of this Agreement,
Southington shall ask all of its attorneys and other professionals to render
current and correct invoices for all unbilled time and disbursements.
Southington shall accrue and/or pay all of such amounts as soon as possible.
(c) Southington shall advise HUBCO monthly of all
out-of-pocket expenses which Southington has incurred in connection with this
transaction.
(d) HUBCO, in reasonable consultation with Southington, shall
make all arrangements with respect to the printing and mailing of the Proxy
Statement/Prospectus and, subject to Section 8.1 hereof, HUBCO shall pay all
expenses related to such printing and mailing. In addition, HUBCO shall pay all
expenses and fees related to filing of the Proxy Statement/Prospectus and
related documents with the SEC and filings pursuant to state "blue sky" laws and
regulations in connection with the Merger, if any.
5.15. Compliance with Antitrust Laws. Each of HUBCO and
Southington shall use its best efforts to resolve such objections, if any, which
may be asserted with respect to the Merger under antitrust laws, including,
without limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976. In
the event a suit is threatened or instituted challenging the Merger as violative
of antitrust laws, each of HUBCO and Southington shall use its best efforts to
avoid the filing of, resist or resolve such suit. HUBCO and Southington shall
use their best efforts to take such action as may be required: (a) by the
Antitrust Division of the Department of Justice or the Federal Trade Commission
in order to resolve such objections as either of them may have to the Merger
under antitrust laws, or (b) by any federal or state court of the United States,
in any suit brought by a private party or governmental entity challenging the
Merger as violative of antitrust laws, in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order, or other
order which has the effect of preventing the consummation of the Merger. Best
efforts shall include, but not be limited to, the proffer by HUBCO of its
willingness to accept an order agreeing to the divestiture, or the holding
separate, of any assets of HUBCO or Southington, except to the extent that any
such divestitures or holding separate arrangement would have a material adverse
effect on HUBCO. The entry by a court, in any suit brought by a private party or
governmental entity challenging the Merger as violative of antitrust laws, of an
order or decree permitting the Merger, but requiring that any of the businesses,
product lines or assets of HUBCO or Southington be divested or held separate
thereafter shall not be deemed a failure to satisfy the conditions specified in
Section 6.1 hereof except to the extent that any divestitures or holding
separate arrangement would have a material adverse effect on HUBCO and HUBCO
shall not have voluntarily consented to such divestitures or holding separate
arrangements. For the purposes of this Section 5.15, the divestiture or the
holding separate of a branch of Lafayette or Southington with less than $20
million in assets shall not be considered to have a material adverse effect on
HUBCO.
5.16. Comfort Letters. HUBCO shall cause Arthur Andersen, its
independent public accountants, to deliver to Southington, and Southington shall
cause KPMG, its independent public accountants, to deliver to HUBCO and to its
officers and directors who sign the Registration Statement for this transaction,
a short-form "comfort letter" or "agreed upon procedures" letter, dated the date
of the mailing of the Proxy Statement/Prospectus for the Shareholders Meeting,
in the form customarily issued by such accountants at such time in transactions
of this type.
5.17. Affiliates. Promptly, but in any event within two weeks,
after the execution and delivery of this Agreement, Southington shall deliver to
HUBCO (a) a letter identifying all persons who, to the knowledge of Southington,
may be deemed to be affiliates of Southington under Rule 145 of the 1933 Act and
the pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of Southington and (b) copies of letter
agreements, each substantially in the form of Exhibit 5.17, executed by each
such person so identified as an affiliate of Southington agreeing to comply with
Rule 145 and to refrain from transferring shares as required by the
pooling-of-interests accounting rules. Within two weeks after the date hereof,
HUBCO shall cause its directors and executive officers to enter into letter
agreements in the form of Exhibit 5.17-2 with HUBCO concerning the
pooling-of-interests accounting rules. HUBCO hereby agrees to publish, or file a
Form 8-K, Form 10-K or Form 10-Q containing financial results covering at least
30 days of combined operations of HUBCO and Southington as soon as practicable
but in no event later than 20 days after the last day of the first full calendar
month following the Effective Time in form and substance sufficient to remove
the restrictions set forth in paragraph "B" of Exhibit 5.17.
5.18. Pooling in Tax-Free Reorganization Treatment. Prior to
the date hereof, HUBCO has not taken any action or failed to take any action
which would disqualify the Merger for pooling of interests accounting treatment,
and before the Effective Time, neither HUBCO nor Southington shall intentionally
take, fail to take, or cause to be taken or not taken any action within its
control, which would disqualify the Merger as a "pooling-of-interests" unless
HUBCO agrees to waive the condition contained in Section 6.2(c) for accounting
purposes or as a "reorganization" within the meaning of Section 368(a) of the
Code.
5.19. Reserves. Notwithstanding that Southington believes that
it has established all reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and regulations, Southington
recognizes that HUBCO has adopted different loan, accrual and reserve policies
(including loan classifications and levels of reserves for possible loan
losses). From and after the date of this Agreement to the Effective Time and in
order to formulate the plan of integration for the Merger, Southington and HUBCO
shall consult with each other with respect to (i) conforming, based upon such
consultation, Southington's loan, accrual and reserve policies to those policies
of HUBCO to the extent appropriate, provided, that any required change in
Southington's practices in connection with the matters described in this clause
(i) need not be effected until the parties receive all necessary governmental
approvals and consents to consummate the transactions contemplated hereby, (ii)
new extensions of credit or material revisions to existing terms of credits by
Southington, in each case where the aggregate exposure exceeds $500,000.00, and
(iii) conforming, based upon such consultation, the composition of the
investment portfolio and overall asset/liability management position of
Southington to the extent appropriate.
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 Southington Shareholders; SEC Registration.
This Agreement and the transactions contemplated hereby shall have been approved
by the requisite vote of the shareholders of Southington. The Proxy
Statement/Prospectus shall have been cleared for distribution by the FDIC. 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 the issuance of
the HUBCO Common Stock shall have been qualified in every state where such
qualification is required under the applicable state securities laws.
(b) Regulatory Filings. All necessary regulatory or
governmental approvals and consents (including without limitation any required
approval of the FRB, the Commissioner, the FDIC and the DEP) required to
consummate the transactions contemplated hereby shall have been obtained without
any term or condition which would materially impair the value of Southington to
HUBCO. All conditions required to be satisfied prior to the Effective Time by
the terms of such approvals and consents shall have been satisfied; and all
statutory waiting periods in respect thereof shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall
be outstanding against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action or other
proceeding shall be pending or threatened by any governmental body in which it
is sought to restrain or prohibit the Merger; and no suit, action or other
proceeding shall be pending before any court or governmental agency in which it
is sought to restrain or prohibit the Merger or obtain other substantial
monetary or other relief against one or more parties hereto in connection with
this Agreement and which HUBCO or Southington determines in good faith, based
upon the advice of their respective counsel, makes it inadvisable to proceed
with the Merger because any such suit, action or proceeding has a significant
potential to be resolved in such a way as to deprive the party electing not to
proceed of any of the material benefits to it of the Merger.
(d) Tax Opinion. HUBCO and Southington shall each have
received an opinion, dated as of the Closing Date, of Pitney, Hardin, Kipp &
Szuch, reasonably satisfactory in form and substance to Southington and its
counsel and to HUBCO, based upon representation letters reasonably required by
Pitney, Hardin, Kipp & Szuch, dated on or about the date of such opinion, and
such other facts and representations as counsel may reasonably deem relevant, to
the effect that
(i) the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code; (ii) no gain or loss will be recognized
by Southington; (iii) no gain or loss will be recognized upon the
exchange of Southington Common Stock solely for HUBCO Common Stock;
(iv) the basis of any HUBCO Common Stock received in exchange for
Southington Common Stock will equal the basis of the recipient's
Southington Common Stock surrendered on the exchange, reduced by the
amount of cash received, if any, on the exchange, and increased by the
amount of the gain recognized, if any, on the exchange (whether
characterized as dividend or capital gain income); and (v) the holding
period for any HUBCO Common Stock received in exchange for Southington
Common Stock will include the period during which the Southington
Common Stock surrendered on the exchange was held, provided such stock
was held as a capital asset on the date of the exchange.
6.2. Conditions to the Obligations of HUBCO Under this
Agreement. The obligations of HUBCO under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties; Performance of Obligations
of Southington. Except for those representations which are made as of a
particular date, the representations and warranties of Southington contained in
this Agreement shall be true and correct in all material respects on the Closing
Date as though made on and as of the Closing Date. Southington shall have
performed in all material respects the agreements, covenants and obligations to
be performed by it prior to the Closing Date. With respect to any representation
or warranty which as of the Closing Date has required a supplement or amendment
to the Southington Disclosure Schedule to render such representation or warranty
true and correct in all material respects as of the Closing Date, the
representation and warranty shall be deemed true and correct as of the Closing
Date only if (i) the information contained in the supplement or amendment to the
Southington 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 Southington Disclosure Schedule, materially adversely affect
the representation as to which the supplement or amendment relates.
(b) Opinion of Counsel to Southington. HUBCO shall have
received an opinion of counsel to Southington, dated the Closing Date, in form
and substance reasonably satisfactory to HUBCO, covering the matters set forth
on Exhibit 6.2 hereto.
(c) Pooling of Interests. HUBCO shall have received assurances
from its accountants, Arthur Andersen, to the effect that the Merger shall be
qualified to be treated by HUBCO as a pooling-of-interests for accounting
purposes.
(d) Certificates. Southington shall have furnished HUBCO with
such certificates of its officers or other documents to evidence fulfillment of
the conditions set forth in this Section 6.2 as HUBCO may reasonably request.
(e) Directors' Voluntary Deferral Compensation Plan. All
current Southington Directors shall be paid in a lump sum amounts due under the
Directors' Voluntary Deferral Compensation Plan and shall release Southington
from all obligations pursuant to such plan.
6.3. Conditions to the Obligations of Southington Under this
Agreement. The obligations of Southington under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties; Performance of Obligations
of HUBCO. Except for those representations which are made as of a particular
date, the representations and warranties of HUBCO contained in this Agreement
shall be true and correct in all material respects on the Closing Date as though
made on and as of the Closing Date. HUBCO shall have performed in all material
respects, the agreements, covenants and obligations to be performed by it prior
to the Closing Date. With respect to any representation or warranty which as of
the Closing Date has required a supplement or amendment to the HUBCO Disclosure
Schedule to render such representation or warranty true and correct in all
material respects as of the Closing Date, the representation and warranty shall
be deemed true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the HUBCO Disclosure Schedule
related to events occurring following the execution of this Agreement and (ii)
the facts disclosed in such supplement or amendment would not either alone, or
together with any other supplements or amendments to the HUBCO Disclosure
Schedule, materially adversely affect the representation as to which the
supplement or amendment relates.
(b) Opinion of Counsel to HUBCO. Southington shall have
received an opinion of counsel to HUBCO, dated the Closing Date, in form and
substance reasonably satisfactory to Southington , covering the matters set
forth on Exhibit 6.3 hereto.
(c) Fairness Opinion. Southington shall have received an
opinion from Endicott, dated no more than three business days prior to the date
the Proxy Statement/Prospectus is mailed to Southington's shareholders, to the
effect that, in its opinion, the consideration to be paid to shareholders of
Southington hereunder is fair to such shareholders from a financial point of
view ("Fairness Opinion").
(d) Certificates. HUBCO shall have furnished Southington 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 Southington may
reasonably request.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to
the Effective Time, whether before or after approval of this Agreement by the
shareholders of Southington:
(a) by mutual written consent of the parties hereto;
(b) (i) by Southington or HUBCO if the Effective Time shall
not have occurred on or prior to the Cutoff Date unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements set forth herein to be performed
or observed by such party at or before the Effective Time, or (ii) by HUBCO or
Southington if a vote of the shareholders of Southington is taken and such
shareholders fail to approve this Agreement at the meeting (or any adjournment
or postponement thereof) held for such purpose;
(c) by HUBCO or Southington upon written notice to the other
if any application for regulatory or governmental approval necessary to
consummate the Merger and the other transactions contemplated hereby shall have
been denied or withdrawn at the request or recommendation of the applicable
regulatory agency or governmental authority or by HUBCO upon written notice to
Southington if any such application is approved with conditions which materially
impair the value of Southington to HUBCO;
(d) by HUBCO if (i) there shall have occurred a material
adverse change in the business, operations, assets, or financial condition of
Southington from that disclosed by Southington in Southington's Form F-4 for
June 30, 1997 and Southington's Annual Report to Shareholders for the year ended
December 31, 1996; or (ii) there was a material breach in any representation,
warranty, covenant, agreement or obligation of Southington hereunder and such
breach shall not have been remedied within 30 days after receipt by Southington
of notice in writing from HUBCO to Southington specifying the nature of such
breach and requesting that it be remedied;
(e) by Southington, if (i) there shall have occurred a
material adverse change in the business, operations, assets or financial
condition of HUBCO and its subsidiaries taken as a whole from that disclosed by
HUBCO in HUBCO's Quarterly Report on Form 10-Q for the six months ended June 30,
1997 and HUBCO's Annual Report on Form 10-K for the fiscal year ended December
31, 1996; or (ii) there was a material breach in any representation, warranty,
covenant, agreement or obligation of HUBCO hereunder and such breach shall not
have been remedied within 30 days after receipt by HUBCO of notice in writing
from Southington specifying the nature of such breach and requesting that it be
remedied;
(f) by HUBCO if the conditions set forth in Section 6.2 are
not satisfied and are not capable of being satisfied by the Cutoff Date;
(g) by Southington if the conditions set forth in Section 6.3
are not satisfied and are not satisfied and are not capable of being satisfied
by the Cutoff Date;
(h) by Southington in accordance with Section 2.1(a)(iii); and
(i) by Southington, if Southington's Board of Directors shall
have approved an Acquisition Transaction after determining, upon advice of
counsel, that such approval was necessary in the exercise of its fiduciary
obligations under applicable laws.
7.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement by either HUBCO or Southington pursuant to
Section 7.1, this Agreement (other than Section 5.5(b), the third from the last
sentence of Section 5.6(h), this Section 7.2 and Section 8.1) shall forthwith
become void and have no effect, without any liability on the part of any party
or its officers, directors or shareholders. Nothing contained herein, however,
shall relieve any party from any liability for any breach of this Agreement.
7.3. Amendment. This Agreement may be amended by action taken
by the parties hereto at any time before or after adoption of this Agreement by
the shareholders of Southington but, after any such adoption, no amendment shall
be made which reduces the amount or changes the form of the consideration to be
delivered to the shareholders of Southington without the approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties hereto.
7.4. Extension; Waiver. The parties may, at any time prior to
the Effective Time of the Merger, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver is
sought to be enforced.
ARTICLE VIII - MISCELLANEOUS
8.1. Expenses.
(a) Subject to Section 5.6(h) and Section 8.1(c) hereof, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including legal, accounting and investment
banking fees and expenses) shall be borne by the party incurring such costs and
expenses.
(b) Notwithstanding any provision in this Agreement to the
contrary, in the event that either of the parties shall willfully default in its
obligations hereunder, the non-defaulting party may pursue any remedy available
at law or in equity to enforce its rights and shall be paid by the willfully
defaulting party for all damages, costs and expenses, including without
limitation legal, accounting, investment banking and printing expenses, incurred
or suffered by the non-defaulting party in connection herewith or in the
enforcement of its rights hereunder if such non-defaulting party prevails.
8.2. Survival. Except for the provisions of Article II,
Section 5.8, Section 5.11, Section 5.12 and Section 5.17 hereof, the respective
representations, warranties, covenants and agreements of the parties to this
Agreement shall not survive the Effective Time, but shall terminate as of the
Effective Time.
8.3. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered personally, by express service,
cable, telegram or telex, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
(a) If to HUBCO, to:
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman,
President and Chief Executive Officer
Copy to:
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And a Copy to:
Pitney, Hardin, Kipp & Szuch
(Delivery) 200 Campus Drive
Florham Park, New Jersey
(Mail) P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
(b) If to Southington, to:
The Bank of Southington
130 North Main Street
Southington, Connecticut 06489-0670
Attn.: Bryan P. Bowerman, President
Copy to:
130 North Main Street
Southington, Connecticut 06489-0670
Attn.: Roman F. Garbacik, Chairman of the Board
And a Copy to:
Tyler Cooper & Alcorn, LLP
CityPlace I, 35th Floor
Hartford, Connecticut 06103
Attn.: William W. Bouton III, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
8.4. Parties in Interest. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement, except for the Indemnitees covered by Section
5.11 hereof, the Southington directors immediately prior to the Closing Date who
are third-party beneficiaries under Section 5.12(b) hereof and the persons
signing letter agreements pursuant to Section 5.17 hereof who shall be entitled
to the benefits of such Section 5.17.
8.5. Entire Agreement. This Agreement, which includes the
Disclosure Schedules hereto and the other documents, agreements and instruments
executed and delivered pursuant to or in connection with this Agreement,
contains the entire Agreement between the parties hereto with respect to the
transactions contemplated by this Agreement and supersedes all prior
negotiations, arrangements or understandings, written or oral, with respect
thereto.
8.6. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
8.7. Governing Law. This Agreement shall be governed by the
laws of the State of New Jersey, without giving effect to the principles of
conflicts of laws thereof.
8.8. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, HUBCO, Lafayette and Southington 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: D. LYNN VAN BORKULO-NUZZO By: KENNETH T. NEILSON
- ----------------------------- ------------------------------------
President and Chief
Executive Officer
ATTEST: LAFAYETTE AMERICAN BANK
AND TRUST COMPANY
By: KENNETH T. NEILSON By: D. LYNN VAN BORKULO-NUZZO
- ----------------------------- ------------------------------------
Executive Vice President and
Corporate Secretary
ATTEST: THE BANK OF SOUTHINGTON
By: BRYAN P. BOWERMAN By: ROMAN F. GARBACIK
- ----------------------------- ------------------------------------
Chairman
<PAGE>
DIRECTORS OF THE BANK OF SOUTHINGTON
BRYAN P. BOWERMAN JOSEPH J. CALVANESES, JR.
- ------------------------------------- ------------------------------------
Bryan P. Bowerman Joseph J. Calvanese, Jr.
NICHOLAS DEPAOLA
- ------------------------------------- ------------------------------------
Harold Charette Nicholas DePaola
PHILIP FERRARO ROMAN F. GARBACIK
- ------------------------------------- ------------------------------------
Philip Ferraro Roman F. Garbacik
JEAN MARTIN ELIZABETH MILO
- ------------------------------------- ------------------------------------
Jean Martin Elizabeth Milo
JAMES PRYOR BENJAMIN RUBIN
- ------------------------------------- ------------------------------------
James Pryor Benjamin Rubin
BOARD OF DIRECTORS OF LAFAYETTE AMERICAN BANK AND TRUST COMPANY
DONALD P. CALCAGNINI
- ------------------------------------- ------------------------------------
William A. Brennan Donald P. Calcagnini
GARY R. GINSBERG DONALD W. HARRISON
- ------------------------------------- ------------------------------------
Gary R. Ginsberg Donald W. Harrison
- ------------------------------------- ------------------------------------
John F. McIlwain Roderick C. McNeil, III
ENZO R. MONTESI
- ------------------------------------- ------------------------------------
Douglas D. Milne, III Enzo R. Montesi
KENNETH T. NEILSON
- ------------------------------------- ------------------------------------
Kenneth T. Neilson Leif H. Olsen
DAVID A. ROSOW
- ------------------------------------- ------------------------------------
David A. Rosow William D. Rueckert
LOUIS F. TAGLIATELA
- ------------------------------------- ------------------------------------
Louis F. Tagliatela, Sr. John H. Tatigian, Jr.
D. LYNN VAN BORKULO-NUZZO
- ------------------------------------- ------------------------------------
D. Lynn Van Borkulo-Nuzzo
<PAGE>
CERTIFICATE OF THE BANK OF SOUTHINGTON DIRECTORS
Reference is made to the Agreement and Plan of Merger dated August 18,
1997, (the "Agreement"), among HUBCO, Inc., Lafayette American Bank and Trust
Company and The Bank of Southington. Capitalized terms used herein have the
meaning given to them in the Agreement.
Each of the following persons, being all of the directors of
Southington agrees to vote or cause to be voted all shares of Southington stock
which are held by such person, or over which such person exercises full voting
control (except as trustee or in a fiduciary capacity, or as nominee), in favor
of the Merger.
BRYAN P. BOWERMAN ROMAN F. GARBACIK
- ------------------------------------- ------------------------------------
Bryan P. Bowerman Roman F.Garbacik
JOSEPH J. CALVANESE, JR. JEAN MARTIN
- ------------------------------------- ------------------------------------
Joseph J. Calvanese, Jr. Jean Martin
ELIZABETH MILO
- ------------------------------------- ------------------------------------
Harold Charette Elizabeth Milo
NICHOLAS DEPAOLA JAMES PRYOR
- ------------------------------------- ------------------------------------
Nicholas DePaola James Pryor
PHILIP FERRARO BENJAMIN RUBIN
- ------------------------------------- ------------------------------------
Philip Ferraro Benjamin Rubin
Dated: August 18, 1997
<PAGE>
Appendix B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") dated August
18, 1997, is by and between HUBCO, INC., a New Jersey corporation and registered
bank holding company ("HUBCO"), and THE BANK OF SOUTHINGTON, a state bank and
trust company organized under the laws of the State of Connecticut
("Southington").
BACKGROUND
1. HUBCO, Southington and Lafayette Bank and Trust
Company, a state bank and trust company organized under the laws of the State of
Connecticut and a wholly-owned subsidiary of HUBCO ("Lafayette"), are prepared
to execute an agreement and plan of merger (the "Merger Agreement") pursuant to
which Southington will be merged with and into Lafayette (the "Merger").
2. HUBCO has advised Southington that it will not
cause the Merger Agreement to be executed unless Southington executes this
Agreement.
3. The Board of Directors of Southington has
determined that the Merger Agreement provides substantial benefits to the
shareholders of Southington.
4. As an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, Southington desires to grant to
HUBCO an option to purchase authorized but unissued shares of common stock of
Southington in an amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, HUBCO and Southington,
intending to be legally bound hereby, agree:
1. Grant of Option. Southington hereby grants to HUBCO the
option to purchase 275,000 shares of common stock, $6.00 par value, of
Southington (the "Common Stock") at a price of $16.00 per share (the "Option
Price"), on the terms and conditions set forth herein (the "Option").
2. Exercise of Option. This Option shall not be exercisable
until the occurrence of a Triggering Event (as such term is hereinafter
defined). Upon or after the occurrence of a Triggering Event (as such term is
hereinafter defined), HUBCO may exercise the Option, in whole or in part, at any
time or from time to time, subject to the termination provisions of Section 19
of this Agreement.
The term "Triggering Event" means the occurrence of any of the
following events:
A person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than HUBCO or an affiliate of HUBCO:
(a) acquires beneficial ownership (as such term is defined in
Rule 13d-3 as promulgated under the Exchange Act) of at least 10% of the then
outstanding shares of Common Stock; or
(b) enters into a letter of intent or an agreement, whether
oral or written, with Southington pursuant to which such person or any affiliate
of such person would (i) merge or consolidate, or enter into any similar
transaction, with Southington, (ii) acquire all or a significant portion of the
assets or liabilities of Southington, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 10% or more of the then outstanding shares of Common
Stock; or
(c) makes a filing with any bank or thrift regulatory
authorities or publicly announces a bona fide proposal (a "Proposal") for (i)
any merger with, consolidation with or acquisition of all or a significant
portion of all the assets or liabilities of, Southington or any other business
combination involving Southington, or (ii) a transaction involving the transfer
of beneficial ownership of securities representing, or the right to acquire
beneficial ownership or to vote securities representing, 10% or more of the
outstanding shares of Common Stock, and thereafter, if such Proposal has not
been Publicly Withdrawn (as such term is hereinafter defined) at least 15 days
prior to the meeting of stockholders of Southington called to vote on the Merger
and Southington's stockholders fail to approve the Merger by the vote required
by applicable law at the meeting of stockholders called for such purpose; or
(d) makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, Southington willfully takes any action in
any manner which would materially interfere with its ability to consummate the
Merger or materially reduce the value of the transaction to HUBCO.
The term "Triggering Event" also means the taking of any
material direct or indirect action by Southington or any of its directors,
officers or agents with the intention of inviting, encouraging or soliciting any
proposal which has as its purpose a tender offer for the shares of Common Stock,
a merger, consolidation, plan of exchange, plan of acquisition or reorganization
of Southington, or a sale of a significant number of shares of Common Stock or
any significant portion of its assets or liabilities.
The term "significant portion" means 10% of the assets or
liabilities of Southington. The term "significant number" means 10% of the
outstanding shares of Common Stock.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over Southington or in soliciting or
inducing any other person (other than HUBCO or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent necessary for Southington to issue the shares of Common
Stock covered by the Option (the "Option Shares") or HUBCO to exercise the
Option or prior to the expiration or termination of any waiting period required
by law, or (ii) so long as any injunction or other order, decree or ruling
issued by any federal or state court of competent jurisdiction is in effect
which prohibits the sale or delivery of the Option Shares.
Southington shall notify HUBCO promptly in writing of the
occurrence of any Triggering Event known to it, it being understood that the
giving of such notice by Southington shall not be a condition to the right of
HUBCO to exercise the Option. Southington will not take any action which would
have the effect of preventing or disabling Southington from delivering the
Option Shares to HUBCO upon exercise of the Option or otherwise performing its
obligations under this Agreement.
In the event HUBCO wishes to exercise the Option, HUBCO shall
send a written notice to Southington (the date of which is hereinafter referred
to as the "Notice Date") specifying the total number of Option Shares it wishes
to purchase and a place and date for the closing of such a purchase (a
"Closing"); provided, however, that a Closing shall not occur prior to two days
after the later of receipt of any necessary regulatory approvals and the
expiration of any legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing
hereunder (a) HUBCO will make payment to Southington of the aggregate price for
the Option Shares so purchased by wire transfer of immediately available funds
to an account designated by Southington; (b) Southington will deliver to HUBCO a
stock certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through Southington, registered in the
name of HUBCO or its designee, in such denominations as were specified by HUBCO
in its notice of exercise and, if necessary, bearing a legend as set forth
below; and (c) HUBCO shall pay any transfer or other taxes required by reason of
the issuance of the Option Shares so purchased.
If required under applicable federal securities laws, a legend
will be placed on each stock certificate evidencing Option Shares issued
pursuant to this Agreement, which legend will read substantially as follows:
The shares of stock evidenced by this certificate
have not been registered for sale under the Securities Act of 1933 (the
"1933 Act"). These shares may not be sold, transferred or otherwise
disposed of unless a registration statement with respect to the sale of
such shares has been filed under the 1933 Act and declared effective
or, in the opinion of counsel reasonably acceptable to Bank of
Southington, said transfer would be exempt from registration under the
provisions of the 1933 Act and the regulations promulgated thereunder.
No such legend shall be required if a registration statement is filed and
declared effective under Section 4 hereof.
4. Registration Rights. Upon or after the occurrence
of a Triggering Event and upon receipt of a written request from HUBCO,
Southington shall, if necessary for the resale of the Option or the Option
Shares by HUBCO, prepare and file a registration statement with the Securities
and Exchange Commission, the Federal Deposit Insurance Corporation (the "FDIC")
and any state securities bureau covering the Option and such number of Option
Shares as HUBCO shall specify in its request, and Southington shall use its best
efforts to cause such registration statement to be declared effective in order
to permit the sale or other disposition of the Option and the Option Shares,
provided that HUBCO shall in no event have the right to have more than one such
registration statement become effective.
In connection with such filing, Southington shall use its best
efforts to cause to be delivered to HUBCO such certificates, opinions,
accountant's letters and other documents as HUBCO shall reasonably request and
as are customarily provided in connection with registrations of securities under
the Securities Act of 1933, as amended. All expenses incurred by Southington in
complying with the provisions of this Section 4, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for Southington and blue sky fees and expenses, shall be paid by
Southington. Underwriting discounts and commissions to brokers and dealers
relating to the Option Shares, fees and disbursements of counsel to HUBCO and
any other expenses incurred by HUBCO in connection with such registration shall
be borne by HUBCO. In connection with such filing, Southington shall indemnify
and hold harmless HUBCO against any losses, claims, damages or liabilities,
joint or several, to which HUBCO may become subject, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any preliminary or final registration statement or any
amendment or supplement thereto, or arise out of a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
Southington will reimburse HUBCO for any legal or other expense reasonably
incurred by HUBCO in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Southington will not
be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement of omission or alleged omission made in such preliminary or final
registration statement or such amendment or supplement thereto in reliance upon
and in conformity with written information furnished by or on behalf of HUBCO
specifically for use in the preparation thereof. HUBCO will indemnify and hold
harmless Southington to the same extent as set forth in the immediately
preceding sentence but only with reference to written information specifically
furnished by or on behalf of HUBCO for use in the preparation of such
preliminary or final registration statement or such amendment or supplement
thereto; and HUBCO will reimburse Southington for any legal or other expense
reasonably incurred by Southington in connection with investigating or defending
any such loss, claim, damage, liability or action.
5. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, conversions, exchanges of shares or
the like, then the number and kind of Option Shares and the Option Price shall
be appropriately adjusted.
In the event any capital reorganization or reclassification of
the Common Stock, or any consolidation, merger or similar transaction of
Southington with another entity, or any sale of all or substantially all of the
assets of Southington, shall be effected in such a way that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions (in form reasonably satisfactory to the holder hereof) shall
be made whereby the holder hereof shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified herein
and in lieu of the Common Stock immediately theretofore purchasable and
receivable upon exercise of the rights represented by this Option, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon exercise of the rights represented by this
Option had such reorganization, reclassification, consolidation, merger or sale
not taken place; provided, however, that if such transaction results in the
holders of Common Stock receiving only cash, the holder hereof shall be paid the
difference between the Option Price and such cash consideration without the need
to exercise the Option.
6. Filings and Consents. Each of HUBCO and
Southington will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to
compliance with all applicable laws including, in the event HUBCO is the holder
hereof, approval of the Board of Governors of the Federal Reserve System, the
FDIC and the Connecticut Department of Banking, and Southington agrees to
cooperate with and furnish to the holder hereof such information and documents
as may be reasonably required to secure such approvals.
7. Representations and Warranties of Southington.
Southington hereby represents and warrants to HUBCO as follows:
a. Due Authorization. Southington has full corporate
power and authority to execute, deliver and perform this Agreement and all
corporate action necessary for execution, delivery and performance of this
Agreement has been duly taken by Southington.
b. Authorized Shares. Southington has taken and, as
long as the Option is outstanding, will take all necessary corporate action to
authorize and reserve for issuance all shares of Common Stock that may be issued
pursuant to any exercise of the Option.
c. No Conflicts. Neither the execution and delivery
of this Agreement nor consummation of the transactions contemplated hereby
(assuming all appropriate regulatory approvals) will violate or result in any
violation or default of or be in conflict with or constitute a default under any
term of the Certificate of Incorporation or By-laws of Southington or any
agreement, instrument, judgment, decree, statute, rule or order applicable to
Southington.
8. Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for a breach of this
Agreement and that the obligations of the parties hereto shall be specifically
enforceable. Notwithstanding the foregoing, HUBCO shall have the right to seek
money damages against Southington for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
10. Assignment or Transfer. HUBCO may not sell,
assign or otherwise transfer its rights and obligations hereunder, in whole or
in part, to any person or group of persons other than to an affiliate of HUBCO,
except upon or after the occurrence of a Triggering Event. HUBCO represents that
it is acquiring the Option for HUBCO's own account and not with a view to or for
sale in connection with any distribution of the Option or the Option Shares.
HUBCO shall have the right to assign this Agreement to any party it selects
after the occurrence of a Triggering Event.
11. Amendment of Agreement. Upon mutual consent of
the parties hereto, this Agreement may be amended in writing at any time, for
the purpose of facilitating performance hereunder or to comply with any
applicable regulation of any governmental authority or any applicable order of
any court or for any other purpose.
12. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect.
13. Notices. All notices, requests, consents and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered personally, by express
service, cable, telegram or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
(a) If to HUBCO, to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman,
President and Chief Executive Officer
Copy to:
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And a Copy to:
Pitney, Hardin, Kipp & Szuch
(Delivery) 200 Campus Drive
Florham Park, New Jersey
(Mail) P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
(b) If to Southington, to:
The Bank of Southington
130 North Main Street
Southington, Connecticut 06489-0670
Attn.: Bryan P. Bowerman, President
Copy to:
The Bank of Southington
130 North Main Street
Southington, Connecticut 06489-0670
Attn.: Roman F. Garbacik, Chairman of the Board
Copy to:
Tyler Cooper & Alcorn, LLP
CityPlace I, 35th Floor
Hartford, Connecticut 06103
Attn.: William W. Bouton III, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are
inserted for convenience and reference purposes, and shall not limit or
otherwise affect any of the terms or provisions hereof.
16. Waivers and Extensions. The parties hereto may,
by mutual consent, extend the time for performance of any of the obligations or
acts of either party hereto. Each party may waive (a) compliance with any of the
covenants of the other party contained in this Agreement and/or (b) the other
party's performance of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement, except as provided in Section 10 permitting HUBCO to assign its
rights and obligations hereunder.
18. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon
either the termination of the Merger Agreement as provided therein or the
consummation of the transactions contemplated by the Merger Agreement; provided,
however, that if termination of the Merger Agreement occurs after the occurrence
of a Triggering Event (as defined in Section 2 hereof), this Agreement shall not
terminate until the later of 18 months following the date of the termination of
the Merger Agreement or the consummation of any proposed transactions which
constitute the Triggering Event.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer, all as of the day and
year first above written.
WITNESS: THE BANK OF SOUTHINGTON
WILLIAM W. BOUTON, III By: ROMAN F. GARBACIK
- ------------------------------------- ------------------------------------
William W. Bouton, III, Counsel Roman F. Garbacik, Chairman
WITNESS: HUBCO, INC.
D. LYNN VAN BORKULO-NUZZO By: KENNETH T. NEILSON
- ------------------------------------- ------------------------------------
D. Lynn Van Borkulo-Nuzzo, Secretary Kenneth T. Neilson, Chairman
President and Chief Executive
Offcer
<PAGE>
Appendix C
THE ENDICOTT GROUP
ENDICOTT FINANCIAL ADVISORS, L.L.C.
November 12, 1997
Board of Directors
The Bank of Southington
130 North Main Street
Southington, CT 06489-0670
Attention: Mr. Roman F. Garbacik
Chairman of the Board
Directors:
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of the outstanding shares of common stock, par
value $6.00 per share (the "Southington Shares"), of The Bank of Southington
("Southington") of the exchange ratio (as described below, the "Exchange Ratio")
pursuant to the Agreement and Plan of Merger, dated as of August 18, 1997 (the
"Merger Agreement"), between Southington, HUBCO, Inc. ("HUBCO"), and HUBCO's
Connecticut banking subsidiary, Lafayette American Bank and Trust Company
("Lafayette").
Pursuant to the Merger Agreement, Southington will merge with and into
Lafayette (the "Merger") and each Southington Share issued and outstanding
immediately prior to the Effective Time (subject to certain exceptions) shall be
converted into the number of shares (the "Exchange Ratio") of common stock of
HUBCO, without par value ("HUBCO Common Stock"), equal to $21.00 subject to
adjustment as described in the Merger Agreement. It is our understanding that
the merger will be accounted for as a pooling-of-interests under generally
accepted accounting principles.
The investment banking business of Endicott Financial Advisors, L.L.C.
("Endicott") includes the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions.
In connection with this opinion, we have reviewed and considered, among
other things: (a) the Merger Agreement; (b) audited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for Southington and HUBCO for the three fiscal years
ended December 31, 1994, December 31, 1995, December 31, 1996; (c) unaudited
consolidated financial statements and management's discussion and analysis of
the financial condition and results of operations for each of Southington and
HUBCO for the quarters ended March 31, 1997 and June 30, 1997; (d) financial
analyses and forecasts for Southington and HUBCO prepared by and/or reviewed
with the respective managements of Southington and HUBCO; (e) the views of
senior management of Southington and HUBCO of their respective past and current
business operations, results thereof, financial condition and future prospects;
(f) certain reported price and trading activity for the Southington and HUBCO
common stock, including a comparison of certain financial and stock market
information with similar information for certain other companies the securities
of which are publicly traded; (g) the financial terms of recent business
combinations in the banking industry; (h) the pro-forma impact of the
transaction on HUBCO; (i) the current market environment generally and the
banking environment in particular; and (j) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
information, analyses and other information reviewed by and discussed with us,
and we did not make an independent evaluation or appraisal of the specific
assets, the collateral securing assets or the liabilities of Southington or
HUBCO or any of their subsidiaries, or the collectibility of any such assets
(relying, where relevant on the analyses and estimates of Southington and
HUBCO). With respect to the financial projections reviewed with management, we
have assumed that they reflect the best currently available estimates and
judgments of the respective managements of the respective future financial
performances of each of Southington and HUBCO and of the combined company, and
that such performances will be achieved. We have also assumed that there has
been no material change in Southington's or HUBCO's assets, financial condition,
results of operations, business or prospects since the date of the last
financial statements made available to us. We have also assumed without
independent verification that the aggregate consolidated allowance for loan
losses for Southington and HUBCO were adequate to cover such losses. We have
further assumed that the conditions precedent in the Agreement are not waived.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon any events occurring after the
date hereof.
We have acted as Southington's financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is continent upon consummation of the Merger. We will also receive a fee for
rendering this opinion.
It is understood that this opinion is not to be quoted or referred to,
in whole or in part, in a registration statement, prospectus, or proxy
statement, or in any other document used in connection with the offering or sale
of securities, nor shall this letter be used for any other purposes, without
Endicott's prior written consent, provided, however, that we hereby consent to
the inclusion of this opinion in this Joint Proxy Statement/Prospectus and the
Registration Statement on Form S-4 of which it comprises a part.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of Southington Shares.
Very truly yours,
ENDICOTT FINANCIAL ADVISORS, L.L.C.
<PAGE>
Appendix D
SECTIONS 36a-125(h) AND 33-855 THROUGH 33-872 OF
THE GENERAL STATUTES OF CONNECTICUT
Sec. 36a-125. Merger and Consolidation of Connecticut Banks
(h) Upon the effectiveness of the agreement of merger or consolidation,
the shareholders, if any, of the constituent banks, except to the extent that
they have received cash, property or other securities of the resulting bank or
shares or other securities of any other corporation in exchange for or upon
conversion of their shares, shall be shareholders of a capital stock resulting
bank. Unless such agreement otherwise provides, the resulting bank may require
each shareholder to surrender such shareholder's certificates of stock in the
constituent bank and in that event no shareholder, until such surrender of that
shareholder's certificates, shall be entitled to receive a certificate of stock
of the resulting bank or to vote thereon or to collect dividends declared
thereon, or to receive cash, property or other securities of the resulting bank,
or shares or other securities of any other corporation. Any shareholder of any
of such constituent banks who dissents from the merger or consolidation is
entitled to assert dissenters' rights under sections 33-855 to 33-872,
inclusive. The rights and obligations of the objecting shareholders and the bank
shall be determined in accordance with said sections. The stock of a capital
stock resulting bank up to an amount of the combined stock of the constituent
banks shall be exempt from any franchise tax.
<PAGE>
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Sec. 33-855. Definitions. As used in sections 33-855 to 33-872,
inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
Sec. 33-856. Right to dissent. (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value if his shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party (A) if shareholder approval is required for the merger by section 330-817
or the certificate of incorporation and the shareholder is entitled to vote on
the merger of (B) if the corporation is a subsidiary that is merged wit its
parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(4) An amendment of the certificate of incorporation that materially
and adversely affects rights in respect of a dissenter's shares because it: (A)
Alters or abolishes a preferential right of the shares; (B) creates, alters or
abolishes a right n respect or redemption or repurchase, of the share; (C)
alters or abolishes a preemptive right of the holder of the shares to acquire
shares or other securities; (D) excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting rights; or
(E) reduces the number of shares owned by the shareholders to a fraction of a
share if the fractional share so crated is to be acquired for cash under section
33-668; or
(5) Any corporation action taken to a shareholder vote to the extent
the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available
to a shareholder by this section, such remedy shall be his exclusive remedy as
holder of such shares against the corporate transactions described in this
section, whether or not the proceeds as provided in sections 33-855 to 33-872,
inclusive.
Sec. 33-857. Dissent by nominees and beneficial owners. (a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
Secs. 33-858 and 33-859. Reserved for future use.
(B)
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
Sec. 33-860. Notice of dissenters' rights. (a) If proposed corporate
action creating dissenters' rights under section 33-856 is submitted to a vote
at a shareholders' meeting, the meeting notice shall state that shareholders are
or may be entitled to assert dissenters' rights under section 33-855 to 33-872,
inclusive, and be accompanied by a copy of said sections.
(b) If corporate action creating dissenters' rights under section
33-856 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in section 33-862.
Sec. 33-861. Notice of intent to demand payment. (a) If proposed
corporate action creating dissenters' rights under section 33-856 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights (1) shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the proposed
action is effectuated and (2) shall not vote his shares in favor of the proposed
action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) of this section is not entitled to payment for his shares under sections
33-855 to 33-872, inclusive.
Sec. 33-862. Dissenters' notice. (a) If proposed corporate action
creating dissenters' rights under section 33-856 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after
the corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificate for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
Sec. 33-863. Duty to demand payment. (a) A shareholder sent a
dissenters' notice described in section 33-862 must demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to subdivision (3) of
subsection (b) of said section and deposit his certificates in accordance with
the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposits his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
Sec. 33-864. Share restrictions. (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate actions is taken or the restrictions
released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
Sec. 33-865. Payment. (a) Except as provided in section 33-867, as soon
as the proposed corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with section 33-863 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
Sec. 33-866. Failure to take action. (a) If the corporation does not
take the proposed action within sixty days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
Sec. 33-867. After-acquired shares. (a) A corporation may elect to
withhold payment required by section 33-865 from a dissenter unless he was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated
and a statement of the dissenter's right to demand payment under section 33-868.
Sec. 33-868. Procedure if shareholder dissatisfied with payment or
offer. (a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or
offered under section 33-867 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
of his shares.
Secs. 33-869 and 33-870. Reserved for future use.
(C)
JUDICIAL APPRAISAL OF SHARES
Sec. 33-871. Court action. (a) If a demand for payment under section
33-868 remains unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior
court for the judicial district where a corporation's principal office or, if
none in this state, its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the superior court for the judicial district where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment (1) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation, or (2)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under section 33-867.
Sec. 33-872. Court costs and counsel fees. (a) The court in an
appraisal proceeding commenced under section 33-871 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable: (1)
Against the corporation and in favor of any or all dissenters if the court finds
the corporation did not substantially comply with the requirements of section
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by section 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
Secs. 33-873 to 33-879. Reserved for future use.
