As filed with the Securities and Exchange Commission on March 17, 1998
Registration No. ___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
HUBCO, INC.
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(Exact name of registrant as specified in its charter)
New Jersey
--------------------------------------------------------------
(State or other Jurisdiction of Incorporation or Organization)
6711
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(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. OMER S.J. WILLIAMS, ESQ.
Pitney, Hardin, Kipp & Szuch Thacher Proffitt & Wood
P.O. Box 1945 Two World Trade Center
Morristown, New Jersey 07962 New York, New York 10048
(973) 966-8125 (212) 912-7432
<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 December 15, 1997 (the "Merger Agreement") among HUBCO, Inc. ("HUBCO"),
MSB Bancorp, Inc. ("MSB") and MSB Bank, attached as Appendix A to the Proxy
Statement-Prospectus.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================== ====================== ====================== ====================== ======================
<S> <C> <C> <C> <C>
Title of each 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
- ---------------------- ------------ ------------------ ------------------ ----------------
Common Stock, No Par 3,005,530 $34.75** $104,442,168** $30,810
Value Shares*
Series C Preferred 600,000 $21.60*** $ 12,960,000*** $ 3,823
Stock, $.01 par value Shares
Total $34,633
</TABLE>
* The number of shares of HUBCO Common Stock issuable in the Merger in exchange
for shares of MSB Common Stock, assuming the maximum Exchange Ratio of 1.03 set
forth in the Merger Agreement, and assuming that all currently outstanding
options to acquire shares of MSB 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 Composite Tape for MSB
Common Stock as of March 13, 1998, a date within five business days prior to the
filing of this Registration Statement.
*** Estimated solely for the purpose of calculating the registration fee for the
filing on Form S-4 pursuant to Rule 457(f)(2) under the Securities Act based on
the book value of the MSB Preferred Stock to be received in exchange, as of
September 30, 1997.
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>
[MSB LOGO]
______________, 1998
To the Stockholders of MSB Bancorp, Inc.:
We cordially invite you to attend a special meeting of the stockholders
of MSB Bancorp, Inc. The meeting is to be held at the South Street office of MSB
Bank, 4 South Street, Middletown, New York 10940 on [Date and Time].
We have called the meeting to seek your approval of a Merger Agreement
which provides for MSB to be merged with HUBCO, Inc. HUBCO is a bank holding
company and the parent corporation of Hudson United Bank, a New Jersey-based
bank, and Lafayette American Bank, a Connecticut-based bank. Prior to closing
the Merger of HUBCO and MSB, HUBCO expects to complete its pending acquisition
of Poughkeepsie Financial Corp. and PFC's subsidiary, Bank of the Hudson, a New
York-based bank. HUBCO anticipates that Bank of the Hudson will serve as HUBCO's
New York bank subsidiary and that MSB's subsidiary, MSB Bank will be merged into
Bank of the Hudson.
On completion of the Merger, MSB Common Stock will be converted into
HUBCO Common Stock at an Exchange Ratio equal to $36.02 divided by the Median
Pre-Closing Price of HUBCO Common Stock, provided the Median Pre-Closing Price
of HUBCO Common Stock is between $34.97 and $37.13. 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 day the
parties receive final federal bank regulatory approval for the Merger. A minimum
Exchange Ratio of 0.97 will apply if the Median Pre-Closing Price is greater
than $37.13, and a maximum Exchange Ratio of 1.03 will apply if the Median
Pre-Closing Price is less than $34.97. HUBCO will pay cash to MSB stockholders
in lieu of issuing fractional shares of HUBCO Common Stock. The investment
banking firm of Keefe, Bruyette & Woods, Inc. has advised your Board of
Directors that, in its opinion, as of _______________, 1998, the consideration
to be received by the holders of MSB Common Stock is fair from a financial point
of view to the holders of such shares.
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 outstanding shares of MSB 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. Failure to return a properly executed proxy card or to vote at the
special meeting will have the same effect as a vote against the Merger
Agreement.
On behalf of the Board of Directors and all of the employees of MSB
Bancorp and MSB Bank, we wish to thank you for your continued support. We
appreciate your interest. If you have any questions, please call us at (914)
294-8100. I look forward to seeing you on ____________, 1998.
Sincerely yours,
William C. Myers,
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________, 1998
To the Stockholders of MSB Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Meeting") of MSB Bancorp, Inc. ("MSB") will be held on [Day of Week], [Date],
1998, at [Time], at the South Street office of MSB Bank, 4 South Street,
Middletown, New York 10940, for the following purposes:
(1) To consider and vote on a proposal to approve and adopt an Agreement and
Plan of Merger, dated December 15, 1997 (the "Merger Agreement"), by and
among HUBCO, Inc. ("HUBCO"), MSB and MSB Bank, which provides for MSB 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 MSB Common Stock (except for treasury shares and certain
shares held by HUBCO or its subsidiaries) will be converted into a number
of shares (the "Exchange Ratio") of HUBCO Common Stock equal to $36.02
divided by the Median Pre-Closing Price of HUBCO Common Stock, provided
that the Median Pre-Closing Price is between $34.97 and $37.13. (The Median
Pre-Closing Price is defined generally as the median of the closing prices
of HUBCO Common Stock during the ten-trading day period ending on the day
the parties receive final federal bank regulatory approval for the Merger.)
A minimum Exchange Ratio of 0.97 will apply if the Median Pre-Closing Price
is greater than $37.13, and a maximum Exchange Ratio of 1.03 will apply if
the Median Pre-Closing Price is less than $34.97. The Exchange Ratio is
subject to adjustment as set forth in the Merger Agreement to prevent
dilution in the event of any stock split, reclassification or other similar
event. Also, if the Median Pre-Closing Price is less than $27.00, MSB will
have certain rights to terminate the Merger Agreement unless HUBCO agrees
to increase the Exchange Ratio to $27.81 divided by the Median Pre-Closing
Price. HUBCO will pay cash to MSB stockholders in lieu of issuing
fractional shares of HUBCO Common Stock.
(2) To consider and vote upon a proposal (the "Additional Proposal") to
authorize the Board of Directors of MSB, in its discretion, to vote upon
such other business as may properly come before the Meeting and any
adjournment or postponement thereof, including, without limitation, a
motion 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 constitute a quorum or approve the Merger Agreement.
The Board of Directors has fixed the close of business on ____________,
1998 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting. Only stockholders 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 stockholders 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 stockholder 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
Karen DeLuca
Secretary
Goshen, New York
____________, 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 ADDITIONAL PROPOSAL.
<PAGE>
PROXY STATEMENT OF MSB BANCORP, INC. PROSPECTUS OF HUBCO, INC.
for its Special Meeting of Stockholders for its Common Stock and Preferred
to be held on ____________, 1998 Stock to be issued in connection
and all adjournments or postponements with the merger of MSB Bancorp, Inc.
thereof with and into HUBCO, Inc.
The Board of Directors of MSB Bancorp, Inc. ("MSB") has called a
Special Meeting of MSB stockholders (the "Meeting") to be held on [Day of Week],
[Date], 1998. The Meeting has been called to seek MSB stockholder approval of a
Merger Agreement which provides for MSB to be merged with HUBCO, Inc. ("HUBCO"),
with HUBCO as the surviving corporation. HUBCO is a bank holding company and the
parent corporation of Hudson United Bank, a New Jersey-based bank, and Lafayette
American Bank, a Connecticut-based bank. Prior to closing the merger of HUBCO
and MSB (the "Merger"), HUBCO expects to complete its pending acquisition of
Poughkeepsie Financial Corp. ("PFC") and PFC's subsidiary, Bank of the Hudson
("BTH"), a New York-based savings bank. HUBCO anticipates that BTH will serve as
HUBCO's New York bank subsidiary and that MSB's subsidiary, MSB Bank, will be
merged into BTH following the Merger.
Upon completion of the Merger, each share of MSB Common Stock (except
for treasury shares and certain shares held by HUBCO or its subsidiaries) will
be converted into a number of shares (the "Exchange Ratio") of HUBCO Common
Stock equal to $36.02 divided by the Median Pre-Closing Price of HUBCO Common
Stock, provided that the Median Pre-Closing Price is between $34.97 and $37.13.
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 day the parties receive final federal bank regulatory
approval for the Merger. A "Minimum Exchange Ratio" of 0.97 will apply if the
Median Pre-Closing Price is greater than $37.13, and a "Maximum Exchange Ratio"
of 1.03 will apply if the Median Pre-Closing Price is less than $34.97. The
Exchange Ratio is subject to adjustment as set forth in the Merger Agreement to
prevent dilution in the event of any stock split, reclassification or other
similar event. Also, if the Median Pre-Closing Price is less than $27.00, MSB
will have certain rights to terminate the Merger Agreement unless HUBCO agrees
to increase the Exchange Ratio to $27.81 divided by the Median Pre-Closing
Price. HUBCO will pay cash to MSB stockholders in lieu of issuing fractional
shares of HUBCO Common Stock.
HUBCO currently holds all the outstanding shares of 8.75% Cumulative
Convertible Preferred Stock, Series A, $.01 par value, of MSB ("MSB Preferred
Stock" and, together with the MSB Common Stock, the "MSB Stock"). Shares of MSB
Preferred Stock held by HUBCO will be cancelled upon consummation of the Merger.
If HUBCO transfers any MSB Preferred Stock prior to consummation of the Merger,
such shares (with certain limited exceptions) will be converted in the Merger
into shares of a newly created series of HUBCO Preferred Stock having terms
substantially identical to those of the MSB Preferred Stock (the "New HUBCO
Preferred Stock" and, together with the HUBCO Common Stock, the "HUBCO 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 the holders of the majority of the outstanding shares of MSB
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 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 MSB Board of Directors to solicit
proxies for the Meeting, and it is the Prospectus of HUBCO regarding the HUBCO
Stock to be issued if the Merger is completed. This document does not serve as a
prospectus to cover any resales of HUBCO Stock to be issued in connection with
the Merger. Persons who are considered "affiliates" of MSB under applicable
securities laws will be subject to restrictions on their ability to resell the
HUBCO Stock received by them in the Merger.
This document is first being sent to MSB stockholders on or about
___________, 1998. It describes the Merger Agreement in detail and includes a
copy of the Merger Agreement as Appendix A. MSB stockholders 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 MSB CONTAINED OR INCORPORATED BY REFERENCE IN
THIS DOCUMENT WAS SUPPLIED BY MSB. 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
____________, 1998.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION..........................................................4
INFORMATION INCORPORATED BY REFERENCE..........................................4
SUMMARY OF PROXY STATEMENT-PROSPECTUS..........................................6
Overview..............................................................6
The Meeting...........................................................7
The Companies ........................................................7
The Merger............................................................8
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO.................................15
SELECTED CONSOLIDATED FINANCIAL DATA OF MSB...................................17
MARKET PRICE AND DIVIDEND MATTERS.............................................20
Market Price and Dividend History....................................20
Limitations on Dividends Under the Merger Agreement..................22
Dividend Limitations on HUBCO........................................22
PRO FORMA FINANCIAL INFORMATION...............................................23
ACTUAL AND PRO FORMA PER SHARE DATA...........................................25
INTRODUCTION .................................................................27
CERTAIN INFORMATION REGARDING HUBCO ..........................................27
General..............................................................27
Recent Developments..................................................28
CERTAIN INFORMATION REGARDING MSB.............................................30
General..............................................................30
Recent Developments..................................................30
THE MEETING ..................................................................31
Purpose of the Meeting...............................................31
Record Date; Voting Rights; Proxies..................................31
Solicitation of Proxies..............................................32
Quorum...............................................................32
Required Vote........................................................32
THE PROPOSED MERGER...........................................................33
General Description..................................................33
Closing Date; Effective Time ........................................33
Consideration; Median Pre-Closing Price .............................34
Conversion of MSB Options............................................35
Cash in Lieu of Fractional Shares ...................................36
MSB Preferred Stock .................................................36
Stock Option to HUBCO for MSB Shares.................................36
Background of the Merger.............................................37
MSB Board's Reasons for the Merger and Recommendation................40
HUBCO's Reasons for the Merger.......................................41
Security Ownership of Certain Beneficial Owners......................46
Interests of Certain Persons in the Merger ..........................46
Opinion of MSB's Financial Advisor...................................46
Resale Considerations with Respect to the HUBCO Stock................50
Conditions to the Merger.............................................51
Conduct of Business Pending the Merger...............................51
Employee Benefits....................................................52
Representations, Warranties and Covenants............................52
Regulatory Approvals.................................................53
Management and Operations After the Merger...........................54
Exchange of Certificates, Issuance of New Options....................54
Amendments; Termination .............................................55
Accounting Treatment of the Merger...................................55
Federal Income Tax Consequences .....................................56
No Dissenters' Rights................................................57
The Rights Agreement.................................................57
THE ADDITIONAL PROPOSAL.......................................................57
PRO FORMA FINANCIAL INFORMATION...............................................58
DESCRIPTION OF HUBCO CAPITAL STOCK............................................66
General .............................................................66
Description of HUBCO Common Stock....................................66
Description of HUBCO Preferred Stock.................................68
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF MSB AND HUBCO.....................70
General .............................................................70
Voting Requirements..................................................70
Removal of Directors; Number of Directors............................70
Preferred Stock......................................................70
Classified Board of Directors .......................................71
Inspection Rights....................................................71
Rights of Dissenting Stockholders....................................72
Stockholder Consent to Corporate Action..............................72
Inspection Rights....................................................72
Dividends ...........................................................72
By-laws..............................................................73
Shareholder Protection Legislation...................................73
Evaluation of Offers.................................................74
Limitations of Liability of Directors or Officers....................74
Indemnification of Directors and Officers............................76
Preemptive Rights....................................................76
STOCKHOLDER PROPOSALS.........................................................76
OTHER MATTERS.................................................................77
LEGAL OPINION.................................................................77
EXPERTS.......................................................................77
APPENDIX A Agreement and Plan of Merger by and among HUBCO,
MSB and MSB Bank................................................A-1
APPENDIX B Stock Option Agreement by and between HUBCO and MSB ............B-1
APPENDIX C Fairness Opinion of Keefe, Bruyette & Woods, Inc................C-1
<PAGE>
AVAILABLE INFORMATION
HUBCO, Inc. ("HUBCO") is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission" 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). The address of the
Commission's web site is http://www.sec.gov. In addition, HUBCO Common Stock is
listed on The Nasdaq Stock Market, and certain material as to HUBCO can be
inspected at the offices of the National Association of Securities Dealers, Inc.
(the "NASD"), 1735 K Street, N.W., Washington, D.C. 20006.
MSB Bancorp, Inc. ("MSB") is also subject to the information
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. The reports, proxy
statements and other information filed by MSB can be obtained from the SEC in
the same manner as HUBCO documents as set forth in the preceding paragraph. In
addition, the common stock, par value $0.01 per share, of MSB ("MSB Common
Stock") is listed on The American Stock Exchange (the "AMEX"), and certain
material as to MSB can be inspected at the offices of the AMEX, 86 Trinity
Place, New York, New York 10006-1881.
HUBCO has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act 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 MSB CONTAINED OR INCORPORATED BY REFERENCE IN
THIS DOCUMENT WAS SUPPLIED BY MSB. ALL INFORMATION REGARDING HUBCO WAS SUPPLIED
BY HUBCO.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by HUBCO with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31,
1996, as amended by Amendment No. 1 on Form 10-K/A filed on
April 3, 1997 and Amendment No. 2 on Form-10-K/A filed on
January 30, 1998.
2. Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997.
3. Current Reports on Form 8-K filed with the Commission on April
23, 1997, August 21, 1997, September 9, 1997, October 23,
1997, December 12, 1997, December 22, 1997, January 14, 1998
and January 16, 1998.
4. Forms 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 Stockholders for the year ended
December 31, 1996 ("HUBCO's Annual Report") and HUBCO's Proxy Statement for its
Annual Meeting dated March 13, 1997 ("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 MSB Common Stock or shares of
8.75% Cumulative Convertible Preferred Stock, Series A, $.01 par value, of MSB
("MSB Preferred Stock" and, together with the MSB Common Stock, the "MSB
Stock").
The following documents filed by MSB with the Commission are
incorporated herein by reference.
1. Annual Report on Form 10-K for the year ended December 31,
1996.
2. Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 (as amended by the Form 10-Q/A, dated
August 13, 1997) and September 30, 1997.
3. Current Report on Form 8-K filed with the Commission on
December 17, 1997.
4. Form 8-A dated September 16, 1996 filed by MSB to register its
Common Stock pursuant to Section 12-(b) of the Exchange Act
All documents filed by HUBCO or MSB 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 Special Meeting of Stockholders of MSB (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 in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. These documents (not including 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 MSB 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 MSB materials, to the office of the MSB Corporate Secretary, Karen DeLuca,
MSB Bancorp, Inc., 35 Matthews Street, Goshen, New York 10924; telephone (914)
294-8100. 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 __________, 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. 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. MSB Stockholders should carefully read the entire Proxy Statement.
Overview
The Board of Directors of MSB Bancorp, Inc. ("MSB") has called a
Special Meeting of MSB stockholders (the "Meeting") to be held on [Day of Week],
[Date], 1998. The Meeting has been called to seek stockholder approval of an
Agreement and Plan of Merger, dated December 15, 1997 (the "Merger Agreement"),
by and among HUBCO, Inc. ("HUBCO"), MSB and MSB's principal subsidiary, MSB
Bank. The Merger Agreement provides for MSB to be merged with HUBCO (the
"Merger"), with HUBCO as the surviving corporation. HUBCO, a bank holding
company incorporated in New Jersey, is the parent corporation of Hudson United
Bank, a New Jersey-based bank ("HUB"), and Lafayette American Bank, a
Connecticut-based bank ("Lafayette"). Prior to closing the Merger, HUBCO expects
to complete its pending acquisition of Poughkeepsie Financial Corp. ("PFC") and
PFC's subsidiary, Bank of the Hudson ("BTH"), a New York-based bank. HUBCO
anticipates that BTH will serve as HUBCO's New York bank subsidiary and that MSB
Bank will be merged into BTH following the Merger. 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
$0.01 per share, of MSB ("MSB Common Stock"), other than Excluded Shares (as
defined below), will be converted into a number of shares (the "Exchange Ratio")
of common stock of HUBCO, no par value ("HUBCO Common Stock"). The Merger
Agreement provides that the Exchange Ratio will equal $36.02 divided by the
Median Pre-Closing Price of HUBCO Common Stock, provided that the Median
Pre-Closing Price is between $34.97 and $37.13. ("Median Pre-Closing Price" is
defined generally as the median of the closing prices of HUBCO Common Stock
during the ten consecutive trading day period ending on (and including) the day
the parties receive final federal bank regulatory approval for the Merger.) A
"Minimum Exchange Ratio" of 0.97 will apply if the Median Pre-Closing Price is
greater than $37.13 and a "Maximum Exchange Ratio" of 1.03 will apply if the
Median Pre-Closing Price is less than $34.97. Cash will be paid in lieu of
fractional shares. The Exchange Ratio is subject to adjustments specified in the
Merger Agreement and described more fully herein. "Excluded Shares" are those
shares of MSB Common Stock which are (i) held by MSB 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).
HUBCO currently holds all the outstanding shares of 8.75% Cumulative
Convertible Preferred Stock, Series A, $.01 par value, of MSB ("MSB Preferred
Stock", and together with MSB Common Stock, "MSB Stock"). All MSB Preferred
Stock held by HUBCO will be cancelled in the Merger. While HUBCO does not
currently anticipate transferring any of the MSB Preferred Stock, if it were to
do so, the transferred shares (with certain limited exceptions) would be
converted in the Merger into shares of a newly created series of HUBCO preferred
stock having terms substantially identical to the MSB Preferred Stock (the "New
HUBCO Preferred Stock" and, together with the HUBCO Common Stock, the "HUBCO
Stock").
At the Meeting, holders of MSB Common Stock will be asked to approve
and adopt the Merger Agreement and to approve a proposal (the "Additional
Proposal") to give the MSB Board of Directors discretion to vote upon other
matters that may properly be brought before the Meeting and any adjournment or
postponement thereof, including a motion to adjourn the Meeting in order to
solicit additional proxies if there are insufficient votes at the time of the
Meeting to constitute a quorum or approve the Merger Agreement.
This document serves two purposes. It is the Proxy Statement being used
by the MSB Board of Directors to solicit proxies for the Meeting, and it is the
Prospectus of HUBCO regarding the HUBCO 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 [Day of Week], [Date], 1998 at [Time], at
the South Street office of MSB Bank, 4 South Street, Middletown, New York 10940.
At the Meeting, holders of MSB Common Stock will be asked to approve and adopt
the Merger Agreement and to approve the Additional Proposal.
Record holders of MSB Common Stock at the close of business on
___________, 1998 (the "Record Date") are entitled to vote at the Meeting. As
provided in MSB's Certificate of Incorporation, record owners of MSB Common
Stock who beneficially own in excess of 10% of the outstanding shares of Common
Stock (the "Limit") are not entitled to any vote in respect of the shares held
in excess of the Limit. Holders of a majority of the outstanding shares of MSB
Common Stock entitled to vote at the Meeting (after giving effect to the Limit)
must be present or represented by proxy at the Meeting for a quorum. The
affirmative vote, in person or by proxy, of the holders of a majority of the
outstanding shares of MSB Common Stock entitled to vote at the Meeting (after
giving effect to the Limit) 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
Additional Proposal. As of the Record Date, there were 2,844,153 outstanding
shares of MSB Common Stock held by approximately ___ holders of record. The
directors of MSB as a group have voting control over 128,199 of these shares
(4.50%) and have agreed to vote them in favor of the Merger Agreement. In
addition, HUBCO has voting control over ____ of these shares (___%) and the
non-director executive officers of MSB as a group have voting control over
25,874 of these shares (0.91%), all of which shares MSB expects will be voted in
favor of the Merger Agreement and the Additional Proposal.
The MSB Board of Directors has unanimously approved the Merger
Agreement and unanimously recommends that holders of MSB Common Stock vote FOR
the Merger Agreement and FOR the Additional Proposal.
The Companies
HUBCO
HUBCO is a bank holding company whose principal operating subsidiaries
are HUB and Lafayette. 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. Prior to closing the
Merger, HUBCO expects to complete its pending acquisition of Poughkeepsie
Financial Corp. ("PFC") and PFC's subsidiary, Bank of the Hudson ("BTH"), a New
York-based bank which had 16 branches and $884 million in assets as of September
30, 1997. HUBCO anticipates that BTH will serve as HUBCO's New York bank
subsidiary and that MSB Bank will be merged into BTH following the Merger. BTH
is currently a federally-chartered savings bank and HUBCO anticipates converting
BTH into a state-chartered commercial bank at some point in the future.
HUB is a full-service commercial bank which primarily serves small and
mid-sized businesses and consumers through 57 branches in Northern New Jersey.
Lafayette is a full-service commercial bank which serves small-to-medium-sized
business firms as well as individuals through 27 banking offices located mainly
in Fairfield and New Haven counties in Connecticut. As of September 30, 1997,
HUBCO had consolidated assets of $3.0 billion, consolidated deposits of $2.3
billion and consolidated stockholders' equity of $212 million. Based on assets
as of September 30, 1997, HUBCO was the fourth largest commercial banking
company headquartered in New Jersey.
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Assuming consummation of all
other acquisitions pending as of the date of this Proxy Statement, the Merger
will be HUBCO's twenty-first acquisition since 1990, and HUBCO will have added
over 100 branches and over $4 billion in assets through acquisitions this
decade. HUBCO expects to continue its acquisition strategy.
MSB
MSB is a registered savings and loan holding company, and conducts its
business through its wholly owned subsidiary, MSB Bank. The principal executive
offices of MSB and MSB Bank are located at 35 Matthews Street, Goshen, New York
10924. MSB's and MSB Bank's telephone number is (914) 294-8100. As of September
30, 1997, MSB had total assets of $774 million, deposits of $684 million and
total stockholders' equity of $76.1 million.
MSB Bank was organized in 1869 as a New York state-chartered mutual
savings bank. In 1992, MSB Bank converted from mutual to stock form, and
organized MSB as its holding company.
On October 27, 1995, MSB Bank converted from a New York state-chartered
savings bank to a federal savings bank in order to facilitate the bank's
acquisition of certain assets and liabilities associated with seven branches of
First Nationwide Bank, a Federal Savings Bank ("First Nationwide"), as well as
future expansion. At the same time, the bank changed its name from Middletown
Savings Bank to MSB Bank. As a consequence of the conversion of MSB Bank to a
federal savings bank, MSB became a savings and loan holding company subject to
the regulation, examination and supervision of the Office of Thrift Supervision
(the "OTS"). Prior to the conversion of MSB Bank to a federal savings bank, MSB
was a bank holding company subject to the regulation, examination and
supervision of the Federal Reserve Board (the "FRB").
MSB Bank provides a broad range of banking services from its main
office, which is located in Goshen, New York, and from 15 additional branches in
Orange, Putnam and Sullivan counties. As of September 30, 1997, MSB Bank was the
largest financial institution headquartered in Orange County, New York, based on
assets. Its principal business is attracting and retaining deposits from the
general public and investing those deposits, together with funds generated from
operations, primarily in loans secured by owner-occupied one- to four-family,
primary residence properties, and short and medium-term investment grade debt
securities. MSB Bank's primary mortgage lending base extends throughout Orange,
Sullivan, Putnam, Dutchess and Ulster Counties in New York, Pike County in
Pennsylvania and Sussex County, New Jersey.
The principal business of MSB is directing, planning and coordinating
the business activities of MSB Bank, and the financial condition and results of
operations of MSB are primarily dependent upon the operations of MSB Bank. MSB
also invests in securities, consisting primarily of U.S. Government and federal
agency securities, federal funds and investment grade corporate notes. MSB also
organized a wholly-owned subsidiary corporation, MSB Travel, in January 1996, to
offer travel services to MSB Bank's customers.
The Merger
Description of the Merger; Closing Date; Effective Time
In the Merger, MSB 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 MSB. 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 MSB. HUBCO and MSB currently
anticipate closing in the second quarter of 1998. Simultaneous with or
immediately following the Closing, HUBCO and MSB will file Certificates of
Merger with the Secretary of State of the State of New Jersey and with the
Secretary of State of the State of Delaware. The Merger will become effective at
a date and time following the Closing which HUBCO and MSB will specify in the
Certificates of Merger (the "Effective Time"). If no Effective Time is specified
in the Certificates of Merger, the Effective Time will be the time at which the
later of the two Certificates of Merger are filed. HUBCO and MSB 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
MSB.
Consideration; Median Pre-Closing Price
Upon completion of the Merger, each share of MSB Common Stock (other
than Excluded Shares) will be converted into a number of shares (the "Exchange
Ratio") of HUBCO Common Stock. The Merger Agreement provides that the Exchange
Ratio will equal $36.02 divided by the Median Pre-Closing Price of HUBCO Common
Stock, provided that the Median Pre-Closing Price is between $34.97 and $37.13.
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 day the parties receive final federal bank regulatory
approval for the Merger. A Minimum Exchange Ratio of 0.97 will apply if the
Median Pre-Closing Price is greater than $37.13, and a Maximum Exchange Ratio of
1.03 will apply if the Median Pre-Closing Price is less than $34.97. HUBCO will
pay cash in lieu of issuing fractional shares of HUBCO Common Stock. The
Exchange Ratio is subject to adjustments specified in the Merger Agreement to
prevent dilution in the event of any stock split, reclassification or other
similar event. Also, if the Median Pre-Closing Price is less than $27.00, MSB
will have certain rights to terminate the Merger Agreement unless HUBCO agrees
to increase the Exchange Ratio to $27.81 (i.e., $27.00 multiplied by the 1.03
Maximum Exchange Ratio), divided by the Median Pre-Closing Price.
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and MSB to result in stockholders of MSB
receiving in the Merger HUBCO Common Stock with a value of $36.02 for each share
of MSB Common Stock, provided that the Median Pre-Closing Price is between
$34.97 and $37.13. However, because of the Minimum Exchange Ratio and Maximum
Exchange Ratio, and because the price of HUBCO Common Stock at the Effective
Time may not be the same as the Median Pre-Closing Price, MSB stockholders are
not assured of receiving any specific market value of HUBCO Common Stock. The
price of HUBCO Common Stock at the Effective Time may be higher or lower than
the Median Pre-Closing Price, and may be higher or lower than the market price
at the time of entering into the Merger Agreement, the time of mailing this
Proxy Statement or at the time of the Meeting. MSB STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE HUBCO COMMON STOCK AND THE MSB COMMON
STOCK.
Cash in Lieu of Fractional Shares
No fractional shares of HUBCO Common Stock will be issued in exchange
for MSB Common Stock. Instead, holders of MSB 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 MSB Common Stock will be aggregated to
constitute as many whole shares as possible before determining the person's
fractional share interest.
Conversion of MSB Options
Pursuant to the Merger Agreement, holders ("Optionees") of options
outstanding at the Effective Time to purchase shares of MSB Common Stock ("MSB
Options") will be given the election to have their MSB Options converted at the
Effective Time into either HUBCO Common Stock or into options to purchase HUBCO
Common Stock ("New HUBCO Options"), in accordance with the formulas set forth
below. Optionees may elect to have some of their MSB Options convert into HUBCO
Common Stock and some convert into New HUBCO Options, or they may elect to have
all of their MSB Options convert into one or the other. MSB Options to be
converted into HUBCO Common Stock are referred to in this Proxy Statement as
"Converting Stock Options," and MSB Options to be converted into New HUBCO
Options are referred to in this Proxy Statement as "Continuing Stock Options."
At the Effective Time, each Converting Stock Option will be assigned a
value (the "Option Value") equal to (i) the Median Pre-Closing Price of HUBCO
Common Stock multiplied by the Exchange Ratio, minus (ii) the stated exercise
price for the MSB Option. The holder of the Converting Stock Option will be
entitled to receive a number of shares of HUBCO Common Stock equal to the
aggregate Option Value for all of such holder's Converting Stock Options,
divided by the Median Pre-Closing Price. HUBCO will pay cash in lieu of issuing
fractional shares of HUBCO Common Stock, based upon the Median Pre-Closing
Price.
At the Effective Time, each Continuing Stock Option will be converted
into a New HUBCO Option, in which (i) the right to purchase shares of MSB 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 MSB 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.
MSB Preferred Stock
HUBCO currently holds all the outstanding shares of MSB Preferred
Stock. Shares of MSB Preferred Stock held by HUBCO will be cancelled upon
consummation of the Merger. If HUBCO transfers any MSB Preferred Stock prior to
consummation of the Merger, such shares (with certain limited exceptions) will
be converted in the Merger into shares of New HUBCO Preferred Stock having terms
substantially identical to those of the MSB Preferred Stock.
No Dissenters' Rights of Appraisal
Under the Delaware General Corporation Law (the "DGCL"), holders of MSB
Common Stock are not entitled to dissenters' rights of appraisal in connection
with the Merger. As holder of all the MSB Preferred Stock as of the Record Date,
HUBCO has certain dissenters' rights, but it will not exercise those rights.
Certain Federal Income Tax Consequences
HUBCO's and MSB's obligations to consummate the Merger are conditioned
upon, among other things, the receipt of an opinion of counsel to HUBCO and an
opinion of counsel to MSB 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 MSB each has the contractual
right to waive this condition to closing, neither will do so.
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 its independent
accountants that the Merger will be so treated. Under the pooling-of-interests
method of accounting, MSB'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 MSB 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 the FRB and the OTS. Applications for FRB and OTS approval have
been filed, and HUBCO and MSB 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 MSB.
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 MSB
stockholders; an opinion of Pitney, Hardin, Kipp & Szuch, counsel to HUBCO, and
an opinion of Thacher Proffitt & Wood, counsel to MSB, 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 MSB stockholders letters of transmittal and instructions for exchanging
their stock certificates for certificates representing HUBCO Stock. Holders of
MSB Stock should not send in their stock certificates until they receive
instructions from the Exchange Agent.
Termination Rights
The Merger Agreement may be terminated by either MSB or HUBCO if, among
other reasons, the Effective Time has not occurred by June 30, 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 MSB if MSB'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, MSB may terminate the Merger
Agreement if the Median Pre-Closing Price of HUBCO Common Stock is less than
$27.00 which, given the Maximum Exchange Ratio, would result in shares of MSB
Common Stock being converted into HUBCO Common Stock with a value of less than
$27.81 (i.e., $27.00 multiplied by the 1.03 Maximum Exchange Ratio). However, if
MSB exercises this termination right, HUBCO can choose to override the
termination by increasing the Exchange Ratio to $27.81 divided by the Median
Pre-Closing Price.
Fairness Opinion
Keefe, Bruyette & Woods, Inc. ("KBW") has rendered its oral opinion as
of December 10, 1997, and its written opinion, dated March 17, 1998, to the
Board of Directors of MSB, 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 MSB Common Stock from a financial point of view. For information
concerning the matters reviewed, assumptions made and factors considered by KBW,
see "THE PROPOSED MERGER -- Opinion of Financial Advisor" and Appendix C to this
Proxy Statement, which sets forth a copy of KBW's written fairness opinion.
Holders of MSB Common Stock are urged to, and should, read such opinion in its
entirety.
No Solicitation by MSB of Alternative Transactions
Pursuant to the Merger Agreement, MSB 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 MSB or MSB Bank (an
"Acquisition Transaction"), except that MSB may enter into discussions or
negotiations or provide information in connection with an unsolicited possible
Acquisition Transaction if the Board of Directors of MSB, 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 MSB.
Stock Option to HUBCO for MSB Shares
HUBCO and MSB entered into a Stock Option Agreement dated as of
December 15, 1997 (the "Stock Option Agreement") in connection with the
negotiation by HUBCO and MSB of the Merger Agreement. Pursuant to the Stock
Option Agreement, MSB 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 600,000 authorized but
unissued shares of MSB Common Stock, representing upon issuance approximately
17.4% of the shares of MSB Common Stock, for an exercise price of $29.00 per
share. HUBCO does not have any voting rights with respect to the shares of MSB
Common Stock subject to the Option prior to exercise of the Option. Acquisitions
of MSB 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 MSB Common Stock received pursuant to the exercise of the Option
if such shares of MSB Common Stock were sold at prices exceeding $29.00 per
share. The ability of HUBCO to exercise the Option and to cause up to an
additional 600,000 shares of MSB Common Stock to be issued may be considered a
deterrent to other potential acquisitions of control of MSB, even if such
potential acquiror were prepared to pay a higher price per share for MSB Common
Stock, as it is likely to increase the cost of an acquisition of all of the
shares of MSB 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.
MSB Rights Agreement
On September 16, 1994, MSB adopted a Rights Agreement (as amended, the
"Rights Agreement"), pursuant to which holders of MSB Common Stock received a
dividend of one preferred share purchase right (a "Right") for each share of MSB
Common Stock outstanding at the close of business on October 7, 1994. Each Right
represents the right to purchase one one-hundredth interest in a new series of
preferred stock of MSB under certain circumstances (generally, upon the
acquisition by an "acquiring person" (as defined in the Rights Agreement) of
beneficial ownership of 10% or more of the outstanding shares of MSB Common
Stock). In connection with the execution and delivery of the Merger Agreement,
MSB amended the Rights Agreement to provide that, for purposes of determining
whether HUBCO (as well as its affiliates) is an acquiring person under the
Rights Agreement, HUBCO shall not be deemed to be a beneficial owner, as defined
in the Rights Agreement, or to beneficially own any securities as a result of
the transactions contemplated by the Merger Agreement and the Stock Option
Agreement. Pursuant to the Merger Agreement, MSB will cause all outstanding
Rights to be redeemed prior to the Effective Time of the Merger.
Interests of Certain Persons in the Merger
Certain directors, officers and executives of MSB and its affiliates
are the holders of stock options to acquire shares of MSB Common Stock. Pursuant
to the Merger Agreement, the Optionees will have the right to elect to convert
all or a portion of their MSB Options into HUBCO Common Stock or options to
purchase HUBCO Common Stock.
The Merger Agreement provides that HUBCO will cause one director
selected by MSB (who may be William C. Myers, the Chairman of the Board and the
Chief Executive Officer of MSB and MSB Bank) and acceptable to HUBCO to be
appointed at the Effective Time to the HUBCO Board of Directors. In addition,
HUBCO has agreed to ask all of the current directors of MSB Bank to serve as
directors of HUBCO's New York banking subsidiary. These directors would receive
substantially the same fees and have substantially the same duties as directors
of other bank subsidiaries of HUBCO.
Mr. Myers will be appointed at the Effective Time as Vice Chairman of
the Board of Directors of HUBCO's New York banking subsidiary and President of
the Southern Region of the New York banking subsidiary. Immediately after the
Effective Time, HUBCO will enter into an employment agreement with Mr. Myers for
a one-year term, providing a base annual salary of $200,000, a guaranteed bonus
of $100,000, coverage for the benefits provided by HUBCO to similarly situated
executives and officers and a lump sum payment of $800,000, payable in two equal
installments, as consideration for two-year non-competition and non-solicitation
covenants from Mr. Myers. The agreement will also contain other required
provisions as well as such other terms and conditions as may be mutually agreed
upon by the parties.
Mr. Myers is a party to an employment agreement with MSB (as amended
through October 31, 1997), which provides, among other things, that upon a
"change of control" of MSB or MSB Bank (which would include the Merger) he would
be entitled to receive a lump sum payment determined in accordance with his
agreement. The agreement also contains a provision (a "gross-up provision")
under which, in the event the present value of the total payments to be made to
Mr. Myers upon a change of control of MSB or MSB Bank constitute an "excess
parachute payment" under Section 280G of the Internal Revenue Code of 1986 (the
"Code") that would trigger the payment of excise taxes under Section 4999 of the
Code, MSB will indemnify Mr. Myers for the amount of the excise taxes and the
amount of any income and employment tax liability that would be triggered as a
result of such indemnification. MSB and Mr. Myers have agreed to amend Mr.
Myers' current employment agreement effective as of the Closing to reduce his
pay-out under the agreement so that it would not constitute an "excess parachute
payment" under Section 280G of the Code (and therefore the gross-up provision
would not be triggered). Assuming a change of control occurred on March 31,
1998, Mr. Myers would receive payments, including the value of any non-cash
benefits, having a present value of approximately $561,000 under his agreement.
Gill Mackay, Executive Vice President and Chief Operating Officer of
MSB and MSB Bank, and Anthony J. Fabiano, Senior Vice President and Chief
Financial Officer of MSB and MSB Bank, are each parties to an employment
agreement with MSB (as amended through October 31, 1997), which provides, among
other things, that upon a "change of control" of MSB or MSB Bank (which would
include the Merger) each executive would be entitled to receive a lump sum
payment in accordance with the terms of his agreement. Each agreement also
contains a gross-up provision. Assuming a change of control occurred on March
31, 1998, the present value of the payment, including the value of any non-cash
benefits, to be payable to Mr. Mackay and Mr. Fabiano would be approximately
$999,000 and $779,000, respectively.
Mary Ellen Rogulski, Vice President -- Commercial Lending of MSB Bank,
Karen DeLuca, Corporate Secretary of MSB Bank, Frances C. Reilly, Vice President
- -- Loan Operations of MSB Bank, Frances J. Fogg, Vice President -- Lending of
MSB Bank, Steven R. Gleason, President, MSB Financial Services and Catherine
Terwilliger, Vice-President -- Finance and Controller of MSB Bank are each
parties to special termination agreements with MSB Bank which provide that if,
at any time within the three year term of the agreement that commences following
a "change of control" of MSB and MSB Bank (which would include the Merger), the
executive's employment is terminated without cause or the executive resigns for
good reason (as defined in the agreements), the executive would be entitled to
receive a lump sum severance payment equal to twice the executive's then current
annual base salary and additional employee benefit contributions and coverages.
The agreements also provide for automatic reductions in the event the
distributions to be made under the agreements would otherwise constitute "excess
parachute payments" under Section 280G of the Code. Assuming a change of control
and termination occurred on March 31, 1998, Ms. Rogulski, Ms. DeLuca, Ms.
Reilly, Mr. Fogg, Mr. Gleason and Ms. Terwilliger would each receive a severance
payment, including the value of non-cash benefits, of approximately $194,000,
$111,000, $170,000, $170,000, $193,000 and $159,000, respectively.
Severance payments will be provided to eligible participants in the MSB
Bank Employee Severance Compensation Plan ("Severance Plan") whose employment is
terminated within one year following the "change of control" of MSB and MSB Bank
(which would include the Merger). The Severance Plan provides for an eligible
participant to receive a severance payment equal to the product of 1/12 of the
participant's annual compensation multiplied by the number of his or her whole
years of service, up to a maximum of twenty-four (24) years. An employee of MSB
or its affiliates who has completed seven years of service or any officer of MSB
or its affiliates, other than any employee or officer covered by an employment
or special termination agreement providing severance benefits, would be eligible
to participate in the Severance Plan. The dollar amount of the severance
expected to be paid under the Severance Plan following the Merger cannot be
quantified with any certainty at this time. Severance will also be payable to
certain eligible persons who are not participants in the Severance Plan under
the current severance policy of MSB, as applicable.
The Retirement Plan For Board Members of MSB Bancorp, Inc., as amended
through October 31, 1997 (the "Retirement Plan"), has been terminated effective
as of December 31, 1997. As soon as practicable, each outside director
participating in the Retirement Plan will receive the benefit that has accrued
for him or her under the Retirement Plan through the purchase of an annuity or a
lump sum distribution. Each director's accrued benefit will be determined as if
a "change of control" of MSB or MSB Bank (as defined in the Plan) occurred
effective as of December 31, 1997 entitling each director to three additional
years of age and credited service for benefit accrual purposes. Payments under
the Retirement Plan will be made whether or not the Merger is consummated. The
estimated annual benefit payable to a participant upon retirement at or after
age 65 based on the $29,400 annual retainer currently in effect for directors of
MSB and assuming 10 years of service would be approximately $29,400 per year. As
a result of the termination of the Retirement Plan, MSB accrued $2.8 million in
the fourth quarter of 1997 for benefits payable to Board Members.
In addition to the foregoing, the Merger Agreement requires HUBCO to
indemnify, for a period of six years after the Effective Time, each director,
officer, employee or agent of MSB or MSB Bank or any person who serves or has
served at the request of MSB or MSB Bank in any capacity with any other person
to the fullest extent which MSB or MSB Bank would have been permitted under
applicable law and their respective Certificates of Incorporation and By-laws
had the Merger not occurred, with respect to any claims made against such person
because he or she is or was serving in such capacity. The Merger Agreement also
requires HUBCO to provide MSB's and MSB Bank's officers and directors with
directors' and officers' liability insurance for at least 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 Stockholders' Rights
MSB is a business corporation incorporated under the DGCL, and HUBCO is
a business corporation incorporated under the New Jersey Business Corporation
Act (the "NJBCA"). The rights of MSB stockholders are currently governed by the
DGCL and MSB's certificate of incorporation and by-laws. At the Effective Time,
each MSB stockholder will become a shareholder of HUBCO. The rights of HUBCO
stockholders are governed by the NJBCA and HUBCO's certificate of incorporation
and by-laws. The DGCL and the NJBCA, and the rights of stockholders thereunder,
differ with respect to voting requirements and various other matters. The most
significant of these differences are: the removal of directors and changes to
the size of the Board of Directors, the requisite Board and shareholder
approvals necessary to amend the By-laws of the two corporations and the
existence of MSB's Rights Plan.
Selected Consolidated Financial Data
The following tables set forth selected historical consolidated
financial information (audited and unaudited) for both HUBCO and MSB for the
five years ended December 31, 1996 and the nine months ended September 30, 1997
and 1996. The tables have been derived from, and should be read in conjunction
with, the historical financial statements of HUBCO and MSB, including the
related notes thereto, incorporated by reference in this Proxy
Statement-Prospectus. See "INFORMATION INCORPORATED BY REFERENCE." The financial
information for the nine month period ended September 30, 1997 for HUBCO and MSB
reflects, in the opinion of the management of HUBCO and MSB, respectively, all
adjustments necessary for a fair presentation of such information. Results for
this period are not necessarily indicative of the results which may be expected
for the full year or any other interim period.
The selected data presented below under the caption "Selected
Consolidated Financial Data of MSB" for the year ended December 31, 1996 are
derived from the consolidated financial statements of MSB Bancorp, Inc. and
Subsidiaries, which financial statements have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The selected data presented below
for each of the years in the two year period ended December 31, 1995 and for
each of the years in the two year period ended September 30, 1993 and the
"Balance Sheet Summary" at December 31, 1993 are derived from financial
statements that have been audited by Nugent & Haeussler P.C., MSB's independent
certified public accounts for those periods. All other information contained in
the "Selected Consolidated Financial Data of MSB" is unaudited.
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
At or for the Year Ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 204,182 $ 203,651 $ 170,929 $ 149,528 $ 164,346
Interest expense 72,828 70,440 53,126 50,771 67,749
------------ ------------- ------------ ------------- ------------
Net interest income 131,354 133,211 117,803 98,757 96,597
Provision for possible loan losses 12,295 9,515 9,309 31,917 26,320
------------ ------------- ------------ ------------- ------------
Net interest income after
provision for possible loan losses 119,059 123,696 108,494 66,840 70,277
Other income 30,276 28,223 22,420 24,571 25,530
Other expenses 116,239 102,842 94,931 97,098 93,764
------------ ------------- ------------ -------------- -----------
Income (loss) before income taxes 33,096 49,077 35,983 (5,687) 2,043
Income tax provision (benefit) 11,599 14,512 12,595 321 (6,441)
============ ============= ============ ============= ============
Net income (loss) $ 21,497 $ 34,565 $ 23,388 $ (6,008) $ 8,484
============ ============= ============ ============= ============
Share Data:
Weighted average common
shares outstanding (in thousands) 22,508 22,127 20,367 16,687 15,117
Basic earnings per share $ 0.91 $ 1.52 $ 1.13 $ (0.36) $ 0.56
Diluted earnings per share 0.88 1.43 1.02 (0.31) 0.56
Cash dividend per common share 0.66 0.56 0.34 0.29 0.25
Balance Sheet Summary:
Securities held to maturity $ 280,914 $ 294,057 $ 715,509 $ 599,587 $ 456,709
Securities available for sale 655,492 502,381 213,815 179,267 130,789
Loans 1,884,355 1,652,022 1,569,059 1,303,397 1,373,631
Total assets 3,115,687 2,778,416 2,770,667 2,322,713 2,219,105
Deposits 2,592,092 2,446,273 2,414,999 2,103,895 2,021,029
Stockholders' equity 206,333 216,796 187,305 117,965 122,406
Performance Ratios:
Return on average assets 0.76 % 1.27 % 0.91 % (0.27) % 0.38 %
Return on average equity 10.44 % 17.31 % 15.77 % (5.01) % 7.57 %
Dividend payout 73.33 % 40.29 % 34.34 % 44.64 %
Average equity to average assets 7.25 % 7.35 % 5.79 % 5.39 % 5.02 %
Net interest margin 5.05 % 5.34 % 5.03 % 4.75 % 4.81 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 1.87 % 1.82 % 1.97 % 2.57 % 2.39 %
Allowance for possible loan losses
to non-performing loans 111 % 118 % 74 % 44 % 42 %
Non-performing loans to
total loans 1.69 % 1.55 % 2.65 % 5.78 % 5.64 %
Non-performing assets to total
loans, plus other real estate 1.98 % 2.23 % 3.62 % 7.39 % 7.54 %
Net charge-offs to average loans 0.69 % 0.66 % 1.28 % 1.84 % 1.76 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF HUBCO
At or For the Nine Months Ended September 30,
-------------------------------------------------------------
1997 1996
------------------------------- -----------------------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income $ 165,249 $ 149,933
Interest expense 58,772 52,491
------------ ------------
Net interest income 106,477 97,442
Provision for possible loan losses 5,027 6,675
------------ ------------
Net interest income after
provision for possible loan losses 101,450 90,767
Other income 28,993 21,915
Other expenses 70,165 83,437
------------ ------------
Income before income taxes 60,278 29,245
Income tax provision 23,860 11,208
------------ ------------
Net income $ 36,418 $ 18,037
------------ ------------
Share Data:
Weighted average common
shares outstanding (in thousands) 23,471 24,070
Basic earnings per share $ 1.61 $ 0.77
Diluted earnings per share 1.53 0.74
Cash dividend per common share 0.55 0.48
Balance Sheet Summary:
Securities held to maturity $ 232,970 $ 274,226
Securities available for sale 653,079 657,269
Loans 1,781,414 1,794,897
Total assets 3,046,034 3,034,297
Deposits 2,298,321 2,500,389
Stockholders' equity 211,893 205,144
Performance Ratios: (1)
Return on average assets 1.62 % 0.87 %
Return on average equity 23.44 % 11.86 %
Dividend payout 35.48 % 64.00 %
Average equity to average assets 6.92 % 7.31 %
Net interest margin 5.22 % 5.14 %
Asset Quality Ratios:
Allowance for possible loan
losses to total loans 2.11 % 1.83 %
Allowance for possible loan losses
to non-performing loans 116 % 95 %
Non-performing loans to
total loans 1.82 % 1.92 %
Non-performing assets to total
loans, plus other real estate 2.02 % 2.30 %
Net charge-offs to average loans 0.29 % 0.39 %
- ----------------------------
</TABLE>
(1) The Performance Ratios are presented on an annualized basis.
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF MSB
At or for the At or for the
12 months Ended Year Ended
At or for the Year Ended December 31, December 31 September 30
----------------------------------------------------------------------------------------
1996 1995 1994 1993(1) 1993 1992
(Dollars in thousands, except for per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Earnings Summary:
Interest income $ 54,350 $ 29,151 24,514 $ 25,403 $ 26,215 $ 27,300
Interest expense 30,793 15,183 10,772 11,281 11,902 15,539
------------ ------------ ------------ ------------ ------------ ------------
Net interest income 23,557 13,968 13,742 14,122 14,313 11,761
Provision for possible loan losses 1,400 483 119 355 527 1,681
------------ ------------ ------------ ------------ ------------ ------------
Net interest income after
provision for possible loan losses 22,157 13,485 13,623 13,767 13,786 10,080
Other income 4,027 2,168 1,753 3,739 4,314 4,434
Other expenses (3) 23,369 11,670 13,720 12,698 12,876 11,367
------------ ------------ ------------ ------------ ------------ -----------
Income before income taxes 2,815 3,983 1,656 4,808 5,224 3,147
Income tax provision 1,104 1,622 626 2,165 2,312 1,337
------------ ------------ ------------ ------------ ------------ -----------
Income before cumulative effect of
accounting change $ 1,711 $ 2,361 1,030 $ 2,643 $ 2,912 $ 1,810
Cumulative effect of accounting changes (2) -- -- 117 -- 483 (682)
============ ============ ============ ============ ============ ===========
Net income $ 1,711 $ 2,361 1,147 $ 2,643 $ 3,395 $ 1,128
============ ============ ============ ============ ============ ===========
Share Data:
Weighted average
shares outstanding (in thousands) 2,780 1,664 1,681 1,787 1,807 --
Basic earnings per share (3) 0.22 1.46 0.70 1.53 1.93 --
Diluted earnings per share (3) $ 0.22 $ 1.42 0.68 $ 1.48 $ 1.88 $ --
Cash dividend per common share 0.60 0.60 0.46 0.30 0.20 --
Balance Sheet Summary:
Securities held to maturity $ -- $ -- 31,908 $ 143,448 $ 162,699 176,889
Securities available for sale 374,113 125,355 96,388 40,552 31,591 37,192
Loans 338,491 280,512 231,075 182,712 172,270 169,344
Total assets 820,916 454,126 405,928 409,429 417,332 421,300
Deposits 736,161 388,944 354,920 356,931 359,703 371,429
Stockholders' equity 70,790 43,996 39,624 43,430 44,055 42,294
Performance Ratios:
Return on average assets (3) 0.21 % 0.54 % 0.28 % 0.64 % 0.82 % 0.30 %
Return on average equity (3) 2.42 % 5.62 % 2.75 % 6.05 % 7.82 % 4.03 %
Dividend payout 272.73 % 43.17 % 69.70 % 20.98 % 10.93 % -- %
Average equity to average assets 8.48 % 9.52 % 10.26 % 10.58 % 10.44 % 7.43 %
Net interest margin 3.07 % 3.35 % 3.58 % 3.65 % 3.67 % 3.33 %
Asset Quality Ratios:
Allowance for possible loan
losses to net loans 0.58 % 0.59 % 0.63 % 0.80 % 0.83 % 0.71 %
Allowance for possible loan losses
to non-performing loans 41.05 % 56.03 % 82.62 % 126.60 % 146.93 % 41.91 %
Non-performing loans to
total loans 1.40 % 1.05 % 0.76 % 0.63 % 0.56 % 1.68 %
Non-performing assets to total loans,
plus other real estate owned 1.67 % 1.33 % 1.06 % 1.32 % 1.35 % 2.47 %
Net charge-offs to average loans 0.36 % 0.11 % 0.06 % 0.16 % 0.18 % 0.77 %
- -------------
</TABLE>
(1) In July 1993, MSB changed its fiscal year-end from September 30, to
December 31. The three months ended December 31, 1993 represented a
transition period. MSB's 1994 fiscal year began on January 1, 1994. For
purposes of comparing the results of operations for fiscal 1994, MSB
believes it is meaningful to use the 12 months ended December 31, 1993
(unaudited) as the basis for that comparison.
(2) Represents a change in the accounting for investment securities in 1994,
income taxes in 1993 and post-retirement benefits in 1992.
(3) Includes a $2.9 million pre-tax charge for SAIF assessment in 1996 and a
$1.6 million pre-tax charge for restructuring expenses in the fourth
quarter of 1994.
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA OF MSB
At or For the Nine Months Ended September 30,
-------------------------------------------------------------
1997 1996
------------------------------- -----------------------------
(Dollars in thousands, except for per share amounts)
<S> <C> <C>
Earnings Summary:
Interest income $ 40,341 $ 40,718
Interest expense 21,922 23,041
----------- -----------
Net interest income 18,419 17,677
Provision for possible loan losses 850 970
----------- -----------
Net interest income after
provision for possible loan losses 17,569 16,707
Other income 3,325 2,867
Other expenses (1) 15,479 18,488
----------- -----------
Income before income taxes 5,415 1,086
Income tax provision 2,143 440
=========== ===========
Net Income $ 3,272 $ 646
=========== ===========
Share Data:
Weighted average
shares outstanding (in thousands) 2,837 2,766
Basic earnings (loss) per share $ 0.85 $ (0.06)
Diluted earnings (loss) per common share $ 0.85 $ (0.06)
Cash dividend per common share 0.45 0.45
Balance Sheet Summary:
Securities available for sale $ 312,916 $434,737
Loans 372,282 326,796
Total assets 773,991 848,255
Deposits 684,018 748,470
Stockholders' equity 76,137 67,968
Performance Ratios:
Return on average assets 0.54 % 0.10 %
Return on average equity 5.99 % 1.22 %
Dividend payout 53.57 % (NM) %
Average equity to average assets 9.10 % 8.42 %
Net interest margin 3.34 % 3.07 %
Asset Quality Ratios:
Allowance for possible loan
losses to net loans 0.63 % 0.55 %
Allowance for possible loan losses
to non-performing loans 74.3 % 35.6 %
Non-performing loans to
total loans 0.85 % 1.53 %
Non-performing assets to total loans,
plus other real estate owned 1.44 % 1.81 %
Net charge-offs to average loans (annualized) 0.26 % 0.38 %
- --------------
</TABLE>
(1) Includes a $2.9 million pre-tax charge for the SAIF recapitalization
assessment in 1996.
<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 MSB Common Stock
is quoted on The American Stock Exchange (the "AMEX") under the symbol "MBB".
The following tables set forth, for the periods indicated, the high and low
closing prices per share of HUBCO Common Stock on The Nasdaq Stock Market and
MSB Common Stock on the Composite Tape, 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 payable on December 1, 1997 to
stockholders of record on November 13, 1997 (the "1997 Stock Dividend") and a
HUBCO stock dividend payable on November 15, 1996 to stockholders of record on
November 4, 1996 (the "1996 Stock Dividend").
<TABLE>
<CAPTION>
Equivalent Pro Forma Market Price Per
Market Market Share of MSB Common Stock(1)
Price Per Share Price Per Share Maximum Minimum
of HUBCO of MSB Exchange Exchange
Common Stock Common Stock Ratio (1.03) Ratio (0.97)
---------------------- --------------------- ---------------------------------------------
High Low High Low High Low High Low
----- --- ---- --- ---- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996:
First Quarter........ $ 21.33 $ 18.32 $ 22.00 $ 17.00 $ 21.97 $ 18.87 $ 20.69 $ 17.77
Second Quarter....... $ 20.50 $ 17.32 $ 18.25 $ 15.00 $ 21.12 $ 17.84 $ 19.89 $ 16.80
Third Quarter........ $ 20.39 $ 18.61 $ 17.50 $ 15.75 $ 21.00 $ 19.17 $ 19.78 $ 18.05
Fourth Quarter....... $ 24.15 $ 19.56 $ 19.63 $ 15.50 $ 24.87 $ 20.15 $ 23.43 $ 18.97
1997:
First Quarter........ $ 25.85 $ 21.84 $ 20.50 $ 16.75 $ 26.63 $ 22.50 $ 25.08 $ 21.19
Second Quarter....... $ 28.52 $ 21.12 $ 20.13 $ 16.38 $ 29.38 $ 21.75 $ 27.67 $ 20.48
Third Quarter........ $ 32.04 $ 26.94 $ 28.88 $ 19.88 $ 33.00 $ 27.75 $ 31.08 $ 26.13
Fourth Quarter......... $ 39.13 $ 30.94 $ 37.63 $ 27.25 $ 40.30 $ 31.87 $ 37.96 $ 30.01
1998:
First Quarter
(through 3/__/98)..... $ $ $ $ $ $ $ $
- -------------
</TABLE>
(1) Equivalent pro forma market price per share of MSB Common Stock represents
the high and low closing prices per share of HUBCO Common Stock, multiplied
by the Exchange Ratio. The Exchange Ratio is subject to customary
anti-dilution adjustments specified in the Merger Agreement.
<PAGE>
<TABLE>
<CAPTION>
Equivalent Pro Forma Dividends Per
HUBCO MSB Share of MSB Common Stock(1)
Common Stock Common Stock Maximum Minimum
Dividends Dividends Exchange Exchange
Per Share Per Share Ratio (1.03) Ratio (0.97)
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
1996:
First Quarter......... $ 0.160 $ 0.15 $ 0.165 $ 0.155
Second Quarter........ $ 0.160 $ 0.15 $ 0.165 $ 0.155
Third Quarter......... $ 0.160 $ 0.15 $ 0.165 $ 0.155
Fourth Quarter........ $ 0.184 $ 0.15 $ 0.190 $ 0.179
1997:
First Quarter......... $ 0.184 $ 0.15 $ 0.190 $ 0.179
Second Quarter........ $ 0.184 $ 0.15 $ 0.190 $ 0.179
Third Quarter......... $ 0.184 $ 0.15 $ 0.190 $ 0.179
Fourth Quarter ......9 $ 0.200 $ 0.15 $ 0.206 $ 0.194
1998:
First Quarter
(through 3/__/98)..... $ $ $ $
----------------------
</TABLE>
(1) Equivalent pro forma cash dividends per share of MSB 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 $.1845 per share of
HUBCO Common Stock payable on March 1, June 1, September 1 and $.20 payable
on December 1, would be $0.752. On an equivalent pro forma basis, such
current annualized HUBCO dividend per share of MSB Common Stock would be
$0.775, based on the Maximum Exchange Ratio (1.03), or $0.729, based on the
Minimum Exchange Ratio (0.97), in each case 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) December 12, 1997, 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 on The
Nasdaq Stock Market and of MSB Common Stock on the Composite Tape and the
equivalent price per share of MSB Common Stock computed by multiplying the
closing price of HUBCO Common Stock on each of the dates specified by the
Maximum Exchange Ratio (1.03) and the Minimum Exchange Ratio (0.97),
respectively.
<TABLE>
<CAPTION>
Equivalent Price Per Share
of MSB Common Stock
Maximum Minimum
HUBCO MSB Exchange Exchange
Common Stock Common Stock Ratio (1.03) Ratio (0.97)
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 12, 1997.......... $36.50 $30.50 $37.595 $35.405
March __, 1998............. $ $____ $____ $_____
-
- --------------------------------------
</TABLE>
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and MSB to result in stockholders of MSB
receiving HUBCO Common Stock with a value of $36.02 for each share of MSB Common
Stock, provided that the Median Pre-Closing Price of HUBCO Common Stock is
between $34.97 and $37.13. However, because of the Minimum Exchange Ratio and
Maximum Exchange Ratio, and because the price of HUBCO Common Stock at the
Effective Time may not be the same as the Median Pre-Closing Price, MSB
stockholders are not assured of receiving any specific market value of HUBCO
Common Stock. The price of HUBCO Common Stock at the Effective Time may be
higher or lower than the Median Pre-Closing Price, and may be higher or lower
than the market price at the time of entering into the Merger Agreement, the
time of mailing this Proxy Statement-Prospectus or at the time of the Meeting.
MSB STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE HUBCO
COMMON STOCK AND MSB COMMON STOCK.
Limitations on Dividends Under the Merger Agreement
The Merger Agreement prohibits MSB from declaring, setting aside or
paying any dividend or other distribution on its capital stock, except that MSB
may pay dividends on the MSB Stock in the same amount as was paid in the two
quarters prior to the date of the Merger Agreement, less the amount, if any,
which MSB may pay to the holders of MSB Common Stock in order to redeem the
Rights which currently exist as part of the MSB Common Stock.
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"), Hudson United Bank ("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. In
addition, upon consummation of HUBCO's acquisition of its first New York-based
bank (whether BTH or MSB Bank), that bank will serve as an additional source of
dividends to HUBCO. Payment of any such dividends by HUBCO's New York bank
subsidiary will be subject to the regulations of the OTS, if the New York bank
continues to be federally chartered, or the New York Banking Law, if the New
York bank converts to a New York State-chartered bank.
<PAGE>
PRO FORMA 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 nine-month period ended September 30, 1997 and for
the years ended December 31, 1996, 1995 and 1994, and the pro forma unaudited
combined condensed balance sheet at September 30, 1997. The HUBCO and MSB pro
forma combined financial information gives effect to HUBCO's proposed
acquisition of MSB in a transaction accounted for as a pooling of interests, as
if such transaction had been consummated for statement of income purposes on the
first day of the applicable periods and for balance sheet purposes on September
30, 1997. The pro forma information is based on the historical financial
statements of HUBCO and MSB, certain of which are incorporated by reference
herein. The pro forma financial information assumes a Maximum Exchange Ratio of
1.03 and a Minimum Exchange Ratio of 0.97 shares of HUBCO Common Stock for each
share of MSB Common Stock outstanding.
The summary unaudited pro forma financial information should be read in
conjunction with the pro forma financial information and the related notes
thereto presented elsewhere in the Proxy Statement and the consolidated
financial statements and related notes incorporated by reference in the Proxy
Statement. Anticipated cost savings net of expected Merger-related expenses and
restructuring charges are not expected to be material and, therefore, the pro
forma financial data does not give effect to these items, nor does it take into
account HUBCO's pending acquisition of PFC or Community Financial Holding
Corporation ("CFHC"), HUBCO's purchase of 22 branches from First Union National
Bank (the "Branch Purchase") or HUBCO's recently completed acquisition of
Security National Bank & Trust Company of New Jersey ("SNB") and The Bank of
Southington ("TBOS"). See "CERTAIN INFORMATION REGARDING HUBCO - Recent
Developments." None of the acquisitions had closed as of September 30, 1997 and
none are sufficiently material to HUBCO under SEC rules to require inclusion in
this Proxy Statement-Prospectus of financial statements or pro forma
presentation regarding such acquisitions. The pro forma information is not
necessarily indicative of the results of operations which would have been
achieved had the Merger been consummated as of the beginning of the periods for
which such data are presented and should not be construed as being
representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Unaudited Combined Condensed Financial Information
(In thousands, except for per share data)
For the Nine
Months Ended
September 30,
-------------- For the Years Ended December 31,
------------------------------------
1997 1996 1995 1994
------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Results of Operations:
Net interest income before provision for possible loan losses $ 124,896 $ 154,911 $ 147,179 $ 131,545
Provision for possible loan losses.......................... 5,877 13,695 9,998 9,428
Net interest income after provision for possible loan losses 119,019 141,216 137,181 122,117
Income before income taxes................................. 65,693 35,911 53,062 37,639
Net income.................................................. 39,690 23,208 36,926 24,535
Earnings per share
Basic-maximum exchange ratio.............................. 1.51 0.84 1.44 1.04
Basic-minimum exchange ratio.............................. 1.52 0.84 1.45 1.04
Diluted-maximum exchange ratio............................ 1.49 0.85 1.36 0.95
Diluted-minimum exchange ratio............................ 1.50 0.86 1.37 0.95
As of September 30,
1997
-----------------------
Balance Sheet:
Total assets................................................ $ 3,801,380
Total deposits.............................................. 2,984,381
Total stockholders' equity.................................. 271,193
Book value per common share
Maximum exchange ratio.................................... 10.70
Minimum exchange ratio.................................... 10.78
</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 MSB Common Stock, both on an
actual (historical) basis and on a pro forma combined basis, as adjusted for the
1996 Stock Dividend and 1997 Stock Dividend. The actual per share data have been
derived from the consolidated financial statements of HUBCO and MSB,
respectively, incorporated by reference herein. See "INFORMATION INCORPORATED BY
REFERENCE."
The pro forma unaudited book value per share data at September 30, 1997
and the pro forma unaudited net income per share data for the nine months ended
September 30, 1997 and for the years ended December 31, 1996, 1995 and 1994 have
been derived from the pro forma unaudited combined condensed financial
statements of HUBCO and MSB, giving effect to HUBCO's acquisition of MSB
accounted for as a pooling of interests. Pro forma unaudited per share amounts
have been determined based on the assumptions set forth in the pro forma
combined condensed unaudited financial statements presented elsewhere herein.
See "PRO FORMA FINANCIAL INFORMATION."
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 MSB incorporated by reference herein and the pro forma combined
condensed financial statements of HUBCO and MSB presented elsewhere herein. See
"INFORMATION INCORPORATED BY REFERENCE" and "PRO FORMA FINANCIAL INFORMATION."
Anticipated cost savings net of expected Merger-related expenses and
restructuring charges are not expected to be material and, therefore, the pro
forma financial data does not give effect to these items, nor does it take into
account HUBCO's pending acquisition of PFC or CFHC, the Branch Purchase or
HUBCO's recently completed acquisition of SNB and TBOS. See "CERTAIN INFORMATION
REGARDING HUBCO - Recent Developments." None of the acquisitions had closed as
of September 30, 1997 and none are sufficiently material to HUBCO under SEC
rules to require inclusion in this Proxy Statement-Prospectus of financial
statements or pro forma presentation regarding such acquisitions. The pro forma
information is not necessarily indicative of the results of operations which
would have been achieved had the Merger been consummated as of the beginning of
the periods for which such data are presented and should not be construed as
being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months
Ended For the Year Ended December 31
September 30, 1997 1996 1995 1994
------------------- ---- ---- ----
<S> <C> <C> <C> <C>
CASH DIVIDENDS DECLARED PER COMMON SHARE: (1)
HUBCO - Actual $ 0.55 $ 0.66 $ 0.56 $ 0.34
MSB- Actual 0.45 0.60 0.60 0.46
MSB, Pro forma equivalent: (2) 0.57 0.68 0.58 0.35
Maximum exchange ratio 0.53 0.64 0.54 0.33
Minimum exchange ratio
NET INCOME PER COMMON SHARE:
HUBCO - Actual
Basic $ 1.61 $ 0.91 $ 1.52 $ 1.13
Diluted 1.53 0.88 1.43 1.02
MSB - Actual
Basic 0.85 0.22 1.46 0.70
Diluted 0.85 0.22 1.42 0.68
Pro Forma:
Pro forma per share of HUBCO
Common Stock:
Basic, maximum exchange ratio 1.51 0.84 1.44 1.04
Basic, minimum exchange ratio 1.52 0.84 1.45 1.04
Diluted, maximum exchange ratio 1.49 0.85 1.36 0.95
Diluted, minimum exchange ratio 1.50 0.86 1.37 0.95
MSB, Pro forma equivalent: (2)
Basic, maximum exchange ratio 1.56 0.87 1.48 1.07
Basic, minimum exchange ratio 1.47 0.81 1.41 1.01
Diluted, maximum exchange ratio 1.53 0.88 1.40 0.98
Diluted, minimum exchange ratio 1.45 0.83 1.33 0.92
As of September 30,
1997
-------------------
BOOK VALUE PER COMMON SHARE:
HUBCO - Actual $ 9.42
MSB- Actual tangible 11.76
ACTUAL TOTAL 22.21
Pro forma per share of HUBCO
Maximum exchange ratio 10.70
Minimum exchange ratio 10.78
MSB, Pro forma equivalent (2)
Maximum exchange ratio 11.02
Minimum exchange ratio 10.46
- ----------------------
</TABLE>
(1) For information regarding HUBCO's and MSB's dividends, and the market price
of HUBCO and MSB Common Stock, see "MARKET PRICE AND DIVIDEND MATTERS."
(2) Equivalent pro forma cash dividends per share of MSB 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 March 1, June 1, September 1 and $.20 payable
on December 1, would be $0.752. On an equivalent pro forma basis, such
current annualized HUBCO dividend per share of MSB Common Stock would be
$0.775 based on the Maximum Exchange Ratio (1.03), or $0.729 based on the
Minimum Exchange Ratio (0.97), in each case 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.
INTRODUCTION
This Proxy Statement solicits, on behalf of the Board of Directors of
MSB Bancorp, Inc. ("MSB"), approval by the holders of shares of common stock of
MSB, $0.01 par value per share ("MSB Common Stock"), of the Agreement and Plan
of Merger, dated December 15, 1997 (the "Merger Agreement"), by and among HUBCO,
Inc. ("HUBCO"), MSB and MSB's wholly owned subsidiary, MSB Bank. Pursuant to the
Merger Agreement, MSB will be merged with and into HUBCO (the "Merger"). A copy
of the Merger Agreement is attached as Appendix A to this Proxy Statement.
Upon consummation of the Merger, each outstanding share of MSB Common
Stock, except for Excluded Shares (as defined below), will be converted into the
right to receive a number of shares (the "Exchange Ratio") of common stock of
HUBCO, no par value ("HUBCO Common Stock"), equal to $36.02 divided by the
Median Pre-Closing Price of HUBCO Common Stock (a term defined in the Merger
Agreement generally as the median of the closing prices of HUBCO Common Stock
during the ten-trading day period ending on the day the parties receive final
federal bank regulatory approval for the Merger), provided that the Median
Pre-Closing Price is between $34.97 and $37.13. A minimum Exchange Ratio (the
"Minimum Exchange Ratio") of 0.97 will apply if the Median Pre-Closing Price is
greater than $37.13, and a maximum Exchange Ratio (the "Maximum Exchange Ratio")
of 1.03 will apply if the Median Pre-Closing Price is less than $34.97. HUBCO
will pay cash to MSB stockholders in lieu of fractional shares of HUBCO Common
Stock. The Exchange Ratio is subject to anti-dilution adjustment provisions set
forth in the Merger Agreement and more fully described in this Proxy Statement.
If the Median Pre-Closing Price is less than $27.00, MSB will have certain
rights to terminate the Merger Agreement unless HUBCO agrees to increase the
Exchange Ratio to $27.81 (i.e., $27.00 multiplied by the 1.03 Maximum Exchange
Ratio) divided by the Median Pre-Closing Price. "Excluded Shares" are those
shares of MSB Common Stock which are (i) held by MSB 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).
Holders ("Optionees") of options to purchase shares of MSB Common Stock
("MSB Options") will be given the election to have their MSB Options converted
in the Merger into either HUBCO Common Stock or into options to purchase HUBCO
Common Stock ("New HUBCO Options"), in accordance with certain formulas
described elsewhere in this Proxy Statement.
HUBCO currently holds all the outstanding shares of 8.75% Cumulative
Convertible Preferred Stock, Series A, $.01 par value, of MSB ("MSB Preferred
Stock" and, together with the MSB Common Stock, the "MSB Stock"). All MSB
Preferred Stock held by HUBCO will be cancelled in the Merger. While HUBCO does
not currently anticipate transferring any of the MSB Preferred Stock, if it were
to transfer any of its MSB Preferred Stock, the transferred shares (with certain
limited exceptions) would be converted in the Merger into shares of a newly
created series of HUBCO preferred stock having terms substantially identical to
the MSB Preferred Stock (the "New HUBCO Preferred Stock" and, together with the
HUBCO Common Stock, the "HUBCO Stock").
All information and statements contained or incorporated by reference
herein with respect to MSB were supplied by MSB, 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, and Lafayette American Bank ("Lafayette"), a
Connecticut-chartered bank and trust company. 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. HUB is a full-service commercial bank which primarily serves small and
mid-sized businesses and consumers through 57 branches in Northern New Jersey.
Lafayette is a full-service commercial bank which serves small-to-medium-sized
business firms as well as individuals through 27 banking offices located mainly
in Fairfield and New Haven counties in Connecticut. As of September 30, 1997,
HUBCO had consolidated assets of $3.0 billion, consolidated deposits of $2.3
billion and consolidated stockholders' equity of $212 million. Based on assets
as of September 30, 1997, HUBCO was the fourth largest commercial banking
company headquartered in New Jersey.
Prior to closing the Merger, HUBCO expects to complete its pending
acquisition of Poughkeepsie Financial Corp. ("PFC") and PFC's subsidiary, Bank
of the Hudson ("BTH"), a New York-based bank which had 16 branches and $884
million in assets as of September 30, 1997. HUBCO anticipates that BTH will
serve as HUBCO's New York bank subsidiary and that MSB's banking subsidiary, MSB
Bank, will be merged into BTH following the Merger.
HUBCO's strategy is to enhance profitability and build market share
through both internal growth and acquisitions. Assuming consummation of all
other acquisitions pending as of the date of this Proxy Statement, the Merger
will be HUBCO's twenty-first acquisition since 1990, and HUBCO will have added
over 100 branches and over $4 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 diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore some dilution of HUBCO's
book value and net income per common share may occur in connection with any
future transactions. From time to time, HUBCO may issue new equity or debt
securities to fund its acquisition plans or for other purposes. For additional
information, see "AVAILABLE INFORMATION"; "INFORMATION INCORPORATED BY
REFERENCE" and "PRO FORMA FINANCIAL INFORMATION".
Recent Developments
Community Financial Holding Corporation
On March 2, 1998, HUBCO, HUB, Community Financial Holding Corporation
("CFHC") and CFHC's wholly-owned subsidiary, Community National Bank
("Community"), signed a definitive merger agreement to merge CFHC into HUBCO
(the "CFHC Merger") and Community into HUB. In the CFHC Merger, each share of
CFHC Common Stock will be converted into 0.695 shares of HUBCO Common Stock.
CFHC's Board of Directors has certain rights to terminate the Merger Agreement
if the median price of HUBCO Common Stock during the pricing period prior to the
closing of the CFHC Merger is below $29.00, unless HUBCO agrees to increase the
exchange ratio to provide the value per share of CFHC Common Stock which would
have been received based on a $29.00 HUBCO price. CFHC is a $150 million asset
bank headquartered in Westmont, New Jersey. The CFHC Merger is expected to
closing in the third quarter of 1998 and to be treated as a pooling of
interests.
Purchase of 22 branches from First Union National Bank
On March 2, 1998, HUBCO signed a definitive agreement to purchase 22
branches of First Union National Bank located in New Jersey, New York and
Connecticut with deposits of $310 million, in the aggregate. The purchase is
expected to close in the second quarter of 1998. 306358A01031298
Security National Bank & Trust Company of New Jersey
On February 5, 1998 HUBCO completed its acquisition of Security
National Bank & Trust Company of New Jersey ("SNB"), an $86 million asset bank
and trust company headquartered in Newark, New Jersey by merging SNB into HUB.
In the merger, stockholders of SNB received $34.00 in cash for each share of SNB
Common Stock. Simultaneously with the merger of SNB into HUB, HUBCO acquired
Fiduciary Investment Company of New Jersey ("FIC"), a closely held corporation
which owned approximately 79.6% of the outstanding shares of SNB.
The Bank of Southington
On January 8, 1998 HUBCO completed its acquisition of The Bank of
Southington, a state bank and trust company organized under Connecticut law and
headquartered in Southington, Connecticut ("TBOS"), by merging TBOS into
Lafayette. In the merger, each share of TBOS common stock was converted into
.618 shares of HUBCO Common Stock. TBOS had $135 million in assets as of
September 30, 1997. The TBOS acquisition was treated as a pooling of interests
for accounting purposes.
Poughkeepsie Financial Corp.
In October, 1997, HUBCO, PFC and BTH signed an agreement to merge PFC
into HUBCO whereby BTH would become HUBCO's New York-based bank subsidiary. In
the merger, each share of PFC common stock is to be converted into between 0.300
and 0.320 shares of HUBCO Common Stock. BTH is headquartered in Poughkeepsie,
New York and has branches in Dutchess, Orange and Rockland counties in New York.
As of September 30, 1997, PFC had $884 million in assets. HUBCO expects to close
the PFC acquisition in the second quarter of 1998 and to treat the acquisition
as a pooling of interests for accounting purposes.
Fourth Quarter and Full Year 1997 Results
On January 15, 1998, HUBCO reported its fourth quarter and full year
1997 record earnings. Net income totaled $49.3 million, compared to $21.5
million for 1996 as reported and $39.3 million in 1996 excluding special
one-time charges. Diluted earnings per share were $2.10 for the full year,
compared to $0.88 for 1996 as reported, and represented a 30% increase from 1996
excluding special one-time charges. Basic earnings per share were $2.20 for
1997, compared to $0.91 as reported for 1996 and $1.71 in 1996 excluding special
charges.
Fourth quarter 1997 net income totaled $12.9 million, compared to $3.5
million for 1996 as reported and $11.1 million in 1996 excluding special
one-time charges. Diluted earnings per share were $0.57 for the fourth quarter,
compared to $0.14 for fourth quarter 1996 as reported and $0.46 for fourth
quarter 1996 excluding special charges. Basic earnings per share were $0.59 for
the fourth quarter 1997, compared to $0.14 as reported in 1996 and $0.49 for
fourth quarter 1996 excluding special charges.
<PAGE>
CERTAIN INFORMATION REGARDING MSB
General
MSB is a registered savings and loan holding company and conducts its
business through its wholly owned subsidiary, MSB Bank. The principal executive
offices of MSB and MSB Bank are located at 35 Matthews Street, Goshen, New York
10924. MSB's telephone number is (914) 294-8100. As of September 30, 1997, MSB
had total assets of $774 million, deposits of $684 million and total
stockholders' equity of $76.1 million.
MSB Bank was organized in 1869 as a New York state-chartered mutual
savings bank. In 1992, MSB Bank converted from mutual to stock form, and
organized MSB as its holding company.
On October 27, 1995, MSB Bank converted from a New York state-chartered
savings bank to a federal savings bank in order to facilitate the bank's
acquisition of certain assets and liabilities associated with seven branches of
First Nationwide Bank, a Federal Savings Bank ("First Nationwide"), as well as
future expansion. At the same time, the bank changed its name from Middletown
Savings Bank to MSB Bank. As a consequence of the conversion of MSB Bank to a
federal savings bank, MSB became a savings and loan holding company subject to
the regulation, examination and supervision of the OTS. Prior to the conversion
of MSB Bank to a federal savings bank, MSB was a bank holding company subject to
the regulation, examination and supervision of the FRB.
MSB Bank provides a broad range of banking services from its main
office, which is located in Goshen, New York, and from 15 additional branches in
Orange, Putnam and Sullivan counties. As of September 30, 1997, MSB Bank was the
largest financial institution headquartered in Orange County, New York, based on
assets. Its principal business is attracting and retaining deposits from the
general public and investing those deposits, together with funds generated from
operations, primarily in loans secured by owner-occupied one- to four-family,
primary residence properties, and short and medium-term investment grade debt
securities. MSB Bank's primary mortgage lending base extends throughout Orange,
Sullivan, Putnam, Dutchess and Ulster Counties in New York, Pike County in
Pennsylvania and Sussex County, New Jersey.
The principal business of MSB is directing, planning and coordinating
the business activities of MSB Bank, and the financial condition and results of
operations of MSB are primarily dependent upon the operations of MSB Bank. MSB
also invests in securities, consisting primarily of U.S. Government and federal
agency securities, federal funds and investment grade corporate notes. MSB also
organized a wholly-owned subsidiary corporation, MSB Travel, in January 1996, to
offer travel services to MSB Bank's customers.
Recent Developments
Fourth Quarter and Full Year 1997 Results
MSB announced a net loss of $991,000 or $0.45 per common share
(diluted) for the fourth quarter of 1997, as compared to net income of $1.1
million or $0.27 per common share (diluted) for the fourth quarter of 1996. For
the year ended December 31, 1997, MSB earned $2.3 million or $0.40 per common
share as compared to $1.7 million or $0.22 per common share in 1996 on a diluted
basis. The results for the fourth quarter of 1997 included pre-tax charges of
$2.8 million related to the termination of the Retirement Plan for Board Members
of MSB Bancorp, Inc. (the "Board Plan") and $330,000 related to the Merger
(these pre-tax charges are collectively referred to herein as the "non-recurring
expenses"). Excluding the non-recurring expenses, net income would have been
$918,000 and $4.2 million for the fourth quarter and fiscal year 1997,
respectively.
During the fourth quarter of 1997, net interest income increased
$185,000 to $6.1 million as compared to the same quarter in 1996. Non-interest
income increased $253,000 or 21.8% to $1.4 million for those same periods, and
non-interest expense (excluding non-recurring expenses) increased $364,000 or
7.5% to $5.2 million. For the year ended December 31, 1997, net interest income
increased $927,000 or 3.9% to $24.5 million as compared to 1996. For those same
periods, non-interest income increased $711,000 or 17.7% to $4.7 million, and
non-interest expense increased $280,000 to $20.7 million (excluding the $3.1
million of non-recurring expenses and excluding the SAIF assessment of $2.9
million in 1996).
MSB's total assets were $765.4 million at December 31, 1997, as
compared to $820.9 million at December 31, 1996. This decrease was due primarily
to the decrease in deposits. For those same dates, deposits decreased $62.7
million to $673.4 million at December 31, 1997. Securities and mortgage-backed
securities available for sale decreased $94.4 million to $279.8 million at
December 31, 1997, as compared to $374.1 million at December 31, 1996. Loans,
net increased $52.9 million to $391.4 million at December 31, 1997, as compared
to $338.5 million at December 31, 1996. Goodwill decreased $3.7 million to $29.2
million at December 31, 1997, as compared to $32.8 million at December 31, 1996.
Real estate owned increased $1.5 million to $2.4 million at December 31, 1997 as
compared to December 31, 1996. Total stockholders' equity increased $4.0 million
to $74.8 million at December 31, 1997, as compared to $70.8 million at December
31, 1996. This increase was due primarily to a $4.1 million decrease in the net
unrealized loss on securities available for sale. The Bank's Tier 1 leverage
capital ratio was 6.2% at December 31, 1997.308546A01031698
THE MEETING
Purpose of the Meeting
The Meeting will be held on [Day of Week], [Date], 1998 at [Time], at
the South Street Office of MSB Bank, 4 South Street, Middletown, New York 10940.
At the Meeting, the holders of MSB Common Stock will consider and vote on the
approval and adoption of the Merger Agreement, approval of the Additional
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 MSB Common Stock on or about __________, 1998 and
is accompanied by a proxy card furnished in connection with the solicitation of
proxies by the MSB Board of Directors for use at the Meeting.
The Board of Directors of MSB has unanimously approved the Merger
Agreement and recommends a vote "FOR" approval and adoption of the Merger
Agreement and "FOR" the approval of the Additional Proposal.
Record Date; Voting Rights; Proxies
The Board of Directors of MSB has fixed the close of business on
________, 1998 as the record date for determining the holders of MSB Common
Stock entitled to receive notice of and to vote at the Meeting (the "Record
Date"). Only holders of record of MSB 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 2,844,153
shares of MSB Common Stock issued and outstanding and entitled to vote at the
Meeting. Each share of MSB Common Stock will be entitled to one vote upon each
matter properly submitted at the Meeting or at any adjournment or postponement
thereof.
As provided in MSB's Certificate of Incorporation, record owners of MSB
Common Stock who beneficially own in excess of 10% of the outstanding shares of
MSB Common Stock (the "Limit") are not entitled to any vote in respect of the
shares held in excess of the Limit. A person or entity is deemed to beneficially
own shares owned by an affiliate of, as well as persons acting in concert with,
such person or entity. MSB's Certificate of Incorporation authorizes the Board
of Directors (i) to make all determinations necessary to implement and apply the
Limit, including determining whether persons or entities are acting in concert
and (ii) to demand that any person who is reasonably believed to beneficially
own stock in excess of the Limit to supply information to MSB to enable the
Board to implement and apply the Limit.
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 Additional Proposal. The Board of Directors of MSB 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 MSB, by delivering to
MSB a duly executed proxy bearing a later date, or by attending the Meeting and
voting in person. However, stockholders 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
stockholder must either file a written notice of revocation or duly executed
proxy with: Karen DeLuca, Secretary, MSB Bancorp, Inc., 35 Matthews Street,
Goshen, New York 10924, 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.
MSB STOCKHOLDERS 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 MSB STOCKHOLDERS BY THE EXCHANGE AGENT PROMPTLY AFTER THE
EFFECTIVE TIME.
Solicitation of Proxies
In addition to using the mails, the directors, officers and employees
of MSB may solicit proxies for the Meeting from stockholders personally, by
telephone or by facsimile. These officers, directors and employees will not be
specifically compensated for their services. MSB has retained D.F. King & Co., a
proxy soliciting firm ("D.F. King"), to assist in the solicitation of proxies at
a fee of $8,650, plus reimbursement of certain out-of-pocket expenses estimated
to be approximately $11,850. MSB 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, including the fees and expenses
of D.F. King, will be borne by MSB.
Quorum
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of MSB Common Stock entitled to vote
(after subtracting any shares in excess of the Limit) is necessary to constitute
a quorum at the Meeting.
Required Vote
Each share of MSB Common Stock will be entitled to one vote upon each
matter properly submitted at the Meeting or at any adjournment or postponement
thereof. As provided in MSB's Certificate of Incorporation, record owners of MSB
Common Stock who beneficially own in excess of 10% of the outstanding shares of
MSB Common Stock (the "Limit") are not entitled to any vote in respect of the
shares held in excess of the Limit. A person or entity is deemed to beneficially
own shares owned by an affiliate of, as well as persons acting in concert with,
such person or entity. MSB's Certificate of Incorporation authorizes the Board
of Directors (i) to make all determinations necessary to implement and apply the
Limit, including determining whether persons or entities are acting in concert
and (ii) to demand that any person who is reasonably believed to beneficially
own stock in excess of the Limit to supply information to MSB to enable the
Board to implement and apply the Limit.
The affirmative vote of the holders of a majority of the outstanding
shares of MSB Common Stock (after giving effect to the Limit) is required in
order to approve and adopt the Merger Agreement. BECAUSE THE REQUIRED VOTE OF
MSB STOCKHOLDERS ON THE MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF
OUTSTANDING SHARES OF MSB COMMON STOCK ENTITLED TO VOTE AND NOT UPON THE NUMBER
OF SHARES THAT ARE ACTUALLY VOTED, A FAILURE TO RETURN A PROPERLY EXECUTED PROXY
CARD OR TO VOTE IN PERSON, OR ABSTAINING FROM VOTING, WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS
HAVING BEEN VOTED IN PERSON OR BY PROXY AT THE MEETING AND WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST 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
additional proposal without regard to either broker non-votes or abstentions as
to that matter.
Record holders of MSB Common Stock at the close of business on
___________, 1998 (the "Record Date") are entitled to vote at the Meeting. As of
the Record Date, there were 2,844,153 outstanding shares of MSB Common Stock
held by approximately ___ holders of record. The directors of MSB as a group
have voting control over 128,199 of these shares (4.50%) and have agreed to vote
them in favor of the Merger Agreement. In addition, HUBCO has voting control
over ____ of these shares (___%) and the non-director executive officers of MSB
as a group have voting control over ____ of these shares (___%), all of which
shares MSB expects will be voted in favor of the Merger Agreement. No
consideration was paid to any of the directors for this agreement. HUBCO
requested that the directors enter into this agreement in connection with HUBCO
entering into the Merger Agreement.
The obligations of MSB 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
stockholders of MSB. See "THE PROPOSED MERGER -- Conditions to the Merger."
THE MATTERS TO BE CONSIDERED AT THE MEETING ARE OF GREAT IMPORTANCE TO
THE STOCKHOLDERS OF MSB. ACCORDINGLY, STOCKHOLDERS 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 Merger Agreement provides that, at the Effective Time, MSB will be
merged into HUBCO, with HUBCO as the surviving entity (the "Surviving Entity").
The separate identity and existence of MSB will cease upon consummation of the
Merger, and all property, rights, powers and franchises of MSB will vest in the
Surviving Entity.
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 MSB. 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 MSB. HUBCO and MSB currently anticipate closing
in the second quarter of 1998. Simultaneous with or immediately following the
Closing, HUBCO and MSB will file Certificates of Merger with the Secretary of
State of the State of New Jersey and with the Secretary of State of the State of
Delaware. The Merger will become effective at a date and time following the
Closing which HUBCO and MSB will specify in the Certificates of Merger (the
"Effective Time"). If no Effective Time is specified in the Certificates of
Merger, the Effective Time will be the time at which the later of the two
Certificates of Merger are filed. HUBCO and MSB 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 MSB.
Consideration; Median Pre-Closing Price
At the Effective Time, each outstanding share of MSB Common Stock
(except for Excluded Shares) will be converted into the right to receive a
number of shares (the "Exchange Ratio") of HUBCO Common Stock. The Merger
Agreement provides that the Exchange Ratio will equal $36.02 divided by the
Median Pre-Closing Price of HUBCO Common Stock, provided that the Median
Pre-Closing Price is between $34.97 and $37.13. The Minimum Exchange Ratio of
0.97 will apply if the Median Pre-Closing Price is greater than $37.13, and the
Maximum Exchange Ratio of 1.03 will apply if the Median Pre-Closing Price is
less than $34.97. HUBCO will pay cash in lieu of issuing fractional shares of
HUBCO Common Stock.
The "Median Pre-Closing Price" will be determined by taking the price
half-way between the closing prices of HUBCO Common Stock 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 "Determination
Date" is defined in the Merger Agreement as the date on which the parties
receive the last approval or waiver from a federal bank regulatory agency
necessary to permit consummation of the Merger.
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 December 15, 1997. The Exchange Ratio
may also be subject to adjustment in connection with provisions relating to the
termination of the Merger Agreement described in the following paragraph.
The Merger Agreement may be terminated by MSB if the Median Pre-Closing
Price is less than $27.00, which, given the Maximum Exchange Ratio, would result
in shares of MSB Common Stock being exchanged for HUBCO Common Stock with a
value of less than $27.81 (i.e., $27.00 multiplied by the 1.03 Maximum Exchange
Ratio). MSB is obligated to provide notice of such termination to HUBCO, which
may then elect, at its sole option, to increase the Exchange Ratio to $27.81
divided by the Median Pre-Closing Price. If HUBCO so elects and increases the
Exchange Ratio, the Merger Agreement will not be terminated. There can be no
assurance that MSB will exercise its right to terminate the Merger Agreement if
the conditions described above exist (a "Termination Event"), and if MSB does
exercise its right to terminate the Merger Agreement, there can be no assurance
that HUBCO will elect to increase the Exchange Ratio as provided in the Merger
Agreement and as described above.
The effects of the above provisions on the Exchange Ratio may be
illustrated as follows:
<TABLE>
<CAPTION>
<S> <C>
Median Pre-Closing Price of HUBCO
Common Stock as of the Determination Date Exchange Ratio
- --------------------------------------------------------- --------------
Greater than $37.13...................................... 0.97
Between $37.13 and $34.97................................ $36.02 divided by the Median Pre-Closing Price
Less than $34.97 and greater than or equal to $27.00..... 1.03
Less than $27.00......................................... 1.03; Provided, That MSB Will Have The Right
To Terminate The Merger Agreement And Hubco
Will Have The Right To Nullify That Termination
By Agreeing To An Exchange Ratio Of $27.81 divided by
The Median Median Pre-closing Price.
</TABLE>
For illustrative purposes, if, hypothetically, the Median Pre-Closing
Price of HUBCO Common Stock were $35.50, the Exchange Ratio would be 1.0146
($36.02 / 35.50), and the holder of 100 shares of MSB Common Stock would receive
101 whole shares of HUBCO Common Stock and a cash payment of $16.33 (0.46 x
$35.50) in respect of the fractional share.
The calculation of the Exchange Ratio called for by the Merger
Agreement was intended by HUBCO and MSB to result in stockholders of MSB
receiving HUBCO Common Stock with a value of $36.02 for each share of MSB Common
Stock, provided that the Median Pre-Closing Price of HUBCO Common Stock is
between $34.97 and $37.13. However, there can be no assurance that the Median
Pre-Closing Price will fall between $34.97 and $37.13 or, even if it does, that
the number of shares of HUBCO Common Stock issued in exchange per share of MSB
Common Stock in the Merger will have a value of $36.02 on the Effective Time or
on the day when certificates representing such shares of HUBCO Common Stock are
issued or delivered to MSB stockholders. The Median Pre-Closing Price will be
determined by taking the price half-way between the closing prices of HUBCO
Common Stock 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 price of HUBCO Common Stock at the Effective Time may be
higher or lower than the Median Pre-Closing Price, and may be higher or lower
than the market price at the time of entering into the Merger Agreement, the
time of mailing this Proxy Statement, the time of the Meeting or the time
certificates representing shares of HUBCO Common Stock are delivered in exchange
for shares of MSB Common Stock following consummation of the Merger. Thus, the
value of the HUBCO Common Stock actually received by holders of MSB Common Stock
may be more or less than (i) the Median Pre-Closing Price or (ii) the value of
the HUBCO Common Stock on the Effective Time resulting from the Exchange Ratio
or any possible adjustment to the Exchange Ratio as illustrated above. MSB
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE HUBCO COMMON
STOCK AND THE MSB COMMON STOCK.
It is not possible to know whether a Termination Event will occur until
after the Determination Date. MSB 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 MSB Board of Directors would, consistent with its fiduciary
duties, take into account all relevant facts and circumstances that exist at
such time and would consult with its financial advisors and legal counsel.
Approval of the Merger Agreement by the stockholders of MSB at the Meeting will
confer on the MSB 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 stockholders of MSB. If MSB elects to
exercise its termination right, MSB must give HUBCO prompt notice of that
decision by 11:59 p.m. on the third business day following the Determination
Date (or the third business day following receipt by MSB of the Closing Notice,
if later). During a three business-day period commencing with its receipt of
such notice from the MSB 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 MSB 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 MSB notice of that election by 11:59 p.m. on
the third business day following receipt of the notice of termination from MSB,
in which case no termination of the Merger Agreement would occur as a result of
a Termination Event.
The foregoing discussion is qualified in its entirety by reference to
the applicable provisions in the Merger Agreement (a copy of which is set forth
as Appendix A to this Proxy Statement) relating to calculation of the Exchange
Ratio and a possible increase of the Exchange Ratio as the result of a
Termination Event.
Conversion of MSB Options
Pursuant to the Merger Agreement, holders ("Optionees") of options
outstanding at the Effective Time to purchase shares of MSB Common Stock ("MSB
Options") granted under MSB's existing stock option plans and agreements will
have the right to elect to have each such MSB Option converted at the Effective
Time into either HUBCO Common Stock or an option to purchase HUBCO Common Stock
(a "New HUBCO Option"), in each case in accordance with the related formula set
forth below. Optionees may elect to have some of their MSB Options convert into
HUBCO Common Stock and some of their MSB Options convert into New HUBCO Options,
or may elect to have all of their MSB Options convert into one or the other. MSB
Options to be converted into HUBCO Common Stock are referred to in this Proxy
Statement as "Converting Stock Options --" and MSB Options to be converted into
New HUBCO Options are referred to in this Proxy Statement as "Continuing Stock
Options."
At the Effective Time, each Converting Stock Option will be assigned a
value (the "Option Value") equal to (x) the Median Pre-Closing Price of HUBCO
Common Stock multiplied by the Exchange Ratio, minus (y) the stated exercise
price for the MSB Option. The holder of the Converting Stock Option will be
entitled to receive a number of shares of HUBCO Common Stock equal to the
aggregate Option Value for all of such holder's Converting Stock Options,
divided by the Median Pre-Closing Price of HUBCO Common Stock. Cash will be paid
in lieu of fractional shares of HUBCO Common Stock, based upon the Median
Pre-Closing Price.
At the Effective Time, each Continuing Stock Option will be converted
into a New HUBCO Option, in which (i) the right to purchase shares of MSB 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 MSB 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 Continuing 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 will use its
reasonable best efforts to file a registration statement on Form S-8 covering
those shares as soon as possible after the Effective Time.
Cash in Lieu of Fractional Shares
No fractional shares of HUBCO Common Stock will be issued in exchange
for any MSB Common Stock or MSB Options. Instead, holders of such MSB Securities
will receive cash equal to the fractional share interest multiplied by the
Median Pre-Closing Price of HUBCO Common Stock, without interest. All shares of
HUBCO Common Stock to be issued to each holder of MSB Common Stock or MSB
Options will be aggregated to constitute as many whole shares as possible before
determining such person's fractional share interest.
MSB Preferred Stock
HUBCO currently holds all the outstanding shares of the MSB Preferred
Stock. Shares of MSB Preferred Stock held by HUBCO will be cancelled upon
consummation of the Merger. If HUBCO transfers any MSB Preferred Stock prior to
consummation of the Merger, such shares (with certain limited exceptions) will
be converted in the Merger into shares of New HUBCO Preferred Stock having terms
substantially identical to those of the MSB Preferred Stock.
Stock Option to HUBCO for MSB Shares
HUBCO and MSB entered into a Stock Option Agreement dated as of
December 15, 1997 (the "Stock Option Agreement") in connection with the
negotiation by HUBCO and MSB of the Merger Agreement. Pursuant to the Stock
Option Agreement, MSB 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 600,000 authorized but
unissued shares of MSB Common Stock, representing upon issuance approximately
17.4% of the shares of MSB Common Stock, for an exercise price of $29.00 per
share. HUBCO does not have any voting rights with respect to the shares of MSB
Common Stock subject to the Option prior to exercise of the Option. Acquisitions
of MSB Common Stock pursuant to our 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 MSB Common Stock received pursuant to the exercise of the Option
if such shares of MSB Common Stock were sold at prices exceeding $29.00 per
share. The ability of HUBCO to exercise the Option and to cause up to an
additional 600,000 shares of MSB Common Stock to be issued may be considered a
deterrent to other potential acquisitions of control of MSB, even if such
potential acquiror were prepared to pay a higher price per share for MSB Common
Stock, as it is likely to increase the cost of an acquisition of all of the
shares of MSB 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 Rule 13d-3
as promulgated under the Exchange Act) of a least 20% of the then outstanding
shares of MSB Common Stock; or
b. enters into a letter of intent or an agreement, whether oral or
written, with MSB pursuant to which such person or any affiliate of such person
would (i) merge or consolidate, or enter into any similar transaction, with MSB,
(ii) acquire all or a significant portion of the assets or liabilities of MSB,
or (iii) acquire beneficial ownership of securities representing, or the right
to acquire beneficial ownership or to vote securities representing, 20% or more
of the then outstanding shares of MSB Common Stock; or
c. makes a filing with any bank or thrift regulatory authorities or
publicly announces a bona fide proposal (a "Proposal") for (i) any merger with,
consolidation with or acquisition of all or a significant portion of all the
assets or liabilities of, MSB or any other business combination involving MSB,
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, a 20% or more of the outstanding shares of MSB 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 stockholders of MSB called to vote on the Merger and MSB'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, MSB 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 MSB or any of its directors, senior executive
officers, investment bankers or other person with actual or apparent authority
to speak for the MSB Board of Directors, inviting, encouraging or soliciting any
proposal which has as its purpose a tender offer for the shares of MSB Common
Stock, a merger, consolidation, plan of exchange, plan of acquisition or
reorganization of MSB, or a sale of a significant number of shares of MSB 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
The Board of Directors and management of MSB have focused on enhancing
stockholder value over time since MSB Bank's conversion to a stock savings bank
in September 1992 and the formation of MSB as the publicly-owned holding company
for MSB Bank. After the conversion, the principal alternatives considered by MSB
have been (i) pursuing a course of increasing stockholder value by remaining a
community bank and growing both internally and through acquisitions of other
institutions or branches of other institutions, (ii) pursuing a merger of equals
with one or more institutions in its market area or adjoining market areas and
(iii) an acquisition of MSB by another financial institution.
In July 1995, during the time that MSB was considering the purchase
(the "First Nationwide Acquisition") of eight branches from First Nationwide
Bank, A Federal Savings Bank ("First Nationwide"), MSB received from HUBCO an
unsolicited expression of interest to explore a business combination with MSB.
The letter did not propose any specific terms for the business combination. The
Board of Directors of MSB considered this letter but chose not to respond to
HUBCO at that time, because (i) the Board had previously adopted a business plan
to increase stockholder value by remaining a community bank and to grow MSB both
internally and through acquisition of other institutions and branches of other
institutions and (ii) in furtherance of its business plan, MSB was at the time
reviewing financial information regarding the First Nationwide Acquisition. On
September 7, 1995, during the time that MSB was negotiating the definitive
acquisition agreement with First Nationwide, MSB received a further unsolicited
letter from HUBCO, which contained a conditional proposal to merge MSB into
HUBCO. Under that proposal, the stockholders of MSB would receive shares of
HUBCO Common Stock having a market value at the time equal to $35.00 for each
share of MSB Common Stock. HUBCO's proposal was conditioned upon a satisfactory
due diligence review of MSB and the execution of a definitive agreement. The
letter stated that the proposal would be automatically withdrawn if MSB did not
respond within 10 days. The Board of Directors of MSB was informed of the letter
and the conditional proposal and discussed it at a meeting of the Board. By
letter dated September 12, 1995, MSB advised HUBCO of its intent to respond to
the proposal following the Board's regularly scheduled meeting in October. On
September 29, 1995, the Board met to consider the First Nationwide Acquisition,
as well as HUBCO's September 7 conditional proposal. At that meeting, the Board
unanimously determined that the First Nationwide Acquisition constituted a
reasonable alternative for building stockholder value within a reasonable period
of time to that offered by HUBCO's conditional proposal and did not preclude the
Board from considering other strategic alternatives in the future. On October 2,
1995, MSB informed HUBCO that it had decided to pursue the First Nationwide
Acquisition rather than the conditional proposal from HUBCO. The September 7
conditional proposal expired in accordance with its terms.
On October 26, 1995, MSB received another unsolicited conditional
proposal from HUBCO to merge MSB into HUBCO. Under this proposal, the
stockholders of MSB would receive shares of HUBCO Common Stock having a market
value at the time equal to $25.00 for each share of MSB Common Stock. This
letter was conditioned not only upon the completion of a satisfactory due
diligence review of MSB and the negotiation of a definitive merger agreement,
but upon the cancellation of MSB's proposed common stock offering (the
"Offering") in connection with the First Nationwide Acquisition. The letter also
stated that the proposal would be automatically withdrawn if MSB did not respond
within 10 days. At a meeting of the Board of Directors of MSB on November 3,
1995, the Board considered HUBCO's October 26 conditional proposal and
unanimously determined that the First Nationwide Acquisition, together with
MSB's Offering, constituted a reasonable alternative for building stockholder
value within a reasonable period of time to that offered by HUBCO's revised
conditional proposal and did not preclude the Board from considering other
strategic alternatives in the future. On November 3, 1995, MSB informed HUBCO
that it had decided to pursue the First Nationwide Acquisition and the Offering
rather than the revised conditional proposal from HUBCO. The revised conditional
proposal expired in accordance with its terms.
On December 28, 1995, MSB received an unsolicited letter from First
Empire Corporation ("First Empire"), which contained a proposal to merge MSB
into First Empire. Under the proposal, the stockholders of MSB would receive,
for each share of MSB Common Stock, either shares of First Empire's common stock
having a market value at the time equal to $26.00, or $26.00 in cash, at MSB's
election. First Empire's proposal was conditioned upon cancellation of the
Offering but was not subject to due diligence or to other similar conditions.
The proposal was accompanied by a draft of a definitive agreement for the
proposed merger, and First Empire indicated that it was prepared to execute the
draft definitive agreement immediately. The Board of Directors of MSB was
informed of the proposal and the draft definitive agreement and discussed them
at meetings of the Board held on December 29 and 30, 1995. At those meetings,
the Board unanimously confirmed its determination that the First Nationwide
Acquisition and the Offering constituted a reasonable alternative for building
stockholder value within a reasonable period of time to that offered by First
Empire's proposal and did not preclude the Board from considering other
strategic alternatives for building stockholder value in the future. The Board's
determination was based, among other things, on the Board's understanding that
the Offering was nearly ready to be priced and closed and that accepting First
Empire's proposal would require the cancellation of the Offering and could
jeopardize the timing of the First Nationwide Acquisition.
On January 4, 1996, MSB and HUBCO entered into a definitive preferred
stock purchase agreement, pursuant to which MSB agreed to issue and sell to
HUBCO, and HUBCO agreed to purchase from MSB, subject to certain conditions, up
to 600,000 shares of MSB Preferred Stock in connection with MSB's First
Nationwide Acquisition and the related Offering. On January 10, 1996, MSB closed
its Offering of 1,100,000 shares of MSB Common Stock and 600,000 shares of MSB
Preferred Stock. On January 12, 1996, MSB completed the First Nationwide
Acquisition.
On May 15, 1997, MSB received another unsolicited conditional proposal
from HUBCO to merge MSB into HUBCO. Under this proposal, the stockholders of MSB
would receive $25 in shares of HUBCO convertible preferred stock for each share
of MSB Common Stock. This letter was conditioned upon the completion of a
satisfactory due diligence review of MSB, the negotiation of a definitive merger
agreement and the satisfactory settlement of all outstanding stockholder
litigation against MSB. At a meeting held on May 30, 1997 at which KBW was
present, the MSB Board considered HUBCO's May 15 letter, as well as MSB's then
current performance and future prospects, and authorized Mr. William C. Myers,
Chairman, President and Chief Executive Officer of MSB, to meet with Mr. Kenneth
T. Neilson of HUBCO to discuss the terms of the letter in more detail. Mr. Myers
subsequently met with Mr. Neilson and discussed HUBCO's May 15 letter and other
terms of HUBCO's proposed business transaction in detail. Mr. Myers reported to
the MSB Board as to these further discussions. Thereafter, the Board determined
not to pursue the proposed business transaction with HUBCO as outlined in
HUBCO's May 15 letter and decided to implement a re-engineering plan, announced
in July 1997, that was designed to enhance earnings and stockholder value.
By letter, dated October 8, 1997, HUBCO modified its May 15, 1997
letter and proposed a business combination with MSB, pursuant to which
stockholders of MSB would receive shares of HUBCO Common Stock having a market
value at the time equal to $30.00 for each share of MSB Common Stock. The letter
also indicated that HUBCO might increase the value of its proposal after
completion of due diligence.
After receipt of HUBCO's October 8, 1997, letter, the Board of
Directors of MSB requested KBW to, among other things, review and analyze the
proposal and the various strategic alternatives available to MSB, including, but
not limited to, maintaining or modifying MSB's existing business plan in pursuit
of a long-term internal growth strategy or pursuing a possible merger partner or
sale of MSB. The Board of Directors of MSB authorized KBW to identify potential
merger partners and acquirors of MSB and to prepare and distribute information
packages to those parties that expressed interest in reviewing the MSB
acquisition opportunity in order to obtain expressions of interest as to a
potential transaction with MSB. KBW met with the Board of MSB on October 17,
1997 to discuss these matters.
By letter, dated October 30, 1997, HUBCO modified its October 8, 1997,
letter and proposed a business combination with MSB, pursuant to which
stockholders of MSB would receive shares of HUBCO Common Stock having a market
value at the time equal to $34.00 for each share of MSB Common Stock.
Beginning in [October] 1997, KBW contacted a total of 17 institutions,
including regional and super-regional banks and thrifts headquartered in New
York, New Jersey, Pennsylvania and North Carolina, as well as an insurance
company and a utility company, that were identified by KBW as parties
potentially interested in acquiring or merging with MSB and as the most likely
candidates to pay a high premium to acquire or merge with MSB. Of these 17, four
entered into confidentiality agreements with MSB and were furnished with
information packages. In November 1997, MSB received written or oral preliminary
indications of interest from these four parties, which preliminary indications
of interest were discussed at a meeting of the MSB Board on November 10, 1997 at
which KBW was present. The preliminary indication of interest from each party
was for an acquisition transaction in which the stockholders of MSB would
receive either common stock, cash or a combination thereof. In each case, the
preliminary indication of interest was subject to, among other things, the
completion of a detailed due diligence review of MSB. HUBCO's preliminary
indication of interest was $34.00 per share in a 100% common stock transaction;
a second institution's preliminary indication of interest was $30.75 per share
in a 100% stock transaction; a third institution's preliminary indication of
interest was valued at between $29.50-$31.50 per share in a part stock and part
cash transaction; and a fourth institution's preliminary indication of interest
was valued at between $33.00-$34.00 per share in either a stock or cash
transaction, at MSB's choice. After the November 10, 1997 MSB Board meeting, a
fifth institution submitted a preliminary indication of interest for an all
stock acquisition transaction valued at $30.00 per share of MSB Common Stock,
and a sixth institution submitted a preliminary indication of interest for an
all stock acquisition transaction valued at $35.00 per share of MSB Common
Stock.
During November and December 1997, KBW, together with senior
representatives of MSB, met with the four parties who had submitted the highest
indications of interest to address specific questions the parties had regarding
the information package that they had been provided and to permit the parties to
perform a detailed due diligence review of MSB. Each of the four parties was
given the opportunity to resubmit its proposal on the basis that its initial
indication of interest was one of those being considered but at that point was
not high enough for MSB to grant it an exclusive right to submit another
proposal. Thereafter, one of the institutions indicated that it was no longer
interested in pursuing a business transaction with MSB. Such party's withdrawal
was not consequential in that its indication was not the highest indication of
value. HUBCO's preliminary indication of interest was revised to $36.02 per
share of MSB Common Stock. The institution that had submitted a preliminary
indication of interest valued at $35.00 per share of MSB Common Stock
reconfirmed its proposal and the remaining institution revised its preliminary
indication of interest to $30.00 per share of MSB Common Stock.
Based upon its evaluation of the three final proposals, on December 5,
1997, the Board of Directors of MSB requested KBW to contact (i) HUBCO and see
if HUBCO would either increase its indication of interest or, alternatively,
remove the condition regarding the satisfactory settlement of stockholder
litigation and (ii) the institution that had submitted the indication of
interest with a value of $35.00 per share and see if it would increase such
proposal or, alternatively, modify or eliminate certain conditions to its
proposal. KBW subsequently advised the MSB Board that HUBCO would not increase
its indication of value but that it would eliminate the condition relating to
the stockholder litigation and that such other institution would neither
increase its indication of value nor modify or eliminate the conditions in its
proposal as requested by KBW. The Board of Directors of MSB authorized senior
management of MSB and KBW to proceed with the negotiation of an acquisition
agreement with HUBCO on the basis that HUBCO had furnished the bid with the
highest value. The Board of Directors met again on December 10 and December 11.
At these meetings, after consideration of the strategic alternatives available
to MSB and reviewing the fairness of the offer, the Board approved the
acquisition of MSB by HUBCO and authorized the execution and delivery by MSB of
the Merger Agreement.
MSB Board's Reasons for the Merger and Recommendation
The Board of Directors of MSB has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, MSB and its stockholders. The Board therefore unanimously
recommends that the holders of MSB Common Stock vote "FOR" the approval and
adoption of the Merger Agreement.
The Board believes that the Merger will enable all holders of MSB
Common Stock to realize significant value when compared to the market value per
share and book value per share of MSB Common Stock prior to the announcement of
the transaction. The market value per share of MSB Common Stock as represented
by the closing sale price on December 12, 1997, as reported on the AMEX, was
$30.50, and the stated book value per share of MSB Common Stock, as of September
30, 1997 was $22.11. See "- Background of the Merger," " - Opinion of MSB's
Financial Advisor" and " - Interests of Certain Persons in the Merger."
In reaching its determination that the Merger is fair to, and in the
best interests of, MSB and its stockholders, the Board of Directors of MSB
considered a number of factors, both from a short-term and longer-term
perspective, including, but not limited to, the following:
(i) The Board's familiarity with and review of the business, financial
condition, results of operations and future prospectus of MSB,
including, but not limited to, the potential growth, development,
productivity and profitability of MSB;
(ii) The current and prospective environment in which MSB operates,
including national and local economic conditions, the competitive
environment for savings and other financial institutions generally, the
increased regulatory burden on financial institutions generally, the
trend toward consolidation in the financial services industry and the
likely effect of the foregoing factors on MSB's potential growth,
development, productivity and profitability;
(iii) pro forma financial information on the Merger, including, among
other things, the pro forma book value and earnings per share to MSB's
stockholders;
(iv) a comparison of the price being paid in the Merger to that paid in
other comparable thrift mergers;
(v) the tax free nature of the transaction to MSB stockholders (see,
generally, "Certain Federal Income Tax Consequences" herein);
(vi) the historical trading prices for MSB Common Stock and HUBCO
Common Stock;
(vii) the price protection afforded to MSB's stockholders due to the
method of calculation of the Exchange Ratio and the ability of MSB to
terminate the Merger Agreement under certain circumstances if the
Median Pre-Closing Price of HUBCO Common Stock is less than $27.00 per
share;
(viii) MSB's alternatives to the Merger, including the range of
possible values of those alternatives and the timing and likelihood of
actually receiving those values;
(ix) the extensive process followed by KBW to obtain acquisition
proposals and preliminary bids, and the conclusion that HUBCO's bid was
more favorable than any of the other indications of interest from the
other companies that also conducted due diligence examinations of MSB;
(x) the presentation of KBW to the MSB Board of Directors on December
5, 1997 and KBW's oral opinion that, as of such date, the consideration
to be received by the stockholders of MSB was fair to the stockholders
of MSB from a financial point of view;
(xi) the expectations that the Merger would provide holders of MSB
Common Stock with an opportunity to receive a premium over the then
current market and book value of such stock and that the consideration
received by MSB stockholders in the Merger would constitute a favorable
premium compared to expected future values of MSB Common Stock under a
variety of circumstances and assumptions;
(xii) the review by the Board with its legal and financial advisors of
the provisions of the Merger Agreement, the Stock Option Agreement and
other related documents; and
(xiii) the compatibility of the respective business and management
philosophies of HUBCO and MSB and the expectation that HUBCO will
continue to provide quality service to the communities and customers
served by MSB.
The foregoing does not purport to be a complete list of the matters
considered by the Board of Directors of MSB in approving the Merger. In
approving the Merger, the Board did not identify any one factor or group of
factors as being more important or significant than any other factor in the
decision making process.
HUBCO's Reasons for the Merger
HUBCO entered into the Merger Agreement with MSB 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 York State which are geographically close to
HUBCO's current markets and which otherwise meet HUBCO's acquisition goals.
HUBCO's initial investment in, expressions of interest in, and merger with MSB
are consistent with this strategy, as is HUBCO's pending acquisition of PFC and
PFC's New York banking subsidiary, BTH. HUBCO anticipates that combining the New
York State operations of BTH and MSB Bank will enhance HUBCO's ability to
promote operational efficiencies and services to the combined institutions' New
York State customers.
Interests of Certain Persons in the Merger
In considering the recommendation of the MSB Board of Directors with
respect to the Merger, holders of MSB Common Stock should be aware that certain
members of the Board of Directors and management of MSB have certain interests
in the Merger in addition to their interests generally as stockholders of MSB.
All of such additional interests are described below, to the extent material,
and except as described below such persons have, to the best knowledge of MSB,
no material interest in the Merger apart from those of stockholders generally.
The MSB Board of Directors was aware of these interests of its directors and
officers and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Ownership of MSB Common Stock and MSB Options
As of the Record Date, the directors and executive officers of MSB and
its affiliates beneficially owned (excluding shares which could be acquired upon
the exercise of options) an aggregate of 155,997 shares of MSB Common Stock
(5.48% of the issued and outstanding shares) and options to acquire an
additional 73,838 shares of MSB Common Stock.
Certain directors, officers and executives of MSB and its affiliates
are the holders of stock options to acquire shares of MSB Common Stock. Pursuant
to the Merger Agreement, the holders of options to acquire MSB Common Stock will
have the right to elect to convert all or a portion of these options into HUBCO
Common Stock or options to purchase HUBCO Common Stock. For information
regarding the treatment of MSB stock options, see "THE PROPOSED MERGER --
Conversion of MSB Options."
Board Membership
The Merger Agreement provides that HUBCO will cause one director of MSB
selected by MSB (who may be William C. Myers) and acceptable to HUBCO to be
appointed at the Effective Time to the HUBCO Board of Directors. HUBCO has
agreed to ask each of the current directors of MSB Bank to serve as directors of
its New York bank subsidiary and to cause the directors of that bank board to
receive board fees and be subject to board duties substantially consistent with
the fees and duties of the directors of other bank subsidiaries of HUBCO. HUBCO
has agreed to modify or waive the provisions of its mandatory retirement policy
to the extent necessary so that those MSB Bank directors who would otherwise be
required to retire as directors of HUBCO's New York bank subsidiary in the six
year period following the Closing because they will have reached HUBCO's
mandatory retirement age of 72 will be permitted to continue to serve until age
75.
Executive Appointments
At the Effective Time, HUBCO will cause William C. Myers to be
appointed to serve as the Vice Chairman of the Board of Directors of HUBCO's New
York banking subsidiary and the President of the Southern Region of the New York
banking subsidiary. Immediately after the Effective Time, HUBCO will enter into
an employment agreement with Mr. Myers for a one-year term, providing for an
annual salary of $200,000, a guaranteed bonus of $100,000 and eligibility for
participation in the incentive compensation plans and employee benefit programs
maintained by HUBCO (and its affiliates) that are offered to similarly situated
senior executives and officers. HUBCO will be permitted to terminate Mr. Myers'
employment "for cause" as defined in the agreement. The agreement will also
contain non-compete and non-solicitation covenants that will run in favor of
HUBCO for a two-year period and cover all of downstate New York, New Jersey and
Connecticut. As consideration for these restrictive covenants, Mr. Myers will
receive a lump sum cash payment of $800,000, payable in two equal installments,
the first upon the signing of the agreement and the balance upon the first
anniversary of the signing.
Employment Agreements
Under the Merger Agreement, HUBCO has agreed to honor Mr. Myers'
existing employment agreement with MSB dated effective as of September 3, 1994,
and amended effective as of September 3, 1995, September 3, 1996 and October 31,
1997 (the "Myers Employment Agreement"), provided MSB and Mr. Myers adopt
certain amendments to this agreement, described below, effective at the Closing.
The Myers Employment Agreement provides for a five year term that will
automatically be extended to a full five years upon a "change of control" of MSB
or MSB Bank, as defined in the agreement. In addition, pursuant to the
amendments to the Myers Employment Agreement adopted in 1997, if a change of
control of MSB or MSB Bank occurs, Mr. Myers or, in the event of his death, his
beneficiary, would be entitled to receive a payment equal to the remaining
salary payments due under the agreement together with all other cash
compensation and benefits, including life, health, dental and disability
coverages, for the full five year term of the agreement, regardless of whether
his employment terminates, on a voluntary or involuntary basis, as a result of
such change of control. The Myers Employment Agreement also provides that in the
event the present value of the total payments to be made to Mr. Myers upon a
change of control of MSB or MSB Bank constitute an "excess parachute payment"
under Section 280G of the Code that would trigger the payment of excise taxes
under Section 4999 of the Code, MSB will indemnify Mr. Myers for the amount of
the excise taxes and the amount of any income and employment tax liability that
would be triggered as a result of such indemnification (a "gross-up provision").
Since it is anticipated that the Merger will constitute a "change of
control" of MSB and MSB Bank under the Myers Employment Agreement, and it is
expected that the total present value of the amounts payable to Mr. Myers upon
such event would constitute "excess parachute payments" under Section 280G of
the Code, thereby triggering the excise taxes under Section 4999 of the Code and
the application of the gross-up provision in the Myers Employment Agreement, MSB
and Mr. Myers have agreed to amend the Myers Employment Agreement, in a manner
acceptable to HUBCO and effective at the Closing, to reduce the total present
value of the payment to be made to Mr. Myers under the agreement so that the
aggregate amount of such distribution would not constitute an "excess parachute
payment" under Section 280G of the Code. Based on Mr. Myers' current annual rate
of salary of $199,500 and pursuant to the terms of the Myers Employment
Agreement, as it is anticipated to be amended, if a change of control occurs on
March 31, 1998, it is expected that Mr. Myers would receive a payment under the
Myers Employment Agreement having a present value of approximately
$[560,209.93], including all non-cash benefits.
The Merger Agreement also provides for HUBCO to honor the employment
agreement entered into between MSB and Gill Mackay, adopted effective as of
September 3, 1994, and subsequently amended effective as of September 3, 1995,
September 3, 1996 and October 31, 1997, and the employment agreement between MSB
and Anthony J. Fabiano, adopted effective as of January 1, 1996 and subsequently
amended effective as of January 1, 1997 and October 31, 1997 (collectively, the
"Employment Agreements"). The Merger Agreement does not require the Employment
Agreements for Messrs. Mackay and Fabiano to be amended in the manner described
above for Mr. Myers.
The Employment Agreements for Messrs. Mackay and Fabiano each provide
for an initial three year term. Pursuant to the Amendatory Agreements to these
agreements adopted in 1997, the term of each executive's Employment Agreement
will automatically be extended to three years in the event a "change of control"
of MSB and MSB Bank occurs, as such term is defined in each Agreement. In
addition, pursuant to such 1997 amendments, upon a change of control, each
executive will automatically be entitled to receive a payment equal to the
remaining salary payments due under the Employment Agreement together with all
other cash compensation and benefits, including life, health, dental and
disability coverages, for the full three year term of the Agreement regardless
of whether the executive's employment terminates due to the change of control.
The Employment Agreements each contain a gross-up provision.
It is anticipated that the Merger will constitute a "change of control"
under each executive's Employment Agreement. Although it is expected that the
payments to be made and the benefits to be provided to each executive will
constitute "excess parachute payments" that would result in the imposition of
excise taxes, the determination of whether an excise tax will be due and the
amount of any such tax will be made on the basis of the circumstances prevailing
at the Effective Time. Assuming a change of control were to occur on March 31,
1998, based on the current annual rate of salary in effect for Mr. Mackay and
Mr. Fabiano of $134,450 and $99,750, respectively, it is anticipated that Mr.
Mackay and Mr. Fabiano would receive payments having a present value of
approximately $[998,965.38] and $[778,606.30], respectively, including the value
of all non-cash benefits. Any excess parachute payments and indemnification
amounts paid will not be deductible compensation expenses for MSB or MSB Bank.
Special Termination Agreements
In the Merger Agreement, HUBCO has also agreed to honor the special
termination agreements between MSB Bank and Mary Ellen Rogulski, adopted
effective as of January 1, 1996, the special termination agreements between MSB
Bank and each of Karen DeLuca, Frances C. Reilly, Frank J. Fogg and Steven R.
Gleason, adopted effective as of September 3, 1994 and subsequently amended
effective as of October 27, 1995, and the special termination agreement between
MSB Bank and Catherine Terwilliger adopted effective as of March 21, 1997
(collectively, the "Special Termination Agreements").
Effective upon a "change of control" of MSB or MSB Bank, each Special
Termination Agreement provides for an extension so that the remaining term of
each Agreement will be three years effective upon such event, as defined in the
Agreements. Each Special Termination Agreement also provides that if, at any
time following a change of control of MSB or MSB Bank and during the term of
such Agreement, the executive's employment is terminated for any reason other
than "for cause" as defined in the Agreement or if the executive were to
terminate his or her own employment following the change of control as a result
of the executive's (i) demotion or loss of title, office or significant
authority; (ii) reduction in the executive's compensation; (iii) relocation of
the executive's principal place of employment; (iv) material change in the
executive's working conditions; or (v) failure of MSB Bank (or its successor) to
continue to provide employee benefit programs substantially similar to those in
effect before the change of control, the executive, or, in the event of his or
her death, the executive's beneficiary, would be entitled to receive a severance
payment in the amount equal to the sum of (a) twice the executive's then current
annual base salary; (b) the contributions that would have been made by MSB Bank
on the executive's behalf to its 401(k) Savings Plan (and any other
tax-qualified defined contribution plan it maintains in which the executive
participates) for the two-year period following the executive's termination of
employment; and (c) the fair market value of any stock that would have been
awarded or allocated to the executive under MSB Bank's Employee Stock Ownership
Plan and any stock-based incentive compensation plan for the two-year period
following the executive's termination of employment. MSB Bank or MSB would also
be required to continue life, health, and disability insurance coverage for the
remaining unexpired term of each executive's Special Termination Agreement.
It is anticipated that the Merger will constitute a "change of control"
under all of the Special Termination Agreements. The Special Termination
Agreements provide that if the total payment to be made to an executive
following a change of control constitutes an "excess parachute payment" under
Section 280G of the Code, the aggregate amount payable under each Agreement
would be reduced to the greater of (a) one dollar below the amount which would
subject the executive to the payment of an excise tax or (b) the net amount
otherwise payable to the executive excluding the 20% excise tax payable on the
portion of the payment constituting an "excess parachuse payment." The current
annual rate of salary for Ms. Rogulski, Ms. DeLuca, Ms. Reilly, Mr. Fogg, Mr.
Gleason and Ms. Terwilliger is $71,400, $43,365, $67,200, $68,250, $58,820, and
$63,000, respectively. Accordingly, if it is assumed that a change of control
and termination were to occur on March 31, 1998, the amount payable, including
non-cash benefits, to Ms. Rogulski, Ms. DeLuca, Ms. Reilly, Mr. Fogg, Mr.
Gleason and Ms. Terwilliger under their respective Special Termination
Agreements would be approximately $[193,454.53], $[110,922.88], $[169,801.80],
$[169,438.71], $[192,547.98], and $[158,322.25], respectively.
Severance Policy
Under the Merger Agreement, HUBCO has assumed the MSB Bank Employee
Severance Compensation Plan (the "Severance Plan"), adopted effective as of
September 3, 1992, and subsequently amended effective as of December 29, 1997.
Pursuant to the Severance Plan, as amended, any employee of MSB (or an
affiliate), other than an employee covered by an Employment Agreement or Special
Termination Agreement, who has completed seven years of continuous service with
MSB (or an affiliate) or who is an officer of MSB (or an affiliate) will be
eligible to receive severance benefits under the Severance Plan. The Severance
Plan further provides that a participant whose employment is terminated within
one year following a "change of control" of MSB or MSB Bank (as such term is
defined in the Severance Plan) will be entitled to receive a severance payment
equal to the product of 1/12 of the participant's annual compensation multiplied
by the number of his or her whole years of service with MSB (or an affiliate),
up to a maximum of 24 years. All payments to be made under the Severance Plan
would be paid out of the general assets of MSB or its successor.
HUBCO has also agreed under the Merger Agreement to provide severance
payments to employees of MSB who are not covered by the Severance Plan, an
Employment Agreement or a Special Termination Agreement and whose employment is
terminated at or following the Closing by HUBCO or at HUBCO's direction. The
Merger Agreement requires HUBCO to provide severance payments to those persons
whose employment is terminated within six months of the Closing, other than for
good cause, and who have not been offered employment by HUBCO at the same or
better base pay at one of HUBCO's other offices within 50 miles of such person's
current place of employment (whether in Poughkeepsie, New York or Mahwah, New
Jersey, or some other HUBCO location within such 50-mile area) equal to one
month's pay for each full year of service with MSB and/or the Surviving New York
Bank.
The approximate total dollar amount of severance benefits that may be
payable under the Severance Plan and the foregoing severance policy to eligible
persons following the Merger cannot be quantified at this time since all such
payments would be triggered by contingencies the probability of which cannot be
accurately determined at this time.
Retirement Plan for Outside Directors
In accordance with the terms of the Merger Agreement, MSB has
terminated, effective as of December 31, 1997, the Retirement Plan for Board
Members of MSB Bancorp, Inc. (the "Directors' Retirement Plan") adopted
effective as of October 21, 1994 and subsequently amended effective as of
October 31, 1997. The Directors' Retirement Plan was implemented in order to
provide retirement benefits to directors of MSB and MSB Bank.
The Directors' Retirement Plan, as amended effective as of October 31,
1997, provides for a normal retirement benefit to be paid to each director who
retires after attaining age 65 and completing at least 10 years of "creditable
service" and who agrees to provide consulting services to MSB following
retirement. "Creditable service" is defined generally in the Directors'
Retirement Plan to mean service on MSB's Board of Directors, or on the Board of
Directors (or board of trustees) of MSB Bank, including any service completed
while the director was a salaried officer or employee of MSB Bank. The annual
normal retirement benefit payable to a director upon retirement at age 65 under
the Directors' Retirement Plan is calculated based on the annual retainer being
paid to the director for service on the Board of Directors of MSB Bank or MSB
(whichever is greater in the case of a member of both Boards), as in effect in
the month in which the director ceases to be a member of such Board. Pursuant to
the Retirement Plan, as amended, "annual retainer" means the sum of the (i)
annual retainer; (ii) aggregate committee meeting fees; and (iii) property
inspection fees, if any, paid to the Board member for the relevant period. The
Directors' Retirement Plan also provides for the payment of a vested retirement
benefit upon the occurrence of certain events, including termination of the
Plan, which may commence at any time after a director attains age 50 at the
director's election upon retirement. The annual vested retirement benefit
commencing at or after age 65 is equal to the annual normal retirement benefit
multiplied by the lesser of 1.00 or the subtotal of the director's years of
creditable service divided by 10. If a vested early retirement benefit is
elected, the Directors' Retirement Plan provides for the amount of the benefit
otherwise payable to be reduced by 0.5% for each month the benefit commencement
date precedes the date on which the director would have attained age 65.
In the event of a "change of control" of MSB, as defined in the
Directors' Retirement Plan, each director would receive a benefit based upon
credit for three additional years of age and service. Additionally, upon a
change of control, the Directors' Retirement Plan permits each director to elect
a lump sum payment of his or her benefit under the plan and for such benefit to
be subject to an early retirement reduction factor of 0.25% rather than 0.5% per
month. In the event a director's service terminates within the period beginning
three months prior to, and ending three years after, a change of control, the
director would not be required to provide consulting services in order to
receive retirement benefits.
In accordance with the Merger Agreement, MSB has amended the Directors'
Retirement Plan to provide for its termination effective as of December 31,
1997. Pursuant to the termination amendment, all benefits under the Directors'
Retirement Plan have become vested and non-forfeitable, and all benefit accruals
have ceased effective as of the plan's termination date. In addition, pursuant
to the terms of the Merger Agreement, the Directors' Retirement Plan has been
amended to provide for each director's retirement benefit to be determined as if
a change of control of MSB had occurred effective as of December 31, 1997 and
for benefits to be immediately distributable to the directors. The estimated
average annual benefit payable to a participant upon retirement at or after age
65 based on an average $29,400 annual retainer currently in effect for directors
of MSB and assuming 10 years of service would be approximately $29,400 per year.
The Directors' Retirement Plan is unfunded. All benefits payable under
the Directors' Retirement Plan will be paid from MSB's current assets. As soon
as practicable, MSB will either purchase an annuity to pay the directors'
benefits upon retirement or will make a lump sum distribution to each director
of his or her plan benefits in the 1998 calendar year. There are no tax
consequences to either the director or MSB until benefits are paid out to the
director. At that time, the director will recognize income in the amount of the
payment, and MSB will be entitled to an offsetting deduction. The actions
described above will occur whether or not the Merger is consummated.
Indemnification
In the Merger Agreement, HUBCO has agreed to indemnify, defend and hold
harmless each person who is, has been, or becomes prior to the Effective Time, a
director, officer, employee or agent of MSB, or who serves or has served at the
request of MSB in any capacity with any other entity (collectively, the
"Indemnitees"), to the fullest extent which MSB would have been permitted under
applicable law and MSB's Certificate of Incorporation and By-laws had the Merger
not occurred, with respect to any claims made against such person because he or
she is or was a director, officer, employee or agent of MSB or serves or has
served at the request of MSB in any capacity with any other entity. In the
Merger Agreement, HUBCO has also agreed to cover MSB's officers and directors
under either an extension of MSB's existing directors' and officers' liability
insurance policy or a rider to HUBCO's then current policy for a period of at
least six years after the Effective Time.
Security Ownership of Certain Beneficial Owners
The information as to those persons believed by management of MSB to be
beneficial owners of more than 5% of the outstanding shares of MSB Common Stock,
incorporated by reference in MSB's Annual Report on Form 10-K for the year ended
December 31, 1996, is incorporated herein by reference. In addition to such
information, based on a Schedule 13-D filed on December 4, 1997, Tontine
Partners, L.P., and Tontine Financial Partners, L.P., and Jeffrey Gendell, as
Managing Member of Tontine Management, L.L.C., and Managing Member of Tontine
Overseas Associates, Ltd., have the shared dispositive power and the shared
voting power over 209,700 shares, or 7.4%, of MSB Common Stock. Such persons are
located at 200 Park Avenue, Suite 3900, New York, NY 10166. Additionally, based
on an amended Schedule 13-D filed on January 16, 1998, Kahn Brothers & Co., Inc.
disclosed that it had reduced its holdings of MSB Common Stock from 5.8% to
4.6%. Kahn Brothers & Co., Inc. reported that it has the sole dispositive power
and sole voting power over 132,000 shares of MSB Common Stock. Also, based on a
Schedule 13-D filed on January 16, 1998, Bear, Stearns & Co., Inc. owns 144,400
shares or 5.1% of MSB Common Stock. Bear Stearns reported that it has sole
voting and dispositive power over 128,400 of the shares and shared voting and
dispositive power over the other 16,000 shares. The address of Bear, Stearns &
Co., Inc. is 115 South Jefferson Road, Whippany, NJ 07981.
Opinion of MSB's Financial Advisor
On December 5, 1997, at a meeting that the MSB Board held to review
indications of interest from three bidders to evaluate a proposed Merger, KBW
delivered to the Board a verbal opinion (which opinion was subsequently updated
verbally on December 12, 1997) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the holders of the
MSB Common Stock. In connection with its opinion dated the date of this Proxy
Statement, KBW updated certain analyses performed in connection with its opinion
and reviewed the assumptions on which such analyses were based and the factors
considered in connection therewith.
KBW has delivered to the MSB Board its updated written opinion dated
the date of this Proxy Statement to the effect that as of such date the Exchange
Ratio is fair, from a financial point of view, to the holders of MSB Common
Stock. KBW's opinion is addressed to the MSB Board and does not constitute a
recommendation as to how any stockholder of MSB should vote with respect to the
Merger Agreement.
The full text of the opinion of KBW, which sets forth a description of
the procedures followed, assumptions made, matters considered and limits on the
review undertaken, is attached to this Proxy Statement as Appendix C and is
incorporated herein by reference. Stockholders are urged to read the opinion in
its entirety. The following summary of the analyses performed by KBW in
rendering its opinion is qualified in its entirety by reference to the full text
of the opinion.
In rendering its opinion, KBW (i) reviewed, among other things, the
Merger Agreement, the Annual Reports to stockholders and Annual Reports on Form
10-K of MSB and Annual Reports on Form 10-K of HUBCO for the four years ended
December 31, 1996, certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of MSB and Quarterly Reports on Form 10-Q of HUBCO and certain
internal financial analyses and forecasts for MSB prepared by management; (ii)
held discussions with members of senior management of MSB and HUBCO regarding
past and current business operations, regulatory relationships, financial
condition and future prospects of the respective companies; (iii) compared
certain financial and stock market information for MSB and HUBCO with similar
information for certain other companies the securities of which are publicly
traded; (iv) reviewed the financial terms of certain recent business
combinations in the banking industry; and (v) performed such other studies and
analyses as it considered appropriate.
In conducting its review and arriving at its opinion, KBW relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and KBW did not attempt to
verify such information independently. KBW relied upon the management of MSB as
to the reasonableness and achievability of the financial and operating forecasts
and projections (and assumptions and bases therefor) provided to KBW and assumed
that such forecasts and projections reflected the best available estimates and
judgments of such management and that such forecasts and projections will be
realized in the amounts and in the time periods estimated by such management.
KBW also assumed, without independent verification, that the aggregate
allowances for loan losses for MSB and HUBCO are adequate to cover such losses.
KBW did not make or obtain any evaluations or appraisals of the property of MSB
or HUBCO, nor did KBW examine any individual credit files.
The following is a summary of the material financial analyses employed
by KBW in connection with providing its opinion.
(a) Financial Summary of the HUBCO Offer. KBW calculated multiples
which were based on the assumed per share purchase price of $36.02 (derived by
multiplying $36.25, the last reported sale price for HUBCO Common Stock on
December 2, 1997, by 0.9936, which would be the Exchange Ratio if $36.25 were
the Median Pre-Closing Price). MSB's September 30, 1997 stated and tangible book
value were $22.40 and $13.72, respectively, its 1997 and 1998 earnings per share
estimates (provided by MSB) were $1.35 and $1.98, respectively, and its trailing
12 months (September 30, 1996 to September 30, 1997) earnings per share was
$1.16. Based on this data, the price to stated and fully diluted tangible book
value multiples were 1.61 and 2.63 times, respectively, the price to the 1997
and 1998 earnings estimates per share were 26.8 and 18.2 times, respectively,
and the multiple of price to the trailing 12 months earnings was 31.1 times.
(b) Analysis of Selected Merger Transactions. KBW reviewed certain
financial data related to a set of recent comparable acquisitions nationwide
from January 1, 1996 to October 27, 1997, where the seller was a thrift and had
assets over $500 million, with a return on assets ("ROA") under 1.0% and a
tangible equity ratio under 10.0%. This criteria produced a list of 33 sellers.
The comparable thrift-only transactions, where the seller had assets over $500
million in the Northeast (NY, NJ, CT, MA, PA) from January 1, 1996 to October
27, 1997, produced a list of 20 sellers. In the New York area comparable group,
the criterion was any thrift sold from January 1, 1994 to October 27, 1997,
which produced a list of 17 sellers. The last comparable group included thrifts
with assets greater than $100 million, which had a ROA less than 0.50% and a
tangible equity ratio under 10.0%, which produced a list of 28 sellers.
KBW calculated an average of the nationwide transactions multiple of
price to the targets' earnings (trailing 12 months) as 17.0 times compared to a
multiple of 31.1 times for the Merger; an average premium to the targets' stated
book value of 181% compared to a premium of 161% associated with the Merger; an
average premium to the targets' tangible book value of 194% compared to a
premium of 263% associated with the Merger; an average premium to the targets'
core deposits (net of tangible equity) of 10.7% compared to 11.6% associated
with the Merger; and an average price as a percentage of assets of 13.6%
compared to 16.3% associated with the Merger.
For the Northeastern region, KBW calculated an average multiple of
price to the targets' earnings (trailing 12 months) of 16.2 times compared to a
multiple of 31.1 times associated with the Merger; an average premium to the
targets' stated book value of 193% compared to a premium of 161% associated with
the Merger; an average premium to the targets' tangible book value of 204%
compared to a premium of 263% associated with the Merger; an average premium to
the targets' core deposits (net of tangible equity) of 10.4% compared to a 11.6%
associated with the Merger; and an average price as a percentage of assets of
14.8% compared to 16.3% associated with the Merger.
For the New York area transactions, KBW calculated an average multiple
of price to the targets' earnings (trailing 12 months) of 16.9 times compared to
a multiple of 31.1 times associated with the Merger; an average premium to the
targets' stated book value of 178% compared to a premium of 161% associated with
the Merger; an average premium to the targets' tangible book value of 182%
compared to a premium of 263% associated with the Merger; an average premium to
the targets' core deposits (net of tangible equity) of 10.7% compared to 11.6%
associated with the Merger; and an average price as a percentage of assets of
15.3% compared to 16.3% associated with the Merger.
For the high price to last twelve months EPS transactions, KBW
calculated an average multiple of price to the targets' earnings (trailing 12
months) of 29.7 times compared to a multiple of 31.1 times associated with the
Merger; an average premium to the targets' stated book value of 154% compared to
a premium of 161% associated with the Merger; an average premium to the targets'
tangible book value of 166% compared to a premium of 263% associated with the
Merger; an average premium to the targets' core deposits (net of tangible
equity) of 7.5% compared to 11.6% associated with the Merger; and an average
price as a percentage of assets of 12.7% compared to 16.3% associated with the
Merger.
No company or transaction used for comparison in the analysis described
above was identical to MSB, 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 and other factors that could affect the public
trading value of the companies to which they are being compared.
(c) Selected Peer Group Analysis. KBW compared the financial
performance and market performance of HUBCO based on various financial measures
of earnings performance, operating efficiency, capital adequacy and asset
quality and various measures of market performance, including market/book
values, price to earnings and dividend yields to those of a group of comparable
holding companies. This group consisted of KBW covered banks with market
capitalizations between $1-5 billion, which produced a list of 46 companies. For
purposes of such analysis, the financial information used by KBW was as of and
for the quarter ended September 30, 1997 and the market price information was as
of December 4, 1997. The companies in the peer group were KBW covered banks
which had market capitalizations ranging from approximately $1 billion to $5
billion.
KBW's analysis showed the following concerning HUBCO's financial
performance: that HUBCO's return on equity on an annualized basis was 24.6%,
compared to an average of 16.3% for the peer group; that HUBCO's return on
assets on an annualized basis was 1.75%, compared to an average of 1.40% for the
peer group; that HUBCO's net interest margin on an annualized basis was 5.38%,
compared to an average of 4.56% for the peer group; that HUBCO's efficiency
ratio on an annualized basis was 52.01%, compared to an average of 56.99% for
the peer group; that HUBCO's equity to assets ratio was 6.96%, compared to an
average of 8.67% for the peer group; that HUBCO's ratio of nonperforming assets
to total loans and other real estate owned was 2.02%, compared to an average of
0.68% for the peer group; that HUBCO's ratio of loan loss reserve to
nonperforming loans was 116%, compared to an average of 337% for the peer group.
KBW's analysis further showed the following concerning HUBCO's market
performance: that HUBCO's price to earnings multiple based on 1997 estimated
earnings was 16.86, compared to an average for the peer group of 19.66 times;
and HUBCO's dividend yield was 2.21%, compared to an average for the peer group
of 1.86%. For purposes of the above calculations, all earnings estimates were
based upon the published estimates of KBW's equity research department for
HUBCO.
(d) Financial Impact Analysis. KBW performed pro forma merger analysis
that combined projected income statement and balance sheet information.
Assumptions regarding the accounting treatment, acquisition adjustments, cost
savings, revenue enhancements and treatment of MSB employee stock options were
used to calculate the financial impact that the Merger would have on certain
projected financial results of HUBCO. This analysis indicated that the Merger is
expected to dilute estimated earnings in 1998 (excluding the effect of a
non-recurring merger and restructuring charge to be incurred in connection with
the Merger), and increase the fully diluted book value. In order for the Merger
to not be dilutive to 1998 estimated earnings, HUBCO would have to save 18.17%
of MSB's pre-tax non-interest expense. This analysis was based on analyst and
the respective managements' estimates of HUBCO and MSB's 1998 earnings per share
and on HUBCO managements' estimates of expected cost savings, revenue
enhancements and a non-recurring merger and restructuring charge to be realized
or incurred by HUBCO in connection with the Merger. The actual results achieved
by HUBCO following the Merger will vary from the projected results, and the
variations may be material.
(e) Discounted Cash Flow Analysis. KBW estimated the present value of
the future cash flows that would accrue to a holder of a share of MSB Common
Stock assuming the stockholder held the stock through the year 2002 and then
sold it at the end of year 2002. The analysis was based on several assumptions,
including an earnings per share of $1.98 in 1998 and a post-1999 earnings per
share growth rate of 8%. A 40% dividend payout ratio was assumed for MSB through
the year 2002. A terminal value was calculated for 2002 by multiplying MSB's
projected 2002 earnings by a price/earnings multiple of 16 times trailing
earnings. The terminal valuation and the estimated dividends were discounted at
a rate of 12%, producing a present value of $32.50. KBW also presented a table
showing the foregoing analysis with a range of discount rates from 10% to 18%
and a range of price-to-earnings multiples of 12x to 22x, resulting in a range
of present values for a share of MSB Common Stock of $19.83 to $47.23. These
values were determined by adding (i) the present value of the estimated future
dividend stream that MSB could generate over the period beginning January 1998
and ending in December 2002, and (ii) the present value of the "terminal value"
of the MSB Common Stock.
KBW repeated this analysis using a post-2000 earnings growth rate of 6%
and earnings per share projections for 1998 and 1999 of $1.98 and $2.51,
respectively, for MSB. The result of this analysis was a present value of $30.86
at a 16 times trailing earnings terminal multiple and a 12% discount rate. KBW
also presented a table showing the foregoing analysis with a range of discount
rates from 10% to 18% and a range of price-to-earnings multiples of 12x to 20x,
resulting in a range of present values for a share of MSB Common Stock of $18.86
to $41.06.
KBW stated that the discounted cash flow analysis is a widely-used
valuation methodology but noted that it relies on numerous assumptions,
including asset and earnings growth rates, dividend payout rates, terminal
values and discount rates. The analysis did not purport to be indicative of the
actual values or expected values of MSB Common Stock.
(f) HUBCO Stock Price Performance. KBW reviewed and analyzed the
historical trading price of HUBCO's Common Stock on a weekly basis from January
3, 1997 to November 28, 1997 as compared to the S&P 500 and the Keefe Bank
Index. During this same time period HUBCO had outperformed both indices.
(g) MSB Stock Trading Analysis. KBW compared the trading multiples of
MSB to the Keefe Bank Scan, a nationwide thrift peer group and a nationwide
commercial bank peer group. This analysis indicated that on a price to 1997
earnings basis, MSB was trading at a higher multiple than each of the three
groups. KBW also compared the profitability ratios and found that MSB's
performance was less than each of the three groups. This analysis indicated that
MSB was trading at a premium to earnings and may suggest that this was based on
takeout speculation rather than fundamentals.
(h) Other Analysis. KBW also reviewed selected investment research
reports, earnings estimates, historical stock price performance relative to the
S&P 500 and to an index of bank and thrift stocks and other financial data for
MSB and HUBCO.
The summary contained herein provides a description of the material
analyses prepared by KBW in connection with the rendering of its opinion. The
summary set forth above does not purport to be a complete description of the
analyses performed by KBW in connection with the rendering of its opinion. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. KBW believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses without considering all analyses, or selecting part of the above
summary, without considering all factors and analyses, would create an
incomplete view of the processes underlying the analyses set forth in KBW's
presentations and opinion. The ranges of valuations resulting from any
particular analysis described above should not be taken to be KBW's view of the
actual value of MSB and HUBCO. The fact that any specific analysis has been
referred to in the summary above is not meant to indicate that such analysis was
given greater weight than any other analyses.
In performing its analyses, KBW made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of MSB and HUBCO. The analyses
performed by KBW are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of KBW's analysis
of the fairness, from a financial point of view, of the Exchange Ratio in the
Merger. These analyses were provided to the MSB Board in connection with the
delivery of KBW's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company actually might be sold or the prices at
which any securities may trade at the present time or at any time in the future.
In addition, as described above, KBW's opinion, along with its presentation to
the MSB Board, was just one of many factors taken into consideration by the MSB
Board in unanimously approving the Merger Agreement.
KBW, as part of its investment banking business, is continually engaged
in the valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies, KBW has experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of its business as a
broker-dealer, KBW may, from time to time, purchase securities from, and sell
securities to, MSB and HUBCO, and, as a market maker in securities, KBW may from
time to time have a long or short position in, and buy or sell, debt or equity
securities of MSB and HUBCO for KBW's own account and for the accounts of its
customers.
Pursuant to the executed Engagement Letter dated October 28, 1997,
between MSB and KBW, MSB has agreed to pay KBW a cash fee equal to 1.125% of the
market value of the total consideration paid to MSB stockholders upon closing of
the transaction, which fee is estimated to be $1,415,450, assuming a Median
Pre-Closing Price of HUBCO Common Stock equal to $34.875 and an Exchange Ratio
equal to $36.02 divided by that Median Pre-Closing Price. In connection with the
execution and delivery of the Merger Agreement, a cash fee of $200,000 was paid,
and an additional cash fee of $200,000 will be paid at the time of mailing of
this Proxy Statement-Prospectus. Both amounts will be credited against the total
fee to be paid at the closing of the Merger. Pursuant to the KBW Engagement
Letter, MSB also agreed to reimburse KBW for reasonable out-of-pocket expenses
and disbursements incurred in connection with its retention and to indemnify KBW
against certain liabilities, including liabilities under the federal securities
laws.
Resale Considerations With Respect to the HUBCO Stock
The shares of HUBCO Stock that will be issued if the Merger is
consummated have been registered under the Securities Act of 1933, as amended
(the "Securities Act") and will be freely transferable, except for shares
received by persons, including directors and executive officers of MSB, who may
be deemed to be "affiliates" of MSB under Rule 145 promulgated under the
Securities Act. An "affiliate" of an issuer is defined generally as a person who
"controls" the issuer. Directors, executive officers and 10% stockholders may be
deemed to control the issuer. Affiliates may not sell their shares of HUBCO
Stock acquired pursuant to the Merger, except pursuant to an effective
registration statement under the Securities Act covering the HUBCO 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 MSB 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 MSB 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 MSB have been
published or filed by HUBCO. Also, in connection with the pooling-of-interests
rules, such persons have agreed not to transfer their MSB 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 Stock
beneficially owned by them in violation of the pooling-of-interests restrictions
set forth above with respect to MSB.
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 MSB 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
MSB stockholders, 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 MSB 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", (vi) receipt by MSB of an opinion of Thacher Proffitt & Wood to
the effect that the exchange of MSB Common Stock for HUBCO Common Stock is a
tax-free reorganization within the meaning of Section 368 of the Code and (vii)
the receipt of a letter from HUBCO's independent accountants that the Merger
will qualify to be treated by HUBCO as a pooling-of-interests for accounting
purposes.
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 MSB contained in the Merger Agreement;
(ii) the performance by MSB, in all material respects, of all its obligations
under the Merger Agreement; and (iii) receipt of an opinion from Thacher
Proffitt & Wood, counsel to MSB, as to certain matters.
The obligation of MSB 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 KBW's fairness opinion; (iv) receipt of
an opinion from Pitney, Hardin, Kipp & Szuch as to certain matters; (v)
acceptance and assumption by HUBCO of certain employment contracts between MSB
and its officers and directors; and (vi) the appointment of one nominee,
designated by MSB, to the Board of Directors of HUBCO, and the offer by HUBCO of
the position, Vice Chairman of the Board of the Surviving Bank and President of
the Southern Region of the Surviving Bank, to William C. Myers.
Conduct of Business Pending the Merger
The Merger Agreement requires MSB to conduct its business prior to the
Effective Time only in the ordinary course of business and consistent with
prudent banking practices, except as permitted under the Merger Agreement or
with the written consent of HUBCO (which will not be unreasonably withheld).
Under the Merger Agreement, MSB 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 By-laws; (b) change the number of shares of its
authorized or issued capital stock, 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 MSB may pay dividends
on the MSB Preferred Stock and dividends on the MSB Common Stock in the same
amount as was paid in the two quarters prior to the date of the Merger
Agreement, less the amount, if any, which MSB may pay to the holders of MSB
Common Stock in order to redeem the Preferred Share Purchase Rights which
currently exist as part of the MSB Common Stock; (c) grant any severance or
termination pay (other than pursuant to written policies or contracts of MSB 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; (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 other than capital expenditures which are either
pursuant to binding commitments existing on the date of the Merger Agreement or
necessary to maintain existing assets in good repair and expenditures described
in business plans or budgets previously furnished to HUBCO; (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 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 MSB'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 $1 million or renew for a period greater than one year any
existing loan in an amount of $1 million or more, or increase by $1 million 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, MSB cannot, directly or indirectly,
encourage or solicit or hold discussions or negotiations with, or provide any
information to, any person, entity or group (other than HUBCO) concerning any
merger, sale of shares of capital stock or sale of substantial assets or
liabilities not in the ordinary course of business or similar transactions (an
"Acquisition Transaction"); provided, however, that notwithstanding the
foregoing, MSB may enter into discussions or negotiations or provide any
information in connection with an unsolicited possible Acquisition Transaction
if the Board of Directors of MSB, 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. MSB
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.
Employee Benefits
HUBCO will make available to MSB and MSB Bank employees whose
employment continues following the Merger coverage under employee benefit plans
and programs generally available to HUB employees and officers on the terms and
conditions available to HUB employees and officers. On and after the Effective
Time, the employee pension and welfare benefit plans of HUBCO and MSB and MSB
Bank may, at HUBCO's election, continue to be maintained separately or be
consolidated. In the event of a consolidation of any such plans, MSB and MSB
Bank employees will receive credit for service with MSB and MSB Bank under any
HUBCO benefit plan or new HUBCO benefit plan in which such employees would be
eligible to enroll, for eligibility and vesting purposes but not for benefit
accrual under HUBCO's or HUB's pension benefit plans.
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 MSB; (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 MSB with the SEC, and
the accuracy of information contained therein; (e) the accuracy of information
supplied by each of HUBCO and MSB 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 September 30, 1997; (n) the absence
of actions that would prevent there being a tax-free reorganization or the use
of the "pooling-of-interests" method to account for the Merger; (o) title to
properties; (p) the adequacy of loan loss reserves; (q) environmental
compliance; (r) brokers' and finders' fees; (s) cooperation on applications and
filings; (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 any of
its subsidiaries' or MSB's business; and (v) HUBCO's regulatory capital adequacy
after giving effect to the Merger and 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. Consummation of the Merger
requires approval of the Merger by the FRB under the Bank Holding Company Act of
1948 (the "BHCA"), which requires the FRB to take into consideration, among
other factors, the financial and managerial resources and future prospects of
the institutions and the convenience and needs of the communities to be served.
The BHCA prohibits the FRB from approving a merger (1) if it would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States; (2) if its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the FRB finds that the anti-competitive
effects of the merger are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served; or (3) if the applicant has failed to provide the FRB
with adequate assurances that it will make available such information on the
operations or activities of the applicant and its affiliates that the FRB deems
appropriate to determine and enforce compliance with the BHCA and other
applicable federal banking laws and regulations. The FRB considers the financial
condition and managerial resources of the applicant, it subsidiaries and the
bank to be acquired, and also has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position. The FRB also considers the convenience and needs of the communities
and whether the acquiring organization meets the requirements of the Community
Reinvestment Act of 1977 (the "CRA"). Under the BHCA, the Merger may not be
consummated until the 30th day following the date of the FRB's approval thereof,
during which time the United States Department of Justice may challenge the
Merger on antitrust grounds. The post-approval waiting period may be reduced by
the FRB to 15 days, with the concurrence of the Department of Justice. The
commencement of an antitrust action would stay the effectiveness of the FRB's
approval unless a court specifically orders otherwise An application for
approval was filed on February 24, 1998 with the FRB. While HUBCO and MSB
anticipate receiving such approval, there can be no assurance that it will be
granted, or that it will be granted on a timely basis or that it will be granted
without conditions unacceptable to HUBCO or MSB
Pursuant to the Bank Merger Act, the Home Owners' Loan Act and the OTS
Regulations promulgated thereunder, the Merger is subject to the approval of the
OTS. HUBCO and MSB filed an application for approval of the Merger with the OTS
on January 28, 1998. This application is currently under review by the OTS.
There can be no assurance as to the timing of such approval or that the OTS will
approve the Merger. The OTS is required to evaluate the application by taking
into consideration, among other things, the capital level of the resulting
institution, the financial and managerial resources and future prospects of the
institutions involved, the convenience and needs of the communities to be served
and the conformity of the transaction to applicable law, regulation and
supervisory policies. In addition, the OTS may not approve any proposed
acquisition (i) which would result in a monopoly or which would be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the savings and loan business in any part of the United States or
(ii) which in any section of the country may have the effect of substantially
lessening competition or tending to create a monopoly or which in any other
manner would be in restraint of trade, unless the OTS finds that the
anti-competitive effects of the proposed acquisition are clearly outweighed in
the public interest by the probable effect of the acquisition in meeting the
convenience and needs of the community to be served. Under the CRA, the OTS must
take into account HUBCO's record of performance in meeting the credit needs of
the entire community, including low- and moderate-income neighborhoods, served
by HUBCO. The OTS also considers, among other things, the fairness and
disclosure of the plan of merger (including compensation to officers, directors
and controlling persons of the disappearing association by the surviving
association), the justification, need for and compensation to be paid to any
advisory board, fees paid to each person or firm rendering legal or other
professional services in connection with a merger and the accounting and tax
treatment of the merger. The regulations of the OTS also provide for the
publication of notice and the opportunity for public comments relating to the
application for approval discussed above.
In addition, under federal law, a period of 30 days must expire
following approval by the OTS within which period the Department of Justice may
file objections to the Merger under the federal antitrust laws. The
post-approval waiting period may be reduced by the OTS to 15 days, with the
concurrence of the Department of Justice. The Department of Justice could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the Merger unless divestiture of an
acceptable number of branches to a competitively suitable purchaser could be
made. While HUBCO believes that the likelihood of such action by the Department
of Justice is remote in this case, there can be no assurance that the Department
of Justice will not initiate such proceeding, or that the Attorney General of
the State of New York or of New Jersey will not challenge the Merger, or if such
proceeding is instituted or challenge is made, as to the result thereof.
Management and Operations After the Merger
At the Effective Time, as a result of the Merger, MSB will be merged
with and into HUBCO, with HUBCO as the Surviving Entity. Prior to closing the
Merger, HUBCO expects to complete its pending acquisition of Poughkeepsie
Financial Corp. ("PFC") and its subsidiary, Bank of the Hudson ("BTH"), a New
York-based bank. HUBCO anticipates that BTH will serve as HUBCO's New York bank
subsidiary and that MSB Bank, will be merged into BTH following the Merger.
HUBCO will cause William Myers, currently MSB's Chairman, President and Chief
Executive Officer, to be appointed at the Effective Time as Vice Chairman of the
Board of HUBCO's New York bank subsidiary and President of the Southern Region
of HUBCO's New York bank subsidiary.
The Merger Agreement provides that HUBCO will cause one director of MSB
selected by MSB (who may be William Myers) and acceptable to HUBCO to be
appointed at the Effective Time to the HUBCO Board of Directors. HUBCO has
agreed to ask each of the current directors of Bank to serve as directors of its
New York subsidiary bank and has agreed that the directors of that bank board
will receive fees and be subject to board duties substantially consistent with
the fees and duties of the directors of other bank subsidiaries of HUBCO. HUBCO
has agreed to modify or waive the provisions of its mandatory retirement policy
to the extent necessary so that those directors who would otherwise be required
to retire in the six year period following the Closing because they will have
reached HUBCO's mandatory retirement age of 72 will be permitted to continue to
serve until age 75.
Exchange of Certificates, Issuance of New Options
At the Effective Time, holders of certificates formerly representing
shares of MSB Stock will cease to have any rights as MSB stockholders and their
certificates automatically will represent the shares of HUBCO Stock into which
their shares of MSB Stock will have been converted by the Merger. Promptly after
the Effective Time, but in no event later than five days after the Effective
Time, HUBCO will send written instructions and a letter of transmittal to each
holder of MSB Stock, indicating the method for exchanging their stock
certificates for certificates representing shares of HUBCO Stock. Holders of MSB
Stock should not send in their stock certificates until they receive
instructions from HUBCO.
Each share of HUBCO Stock for which shares of MSB Stock are exchanged
will be deemed to have been issued at the Effective Time. Accordingly, holders
of MSB Stock who receive HUBCO 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 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 Stock until the certificate or certificates formerly representing
shares of MSB Stock have been surrendered, at which time any accrued dividends
and other distributions on such shares of HUBCO Stock will be paid without
interest. See "-- Consideration".
Holders of outstanding certificates for MSB 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
Stock into which the shares of MSB Stock previously represented by the
surrendered certificates have been converted. At the time of issuance of the new
stock certificate, each stockholder so entitled will receive a check for the
amount of the fractional share interest, if any, to which the stockholder may be
entitled.
As discussed above under the caption "Conversion of MSB Options,"
Optionees will have the right to elect to have each of their MSB Options
converted at the Effective Time into either HUBCO Common Stock or a New HUBCO
Option. Optionees may elect to have some of their MSB Options convert into HUBCO
Common Stock and some of their MSB Options convert into New HUBCO Options, or
may elect to have all of their MSB Options convert into one or the other. HUBCO
and MSB will make arrangements with each Optionee to enable the Optionee to make
the necessary election on a timely basis.
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 MSB at any time
prior to the Effective Time. However, after approval of the Merger Agreement by
the stockholders of MSB, no amendment can be made which reduces the amount or
changes the form of consideration to be delivered to the stockholders of MSB
without the approval of such stockholders.
The Merger Agreement may be terminated by the mutual consent of MSB and
HUBCO. The Merger Agreement may also be terminated by MSB or HUBCO if, among
other things, (i) the Effective Time has not occurred on or before June 30, 1998
(the "Cutoff Date") unless the failure of such occurrence is due to the failure
of the party seeking to terminate to perform or observe its covenants in the
Merger Agreement; (ii) a vote of the stockholders of MSB to approve the Merger
Agreement is taken and such stockholders fail to approve the Merger Agreement at
their meeting; or (iii) any regulatory approvals necessary to consummate the
transaction have been denied or withdrawn at the request of the regulatory
agency or such approval is given with conditions which 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 MSB
and MSB Bank, taken as a whole, from that disclosed by MSB to HUBCO in its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, or MSB
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 MSB 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.
MSB may terminate the Merger Agreement if there has been a material
adverse change in the business, operations, assets or financial condition of
HUBCO and its subsidiaries taken as a whole from that disclosed by HUBCO in its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, except
for the effects of HUBCO's previously announced acquisitions of PFC, CFHC, TBOS,
SNB or the 22 branches from First Union National Bank, 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 MSB'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. MSB may also terminate the Merger Agreement
if the conditions for MSB 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 MSB upon
occurrence of a Termination Event, as described above under the caption "THE
PROPOSED MERGER -- Consideration."
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.
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 MSB'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 MSB would be
added to those of HUBCO at their recorded book values and the stockholders'
equity accounts of HUBCO and MSB 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 MSB as if the Merger had taken place
prior to the periods covered by such financial statements. The pro forma
financial information contained in this Proxy Statement has been prepared using
the pooling-of-interests accounting basis to account for the Merger. See "PRO
FORMA FINANCIAL INFORMATION".
Federal Income Tax Consequences
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR
GENERAL INFORMATION ONLY. IT MAY NOT BE APPLICABLE TO CERTAIN CLASSES OF
TAXPAYERS, INCLUDING INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL
INSTITUTIONS, TAX EXEMPT ORGANIZATIONS, FOREIGN PERSONS AND PERSONS WHO ACQUIRED
SHARES OF MSB COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR
RIGHTS OR OTHERWISE AS COMPENSATION OR AS PART OF A STRADDLE, HEDGE OR
CONVERSION TRANSACTION. MSB STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISERS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
General. The Merger is structured as a tax-free reorganization as defined in
Section 368(a)(1)(A) of the Code and, accordingly, no gain or loss will be
recognized by HUBCO or MSB or by the stockholders of MSB upon the exchange of
their shares of MSB Common Stock solely for shares of HUBCO Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in HUBCO Common Stock). It is a condition to the
obligation of HUBCO and MSB to consummate the Merger that HUBCO shall have
received an opinion, dated as of the Effective Time, of Pitney, Hardin, Kipp &
Szuch, reasonably satisfactory in form and substance to HUBCO,and MSB shall have
received an opinion, dated as of the Effective Time, of Thacher Proffitt & Wood,
reasonably satisfactory in form and substance to MSB, 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 MSB; (iii) no gain or loss will be recognized by MSB
shareholders upon the exchange of MSB Common Stock solely for HUBCO Common
Stock; (iv) the basis of any HUBCO Common Stock received in exchange for MSB
Common Stock shall equal the basis of the recipient's MSB Common Stock
surrendered on the exchange, reduced by the amount of cash received, if any, on
the exchange, and increased by the amount of the gain recognized, if any, on the
exchange (whether characterized as dividend or capital gain income); and (v) the
holding period for any HUBCO Common Stock received in exchange for MSB Common
Stock will include the period during which MSB Common Stock surrendered on the
exchange was held, provided such stock was held as a capital asset on the date
of the exchange. As an exhibit to the Registration Statement of which this Proxy
Statement is part, Pitney, Hardin, Kipp & Szuch has provided an opinion that,
based upon the circumstances as they presently exist, it expects to be able to
render the required tax opinion to both HUBCO and MSB. While HUBCO and MSB have
the contractual right to waive this condition to closing, neither will do so,
and the Merger will not take place if the opinion is not obtained.
Consequences of Receipt of Cash in Lieu of Fractional Shares. Cash
received by an MSB stockholder 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 stockholder, the
stockholder 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 MSB Common Stock allocable to the fractional share interest.
Basis of HUBCO Common Stock. The basis of HUBCO Common Stock received
by an MSB stockholder who receives solely HUBCO Common Stock will be the same as
the basis of such stockholder's MSB Common Stock surrendered in exchange
therefor.
Holding Period. The holding period of shares of HUBCO Common Stock
received in the Merger by holders of MSB Common Stock will include the period
during which such shares of MSB Common Stock surrendered in exchange therefor
were held by the holder thereof, provided such shares of MSB Common Stock were
held as capital assets.
No Dissenters' Rights
Holders of MSB Common Stock do not have dissenters' rights of appraisal
in connection with the Merger. Under the DGCL, stockholders of a Delaware
corporation who dissent from a merger or consolidation of the corporation may be
entitled to appraisal rights, unless such corporation's shares are either (i)
listed on a national securities exchange or designated as a national market
system security on an inter dealer quotation system by the National Association
of Securities Dealers, Inc., or (ii) held of record by more than 2,000
stockholders, and such stockholders receive only shares of stock or depository
receipts of the corporation surviving or resulting from the merger or
consolidation of shares of stock or depository receipts of any other corporation
which at the effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market system
security on an inter dealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 stockholders.
Since the MSB Common Stock is presently listed on the AMEX and the HUBCO Common
Stock to be received pursuant to the Merger is presently listed on the
NASDAQ/NMS, the stockholders of MSB are not entitled to appraisal rights.
On the Record Date, HUBCO held all the outstanding MSB Preferred Stock
and will not exercise its dissenters' rights of appraisal with respect to such
shares in connection with the Merger.
The Rights Agreement
On September 16, 1994, MSB adopted a Rights Agreement (as amended the
"Rights Agreement"), pursuant to which MSB's stockholders each received a
dividend of one preferred share purchase right (a "Right") for each Common Share
of MSB outstanding at the close of business on October 7, 1994. Each Right
represents the right to purchase one one-hundredth interest in a new series of
preferred stock of MSB under certain circumstances (generally, upon the
acquisition by an "acquiring person" (as defined in the Rights Agreement) of
beneficial ownership of 10% or more of the outstanding shares of MSB Common
Stock). In connection with the execution and delivery of the Merger Agreement,
MSB amended the Rights Agreement to provide that, for purposes of determining
whether HUBCO (as well as its affiliates) is an acquiring person under the
Rights Agreement, HUBCO will not be deemed to be a beneficial owner, as defined
in the Rights Agreement, or to beneficially own any securities as a result of
the transactions contemplated by the Merger Agreement and the Stock Option
Agreement. Pursuant to the Merger Agreement, MSB will cause all outstanding
Rights to be redeemed prior to the Effective Time of the Merger.
THE ADDITIONAL PROPOSAL
The Bylaws of MSB require that no business be transacted and no
corporate action be taken at a special meeting of stockholders other than that
stated in the Notice of the Special Meeting. The MSB Board is not aware of any
other business that may properly come before the Meeting. The MSB Board seeks
the authorization of the MSB stockholders to direct the vote of the proxies if
matters incident to the conduct of the Meeting properly come before the Meeting,
including, without limitation, a motion 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 constitute a quorum or approve
the Merger Agreement. As to all such matters, the MSB Board intends to direct
the voting of such shares in the manner determined by the Board of Directors in
its discretion, and in the exercise of its duties and responsibilities, to be in
the best interests of MSB, and its stockholders, taken as a whole.
If it is necessary to adjourn the Meeting, no notice of the time and
place of the adjourned Meeting is required to be given to stockholders other
than an announcement of such time and place at the Meeting. Only proxies marked
"FOR" this proposal will be voted for adjournment, if such vote is necessary.
THE MSB BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE "FOR"
THE ADDITIONAL PROPOSAL, AUTHORIZING ITS BOARD OF DIRECTORS TO DIRECT THE VOTE
OF THE PROXIES UPON SUCH OTHER MATTERS INCIDENT TO THE CONDUCT OF THE MEETING AS
MAY PROPERLY COME BEFORE SUCH MEETING, INCLUDING WITHOUT LIMITATION, A MOTION TO
ADJOURN SUCH MEETING.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Pro Forma Unaudited Combined Condensed Balance Sheet
of HUBCO and MSB
The following pro forma unaudited combined condensed balance sheet
combines the historical consolidated balance sheets of HUBCO and MSB giving
effect to the Merger which will be accounted for as a pooling-of-interests, as
if the Merger had been effective on September 30, 1997 and the pro forma
adjustments described in the notes to pro forma financial information. The
information set forth below should be read in conjunction with the historical
consolidated financial statements of HUBCO and MSB, including their respective
notes thereto, certain of which are incorporated by reference in this Proxy
Statement-Prospectus. Anticipated cost savings net of expected Merger-related
expenses and restructuring charges are not expected to be material and,
therefore, the pro forma financial data does not give effect to these items, nor
does it take into account HUBCO's pending acquisition of PFC or CFHC, the Branch
Purchase or HUBCO's recently completed acquisition of Security National Bank &
Trust Company of New Jersey ("SNB") and The Bank of Southington ("TBOS"). See
"CERTAIN INFORMATION REGARDING HUBCO - Recent Developments." None of the
acquisitions had closed as of September 30, 1997 and none are sufficiently
material to HUBCO under SEC rules to require inclusion in this Proxy
Statement-Prospectus of financial statements or pro forma presentation regarding
such acquisitions. The pro forma information is not necessarily indicative of
the results of operations which would have been achieved had the Merger been
consummated as of the beginning of the periods for which such data are presented
and should not be construed as being representative of future periods.
<PAGE>
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Balance Sheet
As of September 30, 1997
(Dollars in thousands, except per share data)
Pro forma Pro forma
HUBCO MSB Adjustments Combined
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 165,157 $ 16,901 $ -- $ 182,058
Federal funds sold 100,000 16,020 116,020
Securities 886,850 312,916 (18,645 ) 1,181,121
Loans 1,781,414 374,635 2,156,049
Less: Allowance for loan losses (37,622) (2,353) (39,975 )
- --
------------- ---------- ---------- -----------
Total loans 1,743,792 372,282 -- 2,116,074
------------- ----------- ---------- -------------
Other assets 124,657 26,138 150,795
Intangibles, net of amortization 25,578 29,734 55,312
============= =========== =========== =============
Total Assets $ 3,046,034 $ 773,991 $ (18,645) $ 3,801,380
============= =========== =========== =============
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing $ 581,402 $ 50,889 -- $ 632,291
Interest bearing 1,716,919 635,171 2,352,090
------------- ----------- ------------ -------------
Total Deposits 2,298,321 686,060 2,984,381
------------- ----------- -------------
Borrowings 362,354 273 362,627
Other liabilities 23,466 11,521 (1,808) 33,179
------------- ----------- ---------- -------------
Total Liabilities 2,684,141 697,854 -- 3,380,187
Subordinated debt 100,000 -- 100,000
Capital Trust Securities 50,000 -- 50,000
Stockholders' Equity:
Preferred stock 2,216 6 (6) 2,216
Common stock 38,448 30 5,079 43,557
Additional paid in capital 83,959 48,059 (23,140) 108,878
Retained earnings 80,518 33,168 113,686
Treasury Stock -- (3,941) 3,941 --
Restricted Stock (486) (75) -- (561)
Unallocated ESOP Stock -- (273) -- (273)
Unrealized gain (loss) on securities
available for sale 7,238 (837) (2,711) 3,342
------------- ----------- ----------- -------------
Total Stockholders' Equity 211,893 76,137 (16,837) 271,193
============= =========== =========== =============
Total Liabilities and Stockholders' Equity 3,046,034 773,991 (18,645) $ 3,801,380
============= =========== =========== =============
Common shares outstanding (in thousands)
- maximum 22,273 25,147
- minimum 22,273 24,979
Book value per common share
- maximum 9.42 $ 10.70
- minimum 9.42 10.78
</TABLE>
See notes to pro forma financial information.
<PAGE>
Pro Forma Unaudited Combined Condensed Statements of Income of
HUBCO and MSB
The following pro forma unaudited combined condensed statements of
income combine the historical consolidated statements of income of HUBCO and MSB
giving effect to the Merger which will be accounted for as a
pooling-of-interests, as if the Merger had occurred on the first day of the
applicable periods indicated herein, and the pro forma adjustments described in
the notes to the pro forma combined financial statements. The information set
forth below should be read in conjunction with the condensed consolidated
historical and other pro forma financial information, including the notes
thereto, incorporated by reference or appearing elsewhere in this Proxy
Statement-Prospectus. Anticipated cost savings net of expected Merger-related
expenses and restructuring charges are not expected to be material and therefore
the pro forma financial data does not give effect to these items. The pro forma
financial data does not take into account HUBCO's acquisition of PFC expected to
close in the second quarter of 1998, CFHC expected to in the third quater of
1998, TBOS, which closed on January 8, 1998 or SNB, which closed on February 5,
1998, or the Branch Purchase which is expected to close in the second quarter of
1998 and none are sufficiently material to HUBCO under SEC rules to require
inclusion in this Proxy Statement-Prospectus of financial statement or pro forma
presentation regarding the entity to be acquired. The pro forma financial data
is not necessarily indicative of the actual financial results that would have
occurred had the Merger been consummated on September 30, 1997 or that may be
obtained in the future.
<TABLE>
<CAPTION>
Pro forma Unaudited Combined Condensed Statement of Income
For the Nine Months Ended September 30, 1997
(Dollars in thousands, except per share data)
Pro forma
HUBCO MSB Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 120,579 $ 21,757 $ 142,336
Interest on securities 43,860 16,976 60,825
Other interest income 810 1,608 2,429
---------- --------- -----------
Total Interest Income 165,249 40,341 205,590
---------- --------- -----------
Interest on deposits 41,000 21,901 62,901
Interest on borrowings 17,772 21 17,793
---------- --------- -----------
Total Interest Expense 58,772 21,922 80,694
---------- --------- -----------
Net Interest Income before
provision for loan losses 106,477 18,419 124,896
Provision for possible loan losses 5,027 850 5,877
---------- --------- -----------
Net Interest Income 101,450 17,569 119,019
Noninterest income 28,993 3,325 32,318
Noninterest expenses 70,165 15,479 85,644
---------- --------- -----------
Income before income taxes 60,278 5,415 65,693
Income tax provision 23,860 2,143 26,003
---------- --------- -----------
Net Income $ 36,418 $ 3,272 $ 39,690
========== ========= ===========
Earnings per share:
Basic - maximum $ 1.61 $ 0.85 $ 1.51
Basic- minimum 1.61 0.85 1.52
Diluted - maximum 1.53 0.85 1.49
Diluted - minimum 1.53 0.85 1.50
Weighted Average Shares Outstanding
(in thousands):
Basic - maximum 22,207 2,837 25,081
Basic - minimum 22,207 2,837 24,913
Diluted - maximum 23,751 2,865 26,680
Diluted - minimum 23,751 2,865 26,509
</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, 1996
(Dollars in thousands, except per share data)
Pro forma
HUBCO MSB Combined
------------------ ------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 149,548 $24,636 $ 174,184
Interest on securities 53,581 28,437 82,018
Other interest income 1,053 1,277 2,330
----------- -------- -----------
Total Interest Income 204,182 54,350 258,532
----------- -------- -----------
Interest on deposits 62,704 30,710 93,414
Interest on borrowings 10,124 83 10,207
----------- -------- -----------
Total Interest Expense 72,828 30,793 103,621
----------- -------- -----------
Net Interest Income before
provision for loan losses 131,354 23,557 154,911
Provision for loan losses 12,295 1,400 13,695
--------- ------- ---------
Net Interest Income 119,059 22,157 141,216
Noninterest income 30,276 4,027 34,303
Noninterest expenses (1) 116,239 23,369 139,608
----------- -------- -----------
Income before income taxes 33,096 2,815 35,911
Income tax provision 11,599 1,104 12,703
----------- -------- -----------
Net Income $ 21,497 $ 1,711 $ 23,208
=========== ======== ===========
Earnings per share:
Basic - maximum $ 0.91 0.22 $ 0.84
Basic - minimum 0.91 0.22 0.84
Diluted - maximum 0.88 0.22 0.85
Diluted - minimum 0.88 0.22 0.86
Weighted Average Shares Outstanding:
(in thousands)
Basic - maximum 22,508 2,780 25,382
Basic - minimum 22,508 2,780 25,214
Diluted - maximum 24,309 2,809 27,238
Diluted - minimum 24,309 2,809 27,067
</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, 1995
(Dollars in thousands, except per share data)
Pro forma
HUBCO MSB Combined
----------------- ---------------------- ----------------
<S> <C> <C> <C>
Interest on loans $ 147,087 $ 19,831 $ 166,918
Interest on securities 54,929 8,592 63,521
Other interest income 1,635 728 2,363
----------- ---------- ----------
Total Interest Income 203,651 29,151 232,802
----------- ---------- ----------
Interest on deposits 61,677 13,742 75,419
Interest on borrowings 8,763 1,441 10,204
----------- ---------- ----------
Total Interest Expense 70,440 15,183 85,623
----------- ---------- ----------
Net Interest Income before
provision for loan losses 133,211 13,968 147,179
Provision for loan losses 9,515 483 9,998
--------- --------- --------
Net Interest Income 123,696 13,485 137,181
Noninterest income 28,225 2,168 30,393
Noninterest expenses 102,842 11,670 114,512
----------- ---------- ----------
Income before income taxes 49,079 3,983 53,062
Income tax provision 14,514 1,622 16,136
----------- ---------- ----------
Net Income $ 34,565 $ 2,361 $ 36,926
=========== ========== ==========
Earnings per share:
Basic - maximum $ 1.52 1.46 $ 1.44
Basic - minimum 1.52 1.46 1.45
Diluted - maximum 1.43 1.42 1.36
Diluted - minimum 1.43 1.42 1.37
Weighted Average Shares Outstanding:
(in thousands) 22,127 1,616 25,001
Basic - maximum 22.127 1,616 24,833
Basic - minimum 24,205 1,664 27,134
Diluted - maximum 24,205 1,664 26,963
Diluted - minimum
</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, 1994
(Dollars in thousands, except per share data)
Pro forma
HUBCO MSB Combined
----------------- -------------------- -----------------
<S> <C> <C> <C>
Interest on loans $ 116,593 $14,586 $ 131,179
Interest on securities 52,488 9,399 61,887
Other interest income 1,848 529 2,377
----------- -------- -----------
Total Interest Income 170,929 24,514 195,443
----------- -------- -----------
Interest on deposits 47,853 10,683 58,536
Interest on borrowings 5,273 89 5,362
----------- -------- -----------
Total Interest Expense 53,126 10,772 63,898
----------- -------- -----------
Net Interest Income before
provision for loan losses 117,803 13,742 131,545
Provision for loan losses 9,309 119 9,428
--------- ------- ---------
Net Interest Income 108,494 13,623 122,177
Noninterest income 22,420 1,753 24,173
Noninterest expenses (1) 94,931 13,720 108,651
----------- -------- -----------
Income before income taxes 35,983 1,656 37,639
Income tax provision 12,595 626 13,221
----------- -------- -----------
Income before cumulative effect of accounting
change $ 23,388 $ 1,030 $ 24,418
=========== ======== ===========
Cumulative effect of accounting change -- 117 117
=========== ------- ===========
Net income $ 23,388 $ 1,147 $ 24,535
=========== ======= ===========
Earnings per share:
Basic - maximum $ 1.13 0.70 $ 1.04
Basic - minimum 1.13 0.70 1.04
Diluted - maximum 1.02 0.68 0.95
Diluted - minimum 1.02 0.68 0.95
Weighted Average Shares Outstanding:
(in thousands)
Basic - maximum 20,367 1,633 23,241
Basic - minimum 20,367 1,633 23,073
Diluted - maximum 23,013 1,681 25,942
Diluted - minimum 23,013 1,681 25,771
- ------------------------
</TABLE>
Notes to Pro Forma Financial Information
(1) Pro forma financial information assumes the Merger was consummated as
of September 30, 1997 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, a Maximum Exchange
Ratio of 1.03 and a Minimum Exchange Ratio of 0.97 shares of HUBCO
Common Stock for each of the 2,844,153 shares of MSB Common Stock which
were outstanding at September 30, 1997.
(3) The pro forma financial information presented herein gives effect to
the cancellation of 54,200 shares owned by HUBCO of MSB Common Stock at
a cost of $1,165,899 and unrealized gain of $378,801, the cancellation
of 600,000 shares owned by HUBCO of MSB Preferred Stock at a cost of
$12,960,000 and unrealized gain of $4,140,000, and the cancellation of
200,847 shares of MSB Common Stock held in MSB's treasury at a cost of
$3,941,000.
In summary, the pro forma information reflects adjustments for the
Merger accounted for using the pooling-of-interests accounting method
assuming the Maximum Exchange Ratio, as follows:
<TABLE>
<CAPTION>
($ in 000's)
------------
<S> <C> <C>
(i) Issuance of 2,873,652 shares of HUBCO Common Stock
(stated value of $1.778 per share) $ 5,109
(ii) Elimination of 3,045,000 shares of MSB Common Stock
($0.01 par value) ( 30)
-------------
Adjustment to common stock 5,079
(iii) Elimination of 600,000 shares of MSB Preferred Stock ($0.01 (6)
par value)
(iv) Eliminate MSB's treasury stock 3,941
(v) Eliminate HUBCO's investment in MSB Common Stock 1,545
(vi) Eliminate HUBCO's investment in MSB Preferred Stock 17,100
(vii) Tax effect on unrealized gain on HUBCO's investment in
MSB Common Stock and Preferred Stock (1,808)
(viii) Elimination of unrealized gain on securities available
for sale related to HUBCO's ownership in MSB Common and
Preferred Stock, net of tax (2,711)
-------------
Adjustment offset to additional
paid-in capital $ 23,140
</TABLE>
(4) Earnings per share data has been computed based on the combined
historical net income applicable to common shareholders of HUBCO using
the historical weighted average shares outstanding of HUBCO Common
Stock for the given period and the Common Stock to be issued in
connection with the Merger.
(5) The pro forma information presented above does not reflect HUBCO's
pending acquisition of Poughkeepsie Financial Corp., Inc., Community
National Bank, and the pending Branch Purchase. See "CERTAIN
INFORMATION REGARDING HUBCO - Recent Developments."
<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
December 1, 1997, 21,911,502 shares of HUBCO Common Stock were issued and
outstanding, and 1,250 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. on December
13, 1997, HUBCO issued HUBCO Series B Convertible Preferred Stock; 1,250 shares
of HUBCO Series B Convertible Preferred Stock remain outstanding as December 1,
1997. See " -- Description of HUBCO Preferred Stock".
HUBCO's Certificate of Incorporation authorizes the Board of Directors
of HUBCO (except in connection with certain business combinations), from time to
time and without further shareholder action, to issue new shares of authorized
but unissued HUBCO Common Stock or preferred stock. Because of its broad
discretion with respect to the creation and issuance of HUBCO Common Stock or
preferred stock without shareholder approval, the Board of Directors could
adversely affect the voting power of holders of HUBCO Common Stock or preferred
stock and, by issuing shares of preferred stock with certain voting, conversion
and/or redemption rights, could discourage any attempt to gain control of HUBCO.
Description of HUBCO Common Stock
The following description of the HUBCO Common Stock sets forth certain
general terms of the HUBCO Common Stock. For an additional description relating
to the HUBCO Common Stock, see "COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF MSB
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 Hudson
United Bank and Lafayette to pay dividends act as restrictions on the amount of
funds available for the payment of dividends by HUBCO.
As a New Jersey chartered commercial bank, Hudson United Bank is
subject to the restrictions on the payment of dividends contained in the NJBA.
Under the NJBA, Hudson United Bank 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 Federal Deposit Insurance
Corporation ("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 Hudson United Bank or
Lafayette to HUBCO constitutes an unsafe or unsound practice.
HUBCO is also subject to certain FRB policies which may, in certain
circumstances, limit its ability to pay dividends. The FRB policies require,
among other things, that a bank holding company maintain a minimum capital base.
The FRB would most likely seek to prohibit any dividend payment which would
reduce a holding company's capital below these minimum amounts.
At September 30, 1997, Hudson United Bank had $116.7 million available
for the payment of dividends to HUBCO, and as of September 30, 1997 Lafayette
had $10.6 million available for the payment of dividends to HUBCO. At September
30, 1997, HUBCO had $122.2 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 stockholders, holders of HUBCO Common Stock are entitled
to one vote per share. The quorum for stockholders' meetings is a majority of
the outstanding shares entitled to vote represented in person or by proxy.
Except as indicated below, all actions and authorizations to be taken or given
by stockholders require the approval of a majority of the votes cast by holders
of HUBCO Common Stock at a meeting at which a quorum is present.
The Board of Directors is divided into three classes of directors, each
class being as nearly equal in number of directors as possible. Approximately
one-third of the entire Board of Directors is elected each year and the
directors serve for terms of up to three years, and, in all cases, until their
respective successors are duly elected and qualified.
The exact number of directors and the number constituting each class is
fixed from time to time by resolution adopted by a majority of the entire Board
of Directors. Stockholders may remove any director from office for cause. The
affirmative vote of at least three-quarters of the shares of HUBCO entitled to
vote thereon is required to amend or repeal the provisions of HUBCO's
Certificate of Incorporation relating to the classification of the Board of
Directors and the removal of directors.
HUBCO's Certificate of Incorporation contains a "minimum price"
provision. 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
stockholders of HUBCO are offered consideration in an amount equal to or in
excess of an amount determined in accordance with a formula contained in the
Certificate of Incorporation. If either of these tests are met, the proposed
transaction need only be approved by the vote otherwise required by law, the
Certificate of Incorporation and any agreement with a national securities
exchange.
Liquidation Rights
In a liquidation, holders of HUBCO Common Stock are entitled to receive
ratably any assets distributed to stockholders, except that if shares of
preferred stock of HUBCO are outstanding at the time of liquidation, such shares
of preferred stock may have prior rights upon liquidation.
Assessment and Redemption
All outstanding shares of HUBCO Common Stock are fully paid and
nonassessable. HUBCO Common Stock is not redeemable at the option of the issuer
or the holders thereof.
Preemptive and Conversion Rights
Holders of HUBCO Common Stock do not have conversion rights or
preemptive rights with respect to any securities of HUBCO.
Description of HUBCO Preferred Stock
General
1,250 shares of HUBCO Series B Convertible Preferred Stock ("HUBCO
Series B Preferred Stock") remain outstanding as of December 1, 1997. Pursuant
to the Merger Agreement, HUBCO is required to create and issue shares of New
HUBCO Preferred Stock in exchange for MSB Preferred Stock on a share-for-share
basis. However, shares of MSB Preferred Stock owned by HUBCO at the Effective
Time will be cancelled in the Merger. As of the Record Date HUBCO owns all the
outstanding MSB Preferred Stock and HUBCO currently anticipates that it will not
transfer any of the MSB Preferred Stock prior to the Effective Time. If HUBCO
continues to own all shares of MSB Preferred Stock at the Effective Time, all
such shares will be cancelled and no New HUBCO Preferred Stock will be created
or issued. The following is a description of the existing HUBCO Series B
Preferred Stock and of the New HUBCO Preferred Stock which may be issued in the
Merger.
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 September 30, 1997, the conversion rate was
33.2175 shares of Common Stock for each share of HUBCO Series B Preferred Stock
(the "Conversion Ratio"). The Conversion Ratio is subject to adjustment upon
certain events, including the issuance of HUBCO Common Stock as a dividend with
respect to the outstanding HUBCO Common Stock, subdivision or combinations of
HUBCO Common Stock, the issuance to holders of HUBCO Common Stock generally of
rights or warrants to subscribe for HUBCO Common Stock, or the distribution to
holders of HUBCO Common Stock generally of evidences of indebtedness, assets
(excluding dividends in cash out of retained earnings) or rights or warrants to
subscribe for securities of HUBCO other than those mentioned herein.
Notwithstanding the foregoing, the Conversion Ratio is not subject to adjustment
to the extent HUBCO issues any HUBCO Common Stock in connection with any
employee compensation and benefits plans, employee agreements and contracts.
Voting Rights. Holders of shares of HUBCO Series B Preferred Stock vote
together as a class with holders of HUBCO Common Stock for the election of
directors and all other matters to which holders of HUBCO Common Stock are
entitled to vote. Each share of HUBCO Series B Preferred Stock is entitled to a
number of votes equal to the Conversion Ratio as the same may be adjusted from
time to time.
New HUBCO Preferred Stock
Dividend Rights. The holders of New HUBCO Preferred Stock will be
entitled to receive, when, as and if declared by the Board of Directors of HUBCO
out of funds legally available therefore, dividends which are cumulative,
payable quarterly, at a rate of 8.75% per annum ($1.89 per annum per share) and
are subject to increase if there are changes to the Federal income tax laws
relating to the dividends received deduction. Dividends will accrue quarterly in
arrears, on January 15, April 15, July 15 and October 15, in each year.
Dividends payable for any period of less than a quarter will be paid on a pro
rata basis. When a dividends payment date falls on a day that is not a business
day, the dividend will be paid on the next business day.
Liquidation Rights. The holders of New HUBCO Preferred Stock will be
entitled to receive $21.60 per share plus accrued and unpaid dividends (whether
or not earned or declared) in any liquidation, dissolution or winding up of
HUBCO, subject to the rights of creditors or any other class or series of stock
ranking senior to the New HUBCO Preferred Stock upon liquidation. In a
liquidation, dissolution or winding up, the preferential amounts with respect to
the New HUBCO Preferred Stock and any stock on parity with New HUBCO Preferred
Stock, shall be distributed pro rata in accordance with the aggregate
preferential amounts of the New HUBCO 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 New HUBCO Preferred Stock.
Redemption. The New HUBCO Preferred Stock will be perpetual in duration
and will not be redeemable prior to January 10, 1999. The New HUBCO Preferred
Stock will be redeemable at any time on or after January 10, 1999, in whole or
in part, at the option of HUBCO, at the following per share prices (expressed as
a percentage of the liquidation preference per share of New HUBCO Preferred
Stock ) during the 12-month period beginning January 10 in each of the following
years:
<TABLE>
<CAPTION>
Redemption
Year Price
------------
<S> <C>
1999.................................................... 106.125%
2000.................................................... 105.250
2001.................................................... 104.375
2002.................................................... 103.500
2003.................................................... 102.625
2004.................................................... 101.750
2005.................................................... 100.875
2006.................................................... 100.000
</TABLE>
together, in each case, with an amount equal to accrued plus unpaid dividends
(whether or not earned or declared) to the date fixed for redemption.
In addition to the redemption rights set forth above, upon exercise of
the conversion privilege, HUBCO will be able to redeem all or part of the shares
of New HUBCO Preferred Stock surrendered for conversion at a per share
redemption price equal to the higher of the applicable redemption price set
forth above or the average of the last reported sale prices per share of HUBCO
Common Stock for the 10 consecutive trading days on the Nasdaq National Market
System preceding the date on which the shares of New HUBCO Preferred Stock were
surrendered for conversion, multiplied by the number of shares of HUBCO Common
Stock into which the shares of New HUBCO Preferred Stock then subject to HUBCO's
notice of redemption would have been convertible.
Preemptive and Conversion Rights. Subject to HUBCO's right to redeem
shares of New HUBCO Preferred Stock surrendered for conversion, each share of
New HUBCO Preferred Stock will be convertible into one share of HUBCO Common
Stock on or after January 10, 1999, subject to adjustment in certain events.
Voting Rights. Except as indicated below, the holders of the New HUBCO
Preferred Stock will have no voting rights. If HUBCO fails to pay full
cumulative dividends on all the outstanding shares of the New HUBCO Preferred
Stock for four dividend periods, whether or not consecutive, the holders of the
New HUBCO Preferred Stock will have the right to elect two additional directors
at a special meeting of holders of the New HUBCO Preferred Stock and thereafter
at each successive annual meeting of stockholders. This right will continue
until full cumulative dividends for all past dividend periods have been paid or
declared and set apart for payment.
COMPARISON OF THE RIGHTS OF STOCKHOLDERS
OF MSB AND HUBCO
General
MSB is a business corporation incorporated in Delaware under the DGCL
and HUBCO is a business corporation incorporated in New Jersey under the NJBCA.
The rights of MSB stockholders are currently governed by the DGCL. At the
Effective Time, each MSB stockholder will become a shareholder of HUBCO and the
rights of stockholders of HUBCO are governed by New Jersey corporate law. The
following is a comparison of certain provisions of New Jersey corporate law and
Delaware corporate law and the respective certificates of incorporation and
by-laws of each of MSB and HUBCO. This summary does not purport to be complete
and is qualified in its entirety by reference to the DGCL and the NJBCA, which
statutes may change from time to time, and the respective certificates of
incorporation and by-laws of HUBCO and MSB, which also may be changed.
Voting Requirements
Under the New Jersey Business Corporation Act, 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 stockholders 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 stockholders of HUBCO are offered
consideration in an amount equal to or in excess of an amount determined in
accordance with a formula contained in the HUBCO Certificate. See "DESCRIPTION
OF HUBCO CAPITAL STOCK -- Description of HUBCO Common Stock -- Voting Rights."
Under Delaware Law, unless otherwise specified in the Certificate of
Incorporation of a Delaware corporation, the amendment to the certificate of
incorporation, the sale or other disposition of all or substantially all of the
assets of a corporation, or the merger or consolidation of a stock corporation
with another stock corporation requires the affirmative vote of a majority of
the outstanding stock entitled to vote thereon (with respect to the amendment of
the Certificate of Incorporation, the affirmative vote of a majority of the
outstanding shares of stock of each class entitled to vote thereon is also
required). Under the MSB Certificate of Incorporation, the affirmative vote of
the holders of a majority of the outstanding shares of MSB Common Stock (after
giving effect to the Limit) 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
Additional Proposal. An Amendment to MSB's Certificate of Incorporation must be
approved by a majority vote of its Board of Directors and by a majority of the
outstanding shares of its voting stock, provided, however, that an affirmative
vote of at least 80% of the outstanding voting stock entitled to vote (after
giving effect to the Limit) is required to amend or repeal certain provisions of
the Certificate of Incorporation, including the provisions limiting voting
rights, the provisions relating to approval of certain business combinations,
shareholder action, calling special meetings, the number and classification of
the Board of Directors and director and officer indemnification.
All stockholder voting rights of MSB presently are vested in the
holders of MSB Common Stock. All shareholder voting rights of HUBCO presently
are vested in the holders of the HUBCO Common Stock.
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.
Under the DGCL, unless the certificate of incorporation otherwise
provides, in the case of a corporation whose board is classified, shareholders
may remove a director only for cause. MSB's Certificate of Incorporation follows
the DGCL, and requires that, subject to the rights of the holders of any series
of preferred stock then outstanding, any director, or the entire board, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80% of the voting power of all of the
then-outstanding shares entitled to vote generally in the election of directors.
MSB's Certificate of Incorporation provides that only a majority vote of the
Board of Directors may increase or decrease the number of directors constituting
the Board of Directors.
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 December 1,
1997, 21,911,502 shares of HUBCO Common Stock were issued and outstanding, and
1,250 shares of HUBCO Series B Preferred Stock were outstanding. Under the terms
of the HUBCO Certificate, the HUBCO Board has authority at any time to divide
any or all of the authorized but unissued shares of preferred stock into series,
determine the designations, number of shares, relative rights, preferences, and
limitations of any such series and authorize the issuance of such series. See
"DESCRIPTION OF HUBCO CAPITAL STOCK -- General."
The authorized capital stock of MSB consists of 5,000,000 shares of MSB
Common Stock and 1,000,000 shares of MSB Preferred Stock. As of December 10,
1997, there were 3,045,000 shares of MSB Common Stock issued and 2,844,153
shares of MSB Common Stock outstanding and 600,000 shares of MSB Preferred Stock
issued and outstanding. Under the terms of the MSB Certificate of Incorporation,
the MSB Board is authorized to provide for the issuance of the shares of
Preferred Stock in series, to establish the number of shares to be included in
each series, and to fix the designation, powers, preferences, and rights of the
series shares and any possible qualifications, limitations or restrictions. The
number of authorized shares of Preferred Shares may be increased or decreased by
the affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, unless a vote of any such holders is
required pursuant to the terms of any Preferred Stock Designation.
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 DGCL permits a Delaware corporation to provide for the
classification of directors in its certificate of incorporation or by-laws.
MSB's Certificate of Incorporation contains such a provision and divides the MSB
Board into three classes, to be as nearly equal in number of directors as
possible, and with one class of directors generally elected for a three-year
term at each annual meeting.
Rights of Dissenting Stockholders
Stockholders of a New Jersey corporation who dissent from a merger,
consolidation, sale of all or substantially all of the corporation's assets or
certain other corporate transactions are generally entitled to appraisal rights.
No statutory right of appraisal exists, however, where the stock of the New
Jersey corporation is (i) listed on a national securities exchange, (ii) is held
of record by not less than 1,000 holders, or (iii) where the consideration to be
received pursuant to the merger, consolidation or sale consists of cash or
securities or other obligations which, after the transaction, will be listed on
a national securities exchange or held of record by not less than 1,000 holders.
HUBCO's shares are presently held by more than 1,000 holders.
Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation may be entitled to appraisal rights. There are
no statutory rights of appraisal with respect to stockholders of a corporation
whose shares are either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (ii) held of
record by more than 2,000 stockholders, where such stockholders receive only
shares of stock or depository receipts of the corporation surviving or resulting
from the merger or consolidation or shares of stock or depository receipts of
any other corporation which at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders (or cash in lieu of fractional share interests therein). The
exceptions from the Delaware statutory right of appraisal apply to the MSB
Common Stock since the MSB Common Stock is presently listed on the AMEX and the
HUBCO Common Stock to be received pursuant to the Merger is presently listed on
the NASDAQ/NMS. See "THE MERGER -- No Dissenters Rights of Appraisal".
Inspection Rights
The NJBCA states that upon the written request of any shareholder, a
corporation shall mail to the shareholder its balance sheet as at the end of the
preceding fiscal year, and its profit and loss and surplus statements for such
fiscal year. Also, any person who has been a shareholder of record for at least
six months immediately preceding his or her demand, or any person holding or
authorized in writing by the holders of, at least 5% of the outstanding shares
of any class, upon at least five days' written demand has the right to any
proper purpose to examine in person or by agent or attorney, during usual
business hours, its minutes of the proceedings of its shareholders and record of
shareholders and to make extracts therefrom, at the places where the records are
kept.
Under the DGCL, any stockholder, in person or by attorney or other
agent shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom.
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
stockholders, other than the annual election of directors, to be taken without a
meeting upon the written consent of stockholders who would have been entitled to
cast the minimum number of votes necessary to authorize such action at a meeting
of stockholders at which all stockholders entitled to vote were present and
voting. The annual election of directors, if not conducted at a stockholders'
meeting, may only be effected by unanimous written consent. Under the NJBCA, a
shareholder vote on a plan of merger or consolidation, if not conducted at a
stockholders' meeting, may only be effected by either: (i) unanimous written
consent of all stockholders entitled to vote on the issue with advance notice to
any other stockholders, or (ii) written consent of stockholders who would have
been entitled to cast the minimum number of votes necessary to authorize such
action at a meeting, together with advance notice to all other stockholders.
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.
Unless otherwise provided in the certificate of incorporation, Delaware
law provides that any corporate action to be taken at any annual or special
meeting of stockholders may be taken without a meeting, if a consent in writing
to such action is signed by the holders of outstanding stock having not less
than the minimum number of votes necessary to approve such action. The MSB
By-laws provide that any action required or permitted to be taken by the
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by and consented to in writing by such
stockholders. MSB's By-laws provide that special meetings of stockholders may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which MSB would have if there were no
vacancies on the Board of Directors.
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 Hudson
United Bank or Lafayette to pay dividends act as restrictions on the amount of
funds available for the payment of dividends by HUBCO. At September 30, 1997,
HUBCO had approximately $112.0 million available for shareholder dividends. For
a description of the regulatory restrictions on dividend payments by Hudson
United Bank and Lafayette, see "DESCRIPTION OF HUBCO CAPITAL STOCK --
Description of HUBCO Common Stock -- Dividend Rights."
Subject to any restrictions contained in a corporation's certificate of
incorporation (and MSB's Certificate of Incorporation is presently silent on
this issue), Delaware law generally provides that a corporation may declare and
pay dividends out of surplus (defined as net assets minus stated capital) or, if
no such surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. However, the directors of
a Delaware corporation may not pay any dividends out of net profits if the
capital of the corporation has been diminished by depreciation in the value of
its property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes.
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 stockholders (the
HUBCO Certificate does not reserve such power).
Under Delaware law, the authority to adopt, amend, or repeal the
by-laws of a Delaware corporation is held exclusively by the stockholders
entitled to vote, unless such authority is conferred upon the board of directors
in the certificate of incorporation, which shall not limit or divest the
stockholders of such power. MSB's Certificate of Incorporation and By-laws
provide that a majority of the Board of Directors may amend the By-laws. In
addition, MSB's By-laws may be amended by a vote of 80% of the total votes
eligible to be voted at a duly constituted meeting of stockholders.
Shareholder Protection Legislation
The New Jersey Stockholders Protection Act (the "NJSPA") limits certain
transactions involving an "interested shareholder" and a "resident domestic
corporation." An "interested shareholder" is one that is directly or indirectly
a beneficial owner of 10% or more of the voting power of the outstanding voting
stock of a resident domestic corporation. The NJSPA prohibits certain business
combinations between an interested shareholder and a resident domestic
corporation for a period of five years after the date the interested shareholder
acquired its stock, unless the business combination was approved by the resident
domestic corporation's board of directors prior to the interested shareholder's
stock acquisition date. After the five-year period expires, the prohibition on
certain business combinations continues unless the combination is approved by
the affirmative vote of two-thirds of the voting stock not beneficially owned by
the interested shareholder, the combination is approved by the board prior to
the interested shareholder's stock acquisition date or certain fair price
provisions are satisfied.
Section 203 of the DGCL ("Section 203"), in general, prohibits a
"business combination" between a corporation and an "interested stockholder"
within three years of the date such stockholder became an "interested
stockholder," unless (i) prior to such date the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, exclusive of shares owned by directors who are also officers and by
certain employee stock plans, or (iii) on or after such date, the business
combination is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder. The term "business combination" is defined to
include the following transactions between the interested stockholder and the
corporation or any direct or indirect majority-owned subsidiary thereof: any
merger or consolidation; any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (including as part of a dissolution) of assets having an
aggregate market value equal to 10% or more of either the aggregate market value
of all assets of the corporation on a consolidated basis or the aggregate market
value of all the outstanding stock of the corporation; certain transactions
which result in the issuance or transfer by the corporation or such subsidiary
of their stock to the interested stockholders; certain transactions that would
increase the interested stockholder's proportion of share ownership of the stock
of any class or series of the corporation or such subsidiary; and any receipt by
the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation or
any such subsidiary. In general, and subject to certain exceptions, an
"interested stockholder" is any person who (i) is the owner of 15% or more of
the outstanding voting stock of the corporation, or (ii) is an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within a three-year period, and
(iii) the affiliates or associates of such a person. The term "owner" is broadly
defined to include any person that individually or with or through its
affiliates or associates, among other things, beneficially owns such stock, or
has the right to acquire such stock (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of warrants or options or
otherwise or has the right to vote such stock pursuant to any agreement,
arrangement or understanding, or has an agreement, arrangement or understanding
with the beneficial owner of such stock for the purpose of acquiring, holding,
voting or disposing of such stock. The restrictions of Section 203 generally do
not apply, in certain instances, including instances where the corporation has
elected, in the manner provided in Section 203, not to be subject to Section 203
or the corporation that does not have a class of voting stock that is listed on
a national securities exchange or authorized for quotation on the NASDAQ or held
of record by more than 2,000 stockholders. The restrictions of Section 203 do
not apply to this Merger because HUBCO shares are listed on the NASDAQ Stock
Market.
Evaluation of Offers
Under the NJBCA, directors of a New Jersey corporation may consider, in
discharging their duties to the corporation and in determining what he or she
reasonably believes to be in the best interest of the corporation, any of the
following (in addition to considering the effects of any action on
shareholders): (i) the effects of the action on the corporation's employees,
suppliers, creditors and customers, (ii) the effects of the action on the
community in which the corporation operates and (iii) the long-term as well as
the short-term interests of the corporation and its shareholders, including the
possibility that these interests may be best served by the continued
independence of the corporation. If, on the basis of the foregoing factors, the
board of directors determines that any proposal or offer to acquire the
corporation is not in the best interest of the corporation, it may reject such
proposal or offer, in which case the board of directors will have no duty to
facilitate, remove any obstacles to, or refrain from impeding such proposal or
offer. HUBCO's Certificate of Incorporation contains no additional language
regarding this issue.
The MSB Certificate of Incorporation provides that the Board of
Directors of MSB, when evaluating any offer of a person to (i) make a tender or
exchange offer for any equity security of MSB, (ii) merge or consolidate MSB
with another corporation or entity or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of MSB, may, in connection with
the exercise of its judgment in determining what is in the best interest of MSB,
MSB Bank and the stockholders of MSB, give due consideration to all relevant
factors, including, without limitation, the social and economic effects of
acceptance of such offer on MSB's customers and MSB Bank's present and future
account holders, borrowers and employees; on the communities in which MSB and
MSB Bank operate or are located; and on the ability of MSB to fulfill its
corporate objectives as a financial institution holding company and on the
ability of MSB Bank to fulfill the objectives of a stock savings bank under
applicable statutes and regulations.
Stockholder Rights Plan
HUBCO. HUBCO does not have a stockholder rights plan.
MSB. MSB maintains a Stockholder Rights Plan, which is designed to (i)
protect stockholders from attempts to acquire control of MSB without the
approval of the MSB Board and (ii) prevent abusive tactics from potential
acquirors that do not treat all stockholders fairly. Under the Rights Plan, each
outstanding share of MSB Common Stock has attached to it one preferred share
purchase right (a "Right"), which entitles the registered holder to purchase
from MSB one one-hundredth interest in a share of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), of MSB, at a
price of $100.00 (the "Purchase Price"), subject to adjustment. The Rights are
not currently exercisable or transferable, and no separate certificates
evidencing such Rights will be distributed, unless certain events occur. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") dated as of September 16, 1994 and amended as of January 9,
1996, between MSB and Mellon Bank, N.A., as Rights Agent (the "Rights Agent").
The Purchase Price payable, and the number of interests in Preferred
Shares or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. Interests in
Preferred Shares purchasable upon exercise of the Rights will not be redeemable.
Each Preferred Share will be entitled to a minimum preferential quarterly
dividend payment of $1 per share but will be entitled to an aggregate dividend
of 100 times the dividend declared per share of MSB Common Stock. In a
liquidation, the holders of the interests in Preferred Shares will be entitled
to a minimum preferential liquidation payment of $100 per share but will be
entitled to an aggregate payment of 100 times the payment made per share of MSB
Common Stock. Each Preferred Share will have 100 votes, voting together with the
MSB Common Stock. Finally, in any merger, consolidation or other transaction in
which the shares of MSB Common Stock are exchanged, each Preferred Share will be
entitled to receive 100 times the amount received per share of MSB Common Stock.
These rights are protected by customary antidilution provisions.
The Rights are not exercisable until the Distribution Date. The term
"Distribution Date" means the earlier of (a) the 20th business day following a
public announcement that a person or group of affiliated or associated persons
has acquired beneficial ownership of 10% or more of the outstanding shares of
MSB Common Stock (collectively, an "Acquiring Person") or (b) the 20th business
day (or such later date as may be determined by the Board of Directors of MSB)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of affiliated or associated persons of 10% or
more of such outstanding shares of MSB Common Stock. In connection with the
execution and delivery of the Merger Agreement, MSB amended the Rights Agreement
to provide that, for purposes of determining whether HUBCO (as well as its
affiliates) is an Acquiring Person, HUBCO shall not be deemed to be a beneficial
owner, as defined in the Rights Agreement, or to beneficially own any securities
as a result of the transactions contemplated by the Merger Agreement and the
Stock Option Agreement.
If any person becomes an Acquiring Person (unless such person first
acquires 10% or more of the outstanding MSB Common Stock by a purchase pursuant
to a tender offer for all of the MSB Common Stock for cash, which purchase
increases such person's beneficial ownership to 80% or more of the outstanding
MSB Common Stock), each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereafter be void), will thereafter have
the right to receive upon exercise that number of MSB Common Stock having a
market value equal to two times the purchase price of the Right. If MSB is
acquired in a merger or other business combination transaction or 50% or more of
its consolidated assets or earning power is sold, proper provision will be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current purchase price of the Right, that
number of shares of common stock of the acquiring company that at the time of
such transaction will have a market value equal to two times the purchase price
of the Right.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of persons of 50% or more of the outstanding MSB Common Stock, the Board of
Directors of MSB may exchange the Rights (other than Rights owned by such person
or group which have become void), in whole or in part, at an exchange ratio
(subject to adjustment) of one share of MSB Common Stock per Right. At its
option, the MSB Board may substitute interests in Preferred Shares (or shares of
a class or series of MSB's preferred stock having equivalent rights, preferences
and privileges) for MSB Common Stock exchangeable for Rights at an initial rate
(subject to adjustment) of one one-hundredth interest in a Preferred Share (or
equivalent preferred share) for each share of MSB Common Stock.
The Rights will expire on October 7, 2004, unless such date is
extended, or the Rights are earlier redeemed by MSB. At any time prior to the
acquisition by a person or group of affiliated or associated persons of
beneficial ownership of 10% or more of the outstanding MSB Common Stock and for
a period of 15 days thereafter, the Board of Directors of MSB may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right (the "Redemption
Price"). In connection with the Merger, MSB has agreed to redeem the Rights
prior to the Effective Date. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate, and the only right of the holders
of Rights will be to receive the Redemption Price.
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 stockholders for monetary damage for breaches of their
fiduciary duty as a director or officer. A similar provision under Delaware law
applies to directors, but not officers.
Under New Jersey law, a director or officer cannot be relieved from
liability or otherwise indemnified for any breach of duty based upon an act or
omission (i) in breach of such person's duty of loyalty to the corporation or
its stockholders, (ii) not in good faith or involving a knowing violation of
law, or (iii) resulting in receipt by such person of an improper personal
benefit. HUBCO's Certificate of Incorporation contains a provision which limits
a director's or officer's liability to the full extent permitted by New Jersey
law.
Under Delaware law, a director cannot be relieved of liability (i) for
breaches of the duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for the payment of unlawful dividends or
expenditure of funds for unlawful stock purchases or redemptions, or (iv) for
transactions from which such director derived an improper personal benefit. The
MSB Certificate of Incorporation limits a director's or an officer's liability
to the fullest extent permitted by the DGCL.
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 DGCL permits a Delaware corporation to indemnify its directors,
officers, employees and agents if such persons have acted in good faith and in a
manner that such persons reasonably believed was in, or not opposed to, the best
interests of the corporation. A Delaware corporation also may indemnify such
individuals with respect to criminal actions or proceedings, provided that such
individuals had no reasonable cause to believe such conduct was unlawful.
Indemnification shall be made by the corporation only as authorized in a
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth above.
MSB's Certificate of Incorporation provides that MSB shall indemnify
its directors, officers, employees and agents if such persons are made a party
to or are threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or officer of MSB or is or was serving at
the request of MSB as a director, officer, employee or agent, whether the basis
of such proceeding is alleged action in an official capacity or in any other
capacity while serving as a director, officer, employee or agent. These persons
shall be indemnified and held harmless by the corporation to the fullest extent
authorized by the DGCL, as it exists or may be amended (but, in the case of any
such amendment, only to the extent that such amendment permits MSB to provide
broader indemnification rights than such law permitted MSB to provide prior to
such amendment), against all expense, liability and loss reasonably incurred or
suffered by the indemnitee. MSB maintains directors' and officers' liability
insurance on behalf of such persons.
Preemptive Rights
Neither the holders of HUBCO Common Stock nor MSB Common Stock are entitled to
preemptive rights.
STOCKHOLDER PROPOSALS
The Merger may be consummated prior to the 1998 Annual Meeting of
Stockholders of MSB, in which event there would be no MSB Annual Meeting. If MSB
holds a 1998 Annual Meeting of Stockholders, unless such 1998 meeting is
delayed, any proposal which a MSB stockholder wishes to have included in the
proxy materials of MSB must have been presented to MSB not later than December
6, 1997. No such proposal was received prior to December 6, 1997.
OTHER MATTERS
As of the date of this Proxy Statement, the MSB Board of Directors
knows of no other matters to be presented for action by the stockholders at the
Meeting. If any other matters are properly presented, the persons named in the
enclosed proxy intend to vote in accordance with their best judgment on such
matters.
LEGAL OPINION
Certain legal matters relating to the issuance of the shares of HUBCO
Common Stock offered hereby will be passed upon by Pitney, Hardin, Kipp & Szuch,
counsel to HUBCO. Attorneys in the law firm of Pitney, Hardin, Kipp & Szuch,
beneficially owned 791 shares of HUBCO Common Stock as of March 13, 1998.
Certain legal matters in connection with the Merger will be passed upon for MSB
by Thacher Proffitt & Wood, counsel to MSB.
EXPERTS
The consolidated financial statements of MSB as of and for the year
ended December 31, 1996, have been incorporated by reference herein and in the
Registration Statement in the reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated herein by reference, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of MSB as of December 31, 1995
and 1994 and for the years then ended, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of Nugent
and Haeussler, P.C., independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of HUBCO as of December 31, 1996
and 1995 and for each of the years in the three year period ended December 31,
1996, incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
KPMG Peat Marwick LLP will have a representative at the Meeting who
will have an opportunity to make a statement if such representative desires, and
who will be available to respond to appropriate questions.
<PAGE>
Appendix A
AGREEMENT AND
PLAN OF MERGER
by
and
among
HUBCO, INC.
and
MSB BANCORP, INC.
and
MSB BANK
Dated: December 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - THE
MERGER................................................................1
1.1 The Merger........................................................1
1.2 Effect of the Merger..............................................1
1.3 Certificate of Incorporation......................................2
1.4 By-laws...........................................................2
1.5 Directors and Officers............................................2
1.6 Closing Date, Closing and Effective Time.........................2
1.7 The Bank Merger...................................................2
ARTICLE II - CONVERSION OF MSB SHARES, OPTIONS AND WARRANTS....................3
2.1 Conversion of MSB Stock...........................................3
2.2 Exchange of Certificates..........................................4
2.3 Stock Transfer Books..............................................6
2.4 Dissenting Shares.................................................6
2.5 MSB Stock Options.................................................6
2.6 MSB Preferred Share Purchase Rights...............................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF MSB............................7
3.1 Corporate Organization............................................7
3.2 Capitalization....................................................8
3.3 Authority; No Violation...........................................8
3.4 Financial Statements..............................................9
3.5 Broker's and Other Fees..........................................10
3.6 Absence of Certain Changes or Events.............................10
3.7 Legal Proceedings................................................10
3.8 Taxes and Tax Returns............................................11
3.9 Employee, Director and Officer Benefit Plans.....................11
3.10 Reports.........................................................13
3.11 MSB and Bank Information........................................14
3.12 Compliance with Applicable Law..................................14
3.13 Certain Contracts...............................................14
3.14 Properties and Insurance........................................14
3.15 Minute Books....................................................15
3.16 Environmental Matters...........................................15
3.17 Reserves........................................................16
3.18 No Parachute Payments...........................................16
3.19 Agreements with Bank Regulators.................................16
3.20 Disclosure......................................................16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF HUBCO..........................16
4.1 Corporate Organization...........................................17
4.2 Capitalization...................................................17
4.3 Authority; No Violation..........................................17
4.4 Financial Statements.............................................18
4.5 Broker's and Other Fees..........................................19
4.6 Absence of Certain Changes or Events.............................19
4.7 Legal Proceedings................................................19
4.8 Tax Returns......................................................19
4.9 Employee Benefit Plans...........................................20
4.10 Reports.........................................................21
4.11 HUBCO Information...............................................21
4.12 Compliance With Applicable Law..................................21
4.13 Contracts.......................................................21
4.14 Properties and Insurance........................................21
4.15 Funding and Capital Adequacy....................................22
4.16 Environmental Matters...........................................22
4.17 Reserves........................................................22
4.18 HUBCO Stock.....................................................22
4.19 Agreements with Bank Regulators.................................22
4.20 Minute Books....................................................23
4.21 Disclosure......................................................23
ARTICLE V - COVENANTS OF THE PARTIES..........................................23
5.1 Conduct of the Business of MSB...................................23
5.2 Negative Covenants...............................................23
5.3 No Solicitation..................................................24
5.4 Current Information..............................................24
5.5 Access to Properties and Records; Confidentiality................25
5.6 Regulatory Matters...............................................25
5.7 Approval of Stockholders.........................................27
5.8 Further Assurances...............................................27
5.9 Public Announcements.............................................28
5.10 Failure to Fulfill Conditions...................................28
5.11 Employee Matters................................................28
5.12 Disclosure Supplements..........................................29
5.13 Transaction Expenses of MSB and HUBCO...........................29
5.14 Indemnification.................................................29
5.15 Bank Policies and Bank Merger...................................31
5.16 Compliance with Antitrust Laws..................................31
5.17 Pooling and Tax-Free Reorganization Treatment...................31
5.18 Comfort Letters.................................................32
5.19 Affiliates......................................................32
5.20 Appointments....................................................32
5.21 Director Retirement Program.....................................32
ARTICLE VI - CLOSING CONDITIONS...............................................32
6.1 Conditions to Each Party's Obligations Under this
Agreement...................................................32
6.2 Conditions to the Obligations of HUBCO Under this
Agreement...................................................33
6.3 Conditions to the Obligations of MSB Under this
Agreement...................................................34
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER...............................35
7.1 Termination......................................................35
7.2 Effect of Termination............................................36
7.3 Amendment........................................................36
7.4 Extension; Waiver................................................37
ARTICLE VIII - MISCELLANEOUS..................................................37
8.1 Expenses.........................................................37
8.2 Survival.........................................................37
8.3 Notices..........................................................37
8.4 Parties in Interest; Assignability...............................38
8.5 Entire Agreement.................................................38
8.6 Counterparts.....................................................38
8.7 Governing Law....................................................38
8.8 Descriptive Headings.............................................38
8.9 Knowledge........................................................38
EXHIBITS
2.1(a) - TERMS OF NEW HUBCO PREFERRED STOCK
5.19-1 - FORM OF MSB AFFILIATE LETTER
5.19-2 - FORM OF AFFILIATE LETTER FOR HUBCO AFFILIATES
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated December 15, 1997
(this "Agreement"), is among HUBCO, Inc. ("HUBCO"), a New Jersey corporation and
registered bank holding company, MSB Bancorp, Inc., a Delaware corporation
("MSB") and registered savings and loan holding company, and MSB Bank, a
federally chartered savings bank wholly owned by MSB ("Bank").
WHEREAS, the respective Boards of Directors of HUBCO and MSB
have each determined that it is in the best interests of HUBCO and MSB and their
respective stockholders for HUBCO to acquire MSB by (i) merging MSB with and
into HUBCO with HUBCO surviving and MSB shareholders receiving the consideration
hereinafter set forth, and (ii) in HUBCO's discretion, simultaneously with the
merger of MSB into HUBCO, by merging Bank with a New York bank or thrift
subsidiary of HUBCO; and
WHEREAS, 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 MSB Common Stock (as hereinafter defined) and,
simultaneously with the execution of this Agreement, MSB is issuing an option to
HUBCO to purchase 600,000 shares of the authorized and unissued MSB Common Stock
at an option price of $29.00 per share, subject to adjustment and subject to the
terms and conditions set forth in the agreement governing such option (the
"HUBCO Option"); and
WHEREAS, the respective Boards of Directors of MSB, HUBCO and
Bank have each duly adopted and approved this Agreement and the Board of
Directors of MSB has directed that it be submitted to MSB's shareholders for
approval;
NOW, THEREFORE, intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I - THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereafter defined), MSB shall be merged
with and into HUBCO (the "Merger") in accordance the Delaware General
Corporation Law (the "DGCL") and 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 MSB and thereupon and thereafter, all the property, rights,
privileges, powers and franchises of each of HUBCO and MSB 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 MSB 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 or MSB 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 MSB 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 occurred; 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 MSB if the Merger had not occurred.
1.3 Certificate of Incorporation. As of the Effective Time,
the certificate of incorporation of HUBCO shall be amended to fix the
preferences, limitations and relative rights of the series of HUBCO Preferred
Stock the shares of which are to be issued in the Merger pursuant to Article II
hereof. On or prior to the Effective Time, HUBCO shall deliver to the Secretary
of State of the State of New Jersey for filing, pursuant to Section 7-2 of the
NJBCA, a certificate of amendment, in form mutually acceptable to HUBCO and MSB
(the "Certificate of Amendment"), giving effect to the foregoing and containing
any other provisions with respect to the aforementioned series of HUBCO
Preferred Stock necessary to permit consummation of the Merger in accordance
with the terms of this Agreement. The certificate of incorporation of HUBCO, as
so amended, at the Effective Time shall be the certificate of incorporation of
the Surviving Corporation and shall not otherwise be amended by this Agreement
or the Merger but thereafter may be amended as provided by law.
1.4 By-laws. As of the Effective Time, the By-laws of HUBCO
shall be the By-laws of the Surviving Corporation until otherwise amended as
provided by law.
1.5 Directors and Officers. As of the Effective Time, the
directors of the Surviving Corporation shall be the directors of HUBCO
(including the one director appointed pursuant to Section 6.3(f) hereof). As of
the Effective Time, the officers of the Surviving Corporation shall be the
officers of HUBCO.
1.6 Closing Date, Closing and Effective Time. Unless a
different date, time and/or place are agreed to by the parties hereto, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m., at the
offices of Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham Park, New
Jersey, on a date determined by HUBCO on at least five business days notice (the
"Closing Notice") given to MSB, which date (the "Closing Date") shall be not
less than seven nor more than 10 business days following the receipt of all
necessary regulatory and governmental approvals and consents and the expiration
of all statutory waiting periods in respect thereof and the satisfaction or
waiver of all of the conditions to the consummation of the Merger specified in
Article VI hereof (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing). In the Closing
Notice, HUBCO shall specify the "Determination Date" for purposes of determining
the Median Pre-Closing Price (as hereinafter defined), which date is the date on
which the parties receive the last approval or waiver from a federal bank
regulatory agency necessary to permit consummation of the Merger. Simultaneous
with or immediately following the Closing, HUBCO and MSB shall cause to be filed
certificates of merger, in form and substance satisfactory to HUBCO and MSB,
with the Secretary of State of the State of New Jersey (the "New Jersey
Certificate of Merger") and with the Secretary of State of the State of Delaware
(the "Delaware Certificate of Merger"). The New Jersey Certificate of Merger and
the Delaware Certificate of Merger shall specify as the "Effective Time" of the
Merger a date and time following the Closing agreed to by HUBCO and MSB (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 merger certificates, the Merger shall become effective upon (and the
"Effective Time" shall be) the later of the filing of the New Jersey Certificate
of Merger and the Delaware Certificate of Merger.
1.7 The Bank Merger. At HUBCO's option, at the Effective Time,
and simultaneously with the Merger, Bank shall be merged (the "Bank Merger")
with HUBCO's principal New York bank or thrift subsidiary (the "New York Bank")
or with another subsidiary of HUBCO, if HUBCO has no New York bank subsidiary at
the Effective Time, in accordance with the provisions of the Banking Law of New
York and/or the Home Owners' Loan Act of 1933 ("HOLA") and the regulations of
the Office of Thrift Supervision ("OTS") thereunder, and/or the provisions of
the National Bank Act and the regulations of the Office of the Comptroller of
the Currency (the "OCC") thereunder. If the Bank Merger is consummated, the
directors of the surviving bank (the "Surviving Bank") (or if the Bank Merger is
not consummated, the directors of Bank at the Effective Time) shall include all
current directors of the Bank in accordance with Section 5.20 hereof. At HUBCO's
option, at any time following the execution of this Agreement, Bank shall, and
HUBCO shall cause the New York Bank to, execute and deliver a merger agreement,
in form and substance reasonably satisfactory to the parties hereto (the "Bank
Merger Agreement") for delivery to the New York Superintendent of Banking (the
"New York Superintendent"), the Federal Deposit Insurance Corporation (the
"FDIC"), the OTS and/or the OCC, as appropriate, for approval of the Bank
Merger, subject to consummation of the Merger. The Bank Merger Agreement shall
contain provisions whereby the surviving entity (if not Bank) shall expressly
assume Bank's liquidation account and its obligations related thereto.
ARTICLE II - CONVERSION OF MSB SHARES, OPTIONS AND WARRANTS
2.1 Conversion of MSB Stock. Each share of common stock, $.01
par value, of MSB ("MSB Common Stock"), issued and outstanding immediately prior
to the Effective Time, and each share of 8.75% Cumulative Convertible Preferred
Stock, Series A, $.01 par value, of MSB ("MSB Preferred Stock" and, together
with the MSB Common Stock, "MSB Stock"), issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares as defined in Section
2.4) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted as follows:
(a) Exchange of Common Stock; Exchange Ratio; Median
Pre-Closing Price; Exchange of Preferred Stock. Subject to the provisions of
this Section 2.1, each share of MSB Common Stock issued and outstanding
immediately prior to the Effective Time (excluding any treasury shares and
shares to be cancelled pursuant to Section 2.1(d) hereof) shall be converted at
the Effective Time into the right to receive the number of shares of Common
Stock, no par value, of HUBCO ("HUBCO Common Stock") equal to the exchange ratio
(the "Exchange Ratio") determined as follows:
(i) If the Median Pre-Closing Price (as
hereinafter defined) is not greater than $37.13 and not less than $34.97, the
Exchange Ratio shall be the number determined by dividing $36.02 by the Median
Pre-Closing Price;
(ii) If the Median Pre-Closing Price is greater
than $37.13, the Exchange Ratio shall be 0.97; and
(iii) If the Median Pre-Closing Price is less
than $34.97, the Exchange Ratio shall be 1.03; provided, however, that if the
Median Pre-Closing Price is less than $27.00, MSB shall have the right,
exercisable only until 11:59 p.m. on the third business day following receipt by
MSB of the Closing Notice, to terminate this Agreement by giving HUBCO notice of
such termination, referring to this Section 2.1, and this Agreement shall be
terminated pursuant to such notice, subject to Section 7.1, effective as of
11:59 p.m. on the third business day following receipt of such notice by HUBCO,
provided, further, that if HUBCO sends notice to MSB prior to 11:59 p.m. on the
third business day following receipt of such termination notice agreeing that
the Exchange Ratio shall be equal to the quotient obtained by dividing $27.81
(i.e., 1.03 multiplied by $27.00) by the Median Pre-Closing Price, then the
notice of termination shall be voided.
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")
Subject to the provisions of this Section 2.1, each
share of MSB Preferred Stock issued and outstanding immediately prior to the
Effective Time (excluding any treasury shares, shares held by HUBCO and
Dissenting Shares) shall be converted at the Effective Time into the right to
receive one share of a newly created series of HUBCO Preferred Stock ("New HUBCO
Preferred Stock" and, together with the HUBCO Common Stock, the "HUBCO Stock")
having terms (to be set forth in the Certificate of Amendment) substantially
identical to those of the MSB Preferred Stock as they exist immediately prior to
the Effective Time, adjusted to reflect the economic consequences of the
conversion of MSB Common Stock into HUBCO Common Stock at the Exchange Ratio.
Such terms are set forth on Exhibit 2.1(a) hereto.
(b) Cancellation of MSB Certificates. After the
Effective Time, all such shares of MSB Stock (other than those cancelled
pursuant to Section 2.1(d)) shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
certificate previously evidencing any such shares (other than Dissenting Shares
and those cancelled pursuant to Section 2.1(d)) shall thereafter represent the
right to receive the Merger Consideration (as defined in Section 2.2(b)). The
holders of such certificates previously evidencing such shares of MSB Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of MSB Stock except as otherwise provided
herein or by law. Such certificates previously evidencing such shares of MSB
Stock (other than Dissenting Shares and those cancelled pursuant to Section
2.1(d)) shall be exchanged for certificates evidencing shares of HUBCO Common
Stock or New HUBCO Preferred Stock, as the case may be, issued pursuant to this
Article II, upon the surrender of such certificates in accordance with this
Article II. No fractional shares of HUBCO Common Stock shall be issued, and, in
lieu thereof, a cash payment shall be made pursuant to Section 2.2(e).
(c) Capital Changes. If between the date hereof and
the Effective Time the outstanding shares of HUBCO Common Stock shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, stock split, reclassification, recapitalization, merger,
combination or exchange of shares, the Exchange Ratio and the definition of
Closing Price (as set forth in Section 2.1(a) shall be correspondingly adjusted
to reflect such stock dividend, stock split, reclassification, recapitalization,
merger, combination or exchange of shares.
(d) Treasury Shares. All shares of MSB Stock held by
MSB in its treasury or owned by HUBCO or by any of HUBCO's wholly-owned
subsidiaries which is a constituent party to the Bank Merger (other than shares
held as trustee or in a fiduciary capacity and shares held as collateral on or
in lieu of a debt previously contracted) immediately prior to the Effective Time
shall be cancelled.
2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, HUBCO
shall deposit, or shall cause to be deposited, with Hudson United Bank ("Hudson
United"), Trust Department, or another bank or trust company designated by HUBCO
and reasonably acceptable to MSB (the "Exchange Agent"), for the benefit of the
holders of shares of MSB Stock, for exchange in accordance with this Article II,
through the Exchange Agent, certificates evidencing shares of HUBCO Stock and
cash in such amount such that the Exchange Agent possesses such number of shares
of HUBCO 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 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 Stock and cash out of the Exchange
Fund in accordance with Section 2.1. Except as contemplated by Section 2.2(f)
hereof, the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably
practicable either before or after the Effective Time but in no event later than
five 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 MSB Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of transmittal (the
form and substance of which is reasonably agreed to by HUBCO and MSB 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 Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent (or in the case of a lost Certificate, an appropriate Affidavit of Loss
and Indemnity Agreement and/or a bond as may be reasonably required in each case
by HUBCO), 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
(and HUBCO shall cause the Exchange Agent to send to such holder within ten
business days after receipt of all necessary documentation): (A) if the
Certificate formerly represented MSB Common Stock, then (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 MSB Common Stock formerly
evidenced by such Certificate in accordance with Section 2.1 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), and (B) if the Certificate formerly
represented MSB Preferred Stock, then certificates evidencing that number of
whole or partial shares of New HUBCO Preferred Stock which such holder has the
right to receive in respect of the shares of MSB Preferred Stock formerly
evidenced by such Certificate in accordance with Section 2.1 (the shares of
HUBCO Stock and cash described in clauses (A) and (B) being collectively, the
"Merger Consideration") and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of MSB Stock which
is not registered in the transfer records of MSB, a certificate evidencing the
proper number of shares of HUBCO 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 MSB 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 Stock. No dividends or other distributions declared or made after the
Effective Time with respect to HUBCO 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 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 Stock issued in exchange therefor,
without interest, (i) promptly, the amount of any cash payable with respect to a
fractional share of HUBCO Stock to which such holder may have been entitled
pursuant to Section 2.2(e) and the amount of dividends or other distributions
with a record date on or after the Effective Time theretofore paid with respect
to such shares of HUBCO Stock, 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 Stock.
(d) No Further Rights in MSB Stock. All shares of
HUBCO Stock issued and cash paid upon conversion of the shares of MSB 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 MSB Stock.
(e) No Fractional Shares of HUBCO Common Stock. No
certificates or scrip evidencing fractional shares of HUBCO Common Stock shall
be issued upon the surrender for exchange of Certificates and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
stockholder of HUBCO. Cash shall be paid in lieu of fractional shares of HUBCO
Common Stock, based upon the Median Pre-Closing Price of HUBCO Common Stock.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of MSB Stock for two
years after the Effective Time shall be delivered to HUBCO, upon demand, and any
holders of MSB 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 nor the Exchange
Agent shall be liable to any holder of shares of MSB Stock for any such shares
of HUBCO 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 MSB Stock Options (as defined in
Section 3.2), the minimum amounts (if any) that HUBCO is required to deduct and
withhold with respect to the making of such payment under the Code (as defined
in Section 3.8), or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by HUBCO, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the MSB Stock Options in respect of which such deduction and withholding was
made by HUBCO.
2.3 At the Effective Time, the stock transfer books of MSB shall
be closed and there shall be no further registration of transfers of shares of
MSB Stock thereafter on the records of MSB. 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 Notwithstanding anything in this Agreement to the contrary,
any holder of MSB Preferred Stock shall have the right to dissent in the manner
provided in Section 262 of the DGCL, and if all necessary requirements of the
DGCL are met, such shares shall be entitled to payment of the fair value of such
shares in accordance with the provisions of the DGCL ("Dissenting Shares"),
provided, however, that (i) if any holder of Dissenting Shares shall
subsequently withdraw such holder's demand for appraisal of such shares within
60 days of the Effective Time, or, with the written consent of the Surviving
Corporation, any time thereafter, or (ii) if any holder fails to follow the
procedures for establishing such holder's entitlement to appraisal rights as
provided in the DGCL, the right to appraisal of such shares shall be forfeited
and such shares shall thereupon be deemed to have been converted into the right
to receive and to have become exchangeable for, as of the Effective Time, the
Merger Consideration.
2.5 MSB Stock Options
(a) Converting Stock Options. Holders of Stock
Options (as defined in Section 3.2) which, as of the Effective Time, are
outstanding shall be given the right to elect to have all or a portion of such
Stock Options convert at the Effective Time into HUBCO Common Stock in
accordance with the formula set forth below, to the extent permitted under the
MSB Stock Option Plans (as defined in Section 3.2) and the agreements pursuant
to which such Stock Options were granted (each, an "Option Grant Agreement").
Each Stock Option to be so converted is referred to herein as a "Converting
Stock Option."
(i) Each outstanding Converting Stock Option
shall be valued on the basis of the Median Pre-Closing Price
of HUBCO Common Stock (as defined in Section 2.2(e))
multiplied by the Exchange Ratio and subtracting the stated
exercise price for each Converting Stock Option from the
product therefrom (the "Option Value"), and
(ii) Each holder of Converting Stock Options
shall receive at the Effective Time, a number of shares of
HUBCO Common Stock equal to the aggregate Option Value for all
of such holder's Converting Stock Options, divided by the
Median Pre-Closing Price of HUBCO Common Stock.
(iii) Cash shall be paid in lieu of
fractional shares, based upon the Median Pre-Closing Price of
HUBCO Common Stock.
(b) Continuing Stock Options. Each Stock Option
outstanding at the Effective Time which is not a Converting Stock Option (each
of the foregoing, a "Continuing Stock Option") shall be converted into an option
to purchase HUBCO Common Stock, wherein (i) the right to purchase shares of MSB
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 MSB 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 3.2 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.
2.6 At or before the Effective Time, MSB shall cause its
Preferred Share Purchase Rights issued pursuant to the Rights Agreement between
MSB and Mellon Bank, N.A. dated as of September 16, 1994 (the "Preferred Share
Purchase Rights") to be redeemed for $.01 per Right or otherwise to become
inoperable.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF MSB
References herein to "MSB 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 MSB to HUBCO.
MSB hereby represents and warrants to HUBCO as follows:
3.1 Corporate Organization.
MSB is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. MSB is registered
as a savings and loan holding company under HOLA. MSB 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 MSB. As used herein, the capitalized term
"Material Adverse Effect," when used with respect to a particular corporation,
means an adverse effect on the assets, financial condition or results of
operations of the corporation or any of its subsidiaries which is materially
adverse to the business, operations, assets or financial condition of the
corporation and its subsidiaries, taken as a whole, other than a material
adverse effect caused by any change occurring after the date hereof in any
federal or state law, rule or regulation or in GAAP, which change affects
banking institutions generally, including any change affecting the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF") of the
FDIC.
Bank, MSB Financial Services, Inc. ("MSB Financial")
and MSB Travel Inc. ("MSB Travel") are the only current MSB Subsidiaries. For
purposes of this Agreement, the term "MSB Subsidiary" means any corporation,
partnership, joint venture or other legal entity in which MSB, directly or
indirectly, owns at least a 50% stock or other equity interest or for which MSB,
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 "MSB Subsidiary" shall include any
entity which was an MSB Subsidiary at any time during such period. Bank is a
federally-chartered savings bank duly organized and validly existing in stock
form and in good standing under the laws of the United States. All eligible
accounts of depositors issued by Bank are insured either by the BIF or the SAIF
to the fullest extent permitted by law. Each of MSB Financial and MSB Travel is
a corporation duly organized and in active status under the laws of the State of
New York. Each MSB Subsidiary has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing would not have a Material Adverse
Effect on MSB.
The MSB Disclosure Schedule sets forth true and
complete copies of the Certificate of Incorporation and By-laws, as in effect on
the date hereof, of MSB, Bank, MSB Financial and MSB Travel.
3.2 The authorized capital stock of MSB consists of 5,000,000
shares of MSB Common Stock and 1,000,000 shares of MSB Preferred Stock. As of
December 10, 1997, there were 3,045,000 shares of MSB Common Stock issued and
2,844,153 outstanding and 600,000 shares of MSB Preferred Stock issued and
outstanding. As of December 10, 1997, there were 73,838 shares of MSB Common
Stock issuable upon exercise of outstanding stock options. The MSB Disclosure
Schedule sets forth (i) all options which may be exercised for issuance of MSB
Common Stock (collectively, the "Stock Options") and the terms upon which the
options may be exercised, and (ii) true and complete copies of each plan and a
specimen of each form of agreement pursuant to which any outstanding Stock
Option was granted, including a list of each outstanding Stock Option issued
pursuant thereto. All Stock Options are fully vested and will be fully vested on
the Closing Date, in each case in accordance with the terms of the MSB Stock
Option Plans and Option Grant Agreements pursuant to which such Stock Options
were granted. All issued and outstanding shares of MSB Stock, and all issued and
outstanding shares of capital stock of each MSB Subsidiary, have been duly
authorized and validly issued, are fully paid, and nonassessable. The authorized
capital stock of Bank is as set forth in the charter documents of Bank contained
in Section 3.1 of the MSB Disclosure Schedule. All of the outstanding shares of
capital stock of each MSB Subsidiary are owned (directly in the case of Bank and
MSB Travel, and indirectly in the case of MSB Financial) by MSB and are free and
clear of any liens, encumbrances, charges, restrictions or rights of third
parties. Except for the Stock Options and the HUBCO Option, neither MSB nor Bank
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 MSB or Bank
or any securities representing the right to purchase, subscribe or otherwise
receive any shares of such capital stock or any securities convertible into any
such shares, and there are no agreements or understandings with respect to
voting of any such shares.
3.3 Authority; No Violation.
(a) Subject to the approval of this Agreement and the
transactions contemplated hereby by all applicable regulatory authorities and by
the stockholders of MSB, and except as set forth in Section 3.3 of the MSB
Disclosure Schedule, MSB and Bank 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, except as set forth in Section 3.3 of the MSB
Disclosure Schedule, the consummation of the transactions contemplated hereby
have been duly and validly approved by all of the directors of MSB and Bank in
accordance with their respective Certificates of Incorporation and applicable
laws and regulations. Except for such approvals, and except as set forth in
Section 3.3 of the MSB Disclosure Schedule, no other corporate proceedings not
otherwise contemplated hereby on the part of MSB or Bank are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by MSB and Bank, and constitutes the valid and
binding obligation of each of MSB and Bank, enforceable against MSB and Bank 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 federally-chartered savings banks 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 MSB or Bank, nor the consummation by MSB or Bank of the
transactions contemplated hereby in accordance with the terms hereof, or
compliance by MSB or Bank with any of the terms or provisions hereof, will (i)
violate any provision of MSB's or Bank's Certificate of Incorporation or
By-laws, (ii) assuming that the consents and approvals set forth below are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to MSB, Bank or any of their
respective properties or assets, or (iii) except as set forth in the MSB
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 MSB or Bank under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which MSB or Bank 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 MSB,
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 OTS, the OCC, the FDIC, the Securities
and Exchange Commission (the "SEC"), other applicable government authorities,
the stockholders of MSB, 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 MSB or Bank in connection with (x) the execution and delivery by
MSB and Bank of this Agreement and (y) the consummation by MSB of the Merger,
the consummation by Bank of the Bank Merger, if any, and the consummation by MSB
and Bank of the other transactions contemplated hereby, except (i) such as are
listed in the MSB Disclosure Schedule and (ii) such as individually or in the
aggregate will not (if not obtained) have a Material Adverse Effect on MSB or
prevent or materially delay the consummation of the transactions contemplated
hereby. To the best of MSB's knowledge, no fact or condition exists which MSB
has reason to believe will prevent it from obtaining the aforementioned consents
and approvals.
3.4 Financial Statements.
(a) MSB has previously delivered to HUBCO copies of
the consolidated balance sheets of MSB as of December 31, 1995 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the periods ended December 31, in each of the three years 1994
through 1996, in each case accompanied by the audit report of the independent
public accountants with respect to MSB (KPMG Peat Marwick, LLP ("Peat Marwick")
with respect to 1996 and Nugent & Haeussler, P.C. with respect to 1995 and 1994)
and the unaudited consolidated statement of condition of MSB as of September 30,
1997 and the related unaudited statements of income for the three and nine
months ended September 30, 1997 and 1996 and cash flows for the nine months
ended September 30, 1997 and 1996, as reported in MSB's Quarterly Report on Form
10-Q, filed with the SEC (collectively, the "MSB Financial Statements"). The MSB
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 except for the omission of notes from interim financial
statements), and fairly present the consolidated financial condition of MSB as
of the respective dates set forth therein, and the related consolidated
statements of income, changes in stockholders' equity and cash flows fairly
present the results of the consolidated operations, changes in stockholders'
equity and cash flows of MSB for the respective periods set forth therein.
(b) The books and records of MSB and Bank 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 MSB Financial Statements (including the notes
thereto), as of September 30, 1997, or except as set forth in Section 3.4 of the
MSB Disclosure Schedule, neither MSB nor any MSB Subsidiary had any liabilities,
whether absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of MSB and the MSB Subsidiaries, taken
as a whole, which were required by GAAP (consistently applied) to be disclosed
in MSB's consolidated statement of condition as of September 30, 1997 or the
notes thereto. Since September 30, 1997, MSB and Bank have not incurred any
liabilities except in the ordinary course of business and consistent with
prudent banking practice, except as related to the transactions contemplated by
this Agreement or except as set forth in the MSB Disclosure Schedule.
3.5 Except for Keefe, Bruyette & Woods, Inc. ("Keefe"), neither
MSB or Bank nor any of their directors or officers has employed any broker or
finder or incurred any liability for any broker's or finder's fees or
commissions in connection with any of the transactions contemplated by this
Agreement. The agreement with Keefe is set forth in the MSB Disclosure Schedule.
Other than pursuant to the agreement with Keefe or as set forth in Section 3.5
of the MSB Disclosure Schedule, there are no fees (other than time charges and
disbursements 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 MSB or Bank.
3.6 Absence of Certain Changes or Events.
(a) Except as disclosed in the MSB Disclosure
Schedule, there has not been any material adverse change in the business,
operations, assets or financial condition of MSB and the MSB Subsidiaries, taken
as a whole, since September 30, 1997, and to the best of MSB's knowledge, no
fact or condition exists which MSB believes will cause such a material adverse
change in the future.; provided, however, that a material adverse change shall
not be deemed to include (i) any change occurring after the date hereof in any
federal or state law, rule or regulation or in GAAP, which change affects
banking institutions generally, including any change affecting the BIF or the
SAIF, (ii) reasonable expenses incurred in connection with this Agreement and
the transactions contemplated hereby, or (iii) actions or omissions of MSB or
any MSB Subsidiary taken with the prior written consent of HUBCO in
contemplation of the transactions contemplated hereby (including without
limitation any actions taken by MSB or Bank pursuant to Section 5.15 of this
Agreement).
(b) Except as set forth in the MSB Disclosure
Schedule, neither MSB nor Bank has taken or permitted any of the actions set
forth in Section 5.2 hereof between September 30, 1997 and the date hereof and,
except for execution of this Agreement and the other documents contemplated
hereby, MSB has conducted its business only in the ordinary course, consistent
with past practice.
3.7 Except as disclosed in the MSB Disclosure Schedule, and
except for ordinary routine litigation incidental to the business of MSB and the
MSB Subsidiaries, neither MSB nor any MSB Subsidiary is a party to any, and
there are no pending or, to the best of MSB's knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against MSB or any MSB Subsidiary which, if decided
adversely to MSB or an MSB Subsidiary, are reasonably likely to have a Material
Adverse Effect on MSB. Except as disclosed in the MSB Disclosure Schedule,
neither MSB nor any MSB Subsidiary is a party to any order, judgment or decree
entered in any lawsuit or proceeding which is material to MSB or such MSB
Subsidiary.
3.8 Except as disclosed in the MSB Disclosure Schedule:
(a) MSB and each MSB 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.
MSB and each MSB 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 MSB or such MSB Subsidiary through such date. None of the federal
or state income tax returns of MSB or any MSB Subsidiary have been examined by
the Internal Revenue Service (the "IRS") or the New York Division of Taxation
within the past six years. To the best knowledge of MSB, 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 MSB or any MSB Subsidiary, nor has MSB or any MSB 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 MSB nor any MSB 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, (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 MSB or such MSB Subsidiary (nor does MSB have any knowledge that
the IRS has proposed any such adjustment or change of accounting method), or
(iv) has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
3.9 Employee, Director and Officer Benefit Plans.
(a) Except as set forth on the MSB Disclosure
Schedule, neither MSB nor any MSB Subsidiary maintains or contributes to any
"employee pension benefit plan" (the "MSB Pension Plans") within the meaning of
Section 3 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), "employee welfare benefit plan" (the "MSB Welfare Plans") within the
meaning of Section 3 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 MSB
nor any MSB Subsidiary has, since September 2, 1974, contributed to any
"Multiemployer Plan," as such term is defined in Section 3(37) of ERISA.
(b) MSB has delivered to HUBCO in the MSB Disclosure
Schedules (or previously made available to HUBCO) a complete and accurate copy
of each of the following with respect to each of the MSB Pension Plans and MSB
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 MSB 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 MSB 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 MSB'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
MSB or any MSB 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 MSB
Pension Plan have been paid. All contributions required to be made to each MSB
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 MSB
which have not been paid have been properly recorded on the books of MSB.
(f) Except as disclosed in the MSB Disclosure
Schedule, each of the MSB Pension Plans, MSB Welfare Plans and each other
employee benefit plan and arrangement identified on the MSB 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 MSB Disclosure Schedule, if MSB
maintains any MSB Pension Plan, MSB has received or applied for a favorable
determination letter from the IRS which takes into account the Tax Reform Act of
1986 and subsequent legislation, and MSB is not aware of any fact or
circumstance which would disqualify any plan.
(g) To the best knowledge of MSB, 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 MSB Welfare Plan or MSB
Pension Plan that would result in any material tax or penalty for MSB or any MSB
Subsidiary.
(h) Except as disclosed in the MSB Disclosure
Schedule, no MSB 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 MSB Pension Plan.
(i) No "accumulated funding deficiency," within the
meaning of Section 412 of the Code, has been incurred with respect to any MSB
Pension Plan.
(j) There are no material pending, or, to the best
knowledge of MSB, material threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of, or against any of the MSB Pension Plans
or the MSB Welfare Plans, any trusts created thereunder or any other plan or
arrangement identified in the MSB Disclosure Schedule.
(k) Except as disclosed in the MSB Disclosure
Schedule, no MSB Pension Plan or MSB 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 MSB 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 MSB Financial Statements and established
under GAAP or otherwise noted on such Financial Statements.
(m) With respect to each MSB Pension Plan and MSB
Welfare Plan that is funded wholly or partially through an insurance policy,
there will be no liability of MSB or any MSB 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 MSB Disclosure
Schedule, and (ii) as set forth in Section 3.9(n) of the MSB Disclosure
Schedule, or as expressly agreed to by HUBCO in writing either pursuant to this
Agreement or otherwise, the consummation of the transactions contemplated by
this Agreement will not (x) entitle any current or former employee of MSB or any
MSB 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 MSB Pension Plan or MSB Welfare Plan.
(o) Except for the MSB Pension Plans and the MSB
Welfare Plans, and except as set forth on the MSB Disclosure Schedule, MSB has
no deferred compensation agreements, understandings or obligations for payments
or benefits to any current or former director, officer or employee of MSB or any
MSB Subsidiary or any predecessor of any thereof. The MSB Disclosure Schedule
sets forth (or lists, if previously delivered to HUBCO): (i) true and complete
copies of the deferred compensation 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 MSB Disclosure
Schedule, MSB 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 MSB Disclosure Schedule lists each such insurance
policy and any agreement with a party other than the insurer with respect to the
payment, funding or assignment of such policy. To the best of MSB's knowledge,
neither MSB nor any MSB Pension Plan or MSB 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 MSB Disclosure
Schedule, MSB does not maintain any retirement plan for directors. The MSB
Disclosure Schedule sets forth the complete documentation and actuarial
evaluation of any such plan.
3.10 Reports.
(a) The MSB Disclosure Schedule lists, and as to item
(i) below MSB has previously delivered to HUBCO a complete copy of, each (i)
final registration statement, prospectus, annual, quarterly or special report
and definitive proxy statement filed by MSB since January 1, 1995 pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and (ii) communication (other
than general advertising materials and press releases) mailed by MSB to its
stockholders as a class since January 1, 1995, and each such communication, as
of its date, complied in all material respects with all applicable statutes,
rules and regulations and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
(b) Since January 1, 1995, (i) MSB has filed all
reports that it was required to file with the SEC under the 1934 Act, and (ii)
MSB and Bank each 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, in each case in form which was correct in all material
respects, and, subject to permission from such regulatory authorities, MSB
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
special 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 MSB Disclosure Schedule lists the dates of all examinations of MSB or Bank
conducted by either the OTS, the FDIC or the New York Superintendent since
January 1, 1995 and the dates of any responses thereto submitted by MSB or Bank.
3.11 The information relating to MSB and Bank, 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 stockholders of MSB in connection with
the solicitation of their approval of the Merger, as of the date the Proxy
Statement-Prospectus is mailed to stockholders of MSB, and up to and including
the date of the meeting of stockholders to which such Proxy Statement-Prospectus
relates, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.12 Except as set forth in the MSB Disclosure Schedule, MSB and
each MSB 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 MSB or such MSB 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 MSB), and MSB has
not received notice of violation of, and does not know of any violations of, any
of the above.
3.13 Certain Contracts.
(a) Except for plans referenced in Section 3.9 and as
disclosed in the MSB Disclosure Schedule, (i) neither MSB nor Bank 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 MSB or Bank to
any officer, employee, director or consultant thereof. The MSB Disclosure
Schedule lists, and either the MSB Disclosure Schedule sets forth true and
correct copies of or MSB has previously made available to HUBCO, all severance
or employment agreements with officers, directors, employees, agents or
consultants to which MSB or Bank is a party.
(b) Except as disclosed in the MSB Disclosure
Schedule and except for loan commitments, loan agreements and loan instruments
entered into or issued in the ordinary course of business, (i) as of the date of
this Agreement, neither MSB nor any MSB 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 MSB and the MSB Subsidiaries taken
as a whole, (ii) no commitment, agreement or other instrument to which MSB or
any MSB Subsidiary is a party or by which any of them is bound limits the
freedom of MSB or any MSB Subsidiary to compete in any line of business or with
any person, and (iii) neither MSB nor any MSB Subsidiary is a party to any
collective bargaining agreement.
(c) Except as disclosed in the MSB Disclosure
Schedule, neither MSB nor any MSB Subsidiary or, to the best knowledge of MSB,
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 Bank is or will be the creditor) or
arrangement, except for defaults which individually or in the aggregate would
not have a Material Adverse Effect on MSB.
3.14 Properties and Insurance.
(a) Except as set forth in the MSB Disclosure
Schedule, MSB or a MSB 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 MSB's consolidated balance sheet
as of December 31, 1996, or owned and acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for fair value in
the ordinary course of business since December 31, 1996), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said balance sheet or the
notes thereto or that secure liabilities incurred in the ordinary course of
business after the date of such balance sheet, (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith, (iii) such
encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of MSB and the MSB 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, MSB and Bank
as lessees have the right under valid and subsisting leases to occupy, use,
possess and control all real property leased by MSB and Bank in all material
respects as presently occupied, used, possessed and controlled by MSB and Bank.
(b) The business operations and all insurable
properties and assets of MSB and each MSB Subsidiary are insured for their
benefit against all risks which, in the reasonable judgment of the management of
MSB, 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 MSB
adequate for the business engaged in by MSB and the MSB Subsidiaries. As of the
date hereof, neither MSB nor any MSB Subsidiary has received any notice of
cancellation or notice of a material amendment of any such insurance policy or
bond, and to the best of MSB's knowledge, is not in default under any such
policy or bond, no coverage thereunder is being disputed, and all material
claims thereunder have been filed in a timely fashion. The MSB Disclosure
Schedule sets forth in summary form a list of all insurance policies of MSB and
the MSB Subsidiaries.
3.15 The minute books of MSB and Bank contain records of all
meetings and other corporate action held of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors) that are complete and accurate in all material respects.
3.16 Except as set forth in the MSB Disclosure Schedule:
(a) Neither MSB nor any MSB Subsidiary has received
any written notice, citation, claim, assessment, proposed assessment or demand
for abatement alleging that MSB or such MSB 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 MSB and the MSB Subsidiaries taken as a whole. MSB 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 MSB or
any MSB Subsidiary, as OREO or otherwise, or owned or controlled by MSB or any
MSB 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 MSB. None of the
Properties is in the State of New Jersey.
(b) MSB 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 MSB.
(c) To the best of MSB's knowledge, MSB, each MSB
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 requiring the permit or
registration.
(d) To the knowledge of MSB, 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 MSB or any MSB Subsidiary.
3.17 As of September 30, 1997, each of the allowance for loan
losses and the reserve for OREO properties in the MSB Financial Statements was
adequate pursuant to GAAP (consistently applied), and the methodology used to
compute each of the loan loss reserve and the reserve for OREO properties
complies in all material respects with GAAP (consistently applied) and all
applicable policies of the OTS.
3.18 Except as set forth on the MSB Disclosure Schedule, no
officer, director, employee or agent (or former officer, director, employee or
agent) of MSB or any MSB 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 MSB, an MSB 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 Neither MSB nor any MSB 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 MSB prior to the date of this Agreement, nor has MSB 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 MSB prior to the date of this Agreement. Neither MSB nor
any MSB 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 MSB prior
to the date of this Agreement.
3.20 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 MSB. HUBCO hereby represents and warrants to MSB 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
is registered as a bank holding company under the BHCA. 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 HUBCO.
(b) Each of the HUBCO Subsidiaries 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. Each HUBCO Subsidiary is duly organized and validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
Hudson United is a state-chartered commercial bank duly organized and validly
existing and in good standing under the laws of the State of New Jersey. All
eligible accounts of depositors issued by Hudson United are insured by the 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 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 HUBCO. The HUBCO
Disclosure Schedule sets forth true and complete copies of the Certificate of
Incorporation and By-laws of HUBCO as in effect on the date hereof.
4.2 The authorized capital stock of HUBCO consists solely of
53,045,000 common shares, no par value ("HUBCO Common Stock"), and 10,609,000
shares of preferred stock ("HUBCO Authorized Preferred Stock"). As of December
1, 1997, there were 21,530,237 shares of HUBCO Common Stock issued and
outstanding, and no shares of treasury stock, and 1,250 shares of HUBCO
Authorized Preferred Stock outstanding, all of which were designated Series B,
no par value, Convertible Preferred Stock. From time to time hereafter, subject
to the covenant in Section 5.17 below, HUBCO may sell or repurchase shares of
HUBCO Common Stock. Except for shares issuable under or arising from the merger
agreements by which HUBCO is to acquire Bank of the Hudson ("BTH") and its
parent corporation, Poughkeepsie Financial Corp. (the "BTH Agreement"), Security
National Bank & Trust Company of New Jersey ("SNB") and its parent corporation,
Fiduciary Investment Company of New Jersey (the "SNB Agreements"), and The Bank
of Southington (the "Southington Agreement"), and the HUBCO 1995 Stock Option
Plan (the "HUBCO Stock Option Plans"), there are no shares of HUBCO Common Stock
issuable upon the exercise of outstanding stock options or otherwise. All issued
and outstanding shares of HUBCO Common Stock, and all issued and outstanding
shares of capital stock of the HUBCO 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 for the shares issuable
under the HUBCO Stock Option Plans and HUBCO's obligations under the BTH
Agreement, 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 the valid
and binding obligation of HUBCO, enforceable against HUBCO in accordance with
its terms.
(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 By-laws 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 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 its
properties or assets may be bound or affected, except, with respect to (ii) and
(iii) above, such as individually or in the aggregate will not have a Material
Adverse Effect on HUBCO, 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 OCC, the New York Superintendent, the Secretary of State of New
Jersey, the Secretary of State of New York, or other applicable Governmental
Entities, 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 HUBCO. To the best of HUBCO's knowledge, no fact or
condition exists which HUBCO has reason to believe will prevent it from
obtaining the aforementioned consents and approvals.
4.4 Financial Statements.
(a) The HUBCO Disclosure Schedule sets forth copies
of the consolidated statements of financial condition of HUBCO as of December
31, 1995 and 1996, 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 1994 through 1996, in each case accompanied by
the audit report of Arthur Andersen, LLP independent public accountants with
respect to HUBCO ("Arthur Andersen"), and the unaudited consolidated statement
of condition of HUBCO as of September 30, 1997 and the related unaudited
consolidated statements of income and cash flows for the three months ended
September 30, 1997 and 1996, as reported in HUBCO's Quarterly Report on Form
10-Q, filed with the SEC under the 1934 Act (collectively, the "HUBCO Financial
Statements"). The HUBCO Financial Statements (including the related notes) have
been prepared in accordance with GAAP consistently applied during the periods
involved (except as may be indicated therein or in the notes thereto), and
fairly present the consolidated financial position of HUBCO as of the respective
dates set forth therein, and the related consolidated statements of income,
changes in stockholders' equity and 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 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 September 30, 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 September 30, 1997 or the notes thereto. Except for
the transactions contemplated by this Agreement, and other proposed acquisitions
by HUBCO since September 30, 1997 reflected in any Form 8-K filed by HUBCO with
the SEC, neither HUBCO nor any HUBCO Subsidiary has incurred any liabilities
since September 30, 1997 except in the ordinary course of business and
consistent with past practice.
4.5 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. There has not been any material adverse change in the
business, operations, assets or financial condition of HUBCO and HUBCO's
Subsidiaries taken as a whole since September 30, 1997 and to the best of
HUBCO's knowledge, except for any merger related charges arising from or
connected with the consummation of the transactions contemplated by the BTH
Agreement and the effect of the consummation of other publicly announced mergers
or acquisitions, not yet consummated (the "Effects of Announced Acquisitions"),
no facts or condition exists which HUBCO believes will cause such a material
adverse change in the future.
4.7. 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 HUBCO. Except as disclosed in the HUBCO Disclosure
Schedule, neither HUBCO nor HUBCO's Subsidiaries is a party to any order,
judgment or decree entered in any lawsuit or proceeding which is material to
HUBCO or its Subsidiaries.
4.8 Tax Returns.
(a) HUBCO and each HUBCO Subsidiary 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 MSB in
writing). HUBCO and HUBCO's Subsidiaries have established (and until the
Effective Time will establish) on their books and records reserves that are
adequate for the payment of all federal, state and local taxes not yet due and
payable, but are incurred in respect of HUBCO or HUBCO's Subsidiaries through
such date. The HUBCO Disclosure Schedule identifies the federal income tax
returns of HUBCO and HUBCO's 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 HUBCO's
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 HUBCO's Subsidiaries, nor has HUBCO or HUBCO's 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 with third parties, (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 (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.
4.9 Employee Benefit Plans.
(a) HUBCO and its subsidiaries maintain or contribute
to certain "employee pension benefit plans" (the "HUBCO Pension Plans"), as such
term is defined in Section 3(2)(A) of ERISA, and "employee welfare benefit
plans" (the "HUBCO Welfare Plans"), as such term is defined in Section 3(1) of
ERISA. Since September 2, 1974, neither HUBCO nor its subsidiaries have
contributed to any "Multiemployer Plan", as such term is defined in Section
3(37) of ERISA.
(b) Each of the HUBCO Pension Plans and each of the
HUBCO Welfare Plans has been operated in compliance in all material respects
with the provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder, and all other applicable
governmental laws and regulations. HUBCO is not aware of any fact or
circumstance which would disqualify any plan that could not be retroactively
corrected (in accordance with the procedures of the IRS).
(c) The present value of all accrued benefits under
each of the HUBCO Pension Plans subject to Title IV of ERISA, based upon the
actuarial assumptions used for purposes of the most recent actuarial valuation
prepared by such HUBCO Pension Plan's actuary, did not exceed the then current
value of the assets of such plans allocable to such accrued benefits.
(d) During the last five years, the PBGC has not
asserted any claim for liability against HUBCO or any of its subsidiaries which
has not been paid in full.
(e) All premiums (and interest charges and penalties
for late payment, if applicable) due to the PBGC with respect to each HUBCO
Pension Plan have been paid. All contributions required to be made to each HUBCO
Pension Plan under the terms thereof, ERISA or other applicable law have been
timely made, and all amounts properly accrued to date as liabilities of HUBCO
which have not been paid have been properly recorded on the books of HUBCO. (f)
No "accumulated funding deficiency", within the meaning of Section 412 of the
Code, has been incurred with respect to any of the HUBCO Pension Plans.
(g) There are no pending or, to the best knowledge of
HUBCO, threatened or anticipated claims (other than routine claims for benefits)
by, on behalf of or against any of the HUBCO Pension Plans or the HUBCO Welfare
Plans, any trusts created thereunder or any other plan or arrangement identified
in the HUBCO Disclosure Schedule.
(h) Except with respect to customary health, life and
disability benefits or as disclosed in the HUBCO Disclosure Schedule, HUBCO has
no unfunded benefit obligations which are not accounted for by reserves shown on
the financial statements and established under GAAP or otherwise noted on such
financial statements.
4.10. Since January 1, 1995, HUBCO has filed all reports that it
was required to file with the SEC under the 1934 Act, all of which complied in
all material respects with all applicable requirements of the 1934 Act and the
rules and regulations adopted thereunder. As of their respective dates, each
such report and each registration statement, proxy statement, form or other
document filed by HUBCO with the SEC, including without limitation, any
financial statements or schedules included therein, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date. Since January 1, 1995, HUBCO and 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.
4.11 . 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 MSB 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.
4.12. 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 HUBCO) and HUBCO has not received notice of violation of, and does not
know of any violations of, any of the above.
4.13. Except as disclosed in the HUBCO Disclosure Schedule,
neither HUBCO nor its Subsidiaries, or to the best knowledge of HUBCO, any party
thereto, is in default in any material respect under any material lease,
contract, mortgage, promissory note, deed of trust, loan or other commitment
(except those under which Hudson United or another HUBCO Subsidiary 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 HUBCO.
4.14 Properties and Insurance.
(a) HUBCO and the HUBCO 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 September 30, 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 September 30, 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 the HUBCO 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 the HUBCO
Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by HUBCO or the HUBCO
Subsidiaries in all material respects as presently occupied, used, possessed and
controlled by HUBCO and the HUBCO Subsidiaries.
(b) The business operations and all insurable
properties and assets of HUBCO and the HUBCO 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 the HUBCO Subsidiaries. As of
the date hereof, neither HUBCO nor any HUBCO 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.
4.15. 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 have sufficient capital to satisfy all applicable
regulatory capital requirements.
4.16. Except as disclosed in the HUBCO Disclosure Schedule,
neither HUBCO nor any HUBCO Subsidiary has received any written notice,
citation, claim, assessment, proposed assessment or demand for abatement
alleging that HUBCO or any HUBCO 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 HUBCO and
the HUBCO 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 HUBCO Subsidiary 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 HUBCO.
4.17 As of September 30, 1997, each of the allowance for loan
losses and the reserve for OREO properties in the HUBCO Financial Statements was
adequate pursuant to GAAP (consistently applied), and the methodology used to
compute each of the loan loss reserve and the reserve for OREO properties
complies in all material respects with GAAP (consistently applied) and all
applicable policies of the FDIC and the New Jersey Department of Banking.
4.18. As of the date hereof, HUBCO has available and reserved
shares of HUBCO Common Stock sufficient for issuance pursuant to the Merger and
upon conversion of New HUBCO Preferred Stock subsequent thereto. The HUBCO Stock
to be issued hereunder pursuant to the Merger and upon the conversion of the New
HUBCO Preferred Stock, 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 Stock to be
issued hereunder pursuant to the Merger and upon the conversion of the New HUBCO
Preferred Stock, when so issued, will be registered under the 1933 Act and
issued in accordance with all applicable state and federal laws, rules and
regulations.
4.19 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 MSB 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 MSB 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 MSB by HUBCO prior to the date of this
Agreement.
4.20. The minute books of HUBCO and its bank subsidiaries contain
records of all meetings and other corporate action held of their respective
stockholders and Boards of Directors (including committees of their respective
Boards of Directors) that are complete and accurate in all material respects.
4.21. 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. During the period from the date of this Agreement to the
Effective Time, MSB shall, and shall cause Bank to, conduct their respective
businesses only in the ordinary course and consistent with prudent banking
practice, except for transactions permitted hereunder or with the prior written
consent of HUBCO, which consent will not be unreasonably withheld. MSB also
shall use its reasonable best efforts to (i) preserve its business organization
and that of Bank intact, (ii) keep available to itself and Bank the present
services of its employees and those of Bank, and (iii) preserve for itself and
HUBCO the goodwill of its customers and those of Bank and others with whom
business relationships exist.
5.2. From the date hereof to the Effective Time, except as
otherwise approved by HUBCO in writing, or as set forth in the MSB Disclosure
Schedule, or as permitted or required by this Agreement, neither MSB not Bank
will:
(a) change any provision of its Certificate of
Incorporation or By-laws or any similar governing documents;
(b) change the number of shares of its authorized or
issued capital stock (other than upon exercise of stock options or warrants
described on the MSB 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, from the date hereof to the Effective Time, MSB may declare, set aside
or pay only the cumulative dividends due on the MSB Preferred Stock and
dividends on the MSB Common Stock in the same amount as was paid in the two
quarters prior to the date hereof, less the amount, if any, used by MSB to
redeem the Preferred Share Purchase Rights pursuant to Section 2.6 hereof.
(c) grant any severance or termination pay (other
than pursuant to written policies or contracts of MSB in effect on the date
hereof and disclosed to HUBCO in the MSB 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 as specified in Section 5.2 of the
MSB Disclosure Schedule;
(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 the business of MSB or Bank;
(e) make any capital expenditures 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;
(f) file any applications or make any contract 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 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 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;
(j) without first conferring with HUBCO, make or
commit to make any new loan or other extension of credit in an amount of
$1,000,000 or more, renew for a period in excess of one year any existing loan
or other extension of credit in an amount of $1,000,000 or more, or increase by
$1,000,000 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 MSB
Disclosure Schedule and residential mortgage loans made in the ordinary course
of business in accordance with past practice; or
(k) agree to do any of the foregoing.
5.3. MSB and Bank 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 MSB or Bank (an
"Acquisition Transaction"). Notwithstanding the foregoing, MSB may enter into
discussions or negotiations or provide information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of MSB,
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. MSB 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. During the period from the date of this Agreement to the
Effective Time, each of MSB 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, MSB agrees to provide
HUBCO, and HUBCO agrees to provide MSB, with internally prepared profit and loss
statements no later than 15 days after the close of each calendar month. As soon
as reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the last fiscal quarter of each fiscal year) MSB will
deliver to HUBCO and HUBCO will deliver to MSB 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, MSB will deliver to HUBCO and HUBCO will deliver to MSB 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) MSB and Bank shall permit HUBCO and its
representatives, and HUBCO shall permit, and cause each HUBCO Subsidiary to
permit, MSB and its representatives, reasonable access to their respective
properties, and shall disclose and make available to HUBCO and its
representatives, or MSB and its representatives, as the case may be, all books,
papers and records relating to its assets, stock ownership, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' and stockholders' meetings, organizational documents, by-laws,
material contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files, plans affecting employees, and any
other business activities or prospects in which HUBCO and its representatives or
MSB 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, MSB acknowledges that HUBCO may be involved in
discussions concerning other potential acquisitions and HUBCO shall not be
obligated to disclose such information to MSB 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 Stockholders
Meeting (as such term is defined in Section 5.7 hereof), and qualifying under
applicable federal and state securities laws the HUBCO Stock to be issued to MSB
stockholders in connection with the Merger, the parties hereto shall cooperate
in the preparation and filing by HUBCO or MSB (as applicable) with the SEC of a
Registration Statement and 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 MSB and HUBCO to the MSB 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 Stock for sale, including the Proxy
Statement-Prospectus, are referred to herein as the "Registration Statement").
(b) HUBCO shall furnish MSB 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 MSB if at any time prior to the Stockholders Meeting, any
information provided by HUBCO in the Proxy Statement-Prospectus becomes
incorrect or incomplete in any material respect and to provide MSB with the
information needed to correct such inaccuracy or omission. HUBCO shall furnish
MSB with such supplemental information as may be necessary in order to cause the
Proxy Statement-Prospectus, insofar as it relates to HUBCO and its Subsidiaries,
to comply with Section 5.6(a) after the mailing thereof to MSB shareholders.
(c) MSB shall furnish HUBCO with such information
concerning MSB as is necessary in order to cause the Proxy Statement-Prospectus,
insofar as it relates to MSB, to comply with Section 5.6(a) hereof. MSB agrees
promptly to advise HUBCO if at any time prior to the Stockholders Meeting, any
information provided by MSB in the Proxy Statement-Prospectus becomes incorrect
or incomplete in any material respect and to provide HUBCO with the information
needed to correct such inaccuracy or omission. MSB shall furnish HUBCO with such
supplemental information as may be necessary in order to cause the Proxy
Statement-Prospectus, insofar as it relates to MSB, to comply with Section
5.6(a) after the mailing thereof to MSB shareholders.
(d) HUBCO shall as promptly as practicable make such
filings as are necessary in connection with the offering of the HUBCO 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. MSB shall promptly furnish HUBCO with such
information regarding MSB shareholders as HUBCO requires to enable it to
determine what filings are required hereunder. MSB authorizes HUBCO to utilize
in such filings the information concerning MSB provided to HUBCO in connection
with, or contained in, the Proxy Statement-Prospectus. HUBCO shall furnish MSB's
counsel with copies of all such filings and keep MSB advised of the status
thereof. HUBCO shall file as promptly as practicable, and shall use reasonable
business efforts to file within 45 days after the date hereof, the Registration
Statement containing the Proxy Statement-Prospectus with the SEC, and each of
HUBCO and MSB shall promptly notify the other of all communications, oral or
written, with the SEC concerning the Registration Statement and the Proxy
Statement-Prospectus.
(e) HUBCO shall cause the HUBCO Common Stock issuable
pursuant to the Merger to be listed on the NASDAQ at the Effective Time. HUBCO
shall cause the HUBCO Common Stock which shall be issuable pursuant to
conversion of New HUBCO Preferred Stock to be accepted for listing on the NASDAQ
when issued.
(f) The parties hereto will cooperate with each other
and use their reasonable best efforts to prepare all necessary documentation and
applications, to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement as soon as possible, including, without limitation, those
required by the FDIC, the FRB, the OTS, the OCC and the New York Superintendent.
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 body (including the SEC)
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) MSB 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 MSB 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. MSB agrees to
provide HUBCO with any information, certificates, documents or other materials
about MSB 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. MSB 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 MSB for reasonable expenses thus incurred by MSB should this
transaction be terminated for any reason other than as described in Section
7.1(f). HUBCO shall not file with the SEC any registration statement or
amendment thereto or supplement thereof containing information regarding MSB
unless MSB shall have consented to such filing, which consent shall not be
unreasonably delayed or withheld.
5.7. MSB will (i) take all steps necessary duly to call, give
notice of, convene and hold a meeting of the stockholders of MSB (the
"Stockholders Meeting") for the purpose of securing the MSB stockholder approval
of this Agreement required by law, (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 its investment banker withdraws its fairness opinion prior
to the Stockholders Meeting, recommend to the stockholders of MSB 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 take all steps necessary to duly call, give notice and
convene a meeting of its shareholders for such purpose.
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. If 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 MSB 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 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.
5.9. HUBCO and MSB 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 each of HUBCO and MSB agrees that unless approved by
the other in advance, it 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 in the opinion
of counsel.
5.10 In the event that HUBCO or MSB determines that a material
condition to its obligation to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to July 2, 1998 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, MSB and HUBCO
will promptly inform the other of any facts applicable to MSB 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 MSB to honor the existing written contracts with officers and
employees of MSB and Bank that are included in the MSB Disclosure Schedule,
except as otherwise specified in Section 5.20 and 6.3(e) hereof.
(b) Following consummation of the Merger, HUBCO shall
make available to all employees and officers of Bank thereafter employed by any
of HUBCO's bank subsidiaries (which may include Bank) (the "New Employer")
coverage under the benefit plans generally available to Hudson United's
employees and officers (including pension and health and hospitalization) on the
terms and conditions available to Hudson United's employees and officers. As
soon as practicable, but in any event prior to December 31, 1997, the MSB Board
of Directors shall amend the MSB Bank Employee Severance Plan the "Severance
Plan") as set forth in Section 5.11(b)(1) of the HUBCO Disclosure Schedule.
HUBCO shall provide severance payments in accordance with the Severance Plan, as
so amended, to employees and officers of MSB who are covered by the Severance
Plan and whose employment is terminated at or following the Closing by HUBCO or
at HUBCO's direction. HUBCO shall provide severance payments in accordance with
Section 5.11(b)(2) of the HUBCO Disclosure Schedule to employees of MSB who are
not covered by the Severance Plan and whose employment is terminated at or
following the Closing by HUBCO or at HUBCO's direction. On or prior to December
31, 1997, Bank shall contribute to its Employee Stock Ownership Plan ("ESOP") an
amount sufficient to repay all currently outstanding loans that were obtained by
the ESOP in order to finance its purchase of MSB Common Stock and shall cause
the shares of MSB Common Stock released from the suspense account as a result of
such repayment to be allocated among the persons eligible for such allocation
("ESOP Participants") as soon as practicable thereafter in accordance with the
terms of the ESOP and the requirements of all applicable laws. In the event
that, due to the limitations of any applicable law, a portion of the shares of
MSB Common Stock released following the ESOP's repayment of the outstanding
loans cannot be immediately allocated to the ESOP Participants, all such shares
shall be held in the ESOP's suspense account and allocated to the ESOP
Participants as soon as practicable thereafter. If the participation of all or a
portion of the ESOP Participants shall cease during the one year period
beginning on the Closing, HUBCO shall treat such terminations of participation
as one or more "partial terminations" of the ESOP (within the meaning of section
411 of the Code) and HUBCO shall take, or cause to be taken, all actions that
may be necessary or required to be taken as a result of a partial termination of
a tax-qualified plan. After the Effective Time, HUBCO may terminate, merge or
change existing MSB and Bank benefit plans to the extent permitted under
applicable law. Employees of Bank employed by the New Employer will receive
credit for prior employment by Bank for the purposes of determining their
eligibility to participate in all employee benefit plans of New Employer.
Service completed while employed by Bank will also be taken into account for
purposes of determining benefit levels under New Employer's vacation plan, and
severance plan (after the initial six month period has lapsed). Credit for prior
service will be given for purposes of vesting, but not for benefit accrual under
New Employer's pension benefit plans. No pre-existing condition limitation or
evidence of insurability shall be imposed under New Employer's group health
plans, unless such employee was subject to such a limitation under Bank's group
health plan.
5.12 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), a supplement or amendment to the parties'
respective Disclosure Schedules which corrects any representation or warranty
which was untrue when made shall not 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 MSB and HUBCO.
(a) For planning purposes, MSB shall, within 15 days
from the date hereof, provide HUBCO with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by MSB in
connection with this transaction, including the fees and expenses of counsel,
accountants, investment bankers and other professionals. MSB 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,
MSB shall ask all of its attorneys and other professionals to render current and
correct invoices for all unbilled time and disbursements. MSB shall accrue
and/or pay all of such amounts as soon as possible.
(c) MSB shall advise HUBCO monthly of all
out-of-pocket expenses which MSB has incurred in connection with this
transaction.
(d) HUBCO, in reasonable consultation with MSB, 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 MSB or Bank or serves
or has served at the request of MSB or Bank 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 MSB or Bank or serves or has served at
the request of MSB or Bank 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 MSB or Bank or any of their respective affiliates, or by any shareholder
of MSB (collectively, "Claims"), including, without limitation, any Claim which
is based upon, arises out of or in any way relates to the Merger, this
Agreement, any of the transactions contemplated by this Agreement, the
Indemnitee's service as a member of the Board of Directors of MSB or Bank or of
any committee of MSB's or Bank'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
permitted under any of (x) applicable law, (y) the Certificate of Incorporation
of MSB or Bank, as applicable, or (z) the By-Laws of MSB or Bank, as applicable
(and HUBCO shall also advance expenses as incurred to the fullest extent
permitted under any thereof).
(b) From and after the Effective Time, HUBCO shall
assume and honor any obligation of MSB or Bank immediately prior to the
Effective Time with respect to the indemnification of the Indemnitees arising
out of the Certificate of Incorporation or By-Laws of MSB or Bank 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 MSB's and Bank'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 MSB's and Bank'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 MSB's and Bank'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
(a) Notwithstanding that MSB believes that it has
established all reserves and taken all provisions for possible loan losses
required by GAAP and applicable laws, rules and regulations, MSB 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, MSB and HUBCO shall consult and
cooperate with each other with respect to (i) conforming to the extent
appropriate, based upon such consultation, MSB's loan, accrual and reserve
policies and MSB's other policies and procedures regarding applicable regulatory
matters, including without limitation Federal Reserve, Bank Secrecy Act and FDIC
matters, to those policies of HUBCO as HUBCO may reasonably identify to MSB from
time to time, (ii) new extensions of credit or material revisions to existing
terms of credits by Bank, 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 MSB
and Bank to the extent appropriate; provided that any required change in MSB's
practices in connection with the matters described in clause (i) or (iii) above
need not be effected until the parties receive all necessary governmental
approvals and consents to consummate the transactions contemplated hereby,
(b) If the Bank Merger is consummated, HUBCO shall
cause the New York Bank to hold its meetings alternatively in Goshen and
Poughkeepsie.
5.16. Each of HUBCO and MSB shall use its reasonable best efforts
to resolve such objections, if any, which may be asserted with respect to the
Merger under antitrust laws, including, without limitation, the
Hart-Scott-Rodino Act. In the event a suit is threatened or instituted
challenging the Merger as violative of antitrust laws, each of HUBCO and MSB
shall use its reasonable best efforts to avoid the filing of, resist or resolve
such suit. HUBCO and MSB shall use their reasonable best efforts to take such
action as may be required: (a) by the Antitrust Division of the Department of
Justice or the Federal Trade Commission in order to resolve such objections as
either of them may have to the Merger under antitrust laws, or (b) by any
federal or state court of the United States, in any suit brought by a private
party or governmental entity challenging the Merger as violative of antitrust
laws, in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order, or other order which has the effect of
preventing the consummation of the Merger. Reasonable best efforts shall
include, but not be limited to, the proffer by HUBCO of its willingness to
accept an order agreeing to the divestiture, or the holding separate, of any
assets of HUBCO or MSB, except to the extent that any such divestitures or
holding separate arrangement would have a Material Adverse Effect on HUBCO. The
entry by a court, in any suit brought by a private party or governmental entity
challenging the Merger as violative of antitrust laws, of an order or decree
permitting the Merger, but requiring that any of the businesses, product lines
or assets of HUBCO or MSB be divested or held separate thereafter shall not be
deemed a failure to satisfy the conditions specified in Section 6.1 hereof
except to the extent that any divestitures or holding separate arrangement would
have a Material Adverse Effect on HUBCO and HUBCO shall not have voluntarily
consented to such divestitures or holding separate arrangements. For the
purposes of this Section 5.16, the divestiture or the holding separate of a
branch or branches of Hudson United, the New York Bank or Bank with, in the
aggregate, less than $20 million in assets shall not be considered to have a
Material Adverse Effect on HUBCO.
5.17. Prior to the date hereof, neither HUBCO or MSB has taken any
action or failed to take any action which would disqualify the Merger for
pooling of interests accounting treatment. Before the Effective Time, neither
HUBCO nor MSB 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. HUBCO shall cause Arthur Andersen, its independent public
accountants, to deliver to MSB, and MSB shall cause Peat Marwick, its
independent public accountants, to deliver to HUBCO and to its officers and
directors who sign the Registration Statement for this transaction, a short-form
"comfort letter" or "agreed upon procedures" letter, dated the date of the
mailing of the Proxy Statement-Prospectus for the Stockholders Meeting of MSB,
in the form customarily issued by such accountants at such time in transactions
of this type.
5.19. Promptly, but in any event within two weeks, after the
execution and delivery of this Agreement, MSB shall deliver to HUBCO (a) a
letter identifying all persons who, to the knowledge of MSB, may be deemed to be
affiliates of MSB under Rule 145 of the 1933 Act and the pooling-of-interests
accounting rules, including, without limitation, all directors and executive
officers of MSB and (b) copies of letter agreements, each substantially in the
form of Exhibit 5.19-1, executed by each such person so identified as an
affiliate of MSB agreeing to comply with Rule 145 and to refrain from
transferring shares as required by the pooling-of-interests accounting rules.
Within two weeks after the date hereof, HUBCO shall cause its directors and
executive officers to enter into letter agreements in the form of Exhibit 5.19-2
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 MSB 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. HUBCO agrees to cause William Myers to be appointed at the
Effective Time as Vice Chairman of the Board of the New York Bank and President
of the Southern Region of the New York Bank and immediately after the Effective
Time to enter into an employment agreement with William Myers on terms and
conditions to be mutually agreed upon by HUBCO and William Myers (but containing
the specific terms set forth in Section 5.20 of the HUBCO Disclosure Schedule).
William Myers and MSB shall amend Myers' current employment agreement effective
at the Closing to reduce any payout under his current employment contract so it
would not constitute an "excess parachute payment" as defined in Section 280G of
the Code. Such amendment shall be acceptable to HUBCO. HUBCO agrees to cause one
director of MSB selected by MSB (who may be William Myers) and acceptable to
HUBCO to be appointed at the Effective Time to the HUBCO Board of Directors.
HUBCO shall ask each of the current directors of Bank to serve as directors of
the Surviving Bank (if the Bank Merger is consummated) or to continue to serve
as directors of Bank (if the Bank Merger is not consummated) and directors of
such Board shall receive Board fees and be subject to Board duties substantially
consistent with the fees and duties of the directors of other bank subsidiaries
of HUBCO. HUBCO shall modify or waive the provisions of its mandatory retirement
policy to the extent necessary so that such directors who would otherwise be
required to retire in the six year period following the Closing because they
will have reached HUBCO's mandatory retirement age of 72 shall be permitted to
continue to serve until age 75.
5.21. The MSB Director Retirement Program shall have been
terminated on or before December 31, 1997 and the present value of all benefits
(including any accelerated benefits) shall have been paid to directors covered
thereby prior to the Closing and all obligations of MSB, Bank, HUBCO and all
HUBCO Subsidiaries thereby released, to the satisfaction of HUBCO.
ARTICLE VI - CLOSING CONDITIONS
6.0 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 Stockholders; SEC Registration. This
Agreement and the transactions contemplated hereby shall have been approved by
the requisite vote of the stockholders of MSB and, if necessary under NASDAQ
rules or applicable laws, the stockholders of HUBCO. The HUBCO Registration
Statement and Proxy Statement-Prospectus shall have been declared effective by
the SEC and shall not be subject to a stop order, and the issuance of the HUBCO
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 FRB, the OTS, the OCC and the New York Superintendent)
required to consummate the transactions contemplated hereby shall have been
obtained without any term or condition which would have a Material Adverse
Effect on 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. There shall not be in
effect any order, judgment, injunction or decree of a court of competent
jurisdiction which enjoins or prohibits consummation of the transactions
contemplated hereby.
(d) Tax Opinion. HUBCO shall have received an
opinion, dated as of the Effective Time, of Pitney, Hardin, Kipp & Szuch,
reasonably satisfactory in form and substance to HUBCO, and MSB shall have
received an opinion, dated as of the Effective Time, of Thacher Proffitt & Wood,
reasonably satisfactory in form and substance to MSB, in each case 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
MSB; (iii) no gain or loss will be recognized upon the
exchange of MSB Stock solely for HUBCO Stock; (iv) the basis
of any HUBCO Stock received in exchange for MSB Stock shall
equal the basis of the recipient's MSB Stock surrendered on
the exchange, reduced by the amount of cash received, if any,
on the exchange, and increased by the amount of the gain
recognized, if any, on the exchange (whether characterized as
dividend or capital gain income); and (v) the holding period
for any HUBCO Stock received in exchange for MSB Stock will
include the period during which MSB Stock surrendered on 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 MSB, to the effect that the Merger shall be
qualified to be treated by HUBCO as a pooling-of-interests for accounting
purposes.
6.1. 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 MSB and Bank. Except for those representations which are made as
of a particular date, the representations and warranties of MSB 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. MSB 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 MSB
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 MSB 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 MSB
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 MSB, dated the Closing Date, in form and substance
reasonably satisfactory to HUBCO, covering the matters customarily covered in
opinions of counsel in transactions of this type.
(c) Certificates. MSB 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) Director Retirement Program. The MSB Director
Retirement Program shall have been terminated on or before the Closing and the
present value of all benefits (including any accelerated benefits) shall have
been paid to directors covered thereby and all obligations of MSB, Bank, HUBCO
and all HUBCO Subsidiaries thereby released, to the satisfaction of HUBCO.
(e) Myers Contract. The current Myers employment
agreement shall have been amended to limit payments thereunder to those that do
not constitute an "excess parachute payment" under the Code.
(f) Legal Fees. MSB shall have furnished HUBCO with
letters from all attorneys representing MSB and Bank in any matters confirming
that all legal fees have been paid in full for services rendered as of the
Effective Time.
(g) Merger-Related Expenses. MSB 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.
(h) MSB Preferred Share Purchase Rights. At or before
the Effective Time, MSB shall cause the Preferred Share Purchase Rights to be
redeemed for $.01 per Right or otherwise to become inoperable.
6.2. The obligations of MSB under this Agreement shall be further
subject to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions:
(a) Representations and Warranties; Performance of
Obligations of HUBCO. Except for those representations which are made as of a
particular date, the representations and warranties of HUBCO contained in this
Agreement shall be true and correct in all material respects on the Closing Date
as though made on and as of the Closing Date. HUBCO shall have performed in all
material respects the agreements, covenants and obligations to be performed by
it prior to the Closing Date. With respect to any representation or warranty
which as of the Closing Date has required a supplement or amendment to the HUBCO
Disclosure Schedule to render such representation or warranty true and correct
in all material respects as of the Closing Date, the representation and warranty
shall be deemed true and correct as of the Closing Date only if (i) the
information contained in the supplement or amendment to the HUBCO Disclosure
Schedule related to events occurring following the execution of this Agreement
and (ii) the facts disclosed in such supplement or amendment would not either
alone, or together with any other supplements or amendments to the HUBCO
Disclosure Schedule, materially adversely effect the representation as to which
the supplement or amendment relates.
(b) Opinion of Counsel to HUBCO. MSB shall have
received an opinion of counsel to HUBCO, dated the Closing Date, in form and
substance reasonably satisfactory to MSB, covering the matters customarily
covered in opinions of counsel in transactions of this type.
(c) Fairness Opinion. MSB shall have received an
opinion from Keefe, dated no more than three days prior to the date the Proxy
Statement-Prospectus is mailed to MSB's stockholders (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 stockholders of
MSB hereunder is fair to such stockholders from a financial point of view
("Fairness Opinion"), and HUBCO shall not have taken any action (including the
announcement of any other proposed acquisition) which causes Keefe to withdraw
its Fairness Opinion prior to the Closing.
(d) Certificates. HUBCO shall have furnished MSB with
such certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 6.3 as MSB may
reasonably request.
(e) Certain Contracts. HUBCO shall have specifically
acknowledged, accepted and assumed (in a document in form and substance
reasonably satisfactory to MSB) any written employment, severance and other
compensation contracts between MSB and its officers and directors (including
former officers and directors) contained in the MSB Disclosure Schedules in a
writing delivered to the officers and directors covered thereby, unless the
employment contract is terminated or, if applicable, the employment of the
officer by MSB is terminated for any reason prior to the Closing, or if the
employment, severance and other contracts have been amended as provided
hereunder HUBCO shall assume the amended written contracts.
(f) Directors. One nominee, designated by MSB (which
may be William Myers) and acceptable to HUBCO, shall be duly appointed by the
Board of Directors of HUBCO to HUBCO's Board of Directors, effective at the
Effective Time. Provision shall have been made such that all directors of MSB
shall have been appointed as directors of the Surviving Bank (or shall continue
as directors of Bank if the Bank Merger is not consummated at the Effective
Time). HUBCO shall have caused William Myers to be elected Vice Chairman of the
Board of the New York Bank and President of the Southern Region of the New York
Bank. HUBCO shall have presented to William Myers, for his acceptance by
countersignature, an employment agreement executed by HUBCO which contains (i)
the specific terms set forth in Section 5.20 of the HUBCO Disclosure Schedule
and (ii) terms which are otherwise reasonable and which are not inconsistent
with the terms set forth in Section 5.20 of the HUBCO Disclosure Schedule.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of this Agreement by the stockholders of
MSB:
(a) by mutual written consent of the parties hereto;
(b) by HUBCO or MSB (i) if the Effective Time shall
not have occurred on or prior to June 30, 1998 unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements set forth herein to be performed
or observed by such party at or before the Effective Time, or (ii) if a vote of
the stockholders of MSB is taken and such stockholders fail to approve this
Agreement at the meeting (or any adjournment or postponement thereof) held for
such purpose, or (iii) if a vote of the stockholders of HUBCO is required by
applicable NASDAQ rules, such vote is taken and such stockholders fail to
approve this Agreement at the meeting (or any adjournment or postponement
thereof) held for such purpose;
(c) by HUBCO or MSB 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 MSB
if any such application is approved with conditions (other than conditions which
are customary in such regulatory approvals) which would have a Material Adverse
Effect on HUBCO;
(d) by HUBCO if (i) there shall have occurred a
change in the business, operations, assets, or financial condition of MSB and
Bank, taken as a whole, from that disclosed by MSB in MSB's Quarterly Report on
Form 10-Q for the three months ended September 30, 1997 which change shall have
resulted in a Material Adverse Effect on MSB (it being understood that those
matters disclosed in the MSB Disclosure Schedule shall not be deemed to have
caused such a Material Adverse Effect) or (ii) there was a material breach in
any representation, warranty, covenant, agreement or obligation of MSB hereunder
and such breach shall not have been remedied within 30 days after receipt by MSB
of notice in writing from HUBCO to MSB specifying the nature of such breach and
requesting that it be remedied;
(e) by MSB, if (i) there shall have occurred a change
in the business, operations, assets or financial condition of HUBCO and its
Subsidiaries taken as a whole from that disclosed by HUBCO in HUBCO's Quarterly
Report on Form 10-Q for the three months ended September 30, 1997 except for the
Effects of Announced Acquisitions, 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 have caused
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 MSB specifying the nature of such breach and
requesting that it be remedied;
(f) by MSB, if MSB'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 Section
6.2 are not satisfied and are not capable of being satisfied by June 30, 1998;
(h) by MSB if the conditions set forth in Section 6.3
are not satisfied and are not capable of being satisfied by June 30, 1998; or
(i) by MSB, in accordance with Section 2.1(a)(iii).
7.2. In the event of the termination and abandonment of this
Agreement by either HUBCO or MSB 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 stockholders.
Nothing contained herein, however, shall relieve any party from any liability
for any breach of this Agreement.
7.3. This Agreement may be amended by action taken by the parties
hereto at any time before or after adoption of this Agreement by the
stockholders of MSB but, after any such adoption, no amendment shall be made
which reduces or changes the amount or form of the consideration to be delivered
to the shareholders of MSB without the approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all the parties hereto.
7.4. 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. 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, MSB may bear the expenses of Bank.
8.2. 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. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or by reputable overnight courier or sent by registered or certified mail,
postage prepaid, as follows:
(a) If to HUBCO, to:
HUBCO, Inc.
1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman,
President and Chief Executive Officer
Copy to: 1000 MacArthur Blvd.
Mahwah, New Jersey 07430
Attn.: D. Lynn Van Borkulo-Nuzzo, Esq.
And copy to: Pitney, Hardin, Kipp & Szuch
(Delivery) 200 Campus Drive
Florham Park, New Jersey
(Mail) P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
Michael W. Zelenty, Esq.
(b) If to MSB or Bank, to:
MSB Bancorp, Inc.
35 Matthews Street
Goshen, New York 10924
Attn.: William C. Myers,
Chairman of the Board, President
and Chief Executive Officer
Copy to: Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10048
Attn.: Omer S.J. Williams, 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. 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. 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. 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. 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. The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
8.9. Representations made herein which are qualified by the
phrase to the best of MSB's knowledge or similar phrases refer as of the date
hereof to the best knowledge of the Chief Executive Officer, the Chief Financial
Officer and the Executive Vice President and Chief Operating Officer of MSB and
thereafter refer to the best knowledge of any senior officer of MSB or any MSB
Subsidiary. Representations made herein which are qualified by the phrase to the
best of HUBCO's knowledge or similar phrases refer as of the date hereof to the
best of the knowledge of the Chairman, President and Chief Executive Officer,
the Executive Vice President/Legal and the Chief Financial Officer of HUBCO and
thereafter refer to the best knowledge of any senior officer of HUBCO or any
HUBCO Subsidiary. Any reference to a person's knowledge or best knowledge shall
mean, as of the date of the statement in question, such person's actual
knowledge or what such person should have known in the ordinary exercise of that
person's duties in the capacity referred to herein.
IN WITNESS WHEREOF, HUBCO, MSB and Bank have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
ATTEST: HUBCO, INC.
D. LYNN VAN BORKULO-NUZZO KENNETH T. NEILSON
By: __________________________ By: _____________________________
D. Lynn Van Borkulo-Nuzzo, Kenneth T. Neilson, Chairman,
Secretary President and Chief Executive Officer
ATTEST: MSB BANCORP, INC.
KAREN DELUCA WILLIAM C. MYERS
By: _________________________ By: _____________________________
Karen DeLuca, Secretary William C. Myers, Chairman of the
Board, President and Chief Executive
Officer
ATTEST: MSB BANK
KAREN DELUCA WILLIAM C. MYERS
By: _________________________ By: ____________________________
Karen DeLuca, Secretary William C. Myers, Chairman of the
Board, President and Chief Executive
Officer
<PAGE>
CERTIFICATE OF MSB AND MSB DIRECTORS
Reference is made to the Agreement and Plan of Merger, dated
December 15, 1997 (the "Agreement"), among HUBCO, Inc., MSB Bancorp, Inc., and
MSB Bank. Capitalized terms used herein have the meanings given to them in the
Agreement.
Each of the following persons, being all of the directors of
MSB and Bank, agrees to vote or cause to be voted all shares of MSB Stock which
are held by such person, or over which such person exercises full voting control
(except as trustee or in a fiduciary capacity, or as nominee), in favor of the
Merger.
WILLIAM C. MYERS NICHOLAS J. SCALI
- ------------------------------------ ------------------------------------
William C. Myers Nicholas J. Scali
FREDERICK B. WILDFOERSTER, JR. JOHN L. KRAUSE
- ------------------------------------ ------------------------------------
Frederick B. Wildfoerster, Jr. John L. Krause
DOUGLAS PORTO RALPH W. DECKER
- ------------------------------------ ------------------------------------
Douglas Porto Ralph W. Decker
JOAN M. COSTELLO JOSEPH R. DONOVAN
- ------------------------------------ ------------------------------------
Joan M. Costello Joseph R. Donovan
Dated: December 15, 1997
<PAGE>
EXHIBIT 2.1(a)
TERMS OF SERIES C PREFERRED STOCK
Section 1. General.
The Series C Preferred Stock, shall have a stated value of $.01 per
share, and the shares therefore, when issued for such amount, shall be fully
paid and non-assessable. The Series C Preferred Stock shall consist of _______
shares, which number may be increased (but only in connection with a stock split
or stock dividend) or decreased from time to time (but not below the number
thereof then outstanding) by the Board of Directors. Upon the reacquisition of
any of the Series C Preferred Stock, through conversion or otherwise, such
reacquired Shares shall be canceled and shall become part of the authorized and
unissued Preferred Stock, but shall not be authorized and unissued Series C
Preferred Stock. The rights, preferences and limitations of the Series C
Preferred Stock are as follows:
Section 2. Dividends.
(a) Dividends shall accrue daily on each share of this Series C for
each dividend payment period at the rate of 8.75% per annum (multiplied by the
liquidation preference per share) or $___ per share per annum from the date of
their original issuance to and including [the first of January 15, April 15,
July 15 or October 15, 1998 to follow the Effective Time of the Merger] (the
"Initial Dividend Period") and for each quarterly dividend payment period
thereafter, commencing on January 15, April 15, July 15 and October 15 as the
case may be, of each year and ending on and including the day next preceding the
first day of the next such quarterly dividend payment period (a "Quarterly
Dividend Period" and, together with the Initial Dividend Period, a "Dividend
Period"). Such dividends shall accrue from the date of original issuance of such
shares, shall be payable in arrears, when, as and if declared by the Board of
Directors and out of funds of the Corporation legally available for the payment
of dividends, on the 15th day of January, April, July and October of each year,
commencing [the first of January 15, April 15, July 15 or October 15, 1998 to
follow the Effective Time of the Merger] and shall cumulate if not paid on such
payment dates, whether or not in any Dividend Period or Periods there shall be
funds of the Corporation legally available for the payment of dividends. Each
such dividend shall be paid to the holders of record of shares of this Series C
as they appear on the books of the Corporation on such record dates, not
exceeding 30 days preceding the payment dates thereof ("Dividend Payment
Dates"), as shall be fixed by the Board of Directors of the Corporation or by a
duly authorized committee thereof (each a "Dividend Record Date").
(b) The amount of dividends per share of this Series C payable for each
Quarterly Dividend Period shall be $_____. The amount of dividends payable for
the Initial Dividend Period or any period shorter than a full Quarterly Dividend
Period shall be computed on the basis of 30-day months, a 360-day year and the
actual number of days elapsed in the period.
(c) No dividends shall be declared or paid or set apart for payment on
any series of preferred stock or any class of capital stock of the Corporation
ranking, as to dividends or upon liquidation, on a parity with or junior to this
Series C for any period (other than dividends payable in Common Stock or another
stock ranking junior to this Series C as to dividends and upon liquidation), nor
shall the Corporation make any other distribution on the Common Stock of the
Corporation or on any other stock of the Corporation ranking junior to or on a
parity with this Series C as to dividends or upon liquidation, unless (i) full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment on
this Series C for all past Dividend Periods for this Series C terminating on or
prior to the date of payment of any such dividends on the Common Stock or such
other series of preferred stock and (ii) sufficient funds have been set apart
for payment of dividends on this Series C for the Dividend Period during which
payment is to be made for such current Dividend Period. When full cumulative
dividends for all past and current Dividend Periods are not paid or provided
for, as aforesaid, upon the shares of this Series C and any other series of
preferred stock and any other class of capital stock of the Corporation ranking,
as to dividends, on a parity with this Series C (herein referred to as "Dividend
Parity Stock"), all dividends declared upon shares of this Series C and any
other Dividend Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on this Series C and all other Dividend Parity
Stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of this Series C and such other Dividend
Parity Stock bear to each other. Holders of shares of this Series C shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on this Series C. No interest
or sum of money in lieu of interest shall be payable in respect of any dividend
payment or payments on this Series C which may have accumulated or be in
arrears. As used herein, the phrase "set apart" in respect of the payment of
dividends shall require deposit of any funds in a bank or trust company that is
not an Affiliate of the Corporation in a separate deposit account maintained for
the benefit of the holders of this Series C.
(d) Unless full cumulative dividends on all outstanding shares of this
Series C shall have been paid for all past dividend payment periods or declared
and set apart for payment, so long as any shares of this Series C are
outstanding, no Common Stock or any other stock of the Corporation ranking
junior to or on a parity with this Series C as to dividends or upon liquidation
and no warrants, calls, options or other rights to acquire Common Stock, any
equity security of the Corporation or other security exercisable or exchangeable
into Common Stock or any such other stock of the Corporation shall be redeemed,
purchased or otherwise acquired or retired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Corporation or any entity directly or indirectly
controlled by the Corporation (except by conversion into or exchange for stock
of the Corporation or such entity ranking junior to this Series C as to
dividends and upon liquidation).
(e) If the percentage of dividends payable on the shares of this Series
C that is deductible under Section 243(a)(i) of the Internal Revenue Code of
1986, as amended, is reduced below 70%, the dividend rate of this Series C shall
be increased, during any period any such deduction is in effect, by an amount
equal to 5.829 basis points for each percentage point the 70% rate is reduced.
Thus, for example, if the dividend rate on this Series C is then 8.75% and if
such percentage changes from 70% to 65%, the dividend rate on this Series C
shall be increased to 9.04145%.
Section 3. Redemption.
(a) After January 10, 1999, the shares of this Series C shall be
redeemable by the Corporation in whole or, from time to time, in part. The
shares of this Series C shall be redeemable by the Corporation at the redemption
prices (expressed as a percentage of the liquidation preference per share of
Series C) as follows, plus in each case an amount equal to all accrued and
unpaid dividends thereon (whether or not earned or declared) to the date fixed
for redemption.
If redeemed during the twelve-month period beginning January 10 of the
year indicated:
Year Redemption Price Per Share
---- --------------------------
1999 106.125%
2000 105.250
2001 104.375
2002 103.500
2003 102.625
2004 101.750
2005 100.875
and at 100% per share thereafter.
(b) In the event that fewer than all the outstanding shares of this
Series C are to be redeemed as permitted by this Section 3, the number of shares
to be redeemed shall be determined by the Board of Directors, and the shares to
be redeemed shall be determined by lot or pro rata as may be determined by the
Board of Directors or by such other method as may be approved by the Board of
Directors that is required to conform to any rule or regulation of any stock
exchange upon which the shares of this Series C may at the time be listed.
(c) Notice of any redemption of shares of this Series C, specifying the
date fixed for redemption (herein referred to as the "Redemption Date") and
place of redemption, shall be given by first class mail to each holder of record
of the shares to be redeemed, at his address of record, not more than 60 nor
less than 30 days prior to the Redemption Date. Each such notice shall also
specify the redemption price applicable to the shares to be redeemed and that
dividends on shares to be redeemed shall cease to accrue and accumulate on the
Redemption Date. If less than all the shares owned by such stockholder are then
to be redeemed, the notice shall also specify the number of shares thereof which
are to be redeemed and the fact that a new certificate or certificates
representing any unredeemed shares shall be issued without cost to such holder.
(d) Notice of redemption of shares of this Series C having been given
as provided in paragraph (c) of this Section 3, then, unless the Corporation
shall have defaulted in providing for the payment of the redemption price and an
amount equal to all accrued and unpaid dividends to the Redemption Date,
dividends shall cease to accrue on the shares of this Series C called for
redemption at the Redemption Date, all rights of the holders thereof (except the
right to receive the redemption price and all accrued and unpaid dividends to
the Redemption Date) shall cease with respect to such shares and such shares
shall not, after the Redemption Date, be deemed to be outstanding and shall not
have the status of preferred stock. In case fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
(e) Any shares of this Series C which shall at any time have been
redeemed or converted shall, after such redemption or conversion, have the
status of authorized but unissued shares of preferred stock, without designation
as to series until such shares are once more designated as part of a particular
series by the Board of Directors.
(f) In the event that full cumulative dividends on this Series C have
not been paid or declared and set apart for payment for all past Dividend
Periods, no shares of this Series C shall be redeemed unless all outstanding
shares of this Series C are simultaneously redeemed, and neither the Corporation
nor any entity directly or indirectly controlled by the Corporation shall
purchase or otherwise acquire any shares of this Series C; provided, however,
that the foregoing shall not prevent the purchase or acquisition of shares of
this Series C pursuant to a purchase or exchange offer made on the same terms to
all holders of all outstanding shares of this Series C or pursuant to the
exercise of the conversion right provided in Section 4.
(g) Shares of this Series C are not subject or entitled to the benefit
of a sinking fund.
(h) In addition to the Corporation's right to redeem any or all of the
Series C as provided in this Section 3, upon the exercise by a holder of Series
C of the conversion privilege pursuant to Section 4 below, the Corporation may,
by notice of redemption given pursuant to this Section 3 prior to the close of
business on the 10th business day after the date on which all of the conditions
specified in paragraph (b)(1) of Section 4 hereof are satisfied redeem all or a
part of the shares of Series C so surrendered for conversion at a per share
redemption price equal to (i) the Current Market Price (as defined in Section
4(d)(4) hereof) of the Corporation's Common Stock on the date the shares of this
Series C are surrendered for conversion multiplied by the number of shares of
Common Stock into which the Series C shares then subject to the Corporation's
notice of redemption would have been convertible, or (ii) the redemption price
specified in Section 3(a), whichever of (i) or (ii) is higher. This redemption
must be funded and completed within three business days of the Corporation's
notice, or the Corporation's right to redeem the shares of this Series C subject
to the Corporation's notice pursuant to this paragraph (h) shall be
extinguished.
Section 4. Conversion.
(a) Subject to and upon compliance with the provisions of this Section
4, and subject to the Corporation's right to redeem shares of Series C
surrendered for conversion pursuant to Section 3(h) hereof, on or after January
10, 1999, the holder of any shares of this Series C shall have the right, at its
option, to convert the shares into a number of fully paid and nonassessable
shares of Common Stock (calculated as to each conversion to the nearest 1/100th
of a share) equal to $_____ for each share surrendered for conversion divided by
the Conversion Price (as defined in paragraph (d) of this Section 4 below) by
surrendering the shares to be converted, in the manner provided in paragraph (b)
of this Section 4 below; provided however, that if the Corporation shall have
called some or all of the shares of this Series C for redemption, such right
shall terminate on the close of business on the third business day next
preceding the date fixed for redemption unless the Corporation has defaulted in
making or providing for the payment due on the date fixed for redemption.
Anything herein to the contrary notwithstanding, the shares of this Series C
shall become immediately convertible under the circumstances, and subject to the
terms and conditions, set forth in paragraph (i) of this Section 4.
(b) (1) In order to exercise the conversion privilege, the holder of
each share of this Series C to be converted shall surrender the
certificate representing such share to the Conversion Agent for this
Series C appointed for such purpose by the Corporation (the "Conversion
Agent"), or, if no Conversion Agent has been appointed or if the holder
has not received notice of such appointment, then to the Corporation,
with the Notice of Election to Convert on the back of said certificate
duly completed and signed, together with funds equal to the Dividend
Amount, if any, required to be paid under paragraph (b)(2) of this
Section 4 below, at the principal office of the Conversion Agent or the
Corporation, as the case may be. Unless the shares issuable on
conversion are to be issued in the same name as the name in which the
shares of this Series C are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Corporation, duly executed by the holder or its
duly authorized attorney and by funds in an amount sufficient to pay
any transfer or similar tax.
(2) The holders of shares of this Series C at the close of
business on a Dividend Record Date shall be entitled to receive the
dividend payable on those shares on the corresponding Dividend Payment
Date notwithstanding the conversion of the shares after the Dividend
Record Date or the Corporation's default in payment of the dividend due
on the Dividend Payment Date. However, shares of this Series C
surrendered for conversion during the period between the close of
business on any Dividend Record Date and the opening of business on the
corresponding Dividend Payment Date (except shares called for
redemption on a date fixed for redemption during that period) must be
accompanied by payment of an amount equal to the dividend payable on
the shares on the Dividend Payment Date (the "Dividend Amount"). The
dividend with respect to a share of this Series C called for redemption
during the period from the close of business on the Record Date to the
opening of business on the corresponding Dividend Payment Date will be
payable upon such Dividend Payment Date, and the holder converting such
share of this Series C need not include a payment of such dividend
amount upon surrender of such share of this Series C. The holders of
shares of this Series C on a Dividend Record Date who (or whose
transferees) convert any of those shares on or after the corresponding
Dividend Payment Date will receive the dividend payable by the
Corporation on those shares of this Series C on the Dividend Payment
Date, and need not include payment of the Dividend Amount upon
surrender of those shares for conversion. Except as provided above, the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of this Series C, whether or not in arrears, on
conversion of those shares, or for dividends on the shares of Common
Stock issued upon the conversion.
(3) As promptly as practicable after the surrender by a holder
of the certificates for shares of this Series C in accordance with this
paragraph (b), and subject to the Corporation's right to redeem all or
a part of such Series C shares as provided in Section 3(h) hereof, the
Corporation shall issue and shall deliver at the office of the
Conversion Agent to the holder, or on its written order, a certificate
or certificates for the number of full shares of Common Stock issuable
upon the conversion of those shares in accordance with the provisions
of this paragraph (b)(3), and any fractional interest in respect of a
share of Common Stock arising upon the conversion shall be settled as
provided in paragraph (c) of this Section 4 below.
(4) Unless the Corporation shall have exercised its right to
redeem the shares of Series C surrendered for conversion pursuant to
this Section 4, each conversion shall be deemed to have been effected
as of the close of business on the 10th business day after the date on
which all of the conditions specified in paragraph (b)(1) of this
Section 4 above shall have been satisfied, and, the person or persons
in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common
Stock represented by those certificates at such time on such date and
such conversion shall be at the Conversion Price in effect at such time
on such date, unless the stock transfer books of the Corporation shall
be closed on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer books
are open, but such conversion shall be at the Conversion Price in
effect on the 10th business day after the date upon which all of the
conditions specified in paragraph (b)(1) of this Section 4 above shall
have been satisfied. All shares of Common Stock delivered upon
conversion of this Series C will upon delivery be duly and validly
issued and fully paid and nonassessable, free of all liens and charges
and not subject to any preemptive rights. Upon the surrender of
certificates representing shares of this Series C to be converted and
the failure of the Corporation to provide to the holder thereof a
notice of redemption pursuant to paragraph (h) of Section 3 hereof
prior to the 10th business day after the date on which all of the
conditions specified in paragraph (b)(1) of this Section 4 shall have
been satisfied, the shares shall no longer be deemed to be outstanding
and all rights of a holder with respect to the shares surrendered for
conversion shall immediately terminate except the right to receive the
Common Stock or other securities, cash or other assets as herein
provided (including without limitation any dividend payable as
specified in paragraph (b)(1) of this Section 4 above).
(c) No fractional shares or securities representing fractional shares
of Common Stock shall be issued upon conversion of this Series C. Any fractional
interest in a share of Common Stock resulting from conversion of a share of this
Series C shall be paid in cash (computed to the nearest cent) based on the price
(as defined in paragraph (d)(4) of this Section 4 below) of the Common Stock on
the Trading Day (as defined in paragraph (d)(4) below) next preceding the day of
conversion. If more than one share shall be surrendered for conversion at one
time by the same holder, the number of whole shares of Common Stock issuable
upon the conversion shall be computed on the basis of the aggregate Liquidation
Preference (as such term is defined in paragraph (a) of Section 7 below) of the
shares of this Series C so surrendered.
(d) The "Conversion Price" per share of this Series C shall be $____,
subject to adjustment from time to time as follows:
(1) In case the Corporation shall (1) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (2)
subdivide its outstanding Common Stock into a greater number of shares,
or (3) combine its outstanding Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such event
shall be proportionally adjusted so that the holder of any share of
this Series C thereafter surrendered for conversion shall be entitled
to receive the number and kind of shares of Common Stock of the
Corporation which such holder would have been entitled to receive had
the share been converted immediately prior to the happening of such
event. An adjustment made pursuant to this paragraph (d)(1) shall
become effective immediately after the record date in the case of a
dividend or distribution except as provided in paragraph (d)(7) of this
Section 4 below, and shall become effective immediately after the
effective date in the case of subdivision or combination. If any
dividend or distribution is not paid or made, the Conversion Price then
in effect shall be appropriately readjusted.
(2) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them (for a period expiring
within 45 days after the record date mentioned below) to subscribe for
or purchase Common Stock at a price per share less than the Current
Market Price (as defined in paragraph (d)(4) of this Section 4 below)
of the Common Stock at the record date for the determination of
stockholders entitled to receive the rights or warrants, the Conversion
Price in effect immediately prior to the issuance of such rights or
warrants shall be adjusted so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
date of issuance of the rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on
the date of issuance of the rights or warrants plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or
purchase would purchase at the Current Market Price at that record
date, and of which the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of the
rights or warrants plus the number of additional shares of Common Stock
for subscription or purchase. The adjustment provided for in this
paragraph (d)(2) shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately, except as
provided in paragraph (d)(7) of this Section 4 below after such record
date. In determining whether any rights or warrants entitle the holders
of the Common Stock to subscribe for or purchase shares of Common Stock
at less than the Current Market Price, and in determining the aggregate
offering price of the shares of Common Stock so offered, there shall be
taken into account any consideration received by the Corporation for
such rights or warrants, the value of such consideration, if other than
cash, to be determined by the Board (whose determination, if made in
good faith, shall be conclusive). If any or all of such rights or
warrants are not so issued or expire or terminate without having been
exercised, the Conversion Price then in effect shall be appropriately
readjusted.
(3) In case the Corporation shall distribute to all holders of
its Common Stock any shares of capital stock of the Corporation (other
than Common Stock) or evidences of indebtedness or assets (excluding
cash dividends or distributions paid from retained earnings of the
Corporation) or rights or warrants to subscribe for or purchase any of
its securities (excluding those referred to in paragraph (d)(2) of this
Section 4 above) then, in each such case, the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of the
distribution by a fraction the numerator of which shall be the Current
Market Price of the Common Stock on the record date mentioned below
less the then fair market value (as determined by the Board, whose
determination, if made in good faith, shall be conclusive) of that
portion of the capital stock or assets or evidences of indebtedness so
distributed, or of the rights or warrants so distributed, applicable to
one share of Common Stock, and the denominator of which shall be the
Current Market Price of the Common Stock on the record date. Such
adjustment shall become effective immediately, except as provided in
paragraph (d)(4) of this Section 4 below, after the record date for the
determination of stockholders entitled to receive such distribution. If
any such distribution is not made or if any or all of such rights or
warrants expire or terminate without having been exercised, the
Conversion Price then in effect shall be appropriately readjusted.
(4) For the purpose of any computation under paragraphs (d)(2)
or (d)(3) of this Section 4 above, the "Current Market Price" of the
Common Stock at any date shall be the average of the last reported sale
prices per share for the ten consecutive Trading Days (as defined
below) preceding the date of such computation. The last reported sale
price for each day shall be (i) the last reported sale price of the
Common Stock on the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotation System (the "Nasdaq
National Market System"), or any similar system of automated
dissemination of quotations of securities prices then in common use, if
so quoted, or (ii) if not quoted as described in clause (i), the mean
between the high bid and low asked quotations for the Common Stock as
reported by the National Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and asked quotations for the
Common Stock on at least five of the ten preceding days, or (iii) if
the Common Stock is listed or admitted for trading on any national
securities exchange, the last sale price, or the closing bid price if
no sale occurred, of the Common Stock on the principal securities
exchange on which the Common Stock is listed. If the Common Stock is
quoted on a national securities or central market system, in lieu of a
market or quotation system described above, the last reported sale
price shall be determined in the manner set forth in clause (ii) of the
preceding sentence if bid and asked quotations are reported but actual
transactions are not, and in the manner set forth in clause (iii) of
the preceding sentence if actual transactions are reported. If none of
the conditions set forth above is met, the last reported sale price of
the Common Stock on any day or the average of such last reported sale
prices for any period shall be the fair market value of such class of
stock as determined by a member firm of the New York Stock Exchange,
Inc. selected by the Corporation. As used herein the term "Trading
Days" means (x) if the Common Stock is quoted on the Nasdaq National
Market System or any similar system of automated dissemination of
quotations of securities prices, days on which trades may be made on
such system, or (y) if not quoted as described in clause (x), days on
which quotations are reported by the National Quotation Bureau
Incorporated, or (z) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such
national securities exchange is open for business.
(5) No adjustment in the Conversion Price shall be required
unless such adjustment would require a change of at least one percent
in the Conversion Price; provided, however, that any adjustments which
by reason of this paragraph (d)(5) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment;
and provided, further, that adjustment shall be required and made in
accordance with the provisions of this Section 4 (other than this
paragraph (d)(5)) not later than such time as may be required in order
to preserve the tax free nature of a distribution to the holders of
shares of Common Stock. All calculations under this Section 4 shall be
made to the nearest cent or the nearest one hundredth of a share, as
the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled to make such
reductions in the Conversion Price, in addition to those required by
this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision or combination
of shares, distribution of capital stock or rights or warrants to
purchase stock or securities, or distribution of evidences of
indebtedness or assets (other than cash dividends or distributions paid
from retained earnings) hereinafter made by the Corporation to its
stockholders shall be a tax free distribution for federal income tax
purposes.
(6) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with the Conversion Agent
an officers' certificate setting forth the Conversion Price after the
adjustment and setting forth a brief statement of the facts requiring
the adjustment, which certificate shall be conclusive evidence of the
correctness of the adjustment. Promptly after delivery of the
certificate, the Corporation shall prepare a notice of the adjustment
of the Conversion Price setting forth the adjusted Conversion Price and
the date on which the adjustment becomes effective and shall mail the
notice of such adjustment of the Conversion Price to the holder of each
share of this Series C at such holder's last address as shown on the
stock books of the Corporation.
(7) In any case in which this paragraph (d) provides that an
adjustment shall become effective immediately after a record date for
an event, the Corporation may defer until the occurrence of the event
(i) issuing to the holder of any share of this Series C converted after
the record date and before the occurrence of the event the additional
shares of Common Stock issuable upon the conversion by reason of the
adjustment required by the event over and above the Common Stock
issuable upon such conversion before giving effect to the adjustment
and (ii) paying to the holder any amount in cash in lieu of any
fractional share pursuant to paragraph (c) of this Section 4 above.
(e) If:
(1) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
(2) there shall be any reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common
Stock and other than a change in the par value, or from par value to no
par value, or from no par value to par value), or any consolidation,
merger, or statutory share exchange to which the Corporation is a
party, or any sale or transfer of all or substantially all the assets
of the Corporation; or
(3) there shall be a voluntary or an involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the Conversion Agent, and
shall cause to be mailed to the holders of shares of this Series C at their
addresses as shown on the stock books of the Corporation, at least 15 days prior
to the applicable date hereinafter specified, a notice stating (i) the date on
which a record is to be taken for the purpose of the dividend, distribution or
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to the dividend, distribution
or rights or warrants are to be determined or (ii) the date on which the
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the reclassification,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice or any defect in the
notice shall not affect the legality or validity of the proceedings described in
this paragraph (e).
(f) (1) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Common Stock or its issued shares
of Common Stock held in its treasury, or both, for the purpose of
effective conversions of this Series C the full number of shares of
Common Stock deliverable upon the conversion of all outstanding shares
of this Series C not theretofore converted. For purposes of this
paragraph (f), the number of shares of Common Stock which shall be
deliverable upon the conversion of all outstanding shares of this
Series C shall be computed as if at the time of computation all the
outstanding shares were held by a single holder.
(2) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the
shares of Common Stock deliverable upon conversion of this Series C,
the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the adjusted Conversion Price.
(3) The Corporation will endeavor to list the shares of Common
Stock required to be delivered upon conversion of this Series C, prior
to the delivery, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of delivery.
(4) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of this
Series C, the Corporation will endeavor, in good faith and as
expeditiously as possible, to comply with all federal and state laws
and regulations thereunder requiring the registration of those
securities with, or any approval of or consent to the delivery thereof
by, any governmental authority.
(g) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of this Series C pursuant hereto; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the holder of this Series C to be converted
and no such issue or delivery shall be made unless and until the person
requesting the issue or delivery has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that the
tax has been paid.
(h) In case of any reclassification or change of outstanding shares of
Common Stock (other than change in par value, or as a result of subdivision or
combination), or in case of any consolidation of the Corporation with, or merger
of the Corporation with or into, any other entity that requires the vote of the
holders of Common Stock or that results in a reclassification, change,
conversion, exchange or cancellation of outstanding shares of Common Stock or
any sale or transfer of all or substantially all of the assets of the
Corporation, each holder of shares of this Series C then outstanding shall, in
connection with such transaction, have the right to convert the shares of this
Series C held by the holder into the kind and amount of securities, cash and
other property which the holder would have been entitled to receive upon such
reclassification, change, consolidation, merger, sale or transfer if the holder
had held the Common Stock issuable upon the conversion of the shares of this
Series C immediately prior to the reclassification, change, consolidation,
merger, sale or transfer.
(i) In the event that the Corporation shall consummate any
consolidation or merger or similar business combination, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged solely for
or changed, reclassified or converted into stock, securities or cash or any
other property, or any combination thereof, then provision shall be made so that
shares of this Series C that are not immediately converted and receive the
consideration provided in paragraph (h) of this Section 4, shall, in connection
with such consolidation, merger or similar business combination, be assumed by
and shall become preferred stock of such successor or resulting corporation,
having in respect of such corporation, insofar as possible, the same powers,
preferences and relative rights, and the qualifications, limitations or
restrictions thereon, that this Series C had immediately prior to such
transaction, except that after such transaction each share of this Series C
shall be immediately convertible, otherwise on the terms and conditions provided
by Section 4, into the nature and kind of consideration so receivable by a
holder of the number of shares of Common Stock into which such shares of this
Series C could have been converted immediately prior to such transaction. The
rights of this Series C as preferred stock of such successor or resulting
corporation shall successively be subject to adjustments pursuant to Section 4
and paragraph (d) of this Section 4 hereof after any such transaction as nearly
equivalent as practicable to the adjustment provided for by such paragraph prior
to such transaction. The Corporation shall not consummate any such merger,
consolidation or similar transaction unless all then outstanding shares of this
Series C (other than such shares that are converted pursuant to paragraph (h) of
this Section 4) shall be assumed and authorized by the successor or resulting
corporation as aforesaid.
Section 5. Preemptive Rights. Shares of this Series C are not entitled
to any preemptive rights to acquire any unissued shares of any stock of the
Corporation, now or hereafter authorized, or any other securities of the
Corporation, whether or not convertible into shares of stock of the Corporation
or carrying a right to subscribe to or acquire any such shares of stock.
Section 6. Voting. Except as required by law, the shares of this Series
C shall not have any voting powers, either general or special, except as
provided in this Section 6:
(a) Unless the vote of the holders of a greater number of shares shall
then be required by law, the affirmative vote of the holders of at least 66-2/3%
of all of the shares of this Series C at the time outstanding given in person or
by proxy, at a meeting called for the purpose, on which matter the holders of
shares of this Series C shall vote together as a separate class, shall be
necessary to authorize, effect or validate any amendment, alteration or repeal
of any of the provisions of the Certificate of Incorporation of the Corporation
or of any certificate, amendatory or supplemental thereto which amendment,
alteration or repeal would, if effected, adversely affect the powers,
preferences, rights or privileges of this Series C other than any such amendment
or alteration subject to paragraph (b) of this Section 6.
(b) Notwithstanding anything set forth herein to the contrary, the
Board of Directors of the Corporation without the vote of the holders of shares
of this Series C may authorize and issue additional shares of Common Stock and
preferred stock ranking on a parity as to dividends and upon liquidation with
the shares of this Series C. No class or series of equity securities of the
Corporation may rank senior to this Series C as to dividends or upon
liquidation.
(c) (1) So long as any shares of this Series C are outstanding, if the
Corporation shall have failed to pay full cumulative dividends on all
outstanding shares of this Series C for four Dividend Periods, whether
or not consecutive, the number of directors of the Corporation shall
automatically be increased by two, and the holders of this Series C
shall have the right, voting together as a class and separately from
all other classes and series, to elect such two additional directors at
a special meeting of holders of the shares of this Series C to be held
for the purpose of electing directors and thereafter at each successive
annual meeting of stockholders. The right of the holders of this Series
C to elect such members of the Board of Directors as aforesaid shall
continue until full cumulative dividends for all past Dividend Periods
on this Series C have been paid or declared and set apart for payment.
(2) Each director elected by the holders of this Series C
shall comply with the requirements of New Jersey law applicable to
directors of a New Jersey corporation and with all federal laws
applicable to directors of a savings and loan holding company. Unless
otherwise required by law, directors elected by the holders of this
Series C shall not become members of any of the three classes of
directors otherwise required by the Certificate of Incorporation and
By-laws of the Corporation with respect to the remaining directors
elected by other classes or series of stock entitled to vote therefor
but shall serve until the next annual meeting or until their respective
successors shall be elected and shall qualify. At such time as all
cumulative dividends have been paid in full, the voting right of the
holders of this Series C shall, without further action, terminate,
subject to revesting in the event of each and every subsequent failure
of the Corporation to pay such dividends for the requisite number of
periods described above.
(3) The term of office of all directors elected by the holders
of this Series C in office at any time when the aforesaid voting right
is vested in such holders shall terminate upon the election of their
successors at any meeting of stockholders held for the purpose of
electing directors, provided, however, that, without further action,
and unless otherwise required by law, any director that shall have been
elected by holders of this Series C as provided herein may be removed
at any time, either with or without cause, by the affirmative vote of
the holders of record of a majority of outstanding shares of this
Series C, voting separately as one class, at a duly held meeting of the
holders of this Series C.
(4) Upon the later of any termination of the aforesaid voting
right in accordance with the foregoing provisions or the expiration of
the minimum term of office required by law, the term of office of all
directors elected by the holders of this Series C pursuant thereto then
in office shall, without further action, thereupon terminate unless
otherwise required by law. Upon such termination, the number of
directors constituting the board of directors of the Corporation shall,
without further action, be reduced by two, subject always to the
increase of the number of directors pursuant to the provisions of this
paragraph (c) in the case of the future right of such holders of this
Series C to elect directors as provided herein.
(5) Unless otherwise required by law, in case of any vacancy
occurring among the directors so elected by the holders of this Series
C, the remaining director may appoint a successor to hold office for
the unexpired term of the director whose place shall be vacant, and if
all directors so elected shall cease to serve as directors before their
term shall expire, the holders of this Series C then outstanding may,
at a meeting of such holders duly held, elect successors to hold office
for the unexpired terms of the directors whose places shall be vacant.
(6) The directors elected by the holders of this Series C in
accordance with the provisions of this paragraph (c) shall be entitled
to one vote per director on any matter and otherwise to the same rights
and privileges as all other directors of the Corporation.
(7) So long as any shares of this Series C are outstanding,
the Certificate of Incorporation and By-laws of the Corporation shall
contain provisions ensuring that the number of directors of the
Corporation shall at all times be such that the exercise by the holder
of shares of this Series C of the right to elect directors under the
circumstances provided in this paragraph (c) will not contravene any
provisions of the Corporation's Certificate of Incorporation or
By-laws.
(8) On any matter on which the holders of Series C shall be
entitled to vote, they shall be entitled to one vote for each share
held. The holders of Series C shall vote only as a separate class;
their votes shall not be counted together with the holders of the
Common Stock or any other class or series of Preferred Stock as a
single class. At any meeting of stockholders held while holders of this
Series C have the voting power set forth in this paragraph (c), the
holders of a majority of the then outstanding shares of this Series C
who are present in person or by proxy shall be sufficient to constitute
a quorum for the election of directors as herein provided.
(d) Notwithstanding anything to the contrary in Chapter 11 of the New
Jersey Business Corporation Act, the holders of this Series C shall be entitled
to dissenters' rights pursuant to, and to the fullest extent permitted by, the
Chapter 11 of the New Jersey Business Corporation Act in the event of a merger
or consolidation in which the Corporation is a constituent corporation or the
sale of substantially all of the assets of the Corporation.
Section 7. Liquidation Rights.
(a) Upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of the shares of this Series C shall
be entitled to receive out of the assets of the Corporation available for
distribution to stockholders under applicable law, before any payment or
distribution of assets shall be made on the Common Stock or on any other class
or series of stock of the Corporation ranking junior to this Series C upon
liquidation, the amount of $___ per share (the "Liquidation Preference"), plus a
sum equal to all dividends accrued on such shares (whether or not earned or
declared ) and unpaid to the date fixed for such liquidation, dissolution or
winding up. The sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property and assets of the Corporation shall not be deemed a dissolution,
liquidation or winding up of the Corporation for the purposes of this Section 7,
nor shall the merger or consolidation of the Corporation into or with any other
corporation or association or the merger or consolidation of any other
corporation or association into or with the Corporation, be deemed to be a
dissolution, liquidation or winding up of the Corporation for the purposes of
this Section 7.
(b) After the payment in cash (in New York Clearing House funds or its
equivalent) to the holders of the shares of this Series C of the full
preferential amounts for the shares of this Series C, as set forth in paragraph
(a) of this Section 7 the holders of this Series C as such shall have no further
right or claim to any of the remaining assets of the Corporation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of this Series C upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 7, no distribution shall be made on
account of any shares of any other series of preferred stock or any other class
of stock of the Corporation ranking on a parity with the shares of this Series C
upon such liquidation, dissolution or winding up unless proportionate amounts
shall be paid on account of the shares of this Series C, ratably, in proportion
to the full amounts to which holders of all such shares which are on a parity
with the shares of this Series C are respectively entitled upon such
dissolution, liquidation or winding up.
Section 8. Rank. The Corporation shall not issue any other series of
preferred stock ranking senior to this Series C as to the payment of dividends
or upon liquidation or any other series of any equity securities ranking senior
to this Series C as to the payment of dividends or upon liquidation. The
Corporation may issue shares of Common Stock and any other series of preferred
stock ranking junior to or on a parity with this Series C as to the payment of
dividends or upon liquidation. For purposes of this certificate of designations,
any stock of any series or class of the Corporation shall be deemed to rank:
(a) senior to the shares of this Series C, as to dividends or upon
liquidation, if the holders of such series or class shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series C;
(b) on a parity with shares of this Series C, as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series C, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of this Series C; and
(c) junior to shares of this Series C, as to dividends or upon
liquidation, if such stock shall be Common Stock or if the holders of shares of
this Series C shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
series or class.
Section 9. Reports and Notices. So long as any shares of this Series C
shall be outstanding, the Corporation shall provide to the holder or holders of
such shares copies of all annual, quarterly and other reports of the Corporation
and copies of all stockholder notices of the Corporation when and as furnished
to the holders of the Common Stock.
Section 10. Restrictions on Transfer. No transfer of the shares of
Series C may be made to any person if, after giving effect to such transfer,
such person would beneficially own more than 25% of the issued and outstanding
shares of Series C then outstanding.
<PAGE>
EXHIBIT 5.19-1
FORM OF MSB AFFILIATE LETTER
December __, 1997
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Gentlemen:
I am delivering this letter to you in connection with the
proposed acquisition (the "Merger") of MSB Bancorp, Inc. (the "Company"), by
HUBCO, Inc., a New Jersey corporation and registered bank holding company
("HUBCO"), pursuant to the Agreement and Plan of Merger dated December 15, 1997
(the "Agreement") between the Company, its bank subsidiary, and HUBCO.
Capitalized terms used herein and not otherwise defined have the meanings
assigned to them in the Agreement. I currently own shares of MSB Common Stock. I
own no shares of MSB Preferred Stock. As a result of the Merger, I will receive
shares of HUBCO Common Stock in exchange for my MSB Common Stock.
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of the Company, as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations promulgated under the Securities Act of 1933, as amended (the "1933
Act") by the Securities and Exchange Commission ("SEC") and as the term
"affiliate" is used for purposes of the SEC's rules and regulations applicable
to the determination of whether a merger can be accounted for as a "pooling of
interests" as specified in the SEC's Accounting Series Release 135, as amended
by Staff Accounting Bulletins Nos. 65 and 76 ("ASR 135").
I represent to and agree with HUBCO that:
A. Transfer Review Restrictions. During the period beginning
on the date hereof and ending 30 days prior to the consummation of the Merger, I
shall not sell, transfer, reduce my risk with respect to or otherwise dispose of
("transfer") any MSB 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
MSB Stock owned by such person or entity, without notifying HUBCO in advance of
the proposed transfer and giving HUBCO a reasonable opportunity to review the
transfer before it is consummated. HUBCO, if advised to do so by its independent
public accountants, may instruct me not to make or permit the transfer because
it may interfere with the "pooling of interests" treatment of the Merger. I
shall abide by any such instructions.
B. Transfer Restrictions During Merger Consummation Period. I
shall not transfer any MSB 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 MSB Stock owned by such person or entity during the period
beginning 30 days prior to the consummation of the Merger and ending immediately
after financial results covering at least 30 days of post-Merger combined
operations have been published by HUBCO by means of the filing of a Form 10-Q or
Form 8-K under the Securities Exchange Act of 1934, as amended, the issuance of
a quarterly earnings report, or any other public issuance which satisfies the
requirements of ASR 135. For purposes of this paragraph only, "MSB Stock"
includes HUBCO Common Stock is converted.
C. Compliance with Rule 145. I have been advised that the
issuance of HUBCO Common Stock to me pursuant to the Merger will be registered
with the SEC under the 1933 Act on a Registration Statement on Form S-4.
However, I have also been advised that, since I may be deemed to be an affiliate
of the Company at the time the Merger is submitted for a vote of the Company's
stockholders, any transfer by me of HUBCO Common Stock is restricted under Rule
145 promulgated by the SEC under the 1933 Act. I agree not to transfer 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 DECEMBER
__, 1997 BETWEEN THE REGISTERED HOLDER HEREOF AND HUBCO, INC., A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF HUBCO, INC."
E. Consultation with Counsel. I have carefully read this
letter and the Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to transfer HUBCO Common Stock to
the extent I felt necessary with my counsel or counsel for the Company.
Execution of this letter is not an admission on my part that I
am an "affiliate" of the Company as described in the second paragraph of this
letter, or a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter. This letter shall
terminate concurrently with any termination of the Agreement in accordance with
its terms.
Very truly yours,
-----------------------------
Name:
Accepted this _____
day of _______, 199__ by
HUBCO, INC.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 5.19-2
FORM OF AFFILIATE LETTER FOR HUBCO AFFILIATES
December __, 1997
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Gentlemen:
I am delivering this letter to you in connection with the
proposed merger (the "Merger") of MSB Bancorp, Inc. ("MSB") with and into HUBCO,
Inc., a New Jersey corporation and registered bank holding company ("HUBCO"),
pursuant to the Agreement and Plan of Merger dated December 15, 1997 (the
"Agreement") between MSB, its bank subsidiary, and HUBCO. 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 "Commission") applicable to the determination of whether a merger can be
accounted for as a "pooling of interests" as specified in the Commission's
Accounting Series Release 135, as amended by Staff Accounting Bulletins Nos. 65
and 76 ("ASR 135").
I represent and covenant with HUBCO and MSB 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 in advance of the proposed
transfer 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 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.
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.
<PAGE>
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
________________, 199_ by
HUBCO, INC.
By: ________________________________
Name:
Title:
<PAGE>
Appendix B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of December
15, 1997, is by and between HUBCO, Inc., a New Jersey corporation and registered
bank holding company ("HUBCO"), and MSB Bancorp, Inc., a Delaware corporation
and registered savings and loan holding company ("MSB").
BACKGROUND
WHEREAS, HUBCO and MSB, as of the date hereof, are prepared to
execute a definitive agreement and plan of merger (the "Merger Agreement")
pursuant to which MSB will be merged with and into HUBCO (the "Merger"); and
WHEREAS, HUBCO has advised MSB that it will not execute the
Merger Agreement unless MSB executes this Agreement; and
WHEREAS, the Board of Directors of MSB has determined that the
Merger Agreement provides substantial benefits to the shareholders of MSB; and
WHEREAS, as an inducement to HUBCO to enter into the Merger
Agreement and in consideration for such entry, MSB desires to grant to HUBCO an
option to purchase authorized but unissued shares of common stock of MSB 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 MSB,
intending to be legally bound hereby, agree:
Grant of Option. MSB hereby grants to HUBCO the option to purchase
600,000 shares of common stock, $0.01 par value, of MSB (the "Common Stock") at
a price of $29.00 per share (the "Option Price"), on the terms and conditions
set forth herein (the "Option").
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:
acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 20% of the then outstanding
shares of Common Stock; or
enters into a letter of intent or an agreement, whether oral or
written, with MSB pursuant to which such person or any affiliate of such person
would (i) merge or consolidate, or enter into any similar transaction, with MSB,
(ii) acquire all or a significant portion of the assets or liabilities of MSB,
or (iii) acquire beneficial ownership of securities representing, or the right
to acquire beneficial ownership or to vote securities representing, 20% or more
of the then outstanding shares of Common Stock; or
makes a filing with any bank or thrift regulatory authorities or
publicly announces a bona fide proposal (a "Proposal") for (i) any merger with,
consolidation with or acquisition of all or a significant portion of all the
assets or liabilities of, MSB or any other business combination involving MSB,
or (ii) a transaction involving the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 20% or more of the outstanding shares of Common Stock,
and thereafter, if such Proposal has not been Publicly Withdrawn (as such term
is hereinafter defined) at least 15 days prior to the meeting of stockholders of
MSB called to vote on the Merger and MSB's stockholders fail to approve the
Merger by the vote required by applicable law at the meeting of stockholders
called for such purpose; or
makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly Withdrawn, MSB 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 MSB or any of its directors, senior
executive officers, investment bankers or other person with actual or apparent
authority to speak for the MSB Board of Directors, inviting, encouraging or
soliciting any proposal which has as its purpose a tender offer for the shares
of Common Stock, a merger, consolidation, plan of exchange, plan of acquisition
or reorganization of MSB, 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 MSB. The term "significant number" means 20% 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 MSB or in soliciting or inducing any
other person (other than HUBCO or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent necessary for MSB 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.
MSB 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 MSB shall not be a condition to the right of HUBCO to exercise the
Option. MSB will not take any action which would have the effect of preventing
or disabling MSB 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 MSB (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.
Payment and Delivery of Certificates. At any Closing hereunder (a)
HUBCO will make payment to MSB of the aggregate price for the Option Shares so
purchased by wire transfer of immediately available funds to an account
designated by MSB; (b) MSB 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 MSB, 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 MSB Bancorp, Inc., 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.
In connection with such filing, MSB 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 MSB 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 MSB and blue sky fees
and expenses shall be paid by MSB. 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, MSB
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 MSB 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 MSB 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 MSB 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 MSB for any legal or other expense reasonably incurred by MSB 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.
In the event any capital reorganization or reclassification of the Common Stock,
or any consolidation, merger or similar transaction of MSB with another entity,
or any sale of all or substantially all of the assets of MSB, 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.
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 York Department of Banking, and MSB agrees to cooperate
with and furnish to the holder hereof such information and documents as may be
reasonably required to secure such approvals.
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 MSB:
MSB Bancorp, Inc.
35 Matthews Street
Goshen, New York 10924
Attention: William C. Myers,
Chairman of the Board, President
and Chief Executive Officer
With a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10048
Attention: Omer S. J. Williams, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
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.
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.
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.
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.
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.
MSB BANCORP, INC.
WILLIAM C. MYERS
By:-------------------------------------------------
William C. Myers,
Chairman, President and Chief Executive Officer
HUBCO, INC.
KENNETH T. NEILSON
By:--------------------------------------------------
Kenneth T. Neilson,
Chairman, President and Chief Executive Officer
<PAGE>
Appendix C
March 17, 1998
Board of Directors
MSB Bancorp, Inc.
35 Matthews Street
Goshen, NY 10924
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the common stockholders of MSB
Bancorp, Inc. ("MSB Bancorp") of the consideration to be received by such
stockholders in the proposed merger (the "Merger") of MSB Bancorp with and into
HUBCO, Inc. ("HUBCO"), pursuant to the Agreement and Plan of Merger
("Agreement") dated December 15, 1997 by and among MSB Bancorp, MSB Bank and
HUBCO (the "Agreement"). Under the terms of the Merger, stockholders of MSB
Bancorp will receive shares of HUBCO's common stock having a value of $36.02,
subject to adjustment as described in the Agreement (the "Consideration") for
each of their shares of common stock, par value $.01 per share of MSB Bancorp.
It is our understanding that the Merger will be accounted for as a pooling
accounting transaction under generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc. as part of its investment banking
business, is continually engaged in the valuation of banking businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, MSB Bancorp and HUBCO and as a
market maker in securities we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of MSB Bancorp and HUBCO
for our own account and for the accounts of our customers. We have acted
exclusively for the Board of Directors of MSB Bancorp in rendering this fairness
opinion and will receive a fee from MSB Bancorp for our services.
In rendering our opinion, we have (i) reviewed, among other things, the
Agreement, Annual Reports to stockholders and Annual Reports on Form 10-K of MSB
Bancorp for the four years ended December 31, 1996 and Annual Report on Form
10-K of HUBCO for the four years ended December 31, 1996, certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of MSB Bancorp and
Quarterly Reports on Form 10-Q of HUBCO and certain internal financial analyses
and forecasts for MSB Bancorp prepared by management; (ii) held discussions with
members of senior management of MSB Bancorp and HUBCO regarding past and current
business operations, regulatory relationships, financial condition and future
prospects of the respective companies; (iii) compared certain financial and
stock market information for MSB Bancorp and HUBCO with similar information for
certain other companies the securities of which are publicly traded; (iv)
reviewed the financial terms of certain recent business combinations in the
banking industry; and (v) performed such other studies and analyses as we
considered appropriate.
In conducting our review and arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of MSB Bancorp as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of MSB Bancorp and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
management. We have also assumed, without independent verification, that the
aggregate allowances for loan losses for MSB Bancorp and HUBCO are adequate to
cover such losses. In rendering our opinion, we have not made or obtained any
evaluations or appraisals of the property of MSB Bancorp or HUBCO, nor have we
examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of MSB
Bancorp and HUBCO; (ii) the assets and liabilities of MSB Bancorp and HUBCO; and
(iii) the nature and terms of certain other merger transactions involving thrift
and bank holding companies. We have also taken into account our assessment of
general economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Consideration is fair, from a financial point of view, to
the common stockholders of MSB Bancorp.
Very truly yours,
KEEFE, BRUYETTE & WOODS, 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 December 15, 1997, by and
among HUBCO, Inc. ("HUBCO") MSB Bancorp, Inc. ("MSB") and MSB Bank
(included as Appendix A to the Proxy Statement). *
2(b) Stock Option Agreement, dated December 15, 1997, by and between HUBCO
and MSB (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(a) Annual Report of MSB on Form 10-K filed with the SEC for the year ended
December 31, 1996. **
13(b) Quarterly Report of MSB on Form 10-Q filed with the SEC for the quarter
ended March 31, 1997. **
13(c) Quarterly Report of MSB on Form 10-Q filed with the SEC for the quarter
ended June 30, 1997 (as amended by Form 10-Q/A dated August 13, 1997).
**
13(d) Quarterly Report of MSB on Form 10-Q filed with the SEC for the quarter
ended September 30, 1997. **
20 Current Report of MSB on Form 8-K filed with the SEC on December 17,
1997. **
23(a) Consent of KPMG Peat Marwick LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Keefe, Bruyette & Woods, Inc.
23(d) Consent of Nugent & Haeussler, P.C.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits 5 and 8
hereto).
99(a) Form of Proxy Card to be utilized by the Board of Directors of MSB.
- -------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
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 Form of the Fairness Opinion of Keefe, Bruyette & Woods, Inc. is
included as Appendix C to the Proxy Statement-Prospectus.
<PAGE>
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 are 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.
<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 17 day of March, 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>
KENNETH T. NEILSON Chairman, President, Chief
-------------------------------------------- Executive Officer and Director March 17 , 1998
(Kenneth T. Neilson)
ROBERT J. BURKE Director March 17 , 1998
- -------------------------------------------
(Robert J. Burke)
DONALD P. CALCAGNINI Director March 17 , 1998
- -------------------------------------------
(Donald P. Calcagnini)
JOAN DAVID Director March 17 , 1998
- -------------------------------------------
(Joan David)
Director March __ , 1998
- -------------------------------------------
(Thomas R. Farley)
BRYANT D. MALCOLM Director March 17 , 1998
- -------------------------------------------
(Bryant D. Malcolm)
W. PETER MCBRIDE Director March 17 , 1998
- -------------------------------------------
(W. Peter McBride)
Director March __ , 1998
- -------------------------------------------
(David A. Rosow)
CHARLES F.X. POGGI Director March 17 , 1998
- -------------------------------------------
(Charles F.X. Poggi)
JAMES E. SCHIERLOH Director March 17 , 1998
- -------------------------------------------
(James E. Schierloh)
JOHN H. TATIGIAN Director March 17 , 1998
- -------------------------------------------
(John H. Tatigian)
- -------------------------------------------
(Sister Grace Frances Strauber) Director March __ , 1998
JOSEPH F. HURLEY Executive Vice President and Chief
- ------------------------------------------- Financial Officer March 167, 1998
(Joseph F. Hurley)
Senior Vice President
CHRIS A. WITKOWSKI and Controller March 17 , 1998
- -------------------------------------------
(Chris A. Witkowski)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
<S> <C>
2(a) Agreement and Plan of Merger, dated as of December15, 1997, by
and among HUBCO, Inc. ("HUBCO"), MSB Bancorp, Inc. ("MSB") and
MSB Bank (included as Appendix A to the Proxy Statement). *
2(b) Stock Option Agreement, dated December 15, 1997, by and
between HUBCO and MSB (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(a) Annual Report of MSB on Form 10-K filed with the SEC for the
year ended December 31, 1996. **
13(b) Quarterly Report of MSB on Form 10-Q filed with the SEC for
the quarter ended March 31, 1997. **
13(c) Quarterly Report of MSB on Form 10-Q filed with the SEC for
the quarter ended September 30, 1997. **
13(d) Quarterly Report of MSB on Form 10-Q filed with the SEC for
the quarter ended June 30, 1997 (as amended by Form 10-Q/A
dated August 13, 1997). **
20 Current Report of MSB on Form 8-K filed with the SEC on
December 17, 1997. **
23(a) Consent of KPMB Peat Marwick LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Keefe, Bruyette & Woods, Inc.
23(d) Consent of Nugent & Haeussler, P.C.
23(e) Consent of Pitney, Hardin, Kipp & Szuch (included in Exhibits
5 and 8 hereto).
99(a) Form of Proxy Card to be utilized by the Board of Directors of
MSB.
</TABLE>
- ---------------------------------
* Included elsewhere in this registration statement.
** Incorporated by reference.
<PAGE>
Exhibit 5
March 17, 1998
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, NJ 07430
Attn: Kenneth T. Neilson, Chairman, President
and Chief Executive Officer
Re: Merger of HUBCO, Inc. and MSB Bancorp, Inc.
We have acted as counsel to HUBCO, Inc. ("HUBCO") in
connection with its proposed issuance of common stock, no par value (the "Common
Stock"), pursuant to the Agreement and Plan of Merger among HUBCO, MSB Bancorp,
Inc. and MSB Bank dated December 15, 1997. The Common Stock is being registered
pursuant to a Registration Statement on Form S-4 (the "Registration Statement")
being filed with the Securities and Exchange Commission on the date hereof.
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Certificate of Incorporation and By-laws
of HUBCO as currently in effect, relevant resolutions of the Board of Directors
of HUBCO, and such other documents as we have deemed necessary or appropriate in
order to express the opinion set forth in this letter.
Based on the foregoing and assuming that the Registration
Statement has been declared effective under the Securities Act of 1933, as
amended, we are of the opinion that when issued as described in the Registration
Statement, including the Prospectus relating to the Common Stock (the
"Prospectus"), the Common Stock will be legally issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an Exhibit to
the Registration Statement and to the reference to this firm under the heading
"Legal Opinion" in the Prospectus.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
<PAGE>
Exhibit 8
March 17, 1998
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman, President
and Chief Executive Officer
MSB Bancorp, Inc.
35 Matthews Street
Goshen, New York 10924
Attn.: William C. Myers
President and Chief Executive Officer
Re: Merger of Hubco, Inc. and MSB Bancorp, Inc.
We have represented HUBCO, Inc. ("HUBCO"), a New Jersey
corporation which is a registered bank holding company, in connection with the
proposed merger of MSB Bancorp, Inc. ("MSB"), a Delaware corporation and
registered savings and loan holding company with and into HUBCO (the "Merger").
The Merger shall be effected pursuant to the provisions of the Agreement and
Plan of Merger dated as of December 15, 1997 (the "Merger Agreement"), among
HUBCO, MSB and MSB's wholly-owned subsidiary, MSB Bank. The Merger Agreement
defines those capitalized terms appearing in this letter which are not defined
in this letter.
In connection with such representation, we have reviewed the
Registration Statement to be filed with the Securities and Exchange Commission
pertaining to the Merger (the "Registration Statement"), and, in our opinion,
the information included in the section of the Registration Statement captioned
"Federal Income Tax Consequences" accurately describes the material federal
income tax consequences of the Merger. In addition, attached to this letter is a
form of opinion of this firm regarding federal income tax matters applicable to
the Merger (the "Closing Tax Opinion"), the delivery of which is a condition
precedent to the consummation of the Merger pursuant to Section 6.1(d) of the
Merger Agreement. At this time, we expect to deliver such opinion substantially
in the form attached at the closing of the Merger.
Very truly yours,
PITNEY, HARDIN, KIPP & SZUCH
<PAGE>
________________, 1998
HUBCO, Inc.
1000 MacArthur Boulevard
Mahwah, New Jersey 07430
Attn.: Kenneth T. Neilson, Chairman, President
and Chief Executive Officer
MSB Bancorp, Inc.
35 Matthews Street
Goshen, New York 10924
Attn.: William C. Myers
President and Chief Executive Officer
Re: Merger of HUBCO, Inc. and MSB Bancorp, Inc.
Ladies and Gentlemen:
We have represented HUBCO, Inc. ("HUBCO"), a New Jersey corporation
which is a registered bank holding company, in connection with the proposed
merger of MSB Bancorp, Inc. ("MSB"), a Delaware corporation and registered
savings and loan holding company with and into HUBCO (the "Merger"). The Merger
shall be effectuated pursuant to the provisions of an Agreement and Plan of
Merger dated as of December 15, 1997 (the "Merger Agreement"), among HUBCO, MSB
Bancorp, Inc. and MSB Bank. This opinion is delivered pursuant to Section 6.1(d)
of the Merger Agreement. The Merger Agreement defines those capitalized terms
appearing in this letter which are not defined in this letter. Unless otherwise
indicated, all sections refer to the Internal Revenue Code of 1986, as amended
(the "Code").
Pursuant to the Merger Agreement, at the Effective Time, the Merger
shall be effectuated by the merger of MSB with and into HUBCO, in accordance
with the laws of the State of New Jersey and Delaware, the Delaware General
Corporation laws and the New Jersey Business Corporation Act.
Pursuant to the Merger Agreement, at the Effective Time, each
outstanding share of common stock, $0.01 par value, of MSB (the "MSB Common
Stock"), other than shares owned by HUBCO or any of HUBCO's wholly-owned
subsidiaries (other than shares held in a fiduciary capacity or as collateral on
or in lieu of a debt previously contracted) and shares held by MSB in its
treasury, shall be converted into the right to receive and be exchanged for a
number of shares (the "Exchange Ratio") of common stock of HUBCO, without par
value ("HUBCO Common Stock"), equal to a fraction, the numerator of which will
be $36.02 and the denominator of which will be the "Median Pre-Closing Price" of
HUBCO Common Stock (a term defined in the Merger Agreement generally as the
median closing price of HUBCO Common Stock during a 10 trading day period
shortly prior to the closing of the Merger), with a Minimum Exchange Ratio of
0.97 (which will apply if the Median Pre-Closing Price is at or above $37.13)
and a Maximum Exchange Ratio of 1.03 (which will apply if the Median Pre-Closing
Price is at or below $34.97), subject to adjustment provisions set forth in the
Merger Agreement. No fractional shares of HUBCO Common Stock will be issued in
exchange for MSB Common Stock. Instead, cash will be paid in lieu of fractional
shares of HUBCO Common Stock, based upon the Median Pre-Closing Price of HUBCO
Common Stock.
In addition to the foregoing facts, on the date of this letter, you
have delivered to us certificates in which you have made the following
additional representations in regard to the Merger and have authorized us to
rely on such representations in expressing the opinions contained in this
letter.
1. The fair market value of HUBCO's Common Stock and other
consideration received by holders of the MSB Common Stock will be approximately
equal to the fair market value of the MSB Common Stock surrendered in the
exchange.
2. None of the compensation received by any shareholder-employees of
MSB will be separate consideration for, or allocable to, any of their shares of
MSB Common Stock; none of the shares of HUBCO Common Stock received by any
shareholder-employees will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any shareholder-employees
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services.
3. HUBCO has no plan or intention to redeem or otherwise reacquire any
of its stock issued in the Merger.
4. The payment of cash in lieu of fractional shares of HUBCO Common
Stock is solely for the purpose of avoiding the expense and inconvenience to
HUBCO of issuing fractional shares of HUBCO Common Stock and does not represent
separately bargained-for consideration.
5. Following the Merger, HUBCO will continue the historic business of
MSB or use a significant portion of MSB's business assets in the business of
HUBCO.
6. There is no intercorporate indebtedness existing between HUBCO and
MSB that was issued, acquired, or will be settled at a discount.
7. Neither HUBCO nor MSB is an investment company as defined in Section
368(a)(2)(F)(iii) and (iv).
8. HUBCO has no plan or intention to liquidate, sell or otherwise
dispose of any of the assets of MSB acquired in the Merger, except for
dispositions made in the ordinary course of business, or, transfers described in
Section 368(a)(2)(C).
9. HUBCO, MSB and the shareholders of MSB will pay their respective
expenses, if any, incurred in connection with the Merger.
10. Other than the contemplated merger of MSB with and into HUBCO,
there is no larger integrated transaction of which the Merger constitutes only
one step.
11. MSB is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A).
12. There is no plan or intention by the shareholders of MSB who own 5%
or more of the MSB Common Stock, and to the best knowledge of the management of
MSB, there is no plan or intention on the part of the remaining shareholders of
MSB to sell, exchange or otherwise dispose of a number of shares of HUBCO Common
Stock received in the Merger that would reduce the MSB shareholders' ownership
of HUBCO Common Stock to a number of shares having a value, as of the date of
the Merger, of less than 50% of the value of all of the formerly outstanding MSB
Common Stock as of the same date. For purposes of this representation, shares of
MSB Common Stock exchanged for cash in lieu of fractional shares of HUBCO Common
Stock or surrendered by dissenters will be treated as outstanding MSB Common
Stock on the date of the Merger. Moreover, shares of MSB Common Stock held by
MSB shareholders and otherwise sold, redeemed or disposed of prior or subsequent
to the Merger will be considered in making this representation.
13. The liabilities of MSB to be assumed by HUBCO and the liabilities
to which the transferred assets of MSB are subject were incurred by MSB in the
ordinary course of its business.
14. The fair market value of the assets of MSB transferred to HUBCO
will equal or exceed the sum of the liabilities assumed by HUBCO, plus the
amount of liabilities, if any, to which the transferred assets are subject.
As counsel to HUBCO, we have examined the Merger Agreement and copies
of ancillary agreements, certificates, instruments and documents pertaining to
the Merger delivered by the parties to the Merger. In such examination, we have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us. As to any facts material to our opinions expressed in this
letter, we have relied on representations of the parties to the Merger and have
not undertaken to verify any of those representations by independent
investigation. We have based our opinions contained in this letter on our
analysis of the Code, Treasury Regulations promulgated thereunder, and relevant
interpretive authorities as in effect on the date of this letter.
Based on the foregoing, we are of the opinion that:
1. The Merger qualifies as a "reorganization" within the meaning of
Section 368(a)(1)(A). HUBCO and MSB each are a "party to a reorganization"
within the meaning of Section 368(b)(2).
2. No gain or loss will be recognized for federal income tax purposes
by HUBCO or MSB in connection with the Merger. Sections 361(a) and 1032(a).
3. No gain or loss will be recognized for federal income tax purposes
by holders of shares of MSB Common Stock upon the exchange in the Merger of such
shares solely into shares of HUBCO Common Stock (except with respect to cash
received in lieu of a fractional share interest in MSB Common Stock). Section
354(a).
4. Cash received by a holder of MSB 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
MSB Common Stock allocable to the fractional share interest. Section 1001.
5. The basis of shares of HUBCO Common Stock received in the Merger by
holders of MSB Common Stock will be the same as the basis of such shares of MSB
Common Stock surrendered in exchange therefor.
Section 358.
6. The holding period of shares of HUBCO Common Stock received in the
Merger by holders of MSB Common Stock will include the period during which such
shares of MSB Common Stock surrendered in exchange therefor were held by the
holder thereof, provided such shares of MSB Common Stock were held as capital
assets. Section 1223(1).
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
MSB Bancorp, Inc.:
We consent to incorporation by reference in the Registration Statement on Form
S-4, of our report dated January 27, 1997, relating to the consolidated balance
sheets of MSB Bancorp Inc. and Subsidiaries as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended, which report appears in the December 31, 1996 Annual
Report on Form 10-K of MSB Bancorp, Inc.
KPMG PEAT MARWICK LLP
Short Hills, New Jersey
March 16, 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 February 7, 1997 included in HUBCO'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
March 17, 1998
Exhibit 23(c)
Consent of
Keefe, Bruyette & Woods, Inc.
We hereby consent to the use in this Registration Statement on Form S-4
of our letter to the Board of Directors of MSB Bancorp included as Appendix C to
the Proxy Statement - Prospectus forming a part of this Registration Statement
on Forms S-4 and to all references to our firm in such Proxy Statement -
Prospectus. In giving such consent, we do not hereby 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, nor do we admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act or the rules and regulations of the
Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
KEEFE, BRUYETTE & WOODS, INC.
FRANK S. CICERO
By:---------------------------------
Frank S. Cicero, Vice President
Dated: March 17, 1998
Exhibit 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 of our report dated January 30, 1996 as to
the consolidated financial statements of MSB as of December 31,1995 and 1994 and
for the year then ended, and to the references to our firm included in this
Registration Statement.
NUGENT & HAEUSSLER, P.C.
March 17, 1998
Exhibit 99(a)
REVOCABLE PROXY
MSB Bancorp, Inc.
35 Matthews Street
Goshen, New York 10924
This proxy is solicted on behalf
of the Board of Directors of
MSB Bancorp, Inc. for the
Special Meeting of
Stockholders to be held on
_________, 1998.
The undersigned stockholder of MSB Bancorp, Inc. hereby
appoints William C. Myers, Gill Mackay and Anthony J. Fabiano, or any of them,
with full powers of substitution, to represent and to vote as proxy, as
designated, all shares of common stock of MSB Bancorp, Inc. held of record by
the undersigned on ____________, 1998 at the Special Meeting of Stockholders
(the "Special Meeting") to be held at _____ a.m., on, ____________, 1998, or at
any adjournment or postponement thereof, upon the matters described in the
accompanying Notice of Special Meeting and Proxy Statement-Prospectus and upon
such other matters as may properly come before the Special Meeting. The
undersigned hereby revokes all prior proxies.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned stockholder. If no direction is given,
this Proxy will be voted FOR the proposals listed in Items 1 and 2.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IN THE ENCLOSED ENVELOPE.
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(Fold and Detach Here)
<PAGE>
The Board of Directors unanimously recommends a vote "FOR" each of the
proposals in Items 1 and 2.
Please mark your votes as indicated in this example. |X|
1. Approval of the Agreement and Plan of Merger, dated as of December 15, 1997,
by and among HUBCO, Inc., MSB Bancorp, Inc. and MSB Bank (the "Merger
Agreement"), pursuant to which MSB Bancorp, Inc., will merge with and into
HUBCO, Inc.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. Approval of an additional proposal to give the Board of Directors of MSB
Bancorp, Inc. discretion to vote upon other matters that may properly be brought
before the Special Meeting, including a motion to adjourn the Special Meeting in
order to solicit additional proxies.
FOR AGAINST ABSTAIN
|_| |_| |_|
I Will Attend the Special Meeting. |_|
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and the Proxy Statement for the Special Meeting.
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
Signature(s)
Dated:_________________ 1998
Please sign exactly as your name appears on this proxy. Joint owners should each
sign personally. If signing as attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate or partnership proxies
should be signed by an authorized officer.
(Fold and Detach Here)
