As filed with the Securities and Exchange Commission on July 8, 1998
Registration No. 333-56489
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4/A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
HUBCO, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other Jurisdiction of Incorporation or Organization)
6711
(Primary Standard Industrial Classification Code Number)
22-2405746
(I.R.S. Employer Identification No.)
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
(201) 236-2600
(Address, including zip code,
and telephone number,
including area code, of
registrant's principal
executive offices)
KENNETH T. NEILSON
Chairman, President and Chief Executive Officer
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
(201) 236-2600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Please send copies of
all communications to:
MICHAEL W. ZELENTY, ESQ. GERALD F. HEUPEL, JR., ESQ.
Pitney, Hardin, Kipp & Szuch Elias, Matz, Tiernan & Herrick L.L.P.
P.O. Box 1945 12th Floor, The Walker Building
Morristown, New Jersey 07962 734 15th Street, N.W.
(973) 966-8125 Washington, D.C. 20005
(202) 347-0300
<PAGE>
Approximate date of commencement of proposed sale to the public: At
the Effective Time of the Merger, as defined in the Agreement and Plan of Merger
dated as of March 31, 1998 (the "Merger Agreement") among HUBCO, Inc. ("HUBCO"),
Hudson United Bank ("HUB"), IBS Financial Corp. ("IBSF"), and Inter-Boro Savings
and Loan Association (the "Association"), attached as Appendix A to the Proxy
Statement-Prospectus.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _____________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _____________
<TABLE>
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CALCULATION OF REGISTRATION FEE
======================== ====================== ====================== ====================== ======================
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of
registered registered unit price registration fee
<S> <C> <C> <C> <C>
Common Stock, No Par 6,533,584 $33.09** $216,196,294** $63,778
Value Shares*
</TABLE>
* The number of shares of HUBCO Common Stock issuable in the Merger in exchange
for shares of IBSF Common Stock, assuming the Exchange Ratio of 0.534 set forth
in the Merger Agreement, and assuming that all currently outstanding options to
acquire shares of IBSF Common Stock are exercised prior to the Effective Time of
the Merger. The Registrant also registers hereby such additional shares of its
common stock as may be issuable in the Merger pursuant to the anti-dilution
provisions of the Merger Agreement.
** Estimated solely for the purpose of calculating the registration fee for the
filing on Form S-4 pursuant to Rule 457(f)(1) under the Securities Act based on
the average of the high and low prices reported on The Nasdaq Stock Market for
IBSF Common Stock as of June 5, 1998, a date within five business days prior to
the filing of this Registration Statement.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
<PAGE>
[IBSF LOGO]
July 10, 1998
To the Shareholders of IBS Financial Corp.:
We cordially invite you to attend a special meeting of the shareholders
of IBS Financial Corp. ("IBSF"). The meeting is to be held at the Hilton At
Cherry Hill, 2349 West Marlton Pike, Cherry Hill, New Jersey 08002 on Monday,
August 10, 1998, at 11:00 am.
We have called the meeting to seek your approval of a Merger Agreement
which provides for IBSF to be merged with HUBCO, Inc. HUBCO is a bank holding
company with bank subsidiaries based in New Jersey, New York and Connecticut.
Immediately following completion of the Merger of IBSF into HUBCO, IBSF's
subsidiary, Inter-Boro Savings and Loan Association, will be merged into HUBCO's
New Jersey banking subsidiary, Hudson United Bank.
Upon completion of the Merger, each share of IBSF Common Stock will be
converted into 0.534 shares of HUBCO Common Stock, subject to adjustment in
certain circumstances. Cash will be paid in lieu of fractional shares. The
investment banking firm of Ryan, Beck & Co., Inc. has advised your Board of
Directors that, in its opinion dated July 10, 1998, the exchange ratio is fair
to the holders of IBSF Common Stock from a financial point of view.
Completion of the Merger is subject to certain conditions, including
receipt of bank regulatory approvals and approval of the Merger Agreement by the
affirmative vote of a majority of the votes cast by the holders of outstanding
shares of IBSF Common Stock entitled to vote at the Meeting.
We urge you to read the attached Proxy Statement-Prospectus carefully.
It describes the Merger Agreement in detail and includes a copy of the Merger
Agreement as Appendix A.
Your Board of Directors has unanimously approved the Merger Agreement
and unanimously recommends that you vote "FOR" approval of the Merger Agreement.
It is very important that your shares be represented at the special
meeting. Whether or not you plan to attend, please complete, date and sign the
enclosed proxy card and return it promptly in the postage paid envelope we have
provided.
On behalf of your Board of Directors,
Joseph M. Ochman, Sr., Chairman of the Board,
President and Chief Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 10, 1998
To the Shareholders of IBS Financial Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Meeting") of IBS Financial Corp. ("IBSF") will be held on Monday, August 10,
1998, at 11:00 am, at the Hilton At Cherry Hill, 2349 West Marlton Pike, Cherry
Hill, New Jersey 08002, for the following purposes:
(1) To consider and vote on a proposal to approve and adopt an Agreement
and Plan of Merger dated as of March 31, 1998 (the "Merger Agreement")
among HUBCO, Inc. ("HUBCO"), Hudson United Bank ("HUB"), IBSF and
Inter-Boro Savings and Loan Association (the "Association"), which
provides for IBSF to be merged with and into HUBCO (the "Merger"). The
attached Proxy Statement-Prospectus describes the Merger Agreement in
detail and includes a copy of the Merger Agreement as Appendix A. If
the Merger is consummated, each share of IBSF Common Stock (except for
treasury shares and certain shares held by HUBCO or its subsidiaries)
will be converted into 0.534 shares (the "Exchange Ratio") of HUBCO
Common Stock. The Exchange Ratio is subject to adjustment in certain
circumstances, as more fully described in the accompanying Proxy
Statement-Prospectus and in the Merger Agreement which is an Appendix
thereto. HUBCO will pay cash to IBSF stockholders in lieu of issuing
fractional shares of HUBCO Common Stock.
(2) To consider and vote upon a proposal, in the discretion of the Board of
Directors of IBSF, to adjourn the Meeting to another time or place for
the purpose of soliciting additional proxies if there are not
sufficient votes at the time of the Meeting to approve the Merger
Agreement (the "Adjournment Proposal").
The Board of Directors has fixed the close of business on June 12, 1998
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. 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. If you are a shareholder whose shares
are not registered in your name, you will need additional documentation from the
holder of record of your shares to vote personally at the Meeting.
By Order of the Board of Directors
Chiara Eisennagel, Corporate Secretary
Cherry Hill, New Jersey
July 10, 1998
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND "FOR"
APPROVAL OF THE ADJOURNMENT PROPOSAL.
<PAGE>
PROXY STATEMENT OF PROSPECTUS OF HUBCO, INC.
IBS FINANCIAL CORP. for its Common Stock to be issued
for its Special Meeting of Shareholders in connection with the merger of
to be held on August 10, 1998 IBS Financial Corp.
and all adjournments or postponements with and into HUBCO, Inc.
thereof
The Board of Directors of IBS Financial Corp. ("IBSF") has called a
Special Meeting of IBSF shareholders (the "Meeting") to be held on Monday,
August 10, 1998. The Meeting has been called to seek IBSF shareholder approval
of a Merger Agreement which provides for IBSF to be merged with HUBCO, Inc.
("HUBCO"), with HUBCO as the surviving corporation. HUBCO is a bank holding
company with bank subsidiaries based in New Jersey, New York and Connecticut.
Immediately following completion of the Merger of IBSF into HUBCO (the
"Merger"), IBSF's subsidiary, Inter-Boro Savings and Loan Association, will be
merged into HUBCO's New Jersey banking subsidiary, Hudson United Bank.
Upon completion of the Merger, each share of IBSF Common Stock (except
for treasury shares and certain shares held by HUBCO or its subsidiaries) will
be converted into 0.534 shares (the "Exchange Ratio") of HUBCO Common Stock. The
Exchange Ratio is subject to adjustment in certain circumstances, as more fully
described in the accompanying Proxy Statement-Prospectus and in the Merger
Agreement which is an Appendix thereto. HUBCO will pay cash to IBSF stockholders
in lieu of issuing fractional shares of HUBCO Common Stock.
Completion of the Merger is subject to certain conditions, including
bank regulatory approvals and approval of the Merger Agreement by the
affirmative vote of a majority of the votes cast by the holders of outstanding
shares of IBSF Common Stock entitled to vote at the Meeting.
HUBCO has filed a Registration Statement with the Securities and
Exchange Commission (the "SEC") covering the HUBCO Common Stock which will be
issued in connection with the Merger. This Proxy Statement-Prospectus serves two
purposes. It is the Proxy Statement being used by the IBSF Board of Directors to
solicit proxies for the Meeting, and it is the Prospectus of HUBCO regarding the
HUBCO Common Stock to be issued if the Merger is completed. This document does
not serve as a prospectus to cover any resales of HUBCO Common Stock to be
issued in connection with the Merger. Persons who are considered "affiliates" of
IBSF under applicable securities laws will be subject to restrictions on their
ability to resell the HUBCO Common Stock received by them in the Merger.
This document is first being sent to IBSF shareholders on or about July
10, 1998. It describes the Merger Agreement in detail and includes a copy of the
Merger Agreement as Appendix A. IBSF shareholders are urged to read this
document carefully.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ALL INFORMATION REGARDING IBSF CONTAINED OR INCORPORATED BY REFERENCE
IN THIS DOCUMENT WAS SUPPLIED BY IBSF. ALL INFORMATION REGARDING HUBCO WAS
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
FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENTAL
AGENCY.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN WHAT IS INCLUDED IN THIS DOCUMENT. IF SUCH INFORMATION
OR REPRESENTATION IS GIVEN OR MADE, IT MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS DOCUMENT AT ANY TIME, NOR ANY DISTRIBUTION OF
SHARES OF HUBCO 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 July 10, 1998.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
AVAILABLE INFORMATION...........................................................4
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE.............................4
SUMMARY OF PROXY STATEMENT-PROSPECTUS...........................................7
Overview...............................................................7
The Meeting............................................................7
The Companies .........................................................8
The Merger.............................................................9
SELECTED CONSOLIDATED FINANCIAL DATA............................................14
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO...................................15
SELECTED CONSOLIDATED FINANCIAL DATA OF IBSF....................................17
MARKET PRICE AND DIVIDEND MATTERS...............................................19
Market Price and Dividend History......................................19
Limitations on Dividends Under the Merger Agreement....................21
Dividend Limitations on HUBCO..........................................21
PRO FORMA CONDENSED FINANCIAL INFORMATION.......................................22
ACTUAL AND PRO FORMA PER SHARE DATA.............................................24
INTRODUCTION ...................................................................26
CERTAIN INFORMATION REGARDING HUBCO ............................................26
General................................................................26
Recent Developments....................................................27
CERTAIN INFORMATION REGARDING IBSF..............................................30
THE MEETING ....................................................................31
Purpose of the Meeting.................................................31
Record Date; Voting Rights; Proxies....................................32
Solicitation of Proxies................................................32
Quorum.................................................................33
Required Vote..........................................................33
THE PROPOSED MERGER.............................................................33
General Description; The Bank Merger...................................33
Closing Date; Effective Time ..........................................34
Consideration..........................................................34
Cash in Lieu of Fractional Shares; Median Pre-Closing Price;
Determination Date.....................................................34
Conversion of IBSF Options.............................................34
Stock Option to HUBCO for IBSF Shares..................................35
Background of the Merger...............................................36
IBSF Board's Reasons for the Merger and Recommendation.................37
HUBCO's Reasons for the Merger.........................................37
Opinion of IBSF's Financial Advisor....................................37
Conditions to the Merger...............................................42
Conduct of Business Pending the Merger.................................43
Representations, Warranties and Covenants..............................43
Regulatory Approvals...................................................44
Interests of Certain Persons in the Merger ............................44
Management and Operations After the Merger.............................45
Exchange of Certificates, Issuance of New Options......................45
Resale Considerations with Respect to the HUBCO Common Stock...........45
Amendments; Termination ...............................................46
Termination Events.....................................................47
Accounting Treatment of the Merger.....................................48
Federal Income Tax Consequences .......................................48
No Dissenters' Rights..................................................50
PRO FORMA FINANCIAL INFORMATION.................................................51
THE ADJOURNMENT PROPOSAL........................................................59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.................................59
DESCRIPTION OF HUBCO CAPITAL STOCK..............................................61
General ...............................................................61
Description of HUBCO Common Stock......................................62
Description of HUBCO Preferred Stock...................................63
COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF IBSF AND HUBCO......................64
General ...............................................................64
Voting Requirements....................................................64
Removal of Directors; Number of Directors..............................65
Preferred Stock........................................................65
Classified Board of Directors .........................................66
Shareholder Consent to Corporate Action................................66
Dividends .............................................................66
By-laws................................................................66
Limitations of Liability of Directors and Officers.....................67
Indemnification of Directors and Officers..............................67
<PAGE>
SHAREHOLDER PROPOSALS...........................................................67
OTHER MATTERS...................................................................68
LEGAL OPINION...................................................................68
EXPERTS.........................................................................68
APPENDIX A Agreement and Plan of Merger by and among HUBCO, HUB,
IBSF and the Association............................................A-1
APPENDIX B Stock Option Agreement by and between HUBCO and IBSF ...............B-1
APPENDIX C Fairness Opinion of Ryan, Beck & Co., Inc...........................C-1
</TABLE>
<PAGE>
AVAILABLE INFORMATION
Each of HUBCO, Inc. ("HUBCO") and IBS Financial Corp. ("IBSF") 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" or the "SEC"). 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 and IBSF). The address of the Commission's web site is
http://www.sec.gov. In addition, HUBCO Common Stock and IBSF Common Stock are
each listed on The Nasdaq Stock Market, and certain materials regarding HUBCO
and IBSF can be inspected at the offices of the National Association of
Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W., Washington, D.C.
20006.
HUBCO has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act")
(together with all amendments and supplements thereto, the "Registration
Statement"), with respect to the securities being offered by this document (this
"Proxy Statement-Prospectus," sometimes referred to as this "Proxy Statement").
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.
ALL INFORMATION REGARDING IBSF CONTAINED IN, DELIVERED WITH OR
INCORPORATED BY REFERENCE IN THIS DOCUMENT WAS SUPPLIED BY IBSF. ALL INFORMATION
REGARDING HUBCO WAS SUPPLIED BY HUBCO.
INFORMATION DELIVERED AND INCORPORATED BY REFERENCE
The following documents filed by HUBCO File No. 0-10699 with the
Commission are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1997,
filed on March 31, 1998.
2. Quarterly Report on Form 10-Q for quarter ended March 31, 1998,
filed on May 15, 1998.
3. Current Reports on Form 8-K filed with the Commission on October 23,
1997 (announced Poughkeepsie Financial Corp. acquisition), December 22, 1998
(announced MSB Bancorp, Inc. acquisition), January 14, 1998, January 16, 1998,
February 13, 1998, March 20, 1998, March 31, 1998 (announced IBS Financial Corp.
and Dime Financial Corporation acquisitions), April 2, 1998 (announced Community
Financial Holding Corporation and 23 branches of First Union National Bank
acquisitions), April 20, 1998, June 2, 1998, June 11, 1998, June 26, 1998, July
2, 1998, July 6, 1998 and July 10, 1998, and the Current Reports on Form 8-K/A
filed with the Commission on May 15, 1998, June 29, 1998 and July 6, 1998.
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, 1997 ("HUBCO's Annual Report") and HUBCO's Proxy Statement dated
March 24, 1998 for its 1998 Annual Meeting ("HUBCO's Proxy Statement") are
available free of charge, upon written or oral request as set forth hereinafter,
to any holder, including any beneficial owner, of shares of IBSF Common Stock.
Copies of IBSF's Annual Report to Shareholders for the year ended
September 30, 1997 ("IBSF's Annual Report") and Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 ("IBSF's Quarterly Report") accompany each
copy of this Proxy Statement delivered to holders of IBSF Common Stock.
Additional copies of these documents are available to any holder of IBSF Common
Stock, including any beneficial owner, free of charge upon written or oral
request as set forth hereinafter.
The following documents filed by IBSF (File No. 0-24862) with the
Commission are incorporated herein by reference.
1. Annual Report on Form 10-K for the year ended September 30, 1997,
filed on December 29, 1997.
2. Quarterly Report on Form 10-Q for the quarter ended December 31,
1997, filed on February 11, 1998.
3. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
filed on May 14, 1998.
4. Current Report on Form 8-K filed with the Commission on April 10,
1998.
5. Form 8-A filed by IBSF to register its Common Stock pursuant to
Section 12(g) of the Exchange Act.
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 to which this Proxy Statement-Prospectus relates,
or (ii) the termination of the Merger Agreement which is the subject of the
Meeting, are hereby incorporated by reference into this Proxy Statement and
shall be deemed a part hereof from the date of filing of such documents.
Any statement contained herein, in any supplement hereto, or 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 supplement hereto, 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 the
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information incorporated herein) are available free of charge
to any holder of IBSF 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; and,
with respect to IBSF materials, to the office of the IBSF Corporate Secretary,
Chiara Eisennagel, IBS Financial Corp., 1909 E. Route 70, Cherry Hill, New
Jersey 08003; telephone (609) 424-1000. Additional copies of IBSF's Annual
Report and IBSF's Quarterly Report are also available free of charge to any
holder of IBSF Common Stock, including any beneficial owner, upon written or
oral request, to the office of the IBSF Corporate Secretary, Chiara Eisennagel,
IBS Financial Corp., 1909 E. Route 70, Cherry Hill, New Jersey 08003; telephone
(609) 424-1000. 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 August 3, 1998.
CONTAINED WITHIN AND INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-PROSPECTUS ARE CERTAIN FORWARD LOOKING STATEMENTS WITH RESPECT TO THE
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF HUBCO AND IBSF. SUCH
STATEMENTS ARE NOT HISTORICAL FACTS AND INCLUDE EXPRESSIONS ABOUT HUBCO'S AND
IBSF'S CONFIDENCE, STRATEGIES AND EXPECTATIONS ABOUT EARNINGS, NEW AND EXISTING
PROGRAMS AND PRODUCTS, RELATIONSHIPS, OPPORTUNITIES, TECHNOLOGY AND MARKET
CONDITIONS. THESE STATEMENTS MAY BE IDENTIFIED BY FORWARD-LOOKING TERMINOLOGY
SUCH AS "EXPECT", "BELIEVE", OR "ANTICIPATE", OR EXPRESSIONS OF CONFIDENCE LIKE
"STRONG" OR "ON-GOING", OR SIMILAR STATEMENTS OR VARIATIONS OF SUCH TERMS.
FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS OR REVENUE ENHANCEMENTS FROM
THE MERGER OR HUBCO'S OTHER ACQUISITIONS CANNOT BE REALIZED AS ANTICIPATED; (2)
DEPOSIT ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER OR HUBCO'S
OTHER ACQUISITIONS IS GREATER THAN EXPECTED; (3) COMPETITIVE PRESSURE IN THE
BANKING AND FINANCIAL SERVICES INDUSTRY INCREASES SIGNIFICANTLY; (4) CHANGES IN
THE INTEREST RATE ENVIRONMENT; AND (5) GENERAL ECONOMIC CONDITIONS, EITHER
NATIONALLY OR IN THE STATES OF NEW JERSEY, NEW YORK OR CONNECTICUT, ARE LESS
FAVORABLE THAN EXPECTED.
<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, the appendixes hereto and the documents incorporated herein by
reference. IBSF shareholders should carefully read all such materials.
Overview
The Board of Directors of IBS Financial Corp. ("IBSF") has called a
Special Meeting of IBSF shareholders (the "Meeting") to be held on Monday,
August 10, 1998. The Meeting has been called to seek shareholder approval of an
Agreement and Plan of Merger dated as of March 31, 1998 (the "Merger Agreement")
among HUBCO, Inc. ("HUBCO"), Hudson United Bank ("HUB"), IBSF and IBSF's
principal subsidiary, Inter-Boro Savings and Loan Association (the
"Association"). The Merger Agreement provides for IBSF to be merged with HUBCO
(the "Merger"), with HUBCO as the surviving corporation. A copy of the Merger
Agreement is attached as Appendix A to this Proxy Statement.
Upon completion of the Merger, each share of common stock, par value
$.01 per share, of IBSF ("IBSF Common Stock"), other than Excluded Shares (as
defined below), will be converted into 0.534 shares (the "Exchange Ratio") of
common stock of HUBCO, no par value ("HUBCO Common Stock"). The Exchange Ratio
is subject to adjustment in certain circumstances, as more fully described in
the Proxy Statement and in the Merger Agreement which is an Appendix hereto.
HUBCO will pay cash to IBSF stockholders in lieu of issuing fractional shares of
HUBCO Common Stock. "Excluded Shares" are those shares of IBSF Common Stock
which are (i) held by IBSF as treasury shares, or (ii) 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).
At the Meeting, holders of IBSF Common Stock will be asked to approve
and adopt the Merger Agreement and, in the discretion of the Board of Directors
of IBSF, to approve a proposal (the "Adjournment Proposal") to adjourn the
Meeting in order to solicit additional proxies if there are insufficient votes
at the time of the Meeting to approve the Merger Agreement.
This document serves two purposes. It is the Proxy Statement being used
by the IBSF Board of Directors to solicit proxies for the Meeting, and it is the
Prospectus of HUBCO regarding the HUBCO Common Stock to be issued if the Merger
is completed. Therefore, this document is sometimes referred to as either the
"Proxy Statement-Prospectus" or the "Proxy Statement."
The Meeting
The Meeting will be held on Monday, August 10, 1998 at 11:00 am, at the
Hilton At Cherry Hill, 2349 West Marlton Pike, Cherry Hill, New Jersey 08002. At
the Meeting, holders of IBSF Common Stock will be asked to approve and adopt the
Merger Agreement and in the discretion of the Board of Directors to approve the
Adjournment Proposal.
Record holders of IBSF Common Stock at the close of business on June
12, 1998 (the "Record Date") are entitled to vote at the Meeting. Holders of a
majority of the outstanding shares of IBSF Common Stock entitled to vote at the
Meeting must be present or represented by proxy at the Meeting for a quorum. The
affirmative vote, in person or by proxy, of a majority of the votes cast by the
holders of outstanding shares of IBSF Common Stock entitled to vote at the
Meeting is required in order to approve and adopt the Merger Agreement. The
affirmative vote of the holders of a majority of the votes cast affirmatively or
negatively is required in order to approve and adopt the Adjournment Proposal.
As of the Record Date, there were 10,962,116 outstanding shares of IBSF Common
Stock held by approximately 1,930 holders of record. The directors of IBSF and
the Association as a group have voting control over 739,373 of these shares
(6.7%) (excluding unallocated shares held by IBSF's Employee Stock Ownership
Plan) and have agreed to vote them in favor of the Merger Agreement. In
addition, HUBCO has voting control over 150,000 of these shares (1.37%) and the
non-director executive officers of IBSF and the Association as a group have
voting control over 301,431 of these shares (2.7%), all of which shares IBSF
expects will be voted in favor of the Merger Agreement and in the discretion of
the Board of Directors, the Adjournment Proposal.
The IBSF Board of Directors has unanimously approved the Merger
Agreement and unanimously recommends that holders of IBSF Common Stock vote FOR
the Merger Agreement and FOR the Adjournment Proposal.
The Companies
HUBCO
HUBCO is a New Jersey corporation and registered bank holding company
whose principal operating subsidiaries are HUB, a New Jersey-chartered
commercial bank, Lafayette American Bank ("Lafayette"), a Connecticut-chartered
commercial bank, and Bank of the Hudson ("BTH"), a New York state-based
federally-chartered savings bank. HUBCO's corporate headquarters is located at
1000 MacArthur Boulevard, Mahwah, New Jersey 07430 and its telephone number is
(201) 236-2600. HUB's corporate headquarters is located at 3100 Bergenline
Avenue, Union City, New Jersey 07084. Lafayette's corporate headquarters is
located at 1000 Lafayette Boulevard, Bridgeport, Connecticut 06604. BTH's
corporate headquarters is located at 249 Main Mall, Poughkeepsie, New York
12601.
HUB is a full-service commercial bank which primarily serves small and
mid-sized businesses and consumers through 74 branches in northern New Jersey.
Lafayette is a full-service commercial bank which serves primarily
small-to-medium-sized business firms as well as individuals through 39 banking
offices located mainly in Fairfield, Hartford, Middlesex and New Haven counties
in Connecticut. On April 24, 1998, HUBCO acquired Poughkeepsie Financial Corp.
("PFC") and PFC's subsidiary, BTH became HUBCO's New York-based banking
subsidiary. On May 29, 1998, HUBCO acquired MSB Bancorp, Inc. ("MSB") and merged
MSB's subsidiary, MSB Bank into BTH. BTH is a community savings bank serving the
Mid-Hudson Valley area of New York through 32 branches in Dutchess, Orange,
Putnam and Rockland Counties, as well as six residential loan origination
offices in five New York counties and New Jersey. HUBCO anticipates converting
BTH into a state-chartered commercial bank at some point in the future. On June
24, 1998 HUBCO completed the purchase of 21 branches of First Union National
Bank located in New Jersey and Connecticut with deposits of $242.9 million in
the aggregate (the "Completed Branch Purchase"). The completed acquisitions of
PFC, MSB and the Completed Branch Purchase are collectively referred to in this
Proxy Statement-Prospectus as the "Recently Completed Acquisitions." As of March
31, 1998, (prior to the consummation of the Recently Completed Acquisitions)
HUBCO had consolidated assets of $3.05 billion, consolidated deposits of $2.45
billion and consolidated stockholders' equity of $200.3 million. Based on assets
as of March 31, 1998, HUBCO was the fourth largest commercial banking company
headquartered in New Jersey.
As of the date of this Proxy Statement-Prospectus, HUBCO has pending
the acquisitions of Dime Financial Corp. ("DFC") and Community Financial Holding
Corporation ("CFHC") and the purchase of two additional branches from First
Union National Bank (the "Pending Branch Purchase"). DFC is the parent
corporation of The Dime Savings Bank of Wallingford, Connecticut ("Dime"), a
bank headquartered in Wallingford, Connecticut which had 11 branches and $1.01
billion in assets as of March 31, 1998. CFHC is the parent corporation of
Community National Bank of New Jersey ("CNB"), a bank headquartered in Westmont,
New Jersey which had 8 branches and $159.4 million in assets as of March 31,
1998. The Pending Branch Purchase represents the acquisition of two branches
from First Union National Bank located in New York with deposits of $25 million
in the aggregate. The pending acquisitions of DFC and CFHC and the Pending
Branch Purchase are collectively referred to in this Proxy Statement-Prospectus
as the "Pending Acquisitions."
On June 19 1998, HUBCO issued $50,000,000 aggregate principal amount of
7.65% Capital Securities using HUBCO Capital Trust II, a statutory business
trust formed under the laws of the State of Delaware (the "Recently Completed
Trust Preferred Issuance"). The net proceeds of the offering are expected to be
used for general corporate purposes, including acquisition opportunities which
may arise from time to time.
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Assuming consummation of all
acquisitions pending as of the date of this Proxy Statement-Prospectus, HUBCO
will have completed over 25 acquisitions since 1990, and HUBCO will have added
over 140 branches and over $6 billion in assets through acquisitions this
decade. HUBCO expects to continue its acquisition strategy. HUBCO is continually
evaluating acquisition opportunities and frequently conducts discussions,
certain financial analyses and due 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 (as well as the Recently Completed Acquisitions and the
Pending Acquisitions). From time to time, HUBCO may issue new equity or debt
securities to fund its acquisition plans or for other purposes. In the past,
HUBCO has successfully managed its acquisitions to improve its core earnings.
However there can be no assurance that HUBCO will continue to effectively manage
the risks involved. If acquisitions are not managed effectively or acquired
institutions are not assimilated efficiently, HUBCO's business, financial
condition, and results of operations may be adversely impacted.
IBSF
IBSF is a New Jersey corporation and the sole shareholder of the
Association, which converted to the stock form of organization in October 1994.
The only significant assets of IBSF are its investments in the capital stock of
the Association, its loan to IBSF's employee stock ownership plan, and certain
U.S. Government Agency securities and interest-bearing deposits. References
herein to IBSF include the Association unless otherwise noted. IBSF's corporate
headquarters is located at 1909 E. Route 70, Cherry Hill, New Jersey 08003. As
of March 31, 1998, IBSF had consolidated assets of $752.1 million, consolidated
deposits of $575.2 million and consolidated stockholders' equity of $130.5
million.
The Association is a New Jersey chartered stock savings and loan
association which conducts business from nine offices located in Camden,
Burlington and Gloucester Counties, New Jersey. The Association's operations
date back to 1890. The Association's deposits are insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC to the maximum extent permitted
by law.
The Merger
Description of the Merger; Closing Date; Effective Time
In the Merger, IBSF will be merged with and into HUBCO, with HUBCO as
the surviving entity. 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 IBSF. The Closing Date specified by HUBCO
must be at least five business days after the date of the Closing Notice, but no
less than seven and no more than ten business days after the satisfaction or
waiver of the 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 IBSF. HUBCO and IBSF currently
anticipate closing in the third quarter of 1998. Simultaneous with or
immediately following the Closing, HUBCO and IBSF will file a Certificate of
Merger with the Secretary of State of the State of New Jersey. The Merger will
become effective at a date and time following the Closing which HUBCO and IBSF
will specify in the Certificate of Merger (the "Effective Time"). If no
Effective Time is specified in the Certificate of Merger, the Effective Time
will be the time at which the Certificate of Merger is filed. HUBCO and IBSF
currently anticipate that the Effective Time will be the close of business on
the Closing Date. The exact Closing Date and Effective Time are dependent upon
satisfaction of all conditions precedent, some of which are not under the
control of HUBCO or IBSF.
Bank Merger
Immediately following the Effective Time, the Association will be
merged with and into HUB (the "Bank Merger"), with HUB as the surviving bank
(the "Surviving Bank").
Consideration
Upon completion of the Merger, each share of IBSF Common Stock (other
than Excluded Shares) will be converted into 0.534 shares (the "Exchange Ratio")
of HUBCO Common Stock. The Exchange Ratio is subject to standard anti-dilution
adjustments. The Exchange Ratio is also subject to adjustment if IBSF notifies
HUBCO of its intent to terminate the Merger Agreement under certain special
circumstances and HUBCO overrides the termination by increasing the Exchange
Ratio in accordance with a formula set forth in the Merger Agreement. See "THE
PROPOSED MERGER -- Termination Events."
Conversion of IBSF Options
IBSF has outstanding a number of options to purchase shares of IBSF
Common Stock ("IBSF Options") which were granted to optionees ("Optionees")
pursuant to the IBSF 1995 Stock Option Plan (the "IBSF Stock Option Plan") and
the option grant agreements thereunder (the "Option Grant Agreements"). Pursuant
to the Merger Agreement, HUBCO has agreed to honor the provisions of the IBSF
Stock Option Plan and the Option Grant Agreements, including those relating to
vesting and conversion in connection with a change in control of IBSF. Pursuant
to the Merger Agreement, each Stock Option outstanding at the Effective Time
(each a "Continuing Stock Option") will be converted into an option to purchase
HUBCO Common Stock, wherein (i) the right to purchase shares of IBSF Common
Stock pursuant to the Continuing Stock Option will be converted into the right
to purchase that same number of shares of HUBCO Common Stock multiplied by the
Exchange Ratio, (ii) the option exercise price per share of HUBCO Common Stock
will be the previous option exercise price per share of the IBSF Common Stock
divided by the Exchange Ratio, and (iii) in all other material respects the
option will be subject to the same terms and conditions as governed the
Continuing Stock Option on which it was based, including the length of time
within which the option may be exercised (which will not be extended except that
the holder of a Stock Option who continues in the service of HUBCO or a
subsidiary of HUBCO will not be deemed to have terminated service for purposes
of determining the Continuing Stock Option exercise period). Shares of HUBCO
Common Stock issuable upon exercise of Continuing Stock Options will be covered
by an effective registration statement on Form S-8, and HUBCO has agreed to use
its reasonable best efforts to file a registration statement on Form S-8
covering such shares as soon as possible after the Effective Time.
Cash in Lieu of Fractional Shares; Median Pre-Closing Price;
Determination Date
No fractional shares of HUBCO Common Stock will be issued in exchange
for IBSF Common Stock. Instead, holders of IBSF Common Stock will receive from
HUBCO cash equal to their 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 a holder of IBSF Common Stock will be aggregated to
constitute as many whole shares as possible before determining the person's
fractional share interest. "Median Pre-Closing Price" will be determined by
taking the price half-way between the closing prices left after discarding the
four lowest and four highest closing prices of HUBCO Common Stock during the
ten-trading day period ending on the Determination Date. The "Determination
Date" will be the later of (i) the day the parties receive final bank regulatory
approval for the Merger and so notify each other or (ii) the date of the Meeting
to which this Proxy Statement relates.
Termination Rights
The Merger Agreement may be terminated by either IBSF or HUBCO if,
among other reasons, the Effective Time has not occurred by December 31, 1998
other than due to failure of the terminating party to perform its obligations
under the Merger Agreement. The Merger Agreement may be terminated by IBSF if
IBSF'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. In addition, IBSF may
terminate the Merger Agreement if both (x) the Median Pre-Closing Price of HUBCO
Common Stock on the Determination Date is less than $31.82, and (y) (i) the
quotient obtained by dividing the Median Pre-Closing Price of HUBCO Common Stock
on the Determination Date by the HUBCO Common Stock Closing Price on the
Starting Date (as defined below) is less than (ii) the quotient obtained by
dividing the Index Price (as defined below) on the Determination Date by the
Index Price on the Starting Date and subtracting 0.10 from the quotient. If both
conditions (x) and (y) exist, and the IBSF Board of Directors elects to
terminate the Merger Agreement, such termination will not occur if HUBCO elects
to increase the Exchange Ratio to a number calculated pursuant to the Merger
Agreement. The "Starting Date" is April 1, 1998, the day after public
announcement of the Merger Agreement. The "Index Price" on a particular day is
the KBW 50 Index (an index of bank stocks) for that day, as published the
following business day.
Certain Federal Income Tax Consequences
HUBCO's and IBSF's obligations to consummate the Merger are conditioned
upon, among other things, the receipt of an opinion of Pitney, Hardin, Kipp &
Szuch, counsel to HUBCO, dated the Closing Date, 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"). While HUBCO and IBSF
each has the contractual right to waive this condition to closing, neither will
do so. In connection with the Registration Statement of which this Proxy
Statement is a part, counsel to HUBCO has delivered its opinion to the effect
that the Merger will qualify as a tax-free reorganization as defined in Section
368 of the Code.
Accounting Treatment of the Merger
The Merger is expected to be accounted for as a pooling of interests
for financial reporting purposes, and each party's obligation to consummate the
Merger is conditioned upon HUBCO's receipt of assurances from Arthur Andersen,
LLP, HUBCO's independent accountants that the Merger will be so treated. Under
the pooling-of-interests method of accounting, IBSF's historical basis of
assets, liabilities and stockholders' 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 IBSF had been combined for
all periods presented.
Required Regulatory Approvals
Consummation of the Merger is subject to prior receipt of approval of
the Merger by FDIC and the New Jersey Department of Banking (the "NJDOB").
Applications for FDIC and NJDOB approval have been filed, and HUBCO and IBSF
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 IBSF.
Conditions to the Merger
There are a number of conditions to completion of the Merger, including
receipt of bank regulatory approval; approval of the Merger Agreement by the
IBSF shareholders; an opinion of Pitney, Hardin, Kipp & Szuch, counsel to HUBCO,
that the Merger will result in a tax-free reorganization; assurances to HUBCO
from its independent accountants that the Merger will be accounted for as a
pooling of interests; and certain other conditions usual and customary in
transactions similar to the Merger.
Exchange of Certificates
Promptly after the Effective Time, the Exchange Agent for HUBCO will
send IBSF shareholders letters of transmittal and instructions for exchanging
their stock certificates for certificates representing HUBCO Common Stock.
HOLDERS OF IBSF COMMON STOCK SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE INSTRUCTIONS FROM THE EXCHANGE AGENT.
Fairness Opinion
Ryan, Beck & Co., Inc. ("Ryan, Beck") has rendered its oral opinion to
the IBSF Board of Directors on March 31, 1998, subsequently confirmed by a
formal written opinion dated as of the same date, and rendered an additional
formal written updated opinion dated July 10, 1998 (the "Opinion"), that, as of
the respective dates of such opinions and subject to the assumptions set forth
therein, the Exchange Ratio is fair to the holders of IBSF Common Stock from a
financial point of view. For information concerning the matters reviewed,
assumptions made and factors considered by Ryan, Beck, see "THE PROPOSED MERGER
- -- Opinion of Financial Advisor" and Appendix C to this Proxy Statement, which
sets forth a copy of Ryan, Beck's written fairness opinion dated July 10, 1998.
Holders of IBSF Common Stock are urged to, and should, read such opinion in its
entirety.
No Solicitation by IBSF of Alternative Transactions
Pursuant to the Merger Agreement, IBSF has agreed that it will not,
directly or indirectly, encourage or solicit or hold discussions or negotiations
with, or provide any information to, any person other than HUBCO concerning any
merger or similar acquisition transactions involving IBSF or the Association (an
"Acquisition Transaction"), except that IBSF may enter into discussions or
negotiations or provide information in connection with an unsolicited possible
Acquisition Transaction if the Board of Directors of IBSF, after consulting with
counsel, determines in the exercise of its fiduciary responsibilities that such
action should be so taken. This restriction, along with the Stock Option
Agreement described in the following paragraph, may be considered a deterrent to
other potential acquisitions of control of IBSF.
Stock Option to HUBCO for IBSF Shares
HUBCO and IBSF entered into a Stock Option Agreement dated as of March
31, 1998 (the "Stock Option Agreement") in connection with the negotiation by
HUBCO and IBSF of the Merger Agreement. Pursuant to the Stock Option Agreement,
IBSF has granted to HUBCO an option (the "Option"), exercisable only under
certain limited and specifically defined circumstances (none of which has
occurred as of the date hereof), to purchase up to 2,700,000 authorized but
unissued shares of IBSF Common Stock, representing upon issuance approximately
19.8% of the shares of IBSF Common Stock, for an exercise price of $18.00 per
share. HUBCO does not have any voting rights with respect to the shares of IBSF
Common Stock subject to the Option prior to exercise of the Option. Acquisitions
of IBSF Common Stock pursuant to exercise of the option would be subject to
prior regulatory approval under certain circumstances.
The Stock Option Agreement is attached to this Proxy Statement as
Appendix B hereto. If certain specifically enumerated "Triggering Events" occur
and the Merger is not consummated, HUBCO would recognize a gain on the sale of
the shares of IBSF Common Stock received pursuant to the exercise of the Option
if such shares of IBSF Common Stock were sold at prices exceeding $18.00 per
share. The ability of HUBCO to exercise the Option and to cause up to an
additional 2,700,000 shares of IBSF Common Stock to be issued may be considered
a deterrent to other potential acquisitions of control of IBSF, even if such
potential acquiror were prepared to pay a higher price per share for IBSF Common
Stock, as it is likely to increase the cost of an acquisition of all of the
shares of IBSF 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.
Interests of Certain Persons in the Merger
The Merger Agreement provides that Joseph M. Ochman, Sr., the Chairman,
President and Chief Executive Officer of IBSF, will be appointed as a director
of the Surviving Bank and Chairman of the Southern New Jersey Advisory Council
of the Surviving Bank at the Closing. The Merger Agreement also provides that
Mr. Ochman will receive a consulting contract for services to be rendered during
a transitional period. HUBCO also agreed to honor existing written employment
and severance agreements with officers and employees of IBSF and the Association
and the Excess Benefit Plan for Mr. Ochman. Mr. Ochman will receive a lump sum
cash severance payment together with other continuing benefits.
Certain employees of IBSF or the Association (including two executive
officers other than Mr. Ochman) will receive "retention" bonuses in the event
the employee remains an employee of IBSF or the Association through the
Effective Time (or the subsequent systems conversion in certain cases). The
retention bonuses will not exceed an aggregate of $150,000.
All unvested stock options and restricted stock awards held by the
directors, officers and employees of IBSF and the Association (including Mr.
Ochman) will accelerate and become fully vested as of the Effective Time. Such
stock options will be converted into stock options to purchase HUBCO Common
Stock and the holders of the restricted stock awards that accelerate will
receive HUBCO Common Stock based upon the Exchange Ratio.
HUBCO has agreed to indemnify the directors, officers, employees and
agents of IBSF for a period of six years after the Effective Time to the fullest
extent which IBSF would have been permitted to do so and to provide liability
insurance to IBSF's officers and directors for a period of six years after the
Effective Time.
For further details regarding the foregoing, see "THE PROPOSED MERGER -
Interests of Certain Persons in the Merger."
Differences in Shareholders' Rights
Each of IBSF and HUBCO is a business corporation incorporated under the
New Jersey Business Corporation Act (the "NJBCA"). The rights of IBSF
shareholders are currently governed by the NJBCA and IBSF's certificate of
incorporation and bylaws. At the Effective Time, each IBSF 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.
No Dissenters' Rights
Under the NJBCA, holders of IBSF Common Stock are not entitled to
dissenters' rights of appraisal in connection with the Merger.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical consolidated
financial information (audited and unaudited) for both HUBCO and IBSF for the
periods indicated. The financial information for HUBCO has been restated to
include the effects of the merger with The Bank of Southington ("TBOS") which
was consummated on January 12, 1998 and has been accounted for as a pooling of
interests. The tables have been derived from, and should be read in conjunction
with, the selected consolidated financial data of HUBCO and IBSF, including the
related notes thereto, delivered with or incorporated by reference in this Proxy
Statement-Prospectus. See "INFORMATION DELIVERED AND INCORPORATED BY REFERENCE."
HUBCO has filed a Current Report on Form 8-K with the Commission which
contains supplemental financial information of HUBCO for the years ended
December 31, 1997, 1996 and 1995 which has been restated to include the effects
of the Recently Completed Acquisitions, which were accounted for as a pooling of
interests. The selected consolidated financial data of HUBCO included in this
Proxy Statement-Prospectus is not restated to reflect the Recently Completed
Acquisitions or the Recently Completed Trust Preferred Issuance and does not
reflect the Pending Acquisitions. The historical amounts presented in future
financial statements of HUBCO for periods reported in this Proxy
Statement-Prospectus will differ and in certain cases, will differ materially as
a result of the effects of accounting for the Merger, the Recently Completed
Acquisitions and certain of the Pending Acquisitions, when consummated, as
pooling of interests. See "CERTAIN INFORMATION REGARDING HUBCO - Recent
Developments."
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
At or for the Year Ended December 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ----------- ---------- -----------
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 228,438 $ 213,509 $ 212,258 $ 178,052 $ 155,745
Interest expense 81,461 76,171 73,385 55,184 53,070
------------- ------------ ------------ ------------ ------------
Net interest income 146,977 137,338 138,873 122,868 102,675
Provision for possible loan losses 8,530 12,520 10,274 10,069 32,519
------------- ------------ ------------ ------------ ------------
Net interest income after
provision for possible loan losses 138,447 124,818 128,599 112,799 70,156
Other income 41,686 30,811 28,677 23,027 24,868
Other expenses 98,944 120,746 106,584 98,883 100,006
------------- ------------ ------------ ------------ ------------
Income (loss) before income taxes 81,189 34,883 50,692 36,943 (4,982)
Income tax provision 31,512 12,248 15,084 12,831 521
============= ============ ============ ============ ============
Net income (loss) $ 49,677 $ 22,635 $ 35,608 $ 24,112 $ (5,503)
============= ============ ============ ============ ============
Share Data:
Weighted average common shares outstanding (in thousands):
Basic 22,919 23,247 22,857 21,083 17,401
Diluted 24,206 25,048 24,935 23,729 19,981
Basic earnings (loss) per share $ 2.14 $ 0.94 $ 1.52 $ 1.12 $ (0.32)
Diluted earnings (loss) per share 2.05 0.90 1.43 1.02 (0.28)
Cash dividend per common share 0.75 0.66 0.56 0.34 (0.29)
Balance Sheet Summary:
Securities held to maturity $ 227,570 $ 280,914 $ 294,057 $ 715,796 $ 601,246
Securities available for sale 578,658 690,157 528,651 232,424 196,473
Loans 1,857,677 1,965,184 1,726,316 1,642,465 1,372,060
Total assets 3,174,254 3,242,938 2,890,478 2,872,350 2,417,206
Deposits 2,431,114 2,708,371 2,547,677 2,507,642 2,190,291
Stockholders' equity 196,733 216,635 226,253 195,772 125,858
Performance Ratios:
Return on average assets 1.60 % 0.77 % 1.26 % 0.91 % -0.23 %
Return on average equity 23.25 % 10.49 % 17.07 % 15.41 % -4.31 %
Dividend payout 35.05 % 70.21 % 36.84 % 30.36 % --
Average equity to average assets 6.90 % 7.29 % 7.39 % 5.88 % 5.42 %
Net interest margin 5.22 % 5.07 % 5.37 % 5.05 % 4.75 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 2.11 % 1.87 % 1.84 % 1.96 % 2.54 %
Allowance for possible loan losses
to non-performing loans 111 % 107 % 114 % 75 % 45 %
Non-performing loans to
total loans 1.89 % 1.74 % 1.62 % 2.61 % 5.65 %
Non-performing assets to total
loans, plus other real estate 2.09 % 2.04 % 2.28 % 3.57 % 7.20 %
Net charge-offs to average loans 0.46 % 0.68 % 0.65 % 1.28 % 1.79 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO (continued)
Three Months Ended
March 31,
------------------------------
1998 1997
----------- ----------
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income $ 53,729 $ 56,830
Interest expense 18,712 20,935
------------- ------------
Net interest income 35,017 35,895
Provision for possible loan losses 1,939 1,734
------------- ------------
Net interest income after
provision for possible loan losses 33,078 34,161
Other income 10,948 8,895
Other expenses 27,404 24,232
------------- ------------
Income before income taxes 16,622 18,824
Income tax provision 5,652 7,156
============= ============
Net income $ 10,970 $ 11,668
============= ============
Share Data:
Weighted average common shares outstanding:
Basic 22,644 23,024
Diluted 22,952 24,767
Basic earnings per share $ 0.48 $ 0.50
Diluted earnings per share 0.48 0.47
Cash dividend per common share 0.20 0.18
Balance Sheet Summary:
Securities held to maturity $ 228,992 $ 250,868
Securities available for sale 635,537 715,891
Loans 1,836,360 1,930,736
Total assets 3,050,967 3,196,884
Deposits 2,448,016 2,557,806
Stockholders' equity 200,269 217,192
Performance Ratios:
Return on average assets 1.51 % 1.47 %
Return on average equity 22.80 % 21.31 %
Dividend payout 41.67 % 36.80 %
Average equity to average assets 6.62 % 6.88 %
Net interest margin 5.28 % 4.96 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 2.20 % 1.92 %
Allowance for possible loan losses
to non-performing loans 107 % 117 %
Non-performing loans to
total loans 2.05 % 1.65 %
Non-performing assets to total
loans, plus other real estate 2.23 % 1.92 %
Net charge-offs to average loans 0.15 % 0.06 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF IBSF
At or for the Year Ended September 30,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 51,703 $ 52,152 $ 51,692 $ 41,525 $ 47,458
Interest expense 29,080 27,419 25,024 25,674 28,093
------------ ------------- ------------ ------------- ------------
Net interest income 22,623 24,733 26,668 15,851 19,365
Provision for possible loan losses 40 30 30 180 431
------------ ------------- ------------ ------------- ------------
Net interest income after
provision for possible loan losses 22,583 24,703 26,638 15,671 18,934
Other income 685 687 663 901 1,663
Other expenses 14,321 14,231 12,215 9,015 8,738
Special SAIF assessment -- 3,700 -- -- --
------------ ------------- ------------ ------------- ------------
Income before income taxes 8,947 7,459 15,086 7,557 11,859
Income tax provision 3,141 2,922 5,166 2,594 3,807
============ ============= ============ ============= ============
Net income $ 5,806 $ 4,537 $ 9,920 $ 4,963 $ 8,052
============ ============= ============ ============= ============
Share Data:
Weighted average common shares outstanding:
Basic 10,114 11,621 13,074 N/A N/A
Diluted 10,999 12,497 13,536 N/A N/A
Basic earnings per share $ 0.57 $ 0.39 $ 0.74 N/A N/A
Diluted earnings per share 0.53 0.36 0.72 N/A N/A
Cash dividend per common share 0.54 0.20 0.12 N/A N/A
Balance Sheet Summary:
Securities held to maturity $ 354,728 $ 311,979 $ 553,098 $ 472,386 $ 372,815
Securities available for sale 136,430 215,331 -- -- --
Loans 210,008 185,031 141,781 140,618 157,030
Total assets 734,751 742,051 726,536 663,866 665,933
Deposits 567,375 571,366 564,910 603,080 609,805
Stockholders' equity 128,019 144,284 158,049 57,594 52,631
Performance Ratios:
Return on average assets 0.78 % 0.61 % 1.36 % 0.74 % 1.21 %
Return on average equity 4.44 % 2.98 % 6.37 % 8.98 % 16.33 %
Dividend payout 90.80 % 51.07 % 17.06 % N/A N/A
Average equity to average assets 17.61 % 20.53 % 21.18 % 8.24 % 7.43 %
Net interest margin 3.14 % 3.44 % 3.77 % 2.43 % 2.98 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 0.51 % 0.55 % 0.70 % 0.38 % 1.06 %
Allowance for possible loan losses
to non-performing loans 130.07 % 123.80 % 149.91 % 52.71 % 30.51 %
Non-performing loans to
total loans 0.39 % 0.45 % 0.47 % 3.03 % 3.49 %
Non-performing assets to total
loans plus other real estate owned 0.46 % 0.45 % 0.47 % 3.60 % 3.49 %
Net charge-offs to average loans -- -- -- 0.89 % --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF IBSF (continued)
At or for the Six Months Ended March 31,
---------------------------------------------------------------------------
1998 1997
---- ----
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income $ 25,590 $ 25,896
Interest expense 14,521 14,515
------------- -------------
Net interest income 11,069 11,381
Provision for possible loan losses 20 20
------------- -------------
Net interest income after
provision for possible loan losses 11,049 11,361
Other income 511 310
Other expenses 6,951 7,212
------------- -------------
Income before income taxes 4,609 4,459
Income tax provision 1,496 1,547
============= =============
Net income $ 3,113 $ 2,912
============= =============
Share Data:
Weighted average common shares outstanding:
Basic 9,971 10,288
Diluted 10,854 11,145
Basic earnings per share $ 0.31 $ 0.28
Diluted earnings per share 0.29 0.26
Cash dividends per common share 0.20 0.36
Balance Sheet Summary:
Securities held to maturity $ 371,462 $ 330,556
Securities available for sale 111,343 174,760
Loans 228,095 198,670
Total assets 752,115 740,027
Deposits 575,181 570,744
Stockholders' equity 130,517 126,057
Performance Ratios:
Return on average assets 0.85 % 0.78 %
Return on average equity 4.81 % 4.37 %
Dividend payout 62.60 % 120.61 %
Average equity to average assets 17.64 % 17.69 %
Net interest margin 3.09 % 3.13 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 0.48 % 0.53 %
Allowance for possible loan losses
to non-performing loans 156.87 % 94.57 %
Non-performing loans to
total loans 0.30 % 0.56 %
Non-performing assets to total
loans plus other real estate owned 0.30 % 0.56 %
Net charge-offs to average loans -- --
</TABLE>
<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 IBSF Common Stock
is quoted on The Nasdaq Stock Market under the symbol "IBSF". The following
tables set forth, for the periods indicated, the high and low closing prices per
share of HUBCO Common Stock and IBSF Common Stock on The Nasdaq Stock Market, in
each case as reported the following business day in The Wall Street Journal, and
quarterly dividends per share.
All stock prices shown in the tables below have been rounded to
the nearest cent. HUBCO's stock prices and dividends shown in the tables below
have been adjusted for a HUBCO stock dividend paid on December 1, 1997 to
shareholders of record at the close of business on November 13, 1997 (the "1997
HUBCO Stock Dividend") and a HUBCO stock dividend paid on November 15, 1996 to
shareholders of record at the close of business on November 4, 1996 (the "1996
HUBCO Stock Dividend"). IBSF's stock prices and dividends shown in the tables
below have been adjusted for a 15% IBSF stock dividend paid on May 6, 1997 to
shareholders of record at the close of business on April 21, 1997 (the "1997
IBSF Stock Dividend") and a 10% IBSF stock dividend paid on March 15, 1996 to
shareholders of record at the close of business on February 22, 1996 (the "1996
IBSF Stock Dividend") (collectively, the 1997 HUBCO Stock Dividend, the 1996
HUBCO Stock Dividend, the 1997 IBSF Stock Dividend and the 1996 IBSF Stock
Dividend are hereinafter referred to as the "Prior Stock Dividends").
<TABLE>
<CAPTION>
Market Market Equivalent Pro Forma
Price Per Share Price Per Share Market Price Per Share
of HUBCO of IBSF of IBSF Common Stock(1)
Common Stock Common Stock
High Low High Low High Low
Calendar 1996:
<S> <C> <C> <C> <C> <C> <C>
First Quarter........ $ 21.33 $ 18.32 $ 12.94 $ 11.57 $ 11.39 $ 9.78
Second Quarter....... 20.50 17.32 12.61 10.87 10.95 9.25
Third Quarter........ 20.39 18.61 13.16 10.98 10.89 9.94
Fourth Quarter....... 24.15 19.56 14.24 12.93 12.90 10.45
Calendar 1997:
First Quarter........ $ 25.85 $ 21.84 $ 15.76 $ 13.26 $ 13.80 $ 11.66
Second Quarter....... 28.52 21.12 18.13 14.25 15.23 11.28
Third Quarter........ 32.04 26.94 19.00 15.38 17.11 14.39
Fourth Quarter......... 39.13 30.94 18.38 15.00 20.90 16.52
Calendar 1998:
First Quarter......... $ 39.00 $ 33.25 $ 21.25 $ 15.50 $ 20.83 $ 17.76
Second Quarter........ $ 38.75 $ 32.19 $ 20.13 $ 18.50 $ 20.69 $ 17.19
Third Quarter
(through 7/7/98)...... $ 36.75 $ 36.25 $ 19.50 $ 18.50 $ 19.62 $ 19.36
- -------------
</TABLE>
(1) Equivalent pro forma market price per share of IBSF Common
Stock represents the high and low closing prices per share of HUBCO Common
Stock, multiplied by the 0.534 Exchange Ratio. The Exchange Ratio is subject to
customary anti-dilution adjustments specified in the Merger Agreement.
<PAGE>
<TABLE>
<CAPTION>
HUBCO IBSF Equivalent Pro Forma
Common Stock Common Stock Dividends Per Share
Dividends Dividends of IBSF Common Stock
Per Share Per Share (1)
Calendar 1996:
<S> <C> <C> <C>
First Quarter.............. $ 0.160 $ 0.052 $ 0.085
Second Quarter............. 0.160 0.052 0.085
Third Quarter.............. 0.160 0.052 0.085
Fourth Quarter............. 0.184 0.287 0.098
Calendar 1997:
First Quarter.............. 0.184 0.070 0.098
Second Quarter............. 0.184 0.080 0.098
Third Quarter.............. 0.184 0.100 0.098
Fourth Quarter ............ 0.200 0.100 0.107
Calendar 1998:
First Quarter.............. 0.200 0.100 0.107
Second Quarter............. 0.200 0.100 0.107
----------------------
</TABLE>
(1) Equivalent pro forma cash dividends per share of IBSF Common Stock
represents HUBCO's historical dividend rates per share, multiplied by
the 0.534 Exchange Ratio, rounded to the nearest tenth of a cent. The
current annualized dividend rate per share of HUBCO Common Stock, based
upon the four most recently declared quarterly dividend rates of $.184
per share of HUBCO Common Stock payable on September 1, 1997 and $.20
payable on December 1, 1997, March 2, 1998 and June 1, 1998 would be
$0.784. On an equivalent pro forma basis, such current annualized HUBCO
dividend per share of IBSF Common Stock would be $0.419, based on the
0.534 Exchange Ratio, rounded to the nearest tenth of a cent. See
"MARKET PRICE AND DIVIDEND MATTERS - Limitations on Dividends Under The
Merger Agreement." 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.
<PAGE>
The following table presents for (i) March 30, 1998, the last full
trading day before public announcement of the signing of the Merger Agreement,
and (ii) the most recent full trading day prior to the printing of this Proxy
Statement, the reported closing price per share of HUBCO Common Stock and of
IBSF Common Stock on The Nasdaq Stock Market and the equivalent price per share
of IBSF Common Stock computed by multiplying the closing price of HUBCO Common
Stock on each of the dates specified by the 0.534 Exchange Ratio.
<TABLE>
<CAPTION>
Equivalent Price Per
HUBCO IBSF Share of IBSF Common
Common Stock Common Stock Stock
<S> <C> <C> <C>
March 30, 1998............. $38.81 $20.00 $20.73
July 7, 1998............... $36.75 $19.00 $19.62
</TABLE>
IBSF shareholders 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. IBSF SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE HUBCO COMMON STOCK AND THE IBSF COMMON STOCK.
Limitations on Dividends Under the Merger Agreement
The Merger Agreement prohibits IBSF from declaring, setting aside or
paying any dividend or other distribution on its capital stock, except that IBSF
may pay dividends on the IBSF Common Stock in a quarterly amount equal to $0.10
per share.
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 Series B Convertible Preferred Stock (the
"HUBCO Series B 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 Series B
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 of the Connecticut Department of Banking) 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. Under the Office of the
Thrift Supervision Regulations (the "OTSR"), BTH may pay dividends up to an
amount equal to 100% of its net income to date during the calendar year plus the
amount that would reduce by one-half its surplus capital ratio at the beginning
of the calendar year or up to an amount equal to 75% of its net income over the
most recent four-quarter period, provided in each case that if immediately after
giving effect to such proposed dividend (on a pro forma basis), BTH's capital is
equal to or greater than the amount of its regulatory capital requirement.
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following tables present certain pro forma unaudited combined
condensed financial information from the pro forma unaudited combined condensed
statements of income for the three month period ended March 31, 1998 and for the
years ended December 31, 1997, 1996 and 1995, and the pro forma unaudited
combined condensed balance sheet at March 31, 1998. The HUBCO and IBSF pro forma
combined financial information gives effect to HUBCO's proposed acquisition of
IBSF 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 March 31, 1998.
The pro forma information assumes an Exchange Ratio of 0.534 shares of HUBCO
Common Stock for each share of IBSF Common Stock outstanding.
The pro forma information is based on the historical financial
statements of HUBCO, subject to the restatement and pro forma adjustments
described below. The financial information for HUBCO has been restated to
include the effects of the merger with TBOS which was consummated on January 12,
1998 and has been accounted for as a pooling of interests. The financial
information for HUBCO has also been adjusted to give pro forma effect to the PFC
and MSB mergers, which closed on April 24 and May 29, 1998, respectively, and
which were accounted for as pooling of interests. The pro forma financial
information of HUBCO is not restated to reflect the Completed Branch Purchase or
the Recently Completed Trust Preferred Issuance and does not reflect the Pending
Acquisitions. The historical amounts presented in future financial statements of
HUBCO for periods reported in this Proxy Statement-Prospectus will differ and in
certain cases, will differ materially as a result of the effects of accounting
for the Merger and certain of the Pending Acquisitions, when consummated, as
pooling of interests. See "CERTAIN INFORMATION REGARDING HUBCO - Recent
Developments."
The pro forma information is based on the historical financial
statements of IBSF. HUBCO's fiscal year ends December 31 and IBSF's fiscal year
ends September 30, 1997, 1996 and 1995, respectively. In the following table,
financial data for the fiscal years ended December 31, 1997, 1996 and 1995
include IBSF financial data for the 12 months ended September 30, 1997, 1996 and
1995, respectively, and information regarding HUBCO is presented consistent with
the fiscal year of HUBCO ended December 31. The information for the three months
ended March 31, 1998 is based on the respective historical unaudited financial
statements of IBSF and HUBCO (subject to the restatement and adjustments
discussed above).
The pro forma financial information does not give effect to anticipated
cost savings net of expected Merger related expenses and restructuring charges.
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 this Proxy Statement and the consolidated
financial statements and related notes, as well as the historical and pro forma
information for PFC and MSB, all incorporated by reference in this Proxy
Statement. 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. The
financial information also does not reflect one-time merger related and
restructuring charges which either have been or will be incurred in connection
with the Merger and the Recently Completed and Pending Acquisitions.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Unaudited Combined Condensed Financial Information
(In thousands, except for per share data)
For the
Three Months
March 31, For the Years Ended December 31,
--------------------------------------------
Results of Operations: 1998 1997 1996 1995
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net interest income before provision for loan losses........ $ 53,387 $ 220,398 $ 210,289 $ 202,993
Provision for loan losses................................... 6,123 11,985 14,800 12,312
Net interest income after provision for loan losses 47,264 208,413 195,489 190,681
Income before income taxes.................................. 18,586 97,457 46,454 67,537
Net income.................................................. 12,158 59,023 29,217 46,304
Earnings per share
Basic..................................................... 0.35 1.67 0.80 1.35
Diluted................................................... 0.34 1.60 0.78 1.27
As of
March 31,
Balance Sheet: 1998
---------------
Total assets................................................ $ 5,372,659
Total deposits.............................................. 4,312,598
Total stockholders' equity.................................. 443,912
Book value per common share................................. 12.74
</TABLE>
<PAGE>
ACTUAL AND PRO FORMA PER SHARE DATA
The following table sets forth per share data relating to dividends,
net income and book value of HUBCO Common Stock and IBSF Common Stock, both on
an actual (historical) basis and on a pro forma combined basis, as adjusted for
the Prior Stock Dividends. The actual per share data has been derived from the
consolidated financial statements of HUBCO and IBSF, respectively, incorporated
by reference herein. The financial information for HUBCO has been restated to
include the effects of the merger with TBOS which was consummated on January 12,
1998 and has been accounted for as a pooling of interests. The financial
information for HUBCO has also been adjusted to give pro forma effect to the PFC
and MSB mergers, which closed on April 24 and May 29, 1998, respectively, and
which were accounted for as pooling of interests. See "INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE."
The pro forma unaudited book value per share data at March 31, 1998 and
at December 31, 1997 and the pro forma unaudited net income per share data for
the three month period ended March 31, 1998 and for the years ended December 31,
1997, 1996 and 1995 have been derived from the pro forma unaudited combined
condensed financial statements of HUBCO and IBSF, giving effect to HUBCO's
acquisition of IBSF accounted for as a pooling of interests. In the following
table, financial data for the fiscal years ended December 31, 1997, 1996 and
1995 include IBSF financial data for the 12 months ended September 30, 1997,
1996, and 1995, respectively, and information regarding HUBCO is presented
consistent with the fiscal year of HUBCO ended December 31, 1997, 1996 and 1995.
The information for the three months ended March 31, 1998 is based on the
respective historical unaudited financial statements of HUBCO (restated and
adjusted) and IBSF. 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. See "PRO FORMA FINANCIAL
INFORMATION." The pro forma financial information of HUBCO included in this
Proxy Statement-Prospectus is not restated to reflect the Completed Branch
Purchase or the Recently Completed Trust Preferred Issuance and does not reflect
the Pending Acquisitions. The historical amounts presented in future financial
statements of HUBCO for periods reported in this Proxy Statement-Prospectus will
differ and in certain cases, will differ materially as a result of the effects
of accounting for the Merger and certain of the Pending Acquisitions, when
consummated, as pooling of interests. See "CERTAIN INFORMATION REGARDING HUBCO -
Recent Developments."
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 IBSF, as well as the historical and pro forma information for PFC
and MSB, incorporated by reference herein and the pro forma combined condensed
financial statements of HUBCO and IBSF presented elsewhere herein. See
"INFORMATION DELIVERED AND INCORPORATED BY REFERENCE" and "PRO FORMA FINANCIAL
INFORMATION." 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. The
financial information also does not reflect one-time merger related and
restructuring charges which either have been or will be incurred in connection
with the Merger and Recently Completed and Pending Acquisitions.
<PAGE>
<TABLE>
<CAPTION>
For the
Three Months
March 31, For the Years Ended December 31,
----------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- ----------------
CASH DIVIDENDS DECLARED
<S> <C> <C> <C> <C>
PER COMMON SHARE (1):
HUBCO - Actual $ 0.20 $ 0.75 $ 0.66 $ 0.56
IBSF - Actual 0.10 0.54 0.20 0.12
IBSF, Pro forma equivalent: (2) 0.11 0.40 0.35 0.30
NET INCOME PER COMMON SHARE:
HUBCO - Actual (including PFC & MSB)
Basic $ 0.37 $ 1.80 $ 0.81 $ 1.27
Diluted 0.36 1.73 0.79 1.21
IBSF - Actual
Basic 0.15 0.57 0.39 0.74
Diluted 0.15 0.53 0.36 0.72
Pro Forma:
Pro forma per share of HUBCO Common Stock
Basic $ 0.35 $ 1.67 $ 0.80 $ 1.35
Diluted 0.34 1.60 0.78 1.27
IBSF, Pro forma equivalent:
Basic 0.19 0.89 0.43 0.72
Diluted 0.18 0.85 0.42 0.68
As of As of
March 31, December 31,
1998 1997
-------------- ---------------
BOOK VALUE PER COMMON SHARE:
HUBCO - Actual (including PFC & MSB) $ 10.81 $ 10.83
IBSF - Actual 11.91 11.69
Pro forma per share of HUBCO 12.74 12.70
IBSF, Pro forma equivalent 6.80 6.78
- ----------------------
</TABLE>
(1) For information regarding HUBCO's and IBSF's dividends, and the market price
of HUBCO and IBSF Common Stock, see "MARKET PRICE AND DIVIDEND MATTERS."
(2) Equivalent pro forma cash dividends per share of IBSF Common Stock
represents HUBCO historical dividend rates per share, multiplied by the
Exchange Ratio, rounded to the nearest tenth of a cent. The current
annualized dividend rate per share of HUBCO Common Stock, based upon the
four most recently declared quarterly dividend rates of $.184 per share of
HUBCO Common Stock payable on September 1, 1997 and $.20 payable on December
1, 1997, March 2, 1998 and June 1, 1998, would be $0.784. On an equivalent
pro forma basis, such current annualized HUBCO dividend per share of IBSF
Common Stock would be $0.419, based on the 0.534 Exchange Ratio, rounded to
the nearest tenth of a cent. See "MARKET PRICE AND DIVIDEND MATTERS -
Limitations on Dividends Under The Merger Agreement." 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.
<PAGE>
INTRODUCTION
This Proxy Statement solicits, on behalf of the Board of Directors of
IBS Financial Corp. ("IBSF"), approval by the holders of shares of common stock
of IBSF, $.01 par value per share ("IBSF Common Stock"), of the Agreement and
Plan of Merger, dated as of March 31, 1998 (the "Merger Agreement") among HUBCO,
Inc. ("HUBCO"), HUBCO's New Jersey bank subsidiary, Hudson United Bank ("HUB"),
IBSF and IBSF's principal subsidiary, Inter-Boro Savings and Loan Association
(the "Association"). Pursuant to the Merger Agreement, IBSF will be merged with
and into HUBCO (the "Merger"), with HUBCO as the surviving corporation. A copy
of the Merger Agreement is attached as Appendix A to this Proxy Statement.
Approval of a motion to adjourn the meeting if there are not sufficient shares
voted in favor of the Merger Agreement is also being solicited.
Upon completion of the Merger, each share of IBSF Common Stock, other
than Excluded Shares (as defined below), will be converted into 0.534 shares
(the "Exchange Ratio") of common stock of HUBCO, no par value ("HUBCO Common
Stock"). Cash will be paid in lieu of fractional shares. The Exchange Ratio is
subject to adjustment in certain circumstances, as set forth in the Merger
Agreement and more fully described in this Proxy Statement.
IBSF has outstanding a number of options to purchase shares of IBSF
Common Stock ("IBSF Options") which were granted to optionees ("Optionees")
pursuant to the IBSF 1995 Stock Option Plan (the "IBSF Stock Option Plan") and
the option grant agreements thereunder (the "Option Grant Agreements").
Pursuant to the Merger Agreement, HUBCO has agreed to honor the provisions of
the IBSF Stock Option Plan and the Option Grant Agreements, including those
relating to vesting and conversion in connection with a change in control of
IBSF. Pursuant to the Merger Agreement, each Stock Option outstanding at the
Effective Time (each a "Continuing Stock Option") will be converted into an
option to purchase HUBCO Common Stock, wherein (i) the right to purchase shares
of IBSF Common Stock pursuant to the Continuing Stock Option will be converted
into the right to purchase that same number of shares of HUBCO Common Stock
multiplied by the Exchange Ratio, (ii) the option exercise price per share of
HUBCO Common Stock will be the previous option exercise price per share of the
IBSF Common Stock divided by the Exchange Ratio, and (iii) in all other material
respects the option will be subject to the same terms and conditions as governed
the Continuing Stock Option on which it was based, including the length of time
within which the option may be exercised (which will not be extended except that
the holder of a Stock Option who continues in the service of HUBCO or a
subsidiary of HUBCO will not be deemed to have terminated service for purposes
of determining the Continuing Stock Option exercise period). Shares of HUBCO
Common Stock issuable upon exercise of Continuing Stock Options will be covered
by an effective registration statement on Form S-8, and HUBCO has agreed to use
its reasonable best efforts to file a registration statement on Form S-8
covering such shares as soon as possible after the Effective Time.
All information and statements contained in, delivered with, or
incorporated by reference in this Proxy Statement with respect to IBSF were
supplied by IBSF, and all information and statements contained or incorporated
by reference herein with respect to HUBCO were supplied by HUBCO.
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, Lafayette American Bank ("Lafayette"), a
Connecticut-chartered commercial bank, and Bank of the Hudson ("BTH"), a New
York state-based federally-chartered savings bank. HUBCO's corporate
headquarters is located at 1000 MacArthur Boulevard, Mahwah, New Jersey 07430
and its telephone number is (201) 236-2600. HUB's corporate headquarters is
located at 3100 Bergenline Avenue, Union City, New Jersey 07084. Lafayette's
corporate headquarters is located at 1000 Lafayette Boulevard, Bridgeport,
Connecticut 06604. BTH's corporate headquarters is located at 249 Main Mall,
Poughkeepsie, New York 12601.
HUB is a full-service commercial bank which primarily serves small and
mid-sized businesses and consumers through 74 branches in northern New Jersey.
Lafayette is a full-service commercial bank which serves primarily
small-to-medium-sized business firms as well as individuals through 39 banking
offices located mainly in Fairfield, Hartford, Middlesex and New Haven counties
in Connecticut. On April 24, 1998, HUBCO acquired Poughkeepsie Financial Corp.
("PFC") and PFC's subsidiary, BTH became HUBCO's New York-based banking
subsidiary. On May 29, 1998, HUBCO acquired MSB Bancorp, Inc. ("MSB") and merged
MSB's subsidiary, MSB Bank into BTH. BTH is a community savings bank serving the
Mid-Hudson Valley area of New York through 32 branches in Dutchess, Orange,
Putnam and Rockland Counties, as well as six residential loan origination
offices in five New York counties and New Jersey. HUBCO anticipates converting
BTH into a state-chartered commercial bank at some point in the future. On June
24, 1998 HUBCO completed its purchase of 21 branches of First Union National
Bank located in New Jersey, New York and Connecticut with deposits of $242.9
million in the aggregate (the "Completed Branch Purchase"). The completed
acquisitions of PFC, MSB and the Completed Branch Purchase are collectively
referred to in this Proxy Statement-Prospectus as the "Recently Completed
Acquisitions." As of March 31, 1998, (prior to the consummation of the Recently
Completed Acquisitions) HUBCO had consolidated assets of $3.05 billion,
consolidated deposits of $2.45 billion and consolidated stockholders' equity of
$200.3 million. Based on assets as of March 31, 1998, HUBCO was the fourth
largest commercial banking company headquartered in New Jersey.
As of the date of this Proxy Statement-Prospectus, HUBCO has pending
the acquisitions of Dime Financial Corp. ("DFC") and Community Financial Holding
Corporation ("CFHC") and the purchase of two additional branches from First
Union National Bank (the "Pending Branch Purchase"). DFC is the parent
corporation of The Dime Savings Bank of Wallingford, Connecticut ("Dime"), a
bank headquartered in Wallingford, Connecticut which had 11 branches and $1.01
billion in assets as of March 31, 1998. CFHC is the parent corporation of
Community National Bank of New Jersey ("CNB"), a bank headquartered in Westmont,
New Jersey which had 8 branches and $159.4 million in assets as of March 31,
1998. The Pending Branch Purchase represents the acquisition of two branches
from First Union National Bank located in New York with deposits of $25 million
in the aggregate. The pending acquisitions of DFC and CFHC and the Pending
Branch Purchase are collectively referred to in this Proxy Statement-Prospectus
as the "Pending Acquisitions."
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Assuming consummation of all
acquisitions pending as of the date of this Proxy Statement-Prospectus, HUBCO
will have completed over 25 acquisitions since 1990, and HUBCO will have added
over 140 branches and over $6 billion in assets through acquisitions this
decade. HUBCO expects to continue its acquisition strategy. HUBCO is continually
evaluating acquisition opportunities and frequently conducts discussions,
certain financial analyses and due 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. In the past,
HUBCO has successfully managed its acquisitions to improve its core earnings.
However there can be no assurance that HUBCO will continue to effectively manage
the risks involved. If acquisitions are not managed effectively or acquired
institutions are not assimilated efficiently, HUBCO's business, financial
condition, and results of operations may be adversely impacted. For additional
information, see "AVAILABLE INFORMATION" and "INFORMATION DELIVERED AND
INCORPORATED BY REFERENCE."
Recent Developments
Recently Completed Acquisitions: Since March 31, 1998, HUBCO has
completed the acquisitions of the following two institutions and the Completed
Branch Purchase.
MSB Bancorp, Inc.
On May 29, 1998 HUBCO completed its acquisition of MSB, a bank holding
company headquartered in Goshen, New York, by merging MSB into HUBCO and MSB
Bank into BTH, HUBCO's New York banking subsidiary (the "MSB Merger"). In the
MSB Merger, HUBCO issued 2,848,367 shares of HUBCO common stock, no par value
("HUBCO Common Stock"), in the aggregate. At March 31, 1998, MSB had $753.7
million in assets. The MSB Merger was treated as a pooling of interests for
accounting purposes.
Poughkeepsie Financial Corp.
On April 24, 1998, HUBCO completed its acquisition of PFC and PFC's
banking subsidiary, BTH, by merging PFC into HUBCO (the "PFC Merger"). BTH
became HUBCO's New York-based bank subsidiary. In the PFC Merger, HUBCO issued
3,481,903 shares of HUBCO Common Stock in the aggregate. As of March 31, 1998,
PFC had $848.8 million in assets. The PFC Merger was treated as a pooling of
interests for accounting purposes.
Purchase of 21 branches from First Union National Bank
On June 24, 1998, HUBCO completed the purchase of 21 branches from
First Union National Bank (the "Completed Branch Purchase") located in New
Jersey and Connecticut with deposits of $242.9 million, in the aggregate.
HUBCO has filed with the Commission a Current Report on Form 8-K
containing supplemental financial information of HUBCO for the years ended
December 31, 1997, 1996 and 1995 which has been restated to include the effects
of the Recently Completed Acquisitions, which were accounted for as a pooling of
interests. The historical financial statements of HUBCO included in this Proxy
Statement-Prospectus are not restated to reflect the Recently Completed
Acquisitions. The historical amounts presented in future financial statements of
HUBCO for periods reported in this Proxy Statement-Prospectus will differ and,
in certain cases, will differ materially as a result of the effects of
accounting for the Recently Completed Acquisitions, the Merger and certain of
the Pending Acquisitions, when consummated, as pooling of interests.
Pending Acquisitions: As of the date of this Proxy
Statement-Prospectus, HUBCO has entered into definitive agreements to acquire
the following two financial institutions and the Pending Branch Purchase.
Dime Financial Corporation
On March 31, 1998, HUBCO, Lafayette, DFC and DFC's wholly-owned
subsidiary, Dime signed a definitive merger agreement to merge DFC into HUBCO
and Dime into Lafayette (the "DFC Merger"). In the DFC Merger, DFC shareholders
will receive HUBCO Common Stock with an indicated value of $38.25 per share
based upon the median price of HUBCO Common Stock in a period immediately before
regulatory approval (if the price of HUBCO stock during such period is between
$36.42 and $41.13). A maximum exchange ratio of 1.05 shares of HUBCO Common
Stock for each share of DFC common stock will apply if HUBCO's pre-regulatory
approval price is below $36.43. A minimum exchange ratio of 0.93 shares will
apply if HUBCO's pre-regulatory approval price is above $41.13. DFC is a bank
holding company headquartered in Wallingford, Connecticut. At March 31, 1998,
DFC had $1.01 billion in assets. The DFC Merger is expected to close in the
third quarter of 1998 and to be treated as a pooling of interests for accounting
purposes. HUBCO expects to issue approximately 5,510,000 shares of HUBCO Common
Stock in the DFC Merger.
Community Financial Holding Corporation
On March 3, 1998, HUBCO, HUB, CFHC and CFHC's wholly-owned subsidiary,
CNB signed a definitive merger agreement to merge CFHC into HUBCO and CNB into
HUB (the "CFHC Merger"). Pursuant to the merger agreement, each share of CFHC
common stock will be exchanged for 0.695 shares of HUBCO Common Stock, so long
as the median closing price for HUBCO Common Stock during a pre-closing period
is not below $29.00, unless HUBCO agrees to increase the exchange ratio to
provide the value which would have been received based on a $29.00 HUBCO price.
CFHC is a commercial bank holding company headquartered in Westmont, New Jersey.
At March 31, 1998, CFHC had $159.4 million in assets. The CFHC Merger is
expected to close in the third quarter of 1998 and to be treated as a pooling of
interests for accounting purposes. HUBCO expects to issue approximately 834,000
shares of HUBCO Common Stock in the CFHC Merger.
<PAGE>
Purchase of two branches from First Union National Bank
HUBCO anticipates that it will complete the purchase of two additional
branches from First Union National Bank located in New York with deposits of $25
million, in the aggregate on July 24, 1998 (the "Pending Branch Purchase").
<TABLE>
<CAPTION>
Recently Completed Acquisitions
Asset Size
Institution (in millions) Type of Consideration Closing Date
(1)
- --------------------------------------- ----------------- ----------------------------------- -------------------
<S> <C> <C> <C>
MSB Bancorp, Inc., Goshen, New York $ 754 Approximately 2,848,367 shares May 29, 1998
and its subsidiaries including of HUBCO Common Stock
MSB Bank
Poughkeepsie Financial Corp. $ 875 Approximately 3,481,903 shares April 24, 1998
Poughkeepsie, New York, and its of HUBCO Common Stock
subsidiaries including Bank of
the Hudson
21 Branches located in New Jersey and $ 242.9 Assumption of Liabilities less June 24, 1998
Connecticut from First Union premium
National Bank
</TABLE>
(1) Approximate total assets at March 31, 1998.
<TABLE>
<CAPTION>
Pending Acquisitions
Asset Size Projected
Institution (in millions) (1) Type of Consideration Closing Date
- ---------------------------------------------------------- ----------------------------------- --------------------
<S> <C> <C> <C>
Dime Financial Corporation, $ 1,106 Approximately 5,510,000 shares Third Quarter
Wallingford, Connecticut and its of HUBCO Common Stock(2) 1998
subsidiaries, including The Dime
Savings Bank of Wallingford
Community Financial Holding Company, $ 163 Approximately 834,000 shares of Third Quarter
Westmont, New Jersey and its HUBCO Common Stock(3) 1998
subsidiaries, including Community
National Bank of New Jersey
2 Branches located in New York from $ 25 Assumption of Liabilities less July, 1998
First Union National Bank premium
</TABLE>
(1) Approximate total assets at March 31, 1998.
(2) Consideration calculated using the 1.05 maximum exchange ratio.
(3) Consideration calculated using the 0.695 exchange ratio.
If all Pending Acquisitions and the Merger are consummated and taking
into account the Recently Completed Acquisitions, HUBCO anticipates it will have
at least $6.5 billion in assets and $475 million in stockholders' equity.
In connection with its acquisitions which are accounted for as pooling
of interests transactions, HUBCO normally incurs significant one-time merger
related and restructuring charges and realizes significant operating cost
savings. Upon the announcement of significant acquisitions, HUBCO initially
estimates one-time merger related and restructuring costs, which are then
reported on the Current Report on Form 8-K reporting the announcement of the
acquisition. Thereafter, HUBCO does not update or repeat its initial estimate of
such one-time charges. Rather, HUBCO reports the actual one-time merger related
and restructuring charges for the transaction in the earnings release for the
quarter in which the transaction closes. While such one-time charges adversely
effect earnings in the quarter in which a transaction closes, HUBCO also reports
its earnings excluding such one-time charges to allow investors to focus on core
earnings results. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
At the time of the announcement of a significant transaction, HUBCO
sometimes also provides estimated cost savings but not revenue enhancement
estimates for the acquired institution. HUBCO does not update or repeat its
initial estimate of such cost savings. Historically, HUBCO has realized
significant cost savings in the acquisitions it has consummated, and thereby
significantly increased core earnings for the acquired institutions. HUBCO
relies on its quarterly earnings releases following consummation to reflect the
operating efficiencies achieved in its acquisitions.
In quarters in which one or more pooling transactions close, earnings
for that quarter will be adversely effected, sometimes significantly. However,
core earnings, to a limited extent in the closing quarter, and more fully in
subsequent quarters, will reflect cost savings and revenue enhancements. As a
result of consummating the Recently Completed Acquisitions, HUBCO will incur
material one-time merger related and restructuring charges, which will adversely
affect reported earnings in the second quarter of 1998. HUBCO also expects that
due to the anticipated closings of the pending acquisitions of DFC, CFHC and the
Merger it will incur material one-time merger related and restructuring charges
in the third quarter of 1998 which will adversely affect reported earnings in
the third quarter of 1998.
HUBCO attempts to price and structure its acquisitions to provide
earnings per share accretion, excluding one time charges, calculated before the
restatement of prior period results required under pooling-of-interests
accounting treatment.
On June 19, 1998, HUBCO issued $50,000,000 aggregate principal amount
of 7.65% Capital Securities using HUBCO Capital Trust II, a statutory business
trust formed under the laws of the State of Delaware (the "Recently Completed
Trust Preferred Issuance"). The Capital Securities pay interest semi-annually on
June 15, and December 15. Interest on the Capital Securities may, at the option
of HUBCO, be deferred for up to five years. The Capital Securities mature on
February 1, 2027 and are callable on or after June 15, 2007, subject to the
prior approval of the Board of Governors of the Federal Reserve System ("FRB")
to the extent necessary at that time. The Capital Securities will be eligible to
qualify as Tier I capital under the capital guidelines of the FRB. A small
portion of the Capital Securities will not qualify as Tier I capital until and
unless some of the Pending Acquisitions and/or the Merger are consummated. The
net proceeds of the offering are expected to be used for general corporate
purposes, including acquisition opportunities which may arise from time to time.
<PAGE>
CERTAIN INFORMATION REGARDING IBSF
IBSF is a New Jersey corporation and the sole shareholder of the
Association, which converted to the stock form of organization in October 1994.
The only significant assets of IBSF are its investments in the capital stock of
the Association, its loan to IBSF's employee stock ownership plan, and certain
U.S. Government Agency securities and interest-bearing deposits. References
herein to IBSF include the Association unless otherwise noted.
The Association is a New Jersey chartered stock savings and loan
association which conducts business from nine offices located in Camden,
Burlington and Gloucester Counties, New Jersey. The Association's operations
date back to 1890. The Association's deposits are insured by the SAIF of the
FDIC to the maximum extent permitted by law.
IBSF has traditionally offered a variety of savings products to its
retail customers. IBSF invests its funds in U.S. Government, U.S. Government
agency and mortgage-backed securities and other short-term investments and has
concentrated its lending activities on real estate loans secured by single
(i.e., "one-to-four") family residential properties. In fiscal 1996, IBSF also
expanded its investment in commercial real estate loans. The commercial real
estate loans originated are collateralized by small professional and medical
office buildings, commercial retail establishments and religious organizations
in IBSF's market area. In addition and to a lesser degree, construction loans
are originated to construct primarily single-family residences. In the past,
IBSF has also purchased whole residential mortgage loans and participation
interests in commercial real estate projects located principally in New Jersey.
During fiscal 1996, IBSF began emphasizing the origination of more
commercial real estate loans in the local marketplace. In addition, the Company
continued to reduce its liquid assets by reinvesting the proceeds of maturing
investments into mortgage-backed securities generally with maturities of five
and seven years. This was designed to increase IBSF's yield on its loan
portfolio. During fiscal 1996, however, IBSF experienced heavy repayments of
higher yielding residential loans and mortgage-backed securities that were
reinvested in lower yielding loans and mortgage-backed securities. As a result,
IBSF's net interest margin was pressured, decreasing to 3.44% for the year ended
September 30, 1996 from 3.77% during fiscal 1995.
During fiscal 1997, IBSF continued to emphasize the origination of
single-family residential loans and commercial real estate loans. IBSF also
continued to experience relatively heavy repayments of higher yielding
residential loans and mortgage-backed securities that were reinvested in lower
yielding loans and mortgage-backed securities. In addition, IBSF's net
interest-earning assets declined by approximately $20 million, principally
reflecting the shares of IBSF Common Stock repurchased during the fiscal year.
This resulted in a decrease of 30 basis points in IBSF's net interest margin to
3.14% for the year ended September 30, 1997. The net interest margin for the six
months ended March 31, 1998 was 3.09%.
Financial highlights of IBSF include:
o Profitability. Net income totaled $5.8 million, $4.5 million and
$9.9 million for the fiscal years ended September 30, 1997, 1996,
and 1995, respectively. Net income during fiscal 1996 was
impacted by a one-time special assessment of $3.7 million ($2.4
million after tax) to recapitalize the SAIF. Net income was $3.1
million and $2.9 million for the six months ended March 31, 1998
and 1997, respectively.
o Asset Quality. Management of IBSF believes that superior asset
quality is the key to long-term financial strength. At March 31,
1998, single-family residential loans comprised 87.2% of the
Association's total loan portfolio. As of that date, total
non-performing loans and troubled debt restructurings constituted
.30% of total loans, and total nonperforming assets and troubled
debt restructurings were .09% of total assets.
o Capital. IBSF currently exceeds all minimum regulatory capital
requirements of the Office of Thrift Supervision ("OTS"). At
March 31, 1998, it had tangible, core and risk-based capital
ratios of 17.2%, 17.2% and 59.9%, respectively.
o Retail Deposit Base. IBSF has nine offices located in Camden,
Burlington and Gloucester Counties, New Jersey. It provides a
full range of deposit products and other services to its
customers through this branch network. At March 31, 1998, 24.8%
of the Association's deposit base of $575.2 million consisted of
core deposits, which include passbook, money market and NOW
accounts.
IBSF as a savings and loan holding company is subject to examination
and regulation by the OTS and NJDOB. The Association is also subject to
examination and comprehensive regulation by the NJDOB and by the OTS. The
Association is also regulated by the FDIC, the administrator of the SAIF. The
Association is subject to certain reserve requirements established by the Board
of Governors of the Federal Reserve System ("FRB") and is a member of the
Federal Home Loan Bank ("FHLB") of New York, which is one of the 12 regional
banks comprising the FHLB System.
THE MEETING
Purpose of the Meeting
The Meeting will be held on Monday, August 10, 1998 at 11:00 am, at the
Hilton At Cherry Hill, 2349 West Marlton Pike, Cherry Hill, New Jersey 08002. At
the Meeting, the holders of IBSF Common Stock will consider and vote on the
approval and adoption of the Merger Agreement, in the discretion of the Board of
Directors of IBSF, approval of the Adjournment Proposal and any other matters as
may properly be brought before the Meeting and at any adjournments or
postponements thereof. This Proxy Statement is first being mailed to the holders
of IBSF Common Stock on or about July 10, 1998 and is accompanied by a proxy
card furnished in connection with the solicitation of proxies by the IBSF Board
of Directors for use at the Meeting.
The Board of Directors of IBSF has unanimously approved the Merger
Agreement and recommends a vote "FOR" approval and adoption of the Merger
Agreement and "FOR" the approval of the Adjournment Proposal.
Record Date; Voting Rights; Proxies
The Board of Directors of IBSF has fixed the close of business on June
12, 1998 as the record date for determining the holders of IBSF Common Stock
entitled to receive notice of and to vote at the Meeting (the "Record Date").
Only holders of record of IBSF 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 10,962,116
shares of IBSF Common Stock issued and outstanding and entitled to vote at the
Meeting. Each share of IBSF 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 and adoption of the Merger Agreement and "FOR" the approval
of the Adjournment Proposal. The Board of Directors of IBSF 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.
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of IBSF, by delivering to
IBSF a duly executed proxy bearing a later date, or by attending the Meeting and
voting in person. However, shareholders whose shares are not registered in their
own names will need appropriate documentation from the holder of record of their
shares to vote personally at the Meeting. In order to revoke a proxy, a
shareholder must either file a written notice of revocation or duly executed
proxy with: the IBSF Corporate Secretary, Chiara Eisennagel, IBS Financial
Corp., 1909 E. Route 70, Cherry Hill, New Jersey 08003, telephone (609)
424-1000, or attend the meeting and vote in person as described above.
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.
IBSF 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 WILL BE SENT TO IBSF 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 IBSF may solicit proxies for the Meeting from shareholders personally, by
telephone or by facsimile. These officers, directors and employees will not be
specifically compensated for their services. IBSF 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 IBSF.
Quorum
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of IBSF Common Stock entitled to vote is
necessary to constitute a quorum at the Meeting. Abstentions are considered in
determining the presence of a quorum.
Required Vote
Each share of IBSF 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 of a majority of the votes cast by the holders of
outstanding shares of IBSF Common Stock entitled to vote at the Meeting is
required in order to approve and adopt the Merger Agreement. The affirmative
vote of the holders of a majority of votes cast affirmatively or negatively is
required in order to approve and adopt the Adjournment Proposal. Abstentions
will not be counted in determining the vote on the Merger Agreement and on the
Adjournment Proposal. In addition, both proposals are considered
"non-discretionary" for which brokers may not vote unless they receive
instructions from the beneficial owner. Because all of the proposals at the
Meeting are non-discretionary, there will be no "broker non-votes" at the
Meeting.
Record holders of IBSF Common Stock at the close of business on June
12, 1998 (the "Record Date") are entitled to vote at the Meeting. As of the
Record Date, there were 10,962,116 outstanding shares of IBSF Common Stock held
by approximately 1,930 holders of record. The directors of IBSF and the
Association as a group have voting control over 739,373 of these shares (6.7%)
(excluding unallocated shares held by IBSF's Employee Stock Ownership Plan) and
have agreed to vote them in favor of the Merger Agreement. In addition, HUBCO
has voting control over 150,000 of these shares (1.37%) and the non-director
executive officers of IBSF and the Association as a group have voting control
over 301.431 of these shares (2.7%), all of which shares IBSF expects will be
voted in favor of the Merger Agreement. HUBCO requested that the directors enter
into this agreement in connection with HUBCO entering into the Merger Agreement.
The obligations of IBSF 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 IBSF. See "THE PROPOSED MERGER -- Conditions to the Merger."
THE MATTERS TO BE CONSIDERED AT THE MEETING ARE OF GREAT IMPORTANCE TO
THE SHAREHOLDERS OF IBSF. ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT, 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 Bank Merger
The Merger Agreement provides that, at the Effective Time, IBSF will be
merged into HUBCO, with HUBCO as the surviving entity (the "Surviving Entity").
The separate identity and existence of IBSF will cease upon consummation of the
Merger, and all property, rights, powers and franchises of IBSF will vest in the
Surviving Entity. Immediately following the Effective Time, the Association will
be merged with and into HUB (the "Bank Merger"), with HUB as the surviving bank
(the "Surviving Bank").
Closing Date; 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 IBSF. The Closing Date specified by HUBCO must be at
least five business days after the date of the Closing Notice, but no less than
seven and no more than ten business days after the satisfaction or waiver of the
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 IBSF. HUBCO and IBSF currently anticipate
closing in the third quarter of 1998. Simultaneous with or immediately following
the Closing, HUBCO and IBSF will file a Certificate of Merger with the Secretary
of State of the State of New Jersey. The Merger will become effective at a date
and time following the Closing which HUBCO and IBSF will specify in the
Certificate of Merger (the "Effective Time"). If no Effective Time is specified
in the Certificate of Merger, the Effective Time will be the time at which the
Certificate of Merger is filed. HUBCO and IBSF currently anticipate that the
Effective Time will be the close of business on the Closing Date. The exact
Closing Date and Effective Time are dependent upon satisfaction of all
conditions precedent, some of which are not under the control of HUBCO or IBSF.
Consideration
At the Effective Time, each outstanding share of IBSF Common Stock
(except for Excluded Shares) will be converted into the right to receive 0.534
shares (the "Exchange Ratio") of HUBCO Common Stock. "Excluded Shares" are those
shares of IBSF Common Stock which are (i) held by IBSF as treasury shares, or
(ii) 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).
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 March 31, 1998. The Exchange Ratio
may also be subject to adjustment in connection with provisions relating to the
termination of the Merger Agreement described below under the caption "--
Termination Events".
Cash in Lieu of Fractional Shares; Median Pre-Closing Price; Determination Date
No fractional shares of HUBCO Common Stock will be issued in exchange
for any IBSF Common Stock or IBSF Options. Instead, holders of such IBSF Common
Stock 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 IBSF Common Stock will be
aggregated to constitute as many whole shares as possible before determining
such person's fractional share interest. The "Median Pre-Closing Price" will be
determined by taking the price half-way between the closing prices left after
discarding the four lowest and four highest closing prices in the ten
consecutive trading day period which ends on (and includes) the Determination
Date. The "Determination Date" is defined in the Merger Agreement as the later
of (i) the day the parties receive final bank regulatory approval for the Merger
and one notifies the other that such approval has been received or (ii) the date
of the Meeting to which this Proxy Statement relates.
Conversion of IBSF Options
IBSF has outstanding a number of options to purchase shares of IBSF
Common Stock ("IBSF Options") which were granted to optionees ("Optionees")
pursuant to the IBSF 1995 Stock Option Plan (the "IBSF Stock Option Plan") and
the option grant agreements thereunder (the "Option Grant Agreements").
Pursuant to the Merger Agreement, HUBCO has agreed to honor the provisions of
the IBSF Stock Option Plan and the Option Grant Agreements, including those
relating to vesting and conversion in connection with a change in control of
IBSF. Pursuant to the Merger Agreement, each Stock Option outstanding at the
Effective Time (each a "Continuing Stock Option") will be converted into an
option to purchase HUBCO Common Stock, wherein (i) the right to purchase shares
of IBSF Common Stock pursuant to the Continuing Stock Option will be converted
into the right to purchase that same number of shares of HUBCO Common Stock
multiplied by the Exchange Ratio, (ii) the option exercise price per share of
HUBCO Common Stock will be the previous option exercise price per share of the
IBSF Common Stock divided by the Exchange Ratio, and (iii) in all other material
respects the option will be subject to the same terms and conditions as governed
the Continuing Stock Option on which it was based, including the length of time
within which the option may be exercised (which will not be extended except that
the holder of a Stock Option who continues in the service of HUBCO or a
subsidiary of HUBCO will not be deemed to have terminated service for purposes
of determining the Continuing Stock Option exercise period). Shares of HUBCO
Common Stock issuable upon exercise of Continuing Stock Options will be covered
by an effective registration statement on Form S-8, and HUBCO has agreed to use
its reasonable best efforts to file a registration statement on Form S-8
covering such shares as soon as possible after the Effective Time.
Stock Option to HUBCO for IBSF Shares
HUBCO and IBSF entered into a Stock Option Agreement dated as of March
31, 1998 (the "Stock Option Agreement") in connection with the negotiation by
HUBCO and IBSF of the Merger Agreement. Pursuant to the Stock Option Agreement,
IBSF has granted to HUBCO an option (the "Option"), exercisable only under
certain limited and specifically defined circumstances (none of which has
occurred as of the date hereof), to purchase up to 2,700,000 authorized but
unissued shares of IBSF Common Stock, representing approximately 19.8% of the
shares of IBSF Common Stock that would be outstanding if the Option was fully
exercised, for an exercise price of $18.00 per share. HUBCO does not have any
voting rights with respect to the shares of IBSF Common Stock subject to the
Option prior to exercise of the Option. Acquisitions of IBSF Common Stock
pursuant to exercise of the option would be subject to prior regulatory approval
under certain circumstances.
The Stock Option Agreement is attached to this Proxy Statement as
Appendix B hereto. If certain specifically enumerated "Triggering Events" occur
and the Merger is not consummated, HUBCO would recognize a gain on the sale of
the shares of IBSF Common Stock received pursuant to the exercise of the Option
if such shares of IBSF Common Stock were sold at prices exceeding $18.00 per
share. The ability of HUBCO to exercise the Option and to cause up to an
additional 2,700,000 shares of IBSF Common Stock to be issued may be considered
a deterrent to other potential acquisitions of control of IBSF, even if such
potential acquiror were prepared to pay a higher price per share for IBSF Common
Stock, as it is likely to increase the cost of an acquisition of all of the
shares of IBSF 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.
The Option is exercisable only upon the occurrence of a Triggering
Event. As used in the Stock Option 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 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 Exchange
Act Rule 13d-3) of at least 15% of the then outstanding shares of IBSF Common
Stock; or
b. enters into a letter of intent or an agreement, whether oral or
written, with IBSF pursuant to which such person or any affiliate of such person
would (i) merge or consolidate, or enter into any similar transaction, with
IBSF, (ii) acquire all or a significant portion of the assets or liabilities of
IBSF, or (iii) acquire beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities representing, 15% or
more of the then outstanding shares of IBSF Common Stock; or
c. makes a filing with any bank or thrift regulatory authorities with
respect to 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, IBSF or any other business combination
involving IBSF, 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, 15% or more of the outstanding
shares of IBSF Common Stock, and thereafter, if such Proposal has not been
Publicly Withdrawn (as such term is defined in the Stock Option Agreement) at
least 15 days prior to the meeting of shareholders of IBSF called to vote on the
Merger and IBSF's shareholders fail to approve the Merger by the vote required
by applicable law at the meeting of shareholders called for such purpose; or
d. makes a bona fide Proposal and thereafter, but before such Proposal
has been Publicly Withdrawn, IBSF 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 IBSF or any of its directors, senior executive
officers, investment bankers or other person with actual or apparent authority
to speak for the IBSF Board of Directors, inviting, encouraging or soliciting
any proposal (other than from HUBCO or an affiliate of HUBCO) which has as its
purpose a tender offer for the shares of IBSF Common Stock, a merger,
consolidation, plan of exchange, plan of acquisition or reorganization of IBSF,
or a sale of a significant number of shares of IBSF Common Stock or any
significant portion of its assets or liabilities.
The Stock Option Agreement will 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, the Stock Option Agreement will not terminate until the later of 18
months following the date of the termination of the Merger Agreement or the
consummation of any proposed transactions which constitute the Triggering Event.
Background of the Merger
During the fall of 1997, the Board of Directors of IBSF interviewed
several investment banking firms to assist the Board in connection with its
evaluation of various strategic options to maximize shareholder value, including
a possible sale of IBSF. In October 1997, IBSF engaged Ryan, Beck as its
financial advisor to conduct a due diligence review of IBSF, identity potential
acquirors, assist in the preparation of a confidential offering memorandum, and
assist in any discussions and negotiations with potential acquirors.
Ryan, Beck contacted 29 financial institutions or their holding
companies to determine their initial interest in IBSF. Beginning in early
December 1997, a confidential offering memorandum containing September 30, 1997
data was sent to 23 of these companies after they executed a confidentiality
agreement. The companies were initially instructed to provide their preliminary
indications of interest to Ryan, Beck by January 5, 1998, which was subsequently
extended to January 15, 1998 to provide the companies sufficient time to review
the information package regarding IBSF.
Four companies provided preliminary indications of interest, which were
presented to the Board of Directors of IBSF on February 6, 1998. Three of the
proposals contemplated a stock for stock exchange and one was for cash only. The
Board questioned Ryan, Beck about the financial aspects of the proposals,
specifically inquiring into the key financial components of comparable
transactions. The indications of interest by two of the companies were not
deemed to be competitive on price. The Board of Directors was also not satisfied
with the two highest indications of interest, but it agreed to allow these two
companies to conduct a more detailed due diligence review of IBSF since their
preliminary indications were within a range of what Ryan, Beck considered to be
fair.
The remaining two prospective acquirors conducted a due diligence
review of IBSF in February 1998 and then submitted revised proposals, which were
reviewed by the Board of Directors of IBSF on March 20, 1998 with the assistance
of Ryan, Beck. The Board of Directors was not satisfied with either proposal.
Since HUBCO's proposal was the higher of the two, the Board authorized a
committee of the Board to meet with Ryan, Beck and HUBCO to further negotiate on
price.
A meeting with the Chief Executive Officer of HUBCO was held on March
23, 1998. After further discussions the proposed exchange ratio was increased.
The Board of Directors of IBSF met again on March 25, 1998 and authorized
management and IBSF's representatives to negotiate the terms of a definitive
agreement.
The management of IBSF reviewed and revised several drafts of the
definitive agreement with the assistance of IBSF's legal counsel and investment
banker, and a draft of the definitive agreement was delivered to each of IBSF's
directors for their review on March 30, 1998.
On March 31, 1998, the Board of Directors of IBSF reviewed the proposed
definitive Merger Agreement with IBSF's legal counsel and Ryan, Beck. The Board
of Directors considered all factors deemed relevant, including information
regarding HUBCO's other then pending acquisitions and Ryan, Beck's opinion that
the Exchange Ratio is fair to IBSF's shareholders from a financial point of
view. The Board of Directors determined that the proposed Merger is in the best
interests of IBSF and its shareholders, and the Board unanimously approved the
Merger. HUBCO and IBSF publicly announced the Merger on March 31, 1998.
IBSF Board's Reasons for the Merger and Recommendation
The terms of the Merger Agreement, including the Exchange Ratio and the
value of the HUBCO Common Stock to be received by IBSF's shareholders, were the
result of arm's-length negotiations between the representatives of IBSF and
HUBCO. Among the factors considered by the Board of Directors of IBSF in
deciding to approve and recommend the terms of the Merger were (i) the value of
the HUBCO Common Stock to be received by IBSF's shareholders based on the
Exchange Ratio in relation to the market value, book value, earnings per share
and dividend rates of the IBSF Common Stock, (ii) information concerning the
financial condition, results of operations, capital levels, asset quality and
prospects of IBSF, (iii) industry and economic conditions, (iv) the impact of
the Merger on the depositors, employees, customers and communities served by
IBSF through expanded commercial, consumer and retail banking products and
services, (v) the opinion of IBSF's financial advisor as to the fairness of the
Exchange Ratio from a financial point of view to the holders of the IBSF Common
Stock, (vi) the general structure of the transaction and the compatibility of
management and business philosophy, (vii) the likelihood of receiving the
requisite regulatory approvals in a timely manner, and (viii) the ability of the
combined enterprise to compete in relevant banking and non-banking markets. In
making its determination, the Board of Directors of IBSF did not ascribe
relative weights to the factors which it considered.
The Board of Directors of IBSF believes that the Merger is in the best
interest of IBSF and its shareholders. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
HUBCO's Reasons for the Merger
HUBCO entered into the Merger Agreement with IBSF 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.
Pursuant to this acquisition strategy, HUBCO has pursued acquisitions
of financial institutions in New Jersey and in other states which are
geographically close to HUBCO's current markets and which otherwise meet HUBCO's
acquisition goals. HUBCO's expressions of interest in and merger with IBSF are
consistent with this strategy. HUBCO anticipates that combining the New Jersey
operations of the Association and HUB will enhance HUBCO's ability to promote
operational efficiencies and services to the combined institutions' New Jersey
customers.
Opinion of IBSF's Financial Advisor
On October 7, 1997, IBSF formally retained Ryan, Beck to act as IBSF's
financial advisor with respect to the acquisition of IBSF. Ryan, Beck is
regularly engaged in the valuation of banks, bank holding companies, savings and
loan associations, savings banks and savings and loan holding companies in
connection with mergers, acquisitions and other securities-related transactions.
Ryan, Beck has knowledge of, and experience with, the Mid-Atlantic banking
market and banking organizations operating within this market, and was selected
by IBSF because of its knowledge of, experience with, and reputation in the
financial services industry.
In its capacity as IBSF's financial advisor, Ryan, Beck participated in
the negotiations with respect to the pricing and other terms and conditions of
the Merger, but the decision as to whether to accept the HUBCO proposal and the
final pricing of the Merger was ultimately made by the Board of Directors of
IBSF. Ryan, Beck rendered its oral opinion to the IBSF Board of Directors on
March 31, 1998, subsequently confirmed by a formal written opinion dated as of
the same date, and rendered an additional formal written updated opinion dated
July 10, 1998 (the "Opinion") that based on and subject to the assumptions,
factors, and limitations set forth in the Opinion and as described below, the
Exchange Ratio is fair to IBSF's shareholders from a financial point of view. No
limitations were imposed by the IBSF Board of Directors upon Ryan, Beck with
respect to the investigations made or procedures followed by it in arriving at
its opinion.
The full text of the Opinion of Ryan, Beck dated as of July 10, 1998,
which sets forth assumptions made and matters considered, is attached as
Appendix C to this Proxy Statement-Prospectus. Shareholders of IBSF are urged to
read this Opinion in its entirety. Ryan, Beck's Opinion is directed only to the
Exchange Ratio and does not constitute a recommendation to any IBSF shareholder
as to how such shareholder should vote at the Special Meeting. The summary of
the Opinion of Ryan, Beck set forth in this Proxy Statement-Prospectus is
qualified in its entirety by reference to the full text of such Opinion. Ryan,
Beck's oral and written opinions as of March 31, 1998 were to the same effect as
the Opinion. In rendering the Opinion Ryan, Beck does not admit that it is an
expert within the meaning of the term "expert" as used within the Securities Act
and the rules and regulations promulgated thereunder, or that its opinions
constitute a report or valuation within the meaning of Section 11 of the
Securities Act and the rules and regulations promulgated thereunder.
In connection with its analysis, Ryan, Beck: (i) reviewed the Merger
Agreement and related documents; (ii) reviewed this Proxy Statement-Prospectus;
(iii) reviewed HUBCO's Annual Reports to Shareholders and Annual Reports on Form
10-K for the years ended December 31, 1997, 1996, 1995, and 1994 and HUBCO's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1998, September
30, 1997, June 30, 1997 and March 31, 1997; (iv) reviewed HUBCO's Registration
Statements on Form S-4, dated June 10, 1998, May 8, 1998, March 17, 1998,
February 20, 1998, and November 12, 1997 with respect to HUBCO's then pending
acquisitions of DFC, CFHC, MSB, PFC, and TBOS, respectively; (v) reviewed
HUBCO's press releases dated March 2, 1998 and August 28, 1997 with respect to
HUBCO's then pending acquisitions of the Completed Branch Purchase, the Pending
Branch Purchase and Security National Bank and Trust Company of New Jersey
("SNB"), respectively; (vi) reviewed internal analyses prepared by HUBCO's
management containing pro forma financial statements and projections for the
acquisitions of MSB, PFC, TBOS, CFHC, the Branch Purchase, SNB and DFC (the
"Acquisitions"); (vii) reviewed HUBCO's Current Reports on Form 8-K dated July
6, 1998 and July 10, 1998; (viii) reviewed HUBCO's Private Placement Memorandum
dated June 16, 1998 with respect to the 7.65% Capital Securities issued by HUBCO
Capital Trust II; (ix) reviewed IBSF's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the years ended September 30, 1997, 1996, and 1995, and
IBSF's Quarterly Reports on Form 10-Q for the periods ended March 31, 1998,
December 31, 1997, June 30, 1997, March 31, 1997 and December 31, 1996; (x)
reviewed the historical stock prices and trading volume of HUBCO Common Stock;
(xi) reviewed publicly available financial data of commercial banking
organizations which Ryan, Beck deemed generally comparable to HUBCO; (xii)
reviewed publicly available financial data of thrift organizations which Ryan,
Beck deemed generally comparable to IBSF; (xiii) reviewed the historical stock
prices and trading volume of IBSF Common Stock; (xiv) reviewed terms of recent
acquisitions of thrift organizations which Ryan, Beck deemed generally
comparable in whole or in part to IBSF; (xv) reviewed the potential pro forma
impact of the Merger on HUBCO's financial condition, operating results and per
share figures; and (xvi) conducted such other studies, analyses, inquiries and
examinations as Ryan, Beck deemed appropriate. Ryan, Beck also reviewed certain
projections provided by IBSF and HUBCO for the year ending December 31, 1998 and
met with certain members of IBSF's and HUBCO's senior management to discuss
IBSF's and HUBCO's past and current business operations, financial condition,
strategic plan and future prospects, including any potential operating
efficiencies and synergies which may arise from the Merger and the Acquisitions.
As part of its review of the Merger, Ryan, Beck also analyzed HUBCO's ability to
consummate the Merger and considered the future prospects of IBSF in the event
it remained independent.
In connection with its review, Ryan, Beck relied upon and assumed,
without independent verification, the accuracy and completeness of the financial
and other information regarding IBSF, HUBCO, and the Acquisitions provided to
Ryan, Beck by IBSF and HUBCO and their representatives. Ryan, Beck is not an
expert in the evaluation of allowances for loan losses. Therefore, Ryan, Beck
has not assumed any responsibility for making an independent evaluation of the
adequacy of the allowances for loan losses set forth in the balance sheets of
IBSF, HUBCO and the Acquisitions at March 31, 1998, and Ryan, Beck assumed such
allowances were adequate and complied fully with applicable law, regulatory
policy and sound banking practice as of the date of such financial statements.
Ryan, Beck has reviewed certain historical financial data and financial
projections, including the impact of the Acquisitions (and the assumptions and
bases therefor), provided by IBSF and HUBCO. Ryan, Beck assumed that such
forecasts and projections reflected the best currently available estimates and
judgments of the respective managements. In certain instances, for the purposes
of its analyses, Ryan, Beck made adjustments to such financial and operating
forecasts which in Ryan, Beck's judgment were appropriate under the
circumstances. Ryan, Beck was not retained to nor did it make any independent
evaluation or appraisal of the assets or liabilities of IBSF, HUBCO or the other
institutions subject to the Acquisitions, nor did Ryan, Beck review any loan
files of IBSF, HUBCO, or the other institutions subject to the Acquisitions, or
their respective subsidiaries. Ryan, Beck also assumed that the Merger in all
respects is, and will be, undertaken and consummated in compliance with all laws
and regulations that are applicable to IBSF and HUBCO.
The preparation of a fairness opinion on a transaction such as the
Merger involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, the Opinion is not readily susceptible
to summary description. In arriving at its opinion, Ryan, Beck performed a
variety of financial analyses. Ryan, Beck believes that its analyses must be
considered as a whole and the consideration of portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the process underlying Ryan,
Beck's Opinion. No one of the analyses was assigned a greater significance than
any other.
The projections furnished to Ryan, Beck were prepared by the respective
managements of IBSF and HUBCO. IBSF and HUBCO do not publicly disclose internal
management projections of the type provided to Ryan, Beck in connection with the
review of the Merger. Such projections were not prepared with a view towards
public disclosure. The public disclosure of such projections could be misleading
since the projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
In its analyses, Ryan, Beck made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters, many
of which are beyond the control of IBSF or HUBCO. Any estimates contained in
Ryan, Beck'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 nor do they
necessarily reflect the prices at which companies or their securities may
actually be sold.
The following is a brief summary of the analyses and procedures performed by
Ryan, Beck in the course of arriving at its Opinion.
Analysis of Selected Publicly Traded Companies: Ryan, Beck compared
IBSF's financial data as of December 31, 1997 to a peer group of 17 selected
thrifts located in the New England and Mid-Atlantic Regions with assets between
$500 million and $1 billion. Ryan, Beck deemed this group to be generally
comparable to IBSF. At or for the twelve months ended December 31, 1997, IBSF
had equity to assets of 17.74%, a return on average assets of 0.79%, a return on
average equity of 4.36%, a dividend yield of 2.00%, a net interest margin of
3.12%, loans equal to 29.98% of assets, a ratio of non-performing assets to
total assets of 0.11%, a ratio of loan loss reserves to non-performing loans of
130.18%, a ratio of non-interest expenses to average assets of 1.93%, and an
efficiency ratio of 61.58%. These ratios were compared to the median ratios of
the 17 selected thrift organizations, which were, as calculated, an equity to
assets ratio of 8.27%, a return on average assets of 0.94%, a return on average
equity of 10.51%, a dividend yield of 1.70%, a net interest margin of 3.32%,
loans equal to 50.69% of assets, a ratio of non-performing assets to total
assets of 0.33%, a ratio of loan loss reserves to non-performing loans of
131.79%, a ratio of non-interest expense to average assets of 2.15%, and an
efficiency ratio of 58.09%. Ryan, Beck noted that IBSF's performance as measured
by return on average equity was weaker than that of the peer group, largely due
to the fact that IBSF had a much higher level of equity as compared to the peer
group. Ryan, Beck noted that IBSF's performance as measured by return on average
assets was weaker than that of the peer group, largely due to the lower level of
loans at IBSF as compared to the peer group. Ryan, Beck also noted that IBSF's
non-interest expenses as a percent of average assets was lower than that of the
peer group. However, IBSF's efficiency ratio was slightly higher than the peer
group because IBSF's revenue is lower than that of its peers.
Ryan, Beck also compared HUBCO's reported financial data as of December
31, 1997 with that of a group of 20 selected commercial banking organizations
with assets between $2 billion and $15 billion and which are located in the New
England and Mid-Atlantic regions of the United States for which public trading
and pricing information was available. Ryan, Beck deemed this group to be
generally comparable to HUBCO. HUBCO data was presented as reported at December
31, 1997 with certain data pro forma for the Acquisitions and IBSF. Ryan, Beck
noted that HUBCO reported total assets of $3 billion at December 31, 1997 and
assets pro forma for the Acquisitions and IBSF at December 31, 1997 would have
been $7 billion. At or for the twelve months ended December 31, 1997, HUBCO had
a ratio of equity to assets of 6.11% (7.34% pro forma for the Acquisitions and
IBSF), a return on average assets ratio of 1.66% (1.30% pro forma for the
Acquisitions and IBSF, including expense savings estimated by HUBCO's
management), a return on average equity ratio of 24.36% (17.57% pro forma for
the Acquisitions and IBSF, including expense savings estimated by HUBCO's
management), a dividend yield of 2.05%, a net interest margin of 5.20%, a ratio
of non-performing assets to total assets of 1.23% (1.13% pro forma for the
Acquisitions and IBSF), and a ratio of loan loss reserves to non-performing
loans (excluding loans 90 days past due and still accruing interest) of 108.91%
(97.29% pro forma for the Acquisitions and IBSF). These ratios were compared to
the median ratios of the 20 selected commercial banking organizations, which
were, as calculated, an equity to assets ratio of 8.46%, a return on average
assets ratio of 1.25%, a return on average equity ratio of 14.95%, a dividend
yield of 1.92%, a net interest margin of 4.55%, a ratio of non-performing assets
to total assets of 0.42% and a ratio of loan loss reserves to non-performing
loans (excluding loans 90 days past due and still accruing interest) of 243.06%.
Using HUBCO's common stock price as represented by the last trade on March 27,
1998, its price to 1998 estimated earnings per share was 16.71 times (16.57
times pro forma for the Acquisitions), price to book value was 458.63% (303.26%
pro forma for the Acquisitions), and price to tangible book value was 527.62%
(370.84% pro forma for the Acquisitions). The peer group's median price to 1998
earnings was 19.01 times, price to book value was 287.86% and price to tangible
book value was 295.50%.
Analysis of Selected Transactions: Ryan, Beck compared IBSF's financial
data as of December 31, 1997 with that of a group of 36 selected thrift
organizations being acquired in transactions announced since January 1, 1997 and
for which pricing data pertaining to the transactions was publicly available.
The criteria for this group was thrifts located in the New England,
Mid-Atlantic, Midwest, Southwest, and Southeast regions of the country with
assets greater than $200 million and an equity to assets ratio greater than 8%.
Ryan, Beck deemed this group to be generally comparable to IBSF. The median
ratios of the 36 selected companies, as calculated, represented a 9.08% tangible
equity to tangible assets ratio, a non-performing assets to assets ratio of
0.32%, an annualized year-to-date return on average assets of 0.99% and an
annualized year-to-date return on average equity of 9.91%.
Ryan, Beck also calculated certain ratios based on the Exchange Ratio
of 0.534 shares of HUBCO Common Stock for each share of IBSF Common Stock,
HUBCO's closing stock price on March 30, 1998, and the median ratios for the 36
selected thrift acquisitions ("Comparable Transactions"). The price represented
175.64% of stated book value at December 31, 1997, 175.64% of tangible book
value at December 31, 1997, 323.53% of core book value at December 31, 1997,
38.38 times latest twelve months diluted earnings, 22.78 times normalized
earnings, a deposit premium on core capital of 33.04% at December 31, 1997, and
a core deposit premium over tangible book value at December 31, 1997 of 17.62%.
Core capital was defined to equal 6% of assets (i.e. a capital level sufficient
to support IBSF's asset base under its current operating strategy); and core
book value equaled core capital divided by outstanding common shares. It was
also assumed for calculations involving core capital and core book value that
excess capital was returned dollar for dollar to IBSF shareholders. Normalized
earnings adds back certain expenses such as the MRP, ESOP, Excess Benefit Plan,
and additional expenses associated with IBSF's proxy contest to IBSF's estimated
1998 net income. The median ratios for the Comparable Transactions, as
calculated, represented a price to stated book value of 202.71%, a price to
tangible book value of 204.82%, a price to core book value of 293.62%, a price
to latest twelve months diluted earnings of 20.18 times, a deposit premium over
core capital of 24.78 times, and a core deposit premium over tangible book value
of 19.06%. The imputed value of IBSF based on the median ratios of the above
mentioned acquisition peer group was $23.92 based on price to stated book value,
$24.17 based on price to tangible book value, $19.53 based on core book value,
$10.90 based on latest twelve months diluted earnings, $18.36 based on the peer
group's multiple of latest twelve months earnings and IBSF's normalized
earnings, $16.54 based on a deposit premium over core capital, and $21.64 based
on the core deposit premium over tangible book value. Ryan, Beck considered the
core book value ratios to be much more relevant since IBSF's equity to assets
ratio at 17.74% was more than twice that of the peer group median at 8.27%.
No company or transaction used in the Analysis of Selected Publicly
Traded Companies and Analysis of Selected Transactions sections is identical to
IBSF, HUBCO or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved and other factors that could affect the trading values of
the securities of the company or companies to which they are being compared.
Impact Analysis: Ryan, Beck analyzed the Merger in terms of its effect
on HUBCO's (pro forma for the Acquisitions) projected 1998 and 1999 earnings per
share, stated book value and tangible book value based on IBSF's projected 1998
and 1999 earnings which were derived from information provided by the
managements of IBSF and HUBCO. Based upon certain assumptions, including those
with respect to cost savings and other synergies from the Merger and the
stand-alone earnings projections provided by HUBCO and IBSF, the analysis showed
that the Merger would be accretive to HUBCO's projected 1998 fiscal year
earnings per share by approximately 0.33%, dilutive to projected 1999 fiscal
year earnings per share by approximately 0.41%, accretive to book value per
share by approximately 13.65% and accretive to HUBCO's tangible book value by
approximately 23.02%. Ryan, Beck analyzed the impact of the Merger on HUBCO
values per IBSF share based on the Exchange Ratio of 0.534 shares of HUBCO
Common Stock for each share of IBSF Common Stock using pro forma projected 1998
fiscal year earnings per share, pro forma projected 1999 fiscal year earnings
per share, pro forma stated book value per share, pro forma tangible book value
per share and dividends per share at December 31, 1997. That analysis found
that, based on such Exchange Ratio, IBSF's equivalent projected 1998 earnings
per share would increase by approximately 120.64%, projected 1999 earnings per
share would increase by approximately 117.89%, stated book value would decrease
by approximately 41.89% and tangible book value would decrease by approximately
52.61%. Additionally, IBSF shareholders, based on HUBCO's current dividend
level, would receive annual dividends of $0.43 per share as compared to $0.40 at
the present time. The actual results achieved may vary from the projected
results and the variations may be material.
Discounted Dividend Analysis: Using a discounted dividend analysis,
Ryan, Beck estimated the present value of the future dividend streams that IBSF
could produce in perpetuity. Projection ranges for IBSF's five-year balance
sheet and income statement were provided by IBSF's management. Management's
projections were based upon various factors and assumptions, many of which are
beyond the control of IBSF. These projections are, by their nature,
forward-looking and may differ materially from the actual values or actual
future results which may be significantly more or less favorable than suggested
by such projections. In producing a range of per share IBSF values, Ryan, Beck
utilized the following assumptions: discount rates range from 10.0% to 14.0%,
terminal price/earnings multiples ranging from 13.0x to 15.0x (which when
applied to terminal year estimated earnings produces a value which approximates
the net present value of the dividends in perpetuity, given certain assumptions
regarding growth rates and discount rates) and earnings that include estimated
savings in IBSF's non-interest expense equal to 71% in 1998 and 1999, with an
assumed 5% growth in synergies in years thereafter. The discounted dividend
analysis produced a range of net present values per share of IBSF Common Stock
from $17.52 to $20.94. These analyses do not purport to be indicative of actual
values or expected values or an appraisal range of the shares of IBSF Common
Stock. Ryan, Beck noted that the discounted dividend analysis is a widely used
valuation methodology, but noted that it relies on numerous assumptions,
including expense savings levels, dividend payout rates, terminal values and
discount rates, the future values of which may be significantly more or less
than such alternatives.
In connection with its written Opinion dated as of July 10, 1998, Ryan,
Beck confirmed the appropriateness of its reliance on the analyses used to
render its March 31, 1998 written opinion by performing procedures to update
certain of such analyses and by reviewing the assumptions and conclusions
contained in the Opinion.
Ryan, Beck's written Opinion dated July 10, 1998 was based solely upon
the information available to it and the economic, market and other circumstances
as they existed as of the date of such Opinion. Ryan, Beck did not express any
opinion as to the price or range of prices at which HUBCO Common Stock might
trade subsequent to the Merger. Events occurring after such date could
materially affect the assumptions and conclusions contained in such Opinion.
Ryan, Beck has not undertaken to reaffirm or revise its Opinion or otherwise
comment upon any events occurring after the date thereof.
The summary set forth above does not purport to be a complete
description, but is a brief summary of the material analyses and procedures
performed by Ryan, Beck in the course of arriving at its Opinion.
With regard to Ryan, Beck's services in connection with the financial
advisory agreement and the Merger Agreement, IBSF has agreed to pay Ryan, Beck
an advisory fee equal to 0.85% of the aggregate dollar value of the
consideration received by IBSF's shareholders in the Merger. Based upon the
estimated aggregate purchase price to be paid in connection with the Merger,
Ryan, Beck's aggregate fees will be approximately $2 million. Ryan, Beck was
paid approximately $505,000 of its advisory fee upon the delivery of the March
31, 1998 written opinion and the remainder will be paid upon the closing of the
Merger. In addition, IBSF has agreed to reimburse Ryan, Beck for its reasonable
out-of-pocket expenses, which shall not exceed $10,000 without the prior consent
of IBSF. IBSF has also agreed to indemnify Ryan, Beck and certain related
persons against certain liabilities, including liabilities under federal
securities law, incurred in connection with its services. The amounts of Ryan,
Beck's fees were determined by negotiation between IBSF and Ryan, Beck.
Ryan, Beck has had an investment banking relationship with IBSF for a
number of years. Ryan, Beck was the sole underwriter of IBSF's conversion from
mutual to stock form of organization. Additionally, Ryan, Beck has also acted as
financial advisor to IBSF with respect to various other matters from time to
time. Ryan, Beck's research department has issued research reports on IBSF and
comments on IBSF in its periodic commentaries. Ryan, Beck is also a market maker
in IBSF's common stock and, in such capacity, may from time to time own IBSF
securities.
Ryan, Beck was a co-manager of the 8.98% Capital Securities offering by
HUBCO Capital Trust I. Ryan, Beck's research department has issued research
reports on HUBCO and comments on HUBCO in its periodic commentaries. Ryan, Beck
is also a market maker in HUBCO Common Stock and, in such capacity, may from
time to time own HUBCO securities.
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 IBSF 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
IBSF 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) receipt by HUBCO of an opinion of
Pitney, Hardin, Kipp & Szuch, counsel to HUBCO, to the effect that the exchange
of IBSF 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"; and (vi) the receipt by HUBCO 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.
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 IBSF contained in the Merger Agreement;
(ii) the performance by IBSF, in all material respects, of all its obligations
under the Merger Agreement; and (iii) receipt of an opinion from Elias, Matz,
Tiernan & Herrick L.L.P., counsel to IBSF, as to certain matters.
The obligation of IBSF 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; (ii)
the performance by HUBCO, in all material respects, of all its obligations under
the Merger Agreement; (iii) receipt of Ryan, Beck's fairness opinion; (iv)
receipt of an opinion from Pitney, Hardin, Kipp & Szuch as to certain matters;
and (v) the appointment of Joseph M. Ochman, Sr. as a director of the Surviving
Bank and Chairman of the Southern New Jersey Advisory Council of the Surviving
Bank.
Conduct of Business Pending the Merger
The Merger Agreement requires IBSF to conduct its business prior to the
Effective Time only in the ordinary course of business and consistent with
prudent business practices, except as permitted under the Merger Agreement or
with the written consent of HUBCO (which will not be unreasonably withheld).
Under the Merger Agreement, IBSF 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
Certificate of Incorporation or Bylaws; (b) change the number of shares of its
authorized or issued capital stock (other than upon exercise of outstanding
stock options), grant any option or similar right relating to its capital stock,
or declare, set aside or pay any dividend or other distribution in respect of
its capital stock, except that IBSF may pay dividends on the IBSF Common Stock
in a quarterly amount equal to $0.10 per share; (c) grant any severance or
termination pay (other than pursuant to written policies or contracts of IBSF 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, or adopt any new employee benefit plan or arrangement or
award an increase in compensation or benefits, except in each case as required
by law or as disclosed to HUBCO prior to execution of the Merger Agreement; (d)
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; (e) make any capital expenditures in excess of $50,000 in the
aggregate, other than pursuant to binding commitments existing on the date of
the Merger Agreement, expenditures necessary to maintain existing assets in good
repair, expenditures described in business plans or budgets previously furnished
to HUBCO and except as disclosed to HUBCO prior to execution of the Merger
Agreement; (f) file any applications or make any contracts with respect to
branching or site location or relocation; (g) agree to acquire in any manner
whatsoever (other than to realize upon collateral for a defaulted loan) any
business or entity or make any investments in securities other than investments
in government, municipal or agency bonds having a maturity of less than five
years; (h) make any material change in its accounting methods or practices,
other than changes required in accordance with generally accepted accounting
principles or regulatory authorities; (i) take any action that would result in
any of IBSF'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; (j) without first conferring with HUBCO, make or
commit to make any new loan or other extension or credit in excess of $500,000
or renew for a period greater than one year any existing loan in an amount of
$500,000 or more, or increase by $500,000 or more the aggregate credit
outstanding to any existing borrower or affiliated group; or (k) agree to do any
of the foregoing.
Under the Merger Agreement, IBSF 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"). Notwithstanding the foregoing, IBSF may enter into
discussions or negotiations or provide any information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of IBSF,
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. IBSF 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.
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 IBSF; (c) authorization, execution, delivery, performance and
enforceability of the Merger Agreement, no conflict, between the Merger
Agreement and each party's governing documents, and material contracts, required
governmental consents and approvals and related matters; (d) financial
statements and other documents filed by each of HUBCO and IBSF with the SEC, and
the accuracy of information contained therein; (e) the accuracy of information
supplied by each of HUBCO and IBSF 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 payments thereunder, 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 December 31, 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; (t) the accuracy of all minute books; (u) the absence of an agreement
with bank regulators which restricts materially the conduct of HUBCO's or IBSF's
business or that of their respective subsidiaries; and (v) matters relating to
the HUBCO Common Stock to be issued in the Merger.
Regulatory Approvals
Consummation of the Merger is subject, among other things, to prior
receipt of all necessary regulatory approvals. In order to consummate the Merger
and the Bank Merger, HUBCO must obtain regulatory approvals from the FDIC and
the NJDOB and an approval or waiver from the FRB. HUBCO has received a waiver of
approval from the FRB. HUBCO has applied to the FDIC for approval to merge the
Association into HUB, and has applied to the NJDOB for approval of the
acquisition of the Association. Approval by the FRB, FDIC or the NJDOB does not
constitute an endorsement of the Merger or the Bank Merger or a determination
that the terms of the Merger or Bank Merger are fair to the shareholders of IBSF
or HUBCO.
Interests of Certain Persons in the Merger
The Merger Agreement provides that HUBCO will cause Joseph M. Ochman,
Sr., the Chairman, President and Chief Executive Officer of IBSF, to be
appointed as a director of the Surviving Bank and Chairman of the Southern New
Jersey Advisory Council of the Surviving Bank at the Closing. The Merger
Agreement also provides that Mr. Ochman will receive a consulting contract for
services to be rendered through April 30, 2001 (the "Consulting Term"), in
exchange for a fee payable monthly at the rate of $150,000 per annum. During the
Consulting Term, (1) Mr. Ochman will be provided with a secretary and the use of
an office, (2) HUBCO or a HUBCO subsidiary will pay the insurance premiums on
the life insurance policies on Mr. Ochman's life, which premiums aggregate
$9,510 per year, and (3) HUBCO or a HUBCO subsidiary will pay or reimburse Mr.
Ochman for various legal, tax and estate planning services, as well as an annual
medical exam, in an aggregate amount of up to $7,500 per year. The Merger
Agreement also provides that HUBCO will cause Mr. Ochman to be re-elected as a
director of the Surviving Bank and as Chairman of the Southern New Jersey
Advisory Council so that his terms continue until the year 2001 annual
stockholder meeting of the Surviving Bank.
HUBCO also agreed to honor the existing written employment and
severance agreements with officers and employees of IBSF and the Association and
Mr. Ochman's Excess Benefit Plan. Under his employment agreements with IBSF and
the Association, Mr. Ochman will receive a lump sum severance payment
aggregating approximately $1.7 million, together with the continuation of a car
allowance, life insurance, long-term disability insurance and club dues through
the remaining term of his contracts and health insurance until age 70.
All unvested stock options and restricted stock awards held by the
directors, officers and employees of IBSF and the Association (including Mr.
Ochman) will accelerate and become fully vested as the Effective Time. For
information regarding the amount of unvested stock options and restricted stock
awards, see "Security Ownership of Certain Beneficial Officers of IBSF Common
Stock." The stock options will be converted into stock options to purchase HUBCO
Common Stock as set forth under " - Conversion of Stock Options," and the
holders of the restricted stock awards that accelerate will receive HUBCO Common
Stock based upon the Exchange Ratio. In addition, certain employees (including
two executive officers other than Mr. Ochman) will receive "retention" bonuses
from IBSF or the Association in the event the employee remains an employee of
IBSF or the Association through the Effective Time (or the subsequent systems
conversion in certain cases). The retention bonuses will not exceed an aggregate
of $150,000.
In the Merger Agreement, HUBCO has agreed to indemnify, defend and hold
harmless for a period of six years after the Effective Time, each person who is,
has been, or becomes prior to the Effective Time, a director, officer, employee
or agent of IBSF, or who serves or has served at the request of IBSF in any
capacity with any other entity (collectively, the "Indemnitees"), to the fullest
extent which IBSF would have been permitted under applicable law and IBSF's
Certificate of Incorporation and Bylaws 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 IBSF or serves or has served at the
request of IBSF in any capacity with any other entity. In the Merger Agreement,
HUBCO has also agreed to cover IBSF's officers and directors under either an
extension of IBSF's existing directors' and officers' liability insurance policy
or a rider to HUBCO's then current policy for a period of six years after the
Effective Time.
The Merger Agreement provides that IBSF's (and the Association's)
directors and officers have "third party beneficiary rights" to enforce the
provisions of the Merger Agreement relating to indemnification of such persons
following the Merger. No "third party beneficiary rights" are granted in the
Merger Agreement to enforce any other agreements made by HUBCO in the Merger
Agreement with respect to employee benefits or other post-closing matters.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, IBSF will be merged
with and into HUBCO, with HUBCO as the Surviving Entity. Immediately following
the Effective Time, the Association will be merged with and into HUB, with HUB
as the Surviving Bank.
The Merger Agreement provides that HUBCO will cause Joseph M. Ochman,
Sr. to be appointed as a director of the Surviving Bank and Chairman of the
Southern New Jersey Advisory Council of the Surviving Bank.
Exchange of Certificates, Issuance of New Options
At the Effective Time, holders of certificates formerly representing
shares of IBSF Common Stock will cease to have any rights as IBSF shareholders
and their certificates automatically will represent the shares of HUBCO Common
Stock into which their shares of IBSF Common Stock will have been converted by
the Merger. Promptly after the Effective Time, but in no event later than five
business days after the Effective Time, HUBCO will send written instructions and
a letter of transmittal to each holder of IBSF Common Stock, indicating the
method for exchanging their stock certificates for certificates representing
shares of HUBCO Common Stock. Holders of IBSF 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 IBSF Common Stock
are exchanged will be deemed to have been issued at the Effective Time.
Accordingly, holders of IBSF Common Stock 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 IBSF 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 IBSF 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 IBSF 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.
Following the Effective Time, HUBCO will make arrangements with each
holder of a Continuing Stock Option to exchange the Optionee's Option Grant
Agreement for an agreement reflecting the conversion of the Continuing Stock
Option into an option to acquire HUBCO Common Stock.
Resale Considerations With Respect to the HUBCO Common Stock
The shares of HUBCO Common Stock that will be issued if the Merger is
consummated have been registered under the Securities Act and will be freely
transferable, except for shares received by persons, including directors and
executive officers of IBSF, who may be deemed to be "affiliates" of IBSF 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 IBSF 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 IBSF 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 IBSF have been
published or filed by HUBCO. Also, in connection with the pooling-of-interests
rules, such persons have agreed not to transfer their IBSF 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 IBSF.
Amendments; Termination
The Merger Agreement may be amended, modified or supplemented with
respect to any of its terms by the mutual consent of HUBCO and IBSF at any time
prior to the Effective Time. However, after approval of the Merger Agreement by
the shareholders of IBSF, no amendment can be made which reduces the amount or
changes the form of consideration to be delivered to the shareholders of IBSF
without the approval of such shareholders.
The Merger Agreement may be terminated by the mutual consent of IBSF
and HUBCO. The Merger Agreement may also be terminated by IBSF or HUBCO if,
among other things, (i) the Effective Time has not occurred on or before
December 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 shareholders of IBSF to
approve the Merger Agreement is taken and such shareholders 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 would have
a material adverse effect on 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
IBSF and IBSF Bank, taken as a whole, from that disclosed by IBSF to HUBCO in
its Annual Report on Form 10-K for the year ended December 31, 1997, or IBSF
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 IBSF 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.
IBSF 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
Annual Report on Form 10-K for the year ended December 31, 1997, or if HUBCO
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 IBSF'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. IBSF may also terminate the Merger Agreement
if the conditions for IBSF 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 IBSF upon
occurrence of a Termination Event, as described below under the caption "--
Termination Events".
If the Merger Agreement is terminated, the transactions contemplated
thereby will be abandoned without further action by any party, each party will
bear its own expenses and each party will retain all rights and remedies it may
have at law or equity under the Merger Agreement.
Termination Events
The Merger Agreement may be terminated by IBSF, if both of the
following conditions are satisfied:
(x) the Median Pre-Closing Price of HUBCO Common Stock on the
Determination Date is less than $31.82 (the "HUBCO Floor Price"), which
is 85% of the Closing Price of HUBCO Common Stock on April 1, 1998, the
first trading day after public announcement of the Merger Agreement
(the "Starting Date"); and
(y) (i) the number (the "HUBCO Ratio") obtained by dividing the Median
Pre-Closing Price of HUBCO Common Stock on the Determination Date by
the HUBCO Common Stock Closing Price on the Starting Date, is less than
(ii) the number (the "Index Ratio") obtained by dividing the KBW 50
Index for the Determination Date by the KBW 50 Index for the Starting
Date, and then subtracting 0.10.
However, if both conditions (x) and (y) exist, and the IBSF Board of
Directors notifies HUBCO that IBSF elects to terminate the Merger Agreement,
HUBCO will have the option to override IBSF's termination by increasing the
Exchange Ratio to a number which equals the lesser of the following:
(i) a number (rounded to four decimals) equal to a fraction, the
numerator of which is the HUBCO Floor Price multiplied by the Exchange
Ratio (as then in effect) and the denominator of which is the Median
Pre-Closing Price of HUBCO Common Stock on the Determination Date; or
(ii) a number (rounded to four decimals) equal to a quotient, the
numerator of which is the Index Ratio multiplied by the Exchange Ratio
(as then in effect) and the denominator of which is the HUBCO Ratio.
If HUBCO so elects and increases the Exchange Ratio, the Merger
Agreement will not be terminated. There can be no assurance that IBSF will
exercise its right to terminate the Merger Agreement if the conditions described
above exist (a "Termination Event"), and if IBSF 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.
Certain possible effects of the above provisions on the Exchange Ratio
may be illustrated by the following three scenarios (all scenarios assume that
the 0.534 Exchange Ratio has not previously been adjusted pursuant to the
anti-dilution provisions of the Merger Agreement):
(1) If the Median Pre-Closing Price of HUBCO Common Stock is
equal to or greater than $31.82 (the HUBCO Floor Price), there would be
no Termination Event and no adjustment to the Exchange Ratio.
(2) If the Median Pre-Closing Price of HUBCO Common Stock is
less than $31.82 (the HUBCO Floor Price), but the HUBCO Ratio is equal
to or greater than the Index Ratio, there would be no Termination Event
and no adjustment to the Exchange Ratio.
(3) If the Median Pre-Closing Price of HUBCO Common Stock is
less than $31.82 (the HUBCO Floor Price), and the HUBCO Ratio is less
than the Index Ratio, there would be a Termination Event and IBSF could
elect to terminate the Merger Agreement. However, HUBCO could, at its
sole option, override the termination by increasing the Exchange Ratio
to the lesser of the following two numbers (in each case rounded to
four decimals):
(A) a fraction in which the numerator is $16.99 (the HUBCO
Floor Price multiplied by the 0.534 Exchange Ratio) and the
denominator is the Median Pre-Closing Price of HUBCO Common
Stock, or
(B) a fraction in which the numerator is the Index Ratio
multiplied by the 0.534 Exchange Ratio and the denominator of
which is the HUBCO Ratio.
It is not possible to know whether a Termination Event will occur until
after the Determination Date. IBSF 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 IBSF 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 shareholders of IBSF at the Meeting will
confer on the IBSF Board of Directors the power, consistent with its fiduciary
duties, to elect to consummate the Merger following a Termination Event whether
or not there is any increase in the Exchange Ratio and without any further
action by, or resolicitation of, the shareholders of IBSF. If IBSF elects to
exercise its termination right, IBSF must give HUBCO prompt notice of that
decision during the five business day period commencing with (and including) the
first business day following the Determination Date, provided that any such
notice of election to terminate by IBSF may be withdrawn by IBSF at any time
within the aforementioned five business day period. During a three business-day
period commencing with its receipt of such notice from the IBSF 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 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 IBSF were to
exercise its right to terminate the Merger Agreement as set forth above. Any
decision would be made by HUBCO in light of the circumstances existing at the
time HUBCO has the opportunity to make the election. If HUBCO elects to increase
the Exchange Ratio as set forth in the Merger Agreement and as illustrated
above, it must give IBSF notice of that election within three business days
following receipt of the notice of termination from IBSF, 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 a possible increase of the
Exchange Ratio as the result of a Termination Event.
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. Each of HUBCO's and IBSF'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 IBSF would be
added to those of HUBCO at their recorded book values and the stockholders'
equity accounts of HUBCO and IBSF 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 IBSF 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 following is a discussion of certain federal income tax
consequences of the Merger but is not intended to be a complete description of
such consequences. The discussion is included for general information purposes
only and may not apply to special situations, such as IBSF shareholders, if any,
who received HUBCO Common Stock upon the exercise of employee stock options or
otherwise as compensation, that hold IBSF Common Stock as part of a "straddle"
or "conversion transaction", or that are insurance companies, securities
dealers, financial institutions or foreign persons, and does not discuss any
aspects of state, local or foreign taxation. This discussion is based upon laws,
regulations, rulings and decisions now in effect and on proposed regulations,
all of which are subject to change (possibly with retroactive effect) by
legislation, administrative action or judicial decision. No ruling has been or
will be requested from the Internal Revenue Service on any tax matter relating
to the tax consequences of the Merger.
As an exhibit to the Registration Statement of which this Proxy
Statement is a part, Pitney, Hardin, Kipp & Szuch, counsel to HUBCO, have
advised HUBCO and IBSF in an opinion that:
(i) No gain or loss will be recognized for federal income tax purposes
by IBSF shareholders upon the exchange in the Merger of shares of IBSF Common
Stock solely for HUBCO Common Stock (except with respect to cash received in
lieu of a fractional share interest in HUBCO Common Stock).
(ii) The basis of HUBCO Common Stock received in the Merger by IBSF
shareholders (including the basis of any fractional share interest in HUBCO
Common Stock) will be the same as the basis of the shares of IBSF Common Stock
surrendered in exchange therefore.
(iii) The holding period of HUBCO Common Stock (including the holding
period of any fractional share interest in HUBCO Common Stock) will include the
holding period during which the shares of IBSF Common Stock surrendered in
exchange therefore were held by the IBSF stockholder, provided such shares of
IBSF Common Stock were held as capital assets.
(iv) Cash received by a holder of IBSF Common Stock in lieu of a
fractional share interest in HUBCO Common Stock will be treated as received for
such fractional share interest, and, provided the fractional share would have
constituted a capital asset in the hands of such holder, the holder 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 tax basis in
IBSF Common Stock allocable to the fractional share interest.
Consummation of the Merger is conditioned, among other things, on
receipt by each of HUBCO and IBSF of an opinion of their respective counsel,
dated the Effective Time, to the effect that, as of such date, the (i) the
Merger will be treated for federal income tax purposes as a reorganization
qualifying under the provisions of Section 368 of the Internal Revenue Code of
1986, as amended; (ii) no gain or loss will be recognized by IBSF; (iii) no gain
or loss will be recognized by the holders of IBSF Common Stock upon the exchange
of IBSF Common Stock solely for HUBCO Common Stock; (iv) the tax basis of any
HUBCO Common Stock received in exchange for IBSF Common Stock shall equal the
basis of the recipient's IBSF Common Stock surrendered on the exchange; and (v)
the holding period for any HUBCO Common Stock received in exchange for IBSF
Common Stock will include the period during which IBSF Common Stock surrendered
on the exchange was held, provided such stock was held as a capital assets on
the date of the exchange. Unlike a ruling from the Internal Revenue Service, an
opinion of counsel is not binding on the Internal Revenue, Service, and there
can be no assurance that the Internal Revenue Service will not take a position
contrary to one or more of the positions reflected herein or that the positions
herein will be upheld by the courts if challenged by the Internal Revenue
Service. While HUBCO and IBSF have the contractual right to waive this condition
to closing, neither will do so, and the Merger will not take place if the
opinions are not obtained.
The opinions of Pitney, Hardin, Kipp & Szuch summarized above are or
will be based, among other things, on representations contained in certificates
of officers of IBSF and HUBCO.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF IBSF COMMON STOCK, AND OTHER
FACTORS, EACH SUCH HOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS
Consequences of Receipt of Cash in Lieu of Fractional Shares. Cash
received by an IBSF shareholder in lieu of any fractional share interest will be
treated as having been received as a payment in redemption of such fractional
share interest as if a fractional share of HUBCO Common Stock had been issued in
the Merger and then redeemed by HUBCO, 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 IBSF Common Stock allocable to the fractional share interest.
Basis of HUBCO Common Stock. The basis of HUBCO Common Stock received
by an IBSF shareholder who receives solely HUBCO Common Stock will be the same
as the basis of such shareholder's IBSF Common Stock surrendered in exchange
therefor.
Holding Period. The holding period of shares of HUBCO Common Stock
received in the Merger by holders of IBSF Common Stock will include the period
during which such shares of IBSF Common Stock surrendered in exchange therefor
were held by the holder thereof, provided such shares of IBSF Common Stock were
held as capital assets.
No Dissenters' Rights
Under the NJBCA, holders of IBSF Common Stock do not have dissenters'
rights of appraisal in connection with the Merger.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Pro Forma Unaudited Combined Condensed Balance Sheet
of HUBCO and IBSF
The following pro forma unaudited combined condensed balance sheet
combines the historical consolidated balance sheets of HUBCO (restated and
adjusted as described below) and IBSF giving effect to the Merger which will be
accounted for as a pooling of interests, as if the Merger had been effective on
March 31, 1998 and the pro forma adjustments described in the notes to pro forma
financial information. The financial information for HUBCO has been restated to
include the effects of the merger with TBOS which was consummated on January 12,
1998 and has been accounted for as a pooling of interests. The financial
information for HUBCO has also been adjusted to give pro forma effect to the PFC
and MSB mergers, which closed on April 24 and May 29, 1998, respectively, and
each of which will be accounted for as a pooling of interests. The information
set forth below should be read in conjunction with the historical consolidated
financial statements of HUBCO and IBSF, including their respective notes
thereto, as well as the historical and pro forma information for PFC and MSB,
which are incorporated by reference in this Proxy Statement-Prospectus. HUBCO's
fiscal year ends December 31 and IBSF's fiscal year ends September 30. In the
following table, financial data for the fiscal years ended December 31, 1997,
1996 and 1995 includes IBSF financial data for the 12 months ended September 30,
1997, 1996 and 1995, respectively, and information regarding HUBCO is presented
consistent with the fiscal year of HUBCO ended December 31. The information for
the three months ended March 31, 1998 is based on the respective historical
unaudited financial statements of HUBCO (restated and adjusted) and IBSF. The
pro forma financial information does not give effect to anticipated cost savings
net of expected Merger related expenses and restructuring charges. The pro forma
financial statements of HUBCO included in this Proxy Statement-Prospectus are
not restated to reflect the Completed Branch Purchase or the Recently Completed
Trust Preferred Offering and do not reflect the Pending Acquisitions. The
historical amounts presented in future financial statements of HUBCO for periods
reported in this Proxy Statement-Prospectus will differ and in certain cases,
will differ materially as a result of the effects of accounting for the Merger
and certain of the Pending Acquisitions, when consummated, as pooling of
interests. 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. The financial information
also does not reflect one-time merger related and restructuring charges which
either have been or will be incurred in connection with the Merger and the
Recently Completed Acquisitions and Pending Acquisitions
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Balance Sheet
As of March 31, 1998
(Dollars in thousands, except per share data)
Pro forma Pro forma
HUBCO IBSF Adjustments Combined
--------------------------------------------------------------------
Assets:
<S> <C> <C> <C> <C>
Cash and due from banks $ 172,141 $ 23,694 $ -- $ 195,835
Federal funds sold 133,613 -- 133,613
Securities 1,207,264 489,318 -- 1,696,582
Loans 2,903,001 229,179 3,132,180
Less: Allowance for loan losses (55,928) (1,084) -- (57,012)
------------- ---------- ----------- -----------
Total loans 2,847,073 228,095 -- 3,075,168
------------- ----------- ----------- -------------
Other assets 203,927 11,008 214,935
Intangibles, net of amortization 56,526 -- 56,526
============= =========== =========== =============
Total Assets $ 4,620,544 $ 752,115 $ -- $ 5,372,659
============= =========== =========== =============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 698,960 $ -- $ -- $ 698,960
Interest bearing 3,038,457 575,181 3,613,638
------------- ----------- ----------- -------------
Total Deposits 3,737,417 575,181 4,312,598
------------- ----------- ----------- -------------
Borrowings 360,708 44,314 405,022
Other liabilities 59,024 2,103 -- 61,127
------------- ----------- ----------- -------------
Total Liabilities 4,157,149 621,598 -- 4,778,747
Subordinated debt 100,000 -- 100,000
Capital Trust Securities 50,000 -- 50,000
Stockholders' Equity:
Preferred stock 50 -- -- 50
Common stock 51,556 116 10,290 61,962
Additional paid in capital 153,767 113,689 (28,258) 239,198
Retained earnings 112,763 33,413 -- 146,176
Treasury Stock (5,878) (10,106) 10,106 (5,878)
Restricted Stock/ESOP and RRP shares (932) (7,862) 7,862 (932)
Unrealized gain on securities
available for sale 2,069 1,267 -- 3,336
------------- ----------- ----------- -------------
Total Stockholders' Equity 313,395 130,517 -- 443,912
============= =========== =========== =============
Total Liabilities and Stockholders' Equity $ 4,620,544 $ 752,115 $ -- $ 5,372,659
============= =========== =========== =============
Common shares outstanding (in thousands) 28,997 10,960 34,849
Book value per common share $ 10.81 $ 11.91 $ $ 12.74
</TABLE>
See Notes to Pro Forma Financial Information.
<PAGE>
Pro Forma Unaudited Combined Condensed Statements of Income of
HUBCO and IBSF
The following pro forma unaudited combined condensed statements of
income combine the historical consolidated statements of income of HUBCO
(restated and adjusted as described below) and IBSF 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 financial information for HUBCO has been restated to include the
effects of the merger with TBOS which was consummated on January 12, 1998 and
has been accounted for as a pooling of interests. The financial information for
HUBCO has also been adjusted to give pro forma effect to the PFC and MSB
mergers, which closed on April 24 and May 29, 1998, respectively, and each of
which were accounted for as a pooling of interests. 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-Prospectus. The pro forma financial information does not give effect
to anticipated cost savings net of expected Merger related expenses and
restructuring charges. The pro forma financial statements of HUBCO included in
this Proxy Statement-Prospectus are not restated to reflect the Completed Branch
Purchase or the Recently Completed Trust Preferred Issuance and do not reflect
the Pending Acquisitions. The historical amounts presented in future financial
statements of HUBCO for periods reported in this Proxy Statement-Prospectus will
differ and in certain cases, will differ materially as a result of the effects
of accounting for the Merger and certain of the Pending Acquisitions, when
consummated, as pooling of interests. 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. The
financial information also does not reflect one-time merger related and
restructuring charges which either have been or will be incurred in connection
with the Merger and the Recently Completed Acquisitions and Pending
Acquisitions.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Three Months Ended March 31, 1998
(Dollars in thousands, except per share data)
Pro forma
HUBCO IBSF Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 62,582 $ 4,235 $ 66,817
Interest on securities 17,900 8,531 26,431
Other interest income 1,664 -- 1,664
---------- ---------- ----------
Total Interest Income 82,146 12,766 94,912
---------- ---------- ----------
Interest on deposits 26,711 6,665 33,376
Interest on borrowings 7,621 528 8,149
---------- ---------- ----------
Total Interest Expense 34,332 7,193 41,525
---------- ---------- ----------
Net Interest Income before
provision for loan losses 47,814 5,573 53,387
Provision for loan losses 6,113 10 6,123
---------- ---------- ----------
Net Interest Income after
provision for loan losses 41,701 5,563 47,264
Noninterest income 12,495 256 12,751
Noninterest expense 37,940 3,489 41,429
---------- ---------- ----------
Income before income taxes 16,256 2,330 18,586
Income tax provision 5,671 757 6,428
---------- ---------- ----------
Net Income $ 10,585 $ 1,573 $ 12,158
========== ========== ==========
Earnings per share:
Basic $ 0.37 $ 0.15 $ 0.35
Diluted $ 0.36 $ 0.15 $ 0.34
Weighted Average Shares Outstanding:
(in thousands)
Basic 28,949 10,044 34,801
Diluted 29,527 10,883 35,767
</TABLE>
See Notes to Pro Forma Financial Information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1997
(Dollars in thousands, except per share data)
Pro forma
HUBCO IBSF(1) Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 252,724 $ 15,399 $ 268,123
Interest on securities 91,173 36,304 127,477
Other interest income 3,294 -- 3,294
---------- --------- -----------
Total Interest Income 347,191 51,703 398,894
---------- --------- -----------
Interest on deposits 114,332 26,864 141,196
Interest on borrowings 35,084 2,216 37,300
---------- --------- -----------
Total Interest Expense 149,416 29,080 178,496
---------- --------- -----------
Net Interest Income before
provision for loan losses 197,775 22,623 220,398
Provision for loan losses 11,945 40 11,985
---------- --------- -----------
Net Interest Income after
provision for loan losses 185,830 22,583 208,413
Noninterest income 49,962 685 50,647
Noninterest expense 147,282 14,321 161,603
---------- --------- -----------
Income before income taxes 88,510 8,947 97,457
Income tax provision 35,293 3,141 38,434
---------- --------- -----------
Net Income $ 53,217 $ 5,806 $ 59,023
========== ========= ===========
Earnings per share:
Basic $ 1.80 $ 0.57 $ 1.67
Diluted 1.73 0.53 1.60
Weighted Average Shares Outstanding:
(in thousands)
Basic 29,164 10,114 35,016
Diluted 30,676 10,999 36,916
</TABLE>
(1) IBSF information is for the fiscal year ended September 30, 1997.
See Notes to Pro Forma Financial Information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1996
(Dollars in thousands, except per share data)
Pro forma
HUBCO IBSF(1) Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 233,315 $ 12,758 $ 246,073
Interest on securities 94,396 39,394 133,790
Other interest income 2,666 -- 2,666
---------- --------- -----------
Total Interest Income 330,377 52,152 382,529
---------- --------- -----------
Interest on deposits 122,590 26,753 149,343
Interest on borrowings 22,231 666 22,897
---------- --------- -----------
Total Interest Expense 144,821 27,419 172,240
---------- --------- -----------
Net Interest Income before
provision for loan losses 185,556 24,733 210,289
Provision for possible loan losses 14,770 30 14,800
---------- --------- -----------
Net Interest Income after
provision for loan losses 170,786 24,703 195,489
Noninterest income 36,300 687 36,987
Noninterest expense 168,091 17,931 186,022
---------- --------- -----------
Income before income taxes 38,995 7,459 46,454
Income tax provision 14,315 2,922 17,237
---------- --------- -----------
Net Income $ 24,680 $ 4,537 $ 29,217
========== ========= ===========
Earnings per share:
Basic $ 0.81 $ 0.39 $ 0.80
Diluted 0.79 0.36 0.78
Weighted Average Shares Outstanding:
(in thousands)
Basic 29,440 11,621 35,292
Diluted 31,380 12,497 37,620
</TABLE>
(1) IBSF information is for the fiscal year ended September 30, 1996.
See Notes to Pro Forma Financial Information.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Year Ended December 31, 1995
(Dollars in thousands, except per share data)
Pro forma
HUBCO IBSF(1) Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 219,478 $ 11,337 $ 230,815
Interest on securities 78,042 40,355 118,397
Other interest income 2,848 -- 2,848
---------- --------- -----------
Total Interest Income 300,368 51,692 352,060
---------- --------- -----------
Interest on deposits 102,661 25,024 127,685
Interest on borrowings 21,382 -- 21,382
---------- --------- -----------
Total Interest Expense 124,043 25,024 149,067
---------- --------- -----------
Net Interest Income before
provision for loan losses 176,325 26,668 202,993
Provision for loan losses 12,282 30 12,312
---------- --------- -----------
Net Interest Income after
provision for loan losses 164,043 26,638 190,681
Noninterest income 24,931 663 25,594
Noninterest expenses 136,523 12,215 148,738
---------- --------- -----------
Income before income taxes 52,451 15,086 67,537
Income tax provision 16,067 5,166 21,233
---------- --------- -----------
Net Income $ 36,384 $ 9,920 $ 46,304
========== ========= ===========
Earnings per share:
Basic $ 1.27 $ 0.74 $ 1.35
Diluted 1.21 0.72 1.27
Weighted Average Shares Outstanding:
(in thousands)
Basic 27,844 13,074 33,696
Diluted 30,082 13,636 36,322
</TABLE>
(1) IBSF information is for the fiscal year ended September 30, 1995.
See Notes to Pro Forma Financial Information.
<PAGE>
Notes to Pro Forma Financial Information
(1) Pro forma financial information assumes the Merger was consummated as
of March 31, 1998 for the pro forma unaudited combined condensed
balance sheet and as of the beginning of each of the periods indicated
for the pro forma unaudited combined condensed statements of income.
The pro forma information presented is not necessarily indicative of
the results of operations or the combined financial position that would
have resulted had the Merger been consummated at the beginning of the
periods indicated, nor is it necessarily indicative of the results of
operations in future periods or the future financial position of the
combined entities.
(2) 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, an Exchange Ratio
of 0.534 shares of HUBCO Common Stock for each of the 10,959,674 (net
of 650,049 treasury shares held) shares of IBSF Common Stock which were
outstanding at March 31, 1998.
(3) The pro forma financial information presented herein gives effect to
the cancellation of 650,049 shares of IBSF Common Stock held in IBSF's
treasury at a cost of $10,106,000.
In summary, the pro forma information reflects adjustments for the Merger
accounted for using the pooling-of-interests accounting method assuming the
0.534 Exchange Ratio, as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C> <C>
(i) Issuance of 5,852,466 shares of $ 10,406
HUBCO Common Stock (stated value
of $1.778 per share)
(ii) Elimination of 11,609,723 shares (116 )
of IBSF Common Stock ($.01 par
value)
---------
Adjustment to Common stock 10,290
(iii)Eliminate IBSF's treasury stock 10,106
(iv) Eliminate ESOP and RRP shares 7,862
---------
Adjustment offset to additional
paid-in capital.................. 28,258
</TABLE>
(4) Earnings per share data has been computed based on the combined
historical (and pro forma for PFC and MSB) net income applicable to
common shareholders of HUBCO using the historical (and pro forma for
PFC and MSB) weighted average shares outstanding of HUBCO Common Stock
for the given period and the HUBCO Common Stock to be issued in
connection with the Merger.
<PAGE>
THE ADJOURNMENT PROPOSAL
Each proxy solicited hereby requests authority to vote for an
adjournment of the Meeting, if an adjournment is deemed to be necessary. IBSF
may seek an adjournment of the Meeting for not more than 29 days in order to
enable IBSF to solicit additional votes in favor of the proposal to adopt the
Merger Agreement in the event that such proposal has not received the requisite
vote of stockholders at the Meeting and such proposal has not received the
negative votes of the holders of a majority of IBSF Common Stock. If IBSF
desires to adjourn the meeting with respect to such proposal, it will request a
motion that the meeting be adjourned for up to 29 days with respect to such
proposal, and no vote will be taken on such proposal at the originally scheduled
Meeting. Each proxy solicited hereby, if properly signed and returned to IBSF
and not revoked prior to its use, will be voted on any motion for adjournment in
accordance with the instructions contained therein. If no contrary instructions
are given, each proxy received will be voted in favor of any motion to adjourn
the meeting. Unless revoked prior to its use, any proxy solicited for the
Meeting will continue to be valid for any adjournment of the Meeting, and will
be voted in accordance with instructions contained therein, and if no contrary
instructions are given, for the proposal in question.
Any adjournment will permit IBSF to solicit additional proxies and will
permit a greater expression of the stockholders' views with respect to the
Merger proposal. Such an adjournment would be disadvantageous to stockholders
who are against the Merger proposal, because an adjournment will give IBSF
additional time to solicit favorable votes and thus increase the chances of
passing the Merger proposal.
If a quorum is not present at the Meeting, no proposal will be acted
upon and the Board of Directors of IBSF will adjourn the Meeting to a later date
in order to solicit additional proxies on each of the proposals being submitted
to stockholders.
An adjournment for up to 29 days will not require either the setting of
a new record date or notice of the adjourned meeting as in the case of an
original meeting. IBSF has no reason to believe that an adjournment of the
Meeting will be necessary at this time.
Because the Board of Directors recommends that stockholders vote FOR
the proposal to adopt the Merger Agreement, as discussed above, the Board of
Directors recommends that stockholders vote FOR the possible adjournment of the
Meeting. The holders of a majority of the IBSF Common Stock present, in person
or by proxy, at the Meeting will be required to approve a motion to adjourn the
Meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the date indicated, certain
information as to the IBSF Common Stock beneficially owned by (i) each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
Exchange Act, who or which was known to IBSF to be the beneficial owner of more
than 5% of the issued and outstanding IBSF Common Stock, (ii) the directors of
IBSF, (iii) certain executive officers of IBSF, and (iv) all directors and
executive officers of IBSF and the Association as a group.
<TABLE>
<CAPTION>
IBSF Common Stock
Beneficially Owned as of
June 12, 1998(1)(2)
--------------------------------------
Name of Beneficial Owner No. Percent
----------- -----------
<S> <C> <C>
IBS Financial Corp. Employee 1,194,201 (3) 10.9 %
Stock Ownership Plan Trust
1909 E. Route 70
Cherry Hill, New Jersey 08003
Directors:
Arthur J. Abramowitz 1,000 *
Thomas J. Auchter 144,869 (4)(5) 1.3 %
John A. Borden 121,654 (3)(4)(6) 1.1 %
Paul W. Gleason 116,027 (3)(4) 1.1 %
Francis X. Lorbecki, Jr. 109,765 (4)(7) 1.0 %
Joseph M. Ochman, Sr. 527,133 (8) 4.7 %
Albert D. Stiles, Jr. 199,050 (3)(4)(9) 1.8 %
Certain other executive officers:
Richard G. Sharp 183,988 (10) 1.7 %
All directors and executive officers of 1,858,824 (3)(11) 15.8 %
IBSF and the Association as a group
(14 persons)
</TABLE>
* Less than 1%.
(1) For purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to beneficially own shares of
IBSF Common Stock if he or she directly or indirectly has or shares (1)
voting power, which includes the power to vote or to direct the voting
of the shares; or (2) investment power, which includes the power to
dispose or direct the disposition of the shares. Unless otherwise
indicated, an individual has sole voting power and sole investment
power with respect to the indicated shares.
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of IBSF Common Stock which may be acquired
within 60 days of June 12, 1998 pursuant to the exercise of outstanding
stock options. Shares of IBSF Common Stock which are subject to stock
options are deemed to be outstanding for the purpose of computing the
percentage of outstanding IBSF Common Stock owned by such person or
group but not deemed outstanding for the purpose of computing the
percentage of IBSF Common Stock owned by any other person or group.
(3) The IBS Financial Corp. Employee Stock Ownership Plan Trust ("Trust")
was established pursuant to the IBS Financial Corp. Employee Stock
Ownership Plan ("ESOP") by an agreement between IBSF and the trustees
of the ESOP ("Trustees"). The current Trustees are Messrs. Borden,
Gleason and Stiles. As of June 12, 1998, 609,845 shares of IBSF Common
Stock held in the Trust were unallocated and 584,356 shares had been
allocated to the accounts of participating employees. Under the terms
of the ESOP, the Trustees will generally vote the allocated shares held
in the ESOP in accordance with the instructions of the participating
employees and will generally vote unallocated shares held in the ESOP
in the same proportion for and against proposals to stockholders as the
ESOP participants and beneficiaries actually vote shares of IBSF Common
Stock allocated to their individual accounts, subject in each case to
the fiduciary duties of the ESOP trustees and applicable law. Any
allocated shares which either abstain on the proposal or are not voted
will be disregarded in determining the percentage of stock voted for
and against each proposal by the participants and beneficiaries. The
amount of IBSF Common Stock beneficially owned by directors who serve
as trustees of the ESOP and by all directors and executive officers as
a group does not include the unallocated shares held by the Trust.
(4) Includes 13,073 unvested shares granted to each non-employee director
(other than Mr. Abramowitz) pursuant to IBSF's Recognition and
Retention Plan and Trust ("Recognition Plan"), which shares maybe voted
by each director, and 73,431 shares (67,681 shares for Mr. Gleason and
none for Mr. Abramowitz) which may be acquired upon the exercise of
stock options exercisable within 60 days of June 12, 1998 based on
their original vesting schedule.
(5) Includes 31,625 shares held by Mr. Auchter's wife.
(6) Includes 1,897 shares held by Mr. Borden's wife.
(7) Includes 63 shares held by Mr. Lorbecki's wife.
(8) Includes 111,495 shares held jointly with Mr. Ochman's wife, 58,744
unvested shares granted to Mr. Ochman pursuant to IBSF's Recognition
Plan which may be voted by Mr. Ochman, 28,299 shares allocated to Mr.
Ochman pursuant to IBSF's ESOP, 6,325 shares held by Mr. Ochman's wife,
3,232 shares held in trust for the benefit of Mr. Ochman's
grandchildren and 149,218 shares which may be acquired upon the
exercise of stock options exercisable within 60 days of June 12, 1998
based on the original vesting schedule of the options. In addition, Mr.
Ochman holds stock options to purchase 146,863 shares of IBSF Common
Stock which will become fully exercisable as of the Effective Time.
(9) Includes 10,120 shares held by Mr. Stile's wife.
(10) Includes 12,650 shares held jointly with Mr. Sharp's wife, 8,133 shares
held by Mr. Sharp's wife, 2,750 shares held in trust for the benefit of
Mr. Sharp's grandchildren, 23,496 unvested shares granted to Mr. Sharp
pursuant to IBSF's Recognition Plan which may be voted by Mr. Sharp,
28,989 shares allocated to Mr. Sharp pursuant to the Company's ESOP and
88,782 shares which may be acquired upon the exercise of stock options
exercisable within 60 days of June 12, 1998 based on the original
vesting schedule of the options. In addition, Mr. Sharp holds stock
options to purchase 59,187 shares of IBSF Common Stock which will
become fully exercisable as of the Effective Time.
(11) Includes 126,566 shares allocated to all executive officers as a group
pursuant to IBSF's ESOP, 198,452 unvested shares granted to all
executive officers and directors as a group pursuant to IBSF's
Recognition Plan which may be voted by such persons, and 818,020 shares
which may be acquired by all executive officers and directors as a
group upon the exercise of stock options exercisable within 60 days of
June 12, 1998 based on the original vesting schedule of the options. In
addition, all executive officers and directors as a group hold stock
options to purchase 331,309 shares of IBSF Common Stock which will
become fully exercisable as of the Effective Time.
<PAGE>
DESCRIPTION OF HUBCO CAPITAL STOCK
General
The authorized capital stock of HUBCO presently consists of 53,045,000
shares of HUBCO Common Stock and 10,300,000 shares of preferred stock. As of May
31, 1998, 28,491,159 shares of HUBCO Common Stock were issued and outstanding,
and 500 shares of HUBCO Series B Preferred Stock were outstanding.
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 acquisition of Westport Bancorp, Inc., HUBCO
issued HUBCO Series B Convertible Preferred Stock; 500 shares of HUBCO Series B
Convertible Preferred Stock remain outstanding as of March 31, 1998. 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 IBSF
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 those bank
subsidiaries 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. In addition, BTH, HUBCO's recently acquired New
York-based bank will serve as an additional source of dividends to HUBCO.
Payment of any such dividends by BTH will be subject to the regulations of the
OTS, if BTH continues to be federally-chartered, or the New York Banking Law, if
the BTH converts to a New York State-chartered bank. Under the Office of the
Thrift Supervision Regulations (the "OTSR"), BTH may pay dividends up to an
amount equal to one hundred percent of its net income to date during the
calendar year plus the amount that would reduce by one-half its surplus capital
ratio at the beginning of the calendar year or up to an amount equal to
seventy-five percent of its net income over the most recent four-quarter period,
provided in each case that if immediately after giving effect to such proposed
dividend (on a pro forma basis), BTH's capital is equal to or greater than the
amount of its regulatory capital requirement.
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 March 31, 1998, HUB had $130.1 million available for the payment of
dividends to HUBCO, and as of March 31, 1998, Lafayette had $1.7 million
available for the payment of dividends to HUBCO, and as of March 31, 1998, BTH
had $9.7 million available for the payment of dividends. At March 31, 1998,
HUBCO had $104.0 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. If 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 a 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 Preferred Stock
General
Five hundred shares of HUBCO Series B Convertible Preferred Stock
("HUBCO Series B Preferred Stock") remain outstanding as of March 31, 1998. The
following is a description of the existing HUBCO Series B Preferred Stock.
HUBCO Series B Preferred Stock
Dividend Rights. The holders of 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.
Liquidation Rights. The holders of HUBCO Series B Preferred Stock are
entitled to receive $100.00 per share in any liquidation, dissolution or winding
up of HUBCO, subject to the rights of creditors. In a 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 March 31, 1998, 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 IBSF AND HUBCO
General
Each of IBSF and HUBCO is a business corporation incorporated under the
NJBCA. The rights of IBSF shareholders are currently governed by the NJBCA and
IBSF's certificate of incorporation and by-laws. At the Effective Time, each
IBSF 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 following is a comparison of certain provisions of the NJBCA
and the respective certificates of incorporation and by-laws of IBSF and HUBCO.
This summary does not purport to be complete and is qualified in its entirety by
reference to the NJBCA, which may change from time to time, and the certificates
of incorporation and by-laws of HUBCO and IBSF, which also may be changed.
Voting Requirements
Under the NJBCA, unless a greater vote is specified in the certificate
of incorporation, the amendment to the certificate of incorporation of a New
Jersey corporation, the voluntary dissolution of the corporation, the sale or
other disposition of all, or substantially all of the assets of the corporation
other than in the ordinary course of business or the merger or consolidation of
the corporation with another corporation, requires in each case, a majority of
the votes cast by shareholders of the corporation entitled to vote thereon. The
HUBCO Certificate 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."
The IBSF Certificate of Incorporation requires the affirmative vote of
the holders of (1) at least 80% of the outstanding IBSF stock that is entitled
to vote generally in an election of directors ("Voting Shares") and (2) a
majority of the outstanding Voting Shares that are not beneficially owned,
directly or indirectly, by any person or group ("Related Person") which
beneficially owns 10% or more of the Voting Shares ("Independent Majority of
Stockholders") to approve certain transactions involving a Related Person unless
either (a) the IBSF shareholders are offered consideration in an amount equal to
or in excess of an amount determined in accordance with a formula contained in
the IBSF Certificate and certain other conditions are satisfied, or (b) the
transaction is recommended to shareholders by at least two-thirds of the IBSF
Board of Directors and by a majority of the directors unaffiliated with any
Related Person. Because the IBSF Board of Directors has unanimously recommended
that shareholders vote in favor of the Merger Agreement, this supermajority
voting provision is not applicable to the Merger.
The IBSF Certificate of Incorporation also provides that the
affirmative vote of (1) the holders of at least 80% of the outstanding Voting
Shares, (2) an Independent Majority of Stockholders, and (3) any class of IBSF
preferred stock that may be outstanding and entitled to vote (no such preferred
stock is currently outstanding) is required to amend, adopt, alter, change or
repeal any provision inconsistent with Articles 6 (no preemptive rights), 7
(directors), 9 (meetings of shareholders, director nominations and shareholder
proposals), 10 (bylaws), 11 (indemnification of officers, directors, employees
and agents) and 12 (amendment). In addition, any amendment, addition,
alteration, change or repeal of all or any portion of Article 8 (certain
business combinations and acquisitions of stock) requires the affirmative vote
of (i) the holders of at least 80% of the outstanding Voting Shares and (ii) an
Independent Majority of Stockholders, unless such proposal is recommended to
shareholders by at least two-thirds of the whole Board of Directors of IBSF and
a majority of the directors unaffiliated with any Related Person.
Removal of Directors; Number of Directors
The NJBCA allows for the removal of directors for cause by the
affirmative vote of the majority of the votes cast by the holders of shares
entitled to vote for the election of directors. HUBCO's Certificate of
Incorporation states that shareholders may remove a director from office only
for cause. HUBCO's Certificate of Incorporation also allows shareholders to
increase or decrease the number of directors constituting the Board by the
affirmative vote of at least three-quarters of all of the outstanding shares of
common stock entitled to vote.
The IBSF Certificate of Incorporation provides that directors may be
removed from office only with cause by an affirmative vote of the holders of not
less than 80% of the outstanding Voting Shares at a meeting of shareholders
called expressly for such purpose. In addition, at least 30 days prior to such
meeting of shareholders, written notice must be given to the director whose
removal will be considered at the meeting.
The IBSF Certificate of Incorporation provides that the number of
directors that shall constitute the initial Board of Directors shall be seven.
IBSF's Bylaws provide that the number of directors may be increased or decreased
by the affirmative vote of two-thirds of the whole Board of Directors and a
majority of the directors unaffiliated with any Related Person, provided that
the number of directors may not be less than five nor more than fifteen.
Preferred Stock
The authorized capital stock of HUBCO consists of 53,045,000 shares of
HUBCO Common Stock and 10,300,000 shares of preferred stock. As of May 31, 1998,
28,491,159 shares of HUBCO Common Stock were issued and outstanding, and 500
shares of HUBCO Series B Preferred Stock were outstanding. Under the terms of
the HUBCO Certificate of Incorporation, 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."
The authorized capital stock of IBSF consists of 20,000,000 shares of
IBSF Common Stock and 5,000,000 shares of serial preferred stock, $.01 par value
per share ("IBSF Preferred Stock"). As of April 30, 1998, 10,960,978 shares of
IBSF Common Stock were issued and outstanding and no shares of IBSF Preferred
Stock were issued and outstanding. Under the terms of the IBSF Certificate of
Incorporation, the IBSF Board has authority at any time to divide any or all of
the authorized but unissued shares of IBSF 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.
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.
The IBSF Certificate of Incorporation provides that the IBSF Board of
Directors shall be divided into four classes as nearly equal in number as
possible, with one class to be elected annually for a four-year term.
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.
HUBCO's By-laws provide that a special meeting of shareholders may be called for
any purpose by the Chairman of the Board, the President or the Board of
Directors.
The IBSF Certificate of Incorporation provides that any action required
to be taken at a meeting of shareholders or any action permitted to be taken at
a meeting of shareholders may be taken without a meeting if consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
who would be entitled to vote at a meeting. Except as otherwise required by the
NJBCA, the IBSF Certificate provides that special meetings of shareholders may
be called only by (1) the Board of Directors by the affirmative vote of
two-thirds of the whole Board of Directors and a majority of the directors
unaffiliated with any Related Person, (2) the Chairman of the Board or (3) the
President of IBSF.
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 March 31, 1998, HUBCO had
approximately $104.0 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."
IBSF's Bylaws provide that dividends may be declared by the Board of
Directors and paid by IBSF out of the unreserved and unrestricted earned surplus
of IBSF, subject to the conditions and limitations imposed by the NJBCA. Based
on IBSF's earned surplus at March 31, 1998, IBSF had approximately $33.4 million
available for dividends to shareholders at such date. However, funds for the
payment of dividends by IBSF are primarily derived from dividends from the
Association to IBSF. As a result, restrictions on the ability of the Association
to pay dividends act as restrictions on the amount of funds available for the
payment of dividends by IBSF.
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. The
HUBCO Certificate does not reserve such power.
The IBSF Certificate of Incorporation provides that IBSF's Bylaws may
be altered, amended or repealed by the affirmative vote of (1) two-thirds of the
whole Board of Directors of IBSF and a majority of the directors unaffiliated
with any Related Person, or (2) the holders of not less than 80% of the
outstanding Voting Shares and an Independent Majority of Stockholders.
Limitations of Liability of Directors and Officers
Under New Jersey law, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit a directors' or an officers' personal liability to the
corporation or its shareholders for monetary damage for breaches of their
fiduciary duty as a director or officer. 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.
IBSF's Certificate of Incorporation contains a provision which limits
the liability of directors and officers of IBSF to the full extent permitted by
New Jersey law.
Indemnification of Directors and Officers
The NJBCA provides that a corporation has the power to indemnify a
director, officer, employee or agent ("Corporate Agent") against his or her
expenses and liabilities in connection with any proceeding involving the
Corporate Agent by reason of his or her being or having been a Corporate Agent,
other than a proceeding by or in the right of the corporation, if: (i) the
Corporate Agent was acting in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation; and
(ii) with respect to any criminal proceeding, the Corporate Agent had no
reasonable cause to believe that his or her conduct was unlawful. A corporation
has the power to indemnify a Corporate Agent against his or her expenses in
connection with any proceeding by or in the right of the corporation to procure
a judgment in its favor which involves the Corporate Agent because he or she was
or is a Corporate Agent, if he or she acted in good faith and in a manner the
Corporate Agent reasonably believed to be in or not opposed to the best
interests of the corporation.
HUBCO's Certificate of Incorporation provides that HUBCO shall
indemnify its current and former officers, directors, employees and agents
against expenses incurred in connection with any pending or threatened action,
suit, or proceeding, with respect to which the officer, director, employee or
agent is a party, or is threatened to be made a party, to the full extent
permitted by the NJBCA. HUBCO maintains directors' and officers' liability
insurance on behalf of such persons.
The IBSF Certificate of Incorporation provides that IBSF shall
indemnify its current and former officers, directors, employees and agents
against expenses, judgments, fines, taxes and amounts paid in settlement
incurred in connection with any threatened, pending or completed action, suit,
or proceeding, with respect to which the officer, director, employee or agent is
a party, or is threatened to be made party, to the full extent permitted by the
NJBCA. The IBSF Certificate also provides for the advancement of expenses. IBSF
maintains directors' and officers' liability insurance on behalf of such
persons.
SHAREHOLDER PROPOSALS
The Merger may be consummated prior to the 1998 Annual Meeting of
Shareholders of IBSF, in which event there would be no IBSF Annual Meeting. If
IBSF holds a 1998 Annual Meeting of Shareholders, unless such 1998 meeting is
delayed, any proposal which a IBSF shareholder wishes to have included in the
proxy materials of IBSF must have been presented to IBSF not later than March 5,
1998. No such proposal was received prior to such date.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of IBSF to vote the proxy with respect to the approval of the
minutes of the last meeting of stockholders, matters incident to the conduct of
the meeting, and upon such other matters as may properly come before the
Meeting. Management is not aware of any business that may properly come before
the Meeting other than the matters described above in this Proxy Statement.
However, if any other matters should properly come before the meeting, it is
intended that the proxies solicited hereby will be voted with respect to those
other matters in accordance with the judgment of the persons voting the proxies.
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of HUBCO
Common Stock offered hereby will be passed upon by Pitney, Hardin, Kipp & Szuch,
counsel to HUBCO. Attorneys in the law firm of Pitney, Hardin, Kipp & Szuch,
beneficially owned 792 shares of HUBCO Common Stock as of June 2, 1998. Certain
legal matters in connection with the Merger will be passed upon for IBSF by
Elias, Matz, Tiernan & Herrick L.L.P., counsel to IBSF.
EXPERTS
The consolidated financial statements incorporated by reference in this
Registration Statement from IBSF's Annual Report on Form 10-K for the year ended
September 30, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of HUBCO as of December 31, 1997
and 1996 and for each of the years in the three year period ended December 31,
1997, 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.
Deloitte & Touche 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
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 31, 1998
("Agreement"), is among HUBCO, Inc. ("HUBCO"), a New Jersey corporation and
registered bank holding company, Hudson United Bank (the "Bank"), a New Jersey
state-chartered commercial banking corporation and wholly-owned subsidiary of
HUBCO, IBS Financial Corp., a New Jersey corporation and registered savings and
loan holding company ("IBSF"), and Inter-Boro Savings and Loan Association, a
New Jersey state-chartered savings and loan association and wholly-owned
subsidiary of IBSF (the "Association").
RECITALS
The respective Boards of Directors of HUBCO and IBSF have each
determined that it is in the best interests of HUBCO and IBSF and their
respective shareholders for HUBCO to acquire IBSF by merging IBSF with and into
HUBCO with HUBCO surviving and IBSF shareholders receiving the consideration
hereinafter set forth. Immediately after the merger of IBSF into HUBCO, the
Association shall be merged with and into the Bank with the Bank surviving.
The respective Boards of Directors of IBSF, HUBCO, the Bank
and the Association have each duly adopted and approved this Agreement and the
Board of Directors of IBSF has directed that it be submitted to IBSF's
shareholders for approval.
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 IBSF Common Stock (as hereinafter defined) and, simultaneously with the
execution of this Agreement, IBSF is issuing an option to HUBCO (the "HUBCO
Stock Option") to purchase certain shares of the authorized and unissued IBSF
Common Stock subject to the terms and conditions set forth in the Agreement
governing the HUBCO Stock Option.
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I - THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereafter defined), IBSF shall be merged
with and into HUBCO (the "Merger") in accordance with the New Jersey Business
Corporation Act (the "NJBCA") and HUBCO shall be the surviving corporation (the
"Surviving Corporation").
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall be considered the same business and corporate entity
as each of HUBCO and IBSF and thereupon and thereafter, all the property,
rights, privileges, powers and franchises of each of HUBCO and IBSF shall vest
in the Surviving Corporation and the Surviving Corporation shall be subject to
and be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of HUBCO and IBSF and shall have succeeded to all of each of
their relationships, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, liabilities, obligations, duties
and relationships had been originally acquired, incurred or entered into by the
Surviving Corporation. In addition, any reference to either of HUBCO and IBSF in
any contract or document, whether executed or taking effect before or after the
Effective Time, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of HUBCO or IBSF is
a party shall not be deemed to have abated or to have discontinued by reason of
the Merger, but may be prosecuted to final judgment, order or decree in the same
manner as if the Merger had not been made; or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of HUBCO or IBSF if the Merger had not occurred.
1.3. Certificate of Incorporation. As of the Effective Time,
the certificate of incorporation of HUBCO shall be the certificate of
incorporation of the Surviving Corporation until otherwise amended as provided
by law.
1.4. Bylaws. As of the Effective Time, the Bylaws of HUBCO
shall be the Bylaws of the Surviving Corporation until otherwise amended as
provided by law.
1.5. Directors and Officers. As of the Effective Time, the
directors and officers of HUBCO shall be the directors and officers of the
Surviving Corporation.
1.6 Closing, Closing Date, Determination Date 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 IBSF, which date (the "Closing Date")
shall be not less than seven nor more than 10 business days following the
receipt of all necessary regulatory, governmental and shareholder approvals and
consents and the expiration of all statutory waiting periods in respect thereof
and the satisfaction or waiver of all of the conditions to the consummation of
the Merger specified in Article VI hereof (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing). 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 the later of (i) the first date on which all
federal bank regulatory approvals (and waivers, if applicable) necessary for
consummation of the Merger have been received and either party has notified the
other in writing that all such approvals (and waivers, if applicable) have been
received, or (ii) the date of the Shareholders Meeting (as such term is defined
in Section 5.7 hereof). Simultaneous with or immediately following the Closing,
HUBCO and IBSF shall cause to be filed a certificate of merger, in form and
substance satisfactory to HUBCO and IBSF, with the Secretary of State of the
State of New Jersey (the "Certificate of Merger"). The Certificate of Merger
shall specify the "Effective Time" of the Merger, which Effective Time shall be
a date and time following the Closing agreed to by HUBCO and IBSF (which date
and time the parties currently anticipate will be the close of business on the
Closing Date). In the event the parties fail to specify the date and time in the
Certificate of Merger, the Merger shall become effective upon (and the
"Effective Time" shall be) the time of the filing of the Certificate of Merger.
1.7 The Bank Merger. Immediately following the Effective Time,
the Association shall be then merged with and into the Bank (the "Bank Merger")
in accordance with the provisions of the New Jersey Banking Act of 1948, as
amended (the "Banking Act"). In the Bank Merger, the Bank shall be the surviving
bank (the "Surviving Bank"). Upon the consummation of the Bank Merger, the
separate existence of the Association shall cease and the Surviving Bank shall
be considered the same business and corporate entity as each of the Association
and the Bank and all of the property, rights, privileges, powers and franchises
of each of the Association and the Bank shall vest in the Surviving Bank and the
Surviving Bank shall be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Association and the Bank and shall have
succeeded to all or each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property, rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Bank. Upon the consummation
of the Bank Merger, the certificate of incorporation and Bylaws of the Bank
shall be the certificate of incorporation and Bylaws of the Surviving Bank and
the officers and directors of the Bank shall be the officers and directors of
the Surviving Bank, except as provided in Section 5.20 hereof. Following the
execution of this Agreement, the Association and the Bank shall execute and
deliver a merger agreement (the "Bank Merger Agreement"), both in form and
substance reasonably satisfactory to the parties hereto, substantially as set
forth in Exhibit 1.7 hereto, for delivery to the Commissioner of the New Jersey
Department of Banking and Insurance (the "Department") and the Federal Deposit
Insurance Corporation (the "FDIC") for approval of the Bank Merger.
ARTICLE II - CONVERSION OF IBSF SHARES
2.1. Conversion of IBSF Common Stock. Each share of common
stock, par value $.01 per share, of IBSF ("IBSF Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than Excluded Shares,
as hereinafter defined) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted as follows:
(a) Exchange of Common Stock; Exchange Ratio. Subject
to the provisions of this Section 2.1, each share of IBSF Common Stock issued
and outstanding immediately prior to the Effective Time (other than Excluded
Shares) shall be converted at the Effective Time into the right to receive 0.534
shares (the "Exchange Ratio") of Common Stock, no par value, of HUBCO ("HUBCO
Common Stock") subject to adjustment as provided in Section 2.1(c) or in Section
7.1(i) and subject to the payment of cash in lieu of fractional shares in
accordance with Section 2.2(e).
(b) Cancellation of IBSF Certificates. After the
Effective Time, all such shares of IBSF Common Stock (other than those canceled
pursuant to Section 2.1(d)) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares (other than those canceled
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 IBSF Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of IBSF Common Stock except as otherwise provided herein
or by law. Such certificates previously evidencing such shares of IBSF Common
Stock (other than those canceled 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
Median Pre-Closing Price shall be correspondingly adjusted to reflect such stock
dividend, stock split, reclassification, recapitalization, merger, combination
or exchange of shares.
(d) Excluded Shares. All shares of IBSF Common Stock
held by IBSF in its treasury or owned by HUBCO or by any of HUBCO's wholly-owned
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)
immediately prior to the Effective Time ("Excluded Shares") shall be canceled.
2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, HUBCO shall
deposit, or shall cause to be deposited, with Hudson United Bank, Trust
Department or another bank or trust company designated by HUBCO and reasonably
acceptable to IBSF (the "Exchange Agent"), for the benefit of the holders of
shares of IBSF 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 Sections 2.1 and 2.2(b). 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, but in any event no later than five
business days 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 IBSF
Common Stock (the "Certificates"), (i) a letter of transmittal (the form and
substance of which is reasonably agreed to by HUBCO and IBSF prior to the
Effective Time and which 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 which shall have such other
provisions as HUBCO may reasonably specify) and (ii) instructions for effecting
the surrender of the Certificates in exchange for certificates evidencing shares
of HUBCO Common Stock and cash in lieu of fractional shares. 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 (x) 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 IBSF Common Stock formerly evidenced by such
Certificate in accordance with Section 2.1 (as adjusted pursuant to Section
7.1(i) if applicable) and (y) cash in lieu of fractional shares of HUBCO Common
Stock to which such holder may be entitled pursuant to Section 2.2(e) (the
shares of HUBCO Common Stock and cash described in clauses (x) and (y) being
collectively referred to as the "Merger Consideration") and the Certificates so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of IBSF Common Stock which is not registered in the transfer records
of IBSF, 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 IBSF 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 (or a suitable affidavit of
loss and customary bond). 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 Merger Consideration to which such
holder is entitled pursuant to Section 2.2(b) and the amount of dividends or
other distributions with a record date on or after the Effective Time
theretofore paid with respect to the shares of HUBCO Common Stock to which such
holder is entitled, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date on or 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.
(d) No Further Rights in IBSF Common Stock. All shares of
HUBCO Common Stock issued and cash paid upon conversion of the shares of IBSF
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
IBSF Common Stock.
(e) No Fractional Shares; Median Pre-Closing Price. 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, based upon the Median Pre-Closing Price per whole share of HUBCO
Common Stock. 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. (The Nasdaq Stock Market, or such
other national securities exchange on which HUBCO Common Stock may be traded
after the date hereof, is referred to herein as "Nasdaq")
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of IBSF Common Stock for two
years after the Effective Time shall be delivered to HUBCO, upon demand, and any
holders of IBSF Common Stock who have not theretofore complied with this Article
II shall thereafter look only to HUBCO for the Merger Consideration, dividends
and distributions to which they are entitled.
(g) No Liability. Neither HUBCO, the Bank nor the Exchange
Agent shall be liable to any holder of shares of IBSF 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 funds
provided by the holder or from the consideration otherwise payable pursuant to
this Agreement to any holder of IBSF Common Stock, the minimum amounts (if any)
that HUBCO is required to deduct and withhold with respect to the making of such
payment under the Code (as defined in Section 3.8), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by HUBCO,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of IBSF 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 IBSF shall be closed and there shall be no further
registration of transfers of shares of IBSF Common Stock thereafter on the
records of IBSF. 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. IBSF Stock Options. Other than the HUBCO Stock Option,
all options which may be exercised for issuance of IBSF Common Stock (each, a
"Stock Option" and collectively the "Stock Options") are described in the IBSF
Disclosure Schedule and are issued and outstanding pursuant to the IBSF 1995
Stock Option Plan (the "IBSF Stock Option Plan") and the agreements pursuant to
which such Stock Options were granted (each, an "Option Grant Agreement"). HUBCO
acknowledges and agrees to honor the provisions of the IBSF Stock Option Plan
and the Option Grant Agreements, including those relating to vesting and
conversion in connection with a change in control of IBSF. Each Stock Option
outstanding at the Effective Time (each, a "Continuing Stock Option") shall be
converted into an option to purchase HUBCO Common Stock, wherein (i) the right
to purchase shares of IBSF Common Stock pursuant to the Continuing Stock Option
shall be converted into the right to purchase that same number of shares of
HUBCO Common Stock multiplied by the Exchange Ratio, (ii) the option exercise
price per share of HUBCO Common Stock shall be the previous option exercise
price per share of the IBSF Common Stock divided by the Exchange Ratio, and
(iii) in all other material respects the option shall be subject to the same
terms and conditions as governed the Continuing Stock Option on which it was
based, including the length of time within which the option may be exercised
(which shall not be extended except that the holder of a Stock Option who
continues in the service of HUBCO or a subsidiary of HUBCO shall not be deemed
to have terminated service for purposes of determining the Continuing Stock
Option exercise period) and for all Continuing Stock Options, such adjustments
shall be and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code (as defined in Section 3.8 hereof). Shares of HUBCO
Common Stock issuable upon exercise of Continuing Stock Options shall be covered
by an effective registration statement on Form S-8, and HUBCO shall use its
reasonable best efforts to file a registration statement on Form S-8 covering
such shares as soon as possible after the Effective Time.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF IBSF
References herein to "IBSF 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 IBSF to HUBCO.
IBSF hereby represents and warrants to HUBCO as follows:
3.1. Corporate Organization
(a) IBSF is a corporation duly organized and validly existing
under the laws of the State of New Jersey. IBSF 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 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 or qualified would not have a material adverse effect on the
business, operations, assets or financial condition of IBSF and the IBSF
Subsidiaries (as defined below), taken as a whole. IBSF is registered as a
savings and loan holding company under the Home Owners' Loan Act, as amended
(the "HOLA").
(b) Each IBSF Subsidiary and its jurisdiction of incorporation
is listed in the IBSF Disclosure Schedule. For purposes of this Agreement, the
term "IBSF Subsidiary" means any corporation, partnership, joint venture or
other legal entity in which IBSF, directly or indirectly, owns at least a 50%
stock or other equity interest or for which IBSF, directly or indirectly, acts
as a general partner, provided that to the extent that any representation or
warranty set forth herein covers a period of time prior to the date of this
Agreement, the term "IBSF Subsidiary" shall include any entity which was a IBSF
Subsidiary at any time during such period. The Association is a New Jersey
state-chartered savings and loan association duly organized and validly existing
in stock form under the laws of the State of New Jersey. All eligible accounts
of depositors issued by the Association are insured by the Savings Association
Insurance Fund of the FDIC (the "SAIF") to the fullest extent permitted by law.
Each IBSF 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 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 or qualified
would not have a material adverse effect on the business, operations, assets or
financial condition of IBSF and the IBSF Subsidiaries, taken as a whole.
(c) The IBSF Disclosure Schedule sets forth true and complete
copies of the Certificate of Incorporation and Bylaws, as in effect on the date
hereof, of IBSF and each IBSF Subsidiary. Except as set forth in Disclosure
Schedule 3.1(b), the Association and IBSF do not own or control, directly or
indirectly, any equity interest in any corporation, company, association,
partnership, joint venture or other entity.
3.2. Capitalization. The authorized capital stock of IBSF
consists of 25,000,000 shares of IBSF Common Stock. As of March 27, 1998, there
were 10,959,674 shares of IBSF Common Stock issued and outstanding and 650,049
treasury shares. As of March 27, 1998, there were 1,275,503 shares of IBSF
Common Stock issuable upon exercise of outstanding stock options. The IBSF
Disclosure Schedule contains (i) a list of all Stock Options, their strike
prices and expiration dates, and (ii) true and complete copies of the IBSF Stock
Option Plan and a specimen of each form of Option Grant Agreement pursuant to
which any outstanding Stock Option was granted, including a list of each
outstanding Stock Option issued pursuant thereto. All Stock Options will be
fully vested on the Closing Date, in each case in accordance with the terms of
the IBSF Stock Option Plan and Option Grant Agreements pursuant to which such
Stock Options were granted. All issued and outstanding shares of IBSF Common
Stock, and all issued and outstanding shares of capital stock of each IBSF
Subsidiary, have been duly authorized and validly issued, are fully paid,
nonassessable and free of preemptive rights and are free and clear of any liens,
encumbrances, charges, restrictions or rights of third parties imposed by IBSF
or any IBSF Subsidiary. Except for the Stock Options listed on the IBSF
Disclosure Schedule and the HUBCO Stock Option, neither IBSF nor the Association
has granted nor is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the transfer,
purchase, subscription or issuance of any shares of capital stock of IBSF or the
Association or any securities representing the right to purchase, subscribe or
otherwise receive any shares of such capital stock or any securities convertible
into any such shares, and there are no agreements or understandings with respect
to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by all applicable regulatory authorities and by
the shareholders of IBSF, and except as set forth in the IBSF Disclosure
Schedule, IBSF and the Association have the full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the directors of IBSF and the
Association in accordance with their respective Certificate of Incorporation and
Bylaws and applicable laws and regulations. Except for such approvals, no other
corporate proceedings not otherwise contemplated hereby on the part of IBSF or
the Association are necessary to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by IBSF and the
Association, and constitutes a valid and binding obligation of each of IBSF and
the Association, enforceable against IBSF and the Association in accordance with
its terms, except to the extent that enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, conservatorship,
receivership or other similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally or the rights of
creditors of New Jersey state-chartered savings and loan associations or their
holding companies, (ii) general equitable principles, and (iii) laws relating to
the safety and soundness of insured depository institutions and except that no
representation is made as to the effect or availability of equitable remedies or
injunctive relief.
(b) Neither the execution and delivery of this Agreement by
IBSF or the Association, nor the consummation by IBSF or the Association of the
transactions contemplated hereby in accordance with the terms hereof, or
compliance by IBSF or the Association with any of the terms or provisions
hereof, will (i) violate any provision of IBSF's or the Association's
Certificate of Incorporation or Bylaws, (ii) assuming that the consents and
approvals set forth below are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to IBSF, the Association or any of their respective properties or
assets, or (iii) except as set forth in the IBSF Disclosure Schedule, violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
other encumbrance upon any of the respective properties or assets of IBSF or the
Association 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 IBSF or the Association is a party, or by
which they or any of their respective properties or assets may be bound or
affected except, with respect to (ii) and (iii) above, such as individually or
in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of IBSF and the IBSF Subsidiaries,
taken as a whole, and which will not prevent or materially delay the
consummation of the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the Board of
Governors of the Federal Reserve System (the "FRB"), the FDIC, the Office of
Thrift Supervision (the "OTS"), the Department, the New Jersey Department of
Environmental Protection (the "DEP") (if required), the Securities and Exchange
Commission (the "SEC"), and the shareholders of IBSF, 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 IBSF or the Association in
connection with (x) the execution and delivery by IBSF of this Agreement and (y)
the consummation by IBSF of the Merger, and the consummation by IBSF and the
Association of the other transactions contemplated hereby, except (i) such as
are listed in the IBSF Disclosure Schedule and (ii) such 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 IBSF and the IBSF
Subsidiaries taken as a whole or prevent or materially delay the consummation of
the transactions contemplated hereby. To the best of IBSF's knowledge, no fact
or condition exists which IBSF has reason to believe will prevent it and the
Association from obtaining the aforementioned consents and approvals.
3.4. Financial Statements.
(a) The IBSF Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of IBSF as of September 30, 1996
and 1997, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows for the periods ended September 30, in
each of the three fiscal years 1995 through 1997, in each case accompanied by
the audit report of Deloitte & Touche LLP, independent public accountants with
respect to IBSF ("D&T"), and the unaudited consolidated statement of condition
of IBSF as of December 31, 1997 and the related unaudited consolidated
statements of income and cash flows for the three months ended December 31, 1997
and 1996, as reported in IBSF's Quarterly Report on Form 10-Q, filed with the
SEC under the Securities Exchange Act of 1934, as amended ("1934 Act")
(collectively, the "IBSF Financial Statements"). The IBSF Financial Statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved (except as may be indicated therein or in the notes thereto), and
fairly present the consolidated financial condition of IBSF as of the respective
dates set forth therein, and the related consolidated statements of income,
changes in stockholders' equity and cash flows fairly present the results of the
consolidated operations, changes in shareholders' equity and cash flows of IBSF
for the respective periods set forth therein.
(b) The books and records of IBSF and each of its Subsidiaries
are being maintained in material compliance with applicable legal and accounting
requirements.
(c) Except as and to the extent reflected, disclosed or
reserved against in the IBSF Financial Statements (including the notes thereto),
as of December 31, 1997, neither IBSF nor any IBSF Subsidiary had any
liabilities, whether absolute, accrued, contingent or otherwise, material to the
business, operations, assets or financial condition of IBSF and the IBSF
Subsidiaries, taken as a whole which were required by GAAP (consistently
applied) to be disclosed in IBSF's consolidated statement of condition as of
December 31, 1997 or the notes thereto. Since December 31, 1997, neither IBSF
nor any IBSF Subsidiary has incurred any liabilities except in the ordinary
course of business and consistent with prudent business practice, except as
related to the transactions contemplated by this Agreement or except as set
forth in the IBSF Disclosure Schedule.
3.5. Broker's and Other Fees. Except for Ryan, Beck & Co.,
Inc. ("Ryan, Beck"), neither IBSF nor any of its Subsidiaries nor any of their
respective directors or officers has employed any broker or finder or incurred
any liability for any broker's or finder's fees or commissions in connection
with any of the transactions contemplated by this Agreement. The agreement with
Ryan, Beck is set forth in the IBSF Disclosure Schedule. Other than pursuant to
the agreement with Ryan, Beck, 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 IBSF or any its Subsidiaries.
3.6. Absence of Certain Changes or Events.
(a) Except as disclosed in the IBSF Disclosure Schedule, there
has not been any IBSF Material Adverse Change (as hereinafter defined) since
December 31, 1997 and to the best of IBSF's knowledge, no fact or condition
exists which IBSF believes will cause such an IBSF Material Adverse Change in
the future. "IBSF Material Adverse Change" means any change which is material
and adverse to the consolidated financial condition, results of operations,
business or assets of IBSF and the IBSF Subsidiaries taken as a whole, other
than (i) a change in the value of the respective investment and loan portfolios
of IBSF and the IBSF Subsidiaries as the result of a change in interest rates
generally, (ii) a change occurring after the date hereof in any federal or state
law, rule or regulation or in GAAP, which change affects savings institutions
generally, (iii) reasonable expenses incurred in connection with this Agreement
and the transactions contemplated hereby, (iv) payments to executive officers or
other employees of IBSF or the Association pursuant to agreements or
arrangements with such persons, which agreements or arrangements are included in
the IBSF Disclosure Schedule, or (v) actions or omissions of IBSF or any IBSF
Subsidiary either specifically permitted by this Agreement or taken with the
prior written consent of HUBCO in contemplation of the transactions contemplated
hereby (including without limitation any actions taken by IBSF or the
Association pursuant to Section 5.15 of this Agreement).
(b) Except as set forth in the IBSF Disclosure Schedule,
neither IBSF nor any IBSF Subsidiary has taken or permitted any of the actions
set forth in Section 5.2 hereof between December 31, 1997 and the date hereof
and, except for execution of this Agreement, and the other documents
contemplated hereby, IBSF and each IBSF Subsidiary has conducted their
respective businesses only in the ordinary course, consistent with past
practice.
3.7. Legal Proceedings. Except as disclosed in the IBSF
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of IBSF and the IBSF Subsidiaries, neither IBSF nor any IBSF
Subsidiary is a party to any, and there are no pending or, to the best of IBSF's
knowledge, threatened legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against IBSF or any
IBSF Subsidiary which, if decided adversely to IBSF or any IBSF Subsidiary, are
reasonably likely to have a material adverse effect on the business, operations,
assets or financial condition of IBSF and the IBSF Subsidiaries taken as a
whole. Except as disclosed in the IBSF Disclosure Schedule, neither IBSF nor any
IBSF Subsidiary is a party to any order, judgment or decree entered in any
lawsuit or proceeding which is material to IBSF or such IBSF Subsidiary.
3.8. Taxes and Tax Returns.
(a) IBSF and each IBSF Subsidiary 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 on or before the
Effective Time 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) or against which reserves have been established. IBSF and each
IBSF Subsidiary 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
IBSF or such IBSF Subsidiary through such date. None of the federal or state
income tax returns of IBSF or any IBSF Subsidiary have been examined by the
Internal Revenue Service (the "IRS") or the New Jersey Division of Taxation
within the past six years. To the best knowledge of IBSF, except as disclosed in
the IBSF Disclosure Schedule, 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 IBSF or any IBSF
Subsidiary, nor has IBSF or any IBSF Subsidiary given any currently outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to any taxes or Returns.
(b) Neither IBSF nor any IBSF Subsidiary (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 except as disclosed in the IBSF Disclosure Schedule, (iii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a voluntary
change in accounting method initiated by IBSF or such IBSF Subsidiary (nor does
IBSF 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.
(c) Neither IBSF nor any IBSF Subsidiary has any tax loss
carryforwards.
3.9. Employee Benefit Plans.
(a) Except as set forth on the IBSF Disclosure Schedule,
neither IBSF nor any IBSF Subsidiary maintains or contributes to any "employee
pension benefit plan" (the "IBSF Pension Plans") within the meaning of such term
in Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "employee welfare benefit plan" (the "IBSF Welfare Plans")
within the meaning of such term in Section 3(1) of ERISA, stock option plan,
stock purchase plan, deferred compensation plan, severance plan, bonus plan,
employment agreement, director retirement program or other similar plan, program
or arrangement. Neither IBSF nor any IBSF Subsidiary has, since September 2,
1974, contributed to any "Multiemployer Plan," within the meaning of Section
3(37) of ERISA.
(b) IBSF has previously delivered to HUBCO, and included in
the IBSF Disclosure Schedule, a complete and accurate copy of each of the
following with respect to each of the IBSF Pension Plans and IBSF Welfare Plans,
if any: (i) plan document, summary plan description, and summary of material
modifications (if not available, a detailed description of the foregoing); (ii)
trust agreement or insurance contract, if any; (iii) most recent IRS
determination letter, if any; (iv) most recent actuarial report, if any; and (v)
most recent annual report on Form 5500.
(c) The present value of all accrued benefits, both vested and
non-vested, under each of the IBSF Pension Plans subject to Title IV of ERISA,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial valuation prepared by such IBSF Pension Plan's actuary, did not
exceed the then current value of the assets of such plans allocable to such
accrued benefits. To the best of IBSF's knowledge, the actuarial assumptions
then utilized for such plans were reasonable and appropriate as of the last
valuation date and reflect then current market conditions.
(d) During the last six years, the Pension Benefit Guaranty
Corporation ("PBGC") has not asserted any claim for liability against IBSF or
any IBSF Subsidiary 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 IBSF Pension Plan
have been paid. All contributions required to be made to each IBSF 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 IBSF which have not
been paid have been properly recorded on the books of IBSF.
(f) Except as disclosed in the IBSF Disclosure Schedule, each
of the IBSF Pension Plans, IBSF Welfare Plans and each other employee benefit
plan and arrangement identified on the IBSF Disclosure Schedule has been
operated in compliance in all material respects with the provisions of ERISA,
the Code, all regulations, rulings and announcements promulgated or issued
thereunder, and all other applicable governmental laws and regulations.
Furthermore, except as disclosed in the IBSF Disclosure Schedule, if IBSF
maintains any IBSF Pension Plan, IBSF has received or applied for a favorable
determination letter from the IRS which takes into account the Tax Reform Act of
1986 and (to the extent it mandates currently applicable requirements)
subsequent legislation, and IBSF is not aware of any fact or circumstance which
would disqualify any plan.
(g) To the best knowledge of IBSF, 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 IBSF Welfare Plan or IBSF Pension Plan
that would result in any material tax or penalty for IBSF or any IBSF
Subsidiary.
(h) No IBSF Pension Plan or any trust created thereunder has
been terminated, nor have there been any "reportable events" (notice of which
has not been waived by the PBGC), within the meaning of Section 4034(b) of
ERISA, with respect to any IBSF Pension Plan.
(i) No "accumulated funding deficiency," within the meaning of
Section 412 of the Code, has been incurred with respect to any IBSF Pension
Plan.
(j) There are no material pending, or, to the best knowledge
of IBSF, material threatened or anticipated claims (other than routine claims
for benefits) by, on behalf of, or against any of the IBSF Pension Plans or the
IBSF Welfare Plans, any trusts created thereunder or any other plan or
arrangement identified in the IBSF Disclosure Schedule.
(k) Except as disclosed in the IBSF Disclosure Schedule, no
IBSF Pension Plan or IBSF 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 pursuant to conversion or
continuation rights set out in such Plan or an insurance policy providing
benefits thereunder, or (ii) death benefits under any IBSF Pension Plan.
(l) Except with respect to customary health, life and
disability benefits, there are no unfunded benefit obligations which are not
accounted for by reserves shown on the IBSF Financial Statements and established
in accordance with GAAP.
(m) With respect to each IBSF Pension Plan and IBSF Welfare
Plan that is funded wholly or partially through an insurance policy, there will
be no liability of IBSF or any IBSF Subsidiary 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 (i) for payments and other benefits due pursuant to
the employment agreements included within the IBSF Disclosure Schedule, and (ii)
as set forth in the IBSF Disclosure Schedule, or as expressly agreed to by HUBCO
in writing either pursuant to this Agreement or otherwise, or as required by
law, the consummation of the transactions contemplated by this Agreement will
not (x) entitle any current or former employee of IBSF or any IBSF Subsidiary to
severance pay, unemployment compensation or any similar payment, or (y)
accelerate the time of payment or vesting, or increase the amount of any
compensation or benefits due to any current or former employee under any IBSF
Pension Plan or IBSF Welfare Plan.
(o) Except for the IBSF Pension Plans and the IBSF Welfare
Plans, and except as set forth on the IBSF Disclosure Schedule, IBSF has no
deferred compensation agreements, understandings or obligations for payments or
benefits to any current or former director, officer or employee of IBSF or any
IBSF Subsidiary or any predecessor of any thereof. The IBSF Disclosure Schedule
sets forth: (i) true and complete copies of the agreements, understandings or
obligations with respect to each such current or former director, officer or
employee, and (ii) the most recent actuarial or other calculation of the present
value of such payments or benefits.
(p) Except as set forth in the IBSF Disclosure Schedule, IBSF
does not maintain or otherwise pay for life insurance policies (other than group
term life policies on employees) with respect to any director, officer or
employee. The IBSF Disclosure Schedule lists each such insurance policy and
includes a copy of each agreement with a party other than the insurer with
respect to the payment, funding or assignment of such policy. To the best of
IBSF `s knowledge, neither IBSF nor any IBSF Pension Plan or IBSF Welfare Plan
owns any individual or group insurance policies issued by an insurer which has
been found to be insolvent or is in rehabilitation pursuant to a state
proceeding.
(q) Except as set forth in the IBSF Disclosure Schedule, IBSF
does not maintain any retirement plan or retiree medical plan or arrangement for
directors. The IBSF Disclosure Schedule sets forth the complete documentation
and actuarial evaluation of any such plan.
3.10. Reports.
(a) The IBSF Disclosure Schedule lists, and as to item (i)
below IBSF has previously delivered to HUBCO a complete copy of, each (i) final
registration statement, prospectus, annual, quarterly or current report and
definitive proxy statement filed by IBSF since January 1, 1996 pursuant to the
Securities Act of 1933, as amended ("1933 Act"), or the 1934 Act and (ii)
communication (other than general advertising materials and press releases)
mailed by IBSF to its shareholders as a class since January 1, 1996, 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) Since January 1, 1996, (i) IBSF has filed all reports that
it was required to file with the SEC under the 1934 Act, and (ii) IBSF and the
Association each has duly filed all material forms, reports and documents which
it was required to file with each agency charged with regulating any aspect of
its business, in each case in form which was correct in all material respects,
and, subject to permission from such regulatory authorities, IBSF promptly will
deliver or make available to HUBCO accurate and complete copies of such reports.
As of their respective dates, each such form, report, or document, and each such
final registration statement, prospectus, annual, quarterly or current report,
definitive proxy statement or communication, 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 contained in any such document as of a later date
shall be deemed to modify information as of an earlier date. The IBSF Disclosure
Schedule lists the dates of all examinations of IBSF or the Association
conducted by either the FDIC or the OTS since January 1, 1996 and the dates of
any responses thereto submitted by IBSF or the Association.
3.11. IBSF and Association Information. The information
relating to IBSF and the Association, this Agreement, and the transactions
contemplated hereby (except for information relating solely to HUBCO) to be
contained in the Proxy Statement-Prospectus (as defined in Section 5.6(a)
hereof) to be delivered to shareholders of IBSF in connection with the
solicitation of their approval of the Merger, as of the date the Proxy
Statement-Prospectus is mailed to shareholders of IBSF, 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 IBSF Disclosure Schedule, IBSF and each IBSF Subsidiary holds all 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 IBSF or such IBSF
Subsidiary (including, without limitation, consumer, community and fair lending
laws) (other than where the failure to have a license, franchise, permit or
authorization or where such default or noncompliance will not result in a
material adverse effect on the business, operations, assets or financial
condition of IBSF and the IBSF Subsidiaries taken as a whole) and IBSF has not
received notice of violation of, and does not know of any violations of, any of
the above.
3.13. Certain Contracts.
(a) Except for plans referenced in Section 3.9 and disclosed
in the IBSF Disclosure Schedule, (i) neither IBSF nor any IBSF Subsidiary is a
party to or bound by any written contract or any understanding 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 IBSF or
any IBSF Subsidiary to any officer, employee, director or consultant thereof.
The IBSF Disclosure Schedule sets forth true and correct copies of all severance
or employment agreements with officers, directors, employees, agents or
consultants to which IBSF or any IBSF Subsidiary is a party.
(b) Except as disclosed in the IBSF Disclosure Schedule and
except for loan commitments, loan agreements and loan instruments entered into
or issued by the Association in the ordinary course of business, (i) as of the
date of this Agreement, neither IBSF nor any IBSF Subsidiary is a party to or
bound by any commitment, agreement or other instrument which is material to the
business, operations, assets or financial condition of IBSF and the IBSF
Subsidiaries taken as a whole, (ii) no commitment, agreement or other instrument
to which IBSF or any IBSF Subsidiary is a party or by which either of them is
bound limits the freedom of IBSF or any IBSF Subsidiary to compete in any line
of business or with any person, and (iii) neither IBSF nor any IBSF Subsidiary
is a party to any collective bargaining agreement.
(c) Except as disclosed in the IBSF Disclosure Schedule,
neither IBSF nor any IBSF Subsidiary or, to the best knowledge of IBSF, any
other party thereto, is in default in any material respect under any material
lease, contract, mortgage, promissory note, deed of trust, loan or other
commitment (except those under which the Association 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 IBSF and the IBSF Subsidiaries, taken as a whole.
3.14. Properties and Insurance.
(a) Except as set forth in the IBSF Disclosure Schedule, IBSF
or a IBSF Subsidiary 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 IBSF's consolidated balance sheet as of December 31,
1997, 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, 1997), 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 IBSF and the IBSF Subsidiaries taken as a whole and (iv) with
respect to owned real property, title imperfections noted in title reports
delivered to HUBCO prior to the date hereof. Except as affected by the
transactions contemplated hereby, IBSF or one or more of its Subsidiaries as
lessees have the right under valid and subsisting leases to occupy, use, possess
and control all real property leased by IBSF and such Subsidiaries in all
material respects as presently occupied, used, possessed and controlled by IBSF
and its Subsidiaries.
(b) Except as set forth in the IBSF Disclosure Schedule, the
business operations and all insurable properties and assets of IBSF and each
IBSF Subsidiary are insured for their benefit against all risks which, in the
reasonable judgment of the management of IBSF, 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 IBSF adequate for the business
engaged in by IBSF and the IBSF Subsidiaries. As of the date hereof, neither
IBSF nor any IBSF Subsidiary 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. The IBSF
Disclosure Schedule sets forth in summary form a list of all insurance policies
of IBSF and the IBSF Subsidiaries.
3.15. Minute Books. The minute books of IBSF and the IBSF
Subsidiaries contain records of all meetings and other corporate action held of
their respective shareholders and Boards of Directors (including committees of
their respective Boards of Directors) that are complete and accurate in all
material respects.
3.16. Environmental Matters. Except as set forth in the IBSF
Disclosure Schedule:
(a) Neither IBSF nor any IBSF Subsidiary has received any
written notice, citation, claim, assessment, proposed assessment or demand for
abatement alleging that IBSF or such IBSF Subsidiary (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 IBSF and the IBSF Subsidiaries taken as a whole. IBSF has no
knowledge that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any real property owned or leased by IBSF or
any IBSF Subsidiary, as OREO or otherwise, or owned or controlled by IBSF or any
IBSF Subsidiary as a trustee or fiduciary (collectively, "Properties"), in any
manner that violates any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials, the
violation of which would have a material adverse effect on the business,
operations, assets or financial condition of IBSF and the IBSF Subsidiaries,
taken as a whole. Except as described in the IBSF Disclosure Schedule, none of
the Properties is located in the State of New Jersey or the State of
Connecticut.
(b) IBSF has no knowledge that any of the Properties has 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 toxic or hazardous substances and materials, the violation of
which would have a material adverse effect on the business, operations, assets
or financial condition of IBSF and the IBSF Subsidiaries taken as a whole.
(c) To the best of IBSF's knowledge, IBSF, each IBSF
Subsidiary and any and all of their 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 that require the permit or
registration.
(d) To the knowledge of IBSF, 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 IBSF or any IBSF Subsidiary.
3.17. Reserves. As of December 31, 1997, the allowance for
loan losses in the IBSF Financial Statements was adequate pursuant to GAAP
(consistently applied), and the methodology used to compute the loan loss
reserve complies in all material respects with GAAP (consistently applied) and
all applicable policies of the OTS. As of December 31, 1997, the reserve for
OREO properties (or if no reserve, the carrying value of OREO properties) in the
IBSF Financial Statements was adequate pursuant to GAAP (consistently applied),
and the methodology used to compute the reserve for OREO properties (or if no
reserve, the carrying value of OREO properties) complies in all material
respects with GAAP (consistently applied) and all applicable policies of the
OTS.
3.18. No Parachute Payments. Except as set forth in the IBSF
Disclosure Schedule, no officer, director, employee or agent (or former officer,
director, employee or agent) of IBSF or any IBSF Subsidiary 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 IBSF, a IBSF Subsidiary, HUBCO or any HUBCO
Subsidiary which if paid or provided would constitute an "excess parachute
payment", as defined in Section 280G of the Code or regulations promulgated
thereunder.
3.19. Agreements with Bank Regulators. Neither IBSF nor any
IBSF Subsidiary is a party to any agreement or memorandum of understanding with,
or a party to any commitment letter, board resolution submitted to a regulatory
authority or similar undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from, any court,
governmental authority or other regulatory or administrative agency or
commission, domestic or foreign ("Governmental Entity") which restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, its credit or reserve policies or its management, except for those the
existence of which has been disclosed in writing to HUBCO by IBSF prior to the
date of this Agreement, nor has IBSF been advised by any Governmental Entity
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment letter
or similar submission, except as disclosed in writing to HUBCO by IBSF prior to
the date of this Agreement. Neither IBSF nor any IBSF Subsidiary is required by
Section 32 of the Federal Deposit Insurance Act to give prior notice to a
Federal banking agency of the proposed addition of an individual to its board of
directors or the employment of an individual as a senior executive officer,
except as disclosed in writing to HUBCO by IBSF prior to the date of this
Agreement.
3.20. Year 2000 Compliance. IBSF and the IBSF Subsidiaries
have taken all reasonable steps necessary to address the software, accounting
and record keeping issues raised in order for the data processing systems used
in the business conducted by IBSF and the IBSF Subsidiaries to be substantially
Year 2000 compliant on or before the end of 1999 and, except as set forth in the
IBSF Disclosure Schedule, IBSF does not expect the future cost of addressing
such issues to be material. Neither IBSF nor any IBSF Subsidiary has received a
rating of less than satisfactory from any bank regulatory agency with respect to
Year 2000 compliance.
3.21. Accounting for the Merger: Reorganization. As of the
date hereof, after reviewing the terms of this Agreement, the stock repurchases
by HUBCO and IBSF, and the employee benefit plans of IBSF and the Association
with IBSF's independent auditors, IBSF does not have any reason to believe that
the Merger will fail to qualify (i) for pooling-of-interests accounting
treatment under GAAP, or (ii) as a reorganization under Section 368(a) of the
Code.
3.22. 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 IBSF. HUBCO hereby represents and warrants to IBSF 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 and the HUBCO 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 (the "BHCA").
(b) Each HUBCO Subsidiary is listed in the HUBCO Disclosure
Schedule. For purposes of this Agreement, the term "HUBCO Subsidiary" means any
corporation, partnership, joint venture or other legal entity in which HUBCO
directly or indirectly, owns at least a 50% stock or other equity interest or
for which HUBCO, directly or indirectly, acts as a general partner provided that
to the extent that any representation or warranty set forth herein covers a
period of time prior to the date of this Agreement, the term "HUBCO Subsidiary"
shall include any entity which was an HUBCO Subsidiary at any time during such
period. Each HUBCO Subsidiary is duly organized and validly existing under the
laws of the jurisdiction of its incorporation. The Bank is a state-chartered
commercial banking corporation duly organized and validly existing under the
laws of the State of New Jersey. Lafayette American Bank and Trust Company
("Lafayette") is duly organized and validly existing under the laws of the State
of Connecticut. All eligible accounts of depositors issued by the Bank and
Lafayette are insured by the Bank Insurance Fund of the FDIC ("BIF") to the
fullest extent permitted by law. Each HUBCO 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 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 or qualified would not have a material adverse effect on the
business, operations, assets or financial condition of HUBCO and the HUBCO
Subsidiaries, taken as a whole. The HUBCO Disclosure Schedule sets forth true
and complete copies of the Certificate of Incorporation and Bylaws of HUBCO as
in effect on the date hereof.
4.2. Capitalization. The authorized capital stock of HUBCO
consists of 53,045,000 common shares, no par value ("HUBCO Common Stock"), and
10,300,000 shares of preferred stock ("HUBCO Authorized Preferred Stock"). As of
March 26, 1998, there were 22,648,970 shares of HUBCO Common Stock issued and
outstanding, and no shares of treasury stock, and 1,000 shares of HUBCO
Authorized Preferred Stock outstanding, all of which were 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 the HUBCO 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 any
HUBCO Subsidiary 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
any HUBCO Subsidiary 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) Subject to the receipt of all necessary governmental
approvals, HUBCO 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 Board of Directors of HUBCO in accordance with its
Certificate of Incorporation and applicable laws and regulations. Except for
such approvals, no other corporate proceedings on the part of HUBCO are
necessary to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by HUBCO and constitutes a valid
and binding obligation of HUBCO, enforceable against HUBCO in accordance with
its terms, except to the extent that enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, conservatorship,
receivership or other similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally or the rights of
creditors of bank holding companies, (ii) general equitable principles, and
(iii) laws relating to the safety and soundness of insured depository
institutions and except that no representation is made as to the effect or
availability of equitable remedies or injunctive relief..
(b) Neither the execution or delivery of this Agreement by
HUBCO, nor the consummation by HUBCO of the transactions contemplated hereby in
accordance with the terms hereof, or compliance by HUBCO with any of the terms
or provisions hereof will (i) violate any provision of the Certificate of
Incorporation or Bylaws of HUBCO, (ii) assuming that the consents and approvals
set forth below are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to HUBCO, any
HUBCO Subsidiary, or any of their respective properties or assets, or (iii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
HUBCO or any HUBCO Subsidiary under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which HUBCO is a party, or by which it or
any of their properties or assets may be bound or affected, except, with respect
to (ii) and (iii) above, such as individually or in the aggregate will not have
a material adverse effect on the business, operation, assets or financial
condition of HUBCO and the HUBCO Subsidiaries, taken as a whole, and which will
not prevent or materially 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 FRB, the OTS, the SEC, the
Department, or the Secretary of State of New Jersey, and the possible need under
the Nasdaq rules to obtain HUBCO shareholder approval, no consents or approvals
of or filings or registrations with or notices to any third party or any public
body or authority are necessary on behalf of HUBCO in connection with (x) the
execution and delivery by HUBCO of this Agreement, and (y) the consummation by
HUBCO 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, operation, assets
or financial condition of HUBCO and the HUBCO 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 it from obtaining the aforementioned consents and
approvals.
4.4. Financial Statements.
(a) The HUBCO Disclosure Schedule sets forth copies of the
consolidated statements of financial condition of HUBCO as of December 31, 1996
and 1997, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows for the periods ended December 31, in
each of the three fiscal years 1995 through 1997, in each case accompanied by
the audit report of Arthur Andersen LLP ("Arthur Andersen"), independent public
accountants with respect to HUBCO (collectively, the "HUBCO Financial
Statements"). The HUBCO Financial Statements (including the related notes) have
been prepared in accordance with GAAP consistently applied during the periods
involved (except as may be indicated therein or in the notes thereto), and
fairly present the consolidated financial position of HUBCO as of the respective
dates set forth therein, and the related consolidated statements of income,
changes in stockholders' equity and of cash flows (including the related notes,
where applicable) fairly present the consolidated results of operations, changes
in stockholders' equity and cash flows of HUBCO for the respective fiscal
periods set forth therein.
(b) The books and records of HUBCO and the HUBCO Subsidiaries
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 December 31, 1997 neither HUBCO nor any of the HUBCO
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 the HUBCO Subsidiaries which were
required by GAAP (consistently applied) to be disclosed in HUBCO's consolidated
statement of condition as of December 31, 1997 or the notes thereto. Except for
the transactions contemplated by this Agreement, and the other proposed
acquisitions by HUBCO reflected in any Form 8-K filed by HUBCO with the SEC
since December 31, 1997, neither HUBCO nor any HUBCO Subsidiary has incurred any
liabilities since December 31, 1997 except in the ordinary course of business
and consistent with past practice (including for other pending or contemplated
acquisitions).
4.5. Broker's and Other 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 HUBCO Material Adverse Change since December 31, 1997 and to the best of
HUBCO's knowledge, no facts or condition exists which HUBCO believes will cause
a HUBCO Material Adverse Change in the future. "HUBCO Material Adverse Change"
means any change which is material and adverse to the consolidated financial
condition, results of operations, business or assets of HUBCO and the HUBCO
Subsidiaries taken as a whole, other than (i) a change in the value of the
respective investment and loan portfolios of HUBCO and the HUBCO Subsidiaries as
the result of a change in interest rates generally, (ii) a change occurring
after the date hereof in any federal or state law, rule or regulation or in
GAAP, which change affects banking institutions generally, (iii) reasonable
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, (iv) changes resulting from acquisitions by HUBCO or any
HUBCO Subsidiary pending on the date hereof and known to IBSF, other than
changes resulting from facts not disclosed to, or otherwise known by, IBSF on or
prior to the date hereof, or (v) the entry, after the date hereof, by HUBCO or
any HUBCO Subsidiary into an agreement to acquire another entity.
4.7 Legal Proceedings. Except as disclosed in the HUBCO
Disclosure Schedule, and except for ordinary routine litigation incidental to
the business of HUBCO or its Subsidiaries, neither HUBCO nor any of its
Subsidiaries is a party to any, and there are no pending or, to the best of
HUBCO's knowledge, threatened legal, administrative, arbitral or other
proceedings, claims, actions or governmental investigations of any nature
against HUBCO or any of its Subsidiaries which, if decided adversely to HUBCO or
its Subsidiaries, are reasonably likely to have a material adverse effect on the
business, operations, assets or financial condition of HUBCO or its
Subsidiaries, taken as a whole. Except as disclosed in the HUBCO Disclosure
Schedule, neither HUBCO nor any of its Subsidiaries is a party to any order,
judgment or decree entered in any lawsuit or proceeding which is material to
HUBCO or its Subsidiaries.
4.8 Reports. Since January 1, 1996, 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, 1996, HUBCO and each HUBCO
Subsidiary has 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.
4.9 HUBCO Information. The information relating to HUBCO and
its Subsidiaries (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 stockholders of IBSF to which such Proxy Statement-Prospectus
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement shall comply as to form in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
rules and regulations promulgated thereunder.
4.10 Compliance With Applicable Law. 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 (including without limitation consumer,
community and fair lending laws) (other than where such default or noncompliance
will not result in a material adverse effect on the business, operations, assets
or financial condition of HUBCO and HUBCO's Subsidiaries taken as a whole) and
HUBCO has not received notice of violation of, and does not know of any
violations of, any of the above.
4.11 Funding and Capital Adequacy. At the Effective Time,
after giving pro forma effect to the Merger and any other acquisition which
HUBCO or its Subsidiaries have agreed to consummate, HUBCO will be deemed "well
capitalized" under prompt corrective action regulatory capital requirements.
4.12 HUBCO Common Stock. As of the date hereof, HUBCO has
available and reserved shares of HUBCO Common Stock sufficient for issuance
pursuant to the Merger and upon the exercise of Stock Options subsequent
thereto. The HUBCO Common Stock to be issued hereunder pursuant to the Merger,
and upon exercise of the Stock Options, when so issued, 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 hereunder pursuant to the Merger, and upon exercise of
the Stock Options, when so issued, will be registered under the 1933 Act and
issued in accordance with all applicable state and federal laws, rules and
regulations, and will be approved or listed for trading on Nasdaq.
4.13 Agreements with Bank Regulators. Neither HUBCO nor any
HUBCO Subsidiary 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 IBSF 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 IBSF by HUBCO prior to the date of this Agreement. Neither HUBCO
nor any HUBCO Subsidiary 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 IBSF
by HUBCO prior to the date of this Agreement.
4.14 Taxes and Tax Returns.
(a) HUBCO and HUBCO's subsidiaries have duly filed (and until
the Effective Time will so file) all Returns required to be filed by them in
respect of any federal, state and local taxes (including withholding taxes,
penalties or other payments required) and have duly paid (and until the
Effective Time will so pay) all such taxes due and payable, other than taxes or
other charges which are being contested in good faith (and disclosed to IBSF 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
through such date. The HUBCO Disclosure Schedule identifies the federal income
tax returns of HUBCO and its 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 and its
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 or its Subsidiaries, nor has HUBCO or its 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 any 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 any of its Subsidiaries (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.
4.15 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) HUBCO is not aware of any fact or circumstance which would
disqualify any HUBCO Pension Plan or HUBCO Welfare 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 six 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 material 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.
4.16 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.
4.17 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, 1997, 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, 1997), 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.
4.18. 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.
4.19 Reserves. As of December 31, 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,
Connecticut Department of Banking and New Jersey Department of Banking policies.
As of December 31, 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.
4.20. Year 2000 Compliance. HUBCO and the HUBCO Subsidiaries
have taken all reasonable steps necessary to address the software, accounting
and record keeping issues raised in order for the data processing systems used
in the business conducted by HUBCO and the HUBCO Subsidiaries to be
substantially Year 2000 compliant on or before the end of 1999 and HUBCO does
not expect the future cost of addressing such issues to be material. Neither
HUBCO nor any HUBCO Subsidiary has received a rating of less than satisfactory
from any bank regulatory agency with respect to Year 2000 compliance.
4.21 Accounting for the Merger; Reorganization. As of the date
hereof, after reviewing the terms of this Agreement, the stock repurchases by
HUBCO and IBSF, and the employee benefit plans of IBSF and the Association with
HUBCO's independent auditors, HUBCO does not have any reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests treatment under GAAP,
or (ii) as a reorganization under Section 368(a) of the Code. As of the date
hereof, neither HUBCO nor any HUBCO Subsidiary owns any shares of IBSF Common
Stock.
4.22 No Approval of HUBCO's Shareholders Currently Required.
Based upon laws and regulations applicable to HUBCO and currently in effect,
including the rules, regulations and policies of the NASD, as of the date of
this Agreement, assuming that HUBCO's pending acquisitions of MSB Bancorp and
Poughkeepsie Financial Corp. are consummated prior to closing the Merger,
neither approval of this Agreement by the shareholders of HUBCO nor approval of
the transactions contemplated hereby by the shareholders of HUBCO will be
required.
4.23 Disclosure. 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 IBSF. During the period from
the date of this Agreement to the Effective Time, IBSF and the Association
shall, and shall cause each IBSF Subsidiary to, conduct their respective
businesses only in the ordinary course and consistent with prudent business
practice, except for transactions permitted hereunder or with the prior written
consent of HUBCO, which consent will not be unreasonably withheld. Each of IBSF
and the Association also shall use its reasonable best efforts to (i) preserve
its business organization and that of the IBSF Subsidiaries intact, (ii) keep
available to itself and the IBSF Subsidiaries the present services of their
respective employees, and (iii) preserve for itself and HUBCO the goodwill of
its customers and those of the IBSF Subsidiaries and others with whom business
relationships exist.
5.2. Negative Covenants. From the date hereof to the Effective
Time, except as otherwise approved by HUBCO in writing, or as set forth in the
IBSF Disclosure Schedule, or as permitted or required by this Agreement, neither
IBSF nor the Association will:
(a) change any provision of its Certificate of Incorporation
or any similar governing documents;
(b) change any provision of its Bylaws without the consent of
HUBCO which consent shall not be unreasonably withheld;
(c) change the number of shares of its authorized or issued
capital stock (other than upon exercise of stock options or warrants
described on the IBSF Disclosure Schedule in accordance with the terms
thereof) 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; provided,
however, that from the date hereof to the Effective Time, IBSF may
declare, set aside or pay dividends on the IBSF Common Stock in a
quarterly amount equal to $0.10 per share, with the dividend payment
dates to be coordinated with HUBCO, it being the intention of the
parties that the shareholders of IBSF receive dividends for any
particular calendar quarter on either the IBSF Common Stock or the
HUBCO Common Stock acquired in exchange therefor pursuant to the terms
of this Agreement but not both; provided, further, that nothing
contained herein shall be deemed to affect the ability of the
Association to pay dividends on its capital stock to IBSF;
(d) grant any severance or termination pay (other than
pursuant to policies or contracts of IBSF in effect on the date hereof
and disclosed to HUBCO in the IBSF Disclosure Schedule) to, or enter
into or amend any employment or severance agreement with, any of its
directors, officers or employees; adopt any new employee benefit plan
or arrangement of any type; or award any increase in compensation or
benefits to its directors, officers or employees except in each case
(i) as required by law or (ii) as specified in Section 5.2 of the IBSF
Disclosure Schedule;
(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 the business of
IBSF or the Association;
(f) make any capital expenditures in excess of $50,000 in the
aggregate, other than pursuant to binding commitments existing on the
date hereof, expenditures necessary to maintain existing assets in good
repair and expenditures described in business plans or budgets
previously furnished to HUBCO, except as set forth in Section 5.2 of
the IBSF Disclosure Schedule;
(g) file any applications or make any contract 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 or
make any new investments in securities other than investments in
government, municipal or agency bonds having a maturity of less than
five years;
(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 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;
(k) without first conferring with HUBCO, make or commit to
make any new loan or other extension of credit in an amount of $500,000
or more, renew for a period in excess of one year any existing loan or
other extension of credit in an amount of $500,000 or more, or increase
by $500,000 or more the aggregate credit outstanding to any borrower or
group of affiliated borrowers except such loan initiations, renewals or
increases that are committed as of the date of this Agreement and
identified on the IBSF Disclosure Schedule and residential mortgage
loans made in the ordinary course of business in accordance with past
practice; or
(l) agree to do any of the foregoing.
5.3. No Solicitation. So long as this Agreement remains in
effect, IBSF and the Association 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 IBSF or the
Association (an "Acquisition Transaction"). Notwithstanding the foregoing, IBSF
may enter into discussions or negotiations or provide information in connection
with an unsolicited possible Acquisition Transaction if the Board of Directors
of IBSF, 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. IBSF shall 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 IBSF 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, IBSF
agrees to provide HUBCO, and HUBCO agrees to provide IBSF, with internally
prepared profit and loss statements no later than 25 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), IBSF will deliver to HUBCO and HUBCO will deliver to IBSF
their respective quarterly reports on Form 10-Q, as filed with the SEC under the
1934 Act. As soon as reasonably available, but in no event more than 90 days
after the end of each calendar year, IBSF will deliver to HUBCO and HUBCO will
deliver to IBSF their respective Annual Reports on Form 10-K as filed with the
SEC under the 1934 Act.
5.5. Access to Properties and Records; Confidentiality.
(a) IBSF and the Association shall permit HUBCO and its
representatives, and HUBCO shall permit, and cause each HUBCO Subsidiary to
permit, IBSF and its representatives, reasonable access to their respective
properties, and shall disclose and make available to HUBCO and its
representatives, or IBSF 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, Bylaws,
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
IBSF 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 reasonable 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, IBSF acknowledges that HUBCO may be involved in
discussions concerning other potential acquisitions and HUBCO shall not be
obligated to disclose such information to IBSF 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 reasonable 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 (as
such term is defined in Section 5.7 hereof), and qualifying under applicable
federal and state securities laws the HUBCO Common Stock to be issued to IBSF
shareholders in connection with the Merger, the parties hereto shall cooperate
in the preparation and filing by HUBCO with the SEC of a Registration Statement
including a combined proxy statement and prospectus satisfying all applicable
requirements of applicable state and federal laws, including the 1933 Act, the
1934 Act and applicable state securities laws and the rules and regulations
thereunder (such proxy statement and prospectus in the form mailed by IBSF and
HUBCO to the IBSF 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 IBSF with such information concerning
HUBCO and its Subsidiaries (including, without limitation, information regarding
other transactions which HUBCO is required to disclose) 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 IBSF if at any time prior to the Shareholders' Meeting any information
provided by HUBCO in the Proxy Statement-Prospectus becomes incorrect or
incomplete in any material respect and promptly to provide IBSF with the
information needed to correct such inaccuracy or omission. HUBCO shall promptly
furnish IBSF with such supplemental information as may be necessary in order to
cause the Proxy Statement-Prospectus, insofar as it relates to HUBCO and the
HUBCO Subsidiaries, to comply with Section 5.6(a) after the mailing thereof to
IBSF shareholders.
(c) IBSF shall furnish HUBCO with such information concerning
IBSF as is necessary in order to cause the Proxy Statement-Prospectus, insofar
as it relates to IBSF, to comply with Section 5.6(a) hereof. IBSF agrees
promptly to advise HUBCO if at any time prior to the Shareholders' Meeting, any
information provided by IBSF in the Proxy Statement-Prospectus becomes incorrect
or incomplete in any material respect and promptly to provide HUBCO with the
information needed to correct such inaccuracy or omission. IBSF shall promptly
furnish HUBCO with such supplemental information as may be necessary in order to
cause the Proxy Statement-Prospectus, insofar as it relates to IBSF and the
Association to comply with Section 5.6(a) after the mailing thereof to IBSF
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. IBSF shall promptly furnish HUBCO with such
information regarding the IBSF shareholders as HUBCO requires to enable it to
determine what filings are required hereunder. IBSF authorizes HUBCO to utilize
in such filings the information concerning IBSF and the Association provided to
HUBCO in connection with, or contained in, the Proxy Statement-Prospectus. HUBCO
shall furnish IBSF's counsel with copies of all such filings and keep IBSF
advised of the status thereof. HUBCO and IBSF shall as promptly as practicable
file the Registration Statement containing the Proxy Statement-Prospectus with
the SEC, and each of HUBCO and IBSF shall promptly notify the other of all
communications, oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement-Prospectus.
(e) HUBCO shall cause the HUBCO Common Stock issuable pursuant
to the Merger to be listed on Nasdaq at the Effective Time. HUBCO shall cause
the HUBCO Common Stock which shall be issuable pursuant to exercise of Stock
Options to be accepted for listing on Nasdaq when issued.
(f) The parties hereto will cooperate with each other and use
their reasonable best efforts to prepare all necessary documentation, to effect
all necessary filings and to obtain all necessary permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary to
consummate the transactions contemplated by this Agreement as soon as possible,
including, without limitation, those required by the FDIC, the FRB, the OTS, the
Department and (if required) the DEP. Without limiting the foregoing, the
parties shall use reasonable business efforts to file for approval or waiver by
the appropriate bank regulatory agencies within 45 days after the date hereof.
The parties shall each have the right to review in advance (and shall do so
promptly) all filings with, including all information relating to the other, as
the case may be, and any of their respective subsidiaries, which appears in any
filing made with, or written material submitted to, any third party or
Governmental Entity in connection with the transactions contemplated by this
Agreement.
(g) Each of the parties will promptly furnish each other with
copies of written communications received by them or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
(h) IBSF 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 IBSF 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. IBSF
agrees to provide HUBCO with any information, certificates, documents or other
materials about IBSF 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. IBSF 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 for any such acquisition or issuance of securities.
HUBCO shall reimburse IBSF for reasonable expenses thus incurred by IBSF should
this transaction be terminated for any reason. HUBCO shall not file with the SEC
any registration statement or amendment thereto or supplement thereof containing
information regarding IBSF unless IBSF shall have consented in writing to such
filing, which consent shall not be unreasonably delayed or withheld.
(i) Between the date of this Agreement and the Effective Time,
IBSF shall cooperate with HUBCO to reasonably conform IBSF's policies and
procedures regarding applicable regulatory matters to those of HUBCO, as HUBCO
may reasonably identify to IBSF from time to time.
5.7. Approval of Shareholders. IBSF will (i) take all steps
necessary duly to call, give notice of, convene and hold a meeting of the
shareholders of IBSF (the "Shareholders Meeting") for the purpose of securing
the approval of shareholders of this Agreement, (ii) 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 (x) its investment banker
withdraws its fairness opinion prior to the Shareholders' Meeting or (y) IBSF's
Board of Directors, after consulting with counsel, determines in the exercise of
its fiduciary duties that such recommendation should not be made or should be
withdrawn, recommend to the shareholders of IBSF the approval of this Agreement
and the transactions contemplated hereby and use its reasonable best efforts to
obtain, as promptly as practicable, such approval, and (iii) cooperate and
consult with HUBCO with respect to each of the foregoing matters.
If it becomes necessary under Nasdaq rules or applicable laws
to obtain HUBCO shareholder approval, HUBCO shall take all steps necessary to
obtain the approval of its shareholders as promptly as possible. In connection
therewith, HUBCO shall (i) take all steps necessary to duly call, give notice
and convene a meeting of its shareholders for such purpose, and (ii) subject to
the right not to make a recommendation or to withdraw a recommendation if
HUBCO's Board of Directors, after consulting with counsel, determines in the
exercise of its fiduciary duties that such recommendation should not be made or
should be withdrawn, recommend to the shareholders of HUBCO the approval of this
Agreement and the transactions contemplated hereby and use its reasonable best
efforts to obtain, as promptly as practicable, such approval.
5.8. Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to Closing and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement and using its reasonable best efforts to prevent
the breach of any representation, warranty, covenant or agreement of such party
contained or referred to in this Agreement and to promptly remedy the same. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Nothing in this section shall be construed to require any party to participate
in any threatened or actual legal, administrative or other proceedings (other
than proceedings, actions or investigations to which it is a party or subject or
threatened to be made a party or subject) in connection with consummation of the
transactions contemplated by this Agreement unless such party shall consent in
advance and in writing to such participation and the other party agrees to
reimburse and indemnify such party for and against any and all costs and damages
related thereto if the Merger is not consummated.
(b) HUBCO agrees that from the date hereof to the Effective
Time, except as otherwise approved by IBSF in writing or as permitted or
required by this Agreement, HUBCO will use reasonable business efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships, and HUBCO will not, nor will
it permit any HUBCO Subsidiary to, take any action: (i) 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, or prior to, the
Effective Time, or (ii) that would cause any of its conditions to Closing not to
be satisfied, or (iii) that would constitute a breach or default of its
obligations under this Agreement, or (iv) to declare, set aside, make or pay any
extraordinary cash dividend in excess of $0.40 per share of HUBCO Common Stock,
or (v) to enter into any agreement after the date hereof with respect to one or
more acquisitions that, individually or in the aggregate, can reasonably be
expected to materially adversely affect the ability of HUBCO to consummate the
Merger prior to the Cutoff Date (as such term is hereinafter defined), or (vi)
to agree to do any of the foregoing.
(c) HUBCO, the Bank, IBSF and the Association will use
reasonable efforts to cause the Merger to occur on or before October 31, 1998.
5.9. Public Announcements. HUBCO and IBSF shall cooperate with
each other in the development and distribution of all news releases and other
public filings and disclosures with respect to this Agreement or the Merger
transactions contemplated hereby, and HUBCO and IBSF 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 transactions
contemplated hereby, except as may be otherwise required by law or regulation
upon the advice of counsel.
5.10. Failure to Fulfill Conditions. In the event that HUBCO
or IBSF determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to December 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, IBSF and HUBCO will
promptly inform the other of any facts applicable to IBSF 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 Entity or
which would otherwise prevent or materially delay completion of the Merger.
5.11. Employee Matters.
(a) Following consummation of the Merger, HUBCO agrees with
IBSF to honor the existing written employment and severance contracts with
officers and employees of IBSF and Association that are included in the IBSF
Disclosure Schedule.
(b) Following consummation of the Merger, the Bank will decide
whether to continue each of the Association and/or IBSF's pension and welfare
plans for the benefit of employees of the Association and IBSF, or to have such
employees become covered under a HUBCO Pension and Welfare Plan. If HUBCO
decides to cover Association and IBSF employees under a HUBCO Pension and
Welfare Plan, such employees will receive credit for prior years of service with
the Association and/or IBSF for purposes of determining eligibility to
participate, and vesting, if applicable. No prior existing condition limitation
shall be imposed with respect to any medical coverage plan as a result of the
Merger.
(c) Any person who was serving as an employee of either IBSF
or the Association immediately prior to the Effective Time (other than those
employees covered by either a written employment agreement or the arrangements
set forth in Section 5.11 of the IBSF Disclosure Schedule) whose employment is
discontinued by HUBCO or the Bank or any of the HUBCO Subsidiaries within six
months after the Effective Time (unless termination of such employment is for
Cause (as defined below)) shall be entitled to a severance payment from the Bank
equal in amount to one week's base pay for each full year such employee was
employed by IBSF or the Association or any successor or predecessor thereto or
other IBSF Subsidiary, subject to a minimum of two weeks' severance and a
maximum of 25 weeks' severance, together with any accrued but unused vacation
leave with respect to the calendar year in which termination occurs. For
purposes of this Section 5.11, "Cause" shall mean termination because of the
employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties or willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses). Following the expiration of the foregoing
severance policy, any years of service recognized for purposes of this Section
5.11(c) will be taken into account under the terms of any applicable severance
policy of HUBCO.
(d)(i) Each participant in the IBS Financial Corp. Employee
Stock Ownership Plan ("IBSF ESOP") not fully vested will, in accordance with the
terms of the IBSF ESOP, become fully vested in his or her IBSF ESOP account as
of the Effective Time. As soon as practicable after the execution of this
Agreement, IBSF, the Association and HUBCO will cooperate to cause the IBSF ESOP
to be amended and other action taken, in a manner reasonably acceptable to IBSF
and HUBCO, to provide that the IBSF ESOP will terminate upon the Effective Time.
Between the date hereof and the Effective Time, the existing IBSF ESOP
indebtedness shall be paid in the ordinary course of business pursuant to the
existing loan amortization schedule and IBSF or the Association shall make such
contributions to the IBSF ESOP as necessary to fund such payments. Any
indebtedness of the IBSF ESOP remaining as of the Effective Time shall be repaid
from the Trust associated with the IBSF ESOP through application or sale of the
HUBCO Common Stock received by the IBSF ESOP; provided, however, that (A) any
related sale or distribution of shares by the IBSF ESOP shall be effected in
accordance with the requirements of federal and any applicable state securities
laws and regulations, including any rules of the NASD, (B) any related sale or
distribution of shares by the IBSF ESOP and any participant shall be effected in
such a manner (and with such safeguards as may be necessary or appropriate) so
as not to jeopardize the intended "pooling of interests" accounting treatment of
the Merger, and (C) all distributions from the IBSF ESOP after the Effective
Time shall be in shares of HUBCO Common Stock. Upon the repayment of the IBSF
ESOP loan, the remaining funds in the IBSF ESOP suspense account will be
allocated (to the extent permitted by Sections 401(a), 415 or 4975 of the Code
and the applicable laws and regulations including, without limitation, the
applicable provisions of ERISA) to IBSF ESOP participants (as determined under
the terms of the IBSF ESOP). IBSF and HUBCO agree that, subject to the
conditions described herein, as soon as practicable after the Effective Time and
repayment of the IBSF ESOP loan, participants in the IBSF ESOP shall be entitled
at their election to have the amounts in their IBSF ESOP accounts either
distributed to them in a lump sum or rolled over to another tax-qualified plan
(including HUBCO or Bank plans to the extent permitted by HUBCO) or individual
retirement account.
(ii) The actions relating to termination of the IBSF ESOP will
be adopted conditioned upon the consummation of the Merger and upon receiving a
favorable determination letter from the Internal Revenue Service ("IRS") with
regard to the continued qualification of the IBSF ESOP after any required
amendments. IBSF and HUBCO will cooperate in submitting appropriate requests for
any such determination letter to the IRS and will use their best efforts to seek
the issuance of such letter as soon as practicable following the date hereof.
IBSF and HUBCO will adopt such additional amendments to the IBSF ESOP as may be
reasonably required by the IRS as a condition to granting such determination
letter, provided that such amendments do not (A) substantially change the terms
outlined herein, (B) have a Material Adverse Change on IBSF or (C) result in an
additional material liability to HUBCO.
(iii) As of and following the Effective Time, HUBCO shall
cause the IBSF ESOP to be maintained for the exclusive benefit of employees and
other persons who were participants or beneficiaries therein prior to the
Effective Time and proceed with termination of the IBSF ESOP through
distribution of its assets in accordance with its terms subject to the
amendments described herein and as otherwise may be required to comply with
applicable law or to obtain a favorable determination from the IRS as to the
continuing qualified status of the IBSF ESOP, provided, however, that no such
termination distributions of the IBSF ESOP shall occur after the Effective Time
until a favorable termination letter has been received from the IRS. IBSF shall
cause the IBSF ESOP to be amended, effective as of the Effective Time, to
provide that the administrative committee thereof shall consist of four
individuals, two of whom are appointed by the Board of Directors of IBSF prior
to the Effective Time (the appointment of such individuals will be subject to
the prior consent of HUBCO, and such individuals after their appointment may not
be unreasonably removed or changed by HUBCO or its affiliates for a period of
two years after the Effective Time), and two of whom are appointed by HUBCO as
of the Effective Time.).
(e) As of and following the Effective Time, HUBCO shall cause
the Excess Benefit Plan of IBSF ("Excess Benefit Plan") to be maintained for the
exclusive benefit of its sole participant until the participant receives his
termination distribution from the IBSF ESOP at which time HUBCO shall cause the
Excess Benefit Plan to distribute amounts credited to his account in accordance
with the terms of the Excess Benefit Plan.
(f) Employees of IBSF and the Association who become employees
of HUBCO or any HUBCO Subsidiary shall become entitled to participate in HUBCO's
defined benefit pension plan in accordance with its terms. In this regard, each
such employee shall (i) receive, for purposes of participation and vesting only,
credit for all service with IBSF or the Association and (ii) enter the HUBCO
defined benefit pension plan on the entry date concurrent with or next following
the employee's satisfaction of such plan's minimum participation requirements.
(g) Employees of IBSF and the Association who become employees
of HUBCO or any HUBCO Subsidiary shall become entitled to participate in the
applicable HUBCO retirement savings plan ("401(k) Plan") in accordance with its
terms. In this regard, each such employee shall (i) receive, for purposes of
participation and vesting only, credit for all service with IBSF or the
Association, and (ii) enter the applicable 401(k) Plan on the entry date
concurrent with or next following the employee's satisfaction of such plan's
minimum participation requirements.
(h) Each participant in the IBSF Recognition and Retention
Plan ("RRP") not fully vested will, in accordance with the terms of the RRP,
become fully vested in Plan Share Awards thereunder as of the Effective Time. As
soon as practicable after the execution of this Agreement, IBSF, the Association
and HUBCO will cooperate to cause the RRP to be amended and other action taken,
in a manner reasonably acceptable to IBSF and HUBCO, to provide that the RRP
will terminate upon the Effective Time; provided, however, that (A) any
distribution of shares under the RRP shall be effected in accordance with the
requirements, if any, of federal and state securities laws and regulations, (B)
any distribution of shares under the RRP shall be effected in such a manner (and
with such safeguards as may be necessary or appropriate) so as not to jeopardize
the intended "pooling of interests" accounting treatment of the Merger, and (C)
all distributions from the RRP after the Effective Time shall be in shares of
HUBCO Common Stock. No action shall be taken that would adversely affect the
rights of plan participants who hold outstanding grants or awards of shares of
IBSF Common Stock, whether before or after the Effective Time. No further grants
or awards shall be made under the RRP following the date of this Agreement.
(i) IBSF and the Association may continue to administer such
bonus programs and arrangements as are disclosed pursuant to this Agreement
through the Effective Time, with such equitable modifications as may be
appropriate to take into account the circumstances of the Merger and the timing
thereof. In the event the Merger shall occur prior to the end of the current
fiscal year, bonuses shall be provided on a pro rata basis with respect to the
interim period; provided, however, that bonuses for such interim period, in the
aggregate, shall not exceed $50,000.
(j) Within ninety (90) days after the date hereof, HUBCO and
the Bank shall use their reasonable best efforts to inform the employees of IBSF
and the Association of the likelihood of such employees having continued
employment with HUBCO or a HUBCO Subsidiary following the Effective Time and,
where appropriate, shall use their reasonable best efforts to interview the IBSF
and Association employees to determine if there are mutually beneficial
employment opportunities available at HUBCO or a HUBCO Subsidiary. It is the
intent of HUBCO and the Bank in connection with reviewing applicants for
employment positions to give any IBSF and Association employee who is terminated
for other than Cause within six (6) months following the Effective Time the same
consideration as is afforded the Bank employees for such positions in accordance
with existing formal or informal polices for a period of six (6) months from
such date of termination.
(k) Each employee of IBSF or the Association identified in
Section 5.11 of the IBSF Disclosure Schedule shall be entitled to receive a
"retention" bonus from IBSF or the Association in the amount set forth in
Section 5.11 of the IBSF Disclosure Schedule in the event that such employee
remains an employee of IBSF or the Association, as applicable until the
Effective Time (or in certain cases, the date the systems conversion occurs
after the Effective Time) and satisfactorily fulfills the duties and
responsibilities of the position of such employee of IBSF or the Association, as
the case may be, through the Effective Time; provided that retention bonuses, in
the aggregate, shall not exceed $150,000.
(l) HUBCO shall pay the cost of out-placement services for
employees who are terminated without Cause in connection with the Merger within
six (6) months after the Effective Time. HUBCO shall not be obligated to pay any
out-placement fees in connection with the foregoing or more than $25,000 in the
aggregate for such services.
5.12. Disclosure Supplements. From time to time prior to the
Effective Time, each party hereto will promptly supplement or amend (by written
notice to the other) its respective Disclosure Schedules delivered pursuant
hereto with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement, would have been required to be
set forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered materially inaccurate
thereby. For the purpose of determining satisfaction of the conditions set forth
in Article VI and subject to Sections 6.2(a) and 6.3(a), no supplement or
amendment to the parties' respective Disclosure Schedules which corrects any
representation or warranty which was untrue when made shall eliminate the other
party's right (if any) to terminate this Agreement based on the original untruth
of the representation or warranty; provided, that the other party shall be
deemed to have waived such right if it does not exercise such right within 15
days after receiving the correcting supplement or amendment.
5.13. Transaction Expenses of IBSF.
(a) For planning purposes, IBSF shall, within 30 days from the
date hereof, provide HUBCO with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by IBSF in connection with this
transaction based on facts and circumstances then currently known, including the
fees and expenses of counsel, accountants, investment bankers and other
professionals. IBSF 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, IBSF shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. IBSF shall accrue and/or pay
all of such amounts as soon as possible.
(c) IBSF shall cause its professionals to render monthly
invoices within 15 days after the end of each month. IBSF shall advise HUBCO
monthly of all out-of-pocket expenses which IBSF has incurred in connection with
this transaction.
(d) HUBCO, in reasonable consultation with IBSF, shall make
all arrangements with respect to the printing and mailing of the Proxy
Statement-Prospectus.
5.14 Indemnification.
(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 IBSF or the Association or serves or has
served at the request of IBSF or the Association 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 by reason of the fact that he or she is or was a
director, officer, employee or agent of IBSF or the Association or serves or has
served at the request of IBSF or the Association in any capacity with any other
person, 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 IBSF or the Association or any of their respective
affiliates, or by any former or present shareholder of IBSF (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 the Board of Directors
of IBSF or the Association or of any committee of IBSF's or the Association'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, or (ii) the enforcement of the obligations of HUBCO set forth in this
Section 5.14, in each case to the fullest extent which IBSF or the Association
would have been permitted under any applicable law and their respective
Certificates of Incorporation or Bylaws had the Merger not occurred (and HUBCO
shall also advance expenses as incurred to the fullest extent so permitted).
Notwithstanding the foregoing, but subject to subsection (b) below, 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 IBSF or the Association immediately prior to the
Effective Time with respect to the indemnification of the Indemnitees arising
out of the Certificate of Incorporation or Bylaws of IBSF or the Association, or
arising out of any written indemnification agreements between IBSF and/or the
Association and such persons disclosed in the IBSF Disclosure Schedule, 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 5.14.
(d) HUBCO shall cause IBSF's and the Association's officers
and directors to be covered under HUBCO's then current officers' and directors'
liability insurance policy for a period of six years after the Effective Time,
or, in the alternative, to be covered under an extension of IBSF's and the
Association's existing officers' and directors' liability insurance policy.
However, HUBCO shall only be required to insure such persons upon terms and for
coverages substantially similar to IBSF's and the Association's existing
officers' and directors' liability insurance.
(e) Any Indemnitee wishing to claim indemnification under this
Section 5.14 shall promptly notify HUBCO upon learning of any Claim, 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 Claim (whether arising before or after the Effective Time) as to
which indemnification under this Section 5.14 is applicable, (x) 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 Indemnitee 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 Section 5.14(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 multiple Indemnitees would
present such counsel with a conflict of interest that is not waived, and (y) 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. Notwithstanding anything
to the contrary in this Section 5.14, 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.
5.15 Bank Policies and Bank Merger. Notwithstanding that IBSF
believes that it has established all reserves and taken all provisions for
possible loan losses required by GAAP and applicable laws, rules and
regulations, IBSF recognizes that HUBCO may have 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 Bank
Merger, IBSF and HUBCO shall consult and cooperate with each other with respect
to (i) conforming to the extent appropriate, based upon such consultation,
IBSF's loan, accrual and reserve policies and IBSF's other policies and
procedures regarding applicable regulatory matters, including without limitation
Federal Reserve, the Bank Secrecy Act and FDIC matters, to those policies of
HUBCO as HUBCO may reasonably identify to IBSF from time to time, (ii) new
extensions of credit or material revisions to existing terms of credits by the
Association, in each case where the aggregate exposure exceeds $500,000, and
(iii) conforming, based upon such consultation, the composition of the
investment portfolio and overall asset/liability management position of IBSF and
the Association to the extent appropriate; provided that any required change in
IBSF's practices in connection with the matters described in clause (i) or (iii)
above need not be effected (A) more than five days prior to the Effective Time
and (B) unless and until HUBCO agrees in writing that all conditions precedent
to the Determination Date have occurred and HUBCO has provided the Closing
Notice. No accrual or reserve made by IBSF or any IBSF Subsidiary pursuant to
this subsection, or any litigation or regulatory proceeding arising out of any
such accrual or reserve, shall constitute or be deemed to be a breach or
violation of any representation, warranty, covenant, condition or other
provision of this Agreement or to constitute a termination event within the
meaning of Section 7.1(d) or Section 7.1(g) hereof.
5.16 [Reserved]
5.17 Pooling and Tax-Free Reorganization Treatment. Before the
Effective Time, neither HUBCO nor IBSF 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" for accounting purposes or as
a "reorganization" within the meaning of Section 368(a) of the Code. Subsequent
to the Effective Time, HUBCO shall not take and shall cause the Surviving
Corporation not to take any action within their control that would disqualify
the Merger as such a "reorganization" under the Code.
5.18 Comfort Letters. HUBCO shall cause Arthur Andersen, its
independent public accountants, to deliver to IBSF, and IBSF shall cause D&T,
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 of IBSF,
in the form customarily issued by such accountants at such time in transactions
of this type.
5.19 Affiliates. Promptly, but in any event within two weeks,
after the execution and delivery of this Agreement, IBSF shall deliver to HUBCO
(a) a letter identifying all persons who, to the knowledge of IBSF, may be
deemed to be affiliates of IBSF under Rule 145 of the 1933 Act and the
pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of IBSF and (b) use its reasonable best efforts
to cause each person who may be deemed to be an affiliate of IBSF to execute and
deliver to HUBCO a letter agreement, substantially in the form of Exhibit
5.19-1, 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 use its reasonable best efforts to cause its
directors and executive officers to enter into letter agreements in the form of
Exhibit 5.19-2 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 post-Merger combined
operations of HUBCO and IBSF as soon as practicable (but in no event later than
30 days) following the close of the first calendar month ending 30 days after
the Effective Time, in form and substance sufficient to remove the restrictions
set forth in paragraph "B" of Exhibit 5.19-1.
5.20 Appointments. Joseph M. Ochman, Sr. shall be appointed as
a director of the Surviving Bank and Chairman of the Southern New Jersey
Advisory Council of the Surviving Bank at the Closing. Mr. Ochman will receive a
consulting contract for services to be rendered during a transitional period on
terms substantially similar to those set forth in Section 5.20 of the HUBCO
Disclosure Schedule, with the form of the consulting contract to be reasonably
acceptable to HUBCO and Mr. Ochman.
ARTICLE VI - CLOSING CONDITIONS
6.1. Conditions to 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 Shareholders; SEC Registration. This Agreement
and the transactions contemplated hereby shall have been approved by the
requisite vote of the shareholders of IBSF and, if required, by the requisite
vote of the shareholders of HUBCO. The HUBCO Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order or
any threatened stop order, and the issuance of the HUBCO Common Stock shall have
been qualified in every state where such qualification is required under the
applicable state securities laws.
(b) Regulatory Filings. All necessary regulatory or
governmental approvals and consents (including without limitation any required
approval of the FDIC, the OTS, the Department, the FRB, the SEC and (if
necessary) the DEP) required to consummate the transactions contemplated hereby
shall have been obtained without the imposition of any non-standard or
non-customary term or condition which would materially impair the value of IBSF
and the Association, taken as a whole, to HUBCO. All conditions required to be
satisfied prior to the Effective Time by the terms of such approvals and
consents shall have been satisfied; and all statutory waiting periods in respect
thereof (including the Hart-Scott-Rodino waiting period if applicable) shall
have expired.
(c) Suits and Proceedings. No order, judgment or decree shall
be outstanding against a party hereto or a third party that would have the
effect of preventing completion of the Merger; no suit, action or other
proceeding shall be pending or threatened by any Governmental Entity 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 Entity 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 IBSF 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 IBSF shall each have received an
opinion, dated as of the Effective Time, of Pitney, Hardin, Kipp & Szuch,
reasonably satisfactory in form and substance to IBSF and its counsel and to
HUBCO, based upon representation letters reasonably required by such counsel,
dated on or about the date of such opinion, and such other facts and
representations as such counsel may reasonably deem relevant, to the effect
that: (i) the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368 of the Code; (ii)
no gain or loss will be recognized by IBSF; (iii) no gain or loss will be
recognized by the IBSF shareholders upon the exchange of IBSF Common Stock
solely for HUBCO Common Stock; (iv) the tax basis of any HUBCO Common Stock
received in exchange for IBSF Common Stock shall equal the basis of the
recipient's IBSF Common Stock surrendered in the exchange, reduced by the amount
of cash received, if any, in the exchange, and increased by the amount of the
gain recognized, if any, in the exchange (whether characterized as dividend or
capital gain income); and (v) the holding period for any HUBCO Common Stock
received in exchange for IBSF Common Stock will include the period during which
IBSF Common Stock surrendered in the exchange was held, provided such stock was
held as a capital asset on the date of the exchange.
(e) Pooling of Interests. HUBCO shall have received a letter,
dated the Closing Date, from its accountants, Arthur Andersen, reasonably
satisfactory to HUBCO and IBSF, to the effect that, based on a review of this
Agreement and related agreements and the facts and circumstances known to it,
the Merger shall be qualified to be treated by HUBCO as a pooling-of-interests
for accounting purposes.
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 IBSF and the Association. Except for those representations which are made as
of a particular date, the representations and warranties of IBSF 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, except to the extent waived
pursuant to Section 5.12 hereof. IBSF 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 IBSF Disclosure
Schedule to render such representation or warranty true and correct in all
material respects as of the Closing Date, the representation and warranty shall
be deemed true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the Disclosure Schedule related to
events occurring following the execution of this Agreement and (ii) the facts
disclosed in such supplement or amendment would not either alone, or together
with any other supplements or amendments to the IBSF Disclosure Schedule,
materially adversely affect the representation as to which the supplement or
amendment relates.
(b) Opinion of Counsel. HUBCO shall have received an opinion
of counsel to IBSF, dated the Closing Date, in form and substance reasonably
satisfactory to HUBCO, substantially to the effect set forth in accordance with
Exhibit 6.2(b) hereto.
(c) Certificates. IBSF 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.
(d) Legal Fees. IBSF shall have furnished HUBCO with letters
from all attorneys representing IBSF and the Association in any matters
confirming that all material legal fees have been paid in full for services
rendered as of the Effective Time.
(e) Merger Related Expense. IBSF shall have provided HUBCO
with an accounting of all merger related expenses incurred by it through the
Closing Date, including a good faith estimate of such expenses incurred but as
to which invoices have not been submitted as of the Closing Date. The merger
related expenses of IBSF, other than printing expenses (which are within the
control of HUBCO), shall be reasonable, taking into account normal and customary
billing rates, fees and expenses for similar transactions.
6.3. Conditions to the Obligations of IBSF Under this
Agreement. The obligations of IBSF 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, except to the extent waived pursuant to
Section 5.12 hereof. HUBCO shall have performed in all material respects the
agreements, covenants and obligations to be performed by it prior to the Closing
Date. With respect to any representation or warranty which as of the Closing
Date has required a supplement or amendment to the HUBCO Disclosure Schedule to
render such representation or warranty true and correct in all material respects
as of the Closing Date, the representation and warranty shall be deemed true and
correct as of the Closing Date only if (i) the information contained in the
supplement or amendment to the Disclosure Schedule related to events occurring
following the execution of this Agreement and (ii) the facts disclosed in such
supplement or amendment would not either alone, or together with any other
supplements or amendments to the HUBCO Disclosure Schedule, materially adversely
affect the representation as to which the supplement or amendment relates.
(b) Opinion of Counsel to HUBCO. IBSF shall have received an
opinion of counsel to HUBCO, dated the Closing Date, in form and substance
reasonably satisfactory to IBSF, substantially to the effect set forth in
accordance with Exhibit 6.3(b) hereto.
(c) Fairness Opinion. IBSF shall have received an opinion from
Ryan, Beck, dated no more than three days prior to the date the Proxy
Statement-Prospectus is mailed to IBSF's shareholders (and if it shall become
necessary to resolicit proxies thereafter, dated no more than three days prior
to the date of any substantive amendment to the Proxy Statement-Prospectus), to
the effect that, in its opinion, the consideration to be paid to shareholders of
IBSF hereunder is fair to such shareholders from a financial point of view
("Fairness Opinion").
(d) Certificates. HUBCO shall have furnished IBSF with such
certificates of its officers and such other documents to evidence fulfillment of
the conditions set forth in this Section 6.3 as IBSF may reasonably request.
(e) Bank Director Appointment. Joseph M. Ochman, Sr. shall
have been appointed to the Board of Directors of the Bank and shall have been
appointed Chairman of the Southern New Jersey Advisory Council of the Surviving
Bank.
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 IBSF:
(a) by mutual written consent of the parties hereto;
(b) by HUBCO or IBSF (i) 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) if a vote of the
shareholders of IBSF is taken and such shareholders fail to approve this
Agreement at the meeting (or any adjournment or postponement thereof) held for
such purpose (provided that the terminating party shall not be in material
breach of any of its obligations under Section 5.7 hereof), or (iii) if a vote
of the shareholders of HUBCO is required by applicable Nasdaq rules, such vote
is taken and such shareholders fail to approve this Agreement at the meeting (or
any adjournment or postponement thereof) held for such purpose (provided that
the terminating party shall not be in material breach of any of its obligations
under Section 5.7 hereof);
(c) by HUBCO or IBSF 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 Entity or by HUBCO upon written notice to IBSF if any such
application is approved with conditions (other than conditions which are
customary or standard in such regulatory approvals) which would materially
impair the value of IBSF and the Association, taken as a whole, to HUBCO;
(d) by HUBCO if (i) there shall have occurred an IBSF Material
Adverse Change from that disclosed by IBSF in IBSF's Quarterly Report on Form
10-Q for the quarter ended December 31, 1997 (it being understood that those
matters disclosed in the IBSF Disclosure Schedule shall not be deemed to
constitute such a material adverse effect) or (ii) there was a material breach
in any representation, warranty, covenant, agreement or obligation of IBSF
hereunder and such breach shall not have been remedied within 30 days after
receipt by IBSF of notice in writing from HUBCO to IBSF specifying the nature of
such breach and requesting that it be remedied;
(e) by IBSF, if (i) there shall have occurred a HUBCO Material
Adverse Change from that disclosed by HUBCO in HUBCO's Annual Report on Form
10-K for the year ended December 31, 1997, which change shall have resulted in a
material adverse effect on HUBCO (it being understood that those matters
disclosed in the HUBCO Disclosure Schedule shall not be deemed to constitute
such a material adverse effect); 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 IBSF specifying the nature of such breach and
requesting that it be remedied;
(f) by IBSF, if IBSF'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;
(g) by HUBCO if the conditions set forth in Sections 6.1 and
6.2 are not satisfied and are not capable of being satisfied by the Cutoff Date;
(h) by IBSF if the conditions set forth in Sections 6.1 and
6.3 are not satisfied and are not capable of being satisfied by the Cutoff Date;
or
(i) by IBSF, if (either before or after the approval of this
Agreement by the shareholders of IBSF) its Board of Directors so determines by a
vote of a majority of the members of its entire Board, at any time during the
five business day period commencing with (and including) the first business day
following the Determination Date, if both of the following conditions are
satisfied:
(1) the Median Pre-Closing Price of HUBCO Common
Stock on the Determination Date is less than 85% of the Closing Price of HUBCO
Common Stock on the first Nasdaq trading day immediately following the date of
the first public announcement of the entry into this Agreement (the "Starting
Date") (85% of HUBCO's Starting Date Closing Price is referred to herein as the
"HUBCO Floor Price"); and
(2) (i) the quotient obtained by dividing the Median
Pre-Closing Price of HUBCO Common Stock on the Determination Date by HUBCO's
Starting Date Closing Price (the "HUBCO Ratio") is less than (ii) the quotient
obtained by dividing the KBW 50 Index, as published the following business day
by Bloomberg or other reliable source (the "Index Price") as of the
Determination Date by the Index Price as of the Starting Date and subtracting
0.10 from the quotient in this clause (2)(ii) (such number being referred to
herein as the "Index Ratio").
Notwithstanding the foregoing, if IBSF elects to exercise its termination right
pursuant to this subsection (i), it shall give prompt written notice to HUBCO
(provided that such notice of election to terminate may be withdrawn at any time
within the aforementioned five business day period)). During the three business
day period commencing with its receipt of such notice, HUBCO shall have the
option of increasing the consideration to be received by the holders of IBSF
Common Stock hereunder by increasing the Exchange Ratio to equal the lesser of
(i) a number (rounded to four decimals) equal to a quotient, the numerator of
which is the HUBCO Floor Price multiplied by the Exchange Ratio (as then in
effect) and the denominator of which is the Median Pre-Closing Price of HUBCO
Common Stock, and (ii) a number (rounded to four decimals) equal to a quotient,
the numerator of which is the Index Ratio multiplied by the Exchange Ratio (as
then in effect) and the denominator of which is the HUBCO Ratio. If HUBCO makes
an election contemplated by the preceding sentence, within such three business
day period, it shall give prompt written notice to IBSF of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant to
this subsection (i) and this Agreement shall remain in effect in accordance with
its terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this subsection (i).
7.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement by either HUBCO or IBSF pursuant to Section
7.1, this Agreement (other than Section 5.5(b), the penultimate 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 IBSF 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 IBSF 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) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including legal, accounting and investment banking fees and
expenses) shall be borne by the party incurring such costs and expenses.
Notwithstanding the foregoing, IBSF may bear the expenses of the Association.
(b) Notwithstanding any provision in this Agreement to the
contrary, in the event that either of the parties shall willfully default in its
obligations hereunder, the non-defaulting party may pursue any remedy available
at law or in equity to enforce its rights and shall be paid by the willfully
defaulting party for all damages, costs and expenses, including without
limitation legal, accounting, investment banking and printing expenses, incurred
or suffered by the non-defaulting party in connection herewith or in the
enforcement of its rights hereunder.
8.2. Survival. The respective representations, warranties,
covenants and agreements of the parties to this Agreement shall not survive the
Effective Time, but shall terminate as of the Effective Time, except for Article
II, this Section 8.2 and Sections 5.5(b), 5.8(a), 5.11 and 5.14.
8.3. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or by reputable overnight courier or sent by registered or certified
mail, postage prepaid, as follows:
(a) If to HUBCO, to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: Kenneth T. Neilson, Chairman,
President and Chief Executive Officer
Copy to:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to:
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, NJ 07962
(deliver to) 200 Campus Drive
Florham Park, NJ 07932
Attn.: Michael W. Zelenty, Esq.
(b) If to IBSF, to:
IBS Financial Corp.
1909 East Route 70
Cherry Hill, NJ 08003
Attn.: Joseph M. Ochman, Sr., Chairman,
President and Chief Executive Officer
Copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
The Walker Building, 12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Attn.: Gerald F. Heupel, Jr., Esq.
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
actually received.
8.4. Parties in Interest; Assignability. 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 the Indemnitees described
in Section 5.14. This Agreement and the rights and obligations of the parties
hereunder may not be assigned.
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, other than any confidentiality agreements entered into by the parties
hereto.
8.6. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
8.7. Governing Law. This Agreement shall be governed by the
laws of the State of New Jersey, without giving effect to the principles of
conflicts of laws thereof.
8.8. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, HUBCO, the Bank, IBSF and the Association
have caused this Agreement to be executed by their duly authorized officers as
of the day and year first above written.
ATTEST: HUBCO, INC.
By: /s/ D. Lynn Van Borkulo-Nuzzo By: /s/ Kenneth T. Neilson
---------------------------- ----------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, Chairman,
Secretary President and Chief Executive Officer
ATTEST: IBS FINANCIAL CORP.
By: /s/Chiara Eisennagel By:/s/ Joseph M. Ochman, Sr.
----------------------------- -----------------------------
Chiara Eisennagel Joseph M. Ochman, Sr., Chairman,
Corporate Secretary President and Chief Executive Officer
ATTEST: HUDSON UNITED BANK
By: /s/ D. Lynn Van Borkulo-Nuzzo By: /s/ Kenneth T. Neilson
---------------------------- ----------------------------
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, Chairman,
Secretary President and Chief Executive Officer
ATTEST: INTER-BORO SAVINGS
AND LOAN ASSOCIATION
By: /s/Chiara Eisennagel By:/s/ Joseph M. Ochman, Sr.
----------------------------- -----------------------------
Chiara Eisennagel Joseph M. Ochman, Sr., Chairman,
Corporate Secretary President and Chief Executive Officer
<PAGE>
AGREEMENT OF IBSF AND ASSOCIATION DIRECTORS
Reference is made to the Agreement and Plan of Merger, dated
as of March 31, 1998 (the "Merger Agreement"), among HUBCO, Inc. ("HUBCO"), a
New Jersey corporation and registered bank holding company, Hudson United Bank
(the "Bank"), a New Jersey state-chartered commercial banking corporation and
wholly-owned subsidiary of HUBCO, IBS Financial Corp., a New Jersey corporation
and registered savings and loan holding company ("IBSF"), and Inter-Boro Savings
and Loan Association, a New Jersey state-chartered savings and loan association
and wholly-owned subsidiary of IBSF (the "Association"). Capitalized terms used
herein and not otherwise defined have the meanings given to them in the Merger
Agreement.
Each of the following persons, being all of the directors of
IBSF and the Association, solely in such person's capacity as a holder of IBSF
Common Stock, agrees to vote or cause to be voted all shares of IBSF Common
Stock which are held by such person as of the voting record date for the
Shareholders Meeting, 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, unless HUBCO or the Bank is then in breach or default in any material
respect with regard to any covenant, agreement, representation or warranty
contained in the Agreement.
It is understood and agreed that this Agreement of IBSF and
Association Directors (this "Agreement") relates solely to the capacity of the
undersigned as shareholders or other beneficial owners of shares of IBSF Common
Stock and is not in any way intended to affect the exercise by the undersigned
of the undersigned's responsibilities as directors of IBSF or the Association.
It is further understood and agreed that this Agreement is not in any way
intended to affect the exercise by the undersigned of any fiduciary
responsibility which the undersigned may have in respect of any shares of IBSF
Common Stock held by the undersigned as of the date hereof.
JOSEPH M. OCHMAN, SR. PAUL W. GLEASON
- ------------------------------- ----------------------------------------
Joseph M. Ochman, Sr. Paul W. Gleason
THOMAS J. AUCHLER FRANCIS X. LORBECKI, JR.
- ------------------------------- ----------------------------------------
Thomas J. Auchler Francis X. Lorbecki, Jr.
JOHN A. BORDEN ALBERT D. STILES
- ------------------------------- ----------------------------------------
John A. Borden Albert D. Stiles
FRANK G. LOCKHARDT
- -------------------------------
Frank G. Lockhardt
Dated: As of March 31, 1998
<PAGE>
EXHIBIT 5.19-1
FORM OF AFFILIATE LETTER FOR IBSF AFFILIATES
_____________, 1998
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Gentlemen:
I am delivering this letter to you in connection with the
proposed acquisition (the "Merger") of IBS Financial Corp. ("IBSF"), by HUBCO,
Inc., a New Jersey corporation and registered bank holding company ("HUBCO"),
pursuant to the Agreement and Plan of Merger dated as of March 31, 1998 (the
"Agreement") between IBSF, its thrift subsidiary, HUBCO and its bank subsidiary.
Capitalized terms used herein and not otherwise defined have the meanings
assigned to them in the Agreement. I currently own shares of IBSF Common Stock.
As a result of the Merger, I will receive shares of HUBCO Common Stock in
exchange for my IBSF Common Stock.
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of IBSF, as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
promulgated under the Securities Act of 1933, as amended (the "1933 Act") by the
Securities and Exchange Commission ("SEC") and as the term "affiliate" is used
for purposes of the SEC's rules and regulations applicable to the determination
of whether a merger can be accounted for as a "pooling of interests" as
specified in the SEC's Accounting Series Release 135, as amended by Staff
Accounting Bulletins Nos. 65 and 76 ("ASR 135").
I represent to and agree with HUBCO that:
A. Transfer Review Restrictions. During the period beginning
on the date hereof and ending 30 days prior to the consummation of the Merger, I
shall not sell, transfer, reduce my risk with respect to or otherwise dispose of
("transfer") any IBSF Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any IBSF Common Stock owned by such person or entity, without notifying
HUBCO three business days in advance of the proposed transfer (the "Notice
Period") and giving HUBCO a reasonable opportunity to review the transfer before
it is consummated. HUBCO, if advised to do so by its independent public
accountants in writing a copy of which is provided to me, may instruct me prior
to the end of the Notice Period not to make or permit the transfer because it
may interfere with the "pooling of interests" treatment of the Merger. I shall
abide by any such instructions.
B. Transfer Restrictions During Merger Consummation Period. I
shall not transfer any IBSF Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any IBSF Common Stock owned by such person or entity during the period
beginning 30 days prior to the consummation of the Merger and ending immediately
after financial results covering at least 30 days of post-Merger combined
operations have been published by HUBCO by means of the filing of a Form 10-Q,
Form 10-K or Form 8-K under the Securities Exchange Act of 1934, as amended, the
issuance of a quarterly earnings report, or any other public issuance which
satisfies the requirements of ASR 135, in each case except for transfers by
operation of law, by will or under the laws of descent and distribution. For
purposes of this paragraph only, "IBSF Common Stock" includes HUBCO Common Stock
as converted. I understand that HUBCO has agreed to publish financial results
covering at least 30 days of post-Merger combined operations of HUBCO and IBSF
as soon as practicable (but in no event later than 30 days) following the close
of the first calendar month ending 30 days after the Effective Time.
C. Compliance with Rule 145. I have been advised that the
issuance of HUBCO Common Stock to me pursuant to the Merger will be registered
with the SEC under the 1933 Act on a Registration Statement on Form S-4.
However, I have also been advised that, since I may be deemed to be an affiliate
of IBSF at the time the Merger is submitted for a vote of IBSF's shareholders,
any transfer by me of HUBCO Common Stock is restricted under Rule 145
promulgated by the SEC under the 1933 Act. I agree not to transfer any HUBCO
Common Stock received by me or any of my affiliates unless (i) such transfer is
made in conformity with the volume and other limitations of Rule 145 promulgated
by the SEC under the 1933 Act, (ii) in the opinion of HUBCO's counsel or counsel
reasonably acceptable to HUBCO, such transfer is otherwise exempt from
registration under the 1933 Act or (iii) such transfer is registered under the
1933 Act.
D. Stop Transfer Instructions; Legend on Certificates. I also
understand and agree that stop transfer instructions will be given to HUBCO's
transfer agents with respect to the HUBCO Common Stock received by me and any of
my affiliates and that there will be placed on the certificates of the HUBCO
Common Stock issued to me and any of my affiliates, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AS OF
MARCH 31, 1998 BETWEEN THE REGISTERED HOLDER HEREOF AND HUBCO, INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF HUBCO,
INC."
E. Consultation with Counsel. I have carefully read this
letter and the Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to transfer HUBCO Common Stock to
the extent I felt necessary with my counsel or counsel for IBSF.
Execution of this letter is not an admission on my part that I
am an "affiliate" of IBSF as described in the second paragraph of this letter,
or a waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
-----------------------------
Name:
Accepted this _____
day of _______, 1998 by
HUBCO, INC.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 5.19-2
FORM OF AFFILIATE LETTER FOR HUBCO AFFILIATES
_______________, 1998
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Gentlemen:
I am delivering this letter to you in connection with the
proposed merger (the "Merger") of IBS Financial Corp. ("IBSF") with and into
HUBCO, Inc., a New Jersey corporation and registered bank holding company
("HUBCO"), pursuant to the Agreement and Plan of Merger dated as of March 31,
1998 (the "Agreement") between IBSF, its thrift subsidiary, HUBCO and its bank
subsidiary. I currently own shares of HUBCO's common stock, no par value ("HUBCO
Common Stock").
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of HUBCO, as the term "affiliate" is used for
purposes of the rules and regulations of the Securities and Exchange Commission
(the "SEC") applicable to the determination of whether a merger can be accounted
for as a "pooling of interests" as specified in the SEC's Accounting Series
Release 135, as amended by Staff Accounting Bulletins Nos.
65 and 76 ("ASR 135").
I represent and covenant with HUBCO and IBSF that:
A. Transfer Restrictions Prior to Merger Consummation. During
the period beginning on the date hereof and ending 30 days prior to the
consummation of the Merger, I shall not sell, transfer, reduce my risk with
respect to or otherwise dispose of ("transfer") any HUBCO Common Stock owned by
me, and I shall not permit any relative who shares my home, or any person or
entity who or which I control, from transferring any HUBCO Common Stock owned by
such person or entity, without notifying HUBCO three business days in advance of
the proposed transfer (the "Notice Period") and giving HUBCO a reasonable
opportunity to object to the transfer before it is consummated. HUBCO, upon
advice of its independent public accountants, may instruct me prior to the end
of the Notice Period not to make or permit the transfer because it may interfere
with the "pooling of interests" treatment of the Merger. I shall abide by any
such instructions.
B. Post-Consummation Transfer Restrictions. During the period
beginning 30 days prior to the consummation of the Merger and ending immediately
after financial results covering at least 30 days of post-Merger combined
operations have been published by HUBCO by means of filing of a Form 10-Q or
Form 8-K under the Securities Exchange Act of 1934, the issuance of a quarterly
earnings report, or any other public issuance which satisfies the requirements
of ASR 135, I shall not transfer any HUBCO Common Stock owned by me, and I shall
not permit any relative who shares my home, or any person or entity who or which
I control, to transfer any HUBCO Common Stock owned by such person or entity, in
each case except for transfers by operation of law, by will or under the laws of
descent and distribution. I understand that HUBCO has agreed to publish
financial results covering at least 30 days of post-Merger combined operations
of HUBCO and IBSF as soon as practicable (but in no event later than 30 days)
following the close of the first calendar month ending 30 days after the
Effective Time.
C. Consultation with Counsel. I have carefully read this
letter and the Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to transfer HUBCO Common Stock to
the extent I felt necessary with my counsel or counsel for HUBCO.
Execution of this letter is not an admission on my part that I
am an "affiliate" of HUBCO as described in the second paragraph of this letter,
or a waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
-------------------------------------
Name:
Title:
Accepted this ____ day of
________________, 1998 by
HUBCO, INC.
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 6.2
FORM OF OPINION OF COUNSEL TO IBSF
TO BE DELIVERED TO HUBCO ON THE EFFECTIVE TIME
(a) IBSF and the Association have full corporate power to
carry out the transactions contemplated in the Agreement. The execution and
delivery of the Agreement and the consummation of the transactions contemplated
thereunder have been duly and validly authorized by all necessary corporate
action on the part of IBSF and the Association, and the Agreement constitutes a
valid and legally binding obligation of IBSF and the Association enforceable in
accordance with its terms, except as may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship, and other
laws now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of New Jersey chartered
savings institutions or their holding companies, (ii) general equitable
principles, (iii) laws relating to the safety and soundness of insured
depository institutions, and (iv) implied covenants of good faith, fair dealing
and commercially reasonable conduct and by applicable public policies and laws,
and except that no opinion need be rendered as to the effect or availability of
equitable remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Subject to
satisfaction of the conditions set forth in the Agreement, neither the
transactions contemplated in the Agreement, nor compliance by IBSF and the
Association with any of the provisions thereof, will (i) conflict with or result
in a breach or default under (A) the certificate of incorporation or bylaws of
IBSF or the charter or bylaws of the Association, or (B) based on certificates
of officers of IBSF and the Association and without independent verification, to
the actual knowledge of such counsel, any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which IBSF or the
Association is a party and which was referenced in the IBSF Disclosure Schedule;
or (ii) to the actual knowledge of such counsel, result in the creation or
imposition of any material lien, instrument or encumbrance upon the property of
IBSF or the Association, except such material lien, instrument or obligation
that has been disclosed to HUBCO pursuant to the Agreement, or (iii) violate in
any material respect any order, writ, injunction, or decree known to such
counsel, or any corporation, banking or securities statute, rule or regulation
applicable to IBSF or the Association.
(b) IBSF is a corporation validly existing under the laws of
the State of New Jersey, the Association is a validly existing New
Jersey-chartered savings and loan association under the laws of the State of New
Jersey and each of IBSF and the Association has the corporate power and
authority to own or lease all of its properties and assets and to conduct the
business in which it is currently engaged as described on pages __ and __ under
the caption "_____________________" in the Proxy Statement-Prospectus. The
deposits of the Association are insured to the maximum extent provided by law by
the Federal Deposit Insurance Corporation.
(c) Each IBSF Subsidiary listed as such in the IBSF Disclosure
Schedule is validly existing under the laws of the jurisdiction of its
incorporation.
(d) There is, to the actual knowledge of such counsel, no
legal, administrative, arbitration or governmental proceeding or investigation
pending or threatened to which IBSF or the Association is a party which would,
if determined adversely to IBSF or the Association, have a material adverse
effect on the business, properties, results of operations, or condition,
financial or otherwise, of IBSF or the Association taken as a whole or which
presents a claim to restrain or prohibit the transactions contemplated by the
Agreement, except any proceeding or investigation disclosed to HUBCO.
(e) No consent, approval, authorization, or order of any
federal or state court or federal or state banking or securities agency or body,
or to such counsel's actual knowledge of any third party under any note, bond,
mortgage, indenture, license, agreement or other instrument referred to in the
IBSF Disclosure Schedule, is required for the consummation by IBSF or the
Association of the transactions contemplated by the Agreement, except for such
consents, approvals, authorizations or orders as have been obtained or which
would not have a material adverse effect upon HUBCO upon consummation of the
Merger.
In addition to the foregoing opinions, counsel shall state that on the
sole basis of such counsel's participation in conferences with officers and
employees of IBSF in connection with the preparation of the Prospectus-Proxy
Statement and without other independent investigation or inquiry, such counsel
has no reason to believe that the Prospectus-Proxy Statement, including any
amendments or supplements thereto (except for the financial information,
financial statements, notes to financial statements, financial schedules and
other financial or statistical data and stock valuation information contained or
incorporated by reference therein and except for any information supplied by
HUBCO for inclusion therein, as to which counsel need express no belief), as of
the date of mailing thereof and as of the date of the meeting of shareholders of
IBSF to approve the Merger, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make any statement therein, in
light of the circumstances under which it was made, not misleading. Counsel may
state in connection with the foregoing that such counsel has not independently
verified and does not assume any responsibility for the accuracy, completeness
or fairness of any information or statements contained in the Prospectus-Proxy
Statement, except with respect to identified statements of law or regulations or
legal conclusions relating to IBSF or the Association or the transactions
contemplated in the Agreement and that it is relying as to materiality as to
factual matters on certificates of officers and representatives of the parties
to the Agreement and other factual representations by IBSF and the Association.
Such counsel's opinion shall be limited to matters governed by
the corporate and banking laws of the State of New Jersey and the federal
securities and banking laws and regulations of the United States of America.
<PAGE>
EXHIBIT 6.3
FORM OF OPINION OF COUNSEL TO HUBCO
TO BE DELIVERED TO IBSF ON THE EFFECTIVE TIME
(a) HUBCO is a corporation validly existing under the laws of
the State of New Jersey, the Bank is a validly existing New Jersey
state-chartered commercial banking corporation under the laws of the State of
New Jersey and each of HUBCO and the Bank has the corporate power and authority
to own or lease all of its properties and assets and to carry on its business as
described in the Proxy Statement-Prospectus on pages __ and __ under the caption
"_____________________________." HUBCO is registered as a bank holding company
under the BHCA.
(b) Each HUBCO Subsidiary listed as such in the HUBCO
Disclosure Schedule is validly existing under the laws of the jurisdiction of
its incorporation.
(c) The authorized capital stock of HUBCO consists of
____________ shares of common stock, no par value per share ("HUBCO Common
Stock") and _____________ shares of Series B, no par value, Convertible
Preferred Stock (the "Authorized Preferred Stock). Except for
to our knowledge, there are no outstanding subscription rights, options,
conversion rights, warrants or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating HUBCO to issue, deliver or
sell, cause to be issued, delivered or sold, or restricting HUBCO from selling
any additional HUBCO Common Stock or Authorized Preferred Stock or obligating
HUBCO to grant, extend or enter into any such agreement or commitment. The HUBCO
Common Stock to be issued in connection with the Merger in accordance with
Article II of the Agreement, when so issued in accordance therewith, will be
duly authorized, validly issued, fully paid and non-assessable, free of
preemptive rights and free and clear of all liens, encumbrances or restrictions
created by HUBCO.
(d) The Agreement has been authorized, executed and delivered
by HUBCO and the Bank and constitutes a valid and binding obligation of HUBCO
and the Bank enforceable in accordance with its terms, except that the
enforceability of the obligations of HUBCO and the Bank may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, or
laws affecting institutions the deposits of which are insured by the FDIC or
other laws heretofore or hereafter enacted relating to or affecting the
enforcement of creditors' rights generally and by principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). In addition, certain remedial and other provisions of the
Agreement may be limited by implied covenants of good faith, fair dealing, and
commercially reasonable conduct, by judicial discretion, in the instance of
equitable remedies, and by applicable public policies and laws.
(e) Subject to satisfaction of the conditions set forth in the
Agreement, the execution and delivery of the Agreement and the consummation of
the transactions contemplated thereby will not (i) conflict with or violate any
provision of or result in the breach of any provision of the Certificate of
Incorporation or Bylaws of HUBCO or the Charter and Bylaws of the Bank; (ii)
based on certificates of officers of HUBCO and without independent verification,
conflict with or violate in any material respect, or result in a material breach
or violation of the terms or provisions of, or constitute a default under, or
result in (whether upon or after the giving of notice or lapse of time or both)
any material obligation under, any indenture, mortgage, deed of trust or loan
agreement or any other agreement, instrument, judgment, order, arbitration award
or decree of which we have knowledge (through our representation of HUBCO and
the Bank in connection therewith or in the course of our representation of HUBCO
and the Bank in connection with the Agreement) and to which HUBCO or the Bank is
a party or by which HUBCO or the Bank is bound; or (iii) cause HUBCO or the Bank
to violate any corporation or banking law applicable to HUBCO.
(f) All actions of the directors and shareholders of HUBCO and
the Bank required by federal banking laws and regulations and New Jersey law or
by the Certificate of Incorporation or Bylaws of HUBCO and the Bank, to be taken
by HUBCO and the Bank to authorize the execution, delivery and performance of
the Agreement and consummation of the Merger have been taken.
(g) Assuming that there has been due authorization of the
Merger by all necessary corporate and governmental proceedings on the part of
IBSF and that IBSF has taken all action required to be taken by it prior to the
Effective Time, upon the appropriate filing of the Certificate of Merger in
respect of the Merger with the New Jersey Secretary of State in accordance with
Section 1.6 of the Agreement, the Merger will become effective at the Effective
Time, as such term is defined in Section 1.6, and upon effectiveness of the
Merger each share of IBSF Common Stock will be converted as provided in Article
II of the Agreement.
(h) No approvals, authorizations, consents or other actions or
filings under federal banking law or New Jersey law ("Approvals") are required
to be obtained by HUBCO or the Bank in order to permit the execution and
delivery of the Agreement by HUBCO or the Bank and the performance by HUBCO or
the Bank of the transactions contemplated thereby other than those Approvals
which have been obtained or those Approvals or consents required to be obtained
by IBSF.
(i) The Registration Statement has been declared effective by
the Securities and Exchange Commission ("SEC") under the 1933 Act and we are not
aware that any stop order suspending the effectiveness has been issued under the
1933 Act or proceedings therefor initiated or threatened by the SEC.
We are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Proxy Statement-Prospectus and make no representation that we have independently
verified the accuracy, completeness or fairness of such statement, but from our
examination of the Proxy Statement-Prospectus and our general familiarity with
HUBCO no facts have come to our attention that caused us to believe that (except
for financial statements and other tabular financial information, and other
financial and statistical data and information, as to which we do not express
any belief) the Proxy Statement-Prospectus on the date of the mailing thereof
and on the date of the meeting of stockholders of IBSF at which the Agreement
was approved, contained any untrue statement of a material fact regarding HUBCO
or the Merger, or omitted to state a material fact regarding HUBCO or the Merger
therein, in light of the circumstances under which they were made, not
misleading.
We are members of the Bar of the State of New Jersey and we
express no opinion as to any of the laws of any jurisdiction other than the laws
of the State of New Jersey and federal laws and regulations of the United States
of America.
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of March
31, 1998, is by and between HUBCO, Inc., a New Jersey corporation and registered
bank holding company ("HUBCO"), and IBS Financial Corp., a New Jersey
corporation and registered savings and loan holding company ("IBSF").
BACKGROUND
WHEREAS, HUBCO and IBSF, as of the date hereof, are prepared
to execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which IBSF will be merged with and into HUBCO (the "Merger"); and
WHEREAS, HUBCO has advised IBSF that it will not execute the
Merger Agreement unless IBSF executes this Agreement; and
WHEREAS, the Board of Directors of IBSF has determined that
the Merger Agreement provides substantial benefits to the shareholders of IBSF;
and
WHEREAS, as an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, IBSF desires to grant to HUBCO an
option to purchase authorized but unissued shares of common stock of IBSF 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 IBSF,
intending to be legally bound hereby, agree:
1. Grant of Option. IBSF hereby grants to HUBCO an option to
purchase 2,700,000 shares of common stock, $.01 par value, of IBSF (the "Common
Stock") at a price of $18.00 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 terms and conditions set forth herein
and 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 15% of
the then outstanding shares of Common Stock; or
b. enters into a letter of intent or an agreement,
whether oral or written, with IBSF pursuant to which such person or any
affiliate of such person would (i) merge or consolidate, or enter into any
similar transaction, with IBSF, (ii) acquire all or a significant portion of the
assets or liabilities of IBSF, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 15% or more of the then outstanding shares of Common
Stock; or
c. makes a filing with any bank or thrift regulatory
authorities with respect to 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, IBSF or any other
business combination involving IBSF, 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, 15% or more of
the outstanding shares of Common Stock, and in either case 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 IBSF called to vote on
the Merger and IBSF'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, IBSF 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 IBSF or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the Board of Directors, inviting, encouraging or
soliciting any proposal (other than from HUBCO or an affiliate of HUBCO) 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 IBSF,
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 25% of the assets or
liabilities of IBSF. The term "significant number" means 15% 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 IBSF 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 (including any filing, approval or consent required under
the rules and regulations of the National Association of Securities Dealers,
Inc.) necessary for IBSF 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.
IBSF 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 IBSF shall not be a condition to the right of HUBCO to exercise the
Option. IBSF will not take any action which would have the effect of preventing
or disabling IBSF from delivering the Option Shares to HUBCO upon exercise of
the Option or otherwise performing its obligations under this Agreement, except
to the extent required by applicable securities and banking laws and
regulations.
In the event HUBCO wishes to exercise the Option, HUBCO shall
send a written notice to IBSF (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 between two and ten business days inclusive from
the Notice 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 IBSF of the aggregate price for the
Option Shares so purchased by wire transfer of immediately available funds to an
account designated by IBSF; (b) IBSF 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 IBSF, 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 IBS Financial
Corp., 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, IBSF 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
and any state securities bureau covering the Option and such number of Option
Shares as HUBCO shall specify in its request, and IBSF shall use its best
efforts to cause such registration statement to be declared effective in order
to permit the sale or other disposition of the Option and the Option Shares,
provided that HUBCO shall in no event have the right to have more than one such
registration statement become effective, and provided further that IBSF shall
not be required to prepare and file any such registration statement in
connection with any proposed sale with respect to which counsel to IBSF delivers
to IBSF and to HUBCO (which is reasonably acceptable to HUBCO) its opinion to
the effect that no such filing is required under applicable laws and regulations
with respect to such sale or disposition; provided further, however, that IBSF
may delay any registration of Option Shares above for a period not exceeding 90
days in the event that IBSF shall in good faith determine that any such
registration would adversely effect an offering of securities by IBSF for cash.
HUBCO shall provide all information reasonable requested by IBSF for inclusion
in any registration statement to be filed hereunder.
In connection with such filing, IBSF 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 IBSF 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 IBSF and blue sky fees and expenses shall be paid by IBSF.
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, IBSF 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 IBSF 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 IBSF will not be liable in any case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such preliminary or final 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 IBSF 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 IBSF for any
legal or other expense reasonably incurred by IBSF in connection with
investigating or defending any such loss, claim, damage, liability or action.
Notwithstanding anything to the contrary herein, no indemnifying party shall be
liable for any settlement effected without its prior written consent.
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 IBSF
with another entity, or any sale of all or substantially all of the assets of
IBSF, 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 IBSF will use its
reasonable 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 Securities and Exchange Commission, the Board of
Governors of the Federal Reserve System, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the New Jersey Department of Banking,
and IBSF 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 IBSF. IBSF hereby
represents and warrants to HUBCO as follows:
a. Due Authorization. IBSF 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 IBSF.
b. Authorized Shares. IBSF 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 Bylaws of IBSF or any agreement,
instrument, judgment, decree or order applicable to IBSF.
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 IBSF for a breach of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
10. Assignment or Transfer. HUBCO may not sell, assign or
otherwise transfer its rights and obligations hereunder, in whole or in part, to
any person or group of persons other than to an affiliate of HUBCO. HUBCO
represents that it is acquiring the Option for HUBCO's own account and not with
a view to or for sale in connection with any distribution of the Option or the
Option Shares. HUBCO is aware that neither the Option nor the Option Shares is
the subject of a registration statement filed with, and declared effective by,
the Securities and Exchange Commission pursuant to Section 5 of the Securities
Act, but instead each is being offered in reliance upon the exemption from the
registration requirement provided by Section 4(2) thereof and the
representations and warranties made by HUBCO in connection therewith.
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:
If to HUBCO:
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attention: Mr. Kenneth T. Neilson
President and Chief Executive Officer
With a copy to:
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932-0950
Attention: Ronald H. Janis, Esq.
Michael W. Zelenty, Esq.
If to IBSF:
IBS Financial Corp.
The Operations Center
1909 E. Route 70
Cherry Hill, New Jersey 08003
Attention: Joseph M. Ochman, Sr.
Chairman, President and Chief
Executive Officer
With a copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
The Walker Building, 12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
Attention: Gerald F. Heupel, Jr.
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.
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.
IBS FINANCIAL CORP.
By: /s/ Joseph M. Ochman, Sr.
-----------------------------------------------
Joseph M. Ochman, Sr.
Chairman, President and Chief Executive Officer
HUBCO, INC.
By: /s/ Kenneth T. Neilson
-----------------------------------------------
Kenneth T. Neilson,
President & Chief Executive Officer
<PAGE>
APPENDIX C
July 10, 1998
The Board of Directors
IBS Financial Corp.
1909 East Route 70
Cherry Hill, New Jersey 08003
Members of the Board:
You have requested our opinion as investment bankers as to whether the Exchange
Ratio in the Merger (the "Merger") between IBS Financial Corp. ("IBS") and
HUBCO, Inc., Mahwah, New Jersey ("HUBCO") as provided and described in the
Agreement and Plan of Merger dated March 31, 1998 (the "Agreement") is fair to
the holders of IBS Common Stock from a financial point of view.
Pursuant to the Agreement, IBS shall merge with and into HUBCO, and each share
of IBS' issued and outstanding common stock will be converted into and become
the right to receive 0.534 shares, subject to certain adjustments as set forth
in the Agreement (the "Exchange Ratio"), of common stock of HUBCO. We have
assumed that the Merger will qualify as a tax free transaction for the
stockholders of IBS and will be accounted for by HUBCO as a pooling-of-interests
transaction.
Ryan, Beck & Co., as a customary part of its investment banking
business, is engaged in the valuation of banking and savings institutions and
their securities in connection with mergers and acquisitions. In conducting our
investigation and analysis of the Merger, we have met separately with members of
senior management of HUBCO and IBS to discuss their respective operations,
historical financial statements, strategic plans and future prospects. We have
reviewed and analyzed material prepared in connection with the Merger, including
but not limited to the following: (i) the Agreement and related documents; (ii)
the Proxy Statement / Prospectus; (iii) HUBCO's Annual Reports to Shareholders
and Annual Reports on Form 10-K for the years ended December 31, 1997, 1996,
1995, and 1994, and HUBCO's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1998, September 30, 1997, June 30, 1997 and March 31, 1997; (iv)
HUBCO's Registration Statements on Form S-4, dated June 10, 1998, May 8, 1998,
March 17, 1998, February 20, 1998, and November 12, 1997 with respect to HUBCO's
pending acquisitions of Dime Financial Corp., Community Financial Holding
Corporation and the then pending acquisitions of MSB Bancorp, Inc., Poughkeepsie
Financial Corp., and The Bank of Southington, respectively; (v) HUBCO's press
releases dated March 2, 1998 and August 28, 1997 with respect to HUBCO's then
pending acquisitions of 22 branches from First Union National Bank, and Security
National Bank & Trust Company of New Jersey, respectively; (vi) internal
analyses prepared by HUBCO's management containing pro forma financial
statements and projections for the acquisitions of MSB Bancorp, Inc.,
Poughkeepsie Financial Corp., The Bank of Southington, Community Financial
Holding Corporation, 22 branches from First Union National Bank, Security
National Bank & Trust Company of New Jersey and Dime Financial Corp. (the
"Acquisitions"); (vii) HUBCO's Current Reports on Form 8-K dated July 6, 1998
and July 10, 1998; (viii) HUBCO's Private Placement Memorandum dated June 16,
1998 with respect to the 7.65% Capital Securities issued by HUBCO Capital Trust
II; (ix) IBS' Annual Reports to Shareholders and Annual Reports on Form 10-K for
the years ended September 30, 1997, 1996, and 1995, and IBS' Quarterly Reports
on Form 10-Q for the periods ended March 31, 1998, December 31, 1997, June 30,
1997, March 31, 1997, and December 31, 1996; (x) the historical stock prices and
trading volume of HUBCO's common stock; (xi) the publicly available financial
data of commercial banking organizations which Ryan, Beck deemed generally
comparable to HUBCO; (xii) the publicly available financial data of thrift
organizations which Ryan, Beck deemed generally comparable to IBS; (xiii) the
historical stock prices and trading volume of IBS' common stock; (xiv) the terms
of recent acquisitions of thrift organizations which Ryan, Beck deemed generally
comparable in whole or in part to IBS; and (xv) the potential pro forma impact
of the Merger on HUBCO's financial condition, operating results and per share
figures. We also conducted or reviewed such other studies, analyses, inquiries
and examinations as we deemed appropriate. Ryan, Beck as part of its review of
the Merger, also analyzed HUBCO's ability to consummate the Merger and
considered the future prospects of IBS in the event it remained independent.
While we have taken care in our investigation and analysis, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the respective institutions or which was publicly
available and have not assumed any responsibility for independently verifying
such information. We have also relied upon the managements of IBS and HUBCO as
to the reasonableness and achievability of the financial and operating forecasts
and projections (and the assumptions and bases therefor) provided to us and in
certain instances we have made certain adjustments to such financial and
operating forecasts which in our judgment were appropriate under the
circumstances. In addition, we have assumed with your consent that such
forecasts and projections reflect the best currently available estimates and
judgments of the respective managements. We are not experts in the evaluation of
allowances for loan losses. Therefore, we have not assumed any responsibility
for making an independent valuation of the adequacy of the allowances for loan
losses set forth in the balance sheets of IBS, HUBCO and the Acquisitions at
March 31, 1998, and we assumed such allowances were adequate and comply fully
with applicable law, regulatory policy and sound banking practice as of the date
of such financial statements. We also assumed that the Merger in all respects
is, and will be consummated in compliance with all laws and regulations
applicable to IBS and HUBCO. We have not made or obtained any independent
evaluations or appraisals of the assets and liabilities of IBS, HUBCO, the
Acquisitions or their respective subsidiaries, nor have we reviewed any
individual loan files of IBS, HUBCO, the Acquisitions or their respective
subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
in the circumstances. We have assumed, with your consent, that in the course of
obtaining the necessary regulatory approvals for the Merger and the transactions
contemplated thereby, no restrictions will be imposed that will have a material
adverse effect on the contemplated benefits of the Merger or the transactions
contemplated thereby. Our opinion is necessarily based on economic, market and
other conditions and projections as they exist and can be evaluated on the date
hereof. Ryan, Beck did not express any opinion as to the price or range of
prices at which HUBCO Common Stock might trade subsequent to the Merger.
We have been retained by the Board of Directors of IBS as an independent
contractor to act as financial advisor to IBS with respect to the Merger and
will receive a fee for our services. Ryan, Beck was a co-manager of the 8.98%
Capital Securities offering by HUBCO Capital Trust I. Ryan, Beck's research
department has issued research reports on HUBCO and comments on HUBCO in its
periodic commentaries. Ryan, Beck is also a market maker in HUBCO's common stock
and, in such capacity, may from time to time own HUBCO securities. As of the
date hereof, Ryan Beck has no material investment in HUBCO. Ryan, Beck has had
an investment banking relationship with IBS Financial Corporation for a number
of years. Ryan, Beck was the sole underwriter of IBS' conversion from mutual to
stock form of organization. Additionally, Ryan, Beck has also acted as financial
advisor to IBS with respect to various other matters from time to time. Ryan,
Beck's research department has issued research reports on IBS and comments on
IBS in its periodic commentaries. Ryan, Beck is also a market maker in IBS'
common stock and, in such capacity, may from time to time own IBS securities. As
of the date hereof, Ryan Beck has no material investment in IBS.
Our opinion is directed to the Board of Directors of IBS and does not constitute
a recommendation to any shareholder of IBS as to how such shareholder should
vote at any shareholder meeting held in connection with the Merger.
Based upon and subject to the foregoing it is our opinion as investment bankers
that the Exchange Ratio in the Merger as provided and described in the Agreement
is fair to the holders of IBS common stock from a financial point of view.
Very truly yours,
RYAN, BECK & CO., INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
(i) Limitation of Liability of Directors and Officers. Section
14A:2-7(3) of the New Jersey Business Corporation Act permits a corporation to
provide in its Certificate of Incorporation that a director or officer shall not
be personally liable to the corporation or its shareholders for breach of any
duty owed to the corporation or its shareholders, except that such provision
shall not relieve a director or officer from liability for any breach of duty
based upon an act or omission (a) in breach of such person's duty of loyalty to
the corporation or its shareholders, (b) not in good faith or involving a
knowing violation of law or (c) resulting in receipt by such person of any
improper personal benefit. HUBCO's Certificate of Incorporation includes
limitations on the liability of officers and directors to the fullest extent
permitted by New Jersey law.
(ii) Indemnification of Directors, Officers, Employees and Agents.
Under Article X of its Certificate of Incorporation, HUBCO must, to the fullest
extent permitted by law, indemnify its directors, officers, employees and
agents. Section 14A:3-5 of the New Jersey Business Corporation Act provides that
a corporation may indemnify its directors, officers, employees and agents
against judgments, fines, penalties, amounts paid in settlement and expenses,
including attorneys' fees, resulting from various types of legal actions or
proceedings if the actions of the party being indemnified meet the standards of
conduct specified therein. Determinations concerning whether or not the
applicable standard of conduct has been met can be made by (a) a disinterested
majority of the Board of Directors, (b) independent legal counsel, or (c) an
affirmative vote of a majority of shares held by the shareholders. No
indemnification is permitted to be made to or on behalf of a corporate director,
officer, employee or agent if a judgment or other final adjudication adverse to
such person establishes that his acts or omissions (A) were in breach of his
duty of loyalty to the corporation or its shareholders, (B) were not in good
faith or involved a knowing violation of law or (C) resulted in receipt by such
person of an improper personal benefit.
(iii) Insurance. HUBCO's directors and officers are insured against
losses arising from any claim against them such as wrongful acts or omissions,
subject to certain limitations.
Item 21. Exhibits and Financial Statement Schedules.
A. Exhibits
Exhibit
Number Description
2(a) Agreement and Plan of Merger, dated as of March 31, 1998, by and among
HUBCO, Inc. ("HUBCO"), Hudson United Bank (the "Bank"), IBS Financial
Corp. ("IBSF") and Inter-Boro Savings and Loan Association
("Association") (included as Appendix A to the Proxy Statement). *
2(b) Stock Option Agreement, dated as of March 31, 1997, by and between
HUBCO and IBSF (included as Appendix B to the Proxy Statement). *
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of the
securities to be registered. ***
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax consequences
of the Merger. ***
13 Annual Report of IBSF on Form 10-K filed with the SEC for the year
ended September 30, 1997. **
23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Ryan, Beck & Co., Inc.
23(d) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto). ***
23(e) Consent of Deloitte & Touche LLP.
23(f) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
99 Form of Proxy Card to be utilized by the Board of Directors of IBSF.***
- -------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
*** Previously filed.
B. Financial Statement Schedules
All financial statement schedules have been omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto or incorporated by reference therein.
C. Reports, Opinions or Appraisals
The Fairness Opinion of Ryan, Beck & Co., Inc., dated July 10, 1998 is
included as Appendix C to the Proxy Statement-Prospectus. An Updated Fairness
Opinion will be included in the final form of the Proxy Statement-Prospectus as
Appendix C.
Item 22. Undertakings.
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
2. The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
3. The registrant undertakes that every prospectus (i) that is filed pursuant to
paragraph 2 immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a) (3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
4. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
6. Subject to appropriate interpretation, the undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
7. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 and Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
8. The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
9. The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
10. The undersigned registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Township of Mahwah,
State of New Jersey, on the 8th day of July, 1998.
HUBCO, INC.
KENNETH T. NEILSON
By:-------------------------------
Kenneth T. Neilson,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman, President, Chief
Executive Officer and Director July 8, 1998
KENNETH T. NEILSON
- ---------------------------------
(Kenneth T. Neilson)
Director July 8, 1998
ROBERT J. BURKE*
- ---------------------------------
(Robert J. Burke)
Director July , 1998
- ---------------------------------
(Donald P. Calcagnini)
Director July , 1998
- ---------------------------------
(Joan David)
Director July , 1998
- ---------------------------------
(Thomas R. Farley)
BRYANT D. MALCOLM* Director July 8, 1998
- ---------------------------------
(Bryant D. Malcolm)
W. PETER MC BRIDE* Director July 8, 1998
- ---------------------------------
(W. Peter McBride)
DAVID A. ROSOW* Director July 8, 1998
- ---------------------------------
(David A. Rosow)
Director July , 1998
- ---------------------------------
(Charles F.X. Poggi)
JAMES E. SCHIERLOH* Director July 8, 1998
- ---------------------------------
(James E. Schierloh)
Director July , 1998
- ---------------------------------
(John H. Tatigian)
SR. GRACE FRANCES STRAUBER* Director July 8, 1998
- ---------------------------------
(Sister Grace Frances Strauber)
NOEL DE CORDOVA* Director July 8, 1998
- ---------------------------------
(Noel deCordova)
JOSEPH B. TOCKARSHEWSKY* Director July 8, 1998
- ---------------------------------
(Joseph B. Tockarshewsky)
Director July , 1998
- ---------------------------------
(William C. Myers)
Executive Vice President and Chief
JOSEPH F. HURLEY* Financial Officer
- ---------------------------------- July 8, 1998
(Joseph F. Hurley)
Senior Vice President
CHRIS A. WITKOWSKI* and Controller July 8, 1998
- ----------------------------------
(Chris A. Witkowski)
</TABLE>
KENNETH T. NEILSON
- --------------------------------------
* By Kenneth T. Neilson, as Attorney-In-Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
2(a) Agreement and Plan of Merger, dated as of March 31, 1998, by
and among HUBCO, Inc. ("HUBCO"), Hudson United Bank (the
"Bank"), IBS Financial Corp. ("IBSF") and Inter-Boro Savings
and Loan Association ("Association") (included as Appendix A
to the Proxy Statement). *
2(b) Stock Option Agreement, dated as of March 31, 1998, by and
between HUBCO and IBSF (included as Appendix B to the Proxy
Statement). *
5 Opinion of Pitney, Hardin, Kipp & Szuch as to the legality of
the securities to be registered. ***
8 Opinion of Pitney, Hardin, Kipp & Szuch as to certain tax
consequences of the Merger. ***
13 Annual Report of IBSF on Form 10-K filed with the SEC for the
year ended September 30, 1997. **
23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Ryan, Beck & Co., Inc.
23(d) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits
5 and 8 hereto). ***
23(e) Consent of Deloitte & Touche LLP.
23(f) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
99 Form of Proxy Card to be utilized by the Board of Directors
of CFHC. ***
- ---------------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
*** Previously filed.
The Board of Directors
IBS Financial Corp.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
HUBCO, Inc. on Form S-4 of our report dated October 30, 1997 appearing in and
incorporated by reference in the Annual Report on Form 10-K of IBS Financial
Corporation for the year ended September 30, 1997 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
July 7, 1998
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-4 of our
report dated January 10, 1998 included in HUBCO Inc.'s Annual Report on Form
10-K and to all references to our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
July 8, 1998
Exhibit 23(c)
CONSENT OF RYAN, BECK & CO.
We hereby consent to the references in the Proxy Statement to our opinion, dated
July 10, 1998 with respect to the merger of IBS Financial Corp. and HUBCO, Inc.,
and to our firm, respectively, and to the inclusion of such opinion as an annex
to such Proxy Statement. By giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
RYAN, BECK & CO., INC.
By: DAVID P. DOWNS
-------------------------------
David P. Downs
Senior Vice President
Livingston, NJ
July 6, 1998
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement,
relating to the securities being offered in connection with the merger among
HUBCO, Inc., Hudson United Bank, IBS Financial Corp., and Inter-Boro Savings and
Loan Association, of HUBCO, Inc. on Form S-4/A of our report dated January 23,
1998 relating to the financial statements of Poughkeepsie Financial Corp.,
appearing in the Current Report on Form 8-K/A of HUBCO, Inc. dated June 29,
1998.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
July 8, 1998
The Board of Directors
HUBCO, Inc.:
We consent to incorporation by reference in the Registration Statement No.
333-56489 on Form S-4, of our report dated January 27, 1998, relating to the
consolidated balance sheets of MSB Bancorp, Inc. and Subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the years then ended, which report
appears in the 8-K dated May 29, 1998, filed by HUBCO, Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
July 6, 1998
Exhibit 24
HUBCO, INC.
POWER OF ATTORNEY
FORM S-4
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kenneth T. Neilson and D. Lynn Van
Borkulo-Nuzzo, as their attorney-in-fact, with power of substitution, for him or
her in any and all capacities, to sign any and all amendments (whether pre- or
post-effective), to this Registration Statement on Form S-4 of HUBCO, Inc. (SEC
File No. 333-56489) and to file the same with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman, President, Chief
KENNETH T. NEILSON Executive Officer and Director June 4, 1998
- ---------------------------------------
(Kenneth T. Neilson)
ROBERT J. BURKE Director June 5, 1998
- ---------------------------------------
(Robert J. Burke)
Director June __, 1998
- ---------------------------------------
(Donald P. Calcagnini)
Director June __, 1998
- ---------------------------------------
(Joan David)
- --------------------------------------- Director June __, 1998
(Thomas R. Farley)
BRYANT D. MALCOLM Director June 4, 1998
- ---------------------------------------
(Bryant D. Malcolm)
W. PETER MCBRIDE Director June 4, 1998
- ---------------------------------------
(W. Peter McBride)
DAVID A. ROSOW Director June 5, 1998
- ---------------------------------------
(David A. Rosow)
Director June __, 1998
- ---------------------------------------
(Charles F.X. Poggi)
JAMES E. SCHIERLOH Director June 5, 1998
- ---------------------------------------
(James E. Schierloh)
Director June __, 1998
- ---------------------------------------
(John H. Tatigian)
SR. GRACE FRANCES STRAUBER Director June 4, 1998
- ---------------------------------------
(Sister Grace Frances Strauber)
NOEL DE CORDOVA Director June 4, 1998
- ---------------------------------------
(Noel deCordova)
JOSEPH B. TOCKARSHEWSKY Director June 5, 1998
- ---------------------------------------
(Joseph B. Tockarshewsky)
Director June __, 1998
- ---------------------------------------
(William C. Myers)
Executive Vice President and Chief
JOSEPH F. HURLEY Financial Officer June 5, 1998
- ---------------------------------------
(Joseph F. Hurley)
CHRIS A. WITKOWSKI Controller June 5, 1998
- ---------------------------------------
(Chris A. Witkowski)
</TABLE>
